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Bill), will be withdrawn.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