Dichotomising compulsory land acquisition and land contamination valuations

Abstract

Purpose – This study aims at identifying the consequences of adopting statutory rather than market basis in assessing damages due to contamination to land. Most valuations undertaken to assess compensation for damages due to contamination on land are done with valuation methods prescribed by law for the compulsory acquisition of land. Design/methodology/approach – A total of 80 registered valuation firms with experience in both compulsory acquisition and damage assessment participated in a questionnaire survey to ascertain the methods adopted in valuing when determining the compensation payable as damages due to land contamination and the need for a framework for such valuations, in addition to some archival documents relating to the relevant laws and some purposively selected valuation reports, which were reviewed. Findings – The results of the analysis indicate that the use of compulsory acquisition valuation methods results in inadequate damages, which engenders conflicts among the stakeholders. The absence of any framework for damage assessment is responsible for the current practice in the Niger Delta, and it is recommended that international best practices utilising market basis of valuation be adopted. Research limitations/implications – Most valuation methods available are useful for valuing commercial properties regularly traded in the market and not applicable to the Niger Delta, which is mostly rural with very few market transactions. It is expected that this study will enable oil and gas industry operators, professional valuers advising the land owners or operators in the industry and the government to differentiate compensation paid for compulsory acquisition and compensation required to placate those suffering losses due to contamination. Practical implications – The findings will assist professional valuers to be more professional in valuing contaminated land devastated by oil spills. Social implications – Adopting the findings will engender a greater acceptability of the results of valuations undertaken in the wake of an oil spillage disaster and ensure a peaceful environment for the oil operators and the entire populace. Originality/value – The findings of this study are expected to assist policymakers in emerging economies and professional valuers acting in these environments to avoid precipitating crises by adopting inappropriate valuation techniques when assessing damages due to contamination. This study is original and has not been published elsewhere.