Athi Jara May 28 2012 Overview (May 2012) Bowmans | Environment & Climate Change - South Africa Athi Jara Environment & Climate Change Environmental policy and enforcementEnvironmental permitsWasteLiabilityContaminated landPowers of regulatorsReporting and disclosure obligationsGeneral issuesEmissions trading and climate changeEnvironmental insurance liabilityNational Environmental Management Laws Amendment BillEnvironmental policy and enforcementThe environmental right enshrined in the South African Constitution 1996 and relevant national and provincial legislation form the basis for environmental policy.The Constitution provides that 'the Environment' is a functional area of concurrent national and provincial legislative competence.The following government departments are involved in the administration and enforcement of environmental laws:the Department of Water and Environmental Affairs;the Department of Mineral Resources;the Department of Energy; andthe Department of Agriculture, Forestry and Fisheries.At provincial level, environmental directorates in the nine provincial governments are responsible for the administration and enforcement of environmental law in the relevant province.In the first instance, the departments involved in the administration and enforcement of environmental law have created specialist enforcement directorates or designated officials as inspectors. The enforcement directorates or inspectors mainly use administrative and criminal measures to enforce environmental laws. The relevant directorates or inspectors are becoming increasingly active in the enforcement of environmental laws.Access to information held by the state is governed by the Constitution and the Promotion of Access to Information Act 2000. Every person is entitled to access information held by the state. Although the state has grounds to refuse access, unless disclosure of the record would reveal imminent and serious public safety or environmental risk, disclosure is mandatory.Environmental permitsMost environmental statutes require authorisations, licences or permits before particular activities can commence. Permits are usually required for natural resources extraction or utilisation. Permits are required under legislation regulating hazardous substances, nuclear activities, biodiversity conservation, protected areas, fishing and certain agricultural activities. Activities causing pollution or which may result in pollution may also require authorisation. The National Water Act 1998 requires licences for certain water uses. The National Environmental Management Act 1998 requires an environmental authorisation before many types of construction activities can commence. The National Environmental Management Waste Act 2008 requires licensing of various listed waste activities. The National Environmental Management Air Quality Act 2004 requires licensing of various listed activities which result in atmospheric emissions. Generally, depending on the empowering legislation, environmental authorisations or permits are transferable only with the consent or approval of the relevant authority.Environmental legislation generally contains provisions permitting appeals of decisions granting permits, licences and authorisations. In addition, a person aggrieved by an authority's decision may, under the Promotion of Administrative Justice Act 2000, seek a judicial review of the decision in a court or tribunal. Furthermore, in terms of the act, a person who has been aggrieved by an authority's decision has a right to be given reasons for the decision.The main environmental impact assessment provisions are contained in the National Environmental Management Act, which requires an environmental authorisation preceded by some form of impact assessment for a wide range of construction activities. In addition, some sectoral legislation (eg, the National Environmental Management Waste Act, the Minerals and Petroleum Resources Development Act 2002, the Development Facilitation Act1995, the Biodiversity Act 2004 and the Marine Living Resource Act 1998) contain impact assessment provisions. Most environmental impact assessments are governed by the Environmental Impact Assessment Regulations, promulgated under the National Environmental Management Act.Environmental authorisations to commence certain activities may require holders to furnish competent authorities with reports on environmental impacts of the activities at specified intervals or when requested by authorities.The National Environmental Management Act provides for the establishment of environmental management inspectors, and there are both national and provincial enforcement departments. Most environmental statutes contain criminal penalties for breach. Penalties usually involve a prison sentence for a specific period, a fine or both. Increasingly, penalties in the range of R1 million to R10 million are prescribed. Many statutes empower officials to issue abatement notices or directives. Failure to comply with directives usually constitutes an offence.Civil liability may arise, on the basis of delictual or tort law, from violations of permits, licences or authorisations, if a person acted wrongfully or culpably and caused harm to another, and damages resulted. Virtually all environmental legislation requiring permits, licences or authorisations contains provisions providing for their withdrawal, suspension or cancellation.WasteThe National Environmental Management Waste Act introduces a more extensive definition of 'waste'. It includes waste generated by mining, medical or other sectors, but does not apply to radioactive waste, mining residue deposits or stockpiles or explosives. 'Hazardous waste' is widely defined to include any waste that may have a detrimental impact on health and the environment. By-products are not defined as waste and any portion of waste re-used, recycled and recovered ceases to be waste.Under the National Environmental Management Waste Act, specified measures may be required for waste identified by the minister of water and environmental affairs as 'priority waste'. Such measures could relate to minimisation, storage, re-use, recycling, recovery, treatment and disposal of waste, registration, monitoring and reporting requirements and the compilation of industry waste management plans. These measures are not yet of legal force.A person transporting hazardous waste must obtain written confirmation that receivers are authorised to accept it. The Hazardous Substances Act 1973 classifies hazardous substances into four categories, each with its own requirements for disposal. The Hazardous Chemical Substances Regulations, published under the Occupational Health and Safety Act 1993, has requirements for packaging, transportation and disposal of hazardous waste.The Hazardous Substances Act prohibits persons handling or dealing with radioactive waste without the director general's written authority. The National Radioactive Waste Disposal Institute Act 2009 provides the legislative framework for establishing an agency responsible for radioactive waste disposal.The Minimum Requirements for the Disposal of Waste by Landfill distinguish between waste categories. Although the requirements have no legal force, they are often incorporated into waste disposal site permits, thereby enforcing additional duties and controls regarding hazardous waste.Generally, this is prohibited. The National Environmental Management Waste Act prohibits waste disposal that is likely to cause environmental pollution or harm to health and wellbeing. It provides that a waste disposal site may be established or operated only once the minister has issued a licence and an environmental assessment has been submitted. The storage, including temporary storage, of general waste and hazardous waste at a facility that has the capacity to store in excess of 100 cubic metres of general waste or 31 cubic metres of hazardous waste requires a licence.The National Environmental Management Act contains 'cradle to grave' principles – that is, responsibility for the environmental and health consequences of products, processes or services, starting with the extraction or processing of raw materials and extending through manufacture and use to include ultimate disposal.The National Environmental Management Waste Act incorporates this principle by providing for extended producer responsibility for certain products. These responsibilities are subject to the minister issuing regulations on specified measures that are required; this has not yet occurred. The producer's responsibilities may include implementing waste minimisation programmes, financing such programmes, conducting lifecycle assessments or labelling requirements. The application of these provisions implies that producers retain responsibility for their waste, notwithstanding transfer to a lawful recipient.The act also places a general duty on sellers of products that may be used by the public and which are likely to result in hazardous waste generation to take reasonable steps to inform the public of the waste's impact on health and the environment.At present, there are no specific obligations requiring that waste producers take back or recover their waste; however, as discussed above, a producer retains responsibility for its waste. Extended producer responsibility under the National Environmental Management Waste Act may include requirements for re-use, recycling, reduction and treatment of waste resulting from identified products.LiabilityGenerally, breach of environmental statutes invokes criminal penalties. Certain statutes impose strict liability, including the Minerals and Petroleum Resources Development Act and the National Nuclear Regulator Act 1999. The National Environmental Management Act and the National Water Act also provide for recovery of costs for preventing damage and rehabilitation of the environment.The National Environmental Management Act provides that if environmental harm is authorised by law, such as a permit issued under any environmental law, the relevant operator is obliged to minimise and rectify such harm. Where a person fails to take reasonable measures to minimise or rectify the effects of environmental pollution or degradation, the relevant authority may itself take such measures and recover costs from the responsible operator.The National Environmental Management Act was recently amended to provide for liability for historical pollution. An operator occupying land may also be liable in future for remediation costs under the National Environmental Management Waste Act. Therefore, in certain circumstances an operator may be liable for pollution remediation costs, notwithstanding that the activity is authorised.Under the National Environmental Management Act, in certain circumstances a corporation's officer may personally be criminally liable for an offence and damages. A corporation's director may also be criminally prosecuted and liable to pay what are, in effect, civil damages if such director fails to take all reasonable steps necessary to prevent an offence from being committed.Directors and officers of corporations cannot contract out of statutory liability which they incur for environmental wrongdoing, although there is nothing which provides that they cannot:be indemnified by their corporations for any damages or fines payable for environmental damage; ortake out insurance against the payment of any damages or fines.The environmental legislative regime imposes strict obligations on persons (including companies) that pollute the environment. These obligations are specifically aimed at land owners, operations or substances causing pollution. However, due to the principle of separate legal personality in company law, these obligations do not usually extend to such owners' shareholders, although the statutes as drafted could allow a claim against a person who benefited from the polluting activity, which could include a shareholder.Generally, it is therefore preferable, from an environmental liability perspective, to purchase shares rather than assets. However, direct delictual liability could be attributed to shareholders in certain limited circumstances, such as for operations, plans, policies, procedures that they imposed or omissions that they caused a subsidiary to make, provided that all the delictual liability elements are present.Additionally, if shareholders misuse the corporate personality of a subsidiary for advantage, resulting in environmental harm, courts may pierce the corporate veil and attribute liability to shareholders of the subsidiary for environmental damage caused by the subsidiary.The National Environmental Management Act and the National Water Act extend the net of liability to include persons that control or benefit from pollution or degradation. While the ambit of this terminology has not been tested in the courts, it is possible that in certain circumstances liability may extend to include a lender, particularly in a project finance context; however, in the absence of direct intervention this is unlikely.Contaminated landThe fact that soil or groundwater contamination occurred before a new land owner takes ownership does not exempt the new owner from taking steps to remedy such environmental damage. Both the National Environmental Management Act and the National Water Act provide that land owners may be liable for historic contamination which occurred before taking ownership. The owner can attempt to recover a share of remediation costs from any prior polluter.The National Environmental Management Waste Act also provides that if the authorities declare land a remediation site, remediation costs may be recovered for historic contamination from persons "responsible for undertaking the remediation". The act does not specify from whom such costs are recoverable and a land occupier could be liable, particularly if high-risk activities are undertaken which may contribute to the contamination. These provisions do not yet have the force of law.The National Environmental Management Act and the National Water Act allow for the apportionment of costs incurred by a government agency in remedying environmental pollution among persons responsible for the pollution, according to the degree to which each is responsible for the environmental harm.If a programme of environmental remediation is agreed with an environmental regulator, the regulator can require additional works or a third party can challenge the agreement. However, there is no specific provision for this.It is possible to institute a claim for damages against a predecessor in title if it can be proved that the loss occasioned to the new owner was caused by the predecessor's failure to take measures to alleviate environmental harm. Damages are limited to what is required to remediate the polluted land.Powers of regulatorsThe National Environmental Management Act creates broad search and seizure powers for inspectors appointed under the statute. Inspectors are empowered to:question persons regarding acts or omissions which may constitute environmental offences;require production of documents;remove specimens; andtake samples.These powers must be exercised in a procedurally fair manner. These powers were extended by providing that inspectors be regarded as peace officers, with powers assigned to peace officers or police officials who are not commissioned officers under the Criminal Procedures Act 1997. The draft National Environmental Management Laws Amendment Bill 2011 is intended to extend these powers further by providing inspectors with the legal mandate to seize, without a warrant, any items used in the commission of an offence under the National Environmental Management Act.The National Water Act provides that the Department of Water and Environmental Affairs may request that any data, information, documents, samples or materials reasonably required for monitoring purposes or the protection of water resources be provided to it. Various other environmental statutes also include wide powers of search and seizure for inspectors appointed under those acts.Reporting and disclosure obligationsThe National Environmental Management Act does not oblige a person to report pollution to an environmental regulator, unless it constitutes an "emergency incident". In such circumstances, responsible persons must report the incident and all relevant information to the director general of the Department of Water and Environmental Affairs, the police, the head of the relevant provincial government department and all persons whose health may be affected.Under the National Building Regulations, persons that own significantly contaminated land must notify the relevant authority as soon as they become aware of it. Similar provisions are proposed in the National Environmental Management Waste Act.Where an emergency incident occurs, responsible persons must take certain steps under the National Environmental Management Act, including assessing the immediate and long-term effects of the incident and the extent and existence of contamination.The National Building Regulations require an authority that has a reasonable belief that land on which a building is to be erected is contaminated to inform the owner, which must undertake a site assessment. Similar provisions are proposed in the National Environmental Management Waste Act, relating to contaminated land.There is presently no statutory obligation to make any disclosures. Parties usually perform due diligence investigations to assess any potential environmental liability relevant to the transaction.General issuesIt is common for commercial transactions to incorporate environmental indemnities to limit exposure for actual or potential environmentally related liabilities. The polluter remains liable in statute for any contamination or pollution, but could require any loss occasioned following successful prosecution to be made good by the indemnifier.There is no specific legislation regulating dissolution of companies with particular reference to environmental liabilities. However, normal company law principles apply and any outstanding creditors, including those with environmental or delictual claims for harm caused by the company, could apply to court to prevent the dissolution. As set out below, parent companies of subsidiaries which have caused environmental damage can be held liable where the subsidiary has been dissolved.For environmental harm caused by mining activities, the Minerals and Petroleum Resources Development Act imposes strict liability on company directors or close corporation members for environmental damage caused by the entity that they represented, even if they no longer represent such entity or if the entity no longer exists.The National Water Act and the National Environmental Management Act provide that any person "in control" of land or that has benefited from pollution may be liable for pollution arising from the land. There is no case law on whether this extends to parent companies.Delictual or tortious liability may theoretically be attributed to a foreign parent company for damage caused to persons or property by operations, plans, policies, procedures or investments it proposed, or for omissions it directly caused a South African subsidiary to make, provided that all of the delictual liability elements are present. There is, however, no decided case law on this in South Africa.The Protected Disclosures Act 2000 has procedures for the disclosure of information by employees in both public and private sectors regarding unlawful or irregular conduct by their employers. Disclosure of information regarding damage or likely damage to the environment is specifically protected, as are persons making such disclosures. Remedies are available to employees who suffer detriment by making a protected disclosure. The National Environmental Management Act also makes provision for the protection of employees who disclose information that they believe consitutes evidence of an environmental risk.The Constitution provides for class actions, as does the National Environmental Management Act; however, there are no rules of court to assist with such action. Penal or exemplary damages are not awarded to claimants.Emissions trading and climate changeSouth Africa is a party to the United Nations Framework Convention on Climate Change and the Kyoto Protocol. It is categorised as a developing country under the Kyoto Protocol and has no specified commitments to reduce or cap its carbon emissions. However, of the three mechanisms available for countries to meet emissions reduction targets under the Kyoto Protocol (ie, international emissions trade, joint implementation and the Clean Development Mechanism (CDM)), South Africa is involved in several CDM projects. The Johannesburg Stock Exchange opened to trading in credit emissions reductions during 2008.South Africa has not committed to targets or timetables under the Kyoto Protocol. South Africa has not yet enacted national legislation, regulations or policy directly pertaining to climate change. However, a number of initiatives are underway and mechanisms are in place to address the challenges of climate change. For example, in November 2010 the government published for comment a National Climate Change Response Green Paper. The public comment period closed on February 11 2011. The overarching objective of the green paper is to align South Africa's climate change policy with international principles and to ensure a coordinated, coherent, efficient and effective response to the global challenge of climate change. The green paper is generally the first step in law or policymaking. As a result, the green paper was a statement of intent.Following publication of the green paper, the government published the National Climate Change Response White Paper, which was released in October 2011. According to the white paper, within two years of publication, all government departments will be required to review the policies, strategies, legislation, regulations and plans falling within their jurisdictions to ensure their "full alignment" with the national climate change response. The South African government will then determine the adjustments that need to be made and identify any legislative or regulatory measures which are deemed to be necessary.In addition to the green paper and the white paper, South Africa has regulations regarding the establishment of a designated national authority for the CDM. These regulations were published in terms of the National Environmental Management Act and empower the designated national authority, which falls under the remit of the Department of Energy, to consider and approve applications for CDM projects that will result in carbon reductions. The application process to be followed and the manner in which decisions will be taken are set out in the regulations.South Africa is in the process of procuring 3,750 megawatts of renewable power from independent power producers in a competitive bidding process. Following the first bid submission date, 28 renewable energy projects were successful and announced as preferred bidders in December 2011. The preferred bidders named included 18 solar photovoltaic projects, eight onshore wind projects and two concentrated solar power projects. The independent power producers procurement process has replaced the renewable energy feed-in tariff process. South Africa is currently in the second phase of the independent power producers procurement process.Environmental insurance liabilityThe different types of environmental insurance available are:environmental impairment liability policies; anddirectors' and officers' liability insurance.While many companies are beginning to realise the potential of environmental liability, environmental risks are poorly covered and investing in appropriate risk management measures, principally through insurance policies, is still fairly limited. At this stage, the environmental insurance claims experience is also fairly limited.National Environmental Management Laws Amendment BillThe bill aims to extend theprovisions of the National Environmental Management Act, among others, in order to ensure the effective fulfilment of the environmental right in the Constitution. It intends to provide for the restriction or prohibition of certain developments which are likely to have a detrimental effect on the environment in certain geographical areas for a certain period of time on certain conditions. The bill also aims to clarify the governmental authorities (whether provincial or national) that will be responsible for certain applications for environmental authorisations and allows for the national environmental department to intervene in applications submitted to the provincial departments. While the National Environmental Management Act makes an allowance for the submission of applications for rectification of the unlawful commencement of a listed activity without the requisite environmental authorisation, the bill aims to extend the applicability of the submission of rectification applications to include the unlawful commencement of a waste management activity under the National Environmental Management Waste Act. The bill will also extend the search and seizure power of inspectors under the National Environmental Management Act by allowing inspectors to seize, without a warrant, any items used in the commission of an offence under the National Environmental Management Act or another specific environmental act. Finally, the bill also empowers the minister of environmental affairs to develop regulations to control products that have a detrimental effect on the environment.For further information on this topic please contact Claire Tucker or Athi Jara at Bowman Gilfillan Inc by telephone (+27 11 669 9000), fax (+27 11 669 9001) or email ([email protected] or [email protected]).An earlier version of this Overview appeared in The International Comparative Legal Guide to Environment and Climate Change Law 2012, published by Global Legal Group.