Restrictions to Oil activities in Natural Protected Areas. Constitutional Court’s decision on the Regional Conservation Area Cordillera Escalera

This report aims to synthesize the most relevant aspects of the Constitutional Court decision regarding File No. 03343-2007-PA/TC, thereby suspending the exploration and exploitation of hydrocarbons activities in Block 103 overlapped with the Regional Conservation Area Cordillera Escalera which has a Master Plan pending approval.

1. BACKGROUND:

On November 8, 2006, Mr. Jaime Hans Bustamante Johnson filed an Amparo Lawsuit against Occidental Petrolera of Peru, Talisman Oil of Peru, Sucursal del Peru, Peru, Repsol Exploration, Sucursal del Peru, and Petrobras Energia Peru SA, Block 103 contractors, in order to stop oil activities within such Block as it overlapped with the Regional Conservation Area of Cordillera Escalera(hereinafter the Cordillera Escalera RCA) created by Supreme Decree N º 045-2005-AG (16 months after the execution of the License Contract for the Exploration and Exploitation of Hydrocarbons in Block 103, which was approved by Supreme Decree Nº026-2004-EM).

Plaintiff considered that such activities cause damage to the environment and violate other constitutionally protected rights, specially the right to the water of the population located in the area.

The lawsuit was rejected at the first two instances. However, on February 20, 2009, the Constitutional Court (hereinafter “CC”), as last instance, issued a judgement for the plaintiff.

2. RELEVANTS ASPECTS OF THE DECISION:

2.1 Enforcement of the Precautionary Principle related to the Master Plan of the Cordillera Escalera RCA:

CC considers that the environmental management tools play a vital role in relation to prevention, and it is essential to take these into account when referring to the sustainable development of oil and gas activity. In that sense, argues that the exploitation of natural resources (renewable or not) will only proceed if the operation is conducted consistent with the Master Plan of the Cordillera Escalera CRA.

Regarding the Master Plan, the CC recognizes that the lack of it is responsibility of the competent state authorities and not of the defendant companies. However, the CC considers essential to have the Master Plan in place in order to carry out the final phase of the exploration period and the respective and subsequent exploitation stage. In this way, CC forbids such activities until there is an approved Master Plan considering the possibility of exploiting the natural resources found in the CRA Cordillera Escalera.

2.2 Corporate Social Responsibility:

CC states that, “under the social democratic state of law, the social market economy and sustainable development, social responsibility is inevitably required to companies”, in other words and in comparison with previous decision, CC would be giving an obligatory nature to social responsibility, stating that it is a duty to individuals.

However, the decision also states that the social nature of our legal framework implies, in some way, that the State can interfere in an arbitrary and unjustified way in the economic agents freedom, since the stability required by a corporation to develop its activities not only depends on the order that the State may produce, but also on the special and communicative role that corporations must undertake for the sake of social responsibility.

The analysis conducted by the CC is perceived as an attempt to transfer powers and responsibilities from the Government to individuals.

2.3 Overlapping of hydrocabrons block with Natural Protected Areas (NPA):

CC concluded that there is an overlap between Block 103 and the Cordillera Escalera CRA. In this context, CC considers that the analysis must be moved to another level and ask whether the oil activity per se affects the NPA or if the effect is inherent to the development of these activities in an NPA. Here, the CC says that, according to the legislation on NPA, the possibility to develop activities for the exploitation of non-renewable natural resources within an NPA exists, depending on the category assigned to it (in this case the Cordillera Escalera CRA is an area of direct use in which the use of natural resources is permitted) and if it is consistent with the zoning assigned and the master plan for the NPA.

2.4 Rights acquired prior to the creation of the NPA:

In their defence arguments, the oil companies noted that the License Contract for Block 103 was signed earlier (exactly 16 months earlier) to the existence of the Cordillera Escalera CRA and, therefore, according to Legislative Decree No. 757, the rights previously acquired and its exercise should not be subjected to the new status of the area.

On this argument, the CC claims, without making a reference to Legislative Decree N°757, that a “temporal or chronological criteria” cannot prevail but, instead, a broader and more comprehensive analysis of the elements supporting  the establishment of the PNA and the impact on society of a possible serious impact on the environment. Otherwise, the legislation would be consenting “inconsistencies.”

This conclusion, which is the most controversial, would open the possibility to ignore the rights acquired previously to the creation of the PNA without an objective parameter, based on an entirely abstract argument and in violation of Article 5º of Law Nº 26834 and Article 54º of Legislative Decree Nº757.

Accordingly, under this analysis, the lawsuit was admitted and has concluded as follows:

“(…) it is prohibited from conducting the last phase of the exploration and exploitation stage within the Regional Conservation Area known as Cordillera Escalera until there is a Master Plan in place, such activities may restart once it has been developed and set the compatibility between exploration and exploitation activities and objectives of the Regional Conservation Area Cordillera Escalera”.

3. FINAL COMMENT:

Although the CC has ruled on several relevant topics for which there was no explicit previous pronouncements, in most cases the positions are not clear, sufficiently informed, contrary to existing laws and/or unfounded interpretations, creating serious doubts about the status of contracts and concessions that the State has signed or granted for the exploitation of natural resources, which are now open to be challenged with the subsequent creation of NPAs which, only due to the delay of the State itself, may not have a Master Plan approved on due time.

For further information on the topic, do not hesitate in contact the attorneys of our Environmental Area:

Alberto Varillas Cueto   avarillas@garciasayan.com.pe
Africa Morante Brigneti   amorante@garciasayan.com.pe
Diego Grisolle Fontana   dgrisolle@garciasayan.com.pe