Polluter Pays Principle and Directives in Water and Sanitation Sector

Briefing the Portfolio Committee on Water and Sanitation on the Polluter Pays Principle and directives issued Presented by: Mr Anil Singh Deputy Director-General: NWRI 27 May 2015 PRESENTATION TITLE Presented by: Name Surname Directorate Date

Content overview • Polluter pay principle • Legislative framework • Contraventions – number of Notices & Directives • NWA Case Law • Water use charges & Pricing Strategy • Waste Discharge Charge System • Acid Mine Drainage and Mitigation Strategy

Polluter pay principle • National Environmental Management Act (Act 107 of 1998) • Framework legislation = overall template of environmental law in the country and provides guidance to sectoral legislation • 4(p) The costs of remedying pollution, environmental degradation and consequent adverse health effects and of preventing, controlling or minimising further pollution, environmental damage or adverse health effects must be paid for by those responsible for harming the environment.

Introduction • “Polluter pays principle” (PPP) requires the producers or generators of pollution to pay for the costs of avoiding pollution or of cleaning up or remedying its effects. • The polluter pays principle is an important cornerstone of environmental law. • It is generally accepted as an economic principle aimed at consumer protection. • Therefore, any pollution generated by a process must be paid for from within the cost structure of production. • The polluter pays principle may also be applied to impose sanctions for wrongful conduct, or • To require correct measures to restore a given environmental asset to its pre-damage condition. • The polluter pays principle also serves to steer the conduct of potential polluters • The polluter pays principle has also assumed a prominent position in international environmental policy. • For instance, Principle 16 of the United Nations conference On Environment and Development (Rio Declaration) provides that: • National authorities should endeavour to promote the internalisation of environmental costs and

Case Laws • In Pretoria City Council v De Jagerthe Supreme Court of Appeal outlined the following four considerations in deciding whether reasonable steps had been taken to prevent harm: • (a) the degree or extent of the risk created by the actor's conduct, • (b) the gravity of the possible consequences if the risk of harm materialises, • (c) the utility of the actor's conduct, and • (d) the burden of eliminating the risk of harm. • In the case of Earthlife Africa (Cape Town ) v Director General Department of Environmental Affairs and Tourism ;the court held that the PPP applies both to private and the state. • In other words where the state fails to take reasonable measures to curb the potential environmental harm, the state will be liable for the pollution cost.

General Application of Polluter Pays Principle • Existing Frameworks place government in a reactive position • This is evident in the pricing structures and enforcement mechanisms used to discourage pollution using the PPP. • In essence, most of the time PPP is not a liability principle but rather a principle for the allocation of costs of pollution control. • PPP should promote efficient resource use (e.g. water resources) over and above economic and social obligations. • In terms of Section 28 of NEMA measures should be in place to prevent pollution from occurring, continuing and recurring.

General application of principle • Onus is on the polluter to prove that steps were taken to mitigate/ prevent pollution from occurring. • PPP is applicable at domestic level, no provision to govern relations between states at international level. • The PPP applies to identifiable polluters that have sufficient economic resources to pay for their pollution. • PPP advocates that producers or generators of pollution to pay for the costs of avoiding pollution or of cleaning up or remedying its effects. • This principle applies to both government and private persons. • Polluters should prove that measures were taken to prevent pollution

NATIONAL WATER ACT Prevention and remedying effects of pollution S19 an owner of land, person in control of land or a person who occupies or uses the land on which any activity or process causes or has caused pollution of a water resource must take all reasonable measures to remedy the effects of the pollution – should a person fail to comply DWS can take the measures necessary and recover the costs associated

NATIONAL WATER ACT Control of emergency incidents S20 any person responsible for an incident, owns the substance involved in the incident or was in control of the substance at the time of the incident must take all reasonable measures to remedy the effects of the incident – should a person fail to comply DWS can take the measures necessary and recover the costs associated

NATIONAL WATER ACT Rectifications of contraventions S53 DWS may direct a person or the owner of the property in relation to a contravention of an authorisation direct them to take any action specified to rectify the contravention. DWS can carry out any works and take any other action necessary to rectify the contravention and recover its reasonable costs from the person on whom the notice was served or apply to a competent court for appropriate relief

Number of Notices and Directives Issued per Region 2014/2015

Sector Breakdown on Notices 2014/2015

Sector Breakdown on Directives

Notices Issued against Polluters vs Other Users

Directives Issued against Polluters vs Other Users

NWA Case law…

State vs. Harmony Gold (SCoA) • Five gold mining companies (including the appellant, Harmony) conducted gold mining operations in an area in the North West known as the KOSH area. On 1 November 2005 these 5 companies were issued with a directive in terms of section 19(3) of the NWA. The directive required the companies to take anti-pollution measures in respect of ground and surface water contamination caused by their gold mining activities and to continue taking such measures until such time as an agreement, and a joint proposal towards the long term sustainable management of water arising from mining activities in the KOSH area, was submitted to, and approved by, the Department of Water Affairs (DWA). • Since about 2003 Harmony conducted its gold mining operations in the KOSH area on certain immovable property belonging to ARMGold. ARMGold then sold its immovable property and gold mining business to Pamodzi. In terms of the sale, and in February 2008, Pamodzi assumed Harmony’s obligations both in terms of the gold mining operations and the directive.

State vs. Harmony Gold (Supreme Court of Appeal) • During March 2009, Pamodzi was finally liquidated. Accordingly, it no longer had the finances to comply with the directive. • DWA and the other mining companies argued that, notwithstanding Harmony’s agreement with Pamodzi, Harmony retained the duty to comply with the directive. • Harmony disagreed and argued that a directive issued under section 19(3) of the NWA remains valid only for as long as the person to whom it was issued owns, controls, occupies or uses the land in question. Thus, so the argument went, the directive became unenforceable against Harmony from the date upon which Pamodzi took ownership of the land and control of the mining operations conducted thereon. • Harmony applied to the North Gauteng High Court in terms of which it sought the review and setting aside of the directive, or of the refusal to withdraw it and a declaration that it became invalid when Pamodzi took ownership of the land and control of the gold mining operations. • The High Court dismissed the application giving rise to the present appeal.

State vs. Anker Coal Court: Ermelo Regional Court • The largest criminal penalty imposed for environmental offences in South Africa to date was recently handed down by a South African Court. • Golfview's offences included: illegally mining in a wetland; the diversion of water resources; inadequate pollution control; and the unauthorized transformation of three hectares of indigenous vegetation.

State vs. Anker Coal Court: Ermelo Regional Court • The conviction and sentence was imposed as part of a plea agreement in terms of which Golfview is required to pay ZAR 1 million each to the Mpumalanga Department of Economic Development; the Department of Environmental Affairs and Tourism; the Mpumalanga Tourism and Parks Agency; and the Water Research Council. An additional ZAR 1 million penalty has been conditionally suspended for five years. • The court also imposed an order that forces Golfview to rehabilitate the wetland according to an approved rehabilitation report. The potential cost of the rehabilitation has been estimated at between ZAR 50 and ZAR 100 million. • .

State vs. Anker Coal Court: Ermelo Regional Court • The conviction follows the conviction and sentencing of Anker Coal and Mineral Holdings (Pty) Ltd (Anker Coal) and its Director in April this year for similar infringements of environmental legislation and the Mineral and Petroleum Development Resources Act, No. 28 of 2002. The conviction of Anker Coal was the first time that a mining company has been held criminally liable for the contravention of environmental legislation. It was also the first time that provisions of environmental legislation were invoked to hold a director of a mining company criminally liable.

State vs. Anker Coal Court: Ermelo Regional Court • The Golfview conviction is significant not only because of the large fine imposed by the court, but also because it demonstrates that non-governmental authorities and other private persons are prepared to institute criminal proceedings where the environmental authorities are slow or reluctant to do so, and that the prosecuting authority is pursuing prosecutions of companies and directors.

Polluter pay principle – water use charges • used to fund the direct and related costs of water resource management, development and use, and may also be used to achieve an equitable and efficient allocation of water. • used to ensure compliance with prescribed standards and water management practices according to the user pays and polluter pays principles. principles

Polluter pay principle – water use charges • used as a means of encouraging reduction in waste, and provision is made for incentives for effective and efficient water use • Non‑payment of water use charges will attract penalties, including the possible restriction or suspension of water supply from a water work or of an authorisation to use water. • The provision on the revision draft of the Pricing Strategy are as follows: principles

KEY PRINCIPLES OF PRICING STRATEGY • Full Recovery of costs - Provides for recovery of all costs associated with management, use, conservation and development of water resources and associated administrative and institutional costs. • Application of Polluter pays and user pays principle- Polluters and users must pay for the costs of their water use and take into account the need for targeted subsidies where users or polluters are not able to afford costs resulting from full application of principles. • Differential charges and capping of water use charges- allows for differential charges and the capping of water use charges to designated water use sectors and supporting the achievement of key national objectives, i.e. food security, racial and gender equity, job creation, economic level. 25

WASTE DISCHARGE CHARGES • Based on polluter pays principle, in terms of Section 56 (5) of NWA “The pricing strategy may provide for a differential rate for waste discharges, taking into account -(a) the characteristics of the waste discharged;(b) the amount and quality of the waste discharged” • Provides an economic instrument to assist other regulatory tools in moving towards (or maintaining) the desired state of surface water resources, represented by Resource Quality Objectives (RQOs) • Will be implemented at a catchment or sub-catchment level, e.g. in catchments where Resource Quality Objectives are either exceeded or threatened; or will be levied on water quality variables that critically impact on RQOs, e.g. nutrients, salinity, Heavy Metals, organic material, etc. 26

Waste Discharge Charge System (WDCS) • Economic measure to • improve water quality • achieve water quality objectives • through waste load reduction • Reduction either at source or in the resource • Cost recovery mitigation charge • Behaviour changing waste discharge levy

WDCS Mandate • WDCS developed by the DWS • Legal mandate • Constitution • National Water Act • Section 56 (5) – waste discharge charges • Section 56 (6) – incentives • Established under the DWS Pricing Strategy • Based on Polluter Pays Principle

OVERVIEW OF THE PHASES Phase 4 (2012-2014) Charge Rates Phase 3 (2003-2005): Final Strategy Phase 2 (2001-2002): Waste Discharge Charge Draft Strategy Phase 1 (2000/01): Framework Document

Technical Elements: Principles • RQO’s are a measure of acceptable risk • to balance resource protection and utilization • to set of criteria describing the state of a resource to facilitate beneficial use • that includes water quality • determined through a process of consultation • WDCS premised on RQOs • WDCS applies where RQOs are threatened • or exceeded

Technical Elements: Users • All waste discharge related uses requiring registration under Section 21 • Sections 21 (e): engaging in a controlled activity • Section 21 (f): discharging waste or water containing waste into a water resource • Section 21 (g): disposing of waste in a manner which may detrimentally impact on a water resource • Section 21 (h): disposing of water which contains waste from, or which has been heated in, any industrial or power generation process

Technical Elements: Users • Includes some Non-Point Sources (NPS) • Disposal of effluent to land or facility • e.g. tailings dams, irrigated effluent, evaporation ponds • Disposal of waste to land or facility • e.g. landfill, waste-rock dumps, flyash disposal • Controlled land-use activities • e.g. confined animal facilities, dirty water systems

Technical Elements: Users • Excludes some important NPS • urban wash-off • Failing infrastructure and surcharging sewers • run–off from settlements and developments • accident events • irrigation return-flow • Dry land farming and forestry • extensive animal husbandry

Technical Elements: Constituents • WDCS can be applied to any variable • Common variables include: • Nutrients • Salinity • pH • Heavy metals • Organic matter

Technical Elements: Types of Charges • Incentive Charge/Waste Discharge Levy • Basis of the WDCS • Applied in all catchments in which WDCS is implemented • Reduce pollution load at source • Mitigation Charge • Adjunct to the Incentive Charge • Applied in some catchments in which WDCS is implemented • Instrument for recovering costs of mitigation in the resource • Mitigate pollution and impacts in the resource

Acid Mine Drainage- Introduction • AMD occurs when water reacts with mine geological strata to produce acidic water with elevated salinity and dissolved metals • AMD contaminates ground/ surface water resources and creates other undesirable environmental impacts • AMD typically manifests long after mine closure • SA’s first known incident of gold mining AMD occurred in the West Rand in September 2002 • Extensively-documented AMD in the Witwatersrand gold fields is the legacy of >140 years of mining in Johannesburg and surrounds • AMD is a perpetual problem – with SA’s reliance on coal-fired electrical generation, similar AMD scenarios may become prevalent in coal mining areas

“Polluter pays” and AMD – issues to consider… • Lack of definitive policy on AMD • S19/ 20 of NWA permits invoking of “Polluter pays” when addressing AMD • In parallel, S28/30 of NEMA and S38 of MPRDA also triggers “Polluter pays” • Nominal AMD impacts may be managed during life of mine due to conditions in WUL, EMPR and mining right authorisations…however… • AMD impact usually apparent only long after mines have closed – how is liability apportioned and “Polluter pays” invoked in such cases?

“Polluter pays” and AMD – issues to consider… • In 2009, DWS’ attempts to apportion liability and apply “Polluter pays” principle for AMD-generating mines in the West Rand was unsuccessful – based on engagements between the legal teams, S19/20 directives were rescinded • Application of WDCS may enable some degree of “Polluter pays” for AMD mitigation

Mitigation strategy AMD – Witwatersrand Gold Fields • DWS is implementing remedial interventions across the affected areas. The cost of this is borne from fiscal allocations or loans attached to the fiscus i.e. it is ultimately tax payers who are footing the bill and the “polluter pays” is yet to apply.

Mitigation strategy AMD – Witwatersrand Gold Fields • Proposed Environmental Levy (fisus) on mining sector for AMD mitigation has potential to serve as “superfund” for AMD mitigation after mine closure • DWS is assisting National Treasury on proposing a levy for application in the mining sector, where funding will be ring-fenced for mitigating mining-impacted waters. (planned engagement with mining sector by NT with aim of implementing 2016/17.

Thank you

Polluter Pays Principle and Directives in Water and Sanitation Sector