Community sues over pollution in Niger Delta

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Nigeria Village Cited by UN for Chronic Oil Spill Damage Sues Royal Dutch Shell for 1 billion USD

Issue Summary

he Ogale community in the Nigerian delta is suing Shell oil for $1 billion dollars in damages over decades of pollution. The United Nations Environment Programe (UNEP) recently released a report that painted a grim picture of environmental damage in the area. Some of the issues documented by the 18 month long investigation included the following: Benzine content of groundwater was found to be 900 times over WHO safe limit; petroleum hydrocarbons were found in surface soils at depths of up to 5 meters and exceeded Nigerian soil contamination standards; root crops in area near past oil spills were unusable; oil pollution in intertidal creeks denuded mangroves of leaves destroying fish habitat; surface water had layers of floating oil, varying from a thin sheen to a think layer.

The environmental regulations for petroleum industries operating within Nigeria were found to be “internally inconsistent with regard to one of the most important criteria for oil spill and contaminated site management – specifically the criteria which trigger remediation or indicate its closure”. It was also found that two regulating bodies within the Nigerian government had different interpretations of these regulations which enabled “...the oil industry to close down the remediation process well before contamination has been eliminated and soil quality has been restored to achieve functionality for human, animal and plant life.” Another issue was that the Nigerian government lacked the resources and qualified personnel to monitor and enforce their own standards.

Shell Exploration and its production companies adopted new remediation management processes in 2010. However, the UNEP study found that these measures were inadequate and still did not meet industry best practices or local regulatory guidelines.

Analysis

Our topic of study in these Wiki’s is that of Ecosystem Services. These are things that nature provides to us for free that enable our existence on the planet. Essentially these are the ultimate public good, available equally and equitably to all creatures. What we are reviewing in this article is the loss of this public good due to the long-term contamination of the ecosystem by oil exploration and extraction. Of key importance to these villagers is clean and uncontaminated groundwater, fertile soil that can be used to produce crops, and a healthy fishery for subsistence and commercial uses. The community suggests that these goods have been taken from them by the Shell petroleum companies, to the value of $1 billion USD. It is also interesting to note that the UN report makes the recommendation that a restoration fund be setup with initial capital of $1 billion USD, provided by the oil companies and the government.

It seems apparent from the report that the Nigerian government utilized a standards based system for environmental protection, but was apparently unable to fund it or provide suitable training for its staff. It was also reported that the companies operated at a level below industry best practices regarding environmental protection. This would suggest that the companies understood that the government was unable to monitor and enforce its standards, and would therefore only contribute negligible abatement costs. It may also be speculated that companies could bring back-room pressure to bare on governments of developing nations in exchange for “concessions” in light of the economic development they bring to the nation in question. Long term corruption of successive Nigerian governments is documented elsewhere.

A valuation of marginal damages for the region could be put at over two billion USD. Half of this is what the UN claims will be the initial cost of restoring the ecosystems, and the other half is what the Ogale community claims have been the damages to public health, clean drinking water, and their food supply. To compare this to revenues by oil companies operating in the Niger Delta, a quick visit to wikipedia produces the following factiods: Shell commenced oil exports from the region in 1958; as of 2000, oil and gas exports accounted for 83% of federal government revenue and 40% of the countries GDP. Another source claims that Shell Nigeria’s annual gross operating revenue for 2010 was around $8.5 billion USD.

From an economic perspective, is this an efficient arrangement for society? It would appear not from a number of perspectives. If we assume that the standards set by the government--and industry best practices-- approximate the efficient point, then the oil industry in Nigeria operate well below this level. This would then indicate that they are saving on abatement cost at the expense of society.

Prof's Comments

Good job.

10/10