Leopoldo Burguete Stanek
González Calvillo Abogados

Avoiding Social Conflicts in Renewable Energy Projects

Wed, 02/19/2014 - 17:22

Securing land rights can be a real bottleneck for all renewable energy project developers. If done without the right amount of attention, this bottleneck can escalate into a nightmare. “There have been many projects on the verge of construction, or that were in the operating phase, that were stopped because of social issues, which often are reflected in obtaining environmental permits,” says Leopoldo Burguete Stanek, Partner at González Calvillo, S.C., the law firm that provides an interdisciplinary approach to legal matters surrounding renewable projects.

Burguete Stanek notes that many wind projects are located on land belonging to ejidos and communities. According to data from the Ministry of Agrarian, Territorial and Urban Development, 78% of the land in Oaxaca belongs to ejidos. There are two options to deal with this scenario: change the land’s status from communal property to private property or negotiate leasing schemes with the community. Burguete Stanek explains that technically speaking, the law states that land ownership rights cannot be acquired without the consent of the local assemblies, but it can be leased without the intervention of the local assemblies. In principle, the assemblies can be circumvented by following the procedures or talking to the right people. A simple option is to buy the land, but that may turn out to be nigh on impossible. Another option is to use the easement option, wherein one party can enjoy the rights to use land without owning it. This is the option most companies choose. “But problems may arise when outsiders tell community members to ask for more money and change the easements. Usually, we tell our clients to buy the land, but if that is not an option, well-shielded easements (to evacuate the generated electricity as well as to place infrastructure) are the second best thing. One way the easements can be shielded is by seeking the approval of the local assembly,” says Luis Esparza, Associate at González Calvillo, S.C.

The most important thing is getting legal certainty, Burguete Stanek points out, and this goes beyond going to the public notary in charge of the land registry deeds. The first step is visiting the project site and then the National Property and Commerce Registry as well as the Agrarian Registry in order to determine the chain of transfers, while working out issues to do with agrarian reform. These lease contracts are limited to a 30 year period, and involve working out the type of land possession that the company will enjoy, as well as how it will be managed.

There is no magic process to secure land and every case is different but the best way seems to be to approach the community directly. “We use environmental and social methodologies from the World Bank and the IFC, which approach the issue through four lines,” Burguete Stanek says. When banks lend money, they request that the project fulfill certain social and environmental aspects. Before carrying out the needed social and environmental assessments, the conflicts and conditions of a community should be evaluated. “This is a preventative measure. It is not only part of the legal framework but it is also necessary to construct the social and environmental arguments to convince the members of the community and get their support,” Esparza states.

Another important step is getting support from municipal authorities. The local government must become involved and take ownership of the project. This will enable the municipal leader to inform the community that they are working together with the project developer, seen as a way to empower the community as well. However, the law firm knows that a social conflict cannot be spotted from an office desk. “At González Calvillo, S.C., in addition to revising the paperwork, we like to make on-site visits. We visit the local communities and identify potential social conflicts as well as stakeholders. If an existing social conflict is not spotted early on, it can become a deepseated problem that can lead to project closure,” Burguete Stanek emphasizes.

In order to avoid social conflicts, a strong community management plan has to be created. A starting point is to pinpoint the needs of both the community and the municipality and create a program that addresses both those needs at once. “If the land is being affected by a renewable project, both parties (developer and community) have to benefit. The energy that is generated will not benefit the community directly, because it is loaded into the grid for CFE to distribute. However, the company can negotiate with the community and create programs that will have a tangible positive local impact,” explains Burguete Stanek. “In this process, openness and honesty with the community, particularly regarding the real benefits that will be generated, are essential. Sometimes, the community can misinterpret what is being proposed, therefore the project developer has to be very clear when offering something,” adds Esparza.

The World Bank and the IFC acknowledge the importance of community management. They do not just finance a project for its moral good; they want to have their return on investment warrantied. This is the main reasons why financial institutions comply with the Equator Principles. “If the social requirement is complied with, the economic side is guaranteed,” Burguete Stanek explains and underlines the importance of having a planned and shielded community strategy, recalling one hapless project that was bogged down with 160 lawsuits related to social issues that ended up having an environmental impact as well.