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2018 | OriginalPaper | Chapter

7. Legal Rights and Interests in Resource Extraction

Author : Damilola S. Olawuyi

Published in: Extractives Industry Law in Africa

Publisher: Springer International Publishing

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Abstract

This chapter examines the key features of, and distinctions between, the different types of legal rights and interests granted by African regimes for petroleum, mining and metallurgical operations. After discussing the nature, scope and fundamentals of freehold, leasehold, mineral, surface and royalty interests, the chapter unpacks the characteristics of commonly encountered mining and petroleum interests in African countries. The chapter also examines the common types of petroleum and mineral exploration rights and licenses across Africa; the conditions for the grant of each of those licenses and permits; and the procedures for assignment and revocation of these rights.

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previous chapter Regulatory Institutions
next chapter Contractual and Fiscal Arrangements in the Extractive Industry
Footnotes
1
See generally, Lowe (2014), p. 38.
 
2
US States where minerals (the mineral estate) are often severed from the surface estate include: Texas, Oklahoma, Pennsylvania, Louisiana, Colorado, New Mexico and others where oil and gas has been produced for decades. Ibid.
 
3
Omorogbe and Oniemola (2010), pp. 116–117.
 
4
Before the English Law of Property Act 1925, a freehold estate transferable to the owner’s heirs and assigns (successors by inheritance or “purchase” [including gift], respectively) was a “fee simple estate.” On the other hand, when transfer, by inheritance or otherwise, was limited to lineal descendants (“heirs of the body”/“heirs of the blood”) of the first person to whom the estate was given, it was known as a “fee tail estate.”
 
5
Lowe (2014), p. 38.
 
6
Ibid, 39.
 
7
Lowe (2014), p. 43.
 
8
For instance, a lease of “oil, gas and other hydrocarbons”, will not include non-hydrocarbons such as sulphur in its ambit. See ibid, 43.
 
9
Omorogbe and Oniemola (2010).
 
10
An easement is a right either of passage, to cross or use land belonging to another for a specified purpose. It creates a limited property or non-possessory right for a third party to do something on land that does not belong to them. See LeFort et al. (2013).
 
11
Ibid. See also the US case of Altman v Blake 712 S.W.2d 117, 118.
 
12
See Lowe (2014), pp. 39–42.
 
13
Lowe (2014), pp. 43–44.
 
14
See Hamilton v. Morris Res., Ltd., 225 S.W.3d 336, 344 (Tex. App.-San Antonio 2007, pet. denied) (first citing Luckel v. White, 819 S.W.2d 459, 463 (Tex. 1991); then citing Altman v. Blake, 712 S.W.2d 117, 118 (Tex. 1986)). “A conveyance of a mineral estate need not dispose of all interests; individual interests can be held back, or reserved, in the grantor.” French v. Chevron U.S.A. Inc., 896 S.W.2d 795, 797 (Tex. 1995).
 
15
See Smith and Weaver (2015).
 
16
See Ingram and Conner (2018), Mineral v Royalty Distinction.
 
17
Ibid, 46–47.
 
18
See the Petroleum Act, 1969, s 1. See also Omorogbe (2001), pp. 34–37.
 
19
See Attorney General of the Federation (AGF) vs. Attorney General of Abia State (No. 2) (2002) 6 N.W.L.R3. Part 764, page 542 stating that only the Nigerian Federal Government alone and not the littoral states can lawfully exercise legislative, exclusive and judicial powers over the maritime belt or territorial waters as well as sovereign rights over the resources therein. See also Famfa Oil Ltd. vs. A.G.F. & NNPC (unreported suit No. C. CA/A/173/06) affirming that participation or acquisition of oil mining licenses in Nigeria is subject to the approval and authority of the Federal Government of Nigeria.
 
20
See for example the Ministry of Petroleum in Angola and the role of Sociedade Nacional de Combustíveis de Angola (Sonangol) EP which is the holder of concession rights and grants exploration and production licenses. Angola’s Petroleum Law No. 10/04 of 12 November 2004, and Article 3 of the Constitution of Angola, 2010. See also the structure in Nigeria with the Federal Ministry of Petroleum Resources serving as the supervising ministry, while the Nigerian National Petroleum Corporation grants licenses and contracts on behalf of the State. See the Nigerian See Petroleum Act, 1969, s 2(1)-(3).
 
21
Omorogbe (2001).
 
22
See Petroleum Act, 1969, s 2(1)-(3).
 
23
For example, petroleum rights in Nigeria are acquired via an Oil Prospecting License or Oil Mining Lease as specified by the Petroleum Act and explored via contractual arrangements such as Joint Venture Contracts, Production Sharing Contracts and Service Contracts. Production from offshore fields, are mostly governed by Petroleum Sharing Contracts and are regulated by the Deep Offshore and Inland Basin Production Sharing Contracts Act.
 
24
In Nigeria, the OEL confers exclusive rights of surface and subsurface exploration for the production of petroleum in an area not more than 2590 km2 (1000 square miles) in size.
 
25
See Olawuyi (2018), pp. 1–2.
 
26
See generally, Petroleum Act, supra n 13, Schedule I, paras 1–4. For more detailed provisions on the rights and powers of the holder of an OEL, as well as their obligations, see generally, the Petroleum (Drilling and Production) Regulations of 1969 to the Petroleum Act, supra note 13, ss 10–13 [Petroleum Drilling and Production Regulations].
 
27
Olawuyi (2018), pp. 1–3.
 
28
See for example Mercier and Olawuyi (2014).
 
29
See the Petroleum Profits Tax Act, Laws of the Federation of Nigeria, 2004, c P13. [PPTA].
 
30
See generally, Petroleum Act, Schedule I, paras 5–7. For more detailed provisions on the rights and powers of the holder of an OPL, as well as their obligations and restrictions on their activities, see generally, the Petroleum Drilling and Production Regulations, ss14, 15 and 16–25.
 
31
The conditions and legal requirement for converting an OPL to OML in Nigeria is well detailed in the Oil Prospecting Licenses (Conversion to Oil Mining Leases etc.) Regulations 2004, which clarifies the terms and conditions under which an OPL issued under the Petroleum Act may be converted to an OML. See also South Atlantic Petroleum Company vs. Minister of Petroleum Resources (unreported suit No. FHC/L/CS/361/2006).
 
32
Oil is deemed to have been discovered in commercial quantities by the holder of a prospecting licence if the Minister, is satisfied that the licensee is capable of producing at least 10,000 barrels of crude oil per day from the license area. See Petroleum Act, ibid, Schedule I, para 9.
 
33
Olawuyi (2018), pp. 1–3.
 
34
See generally, Petroleum Act, Schedule I, paras 8–13. For more detailed provisions on the rights and powers of the holder of an OML, as well as their obligations and restrictions on their activities, see generally, the Petroleum Drilling and Production Regulations, ss14, 15, 16–25.
 
35
Part III of the Kenya Mining Act specifies that a person shall not search for, prospect or mine any mineral, mineral deposit or tailings in Kenya unless that person has been granted a permit or license in accordance with the Act. See also s 2 of the Nigerian MMA 2007 which vests control of all properties and minerals in Nigeria in the State and prohibits unauthorised exploration or exploitation of minerals.
 
36
See S. 1 of Kenya’s Mining Act, 2016 and The Model Production Sharing Contract, 2015. See also MMA 2007, ibid, s1 (1).
 
37
MMA 2007, ibid, s 46.
 
38
See section 77(1) of South Africa’s Mineral and Petroleum Resources Development Act (MPRDA).
 
39
For example, in South Africa, Falcon Oil and Gas Limited holds a technical cooperation permit covering an area of approximately 7.5 million acres (approximately 30,327 km2) onshore Karoo Basin, South Africa.
 
40
See section 77(1) of South Africa’s MPRDA.
 
41
See section 78(1) of South Africa’s MPRDA.
 
42
In Nigeria, in order to qualify for the award of a Reconnaissance Permit, an applicant must be a Nigerian citizen of capacity who has not been convicted of a criminal offence, or incorporated company under the Companies and Allied Matters Act (“CAMA”) or a mining cooperative. See the Companies and Allied Matters Act of 2018, Laws of the Federation of Nigeria 2004, c 20 [CAMA]. See also MMA 2007, s 47; Kenya’s Mining Act, 2016 and The Model Production Sharing Contract, 2015, and Extractives Baraza, Types of Mineral and Hydrocarbon Rights (2018).
 
43
See s 1 of Kenya’s Mining Act, 2016. See also S. 164, MMA (2007). Prospecting must be differentiated from fossiking. Fossicking in many countries is defined to mean searching for minerals for a purpose other than for commercial gain often to a depth of 2 m by digging by hand; or using hand held instruments.
 
44
See s. 1 of Kenya’s Mining Act 2016.
 
45
S. 1 of South Africa’s MPRDA.
 
46
MMA 2007, ibid, ss 56–58.
 
47
In Nigeria, to qualify for an Exploration Licence, an applicant must be an incorporated company under the CAMA, or a mining cooperative, who hold a Reconnaissance permit, and have fulfilled all the conditions attached to the permit.
 
48
See s 1of South Africa’s Mineral and Petroleum Resources Development Act (MPRDA), also s. 164, MMA (2007).
 
49
MMA 2007, ibid, s 60.
 
50
MMA 2007, ibid, s 61.
 
51
MMA 2007, ibid, s 59.
 
52
MMA 2007, ibid, s 62–63. See also KPMG Report, 8.
 
53
See MMA 2007, ibid, s 62–63.
 
54
MMA 2007, ibid, s 68.
 
55
MMA 2007, ibid, s 70–71.
 
56
MMA 2007, ibid, s 66. See generally, KPMG Report, 8.
 
57
Mining Facts (2012), also Extractive Hub (2017).
 
58
See Ledwaba and Nhlengetwa (2016), pp. 26–30.
 
59
According to the World Bank, there are approximately 100 million artisanal miners globally, accounting for 80% of global sapphire, 20% of gold mining and up to 20% of diamond mining. See World Bank Group (2013).
 
60
See Small-Scale Gold Mining Law, 1989 (PNDCL 218) and the Precious Minerals Marketing Corporation Law, 1989 (PNDCL 219), which set up the Precious Minerals Marketing Corporation (PMMC) to promote the development of small-scale gold and diamond mining in Ghana and to purchase the output of such mining, either directly or through licensed buyers. See also s 91 of Nigeria’s MMA 2007, ibid, s 49; and Second Schedule to Kenya’s Mining Act, 2016.
 
61
Ledwaba (2017); also Chamber of Mines (2016).
 
62
See Minerals and Mining Policy of Republic of South Africa, 1998; also Scott et al. (1998), pp. 2–3; Mutemeri and Petersen (2002), pp. 287–288.
 
63
MMA 2007, ibid, s 49.
 
64
In Kenya, the proposed prospecting area for ASM may not exceed 25 contiguous blocks; or (b) in the case of mining operations, the proposed mining area may not exceed two contiguous blocks. An activity may still be designated as ASM if (a) in the case of mining operations, the actual or estimated annual extraction of minerals or material bearing minerals does not exceed 25,000 m3; or, (b) the prospecting or mining operations do not employ specialised prospecting, mechanized mining technologies ,chemicals including mercury and cyanide or explosives; or, (c) the proposed prospecting or mining operations, do not involve an investment or expenditure which exceed such amount as may be prescribed by the Cabinet Secretary. See Second Schedule to Kenya’s Mining Act, 2016.
 
65
MMA 2007, ibid, s 90. See also KPMG Report, 8.
 
66
See definition of quarry of in Section 2 of Fiji’s Quarries Act, Cap 147.
 
67
MMA 2007, ibid, s 76–78. See also KPMG Report, 8.
 
68
MMA 2007, ibid, s 51.
 
69
In many parts of the United States, a water use permit is required before persons may withdraw water in quantities that average 100,000 gallons per day (equivalent to 70 gallons per minute for 24 h straight) or 1 million gallons per year from groundwater or surface water. See for example, Department of Natural Resources Minnesota.
 
70
See for example Section 151(1) of South Africa’s National Water Act (Act 36 of 1998) which provides that no person may use water otherwise than as permitted under this Act, fail or refuse to give data or information, or give false or misleading data or information when required to give information under the Act, fail to register an existing lawful water use when required by a responsible authority to do so and fail to register a dam with a safety risk. The Act gives the Department of Water and Sanitation the power to grant water use permits and to mandate the registration of water use. Registration of water use is compulsory to all mining or exploration operations in South Africa.
 
71
MMA 2007, ibid, s 52. See also KPMG Report, 8.
 
72
See for example Mercier and Olawuyi (2014).
 
Literature
Attorney General of the Federation (AGF) vs. Attorney General of Abia State (No. 2) (2002) 6 N.W.L
Chamber of Mines (2016) Illegal and artisanal mining. Fact sheet 2016. Johannesburg, South Africa
Companies and Allied Matters Act, 2018 Laws of the Federation of Nigeria, c 20, 2004
Famfa Oil Ltd. vs. A.G.F. & NNPC (unreported suit No. C. CA/A/173/06)
French v. Chevron U.S.A. Inc., 896 S.W.2d 795, 797 (Tex. 1995)
Hamilton v. Morris Res., Ltd., 225 S.W.3d 336, 344 (Tex. App.-San Antonio 2007, pet. denied)
Kulander CS (2016) Fixed vs. Floating non-participating oil & gas royalty in texas: and the battles rage on. Texas A&M Law Rev 4(1)
Laborde Properties, L.P. v. U.S. Shale Energy II, LLC; No. 04-16-00168-CV, ___ S.W.3d ___ (Tex. App. – San Antonio Oct. 12, 2016)
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Metadata
Title
Legal Rights and Interests in Resource Extraction
Author
Damilola S. Olawuyi
Copyright Year
2018
Book
Extractives Industry Law in Africa

Print ISBN: 978-3-319-97663-1

Electronic ISBN: 978-3-319-97664-8

Copyright Year: 2018

DOI
https://doi.org/10.1007/978-3-319-97664-8_7

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