Developments in proposed environmental regulation of fracking

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The Minister of Water Affairs issued a notice on 13 August 2013 of her intention to declare the exploration for and/or production of onshore unconventional oil or gas resources and any activities incidental thereto, including but not limited to, hydraulic fracturing a "controlled activity" under the National Water Act 36 of 1998 ("NWA") (referred to as the "Declaration").

This means the Department of Water Affairs ("DWA") may proclaim fracking as an activity which specifically requires a water use licence ("WUL") before it can lawfully commence. The intention of the Declaration is clearly to allow for greater control and oversight of fracking operations by the DWA.

Companies who wish to undertake fracking will be required to timeously apply to the DWA for a WUL before they can commence their operations.

In addition, on 15 October 2013 the Minister of Mineral Resources (the "Minister") gave notice of her intention to promulgate the Technical Regulations for Petroleum Exploration and Exploitation under the Mineral and Petroleum Resources Development Act 28 of 2002 (the "Draft Technical Regulations").

The Department of Mineral Resources ("DMRs") Director-General Thibedi Ramontja, has stated that the final regulations would be published soon after the comment period has expired, although no definite time frame was given. He said the actual physical exploration of shale gas in the Karoo could start soon after the final regulations were published.

The Minister has stated the Draft Technical Regulations aim to augment gaps in the regulatory framework governing onshore and, where relevant, offshore exploration and exploitation of petroleum resources. She has conveyed this will ensure precautions are taken so that fracking operation's possible impacts on biodiversity and water resources are "carefully managed and minimised" and fracking is undertaken in a safe and socially and environmentally balance manner. The polluter pays principle has been included, the Minister said, to ensure the environment is rehabilitated after exploration and exploitation activities.

The Draft Technical Regulations have apparently been based on a comprehensive international benchmarking exercise of well-developed jurisdictions that have begun shale gas exploitation, in particular the American Petroleum Institute's standards.

It proposes certain studies that must be undertaken to assess exploration and production activities' potential environmental impacts ("Impact Prediction Study"). An Impact Prediction Study must be conducted as part of an environmental impact assessment ("EIA") prior to the approval of an exploration or production right. Onerous requirements of what must be included in an Impact Prediction Study are proposed, including inter alia:

• characterisation and knowledge of the operation's sources which may result in an impact, including environmental pathways along which such impacts could migrate and receptors that experience impacts;
  
• an assessment of capabilities and limitations of the various approaches and tools that can be used for impact predictions and responses to issues that are agreed with relevant government departments, such as the DMR, to be key questions;
  
• risks and uncertainties inherent in the assessment procedure;
  
• a conceptual model, describing interactions between sources, pathways and receptors;
  
• the appointment of suitably-qualified persons who have access to various appropriate tools and are properly experienced in selecting such tools for any assessments undertaken;
  
• an independent review of the prediction methodology and results;
  
• the design and implementation of an appropriate post-prediction monitoring programme;
  
• a recommendation on the most appropriate management action; and
  
• comprehensive details on the fracking fluids or chemicals that will be utilised and their status as hazardous.

During an Impact Assessment Study, the applicant must interact with the authorities at appropriate stages and reach agreement on the (a) identity of critical receptors; (b) initial and final conceptual models and their underlying assumptions; (c) tools to be used to undertake the impact prediction; and (d) appropriate alternative options to manage any unacceptable impacts.

There are a range of requirements aimed at environmental pollution, covering various phases from site assessment and design to post operation monitoring, including:

• onerous reporting duties to the DMR during the pre-commissioning, commissioning, operational, decommissioning and remediation phases;
  
• assessing below ground conditions, including the affected area's geology and geo-hydrology and preparation of a geological overview report;
  
• conducting an in-depth water resource assessment, with a hydro census, baseline and subsequent water quality assessments, and identifying priority water source areas and domestic aquifer supplies. The Council of Geoscience is also required to undertake its own independent water investigations;
  
• assessing potential fracking related seismicity risks and compiling a report with proposed mitigation measures for preventing fracking fluids or chemicals from entering any stressed faults, which must be approved by the Council of Geoscience. On-going micro-seismic monitoring is required;
  
• a fracture containment risk assessment;
  
• protection of radio and optical astronomy advantage areas for the South African Large Telescope and Square Kilometre Array stations, under the Astronomy Geographic Advantage Act 21 of 2007, through assessing the operation's potential impacts; consultations with the Ministers of Science and Technology and Mineral Resources; and proclaiming distances from such areas where no fracking operations can occur;
  
• well(s) design, construction, equipment, commissioning, operation, potential modifications, maintenance, examination, suspension and abandonment, to ensure prevention of (a) petroleum and other fluids migrating into any other formation except the targeted formation; (b)_pollution of useable groundwater; and (c) risks to health and safety of persons from it;
  
• ensuring compliance with various casing standards;
  
• criteria for cementation by requiring specified compressive, casing string and formation pressure integrity tests be conducted;
  
• blowout prevention equipment; and
  
• on-going mechanical integrity tests and monitoring for equipment under approved plans.

The Draft Technical Regulations stipulate that the holder of an exploration or production right ("the holder") may not commence with fracking operations before obtaining all necessary authorisations and permits for any activities associated with fracking, including a WUL under the NWA; the Regulations have been complied with and the required plans approved. Some of the additional plans that must be submitted to the DWA and "designated agency" in the DMR include a:

• plan for handling, storage, transportation, and disposal of fracking fluids and chemicals, as well as fracking flowback;
  
• waste management plan;
  
• a risk assessment;
  
• well engineering design; and
  
• fracking programme and procedures.

On-going obligations are included relating to water resources protection and management; and management of storm water, waste, spillage, air quality and noise levels. If any of these requirements are not adhered to; or the mechanical integrity of the well is compromised and continued fracking operations pose environmental risks, the holder must comply with the provisions relating to well suspension. This includes immediately notifying the designated agency at the DMR and suspending hydraulic fracturing operations until remedial action has been completed.

A post-fracking report is also required for review by the designated agency.

Members of the public and interested and affected parties are invited to submit written comments to the Minister by no later than 16 November 2013.

The Treasure Karoo Action Group has stated that a court battle over the implementation of the Draft Regulations is inevitable.