Regulation Of The Desalinization Industry In Chile

• Law Firm: Urzua Abogados
• Subject Matter: Energy and Natural Resources, Mining, Water
• Author: Mr Daniel Weinstein
• Published date: 30 March 2023

Chile is a country with a long shoreline and a scarcity of fresh water in the regions where most of the mining activity is developed.¹ Therefore, desalinization appears as the perfect solution to meet the rising demand for water, especially in the mining industry. Chile currently has 24 desalinization plants operating, with a combined capacity of 8,000 liters per second. As per the Chilean Copper Council (Cochilco), by the year 2033, 71% of the water used for the mining of copper shall be desalinated water. To meet that demand (plus the demand of desalinated water for other uses), several desalinization plants will have to be built in the coming years.

However, Chile does not have a comprehensive regulatory framework for desalinization. This creates a degree of uncertainty for investors, which could potentially obstruct the development of the industry. Furthermore, the lack of regulation and the ensuing uncertainty affect third-party project developers' ability to obtain financing, as banks often seek for a higher degree of certainty.

In practice, the lack of a special regulatory framework means that the developer of a desalinization plant must request a myriad of permits to different governmental agencies which, in the majority of cases, were thought for projects other than desalinization plants. Similarly, whoever is extracting seawater and producing desalinated water must comply with all applicable laws, which are dispersed throughout different legal bodies and regulations.

There may be significant repercussions depending on how a nation regulates (or does not regulate) the right to use desalinated water. In some countries -like Chile-, desalinated water is regarded as an industrial product that belongs to its producer, either due to a specific regulation or because there is none. This means that the developer of the desalinization plant has the right to deliver the desalinated water to the mine without the need of a special concession granted to allow it.

The ownership and/or right to utilize desalinated water, however, may be restricted in some jurisdictions, and in certain circumstances, the authority may order that water intended for the mine site be diverted for use elsewhere, like for residential use. In these cases -and especially in those cases in which these powers do not have clear limits, the potential developer or financer of a desalinization project will ponder carefully this limitations before investing on it, as it may not obtain the...