SUBMISSION BY WEBBER WENTZEL
BOWENS TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY ON THE MINERAL AND
PETROLEUM RESOURCES DEVELOPMENT AMENDMENT BILL, 2007
REF: M BOOYSEN
SUBMISSION 2: TECHNICAL
MINING AND ENVIRONMENTAL ISSUES
24 MAY 2007
Webber Wentzel
Bowens is a leading South African law firm with a significant practice in
Natural Resources and Environmental Law. The Natural Resources and Environmental Law
Unit of Webber Wentzel Bowens Attorneys is grateful for the opportunity to make
a written submission to the Portfolio Committee on Minerals and Energy ("the PC") on particular aspects of the
Mineral and Petroleum Resources Development Amendment Bill ("the Bill") which we believe
deserve closer attention. Our submission
is our own and is not sponsored by any of our clients.
The Regulatory
Law Unit of our firm will make aseparate submission to the PC with regards to
international mining industry best practice, security of tenure to holders of
OP26 prospecting sub-leases in the oil and gas exploration and production industry
and comments which relate to policy and regulatory matters and specific aspects
of the Bill. This submission will focus
on technical Mining and Environmental Law issues of the Bill.
As these
submissions were compiled under strict time constraints, we would like to
supplement our submission in due course.
We respectfully
request the PC to afford us the opportunity to participate in the PC hearings
to be held on 29 and
An advertisement
published on
2.1
The
Bill is in our respectful submission, a very important piece of legislation
which has the potential to improve and to amend the Mineral and Petroleum
Resources Development Act No 28 of 2002 ("MPRD Act") in order to facilitate the implementation of the
new legal dispensation relating to the natural resources of our country.
The MPRD Act and its implementation is of vital
importance to ensure that our nation's natural resources are developed, and
that economic growth is promoted, for the benefit of all South Africans in
particular the poorest of the poor. In the light of the aforesaid we cannot
over-emphasise the importance of the Bill to achieve the fundamental objectives
of the MPRD Act.
2.2
However
we must point out that the process that has been followed in respect of the
Bill is inadequate. We respectfully submit that the various stakeholders have
not had time to consider and make meaningful representations on the Bill and
its consequences.
2.3
It is
also clear from the memorandum accompanying the Bill that only selected
Government Departments had been consulted. No public participation process
which involved the Mining Industry, the legal profession, organised labour,
financial institutions or Black Empowered entities and various other stakeholders
have been followed.
2.4
We
further respectfully submit that the amendments proposed by the Bill are not
critically urgent, but that it would be in everybody's best interest to deal
with amendments to the MPRD Act in a proper manner.
2.5
Adequate
time is required by all stakeholders, to consider the proposed amendments
properly, to make recommendations and for the PC to apply its mind properly to
the proposals and omissions in the Bill.
2.6
We recommend
an extension of time for all interested and affected parties to make
representations in order to ensure an inclusive process with the best possible
results.
Through our
submission we aim to:
3.1
analyse
the environmental law aspects of the Bill; and
3.2
point
out certain technical problems arising from the Mineral and Petroleum Resources
Development Act, 2002 ("the MPRDA")
which the Bill fails to address. These
issues are stumbling blocks which, in many respects hamper or frustrate
achieving the laudable objects of the MPRD Act and growing the South African
natural resources industry in a time when this is crucial for the growth and
development of our country. We ought not
to forego the opportunity to resolve these issues to the benefit of our
country, the natural resources industry and all its people, particularly historically
disadvantaged South Africans.
4.
Environmental law amendments
4.1
While most of the proposed amendments relating to the environment are
acceptable, some of the proposed amendments do, however, require clarification.
4.2
The Bill seeks to harmonise environmental impact assessment requirements
with national norms and standards set out in the National Environmental Management Act 1998
("NEMA") which is an
express requirement of the MPRD Act. We
respectfully submit that this harmonisation process is incomplete.
4.3
The basic assessment process provided by
Regulations 22 and 56 of the NEMA Regulations of 2006 require that notification
and consultation be done in respect of "all interested and affected parties." In contrast, the proposed amendments of
section 16 and section 27 of the MPRDA require notification and consultation with
only "the land owner or lawful
occupier". It is foreseeable
that the restriction of the duty to notify and consult with only "the land owner or lawful occupier"
does not recognise the rights and interests of other interested and affected
parties, which is expressly required by NEMA.
4.4.1
The proposed amendment to the definition of "environmental authorisation" in section 1(e) of the
MPRDA, read together with the proposed
amendment to section 39 of the MPRDA, seeks to give the Minister,
through the Department of Minerals and Energy ("DME") control over the environmental processes relating to
mining. In pursuance thereof, the Minister is given responsibility for issuing
environmental authorisation.
4.4.2
We respectfully submit that, in terms of environmental best practice, the
Minister is not the appropriate authority to issue such an authorisation. The
Minister's primary interest is to promote mining whereas the environmental
provisions of the MPRDA are supposed to serve the interests of environmental
protection.
4.4.3
It is foreseeable that "conflicts of interest" might arise
between the DME and the Department of Environmental Affairs and Tourism ("DEAT"). Such a conflict is likely to frustrate the laudable
objects of the MPRD Act relating to development of the nation's natural
resources in a sustainable manner while protecting the environment.
4.4.4
In the alternative we propose that provision be made whereby the DME is
required to follow the recommendations of the DEAT in relation to the decision
to grant, or refuse to grant the proposed environmental authorization. Section 39 (4) of the MPRD Act merely
requires the Minister to consider the comments of other departments
charged with the administration of any law which relates to matters affecting
the environment.
The proposed section 39(3) provides that the Minister
must prescribe (by regulation) requirements and time frames for the
consideration and decision-making on the entire process of applying for, the
supporting information to be submitted and related matters to obtain an
environmental authorisation.
The section does not stipulate the criteria which the
Minister must take into account and/or the basis on which a decision to grant
or refuse to grant an environmental authorization, save for the provisions of
section 39(4)(b) which requires consideration only of recommendations by
the Regional Mining Development and Environmental Committee and other
departments charged with the administration of any law which relates to matters
affecting the Environment.
We respectfully submit that regulating all these
matters by regulation is not appropriate and will effectively further increase
the Minister's discretion on environmental regulation in relation to mining.
5.1
The proposed amendment to sections 16(2) of the MPRD Act provides that
the Regional Manager must accept an application for a prospecting right, mining
right or mining permit if
"no other person holds a
prospecting right, mining right, mining permit or retention permit for any
mineral and on the same land".
5.2
Section 16(3) of the MPRDA expressly provides that if the application
does not comply with the requirements of section 16(1) (including the absence
of any right for any mineral having been granted on the same land) the Regional
Manager must reject the application.
5.3
We note that this amendment has been applied to all sections [16(2),
22(2) and 27(3)(b)] of the MPRDA dealing with the conditions of acceptance of
any application for prospecting rights, mining rights and mining permits.
5.4
Second, the Bill effectively prevents the possibility of conducting
different activities (i.e. reconnaissance, prospecting or mining, ) on the same
land for different minerals.
5.5
The practical consequences of these proposed amendments should not be
underestimated as this may prevent, for example, an applicant from obtaining a
prospecting right and from conducting prospecting on an area where it is known
that substantive gold, platinum or other strategic mineral reserves exist or
might exist, as long as another entity already holds a mining right for sand,
granite or similar minerals occurring on the surface of the same land, for a 30
year period.
5.6
We respectfully submit that these amendments will result in the untoward
sterilisation of South Africa's mineral resources in a manner inconsistent with
the express objects of the MPRDA to promote economic growth and mineral and
petroleum resources development as well as the creditable purpose of promoting
investment in mining, with which we respectfully agree.
5.7
Further, we respectfully submit that it is necessary to clarify the
wording of the proposed amendment of subsection 4 paragraph (a).
5.8
The suggested clarification applies to the same proposed amendment of section
22 (grant of a mining right) and section 27 (grant of a mining permit) as
described in paragraph 5.3 above.
For purposes of grammatical and interpretive clarity, we submit that
section 16(4)(a) and section 27(5)(a) should be amended to read as follows:
"to apply for an
environmental authorisation, and lodge within 60 days from the date of
notification a basic assessment report and a standard environmental management
plan; and".
Our view is that is advisable that notification and
consultation should be done in respect of all interested and affected parties,
and not just in respect of the owner or occupier, to avoid disparity between
the requirements of NEMA and that of the MPRD Act. We recommend that Section
16(4) should therefore be amended to read:
"to notify in writing and
consult with the land owner or lawful occupier and other interested and
affected parties, and to include the result of this consultation in the
basic assessment report."
We welcome the proposed addition of subsection 8. We respectfully submit
that in order to avoid disputes with the authorities and to ensure that
amendments are acceptable, an amendment of the authorisation or plan must be
approved by the Minister. We submit that the subsection be amended to read:
"The holder of a
prospecting right, mining right, retention permit or mining permit operating
within an area with a cumulative impact must, subject to the approval of the
Minister, amend the environmental authorisation and the standard
environmental management plan or environmental management plan accordingly or must
submit a closure plan which is aligned with closure strategies for such areas
as published by the Minister from time to time by notice in the Gazette."
Our experience in legal practice in the Natural
Resources Industry reveals that there is a lack of openness and transparency in
the decision making process of the DME and that it is difficult and time
consuming to obtain information from the DME in terms of the provisions of the
Promotion of Access to Information Act. We respectfully submit that interested and
affected parties in respect of all decisions taken by the DME and the Minister
ought to have access to the factors considered by the Minister in arriving at
such decisions. Of particular relevance
is the provisions of section 39(4)(b), the fact that the Minister must consider
any recommendation by the Regional Mining Development and Environmental
Committee and the comments of any State Department charged with the
administration of any law which relates to matters affecting the environment. Interested and affected parties are not privy
to these recommendations. These facts do not support the requirement of section
6(1) of the MPRD Act in terms of which all decisions taken in terms thereof
must be taken in accordance with the principles of lawfulness, reasonableness
and procedural fairness. We would therefore recommend that section 39(4)(b) be
expanded to provide that the Minister be obliged to make the recommendations of
the Regional Mining Development and Environmental Committee and the comments of
any State Department charged with the administration of any law which relates
to matters affecting the environment, on application be made available to
interested and affected parties.
10.1
In terms of the proposed new section 41A, financial provision for the
cost of environmental management through the use of a trust fund, must be solely in respect of the right or permit
granted.
10.2
We respectfully submit that this requirement (of a dedicated trust fund
for each right or permit granted) will necessarily give rise to a proliferation
of trust funds. This will be impractical, unnecessarily costly and create an
unbearable administrative burden on the administration of multiple trust funds.
11.1
Item 9 of Schedule II provides for the continuation of reservations,
permissions and rights granted under the legislation which preceded the
Minerals Act. Item 9 relates to rights to use the surface of land such as surface
right permits, industrial stands and similar rights granted in terms of the
Precious and Base Metals Act, 1908 and the Mining Right Act Number 20 of 1967.
11.2
Item 9(2) provides that the holder of such rights must register such
rights in the Mineral and Petroleum Titles Office within one year from the date
on which the MPRD Act took effect, i.e. before 30 April 2005. The item does not
regulate the consequences of a failure to comply with item 9(2).
11.3
There are numerous holders of such surface rights who were not aware of
the requirement to register such rights before 30 April 2005. Officials in the
Mineral and Petroleum Titles Registration Office refuse to register transfers
of these surface rights unless they have been registered in terms of item 9(2).
The aforesaid leads to sterilisation of these rights which impacts
detrimentally on the holders' ability to trade with and/or transfer such
surface rights. No apparent reason exists why section 9(2) was inserted in
Schedule II as all the relevant rights were previously registered in the Mining
Titles Office. Neither is there any
apparent reason for the short time (one year) allowed to register (or
re-register if that was the intention) such rights. We were informed that the
Department of Minerals and Energy seeked legal opinion from the State Law
Advisors on the effect of non-compliance with item 9(2) but currently the
situation remain unresolved. We respectfully submit that legislative amendment
is required to address this issue.
11.4
The most practical way to achieve this would, in our respectful
submission, be to allow the designated official in the Mineral and Petroleum
Titles Registration Office a discretion to register the relevant rights
subsequent to 30 April 2005 on application where such right was not registered
before that date.
12.1
Item 11 of Schedule II provides for the continuation to accrue, of any existing
consideration, contractual royalty or future consideration ("Royalties") which would cease to
be payable by virtue of the cessation to exist of old order rights in terms of
Schedule II. Two categories of
recipients of such Royalties' right to Royalties are preserved by item 11
namely:
12.1.1
individuals (under certain circumstances); and
12.1.2
communities (subject to certain conditions).
12.2
Contractual rights to Royalties which accrue to the State and various
organs of State are not so preserved. Table 3 to the Taxation Laws Amendment Act
Number 16 of 2004 does provide for the continuation of the obligation of
lease, royalty or similar payments to the State if the holder of a
mining right, production right or mining permit or prospecting right with a
permission to remove and dispose of minerals acquired that right upon
conversion of an old order right or OP26 right and was immediately before that
conversion required to make lease, royalty or similar payment. However, we respectfully submit that Table 3
has two shortcomings namely:
12.2.1
the amounts of the "lease, royalty
or similar payments" are not the amounts contractually agreed upon
between the State (or an organ of State) and the holder of the right, but an
amount which the Minister of Finance must determine in consultation with the
Minister of Minerals and Energy according to the same practices, formulae and
procedures which applied before conversion [paragraph (2)(a)]; and
12.2.2
the provisions of Table 3 will cease to apply on 1 May 2009.
12.3
The provisions of Table 3 regulate adequately lease, royalty or similar
payments which accrue to the State as such. However, we submit that these provisions are
inadequate to regulate lease, royalty or similar payments which accrue to various
organs of the State which resulted from specific contractual negotiations and
agreements and with pre-determined formulae to determine the amounts so
payable. Those organs of State will be
severely prejudiced if the contractual lease, royalty or similar payments cease
to be payable on 1 May 2009. We are
aware of instances where organs of the State have granted valuable
consideration in exchange for a contractual right to receive Royalty payments.
12.4
Recommendation
Our respectful submission is that these inequities
could be resolved by expanding the provisions of item 11 of Schedule II to
provide for continued contractual lease, royalty and other payments which
accrued to organs of State and which are not paid into the State Revenue Fund
but directly to such organs of State.
13.1
Our practical experience in natural resource legal practice is that a
particular issue which deters investment and gives rise to inequitable results,
is the fact that the MPRDA does not provide for acquiring prospecting, mining
exploration and production rights, upon conversion in terms of Schedule II in undivided shares. This arises from the fact that, in terms of
the Minerals Act, prospecting permits were issued to the holder of an undivided
share of mineral rights, without reflecting the undivided share.
13.2
The transitional provisions of Schedule II give rise to uncertainty on
the question whether the holder of an undivided share in an old order right, when
converted, will acquire an undivided share only, or a full share of the
converted right. This could give rise to
the illogical result that a person who held 10% of an old order right can
convert his right to a full new order right to the exclusion of all other holders
of undivided shares in the same old order right.
13.3
This uncertainty may lead to further unintended consequences. There may be various reasons why a number of
investors in a natural resource project, do not wish to establish a new company
but would prefer to form an unincorporated joint venture to pursue the project. In these circumstances, the investors would
wish to acquire the prospecting or mining right in undivided shares. The MPRD
Amendment Bill provides the ideal opportunity to address this issue by amending
the Act to provide for multiple holders having a share in a prospecting, mining
exploration or production right.
14.1
The Bill provides the ideal opportunity to address various matters which
are considered to be shortcomings or opportunities to improve the
implementation of the MPRD Act.
14.2
We respectfully submit that inadequate public participation process have
been conducted in respect of the Bill. We
further submit that inadequate time was allowed for proper consideration of the
proposals set out in the Bill. We recommend that extension of time be granted
and that all shareholders be granted proper opportunity to consider and to make
representations on the Bill.
14.3
We reiterate that these submissions are being submitted in an attempt to
promote the objectives of the MPRD Act, in an attempt to participate
constructively in the legislative process to the benefit of our country and all
its people and with the objective of improving the natural resource laws of our
country. We would appreciate an
opportunity to make verbal representations to the PC.
THE NATURAL RESOURCES AND ENVIRONMENTAL LAW UNIT
WEBBER WENTZEL BOWENS