The new Hydrocarbons bill: public or private interests?

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On the first hours of July 29th, the Chamber of Deputies approved the draft bill emerged from the Hydrocarbons Law. One of the critical aspects of the aforementioned law is to be found on the fourth chapter, which refers to the superficial use and occupation of lands in order to transform them into fields for exploration and exploitation of hydrocarbons. This law, unlike the previous one, replaces the term “expropriation” with “temporary occupation”, while also adding the possibility of a negotiation between private entities and only if this scheme fails will the government be allowed to intervene. Ideally, this system should provide a balance between the interests of contractors and property owners but several circumstances create uncertainty regarding the resolution of any potential conflict that might arise from this negotiation scheme.

The first thing that is worth noticing is that there are at least two moments where decisions regarding the land ownership can be prosecuted. The first of these scenarios is when the negotiation between private stakeholders fails and the company asks for the exercising of a concept known as servitude or a mandatory superficial use via leasing. In this case, the proprietor has the option of protecting himself against the replacement of his will by the authorities’: it should be interesting to see whether the judicial stances will be solved according to its public use. In case the legal protection does not favor the original owner, there is still the possibility of expropriation since it is not necessary for a law to have the explicit term as a way to apply the procedure. The second scenario would come into force when there is non-compliance with the terms previously agreed by private stakeholders and that were also subject to a legality control from an agricultural tribunal through the issuance of a court ruling. In this case, there can be applied mechanisms of dispute settlements on civil, market or agricultural issues, according to each particular stakeholder.

Nevertheless, it does not matter how theoretically effective this decision and conflict resolution process might prove to be for the allocation of properties if, in the end, the general criteria is considered unfair because it favors contractors. The problem is that the Hydrocarbons Law assumes that the exploitation of hydrocarbons belongs is a public interest issue and, thus, favors the economic and social interests of those who own the land. This vision is derived from a leasing outlook in which resources are exploited in an intensive manner in order to obtain short-term objectives and not taking into account a broader perspective, with other social and economic benefits.

This way, these processes appear to become legally scrutinized and their consequences will be essential for both the guarantee and certainty that offered for investors as a way to defend the legitimate right of land owners and, if given the situation, ask for a fair compensation. This undoubtedly represents a major challenge to address the targets of agricultural legislation with those of the energy reform and if these results will demonstrate if the Constitutional reforms will actually establish a framework that will protect citizens from government abuse or whether it will be the other way around.


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