Petroleum Institutions


3. Legislative bodies

At times, legislatures and parliaments are overlooked in the extractive industries sector value chain, and are often affected by weak institutional capacity and more powerful executive bodies. However, legislatures have the potential to play a vital role in effective management of oil, gas and mining sectors. Through their core law-making and oversight functions, they hold the “power of the purse” in control of public expenditure.

In law-making, legislatures are responsible for reviewing bills and enacting legislation needed to support the extractives sector. Legislatures also play an important role in extractives sector contract making in some countries. Legislatures also serve an oversight function that allows them, and particularly their committees, to:

  • Inject accountability through investigation of oil, gas and mining sector issues; and

  • Scrutinise government activities and the allocation of funds.

  • The latter function can extend to the scrutiny of national resource companies, perhaps through a requirement to submit annual reports and audited financial statements. For instance, under Norway’s Petroleum Act, the state petroleum company, Statoil, is obliged to report to the legislature on any projects it undertakes which have significant economic and social impacts or which have costs reaching to more than US$840 million.

Legislative duties

Finally, in their representative role, legislatures can ensure public participation in the political process as it relates to these sectors. 

Legislature duties

 

Key roles of parliaments in the EI sector

In a World Bank study, key roles of parliaments have been identified in five important stages of the EI value chain which are crucial to avoid the resource curse. These are as follows:

1. The decision to extract – legislatures can commission studies and consult experts on the potential consequences of extraction of the resources, in order to make a decision of whether to exploit or leave the resource in the ground;

2. Contracts and licences – legislatures can vet contracts and ensure that certain terms like fiscal and taxation and local content are properly addressed. Usually, the drafting and negotiation of contracts is the responsibility of executive branch ministries or state-owned enterprises. After this. Some countries require the final, negotiated contract or selected bid to be ratified by parliament for it to come into effect. The following countries require parliamentary vetting of contracts: Azerbaijan, Egypt, Georgia, Kenya, Kyrgyzstan, Liberia, Sierra Leone and Yemen;

3. Monitoring of operations – Parliamentary committees can use hearings and make field visits to monitor compliance with contractual terms, ask relevant questions, and produce committee reports. They can also seek executive clarifications during parliamentary sittings, and liaise with civil society and administrative organs to monitor compliance;

4. Collection of revenues – Parliament or parliamentary committee can compare estimated revenues in the approved budget with actual received revenues, and flag any major differences. In reports. Parliament can also engage with the media to highlight discrepancies and conduct investigations. Parliament can also seek updates on the workings and commitments of Extractive Industries Transparency Initiative (EITI) multi-stakeholder groups, where a country is an EITI member; and

5. Revenue spending Monitoring of revenue spending can be through efforts of a parliamentary audit committee and public accounts committee, and seeking audit reports from the auditor general. Clarifications on audit reports should be sought in parliamentary seating, and the findings publicised in order to maintain pressure on the executive.