Energy Integration in Latin America: Chilean perspective.

• Jurisdiction: Derecho Internacional

Oil and Gas Development in Latin America
(Mar 1999)
CHAPTER 16A
Energy Integration in Latin America: Chilean perspective.
José María Eyzaguirre B.
Claro Y Cia
Santiago, Chile

1. The Chilean Legal Framework.

Chilean main rules regarding distribution and transportation of gas are set forth in the Chilean Gas Services Act, Decree No. 323 issued by the Ministry of Interior, 1931, as amended, the "Gas Act". In addition, important rules applicable in this regard are contained in the Regulations on Provisional and Final Concessions for the Distribution and Transportation of Gas (Decree No.263, issued by the Ministry of Economy, Development and Reconstruction, 1995, the "Regulations").

The Gas Act and the Regulations provide for the following basic principles applicable to the exploitation and commercialization of natural gas:

a) companies interested in carrying out businesses related to gas must hold a concession granted by the competent authorities. The Gas Act and the Regulations contemplate two kinds of concessions: (a) concessions for public gas distribution service through networks ("distribution concessions") and (b) concessions for public gas transportation service through networks ("transportation concessions");

b) for the aforementioned purposes, network gas is understood to be any gaseous fuel liquid that is transported or distributed through pipeline networks, either natural gas, gas obtained from coal, naphtha or coke, propane and butane in its gaseous phase and any other type or mixture of the above;

c) the concessions, either for distribution or for transportation, may

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be provisional or final. Final concessions are granted for an indefinite period of time. Provisional concessions do not constitute a prior requirement to obtain a final concession. Provisional concessions grant the concessionaire the right to obtain from the competent court the permit to carry out, or cause in fiscal, municipal or private land, the necessary measurements and studies for the preparation of the final project of the works to be included in the final concession;

d) distribution concession authorizes the holder thereof to render gas distribution services in the pertinent geographical zone and to construct, maintain and exploit the respective gas distribution network in said geographical zone;

e) transportation concession authorizes the holder thereof to render gas transportation services through a network or transportation system from one point of origin to one point of destination and to construct, maintain and exploit the respective gas transportation system;

f) new concessions may be granted in geographical zones (or, if applicable, with respect to points of origin and destination) already granted in concession, whether the new concessionaire covers the prior concession wholly or partially. In said event, the creation of special easements is contemplated in order to protect legal rights of both concessionaires;

g) the applications for concession must be submitted to the Superintendency of Electricity and Fuels (Superintendencia de Electricidad y Combustibles, "SEC") accompanied by information and documents regarding the identification of the applicant; indication of the class of concession requested thereunder; a general plan of the works; chronogram of the progress of the works; if for a distribution concession, the delimitation of the zone requested in concession and the planned locations for its facilities; if for a transportation concession, the location of the

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points of origin and destination among which the gas will be transported, the projected route to construct the transportation system and the planned locations for its facilities; individualization of the properties that will be subject to pipeline easements and rights of way; and technical and economic feasibility studies;

h) the President of the Republic shall resolve regarding the applications for concession, with a prior report of the SEC, and issue the concession decree that shall be recorded by the concessionaire in a public deed within 30 days from its publication in the Official Gazette;

i) the President of the Republic, by means of a well-founded decree, may declare the unilateral termination of a concession before the respective concessionaire starts its exploitation, if such concessionaire does not record the concession decree in a public deed within 30 days as above-mentioned. In addition, the Ministry of Economy, Development and Reconstruction may ask the respective Court of Appeal to declare serious breach of the obligations of a concessionaire, if a least two third of the works have not been executed during the terms established in the concession decree. In such event, the President of the Republic can declare the unilateral termination of the concession;

j) concessionaires (whether holding distribution or transportation concessions) are allowed to transfer and encumber the concession they own as well as any rights thereon;

k) permanent concessions confer upon the concessionaire the right to use and occupy fiscal and national property of public use for routing their installations. Moreover, permanent concessions grant the concessionaire the easements for laying pipe across private property, using the necessary land for gas installations and carrying out all works required for the building...