ONO comments on Gas Amendment Bill

Herewith comments on the draft Gas Amendment Bill (25 June 2021) on behalf of the coalition Oceans Not Oil. There are over 25 organisations affiliated with Oceans Not Oil (see below). The ultimate objective of Oceans Not Oil is the termination of offshore oil and gas extraction and consumption off our coastline, inspiring South African policy makers to build an economy beyond oil and deal with climate change vulnerability that is the legacy of oil.

We thank you for allowing us the opportunity to comment on this Bill. Below you’ll find our main areas of concern, which include:

a) SUSTAINABILITY ASSUMPTION NEEDS SCIENTIFIC PEER REVIEW

The assumption that this the Bill can provide environmentally sustainable development needs to be supported by evidence.

i. Whether gas can achieve substantial climate benefits in the transition from coal-based electricity is highly contentious. That perception of gas climate compatibility was derived from the fact that gas burns cleaner than coal, generating roughly half of the carbon emissions. However, that calculation ignores the enormous volumes of methane into the atmosphere up and down the supply chain – at drilling sites, compressor stations, pipelines, and liquefaction facilities. That calculation also ignores the energy used to liquefy the gas, transport it around the world, and re-gasify it upon arrival.

ii. Also the unabated use of natural gas is incompatible with achieving the climate-neutrality objective by 2050. Its use will have to be reduced by over 70 % of current use in 2021. Studies show further development of gas infrastructure is incompatible with the Intergovernmental Panel on Climate Change (IPPC) target of keeping global increases in temperature below 2°C . This all begs the question of the employment outlook, a just transition, economics and plain logic in the South African context. South Africa has already warmed at around twice the rate of global warming.

iii. The National Gas Pipeline will be flared every 187 kms (National Department Of Environmental Affairs’ (DEA) Strategic Environmental Assessment (Sea) For A Phased Gas Pipeline Network And Expansion Of The Electricity Grid Infrastructure In South Africa, 2018) and studies show that leaks to pipelines are par for the course , affecting communities and global warming, since what escapes is methane, which traps 84 times more heat per mass unit that CO2, over a 20 year period . Over 60% of the methane emissions are fugitive, the rest are from vented or combusted emissions.

iv. In May 2021, the International Energy Agency (IEA) published a high-profile report that detailed the pathway to achieving net-zero carbon emissions by 2050, and in the report the agency concluded that expanding fossil fuel exploration and use must end:
“No new natural gas fields are needed in the [Net Zero Emissions scenario] beyond those already under development,” the IEA said. “Also not needed are many of the liquefied natural gas (LNG) liquefaction facilities currently under construction or at the planning stage.” The agency went on to add that the volume of LNG traded needs to fall sharply going forward.

v. A Natural Resources Defence Council (NRDC) study (December, 2020) found that the climate benefit of LNG compared to coal is only modest at best, and because of the leakage inherent in producing the gas and the energy required to cool it and ship it, it ultimately presents a significant threat to the climate.

vi. The legacy of gas infrastructure build is massive – about 40 to 50 years of environmental and socioeconomic impacts. 68% of South Africa’s emissions come from fossil-fuel combustion with fugitive emissions from oil and natural gas contributing to 9% and 7 % of the total emissions respectively.

vii. Given that this Act has the potential to cause severe and irreversible harm to the public or the environment [see the harms listed at f.) viii below], and given the studies cited herein, the operation and transmission of gas cannot be deemed sustainable. We suggest the removal of the word ‘sustainable’ from the Act [The Explanatory note; Amendment of section 2 of Act 48 of 2001 ; 2 (a) (aA) and (aB)] completely.

viii. What provision is being applied for fast-tracking gas development?

b) FINANCIAL IMPLICATIONS FOR THE STATE

The memorandum of the Objects of The Gas Amendment Bill states that,
“Bill will not have any organisational and personnel implications for the Department and does not create further financial liabilities to the State.”

i. This claim needs to be substantiated considering the newly created National Petroleum Company merged from iGas, Petrosa and the Strategic Fuel Fund(SFF) into one entity, will play a central role in the proposed Gas Master Plan and this Bill, yet none of these SOEs find themselves in a gross-profit-generating situation.

a. PetroSA ‘s R7.4 billion Abandonment Liability (provision) needs to be paid by February 2024 and its year-on-year financial losses (R20 + billion) and current debt trajectory are not sustainable.

b. iGas is still at a development stage in its projects and requires major capital to be deployed in order to achieve the planned objectives . Its tax losses have been in the region millions, and the viability of this concern was thus brought into question in the May 2021 Report of the Portfolio Committee.

c. The public bears the cost of SFF’s strategic stock which also holds an environmental liability. SFF has reported a 61% drop in revenue (2019), and faces the potential of over R2 billion in losses from litigatory action.

ii. The break-even point of combined-cycle infrastructural development will sit well past 2030 and profits will only be seen in the decades after 2050.

This begs the question then of where incentives for closure and transition from gas to renewables will be derived, and what is the logic of development of gas as a transition energy if it is bound to be locked in past 2070?

iii. The sector is unattractive for new investments as the cost- of- financing by financial institutions will be high, given the country’s junk status, as such no major new major projects will take- off in the short to medium term. Nedbank will no longer finance new gas exploration projects.

iv. The public will bear the brunt of the decarbonisation challenges the roll out of the Gas Master Plan faces.

c) DELAYED FINAL INVESTMENT DECISIONS

Gas projects are 30-year-plus projects, customers are unwilling to commit to contracts longer than 10 years and a retreat of bankers from financing new fossil fuel projects has begun . New LNG and gas projects have considerable risks of being stranded assets prior to the operating life being complete .

d) DISINCLINATION TO TRANSITION

i. Substitution of natural gas for coal has not been addressed by the Bill. Studies have shown changes in emissions of carbon dioxide (CO2), sulphur dioxide (CH4), a sulphate aerosol precursor (SO2), and blackcarbon (BC) particles resulting from the replacement of coal by natural gas in the electric utility sector initially produces higher temperatures relative to continued coal use and can last from 1 to 30 years, depending on the sulphur controls assumed. This is followed by a net decrease in temperature relative to continued coal use, resulting from lower emissions of CO2 and BC. The length of this period and the extent of the warming or cooling expected from coal-to-gas substitution is found to depend on key uncertainties and characteristics of the substitutions, especially those related to: (1) SO2 emissions and consequent sulphate aerosol forcing; and (2) the relative efficiencies of the power plants involved in the switch. Fossil fuel switching may therefore continue to take a toll on the environment and society. The CMCC Foundation and RFF-CMCC European Institute on Economics and the Environment (EIEE) and Athens University of Economics and Business have projected a cost of up to 20% of GDP in their investigation into how climate change could impact the GDP of South Africa.

ii. Delayed action on an energy transition away from fossil fuels could maximize adverse impacts to a Just Transition and minimize the opportunities offered by a transformation of the energy sector. State promises of the 34% ghg reduction by 2020 and meeting the 42% BAU emission reduction trajectory (business as usual) by 2025 target, and the transition from coal to renewals by 2030, are hollow and have not materialised

e) OBSOLESCENCE

i. The International Energy Agency (IEA) has concluded that if planetary systems are to remain within the two degree limit, no more than one-third of proven reserves of fossil fuels can be consumed prior to 2050. Therefore two-thirds of proven reserves of oil, coal, and natural gas, including reserves that corporations have paid billions of dollars for, must be left in the ground to stay within the global carbon budget. Neither international law nor domestic law has ever mandated the stranding of assets of that magnitude and needs consideration before the public purse is involved in massive infrastructural build that will take until 2035 to complete.

ii. Renewable energy is increasingly the cheapest option to generate electricity in most parts of the world, and the cost declines are expected to continue.

iii. The basic rationale of an industry built around a relatively small number of massive but highly vulnerable facilities, to climate change and extreme weather events, is now being called into question.

iv. Carbon capture technologies are not profitable, potentially unfeasible, and have questionable climate benefits.

f) OMISSIONS

i. Absence Of Precautionary Principle

In light of the fundamental structural uncertainties attached to climate change, adopting and operationalizing a precautionary approach in this Bill is a priority. Irreparable mistakes must be avoided through engagement with the definitive evidence of climate science

ii. Absence Of Environmental Consideration

There is no mention of the Bill’s or the Gas Master Plan’s relation to emission targets or environmental consideration in the Gas Act of 2001, nor is there in the Amendment 9B in general nor in its process for applications for license, nor the Powers of Minister regarding new gas facilities, services or gas and integrated energy projects.

iii. Absence Of Polluter Pays Principle.

iv. Strategic Environmental Assessment for the Gas Master Plan

There are about 140 municipalities that will be affected by the planned Gas Master Plan. To date only 7 major towns have undergone a public participation process for the National Gas Pipeline SEA. Considering that the Gas Master Plan may adversely affect our environment, society and climate resilience it demands an overarching evaluation of its environmental and climate change–related implications, which will also provide a means for looking at cumulative effects and appropriately address them at the earliest stage of through inclusive decision making alongside economic and social considerations.

v. Absence of a National Mitigation Plan

Given the danger of the proven risk tolerance of the oil and gas sector, and in terms of PAJA (Promotion of Access to Administrative Justice Act), the public needs to be assured that relevant hazard identification and specialist risk assessment has been taken into account for the following events that pose a threat to public safety, property, the environment, critical infrastructure or the economy:

a. fire;
b. blowout, explosion, ignition, influx of inflammable or noxious gases;
c. toxic dust or gas which can cause a reversible or irreversible disturbance of the normal physiological processes of one or more bodily systems;
d. bursting of equipment, pipeline or uncontrolled escape of petroleum;
e. ionising radiation from the radioactive materials, sealed and unsealed radioactive sources and radiation generators used extensively by the oil and gas industry.
f. failure of structures;
g. accident involving boat, helicopter etc.
h. uncontrolled emission of petroleum or chemical spillage;
i. natural calamities;
j. medical evacuation, man over board; and
k. any other emergencies from uncontrolled developments in the course of drilling and for production, storage, handling or transportation of petroleum or machinery or owing to natural events leading to serious effects (both immediate and delayed as well as inside or outside the installation) causing or likely to cause substantial loss of life or property.

vi. Absence of Annual Review

Given the scarcity in the carbon budget, and that staying within the two-degree limit will entail wrenching choices and significant changes in any ‘forward-looking fossil-fuel based plan” we submit that the Minister should undertake an annual review of the Gas Master Plan to triage cost analysis, market feasibility and operational feasibility and a feasibility schedule that dovetails with South Africa’s absolute peak, plateau and decline greenhouse gas emissions trajectory range commitments.

vii. Absence of Costs Benefit Analysis

To clarify the wide disputation and doubt on the rationality of burning natural gas instead of coal an independent cost-benefit analysis (CBA) is needed.

How the following issues identified by Portfolio Committee on Mineral Resources and Energy on the Oversight Visit to PetroSA, Mossel Bay, dated 02 December 2020, will be dealt with need to be made clear to the public through a CBA:

a. Lack of trust and support in the market for Petro SA;
b. Unviable gas-to-liquid operating model;
c. High cash fixed costs and diminishing cash flow;
d. Low efficiency and sub-optimal plant utilisation;
e. Leadership instability;
f. 5 year wait for feedstock from production off Total’s offshore operations;
g. Disconnection from changing market drivers and value;
h. Declining profitability and cash flow challenges.

g) CONFIDENTIAL TREATMENT OF APPLICANTS

The prevention of easy access to information sits contrary to the provisions found in Section 23 and 32 of the Constitution, and therefore clauses 16 (d); 29A and Parliamentary Procedure 6.7 need to be removed from the Act.

h) FOX GUARDS THE HEN HOUSE

Functions of Energy Regulator that delegate both regulatory and promotion participation requires review to ensure that the Regulator’s prescribed mandates to “act independently of any undue influence or instruction” [NERSA 9 (c)] are not undermined in the interests of expedience or profit by the regulator’s obligations to promote gas development. See Section 4 (e) and (l).

i) OPEN/ BROAD CLAUSES

A number of the clauses in the Bill are too broad or vague and afford the Minister and Energy Regulator practically boundless justification and interpretation and may occasion highly disproportionate results. Vague and ambiguous clauses deprive the applicant, authorities and the public, of notice about what the law requires and serve to undermine compliance. See Section 15 A ,15B(d) and 18 (f).2.

CH I.

1. Definitions

(k) by the substitution for the definition of ‘‘gas’’ of the following definition: ‘‘‘gas’ means all hydrocarbon gases [transported by pipeline], 50 including natural gas, artificial gas, hydrogen rich gas, methane rich gas, synthetic gas, coal bed methane gas, liquefied natural gas, compressed natural gas, re-gasified liquefied natural gas, re-gasified liquefied petroleum gas or any combination thereof;’

Sustainably sourced gas from renewable sources, such as biogas and organically sourced hydrogen, should be included.

(x) by the insertion after the definition of ‘‘price’’ of the following definition:
‘‘ ‘private sector party’ means any natural or juristic person in which the Government or an organ of state does not hold a controlling ownership interest (whether direct or indirect);’’;

This needs further definition considering there are ways of giving the government control, or even negative veto power over specific management issues, in public private joint ventures even where the majority of the shares in the entity are held by the private sector.

The vagueness of current environmental and public precautionary descriptors is worrying, therefore Section 1 of the Gas Act, 2001 (Act No. 48 of 2001), needs to be amended with the following insertions:

(zR) “environmentally responsible” needs definition.

(zV) “Sustainable” suggest deleting.

(zW) “The public interest” must be defined beyond aspects of expropriation and third-party transfer for purposes of economic development [section 25(4)(a) of the 1996 Constitution, 1975 Expropriation Act], to support national and global climate change responses.

(zX) “Safe” must be defined.

Ch III

7.‘‘Activities not licensed
15A. The Minister may, after consultation with the Energy Regulator, declare, by notice in the Gazette, any activity contemplated in section 15(1) to be no longer a licensed activity from the date set out in such notice.

There should not be a clause relating to the arbitrary removal of a listed activity through publication in the Gazette. There is no purpose in this clause and the consequences of this clause, since they set the entire process of public participation rolling [NERSA 10.(d)], seem great.

15B. (1) A person undertaking any of the following activities must register with Energy Regulator:
(d) any other activity as may be prescribed by the Minister.

The breadth of this clause, encompasses too many possibilities, and therefore needs to be addressed or removed.

Amendment of section 16 of Act 48 of 2001

8. Section 16 of the principal Act is hereby amended—
   
   1.(d) by the substitution for subsection (3) of the following subsection:
   ‘‘(3) The applicant may, in accordance with the Promotion of Access
   to Information Act, request confidential treatment of commercially sensitive information contained in an application and, subject to concurrence by the [Gas] Energy Regulator, such information may be withheld from publicly available copies of the application.’’; and
   
   As per our objections relating to confidentiality – above (g)- this clause should be removed.
   
   Amendment of section 18 of Act 48 of 2001
9. Section 18 of the principal Act is hereby amended—

(f) by the insertion of the following subsections, the existing section becoming subsection (1):

‘‘(2) The Minister may, in writing, direct that when the Energy Regulator decides upon a licence application, the Energy Regulator must satisfy itself that such application meets, inter alia, any additional criteria specified by the Minister, which criteria must be based upon, and must reflect—
(a) the objects of the Act;
(b) the national interest;
(c) the promotion of regional growth;
(d) any other social objective.

These broad, shotgun clauses leave interpretation open to the discretion of Energy Regulator.

Repeal of section 20 of Act 48 of 2001

In the interests of transparency and the checks and balances of oversight of State assets, Section 20 of Act 48 of 2001 relating to the Disposal of gas assets controlled by State, needs to remain.

Substitution of section 23 of Act 48 of 2001

17. The following section is hereby substituted for section 23 of the principal Act:
    
    ‘‘Term of licence and non-transferability
    23.(1) Any licence issued in terms of this Act to operate a gas facility, to provide a gas service, or trade in gas, is valid for [a] the period [of 25 years or such longer period as the Gas Regulator may determine] specified in the licence and determined by the Energy Regulator, taking into consideration relevant factors, including the objects of the Act, the applicant’s requested duration of the licence and the time required to get a return on the investment.
    
    Considering the climate science and imperative stipulated above, a 25 year time period for licenses seems unreasonable if the energy sector is to cut its emissions to net zero by 2050.
    
    Insertion of section 29A in Act 48 of 2001
    25. The following section is hereby inserted in the principal Act after section 29:
    ‘‘Handling of confidential information by Energy Regulator
    
    As per our objections relating to confidentiality – above (g)- this clause should be removed, especially since it may affect access by interested and affected parties to key documents.
    
    ‘‘Expropriation of land by [Gas] Energy Regulator
    
    32. 1) In pursuit of the objects of this Act, the [Gas] Energy Regulator may expropriate land, or any right in, over, or in respect of, land on behalf of a licensee or an applicant for any gas [transmission, storage, distribution, liquefaction or re-gasification] facilities, in consultation with the Minister and in accordance with section 25 of the Constitution.
    
    To be amended to read:
    
    (1) In pursuit of the objects of this Act, the [Gas] Energy Regulator may expropriate land, or any right in, over, or in respect of, land on behalf of a licensee for any gas [transmission, storage, distribution, liquefaction or re-gasification] facilities, in consultation with the Minister and in accordance with section 25 of the Constitution.
    
    It is accepted that property may not be expropriated for the sole benefit of third parties [1975 Expropriation Act; section 25(2) of the 1996 Constitution], therefore until such time as the applicant becomes a licensee, and holds a contract with the state, expropriation would clearly be unjustifiable.
    
    32.(3) b)the land or any right in, over, or in respect of, such land is reasonably required by a licensee for gas [transmission, storage, distribution, liquefaction or re-gasification] facilities, which is in the public interest or which [enhance] enhances the Republic’s gas infrastructure. ( will act in consultation with the Minister of Public Works,)
    
    Since any appropriation should be in the public interest and accountability widened beyond development frameworks this should be amended to read:
    
    b) the land or any right in, over, or in respect of, such land is reasonably required by a licensee for gas [transmission, storage, distribution, liquefaction or re-gasification] facilities, which is in the public interest.
    
    We would welcome the opportunity to make a verbal presentation on our review of the Gas Amendment Bill should this be deemed helpful.
    
    For all the above reasons, we look forward to your most urgent response.
    
    Affiliates to the Oceans Not Oil campaign are:
    Organisations
    • African Conservation Trust
    • AfriOceans Conservation Alliance
    • Centre for Environmental Rights
    • Conservation Guardians
    • Coastwatch
    • Coastal Links (KwaZulu Natal)
    • Earth Life Africa (Durban)
    • Embabhaceni Development and Nature Solutions
    • Fisherfolk Formations
    • FrackFree SA Youth
    • Green Thumb Society
    • groundwork
    • KwaZulu Natal Marine stranding Network
    • Legal Resources Centre
    • Mayine Azanian Movement
    • Masifundise Development Trust
    • South African Youth Climate Change Coalition
    • South African Squid Management Industrial Association
    • South Durban Community Environmental Alliance
    • The Bluff Work Experience and Volunteer Program
    • Umkomaas Fishing Forum
    • Vaal Environmental Justice Alliance
    • Vanishing Present Productions
    • Wildlands
    Commercial
    • Shark Warrior Adventures
    • Ufudu Flyfishing Safaris
    
    This submission is also supported by:
    Project 90 by 2030

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