Power in natural resource governance projects: power hierarchies in the negotiation of an international petroleum contract

Alero Akporiaye and D. G. Webster

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PROJECT SUMMARY

This chapter describes an activity that helps students better understand how power works in natural resource governance settings. Specifically, students will learn about key components of the policy processes associated with mineral exploitation, including environmental impact assessments (EIAs), stakeholder engagement through public comment sessions, and the negotiation of international petroleum contracts. The simulation fosters deep learning by asking students to take on roles as one of three types of actors: government, oil multinational, and host community. We focus specifically on the ways in which institutions (rules and norms) empower some actors while marginalizing others, and teach students to understand how the resulting multilevel power disconnects—or power hierarchies—can lead to social injustice in resource governance settings.1 After the simulation is over, we ask students to think about institutional and systemic changes that could improve the negotiation process to achieve justice-focused outcomes.

We have used variations on this project in seminar courses on the political economy of natural resources and environmental economics and governance. It could be used in upper-level courses on environmental politics, environmental justice, environmental economics, and private governance. Our pedagogical approach is based on the literature on active learning, which encourages students to engage with the course material through problem solving and role play (Afzal, 2010). It also fosters collaborative learning and helps build skills in critical thinking, argumentation, and political economy analysis. In addition to applying what they learn about power hierarchies and institutions, students are asked to identify and articulate their (role’s) interests, seek areas of cooperation while defending their positions, and engage in conflict resolution. Individual, group, and class collaborative writing are also emphasized.

The activity includes two in-class simulations and ensuing discussions, which should take place over about a week of course time (three one-hour periods or two two-hour periods). It also incorporates considerable work outside the classroom, both to prepare students to effectively represent their (role’s) interests and to replicate informal interactions that are frequent components of stakeholder engagement and contract negotiation. The project is best executed toward the end of the semester, after students have learned about political and economic theoretical perspectives on natural resource politics and have had weeks of practice presenting, writing, and discussing these theories through small class assignments. However, instructors may want to hand out instructions three to four weeks ahead to give students ample time to prepare. The assigned readings prime students for understanding the political economy of resource-dependent economies, the architecture of international petroleum contracts, and the ways in which resource extraction can negatively impact local communities.

The rest of the chapter is organized as follows: we share a summary of the learning objectives, which could be tailored, depending on the context of the course in which this project is used. Next, we provide a selection of readings along with brief annotations that will prepare students to participate in the project. After that, we provide background information on the resource governance settings of oil extraction, followed by detailed project instructions. We conclude with thoughts about common challenges we have faced using this project in our teaching, suggestions for how the project can be modified or extended to suit different settings, and reflections on equity in the classroom.

LEARNING OBJECTIVES

  • Critically evaluate political and economic theories of natural resource politics.
  • Understand the interests of key actors involved in natural resource extraction.
  • Understand the value and role of EIA/statement in the resource extraction process.
  • Identify power hierarchies among key actors involved in natural resource extraction and the impact of these hierarchies on their interests.
  • Identify the formal and informal institutions that determine power hierarchies at different levels, including among local stakeholders, national governments, and international corporations.
  • Critique the role of power in delivering material benefits and inequitable outcomes for actors involved in resource governance and extraction.
  • Examine potential avenues for transforming existing power structures through institutional design and system-level transition.

BACKGROUND READINGS AND RESOURCES

Depending on their topical and pedagogical goals, instructors can make choices from the selected readings described below or may assign similar readings focused on different cases, including petroleum production in other parts of the world or even other types of natural resource exploitation. The three core components of the simulation (EIAs, public comment, and contract negotiation) are par for the course in many natural resource governance settings. The suggested readings are from the scholarly literature, government reports, company reports, industry experts, and a local community. They break down thus: (i) scholarly literature providing theoretical grounding on the political economy of natural resource politics; (ii) chapters from the economics literature and practitioners explaining the types of petroleum contracts and their architecture; (iii) EIAs describing the anticipated environmental consequences of proposed extraction activities that can be used to inform decision-making; (iv) scholarly literature and primary documents on the effects of oil extraction on local communities and how it affects the relationship between these communities and oil companies; and (v) corporate social responsibility reports from major oil companies describing a company’s perspective on their relationship with communities and society.

Political Economy

  • Barma, N., Kaiser, K., Le, T. M., & Vinuela, L. (2012). Rents to Riches? Factoring in the Political Economy of Natural Resource-Led Development. World Bank. (Chapters 1 to 5)
    • From a practitioner perspective, this book presents key political economic frameworks on understanding natural resource politics in resource-dependent countries.
    • These theoretical chapters explicate the natural resource curse, the interaction between political economy and natural resources, and offers practitioner frameworks for how countries can organize the extraction, taxation, and investment of resource wealth.
  • Bridge, G., & Le Billon, P. (2017). Oil. John Wiley & Sons.
    • How do power hierarchies among states, firms, and society determine socioeconomic outcomes for each actor? This book serves as a primer on the relationships among states, firms, and society involved in oil extraction. It traces the domestic and international political issues involved in the governance of oil as a strategic commodity
  • Karl, T. L. (1997). The Paradox of Plenty: Oil Booms and Petro-States. University of California Press.
    • This seminal book provides a comparative analysis of how oil governance has impacted development trajectories in oil-producing countries like Venezuela and Nigeria.
  • Turnhout, E., Metze, T., Wyborn, C., Klenk, N., & Louder, E. (2020). The politics of co-production: participation, power, and transformation. Current Opinion in Environmental Sustainability, 42: 15–21.
    • This review paper synthesizes research on how co-production in environmental governance reinforces rather than improves unequal power relations among actors involved in natural resource extraction.

Contracts

  • Aghion, P., & Quesada, L. (2010). Petroleum contracts: what does contract theory tell us? In W. Hogan & F. Sturzenegger (eds.), The Natural Resources Trap: Private Investment Without Public Commitment (Chapter 2). MIT Press.
    • From the economics literature, this chapter describes the types of international petroleum contracts between oil companies and governments. Sections 2.1 to 2.3 are the most relevant parts of the chapter; however, if this project is used in an environmental economics class, the rest of the chapter utilizing contract theory to explain the strengths and weaknesses of petroleum contracts could be of interest.
  • Johnston, D. (1994). International Petroleum Fiscal Systems and Production Sharing Contracts (Chapters 1 to 4). Pennwell Books.
    • This book offers foundational frameworks for understanding how the pie of resource rents is shared between a host government and an oil company.
    • It provides priming on key terms such as government/contractor take, explains the differences between contract types and petroleum fiscal systems, and provides examples of elements in actual contracts.
  • Manzano, O., & Monaldi, F. (2010). The political economy of oil contract renegotiation in Venezuela. In W. Hogan & F. Sturzenegger (eds.), The Natural Resources Trap: Private Investment Without Public Commitment(Chapter 12). MIT Press.
    • This chapter investigates how oil companies and host governments renegotiate contracts, arguing that inadequate petroleum fiscal regime systems and structural features of the industry compel renegotiation.

Socioeconomic and Environmental Impacts of Oil Extraction

  • Aaron, K. K., & Patrick, J. M. (2013). Corporate social responsibility patterns and conflicts in Nigeria’s oil-rich region. International Area Studies Review, 16(4), 341–356.
    • What is the relationship between oil companies and local oil-producing communities? This paper explores this question in the case of the NigerDelta region in Nigeria.
    • How do companies use corporate social responsibility to manage this relationship?
    • To what extent could corporate social responsibility be used as a conflict mitigation tool? Is it a tool that can ameliorate the negative social and environmental consequences of extraction?
  • EIA reports by Shell Nigeria and Eni U.S.A. for proposed oil fields inNigeria and the United States. These show the issues at play in developing and developed countries and could allow students make comparisons between both contexts.
    • Shell Nigeria’s Environmental Impact Assessment (EIA) of the pro-posed EA/Eja field in Bayelsa, Nigeria (2016).
    • Eni 2017 Beaufort Sea Exploration Plan, 2017 (OCS EIS/EA BOEM2017-047).
    • There are more EIAs to select from online.
  • Movement for the Survival of Ogoni People (1992). Ogoni Bill of Rights: Presented to the Government and People of Nigeria, October, 1990 with an Appeal to the International Community. Saros International Publishers. https://bebor.org/wp-content/uploads/2012/09/Ogoni-Bill-of-Rights.pdf.
    • What is the view of a local community on the effects of oil extraction on their socioeconomic and environmental wellbeing? This primary document presents the Ogoni people’s perspective on how the Nigerian government and Shell have used their power to accrue benefits from oil extraction and how such benefits have affected their political, economic, social, and cultural rights.
  • Rajan, S. C. (2011). “Poor little rich countries: another look at the ‘resource curse’.” Environmental Politics, 20(5): 617–632. https://doi.org/10.1080/ 09644016.2011.608530.
    • How do power hierarchies differentiating domestic political elites and oil companies from ordinary citizens explain which group benefits and loses from oil extraction? This paper focuses on the cases of Angola, Venezuela, and Mexico.
  • Ross, M. L. (2012). The Oil Curse: How Petroleum Wealth Shapes the Development of Nations. Princeton University Press.
    •  What is the variation in the political and economic consequences of oil extraction among oil-producing countries
  • UNEP (2011). Background to environmental degradation in Ogoni Land. In UNEP, Environmental Assessment of Ogoniland. United Nations Environment Programme
      • What are the environmental effects of oil extraction? This report from the United Nations provides extensive analysis of the environmental degradation from oil extraction in Ogoniland in Nigeria.

Company Reports

  • Shell, Kosmos, Chevron, and British Petroleum Sustainability/Corporate Social Responsibility Reports.
    • How do oil companies view their role in contributing to the socioeconomic and environmental welfare of society? Do companies hold themselves responsible for the harms from extraction? Do they sufficiently address the harms they cause? How do they view their relationships with governments and local communities? What types of community-oriented projects do they focus on? What types of projects do they ignore?
    • These reports are available on company websites and it may be a useful exercise to have students search for them.
      • Chevron (2021). Sustainability. chevron.com. Retrieved August 3, 2022, from https://www.chevron.com/sustainability.
      • Shell (2021). Shell Sustainability Report 2021. Retrieved August 3, 2022, from https://reports.shell.com/sustainability-report/2021/.
      • BP Global (2021). Sustainability: Home. Retrieved August 3, 2022, from https://www.bp.com/en/global/corporate/sustainability .html.
      • Kosmos Energy (n.d.). Sustainability—Kosmos Energy: Deepwater Exploration and Production. Retrieved August 3, 2022, from https://www.kosmosenergy.com/responsibility_/.

Stakeholder Engagement

  • Lawrence, A. T. (2017). The drivers of stakeholder engagement: reflections on the case of Royal Dutch/Shell. Journal of Corporate Citizenship, 6, Stakeholder Responsibility (Summer): 71–85. https://tinyurl.com/ 5h9x2zpj.
  • Mathur, V. N., Price, A. D., & Austin, S. (2008). Conceptualizing stakeholder engagement in the context of sustainability and its assessment. Construction Management and Economics, 26(6), 601–609.

Multimedia Resources

  • FRONTLINE | Alaska Gold. (2012). [Video]. PBS. https://www.pbs .org/video/frontline-alaska-gld/: A Frontline documentary showing the pre-contract process and the different problem narratives of mineral extraction held by corporate and civil society. Also provides examples of how stakeholder engagement sessions are often run in the United States.
  • Boynton, R. (2022, August 2). Watch Big Men Online | Vimeo on Demand [Video]. Vimeo. https://vimeo.com/ondemand/bigmen: A documentary on the sociopolitical issues surrounding oil extraction in Nigeria and Ghana. The documentary also provides insight into the contract negotiation process between a government and oil company at the highest levels.
  • The Compass: Slick (2022). A BBC podcast about the effect of oil extraction in Ogoniland, Nigeria. The podcast presents the Ogoni experiences of oil exploration as well as interviews with local Shell officials.

ISSUE BACKGROUND

Natural resources are materials from the Earth that could be used to support life and also exploited for economic gain. They include resources such as water, hydrocarbons, and metal ores. Some of these resources have been accorded a strategic quality that has prompted their role in political and economic dynamics in the domestic and international arenas, shaping strategies of power (Le Billon, 2001). This project focuses on oil as a natural resource from a political and economic perspective and examines its implications in a variety of contexts, which include the institutional and power dynamics in policymaking, conflict, foreign investment, and the environment.Resource-dependent countries typically rely on foreign oil companies to extract and produce their natural resources (Bridge & Le Billon, 2017). As a result, host governments court such companies for investment and their expertise, negotiate terms of engagement with them, regulate the industry, and receive and redistribute resource rents from extraction (Mahdavy, 1970; Johnston, 1994; Dunning, 2008; González & Lodola, 2019; Sandbakken, 2006). Resource-led development has been embraced as a strategy to spur economic development in resource-dependent countries (Ogwumike & Ogunleye, 2008; Mahdavy, 1970). There are three main actors involved in resource extraction: a host government with revenue-seeking interests; an oil company (usually a multinational) with profit-seeking interests; and a host community seeking to gain localized benefits from the injection of foreign direct investment in their local economy while minimizing any environmental or health costs associated with the extractive process (Bridge & Le Billon, 2017).

These varied interests result in the emergence of power hierarchies that are reinforced through the creation of institutions such as laws, social rules, and norms of behavior. For instance, many countries have passed laws granting control over rights to access mineral resources to national governments as opposed to private landowners or local communities. This gives the national government considerable power both to negotiate contracts with resource extraction companies and to control the revenues generated by resource extraction. Similarly, laws requiring EIAs and public comment sessions are also common in the governance of many types of natural resources. However, these formal institutions may be weak to begin with (e.g., requiring EIAs without establishing specific decision rules for rejecting a proposed mine or consultation without requiring action on public comment), and may be further undermined by informal institutions (e.g., norms that favor high-visibility corporate sustainability activities that do little to actually empower host communities or close networks between government decision-makers and corporate authorities).

Institutionally reinforced power hierarchies have important distributional and political consequences. The reality is that resource extraction is largely associated with environmental degradation and socioeconomic upheaval in local communities hosting operations, while political (government actors) and economic (company actors) elites tend to accrue the majority of the material benefits from extraction (Aaron & Patrick, 2013; Rajan, 2011; Bridge & Le Billon, 2017). This unfair state of affairs leads to a variety of grievances and can initiate company–community conflicts that include litigation, protests, targeted attacks against government/company assets, and armed conflict (Davis & Franks, 2014; Le Billon, 2001; Collier & Hoeffler, 2004). Negative social and environmental consequences can also bring international attention and pressure from shareholders, nongovernmental organizations, and even other countries. Thus, while institutions may privilege corporate and national government actors, host communities can wield some power in the policy process and may even be able to engender institutional changes that improve distributional or social justice outcomes.

As resource-dependent countries and oil companies seek to maximize the revenues and profits generated from oil extraction, they continually work to enable continued extraction amid often difficult relationships with host communities. The process simulated through this project, which includes both stakeholder engagement and the negotiation of an international petroleum contract, reveals the power hierarchies involved in natural resource governance settings in oil extraction and allows students to identify the formal and

informal institutions (rules and norms) that create these power imbalances. Additionally, the simulation reveals how power informs social injustice that delivers material benefits and inequitable outcomes in natural resource extraction. Lastly, the activity can form the basis of discussions regarding changes in institutions that might reduce power imbalances and improve environmental justice.

PROJECT INSTRUCTIONS

[Written for students; notes for Instructors are in square brackets]

This activity comprises two simulations, a class discussion, and considerable preparation/coordination outside of class. It will take place over about a week of class time. The goal of the exercise is to negotiate an international petroleum contract, following procedures that are representative of real-world contract negotiations. You have been divided into five groups of three to five students, namely:

  1. the host government of the country;
  2. the oil multinational (already operating in the country); and
  3. the host community, which is located close to the proposed petroleum project, and will be further divided into: a. Bemdoni;
    b. Brass; and
    c. Koku.

NOTE: After the public comment session, members of the host community may also form their own groups based on shared interests rather than ethnicity alone. See the detailed instructions to groups for more direction on this process.

All actors will participate in the negotiation process, but they will take on different roles depending on their legal standing. Officially, only the government and the oil multinational must agree on the oil contract. However, both of these groups are also likely to seek social license for the new project from the host community. Thus, we have two phases of the project. First, stakeholders from the host community will have a chance to express their opinions on the potential project through a public comment session, which will include a short presentation by the corporation and will be run by the national government. Next, the government and the multinational corporation will negotiate the contract, consulting as needed with their local contacts to maintain stakeholder support. Once both simulations are completed, we will use our last session to discuss the process and its final outcome, relating the experience back to theories about the use of power and related institutions.

You will receive independent instructions for your group, country background information, preliminary contract terms, a fiscal regime for a royalty/ tax (concession) agreement and production sharing contract, examples of real contracts, some background information on environmental and stabilization clauses, and general rules for stakeholder engagement processes.2 These documents are available in the online appendix.

Once you are familiar with these materials, your group should coordinate to decide individual members’ roles; individuals will then be responsible for conducting additional research based on that information. For instance, the government group might divide up responsibilities based on relevant agencies (e.g., energy and mines, environment and tourism, legal counsel) and legislative bodies (e.g., parliamentary/congressional committees on revenue and appropriations and/or national-level representatives from the region where the proposed extraction would take place). Similarly, the corporation group would want expertise in the legal, environmental, economic, and political engagement components of the negotiations, as well as at least one person who will lead their stakeholder engagement activities. Both the government and the corporation will also need to appoint one to three individuals who will be responsible for conducting the face-to-face negotiations and who are empowered to make executive decisions during the negotiation. In contrast, members of the host community will have to plan for a diverse array of roles, including, for example, oil workers, doctors, parents, store owners, restaurateurs, members of the local council, etc. Although the majority of coordination will occur within the smaller groups, the host community should be transparent, with all groups regarding the roles that individuals are playing (i.e., everyone should know who is their council representative, who is the local doctor, etc.). As we mentioned earlier, instructors may want to hand out instructions three to four weeks ahead, to give students ample time to research and prepare for their roles.

Deliverables

The deliverables are thus:

Interests essay: Each group will submit a short (two-page, double-spaced) description of their group’s general interests and the different roles that will be played by each group member. For groups with divided interests, please describe your differences and explain how these differences are reflected in your selection of roles.

Role paper: Each student will write a short (two-page, double-spaced) paper describing their role in the group and contribution to the group’s interest(s). This activity differs somewhat for corporate/government members and host community members.

Corporate/government: Explain how factors in your area of expertise affect your group’s interests. For instance, if you are the legal expert for the corporation, your paper should describe the legal considerations that you researched, including any components of the law that might either advance or hinder the corporation’s interests in the negotiations. Remember that this is a negotiation, so think of the type of information that you will need to keep private from other groups.

Host community: Based on your role in the community, describe what you would like to see in the contract. Also consider which other community members you might collaborate with, how you could best use your comment time, how else you might affect negotiations (e.g., through side negotiations with the government and/or corporation), and what your recourse might be if negotiations do not match your interests.

Everyone should rely on our readings and discussions from the semester, the country background information, the fiscal regime, and the model contract terms to develop your group’s interests (found in the online appendix). Your discussion should also preview the role you believe power will play in the negotiations for your group. Do you anticipate power will be used in inclusive or exclusive ways?

Initial contracts: After the public comment session but before we start the negotiation simulation, each group will collectively submit an “initial contract,” which you should keep private from the other groups. Utilize the model contract terms to build the initial contract, based on your interests. For the government and corporate groups, these initial contracts will be the starting point of your negotiations. Remember that your goal is to negotiate a contract agreeable to both sides. The host community group should develop an initial contract that reforms what an ideal contract would look like if the government and company seriously considered their needs and interests.

Negotiation/stakeholder videos: Because not all parties will be in the same room, we will record the negotiation itself and encourage small groups in the community classroom to record their discussions. These videos will be made available to the entire class after the negotiation simulation ends.

Final contract: Assuming that an agreement can be reached, the government and corporate groups will collectively submit a final contract that both sides agree on. This will then be distributed to the entire class.

Reflection paper: After the negotiation simulation is finished, you should read the final contract (if there is one), watch the video of the negotiation itself, and then write a five-page, double-spaced paper about your reflection on the process. In this paper, address the following: (i) How close is the final contract to your original interests at the beginning of this process? Are you satisfied with the final contract – why or why not? Alternatively: why could you not negotiate a final contract? (ii) Issues two topics we have discussed in class (extracting, taxing, and investing resource wealth, bargaining power dynamics, resource conflict, environmental justice, etc.) that emerged in the activity. (iii) What sort of negotiation strategies did you use and which one of them worked or did not work? (iv) What role did power play in the negotiation process; how was it used by each actor? (v) What could a contract look like if governments and companies listened to communities? (vi) What systemic or institutional changes would be needed to ensure a more just outcome? We will use these reflections as a starting point for our discussions on the final day of the activity.

Public Comment Session

Before formal negotiations begin, the corporation and national government will solicit input from the host community. Some of this will occur informally through contacts outside of class, but there will also be a chance for formal comment. This will be our first in-class “simulation.” It will be run by the government group and will follow a typical pattern where the corporation will have a chance to present the proposed project to the community and then community members will have one to two minutes each to make a statement. This is an important exercise because it gives both the corporation and the government the information that they need to identify potential local partners and to adjust their contract proposals accordingly. It also will help host-community members to connect with members who share their interests, even if they are from a different ethnic group.

Negotiation Process

The following should provide some structure to the negotiation process. Remember that you should all make good-faith efforts to reach a final agreement. This means that individuals or teams should not be unnecessarily obstructionist and should not treat this exercise like a game. You should pre- serve the integrity of the academic exercise.

The host government and oil company each have an initial contract (see other documents for a template), from which negotiations will begin. The bulk of the negotiations will occur between the host government and the multinational corporation; however, there are key provisions in the contract that require the voice of the host community: namely: the environmental, corporate social responsibility, and other clauses. The host government and oil company will get the first round of input from the host community during the public comment session. Thereafter, they will work with community partners as they negotiate the contract. The other clause allows for flexibility in the negotiations to facilitate compromise; parties could allow/agree to include clauses outside the listed contract terms (see documents for the negotiation below) to sweeten the deal, so to speak, for another party. You may find that you may need to have side consultations and negotiations that could exclude another team. That is an acceptable part of the process, but should be carried out in good faith.

Rules of the Negotiation Process

We will host negotiations in a small room near our regular classroom. Only members of the government and the corporate groups may be in the room for the negotiations. Host community members will wait in our regular classroom, spending the time discussing their positions, formulating post-negotiation strategies (i.e., how they will respond to different possible versions of the contract, such as developing post-negotiation strategies to a perfect or imperfect contract), and interacting with government/corporate representatives as needed. The extension options section below offers alternative suggestions for how to structure the negotiation to keep all students in the same room.

Process: Negotiators should take each provision, one at a time, and then negotiate around the substance and language of the provision. Using your initial contracts, each negotiating party should make offers, demands, counter-offers, and counter-demands until a negotiated agreement is reached. If one provision is proving to be a sticking point, you can move on to another.

I would recommend that each negotiating group nominate one person to represent their interests at the negotiating table. You could also have a rotation of people cycling through to represent your team, but no more than three representatives are allowed. Pick your most effective representative. Each negotiator should also have a stakeholder liaison who will be able to consult with stakeholder partners on contract language as needed. Lastly, be sure that each group assigns at least one person to take notes on the language or agreement/ disagreement on each negotiated clause. I will play a very passive role in this process; I am there for clarification purposes.

Once you have reached agreement on the substance and language of the provisions, use the information you record in your notes to put together a final contract. Draw on the multiple sample and real contracts that have been made available to you for guidance.

As you go through the process, think about the tactics employed, the power dynamics, and your incentive to reach an agreement. You should explore these thoughts in your reflections paper. In exploring these thoughts, think about the real-life stakes for the real-life actors involved in such negotiations and make comparisons to your experience in this exercise. An important question to answer in your reflection papers is how power creates social injustice that affects the outcome of the negotiation. Further, how could the negotiation process be improved to yield justice-focused outcomes?

Documents for the Activity

The following documents provide background and context for all students to flesh out their characters, interests, and strategies for the negotiation. Instructors can tailor them to suit their conceptual and pedagogical interests. They can be found in the online appendix.

  • Country background.
  • Current petroleum fiscal regime for two types of contracts (the government and oil company will make a choice between them).
  • A model contract that has been derived from model contracts available in the industry. The terms have been simplified to a level appropriate for undergraduate students. The model contract is the template that students should use to draft the initial contract that they will bring to the negotiating table.
  • Two actual contracts that students could study and use to develop their initial contract using the model contract template. The Resource Contracts database is a good place to find actual contracts to provide to students: https://resourcecontracts.org/.In addition, exogenous circumstances—instructors could develop a list of political and economic events that could influence the outcome of the negotiation. These events could be shared with all or certain groups at random points. Examples include oil price increase/decrease, new deposit discoveries, change in CEO, community protest, etc.The instructions described in the rest of this section will only be provided to specific groups.

Host Government Instructions (Not Seen by Other Groups)

Oilsania is a capital- and skill-deficient developing country that needs foreign direct investment and technical expertise to exploit its natural resources. Export rent from the sale of your resources constitutes 85% of government revenue; hence, profiting from the success of natural resource extraction is important to the success of your government. You are forecasting several years of an increasing budget deficit and you are trying to get back on track with payment of your sovereign debt. If your government falls behind on payments, your country’s credit rating will decrease, which will tighten your country’s access to international credit. Your goal is to address these issues through your country’s natural resource sector; although you can do this by diversifying your economy, the payoff of that strategy is in the long run. Your country’s financial constraints also mean that sharing project costs with the oil company for extraction is difficult at this time.

There is ongoing socio-political unrest in the major oil-producing town, Bemdoni. Bemdoni citizens are demanding greater resource-revenue redistribution, economic development (jobs, healthcare, education, etc.), and environmental regulation. Meeting these demands diverts revenue away from political elites (who belong to the Ichi and Stenge ethnic groups), to whom your government owes patronage favors. However, Bemdoni have been able to effectively wage a violent campaign against your government and your natural resource sector; their threats of continued violence are credible and deplete your resources as you utilize the security apparatus of the state to curb their threats. Bemdoni are also engaged in low-level ethnic conflict with their neighbors, the Brass and Koku people. The conflict is historically determined and derived from colonial territorial boundaries imposed on the region by a former imperial government. The boundaries determine the resource-revenue redistribution formula, and thus have been a source of ethnic conflict for decades.

In contrast, you have good relationships with members of the Brass and Koku ethnic groups. Most legislative representatives from the region are of Brass origin, and the Brass ethnic group has received the majority of the local benefits from oil production without experiencing many costs. The Koku ethnic group has also benefited from petroleum historically, due to high levels of employment in the industry; but there is increasing unrest among a subset of the group that has experienced higher than average health and environmental costs due to exposure to oil-related pollution.

Oilsania is also due to enact environmental regulations to bring you into compliance with an international environmental treaty you have signed. Enacting these regulations is a requirement of a loan you have borrowed from an international financial institution. You are being lobbied by environmental NGOs to enact these regulations. They are using a name and shame tactic, which may tarnish your government’s international reputation, which may then have a bearing on getting future loans. Your government has a reputation for corruption.

You could choose to negotiate a joint venture or a petroleum-sharing con- tract. Currently, the government’s share of rents (known as government take) is at 70%, but you find that you need to increase it to resolve your financial constraints. You can do this by changing elements of your established fiscal regime.

Community engagement forum

For the first simulation, all actors will participate in a community engagement forum. As the government, you will run the forum. After introductions and a review of the rules, the oil company will make a ten-minute slide presentation about its new project in Bemdoni. Then, members of the community will each have two minutes to present their interests on the project and contract to both you and the oil company. The goal is that the input from the community will inform the final negotiations of the contract. There will be an opportunity for community members to ask questions of the government and oil company, but you should limit question time to one minute per person as there are time constraints. If there is time, you may put together a list of the expected positions from each group and make a preliminary commitment about community interests the government will guarantee in the final contract. Remember that some communities may not be entirely in agreement regarding the project. Remember to stay in character as representatives of your group.

Questions to consider

  • What are your interests (political, economic, social, environmental, etc.)?
  • What type of contract should you negotiate?
  • Are you going to change your fiscal regime? If so, how and why? If not,why not?
  • Will you address the interests/needs of the Bemdoni, Koku, and Brass citizens you heard in the community engagement forum? Why or why not? If you do address them, how will you do so and whose interests or needs will you prioritize (political elites or members of the oil-producing region)?
  • Will you comply with the suggested environmental regulations? Why or why not?
  • Recall that power is the ability for one actor to make another actor do something that they do not want to do. How much power do you anticipate you will have to deploy in this negotiation and how will you use it? Think about whether you will use power in inclusive or exclusive ways.Oil Multinational Instructions (Not Seen by Other Groups)You are a multinational corporation called Star Energy that has been operating in Oilsania—a developing country—for close to three decades. You are familiar with the host country’s environment. You are getting ready for contract negotiations with Oilsania for a new contract block in Bemdoni. Your shareholders are demanding higher profits from Oilsania so you must meet your fiduciary obligation. The climate crisis is also an issue your company and its shareholders are interested in addressing; hence you seek to balance these interests in the negotiation. You are satisfied with the current government take level, but may need to reconsider this so you can increase profits. The type of contract you choose may also matter for your profit concerns. You are also being lobbied by Bemdoni community leaders to address environmental harms caused by your extractive activities and for developmental interventions (like jobs, education, healthcare, etc.). Again, this may take away from your profit goals. However, in the past, when their pleas have been ignored, protesters and armed groups from Bemdoni have been able to successfully shut down your facilities for six months. You lost revenue when this happened last time and it was costly to bring those facilities back online. Bemdoni is also engaged in low-level ethnic conflict with the people of Brass and Koku. Your understanding of this ethnic conflict is that it stems from disagreements over colonial territorial boundaries that determine how resource revenue is redistributed among these ethnic groups. The government is looking to enact environmental regulations that will be costly to your operations. You are also being lobbied by environmental NGOs that are using the name and shame tactic, which would bring bad publicity to your firm.

Government take is currently at 70%. Though you could reckon with this level, it would be ideal for the government take to decrease.

Community engagement forum

On the first day, all actors will participate in a community engagement forum. In this forum, your company will have ten minutes to make a slide presentation about your new project in the Bemdoni community. Only one or two people should present and come prepared to answer questions from the community and government. Remember to stay in character as representatives of your group.

Questions to consider

  • What are your interests (political, economic, social, environmental, etc.)?
  • What type of contract should you negotiate?
  • Are you going to lobby to change the fiscal regime? If so, how and why?If not, why not?
  • Will you address the demands from the Bemdoni, Koku, and Brass communities you heard in the community engagement forum? Why or why not? If you do address them, how will you do so and whose demands will you prioritize?
  • What position will you take on the environmental regulations? Will you support or go against them? Why or why not?
  • Recall that power is the ability for one actor to make another actor do something that they do not want to do. How much power do you anticipate you will have to deploy in this negotiation and how will you use it? Think about whether you will use power in inclusive or exclusive ways.

Host Community Instructions: Bemdoni (Not Seen by Other Groups)

The Bemdoni ethnic group lives in the oil-rich region of the country of Oilsania, which is a developing country. Natural resources have been extracted from your community for years. While your government and the oil multinational have benefited materially from extracting oil from your lands, your people experience high levels of poverty, and environmental degradation polluting your lands, waters, and air. This environmental degradation has negatively impacted your fishing and farming livelihoods. Importantly, your historical cultural and spiritual practices enabling the preservation of your lands and resources therein have been denied due to government and company takeover of your lands to extract oil for their economic gain. You have repeatedly presented your dissatisfaction with the effect of oil extraction from your communities on your political, economic, social, and cultural rights, but have been unsuccessful at holding the government and oil companies accountable. However, some members of your community have been able to use violent campaigns to lobby Star Energy to make developmental investments in your society. You observe that Star Energy responds with more investment after you shut down their facilities through protests or material attacks. When you protest, the government retaliates with a heavy hand, so continuing this practice may not be effective. You are, in addition, enlisting the help of an environmental NGO to help you compel the government and Star Energy to take the environmental impact of natural resource extraction seriously. Future violent campaigns will deter help from the environmental NGO, but it is a viable option favored by some members of your community against Star Energy and the government. Bemdoni are also engaged in low-level ethnic conflict with the people of Brass and Koku. The conflict results from colonial territorial boundaries imposed by an imperial government but has been exacerbated by the effects of institutions governing the distribution of benefits from the oil industry. Recently, there has been some reduction in conflict with the Koku as a portion of this ethnic group has also expressed dissatisfaction with the state of the oil industry in Oilsania.

You know that your national government is about to begin negotiations with Star Energy on a new petroleum contract for a new contract block in your community. Both actors have promised that they will solicit the community’s input, which will inform the terms of the contract. This is an opportunity for you to compel both sides to codify your community’s environmental and development interests in the final contract.

Community engagement forum

On the first day, all actors will participate in a community engagement forum. In this forum, members of the Bemdoni, Brass, and Koku communities will each have two minutes to comment on the oil company’s proposal and contribute to shaping the contract on environmental protections, corporate social responsibility, and any other interests you want to see codified in the contract. You will not have a slide presentation, but you may have notes and/ or a prepared statement. Although you all come from the same region, there is no requirement that you agree on your statements or that you choose the same policy options. As a group, you should decide on the role played by each member (e.g., community leader, activist, labor union rep, oil company vendor, potential oil company employee, resident, etc.), seeking to best represent the make-up of your region. Once individuals have their roles, they should research the positions of similar actors in the real world and use that information to decide their position on the contract. Then each member should choose the path that is the best fit for attaining that goal. For instance, if the actor’s preference aligns with others in the community, coordination is a good idea, given the limited time for individuals to speak and the persuasive power of multiple statements in support of the same policy option. You may also try to work with people in other communities who share your preferences. However, if the actor’s preference does not align with other members of the community or with outside groups, then that student should work and make their statement independently. Remember to stay in character as representatives of your stakeholder during the entire simulation.

Questions to consider

  • What are your interests (political, economic, social, environmental, etc.)?
  • What should the government do to address your interests/needs? How should they address them in the contract?
  • What should Star Energy do to address your interests/needs? Should they address your interests/needs?
  • What position will you take on the environmental regulations? Will you support or go against them? Why or why not?
  • How are you going to compel the government or Star Energy to address your interests/needs?
  • Recall that power is the ability for one actor to make another actor do something that they do not want to do. How much power do you anticipate you will have to deploy in this negotiation and how will you use it? Think about whether you will use power in inclusive or exclusive ways.

Host Community Instructions: Brass (Not Seen by Other Groups)

Brass is the seat of the regional government. For decades, local leaders have gained both economically and politically from close relationships with the oil industry and the national government. Although some community members live close enough to the proposed project site to experience negative health and environmental impacts, most do not; and, indeed, the Brass community has not experienced much pollution from the oil industry to date. However, they have received benefits, such as corporate investments in roads, schools, and hospitals, as well as national support for a regional airport and other major infrastructure projects. All of the region’s elected representatives in the national government come from Brass and they rely heavily on their ability to distribute benefits from the oil industry to maintain their power bases among both the Brass and the Koku ethnic groups.

[Replicate the rest of the Bemdoni instructions here.]

Host Community Instructions: Koku (Not Seen by Other Groups)

Star Energy is the largest employer of members of the Koku ethnic group, many of whom benefited from national government support for the university which is located between the Brass and Koku-dominated areas of Oilsania. Although the majority of the jobs are low skilled, Koku also hold higher-income positions in the management, engineering, and technical components of oil production. Thus, many Koku anticipate benefits from the proposed production facility. However, the Koku have also experienced some negative health and environmental impacts from petroleum production in the past, and some members of the community are disgruntled about the potential negative effects of yet another oil production facility in their region. This component of the Koku community is also sympathetic to the dissatisfaction expressed by the Bemdoni ethnic group and desires more peaceful relationships with their neighbors. Political elites from the Brass ethnic group and Star Energy stakeholder engagement specialists have tried to counter this increasing dissatisfaction among the Koku by increasing transfers of benefits. Most recently, they co-funded a new football pitch for the largest secondary school in the Koku area. Nevertheless, the Koku ethnic group remains divided on the proposed production facility, and members are likely to form alliances with either the Brass or the Bemdoni if they are for or against the project respectively.

[Replicate the rest of the Bemdoni instructions here.]

COMMON CHALLENGES

This project faces common challenges that emerge in group projects: (i) insufficient student preparation; (ii) free riding; and (iii) good-faith effort participation. Over the course of the semester, students get adequate grounding in the theories and concepts that are elucidated in the content and process of the negotiation. Hence, it is best to use this project at the end of the semester and have it comprise a substantial portion of their final grade, so students are incentivized to prepare adequately. A common feature of collaborative work is free riding. To minimize this challenge, students should draft and sign group contracts delineating their individual responsibilities (e.g., research, writing, compilation and formatting, etc.), and a timeline for completion of these responsibilities. These contracts could also include policies on resolution of group conflict, which could help instructors assist them in resolving conflict should there be a need for such intervention. Another tool to minimize free riding is group peer evaluation, which could be factored into their final grades. This project is best suited for use in upper-level courses with students who are specializing in environmental justice, environmental economics, environmental politics, and international political economy. For such students, interest in the topics and project should be high, thereby increasing the likelihood of good-faith participation.

An intangible, but salient aspect of the course is the role listening plays in the negotiation process (see Kroeker, Ramirez-Ruiz and Daniel in this volume). Instructors should play a passive role during the negotiation process and community engagement forum, which should allow an opportunity to observe how groups/students are interacting with and listening to each other, and whether what they are hearing is affecting the process and outcome. It is our experience that students can get so passionate about the negotiation process that they may lose sight of the learning objectives of the simulation. In other words, students become personally vested in winning as individuals and forget to accurately represent their stakeholder groups or to treat other students in the classroom with respect. Instructors can prevent this issue by preparing students ahead of time to behave in a professional manner, as would be most likely given the nature of the simulation; and by emphasizing the role of listening in delivering justice-focused outcomes. A corollary of emphasizing listening is developing ways to assess listening in the project. Students’ discussion on prompt (v) in the reflection paper is a way to assess listening in the project.

EXTENSION OPTIONS

Assigning Students to Groups

Our instructions assume that the instructor will assign students to groups, either randomly or based on some scheme of their own. In some contexts, it may also be acceptable for students to form their own groups.

You could try to keep group size the same, but we recommend assigning fewer students to the government and corporate groups than the host community groups because this will increase the diversity of local interests that can be represented in the simulation.

Different Size of Classes/Course Schedules/Facilities/etc.

We wrote the description assuming a relatively small class of ten–20 students. With fewer than ten students, it would be better either to run the simulation with the Bemdoni ethnic group as the only host community or to remove the stakeholder engagement session entirely and focus on the negotiation itself. For larger groups, you can assign more students to the host community groups, increasing the representativeness of this portion of the project. There is a limit, however, insofar as you need to be sure that all members of the host community will get their one to two minutes to speak.

We’ve set this up for three class periods of about one hour each, with the stakeholder engagement on day one, the negotiations on day two, and the discussion on day three. If you teach in two-hour slots twice a week, and cannot give up three periods for this activity, we recommend starting negotiations right after the stakeholder engagement on day one, continuing them at the start of day two, and then wrapping up with discussion the same day. Other ways to shorten the activity depend on your learning goals, but could include focusing on only the stakeholder engagement (in which case, the government could be asked to make a yes or no decision on the proposal from the corporation rather than negotiating), or only the negotiations (in which case stakeholders would be “at the table” but could only weigh in on specific components of the contract). Time permitting, it could also be useful to give students time in class to coordinate with their groups before the first simulation starts. This may be particularly helpful if you work with students who are not used to these types of in-class activities.

For those with extra time, it could also be useful to conduct the simulation a second time with different rules of engagement – for instance, giving the community a seat at the negotiating table or ensuring that they have veto power over the final contract. Ideally, students could come up with these suggestions during the first-round discussion and then implement them in a tabula rasa negotiation.

We chose to hold the negotiations themselves in a separate room because most real-world negotiations for petroleum contracts do occur behind closed doors. However, if you do not have access to an additional space, it is fine to hold the negotiations in the classroom with everyone present. We recommend rearranging the seating if possible to delineate between those who are “at” the negotiating table and those who are merely “observers.” This will make it more difficult for students to make deals, etc., so it may be useful to either provide short breaks in the negotiations for consultation or allow students to go out into the hallway for side discussions while negotiations are going on.

Alternative Topical Applications

We apply this activity to petroleum in a developing country but it could easily be modified for other issue areas, including mineral mining, timber concessions, and even fisheries contracts. The instructor would simply need to substitute readings and alter the scenario parameters to fit their preferred topic. In some cases, this might mean reducing the emphasis on EIAs or other regulatory components but this would just leave room to highlight other types of regulation. Details could also be altered to suit different legal contexts or to explore the effects of different institutions (and therefore a different distribution of power) more broadly.

CLASSROOM EQUITY REFLECTIONS

In our experience, gender dynamics come to play in a project that emphasizes the role of power in negotiations and decision-making. Often, people who identify as women could feel ignored and undermined by group members who identify as men. Instructors could help to alleviate this issue by candidly discussing this dynamic with students. Additionally, instructors could recommend that equitable distribution of labor in the group contracts could minimize the problem. The issue also presents an opportunity to examine the role listening plays in delivering justice-focused outcomes.

The project features a developing country, which could prompt students schooling in the West to employ a charitable lens in their analytical approach. In our experience, the project demands careful analytical attention that students embody their roles so deeply that the charitable lens is minimized. Instructors could discuss this issue with students in preparation for the project and utilize the documentary Alaska Gold to show that these governance dynamics also arise in developed countries.

NOTES

  1. We rely on the definition of power asserting that it is the ability of one actor to get another actor to do something they are reluctant to do (Dahl, 1957).
  2. In the petroleum sector, the fiscal regime is a formula of royalties, taxes, and cost and profit sharing that estimates the division of the project costs and revenues between the host government and oil company. The fiscal regime estimates two important indicators—government take and contractor take—which are percentages dictating the division of energy rents between the two actors.

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