Gas Amendment Bill: DMRE briefings

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Mineral Resources and Energy

26 May 2021
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

Video: Portfolio Committee on Mineral Resources and Energy, 26 May 2021

The Committee met virtually to be briefed by the Department of Mineral Resources and Energy (DMRE) on the 2020 Gas Amendment Bill. The Department explained the Bill amended the 2001 Gas Act to:

-Promote the orderly development of the gas industry;

-Promote broad-based black economic empowerment;

-Provide for socio-economic and environmentally sustainable development;

-Provide for new development and changing technologies in the gas sector;

-Facilitate gas infrastructure development and investment; and

-Strengthen enforcement and improve compliance.

The current Gas Act was as it does not adequately empower NERSA to monitor and enforce compliance with the Act; has no timeline for carrying out some stipulated obligations; and does not incorporate recent technological developments in the gas sector. The current Act also excludes other gas sources (Landfill Gas and unconventional gas like Shale- gas and Coal Bed Methane(CBM);  new technologies for storage and transportation for Liquid Natural Gas (LNG); and Compressed Natural Gas (CNG), hence the need for amendment. The current Act also has no penalty for licensees for failure to comply with NERSA’s directives, does not enforce immediate cessation of unlicensed activities and enforce registration of unlicensed operation, is not clear on sanctions regarding a licensee’s failure or refusal to provide the required data / information to the Regulator or Department or the provision of incorrect or false data / information and has no timeline for carrying out some stipulated obligations.

Members were concerned that it took eight years to amend the Act and asked if this brought into question the Department’s capability to effectively manage the Bill and its implementation. Members also questioned the timeframes for implementation of the Bill.

The Department assured the Committee it always had the capability to manage this Bill and implementation would not be stalled.

Meeting report

The Chairperson welcomed everyone and said he was informed the Minister would not attend today’s meeting because of a Cabinet meeting.

He said the Committee’s task was to consider the Gas Amendment Bill and follow the proper channels to adopt the Bill.

DMRE Briefing on Gas Amendment Bill, 2020

Adv Thabo Mokoena, Director-General, Department of Mineral Resources and Energy (DMRE), said the DDG for Gas Regulation will lead the presentation on the Department’s behalf. He handed over to Ms Stella Mamogale to present to the Committee.

Ms Mamogale took the Committee through the presentation. She outlined the background to the Gas Act (2002) and the White Paper on Energy Policy (1998).

The objectives of the 2020 Gas Amendment Bill:

-Promote the orderly development of the gas industry;

-Promote broad-based black economic empowerment;

-Provide for socio-economic and environmentally sustainable development;

-Provide for new development and changing technologies in the gas sector;

-Facilitate gas infrastructure development and investment; and

-Strengthen enforcement and improve compliance.

The Committee was taken through the rationale of amending the Gas Act and the process followed.

Key Amendments

Section 4 Functions of Energy Regulator: The Energy Regulator has been empowered with mandate to regulate tariff and prices;

Section 22A Exclusivity: An applicant for a licence to construct a distribution facility within a geographic area/or sell gas in particular area may request the Energy Regulator to grant it exclusive right to this licence;

-Empower the Minister to prescribe additional principles applicable to an application for exclusivity;

-Licensee granted exclusivity must be bound to an Infrastructure or Market Development Plan for the area of exclusivity;

-Energy Regulator must undertake an annual review of this plan;

-Energy Regulator may partially or completely withdraw exclusivity to the extent that licensee has not met the goals stated in the Plan

Section 22B - Regulation of tariff and maximum prices:

The maximum price set by the Energy Regulator must enable the licensee to:

-recover all efficient and prudent investment and operational costs; and

-make profit or add trading margin commensurate with the risk.

The tariff must enable the licensee to:

- Recover investment;

-Recover its prudently and efficiently incurred cost for operating; and

-Make a profit commensurate with the risk.

Section 26: Compliance Notice:

-Empowers the Energy Regulator to issue compliance notice to any person who among other things, fails to comply with the Provision of the Act, and

-To impose administrative fines. 

Section 28A: Gas Master Plan:

-Empowers the Minister to compile an Integrated Gas Development, after engagement in gas supply and demand scenarios planning

-Prepare a document setting out various scenarios in respect of gas supply, demand and transportation scenario’s and estimated cost of those scenarios

Section 26: Compliance Notice:

-Empowers the Energy Regulator to issue compliance notice to any person who among other things, fails to comply with the Provision of the Act, and

-To impose administrative fines. 

Section 28A: Gas Master Plan:

-Empowers the Minister to compile an Integrated Gas Development, after engagement in gas supply and demand scenarios planning

-Prepare a document setting out various scenarios in respect of gas supply, demand and transportation scenario’s and estimated cost of those scenarios

Section 28B (Gas Determination):      

-Empowers the Minister to make a determination for Gas Infrastructure, Gas and Services;

-The determination may stipulate whether the person who intend to construct, operate, maintain or manage the required gas facility or service is an organ of state,  private sector party or Co-operatives in terms of Co-operatives Act; and

-The determination also provide for the establishment of Integrated Energy Project.

Section 34(C): Empower the Minister in consultation with the Energy Regulator to issue an exemption from any of the provision of the Act, if it is likely to:

-Safeguard the national security of the Republic;

-Promote national, strategic or economic interest of Republic ; or

-Discharge an international obligation of the Republic.

Schedule 1: Exemption from obligation to apply for and hold a licence:

-Person engaged in the transmission or distribution of gas for exclusive use;

-Any biogas projects not connected to a transmission or distribution facility;

-Gas reticulation;

-LPG supplied from a bulk storage tank or cylinder, piped at less than 2 bar gauge and not crossing no more than four erf lines between separate; and

-Trading in gas by a person where the quantity of gas sold is less than a quantity as prescribed by the Minister in a year…

Discussion

The Chairperson asked Members to engage with the Bill. He said quite a few Members joined but would not be able to participate as they are currently sick. He hoped Members were not affected by the third wave.

The Chairperson asked what the timeframes for implementation for this Bill were. He said the process to amend this Bill started in 2013 but it was only being presented to the Committee eight years later. Would this be an indication that once adopted, implementation might also be stalled? He asked why it took this Bill so long to be amended and if the Department would be able to effectively manage the Bill.

Ms Mamogale responded and said change of leadership within the Department might have stalled the Bill but the Department had a lengthy consultative process and various legal opinions were consulted. She said the previous Minister also made a determination regarding gas and power and this stalled the amendment for quite a while. The Bill had to be aligned to this determination and consultations with NEDLEC also took a while. She said the Department always had the capability to manage this Bill and implementation would not be stalled. The Department will be informed by the work NERSA is doing and work done by the Department.

The Chairperson said if there are no further questions from Members, the Committee could dismiss the Department and look at the internal Committee business.

The Committee Secretary said some Members had left the meeting were struggling to reconnect.

The Chairperson allowed for a 20 minute break to solve the problem.

Once there was a quorum, the Committee considered and adopted its minutes of 11, 12 and 14 May 2021/

The meeting was adjourned.

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