African Mining January - February 2019 | Page 50

This month's focus The future of underground coal gasification – take two! n 2015, we published an article on underground coal gasification (UCG) and its place within the regulatory framework under the Mineral and Petroleum Resources Development Act, 2004 (as amended). Three years later, it would appear that uncertainty about the regulatory place for UCG would continue with the announcement by Gwede Mantashe, the minister of mineral resources, that the Mineral and Petroleum Resources Development Amendment Bill, 2014 (MPRDA Amendment Bill), will be withdrawn. The eventual withdrawal of the MPRDA Amendment Bill is generally welcomed, as it implies that certain proposed amendments (the declaration of strategic minerals, the proposed new application system for rights, and so on), which would have created further uncertainty in the mining sector in South Africa, are abandoned. However, certain provisions within the MPRDA Amendment Bill were intended to provide clarity to the position of UCG and whether the underground gasification is a mining technique or a petroleum production process. In broad terms, UCG is a technology where coal is ignited underground with a controlled flow of oxidant gas (such as air or enriched air) and water. It converts the coal into synthetic gas, of which the gas is directly used as fuel, co-fired with other fuels such as natural gas or coal and can power gas turbines for electricity generation. To clarify whether UCG constitutes a mining operation (Chapter 4 of the MPRDA) or a production operation (Chapter 6 of the MPRDA), the MPRDA Amendment Bill introduced the word ‘gasification’ after the word ‘underground’ as part of the definition of ‘mine’. It further introduced a definition of gasification that reads: “A process applied to non-mined coal seams, using injection and production wells drilled from the surface, which enables the coal to be converted in situ into gas.” This proposed amendment intended to make it clear that the extraction of syngas utilising UCG technology constitutes a mining process as opposed to a production process (oil and gas). There has been stagnation in the legislative process and it is hoped that regulatory certainty would be provided to the place of UCG technology in extracting syngas from qualifying coal seams. From an extractive industry perspective, UCG is recognised as a mining technique, as a solid hydrocarbon (coal in situ) is converted to synthetic gas. It is now hoped that regulatory certainty, from an upstream perspective, will be done as part of the proposals by government to split the MPRDA into two pieces of legislation that separately will regulate the upstream mining and petroleum sectors in South Africa. As part of that process, it is also imperative that there is a clearly legislative regime that deals with conflicting rights applications for minerals and petroleum resources over the same area. Our first-hand experience suggests that there is a need to ensure that conflicts of rights are adequately dealt with in any future legislation — not to leave a vacuum, as is currently the case with conflicting mineral and petroleum rights. The MPRDA, as it stands, allows for an applicant to apply for a mineral right for coal and a production right for methane gas over the same land. This has resulted in numerous disputes between holders of mineral rights and holders of petroleum rights. Then there is the proposed water use licence regulations for UCG, which have not progressed for the past three years — we understand a draft has been prepared by the Department of Water and Sanitation with input from a leading UCG expert in Canada — but to date, the industry is still awaiting the official publication of the regulations by the Department. In addition, from a downstream perspective, there is recognition in the Draft Integrated Resource Plan, 2018 (Draft IRP2018) that UCG must play a role in South Africa’s energy generation capacity — but it is not clear whether the Draft IRP2018 contemplates whether syngas that can be commercially extracted using UCG technology before 2030 will be considered as part of the proposed gas allocation in the Draft IRP2018. The uncertainty is created by the fact that UCG is only referred to under the discussion relating to detailed studies of certain technologies to be considered post-2030, and that the post-2030 path not be confirmed in the new IRP once gazetted.  UCG appears to have so much potential for South Africa from an energy security and job creation perspective, and it could be one of those sectors that could be a catalyst for South Africa to be a front-runner in the clear coal technology revolution. As a country built on coal, we have the expertise and the skills to invest in a clean coal revolution. A number of academic institutions in South Africa have already taken on the task of investing the necessary skills for the industry, but government support remains lacking. If South Africa does not invest in clean coal technologies, countries such as Botswana, which is equally endowed with large coal resources, appears to be prepared to take up the opportunity. Botswana’s government has a great drive to encourage investment in the coal mining sector, with various incentives and benefits for qualifying investors. From both the upstream mining to the downstream electricity generation perspective, it is imperative that the South African government supports the realisation of UCG as a technology that could be a catalyst for future economic growth. South Africa has an abundance of coal resources and the potential exists to ensure that clean coal technologies are utilised to provide for sustainable future exploitation of coal in a manner that reduces the environmental impact thereof and builds industries for the Fourth Industrial Revolution. b I There is still no clarity on the position of underground coal gasification in the South African regulatory framework, writes Jackwell Feris. Jackwell Feris is a director in the dispute resolution practice at Cliffe Dekker Hofmeyr. Coal gasification’s role in the South African mining industry is still uncertain. 48 AFRICAN MINING JANUARY - FEBRUARY 2019 www.africanmining.co.za