ANY interpretation of the Petroleum Development Act 1974 (PDA) by the judiciary will set a binding precedent and could have far-reaching consequences for Sabah, said the Sabah Law Society (SLS) president today.

Brenndon Keith Soh said a central issue in national oil company Petronas’ application to the Federal Court, for a declaration that it is the exclusive owner of petroleum resources in Malaysia, including Sarawak, is whether the extraction of petroleum resources requires mining leases from the state government.

This is in view of Sarawak’s announcement that all firms operating in upstream activities must obtain leases from the state government, in accordance with the Sarawak Mining Ordinance 1958.

In the case of Sabah, Under Item 2(c) of the State List, provisions of the federal constitution in relation to royalties from petroleum may also include the validity of the Territorial Sea Act 2012, which purports to limit the territorial sea of Sabah to three nautical miles, among others.

But, the act defining the boundary of Sabah was passed by the federal government without the consent of the state, with Sabah Star president Dr Jeffrey Kitingan saying the boundary extends to the continental shelf, which includes the seabed and the subsoil that lies beneath the high seas, with the adoption of the Queen’s Order in Council in 1954.

This has not been lawfully changed since.

“Matters likely to be canvassed before the court will include the legality of the intention of the state to issue mining permits and licences,” said Soh.

“Petronas is relying on PDA, which states that Petronas is the exclusive regulatory authority of the upstream oil and gas sector throughout Malaysia.

“PDA vests Petronas with the entire ownership, rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum, whether onshore or offshore, in Malaysia.”

The company is seeking a declaration of Article 74(1), read with item 8(j), List I, Ninth Schedule of the federal constitution, that Parliament has exclusive legislative competence to enact laws pertaining to the exploration of petroleum throughout Malaysia, and consequently, PDA was duly enacted by Parliament.

Therefore, by virtue of Section 7 of PDA, Regulations 3 and 5 of the Petroleum Regulations 1974, and the order dated November 28, 1980, made under Section 7A of PDA, the chairman and chief executive of Petronas have exclusive regulatory authority over all upstream activities.

Petronas is also seeking a further declaration that the Sarawak Mining Ordinance was, by implication, repealed by PDA.

SLS stands guided by the state attorney-general, who is constitutionally mandated to advise the state government on all legal matters involving Sabah.

Soh said SLS affirms its commitment and readiness to assist the state government if it plans to intervene, adding that it is prepared to form a special committee of legal practitioners familiar with the issue to strengthen Sabah’s position. – June 8, 2018.