Environmental law a factor in fracking
SHALE gas and its extraction through hydraulic fracturing is a recent and highly controversial entrant to the South African mining canvas. Until public consultations as required by the Mineral and Petroleum Resources Development Act began about 12 months ago, few South Africans knew the implications of applying this process to extract natural gas from shale.
Since then, however, SA’s newspapers have carried stories regularly of the often heated debates over the merits and demerits of what has come to be known as “fracking”, much of which has focused on whether or not the South African regulatory framework is able to deal with the challenges unique to shale gas projects.
The first indication that the government acknowledged the unique challenges of shale gas projects was on April 20 2011, when SA’s Cabinet endorsed the decision by the Department of Minerals to place a moratorium on exploration licences in the country’s semi-arid Karoo region, where fracking was contemplated.
The next day a government communications statement announced:
“…. The Department of Mineral Resources will lead a multidisciplinary team including the Departments of Trade and Industry, Science and Technology, among others, to research the full implications of the proposed fracking fully …”
In order to establish what the challenges unique to shale gas projects are, it is important to note the findings of the Energy and Climate Change Committee of the UK’s House of Commons, published on May 23 2011. The committee warned the UK legislature of three such challenges. It stated that shale gas projects:
Require a combination of hydraulic fracturing and horizontal drilling at multiple wells;
They need large volumes of water that contain chemicals; and
They require managing and disposing of large volumes of waste water.
Intriguingly, the report did not propose enacting specific laws or regulations governing shale gas projects.
In the context of the first of the identified challenges, the Mineral and Petroleum Resources Development Act will be applicable to SA. The act distinguishes between minerals and petroleum and defines shale gas as petroleum. It provides for granting rights permitting and regulating activities that are applicable to the extraction of minerals and petroleum.
Those wishing to carry out an activity relating to shale gas must apply for a technical co-operation permit, an exploration right or a production right as the case may be. Permit and rightholders must also submit a work programme, to be approved by the Minister of Mineral Resources, setting out the planned activities for the duration of the right or permit.
Although the permit or right-holder must comply with the Mine Health and Safety Act, neither this legislation nor the Mineral and Petroleum Resources Development Act provide guidelines specific to hydraulic fracturing.
Instructively, on July 8 2011 the New York State Department of Environmental Conservation released a preliminary revised draft supplemental generic environmental impact statement that allows for high-volume hydraulic fracturing in prescribed circumstances, Appendix 10 of which provides for applicable permit conditions. These conditions prescribe, among other things, that all fracturing products must be approved by the authorities and that a prescribed process be followed during high-volume hydraulic fracturing.
The second and third challenges identified by the UK’s Energy and Climate Change Committee deal with environmental issues in which context the Mineral and Petroleum Resources Development Act provides that the rights holders must have in place an approved environmental management programme. They must provide an environmental management guarantee to cater for managing potential negative environmental impacts.
SA boasts one of the world’s best environmental regulatory frameworks. Therefore holders of permits and rights granted under the Mineral and Petroleum Resources Development Act have to comply with the legislation, the National Environmental Management Act, the Water Act and any related environmental legislation.
Be that as it may, the South African legislature has yet to address the first challenge, which is unique to shale gas projects and which relates to the method used for the extraction of the gas.
If the moratorium is lifted — and this is imminent — it is imperative that the legislature puts in place regulations similar to those published in Appendix 10 of the US’ DEC. Not only will this provide the permit and right-holders with certainty as to the framework in which they must work, it will also help to ensure that they comply with SA’s environmental laws.
It is my understanding that most work programmes associated with Karoo Basin exploration rights applications provide that hydraulic fracturing may only be undertaken at the end of the second year, allowing the legislature adequate time within which to frame relevant regulations that serve the public interest.