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Fracking: The Challenge facing our Lawmakers

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The pros and cons of hydraulic fracturing, the process of injecting a mixture of water, chemicals and sand under high pressure into the geological formations to so as to extract gas, commonly referred to as “fracking”, have been hotly debated by the oil and gas industry, regulators, legislatures, academics and a plethora of environmental organisations for the past few years.

Fracking, which has been identified as the most significant environmental cause of 2011, surpassing nuclear energy and global warming-related concerns, is arguably the most controversial mining technique of all time.  Currently, fracking is subject to some form of restriction in more than 150 jurisdictions around the world.  In the USA, which has the most experience in conducting fracking operations, litigation against fracking companies is now a burgeoning business for its legal fraternity.  Unsurprisingly, a myriad of fracking-related conferences have been held around the world and in South Africa, the primary issue at each being whether it would be in South Africa’s best interests to allow fracking.

For South Africans, to frack or not to frack is a question that touches on a host of inter-related issues from economics and energy supply to environmental science and public health.  The position that the South African government finds itself in is not one to be envied. It is the government that will have to make a decision whether or not to permit fracking and, either way, its decision will be subject to much criticism.

Against this background, there is a growing interest in the relevant law, in particular, the environmental aspects thereof.  The starting point for any discussion regarding the relevant South African law is, however, recognition of the fact that South Africa does not possess any fracking-specific laws, guidelines or even policies.  While we do have a legislative framework that governs the exploitation of hydrocarbon resources; our primary statute, the Mineral and Petroleum Resources Development Act (“the MPRDA”), has not been drafted with fracking in mind.  Because contemporary fracking is a relatively new mining technique, South Africa is but one of many jurisdictions where this legislative lacuna exists.  Even in the USA, which has the most fracking experience, there is a move to introduce fracking-specific legislation to areas that possess shale gas resources, with the exception of course of those areas where the technology has already been banned.

There is, however, a significant difference between those jurisdictions where the lawmakers are currently drafting fracking-specific legislation, such as New York State, and the current South African approach to its particular legislative lacuna.  In the USA, fracking has already been undertaken, and it is only now, as a result of a massive public outcry and perhaps the recent spike in fracking-related lawsuits, that legislation is being drafted to address the public’s concerns.  In South Africa the primary question is not how fracking should be regulated, but whether it should be permitted at all.

There is currently a moratorium over fracking in South Africa, which has been in place for more than a year. The drafting of fracking-specific legislation can only be undertaken once government has facilitated in-depth scientific research into the pros and cons of fracking and concluded that the former outweigh the later.  The full implications of the proposed fracking must be fully understood before the legislature puts pen to paper, failing which the anti-fracking lobbies will have a much easier time persuading the judiciary that the granting of fracking-related licenses by government was a premature decision.

For the South African government a swift solution does not exist.  Arguably, filling South Africa’s legislative lacuna by simply adopting a foreign regulatory regime is not an appropriate solution.  It is common cause that the potentially negative consequences of fracking vary depending on the specific features of the location in which fracking is proposed.  From a national perspective, for example, operators in South Africa are confronted by unique astronomical and paleontological concerns that they would not encounter in the United Kingdom.  From a local perspective, each wellpad and the associated infrastructure will have an impact on the environment that is unique to that particular area.

A further reason why a simple cut and paste approach cannot be adopted is that detailed consideration would have to be given to the numerous amendments that would need to be made to the many statutes and regulations that would be affected by the introduction of fracking-specific regulations. There is a plethora of laws that regulate mining operations in South Africa, none of which address fracking. As a result, the interplay between all of these laws and new fracking-specific regulations would have to be carefully considered before such regulations could be adopted.

Consideration of foreign fracking-related legislative drafting processes demonstrates that the drafting task is substantial.  Fashioning a suitable regulatory framework for South Africa will be no different.  That said, representatives of the Petroleum Agency of South Africa (“PASA”) have conveyed that they are of the view that South Africa’s current regulatory framework is adequate to manage what could become one of the largest shale gas industries in the world.  While Shell, which is an applicant for a fracking-related exploration license, is in agreement, legal advisors for two other applicants, namely, Bundu and Falcon have disagreed and stated that it is imperative the relevant regulatory framework be reviewed.

From a legal perspective, the majority opinion is that South African law is simply not up to scratch and that a failure on the legislature’s part to meticulously consider the interplay between the substantial body of legislation that currently governs hydrocarbons and any new fracking regulations would undoubtedly occasion the advent of fracking-related litigation.

As the South African debate regarding fracking continues, there is unanimous acknowledgement of the fact that the South African government will have to demonstrate that it has adopted an objectively reasonable science-based approach with the best interests of the populace in mind, failing which protracted litigation appears inevitable.  Unfortunately, however, the governmental task team that was set up to investigate the implications of fracking has, for the most part, been conducting its affairs behind closed doors. As a result, even if the task team produces a report that receives governmental approval and the moratorium is lifted, interested and affected parties will undoubtedly demand the suspension of any such decision until such time as they have had an opportunity to critically evaluate the task team’s report.   For South Africans the fight over fracking is unfortunately far from finished.

 

Luke Havemann

BA, LLB, LLM (Marine & Environmental Law) UCT, PhD (Oil & Gas Law) Aberdeen

Luke was admitted as an attorney in 2005 after having completed his articles at Cliffe Dekker.  He spent two years at Bowman Gilfillan before leaving to focus on non renewable energy (oil & gas) work.

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