On May 7, 2015, the Provisional Conciliation Commission presented to the Plenary Session of the Senate and House of Representatives its Conciliation Report on the Draft Law of the 2014-2018 National Development Plan ("NDP"). The reconciled text includes new aspects and reforms to the current mining legislation, the most important of which are:
Overlapping of areas of unconventional hydrocarbon deposits and mining titles
The need to coordinate unconventional hydrocarbons exploration/exploitation projects and mining projects in the event of their areas overlapping is maintained. In this sense, it is still assumed that the titleholders of both rights will reach an operational agreement for the development of both resources so as to enable an integrated and coordinated management of both activities.
In such cases, the mining authority may authorize the suspension of the mining titles without affecting the contractual term. The NDP does not provide what will happen if there is no agreement between the parties, because in the reconciled text of the NDP the authority of the Ministry of Mines and Energy ("MME") to determine conditions for the integrated handling of the operations is eliminated.
Return of areas for mining formalization. (Article 19 of the reconciled text)
The return of areas by choice of the beneficiary of a mining title is authorized, even though such mining titles do not overlap with requests for legalization by traditional mining. This is in order to contribute to the formalization and relocation of small traditional miners who have carried out exploitation activities in areas of environmental or social restriction and therefore have to be relocated.
The Government must regulate the conditions for the acceptance of the returns and / or waivers of areas for the purposes of formalization. This measure seeks to facilitate the process of formalization of traditional miners that are being promoted by the Ministry of Mines and Energy ("MME"), and unblock some areas whose current holders have not been able to return them due to the interpretation adopted by the National Mining Agency and the Secretariat of Mines of the Government of Antioquia in relation to the total or partial waiver of mining titles.
Furthermore, the reconciled text establishes strict environmental protection mechanisms for granting mining formalization subcontracts such as: (i) the obligation to apply for and obtain an environmental license, (ii) until the environmental permit is obtained, the small miner must apply the Environmental Mining Guidelines, and (iii) the prohibition of establishing areas for mining formalization or entering into formalization subcontracts in reserve areas according to the terms of Law 2 of 1959.
Requests for formalization of traditional mining currently being processed. (Article 19 of the reconciled text)
The reconciled text retains the original wording of the Draft NDP Law. In this regard we note that the NDP establishes a term of two years counted as of the issuance thereof for resolving applications for formalization of traditional mining that are currently being processed.
This term will be relevant to the extent that it will resolve the situation of mining titles under which current traditional exploitation activities are being undertaken, protected by an application for legalization.
In any event, it is unclear what happens if the application for legalization has not been resolved within two years, which may create legal uncertainty for both the applicant and for those interested in the area.
Evaluation of the environmental management and control instruments in the processing of small-scale mining activities. (Article 19 of the reconciled text)
A relevant aspect is that the reconciled text orders environmental authorities to immediately take a decision on the merits of applications for environmental management and control instruments of small-scale mining activities protected by mining titles, that have not been resolved under the terms established in the corresponding regulation, failing which the responsible official will be given a disciplinary sanction for serious misconduct.
This measure seeks to expedite the study of environmental management and control instruments of mining activities that generate lower environmental impact, in order to debottleneck the environmental procedures.
Overlapping of areas of unconventional hydrocarbons deposits and mining titles. (Article 20 of the reconciled text)
The reconciled text establishes that if the parties reach an operational agreement for the development of both resources, the mining authority may authorize suspension of the mining rights without affecting the contractual term. We understand that such a suspension would be authorized to allow for an integrated and coordinated management of both activities.
Another aspect is that the reconciled text states that the MME must delimit the strategic areas for mining and energy development in a period not exceeding twelve months counted as of the entry into force of the NDP.
For its part, the text removes the MME’s authority to determine the conditions under which the integrated management of operations is to be conducted, if there is no agreement between the parties.
The NDP does not set guidelines for operational agreements or directives to be followed by the MME when regulating the development of joint operations in the event of overlapping areas.
Meanwhile, it is considered that the term granted for delimiting these areas is not sufficient to undertake the studies necessary to determine their mineral potential. Furthermore, the term provided in the Article is not subject to extension; thus it is unclear what would happen if the areas have not been determined in the twelve months granted to such effect, which may create legal uncertainty for both the mining company and for those interested in exploiting unconventional hydrocarbons.
Classification of types of mining. (Article 21 of the reconciled text)
The reconciled text retains the original wording of the Draft NDP Law; therefore we reiterate that mining activities will be classified in subsistence mining, small mining, medium mining and large-scale mining, which must be defined by the Government. The factors taken into account by the Government to define and establish the requirements will be the number of hectares and production by type of mineral.
This classification will be relevant to the extent that clear and fair public policies are set for every mining sector, thus generating legal stability.
It is important to note that Law 685 of 2001 eliminated the classification of types of mining and the NDP reestablishes them.
Economic capacity. (Article 22 of the reconciled text)
Law 1382 of 2010 regulated the economic capacity of the mining company, a requirement that was eliminated by judicial annulment. Then Decrees 935 and 1300 of 2013 established economic capacity requirements for applicants for mining rights. However, these decrees have been sued and were temporarily suspended by the Council of State.
The reconciled text of the NDP maintains the reactivation of the accreditation of economic capacity for the granting of a mining title. However, it is important to note that the requirement of the accreditation of the economic capacity of the beneficiaries of an assignment of rights in the process of a concession agreement and the tax of 10% on the assignment of mining rights are eliminated.
The reconciled text also determines that the requirement of the accreditation of economic capacity only applies for the concession agreement proposals that are submitted after the entry into force of the NDP, thus excepting the proposals that are being studied prior to the term thereof.
The relevance of this article will depend on the parameters set by the Government to determine the economic capacity required of the mining company. It is very important that the participation of junior exploration companies that are critical in the mining cycle not be restricted.
Social management of mining projects. (Article 22 of the reconciled text)
The minutes of the mining concession agreement must be amended to include the concessionaire’s undertaking to prepare and implement Social Management Plans that must include the social development programs, projects and related activities to be determined by the Mining Authority.
In addition, the reconciled text determines that verification of compliance with the Social Management Plan by the Mining Authority will be part of the auditing process and may be financed with revenues derived from this process.
The modification of the minutes of the concession agreement was already regulated by Resolution 898 of December 26, 2014, and the concession agreements signed after that date already include this change. According to Resolution 898, the Social Management Plan must be submitted along with the works and facilities program.
Integration of areas. (Article 23 of the reconciled text)
Law 685 of 2001 (the Mining Code), regulated the integration of areas for mining titles that were adjacent or neighboring. However, the possibility of integrating other than adjoining areas was unclear. The NDP clarifies the possibility of integrating areas of the same deposit, even if they are not neighboring or adjacent. However, the Mining Authority may impose new contract terms and determine considerations additional to royalties. This provision has to be regulated by the Government.
Moreover, the reconciled text makes the proviso that the integration of areas shall under no circumstance give rise to extensions of mining rights.
In this regard it is important to mention that the integration of areas was already regulated by Decree 467 of March 17, 2015 and Resolution 209 of April 14, 2015.
Mine closure. (Article 24 of the reconciled text)
The Government will determine the conditions, provision of resources and guarantees to implement the Mine Closure and Abandonment Plan as of the exploration stage, including the construction and assembly stage, as well as their approval and performance. It is important to note that the Mining Code does not regulate the procedure for the closure of mines.
Another aspect, in connection with environmental liabilities, is that the reconciled text determines that the Government must establish and direct the implementation of a comprehensive strategy for the environmental identification, care and remediation of mining areas that have been abandoned, or that have been affected by illegal mining, especially those that pose a serious environmental concern, risk to people, property and activities and vital infrastructure.
The identification of environmental liabilities was not regulated by the mining legislation, however, this Article of the NDP does not determine a deadline for the establishment and implementation of the strategy for the care and remediation of the affected areas.
Calculation of surface rights. (Article 27 of the reconciled text)
The reconciled text continues to calculate the surface rights according to the number of hectares and title exploration year. However, it reduces the value determined for the first eight years of the exploration stage for titles with over 151 hectares and increases the value of the eighth year of exploration on, depending on the number of hectares. As follows:
Click here to view table.
The last surface rights paid during the exploration stage will be paid for the stages of construction and assembly and further exploration.
These adjustments will only be applied to concession agreements that are entered into after the effective date of Law.
Strategic mining reserve area. (Article 20 of the reconciled text)
The possibility of declaring strategic mining areas as envisaged in the previous National Development Plan is reiterated and they will be granted through objective selection processes.
However, this Draft includes the authority to delimit these areas indefinitely, provided they are free.
The reconciled text adds the following: (i) These areas shall not be declared in delimited areas such as moors and wetlands or exclusion zones in accordance with the provisions of the regulations currently in force, and (ii) in the Special Exploration and Exploitation Contracts arising from these delimitations, special rules and obligations may be established in addition to or different from those set forth in the Mining Code.
Furthermore, the possibility remains of declaring reserved areas for the formalization of small miners in free areas or those that are delivered by the mining company under the figure of devolution of areas for mining formalization.
It is important to note, as published on May 20 this year, that the Council of State has temporarily suspended the legal effects of the rules that created 516 strategic mining areas in 22 departments of the country, with an area of 20,470,200 hectares (Resolution 180241/12 of the Ministry of Mines and Resolutions 0042/12 and 429/13 of the National Mining Agency). Consequently, the applicability of this Article will depend on the final decision on this matter taken by the Council of State.
Protection and limits of moors.
(Article 173 of the reconciled text)The text of the NPD still bans the exploration and exploitation of non-renewable natural resources and the construction of oil refineries in areas defined as moors (páramos).
The Ministry of the Environment and Sustainable Development must delimit the areas of moorland within the area of reference defined in the mapping generated by the Alexander Von Humboldt Institute at a scale of 1:100,000 or 1:25,000. The areas that are not included in the delimitation will be subject to zoning and integral management by the local authorities, in accordance with the guidelines established by the regional autonomous corporations. In the area of reference that is not included within the area of delimited moorland, the granting of new mining titles will not be permitted.
Meanwhile, and in order to protect the acquired rights, the NDP determines that the exploration and exploitation of non-renewable natural resources that have an environmental license and contract or equivalent environmental control and management instrument, awarded with prior to February 9, 2010 for mining activities, may continue to operate until completion but without possibility of extension.
However, the NDP itself determines that the Environmental Authorities must review the environmental licenses granted before the specified period and any breach of the terms and conditions thereof, will result in the expiration of the mining title pursuant to the mining legislation or the revocation of the environmental license.
It also provides that if, despite the existence of environmental license, potential environmental damage in an area defined as moorland cannot be mitigated, corrected or compensated, mining activities must stop.
Although the Article intends to resolve the current dispute over the rights acquired by holders of concession agreements in areas defined as moorland, it is important to bear in mind the limits established in environmental matters for the development of these activities in these areas, even when the titleholder has an environmental license and concession agreement.
Extension of mining concessions.
The reconciled text explicitly establishes the authorization to continue to apply for extensions of the exploration stage for up to eleven years. The party interested in applying for these extensions must meet certain technical and economic requirements set forth in the NDP and show that it is up-to-date with the payment obligations of surface rights and renewal of Mining-Environmental Policy. The wording of the Article excludes compliance with the presentation of the Basic Mining Forms as a condition for granting the extension of the exploration period.
For its part, the reconciled text determines that in order to request an extension of the mining concession agreement, this must be done at least two years before the expiration of the exploitation period, always provided that the contract is in good standing with the obligations arising from same. Additionally, the text of the article gives the right to the Mining Authority to decide whether to grant the extension and if it does, it may demand new conditions in the contracts and impose considerations additional to the royalties.
In addition, the reconciled text grants the right of first refusal to the beneficiaries of exploitation licenses who have opted for the extension of this title and the beneficiaries of small-scale mining contracts entered into for contribution areas, to again obtain the area through a concession agreement in the terms established for the extension of the concession agreement.
Procedures pending for final approval of the ndp.
By Decree 133 of January 22, 2015, the President of the Republic called Congress to special sessions from February 6 to March 15, 2015. On May 7, 2015, the text was approved by the Plenary Session of the Senate and House of Representatives. The only procedure remaining is the presidential approval by assigning the law number and its subsequent publication.