--Environmental department's authority has declined during
Pinera administration
--President Pinera questions recent Supreme Court ruling
--New environmental courts could solve part of the problem with
current permitting process
By Graciela Ibanez
SANTIAGO, Chile--Chile's environmental permitting process has
come under fire amid legal delays and suspensions of energy
projects.
Industry executives charge the system fails to solve disputes
that put the Andean nation's long-term energy supply at risk.
Chile needs to double its current 15,000-megawatt installed
capacity over the next decade to keep up with projected demand.
Meeting that challenge recently became harder after the Supreme
Court halted the $5 billion, 2,100-megawatt Hacienda Castilla power
project and modified the environmental approval timetable for the
$733 million, 640-megawatt Cuervo power plant, the first of the
three hydroelectric plants that make up Origin Energy Ltd. (ORG.AU)
and Xstrata PLC's (XTA.LN) Energia Austral project.
During previous administrations, the environmental department
usually had the final word on energy projects, but in President
Sebastian Pinera's administration, the entity's authority has
declined.
"Until recently, the Supreme Court trusted the environmental
authority, but now the court bypassed the authority's technical
skills," said Rene Muga, general manager of the Association of
Power Generators trade group.
Chile's minister of the environment, Maria Ignacia Benitez, and,
most recently, Mr. Pinera have questioned the court's decision on
Castilla, a project developed by Brazil's MPX Energia S/A (MPXEY,
MPXE3.BR) and German utility E.ON AG (EONGY, EOAN.XE).
The Supreme Court ruling asked Castilla's shareholders to submit
a new environmental-impact study for the project's generating units
and port in northern Chile, delaying approval as the environmental
authority takes around two years to make a decision after receiving
a study.
Parts of the Supreme Court ruling "weren't exactly in keeping
with the facts," Mr. Pinera said on television late Wednesday.
Contrary to the court's opinion, the study did assess the
connection between the units and the port, Mr. Pinera added.
MPX Chile and the Supreme Court declined to comment.
The upcoming launch of environmental courts could solve part of
the problem with Chile's permitting framework, as these courts will
receive legal claims against the governmental environmental
authority, adding a new ruling level before claims reach the
Supreme Court.
"The current framework is inadequate as it's missing the
environmental courts," said Hugh Rudnick, a professor at Pontificia
Universidad Catolica de Chile. In the future, the Supreme Court
could rely on the environmental courts' decisions when handling a
ruling and wouldn't need to get into technical details as it did
with the Castilla ruling, Mr. Rudnick added.
Amid legal delays and rising animosity toward planned
electricity projects in Chile, power companies also have expressed
concerns about the current framework and have repeatedly called on
the government to take measures to ensure supply meets growing
demand.
If Chile doesn't meet its growing energy needs, mining companies
could delay large projects in the pipeline, such as the expansion
at state copper giant Corporacion Nacional del Cobre de Chile's
Salvador division, shaking the local economy. The mining industry,
namely copper production, accounts for 60% of the country's exports
and 15% of gross domestic product.
Chile's Supreme Court, however, isn't the only one to have
stopped energy projects in recent years.
Mr. Pinera in 2010 halted a 540-megawatt thermal power project
by GDF Suez SA (GSZ.FR) by asking the company to relocate it
because of its proximity to a nature reserve, even though the
generator had already received environmental approval.
With more than 3,000 megawatts out of the system after the
Supreme Court rulings and Mr. Pinera's veto, concerns are now
focused on the 2,750-megawatt HidroAysen energy project, which is
being delayed by its shareholders, power generators Colbun
(COLBUN.SN) and Empresa Nacional de Electricidad SA (EOC,
ENDESA.SN), as they await an electricity transmission bill the
government recently sent to Congress for approval.
Once the bill is approved, HidroAysen is expected to submit the
environmental impact study for its $4 billion transmission line as
it already received the environmental green light for its $3
billion generation project.
Given the recent rulings, the new environmental-impact studies
will face a complex process, as they will have to include details
they didn't need to include before, said Mr. Muga.
Write to Graciela Ibanez at graciela.ibanez@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires