Enhancing Sustainability of the Niger Delta Environment through the Choice of Techniques for Valuing Contaminated Land

Abstract

This paper provides an overview of the professionally accepted factors that should guide the choice of techniques for valuing contaminated land affected by oil spills to ensure environmental sustainability in the Niger Delta. We review ways to improve current valuation approaches and the various factors estate surveyors and Valuers should consider in choosing a technique(s) to adopt. We administer a questionnaire to 60 Estate Surveyors and Valuers in the Niger Delta using purposive sampling to examine the current preferred method. Forty-six questionnaires, representing 76.7% of the total, were validly answered and returned. By applying the current method to the Bodo Oil Spill as a case study, we find that the resultant compensation is hardly adequate, that it discourages recipients from continuing in their occupation prior to the contamination, aggravates the poor community’s relationship between oil exploration companies and their host communities, and reinforces the perception that oil activities cause most problems in the Niger Delta. We conclude that the continued use of predetermined compensation rates endangers the environment and results in unsustainable practices that will sooner or later destroy the entire Niger Delta ecosystem. We recommend the adoption of methods suitable to the subject contaminated property and the incorporation of the impact duration as key factors in the choice of techniques for a sustainable contaminated land valuation.

Keywords:

• environmental sustainability
• contaminated land valuation
• oil spill damages
• appropriate techniques

Oil spills, which are now frequent incidents within the oil-producing Niger Delta area of Nigeria, often affect considerable land area, and their impact can persist for a number of years, with grave consequences to the health and means of livelihood of people living within the impacted area. Compensation claims for oil spillage are often very substantial, and the controversies which often surround the payable compensation invariably become the subject of litigation. In Nigeria, there appears to be no comprehensive legislation that addresses issues of compensation and liability for oil spill and environmental damage (Oluduro, 2012). Schopp and Pendergrass (2003) observed that a majority of the statutes and regulations in Nigeria do not confer any right of private action for the victims of oil pollution. Thus, claims have generally been brought as common law tort claims under the theories of negligence, nuisance, and strict liability. Apart from Oil Pipeline Act Cap 145, LFN, 1990 that contains direct provision relating to compensation arising from oil spillage, other statutes such as Land Use Act Cap L5 LFN, 2004, Minerals Act Cap 121 of 1946, and Petroleum Act No. 51 of 1969 (now Cap 350 LFN 1990), Mining Act No 24 of 1990, Oil in Navigational Water Act, Cap 337 LFN 1990, deal primarily with property acquisition rather than injurious affection (Imosemi & Abangwu, 2013). Otegbulu (2009) described the Nigerian legal framework for compensation as either not designed to capture the total economic value of the impaired interests or misinterpreted by the practitioners. Kakulu et al. (2009) argued that the Nigeria Constitution does not allow a fair play in compensation assessment of non-market goods. Deeyah and Akujuru (2016) observed that the compensation determined under the Land Use Act Cap L5, LFN 2004 cannot solve the task of restoring income and livelihood to their pre-project levels; while the National Oil Spill Detection and Response Agency, NOSDRA (2014) concluded that the Land Use Act was not designed for the oil industry at all. Apart from the application of Land Use Act in the valuation of structures on land, Valuers depend largely on a predetermined rates commonly called the OPTS (Oil Producers Trade Section of Lagos) rates.

Most Valuers adopt the replacement cost method, which is applicable to crop compensation rates. Currently, the rate applicable for government acquisitions in the Niger Delta states of Akwa lbom, Bayelsa, Cross River, Edo, and Rivers States is also used for pollution valuation in States. Most oil companies have their own rates, which are slightly higher than the government rates in some cases and lower in others. Some even have a maximum quantum per hectare of land, no matter the crop composition involved. The compensation rates do not include long-term changes, non-market goods, or off-site effects. Long-term ecological changes including vegetation changes are not covered. The method also neglects to include indirect economic impacts, like the disruption-of breeding grounds for marine fishes. The current compensation programs aggravate community relations and reinforce the perception that oil activities cause most of the problems of the Delta areas (Akujuru, 1999).

The general misconception about the applicability of the Land Use Act to contamination damage assessment has led Valuers to no longer rely on previous methods of valuation. Each valuation assignment is treated as a new project, with Valuers making no recourse to previous valuations athough there is clearly a need to evaluate and learn from past valuations (Akujuru, 2014).

The application of the appropriate valuation model for assessing compensation for environmental contamination generally, and for damages arising from oil spills in particular, should be of interest not only to the valuation profession but also to owners of impacted properties, the oil prospecting companies, relevant government agencies, and a host of other stakeholders (Kayode & Ukabam, 2018). IVSC (2013) and RICS (2012) require that credible valuations must promote transparency and minimize the influence of any subjective factors on the process. The valuation process requires the Valuer to make impartial judgements as to the reliance given to different factual data or assumptions in arriving at a conclusion. Valuation has a crucial role in increasing the level of sustainability in the built environment. However, Valuers have been criticized for not identifying a relationship between sustainability and market value, and it is apparent that the inclusion of sustainability in valuation practice is limited (Boughey, 2000; Lorenz et al., 2007; Robinson & Lawther, 2005). The current Nigerian practice of valuing contaminated land as a result of oil spills fails to accommodate the elements of sustainability and results in inadequate compensation to land owners. We examine current valuation approaches and factors that will ensure sustainability of land owner’s occupation with the resulting compensation. A case study highlighting the valuation approaches applicable to contaminated land is used to illustrate that the incorporation of impact duration will ensure the sustainability of the occupation/business of land owners. We conduct a survey of valuation professionals to examine how to improve current approaches to ensure environmental sustainability, and we argue that the real-world choice of valuation methods for contaminated land due to oil spill damages should be based on relevant factors that are professionally determined and not on static statutory provisions or normative property valuation models that do not capture environmental damages.

Literature Review

Contaminated Land and its Effect on Property Values

The Collins English Dictionary defines contamination as the act or process of contaminating or the state of being contaminated. To contaminate is to make impure, especially by touching or mixing; to pollute; and to pollute is to contaminate, as with poisonous or harmful substances. Akujuru (2014) defines contaminated land as “land that contains substances that, when present in sufficient quantities or concentrations, are likely to cause harm, directly or indirectly, to man, environment, or on occasions to other targets.” Akujuru notes that Smith’s definition is helpful in describing the situation in the Niger Delta. In Simons and Saginor (2006), environmental sources that influence residential property values were identified as leaking underground storage, Superfund sites, landfills, water and air pollution, power lines, pipeline ruptures (oil spill), nuclear power plants, animal feedlots, and several other urban nuisance uses. In the Niger Delta, pipeline rupture frequently occurs, leading to oil spills, and whenever a major oil spill occurs, the prime focus is to determine how much of the oil or other contaminant can be recovered, how much beach area can be cleaned, and how many birds, sea mammals, and fish hatcheries can be protected (Freeman & Koop, 1989). This is followed by scientific studies to determine the persistence of the pollutant and its impact on all aspects of the ecological system affected (Freeman & Koop, 1989). In the end, scientists and land appraisers seek to quantify all damages suffered as a result of the spill. These damages may cover the full range of economic losses, from damages to commercial fisheries and economic crops and trees to quasi-economic damages relating to the losses sustained by Niger Delta people and others who survive off the natural resources in the affected lands and waters.

Several studies address the effects of oil contamination on property values. Simons (1999) investigated residential property value decreases along pipeline easements in suburban Virginia, using multiple regression analysis of the housing markets, and finds losses of 1–2% for residential properties farther away but on the pipeline corridor within the same market area, and up to 4–5% for properties located within two miles.

Simons et al. (2001) conducted an assessment of the effects of environmental contamination on residential property value in Maryland. The purpose of this study was to determine to what degree the value of properties with rights to water have been affected after an oil pipeline rupture occurred on the Patuxent River in Maryland. The impact on property values of the oil pipeline rupture and release of oil was analyzed using hedonic and predictive regression analysis techniques. The result of the oil spill on residential property value has negatively affected house values in the impacted areas with a significant reduction in price of over ten percent.

Approaches to Valuing Oil Spill Contaminated Land

In valuing contaminated land, the ordinary principles of valuation apply, except that the Valuer is expected to pay due attention to the positions of the parties as provided by relevant statutes and civil laws, among others. Thus, any of the individual conventional valuation models (income capitalization, direct market comparison, and cost methods)—or a combination of the three—could apply. Each model can be suitably adapted to value a number of the “heads of claims” in compensation for oil spillage, particularly loss of fishing rights, and damage to fishing equipment/amenities (hooks, nets, traps, canoes, etc.). However, assessing damages for injurious affection, ecological degradation, and other forms of environmental contamination may not be adequately captured by these models. The conventional methods of valuation have been the subject of far-reaching criticism in Babawale (2013), who notes that environmental valuation, no matter the scale, is inherently spatial and therefore requires the use of an analytical framework that extends beyond these three traditional neoclassical economic methods of valuation.

In particular, contamination and stigma are not adequately captured by these models. Attempts have therefore been made to use some of the contemporary valuation techniques such as the hedonic, contingent, conjoint, multiple regression, and PROBIT to assess the contamination and stigma effects of oil spillage, landfills, nuclear power plants, and hazardous waste sites, among others, on property values, but regrettably with conflicting results (Mundy, 1992; Otegbulu, 2011).

Ajibola et al. (2019) assert that, even though such are not traded in the open markets and therefore are regarded as having no marketplace prices, the values of natural goods and services still need to be assessed, especially when there is need to compensate affected persons, because man’s continuous survival is dependent on the goods and services provided by the natural environment. They further state that future economic growth and development itself is endangered by environmental degradation, especially land contamination by oil spills as is common in the study area.

Other studies have shown that there are various valuation techniques available to the Valuer in determining the value of an interest in a property. A study on Australian valuers’ practices by Chan (2000) reveals that there are two essential ways to assess the value of contaminated land. The first is the unimpaired/unaffected valuation technique, which requires the appraiser to assess the land as if it were uncontaminated. This valuation technique is not helpful to the client because the Valuer does not take the impaired state of the property into consideration. The second technique is the impaired/affected valuation technique, which requires the Valuer to assess the land as though it were uncontaminated and then to subtract any future loss in income caused by the impairment, and any other expense incurred to carry out investigations and cost of remediation and likely stigma. The author represented the method with the following equation: $${\mathrm{V}}_{\mathrm{c}}={\mathrm{V}}_{\mathrm{u}}–\mathrm{L}–{\mathrm{C}}_{\mathrm{r}}–\mathrm{S}$$ where

• V_c = contaminated value

• V_u = uncontaminated value

• L     =  Loss due to reduced income/productivity and/or legal liabilities

• C_r =  investigation and remediation costs

• S    =   stigma impacts

Chan (2000) reveals that the valuation methods mainly used by the Australian Valuers in practice are the comparison method, the capitalization method, the cost method, and the hypothetical development method of valuation. However, he notes that adopting traditional methods of valuation is not a bad idea, but one that has its challenges because such methods rely greatly on market data that are unavailable for contaminated land. The author concludes that the Australian Valuers are mainly adopting conventional methods of valuation in assessing the value of contaminated land; the methods that allow for more innovation are hardly ever used. McLean and Mundy (1998) cited in Simons and Winson-Geideman (2005) suggest the use of contingent valuation in real estate when buyers may be unaware of the impact of contamination on their property values, thus impacting the reliability of sales data. When the availability of adequate sales data is limited, traditional valuation techniques are unreliable and difficult to use. On the contrary, they note that the contingent valuation as a research method has well documented limitations; and that the techniques adopted are determined by factors such as the type of property, available data, and basis of valuation, among others. Oni et al. (2015) were of the opinion that since the desire of affected farmers is to be adequately compensated, valuation methods adopted should take into account aspects of the environment that are not traded in the market. In the case of contaminated land valuation in the United States, Jackson (2003) made reference to Advisory Opinion 9 (AO-9) and the Uniform Standards of Professional Appraisal Practice (USPAP). The author cautions appraisers to stay abreast with and precisely adopt recognized techniques to both enhance and necessitate the production of a credible appraisal prior to assessing contaminated properties. Chan calls for an appraiser’s expertise and competence in applying these techniques as a requirement in the field of practice; and also the use of methods that have gained general acceptance since most contaminated land valuations are destined for litigation. A study by Roddewig (1999), using lessons from the U.S. Supreme Court, document that litigation support assignments sometimes test the limits of acceptable appraisal methodology and practice. He explains that the trial court specifically stated that the trial judge is responsible for deciding whether an expert’s proposed testimony is built on a reliable foundation relevant to the task at hand and uses factors like testing, peer review, error rates, and acceptability in testing the reliability of a particular theory or technique. Chan notes that the Court decision acknowledged that factors beyond the four mentioned may also be applied. He then opined that an institutional perspective and official position on appraisal methodology may be required, along with a whole new way of determining the appropriateness of specific appraiser practice.

Contaminated land valuation in the foregoing examples deals with contamination caused by oil spill and other heavy industrial activities, not just contamination by oil spill, which is the focus of this study. The Green Book (2019) documents that although Nigeria has a number of statutes that provide for compensation in matters relating to land or landed property acquisition, only the Oil Pipelines Act Cap 145, LFN, 1990 and the Mineral and Mining Act 2007 contain provisions that directly provide for compensation arising from oil spillage. Both statutes provide for injurious affect, particularly Section 20(3) of the Oil Pipelines Act (Cap 145 LFN 1990), which prescribes the “before and after” approach for valuation of environmentally impaired property. The process generally involves three steps:

1. Estimate the value of the property under a hypothetical condition as if there were no loss of value due to environmental impairment, that is, the unimpaired value;

2. Value the property taking into consideration the environmental impairment, that is, the impaired value: Impaired value = Unimpaired value – Cost effects (remediation and related costs) – use effects (effects on site usability) – Risk effects (environmental risk/stigma);

3. Calculate the difference between the two estimates. This will produce the loss in value due to the impairment; that is: Property value diminution = Unimpaired value – Impaired value. Likewise, Property value diminution = Cost effects (remediation and related costs) + Use effects (effects on site usability) + risk effects (environmental risk/stigma).

This approach therefore requires significant inputs from other professionals such as micro- biologists, marine scientists, environmental scientists, and health and medical experts. In the Niger Delta, valuation practice has always seemed to depend on statutory provisions necessitating the use of predetermined rates for assessment of compensation, on the premise that most lands were compulsorily acquired. This has resulted in untold sufferings on the part of affected persons—community dissatisfaction with compensation, rejection of compensation amount by communities, violence and litigation—consequently aggravating community relations and strengthening the perception among oil-producing communities that oil activities cause most problems (Akujuru, 1999).

Implications of the Current Valuation Approach

Professionally, where the law determines the purpose, basis, and methodology of valuation, it discredits the professionalism of the Valuer. Akujuru (2014) argues that by adopting pre-determined rates as a method of valuation, it is assumed that no data or assumptions were made in determining value. This is not only unprofessional but questions the credibility of the valuation process followed and opposes the appraisal process set out by the IVSC (2007). Akujuru notes that this approach opens the practice of valuing for compensation arising from oil spill damage to non-professionals who can easily multiply the quantity of any property by the unit rates provided in the schedule of predetermined rates. This renders the patronage of practicing Valuers by land owners unnecessary when their land is to be assessed for compensation because they cannot see any professional input by the Valuer they retain since the oil companies’ valuation will be exactly the same with that of landowners’ Valuer, since both Valuers will work with the same set model. He contends that if the practice is not checked, it might eventually lead to the extinction of valuation retainership practice in claims compensation and will not ensure sustainability of valuation practice.

Factors Responsible for the Choice of Valuation Method

Generally, the choice of method(s) adopted in the valuation of environmental resources is/are predicated on some factors that must be taken into consideration in the process of valuation, and the choice of method(s) must be decided before setting out for field work. Such a choice stems from the purpose and basis of valuation (Ajibola, 2014). Barbier et al. (1997) and Ramachandra and Rajinikanth (2000) variously identify the determination of the overall objective or problem to be solved by the valuation as the most important factor to take into consideration when choosing a particular method. The two group of authors conclude that where the damage is from a specific external environmental impact such as oil spills on a coastal wetland, the type of assessment required is impact analysis, but where the problem has to do with making a choice between two or more alternative wetland use options (e.g., whether to divert water from the wetlands for other uses, or to convert/develop part of the wetlands at the expense of other uses), the type of assessment required is partial valuation. When the total economic contribution or net benefits to society of the wetland system (e.g., for national income accounting or to determine its worth as a protected area) is concerned, then total valuation is required. Also, Barbier et al. (1997) are of the opinion that resource control and data collection options will influence the choice of valuation method to be adopted for any wetland valuation and importance of the wetland resources, to be valued, must equally be taken into consideration in choosing a valuation method. Similarly Hanford (2011) and Dorchester (2011) are of the opinion that the choice of the valuation method should be objective and rational and not based on personal reasons or client influence. Valuation standards and principles should guide one’s work. Ethical conduct, relevant and accurate research, use of generally accepted valuation principles and standards, as well as the ability to draw informed judgements from properly analyzed market data, make professional Valuers.

Akujuru (2014) has argued that there appears to be a weak relationship between the indicators of degradation and the choice of valuation method and the method used by the firm, and a weak relationship between all the indicators—except noxious odors, which shows a medium relationship. He also finds that Valuers’ best practice was not at all influential on them when they had a valuation assignment, but that they were slightly influenced by what methods other Valuers adopt. He found out that in the choice of method of valuation, 60% of professional Valuers relied on their cognate experience to choose a method that was suitable for the subject assignment, while 40% of them relied on their previous reports and the enabling statute because, they asserted, most of the valuation was provided for by the relevant statute.

Chitumba (2014) documented important factors that Valuers should consider when choosing a valuation method generally. They are:

1. Theoretical soundness of the valuation method: The concept of value is an economic concept, anchored in finance. An acceptable valuation method must conform to some recognizable economic concept of value. In other words, a valuation method should be theoretically sound, based on firm economic theory. The methodology used needs to be statistically/econometrically accurate, robust, and logical.

2. Practical applicability of the valuation method: A valuation method should be suitable to the type of property and there should be sufficient relevant and reliable data to compute the value estimate. Wyman et al. (2011) cited in Chitumba (2014) observe that “the problem in real estate is that there is rarely enough data and the data that is available is not normally distributed so basic statistical models and probability analysis are not necessarily appropriate, although they have been used extensively in real estate research.” Chitumba asserts that direct primary market research is the best way to obtain information for valuation.

3. Type of property: Income-generating properties are investment properties, and their values depend upon the potential future cash flows (rental income) they can generate. A discounted cash flow (DCF) valuation method is more appropriate than traditional methods in such cases. Geltner et al. (2007) cited in Chitumba (2014) said “these real estate assets can be compared to, and indeed compete in the capital market with, other forms of capital assets, such as stocks and bonds.” Thus, to allow for comparison among these capital assets, the valuation method used for income-generating properties should be applicable to stocks and bonds.

According Akujuru (2014), the reliance on methods usually used by the firm probably implies that every valuation problem is considered to be similar to an earlier assignment undertaken by the firm and the firm assumes that the previous method of valuation adopted should be relevant. He noted that this is a habit that Valuers have formed over the years for several reasons, ranging from their education to the practice environment which has been conditioned by the prevailing statutes affecting valuation practice. He argued that reliance on methods used by the firm also means that there is a conservatism among Valuers in which there exist a belief that knowledge is static and not subject to change—a belief that has resulted in some Valuers calling themselves “old generation valuers” while those who adopt modern methods are termed “jet age valuers.” A Valuer is defined by the IVSC (2007) as a person who possesses the necessary qualifications, ability, and experience to execute a valuation, and shall be a person of good repute who has obtained an appropriate degree at a recognized center of learning, or an equivalent academic qualification; has suitable experience and is competent in valuing in the market and category of the asset; is aware of, understands, and can correctly employ those recognized methods and techniques that are necessary to produce a credible valuation; is a member of a recognized national professional valuation body; pursues a program of professional learning throughout his or her career; and follows all the requirements of the IVSC Code of Conduct. We contend that a Valuer having this requisite training, qualification, experience, and competence should be able to choose from among various valuation techniques in any given valuation assignment based on a criterion of factors incorporating elements of sustainability that will produce a credible valuation that is not prone to litigation.

Contaminated Land Valuation and Sustainable Development

The word “sustainability” is a complex phenomenon to attempt, assess, and measure; but its emphasis is to integrate social, economic, and environmental aspects for decision making (Barnebeck & Kalff, 2015; Huambachano, 2014). Recent thinking has it that sustainability promotes inclusivity, diversity, and integration of environment, society, government, and businesses through partnership for efficient use of natural resources (Kleine & Von Hauff, 2009). The most acceptable provision is the one that meets the needs of present and future generations and employs the most relevant practices. Sustainable development has been defined in many ways, but the most frequently quoted definition is from Our Common Future proposed by World Commission on Environment and Development also known as the Brundtland Report (1987). According to Brundtland Commission (1987), “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” In line with the global commitment to the Millennium Development Goals (MDGs), environmental sustainability is widely acknowledged as the principal means through which these goals can be achieved. MDG Goal 7 (Affordable and Clean Energy) has been adopted to ensure environmental sustainability. Within that goal, targets 9 and 11 of the MDGs are “to integrate the principles of sustainable development into a country’s policies and programs and reverse the loss of environmental resources.” Although there are no direct references to contaminated land valuation in the specific targets, if the MDGs of environmental sustainability are to be achieved in Nigeria, sound valuation practice that addresses issues of compensation and liability for oil spill and environmental damage must become one of the chief focus areas.

Environmental degradation caused by oil exploration and exploitation in the Niger Delta has not been abated and thus remains a great concern. No appreciable progress has been made in this direction. Based on the concepts of sustainable development, the Niger Delta region belongs to the world’s poor and therefore needs special attention. Contamination of wetlands of the Niger Delta involves both economic and sociocultural values which, when combined with ecological values of the environment, indicate the total economic value (TEV) of the land (Akujuru & Ruddock, 2014). In assessing damages due to contamination, Valuers rely on the normative property valuation models that they are trained to use (Akujuru & Ruddock, 2014); without recourse to the fact that every valuation assignment is unique and predicated on some factors that must be taken into consideration in the valuation process (Ajibola, 2014). Akujuru and Ruddock (2014) particularly note that normative property valuation models determine very inadequate values and do not capture the peculiarity of the damaged wetlands of the Niger Delta, which contain both economic and sociocultural values. Empirical evidence from Udoekanem (2013) confirms that compensation determined on the basis of the basic valuation methods was far higher than that determined on the basis of the Land Use Act Cap L5 LFN 2004 provision. These variations are up to 84.94% and 88.83% in the case of loss of income from economic trees and loss of income resulting from injurious effects on fishing rights respectively, assessed on a before-and-after basis.

It follows that valuation decisions in the Niger Delta are made without concern for sustainability, which requires the incorporation of economic criteria, or for the social, environmental and ethical aspects of valuation practice. Lorenz (2006) has argued that success in achieving more sustainable development in property largely depends on progress in integrating sustainability issues into property valuation theory and practice. The theoretical basis for the incorporation of sustainability considerations into valuation practice has existed since 1996. Topics of discussion are well documented by Harrison and Seiler (2011) and Lorenz and Lützkendorf (2011):

• 2007 At the Vancouver Valuation Accord meeting of valuation organizations, standards owners and implementers from 131 countries agree to work towards embedding sustainability with valuation practices

• 2008 Appraisal Journal publishes “Green buildings: Valuation issues and perspectives”

• 2009 Valuation Insights and Perspectives publishes “Finding green in sustainability: How to get in on the ground floor of this fast-moving trend’’

• 2009 Valuation Insights and Perspectives publishes ‘‘Valuing sustainable leases’’

• 2011 Appraisal Journal republishes “Energising property valuation: Putting a value on energy-efficient buildings,” a paper from the 17th Annual American Real Estate Society Conference in 2010.

While identifying the need to integrate aspects of sustainability into valuation, Lorenz and Lützkendorf (2011) argue that professional ethics of the valuation profession and the resulting responsibility to society dictate that valuation professionals take action to further advance sustainable development within the real estate sector, and that a continuation of poor property valuation practice can lead to a misallocation of capital and the degradation of financial, natural, and social resources.

Sustainability has not received adequate attention in valuation practice until now, and as a result the relationship between sustainability and market value has not been clearly defined. To make valuation sustainable, Kucharska-Stasiak and Olbińska (2018) said sustainability can be achieved when the benefits that property owners, (in this circumstance contaminated land owners) can have from sustainable valuation practice is reflected in valuations. The idea of sustainable development was taken up by the international real estate community, leading to the adoption of the Vancouver Valuation Accord in 2007. In the accord, the community undertook to advance the understanding, education, and practices of valuation according to the principles of sustainable development (Armitage, 2009). This implies that there academics are still searching for the criteria by which to choose the appropriate techniques and methodology to extrapolate value. Roddewig (1999) documents that the answers to all questions about the appropriateness and reliability of particular valuation techniques cannot be found in the various professional standards, publications, courses, and seminars because valuation of property affected by contamination is a relatively new part of the appraisal discipline, which has emerged only in the past 15 years, and that the techniques and methodologies for determining the impact on market value are still developing. He noted that there is continuous search for guidance on how to resolve methodological disagreements encountered in litigation and which techniques pass the test of reasonableness in a marketplace setting by both the courts and appraisal community.

We contend that environmental sustainability can only be ensured when professionally determined factors incorporating social, economic, and environmental aspects becomes the basis for choosing appropriate valuation methodologies for the assessment of contaminated land damaged by oil spillage and not static statutory provisions or normative property valuation models that do not capture environmental damages.

Research Methodology

This paper aims to suggest ways to improve current approaches by incorporating into valuation factors that ensure the determination of damages are adequate and will guarantee sustainable land use. In this research, the target population are registered Estate Surveyors and Valuers domiciled and operating within the Niger Delta. These respondents were extracted from the 2011 Nigerian Institution of Estate Surveyors and Valuers (NIESV) membership directory. The choice of the 2011 membership directory was to enable researchers to elicit information from experienced Valuers who have been in practice for some time. The directory provides a comprehensive list of all registered Estate Surveyors and Valuers in Nigeria that have practiced for periods above eight years, together with their firms’ address. In total, 60 Estate Surveyors and Valuers in Niger Delta registered under Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON), Cap E13 Law of Federal Republic of Nigeria 2007 were drawn from the directory using purposive sampling technique. Out of the 60 questionnaires sampled, 46, representing 76.7% of the questionnaires, were validly answered and returned. The researchers sought to access the most significant factor that influences the choice of techniques for valuing contaminated land due to oil spill among the Estate Surveyors and Valuers in Niger Delta. A list of possible factors derived from literature was suggested to Estate Surveyors and Valuers in this regard. These factors, as identified in the works of Akujuru (2014), Chitumba (2014) and Ajibola (2014), include:

1. Problem to be Solved by the Valuation

2. Impact Duration Analysis

3. Total Economic Contribution or Net Benefits to Society

4. Previous Method of Valuation Adopted

5. Data Collection Options

6. Methods Other Valuers Adopt

7. Personal Reasons or Client Influence

8. Generally Accepted Valuation Standards and Principles

9. Methods Used by the Firm

10. Judgements from Properly Analyzed Market Data

11. Cognate Experience

12. Theoretical Soundness of the Valuation Method

13. Practical Applicability of the Valuation Method

14. Methods Suitable to Subject Property

Data analysis and presentation was done through the use of appropriate statistical techniques; percentages, mean and Relative Significance Index (RSI). Responses were measured on a 5- point Likert scale corresponding to very significant, significant, neutral, not significant, and not very significant. Relative Significant Index (RSI) in prevalence data is determined thus: Using Bakhary and Othman (2008) formulae, the $$\mathrm{RSI}=\frac{5\mathrm{a}\mathrm{ }+\mathrm{ }4\mathrm{b}\mathrm{ }+3\mathrm{c}\mathrm{ }+\mathrm{ }2\mathrm{d}\mathrm{ }+\mathrm{ }1\mathrm{e}\mathrm{ }}{\mathrm{jN}}(0<\mathrm{index}<1)$$ where:

• a = number of respondents ‘‘Very significant’’

• b = number of respondents ‘‘Significant’’

• c = number of respondents ‘‘Neutral’’

• d = number of respondents ‘‘Not significant’’

• e = number of respondents ‘‘Not very significant’’

• N = sample size = 46

•  j  = number of response categories = 5

To further demonstrate how different methods could bring different values, a case study highlighting the valuation approaches applicable to contaminated land is used to illustrate that the choice of technique premised on impact duration factor will ensure the sustainability of the occupation/business of the land owners.

Results and Discussion

The results of the study are presented below using tables for clarification and better interpretation. The results are provided in Tables 1–6.

Table 1. Academic qualification of respondents.

Academic Qualification	Frequencies	Percentages
ND	2	4.3
HND	11	23.9
B. Sc	28	60.9
M. Sc	5	10.9
Total	46	100

Source. Authors’ field survey, 2019.

Respondents’ Academic Qualifications

Table 1 reveals the educational distribution of respondent Estate Surveyors and Valuers in the study area. It shows that 4.3% of the respondents are holders of ND Certificate, 23.9% had HND Certificates, while 60.9% and 10.9% of the total had attained a BSc or MSc, respectively. This shows that more than 90% of the respondents are graduates that have undergone requisite training in estate management and valuation. This implies that they possessed reliable information through training, thus their opinions are dependable.

Professional Qualification of the Respondents

Table 2 showed respondents’ professional qualifications. It showed that 69.6% of the respondent Estate Surveyors and Valuers are corporate members of the Nigerian Institution of Estate Surveyors and Valuers, indicating that they possessed reliable professional knowledge based on practical experience, thereby making their opinions appear to be reliable.

Table 2. Professional qualification of the respondents.

Grades of Membership	Frequency	Percentage
Fellows	4	08.7
Associates	28	60.9
Probationers	14	30.4
Total	46	100

Source. Authors’ field survey, 2019.

Respondents’ Involvement in Oil Spill Valuation

The response in Table 3 shows high rate (80.4%) of involvement in oil spill valuation by respondents Estate Surveyors and Valuers. This proves the credibility of the respondents and shows that the information provided in this study are credible and reliable.

Table 3. Respondents’ involvement in oil spill valuation.

Options	Frequency	Percentage
Yes	37	80.4
No	09	19.6
Total	46	100

Source. Authors’ field survey, 2019.

Issues Arising from Current Approach

To examine the issues associated with current valuation approaches adopted in the assessment of contaminated land due to oil spill damages in the Niger Delta, respondent Estate Surveyors and Valuers were asked to express their opinion on five listed issues. The results of the survey are presented in Table 4.

Table 4. Issues from current approach.

S/No.	Issues from Current Approach	Yes		No		Total
		Freq	%	Freq	%	Freq	%
1	Does current approach aggravate community relations?	44	95.7	2	04.3	46	100
2	Are compensation amount rejected by communities?	42	91.3	4	08.7	46	100
3	Is the compensation amount the reason for violence and litigation by communities?	40	87.0	6	13.0	46	100
4	Do communities show dissatisfaction with the anount of compensation paid?	41	89.1	5	10.9	46	100
5	Do communities think that oil activities cause most problems?	43	93.5	3	06.5	46	100

Source. Authors’ field survey, 2019.

The findings indicate that all of the respondents agree that there are issues with current compensation practice. All five main issues were considered significant by the respondents.

Rejection by communities of compensation amount, violence, and litigation imply that the current approach does not reflect communities’ well-being in valuation, and is thus far from being sustainable. This finding negates advocacy by Kucharska-Stasiak and Olbińska (2018) that sustainability can be achieved when the benefits that property owners, (in this circumstance contaminated land owners) can have from sustainable valuation practice is reflected in valuations. It does, however, reiterate earlier findings by Akujuru (1999) that the current compensation programs aggravate community relations and reinforce the perception that oil activities cause most problems of the delta areas.

Suggested Ways to Ensure Sustainable Practice

In order to provide the Niger Delta Valuers with a roadmap to the valuation of contaminated land with sustainability considerations, respondent Estate Surveyors and Valuers were asked to state their preferences to the suggested remedies to the problems of the current approach. The suggested remedies were identified from practice and our interactions with practicing Valuers involved in the process of valuation for compensation on various projects involving land acquisition, oil spillage valuation, and damage assessment surveys. The Estate Surveyor and Valuer, by virtue of Decree No. 24 of 1975 (now Cap E13, LFN, 2007) are the only professionals empowered to carry out valuation in Nigeria; hence the need for their opinion on ways to ensure sustainable practice. Their responses presented in Table 5 shows that 91.3% of the respondents agree that Valuers should choose techniques for contaminated land valuation based on professionally determined factors while 8.7% do not consider so, 26.1% were of the opinion that Current approach should be determined based on statutory provision of the Land Use Act while 72.9% disagree, On whether Valuers should make judgment on compensation value based on current market conditions 76.1% said yes while 23.9 said no. Similarly, 67.4% of the respondents agree that, Estate Surveyors and Valuers should improve their skills while 32.6 disagree, and whereas 82.6% agree that Valuers should be allowed to use the applicable methods rather than the sticking to a particular method of valuation as provided in the Land Use Act, only 17.4% disagree.

Table 5. Suggested remedies to problems of current approach.

S/NO	Suggested Remedies	Yes		No		Total		Ranking
		Freq	%	Freq	%	Freq	%
1	Valuers should choose techniques for contaminated land valuation based on professionally determined factors	42	91.3	4	08.7	46	100	1^ST
2	Valuers should be allowed to use the applicable methods rather than the sticking to a particular method of valuation as provided in the Land Use Act.	38	82.6	8	17.4	46	100	2^ND
3	Valuers should make judgment on compensation value based on current market conditions.	35	76.1	11	23.9	46	100	3^RD
4	Estate Surveyors and Valuers should improve their skills	31	67.4	15	32.6	46	100	4^TH
5	Current approach should be determined based on statutory provision of the land use act	12	26.1	34	73.9	46	100	5^TH

Source. Authors’ field survey, 2019.

In terms of ranking, Table 5 shows the suggestion that Valuers should choose techniques for contaminated land valuation based on professionally determined factors ranks highest, followed by the suggestion that Valuers should be allowed to use the applicable methods rather than the sticking to a particular method of valuation as provided in the Land Use Act. The suggestions support Jackson’s (2003) call for appraiser expertise in adopting recognized techniques that will enhance and necessitate the production of a credible appraisal prior to assessing contaminated properties, and the use of methods that have gained general acceptance because most contaminated land valuations are destined for litigation. The choice of techniques for contaminated land valuation based on professionally determined factors is in line with Roddewig’s (1999) position that an institutional perspective and official position on an appraisal methodology may be required, as well as a whole new way of determining the appropriateness of specific appraiser practice. The implication of these findings is that it will lend credence to the respondents’ opinion on questions 2 and 4 in Table 4 by curbing the persistent rejection of compensation amount and communities’ dissatisfaction with the amount of compensation paid in the Niger Delta.

The suggestion that the current approach should be determined based on statutory provisions of the land use act was rejected. The implication of this rejection is that Valuers are no longer comfortable with predetermined compensation rates. This fear was also confirmed by Akujuru (2014) when he said “this approach opens the practice of valuing for compensation arising from oil spill damage to non-professionals who can easily multiply the quantity of any property by the unit rates provided in the schedule of pre-determined rates and that the continued use of this approach endangers the environment and results in unsustainable practices that will sooner or later destroy the entire Niger Delta ecosystem.” An earlier work by Lorenz and Lützkendorf (2011) also supported this position by asserting that “a continuation of poor property valuation practice can lead to a misallocation of capital and the degradation of financial, natural, and social resources.”

We contend that only the real-world choice of valuation methods for contaminated land due to oil spill damages based on relevant factors that are professionally determined and not a static statutory provision or normative property valuation models that do not capture environmental damages will ensure sustainable valuation practice for contaminated land in the Niger Delta.

Factors that Influence the Choice of Contaminated Land Valuation Technique

To promote transparency and to minimize the influence of any subjective factors on the process for a credible valuation as required by the Royal Institution of Chartered Surveyors and International Valuation Standards Committee (IVSC, 2013; RICS, 2012), it is necessary to examine factors that should guide the choice of techniques for valuing contaminated land affected by oil spill to ensure sustainability. Estate Surveyors and Valuers were required to professionally rate the factors which can best be relied upon in the choice of valuation techniques for valuing contaminated land due to oil spill damages. Responses of the respondent Estate Surveyors and Valuers are shown in Table 6, which itemizes 14 listed factors for choosing valuation techniques of contaminated land valuation. Twelve factors scored with mean of more than 3.0 and were therefore considered to have significant influence on the choice of valuation technique for contaminated land valuation.

Table 6. Professional suggested factors for choosing CLV techniques.

Professional Suggested Factors	Weights (N = 46)								Decisions	Rank
	1	2	3	4	5	Sum	Mean	RSI
Methods Suitable to Subject Property	–	–	3	6	37	218	4.74	0.948	Significant	I^ST
Impact Duration Analysis	1	3	2	7	33	206	4.48	0.896	Significant	2^ND
Total Economic Contribution or Net Benefits to Society	2	5	1	4	34	201	4.37	0.874	Significant	3^RD
Problem to be Solved by the Valuation	1	3	4	10	28	199	4.33	0.865	Significant	4^TH
Generally Accepted Valuation Standards and Principles	2	8	1	13	22	197	4.28	0.796	Significant	5^TH
Previous Method of Valuation Adopted	2	9	3	12	20	177	3.85	0.770	Significant	6^TH
Theoretical Soundness of the Valuation Method	5	6	5	10	20	172	3.73	0.748	Significant	7^TH
Methods other Valuers Adopt	2	10	4	16	14	168	3.65	0.730	Significant	8^TH
Methods Used by the Firm	4	8	5	10	18	165	3.57	0.717	Significant	9^TH
Judgements from Properly Analyzed Market Data	5	10	7	7	17	159	3.46	0.691	Significant	10^TH
Practical Applicability of the Valuation Method	1	17	4	13	11	154	3.35	0.670	Significant	11^TH
Data Collection Options	6	14	6	13	7	139	3.02	0.604	Significant	12^TH
Cognate Experience	10	9	8	12	7	135	2.93	0.587	Not Significant	13^TH
Personal Reasons or Client Influence	18	11	8	9	–	100	2.17	0.435	Not Significant	14^TH

Source. Authors’ field survey, 2019.

<3.00 = Not Significant >3.00 = Significant.

The implication is that Valuers’ professional expertise in the choice of valuation technique will be felt more in practice, which again supports Jackson’s (2003) call for appraiser expertise and competence. Reliance on factors such as impact duration, problem to be solved by the valuation, total economic contribution or net benefits to society, and others for choice of methods for contaminated land valuation assignment will incorporate sustainability issues into contaminated land valuation practice, will eliminate the influence of any subjective factors on the process, and will address the rejection of compensation amount, violence, and litigation by communities associated with the current approach. This agrees with the Lorenz (2006) position that success in achieving more sustainable development in property largely depends on progress in integrating sustainability issues into property valuation theory and practice. However, only two factors that scored a mean of less than 3.0 were considered not significant in the choice of valuation technique for contaminated land valuation: Personal Reasons or Client Influence and Cognate Experience.

Recommended Factors that Influence the Choice of Contaminated Land Valuation Technique

The respondents’ responses in Table 6 were further ranked in order to determine the level of significance that each factor has on the choice of valuation method when valuing contaminated land due to oil spill damages in the Niger Delta. Relative Significance Index (RSI) analysis was carried out using suggested factors that were considered to influence the choice of valuation method.

The most significant factors that influence choice of valuation technique and are therefore recommended by this study are the following four: methods suitable to subject property, impact duration analysis, total economic contribution or net benefits to society, and problem to be solved by the valuation. The recommendation of these four highly ranked factors will not only ensure the benefits that affected communities can have, are achieved, but provides a credible link to sustainability. This finding is in agreement with Kucharska-Stasiak and Olbińska (2018) assertion that sustainability can be achieved when the benefits that property owners (in this circumstance contaminated land owners) can have from sustainable valuation practice is reflected in valuations.

Case Study: The Bodo Oil Spillage

Bodo city is located in Gokana local government area of Rivers State, Niger Delta, Nigeria. The town is traversed by major and minor rivers, creeks, and streams, notably the Kolasugi-Tesoro Creek and the Bodogarara Creek. A series of oil spills have been reported in the area. Akujuru and Ruddock (2014) document that the impacted land is situated within a tropical rain forest region with an annual rainfall of over 3,000 mm and that the bush outside the perimeters of the impacted area is dense with mangrove forests, containing economic trees such as oil palm, raffia palm and napa palm. The rain forest vegetation provides valuable farm land, and the swamp forest provides rich fishing grounds and seasonal farming which are the main occupations of the people of Gokana coastal communities.

Losses suffered by the community included contamination of fish ponds and fishing channels; contamination of the mangrove forest resulting in the loss of mangrove and other economic crops and trees; non-timber forest resources like crabs, periwinkles, crayfish, and other seafood usually gathered freely from the mangrove vegetation; and contamination of water sources and fishing gear. This presupposes that the source of livelihood of the larger population of the people is threatened by oil spillages. Findings in this study have shown that valuation under current practice must be by reference to the Oil Producers Trade Section (OPTS) rate for economic crops and trees, and ponds. A map showing the Bodo community and an illustration for one of the claimants from Bodo whose man-made fish pond was damaged by an oil spill is shown in Figures 1 and 2, respectively.

Figure 1. Map of Rivers State showing Gokana LGA.

Source. Adapted from https://www.loc.gov/maps.

Figure 2. Map of Bodo Town showing man-made fish pond, Gokana LGA Rivers State. Notes: Total number of ponds = 4, average area of each impacted pond = 81m^2, compensation rate for ponds (as provided by the OPTS subcommittee on land acquisition) = N40/m², estimated annual gross income per pond from market evidence = ₦768, 000, and duration of impact/period of recovery (available from scientific report) = 12 years. Conversion rate is ₦385/$1US as of January 7, 2021.

Source. URP GIS Laboratory, Rivers State University, Port Harcourt, 2021.

Method 1: Using Oil Producers Trade Section (OPTS) Rate

The OPTS compensation rate for a pond in the Niger Delta states is N40/m2. Thus the assessment will be as follows:

Table

Compensation for Ponds	= Area × OPTS Compensation rate ×Total no. of ponds affected
	= 81m^2 × ₦40 × 4
Compensation value	= ₦12, 960

Method 2: Using Income Capitalization Techniques

By recourse to the income capitalization technique, the annual gross income is estimated from a particular pond, thereafter the outgoing expenses are deducted to arrive at the net income before capitalizing at an appropriate year’s purchase over the duration of impact to ascertain the full market value of the loss. The assessment will be as follows:

Table

Estimated annual gross income from market evidence	= ₦768,000
Less: outgoings (void/lean period/ maintenance etc.) @ 45%	= ₦345,600
Net income	= ₦422,400
YP for 12 years @ 25% & 3%	3.12
Capital value	= ₦1, 317,888
Compensation value for four damaged ponds (₦1, 317, 888 × 4)	= ₦5, 271,552

This analysis shows that the current method’s resultant compensation is hardly adequate for assessing oil spill damages. The ₦5, 258,592 value differential between the market approach and the predetermined rate approach analyzed here clearly confirms that the predetermined (OPTS) rate is unsustainable. The capitalization factor in the market approach takes into account the impact duration (period of recovery) of the oil spill on the livelihood income stream of the affected persons. It should be noted that the adoption of a high rate of interest (25%) is due to the insecurity of this type of investment.

Conclusions and Recommendations

This study examines the current valuation approaches and factors that will ensure sustainability of land owners’ occupation with resulting compensation. This is necessary because it is apparent that the inclusion of sustainability in valuation practice is limited (Boughey, 2000; Lorenz et al., 2007; Robinson & Lawther, 2005). We show that there are issues with the current compensation practice for land contaminated by oil spills and we reiterate the view of previous studies that compensation aggravates community relations, results in violence and litigation, causes the rejection of compensation amount by communities, and strengthens communities’ perception that oil activities cause most problems. This study confirms that these issues are connected with the current compensation practice whose techniques are determined based on statutory provision of the Land Use Act. The high discrepancy between values of the income capitalization method incorporating impact duration (years of recovery) and methods that adopt OPTS rates is evidence that the choice of techniques premised on professionally determined factors ensures sustainability. The continued use of the OPTS rate endangers the environment and results in unsustainable practices that will sooner or later destroy the entire Niger Delta ecosystem. As many of the people in the region are dependent on the land and environment as their source of income and livelihood, the interest of the people cannot be waved aside. The production of a credible assessment for contaminated land will require that these benefits be reflected in the techniques adopted to ensure sustainability. It is therefore recommended that the choice of valuation methods for contaminated land due to oil spill damages should be determined based on relevant factors and not statutory provisions that do not capture environmental damages. We conclude that the methods suitable to subject property (which ranked first, with RSI of 0.948), impact duration analysis (which ranked second, with RSI of 0.896), problem to be solved by the valuation (which ranked third), and generally accepted valuation standards and principles are key factors that can help Valuers professionally choose valuation techniques that ensure environmental sustainability. The limitation of this study is that the sample size is relatively small because Valuers with experience in the valuation of oil spill damages are few in the Niger Delta, thus making large collections of data difficult. Future investigations to test this proposition are necessary, particularly using larger sample sizes or multiple case studies. Further studies can also look at factors that define the relationship between sustainability and values.