INDIGENOUS LAND RIGHTS IN THE ENERGY SECTOR
The challenge of creating enough energy supplies to fuel Chile’s economic growth is a major consideration. Today, the Chilean Government is pressing forward with plans to make the most of the country’s abundant natural resources and to incorporate alternative and renewable power into its grid.
Some of these resources, however, are located in areas that affect indigenous land interests. Although the Chilean government controls subsurface rights for minerals and geothermal energy, it does not provide investors with any guarantees against opposition from ethnic groups, who have objected to developments for economic or environmental reasons. It is up to the investor to negotiate with these groups. If issues are unresolved, they can be referred to the court system, where the Government’s legal policies on such conflicts are still under development.
The Law on Geothermal Energy Concessions (Law No. 19.657, “the Law”) gives the holder of a concession a property right in rem, which is independent from the property of the surface holdings. The right granted under this Law may conflict with holders of other rights in the same territorial areas covered by the geothermal energy concession.
Nevertheless, over the last few years an ill-defined regulatory framework has allowed environmental and social groups to take to court energy projects that have already been approved which has put billions of dollars of investment at risk.
With Chilean elections coming up, frontrunner Michelle Bachelet has been discussing the policies that she would like to put forward. One of the policies is reforming the land-use plans. This will help clarify the locations in which energy projects can be built and some say would be welcomed by the energy sector which is seeking clearer rules.
According to the Chilean government, an estimated 8,000 megawatts needs to be added to Chile’s 17,000 MW of power production capacity by the end of the decade to keep up with demand.
Chile has been recognised as a premier market for solar power projects because of the country’s high-energy prices, strong demand and abundant solar irradiation. There are a record number of projects that have been approved over the last 2 years.
On the other hand, geothermal power has been slow to take off because of the lack of exploratory information. Deep exploratory drilling is extremely costly in Chile and is the riskiest part of geothermal development process. With the proposed launch of a geothermal drilling insurance by year-end to advance development there seems to be some progress being made that should help to strengthen the sector.
Beyond some of the greener energy sources, it is clear that Chile will need to rely on traditional fossil fuels to keep up with its energy demand. The media in Chile is suggesting that presidential candidate Michelle Bachelet is leaning towards LNG imports as the best alternative.
Regardless of the energy source, companies who are looking at developing energy in Chile should be optimistic, as the demand for energy from a variety of sources will be needed to fill the gap. To be successful, companies will need to be proactive and consult with various stakeholders to ensure that their projects receive the support they need to move forward.
Harris Gómez Group is an Australian-Chilean legal and business advisory firm located in Santiago, Chile and Bogota, Colombia . In 2001, HGG was the first Australian law firm to have a local office in Latin America. The firm specialises in Common Law and Latin American cross-border issues in areas such as Mining and Energy, Corporate, Mergers and Acquisitions, Tax, Intellectual Property and Business Enterprises. With over 19 years of experience immersed in the respective legal and business cultures of Australia and Latin America, we create a seamless bridge between the two regions and have become an essential partner to many multinational enterprises.
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