Senate Bill 8-135 introduced by Sen. Adalbert Eledui took into account the recommendations of the Oil and Gas Task Force.
The new measure also give the national government and state government the authority to approve licenses to conduct petroleum exploration and extraction as long as activities was awarded through a public bidding process to be administered by the Ministry of Natural Resources, Environment and Tourism.
The bill covers proposed sections on developing petroleum regulatory policies, rules and regulations for exploration.
“Without such a framework, potential investors lack any guarantees of stability for their investments and the republic is not provided with any guarantee it will receive a fair percentage of the revenues generated by the oil exploration industry,” the bill stated.
The bill also places the exclusive ownership rights to each state to any oil or gas resources found in the area from land to 12 nautical miles seaward from traditional baselines.
The measure also tasks the Ministry of Natural Resources, Environment and Tourism to set the minimum and maximum royalty rates for both the national and the state governments.
The oil agreement executed between Palau Pacific Energy Exploration and the national government pegs the royalty rate at 12.5 percent.
However the measure authorizes the ministry to come up with the rates.
The measure also calls for the creation of a commission on petroleum operations which will be responsible for overseeing the licensing and performance of petroleum-related activities.
The measure also prohibits an elected official from acquiring directly or indirectly any rights or interests in any of the petroleum license issued pursuant to the law.
The measure also sets an exploration phase of 10 years, subdivided in one period of four years and two periods of three years.
The exploration phase however can be extended in the event of discovery of commercially viable reserves of petroleum-related products.
Earlier, Palau has received a grant from the World Bank in the amount of $ 223,324.57 equivalent toward the cost of the Palau Oil and Gas Technical Assistance Project.
The development of the legal and regulatory framework will need to take into account Constitutional and existing laws pertinent to the oil and gas sector, most particularly, those relating to the environment, financial oversight, taxation, auditing, procurement and general executive and legislative oversight and management.
The measure is much anticipated due to the controversial signing of the oil agreement by President Johnson Toribiong even before a legal framework is put in place.
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