EI Sourcebook | 5.3 Sector Legislation: Content

5.3 Sector Legislation: Content

5.3.1 General

There are a wide range of issues that will typically be addressed in EI sector-specific laws, whether it applies to petroleum or mining. The same issues need to be addressed by the package of legislation and licenses or contracts. Differences between the two EI sectors tends to lie in the level of detail or comprehensiveness adopted in each instrument, but the necessity of addressing these issues in some form remains. The principal issues that need to be addressed are the following:

ownership of the natural resource;
authority to allocate rights for the development of natural resources;
establishment of a clear framework for the role of the competent bodies of government, for companies, and for civil society and local communities;
identification of the authorities and procedures by which the government allocates mineral or petroleum rights along with the rights and obligations of both the license holder and the government;
clear, transparent, competitive, and non-discretionary procedures for issuing exploration and production rights, including those issued by contracts, including the technical and financial qualifications needed to hold a mineral or petroleum right;
permissible contract types;
assurance to a prospective license holder or contract signatory of security of tenure, which includes issues relating to development rights, assignment rights, and retention rights;
listing of the obligations of the mineral or petroleum right holder to explore, invest, and produce the mineral or petroleum or else relinquish the right so that it can be made available or assigned to another party ready to take on those obligations;
reporting requirements of the license or right holder;
conditions for voluntary relinquishment and termination for cause of the license or right;
health, safety, and environmental (HSE) requirements related to the license or right;
procedures for management of possible land-use conflicts between different claimants or users;
dispute resolution procedures;
establishment and implementation of an effective communications strategy;
definition of the mandate and role of state-owned NRCs and minority state equity in mining, oil and gas companies (NRCs are addressed in Chapter 6 below);
grant of the right to construct and own infrastructure specific to petroleum or mining operations (for example, pipelines or rail routes); and
main principles of the fiscal regime.

5.3.2 Operation of the Rules

The basic principle underlying any legislation is that the government provides the investor with mineral rights in exchange for the investors undertaking exploration or development work. The laws and regulations will need to specify the authorities and procedures by which a government allocates mineral rights along with the rights and obligations of the license holder. A well-designed licensing system (see below) will provide a licensee with good assurance that whatever is found can be developed by the licensee, and what it develops can be retained with an equitable sharing of both risks and benefits with the host government. The legal regime will also provide the government with good assurance that licensees or contractors will undertake exploration or development work in a timely, technically, environmentally and socially acceptable manner, or be obliged to relinquish the mineral right so that the land can be made available to another party for exploration and exploitation. Thus, the laws will need to clearly specify the mandate, authority and responsibility of different agencies and ensure that overlaps and inconsistencies (especially between sector law/codes, environmental and health and safety regulation) are avoided between different laws. In the event of omissions or ambiguities arising, one way to resolve them may be through supplementary agreements with individual operators/investors until such time as the needed amendments can be made to the laws or regulations. In the case of overlapping regulations between say the sector law and the environmental law, different departments of government may decide by written memorandum of understanding, which regulation will be applied and by whom until the time as the regulations or legislation are clarified.^[20] This would give clarity in the interim which would allow activities to proceed.

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