Upstream Petroleum Resources Development Bill: Department response to public submissions; with Minister and Deputy Minister

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Mineral Resources and Energy

22 November 2022
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

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In a virtual meeting, the Portfolio Committee received the responses from the Department of Mineral Resources and Energy (DMRE) on the Upstream Resources Development Bill.

Members asked if the Department had changed anything in the Bill, and, if so, what had been changed. There was also concern that its public hearings had been conducted virtually, and doubt was expressed as to whether this was an effective means of consultation, given the majority of South Africans lack access to virtual platforms. Another Member spoke on the issue of black economic empowerment (BEE) and the participation of black people, and commented that if it was looking at addressing the legacy of colonialism, what informed 10% as the minimum allocation for black participation, as they constituted about 70% of the population,

The Chairperson said he had been asked when the Committee intended to finish the processing of the Bill. It would have loved to finish it as quickly as possible, but unfortunately, there were parliamentary processes that guided it. Failure to manage or master those processes would leave the legislation vulnerable and open to many challenges.

Meeting report

Opening remarks

The Chairperson said the Committee would be getting responses from the Department of Mineral Resources and Energy (DMRE) on the Upstream Petroleum Resources Development Bill (UPRDB) after the public submissions that had been submitted, supported by oral submissions. The Committee would move to the DMRE to give its response to the proposals made by the stakeholders. He handed over to the Department.

Draft Upstream Petroleum Resources Development Bill

Dr Nobuhle Nkabane, Deputy Minister of Mineral Resources and Energy, said she would hand over to the Director-General (DG), who would present and assign the relevant official to give information on some details in the presentation.

Mr Jacob Mbele, DG, DMRE, said the presentation would be delivered by a colleague in the Department who was extensively involved in the consultations for this Bill. She was Dr Stella Mamogale, Director: Mining and Mineral Policy, DMRE.

Progress to date:

Dr Mamogale said that in November 2019, Cabinet had approved the Bill to be published for public comment. It was then published for public comment on 24 December 2019. The closing period for written submissions ended in February 2020. About 60 written submissions were received from interested stakeholders. Between April and May 2020, the drafters conducted virtual consultations on the draft Bill. These included the industry, industry representatives, the legal fraternity, financial institutions, black economic empowerment (BEE) structures, consultants and non-governmental organisations (NGOs). All the submissions were reviewed and considered where possible. The Bill went through Cabinet processes and was approved for tabling in Parliament on 1 July 2020. On 24 June 2022, Parliament published the Bill for the submission of written comments, and the closing date was 29 July 2022.

Licensing rounds and consultation

There was concern over Sections 15 and 37. Both of these sections provided for “licensing rounds,” and they did not provide for the current situation as provided for in the Mineral and Petroleum Resources Development Act (MPRDA), in which the option of direct submission of applicants was provided.

Response: The Bill intended to move away from first come, first serve, and this would be allowed only under exceptional circumstances at the Minister’s discretion.

Concern - Section 19: The use of the word “may” within the scope of section 19(2) denoted the Petroleum Agency of South Africa's (PASA’s) discretion to decide when it would conduct public hearings when consulting with interested and affected parties. This discretion was contrary to the principles of openness, transparency and procedural fairness when decisions were made subject to the discretion not to provide affected persons with a fair opportunity to raise their concerns before making the decisions

Response: Disagree. Where PASA had concerns with some of the issues in the report, they may consult. However, PASA was obligated to make it known that an application had been accepted and the applicant had an obligation to conduct public consultation.

Black persons' participation/Reservation of blocks

Concern - Section 31: The two-year extension may not be sufficient, as there may be difficulty in finding black persons who would be able to secure funding for high-risk, capital-intensive exploration phase funding. It was therefore submitted that the extension period be made flexible to take into account the aforementioned circumstances.

Response - An open-ended extension goes against the objects of the Bill of ensuring that black persons actively participate in the development of oil and gas.

Concern - Section 32: This section assigns legal benefits on the basis of race, with persons not of a certain race not enjoying such benefits.

Response - The provision was to promote active participation of black persons in the petroleum sector. It was the Department’s view that the legal basis of this provision was to benefit a certain race.

State Participation

Concern - Section 34: The provisions for a 20% carried interest were relatively vague and unspecific.
Response - This was to ensure that the people of South Africa benefit optimally from exploiting oil and gas.

Concern - This section was nothing more than a misnamed tax, entitling the state to a disproportionate 20% of benefits accruing from petroleum resources.

Response - this was not a tax; the holder was entitled to recover the costs.

Concern - Worryingly, in so doing, the state interprets the custodianship principle as akin to nationalisation, in contravention of the original intention behind that principle.

Response - The intention of the Bill on custodianship did not mean that the state was the owner. Custodianship did not bestow ownership. The state would manage the administration.

General comments

Concern - The UPRD Bill ignores the climate change crisis, and was not aligned with South Africa’s Climate Change Bill and international climate change commitments. The Bill should not be promulgated in its current form, but should instead provide an appropriate framework for a just transition away from fossil fuel extraction and use, and towards ecologically sustainable renewable energy.

Response - The Bill seeks to ensure petroleum resources were developed ecologically and sustainably, while seeking to uplift socio-economic conditions in South Africa. The Bill further gives effect to section 24 of the Constitution.

Concern - Inclusion of BEE companies in the industry.

Response - Section 31 provides for a minimum of 10% per cent undivided participating interest of black persons.

Concern - Growth of local skills and expertise.

Response - The object of the Bill was to promote local employment, skills development, technology transfer and national industry participation through the supply of goods and services.

Discussion
 

The Chairperson apologised for not seeing the Minister’s name on the platform. The secretariat of the Committee had brought it to his attention. He asked the Committee if there were any questions of clarity, not their views or their position on the Bill. It was dealing with the Bill and there was still a long process to follow. This was to get clarity so that when it dealt with the Bill on its own, it was clear on what the meaning was of what was suggested.

Mr J Lorimer (DA) asked if, as a result of these written submissions, the DMRE had changed anything in the Bill. If so, what did they change? The second question was on slide 12, section 20
(consultation/consent by landowners). Why leave it to regulation? Why not put it in the legislation for greater certainty? The next question was from slide 50, section 36 (strategic stock). Why was it not stipulated in the Bill? To him, this left it open for negotiation. Negotiation opened the door to the possibility of a sweetheart deal. This was exactly what people complained about. What the government had acknowledged was a lack of certainty in its legislation. Why were they proposing another bill with uncertainty written into it?

Mr V Zungula (ATM) wanted to find out, in accordance with the Department’s perspective, whether the public hearings had been effective consultation, given that ordinary South African’s access to platforms was limited. He felt this was important, because when it did its own public hearings, it would not want a situation where the citizens it met felt left out and did not participate on the Bill because of the lack of access to those platforms where they could express their views.

Ms P Madokwe (EFF) said Mr Lorimer had partly covered her in aspects where the Bill either referred to other regulations and policies, as opposed to making explicit clauses on the Bill. She was interested in this, and the impact on climate change and the environmental impact on why it was not included in the Bill. She then spoke on the issue of BEE and the participation of black people. If it looked at addressing the legacy of colonialism and understood that black people constituted about 70% of the population, what informed 10% as the allocation of black participation opposed to a slightly higher percentage?

The Chairperson handed over to the Minister of Mineral Resources and Energy to respond to the questions raised.

DMRE's response
 

Mr Gwede Manatashe, Minister of Mineral Resources and Energy, said he would allow officias from the Department to respond to the questions, and would fill in the gaps where necessary in the end.

Dr Mamogale started with Mr Lorimer’s question, which was a general comment on whether it changed anything in the Bill. No, it did not.

The next question was on slide 20, where he asked why it was mostly working on regulations. It would provide step-by-step details on the regulations. It did not believe that anything was lost.

She had not heard much on section 36 on the issue of strategic stock. It could have been a network issue, as she did not get the question. She had just heard about uncertainty in the provision. She asked for clarity on this question.

She moved to Mr Zungula’s concern about the consultation that had been conducted virtually. Unfortunately, the Department believed that had been the most suitable, conducive method to do consultations, because the Bill was already in process and COVID-19 had struck. It had tried its best and could see, after its first gazette, the public’s vast comments. Going forward, as Parliament went through the parliamentary sessions with the public, it was hoping to receive more information.

On the issue of climate change, it had been asked why the Department was not dealing with it in this Bill. The issue was that the environmental management in the country was addressed through the relevant legislation. As a Department, it could not start with new requirements for environmental management. What it was doing was working, and the Department did not see any issues in environmental management which had been brought about by climate change. The DMRE believed it would be working together with the other departments to address that.

The Department had been asked why it had settled on 10% minimum participation of black people. Its view was that the section provided for a minimum of 10%, meaning it could be expanded. It could not be less than 10%, but 10% and above. She thought one of her colleagues had got the question on why the percentage was not stipulated in the act regarding the sale of the strategic stock. In that section, there was a clause that spoke to that agreement, in which the terms and conditions of the sales were stipulated. That allowed for the percentage between the two parties to be agreed upon, unless there was another view that it needed to have a minimum percentage of the sale, that could be another discussion. It wanted to leave it to the parties so it did not necessarily tie the parties, but it was open to more input on the issue of the percentage.

Mr Mbele said he believed his colleagues had addressed all the questions raised. He reiterated the point Dr Mamogale had made on dealing with environmental and climate issues in detail in the Bill. It had been indicated that this was obviously the competency of the Department of Forestry, Fisheries and the Environment (DFFE), but also because it looked at things in a holistic manner. If it created a regime that was different in its Bill, it could have a challenge later on. When the DFFE changed things on its side, it would find a contradiction between what it was driving and what was contained in the Bill. Those were the responses from the Department’s side.

Minister’s response

Minister Mantashe responded to Ms Madokwe, who had asked why it was 10% for BEE and 20% for the state. When it made the 10% provision, it did not exclude the BEE entities from negotiating a percentage on their own. He thought 10% was reasonable. The 10% in the mining chapter dealt with communities and workers. It was a good foundation, and if they wanted to increase it, they could do so. The reality was that business had to put its scheme in the file. If they did not do this, they would not be successful businesspeople. Even if it was given 50%, it would collapse. That was the only point he wanted to make.

Secondly, he spoke on the question of why everything could not be in the legislation. One of the measures of any omnibus legislation was that it was less effective than focused legislation, but the Department was there to listen to the directive of the Portfolio Committee.

The Chairperson said that, unfortunately, this process was not similar to other processes the Committee undertook. When it was given answers, as expressed by the Minister, in the end, the Committee had to express these views on the proposals. This was after it had followed all the required procedural processes as prescribed in the rules of the National Assembly on how to process legislation, so that when these questions were raised, and when it made its recommendations, it was at least coming from an informed point of view on what should be the approach on the issues contained in the legislation when it was finalised. He hoped the Members were able to get clarity on the issues they raised in the presentation.

He handed over to the Minister to make his closing statements on behalf of the Department.

Minister Mantashe said the Department always appreciated coming to the Committee, because the Members did not ask what they wanted to hear. They asked many complicated questions which built the Department and instilled confidence. He thanked the Committee for the session.

Committee programme

The Chairperson said the Committee would deal with the programme for the first quarter of 2023. It would also consider the process to be followed with the legislation, and then other matters as an interactive session. It was still going to be a tedious process that it was going to undertake. He had been asked when the Committee intended to finish the process. It would have loved to finish it as quickly as possible, but unfortunately, there were parliamentary processes that guided it. Failure to manage or master those processes would leave the legislation vulnerable and open to many challenges. If there were errors made, they should be on the basis of not being able to be detected without any intention of shortcomings. The Committee would continue with this process until its finality. When it was done, it would be taken to the National Assembly, and if it succeeded and went through, it would then be taken for processes in the National Council of Provinces. There was still a long way to go with processing this piece of legislation.

He asked the Committee to go to the minutes.

A staff member said the minutes had not been distributed.

The Chairperson said the Committee would deal with the minutes at its next meeting.

The meeting was adjourned.

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