Although Yanchang Oil Group has yet to provide a clear response to the former investors of Shanbei Oil, which was government-appropriated under a cloud of disagreement over compensation, the past three months has seen all kinds of news worthy of their celebration. "The new Shanbei government has opened a door, and through the crack we can see light," says one investor involved in the dispute.
After four years of conflict, investors had abandoned their lawsuit against Shanbei's government over its claim for the wells. They were independently able to agree upon a fair compensation scheme, and Yu Lin city and Shaanxi province is coolly approaching the drawn-out conflict’s resolution.
The dispute, which exploded in June of 2003, involved 60,000 investors and become known as the first case involving protection of personal property in China. Some investors felt that compensation by the government was too low, which they say led to the bankruptcy and deep indebtedness of many.
On July 1, the Property Law formally went into effect. It is widely believed that the new law will have a huge impact on the final result of the dispute. "We've been waiting for this," says Tong Anrui, one investor representative.
Guo Haiyan Delivers a Letter
Guo Haiyan, a professor at Capital Normal University, delivered information about the suit to Bao Yujun, one attendee of the double-congressional meeting this past March. That afternoon, during a discussion meant to cover other issues, Bao spoke out about the case. He then wrote his own report, which he sent to the National Reform and Development Commission and the Bureau of Land and Resources. The Shaanxi provincial government was then contacted, whereupon Yuan Chunqing, the governor, personally gave Yu Lin City's party secretary a call that Monday demanding that he address the issue of losses by the investors.
It's said that the Yu Lin City government has recently received three documents-- one from the Chinese People's Political Consultative Conference, one from the National Reform and Development Commission, and one from the Bureau of Land and Resources.
Guo Haiyan has been a long-time researcher of Marxism and is a member of Beijing's Propoganda Group. In 1969, at 19 years of age, he joined the production brigade in Yanan, in the north of Shaanxi. From this he developed what he calls "a deep connection" with Shaanxi. In November of 2004, Guo went to Yu Lin to investigate Shanbei Oil, after which he wrote letters to the Central Committee and the State Council, and began working with Zhu Jiu, an attorney representing the investors.
"I spent time with some of the investors in the oil well. They were utterly destitute," says Guo.
Guo's first contact with the case was through Bao Yujun, a member of the CPPCC. The mere mention of the case to Bao at that time would stir him-- he has said that the case “defies human nature." After the investigation in November 2004, Guo discovered that despite having working the well for ten years, the government appropriated their assets in a flash. Common citizens began doubting their government and their party.
This March, Tong Zongrui and several other representatives of the Shanbei Oil investors came to Beijing, where they delivered new information to Gou. He then directly called Bao, who was in a meeting at the two congresses.
“Bao Yujun, after receiving the call, said that I should immediately send him the information,” says Gou.
On June 12, Bao Yujun told the EO via phone that the Shanbei Oil case had been discussed both in 2003 and in 2004 at the two congresses. But a changes in leadership and implementation of the Property Law have catalyzed a turning point in the case.
Mo Shaoping’s Ten Words Become Policy
In a secluded, small courtyard tucked in Beijing’s Zhongshan Park, Mo Shaoping, partner of his namesake firm, tells us the premise for his involvement in the case.
By 2005, many investors’ representatives had sought his expertise, and he accepted under three conditions. First, he stipulated that they fight for compensation, not the return of the well. Two, he wanted to change the lawsuit against the local and provincial governments into coordination and negotiation. Three, he would have to walk a middle road. Mo believed that the highest levels of central government weren’t clear on the dispute, and wanted to report the problem to the State Council with support from the Association of Industry and Commerce.
Last December, Mo’s firm rushed a copy of their legal opinions to Shaanxi province’s complaints office, governor, and people’s congress. On December 26, officials from the Shaanxi government headquarters acknowledged receipt of the package and promised that they would “actively look into the matter”
On March 8, the same day that Guo sent his materials to the CPPCC, Mo Shaoping, Ping Xiaoling, and Hu Xiao all distributed their own materials.
Guo’s letter said that in June of 2006, after the oil well had been forcibly taken by the government from its investors without proper compensation, many investors sought an audience with more senior government officials. As they sat tight and drew in domestic and international attention, the local judicial bodies penalized Ping Bingxian and three others involved in the seizure. While this cooled down the investors, they have still fiercely sought greater justice, as many of them had become burdened by massive debt that has left them penniless and frantic.
Beyond that, some say that the case does damage to China’s image abroad. “We believe that whether or not the privately owned property of citizens can be protected and respected is a major condition for the development of a harmonious society,” says the letter.
Ren Guangming of Liuwan village in Jingbian county is 49 years old. From 1999 to 2001, he responded to the local government’s appeal for investment and lent over 4 million yuan to oil well number four. In 2003, when the government took the well back, he was given 1 million yuan and is now in debt for the remainder.
“I really want to jump off of a building right now. This money… I couldn’t pay it off in a lifetime,” says Ren, who now makes ten yuan a day doing odd jobs while his wife acts as a maid. In 2003, when Ren was still earning from the well, he made 3 or 4 million yuan a year.
“If the government can compensate us according to the second batch of standards and give me four or five million, I’ll be happy.”
Shi Xiucheng is 57 years old. He and his son invested 2 million yuan in oil well number eight, which produced ten tons of oil a day. They were given one million yuan by the government.
Shi says that he was originally a food and clothing retailer before investing everything he had into the wells. Now he is a bricklayer earning 30 yuan a day. “The lender is at the door every day, threatening to cut my arms and legs off.” He says that if nothing changes, it is inevitable that he one day end up in prison for his debt.
“We only hope to be fairly compensated,” he says. On June 5, Qi Fengfei, a representative of the investors, said that they wouldn’t oppose the nation’s reorganization of oil resources. The well has already been nationalized, so they don’t want it back.
Qin Linhui’s Secret Report
“The right to take initiative is still Yanchang Oil’s hands,” says Qin Linhui, director of the Petrochemical Department of Yu Lin City. “We’ve been very serious about discussing matters of compensation.”
According to him, Yanchang Oil has already established special organs to deal with the Shanbei oil dispute.
According to our understanding, Qin is a pivotal character in the case, as he personally was involved in the planning of the well’s appropriation and the associated compensation schemes. After the dispute erupted, he would send reports directly to the governor’s office.
“After the CPPCC raised the motion, Qin Linhui had already been to the provincial governor to discuss compensation five times, and each time there was a letter involved, says one source.
Hu Xiao, an attorney at Mo Shaoping Law Offices, says that the government’s attitude is being adjusted and that after this year, there will be more big changes. Before, the government virtually didn’t discuss the dispute, saying “it’s already over.” Now, no one can be found saying this.
For the media, the government has also been more open-minded. Qin Linhui says, “If you want to know the true history of the dispute, feel free to stop by.”
Qin says that the biggest problem now is finding an arbitrator. “Who’s to say what compensation is high and what is low?”
“We want to respect history and face the facts,” he continues. He says that some people believe that there should be a new round of compensation, but that this is very irrational. The first and second rounds of compensation were different because the oil well’s circumstances were different. Some investments were simple, some were exceedingly complex. Each block has different pricings due to depth, production. He says it was all based on the facts and the market
Differences in the Rounds of Compensation is the Crux of the Dispute
According to one private oil investor, after the government seized the wells in June of 2003, they only compensated 20 percent of their value, and all signed agreements to that were forced. At that point, investors of 39 of the wells did not sign on, and they subsequently enjoyed 100 percent compensation when they eventually did. There is suspicion that these investors had government backgrounds.
“Our demands are very simple: We want compensation according to the standards used for those 39 wells,” says Qi Fengfei, investor representative.
“This time the government really came around and started to discuss compensation with the investors. Before, the moment people started to discuss this there were arrests,” says Guo Haiyan. He hopes that the government can start compensations quickly, as there are over 6,000 people without means of survival who have a stake in the process.
Yanchang Takes Over
According to understanding, by the end of this past May, senior officials from Yulin City and Chanbei Yanchang Oil held talks, where Yulin City formally requested that the firm take responsibility for the compensation and dealing with the aftermath of the incident. In attendance were the city’s secretary-general, the mayor, vice-secretary general, vice-mayor, along with Shen Hao, the newly appointed director of the firm, and four executives from drilling companies. Yanchang has already promised to establish a body to deal with the incident.
Shaanxi Yanchang Oil Group was re-organized in 2005, producing 9.2 million tons of oil. It is China’s fourth largest oil company and the leading contributor to Shaanxi’s tax revenues, with sales last year of 40.2 billion yuan, more than half of which went to taxes.
On June 11, one investor visiting Yanchang’s headquarters in Xi’an was told that they still hadn’t received information, and whether or not to compensate rests on what the provincial government decides.
According to Zhang, director of Yanchang Oil Group’s office, when everything was seized by the government, assets became the city government’s, and that Yanchang was just the operating organ. The board had four people from the provincial level, two from Yanan City and one from Yulin City, thus making the government the proprietor of all assets.
“In the end, the government makes the policy and the company will pay the cash,” says Kang Guoqing, one investor representative from Dingbian county. He believes that the provincial government has only given signals, but nothing concrete. How to deal with the dispute and who will compensate the investors has yet to be decided by the local government involved.
One source from Yanchang says that investors at that time were speculating wildly, and after their losses, didn’t pay the government any contract fees. Taxes were equally low. Later, the government used the tax revenue to calculate compensation, which was accordingly low.
Tong Zongrui, an investor representative, says “Perhaps there are isolated cases of tax evasion, but if so why didn’t the government manage things better? If people evade taxes, the government can arrest and fine them, but this and compensation are two entirely different matters…Compensation is compensation, if there is evidence of tax evasion, it can be taken out of that.”
More and more signals are emerging to suggest that the dispute is approaching a resolution. Qi Fengfei, one investor representative, recently discovered that several officials from Yushi City had discussed the Property Law, and that they said, “After the Law goes into effect, things will look better for you.”
For the past dozen years, thousands of investors have poured into Shanbei to speculate and dig for oil. And for everyone who’s profited nicely, there’s someone who’s lost everything.
[Chinese version]
