Rethinking application procedure for exploration right: When to object?

On 24 March 2020, the Constitutional Court handed down judgment in the matter of Normandien Farms (Pty) Limited v South African Agency for Promotion of Petroleum Exploration and Exploitation SOC Limited and Others (the Normandien matter).[1] The Normandien matter concerned the validity of the acceptance of an exploration right application by the Petroleum Agency of South Africa (PASA) in terms of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA). In particular, the Court was called upon to determine whether the failure to comply with certain statutory provisions, regarding public participation, in an application for an exploration right is reviewable and if so, under which peculiar circumstances and at what stage of the process would such be permissible.   

In terms of section 5(1) of the MPRDA, an exploration right is defined as “a limited real right in respect of the mineral or petroleum and the land to which such right relates”. The Court expanded this definition and added that the right “may at times be over land that belongs to other landowners.”[2] In trying to mitigate the potential invasive effect the exploration right would have on other landowners, the second respondent, Rhino Oil and Gas Exploration South Africa (Pty) Limited (Rhino), had in place non-invasive techniques for the drilling of boreholes to recover oil and gas.[3] 

Insofar as the application procedure for the right is concerned, the Court outlined it as a four-step process. The first step involves the acceptance of the application by the PASA having satisfied the prescribed formalities enlisted in section 79 of the MPRDA.[4] The second step requires that the acceptance of the application be published for public scrutiny and comments from interested parties.[5] The third step requires the compilation and submission of the environmental impact assessment (EIA) and Scoping Reports.[6] The last step is the granting of the exploration right by the PASA.[7]

A brief factual background to this matter is that Rhino filed its application for an exploration right with the PASA in terms of section 79 of the MPRDA on 12 April 2016, which was later formally withdrawn on 24 July 2019. Rhino’s application was in respect of approximately two million hectares of land in the Northern KwaZulu-Natal. With this application, about 5 500 farms stood to be affect, including the timber production farms owned by the applicant, the Normandien Farms (Pty) Limited (Normandien).

Subsequent to this, on 13 December 2016, the aggrieved Normandien approached the Western Cape High Court on an urgent basis seeking an order setting aside the acceptance of Rhino’s application by PASA.[8] The crux of the matter revolved around the formal defects in the acceptance and publication of the application. That is steps one and two respectively of the process outlined above. On the one hand, Normandien argued that it suffered prejudice by virtue of the PASA’s failure to properly publish the acceptance of Rhino’s application, and that it could challenge this failure immediately, regardless of the fact that the exploration right had not yet been granted, as per step four. Put differently, Normandien argued that it can challenge errors in steps one and two without having to wait until the process is wholly exhausted, that is with the granting of the exploration right. In the contrary, Rhino argued that the challenge was premature, and that Normandien should have first awaited the granting (if any) of the exploration right in question.  Rhino further argued that Normandien has not suffered any prejudice because there was substantial compliance with the relevant requirements and, in any event, Rhino has since withdrawn its exploration right application on 24 July 2019.  

The High Court ruled in favour of Normandien, stating that indeed the latter has been prejudiced since it did not have an opportunity to object to the acceptance of the application. The PASA’s acceptance of Rhino’s application was then set aside.[9] Dissatisfied with the High Court ruling, Rhino appealed to the Supreme Court of Appeal (SCA).[10] The SCA ruled in favour of Rhino and overturned the findings of the High Court, reasoning that Normandien had not suffered any prejudice and that the matter was not ripe for adjudication.[11] Normandien then brought the matter before the Constitutional Court. Here it is important to mention that there were notable developments that gave a case a new different posture at that stage. The developments were that Rhino had just withdrawn its application (the effect to which Normandien was notified by letter) and that an attempt was made to settle the dispute amicably.[12] The two developments, according to the Constitutional Court, rendered the matter moot. The matter is moot when it “no longer presents an existing or live controversy.”[13]

This then required the court to determine only one issue: whether it was in the interests of justice to hear the matter notwithstanding its mootness. The court eventually ruled that nothing in this case gave rise to the interests of justice and dismissed Normandien’s application accordingly.[14]    

The case commentary is concluded with the following takeaways. First, the Normandien matter must have served an important learning curve for the PASA to conduct itself correctly in the future matters. The High Court is also correct in that “one must always treat matters falling under the MPRDA with the sensitivity deserved”.[15] From this case, we also learn that the PASA’s decisions to either accept or decline applications for exploration rights in terms of the MPRDA do not constitute an administrative action that would otherwise fall within the meaning and text of the Promotion of Administrative Justice Act 3 of 2000. Third, the Normandien case serves to remind us that the general public ought to know their rights. Lastly and by no means least, we learn that the objection to the application for exploration right can brought only once the process has been exhausted, provided there is prejudice.

Written by Chiyedza Mutendera.