10.5 Response 2: Effective Implementation, Monitoring, and Enforcement

to harm the quality of governance include a lack of available information on what the rules are, policies adopted or announced but then not implemented or policies frequently changed or adopted and then postponed, and different rules applied to different investors. The effect of any of these features is to reduce transparency and consume scarce resources on the government side. They are likely to increase the challenges of monitoring contracts.

As the Sourcebook has noted, there is a wide variety of standardization in the oil, gas, and mining sector, with model contracts particularly common in the oil and gas sector. The content of such agreements may differ but many of the headings are very similar. Petroleum operations are often required to be carried out in accordance with “good oilfield practice,” which may be defined in the contract— as it is in the Kashagan (Kazakhstan) production-sharing agreement—as “all those uses and practices that are at the time in question then generally accepted in the international petroleum industry as good, safe, economical and efficient in exploring for, developing, producing, processing and transporting Petroleum” (cited in Bowman 2015). In this way industry practices can be transformed into legal obligations. By contrast, petroleum laws show a considerable diversity and are often much briefer in scope than is typically found in the mining sector, where (and perhaps as a result) agreements tend to play a different role in many cases.

One further outcome of the Sourcebook chapters is the mapping of the extensive role played by non-legally binding standards or quasi-rule-making. Examples would include the Extractives Industries Transparency Initiative Standard 2016 (see chapter 8) and the emerging Responsible Mining Standard for industrial-scale mines developed by the Initiative for Responsible Mining Assurance (see chapter 9). Companies and industry associations often develop standards that have a near-mandatory impact on their operations. The International Finance Corporation standards are also relevant in this context. In this sense, there is an aspect of good governance that is driven by international bodies and organizations.

10.5 RESPONSE 2: EFFECTIVE IMPLEMENTATION, MONITORING, AND ENFORCEMENT

Effective monitoring and management capacity are critical to ensuring compliance with the requirements set out in the Sourcebook’s chapters. Without the appropriate institutions to monitor compliance with laws and standards, however, efforts at compliance will have little chance of success. The “resource curse” literature has underlined the importance of institutions for accountability, such as government auditors and parliamentary commissions (see the discussion in chapter 2).

Governance systems for oversight can take various forms. One approach, which may be best suited for smaller countries with limited capacity, is a prescriptive or audited approach from the governmental authorities. For countries where there is more capacity, the requirements in the legal regime could be supplemented by placing more responsibility on the operator to work with codes of conduct it develops and are agreed with the governmental authorities. Both systems need the capacity within the authority to manage the workload. To some extent, this will be dependent on the size of the oil, gas, or mining sector in a country. For example, where there is a single mine, oversight capacity does not have to be overly elaborate.

Organizational capacity

The relevant laws should specify the authority and responsibility of different institutions (see chapters 5, 6, and 7). As chapter 5 has shown, there is a growing body of knowledge about the most effective ways of allocating responsibilities across government institutions, even though there have been setbacks where countries have attempted to introduce new systems of oversight. In established EI regimes, such as Australia and the United Kingdom, reorganization has evolved in line with the changing national EI context, and underlined the value of learning from other countries’ practices in regulatory design. Although not a model, the Norwegian approach has been a useful benchmark for new EI states in making comparisons and contrasts.

In addition, the allocation of responsibilities should take full account of environmental and social protection in the sector. For countries with well-developed environmental monitoring capacity, the environmental ministry should be responsible for policy and establishing laws and regulations, and a national environmental protection agency or local environmental authorities should be responsible for enforcement. The laws and regulations should clearly specify which environmental authority is responsible for monitoring and enforcement. They should also specify the procedures for companies to follow in preparing and submitting environmental and social performance data and the procedures for verification and independent testing by the environmental authorities.

The environmental authority should be able to put in place the institutional arrangements and capacity needed to respond to serious environmental incidents or accidents, so that they can be controlled rapidly and investigated thoroughly with results disseminated to communities

294 OIL, GAS, AND MINING