Its back to the drawing board for big oil companies Shell and Impact Africa after the Constitutional Court on Friday effectively blocked any chance of them renewing their Wild Coast oil and gas exploration rights.
It has taken more than a decade to untangle the mess that started with mineral and petroleum resources minister Gwede Mantashe in 2014 granting the oil and gas exploration right.
Wild Coast communities and environmental groups launched legal action to stop the offshore seismic surveys which, in 2022, culminated in a full bench of the Makhanda high court declaring the decision unlawful and setting it — as well as two subsequent renewals of that right — aside.
On appeal, the Supreme Court of Appeal (SCA) in 2024 agreed that the process followed had been unlawful.
But it threw the two companies a lifeline by suspending the setting aside of the right pending a decision by the minister on Shell and Impact Africa’s third and final application to renew the exploration permit.
The SCA said this was a “just and equitable” remedy given that the two companies had spent more than R1bn on the process and had only one last opportunity to renew it.
It said the department had also subsequently placed a moratorium on exploration rights over the entire SA coast, and Shell and Impact might never get the opportunity to exercise the right.
It also expressed the concern that setting aside the permit in its entirety would have a “chilling effect” on foreign investment.
It directed instead that Shell and Impact Africa undertake a further public participation process to correct the serious defects identified.
The Constitutional Court had granted leave to appeal only on the issue of whether the companies could legally be allowed to use their third renewal application to fix an initial, unlawful consultation process.
The CC decided it could not.
In the majority judgment, judge Jody Kollapen said a just and equitable remedy had to consider the interaction between people, the environment (in particular, the Wild Coast); and social and economic development.
He said these three crucial components did not stand separate and isolated from each other but were “interconnected and interdependent”.
“This entails the need to recognise the value and the necessity of economic development, while ensuring that such development is sustainable, carefully balancing environmental and socio-economic consideration.”
He described the 250km strip of Wild Coast as overwhelmingly beautiful and carried “deep cultural and economic significance, supporting the spiritual practices and customary fishing rights of the communities living along the coast”.
It was also home to many species of endangered marine and avian life affording it a high level of protection.
He said the SCA had explicitly endorsed the substantive findings of the Makhanda high court’s, which led it setting aside the right and its subsequent renewals.
“It accepted that the exploration right and the two renewals had been granted unlawfully.”
He ruled in the majority judgment that the SCA had therefore “misdirected itself in law and the facts” in then ordering the high court order be suspended and the companies be given the chance to remedy the defects in its consultation of interested parties.
But, he said the defects were not just around consultation but also the failure by the minister to consider environmental impacts, including climate change.
In any event, he said a flawed consultation process during the application phase could not be cured by improved public consultation in the renewal stage, of a right.
He said the companies had contributed to the unlawful decision because their application for the exploration right was “seriously and indeed fatally flawed”.
“They brought a flawed application which was unlawfully granted.
“That decision was properly reviewed and set aside and placed them in the same position as everyone else affected by the moratorium.
“No special considerations exist for them to be exempt from the moratorium …
“Taken together, the financial prejudice to the company respondents from setting aside the decisions while a moratorium is in place cannot outweigh the gravity of the unlawfulness in this case, especially where there is no demonstrable public interest in preserving the unlawful right or allowing the application for the right to be reconsidered on substantively new grounds.”
Daily Dispatch