JSE- and ASX-listed Renergen has provided an update on ongoing actions involving its majority-owned subsidiary, Tetra4, which produces helium, and a proposed solar plant being planned by another entity.

Renergen has welcomed the signing of the Upstream Petroleum and Resources Development Act into law in October.  

It states that this Act notably expands the definition of petroleum to include “associated liquid or gas, any liquid or solid hydrocarbon or combustible gas”, which effectively categorises helium as an associated gas of petroleum rather than a mineral.

Additionally, helium does not qualify as a “mineral” under the current definition contained in the Mineral and Petroleum Resources Development Act (MPRDA), which Renergen says renders the appeal by solar plant developer to Tetra4’s right to helium without merit, as the helium cannot be separated from petroleum underground prior to its extraction.

“More importantly, helium is not produced by a geological process but rather through a result of radioactive decay, which is a physical process or nuclear process.

“Regardless of the outcome of the appeal against the explicit inclusion of helium into Tetra4’s production right, [the solar plant developer] commenced construction without obtaining a valid Section 53 consent in an area where Tetra4 has held an undisputed onshore Petroleum Production Right since 2012,” Renergen points out.

In 2022, Tetra4 was approached by the solar plant developer regarding the environmental authorisations for two of its solar projects.

During these discussions, the developer disclosed the existence of the third solar project it is planning.

For the initial two projects, the developer initiated a separate series of engagements with Tetra4 to obtain the required letters of support for the Section 53 consent, Renergen explains.

However, it says that no such engagement was ever undertaken for the third proposed solar plant. “Tetra4 simply assumed the same process would follow in due course as precedent was established.”

In May 2023, the developer, through electronic communication with directors of Tetra4 on the topic of Tetra4’s production right and more specifically the requirement for the Section 53 consent, the developer requested a letter from Tetra4 granting support or permission to build, allowing them to obtain a Section 53 consent for their various projects which Renergen believed would have included the third solar plant, Renergen explains.

Tetra4 indicated that it would issue such letters without requiring compensation on the basis that the developer consult with Tetra4 and provide for future access to the gas-bearing structures.

This condition was acknowledged by the developer’s directors, but no further correspondence in respect of the third solar plant was pursued thereafter, while the engagements continued on the other two developments.

Renergen says that, since the May 2023 interaction, the developer has not engaged meaningfully or in a practical, technical manner in respect of any detrimental impact that the third plant could have on Tetra4’s production right, given that Tetra4 is a petroleum right holder and not a mineral right holder, and had made specific requests to be consulted to obtain Tetra4’s support for a Section 53 consent.

“They chose to proceed with construction knowingly. We struggle to understand why the current [solar plant] director never engaged with Tetra4 on any Section 53 discussion despite being aware of the extent of Tetra4’s production right from May 2023,” Renergen avers.

Tetra4 has filed an appeal in terms of the MPRDA to the Department of Mineral Resources and Energy (DMRE) to consider the entire application, as well as the resultant arbitrary decision by the regional manager, to grant the Section 53 consent, and is hopeful it will receive an appeal decision that sets aside the decision.

Tetra4 further filed an application for the suspension of their current Section 53 consent, subject to the appeal decision, which would effectively require the solar plant developer to halt construction on the basis that further construction would lead to sterilisation of Tetra4’s production right on that land.

However, by the time the application was heard, the construction on the area in question was already advanced, rendering the application as being ineffectual.

Renergen warns that a decision allowing the construction of the solar plant without a valid and complete Section 53 consent within Tetra4’s production right area would set a “dangerous precedent” with far-reaching consequences for the entire sector.

Renergen is of the view that the situation underscores a crucial issue, namely, that if the DMRE allows construction without obtaining consent from existing mineral and petroleum right holders, it could lead to a scenario where all mineral and petroleum rights in South Africa are subordinated to developments on the mining right area or production area, regardless of the fact that these rights are lawful limited real rights that were first in time.

This may effectively amount to the dispossession of mineral and petroleum rights and result in a precedent that is entirely contrary to the objectives of the MPRDA, the company states.

It posits that this shift would undermine investor confidence in the mining industry as a whole.

Tetra4 affirms that it is only seeking to protect access to the known gas-bearing fault lines and structures to continue with its core business under the rights conferred to it by the DMRE in terms of the production right.

“On this basis, co-existence is certainly possible and requires no compensation by [the solar plant developer] to Tetra4.

“However, to date, this consideration to co-exist has been refused by [the developer]. The company remains hopeful that the rule of law will prevail and that measures will be taken to prevent such detrimental precedents from being established for the sake of the entire mining sector,” it states.