Companies operating in the mining and oil & gas sectors face numerous challenges as they pursue their projects that firms in other industries do not have to contend with.One of the primary reasons for this difference is that rich mineral deposits and oil & gas reserves are often found in remote or isolated geographical regions that lack the physical infrastructure such as roads and electrical power that are necessary for the successful operation of industrial facilities.Another major reason is that the local communities living in these regions may be resistant to large projects and the social and environmental impacts that result from them.
Free, prior, and informed consent (FPIC) in the mining and oil & gas sectors has been a much-discussed topic in recent years.
The interest in this subject stems from the fact that the International Finance Corporation (IFC) requires companies who wish to build projects of this nature to consult with project-affected persons beforehand in an open and transparent manner free of coercion so that they can understand the potential benefits and drawbacks associated with the project. While this sounds good in theory, the reality on the ground can be far more complex.
For some large projects, the number of project-affected persons can run into the thousands. These stakeholders are rarely, if ever, unanimous in their views. Meetings in different communities must be scheduled in advance, and information about the project has to be properly diffused within them. Keeping track of the minutes of these meetings and the various stakeholders who voice their opinions requires a robust information management system.
FPIC has been criticized for a number of reasons. Environmental and human rights organizations have often pointed out that project-affected persons are at a disadvantage from the outset of the process because they do not have vast financial resources at their disposal to successfully challenge proposed projects.
Robert Goodland, who worked as the World Bank’s Chief Environmental Advisor from 1978 to 2001, argues that consent, rather than consultation, should be the goal of FPIC, as this would avoid a number of human rights issues related to involuntary resettlement and indigenous peoples.
It appears that the IFC has taken some of this criticism to heart, as the proposed 2011 changes to its Performance Standards mandate free, prior, and informed consent when a transaction involves projects that “are to be located on or make commercial use of natural resources on lands subject to traditional ownership and/or under customary use by Indigenous Peoples… require relocation of Indigenous Peoples from traditional or customary lands… or involve commercial use of Indigenous Peoples’ cultural resources.” Although this might seem like common sense, the legal repercussions of this change in language are important– indigenous communities will now effectively have veto power over project design and implementation. Given the distinct challenges that mining and oil & gas companies face when operating in remote environments, FPIC is an issue that will remain particularly relevant for these sectors in the years to come¸.
Borealis will continue to keep on top of new developments related to FPIC to better serve its customers and follow up the project-affected persons.
Andrew Sandford, Environmental Analyst, Borealis