Green Scorpions close in as Karpowership tries to save R225-billion deal

Green Scorpions close in as Karpowership tries to save R225-billion deal

  • The Turkish-led
    consortium has filed an appeal against the environment department’s decision to
    reject its powership solution for government’s emergency power programme.
  • Environment minister
    Barbara Creecy has roughly 70 days to rule on the appeal, while the energy
    department mulls extending deadlines for the deal.  
  • Meanwhile, the Green
    Scorpions have recommended criminal charges arising from Karpowership’s earlier
    attempt to bypass environmental regulations.

Karpowership SA is not going down without a fight: on
Tuesday it filed an 11th hour appeal against government’s decision
to reject its ship-borne powerplants on environmental grounds.

But its R225-billion deal faces fresh icebergs ahead.

The Green Scorpions, the law enforcement unit tasked
with investigating environmental crimes, believes that agents of the company
should face criminal charges for intentionally misleading the Department of
Forestry, Fisheries and the Environment (DFFE).

“The docket was referred to the Director of
Public Prosecutions (“DPP”) North Gauteng on the 15th of June 2021.
The DPP is in the process of reviewing the docket, and the investigating
officer has been requested to provide additional clarity on certain aspects of
the investigation,” spokesperson Albi Modise confirmed in a written
statement.

The criminal charges relate to Karpowership’s earlier
attempt to bypass the lengthy and costly environmental studies required by the National
Environmental Management Act (NEMA).

Companies can apply for an exemption under section 30a
of NEMA if there is an emergency where quick action can save lives and prevent
further environmental damage.

In June 2020, Karpowership used this clause to get its
wide-reaching exemption for its powerships by claiming that they would
deliver emergency power to assist with the Covid-19 pandemic
.

The section 30a permits were withdrawn after the DFFE concluded
that “there was in fact no emergency situation”.

In terms of the legislation, it is an offence for
anyone to “wilfully, knowingly or negligently, provide incorrect or
misleading information” to the department in an attempt to secure an
exemption. Anyone found guilty faces a fine of up to R10 million and/or jail
time of up to 10 years.

In early June, DFFE confirmed that “Environmental
Management Inspectors within the Department”, aka the Green Scorpions, were
investigating Karpowership and its environmental consultants: Triplo4
Sustainable Solutions and Nselenduna Consulting. 

“Should prima facie evidence exist of an
offence, the Department will bring the relevant information to the attention of
the South African Police Service for further investigation and/or the Director of
Public Prosecutions to commence a prosecution,” Modise told us at the
time.

By referring the case to the police and the director
of public prosecutions, the DFFE is effectively saying it has found prima
facie
evidence.

However, DFFE would not confirm whether it is
Karpowership’s representatives or its environmental consultants, or both, who
will be the focus of any potential charges.

Neither Karpowership
nor its consultants responded by the time this article was published. We will
update the article with any comment that is forthcoming.

‘Substandard’ environmental reports

Although the Green Scorpion’s investigation is
separate from the appeal Karpowership filed on Tuesday, the two cases are
intertwined.

After its Section 30a exemptions were withdrawn in
August 2020, Karpowership was forced to conduct environmental impact
assessments (EIAs) on its three proposed projects in the ports of Richards Bay,
Coega and Saldanha.

In March this year, these three projects were selected
as preferred bidders for the Risk Mitigation Independent Power Producer
Procurement Programme (RMI4P). Collectively the gas-fired powerships would
deliver 1 220MW of electricity to Eskom.

At the time, the EIAs were incomplete. But in June,
DFFE said it would not grant the environmental authorisations necessary for these
RMI4P projects to go ahead, citing numerous shortcomings in the EIAs.

Amongst the many concerns was that the powerships
would cause irreparable harm to birds and marine life.

The appeal, filed by Karpowership on Tuesday, seeks to
overturn this decision.

But the Green Scorpions’ investigation makes that
harder to do. Essentially, Karpowership and/or its consultants are accused of
first lying to bypass an EIA, then producing allegedly substandard EIAs that
downplayed the environmental damage the powerships would cause.

The DFFE previously told us: “If the outcome of
the investigation reveals that there was something untoward about their
conduct, then that would have a material effect on the current EIA applications
that is under review by the Department.”

Doubling down

Karpowership, meanwhile, is doubling down on claims
that DFFE has been misled by a “vicious, adversarial and aggressive”
campaign.

When DFFE’s decision was announced in late June,
Karpowership’s knee-jerk reaction was to claim that the department had “allowed
a misinformation campaign to derail the [DMRE’s] strategic plan to end load
shedding and address South Africa’s economic and energy crisis”.

“South Africans should understand that the
decision on behalf of the DFFE threatens the delivery of this power and will
extend load shedding for years to come,” it warned in a statement to
media.

In its 77-page appeal on the 450 MW Richards Bay
project, the company made similar claims, lashing out at its critics, including
the media:

“The Minister will be aware that the Karpowership
proposal has become highly controversial and is the subject of attacks at a multiplicity
of levels, most of which are uninformed and needlessly adversarial … The Project
also raised significant controversy particularly from the media and NGOs, which
we believe to be unfounded and emotive,” it said.

At another point in the appeal, Karpowership accuses
DFFE officials of being “downright obstructive” for failing to
provide guidance on its application.

However, the appeal also sets out the technical
reasons why Karpowership believes DFFE erred by refusing to approve its
projects. One of the concerns DFFE cited was that there was inadequate public
consultation. Karpowership insists that it met the minimum standards.

Another reason DFFE gave for rejecting the projects
was that Karpowership had failed to conduct sufficient underwater studies. The
company argues that since there are no powerships currently moored in South Africa
that it relied on comparative international studies.

It argues that DFFE could approve the projects but
require the company to conduct ongoing studies of underwater noise and the
impact on the environment.

The appeal also recycles the argument that
Karpowership will help to end load shedding, and that its projects should be
treated as strategically important for the country.

“The Project … is a national priority, requiring
a degree of urgency,” it said.

“The DFFE failed to consider the strategic nature
of the Project … given the impacts of the Project on energy risk mitigation
and the development and growth of the SA Economy.”

This argument is supported to two other appeals filed
by business forums: the West Coast Black Business Alliance and the National
African Federated Chamber of Commerce and Industry. Both implore DFFE to
consider the socio-economic plusses of Karpowership’s projects.

The next 70 days

In terms of the regulations, the appeal will play out
over roughly the next 70 days, a process governed by the National Appeal
Regulations (2014).

Interested and affected parties have 20 days to
compile responding statements, challenging the arguments contained in
Karpowership’s appeal.

While Minister Barbara Creecy can grant an extension
to this timeframe, there is no provision in the regulations for her to speed up
this vital consultation process.

After that, the department can move faster if it
chooses to do so. The person within the department handling the appeal (the
appeal administrator) has up to 30 days to come up with a recommendation. They
can also appoint an independent expert or panel of experts to provide input.

But appeal administrator only makes a recommendation
on whether to uphold the appeal. That recommendation is then sent to the
minister who has another 20 days to take the final decision.

While Creecy could make a decision sooner, she can, by
our calculations, wait until early September to make a decision on whether the
sink or save Karpowership’s projects.

RMI4P in question

So, where does this leave the RMI4P and can
Karpowership continue as a preferred bidder?

Although Karpowership’s appeal was filed within the stipulated
20-day window set out in the National Appeal Regulations, it was filed too late
for the projects to meet the deadline set by the rules of the RMI4P tender.

The tender required that all preferred bidders reach
financial close by 31 July 2021; which included having “unconditional”
environmental authorisations in place. 

However, the Department of Mineral Resources and
Energy (DMRE) has hinted that this deadline could be moved.

“The date of 31 July remains. However, this will
depend on the DMRE and Eskom having achieved all the necessary [Public Finance
Management Act] approvals,” DMRE told us in a written statement.

But shifting the deadline risks attracting further
legal challenges.

DMRE is already facing a legal challenge from losing
bidder DNG Power which is seeking to overturn the tender on the basis that
Karpowership was given preferential treatment.

In recently filed court papers, DNG chief executive
Aldworth Mbalati claimed that the department and others “went to great
lengths to ensure that the friction in the course of [Karpowership’s] path was minimised”
and that Karpowership “enjoyed a less-challenging bid process” than
other bidders.

Any attempt to relax the deadlines seemingly for
Karpowership’s benefit would fuel those claims.

But DMRE told us that the case itself was putting the
31 July deadline under pressure: “The case was scheduled for 21-23 July
2021, However, we have been informed that the assigned Judge is no longer
available on those dates, we are waiting for the Deputy Judge President to
assign another Judge to hear the case.”

The RMI4P plans to bring 2 000MW of power online by
December 2022.

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