Gas Amendment Bill: public hearings

Meeting report

The Chairperson said that he did not want to spend time making introductions. The Committee needed to stick to the time that was allocated to it by Parliament. The Committee was working on the basis of a three-hour meeting according to the rules and regulations of all Committees of Parliament. The Committee was dealing with the written submissions that were received. Each stakeholder would be provided with 20 minutes to deliver their presentation.

National Energy Regulator of South Africa (NERSA) submission

Ms Nomfundo Maseti, Fulltime Regulator Member: Piped Gas, NERSA, shared the views, experiences and challenges that NERSA encountered during the implementation of the Gas Act. The submission put forward proposals based on those challenges and experiences. NERSA administered the electricity industry, piped-gas industry and petroleum pipelines industry. Focusing specially on the piped-gas mandate, NERSA implemented the Gas Act of 2001 and the associated Piped Gas Regulations. It developed the Gas Act rules, pricing methodology and tariff guidelines. It also facilitated investment, promoted orderly development, promoted competition and monitored developments in the industry.

NERSA supported the proposed amendment of the Gas Act which was necessary to strengthen the regulatory mandate of gas prices and tariffs, third party access to gas facilities and compliance enforcement. The proposed amendment would stimulate gas infrastructure investments and gas market development. It was noted that the current act limited the powers of NERSA to approving not setting maximum prices. This resulted in the lack of uniformity in basis of formulating gas prices by different licensees that potentially expose customer to higher and inconsistent prices. The power to regulate maximum gas prices and tariffs provided in the Bill would allow NERSA to exercise its sole discretion to approve or to set a maximum price or tariff when processing applications from licensees. It would also eliminate any possible confusion about what the regulator was expected to do.

The key amendments to strengthen regulatory mandate included the powers to regulate maximum gas prices and tariffs, powers to regulate tariffs for gas distribution and LNG facilities, mandatory third-party access to gas distribution and LNG facilities, increased powers to enforce compliance, powers to regulate all hydrocarbon gases and related activities irrespective of the mode of transportation or technology involved and the limited exclusivity for gas distribution.

NERSA proposed new insertions on registration conditions. There was a lack of provisions for imposition of registration conditions. Registrants were required to submit annual information concerning their registered activities in terms of Regulation 9 of the Piped Gas Regulations of 2007, yet NERSA had no powers to enforce and monitor compliance on this. It proposed a new section 21A after section 21 to provide for imposition of registration conditions. It also proposed new insertion on registration term and non-transferability. Unlike the licencing regime, the Bill did not make provisions regarding the term of registration and non-transferability of the registration status. NERSA proposed including a new section 23A which would address this issue.

(See Presentation)

Climate Justice Charter Movement submission

Mr Charles Simane, Climate Justice Charter Movement activist and policy researcher, explained that the Climate Justice Charter Movement was a diverse movement. There were 262 organisation that had endorsed the CJC. The CJC was the world’s first climate justice charter. On 16 October 2020 it handed over the CJC to Parliament for adoption. It called on Parliament to adopt the CJC as per section 234 of the Constitution.

The Climate Justice Charter Movement said that the Bill violated section 24 of the Constitution. The right to an environment that was not harmful to human health would be violated by the extraction of harmful Greenhouse Gases. Coal bed methane gas extraction would require extensive use of groundwater. The Bill undercut the ecologically sustainable development envisaged in section 24 of the Constitution by providing the legal framework and justification to an ecologically unsustainable industry.

The Bill was an intergenerational crime. There was a moral and ‘existential’ duty to protect the earth for future generations. The exploration of oil and gas through seismic exploration would destroy marine life and biodiversity.

There were cheaper sustainable alternatives like offshore wind energy. Offshore wind energy could supply 2387.98 terawatt-hours of electricity annually. That was eight times the current energy needs. The costs of renewable energy systems and unit costs of renewable energy generation had come down dramatically in comparison to fossil fuels. Investments in renewable energy more than double in comparison to investments in fossil fuels.

The submission noted climatic tipping points. South Africa was warming at about twice the global rate of temperature increase. There would be more climate famines, more climate refugees and many people would die. Climate shocks were increasing in frequency and severity. Carbon dioxide level reached a record of 415 ppm in 2021.

(See Presentation)

Sakeliga submission

Mr Martin van Staden, Legal Fellow, Sakeliga, said that Sakeliga was a business community with over 12000 individual and cooperate members. Sakeliga was dedicated to the principle of more business and less politics in South Africa’s commercial environment. Sakeliga did not have much to contribute to the Gas industry, specifically, or environmental concerns.  Sakeliga’s contribution related only to those aspects of the Bill that formed part of broader trends that were seen in other pieces of legislation.

Sakeliga was concerned about the renewed dedication evident in the Bill to a policy that was of a racial nature. In the Gas Act of 2001, there were provisions of this kind. This could not justify the same kind of approach two decades later in society that was constitutionally committed to non-racialism. Clauses 14 and 20 of the Bill reconfirmed the obligation on firms in this sector to provide Government with information related to the promotion of Black Economic Empowerment. This seemed to form part of the licensing conditions in the sector. Clause 31 of the Bill allowed the Minister to make regulations to promote racial empowerment.

Sakeliga had a clear mandate from its members to publicly and vociferously oppose the continued legislative racialisation of commerce in South Africa. In practice these policies disincentivised wealth creation and created unnecessary resentment. There was inevitably less investment and in some cases disinvestment. Clause 20 was a cause for great concern in its view. It effectively allowed a firm in this sector to have its license suspended for not complying with Government targets. Research by the World Inequality Database appeared to show that Government’s redistribution policies had only benefited a smaller number of persons identified as previously disadvantaged. The vast majority of Black South Africans had only gotten poorer between 1993 and 2017. This was a necessary consequence of having politics rather than economical and commercial considerations. South Africa could not afford to disincentivise economic activity anymore than it was currently doing. Coercive measures such as the suspension or withdrawal of operating licenses or the imposition of fines had to be completely out of the question for as long as South Africans suffered extreme economic hardships. Sakeliga recommended that the Amendment Bill be revised to be race-neutral. It recommended that the Gas Act be race-neutral. The Bill should encourage more economic activity in this sector in any way that it can. Sakeliga also recommended that any regulation-making powers that the Minister might have, in terms of the Bill, exclude anything having to do with racial considerations.  

(See Presentation)

The Green Connection submission

Mr Neville van Rooy, Community Outreach Coordinator, The Green Connection, said that the entity was an NPO which promoted public participation in decisions about the environment as a means to achieving sustainable development.

The Green Connection was opposed to further development of the oil and gas industry in South Africa because of climate change impacts and the South African National Determined Contributions (NDCs). The world was moving away from coal, gas and oil. Renewable energy continued to emerge as cheaper and more reliable as a sector that would improve universal access to energy services for all including indigent households. The IEA report made numerous recommendations, but the most important message about a global pathway to reach net zero emissions by 2050 was that there should be massive investment in renewable energy and no new investments in coal, oil or gas from 2021.

(See Presentation)

Discussion

The Chairperson asked the members if they had any questions for clarity based on the issues that the presenters had raised. The members would obviously not agree with all of the issues raised by the presenters. The questions asked should be about avoiding distortion in the event that the Committee made reference to the points that the presenters had made. He would not be allowing comments. Only questions of clarity. There were no questions from the members. The Chairperson then addressed NERSA. NERSA was an entity of the Department. The Chairperson asked NERSA if it had made contributions and presentations? He had assumed that NERSA was part of the proposed amendments process. Was NERSA part of the development of the Bill? What had been the attitude of the Department?

Ms Maseti said that the Chairperson’s connection was bad, and she hoped that she had captured the essence of his question. NERSA had been invited, as a stakeholder, to provide input to the Department during the development of the Bill. NERSA was not part of the development of the Bill. That was the responsibility of the Department. NERSA had been invited to provide input. The Bill had been in the pipeline for a number of years. At the time that it had given input, at the beginning of the process in 2011, and it had asked for another opportunity given the challenges over the years. As recent as September or October last year, the Bill had again been revised by the Department. There was a meeting held by the Department for all stakeholders but not particularly on the Bill but on gas issues in general. NERSA raised that it would like to get an opportunity to comment on the new insertions that were in the Bill. The Department agreed but unfortunately then the Bill was submitted to Cabinet before NERSA could get that opportunity to respond to the newly revised version of the Bill. There had been some serious issues and NERSA had needed an opportunity to be aligned with the Department and indicate what could be the challenges with the new insertions. These issues related to implantation, facilitation of investment and customers. Some of the proposals in the submission were those that could not be included in the Bill given the fact that the Department revised the Bill again last year. NERSA had been invited during the development of the Bill, but it took time. It was more than eight years that this Bill had been in the pipeline. Things had arisen and there had been new developments. The Bill had also been changed a number of times. NERSA had missed the opportunity of commenting and providing input on the final version that was submitted to Cabinet and finally, to Parliament. NERSA thought that as the entity that administered the Act it would be important to be part of the engagement process with Parliament so that it would be able to clarify some of its views on the amendments.

The Chairperson said that he had to ask those questions even if they were difficult so that those who were puzzled could receive clarity. The Committee moved on to the second group of submissions.

South Durban Community Environmental Alliance (SDCEA) submission

Ms Cassandra Schnoor, Environmental Project Officer: Oil, Gas and Energy, SDCEA, presented the submission on the Gas Amendment Bill. The SDCEA represented 21 community and environmental organisations concerned with environmental justice and sustainable development in South Durban and KwaZulu-Natal. It also represented vulnerable and disadvantaged persons whose lives, livelihoods, jobs and small businesses depended on the protection of ecosystems of KwaZulu-Natal, and in the vicinity of Durban.

The Gas Amendment Bill fell short of achieving many of the goals laid out in its introduction. These included promoting broad-based black economic empowerment, providing socio-economic development and improving the public and private sector. The majority of the Bill focuses on Government’s relationship with the private sector and attempts to facilitate access to gas licenses.

SDCEA felt that public participation was vital to all Governmental processes and all processes that involved the environment. All citizens of South Africa needed to be included in the public participation process. Gas pipelines were going to be placed across South Africa and had the potential to affect millions of people, therefore communities should have a say as to what goes in their land. There were many areas in KwaZulu-Natal that had not been included in any public participation.

The SDCEA felt that topographic aspects were not considered in the Bill. The Bill gave too much power to the Minister. The Ministry failed to consult in advance. Section 22A spoke about exclusivity which the SDCEA disagreed with. Exclusivity led to monopolies and fixed prices. This would not benefit the public.

There was a need to look into the best available technology and a move away from fossil fuels to achieve the targets set out in the Paris Accord. To be in line with the Paris Agreement goals, South Africa would need to adopt more ambitious clime action beyond the Integrated Resource Plan (IRP2019) such as further increasing renewable energy capacity by 2030 and beyond, stopping the planned commissioning on 1.5GW of new coal capacity, fully phasing out coal-fired power generation by 2040 at the latest, and avoid investing in natural gas.

Instead of focusing all these resources into expanding the current gas programmes, Government should consider looking into renewable energy sources that would be more sustainable in the long-run and which would lead to a net reduction of emissions in the long run. Methane and other chemical emitted from the production and usage of natural gas were likely to cause irreparable damage to the natural environment as well as affect citizens of this country. The Bill should be sent back to the Department to engage meaningfully with people as this Bill failed the democratic test to include the citizens of this country, whose views not only needed to be ascertained but also included in the policy and legislation.

(See Presentation)

Centre for Environmental Rights submission

Mr Brandon Abdinor, Climate Advocacy Lawyer, Centre for Environmental Rights, and Ms Gabrielle Knott, Specialist Gas Attorney, Centre for Environmental Rights, presented the submission on the Gas Amendment Bill. The presentation mainly dealt with climate change considerations.

The overall intentions of the Bill were the promotion of orderly development of the gas industry, to facilitate gas infrastructure development and investment, and to provide for socio-economic and environmentally sustainable development. The Centre for Environmental Rights submitted that the Bill in its current form was deficient and unacceptable. It noted that the investment in fossil fuel infrastructure, including gas, would introduce unprecedented levels of risk to society. The submission noted how the climate crisis could hurt South Africa. Gas had become known as a transition fuel. Extensive gas production and burning was counter to the need for accelerated decarbonisation.

The Bill presented a number of economic risks for South Africa. These risks related to carbon border taxes, stranded assets, climate financing, reputational risk and litigation risk. The physical risk of relying on greenhouse gas included extreme heat, drought, flooding, storms and sea level rise. These issues gave rise to food insecurity and the viability of the agricultural sector, shortages of clean water, a badly handed transition to low carbon energy, heat stress and disrupted ecosystems and loss of biodiversity.

The Centre for Environmental Rights submitted that the Bill must ensure socio-economic and environmentally sustainable development, manage economic risk, elevate and centre climate change considerations and strengthen administrative justice considerations.

(See Presentation)

Ms Marilyn Lilley submission

Ms Marilyn Lilley, member of the public, said part of the preamble of the Gas Amendment Bill stated that the purpose of the amendments was to provide for socio-economic and environmentally sustainable development and to facilitate gas infrastructure development and investment. This statement did not acknowledge the fact that gas was a fossil fuel and that the extraction, distribution, processing and consumption of this resource was key driver of greenhouse and climate change. This placed the Bill and South Africa directly at odds with the Paris Climate Agreement, to which South Africa was a signatory, which required divestment from and a reduction in the extraction of all fossil fuels. The Bill sought to facilitate further investments in the gas sector.

The Gas Amendment Bill was focused on infrastructure, transmission, storage and related activities and processes. The health and pollution risk and impacts were also important during the fugitive emissions at each stage of the processing and transmission phase and operation. These two phases could not be looked at in isolation from each other. The risks and impacts cover the entire processes from exploration to end usage.

During the drilling, fracking and extraction processes, significant amounts of fugitive gas emissions take place, with serious implication for air pollution, climate change and human health. Fracking was a public health issue, human rights issue, an environmental justice issue and a climate justice issue.

Ms Lilley recommended that Government note and record the ‘Compendium of Scientific, Medical, and Media Findings Demonstrating Risks and Harms of Fracking’ (Unconventional Gas and Oil Extraction) Seventh Edition December 2020. Government and any other bodies involved in assessing all fossil fuel permit applications should take into account the contents of the Compendium. Government should adopt the Precautionary Principle until the known health issues and other impacts were properly researched and proved safe for humans, the environment and the climate. Government should institute a moratorium on fracking, including coal seam gas fracking. A timeline of six months be given to address a policy on reducing gas and other fossil fuel operation, development and dependency in South Africa, especially methane related operations.

Tetra4

Mr Will Frits, Legal Counsel, Tetra4, and Mr Francois Joubert, Tetra4, said that Tetra4 was an emerging natural gas producer that was currently developing the Virginia Gas Project. It was the holder of the first and only onshore production right as well as various exploration rights coving 187 000 ha of gas fields across Welkom, Virginia and Theunissen, in the Free State. Tetra4 focused on the regulatory and specific provisions within the proposed Amendment Bill.

The Amendment Bill sought to regulate all hydrocarbon gases whether they were transported by pipeline or not as the proposed definition of gas under the Amendment Bill no longer refers to gases ‘transported by pipeline’. The proposed definition would create an ambiguous licensing and regulatory regime for domestic gas produced and regulated under the MPRDA. The MPRDA provides that holders of a valid Production right may explore, beneficiate and sell their product/s. The proposed definition should be amended to explicitly exclude domestic gas across the value chain provided the entity operating in the value chain was regulated under the MPRDA. There was also a reoccurring ambiguity with the definitions of storage, trading, distribution and transmission. The definitions needed to be aligned with existing legislative requirements. There needed to be clarity regarding the regulation of production activities.

On registration in terms of section 12B (1) of the Amendment Bill it proposed increasing the number of people obliged to register with NERSA and therefore exempted from applying for and holding a license as per Schedule 1. The proposed registration list should be amended to explicitly exclude any companies who were holders of valid and existing production rights under the MPRDA.

On tariffs in section 22B the Amendment Bill proposed that NERSA must regulate all tariffs and prices. The current position under section 4(h) of the Gas Act was that NERSA must ‘monitor and approve, and if necessary regulate, transmission and storage tariffs’. Section 22B (4) further proposed that the maximum price regulated by NERSA should enable the licensee to recover all efficient and prudently incurred investment and operational costs; and make profit or add a trading margin commensurate with the risk. Tetra4 said that tariff determination needed to be done in concurrence with the licensee. There also should not be a system of dual licensing. There should be one system that was driven for upstream activities.

(See Presentation)

Discussion

The Chairperson said that the Committee had received another four presentations. He asked the members if they needed to ask any questions for clarity?

Mr M Mahlaule (ANC) addressed the SDCEA. Towards the conclusion of the presentation Ms Schnoor mentioned that she did not believe that there had been proper and effective public participation. What, in her view, constituted a proper and effective public hearing that was different from what had been done in the past?

The Chairperson responded that the SDCEA had mentioned that a number of areas in KwaZulu-Natal should have been included in the public participation process. The choice of the venue was also an issue. The Department had also not done any interaction with the public. The SDCEA believed that the Department should have conducted public hearings on the Amendment Bill.

Ms Schnoor agreed with the Chairperson. The SDCEA was concerned with the venue choice. KwaZulu-Natal was a large province and there were only two venues chosen. The location of the venue in Durban was not easily accessible to the masses. In the case of the SDCEA, it had been approached a week before the public hearing by an education officer. She sent a letter to the office to say that the SDCEA was upset by this approach because it had been informed a week before that it was going to receive education materials. SDCEA was supposed to distribute this to the community or provide contacts for it to be distributed. A week was not sufficient time for communities to engage with material that was contained within a Bill. These were ordinary people and needed to have public forums that could actually explain the contents of the Bill. There was no advertising in the local papers. When she had gone to the Durban hearing there was no diversity in the attendance. She wanted to find out how those people even heard about it. The documentation that was available there was only in English when the majority of the people living in KwaZulu-Natal spoke isiZulu. Those were the things that the SDCEA felt should have been better planned. Communities needed time to engage with the material because they needed to understand the details because this was a piece of legislation that affected the masses and the environment. It could not just be pushed through. It had to be effective, inclusive and quite thorough at this level. That was what the SDCEA meant by effective public participation.

Ms Knott added to what Ms Schnoor mentioned. Right before the first set of public hearings the Centre for Environmental Rights on behalf of groundWork wrote a letter to the Chairperson and the PCC regarding the public participation processes. The view that groundWork and CER took was that it was inadequate timing for preparation and presentation at the first set of public hearings. It was a week notice. She agreed with and echoed the views of Ms Schnoor.

The Chairperson said that the Committee had responded to the issue of securing the venue. It was beyond the powers of a Committee of Parliament to secure the venue. The Committee got the venue that was made available by the municipality. The Committee would have preferred going to one of the second biggest townships in South Africa, which was Umlazi. If the municipalities were not able to provide a venue, then there was nothing the Committee could do. The Committee used the venue that was supplied to it.

The Chairperson stated that there was a recourse when the public was dissatisfied with the answer that was provided on behalf of the Committee. The Committee would still continue working through the oral submissions based on the written submissions with the other stakeholders that had written to the Committee. The Committee had not finished with the public participation. It would still go to another four provinces. He repeated that the Committee went according to the guidance of Parliament. Parliament guided the Committee on the time allocated, the areas visited and the period it would spend there. Committees had an allocated time and an allocated day. This Committee met every Tuesday. If Parliament was in recess, then no Committee could convene. This Committee was supposed to meet twice a week depending on if there was no House sitting. If there was a House sitting on a Friday it would have to make alternative arrangements. If the House sitting started early on a Tuesday that meant the Committee could not sit or it would sit between 09:00 and 09:45. Unfortunately, those were the technical constraints. The Committee did not meet as and when it wished. It met as and when it was granted permission to meet. The Committee made an application for every meeting that it was going to have. It had to get an approval. It had to be included on the set list so that it could be known in public that the Committee would be meeting. The Committee had to follow what the rules on Committees of Parliament stated.

It would not be fair for the Committee to sit and make a judgement on the presentations. The presentations were made in order to influence the thinking of the members of the Committee. When the Committee would finalise its work the stakeholders would also seek to influence some of the members of the National Assembly who might be watching and listening to the meeting. When the Committee finalised this report, it took it to the National Assembly with the recommendations of what the Committee was saying. If it was adopted by the National Assembly, then it would go to the National Council of Provinces. If not, it would be referred back to the Department. The stakeholders were shaping thinking of members. He did not believe in the principle of public hearings. He believed in the principle of public consultation. Public hearings meant that the Committee went to areas, listened, and that was it. Consultation meant that the Committee heard what was said and sought to act on some of the things that were raised. The Committee had to listen to even those things that it might not necessarily be in agreement with. The Committee would meet again on Friday at 09:00.

The meeting was adjourned.