AYESHA A. MALIK, J. - This consolidated judgment shall decide upon the common issues raised in Writ Petition Nos. 25984/2011, 21101/2012, 11269/2012, 17237/2012, 22706/2012, 29306/2012, 31841/2012, 940/2013, 1524/2013 and 8262/2013.
2. The basic issue that arises in these petitions is with respect to the annual safety inspection of CNG stations. The case of Petitioners is that the annual safety inspection is to be carried out by third party inspectors as appointed by the Chief Inspector Explosives, under the control of the Ministry of Explosives. It is their case that the Oil and Gas Regulatory Authority (OGRA) has no jurisdiction or authority to appoint their party inspectors for the purposes of inspections, certifications and verification of CNG stations. This authority lies exclusively with the Chief Inspector Explosives.
3. The grievance of the Petitioners is that OGRA has issued notices to conduct annual safety inspections of CNG stations through third party inspectors, appointed by them, failing which the gas supply to the CNG stations will be disconnected. The Petitioners counsels argued that the annual safety inspection was carried out by third party inspectors appointed by the Chief Inspector Explosives, therefore, the Petitioners should not be burdened with the free demanded by OGRA for carrying out an inspection already completed by the Chief Inspector Explosives. The Petitioners contend that the dispute between the Ministry of Explosives and OGRA over who has to conduct the annual safety inspection of the CNG stations should not transgress upon the rights of the Petitioners to conduct their business.
4. The Petitioners in Writ Petition Nos. 25984/2011, 21101/2012, 11269/2012, 17237/2012, 22706/2012, 29306/2012, 940/2013, 1524/2013 and 8262/201 & well all issued notices by OGRA for the purposes of conducting annual safety inspection of third party inspectors appointed by OGRA. Writ Petition No. 31841/2012 has been filed against a notice issued for retesting of CNG cylinders. Writ Petition No. 1524/2013 has been filed by the association of third party inspectors who seek a declaration from this Court that they enjoy exclusive jurisdiction to conduct all safety related inspections. The case of the Petitioners is that in terms of Sections 5 and 6 of the Explosive Act, 1884 (Act of 1884) Sections 4 and 5 of the Petroleum Act, 1934 (Act of 1934) read with Explosives Rules, 2010 and the Mineral and Industrial Gas Safety Rules, 2010 (2010 Rules), the Department of Explosives is exclusively empowered to grant approval of designs, specifications, standards, manufacturing and all other issues with respect to a CNG station. Furthermore, the Department of Explosives is also given the exclusive mandate under the law to ensure implementation of all safety rules wherever any industrial gasses, hazardous, substances and explosives are used. Section 7 of the Act of 1934 specifically empowers the Chief Inspector Explosives to appoint third party inspectors for inspection, certification and verification of CNG stations. It is the Petitioners case the OGRA has no role to play when it comes to public safety and installation of a CNG station. In order to resolve this issue between the Department of Explosives and OGRA, the Department of Explosives wrote a letter to the Chairman, OGRA on 10.08.2011 explaining the role of the Department of Explosives as follows:- "(I) As per Sections 5 and 6 of Explosives Act, 1884 and Sections 4 & 5 of Petroleum Act, 1934 and rules framed under there, the Department of Explosives is empowered to grant approval of design, specification, standards, import & manufacturing and manners of installation of all sort of compressed/liquefied Gas containers (Cylinders, Vessels) Petroleum Storage Tanks, compressors, Dispensers, piping fitting, allied equipments and all kind of safety devices.
(II) As per Section 7 of Explosive Act, 1884 and Section 26 of Petroleum Act, 1934, Department of Explosives is an entity empowered to appoint third party inspectors to enter for inspection/certification/verification of CNG stations, LPG plants, LPG automotive station, Petrol pumps, Bulk Petroleum Oil & other Petrochemicals depots, all sort of CNG/LPG/LNG/Industrial Gases carriers and containers (cylinders, vessels) etc.
(III) As compared to above, the domain of OGRA under Ordinance No. XVII of 2002, dated 28.03.2002 is that OGRA was formulated to foster competition, increase private investment and ownership in the midstream and downstream. Petroleum industry to protect the public interest while respecting individual rights. Obviously OGRA is mainly concerned with the pricing, marketing, tariff, duties, tax exemptions, supply of CNG, LPG, LNG to provide effective and efficient regulation for above- mentioned purposes. "
However, OGRA totally Ignored the said letter and continued to issue letters to CNG stations with respect to third party Inspections. In this regard, a letter was issued by the Ministry of Industries Department to the Respondents Nos. 4 and 5 on 11.9.2012 explaining that the relevant authority to regulate safety aspects of CNG stations is the Chief Inspector Explosives. Based on these letters, it has been argued that OGRA cannot appoint third party inspectors. The learned DAG supported the case of the Respondents Nos. 6 and 7 by contending that the authority for appointment of third party inspectors for annual safety inspections lies with the Chief Inspector Explosives.
5. The Respondent No. 3, Hydrocarbon Development Institute of Pakistan argued that all testing of CNG cylinders fell within their jurisdiction under the Hydrocarbon Development Institute of Pakistan Act, 2006 (2006 Act) and the CNG Rules, 1992. The OGRA is responsible to maintain the Standard Code of Practice and the CNG Safety Rules and that the competent authority for maintaining safety and conducting inspections was OGRA.
6. In the instant petitions, report and para wise comments have been filed by the Respondent No. 1 OGRA, the Respondent No. 2 Ministry of Petroleum & Natural Resources, the Respondent No. 3 Hydrocarbon Development Institute of Pakistan, the Respondents No. 6 & 7 Ministry of Industries and Department of Explosives and the Respondent No. 8 Federation of Pakistan through Secretary Cabinet Division, Islamabad.
7. In order to appreciate the controversy at hand, the learned counsels appearing before this Court set out to explain the law governing the dispute at hand. OGRA was established under the Oil and Gas Regulatory Authority Ordinance, 2002 (OGRA Ordinance, 2002) to regulate the Oil and Gas sector especially with regard to petroleum, oil, natural gas, LPG, LNG and CNG. Section 2(1)(xxxii) of the OGRA Ordinance, defines 'regulated activity' as an activity that requires a license. License has been defined under Section 2(1 )(xi) as one granted under the OGRA Ordinance, 2002. Section 22 of the OGRA Ordinance, 2002 provides that OGRA shall have exclusive powers to grant licenses in respect of any regulated activity. Section 23(2) provides that no person shall construct or operate any CNG testing facility, CNG storage facility and undertake transportation, filling, marketing of distributing CNG unless a general or specific license has been issued by OGRA. OGRA has also adopted the Standard Code appended to the CNG (Production & Marketing) Rules, 1992 (CNG Rules, 1992) and is the Authority under the CNG Rules, 1992. Rule 3 of the CNG Rules, 1992 provides that a license must be obtained from OGRA before the operation, or construction of works connected with compression of natural gas for the purpose of filling, storing and distributing CNG.
Rule 10 of the CNG Rules, 1992 provides that the licensee, after the commencement of the license, shall execute to the satisfaction of the Authority his works in accordance with the code of practice, appended to these rules, within a period of two years or; such further period as the Authority may allow under special circumstances proved by the licensee to be behind his control. Rule 10 further provides that the Authority shall appoint third party inspectors for verification of works of the licensee in pursuance of Rule 10(1).
8. Learned counsel for OGRA argued that the license issued by the Authority is for filling, storing, distribution, transportation and marketing CNG stations. In order to establish a CNG station, a provisional marketing license is issued by the Authority OGRA. Thereafter the proprietor of the CNG station provides the Authority with all the required documentation which includes No Objection Certificates from various Departments. Under the CNG Rules, 1992 when the works commence at the CNG station, OGRA is to conduct an inspection and on the completion of the works it issues a license. Prior to the issuance of the license, OGRA obtains verification of the works through third party inspection.
Subsequently after the commissioning of the station, OGRA obtains a report through third party inspectors to ensure that the Explosive Rules, 2010 are made under the Explosive Act, 1884. Under the Petroleum Act, 1934, the Petroleum Rules, 1937, Gas Safety Rules, 1960 and the Gas Safety Rules, 2010 were framed. Under the Regulation of Mines and Oil Fields Act, 1948, the CNG Rules, 1992 were framed prior to the establishment of OGRA. Third party inspection was carried out under the CNG Rules, 1992 by the Department of Explosives. However, after 2002 with the establishment of OGRA, all mattes related to CNG stations, such as issuance of license, testing, certifications, storage all fall under the exclusive control of OGRA.
9. Learned counsel for the Petitioners argued that letter dated 28.07.201-1 issued by the Ministry of Industries clarifies the matter and the legal position. Pursuant to this decision, the Chief Inspector Explosives requested OGRA to refrain from appointing third party inspectors to inspect CNG station.
However, notwithstanding the clarification from the Ministry of Industries, OGRA continued to interfere in the third party inspections carried out by the Department of Explosives. Again on 23.01.2012 the Department of Explosives addressed a letter to all the Chief Secretaries of all the Provinces stating that third party inspectors could only be appointed by the Department of Explosives. However, with reference to the Petitioners' cases OGRA has issued letters calling for appointment of third party inspectors failing which the gas supply of the Petitioners with the CNG stations will be disconnected.
10. I have heard learned counsel for the parties and reviewed the record available on the files.
11. The Explosives Act, 1884 promulgated under the Ministry of Industries provides in Section 4(1) definition of explosives. The definition of explosives is conferred a substances whether solid, liquid or gaseous used or manufactured with a view to produce an explosion or fireworks. Section 5 gives the power to make rules as to license and manufacturing, use, sale, transport and Import of explosives. Section 7 provides for conferring the rule making power for Inspection, search, seizure, detention and removal. Under this Act the Explosives Rules, 2010 were framed. However, there is no provision in the said rules relevant to the controversy at hand.
12. The Petroleum Act, 1934 regulates the import, transport, storage and production, refining and blending of petroleum substances. Petroleum is defined to mean any liquid hydrocarbon or mixture of hydrocarbons. Section 4 relates to the import, transport and storage of petroleum, providing that the Federation Government may make rules in relation to import, transport and storage of petroleum. Section 5 relates to production, refining and blending of petroleum and provides that the Federation may make rules for this purpose Section 13 provides for inspection of places where petroleum is imported, stored and produced, refined and blended. The Federal Government may authorize any officer to cause such inspection. Section 26 provides for entry and search to any place to seize, detain or remove the petroleum. Again the Federal Government is to authorize an officer for this purpose. Under the Act of 1934 the Mineral and Industrial Gases Safety Rules, 2010 for promulgated. The 2010 Rules regulate filling and manufacture of compressed gas in any vessel including the transport of vessel filled with compressed gas. Vessel is defined as a pressure vessel under Rule 2(xxxvii) and pressure vessel is defined in Rule 2(xviii) as a closed "metal container of whatever shape for storage and transport of compressed gas. Rule 3 provides that filling and manufacture in any vessel shall be as per the specified standard or code and with the approval-of the Chief Inspector Explosives. The procedure for seeking the approval of the Chief Inspector Explosives is provided under the said Rule. The 2010 Rules provide that third party Inspectors carry out certifying pressure vessels and their fittings so as to ensure that the pressure vessels are designed and constructed as per the prescribed standard Rule 2(XIII); The Chief Inspector Explosives also carries out inspection and testing of cylinders filled with compressed gas under Rule 28. The filling, possession, import and transport of cylinders with compressed gas have to be approved by the Chief Inspector Explosives under Rule 129. Similarly the valves used on the gas cylinders must also comply with the required specification (Rule 130) and so must the electrical installation used at the CNG station (Rule 148). Rule 155 of the 2010 Rules provides that no person shall fill any cylinder, vessel and container with compressed gas and no cylinder, vessel and container filled with compressed gas shall be possessed by anyone except under and in accordance with the conditions of a licence granted under these rules and Rule 159 of 2010 Rules provides the plans of the premises proposed to be licensed are to be submitted to the Chief Inspector Explosives who will ensure that the compressed gas will be filled and stored in the premises as per the proposed license. Therefore the 2010 Rules regulate the design and manufacturing of pressure vessels, the cylinders, valves and the electrical installation used in CNG stations. The inspection carried out by the third party inspectors under the 2010 Rules is to ensure that the vessel, cylinder valves and electrical installation are manufactured as per the standards prescribed. The Chief Inspector Explosives is the licensing authority who has to ensure that every vessel, cylinder or container which is filled with or used for storage or transport of compressed gas is manufactured and maintained as per the rules. In this regard the Chief Inspector Explosive is required to carry out periodic inspections, which includes an annual safety inspection of the pressure vessels, cylinder, valves, electrical installation and allied fittings used in the CNG stations to ensure compliance of the 2010 Rules. The Chief Inspector Explosives will issue its approval that all the cylinders, vessels, valves and electrical installations are as per the prescribed standards. In this regard the Chief Inspector Explosives will also review the plans for the installations of the cylinders, vessels and electrical installations to ensure compliance with the prescribed standards. OGRA on the other hand is the licensing authority for the operation of the CNG stations. The regulation of OGRA starts from the inception, such that no person shall without first obtaining a license from OGRA, enter into an agreement for the operation and construction of works for storages, filling and distributing CNG. Under Rule 5 of the CNG Rules, 1992 when considering an application for issuance of license OGRA is required to give regard to public interest. OGRA regulates the total area within which the CNG is stored, filled or distributed. It regulates the price of CNG, the location of the station and the use of the site for the CNG station and all related safety issues. It regulates the work after commencement of the license till its completion. OGRA can conduct inspection under Rules 16 and 18 of the CNG Rules, 1992 to ensure compliance of the terms and conditions of the license as well as to ensure public safety which read as follows:- "16. Entry, inspection and enforcement of the rules. The Authority or any person duly authorized by the Authority in this behalf may enter, inspect and examine any place in which he has reason to believe that there is any work(s) for compressing natural gas for the purpose of storing, measuring or distribution of CNG and take other necessary steps for the due observations of the provisions of these rules by licensees, consumers or any other person connected with the storage, filling distribution and use of CNG."
"18. Protection to public. (1) A licensee shall locate, construct and operate his pipeline and all works connected with CNG refueling station, and installation of CNG equipment in automobiles in accordance with the licence granted by the Chief Inspector of Explosives under the Mineral Gas Safety Rules, 1960, and strictly comply with the provisions of the Petroleum Rules, 1937 and the Gas Cylinder Rules, 1940k so as to avoid any danger to the public health or safety "
Therefore as per the 2010 Rules and the CNG Rules, 1992,1 find that the Chief Inspector Explosives conducts annual safety inspection of the vessel, cylinders, valves and electrical installation of the CNG station and allied fittings to ensure compliance of the design and manufacturing standards and OGRA conducts the annual safety inspection to ensure that the licensee is complying with the Standard Code of Practice in the operation of its CNG station. Both inspections can be carried out through third party inspectors. The primary objective for both inspections is to ensure strict compliance with the terms of the license and the safety codes. I may add here that the law and the rules referred to contemplate "public safety" not only from the perspective of the location and operation of the CNG station but also to ensure the checking of every vessel, cylinder, valve or electrical fitting used in the CNG station. Therefore both OGRA and Chief Inspector Explosives are responsible to ensure compliance of the rules and to maintain public safety and prevent accidents.
13. Each regulator is to work within its given jurisdiction. The explanation give by Respondent No. 2 does not resolve the matter at hand and has misconstrued the role of both OGRA and Chief Inspector explosives. OGRA is the licensing authority for compressed natural gas and is required to conduct third party inspections of the licensed premises to ensure strict compliance of OGRA Ordinance, 2002 and the CNG Rules, 1992, the terms of the license and to ensure compliance with the Standard Code of Practice as prescribed in the CNG Rules, 1992. The Chief Inspector Explosives is the licensing authority for the vessel and cylinder used for filling, storing and distributing compressed gas. He has to ensure that every vessel, cylinder, valve and electrical installation used at the CNG station is as per the specifications prescribed. The role of both regulators is of paramount importance when it comes to public safety. Therefore, the notices issued by OGRA for conducting annual safety inspections and for retesting cylinders are in accordance with the law and should be complied with by the Petitioners.
14. In view of the aforesaid all these petitions are dismissed.