Portfolio Committee Workshop

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PETROLEUM PIPELINES BILLPARLIAMENTARY
PORTFOLIO COMMITTEE WORKSHOP20 MAY
2003DEPARTMENT OF MINERALS AND ENERGY
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Background Governments Objectives

• Lower intermediate input costs (energy) to create
  low-cost platform for economic development esp.
  in industrial heartland
• Reduce monopoly rents in natural monopolies
• (Energy Policy White Paper Dec 1998)

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Background 2 Governments Approach

• Competition between and within energy carriers
• Protect countrys strategic interests
• Appropriate rules of the game for investors
• Facilitate investment projects
• Regulation only where and to extent necessary

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Government considerations

• Pipeline network strategic importance eg Natref
  fire
• Most pipelines currently state-owned
• Additional capacity investment needed - /-
  2007
• Not clear if all tariffs market related
• Transparency in tariff composition

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Process to date

• International Energy Agency survey - April 1996
• Energy White Paper December 1998
• Consultants appointed July 2000
• 3 stakeholder workshops
• Published for comment, 14 September 2000
• Submissions from 8 parties
• Cosatu
• Engen (Coastal refiners)
• Groundwork (Environmental NGO network)
• Petronet
• Sasol
• SA Institute of Civil Engineers
• TotalFinaElf
• Umhaba Estates

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Purpose of Bill

• - Establish a national regulatory framework
• - Establish a Regulator as custodian enforcer
  of regulatory framework
• - Provide for issuing of licenses

Scope of Bill

• Crude oil
• Petroleum products
• Pipelines, storage facilities, off-loading
  facilities
• Excludes production facilities

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Objects of the Bill

• Promote competition limit anti-competitive
  practices
• Promote efficiency effective, sustainable
  orderly development from national industry
  perspective
• Promote fair equitable access

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The Regulator - 1

• Independent ( legal person)
• Functions
• Issue licenses for construction operation of
  pipelines related facilities
• Gather information
• Set tariffs charges
• Promote competition
• Right to expropriate land

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The Regulator - 2

• Composition
• 5 members full time
• Appointed by Minister for 4 year term, renewable
• Limitations
• RSA citizens solvent no convictions
• Conflict of interest disclosure
• To be phased into single regulator
• Qualifications
• Relevant experience
• Impartial objective
• Balance between continuity capacity building

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The Regulator - Meetings

• Procedures prescribed by regulator
• Open to public unless confidential, proprietary
  or commercially sensitive information discussed
• Decisions to be reduced to writing
• Record of proceedings

The Regulator - Duties

• Act in justifiable transparent manner
• Not act in own interests
• Act independently of undue influence or
  instruction
• Act in a manner required expected from holder
  of public office

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The Regulator - Decisions

• Procedurally fair
• Based on facts evidence
• Legally consistent
• In public interest
• Written
• Explained
• Appeals to to court having jurisdiction

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The Regulator - Support

• CEO professional/administrative support staff
• CEO may be person employed by another energy
  sector regulatory authority
• Support to be common to eventual single
  regulatory authority

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Funding

• Appropriation from national revenue
• Levies by separate legislation (has been drafted)
• Fees earned eg dispute resolution
• Accounts to be audited by Auditor General

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Issue of Licenses

• Applications advertised
• Objections within 30 days
• Decision period 60 days after replies to
  objections
• Separate licenses for each activity
• Existing activities must apply and get licenses

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Licensing Conditions - 1

• Regulator may impose conditions, eg
• Setting approval of tariffs
• Period of validity 25 years may be
  relinquished
• Construction operations standards
• HSE concerns
• Competition issues
• Non-discriminatory practices
• Separate management accounts for vertically
  integrated companies no cross-subsidisation

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License conditions - 2

• Access on commercially reasonable terms in
  transmission storage for all
• Negotiated changes in routing, diameter, capacity.

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Licenses - Miscellaneous

• Non-discrimination term amendment, revocation
• Regulator can amend licenses
• Regulator arbitration on request
• Standards of construction
• Contraventions
• Suspend or revoke
• Fines up to R2 mill / day
• Appeals to high Court

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Other provisions

• Entry, inspection information gathering by
  Regulator
• Voluntary resolution of disputes
• Compulsory of disputes
• Compulsory resolution of disputes
• Expropriation rights of way

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Regulations

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

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General

• Prohibition on agreements contrary to Act
• Short Title Petroleum Pipelines Act