Business Report / 6 November 2017, 3:00pm / Sandra Gore, Gareth Howard and Neo Tshikalange
JOHANNESBURG - The plans of companies seeking to commence with deep drilling or hydraulic fracturing (fracking) in parts of the Karoo exceeding 120 000km² hit a stumbling block after the Eastern Cape High Court declared the Regulations for Petroleum Exploration and Production (the fracking regulations) invalid on October 17, 2017, in the case of John Douglas Stern NO and Others versus the Minister of Mineral Resources.
The court held that the minister of mineral resources lacked the authority to promulgate the fracking regulations and that they were not published in a procedurally fair manner.
The applicants, which comprised several farmers and farmers’ organisations from the greater Karoo area (applicants), sought an order reviewing and setting aside the minister’s decision to promulgate the fracking regulations, alternatively declaring his promulgation of the fracking regulations, alternatively the content of the fracking regulations, inconsistent with the constitution.
The applicants’ challenge to the fracking regulations’ validity essentially was that:
* The minerals minister was not authorised under the Mineral and Petroleum Resources Development Act, No 28 of 2002 (the MPRDA) to promulgate the fracking regulations and therefore acted unlawfully, rendering them invalid.
* The fracking regulations’ purpose was to regulate the environmental consequences of fracking. However, the authority to regulate the environmental aspects of fracking fell outside the minister’s powers, as this power was removed from the scope of his authority as part of the amendments made to the MPRDA during 2013.
* The fracking regulations were not published in a procedurally fair manner, as its “Schedule 1” (which listed the substances prohibited from use as additives to fracturing fluids during the fracking process) was not included in the draft fracking regulations when they were initially published for comment from interested and affected parties.
The fracking regulations’ purpose was to: (a) conserve the environment; (b) manage the environmental impacts of the production operations; (c) rehabilitate disturbances of the surface of land where they take place due to fracking; and (d) prevent, control and combat pollution of air, land, sea or other water (including groundwater).
Among other things, they also prescribed certain technical specifications and requirements in relation to (a) conducting environmental impact assessments; (b) well design and construction; (c) conductor casing, surface casing, intermediate casing and production casing requirements and compression strength tests; (d) installation and pressure testing of blowout prevention equipment; (e) permitted drilling fluids; (f) management of fracking operations; (g) containment and management of fracturing fluids; (* ) management and storage of flowback and produced fluids and fracking fluids; and (i) decommissioning and well closure.
Against this context, the court found that:
* The minerals minister was not authorised under the MPRDA’s repealed provisions to promulgate the fracking regulations.
* Under the National Environmental Management Act, No 107 of 1998 (Nema), the minister of environmental affairs is empowered by legislation to set the regulatory framework and norms and standards for environmental matters. By contrast, the minerals minister is only empowered to implement provisions of Nema and its subordinate legislation insofar as it relates to fracking.
* The minerals minister contravened Nema by attempting to set the regulatory framework and norms and standards governing the environmental-related aspects of fracking by promulgating the fracking regulations.
* The fracking regulations were not published in a procedurally fair manner, due to the failure to attach Schedule 1.
The court ruled that the minerals minister acted unlawfully in promulgating the fracking regulations and set them aside retrospectively.
It also ordered that the matter be remitted to the minerals minister for reconsideration.
The minerals minister has not yet confirmed whether the Department of Mineral Resources will appeal the court’s ruling and it is also unclear whether and when the environmental minister and the Department of Environmental Affairs will be redrafting the fracking regulations under Nema.
Whatever the final outcome, it is nevertheless apparent that the application for and the possible granting of any exploration or production rights will remain contentious.
This particularly prior to revised regulations being published, and the matter is likely to still give rise to numerous challenges in the future.