South Africa: Karoo Fracking Debate Triggers Legislative Overhaul

Last Updated: 20 November 2013
Article by Matthew Ash

The debate surrounding hydraulic fracturing or fracking of the Karoo's potentially massive shale gas reserves continues to rage. There are strong arguments both for and against harvesting the gas which could potentially alter South Africa's energy and development outlook for many years to come. The issue has also triggered major legislative changes.

Matt Ash, head of premier law firm Norton Rose Fulbright's Sub-Saharan African energy division recently discussed some of the key drivers behind the issue as well as some of the legislative spinoffs.

"South Africa is currently beset by a number of socio-economic challenges such as a lack of infrastructure, high levels of unemployment and a looming energy deficit," says Ash. "In a bid to tackle these issues, government has introduced a number of initiatives including the National Development Plan (NDP) and the Integrated Resources Plan (IRP).

"The aim of the NDP is to eliminate poverty and reduce inequality by 2030 in the main, through dramatically improving and expanding the country's infrastructure. The IRP outlines government's strategy for electricity generation through to 2030 and is premised on a scenario which estimates that South Africa will require a staggering 41 346 MW of new power generating capacity by that time.

"Although a mix of energy sources has already been earmarked for providing this capacity over the coming years, the discovery of shale gas in the Karoo basin has changed this outlook."

Ash explains that it was originally estimated that as much as 485 trillion cubic feet (tcf) of gas lay trapped in the shale formations of the Karoo basin. A June 2013 revision conducted by the US Energy Information Administration reduced the estimate to 390 tcf due to geological factors. Even with the revision this means the Karoo basin could potentially play host to the world's eighth largest reserve which has the potential to provide South Africa with hundreds of years of energy worth trillions of rands.

However, to reach and harvest the gas, the controversial method of fracking would have to be employed.

"Those in favour of fracking believe that the reserves could be the answer to South Africa's energy woes and could create thousands of jobs, which dovetails neatly with both the NDP and IRP. Unsurprisingly, government supports the exploitation of the resource, and has gone so far as including it as a key pillar of the NDP," explains Ash.

Government's resolve to incorporate gas into the country's future energy mix was recently underscored by an announcement made by Energy Minister Dipuo Peters who issued a new determination under the IRP stating that additional base load generation capacity equating to nearly 2700 MW must be procured from natural gas. The determination doesn't state whether this gas will stem from local or cross-border sources but it speaks volumes about government's intent on the matter says Ash.

Much of the debate surrounding the fracking issue stems from the fact that South Africa currently doesn't have any fracking - specific regulations that take into account the particular exigencies and risks posed by fracking. The fact that the current exploration and production rights framework weighs heavily in favour of first movers has also proven a major sticking point.

Given the drawbacks, a moratorium on exploration licensing was imposed in 2011. Following an investigation, the moratorium was lifted and the original exploration applications are now being processed.

The applications will, however, be processed in line with the new regulatory framework which will likely favour South African interests and, according to government, will be robust and enforce best practice.

Ash refers to a number of sweeping legislative changes that have already been proposed such as an amendment to the 'first-in-first-assessed' exploration rights principle which could be replaced by ministerial discretion over who is awarded mining rights. The proposed changes have elicited strong reactions from various quarters.

In addition to an augmented framework, government has also introduced an Infrastructure Development Bill which Ash says addresses some of the key obstacles to shale gas development, in particular a landowner's right to refuse to apply for rezoning.

In a nutshell the Bill, which includes an expropriation clause, is designed to speed up strategic infrastructure delivery by extending state powers for the expropriation of land and shortening the approval time for projects by government authorities. The fact that shale gas development has been identified as a strategic initiative under the NDP is undoubtedly a key driver behind the Bill, notes Ash.

"Under the present framework, a landowner is obliged to give mineral rights holders free and unfettered access to the land without compensation for the unhindered exploration for, and exploitation of mineral resources.

"However, only a landowner can apply for rezoning of property appropriate for the mining activity concerned. The landowner can refuse to rezone on environmental grounds. If the land is not zoned appropriately, the landowner can effectively prevent the mineral rights holder from exercising their rights.

"Should the Bill be passed into law, it will grant statutory powers to a Presidential Infrastructure Co-ordination Commission (PICC) to expropriate land required for development in terms of the NDP.

"The power of the state to expropriate land already exists under separate legislation – but that provides for compensation on a willing buyer, willing seller basis. As long as the seller disputes the value of the land and this remains unresolved by a court, no expropriation can take place.

"The Bill proposes a far-reaching departure from this principle. Instead, the Bill proposes compensation on a fair market value basis, with various mechanisms proposed as to how fair market value is to be determined.

"Importantly, the Bill effectively provides for the state to expropriate at its proposed value while allowing the landowner a right to approach the courts after expropriation has occurred, for a fresh valuation. The law would effectively enable the state to acquire land for purposes of the NDP and would prevent reluctant landowners from stalling the acquisition."

Ash adds that government's commitment to the Bill was highlighted when Economic Development Minister Ebrahim Patel stated that the state will carry on with development even where there is court action and that "the state will be expected to take that risk."

Unsurprisingly the Bill has drawn criticism from various quarters. The Centre for Environmental Rights has, besides other concerns, complained that the Bill does not contain a single reference to sustainable development despite numerous commitments made by government to engage in such projects.

The Ludwig Von Mises Institute of South Africa has lodged objections to the Bill. Amongst numerous concerns noted, the clause regarding expropriation was questioned. The institute recommended that the Bill be scrapped.

In a recent presentation to the South African National Energy Association, National Energy Regulator of South Africa (NERSA) member Dr Rod Crompton said that the Bill showed that policy - makers are aware of the various infrastructure development issues facing South Africa but that the Bill "was poorly drafted and did not focus on the right issues."

Ash agrees that the Bill draft isn't perfect but the drafting can be changed and the purpose should be viewed in the context in which it is intended, specifically to fast-track development and improve the country's long term infrastructure outlook, including major energy-related projects.

"Those against the Bill should also consider the fact that the issue is two-sided. Some of Government's previous attempts to expropriate land needed for development have been thwarted by owners.

"It should also come as some comfort that various checks and balances have been built into the legislation. Aspects such as the current use of the land, the history of its use, the history of its acquisition by the current owner and any investment in the property would also be taken into consideration when expropriating.

"Overall, in my view, the Bill is fairly positive in that it will facilitate fundamentally important projects such as that which the Karoo shale gas presents without ousting the oversight of the courts.

"That said it cannot be denied that there are aspects of the Bill which need to be addressed. For instance, the fact that the Bill states that compensation only becomes payable when the amount has been agreed with the state or decided by the courts gives cause for concern. It can cost a lot of money and take years for such matters to be settled which puts great pressure on an owner to accept an expropriation sum.

"Unfortunately the fact remains that South Africa is grappling with major socio-economic challenges which need to be addressed. The country needs to fast-track infrastructural and energy projects. The Bill and augmented mining framework is government's answer to these issues.

"We can but hope that the objections raised will be constructive and will be dealt with appropriately as matters play out. Should the concerns be addressed and the expropriation process be followed in a fair and transparent fashion, both government and those subject to expropriation should be able to reach amicable outcomes that will facilitate the country's growth."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions