Big blow to Renergen 

Renergen’s Tetra4 project cannot proceed with its expansion or undertake any activities associated with it following an appeal from environmental groups that was upheld.

Tetra4 – previously known as Molopo South Africa Exploration and Production – is Renergen’s primary asset and core to the company’s gas production.

It was established in 2005 and awarded its first Exploration Right in 2007. In 2012, some of Tetra4’s exploration rights were converted to onshore petroleum production rights.

In January 2023, Renergen also received a R550 million investment from BEE investor Mahlako Gas Energy for a 5.5% stake in Tetra4.

Renergen has widely promoted the potential of Tetra4 to produce and supply the market with liquefied natural gas (LNG) and liquid helium (LHe).

In its March 2024 quarterly update, Renergen said that its original equipment manufacturer and Tetra4 are completing the last pre-checks and assessments before collectively embarking on the next step of commercial liquefication for customers. 

“As communicated to the market in our December 2023 quarterly report, the liquefication process has already been fully tested, and we foresee no challenges in achieving our next milestone,” the company said.

“Once liquefication commences, the liquid helium will be utilised to further cool down the storage tank to 4 degrees Kelvin and signal the commencement of the final performance test undertaken by the OEM supplier.”

In a recent SENS announcement released on 12 August, Renergen said it is pleased to announce that its LHe production train is now fully operational.

It added that it was accumulating LHe inventory for sale to its customers, whose Iso-container is scheduled to arrive later this month for filling.

CEO Stefano Marani said they could declare South Africa one of a select few countries worldwide to produce liquid helium for the global market.

This comes after years of delays in LHe production and Renergen missing its deadlines communicated to the market and shareholders.

The company’s share price skyrocketed following this latest announcement that it had successfully produced LHe.

Its share price shot up by as much as 31%. By market close, it had gained the most since May 2020, up more than 25%.

Tetra4 expansion and environmental concerns

The current dispute centres around Renergen’s proposed expansion of Tetra4’s gas production operations in South Africa. 

According to the Centre for Environmental Rights (CER), Renergen subsidiary Tetra4 holds the only Gas Production Right issued in South Africa for onshore gas production. 

The production right was granted in 2012 over an area spanning approximately 187,000 hectares of the Free State near the town of Virginia. 

Tetra4 applied for and was issued environmental approvals for an initial project under its Production Right that it calls ‘Cluster 1’.

In 2017, it sought to drill additional wells and construct pipelines, booster and compressor stations, a helium and liquid natural gas (LNG) facility and associated infrastructure. 

In the same year, the Department of Mineral Resources and Energy (DMRE) issued an environmental authorisation to Tetra4 for that purpose. 

Tetra4 has drilled all of the authorised wells and has, therefore, completed its Cluster 1 project. 

It is in the process of applying for the approvals needed for an enormous expansion of its production operations, called ‘Cluster 2’.

The Cluster 2 application area covers around 27,500 hectares. 

This proposed expansion to the existing production activities will, according to Tetra4’s records, involve the following:

• Up to 300 new production wells.
• Around 480km of gas transmission pipelines and associated infrastructure.
• Three compressor stations.
• An additional new combined LNG and LHe plant and associated infrastructure.

In March 2023, Tetra4 commenced the process of applying for a Water Use Licence (WUL) for the proposed Custer 2 expansion. 

It prepared a draft Integrated Water and Waste Management Plan pursuant to that application. 

The appeal

In response to Tetra4’s proposed expansion, the Centre for Environmental Rights (CER) submitted an objection to the project’s integrated water and waste management plan.

This was done on behalf of the CER’s clients – the Mining and Environmental Justice Community Network of South Africa (MEJCON-SA) and Mining Affected Communities United in Action (MACUA).

MEJCON-SA and MACUA are concerned about the proposed project’s risks to an important aquifer, including groundwater contamination with radioactive materials such as radium and uranium.

They claimed that Tetra4’s geohydrological study did not measure radium or levels of radioactivity, nor did it adequately measure uranium. 

“The human health risk from potential groundwater contamination was thus also not assessed,” the organisations said.

MEJCON-SA and MACUA claimed that the following was missed in the geohydrological assessment –

• It did not take into account the 15,000 historical wells that exist in the proposed expansion area.
• It failed to provide a detailed strategy to address the leaching and spilling of hazardous waste to surface and groundwater.
• It did not properly account for its water use and the impact this would have on residents reliant on water from the municipality (Tetra4 will reportedly be using municipal water).
• It did not consider the impacts of climate change, including on South Africa’s scarce water resources.

It should be noted that Tetra4’s appointed environmental assessment practitioner (EAP) provided a tabled response to MEJCON-SA and MACUA’s objections. That response is available here: EAP Response to Objection.

Despite objections, the DMRE granted Tetra4 an integrated environmental authorisation for its Cluster 2 expansion in July 2023. 

In response to this decision and on behalf of its clients, the CER submitted an appeal to the Department of Forestry, Fisheries and the Environment (DFFE) in terms of Section 43 of the National Environmental Management Act.

Specifically, the appeal was lodged against the DMRE’s decision to grant an integrated environmental authorisation (EA) for the proposed Tetra4 Cluster 2 Virginia Gas Production Project activities.

According to the CER’s website, the grounds of appeal are based on –

• The shortcomings in the groundwater impact analysis.
• The failure to consider climate change.
• The failure to conduct adequate public participation.
• The fact that the project is not needed nor desirable.
• The impact of the proposed project on the agricultural and tourism sectors, including food production, employment and livelihoods, was not assessed.
• The fact that it is irrational and dangerous to authorise projects with egregious impacts when the state lacks the resources and capacity to adequately ensure compliance with the conditions of the EA and environmental laws.

Tetra4 filed its Responding Statement late on 14 September 2023. Along with this statement, it submitted a condonation request – essentially a request to excuse a missed deadline or procedural error. 

As Tetra4 was required to show exceptional circumstances that justified the late filing, and these do not exist, MEJCON-SA and MACUA opposed Tetra4’s condonation request. 

Before the DFFE Minister decided on the Appeal, Tetra4’s Environmental Authorisation (EA) was suspended, and no activities were permitted.

Appeal upheld

On 1 August 2024, the newly appointed Minister of Forestry, Fisheries and the Environment, Dr Dion George, handed down his decision on the appeals. 

In the appeal decision, which Daily Investor has seen, the minister dismissed five grounds of appeal but upheld the appeals on two grounds. 

“In as far as I have considered the new information provided by the appellants in relation to the first and second grounds of appeal, I deem it appropriate to remit the application for EA to the DMRE for reconsideration,” he said.

“I am of the view that the appropriate recourse is to afford the applicant an opportunity, as I hereby do, to remedy the identified shortcomings of the EIAr (Environmental Impact Assessment Report).”

Simply put, he directed Tetra4 to reassess the proposed expansion’s climate change impacts and groundwater impacts. 

CER Attorney and Programme Head for Mining Catherine Horsfield told Daily Investor that once Tetra4 has reassessed the expansion’s impact, it is directed to consult with interested and affected parties on the new reports.

Afterwards, it must submit its application for environmental authorisation to the Department of Mineral and Petroleum Resources for reconsideration.

She explained that the environmental assessment was set aside, and Tetra4 must apply again.

“It, therefore, cannot lawfully undertake any of the activities related to the proposed expansion,” she said. 

“Additionally, Tetra4’s application for a water use licence for its expansion is still pending. This means it cannot lawfully undertake any activities associated with the expansion.”

‘Strange’ SENS announcement

Renergen has not provided information about this decision or the appeal to shareholders, and the company did not respond to questions from Daily Investor related to the case.

However, on 14 August 2024, Renergen released a SENS announcement stating that it has “consistently demonstrated its unwavering commitment to sound corporate governance”. 

“Over the past several months, the company has faced allegations regarding potential irregularities in its business practices and South African corporate governance,” Renergen said in the announcement. 

“The company is pleased to announce that after thorough reviews, the relevant South African regulatory bodies have unequivocally cleared the Company and its directors of any alleged wrongdoing, leaving no grounds for further inquiry or action.”

Renergen further explained that the claims raised concerns about the company’s adherence to established regulations and industry standards. 

Stemming from its acquisition of Tetra4 in 2015, the key areas of scrutiny included:

• Allegations relating to company directorships that were not appropriately disclosed.
• The company has not complied with JSE disclosure requirements or has misled investors.
• Certain of the company’s financial statements are not fully in compliance with IFRS.
• Alleged unauthorised discharge of wastewater.

“Responding to these allegations, the relevant South African regulatory authorities initiated comprehensive investigations,” Renergen said.

“We fully cooperated with these inquiries, providing complete transparency and access to all necessary information.”

“With this matter conclusively resolved and our ethical business practices and regulatory compliance decisively validated, we will continue to focus on delivering value to our stakeholders while upholding the highest standards of corporate governance and responsible business conduct.”

Renergen did not respond to Daily Investor’s question on whether this announcement is related to the CER’s appeal.

Renergen CEO Stefano Marani also declined to specify to News24 exactly which regulators had been involved.

However, he told the publication, “I think it’s fair to say that there’s been a lot of mudslinging at the company. Obviously, some allegations were made, and those led to investigations and … we’ve got a clean bill of health.”

“Long story short, it just puts paid to a lot of this mudslinging that took place in social media. The fact of the matter is that a lot of it was just nonsense.”

Horsfield told Daily Investor that the SENS announcement does not appear to be related to the appeal.

However, she said this “in itself is strange because Tetra4 isn’t in a position to proceed with its expansion presently”.

Update from Renergen

Following this article’s publication, Renergen published a statement on SENS (Stock Exchange News Services). The update is provided in full below.

In the Company’s recent AGM, which was attended by representatives from the Centre for Environmental Rights (“CER”) who posed questions in relation to the Phase 2 expansion and environmental authorisation, we want to make clear the Company’s position on the matter just as we did in the AGM:

The Company’s positive Phase 2 Environmental Authorisation (“EA”) was appealed by CER on behalf of MEJCON-SA and MACUA. The Minister dismissed 5 of their 7 grounds of appeal.

The appeal has not resulted in any delays to the progress on Phase 2, nor is it likely to have any impact on the timing of Phase 2. This is due to the fact that our select drilling programme is fully authorised under the Production Right granted in 2012.

On the advice of the Minster’s supporting technical advisory team, the Minster requested that Tetra4 expand upon the Impact Assessment Reports to address areas for improvement observed in the report and in relation to the first and second grounds of appeal.

Once the additional information has been incorporated a revised report is to be submitted to registered I&APs for a further review and commenting period of 30 days and thereafter re-submitted to the DMRE for approval.

We are pleased with the progress and believe that the remaining information to be provided will satisfy the requirements to obtain a positive EA.