South Africa’s hydraulic fracturing regulations – what they mean for exploration companies
Regulations governing petroleum exploration and production in South Africa have been in development since the lifting of the moratorium on Petroleum exploration in September 2012. After a long period involving heavy debate, 3 June 2015 saw the enactment of theRegulations for Petroleum Exploration and Production, which prescribe technical and environmental standards for onshore hydraulic fracturing.
The promulgation of the regulations means that exploration companies may now conduct hydraulic fracturing provided all necessary statutory authorisations are in place. The Minister of Mineral Resources is expected to take a decision on pending Karoo exploration right applications in the coming months.
The regulations do not differ markedly from the draft version that was published for public comment in October 2013, although offshore operations are now excluded. We highlight some of the key differences below.
Environmental impact assessment
The regulations have removed the confusion around the nature of the environmental impact assessment prescribed for hydraulic fracturing by aligning the provisions with the National Environmental Management Act (NEMA). Whereas the draft regulations prescribed a distinct environmental assessment process, subject to specific procedures and requirements, the final regulations have deleted these provisions and instead reiterate the requirement that a person undertaking exploration and production activities must hold a valid environmental authorisation in terms of NEMA. Accordingly, the environmental assessment process prescribed in the Environmental Impact Assessment Regulations, 2014 must be followed.
The regulations have also refined the section on water monitoring. The applicant or holder is now required to appoint an independent specialist to conduct a hydrocensus to identify potentially affected water resources. The draft regulations provided that the census had to be conducted on at least a one kilometre radius from the furthest point of potential horizontal drilling. The promulgated regulations have extended the radius to three kilometres. Applicants are also required to prepare and submit a water resource monitoring programme with the water use licence application to the department responsible for water affairs.
Hydraulic fracturing fluid composition – things to look out for
A potentially contentious aspect that has not been modified in the final version of the regulations relates to disclosure of the composition of hydraulic fracturing fluids. Right holders are required to disclose a range of information about the fluids to be used including the trade name of each additive and its general purpose in the fracturing process. In addition, right holders must disclose details of each chemical that is intentionally added to the base fluid, including the chemical, the chemical abstracts service number and the actual concentration.
There is an obvious tension between environmental and intellectual property interests where hydraulic fracturing fluid is concerned. In order to ensure environmentally responsible operations, the authorities must be informed of any potentially toxic chemicals to be used. However, in many cases these fluids are patented or considered trade secrets and their composition is not made known to the right holder by the supplier. It remains to be seen how these conflicts will be resolved in the South African context.
The requirement for the relevant government agency to be present at a myriad of exploration activities remains. As a result, government will have to increase its capacity to fulfil this function.