The NMMA specifically stipulates that the holder of a mining lease, small scale lease or quarry lease shall negotiate and conclude a CDA with the relevant host community “prior to the commencement of any development activity within the lease area.” In other words, section 116 (1) requires that lease holders must agreed to a CDA with their host communities before the commencement of any development activity within the lease area. This means that a company must immediately after obtaining licence under the NMMA initiate a structured engagement process with the relevant host communities with a view to concluding a CDA prior to the commencement of any mineral development activity. So, community engagement should be ongoing during the exploratory or preliminary stages when all the seismic and assets evaluation activities are taking place within the lease area. Companies are often advised to initiate or establish contact with their host community as soon as a mineral licence is obtained. The reason is that genuine community engagement process (which usually leads to the grant of a community’s consent and support for a project) takes a reasonably long period of time. Thus, to avoid unnecessary delays which may adversely affect a project’s timelines and ultimately the economics of it, community engagement must be commenced very early. This will allow the parties the time needed to cultivate a health relationship, gain the trust of the other party which makes community agreement-making substantially easier to concluded.
Within the context of extractive industry projects, it is always useful to differentiate community engagement from a CDA. Community engagement refers to the interface between a host community and the project proponent enabling the community party to participate actively in the monitoring and implementation of the licensed activity. A community engagement process in energy project context is usually designed to endure for the duration of the project. The main purpose of community engagement is to enable a community to access useful information concerning the nature of the activity proposed by a project proponent, how the proposed project will affect the community and the remedies or palliatives which the proponent proposes to implement to mitigate the adverse impacts of the project. Where community engagement is initiated and sustained, a host community will usually have all the information required in order to arrive at an informed decision whether to provide consent and support for a proposed project or to withhold consent. The NMMA did not expressly provide for the effect of a community’s decision to withhold consent on a proposed project but merely provides that in the event of the failure of the host community and the lessee to conclude a CDA by the time the lessee is ready to commence development after several attempts to reach an agreement, the matter shall be referred to the Minister for resolution.
Nevertheless, experiences from jurisdictions such as Canada, Australia and Papua New Guinea each of which has more than 20 years demonstrable know-how in community engagement demonstrates or proves that a company’s ability to win the consent and support of its host community is beneficial both for the project and the value of the company’s stock.
So, project proponents in these jurisdictions invest tremendous amount of time and resources to community engagement thus significantly reducing the various social risks associated with most extractive industry projects. The expectation is that the Nigerian CDA process will be able to achieve a similar result over time.
The NMMA identifies the need to transfer mining-projects-induced social and economic benefits to the host communities as the principal purpose for instituting the CDA regime. Furthermore, subsection (2) of section 116 provides that every CDA shall contain certain undertakings regarding the social and economic contributions which a proposed project will make to the sustainability of such community. Thus, from the provisions of section 116 (1) and (2), it is expected that CDAs executed pursuant to the provisions of the NNMA and the 2011 Minerals and Mining Regulations will embody certain undertakings which are designed and implemented to engender social and economic benefits in the relevant host communities. However, it should be noted that the existence of a duly negotiated CDA regardless of the undertaking contained therein will be insufficient to secure sustainable social and economic benefits to any host community. Accordingly, careful implementation and regular monitoring of performance are two critical elements of a successful CDA process. Additionally, the issue of how community benefits contained in a CDA is structured is also pivotal to the realisation of CDA-based expectations or outcomes.
Sustainability of host communities within the context of energy projects development is a higher ideal achievable through the CDA process. The reason is because CDAs are traditionally private agreements between a project proponent and the host community and their existence do not automatically lead to a sustainable outcome. Thus, the support of other strategic stakeholders (especially the State) is often critical to achieving a sustainable outcome through the instrumentality of CDAs. This will be discussed in detail in another article.
One of the important bases for CDA negotiation is that resource development projects generally occur within a context of legal rights and/or interests. The minerals right and title usually reside or lie with the State in most jurisdictions including Nigeria. However, the minerals title holder does not always have the rights and title to land or territory on which the minerals are found and upon which a project development activity takes place. While the State may issue or grant mineral licences, it generally would not have the right to grant the mineral lease holder access to land or territory which belongs to another juristic entity or an individual. In Nigeria, the initial thinking and disposition of the Federal Government, which in turn is reflected in the way our natural resources laws are couched, was that the Federal Government has the right to acquire any land upon which mineral resources are found. Nevertheless, Nigerian law recognises Federal Government owned land, a State-owned, community and individual landownership and thus provides a framework for land acquisition by the State which must be adhered to before the State can validly acquire any community land or land belonging to an individual. The CDA process is therefore designed to give recognition to the different legal rights and to facilitate the management of the various interests usually at play in energy project context.
The CDA process thus provides a collaborative framework which enables the mineral title holder to exercise or maximize the full extent of its rights without infringing or diminishing the rights, title and interest of the landowner. The mechanisms of a well structured CDA process help to ensure an orderly and conflict-free exploration and development of minerals.
Obinna Dike, PhD
Dr. Dike is the leading authority on Community Agreements Law and Policy in extractive industry context and works as a Managing Associate, Energy, Infrastructure and Projects at Alliance Law firm
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