Shell liable to $3.6 billion fine over Bonga oil spill, Nigerian court rules

 

Oil giant, Shell Nigeria Exploration and Production Company Limited, is liable to a $3.6 billion fine levied on it by the National Oil Spill Detection and Response Agency (NOSDRA) over a 2011 crude oil spill offshore on Nigeria’s coastline, a federal court has ruled.

Mojisola Olatoregun, the federal judge, held that NOSDRA’s power to impose penalties does not violate the provisions of the Nigerian Constitution, according to a copy of the court’s judgement obtained by PREMIUM TIMES.

The judgement was delivered on May 24.

The Bonga Spill

On December 20, 2011, during Shell’s exploration activities within OML 118 situated 120 kilometres off the coast in the Gulf of Guinea, the company’s export line linking their Float Production Storage and Offloading (FPSO) vessel at the Bonga deep offshore ruptured and spewed crude oil into the sea.

The vessel, which was supplying crude oil to a tanker MV Northia, spewed about 40,000 barrels (6.4 million litres) of crude oil into the sea, according to NOSDRA.

As a penalty for the spill, NOSDRA levied $1.8 billion as compensation for the damages done to natural resources and consequential loss of income by the affected shoreline communities as well as a punitive damage of $1.8 billion.

In 2016, Shell, through its lawyer, Wole Olanipekun, dragged NOSDRA before a Lagos Division of the Federal High Court challenging the fine.

The company argued that the NOSDRA Act empowering the agency to conduct remediation and damage assessment regulations encroaches on the judicial powers exclusively vested in the courts and the legislative powers of the National Assembly.

The company further argued that the imposition of the $3.6 billion fine by the agency is a violation of its right to fair hearing.

As a result, Shell sought a declaration of the court that NOSDRA cannot perform its enforcement functions in contravention of the provisions of the Nigerian Constitution.

It also sought a declaration that the procedure leading to the imposition of the $3.6 billion fine or any amount is a breach of the company’s rights under the Constitution and also an order setting aside the fine.

The company sought a declaration that NOSDRA’s letters dated December 19, 2014, and March 25, 2015, imposing the fine constitutes a breach of the Constitution and therefore, null and void.

It further sought an order of perpetual injunction restraining NOSDRA from enforcing or seeking compliance to the fine.

In response, NOSDRA’s counsel, D.A Awosika, filed a preliminary objection arguing that the suit is caught by the statute of limitation because Shell ought to have acted within three months of March 25, 2015, when it served the company the notification of the sanction in respect of the spill.

Shell responded that it is neither an officer nor employee of NOSDRA and therefore cannot be affected by the Public Officers Protection Act which the agency is relying upon.

The judge agreed with the oil multinational and dismissed NOSDRA’s preliminary objection.

In its originating summons, Shell stated that after the detection of the Bonga oil spill, it notified NOSDRA in line with the applicable laws via a letter dated December 20, 2011.

“Upon detection of the spill, emergency response was activated while the relevant agencies and government departments were informed,” the company added.

The company said although it contained the Bonga spill and cleaned up offshore with no impact to the Nigerian coastline, NOSDRA went ahead to procure the services of an independent consultant to undertake a post-damage assessment of the spill.

“The plaintiff (Shell) was neither invited nor involved in the post-damage assessment by the independent consultant appointed by the defendant (NOSDRA).”

Shell reports falling profit amid oil price slump

Shell further maintained that it was not given any hearing or opportunity to be heard before an independent tribunal before NOSDRA awarded the $3.6 billion fine.

Post Impact Assessment Failure

But in the counter affidavit filed by NOSDRA, the agency said the Bonga spill was found to have been caused by equipment failure that resulted from a snapped loading hose under water at Shell’s export terminal.

The agency maintained that the 40,000 barrels of crude oil which spewed into the sea as a result of the rupture caused devastation and degradation of the aquatic life and marine environment including the Exclusive and Economic Zone.

“There were severe disruptions to communities, persons, properties and lives of people in the shoreline area as a result of the oil spill.

“That during the course of the investigation, 285,000 persons from 350 communities and satellite villages were affected by the plaintiff’s spillage and harmful chemical pollutants utilised in the clean-up operation.”

NOSDRA stated that after a number of joint investigation visits with other stakeholders such as the Nigerian Maritime Administration and Safety Agency (NIMASA), consultants from the National Assembly Senate Committee on Environment and Ecology; it established the scope and terms of reference for a Post Impact Assessment (PIA).

NOSDRA further stated that it gave an approval, in April 2012, for the PIA which would give a detailed assessment and analysis of the impact of the Bonga oil spill on the marine environment and aquatic life around Bonga and between Bonga and the shoreline.

The agency said it was forced to carry out the PIA two years later after Shell continued to delay the process and, afterwards, wrote to the company informing it of the fine it is liable to pay.

“The question before the court is not a determination of whether a spillage occurred,” the judge said.

“The issue is the belief of the plaintiff that the defendant is not empowered to sanction the plaintiff. That the duty is that of the court to wit the Federal High Court.”

The judge held that the NOSDRA Act does not conflict with the Nigerian Constitution and that the assessment and valuation of damages by the agency is not inconsistent with the constitutional duty imposed by the Constitution the Federal High Court.

“These assessments can only provide a guide to the court in coming to a just complete conclusion in the determination of causes before it,” Mrs Olatoregun said.

“I found no conflict with the duties conferred on NOSDRA by law and the power of the court to adjudicate in this matter.”

The judge also held that the duties imposed on NOSDRA are statutory and that when a statutory body acts in excess of the powers given to it, recourse can then be laid before the court for interpretation.

The judge stated that after it received the letters from NOSDRA in December 2014 and March 2015 notifying it of the sanctions, Shell could have appealed to the agency or approached the court.

“These letters cannot be taken to be in conflict with Section 44 of the 1999 Constitution or a violation of Section 36 of the 1999 Constitution,” she said.

“The plaintiff had notice and opportunity to fair hearing.

“The plaintiff ought to have had recourse to the court for the determination of its civil rights and a proper adjudication on the issues if it felt its rights were infringed or about to be infringed, inconsistent with Sections 36 and 44 of the 1999 Constitution.

“I have no reason to set both letters aside as well as the sums ordered as parties did not make evaluation of the assessed damage an issue for consideration in the questions raised for determination.

“No evidence upon which an evaluation could be made was also proffered.

“In the final analysis, all the questions raised by the plaintiff are resolved in favour of the defendant. The only thing left to do make an order dismissing this suit. Same is dismissed.”

Credit: Premium Times