The Role of Government as Allocator of Oil & Gas Rights in South Africa

I  INTRODUCTION

The advent of South Africa’s constitutional democracy has transformed and redefined government’s role as allocator of oil and gas rights. It has done so by ensuring that government allocates oil and gas rights as such that there is recognition of past injustices with an aim to “[i]mprove the quality of life of all citizens…”.[1] Accordingly, government is entrusted with the power to allocate oil and gas rights as custodian of petroleum resources.[2] The reason for government’s custodianship over petroleum resources was recently encapsulated in Maledu and Others v Itereleng Bakgatla Mineral Resources (Pty) Ltd and Another[3] wherein it was held that:

“The MPRDA, recognising that the custodianship of the country’s mineral and petroleum resources vests in the state, has as one of its primary objects the transformation of the sector and the empowerment of those of the country’s population who were previously excluded from participating in the exploitation of the country’s mineral and petroleum resources.”

That government is entrusted with the power to allocate oil and gas rights as custodian is illustrative of a historic bridge between the past wherein government had the authority to confer oil and gas rights to the exclusion of most South Africans, to an era in which the exercise of all public power and performance of all public functions must be lawful, reasonable and procedurally fair when allocating oil and gas rights. This was echoed in Fedsure Life Assurance Ltd and Others v Greater Johannesburg Transitional Metropolitan Council and Others[4] wherein it was held that:

“It seems central to the conception of our constitutional order that the legislature and executive in every sphere are constrained by the principle that they may exercise no power and perform no function beyond that conferred upon them by law.”

In exercising and performing such powers and functions, government must give effect to the overarching objectives at the heart of the MPRDA, namely, to create equitable access to and sustainable development of petroleum resources.  

II  ALLOCATING OIL AND GAS RIGHTS

To create equitable access to and sustainable development of petroleum resources and in achieving the constitutionally transformative objectives underpinning the MPRDA, government must only allocate oil and gas rights provided that petroleum operations are carried out pursuant to “generally accepted principles of sustainable development by integrating social, economic and environmental factors…that…serves present and future generations”.[5]

In ensuring that socio-economic factors are considered, the MPRDA specifically provides that oil and gas rights are limited in nature and must only be granted subject to certain requirements.[6] Such requirements include, inter alia, the imperatives under ss 5(4)(c) and 10 of the MPRDA which prescribes notification and consultation with landowners, lawful occupiers as well as interested and affected parties prior to petroleum operations, thereby ensuring that the rights and interests of those most affected are meaningfully considered. In Baleni v Regional Manager, Eastern Cape Department of Mineral Resources,[7] the court postulated the meaning of consideration for the rights and interests of those most affected when it held that:

“Meaningful consultation entails discussion of ideas on an equal footing, considering the advantages and disadvantages of each course and making concessions where necessary.”

Importantly, the legacy of exclusion from the petroleum industry and the socio-economic benefits derived therefrom necessitate that, as provided under ss 9(2) and 12(1) of the MPRDA, government give preference to and facilitate assistance to historically disadvantaged persons when allocating oil and gas rights. This includes the transfer of rights pursuant to s 11(2) of the MPRDA which places an obligation on government to ensure that oil and gas rights fall into the hands of holders capable of effecting the transformative objectives underpinning the MPRDA. This was confirmed in Mogale Alloys (Pty) Ltd v Nuco Chrome Bophuthatswana (Pty) Ltd And Others[8] wherein it was held that the purpose for which s 11 of the MPRDA exists must be understood contextually, namely, against the backdrop of the objectives of the MPRDA which, inter alia, seek to transform the petroleum industry and give effect to sustainable development.  

In ensuring that effect is given to the environmental pillar of sustainable development, government must fulfil its custodianship role and constitutional duty to protect the environment for the benefit of future generations. This is informed by s 24(b) of the Constitution which provides that “Everyone has the right to have the environment protected, for the benefit of present and future generations through reasonable legislative and other measures…”. Further, in HTF Developers (Pty) Ltd v Minister of Environmental Affairs and Tourism & others[9] government’s role in protecting the environment was clearly defined when the court stated that:

“The attainment of this objective or imperative confers upon the authorities a stewardship, whereby the present generation is constituted as the custodian or trustee of the environment for future generations”.

From this follows that government’s primary environmental obligation is to ensure that petroleum operations do not have adverse environmental effects. This necessitates that government ensures that, inter alia, right holders conduct an environmental impact assessment (EIA) as well as submit an environmental management programme and mine closure plan.[10]

III  CONCLUSION

On analysis of the above, government must allocate oil and gas rights as custodian of petroleum resources. This presupposes that government will only allocate oil and gas rights provided that petroleum operations give effect to the overarching objectives of creating equitable access to and sustainable development of petroleum resources.