Petroleum Pipelines Bill & Mining Titles Registration Amendment Bill: Response from Department of Minerals & Energy to public su

Meeting report

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MINERALS AND ENERGY PORTFOLIO COMMITTEE
11 June 2003
MINING TITLES REGISTRATION AMENDMENT BILL & PETROLEUM PIPELINES BILL: RESPONSES BY THE DEPARTMENT OF MINERALS AND ENERGY TO PUBLIC SUBMISSIONS

Chairperson: Mr M Goniwe (ANC)

Documents handed out:
Petroleum Pipelines Bill: Feedback from the Department of Minerals and Energy (PowerPoint Presentation)
Mining Titles Registration Amendment Bill: Feedback from the Department of Minerals and Energy (see Appendix)

SUMMARY
Regarding concerns expressed by inland refineries about the removal of the "Natref in Durban' subsidy, the Department confirmed that this subsidy would fall away. The Bill's intention was to move away from apartheid economics and hidden subsidies towards normal market economics and rational, transparent regulation.

Concerns expressed by industry stakeholders about the implications of the Mining Titles Registration Amendment Bill for commercial transactions on old-order rights during the transition period following the implementation of the Bill were allayed. Where possible, industry representatives and the Department had reached agreement on the wording of clauses that needed to more clearly spell out the Bill's intentions on this and related issues.

MINUTES
Petroleum Pipelines Bill
Dr R Crompton, Deputy Director-General, Department of Minerals and Energy, presented the Department's perspective on public submissions on the Petroleum Pipelines Bill. A detailed document articulating the Department's response to each submission would follow in due course.

Dr Crompton expressed the Department's appreciation of the many constructive views, comments, and recommendations presented by all stakeholders. However, the difference between legislation (a general policy framework) and regulation (explicit instructions and guidelines) needed to be born in mind when reviewing this input and its implications for the Bill. He especially thanked the South African Petroleum Industries Association (SAPIA), African Minerals and Energy Forum (AMEF) and the Competition Commission for endorsing the Department's use of the 'common carrier' principle in the Bill.

He noted that the Bill would not change the ownership of the pipeline network.

Concerns raised regarding various externalities associated with the pipeline network fell under the jurisdiction of other ministries and the relevant legislation. While the Department would regulate the economic functions of pipelines through the Bill, other departments would deal with issues specific to their mandates.

Dr Crompton acknowledged the significance of third party activities and encroachment on pipelines and the significance of this issue for local authorities, especially in respect of informal settlements. The Department would continue to explore ways of addressing this matter.

Regarding the controversy surrounding the current subsidy for inland refineries, Dr Crompton said that the Bill sought to move away from the distortions of apartheid economics and hidden subsidies towards normal market economics and rational, transparent regulation. Submissions calling for the subsidy to remain in force had not convincingly argued their need for it. Tough behind-the-scenes negotiations between oil companies over the impending end to the Sasol supply agreement were related to this. Through the proposed regulatory authority, the Bill would guarantee a supply of sufficient crude oil to meet Natref's current refining capacity at commercial rates for as long as Natref continued to operate. If the parties concerned could prove their case for continuing the subsidy, they should approach Government whose task would then be to decide who should pay for it. To date, consumers had done so.

Dr Crompton then highlighted changes the Department had made to key definitions in the Bill and, particularly, those for the terms 'petroleum products', 'storage' and 'petroleum pipelines.

He emphasised the Department's commitment to multi-product pipelines, reiterating that crude oil supply to Natref would remain at its current level. The 'common carrier' principle would apply to pipelines and loading facilities, but would be an option for storage facilities.

The Bill would provide guidance on the methodology for setting tariffs, but would leave the specifics of this to the proposed regulatory authority.

Discussion
Mr J Nash (ANC) asked how gas pipelines would be regulated to allow for third party access if they did not fall under the auspices of the Bill.

Dr Crompton replied that the Gas Act regulated gas pipelines.

Professor I Mohamed (ANC) enquired how the Department planned to guarantee crude oil supply to the inland refinery and asked how other countries facing similar challenges had responded. He also wondered if a mandated supply of crude oil to Natref could also be considered a market disruption.

Dr Crompton explained that, in terms of the Bill, the proposed regulator would be required to ensure that the licences concerned guaranteed an uninterrupted supply of crude oil to Natref. A market distortion would result if supplying crude oil to Natref disrupted the supply of other products transported by the pipelines in terms of the 'common carrier' principle. The regulator would need to maintain a sensitive balance between crude oil and petroleum product.

Mr I Davidson (DA) endorsed the Bill's provisions for dismantling apartheid economics in the industry. He wondered why the Bill did not make the multiple-product use of pipelines mandatory. Regarding the subsidy issue, he said that the Committee could not adequately engage with the Department on this without figures to substantiate each side of the argument and sight of the contracts concerned. Would Natref face closure if the subsidy was removed?

Dr Crompton replied that Clause 20 (1) (d) would be amended to reflect commitments to multiple-product pipeline use.

Regarding clause 20 (1) (f), he suggested that the Committee should focus on the principle rather than the technical details of the supply contracts concerned. Tariffs had not, as yet, been set and there might not, in fact, be any need for a subsidy. If Natref faced closure as a result of the subsidy falling away, this would be an operational issue. Government would decide whether or not to intervene on that basis.

Mr Nash asked why the inland refinery needed a guaranteed supply of crude oil when it had on-site storage facilities as well as a facility in Durban. Surely these guaranteed an uninterrupted supply?

Dr Crompton replied that the extent to which Natref's crude oil storage facilities could themselves be drawn upon to guarantee an uninterrupted supply of crude oil to the refinery would depend on how they were managed. On this basis, licences issued by the proposed new regulator would need to make provision for sufficient capacity for crude oil transport in common carrier pipelines.

The Chair observed that a 'hands-off' approach to issues not falling within the ambit of the Department's line function might have undesirable consequences. Other departments concerned needed to be alerted to these issues. He asked Dr Crompton to comment on an assertion in the Tosaco submission that removing the subsidy for inland refineries could impact negatively on the black economic empowerment (BEE) investment underpinning that company.

Dr Crompton replied that the Department regularly engaged with other departments on industry-related specifics. He suggested that the Committee might want to refer its concerns in this regard to the relevant portfolio committees for their input.

Regarding the impact of removing the subsidy on affected inland BEE initiatives such as Tosaco, Dr Crompton suggested that coastal BEE initiatives might present a very different argument. The Department did not want to involve itself in picking winners among BEE initiatives in the industry. Since there was no basis for the subsidy in law, Tosaco should not have assumed that it would remain in force and should have factored this possibility into its risk assessment.

The Chair observed that formal consideration of the Bill might need to be deferred until after the recess.

Mr Nash again asked if the Gas Act dealt with the issue of third party access to gas pipelines and was told that regulations stemming from the Act would do so.

Mining Titles Registration Amendment Bill
Ms S Bopope-Dlomo said that the Department had met with industry stakeholders the previous day to identify common cause and, where possible, agree on changes to the wording of the Bill. The Minerals and Petroleum Resources Development Act (MPRDA) addressed the issue of commercial transactions on old-order rights during the transitional phase following implementation of the Bill. However, the Bill's intentions in this regard would now be spelled out. These were that commercial transactions in respect of old-order rights would be able to continue during the transition period. In this regard, the Bill had caused unnecessary anxiety among industry stakeholders whose concerns had now, in large part, been addressed.

Regarding a concern that a mineral right could not be registered in the name of both spouses, the Bill had included this provision in keeping with the new laws of succession based on the principle of mineral resources being a national patrimony. The relevant clauses of the Bill would be amended to clarify its intention.

Agreement with industry had been reached on how Clauses 12, 52 and 53 of the Bill should read. Concerns raised in the submissions had been based on interpretation, and the changes agreed were not material.

Ms Bopape-Dlomo said that, regarding concerns expressed about the negative implications of the Bill for BEE partnerships, it was the intention of the Bill to reinforce the principles underpinning the MPRDA. These sought to facilitate and promote ownership and control of mining ventures by BEE groups, hence the Bill's very specific options in respect of partnerships between legal entities. The Bill also sought to avoid the administrative burden of dealing with partnerships that were not legal entities.

Regarding concerns raised by De Beers regarding the lease of state interests and surface rights, it was the Department's view that there was no need to make special provision for these types of rights in the Bill.

Ms Bopape-Dlomo said that concerns regarding old records were unfounded and were addressed by the Promotion of Access to Information Act. The powers of the Director General could be re-vested in the Minister, although this would lengthen the administrative processes concerned.

Discussion
Mr E Lucas (IFP) expressed concern about the Bill's implications for mineral rights applications by family trusts and business entities other than companies. Perhaps the Bill was overly restrictive in this regard?

Ms Bopape-Dlomo reiterated the Department's preference for dealing with legal entities in respect of access to mineral rights, especially because only legal entities can sue or be sued. A trust was a legal entity but a co-operative was not.

Mr S Mongwaketse (ANC) asked whether, in the absence of the necessary title deed, community co-operatives and trusts and tribal authorities could secure mineral rights, apply for new-order rights or transfer old-order rights. He was told that permission to mine or prospect could not be granted without the consent of the land owner concerned.

Ms F Mathibela (ANC) asked for clarity on the issue of stolen and damaged records and was told that everything possible was done to prevent this. However, the fact that these records had to be accessible to the general public did tend to make them vulnerable to abuse.

The Chair observed that the Bill might be perceived to be promoting an individualistic approach to ownership. How, in the context of BEE, could South Africa legitimise the co-operative ownership of assets since group ownership was often the only practical and affordable BEE option available?

Ms Bopape-Dlomo replied that the Bill had needed to take into account the legal realities governing ownership and, particularly, the financing of new ventures. As legal entities, partnerships did not limit the number of people involved. Close corporations were also an option. These mechanisms for ownership tended to offer greater protection for individuals seeking access to the industry who were not necessarily familiar with the legal complexities entailed.

In the absence of an updated version of the Bill, it was agreed to postpone formal line-by-line deliberations on its provisions until the following week.

The meeting was adjourned.

APPENDIX

Mining Titles Registration Amendment Bill

DME Response to Public Hearings to Minerals and Energy Portfolio Committee
11 June 2003

Registered real rights

· Defined as a limited real right in MPRDA and therefore guaranteed in law and registerable
· Able to continue to deal with rights granted new Act e.g. transfer, cede, bond, etc
· Willing to insert proposed clause with amendment
Registration of rights into this Act shall constitute real rights binding on third parties

Not part of personal property

· Concern - not registerable in the name of both spouses
· Principle - not form part of the joint and not passable into law's of succession based on principle of
mineral resources being a national patrimony
· Change clause to clarify the intention

Clause 12, 52 and 53

· Agreed on how clauses should read
· Clause 12 and 52 amended and 53 to stay same
· On above issues it is a question of interpretation and the changes are not material

Diagrams and plans

· Provided for in the regulations
· Agreed to include an enabling provision in the body of the Act in light of discussions with the SG's
Office
· Diagrams only required for mining rights when dealing with new applications but SG to continue
during the transitional period to deal with old diagrams include amending and cancelling them

Partnerships

· Concern - limits options on legal entities
· DME mainly concerned about the administrative burden in light of the nature of the said legal entity
· On co-operatives the fact, that they are not provided for in our law as a legal entity becomes an
issue since they have no legal standing

Lease of state interest, permissions and surface right permits

· Concern - not specifically provided for
· Response - clause 9 of the schedule 2 to the MPRDA covers them and so does clause 1j, 5c,d,e
and t of the MTRAB
· The MTRAB is generic in nature since these rights due to their status in law as valid titles had to be
perpetuated 'to give security of tenure

Records and access to the office

· Concern was old records will be destroyed unconditionally and agreed reference de made to
the Regulations.
· the Regulations provide for the Dir-Gen to with the Dir of Archives before the destruction of any
records.
· Concern was that the Dir-Gen may (and not shall) permit access to the records
· It was further agreed to make the permission of the Dir-Gen subject to clause 6(1)(e)