Victor A. Akujuru Department of Estate Management,
Rivers Stale University of Science and Technology, Nkpolu-Oroworuokwo, Port Harcourt,
Rivers State, Nigeria. Abstract The paper seeks to establish the basis for determining a fair and adequate compensation- for oil spillage pollution. The role of professionals in determining the true value of polluted properties is discussed and a conclusion made that it is better for both the polluters and the claimants to engage estate surveyors and valuers who are legally empowered to evaluate properties, to assess the true value of polluted properties. Introduction
Public concern about the impact of environmental pol1ution and hazards on the environment has grown dramatically As land owners realise the economic losses suffered as a result of pollution, numerous claims have been made to the oil and gas companies whose activities have become key source or pollution to the environment.
Most claims have no scientific basis for determining the compensation. The oil and gas companies are shrewed business concerns and devise ways and means minimise the pollution compensation. While some ascribe every pollution to sabotage of installations by third parties, others arbitrarily fix a ceiling for compensation. From both claimants' and polluters' point of view, no professional basis is adopted in fixing appropriate compensation.
Pollution occurs when foreign objects or contaminants are introduced into the environment. The Environmental Pollution Panel of the President's Science Advisory Committee, U.S.A. (196:5) defined pollution as
The unfavourable alteration of our surroundings, wholly, or largely as a by-product of man's actions through direct or indirect effects of changes in energy patterns, radiation levels, chemical or physical constitution and abundances of organisms. these changes may affect man directly or through his supplies of water and of agricultural and other biological products, his physical objects or possessions or his opportunities for recreation and appreciation of nature.
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ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
GESAMP (1972) sees pollution as:
The introduction by man into the environment of substances or energy liable to cause hazards to human health, harm to living resources and ecological systems, damage to structures or amenity or interference with legitimate uses of the environment.
Holister and Porteous (1976) defined it as:
Substance or effect which adversely alters the environment by changing the growth rare of species, interfering with the food chain or interfering with health. comfort, amenities or property values of people and is generally toxic.
Georgewill (1997) suggests that pollution is:
Something in the wrong place at the wrong time in the wrong quantity and that pollution III List be seen in a socio-economic context.
It has been suggested that pollution where it occurs, causes damages to:
I. human. health caused by specific chemical substances present in the air, water and radioactivity,
II. natural' environment which affects vegetations, animals, crops, soils and water:
III. Aesthetic quality of the environment caused by smoke, chemical fumes, dust, noise, the dumping of waste and rubbish and dereliction; and
IV. damage caused by long term pollution effects which are not immediately apparent.
For the study, we accept the definition of Holister and Porteous and the likely damages resulting from pollution as earlier stated. As posited by Holdgate (1980), the quantification or assessment of the scarcity of the hazard or damage or interference with the quantity of the environment is very crucial if the environment is to be sustained.
In the Niger Delta region, it has been identified that pollution may occur from one of three possible sources, with attendant effects as follows:
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
SOURCE: Pallo D. Grerv: Oil and Gas: Production and Pollution. Carl Bro International a/s Carl Bro Group 1992.
Purpose of Study Among these sources,' the study concentrates on the pollution occurring from
Category 2. Oil pollution from oil production manifests itself in the form of oil spillages. It is appropriate to discuss the sources of oil spillages and pollution. Literature Review Maynel (1982) opines that crude oil can sterilise soils and prevent crop growth for varying time periods depending upon the degree to which the soil is saturated with oil. Sources of Oil Spillages and Pollution (a) Discharges of crude or fuel oil by tankers on the' high seas as a result of one or more of the following causes:
(i) Tankers mixture and leakages;
(ii) Deballasting by tankers in unauthorised sea zones;
CATEGORY SOURCE OF POLLUTION EFFECTS
Category 1 Effluent domestic waste water Direct health hazards and
eutrophication.
Waste generation Direct health hazards. Blockage of
septic waste water.
Uncontrolled industrial effluents Direct health hazards and toxic
effects,
Physical impacts from oil Degradation of the integrity in
Exploration and exploitation poistine areas, loss of biodiversity and-
confrontation with local settlements.
Lead in exhaust emissions Direct health hazards to new
generation.
Category 2 Oil pollution from oil production Degradation of the environment.
Gas flaring Contribution to the global green-house
effect.
Category 3 Acidification from gas flaring Corrosion effects within short distance
from flares.
Exhaust emissions from traffic Reduced pulmonary function
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
(iii) Accident to oil tankers - running around or hitting submerged rock formation;
(iv) Equipment failure or malfunction; and
(v) Deliberate discharge of oil from a leaking tanker in a bid to prevent further damage to the tanker or even to save life
(b) Wave and wind action on discharged pollutants;
(c) Spillages from petroleum operations on land swamp and offshore areas owing to:
(i) Equipment failure or malfunction as well as poor production facilities;
(ii) Improper separation of oil or water by separators in crude oil production
(iii) Well testing;
(iv) Damage to oil pipeline;
(vi) Accidental oil loss during loading of oil rankers;
(vii) Well blowouts;
(viii) Sabotage of oil installations
Obligations of the Holder of an Oil Pipeline License 1. Obligation to pay compensation to
(a) Any person whose land or interest in land is injuriously affected by the exercise of the holder’s right whet her or not the affected land or interest falls outside the area or route of the pipeline licence.
This means that fishing gears, fishing rights, crops, economic trees, structures and land around a location or the route of a pipeline involved in the pipelaying operations is compensatable.
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
(b) Any person who suffers damage as a result of neglect on the grantee's part or his agent's and servant's to protect, maintain or repair any project undertaken in furtherance of the licence.
(c) Any person suffering damage as consequence of any breakage of, or leakage from, the oil pipeline or any of its ancillary installations.
A proof of damage by sabotage will obviate the grantee‘s responsibility
In awarding compensation, regard will be given to the following: 1. any damage done to any buildings, crops or
profitable trees; 2. any disturbance caused by the holder in exercise of
his rights; 3. any damage suffered by any person.. by reason of
any neglect on the part of the licencee or his agents, servants or workmen, to protect, maintain or repair any work, structure or thing executed under the licence;
4. Any damage suffered by any person, arising from any breakage of or leakage from the pipeline or any ancillary installation;
5. loss in value of the land or interests; in land by reason of the exercise of the rights above;
6. any compensation already awarded in the same respect from other court actions or sources.
Other Obligations of a Licencee
1. Provide alternative infrastructure e.g. customary tracks, paths,
crossings, bridges, culverts, drains or passages interrupted by his
operations under the licence. This will be dispensed with where
adequate compensation has been paid. Though this obligation is
once and for all, it 'is always very impracticable to fulfil in view of
the fact that it requires extra land which may not always be
available.
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
2. Give prior notice of certain circumstance e.g.
a. altering the level/position of any pipe, conduit, water-course, drain, electric powerlines, telephone or telegraph wires or posts. Section 16(2), oil pipelines act requires him to give reasonable notice of his intention to alter.
(b) felling a tree near a pipeline or other installation . This will also attract compensation,
3. Make good damage caused on termination of licence - after giving 3 months’ notice of intention to remove the pipeline on expiration of licence, will be required to make good any damage within 3 months of such termination.
4. Commence work with dispatch.
Compensation
Compensation can be defined as the preparation for loss or injury paid for damage to property, Damages by oil spill arc difficult to quantify as they involve a socio-economic component. It is generally accepted that the polluter pays for his pollution and this principle covers the cost or clean-ups and any damages incurred. Waller (1981) states that the compensation paid serves two purposes to:
(i) restore the aggrieved parties to their stale of wellbeing; and
(ii) deter the polluter from causing such damage again.
Thus, only when any compensation paid meets these two aims does it constitute a fair and adequate compensation has been argued that the second aim makes it punitive but it is submitted that such a penal consideration is essential to enforce better environmental standards in oil operations.
Determination of Compensation Payable
Compensation is the reparation for loss or injury paid for damages to .land and other properties.
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
The quantum of compensation payable is a value problem which determines, to a large extent, the co-operation of the oil bearing communities in the wake of an oil spillage . The determination of the value or the valuation of any property is a specialised function prescribed by law to be the duty of Estate Surveyors and Valuers. CAP 111 (LFN 1990) defines the estate surveying and valuation professionals as those engaging in the art, science and practice of:
i. determining the value of all descriptions of property and of the various interests therein;
ii. managing and developing estates and other business concerned with the management of landed property;
iii. securing the optimal use or land and its associated resources to meet social and economic needs;
iv. determining the structure and condition of buildings and their services and advising their maintenance, alteration and improvement;
v. determining the economic uses of the resources by means of financial appraisal for the building industry;
vi. selling (whether by auction or otherwise), buying or letting as an agent, real or property or any interest therein
The law makes it an offence for a non-estate surveyor and valuer to determine the value of real property.
Determine the value of land or any interests in land, thus appropriately falls within the ambit of the practice of estate surveying and valuation.
Only the professional estate surveyor and valuer can thus place a value on interests on land for compensation purposes, The estate surveyor and valuer is the professional who has been duly 'registered by the Estate Surveyors and Valuers Registration Board of Nigeria, This body is a government body established in 1975 under Decree No.24 1975, now CA III (LFN 1990) to regulate the practice of estate surveying.
In Nigeria, compensation valuation has been seen as all-corners' affair. Not only do other professionals like crop scientists, soil geologists' etc. profess to be experts in compensation assessments, but non-professionals of estate surveying have been retained by the, oil companies to determine compensation payable. These non-professionals known as damage clerks or claims, officers in the oil companies team up with businessmen In the style of claim agents to determine the quantum of compensation for oil spills
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
No qualification except the possession of basic secondary school education is required to be a damage clerk or claim agent In fact, many claim agents are hardly literate. It is this practice of determining compensation by non-professionals that has resulted in communal crises with the oil companies bearing the brunt. The crises have caused inadequate compensation. It is not suprising therefore that the claim agents run to estate surveyors and valuers in time of litigation.
If compensation is determined by professionals, there will be minimal problems of adequacy and acceptability. The technicality of a valuation exercise is such that an untrained mind can hardly handle. The practice of only enumerating the crops and structures actually damaged by a spill, as constituting the main compensatable items of claim, does not determine the actual loss suffered by the victim of oil pollution.
A professional estate surveyor and valuer will not only enumerate but will professionally determine the value of such crops and trees but quantify other losses.
Valuation for Oil Pollution Compensation
Mattson (1979) identified live categories of damages:
i. Clean-up costs; ii. Loss of income by individuals who depend directly upon
the damaged resource for their living; iii. Loss of income by individuals who depend indirectly upon
the damaged resource; iv. Property damage or loss of use; v. Damage to natural resources.
A valuer faced with the task of establishing the amount of compensation payable will identify which category that is most relevant to the case in point. In the Uyakama oil spill of 1981, in the then Ahoada Local Government Area of Rivers State, damages to the following were considered:
1. Annual/subsistence crops @ NI,782,000.00 2. Cashcrops @ N175,080.00 3. Forest products and economic trees @ N115,672.00
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
4. Fisheries @ Nl,365,000.00 5. Loss of hunting amenity @ N88,630.00 6. Water resources @ N7,014,000.00 7. Damages to roads, property and livestock @ N2,000 8. Desecration of juju shrines @ N83,800.00 9. Social effects like health hazard, shock and fear, general inconveniences
and legal expenses @ N4,879,00000
While most heads of claim are easily quantifiable the compensation for hunting amenity and social effects has remained debatable. The social effects have now been accepted as a compensatable head of claim by the Appeal Court in the case of Councillor Farah in Shell Petroleum Development Company (1994); where damages were awarded for shock and fear resulting from an oil blowout sometime in 1971.
Compensation Valuation Problems
Many assessors of compensation hardly know the spacing of most economic and cash crops in their areas of operation For instance, how many claim agents or damage clerks know that cassava and yam should be scientifically spaced at 1m2 intervals and thus 1 ha of land should contain 10,000 stands? How many palm trees of the wild growing variety or plantation type can be found on 1ha of land etc. If a farm is polluted, then the farmer can only be satisfied with his compensation; if such payment reflect his cropping or approximates his cost of planting the farm. Valuers have generally adopted the replacement cost method and some modified form of investment valuation to determine the quantum of compensation. While crops and fishing are easy to compute; the loss of hunting amenity and social effects are onerous tasks that require knowledge and skill of professionals. Social effects valuation, calls for a knowledge of demography, sociology and psychology. Social effects manifest themselves in the form of shock and fear as a. result of the sudden discovery of the pollution. It is true that the more aware a person is about a situation, the less likely it is for him to be frightened by such a situation. The rural populace is more ignorant and prone to shock and fear. In determining the compensation payable, it is necessary to allay the fears of the communities affected that the condition
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
will eventually return to normal. While it is difficult to relate shock and fear to any economic criteria; it is possible that these psychological factors have a deleterious effect on the work and life of the people. The valuation of damages for the desecration of juju shrines has provoked a lot of arguments in recent times. While it is accepted that it should be compensated for, the problems have been the extent the damage should cover.
Methods of Valuation for Oil Pollution Damages
It is proposed here to review the methods in use and suggest possible ways of minimising the attendant problems. Most valuers adopt the replacement cost method which is applicable to crop compensation rates. Currently, the rate applicable for government acquisitions in the Eastern States of Akwa lbom, Anambra, Cross River, lmo and Rivers States is used for pollution valuation in Rivers State. Most oil companies have their own rates which are rightly higher than the government rates in some cases and lower in others. Some even have a maximum quantum per hectare of land, no matter the crop composition Involved.
The compensation rates do not include long term, non-market goods, or off-site effects. Long term ecological changes including vegetation changes are not covered. The method also neglects to include indirect economic impacts, like the disruption-of breeding grounds for marine fish.
The current compensation programmes aggravate community relations and reinforce the perception that oil activities cause most problems of the delta areas.
To illustrate the valuation problem practically, let us examine a land of about 2.5 ha. Polluted by an oil spillage from the facilities of one major oil companies at Ihuama in
Ahoada East Local Government Area of Rivers State. Where this land is farmed, an enumeration of the crops specie will be undertaken. If it is assumed that about 30% of this land is used for food crops like cassava, yams and vegetables, 30% is occupied by raffia palms and the balance of 40% is pure forest. Within the forest, natives gather snails, medicinal herbs, chewing sticks, ropes etc. Hunters also hunt for game prior to the pollution.
Method 1: Orthodox
This method adopts the replacement cost approach in ascertaining the value of the compensation. It will entail enumerating the crops and economic trees and applying the crop compensation rates to determine the compensation. It ignores the forest products
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
This approach looks like this:
5000 stands of cassava @ N3. 00 - N15,000.00
2000 stands of yam @ N 12.00 - N24,000.00
1000 vegetables @ N3.00 - N 3,000.00
60 raffia palm trees @ N100 - N 6,000.00
20 hardwood @ N400 - N 8,000.00
15 softwood @ N200 - N 3,000.00 Tolal - N59,000.00
Method 2: Using Maximum Rate for Hectare
If instead of the unit of compensation, a maximum rate of say NI8,000.00 per hectare is adopted, the total compensation will be N45,000.00 only. In this method, no cognisance is taken of the crop composition on the land or tree composition. No notice is also taken of forest products which provide a means of income for the populace.
While Method 1 depends on accurate enumeration of the specie composition to arrive at the compensation' value, Method 2 disregards the specie composition, thus disregarding the differences between farmers The unit rates of N3.00 per cassava stand and N12.00 per yam stand arc very unrealistic at a time when garri is costing 5 cups for N20.00 and one stand 0(' cassava can produce more than 5 cups of garri when processed. So also is the rate for yam and the other crops.
For the trees, the mere enumeration of the number of tree does not recognise the use to which the trees can be put. Linddal (1995) has opined that oil producers pay about N1, 000.00/ha in compensation for damaging forest land in Delta State whereas the actual price should be at least N50,000.00. It can be concluded, therefore, that these methods result in an underestimation of the compensation.
The methods do not account for loss of production in subsequent years after the spillage, until normalcy returns.
Method 3: The Preferred Method.
This method seeks to establish the compensation by adopting a scientific approach. Firstly, it requires accurate enumeration of crops and economic trees. Secondly, it requires a listing of the various uses for such crops/trees and the estimates income from such uses, after allowing for the production costs. Thirdly, a capitalisation of the income for the estimated life span of the crop/tree at an appropriate rate of return.
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
The problem inherent in this approach is the life span and the choice of the appropriate rate of return. It is suggested that the life span can be determined By ascertaining the time-lag between the spill and when the soil will return to its pre-spill state. For those trees that are used and for all like timber, the income should be the net income from its potential uses after allowing for wastes etc. when it is ascertained that the pollution has destroyed their economic life. Thus for the example stated above, there are crops, wood products and non-timber products.
Crops:- Cassava used for foofoo, garri
Yam used on its yarn flour
Vegetables used for itself
Cassava has an annual yield of about 29 tonnes/ha and can be sold at 2.50 per kg. Yams have a yield of about 15 tonnes/ha per annum and can be sold for about N20.00 per kg.
Raffia palm is a non-timber forest product that can be used for wine and arrack production. The poles are for fencing while the leaves are used for roofing. It is also used as a cane and for fishing material.
Timber can be used as sawlogs, building poles, transmission poles, fuel wood, chewing sticks etc. Each use has different market price. For instance, mahogany sawlogs can be sold at N6,500/m1 One tree yields 3 -logs that are 4m long. One log is approximately 1m3. Fuelwood is sold for N40 per 5Okg bundle and chewing sticks are sold at N15 per bundle of 20 sticks.
Besides timber, the other crops are renewable and the attendant income can be earned for a long time. Thus, assuming a recovery period of say 10 years for the perishable crops, the compensation can now be computed as follows:
Item Net Income
141,159.38
15,057.00
Cassava N(0.25 x 29 x 100 x2.5) 18,125.00
Yams N(0.25 X 15 X 1000 X 2.0) 7,500.00
Vegetables N(0.25 x 1000 x 10.00)
2,500.00
Total Income 28,125.00
Y.P. for for 10 years*(1) @ 15%*(2) 5,019
Timber*3 24,000.00
6,750.00 Hardwood (20 x 3 x 400)
Softwood (15 x 3 x 150)
Total Compensation 186,966.38
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110 years is taken as the period during which the income will be lost due to the pollution. Thereafter, it is expected that
normalcy will return.
215% is assumed to be an adequate return for this type of investment. 3It is assumed that the pollution destroyed the economic life of these items.
So far, we have not added any non-timber forest product, loss of hunting amenity or social effects.
Hunting amenity is valued by estimating the extra time a hunter will travel to find game; this is because wild life would have avoided the polluted area after the spill. Thus after establishing the number of hunters and observing their incomes, extra time taken can be costed to determine the compensation for each hunter.
Social effects manifest in the form of shock and fear which the landowners suffer on discovery of an oil spill. While it is difficult to relate shock anlfear to any economic criteria, if is- possible that these psychological factors will have a deleterious effect on the work and life of the affected people. It is thus possible to place a shadow value on these by establishing the loss in daily production of individuals affected by the spillage. This will be related to the daily wage range in the community and the estimated duration of the effects. While the effects may last for as long as 12 months, some may be as short as 3 months, depending on the suddenness of the occurrence. It is assumed that after the initial period, the initial shock of the incident, would wear off gradually. In legal terms, these hunters have been injuriously affected by the' pollution.
Non-Timber Forest Products (NTFPS)
In most compensation assessments, no attention is paid to certain sources of income which are lost as a result of the pollution. in particular, they are members of the land owing communities who depend on what they can gather from the forests (besides timber), for their livelihood. These include snails, herbs, and other byproducts of plants like chewing stick, dying and tanning, veterinary medicine, bee .plants, fish poison etc fruits like agbono, oil-bean seeds, periwinkles, cockles etc. which are termed non-timber forest products (NTFPs). These' products ought to be assessed, and proper values placed on them and adequately compensated for. Clearly, these are neither land or crop/trees but economic gains from the land:-Hence, NTFPs .should also be a head of claim.
In the case study, it is, obvious that without even a detailed inventory of the non- forest products in the 2.5 ha site, but by applying a professional approach to the assessment of the damages, the compensation claimable will be higher than what the oil companies are paying currently.
This indicates a multiplier of almost 3 when methods 1 and 3 are compared.
ASSESING THE VALUE OF POLLUTED PROPERTIES V.A AKUJURU
Professional Representation
Most communities affected by oil spills retain either claim agents or lawyers for representation in the negotiation of the compensation payable. These persons are only business persons who charge about 33.31% fees on every compensation paid, These persons are not qualified either in law or practice to determine the quantum of compensation, yet they charge so highly.
Compounding the plight of the claimants is the non-inclusion of professional fees as an additional payment to the claimants. In developed countries, payments for professional representation are always an extra payment. This leaves the compensation agreed intact for the claimants and encourages them to seek professional representation. Valuers normally charge a paltry 10% of the amount of compensation agreed as fees. This is more favourable to the claimants if they retain valuers directly. It is thus obvious from both the determination and fee basis, that a professional representation by estate surveyors and valuers is a preferred option. Conclusion
The determination of a fair and adequate compensation for oil spillages is a professional job for estate surveyor, and valuer. While a professionally determined compensation will improve the lot of victims of oil spillages, it will also ensure that the polluter pays for the payment of fees for professional representation if claimants are to receive what is agreed upon as a fair and adequate compensation
References
Odudu, W.O. (1990). The estate surveyor and valuer: His role in the Nigerian Society; Paper presented at the Annual Dinner of the Rivers State Branch ojNIESV Anon (1983) A guide to narrative demonstration appraisal reporting. The Society of Real Estate Appraisers, Chicago, Illinois. Anon (1983): The Appraisal of Real Estate, American Institute of of Real Estate Appraisers, Chicago, Illinois. Idoniboye-Obu, E. (1981): Damage assessment following an oil spill in Nigeria. Paper presented at an N.N.P.C. Seminar. Uduehi, G. O. (1987): Public lands acquisition and compensation practice in Nigeria.
Ikeja: John West Publication Limited. Anon (197X): Land Use Act. Lagos: Federal Government Printing. Anon (1956): Oil Pipelines Act Lagos Federal Government Printing. Holister, G & A. Porteous, (1976): the environment. A dictionary of the world around us. London: Arrow Publishers. Holdgate, M.W. (198(1): A perspective of environmental pollution. Cambridge: University Press. Georgewill, J.W. (1977): A textbook of environmental education. Port Harcourt: EI-Spital (Nig.) Limited
