Investigation of Hydraulic Fracturing: briefing by Minister of Mineral Resources

PMG 11 September 2012.

Date of Briefing:

11 Sep 2012

Audio recording of the meeting:

Minister Shabungu media briefing on fracking

Summary:

Susan Shabangu, Minister of Mineral Resources, Godfrey Oliphant, Deputy Minster of Mineral Resources and Thibedi Ramontja, Director General: Department of Mineral Resources, briefed the media on the task team investigation report on hydraulic fracturing in the Karoo basin in the Imbizo Media Center of Parliament. The task team report was endorsed by Cabinet last week which lifts the moratorium on shale gas exploration. For the time being, only normal geological exploration will be allowed to establish the size and potential of the shale gas reserve.

Questions & Answers:

Journalist: Could you give us an idea if the government was unprepared for this debacle regarding hydraulic fracturing? Was there anything to prepare the government for what was coming because it seems it has just been a rushed job to fill in the gaps. Were we prepared from the onset in 2010?

Journalist: How many exploration requests for applications have you received? How many companies are interested? How many licences will you be giving out? For exploration, you said that there would be no actual hydraulic fracturing taking place but will there be other methods? Will there be any drilling at all?

Journalist: Initial investigations say that this could be detrimental to the Square Kilometer Array (SKA) radio frequency telescopes but an effort will be made to minimize these effects. If there are no mitigating circumstances that will work, will the fracking continue?

Journalist: What can we use this gas for and who is going to be on this monitoring committee that has been talked about?

Journalist: I think the biggest concern is that civil society was not a part of this discussion and if I can remember well, there was supposed to be consultation with the public before the moratorium was lifted but that has not happened. I would like to know why?

Minister Shabangu: In reply to the first question, the government was prepared because of the regulatory framework, if you look at the Mineral and Petroleum Resources Development Act (MPRDA,) it allows exploration of mineral resources. This will be the first of its nature in the country so government has been prepared for this to happen. Government through its framework is ready for any form of mineral exploration in this country. If you look at shale gas, years back there were studies but because of the size, there was not enough technology to procure it but government has always been ready. Some would say government is delaying this on purpose but we had to take time so that the government can say if they are for or against what will happen. The report was taken to Cabinet so that it could help influence the decision that Cabinet made. There have been five companies who have made applications. The initial process will include drilling because they have to establish if there is anything or not. The actual fracturing cannot be done now, that will come later but drilling must happen to establish the potential. The drilling will have to be done while taking environmental issues into account. SKA has always been an issue that has been considered. We have agreed that the Department of Mineral Resources and SKA have to work closely to make sure that what happens is consistently monitored. The issue of SKA is one of the mitigating factors. If the fracking affects SKA then we will have to go back to Cabinet. The task team has identified that the shale resource has potential to energise our country and integrate it into the energy plan and that the first potential will be electricity. The monitoring committee has not yet been established. The task team did not go to outside people for consultation because they had no money for it but now this will be part of the process. The consultation process will include all of the role players.

Journalist: Is this a conditional or unconditional approval of the process because the report states both. Who paid for the water research that was done?

Journalist: Who will issue the licences? What is the time frame for the issuing of the licences? It seems like putting the cart before the horse because one would get a licence but would not be able to do serious exploration activities. My understanding is that you have to do some limited hydraulic fracturing, one cannot just drill, can you comment on that? Does this mean exploration activities will be very limited, is that a correct assessment?

Journalist: Should any court cases come forward, will your department contest those cases? From the report issued, are you concerned about any of the environmental issues that have been highlighted?

Minister Shabangu: Conditional approval was granted, I have clearly outlined that there will be clear conditions provided with the licensing. This is a new territory that we will be entering so we should establish confidence but also do it in a way that meets all of the requirements. In terms of water, whoever uses the water will have to pay and will have to use the resource so it does not impact on water. The licences will be issued by the Department of Mineral Resources (DMR.) They will licence any mining that will occur in South Africa. There are limitations because this is the first time we are doing this and we want to ensure licensees recognize the issues with SKA and the environment and if there is a negative effect then we must minimize it. We are conditioning it in a very limited way. As government we must behave in a responsible way and be careful because of the environment and sustainability. We are signatories of the climate change bill so we must make sure that we go by that as well –  which is why we are going for a minimal approach. In terms of court cases, as a government we have a responsibility to defend our decisions in court.

Journalist: We are certainly encouraged to hear from you about the public consultation that will occur but we are perplexed at the sequence of how the government first lifts the moratorium and then seeks public consultation. We do not see how the moratorium kept you from discussing this from the public of South Africa so we are curious on your comments in regard to that.

Journalist: When will the full report be published? Given government’s track record in overseeing compliance and environmental issues, how confident are you that whatever framework you put into place will be adhered to? In the case of SKA, I understand that the issue is dust. Mining will create lots of dust that will go up into the atmosphere, so how will you be able to make a decision on the efficiency of SKA? Who paid for the water research and is there any other research being done?

Minister Shabangu: In terms of public engagement, we had no mandate, report or government decision, so we can now go to the public because we have a government decision. We had to go to Cabinet first because one of the decisions Cabinet ended up making was to go engage with the public.

Deputy Minister Oliphant: “I expected us to very excited but we look very dull”. When it comes to gas resources in the country, we have massive amounts and we are the best country in the world when it comes to gas-to-liquid technologies. We thought we had a trillion cubic feet of gas but now we find we have much more which will change the energy landscape of the country. We must be excited about these gas resources. The Minister is right about the sequencing of consultation. We are doing our best in monitoring the mines in the country. Environmental protection is not the responsibility of government alone but we are doing our best and there are those that are slipping through the cracks but if they are caught we will take action. There will also be a monitoring committee to help. As South Africans we should be able to ensure that the environment will be protected.

Minister Shabangu: The Report is still being edited and as soon as that is done it will be published. The government paid for the water research and all other research. On the issue of dust, we are going through that process with SKA. DMR and SKA will be working together. We must look at areas where there is a direct interest and in fact there was a big debate about this in Cabinet.

Journalist: In the event of any unacceptable outcomes, the process may be altered. What does government consider an “unacceptable outcome” and what does “may be altered” mean? That seems very far from if there is a huge environmental issue, the program will be shut down. This is considering the economic benefits juxtaposed with the environmental concerns.

Journalist: Could you name the companies that have applied for licences? Do you expect more to apply and what are the Black Economic Empowerment (BEE) considerations in the mix?

Journalist: The task team recommends ‘normal exploration’ so I was wondering what this normal exploration means. At any point will chemicals be pumped or poured down the drill holes? Will exploration include seismological investigations and, if so, has that got the people at SKA worried because of calibration.

Journalist: Earlier you made the statement that government is prepared because of the regulatory framework and one of the key parts of the report points out the already existing regulatory framework. Will there be consultation regarding this regulatory framework?

Journalist: If there is actually over a trillion cubic feet of natural gas, how is that going to feed into the government’s undertaking on the reduction of carbon emissions in South Africa and how is this going to effect the decision by government to build six nuclear power stations?

Minister Shabangu: One commitment we have made is on carbon emissions and we have committed a reduction by 2025 and there is no way this process can undermine that. We have to ensure that we do not renege on our international responsibilities and obligations. In regard to the nuclear plants, those are some of the issues we will look at. Shale does not replace what government has committed to regarding nuclear power. Initial studies are showing that the shale can help with clean energy and carbon emissions, but once the exploration starts we can learn more. In terms of the regulatory process, there is always consultation in South Africa. As government, one must know that this will happen. The framework is not static, it is dynamic so it responds to issues that arise. On a regular basis there is a review. It is an ongoing process so it cannot be inflexible. In terms of seismology, it will be monitored. I will ask the Director General to respond to what ‘normal exploration’ means. In terms of water, we are a water scarce country, so if this does take too much water then the process will be stopped. There are certain conditions that may lead to the process being stopped.

Director General Ramontja: ‘Normal exploration’ means that it excludes hydraulic fracturing. This type of drilling is probably taking place today somewhere in the country. The situation is that if someone submits an application, we have to look at the impact that it will have on the Karoo environment.

Minister Shabangu: In terms of the five companies that have applied for licences, we will have to get back to you on that because we do not want to make any mistakes. BEE will have to occur within the current framework. We have clearly defined the participation of BEE. The processes will have to be followed properly.

Journalist: When will the consultation start and is there a time frame in which they have to be completed?

Journalist: Will the DMR start issuing licences now?

Journalist: On clarity on timeframes, will the drilling take place during exploration? If not, what would the timeframe be?

Journalist: About the consultation, does that mean that you talk to people and you tell them what is going to happen or can the report be amended? Was the Department of Water and Environmental Affairs really part of the task team because I heard that they were not.

Journalist: How does fracturing in the Karoo affect the national parks and game reserves?

Journalist: With regards to the environmental impact, do you have any concerns about this exploration? Does the report indicate how much the GDP will benefit and how it will effect job creation?

Minister Shabangu: The issue with drilling now or later will depend on when the Cabinet gives licences and for what, so it is an administrative process at the moment. We have a clear regulatory process so that the issues that we have raised will be followed. No licence is given to any applicant without conditions. We will be consulting with people not telling them, it is not informing. We will not be consulting on the report but on the process – which can be amended. I do not know about Water Affairs because it is on record in Parliament that they were part of it. In fact the word “normal exploration” was insisted by Water Affairs. When it comes to game reserves, we have already displayed being sensitive to them so that we can ensure that we work closely with Environmental Affairs. I will always be concerned when it comes to the environment and will be a responsible citizen but also as a minister, I know that environmental affairs cannot be undermined. We must have an environmental plan. There has not been a study of job creation or GDP yet. But the exploration is important because we will be able quantify the amount of resources down there. Licensing is an administrative process, now we must physically look at the submitted applications and if see if they are sufficient.

Journalist: Given that in increasingly mineral rich areas, government is going for a direct state role. Has there been any thinking done in the DMR of having a more direct role in the Karoo through a mechanism such as PetroSA, having a percentage of stock in the blocks being licensed.

Journalist: I was wondering if there had been any investigation into the histories of the companies applying for licences. Also a Shell representative told me that they anticipate there being only five years of shale gas available in the Karoo. What is your response to that?

Journalist: I am getting a bit confused. You say that one can apply for licences now but you are also saying that the framework for the licensing is being developed, so if someone applies now and gets a licence, what will it be based on?

Journalist: Since the farming sector will be directly affected by both exploration and mining, why was neither the Department of Agriculture nor AgriSA included in the task team that compiled this report?

Journalist: What is the total budget for this process?

Minister Shabangu: State participation is there, we are taking about a mineral that is mined and we are following that policy. The state already is mining coal so unless you say gas is not mined; the fact is that it is mined so the mining policy applies to it. I do not know what Shell is saying but they have applied for a licence and they are showing enthusiasm as we have all seen in the newspapers. In terms of licensing, there are conditions for them. If the licences are not granted then the companies can go to court, so legally we have to issue a licence to all of those who apply and meet the current standards. Even if they applied during the moratorium we would have to review their application because of the courts and courts have gone by us and issued licences in the past. At that time we did not know that this would affect the farmers but the Minister of Agriculture has endorsed this and is very excited. I am told that farmers are very excited, I do not know why but perhaps it is because they think they are going to be relieved from the high price of electricity but I do not know, it is hearsay. In terms of the total budget, the state has incurred costs for the processing of the report and the research. Moving forward, government has not yet committed any money because the people who have applied are all private sector who must incur the costs.

End of briefing

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