Finalisation of Gas Bill

Meeting report

****************************************************************
This Report is a Contact Natural Resource Information Service
Taking Parliament to People, and People to Parliament
****************************************************************
The aim of this report is to summarise the main events at the meeting and identify the key role players. This report is not a verbatim transcript of proceedings.

MINERALS AND ENERGY PORTFOLIO COMMITTEE
19 September 2001
FINALISATION OF GAS BILL

Chairperson: Mr D. Nkosi

Documents handed out:
Gas Bill Modified by PPC 21-23 Aug 01plus vers17thSept01 [B 18 - 2001]
Agreement Concerning the Mozambican Gas Pipeline between the Government of the Republic of South Africa and Sasol Limited
Committee Report

SUMMARY
The Committee met to finalise the Gas Bill. The Committee unofficially proceeded through the Bill to discuss remaining issues. There was discussion on Sections 6(3), 19(2), 20, 21 and 36 regarding the Portfolio Committee’s role in the appointment of the Gas Regulator, vested interests of members of the Gas Regulator, licence applications, disposal of assets, conditions of license and the Mozambique Gas Pipeline Agreement. The Committee proceeded to unanimously accept Sections 1 to 4 and 6 to 37 and voted against a motion to amend Section 5(1). The Committee agreed to submit their report on the Gas Bill to Parliament once the Members had had a chance to comment on the final report.

MINUTES
Mr D. Nkosi (ANC), in his capacity as Chairperson, opened the meeting. He stated that the Committee would go informally through the Gas Bill to finalise discussion and would then formally vote on the Bill. He stated that there would be a report submitted to Parliament afterwards. The Chairperson thanked the Department for their presence and requested that Dr Crompton to proceed through the Bill.

CHAPTER I: DEFINITIONS AND OBJECTS
Section 1: Definitions
"distribution"
Dr Crompton, Department of Minerals and Energy, stated that there was a new insertion, Section 34(1)(b), to set the criteria for qualification as distributor.

Mr I. Davidson (DP) stated that there appeared to be no problem with the definition but asked if the exact working for Section 34(1) was available.

CHAPTER II: NATIONAL GAS REGULATOR
Section 4: Function of Gas Regulator
Dr Crompton stated that Paragraph "o" was separated. He added that the Section would empower the Regulator to make rules.

Section 5: Constitution of Gas Regulator
Dr Crompton stated that there had been no previous agreement on the involvement of the Portfolio Committee in the appointment process to the Gas Regulator.

The Chairperson asked Committee Members for suggestion and upon receiving no suggestions, suggested that the Committee skip the issue and return to it later.

The Committee proceeded to discuss the other issues and returned to Section 5 before taking a formal vote.

Mr E. Nel (NNP) stated that the issue of the Portfolio Committee’s involvement in the appointment process of the Gas Regulator had not been resolved. He proposed that the words "…after presenting the short list to the Portfolio Committee for information…" be added at the end of Section 5(1).

Mr G. Oliphant (ANC) stated that the Portfolio Committee could assist the process, but added that there was no need to put it in the Bill.

Mr Nel stated that it was necessary for the provision to be included in the Bill because it would fulfill the Committee’s duty to oversee.

The Chairperson asked the State Law Advisor for input.

Mr H. Smuts, State Law Advisor’s, stated that from a legal point of view, the Minister could inform the Portfolio Committee for information purposes.

Mr B. Bell (DP) stated that any replacements that the Minister might make to the list of nominations to the Gas Regulator should be brought before the Committee for information purposes.

The Chairperson summarised the issue as being whether there was a need for the Minister to inform the Portfolio Committee for oversight and stated that Mr Bell’s suggestion was a different issue. He suggested that the initial issue be dealt with first.

Mr J. Nash (ANC) stated that the Section was sufficient as it was.

Mr Oliphant stated that he was confident that the Minister would act properly and added that he was uncomfortable with the view that would require the Minister to go to the Portfolio Committee before making the decision.

Ms D. Motubatse (ANC) seconded Mr Nash’s statement. She stated that the Minister was the final decision maker on the appointments of the Gas Regulator.

The Chairperson stated that there was insufficient consensus at this stage.

Mr Nel asked if Mr Oliphant would feel differently should the ANC someday lose power. He stated that it would be good to give Portfolio Committee Members input in the appointment process in order to safeguard the minority.

The Chairperson declared that there had been no consensus on this particular issue.

Section 6: Disqualifications and Requirements Regarding Appointment to Gas Regulator
Section 6(3)
Dr Crompton stated that there was new wording in Section 6(3) which was recommended by the Department and approved by the State Law Advisor. Dr Crompton read the new wording which would strengthen the declaration of vested interests by individuals appointed to the Gas Regulator:

The Committee Members expressed satisfaction with the new wording.

Section 6(4)
Dr Crompton read Section 6(4) and stated that this Section would exclude those with vested interests from influencing decisions of the Gas Regulator.

Mr J. Lucas (IFP) suggested that Section 6(d) be discussed again. He stated that the Committee had previously agreed to delete Section 6(d) to allow the Gas Regulator to benefit from the service of the most qualified people. He stated that if industry people could be involved in the Gas Regulator, they could manipulate the system. To safeguard against such manipulation, he suggested that people could be trained to work in the Gas Regulator.

The Chairperson stated that measures had been taken to make sure the Gas Regulator could not be manipulated by outside interests. He added that if what was covered in the Section was not enough, the Committee could explore additional ways of safeguarding against manipulation.

Mr Davidson stated that the wording was adequate. He suggested that the wording in Section 6(4) be improved. He suggested that the Section read: "A member may not at any time be present during…". He was concerned that if the words "at any time" were not added, there could be confusion between formal and informal decision making processes and when those with vested interest might be allowed to participate in the process.

Mr Nash, referring to the wording in Section 6(3), asked why it was necessary to say "may not". He stated that the word "may" would cause confusion as it appeared ambiguous and suggested that "may" be changed to "must not".

The Chairperson asked Dr Crompton if the alternation would improve the wording.

Dr Crompton stated that "must" and "may" were the same in the context of the legislation and asked for input from the State Law Advisor.

Mr Smuts, stated that there was no difference between "may" and "must". He stated "may not" was translated in the legal language to mean "must not".

Mr Nash stated that it was important to clear up the ambiguity.

Mr Lucas stated that if the Committee Members agreed to use "must not", then the wording should be changed to "must not".

The Chairperson accepted the suggested changes to Section 6(4) in order to clarify the meaning.

Section 9: Duties of Members of Gas Regulator
Dr Crompton proceeded to Section 9(e) and stated that the wording recommended by Department of Minerals and Energy had been inserted in Sections 6(3) and 6(4) to tighten restrictions on participation of individuals on the Gas Regulator in making decisions where they had a vested interest in the issue.

CHAPTER III: GAS LICENSING AND REGISTRATION
Section 16: Application for License
Dr Crompton stated that there had been a mistake in the typing and it had been corrected and approved.

Section 18: Particular Information to be Supplied by Applicant
Dr Crompton stated the wording had been drafted. He stated a new paragraph had been proposed for Section 18. He stated the new Section 18(e) would read, "Shall publish criteria contemplated in Section 19(2) and allow the applicant the opportunity to amend its application."

The Committee Members accepted the amendment.

Section 19: Finalisation of Application
Dr Crompton stated that Section 19(2) related to an upcoming section and postponed discussion until the related matter was discussed.

After Dr Crompton addressed Section 20, discussion returned to Section 19 as the two Sections were related.

Mr Davidson stated that he was satisfied with the first part but added that he had concerns regarding the specific criteria set out in Section 19(2). He stated that he was concerned that there was room for manipulation of the process as unsolicited applications for licenses could be submitted to the Gas Regulator, and since the Minister would ask the Gas Regulator to judge the applications according to the three criteria in Section 19(2), the Minister should indicate the criteria in the advertisements.

Dr Crompton stated that clever entrepreneurs were busy coming up with ways and the Minister could not keep up. But he stated that the Bill made the provision that license applications had to be published for public comment, so the concerns could be addressed at that stage.

Mr Davidson, referring to Section 19(2)(b), expressed concern over the use of "or" and sought to ask if using "and" might be better. He stated that, with the current wording, he was unsure what criteria was being included and what was being excluded.

Mr Smuts stated that there was no difference between the two and stated that changing "or" to "and" was not necessary as it would not improve on the meaning.

Section 20: Disposal of Gas Assets Controlled by the State
Dr Crompton stated that the previous Section 20 had been deleted and replaced with the new Section 20. He stated that the new Section 20 addressed what would happen in the privatisation of licensed entities. He stated that Section 20 set out that the selling of state controlled entities licensed pursuant to the provisions of Section 19(2), would have to be done through an open and transparent bidding procedure.

Ms Motubatse asked Dr Crompton to repeat the amendment.

Dr Crompton stated that the amendment was to ensure that if state entity wanted to sell off, it would be required to do so in an open and transparent manner.

Section 21: Conditions of License
Section 21(1)(b)
Dr Crompton, referring to Section 21(1)(b), stated that the pervious debate over licensees providing information to the Regulator revolved around concerns for historically disadvantaged South Africans (HDSA). He stated that the previous positions had been to take out or retain the list of particular details that the licensee had to provide. Dr Crompton then referred to Section 34(1)(i) and suggested that the reference to promotion of HDSAs was adequate and so the reference to the particular details in Section in 21(1)(b) could be deleted. He stated that the intent to provide information was in the legislation and added that the particular details to be provided should be left in the regulations.

The Chairperson summarized the previous discussion and stated that the suggestion of having the particular details covered in the regulation was good.

Ms Motubatse stated that the list of particular details in Section 21(1)(b) was not complete and added that it could lead to problems if the wording was not changed.

Mr Oliphant stated that the list of particular details was complete in his view. He stated that the sentence was not vague and the guidelines in the Section were adequate.

The Chairperson stated that the point was the fact that the list of particular details in Section 21(1)(b) was inconclusive and added that it might lead to other problems.

Mr Oliphant stated that the list of particular details in the Section was complete and added that he could not think of any other details that needed to be included.

Mr Nel stated that he agreed with the Chairperson. He expressed his agreement with Dr Crompton’s suggestion that the details be left to the regulations. He stated that leaving the details in the legislation meant that it would have to be looked at in the future when South African democracy was normalised. He suggested that the details of what a licensee needed to provide in terms of the participation of HDSA should be left in the regulations.

Dr Crompton stated that the shaded part in Section 21(1)(b) that listed the particular details would be deleted and replaced by "…as prescribed by regulations."

Ms Motubatse stated that the additional words should read "…in line with other legislation and regulations."

The Chairperson accepted the amendments to Section 21(b) and asked if there were any further suggestions.

Dr Crompton stated that a suggestion for legislation on empowerment had come out of a report from the Empowerment Commission. He stated that the Gas Bill should be inline with empowerment principles.

Mr Lucas suggested that the additional words should read "…in compliance with other laws and regulations."

Dr Crompton stated that the additional wording to replace the reference to the particular details would be "…as prescribed by regulation and other legislation."

The Chairperson asked if the new wording was accepted and the Committee Members expressed their acceptance of the wording.

Section 21(1)(m)
Dr Crompton stated that the words "…for a period of 25 years or such longer period…" were added to make the wording consistent with Section 23(1) that the Committee had previously agreed to.

The Chairperson asked Committee Members for comments and having received no comments took the suggestion as accepted and proceeded.

Section 21(1)(s)
Dr Crompton stated that the words "…and customers of reticulators…" had been added for clarity. He stated that it was to prevent distributors from eliminating reticulators and taking the reticulator’s customers.

Section 21(2)(a)
Dr Crompton stated that the issue had not been debated to finality and added that there had been discussion of adding appeal procedures.

The Chairperson stated that the previous discussion was that there was concern over the lack of opportunity for persons aggrieved by conditions imposed by Section 21(1) to approach the Regulator and added that appealing through the High Court was costly. He stated that if Committee Members agreed, there would be no reference to the appeal procedures at the High Court and the Committee Members expressed their agreement.

Section 23: Terms of Licence
Section 23(4)
Dr Crompton stated that Section 23(4) had been added at the Department’s suggestion to ensure that a licence was not traded to a third party.

The Committee Members accepted the amendment.

CHAPTER IV: GENERAL PROVISIONS
Section 33: Rights of Licensee in Respect of Premises or Land Belonging to Others
Section 33(6)
Dr Crompton stated that the words "…from the Gas Regulator…" were inserted in Section 33(6) to make the official authorization clear.

The Committee Members accepted the amendment.

Section 34: Regulations
Section 34(1)(j)
Dr Crompton stated that criteria for pipeline pressure had been amended in the Definition Section.

Section 36: Gas Pipeline Agreement
Dr Crompton stated that the Mozambique Gas Pipeline Agreement (the "Agreement") was the basis for ownership of the pipeline. He added that Cabinet had approved the Agreement but had not yet signed it.

The Chairperson stated that the Committee should distribute the unsigned copies available and go through the flagged issues in the Agreement. Copies of the unsigned Agreement were distributed to the Committee Members and Dr Crompton proceeded to briefly highlight the main issues in the Agreement.

Dr Crompton stated that concern over the Agreement revolved around uncertainties regarding the size of the gas reserve and whether or not it was sufficient for a 25 year project. He stated that the Agreement now had two classes of shares: Class A shares were intended to enable deferred full participation in the Pipeline Company, while Class B shares were intended to enable immediate full participation in the Pipeline Company. He then proceeded to discuss the participation of the parties to the Agreement. He stated that Sasol would own 50 percent of the Pipeline Company while the Government of the Republic of South Africa and the Government of Mozambique would own the other 50 percent. He then proceeded to discuss the protection of minority rights. He stated that the Agreement made provisions to protect the interests of minorities in the Pipeline Company by requiring prior consent from minority shareholders in making significant decisions. Dr Crompton then proceeded to discuss the participation of third parties in the Pipeline Company. He stated that empowerment company issues would have to be dealt with by the South African and Mozambican governments. He then proceeded to the construction of the transmission pipeline and stated that Sasol would lead the design and construction of the transmission pipeline. He then touched on the diligence Section that would protect the South African government from deliberate misrepresentation. Dr Crompton then briefly went through the Regulatory Agreement Between the Minister of Minerals and Energy, the Minister of Trade and Industry and Sasol Limited. He stated that the Agreement would not be effective without the Regulatory Agreement. He mentioned the validity of reserves, rights to gas, pricing to customers, the review Section and the period of operation.

The Chairperson stated that that there had been an error in one of the formulas for the calculation of gas prices in the Regulatory Agreement and asked if it had been corrected.

Dr Crompton replied that the error had resulted from a typing mistake and stated that it had since been corrected.

The Chairperson invited the Committee Members to comment on Section 36. He stated that in terms of the legislation, the Committee was going to accept the inclusion of the Agreement in the Bill, as there was nothing in the Agreement that would disadvantage anyone. He stated that the Committee had been briefed in detail on the contents of the Agreement.

Mr Oliphant asked what the Department’s position was on Section 36(2).

Dr Crompton stated that the Agreement would bind the Gas Regulator until ten years after natural gas was first received from Mozambique.

Mr Oliphant asked if the Agreement was then above the law. He stated that the question had been raised before and the Department had been asked to respond but had failed to do so.

Dr Crompton stated that the Agreement was not above the law but was instead part of the law.

The Chairperson stated that the Agreement would become law upon the passing of the Bill.

Mr Lucas asked if there was any information on the agreement between Sasol and the Mozambique government.

The Chairperson stated that the information would be requested and added that he was confident that Sasol would share the necessary documents with the Portfolio Committee.

The Chairperson stated that the informal discussion on the Bill was complete and added that the Committee should officially vote on the Bill unless there were further points for discussion.

Formal Deliberations
Mr Davidson stated that the Committee had adequately debated the issues and suggested that the Committee move directly to voting on the Bill.

The Chairperson accepted the suggestion and proceeded to conduct formal voting on the Gas Bill Modified by the PPC 21-23Aug01plus vers17thSept01. The Committee unanimously accepted Sections 1 to 4 and Sections 6 to 37.

Mr Nel moved to make an amendment to Section 5(1) by inserting the words "...after presenting the shortlist to the Portfolio Committee for information." at the end of the Section 5(1).

The Chairperson took a formal vote on the proposed amendment. Mr Nel, Mr Davidson, Mr Bell and another Member voted to accept the proposed amendment whilst the ANC members voted against it. The IFP and UDM members both abstained. The Chairperson then declared that the motion had been rejected and Section 5(1) was included in the Bill without amendment.

Committee Report to Parliament
The Chairperson proceeded to the next issue on the agenda which was the Committee’s report to Parliament. The report was circulated and the Chairperson stated that the report incorporated the Mozambique trip and ignored smaller details. He stated that the suggestion was to submit the report to Parliament and added that Committee Members would be given two days to comment on the report.

Mr Oliphant suggested that the report be accepted because it was a straightforward account of events and added that two days was adequate time for Committee Members to submit their comments on the report.

The Chairperson stated that if no comments were submitted by Friday, the report would proceed to Parliament. He thanked the Department and the meeting was adjourned.

The copyright in this material subsists with the Contact Trust. Further distribution or copying of this material is prohibited without the prior agreement of the Contact Trust.
__________________________________________________________________________Appendix 1