Oil’s Not Well for Nagaland

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Demanding his due Nagaland Chief Minister Neiphu
Demanding his due Nagaland Chief Minister Neiphu Rio Photo: UB Photos

“Urra uvie” (our land belongs to us) is the motto around which the 60-year-old Naga struggle for sovereignty has evolved. As a peaceful struggle gave way to an armed movement, Nagaland was created in 1963 and given a special status under Article 371A of the Indian Constitution. A special status that grants, among other things, that no Act of Parliament shall affect the ownership and transfer of land and natural resources unless the Nagaland Assembly decides to do so by passing a resolution.

And it is the interpretation of this clause that has pushed the state government and the Centre into a constitutional row over how to exploit Nagaland’s natural resources.

On 22 September 2012, the Neiphu Rio government passed the Nagaland Petroleum and Natural Gas Regulation and welcomed expressions of interest from companies to extract oil and natural gas in the state. The move sent alarm bells ringing in New Delhi.

The clash between the state and Central government is over the interpretation of Article 371A. According to reports, the Centre feels that the special status grants the Nagaland Assembly “negative powers”, as in the right to reject any Central act that falls in the areas mentioned in the provisions. However, it does not give the state government powers to legislate on any areas that may fall under Central control, like natural resources. Hence the UPA government has sent two letters of objection.

But the state government, led by the Nagaland People’s Front, has stood firm in its stand, quoting a 2010 Assembly resolution which states that, “No act of Parliament governing petroleum and natural gas shall be applicable to the state of Nagaland, and all such acts shall be deemed to have become inapplicable to the state of Nagaland and all such acts shall be deemed to have become inapplicable to the state from the date of enactment of Article 371A (1) (a) of the Constitution of India.”

The Rio government also produced a response by the petroleum ministry to a parliamentary question in March 2011 conceding that the constitutional provision applied to the exploration of natural resources. However, the ministry has admitted that this is a mistake and corrected its stand, following that up with a letter from Petroleum Minister Veerappa Moily stating that the notification of petroleum and natural gas was unconstitutional.

Situated on the Assam-Arakan Basin, Nagaland is sitting on 600 million tonnes of crude oil, with a recoverable reserve of approximately 1,600 barrels per day, among other natural resources. However, any previous attempt to extract this oil has been met with staunch resistance.

In 1952, rebel outfit Naga National Council pushed out the Burma Oil Company, which had started oil exploration in the plains of Chumukedima near Dimapur. In 1994, the Naga Students Federation (NSF) sent the Oil and Natural Gas Corporation packing after the State-run firm had already extracted 1 million tonnes of crude oil.

The logic was twofold: First, if Nagaland was to get sovereignty, it would need its natural resources to run its economy. Second, according to Naga custom, all land is privately owned. It is divided between individuals, village councils, range councils and tribal councils, each of whom own the resources above and below the ground. Hence, not only is there consent required, but the benefits must be accrued by them.

“Interestingly, if you were to superimpose the maps put out by the Geological Survey of India, mapping out the potential for oil, natural gas and coal with that of the territories patrolled by Naga rebel groups in Nagaland, Manipur’s Naga Hills and sections of Assam, they match almost perfectly” says a retired police officer, who spent the better half of his career fighting insurgency in the Northeast. “They hold on to these areas because they are a future source of revenue and whenever these fields are opened up, they will get a share of the petroleum pie.”

However, the tone has become mellow in recent times. “Anybody who comes to drill oil must build infrastructure here,” says the leader of an underground group. “They must create job opportunities for our youth and set up refineries here. We will not allow crude oil to be taken out of the state. If the companies or the government don’t follow these guidelines, we will interfere and we should not be held responsible for our actions.”

Even the NSF has changed its stand. “Natural resources in Naga-inhabited areas belong to the Nagas,” says an NSF leader. “Any exploration in Naga-inhabited areas should be done through a deal with the Nagas and the benefit should be enjoyed by our youth.”

The change of heart is the result of a simple realisation. “Nagaland’s oil wells are part of the Assam-Arakan Basin. So, even if we stop drilling from our side, Assam will continue to do so,” says a source close to an underground group. “The idea is no longer about resources or sovereignty but about extracting maximum economic benefit.”

As a result, the Assembly passed the Nagaland Petroleum and Natural Gas Regulation last year and started working overtime to invite bids from companies to extract oil and gas within the state.

The resolution had three pre-conditions: any product had to have the prefix of ‘Naga’; 16 percent of the revenue would go to the state government; and companies that do business with states with whom Nagaland has a boundary dispute will be blacklisted.

While the state government and the Centre continue to negotiate on the issue of jurisdiction of natural resources, there has been a wave of support for the state government’s stand from the civil society. “There is huge unemployment in Nagaland. Apart from the senior government officials, most of the people are facing financial hardship,” says a Naga youth on the condition of anonymity. “We want oil exploration and production to start so that the local economy gets a boost.”

There have been multiple proposals to make best use of this investment. According to the regulation itself, besides the permit fees, the company that gets the contract has to make an additional payment of 16 percent of its total value of production of petroleum or 12 percent of the value of natural gas. This is to be distributed between landowners, the District Development Board and the government. Regarding employment, every company will have to reserve 33 percent of the unskilled jobs and 10 percent of non-technical jobs for Nagas.

The Naga Hoho, an umbrella organisation of various Naga civil society groups, has made a counter-proposal: 12-16 percent of the gross revenue should be paid for natural gas wells and a flat royalty of 12 percent on gross revenue capped at $4.2 per MMBtu (million British thermal unit). Free equity can be kept at 2-3 percent, but should be paid off after the project has a positive cash flow. It also wants 40 percent of the net income to be distributed to the landowners of the project area. On the jobs front, the Hoho has demanded 100 percent reservation for locals in Grade III and IV jobs and 30 percent in Grade I and II jobs.

Depending on how this process unfolds, Nagaland could open up its vast natural resources of coal, limestone and noble metals for extraction. But for now, even though everyone agrees that oil and natural gas exploration is the need of the hour, the debate on the jurisdiction over natural resources continues.

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