The national and provincial governments recently signed the Federal Energy Agreement. The agreement aims to develop and foster the implementation of energy policies at the provincial and federal level. The cooperation of the national and provincial governments is key to a long-term energy policy. The regulatory framework introduced for the different jurisdictions will ensure quality of service and help to develop the national energy network.
The government has amended the Renewable Energy Act and issued a regulatory decree, which includes new promotional schemes to foster investment in renewable energy projects and reduce Argentina's dependency on fossil fuels. This update examines the decree, the benefits granted by the federal government in that regard and the terms and conditions of the first renewable energy project contest due to be launched by the Ministry of Energy.
The recently elected government hopes to tackle the energy deficit and reduce the impact of subsidies on the public budget. In that regard, the Energy and Mining Ministry aims to suspend the government's utility bill subsidy system, include renewable energy in the energy matrix to reduce dependence on hydrocarbons, develop nuclear energy and increase domestic production of hydrocarbons through foreign investment.
The new Civil and Commercial Code affects claims in the energy and natural resources sector. The most significant reforms include provisions concerning environmental matters. The code imposes limits and minimum standards on environmental protection, access to environmental information and participation in environmental decisions and outlines liability for damage to the environment.
The Argentine electricity sector comprises generation, transport and distribution services, which are carried out by companies and state-owned enterprises. Investment is required to satisfy demand for electricity, which has increased over the last decade. To address a fall in private investment, the government has launched special schemes to increase generation and improve transport and distribution facilities.
The federal legislature recently passed a new law overhauling the hydrocarbons regime with a view to encouraging renewed investment in the sector. The key development is the move towards a uniform regulatory system across Argentina. This is a sensible and necessary direction to take to promote the development of the industry in Argentina, given that many hydrocarbon deposits run through multiple provinces.
There is a tension in Argentina as to how federal and provincial governments can each obtain an appropriate level of income from hydrocarbon reserves, while at the same time setting such costs at a reasonable level so as not to discourage investment in the sector. It has been recognised recently that the balance may not be right at present and steps are being taken to rectify this issue. Specifically, draft reforms to the framework of hydrocarbon regulation are being debated by congressional committees.
A bill on renewable energy was recently submitted to the National Senate. The bill aims to amend the rules on the promotion regime for renewable energy and expand policies that encourage investment in renewable energy by promoting credit lines and granting tax benefits. It also reflects the national need for fast integration of renewable energy in order to solve one of the major problems faced by projects of this nature: financing.
The Executive Branch has introduced its programme for the promotion of investment in hydrocarbons exploitation. The programme applies nationwide and is aimed at achieving hydrocarbon self-sufficiency, fostering both national and foreign direct investment and enabling the incorporation of new technologies. To apply for the programme, applicants must meet certain conditions.
The province of Santa Cruz has recently been subject to significant public attention for enacting a law and a series of regulations that establish a new tax on mining real estate property. The tax is levied annually on mining concession holders. The tax has given rise to a number of objections, with commentators stating that it could potentially affect the development of numerous relevant mining projects in the province.
The Mining Code was passed in 1886 and has been subject to subsequent amendments. However, one consistent inclusion in the code is the mining company. The Commercial Court of Appeals recently considered whether a dispute involving a mining company can be submitted to arbitration. The decision has met with much criticism, as it is arguably based on a misleading interpretation of Argentine law.
Since the enactment of the Glaciers Law in 2010, natural resources companies in Argentina have been waiting with interest for the results of the national inventory of glaciers and the environmental audits of priority areas. According to preliminary findings, the work carried out in both the cross-border Pascua Lama project and the Veladero project has been deemed to have no impact on local glaciers.
International resources companies are aware of the need to pay attention to indigenous rights from their experiences of mining around the world. Accordingly, many companies currently go beyond what is specifically required of them by Argentine law to protect indigenous rights. However, changes proposed by the new Civil Rights Reform Bill could provide greater certainty for both resources companies and indigenous communities.
The mining industry in Argentina has experienced unrelenting growth over the past decade, but has met with opposition from local communities due to its perceived environmental impact. The Supreme Court recently issued a series of decisions that may be crucial in the government's effort to reconcile mining, economic development and environmental protection.
Argentina's largest oil and gas company, YPF, was recently nationalised. A major reason given by the government for the expropriation was that hydrocarbons self-sufficiency is a matter of national public interest and a state priority. The government has also indicated that it envisages increased investment activity in the oil and gas sector in the immediate future.
Historically, mining and drilling for hydrocarbons in Argentina have met with considerable opposition. However, the government has recently taken steps to promote the resources industry in a sustainable way that aims to give a real economic return to the provinces in which such activity is located. It is hoped that the new measures will promote a simplified process and alleviate some of the activists' concerns.
The provinces of Rio Negro and Neuquen have recently implemented decrees that encourage investment in the exploration and exploitation of shale gas reserves, as well as other unconventional oil and gas reserves. The decrees provide for a relaxation or pausing of the exploration periods when discoveries cannot currently be exploited economically.
Argentina recently abrogated the foreign exchange benefits applicable to the mining and oil and gas industries for the transfer to and settlement in Argentina of export proceeds. Exporters must therefore now transfer to and settle in Argentina all foreign currency obtained from their exports. The order brings the mining and oil and gas sectors into line with other sectors in the Argentine economy.
President Cristina Fernández recently introduced the Bill on the Protection of the National Ownership, Possession and Holdings of Rural Land to Congress, aimed at restricting foreign ownership of rural land. The bill could potentially have a significant impact on the resources industry in Argentina, forcing foreign resources companies to reevaluate their current land management practices.
Argentina has significant competitive advantages in mining lithium. Following the lead of the presidents of Bolivia and Chile, the governor of Jujuy, one of the three provinces with substantial lithium reserves, recently declared lithium a strategic resource and issued a decree setting out requirements for assessing the economic and social impacts that may result from approving lithium exploration and exploitation projects.