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What preliminary environmental authorisations are required before commencing oil and gas-related activities?
Until recently, the environmental regulation of petroleum exploitation was addressed in the Mineral and Petroleum Resources Development Act and the regulations promulgated thereunder. For various historical reasons, minerals and petroleum exploitation was subject to a special environmental regime. However, recent amendments to both the National Environmental Management Act and the Mineral and Petroleum Resources Development Act have brought petroleum within the ambit of the National Environmental Management Act.
Exploration and production right applicants must now secure an environmental authorisation in terms of the National Environmental Management Act as a condition for grant of the exploration or production right.
Section 24 of the National Environmental Management Act empowers the minister of environmental affairs to list activities that may not commence without an environmental authorisation. An environmental authorisation is granted on the basis of an assessment conducted in terms of the Environmental Impact Assessment Regulations. The minister of environmental affairs in December 2014 published an updated version of the Environmental Impact Assessment Regulations, together with updated listing notices, containing various exploration and production-related activities.
The required environmental impact assessment encompasses studies and reports evaluating the socio-economic and environmental impacts of the proposed operations. The reports must be subject to at least one round of public participation, with a final report incorporating the comments and concerns of interested and affected parties.
Under this new regime, the minister of mineral resources remains the competent authority to grant environmental authorisations for activities relating to exploration and production, while the minister of environmental affairs will serve as the appeal authority.
Depending on the nature of the facility, other environmental licences and permits may be required, such as a waste management licence in terms of the National Environmental Management: Waste Act (59/2008) or an air quality licence in terms of the National Environmental Management: Air Quality Act (39/2004). Although these are separate statutory permits, the application process has been harmonised with that required for an environmental authorisation under the National Environmental Management Act. Accordingly, such applications will be supported by common studies and reports.
The minister of mineral resources has published Technical Regulations for Petroleum Exploration and Exploitation in terms of the Mineral and Petroleum Resources Development Act, which apply to onshore exploration and production operations. The regulations establish comprehensive technical and environmental standards for the conduct of hydraulic fracturing in South Africa. They govern, among other things, well design and construction, well abandonment, drilling fluid management of waste and management of water. They also appear to supplement existing regulation of environmental impact assessments.
What environmental protection requirements apply to the operation of oil and gas facilities?
Companies must comply with the conditions of the environmental authorisations when conducting exploration or production activities. When applying for renewal of an existing licence, companies must submit a report reflecting the extent of compliance with the conditions of the environmental authorisation
Under the National Environmental Management Act, an exploration or production right holder must also make financial provision for the rehabilitation, closure and ongoing post-decommissioning management of negative environmental impacts by way of an insurance policy, a bank guarantee, a trust fund or cash. The quantum must be determined through a detailed itemisation of all activities and costs required to implement final rehabilitation and decommissioning and remediation of any latent residual environmental impacts in accordance with plans and studies submitted to the Petroleum Agency as part of the application for an environmental authorisation. At any given time, the holder must ensure that the financial provision is sufficient to cover the actual costs of implementing these measures for a period of 10 years.
In addition, the standard form exploration and production right provides that the holder undertakes to “defend, hold harmless and indemnify the state from and against any and all claims, costs, charges, liabilities and expenses, including reasonable legal costs that may be instituted against or suffered by any member of the state as a result of injury to or death of any person or damage or destruction to any property or the environment arising from the negligent or unlawful acts or omissions of the holder”.
What are the consequences of failure to adhere to the relevant environmental regulations and to what extent can operators be held liable for environmental damage?
With respect to enforcement of environmental compliance, the National Environmental Management Act provides for the appointment of environmental management inspectors within the Department of Mineral Resources to police compliance with environmental obligations. Such environmental management inspectors enjoy particularly wide powers. They may, without a warrant, interrogate persons suspected of contravention of the National Environmental Management Act or other environmental statutes and collect evidence by copying documents and extracting samples from the site. An environmental management inspector may also issue any person with a compliance notice directing specific measures. Failure to comply with a compliance notice may result in revocation of the environmental permit or authorisation in respect of which the infraction occurred, and possibly prosecution.
Section 28 of the National Environmental Management Act imposes a broad duty of care on right holders in respect of preventing environmental degradation and requires that every person that causes, has caused or may cause environmental degradation or pollution take reasonable steps to prevent, mitigate or stop such degradation or pollution. This section enables the director general of the Department of Mineral Resources to direct the person causing damage to cease any activity, evaluate and assess the impact of activities on the environment and take measures to remedy these effects. If the holder of a right fails to comply with the directive, the director general may take the steps necessary to remedy any ecological degradation and pollution and recover the costs required to fully implement the rehabilitative measures from the right holder.
In terms of Section 34(7) of the National Environmental Management Act, any person who is or was a director of a firm at the time of the commission by that firm of an offence under various environmental statutes set out in Schedule 3 to the National Environmental Management Act shall himself or herself be guilty of the offence, and be liable on conviction to the penalty specified in the relevant law, if the offence in question resulted from the director’s failure to take all reasonable steps that were necessary under the circumstances to prevent commission of the offence. Scheduled offences include breach of the Section 28 duty of care and offences established in other environmental legislation, such as the statutes regulating water, air and waste. For example, Schedule 3 lists Sections 151(1)(i) and (j) of the National Water Act, 1998. In terms of this section, it is an offence to unlawfully and intentionally or negligently commit any act or omission which pollutes or is likely to pollute a water resource, or unlawfully and intentionally or negligently commit any act or omission which detrimentally affects or is likely to affect a water resource. Proof of the offence constitutes prima facie proof that the director is guilty under Section 34(7).
The financial implications of a conviction under the National Environmental Management Act are significant. It is competent for a court, simultaneously with consideration of the criminal penalty, to enquire summarily into and assess the monetary value of any advantage gained or likely to be gained by such person in consequence of that offence and, in addition to any other punishment imposed in respect of that offence, order the award of damages or compensation or a fine equal to the amount so assessed.
The principles set out in Section 28 of the National Environmental Management Act are underscored by Sections 44 and 45 of the Mineral and Petroleum Resources Development Act, which provide that if any exploration or production operation causes or results in ecological degradation, pollution or environmental damage, or contravenes the environmental authorisation, the minister of mineral Resources may, in consultation with the minister of environmental affairs and tourism, direct the right holder to investigate and report on the impact of the ecological degradation, pollution or contravention and take any steps specified by the minister in the directive. If the holder of a right fails to comply with the directive, the minister of mineral resources may take the steps necessary to remedy any ecological degradation and pollution and recover the costs required to fully implement the rehabilitative measures from the right holder.
The Mineral and Petroleum Resources Development Act also empowers the minister of mineral resources to cancel or suspend any right if the holder is in contravention of any condition of the environmental authorisation.
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