Fund likely for future fracking fiascos

Published Sep 17, 2012


Donwald Pressly

THE Government appears to be considering the idea that gas exploration companies that will ultimately be given the green light to frack in the Karoo will be required to put a capital amount in trust upfront as an environmental insurance to avoid a repeat of the acid mine drainage saga in Gauteng.

Derek Light, a Graaff-Reinet lawyer who has been fighting against hydraulic fracturing – the process of drilling up to 5km below the earth’s surface and then blasting lateral legs with water and chemicals to force shale gas to the surface – said that the idea of a trust fund was first raised by businessman Johann Rupert.

Rupert, the tobacco tycoon who has farmland in the area, raised the question at one of Shell’s public engagements early on in the process of its environmental assessment plan, Light confirmed this week. Rupert was approached for comment, but declined.

When the question was put whether the Department of Mineral Resources (DMR) would impose an environmental protection trust requirement on the gas companies, Zingaphi Jakuja, the spokeswoman for Mineral Resources Minister Susan Shabangu said: “The minister indicated that [the] DMR will and is working with the Departments of Environmental Affairs and Water Affairs on issues of licensing in this regard.

“She also mentioned that the process of applications and conditions will be clarified in the Government Gazette that will give effect to the decision of lifting the moratorium.”

Jakuja was asked the question in the context of the state having to finance the clean-up of the acid mind drainage in Gauteng and Mpumalanga left behind by coal and gold mining companies, many of which were no longer trading.

Last Tuesday, Shabangu gave reasons for the lifting of the moratorium, which had been ratified by the cabinet the week before.

The task team working group, which spent more than a year detailing the conditions under which mining for gas could take place, recommended that as a first step “normal” exploration and drilling should take place.

It now appears that companies that apply – or have already applied – for exploration rights would need to go through a further application procedure to be allowed to frack.

These new obligations are likely to be clear once a new set of regulations are gazetted, which the minister said would take from six months to a year.

Royal Dutch Shell is seeking three blocks of 30 000km2 each for fracking; Denver-based Falcon Oil & Gas wants a 30 000km2 block straddling the Eastern, Northern and Western Cape; and Bundu Exploration, owned by Challenger Energy of Australia, sought an area of 4 100km2 near Pearston.

Falcon was the first to apply for a technical co-operation permit from the Petroleum Agency South Africa in March 2009. While Sasol withdrew interest later, it beat Anglo Coal to land near Lesotho’s borders, but it may be back in contention now.

Shabangu would not divulge which companies had applied or any future likely applicants.

Related Topics: