An Expert Legal Analysis of the Roles, Rights, and Inter-governmental Relationships of County

Governments and Local Communities Under Kenya's Petroleum Act, 2019

Executive Summary
This report provides a comprehensive legal analysis of the roles, rights, and relationships of
County Governments and local communities within the framework of Kenya's Petroleum Act,
2019 (Act No. 2 of 2019, Revised Edition 2022). The analysis reveals that the Act establishes a
multi-faceted and mandatory legal framework that integrates devolved government entities and
local populations into the governance, financial, and operational aspects of the petroleum sector.
County Governments and local communities are not merely passive recipients of benefits; they
are granted explicit statutory roles in revenue sharing, administrative oversight, public
participation, and environmental management. This analysis identifies and details these key
statutory provisions, synthesizes their implications, and explores the legal and operational
complexities inherent in this shared governance model. Furthermore, this report directly
addresses and corrects misleading information found in certain secondary summaries of the Act,
reinforcing the necessity of a primary legal text review for accurate and authoritative
conclusions.

1.0 Introduction and Foundational Principles

1.1 Background and Context
The Petroleum Act, 2019, represents a significant legislative overhaul, repealing the prior
Petroleum (Exploration and Production) Act (Cap. 308) and instituting a modern, comprehensive
framework for the contracting, exploration, development, and production of petroleum in
Kenya.1 The Act applies to all upstream, midstream, and downstream petroleum operations and
is designed to give effect to relevant articles of the Constitution of Kenya as they pertain to the
petroleum sector. Its structure and content reflect a legislative commitment to transparency and a
more structured approach to resource management, particularly in a sector of critical national
economic importance.1
1.2 Statutory Recognition of Devolution
The legal basis for the involvement of County Governments and local communities is not merely
a matter of policy but is explicitly and definitively enshrined in the Act itself. Section 2, the
Interpretation section, formally defines "county government" as having the meaning assigned to
it in Article 176 of the Constitution.1 Similarly, "local community" is precisely defined as "a
people living in a sub-county within which a petroleum resource under this Act is situated and
are affected by the exploitation of that petroleum resource".1
This explicit incorporation of constitutional principles into the Act's foundational definitions
signifies a deliberate legislative intent to legally bind the petroleum sector—a traditionally
centralized and national strategic domain—to the principles of devolved governance. This legal
architecture mandates a departure from a purely centralized model, requiring the National
Government and private contractors to operate within a shared governance space. This
foundational recognition establishes the legal basis for all subsequent rights and obligations
granted to County Governments and local communities, ensuring that their roles are not
discretionary but are legally mandated and enforceable.
2.0 The Financial Framework: Revenue Sharing and Fiscal Roles
2.1 Revenue Apportionment
The Act contains a specific and detailed formula for the sharing of profits derived from upstream
petroleum operations. Section 58(1) states that the National Government's share of profits shall
be apportioned between the National Government, the County Government, and the local
community.1 The Act then specifies the precise percentages for this apportionment:
 The County Government's share is "equivalent to twenty percent of the national
government's share" [1, Section 58(2)].
 The local community's share is "equivalent to five percent of the national government
share" [1, Section 58(3)].
This financial distribution formula is a cornerstone of the Act's devolved framework. The
National Government's share is the foundational metric, with the County Government and local
community percentages being derived as a function of that national share.

Recipient Share of National Government's Petroleum Profits

National The remainder of the total share after County and Local
Government Community apportionment

County
20% of the National Government's share
Government

Local Community 5% of the National Government's share

This statutory provision is of critical importance and represents a direct and fundamental
contradiction of certain claims that the Act contains no information on the financial roles of the
County Government or its specific share of revenues. 1 The document unequivocally provides
these precise details, as will be further elaborated in a later section of this report.
2.2 Legal and Fiduciary Responsibilities
Beyond merely allocating a share of profits, the Act vests the County Government with a direct
legal and fiduciary responsibility for the management of the community's share. Section 58(3)
and (4) stipulate that the local community's 5% share is "payable to a trust fund managed by a
board of trustees established by the county government in consultation with the local
community" [1, Section 58(3)]. Furthermore, the Act explicitly mandates that the "respective
county government shall legislate on the establishment of the board of trustees and the prudent
utilisation of the funds received under this section for the benefit of present and future
generations" [1, Section 58(4)].
This legal structure creates a clear causal relationship between devolved governance and
community benefit. The Act does not simply give money to the community; it delegates the
responsibility for its effective management to the County Government. This means that the
benefit to the community is not solely dependent on the National Government's transfer of funds,
but on the County Government's ability to create a sound legal and fiduciary framework. The
success of the revenue-sharing model hinges on the quality of county-level legislation and
governance, which now bear the burden of ensuring prudent utilization of these funds for both
present and future generations. This delegation introduces a significant layer of legal,
administrative, and political risk at the local level.

2.3 Transparency and Accountability

The Act provides a framework to ensure that the flow of these funds is transparent and
accountable. Section 119 mandates the Cabinet Secretary to "develop a framework for reporting,
transparency and accountability in the upstream petroleum sector". 1 This framework is required
to include the "publication of all petroleum agreements, records, annual accounts and reports of
revenues, fees, taxes, royalties and other charges" [ 1, Section 119(1)]. A key component of this is
the specific requirement for the framework to publish "transfers of all upstream petroleum sector
revenues from the national government to county governments and communities, including
royalties" [1, Section 119(1)(c)].
By requiring the publication of all transfers, the Act creates a system of mutual accountability.
The National Government is accountable for transferring the funds in accordance with the
statutory formula, while the County Government is implicitly held accountable by the public for
the receipt and use of those funds. This shared obligation for transparency is designed to combat
potential corruption and mismanagement, ensuring that the fiscal benefits of resource extraction
are properly documented and auditable at both the national and devolved levels.

3.0 Administrative and Operational Roles

3.1 Roles in Petroleum Institutions
The Act formalizes inter-governmental collaboration at the highest advisory level through the
establishment of the National Upstream Petroleum Advisory Committee. The composition of this
committee is explicitly defined and includes a "representative of the Council of Governors" [ 1,
Section 12(2)(i)].
The inclusion of the Council of Governors, the collective body representing all County
Governments, on this key national advisory committee means that County Governments have a
direct voice in national petroleum policy and strategy. This is not a passive role but a direct
mechanism for integrating county-level interests and perspectives into national-level decision-
making. This institutional integration aims to proactively resolve potential conflicts and ensure
that local concerns are considered before major policies or agreements are finalized.

3.2 Licensing and Permitting Authority

While the national Authority is responsible for granting licenses for upstream operations, County
Governments possess distinct licensing powers for specific downstream activities. Section 74(2)
states that a person who wishes to carry out the supply of petroleum products by means of a
"retail dispensing station, or of gas through a centralised reticulation system, must have a licence
issued by the County Government" [1, Section 74(2)]. This section also stipulates that any such
facility must comply with "National guidelines published by Authority" [ 1, Section 74(2)].
Similarly, Section 86 mandates a construction permit from the "licensing authority" for these
facilities.1
This division of licensing authority creates a dual regulatory environment. While the National
Government maintains control over upstream and major midstream activities, a significant
portion of the downstream sector is devolved to the county level. This has a profound implication
for investors and operators, who must now navigate two distinct regulatory bodies with different
legal mandates. This fragmentation of regulatory power is a direct consequence of the devolved
framework, and it necessitates careful coordination to avoid potential regulatory friction.

3.3 Participation in Planning and Approvals

The Act mandates early and consistent communication with County Governments to ensure their
involvement in key planning phases. The Authority is required to "inform each County
Government affected by the non-exclusive exploration activities of the nature and status of such
non-exclusive exploration activities" [1, Section 23(3)]. This provision ensures that local
authorities are kept in the loop from the very initial stages of exploration, which sets a precedent
for collaboration throughout the project lifecycle.
Furthermore, Section 68(4) requires the contractor, in conjunction with the Authority, to involve
the "Council of Governors and the relevant local communities in the preparation of emergency
preparedness measures" [1, Section 68(4)]. This proactive approach aims to build trust, secure
local consent, and mitigate political and social risks that could otherwise derail a project. It
legally obliges the National Government and contractors to ensure that local authorities and
communities are part of the process from the initial exploration phase through to operational
safety.
4.0 Rights, Obligations, and Inter-governmental Relationships
4.1 Public Participation and Community Engagement
The Act establishes a robust requirement for public participation, explicitly linking it to the
devolved governance structure. Section 24 mandates that the Authority, in collaboration with the
contractor and other relevant stakeholders, must give the local community "adequate opportunity
to participate in the process of reviewing and awarding permits" [ 1, Section 24(8)]. This is not a
vague directive; the Act specifies that public participation must be conducted "through such fora
as may be necessary...including the structures for citizen participation established by a county
government pursuant to section 91 of the County Governments Act" [ 1, Section 24(9)(b)]. The
notice period for these activities is also specified as at least 21 working days [ 1, Section 24(9)(a)
(ii)].
By outsourcing a critical component of its public participation mandate to County Government
structures, the Act creates a powerful, decentralized mechanism for local input and consent. This
link between the Petroleum Act and the County Governments Act means that the effectiveness of
public engagement is dependent on the County Government's existing legal and administrative
capacity for citizen engagement. This arrangement shifts a significant procedural burden and the
responsibility for genuine community dialogue from the national to the local level.

4.2 Land Use and Infrastructure

The Act recognizes the legal supremacy of County Government laws on certain local matters.
Section 108(1) states that access to land for petroleum operations is governed "pursuant to the
provisions of the Constitution and the relevant land laws" [ 1, Section 108(1)]. Section 115 further
mandates that a contractor installing petroleum infrastructure along public streets or railways
must comply with "the legislation, if any, of the county government" [1, Section 115(5)].
These provisions establish that while the Act grants the right to access land for petroleum
operations, the specific procedures for doing so must conform to local land and planning laws.
The reference to "legislation...of the county government" implies that county-level spatial
planning, zoning, and land use regulations can directly impact the execution of a petroleum
project. This legal arrangement prevents a unilateral approach by the National Government and
forces all actors to integrate their projects into existing local legal and planning frameworks,
demonstrating a crucial aspect of devolved legal supremacy.

4.3 Environmental Management and Decommissioning

The Act provides for the long-term involvement of County Governments in environmental and
fiscal oversight. Section 40(8) mandates the establishment of a committee to manage the
decommissioning fund, and specifies that this committee shall consist of representatives from the
National Government, the "County Government," and the contractor [1, Section 40(8)].
Decommissioning is a critical phase of any petroleum project, often fraught with environmental
and financial risks. By including a County Government representative on this management
committee, the Act embeds local oversight into this long-term obligation. The County
Government is not just concerned with immediate revenue but is granted a legal role in ensuring
that funds are set aside and prudently managed to address the environmental legacy of a project.
This creates a multi-stakeholder oversight model, blending national technical expertise with local
governance and fiscal responsibility.

4.4 Community Rights

Section 125 enumerates several rights for the local community, emphasizing the County
Government's partnership role in ensuring these rights are met. These rights include the right to
be informed, to put forward inquiries, and to be compensated for land, environmental damage,
injury, and lost livelihoods.1
Of particular note is the right to "participate in planning for corporate social responsibility
projects that are to be implemented within the contract area by the contractor in consultation with
the national government and a county government" [ 1, Section 125(h)]. This provision elevates
Corporate Social Responsibility (CSR) from a discretionary corporate activity to a legally
enshrined right for the community. By requiring consultation with the County Government, the
Act makes the devolved unit a co-equal partner in the planning of these projects. This shifts the
dynamic from a company unilaterally deciding on a project to a mandatory, tripartite negotiation,
thereby embedding the local political entity—the County Government—into the social contract
between the contractor and the community.
5.0 High-Level Analysis and Synthesis of Insights
5.1 Synthesis of Roles
The analysis of the Petroleum Act reveals that the County Government's roles are multifaceted
and span several pillars of governance:
 Fiscal: The County Government has a direct statutory share of petroleum revenue and a
specific legal mandate to legislate for and manage the local community's share.
 Administrative & Regulatory: The Act grants specific licensing powers for downstream
operations and provides for representation on key national advisory and disaster
management committees.
  Participatory: The County Government has an explicit and legally mandated role in
public participation for permits, with a direct link to county-level citizen engagement
structures.
 Environmental & Social: The County Government is an equal partner in the long-term
oversight of the decommissioning fund and in the planning of community social
responsibility projects.
5.2 Addressing Inaccurate Information
A review of certain secondary summaries, as exemplified by the provided snippets, reveals a
significant factual error that a legal analysis of the primary text must correct. The snippets claim,
"there is no information available about the financial roles of the County Government, its
specific share of petroleum revenues, or its responsibilities for legislating and managing local
community trust funds".1
This assertion is in direct contradiction with the content of the Petroleum Act itself. As detailed
in this report, Section 58 of the Act explicitly provides the exact financial formula, stipulating
that the County Government's share is 20% and the local community's is 5% of the National
Government's share [1, Section 58(2), 58(3)]. Furthermore, Section 58(4) unambiguously assigns
the County Government the legislative responsibility for establishing the trust fund and ensuring
the prudent utilization of the funds [ 1, Section 58(4)]. The discrepancy is not a minor omission
but a complete misrepresentation of the primary source. This highlights the importance of relying
on the legal text itself for accurate and authoritative analysis.
5.3 Nuanced Insights and Potential Legal Challenges
The Act's attempt to balance the National Government's strategic interest in a key sector with the
constitutional mandate for devolution creates an inherent tension. While the Act provides a
framework for collaboration, it does not eliminate the potential for conflict. For example, if a
County Government's decision on a retail license or construction permit were to impede a
nationally significant midstream project, a jurisdictional dispute could arise. The Act's "to
prevail" clause in Section 4 1 suggests a national supremacy, but the specific delegation of
powers to the County Government creates legal ambiguity that could lead to disputes before the
Energy and Petroleum Tribunal or other courts. The Act is not a conflict-free blueprint but rather
a legal framework that will be tested by future inter-governmental relations.
Furthermore, a potential "fiduciary gap" exists within the framework. While the Act mandates
the County Government to create a trust fund and legislate on its use for the community's benefit
(Section 58(4)), it does not specify the details of that legislation or the standards for "prudent
utilization" [1, Section 58(4)]. The effectiveness of this framework is therefore contingent on the
political will and administrative capacity of the devolved unit. A County Government's failure to
pass the necessary legislation in a timely manner, or the subsequent mismanagement of the trust
fund, could introduce a significant layer of operational and reputational risk for communities and
all stakeholders.
6.0 Recommendations and Conclusion
6.1 Recommendations
Based on this legal analysis, the following recommendations are provided to key stakeholders:
 For contractors and investors: A robust stakeholder engagement strategy that extends
beyond legal compliance is essential. Due diligence should include a thorough
understanding of county-level laws, political landscapes, and citizen engagement
 structures. Building genuine relationships with County Governments and local
communities is crucial for mitigating political and social risks.
 For the National Government: It is recommended that clear regulations and guidelines
be developed to support County Governments in their new roles. This is particularly
important for the management of the community trust funds and the practical
implementation of public participation requirements, ensuring uniformity and
accountability across different counties.
 For County Governments: It is critical to proactively develop the necessary legislative
framework and administrative capacity to manage petroleum revenues and oversee local
petroleum activities. This includes establishing dedicated units for liaising with national
bodies and contractors to ensure a smooth and effective implementation of the Act.
6.2 Concluding Remarks
The Petroleum Act, 2019, is a landmark piece of legislation that fundamentally integrates County
Governments and local communities into the petroleum value chain. Their roles are not merely
symbolic; they are legally defined and carry significant fiscal, administrative, and social weight.
The successful implementation of the Act, and by extension the long-term success of Kenya's
petroleum sector, will depend on effective collaboration and a shared commitment to
transparency and accountability among all stakeholders.