JAWWAD S. KHAWAJA, J.---Pakistan has been blessed with a diverse array of natural resources including mineral oil and natural gas. The people of Pakistan are the ultimate owners of such resources through their Governments and State controlled entities. The Oil and Gas Development Corporation Limited (OGDCL) which is a State enterprise and more than 25 other Companies, domestic and international, are engaged in exploration and mining of oil and gas in various districts covering in excess of 30% of the land area of Pakistan. The activities of these Companies inevitably have a disruptive effect on the populations residing in the areas where they operate.
2. The world of today is no longer one of unbridled capitalism and laissez-faire. Corporate enterprises doing business the world over are being forced to consider the impact of their activities on the immediate social and environmental surroundings, habitat and infrastructure and on the people of the areas where such enterprises operate. While Corporate Social Responsibility (CSR) may be voluntary, the Government, recognizing the importance of activities of companies in the oil and gas sector, has incorporated provisions in contracts and official policies, setting out obligations of oil Exploration and Production (E&P) Companies operating in Pakistan. The present case deals with these contractual and legally mandated obligations of E&P Companies towards the environment and the societies living in areas where these Companies are engaged in the exploration and extraction of mineral oil and gas.
3. The present case also emphasises the importance and utility of Article 184(3) of the Constitution as will be evident from the circumstances considered below. This is highlighted by the manner in which this matter has arisen and has been taken up by this Court in exercise of jurisdiction under Article 184(3) of the Constitution.
4. While it is necessary for the economic wellbeing of the country that the natural resources and mineral wealth of the country be exploited for the public weal, it is, at the same time, necessary that the welfare of the people residing in areas where E&P Companies operate, is not adversely impacted and also that the inhabitants benefit from the economic activity resulting from such operations and from the natural/mineral resources extracted from their local areas. This Court has had an expansive approach when setting the boundaries of the right to life in the celebrated judgment of Shehla Zia v. Federation of Pakistan (PLD 1994 SC 693), with later precedents highlighting the continuing expansion of this approach for which reference can be made to the cases titled General Secretary, West Pakistan Salt Miners Labour Union (CBA) Khewra, Jhelum v.
Director, Industries and Mineral Development, Punjab, Lahore (1994 SCM R 2061) and Abdul Wahab v. HBL (2013 SCM R 1383).
5. This matter has its genesis in a simple event organised by the Tando Adam Bar Association (District Sanghar). The oath taking ceremony of the elected Office bearers of the Association took place on 10-4-2013. The Chief Justice of Pakistan was invited as Chief Guest to administer the Oath of Office to such office bearers. Mr. Abdul Hakeem Khoso Advocate, President of the Tando Adam Bar Association, in his speech on the occasion said inter alia, that "our district [Sanghar] has a number of oil and gas fields and the oil exploring companies are acting in violation of law and the terms and conditions of the [petroleum concession] agreements which they executed with the Government of Pakistan whereby they are bound to control environmental pollution, provide jobs and gas facility to the local people ... [and] spend specified amount[s] on the [local] infrastructure such as roads, schools, hospitals and the betterment of local people". A copy of the speech was marked by the Chief Justice to the Human Rights Cell (HRC) of the Court, for a report which was numbered as HRC No,13371-S/2013. Comments were sought by the HRC from the Secretary, Ministry of Petroleum and Natural Resources (MPNR) and OGDCL. The comments were not found satisfactory and it was, therefore, directed that the matter be put up in Court as a petition under Article 184(3) of the Constitution. Thus the first hearing of the case took place on 19-8-2013.
Thereafter, the matter was listed by the Court on various dates of hearing at Islamabad and at Karachi on 19-9-2013 and lastly on 28-10-2013 when judgment in this matter was reserved.
6. It is important to note that the Ministry of Petroleum and Natural. Resources through the Director General Petroleum Concessions (DG PC) regulates and oversees the grant of permits, licenses and leases for exploration, development and production, to E&P Companies. Such licenses and leases are in respect of blocks covering specific geographical areas located in various districts. At times exploration blocks straddle the boundaries of administrative districts. The MD OGDCL and DG PC first appeared in Court on 19-8-2013 and 9-9-2013 respectively in response to notices issued to them. Thereafter, a number of persons who became aware of the proceedings filed applications for being impleaded as intervenors in the case. Amongst these applicants were Sardar Abdullah Khan belonging to District Harnai (Balochistan) who sought action against Mari Gas Company, Roshan Ali of Ghotki (Sindh) and Nasir Khan Khattak, Member National Assembly from Karak (KPK).
They filed applications against E&P Companies operating within their respective local areas. The primary thrust of these applications was that E&P Companies that were operating within the home districts of the applicants were failing to fulfil their contractually mandated obligations in respect of the welfare and uplift of their areas of operation. The hearings in this case have shown that these complaints are D not without substance and that the Federal, Provincial and Local Governments have failed to ensure performance of the obligations of E&P Companies.
7. From the manner in which this case has arisen it is encouraging to note that public-spirited people such as Mr. Abdul Hakeem Khoso Advocate and Mr. Anwer Mehmood Nizamani Ex-President District Bar Association Sanghar had not only taken note of the adverse impact of E&P Companies active within District Sanghar but had taken the important step of bringing the matter to the attention of the Chief Justice at the oath taking in Tando Adam. The significance of Article 184(3) of the Constitution in enforcing the fundamental rights of the people all over Pakistan without the necessity of having a petitioner from each district is evident from the present case. In the ordinary course it would have been extremely difficult logistically and financially for a public-spirited resident of District Sanghar to file and pursue legal recourse in the Civil Courts or in the constitutional Courts. Even if such recourse had been taken it would have remained confined to issues relating to District Sanghar. It is only on account of Article 184(3) of the Constitution and the willingness and ability of the Court to take notice suo motu that the entire country spread over more, than 105 Districts has been brought within the compass of one initiative taken by a Taluka Bar Association and then proactively dealt with by the Human Rights Cell of the Court and then in Court hearings. It should be obvious from the facts of this case that conventional methods of seeking legal redress can be grossly inadequate for people without sufficient means, particularly when they may be pitted against more resourceful individuals and corporate entities. This case sums up the rationale behind Article 184(3) of the Constitution, and the wisdom and foresight of the framers who sought an egalitarian polity by equalising the ordinary citizen with those of greater resources and means, in matters of "public importance with reference to the enforcement of the Fundamental Rights" guaranteed by the Constitution.
8. Before delving into the submissions made before us during these proceedings, it is necessary to lay out the legal regime of the social welfare obligations of E&P Companies. There is a simple calculus underpinning this case which has been the reason why the Court has taken proceedings under Article 184(3) of the Constitution. Simply put, the E&P Companies operating in Pakistan are contractually obliged to make specified payments in lieu of exploration rights and privileges, as will be discussed shortly. According to a report submitted by the DG PC (C.M.A. 6508/2013), over the years these contractual commitments of E&P Companies have amounted to many millions of US Dollars. Furthermore, as per presentation on Welfare Obligations of E&P Companies submitted by the MPNR, the total sum of royalty payable by these Companies in rupees was more than Rs,160 billion in respect of crude oil and more than Rs,293 billion in respect of gas extracted from the various districts in Pakistan in which the E&P Companies are active. These are very substantial amounts considering particularly the inadequacy of funds available to ensure even the very basic needs of the people of Pakistan such as clean drinking water and quality education. These sums, it may be reiterated, are vested beneficially in the People. It is all the more important in this context that enforcement of the contractual commitments of E&P Companies in relation to social welfare obligations etc. Are properly monitored and rigorously enforced. Those responsible for ensuring fulfillment of these payment obligations including the DG PC, the Provincial and Local Governments are fiduciaries of the people in this respect and it is their duty to recover the agreed social welfare obligations and to ensure spending of the same in the most efficient and optimal manner for the benefit of the people.
9. Some of these obligations are expressed in monetary terms while others such as employment and training opportunities are specified differently. At this point, a brief overview of the contractual commitment of E&P Companies can be made. As a standard practice, a Petroleum Concession Agreement (PCA) is entered into between an E&P Company and the Government, through the President of Pakistan. A PCA grants an E&P Company the licence to explore and extract oil, gas and hydrocarbons from a specified area for a specified period of time. A typical PCA contains clauses which ensure the development, capacity building and environmental protection of the area from which the E&P Company extracts oil and gas. It is clear, therefore, that E&P Companies must fulfil the social welfare obligations which they agree to in the PCA they sign with the President of Pakistan. In this respect, it is helpful to reproduce the following clauses of the Exploration Licence for a Petroleum Concession Area, which was placed on record by the learned Additional Attorney- General for Pakistan:
(5) The Licencees shall simultaneously with the grant of the Licence but no later than thirty (30) days thereafter enter into a Concession Agreement with the President (of Pakistan) for the Licence Area...
(6) .
(e) The unskilled persons to be engaged as labour should be taken from the inhabitants of the area particularly where the work has to be carried out with preference to displaced landowners.
Rest of the manpower will also be taken from the area if available. Locals of the area will be considered for grant of subcontracts provided their terms are competitive.
The forestproperty will not be damaged and in case damage occurs during any survey, the Licencees shall be responsible for it as per provisions of the Forest Act.
(a) The Licencees will not use forest roads without permission. However, where the use of these roads is permitted, the Licencees will be responsible for proper maintenance of such roads.
(b). Investment in social welfare schemes and training will be made in accordance with the provisions of the Petroleum Policy, 1997 [now 2012]. The Licencees provide the manpower requirements (Category-wise) during different phases of operation to DG PC for approval.
(c). The Licencees will strictly follow the environmental protection and pollution control laws and guidelines as notified by the Government from time to time."
10. The PCA for the aforesaid area reads as under in relation to social welfare obligations: 29.10 The Working Interest Owners, other than the GOVERNMENT HOLDINGS, shall be required, in consultation with local administration/Provincial Governments and the Ministry, to undertake schemes of Social Welfare such as fight against narcotics, promotion of sports, rehabilitation of the mentally retarded and handicapped children, improvement of educational facilities, drinking water, health, roads, and grant of scholarships for local students and shall spend during the period prior to Commercial Production period not less than twenty thousand US Dollars (US $20000) per year. After the commencement of Commercial Production in the Area, the following minimum amounts will be spent during each year: Production Rate Amount/Year (BOE/day) (US Dollars)
For all Zones Less than 2000 20000 2000-5000 40000 5000-10000 75000 10000-50000 150000 More than 50000 250000 These amounts will be increased from time to time by mutual agreement of the Working Interest Owner mentioned above and THE PRESIDENT.
Subsequent changes in the Petroleum Policy have enhanced these financial obligations. The current policy is that announced in 2012.
11. As noted above, E&P Companies are actively exploring nearly one-third of the land area of Pakistan. In view of the vast numbers of people affected by the issues arising herein, the case was deemed to raise matters of public importance relating directly to their fundamental rights; especially those guaranteed in Articles 9 and 14 of the Constitution. The Court sought replies and a number of reports from the MPNR, OGDCL and the DG PC. The Court also considered the applications submitted by the various parties from Harnai, Ghotki and Karak, to join the proceedings as detailed above. The conclusion arrived at by the Court was that the social welfare obligations imposed on E&P Companies were not being met. To this extent the DG PC acknowledged that the concerned agencies and E&P Companies had taken these obligations casually and also that there was inadequate monitoring and enforcement to ensure that such obligations are fulfilled.
12. The stipulation of social welfare obligations is not limited to the PCAs. The learned Advocate- General Sindh, Mr. Khalid Javed Khan was requested to assist the Court as amicus curiae. He graciously accepted this responsibility and fulfilled it admirably. He also submitted his report wherein it was noted that binding social welfare obligations under the heads of social welfare, employment, training, production bonuses, marine research and royalty arose under successive petroleum policies, with the Petroleum Policy 2012 currently in the field. Furthermore, he submitted that the MPNR has issued separate guidelines for use of social welfare funds, production bonuses and marine research; and that the governments of Sindh and KPK have adopted these guidelines.
The two provinces have also issued separate guidelines- on production bonuses under the Petroleum Policy, 2012. (These financial obligations are, for ease of reference, collectively referred to as the social welfare obligations.)
13. The Petroleum Policy, 2012 prescribes different percentages for each use. Ten percent of onshore royalty is to be used "in the district where oil and gas is produced for infrastructure development".
Onshore production bonuses are to be used for "social welfare projects in and around the respective contract areas". Social welfare funds are to be used "to give lasting benefit to the [local] communities". Seventy five percent of the marine research and coastal area development fee is to be utilised for "coastal area development". Employment is for Pakistani nationals and training includes "internships/scholarships and training of local inhabitants". It may be mentioned that unlike onshore production bonuses, production bonuses from offshore areas are not specifically required to be spent on the social welfare of local inhabitants. In any event, most of the social welfare obligations contained in successive Petroleum Policies have been reflected in the PCAs.
14. Under the revised Social Welfare Guidelines issued by the DG PC dated 20-4-2009, social welfare schemes involve only the relevant MNA, DCO and the concerned E&P Company. The schemes are prepared by the E&P Compaq in consultation with the local administration (in the context, just the District Coordination Officer), endorsed by the concerned MNA, executed by the E&P Company in coordination with the DCO, and monitored by the DCO who issues a completion Certificate to the E&P company in respect of each social welfare scheme. The E&P Companies are also required to submit annual certificates from their statutory auditors showing that they have complied with social welfare obligations under the PCA and the Guidelines. During the course of hearings in this case it has become evident that either these processes are non-existent on ground or are undertaken without due care and diligence. Certification through auditors is currently not required to ensure proper utilization of funds appropriated towards a scheme. It is relevant that paragraph 6.3 of the Petroleum Policy 2012 authorises the DG PC to take "enforcement action" against any company "non-compliant with the terms of a permit, licence, lease, agreement and/or the Rules". Enforcement, it appears, is almost nonexistent. It is also quite apparent that the Social Welfare Guidelines dated 20-4-2009 are more in the nature of a suggested arrangement and do not create any institution or body within which the MNA, DCO and the E&P Company are formally supposed to perform their responsibilities. Nor do the Guidelines set out procedures for ensuring financial and implementation discipline. From the hearings in this matter, it is our view that enforcement actions need to be taken actively by the DG PC so that social welfare obligations are met in a timely manner.
15. The guidelines for utilization of marine research fee dated 14-4-2009 create a committee called the Petroleum Marine Development Committee (PMDC). The Committee consists of MNAs and MPAs of the area, the DCO, two representatives of the E&P companies, and one representative each of the DG PC, National Institute of Oceanography and Centre of Excellence in Marine Biology (CEMB) of the Karachi University. The Committee is mandated to "approve the projects" and periodically review the implementation of such projects. The DCO is exclusively responsible for collecting and managing due production bonuses directly from E&P companies and execution of the schemes approved by the PSDC. The projects are required to be executed through third parties who are in turn required to provide completion certificates endorsed by the DCO to the DG PC and E&P Company. Completed schemes are supposed to be handed over to the local government. There are; in our view, certain aspects of these guidelines which may be inadequate for the purpose of ensuring optimum utilization of available funds for the maximum public good.
16. The guidelines for utilization of production bonuses dated 29-10-2009 are similar to the marine research fee guidelines. These guidelines create a Petroleum Social Development Committee
(PSDC) consisting of MNAs and MPAs having their constituencies in the District, District and Tehsil/Taluka Nazims, DCO and an E&P Company representative. The PSDC is mandated to "identify, prepare and approve sustainable schemes for the benefit of the Community" and periodically review the implementation of such schemes. The DCO is exclusively responsible for collecting and managing production bonuses directly from E&P companies and for execution of the schemes approved by the PSDC. Furthermore, completed schemes are supposed to be handed over, funded, and managed by the local government. However, there is no obligation under these Guidelines on anyone to evaluate a scheme or to produce any completion certificates as to the implementation (successful or otherwise) of a welfare scheme.
17. The KPK government has issued regulations under the Petroleum Policy 2012 for utilization of onshore production bonuses. The KPK regulations are very similar to the Federal guidelines on the subject, except that the Committee to approve and review the projects replaces district and tehsil nazims with a representative of the concerned [DCO] at the District, Assistant Commissioner of concerned Tehsil and Divisional Monitoring Office (DMO) of Monitoring and Evaluation Directorate, P&D Department. The Government of KPK has also, by way of good governance, issued guidelines dated 24-3-2012 for utilisation of royalties from oil and gas in the source districts. Under these guidelines, specified schemes are meant to be executed, supervised and monitored by a committee consisting of the DCO and MPAs from the district. The schemes also require clearance from all competent forums on the pattern of ADP schemes.
18. It is also worth mentioning that Mr. Hakeem Khoso brought to light a directive issued by the Prime Minister dated 15-9-2003 which stipulated that "[t]he Prime Minister has been pleased to direct that gas be provided to villages falling in the radius of 5-KM from the gas source (Zamzama Gas Field, Tehsil Johi, District Dadu, Sindh). Prime Minister was further pleased to announce that this principle would apply to all gas fields and that gas may be provided to all the surrounding localities/villages falling in the radius of 5 km of all Gas Field, on priority basis." (emphasis added).
The reply filed by the MPNR on 29-6-2013 stated that the "Prime Minister's directives [were] pertaining to the villages in the gas producing field Zamzama District Dadu and not for those Blocks which are situated in District Sanghar". The Ministry's stance is a clear deviation from the express words of the Prime Minister's directive as highlighted above.
19. From the foregoing discussion, it is apparent that the district is the basic administrative unit used for determining the entitlement to and the disbursement of social welfare obligations. There seems to be a proliferation of committees with varying memberships under different guidelines.
For example, in the case of KPK, different committees and varying administrative regulations have been specified for utilization of royalty, production bonuses, and social welfare obligations, despite the fact that all three of these committees are meant to be District level and are charged with ensuring proper utilization of the funds accruing to the District on account of its petroleum resources. The geographical .Source and intended use of these various funds require that the same should be administered by the same body, even if these are under separate guidelines issued by separate authorities and through separate bank accounts as per the policy and contractual obligations of the Federal and Provincial governments.
20. We also note that at present there is no central database or map showing which exploration blocks fall within which revenue district and tehsil/taluka and to what extent. The DG PC however, during the hearing informed the Court that the concession blocks had been mapped onto the administrative districts where the blocks straddled district boundaries. This would enable the DG PC and concerned functionaries to determine the area falling within a District and to then ascertain the proportionate amount available for a district from one concession or block. Efficient and smooth allocation and utilization of various welfare funds payable by E&P Companies to the relevant districts require that amounts due to such districts be pre-determined (just as they are in the relevant Petroleum Policy) and are independently verifiable and centrally available. This cannot be done by leaving the E&P Companies and the local inhabitants at the discretion of the DCO alone. The same consideration also applies to utilization of royalties in source districts as per the Petroleum Policy, 2012. Moreover, the local inhabitants of relevant districts - the intended beneficiaries of welfare funds - have been allowed no direct participation in proposing new schemes or to object to ongoing or completed schemes. It seems all the more unreasonable that completion certificates of the welfare spending should be issued without inviting their comments. It is therefore necessary that public participation is ensured to receive and address the views of intended beneficiaries of each ongoing and completed welfare scheme. After all it is these beneficiaries who are the real owners and recipients of the benefits resulting from welfare schemes.
21. Throughout the proceedings, it became clear to us that the current framework for the administration and disbursement of social welfare obligations is inadequate. Therefore, the Court has considered aspects of the utilization of these available funds, where such utilization can be streamlined and optimized, thereby ensuring that transparency and public access to these funds is duly translated into enforcement of the fundamental rights of the People, guaranteed to them, inter alia, by Articles 9 and 14 of the Constitution and the Principles of Policy enunciated in Chapter 2 of Part II of the Constitution. Here it is appropriate to refer to a submission made by Mr. Khalid Javed Khan learned amicus curiae. He, in his capacity as Advocate General Sindh has assisted the Court in the case of toxic effluent entering Manchhar Lake and the hazards connected therewith, resulting in death of marine life, degradation of an ecosystem and harm to the life and health of the local community. The learned amicus curiae pointed out that for efforts to cleanse and detoxify Manchhar Lake, funds are required but are presently unavailable. He submitted that funds generated by social welfare obligations under PCAs could be used for such projects, considering particularly that E&P Companies are active in and around District Dadu where Manchhar Lake is located. This is just one example of the possibilities and potential for utilization of such funds for the uplift of the living standards of the population of a source district and for reducing the environmental depredation in the concerned district.
22. Although the preparation of appropriate guidelines is a policy matter falling within the executive domain, our examination of the present status of collection, expenditure, administration etc. Of social welfare funds and the preparation of guidelines shows that this aspect of the matter has not received the requisite attention. The rights of the people in the funds generated on account of social welfare obligations have a direct nexus with the fundamental rights mentioned above. These funds have either remained unutilized or have been under-utilized or the use of these funds has not been adequately monitored to ensure evaluation of spending. As an initial measure, therefore, we direct as under:--
(a) The DG PC and the relevant Provincial Government shall ensure diligent collection and monitoring of social welfare obligations of E&P Companies.
(b) The DG PC, the relevant Provincial Government and the Local Government within the area of activities of an E&P Company shall ensure optimum utilization of social welfare funds, production bonuses and other sums such as marine research fee, as are generated on account of the contractual obligations of E&P Companies. This shall be done in an open and transparent manner by ensuring that consistent with Article 19A of the Constitution [Right to Information], the local population has available to it, all relevant information relating to such funds.
(c) The Provincial and Local Governments shall review the existing policy guidelines and, where necessary, make suitable amendments to ensure that as far as may be, one Committee be constituted for each district or tehsil/taluka to ensure coordinated and effective use of the aforesaid funds. Keeping in view the provisions of Article 140A, the Local Governments established in each tehsil/taluka be given due representation or a voice on such Committee in line with the said constitutional provision which requires "each Province ... [to] devolve political, administrative and financial responsibility and authority to the elected representatives of the Local Government".
(d) Guidelines may be framed by the Federal and Provincial Governments in reasonable detail so that social welfare obligations can be monitored and the expenditure of funds can be examined in an open and transparent manner. The Committee for utilization of funds should;
(i) ensure that the social welfare obligations of E&P Companies are fulfilled;
(ii) proposed schemes receive due publicity and inputs from the final recipients and beneficiaries or their representatives;
(iii) evaluate progress and completion of welfare schemes;
(iv) have public hearings for receiving local level inputs in respect of selection, completion etc. Of welfare schemes.
(e) Once every sixth months, the DCO shall effect the publication of a notice online and in the most widely-read newspaper in the district, announcing a public hearing to solicit any comments or reservations that the inhabitants of the district in general, and the purported direct beneficiaries of the scheme in particular, may have with regard to the schemes completed, initiated, or ongoing during the preceding six months. A list of all such schemes shall be included in the public notice along with their location, budget and current status.
(f) Such notices for public hearings shall be sent to all district level trade organisations, chambers of commerce, Bar Associations and other prominent organisations and social welfare organisations. Notices shall also be sent to the provincial ombudsmen. Such public notices of the public hearings shall also be promptly placed on the website of the district government, if it has one.
(g) A report in respect of completed schemes shall be sent to the Federal and Provincial Ombudsmen and to the Human Rights Cell of this Court.
(h) The DG PC shall prepare a comprehensive account of the amounts due to each district from the various E&P Companies operating therein under the heads of social welfare obligations, production bonuses, and, if applicable, marine research fee. The estimated figures for royalties due to each district may also be included in this account. A statement of this account shall be made within 45 days and shall be submitted in Court. The account shall be displayed in Urdu, English and regional languages on the website of the MPNR.
(i) The DG PC shall solicit half-yearly reports from all licence/lease holders in respect of their social welfare obligations towards the local community, including among other things, the locations, budgets and status of schemes completed, ongoing, or initiated during those six months.
(j) The DG PC shall use his enforcement powers under PCAs actively and diligently to seek compliance with the terms of the PCAs.
(k) The Ministry of Petroleum and Natural Resources shall, ensure implementation of the Prime Minister's directive of 15-9-2003 and provide gas to "all the surrounding localities/villages falling within the radius of 5km of all Gas Fields, on priority basis" as directed, in accordance with law.
23. The DG PC shall coordinate with the Provincial Chief Secretaries and/or concerned Secretaries with the object of preparing a report in line with the aforesaid directives. The report preferably should contain suggestions/recommendations which are practical and workable keeping in view the objective that the social welfare funds are duly collected and properly spent for the benefit of beneficiaries i,e, the local people in concerned districts. For the purpose of collating information/ data in a readily usable form and for analysis of the same, the help of Professor Anjum Nasim, Senior Research Fellow, Institute of Development and Economic Alternatives, an experienced academic, may be sought by the DG PC.
24. The case shall be listed for hearing after 45 days to consider the report of the DG PC and steps taken pursuant to the aforesaid directions and for further orders if appropriate.