EXCERPT ON THE LEGAL REGIME OF THE EXTRACTIVE INDUSTRY IN KENYA

Legal Regime of the Extractive Industry in Kenya

Kenya has several laws which regulate the extractive industry in the country, paramount among them being:
a) the Constitution of Kenya2010;
b) the Petroleum (Exploration and Production) Act;
c) the Income Tax Act;
d) the Mining Act;
e) the Environmental Management and Coordination Act;
f) the Public Finance Management Act; and
g) the Land Act.
In addition to the above mentioned legislations, there are also ongoing legislative processes to reform laws for the sector with proposed laws including:
a) the Petroleum Exploration and Production Bill 2014
b) the Mining Bill 2014;
c) the Energy Bill 2014; and
d) the Sovereign Wealth Fund Bill 2014.
These are the main instruments that regulate the sector, although there are other laws that directly affect it.

1.1 The Constitution of Kenya 2010

The Constitution of Kenya is now just about 5 years in operation since its promulgation. The period since August of 2010 has been a transitional period in which the country has been undertaking several systematic, structural and legal transformations to be in line with the provisions of the Constitution.
The Constitution has far reaching provisions on land rights, utilisation, management and conservation. Some of these provisions include:

 Article 60 requires that land be held, used and managed in a manner that is equitable, efficient, productive and sustainable, and in accordance with a set of principles including:

o security of land rights;
o sustainable and productive management of land resources;
o sound conservation and protection of ecologically sensitive areas; and
o the elimination of gender discrimination in law, customs and practices related to land and property in land.

 Article 62 (1(f) includes all minerals and mineral oils to the definition of public land.
 Article 69 (1) (a) of the Constitution bestows on the State the responsibility to ensure sustainable exploitation, utilization, management and conservation of the environment and natural resources, and ensure the equitable sharing of the accruing benefits.
 The State is required to utilize the environment and natural resources for the benefit of the people of Kenya.
 The Constitution further requires equitable sharing of revenues raised nationally among national and county governments, as well as equitable sharing of the burdens and benefits of the use of resources between present and future generations.
 Article 42 further provides that all people have the right to benefit equally from the use of natural resources as well as an equal entitlement to a clean and healthy environment.
 Transactions entailing the grant of a right or concession by or on behalf of any person, including the national government, to another person for the exploitation of any natural resource of Kenya are subject to ratification by Parliament under Article 71 of the Constitution.
 The Constitution also entrenches a devolved system of governance under Article 174 by outlining its salient principles to include, providing for
participatory decision making, and also providing for the equitable sharing of both national and local resources.
 The national government, with regard to the extractives sector, is allocated roles including international trade, national economic policy and planning, energy policy, transportation including pipelines, as well as protection of the environment and natural resources with a view to establishing a durable and sustainable system of development. These roles are buttressed by Article 69 of the Constitution on the responsibility of the state with regard to environment and natural resources.
 The county governments, on the other hand, deal with county planning and development which includes electricity and gas reticulation and energy regulation.

1.2 The Mining Act Chapter 306 Laws of Kenya

This is the operative law in relation to mining and therefore sand harvesting in Kenya. It provides for among other things:
 Any authorization for the exploitation of minerals is granted through the Commissioner of Mines and Geology or an officer duly authorized by him.
 Prospecting licenses are issued for one year and may be renewed at the discretion of the Commissioner for a further period of one year each up to a maximum of five years each.
 Prospecting rights confer a number of privileges to the holder to:

o prospect for all minerals except diamonds;
o erect any buildings or machinery;
o make excavations, sink shafts or wells, drive adicts or levels or dig trenches;
o take for the purposes of prospecting, take water from any lake, river or stream;
o create a protection area and apply for an exclusive prospecting license among other privileges.

 Any minerals obtained during prospecting are the property of the government and may not be disposed.
 The exploitation of minerals requires the issuance of a mining lease.

o An applicant for a mining lease must carry out a feasibility study and an approved cadastral survey of the deposits of the mineral in question.
o The applicant must then prepare an Environmental Impact Assessment (EIA) study in accordance with the requirements of the Environmental Management and Coordination Act (EMCA) No. 8 of 1999.
o This study has to be approved by the National Environmental Management Authority (NEMA). The EIA report is submitted to public for commentary before final approval.

 An applicant then submits a formal application for a mining lease which must include all information established in the first two steps above as well as any compensation agreements payable to landowners. This must be published in the Kenya Gazette and a local newspaper inviting any objections.
 The process then moves to registration of the mining lease under the Mining Act and the Registration of Documents Act. The applicable stamp duty must be paid at this point.
 The Constitution then requires Parliament to ratify any right or concession for the exploitation of natural resources.
 The Act does not make provision for local content requirements or obligations for consultation with local communities before the commencement of exploration and mining operations.
 There is no express requirement that mining companies engage in public consultation with regard to exploration rights, mineral rights and environmental impacts.
 Acquisition of land under the Act is done through compulsory acquisition by the government, payment of compensation is required.

1.2.1 Areas for Reform

a) The lack of appropriate mechanisms for community engagement before commencement of exploration and mining activities;
b) Inadequate provisions relating to compensation mechanisms, community engagement and participation in EIAs;
c) The lack of a single fiscal regime to regulate the sector. Taxes are usually paid in the form of corporate income tax as well as royalties payable depending on the mineral in question;

1.3 Environmental Management and Coordination Act

The law establishes the National Environment Council to be responsible for policy formulation. It also establishes a National Environmental Management Authority (NEMA) to exercise general supervision and coordination over all matters relating to the environment. It is buttressed by the Environmental (Impact Assessment and Audit) Regulations of 2003.
It further establishes the Standards Enforcement and Review Committee whose principal function is to set standards for water quality, air quality, and classification of waste for purposes of proper handling, pesticide residues in raw agricultural commodities, noise emissions, noxious smells, and ionizing radiation.
The law lays down the procedure for conducting Environmental Impact Assessments (EIA) and states that all new projects that are likely to affect the environment in any way must undertake an EIA after which the EIA report should be submitted to NEMA for review and approval.
The second Schedule of the Act lists the nature of projects that require an EIA. These include:

o mining;
o mineral processing;
o reduction of ores and minerals;
o smelting and refining of ores and minerals; as well as
o the exploitation of the production of petroleum in any form.
A number of regulations are gazetted by NEMA as authorized under EMCA. These include:
o Environmental (Impact Assessment and Audit) Regulations, 2003, Legal Notice No. 101.
o The Environmental (Prevention of Pollution in the Coastal Zone and Other Segments of the Environment) Regulation, 2003.
o The Environmental Management and Coordination (Wetlands, River Banks, Lake Shores and Sea Shore Management) Regulations, 2009 Legal Notice No. 19.
o The Environmental (Impact Assessment and Audit) (Amendment) Regulations, 2009.

1.3.1 Areas for Reform

Some of the fundamental weaknesses in this Act have been identified as to include:

a) the lack of rules on the decommissioning of sites;
b) the fact that environmental licenses are not a precondition for the obtaining of a mining license. This situation has seen the abandonment of sites without proper sealing and the carrying out of mining activities without conservation or rehabilitation/reclamation.
c) the requirement that the proponent of a project hire an EIA expert limits the operational independence of such an audit given the pecuniary relationship
between a proponent and the person tasked with conducting the audit. It also limits the public participation element in the carrying out of ESIAs.

2 References

 www.kenyalaw.org
 (Institute of Economic Affairs, 2014)