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Regulatory Updates on the Occupation of Land for Electric Generation Projects, by José María Lujambio

December 15, 2016
Regulatory Updates on the Occupation of Land for Electric Generation Projects, by José María Lujambio

Article 71 of the Electric Industry Law (EIL) provides that the occupation of the surface or the establishment of easements for the construction of power plants shall take place in cases in which the characteristics of the project require a specific location.

Since the publication of the EIL in the Official Journal of the Federation in August 2014, there has been concern within the industry as to whether such precept should be understood as applicable to all electric generation projects that use renewable sources or only some of them. The definition was of utmost importance in order to determine the types of projects that would be subject to the strict rules of the EIL applicable to the negotiation and agreement regarding the terms and conditions for land use or occupancy.

Therefore, in May 2016, the Department of Energy (SENER, for its Spanish acronym) requested that the Energy Regulatory Commission (CRE, for its Spanish acronym) issue an interpretation regarding what should be understood as a “specific location” from a technical and regulatory point of view, in order to provide certainty to the developers of projects, landowners and other interested parties.

Thus, on November 8th of this year, the CRE published in the Official Journal of the Federation a resolution by means of which it interprets the EIL to mean that only the generation projects that deploy a geothermal site or hydraulic resources require a “specific location,” because in such cases the location impacts the technology used in the generation process itself and the viability of the project.

For many developers, this interpretation is a relief. It is now clear that, for example, wind or solar projects that are experiencing a real boom, especially during the last few months, will not require the procedure of notifying the Department of Agrarian, Territorial and Urban Development (SEDATU, for its Spanish acronym) regarding the beginning of the negotiations with landowners or communal members. Neither will they have to use the tabulators prepared by the National Institute of Management and Evaluation of National Assets (INDAABIN, for its Spanish acronym) as a basis for such negotiations, or submit the agreements that have been reached to a District Judge or Agrarian Unitary Court for validation. However, the downside is that they will not be able to use the procedures of administrative mediation or of the eventual establishment of legal easements.

It must be noted that this interpretation by the CRE in no way excludes the need for the projects to be subject to the social impact evaluations ordered by the EIL or the consultations with indigenous communities that might exist in the relevant region.

Even though bureaucratic burdens that seemed excessive are eliminated, it is recommended that developers, for their own interests, take into account the material aspects of Chapter VII of the EIL in their land use affairs, as such clearly reflect the international best practices on the matter. This will inure to the success of the projects, as it reflects the understanding that landowners and communal members shall be considered as key players in the development of the electric industry.

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