Federico Ruanova Guinea
Environmental and Natural Resources Practice Group Coordinator
Baker McKenzie
View from the Top

Environmental Regulation Implications for Business

Wed, 10/21/2015 - 16:22

Q: How does Baker & McKenzie’s value proposition differ from other firms specialized in environmental law?

A: Baker & McKenzie is very familiar with Mexican law, particularly environmental legislation, which the firm has practiced for many years. Our value proposition lies in the fact that we are well acquainted with all legal requirements and with how the mining industry operates. As corporate and commercial lawyers, we know that our clients want to begin their business activities as promptly as possible. We educate them so that they can quickly secure their environmental permits. However, the environmental aspect is only one of many areas with which they must comply. Others include fiscal, labor, or real estate obligations. At the end of the day, our clients come to us so that we can provide them with the necessary tools to begin their operations in an acceptable timeframe.

Q: How can existing legislation be modified to better align with Mexico’s industrial development needs?

A: There have already been some relevant amendments since 1992, particularly in the areas of waste management and communities’ right to information. Another area that needs to be highlighted is that many other relevant environmental laws have also been enacted. The General Law on Waste Management, which addresses how operators should properly dispose of their waste streams, has had a very clear impact on the mining industry. There have also been some important changes in environmental impact permitting. Another recently introduced law addresses land use and how companies can go about meeting zoning requirements, particularly with regards to mining activities.

At this point, we should be thinking less about changing the current General Law of Ecological Balance and Protection of the Environment, and focusing more on amending other federal by-laws that have a direct impact on mining activities. The one that really stands out is the law pertaining to changes in land use. Under this law, mining companies are required to change their land use statement, even if they are only at the exploration phase. I believe the focus should be on amending such laws. The general law had a big impact when it was enacted in 1998, but it is now more about establishing a law that provides a general framework for how environmental protection should be enacted at the federal and state level. The evolution of our environmental protection system will be achieved by focusing on complementary laws, not the general law.

Q: How has the new Environmental Responsibility Law impacted the mining industry thus far?

A: The law regarding environmental liability came into effect in early 2013 and addresses collective class actions. Although this law has had very little impact on mining operations so far, it remains to be seen how it will affect communities or individuals. The law is already in place and it is resulting in a shift away from how the laws have been traditionally enforced. Conventionally, these have been enforced by regulatory agencies but this responsibility will now fall into the hands of the court system. At this point, we have not seen any significant changes in mining companies’ compliance of federal environmental laws. We will have to wait and see if any of these legal actions will have the desired effect, namely changing behaviors and altering the ways some mining companies operate in Mexico.

Q: Which major changes do you anticipate seeing in environmental regulation as a result of the recently approved Energy Reform?

A: I do not think that the Energy Reform is likely to influence the way mining companies tackle environmental matters. We have to remember that mining activities are regulated by a different regulatory body. Under the recently approved amendments to the Constitution, hydrocarbon extraction and related activities will take precedence over both mining and water concessions. We may see a scenario in which one person holds a mining concession but another player finds shale gas or oil reservoirs at the same location, making the mining concession a lesser priority than hydrocarbon production. Another possible impact might be that mining companies start directly hiring private companies for their energy needs. With the Constitutional changes, mining companies will have the advantage of being able to buy directly from wholesale power producers rather than having to participate in cogeneration schemes. This will have a positive impact on operating costs for mining companies.