The Natural Resources(Benefit Sharing) Bill, 2014. The Bill's objective is, among many other things, is to establish a system of benefit sharing in resource exploitation between resource exploiters, the national government, county governments and local communities; to establish the Natural Resources Benefits Sharing Authority. The bill is expected to streamline natural resource sharing between the two levels of government with specific emphasis on trickling benefits back to the communities in areas with abundant resources.
There have been numerous discoveries of various mineral resources in Kenya, such as Oil. So far, the exploitation of these minerals has been effected with very little or no benefit to the local communities. There is also increased need for Kenya to explore mineral deposits ranging from traces of oil and natural gases, coal to deposits of rare earth minerals, large aquifer of water, and coal among other minerals. This Bill is coming at an opportune moment. The Bill proposes that the exploration firms signs benefit sharing agreements with counties which will remove such projects from the realm of social responsibility and make them legally enforceable and also includes non legal benefits. This will essentially help communities living around the mining site to keep the firms legally accountable to the provisions in the agreements signed.
To establish a system of benefit sharing in resource exploitation between resource exploiters, the national government, county governments and local communities and to establish the Natural Resources Benefits Sharing Authority(NRBSA).
Kenya’s Parliament recently debated a new law to regulate oil and gas exploration. If the Petroleum (Exploration, Development and Production) Bill 2015 (Petroleum Bill) is passed, the national government will retain 75% of the profits from commercial oil and gas produced, with the county governments hosting the deposits getting 20% and the local community 5%. The Petroleum Bill, which was prepared by a technical committee of the Ministry of Energy after reviewing the Petroleum Exploration and Production Act of 1986 that was deemed too oil-centric, also requires the National Government to create a conducive environment for exploration of crude oil and natural gas. The Petroleum Bill proposes the establishment of the Upstream Petroleum Regulatory Authority (UPRA) and National Upstream Petroleum Advisory Committee (NUPAC). UPRA will regulate the industry while NUPAC comprising a panel from the Ministry of Energy & Petroleum and the National Treasury as well as the Kenya Revenue Authority will advise the Cabinet Secretary responsible for petroleum. UPRA will also manage a national centre for storage, analysis, interpretation and management of petroleum data and information from sedimentary basis and field operations on behalf of the Government. The Bill proposes awarding of exploration blocks through competitive tendering. The proposed law requires the Cabinet Secretary to develop a framework for reporting, transparency and accountability in the sector. This will require publication of agreements, records, annual accounts, reports of revenues and fees.
To read a copy of the proposed Bill, please click here
Article 71 of the Kenyan Constitution provides that a transaction is subject to ratification by Parliament if it:
a) involves the grant of a right or concession by or on behalf of any person, including the national government, to another person for the exploitation of any natural resource in Kenya;
b) is entered into after the effective date (in accordance with Article 263 that is, 27th August 2010).
According to Article 93(1) of the Constitution, the Kenyan Parliament is comprised of both the National Assembly and the Senate. In accordance with Article 71(2) Parliament has enacted the Natural Resources (Classes of Transactions Subject to Ratification) Act 2016, which was assented to by the President on 13th September 2016 and came into force on 4th October 2016.
Under the said Act, the class of transactions set out in Section 4(1) and set out in the Schedule to the Act will require Parliament’s ratification in order to give effect to the transaction. The class of transactions which require ratification touch on: authorization to extract crude oil and gas (excludes exploration permits), mineral agreements with a threshold of US$500 million; water resources (the extraction of sea water within the territorial sea for private commercial use), underground water resource ( the extraction of underground steam within a water conservation or other water resource protected are), wildlife (export and re-export of endangered wildlife species as well as the extraction of oil, gas and minerals within a wildlife protection area), forests ( long term concession of a gazetted forest resource as well as any excision or change of boundaries of gazetted public forests or nature reserves) and lastly any other transaction subject to ratification under an Act of Parliament.
Section 4(2) lists the transactions which have been exempted from the need to obtain any ratification by Parliament, namely: grant of a concession or right to exploit a natural resource through a permit, licence or other authorisation issued in accordance with the requirements of national or county government legislation (subject to the threshold set by the Cabinet Secretary under sub-paragraph (e), grant of a concession or right by a private person to exploit a natural resource through an agreement or a contract, the grant of a concession or right to exploit a natural resource for scientific purpose, educational or other non-commercial purposes unless the exploitation involves taking the natural resource or any portion of it outside Kenya; the exploitation of a natural resource by a Kenyan for subsistence purposes (in circumstances in which the law does not require that a permit, licence or other authorization be obtained; and lastly the exploitation of a natural resource in quantities falling below a threshold prescribed by the Cabinet Secretary by notice in the Gazette.
A beneficiary of a transaction (touching on a natural resource subject to ratification) has a duty to submit the agreement or other instrument evidencing the transaction within fourteen (14) days to the Cabinet Secretary responsible for the natural resource.
The Cabinet Secretary has seven (7) days to then submit the agreement for ratification to Parliament (which is supposed to be an open process, unless the Cabinet Secretary has acceded to a request for portions of the agreement to be treated as confidential in nature in which said case the ratification process will be conducted in camera).
An agreement subject to ratification shall only take effect once it is so ratified (although the transitional provisions provide that agreement which was entered into after the effective date but before the coming into force of this Act shall be deemed valid - which is a welcome relief for all beneficiaries of such agreements who were concerned about the legality of such agreements in light of Article 71 of the Constitution).
The timelines within which both houses of Parliament are to ratify those classes of transactions is sixty (60) days of receiving the agreement in accordance with the laid down procedures.
Lastly, the Act provides an interesting challenge to the Cabinet Secretary’s request for confidentiality of an agreement, as in line with Article 35(1) of the Constitution (as read with the Access to Information Act 2016). The Act does allow a person to challenge in the High Court the decision of the Cabinet Secretary on the request for confidentiality.
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