Technical Regulations for extraction of shale gas through hydraulic fracturing: Department of Mineral Resources briefing

Meeting report

Department of Mineral Resources on Technical Regulations for Extraction of Shale Gas through Hydraulic Fracturing
Mr Thubedi Ramontja, Director-General, DMR, told the Committee that an inter-departmental committee had developed draft technical regulations to govern exploration and exploitation of shale gas through hydraulic fracturing. Gaps in the current regulatory framework were identified. The draft regulations were published for public comments in October 2013. The DMR was consulting affected communities. Regulations were meant to augment the existing legislative framework.
 

It was highlighted that the key objective of the regulation is to incorporate well construction and integrity standards and practices into the regulatory framework governing the exploration and production of oil and gas. Hence, some aspects of the draft regulation will not apply in terms of hydraulic fracturing but generally to issues relating to petroleum exploration..

Shale gas was extracted from shale, a finely grained rock, through the hydraulic fracturing process. The shale layer was overlain by tight geological formations that could act as a barrier to protect ground water. Current well construction and integrity practices ensured the protection of underground sources of drinking water. The geology of the area had to be understood to determine appropriate protective regulatory measures. Ground water was protected by cementing a steel casing in place. Salient provisions of the regulations included baseline water quality assessment by an independent specialist for a year prior to operations; hydraulic fracturing fluid disclosure; induced seismicity assessment, and fluids disposal. There were regulations to protect astronomy activities, as shale gas exploration interfaced with the Square Kilometre Array (SKA) telescope project. All phases of operations were to be monitored.

Draft regulations once finalised would result in a regulatory framework that ensured safe extraction of shale gas which would significantly boost the South African economy and have positive effects on the Gross Domestic Product.

Discussion
Mr J Lorrimer (DA) asked when a final version of the regulations would be available. There had been a significant change from the draft.

Mr Lorrimer asked if the Department of Agriculture (DOA) would be represented on the monitoring committee.

Mr Lorrimer referred to bodies like the Council for Scientific and Industrial Research (CSIR) and the Institute for Geoscience. Was there was a final list of such entities. The shale gas project was controversial, and it would enhance credibility if there was involvement by civil society, including the universities.

Mr Lorrimer opined that transparency and credibility were important. Who would have the final decision if the Departments of Agriculture or the Environment had objections?

Mr Lorrimer said that there was reference to a monitoring committee and also to a monitoring team.  How inclusive would the team be, and how many people would be on it. There had to be a comprehensive team who would be there all the time, especially during the initial drilling.

Mr H Schmidt (DA) noted that Australia was partner to South Africa in the SKA telescope project- was their views considered? Were there modalities for objective supervision by the monitoring group, and continuous monitoring by an independent group?

Mr Ramontja replied that SKA was an international project, and Australia was aware of shale gas developments. The Department of Science and Technology (DST) was approached. There would be a buffer zone around the SKA telescope.

Mr Schmidt asked about the views of other departments and affected provinces and whether their views were considered.

Mr Ramontja replied that a lot of debate among key departments had gone into the regulations. Discussions with the Department of Water Affairs had led to the proposal of a buffer zone for water in a bid to protect the wells. There was cooperation with other departments, as well as checks and balances

Ms M Mafolo (ANC) asked how long the application process would take.

Mr Ramontja replied that inputs were currently being considered and information would be incorporated into a draft in the coming month.

Ms Mafolo noted that water was scarce in South Africa and polluted water was a threat. Who would take responsibility if water was contaminated, and how would communities be protected against possible pollution.

Mr M Matlala (ANC) asked if the Department had consulted communities.

Mr Matlala asked that the shale gas extraction process be unpacked.

Mr Ramontja responded that gas was trapped in fine grained rock known as shale. There was coarse rock below it and finer rock above. Gas was trapped in the fine particle zone. But it could not simply be released. The rock had to be fractured to release the gas.

Mr J Esterhuizen (IFP) noted that there was potential, especially given the fact that South Africa belonged to the same geocomplex as Mozambique. However, it seemed that estimates were over-inflated. It had been said that there were 400 trillion cubic feet available, but that figure was over-inflated. The question was whether it justified the costs involved.

Mr Ramontja replied that there had been an initial estimate of 480 trillion cubic feet, based on detailed exploration through drilling. But even 30 trillion cubic feet would be enough. Mosgas was a mere one trillion.  There was still uncertainty about the amount of gas and some estimates were more conservative but it would change the economy. Growth potentials had to be considered-  there were claims that shale gas had contributed largely to the recovery of the United States economy.

Mr Esterhuizen remarked that the 480 trillion cubic feet was an over-inflated figure. A UCT Professor had estimated 40 trillion cubic feet and he again questioned asked if costs were justified. It was not a short term solution to the energy crisis.

Mr Esterhuizen asked about precautions-there had been problems in Limpopo. The Karoo environment could be affected.

Mr Nkosi Z Mandela (ANC) referred to the statement that shale gas would be a game changer and asked how many jobs it would create. It would not be worthwhile to pursue the project for a few hundred jobs. Potential for job creation had to be considered, as well as the impact on the economy.

Mr Ramontja replied that it would be comparable to Mosgas, which not only created jobs directly but had a huge multiplier effect. It would directly and indirectly bring changes to the economy.

Ms Mafolo returned to the threat of polluted water. Clean drinking water was scarce; how certain was the DMR that the environment and water would be protected.

Mr Ramontja replied that a concern with water pollution was at the heart of the regulations. There would be intensive monitoring. There had to be baseline information about the exact conditions of an area before projects started; operators had to inform on the quality of water. The Department of Water Affairs could stop the process if there was a threat to water. Casings protected against water pollution- it was not a new technology, it had been in use for 20 years and had been perfected over time.

Ms Mafolo asked if operators would source from the sea or underground water.

Mr Ramontja replied that operators had to disclose where the source of water was. If the DMR was not happy it would not be allowed. If it was sea water, environmental issues would be investigated. Chemicals used in fracturing would have to be disclosed.

Mr Esterhuizen remarked that the fracking principle was to force water under high pressure into solid rock to free gas. South Africa was the thirty fourth driest country in the world. 20 million litres of water was used in each operation. Water resources would be affected. Sea water was uneconomical for fracking. In Limpopo contamination was observed three kilometres away from operations.

Ms Mafolo asked if there would be interdepartmental and interministerial teams involved in the project. Concerns of other departments had to be considered. Environmental issues had to be identified.
 
Mr Ramontja replied that key departments would be engaged through the cluster. Other departments and universities would be involved later. There would be interaction and consultation. The DMR would not act unilaterally as government, Unisa and the Free State University would be involved. It was an opportunity for South Africa- there were many young people in research and engineering who would benefit. There would be engineering partnerships with the universities, which would create opportunities for advanced postgraduate study.

Mr Ramontja continued that the environment would not be affected negatively if there was a responsible process, with regulatory standards followed.

Ms Mafolo asked about implications for the energy sector. How many power stations would be built for electricity and what was the direct impact on electricity shortages.

Mr Ramontja replied that there was no estimate as yet. Electricity issues were the concern of the Department of Energy.

Ms Mafolo referred to earthquakes and tremors in the North West and Gauteng; was there the possibility that it would get worse in the region.

Mr Ramontja replied that earthquakes and tremors in the area were monitored. From the outset each report showed evidence of tremors and this was being monitored. If risks increased, standards of casings would be revisited.

Mr Lorimer asked if there would be a list of departments and organisation set, or whether the Minister would make the final decisions. It had to be known how often and closely monitoring teams would check operations.

Mr Ramontja replied that process regulation would be mitigated by science and engineering. Casings would be brought on par with the rest of the world. The monitoring team would protect integrity. If standards were not in place the operators would be challenged. Standards would be increased where needed. There would be close scrutiny of processed applications.

Mr Ramontja added that the key departments on the monitoring team were those of water and environmental affairs. Other departments would be coopted in consultation with the Minister. Water Affairs had a critical monitoring role. Departments would be brought together in a forum.

The Chairperson remarked that it seemed to be a battle of science.

Mr Ramontja agreed. Contamination benchmarks would be set against other countries and implementation would be effective. South African engineering had one of the best standards in the world. Integrity of wells would be protected- cement for casings would have to adhere to standards. The Water Act would be administered uproad and water from the sea would be assessed. Applications would have to show cash flow and profits, costs incurred, and revenue. Capacity had to be strengthened, through interaction with strong countries. The project would unfold in phases, and DMR officials would be trained. There would a three year initial exploratory phase involving all stakeholders.

The Chairperson remarked that there was no intended legislation for regulation. There was not much certainty. Public input had to be considered by 15 October. There had to be consultation with affected communities.

The Chairperson referred to hydraulic fracturing fluid disclosure (page 23). There was no prescription regarding what had to be disclosed.

The Chairperson remarked that the DMR were responsible for monitoring at the geological exploration level. The multiplicity of departments involved made monitoring more complex. The committee that dealt with pollution had to decide on the environmental impact. The problem was that shale gas mining was an envisaged process, it was not qualified.

Mr Lorrimer remarked that there was huge public interest in shale gas, and it was said to be a game changer. Things had to be done right from the outset. Coalbed methane was different from shale gas. Intersections were shallower. There was a greater risk of water contamination. The question was how to mitigate the risk. He asked when regulations could be viewed.

Mr Ramontja replied that each gas had its own challenges and the environment had to be understood to mitigate against it. Fracking would be governed by regulation standards to protect the environment.

Mr Esterhuizen remarked that energy was needed above all. Natural resources had to be protected, especially water. Sea water was uneconomical for fracking. The shale gas process used 20 million litres of water per operation. There was water injection drilling in a dry area. He referred to Nkosi Mandela’s question about job creation. It was an exaggeration to say that fracking had created 400000 jobs in the USA.

Mr Musa Mabusa, Deputy Director General: Policy and Promotion, replied that Qatar was a drier region than the Karoo, and yet fracking was practised there. Other fluids besides water were used. The applicant would have to state which fluid would be used, and demonstrate it to the Department. There was a considerable range of fluids that could be used.

Mr Ramontja added that the process of exploration would be long. There would be briefing on production issues.

Mr Esterhuizen remarked that the risk of contamination was even bigger when fluids other than water were used.

Mr Ramontja responded that various companies had stated that they had their own fluids. Those would have to be disclosed for interrogation about the impact it could have, by scientists. The DMR’s approach was to allow proposals and to hear them out, also taking into consideration economic impact.

The Chairperson said that the risk factor of fluids other than water had to be considered. He asked how much research had been done on the matter. Currently there was speculation but no certainty. The DMR had to return and submit with more certainty as the process unfolded. There had to be clarity on work done by the monitoring team and committee. He asked what interventions could made if the Portfolio Committee held different views on the matter. He asked if the process was presented to all committees involved, especially science and technology, water, and the environment.

Mr Ramontja responded that the DMR was fully prepared to return to the Committee. The current draft document was published in November 2013. Written inputs from stakeholders were incorporated in the document. The DMR would engage, once the document had been finalised.

Mr Lorrimer asked if there would be individual conditions for licence applications, or overall standards.

Mr Ramontja replied that there were general standards, but it had to be customised to the terrain for mitigation.

The Chairperson remarked that the Committee and the Department would have to work closely together. There was a lot of interest in the project, and it had to be handled responsibly. There was a need for follow up. It had to be known what was happening in other Portfolio Committees. There could be disagreement among committees, or there could be a situation where the Minerals Portfolio Committee would have to take decisions on behalf of the Environmental Affairs Portfolio Committee. A way had to be proposed in terms of the process. He asked if the DMR was aware of other processes, not handled by the Department.

Mr Ramontja responded that the project would be led by the DMR. Other committees would be consulted from then on. The PC could consider inviting other committees.

The Chairperson remarked that the process also resided in other departments. The DMR had to come back with more certainty about the process. He asked the DMR to respond to questions in writing.

Adoption of Committee Minutes
Minutes of 30 July were adopted as a true reflection of proceedings. Matters arising from the minutes were diamond trading and the Committee Programme. The Chairperson discussed the oversight week of 22 to 26 September with Members. The Wednesday of that week was Heritage Day. The Committee felt that Heritage Day events presented by the Department of Arts and Culture, had to be attended. It was resolved that the Committee would look at entities and illegal mining in Gauteng, and meet with traditional leaders. The Committee Programme would be available in the following week.

The Chairperson adjourned the meeting.