THE PETROLEUM PIPELINES BILL Presentation to Parliamentary Portfolio Committee on Minerals and Energy Dr Rod Crompton Chief Director Hydrocarbons Department of Minerals and Energy 7th November 2001

Background: Government’s Objectives Lower intermediate input costs (energy) to create a low-cost platform for economic development – industrial heartland. Reduce monopoly rents in the natural monopolies. (Energy Policy White Paper Dec 1998)

Background: Government’s Approach Competition between and within energy carriers. Appropriate “rules of the game” for investors Facilitate investment projects Regulation where necessary Protect country’s strategic interests

Government considerations Most but not all pipelines state owned Additional pipeline capacity & investment required + - 2005 Pipeline network strategic importance e.g. Natref fire Not clear if all tariffs market related. Transparency in tariff composition.

PROCESS THUS FAR Consultations: International Energy Agency survey, April 1996 White Paper on Energy Policy, December 1998 Consultants appointed July 2000. Three stakeholder workshops Published for comment, 14 September 2000. Submissions from 8 parties Currently processing submissions Next steps Cabinet State Law Advisor Parliament Translation (Zulu)

Submissions received from Engen(Coastal Refineries) Sasol TotalFinaElf Petronet South African Institute of Civil Engineers COSATU Groundwork Umbhaba Estates

Purpose of Bill To establish a national regulatory framework. To establish a Petroleum Pipeline Regulator as custodian and enforcer of the national regulatory framework. To provide for issuing of licenses To provide for registration of certain activities

Scope Crude oil Petroleum products Pipelines, Storage facilities, off-loading facilities Excludes production of petroleum (i.e. mining or farming)

Objects Promote competition, limit anti-competitive practices Promote the efficient, effective, sustainable orderly development from a national and industry perspective. Promote fair and equitable access

Petroleum Pipeline Regulator Established as a legal person. Functions of the Regulator:- Issue licenses for construction, operation, of pipelines and related services Register storage facilities Gather information Set tariffs and charges Promote competition Right to expropriate land

Petroleum Pipeline Regulator Composition: 5 part-time members; appointed by Miniser for 4 years renewable; limitations RSA citizen, solvency, no convictions Conflict of interest (disclosure)

Qualifications of Regulator Board Relevant experience. Impartial and objective. Balance between continuity and capacity building

Regulator Meetings Procedures prescribed by regulation. Open to public unless confidential, propriety or commercially sensitive information discussed. Decisions reduced to writing. Record of proceedings.

Duties of Regulator Act in a justifiable and transparent manner. Not act in own interests. Act independently of undue influence or instruction. Act in a manner required and expected from the holder of a public office.

Decisions of the Regulator Procedurally fair – hear both sides. Based on facts and evidence. Legally consistent. In public interest Written. Explained. Appeals to court having jurisdiction.

Regulator support CEO + staff CEO may be to person employed by another energy regulatory authority

Regulator Funding By appropriations from National Revenue or ; Monies in terms of section 3 of CEF Act Levies by separate legislation Fees earned, e.g. dispute resolution; Accounts audited by Auditor General.

Issuing of Licenses Application advertised Objections within 30 days considered. Decision period 60 days after replies to objections Separate licenses for each activity. Existing activities must apply and get licenses.

License Conditions (1) Regulator may impose conditions, e.g. Setting and approval of tariffs Period of validity Construction and operations standards HSE concerns Competition issues Non-discriminatory practices Separate management and accounts for vertically integrated companies - no cross-subsidization.

License Conditions (2) Access on commercially reasonable terms in transmission and storage for all. Negotiated changes in routing, diameters capacity, compression at own cost.

Licenses - Sundry Non-discrimination,term, amendment, revocation of license. Regulator can amend license Regulator arbitration on request Standards of construction Contravention: penalise, suspend or revoke, fines up to R2 mill. per day. Appeals to High Court Registration can be converted to licensing

Other Provisions Storage facilities must be registered. Following arbitration of a dispute Minister and Regulator may make it a licensed activity Entry, inspection and information gathering by Regulator. Voluntary resolution of disputes. Compulsory resolution of disputes Expropriation - rights of way.

Regulations Made by Minister after consulting Regulator and inviting public comment: Procedures Record keeping Forms Publishing information Methodology to be used by Regulator Land rehabilitation

General Prohibition on agreements contrary to Act Short Title, Petroleum Pipelines Act

Historical

Current usage