“F” For Fracking: Setting Aside the Fracking Regulations

Not only is the date of 4 July important to many in the United States, but it will now also be just as important to some in the Republic of South Africa. 4 July 2019 marked a celebratory event for many as it brought an end to an era and marked the independence of the South African environmental law-making regime, when the Supreme Court of Appeal (“SCA”) set aside the regulations [1] that govern, inter alia, fracking (“Fracking Regulations”) in the case of Minister of Mineral Resources v Stern & others (1369/2017) and Treasure the Karoo Action Group & another v Department of Mineral Resources & others (790/2018) [2019] ZASCA 99 (4 July 2019) (the “TKAG Case”). The effect of the decision in the TKAG Case is that the fracking regulations have been set aside and are no longer of force and effect.

THE SCA’S FINDINGS

The core question that the SCA had to answer in the TKAG Case was whether the Minister of Mineral Resources and Energy (“MMRE”) was empowered to make the Fracking Regulations [2] or whether they fell afoul of the principle of legality.

The SCA held, inter alia, that the majority of the provisions of the Fracking Regulations fell within the exclusive competence of the Minister of Environment, Forestry and Fisheries (as it is now referred to) (“MEFF”) and were prohibited by section 44(1C) [3] of the National Environmental Management Act, 107 of 1998 (“NEMA”). The SCA further confirmed that after the introduction of the One Environmental System (“OES”) [4], the environment-related object of section 2(h) [5] of the Mineral and Petroleum Resources Development Act, 28 of 2002, as amended (“MPRDA”) must be achieved through the application of NEMA to petroleum exploration and production. Accordingly, only the MEFF and not the MMRE has the power to regulate these matters. The SCA accordingly set aside the Fracking Regulations in their entirety.

FACTS OF THE TKAG CASE

Between 2008 and 2010, 3 (three) companies applied to the Petroleum Agency of South Africa for rights to explore for shale gas in the Karoo by use of hydraulic fracking. A litany of objections to these applications were received during the adjunct public participation processes, primarily because of the myriad of adverse impacts that the fracking process naturally has on the environment, and in particular, the emission of pollutants and the contamination of surface and groundwater.

In response to these objections, the MMRE imposed a moratorium on all applications for rights under Chapter 6 [6] of the MPRDA. Pursuant to this moratorium, and during December 2011, the MMRE established an inter-departmental task team that was tasked with, inter alia, the evaluation of “the potential environmental risks posed by the process of hydraulic fracking as well as the social impacts of shale gas exploitation”.

The meetings between the inter-departmental task team resulted in, inter alia, an agreement between the MEFF, the Minister of Water and Sanitation and the MMRE, which agreement was entitled the OES [7]. The OES’ main import, which has since been legislated in section 50A of NEMA, is that all environmental related aspects would be regulated through one environmental system, being NEMA, and that all environmental provisions in the MPRDA would be repealed.

The elephant in the room was, therefore, whether the Fracking Regulations, promulgated on 3 June 2015 and subsequent to the promulgation of the OES on 8 December 2014, were valid in law and could be given effect to.

RATIO DECIDENDI

First and foremost, the OES repealed various sections of the MPRDA, particularly section 107(1)(a) of the MPRDA. This meant that, the very basis for the Fracking Regulations were repealed owing to and as a result of the introduction of the OES.

The SCA then reasoned that the OES, inter alia, established NEMA as the only environmental statute and the MEFF as the “lead” Minister. This meant that the OES envisaged that all environmental aspects related to prospecting, exploration, mining and/or production in terms of the MPRDA would be regulated through NEMA and its subordinate legislation. In other words, the OES divested the MMRE of the power to make, not just the Fracking Regulations, but in fact, any regulations regarding environmental matters.

The MEFF would therefore be responsible for setting the regulatory framework, as well as the norms and standards, which could then be implemented by the MMRE. Accordingly, unless the MMRE has issued an environmental authorisation in terms of NEMA, exploration and/or production may not commence. This, as we know, was not the position quo in the TKAG Case, as the Fracking Regulations were promulgated in terms of the repealed section 107(1)(a) of the MPRDA.

In conclusion, the SCA held that as the Fracking Regulations were promulgated by the MMRE and in terms of section 107(1)(a) of the MPRDA, and not by the MEFF and in terms of NEMA, they were ultra vires and must be set aside in their entirety, resulting in the regulations which were published with the intention of permitting and regulating fracking, to be set aside, and TKAG reigning victorious. Whether this decision will be appealed further to the Constitutional Court, remains to be seen.

By Lili Nupen and Ross McLean

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[1] On 3 June 2015, the Minister of Mineral Resources and Energy (as he is now referred to) promulgated the Regulations for Petroleum Exploration and Production, 2015 (GN R466, GG 38855, 3 June 2015).

[2] The Fracking Regulations were promulgated in terms of section 107(1)(a) of the MPRDA. Section 107(1)(a) of the MPRDA bestows on the MMRE the power to make regulations regarding, inter alia, the conservation of the environment, the management of the impact of any mining operations on the environment, the rehabilitation of disturbances of the surface of land, the prevention, control and combatting of pollution of the air, land, sea or other water, including ground water.

[3] “Regulations made in terms of this Act or any other Act of Parliament that may have the effect of amending the provisions of the Agreement referred to in section 50A must be made by the Minister in concurrence with the Minister responsible for mineral resources and the Minister responsible for water affairs.”

[4] The OES was promulgated on 8 December 2014.

[5] “… give effect to section 24 of the Constitution by ensuring that the nation’s mineral and petroleum resources are developed in an orderly and ecologically sustainable manner while promoting justifiable social and economic development”.

[6] Applications in terms of Chapter 6 of the MPRDA include those for exploration rights, productions rights, and the issuing of technical co-operation permits and reconnaissance permits.

[7] This agreement is from where the “One Environmental System” originates.