EI Sourcebook | 5.7 Regulations

5.7 Regulations

Regulations in the EI sector typically fall into two major categories: (1) HSE and (2) resource management.

Regulations should complement laws and contracts, filling in the details essential to their implementation. Typically, the legislation should authorize the competent authority to make regulations from time to time, providing the detail and procedures by which to implement the policy objectives for the EI sector, and by reference to specific enabling provisions of the legislation. They are subsidiary instruments of the EI sector legislation and should never be inconsistent with it.

Regulations should primarily focus on technical and operational matters (such as licensing procedures, contract area, reports on operations, and operational standards) but may also include fiscal elements (such as royalty definitions, surface rental, fees, and fines), cost and volume audits, and or social and environmental requirements. In some cases, regulations may even specify the competent authority or authorities in the EI sector.^[71]

In the early stages of EI sector development, regulations may focus on main principles rather than detailed rules, leaving details to be elaborated at a later date based on growing EI sector experience and understanding. There are, however, a number of critical provisions related to resource management which should be recognized at the outset, including the right to receive all relevant information, the right to inspect, and the right to issue more specific rules as the EI sector develops.

5.7.1 HSE

Regulations dealing with social and environmental concerns have become critically important in the management of the EI sector, and are dealt with in more detail in Chapter 9.

However, at the basic level, there exists a well-developed international practice on HSE standards.^[72] These standards are reflected in state legislation or regulations and available for adoption by newcomers to the EI sector of a particular state. As the EI sector develops, HSE regulations tend to become more detailed and highly prescriptive.

The current trend, however, is to move away from overly detailed requirements and to develop ‘goal-setting’ regulations. Goal-setting regulations are normally backed up by non-mandatory guidance notes.^[73] The regulations set out the objectives that must be achieved, but allow flexibility in the choice of methods or equipment that may be used by companies to meet their obligations. Instead of putting all the burden on the regulator to decide ex ante what would count as safe and what would not, increasing responsibility is put on the company to convince the regulator that their plans are reasonable and responsible.

This goal-setting approach is also sometimes referred to as the ‘internal control principle.’ The perceived advantages of the approach are: (1) it avoids the problems which must inevitably arise when prescriptive regulations become outdated as a result of rapidly changing and increasingly complex operating conditions and procedures; and (2) it puts responsibility squarely where action can be taken: at the company or operator level.^[74]

Box 5.5: CommDev resources on Health & Safety

Featured CommDev resources include documents Environmental and Social Guidelines for Occupational Health and Safety and a handbook on The Safety and Health in Small-Scale Surface Mines, alongside News, Events and Websites for this vital subject area.

5.7.2 Resource Management

Regulations directed at resource management are now common practice and are vital to effective EI sector oversight and control. These regulations generally focus on the following: (1) regular and comprehensive reporting; (2) transfer of all significant data, analyses, and samples obtained in operations; and (3) consultation, consent, and approval requirements at critical stages of operations.

Typical requirements are numerous; they include reporting and where appropriate, consent or approval by the governmental authorities at each of the following junctures in the implementation of the EI value chain: (1) reconnaissance; (2) exploration work program implementation; (3) drilling; (4) discovery; (5) appraisal; (6) commerciality; (7) development plan and any revisions thereto; (8) reservoir management and production; (9) late field or mine life plans; and (10) decommissioning plans.

Beyond their immediate relevance in ensuring adherence to ‘good oil field practice,’ these regulations can be expected to provide vital inputs to broader policy decisions on licensing, the pace of sector development, state participation, social and environmental safeguards, and macroeconomic planning.