The National Assembly approved the “Organic Law for the Strengthening of the Strategic Mining and Energy Sectors” that reforms the Mining Law. The scope of the reform is described below.
1. Object and scope
The proposal seeks to strengthen mining and energy through efficient regulation for tax revenues and is declared as a special rule, of public order, applicable to mining and electricity in the public and private spheres throughout the territory .
2. Institutional reform: ARCOM attributions under delegation
Article 9 of the Mining Law is amended to specify that the powers of the Mining Regulation and Control Agency (ARCOM) shall be exercised only by express and current delegation of the Sectoral Ministry; if the delegation is revoked, suspended or does not exist, the powers are exercised directly by the Ministry, without prejudice to their being delegated again .
3. Prior administrative acts and administrative silence with consequences
Article 26 of the Mining Law is replaced to establish that, in order to carry out mining activities, prior, reasoned and favorable administrative acts are required from: (i) Competent Environmental Authority (environmental administrative authorization); (ii) Single Water Authority (possible impact on bodies of water and priority of the right to water); and (iii) a notarized affidavit from the concessionaire on the non-affectation of a wide list of assets (roads, public infrastructure, ports, beaches, seabed, telecommunications, military installations, oil and aeronautical infrastructure, electrical networks/infrastructure, archaeological vestiges and natural/cultural heritage).
If the mining authority notices that these assets may be affected, it must request authorization from the competent entity, which must make a decision within 30 days; if it does not do so, it is understood that there is no opposition and the responsible official would be dismissed. It also includes that municipalities and metropolitan districts must regulate the exploitation of aggregates and stones by ordinance .
4. Conservation patent: rigid terms and new fees
Article 34 of the Mining Law is replaced to establish that the annual license is paid until March of each year (per hectare), without the possibility of administrative or judicial extension. The patent from the granting until December 31 of the fourth year of exploration would be 2.5% of a Unified Basic Remuneration (UBI) per hectare; then, during the following years of exploration, 5% of a UBI per hectare; and in operation, 10% of a UBI per hectare. The first payment must be made within 30 days of the granting of the title and covers from the granting until December 31 of that year. An annual patent is also created for simultaneous exploration-exploitation activities in small-scale mining equivalent to 2% of one UBI per hectare .
5. Stages and subphases: exploration up to 15 years and automatic transition
Article 36 is amended to indicate that the concession is divided into the exploration stage and the exploitation stage, incorporating main, secondary and other minerals with economic value . Then, article 37 is replaced: once the concession is granted, the holder must carry out exploration for a maximum period of 15 years, divided into: (i) initial exploration (up to 4 years) and (ii) advanced exploration and economic evaluation (up to 11 years together). The transition between subphases would operate over time, without prior authorization, complying with applicable technical and environmental parameters. Typical activities permitted during the exploration stage and its subphases are listed: manual sampling, geophysical methods, trails, trenches, wells, boreholes, flying camps, and infrastructure necessary for exploration and economic evaluation .
6. Promotion of investment: comprehensive mining clusters and enabling infrastructure
A new Chapter III (arts. 66.1–66.3) is incorporated to allow the State (through the sectoral Ministry and competent entities) to implement Integral Mining Clusters as delimited areas with infrastructure and enabling services for common use, under principles of planning, efficiency, inter-institutional coordination, sustainability, security, transparency and control; the declaration and delimitation is made by the sectoral Ministry considering technical criteria, logistics, energy, socio-environmental and security, and the Ministry manages the cluster’s enabling portfolio .
Its components are listed: electrical interconnection (coordination for access to transmission/distribution); fuel supply (enabling infrastructure and supply points, without subsidies or assumption of State costs; fuel is purchased and paid for by the owner); road and logistics infrastructure (consideration in public planning, without prejudice to contributions or agreements); and explosives/related materials (optimization of procedures and availability for legal projects, conditioned on justification, technical and environmental compliance, security and control, not compromising internal order, and operational availability).
7. Promotion of productive investment and “without acquired rights”
Article 66.2 proposes that the State guarantee legal certainty, regulatory stability, transparency and administrative facilitation for productive investment, and instructs the Executive Branch to promote public-private articulation, simplification and reduction of duplications, clear information to investors, technology transfer, local suppliers and “responsible investment”“ with respect for human rights, nature and communities; but it clarifies that these provisions do not generate acquired rights or automatic exemptions and are subject to current regulations.
8. Security: Mining Areas with Strategic Security Protection
Article 66.3 proposes the figure of Mining Areas with Strategic Security Protection, declared by a reasoned act of the competent authority in coordination with the sectoral Ministry and ARCOM; in the presence of criminal groups, the Armed Forces would provide support to neutralize threats and restore normality, for the purpose of protecting personnel, installations and assets. prevention and neutralization of illicit activities (including illegal mining, sabotage or illegal occupations) and support for territorial control; It is specified that this does not replace the responsibilities of the holder in industrial, environmental and labor safety, nor does it delegate private functions to the public force .
9. Environmental: guarantees, audits and authorizations by phase
Article 78 of the Mining Law is replaced to reinforce that, before starting activities, owners must submit environmental studies and information (prevention, mitigation, control and reparation) approved by the environmental authority through authorization. It is added that, prior to obtaining environmental authorization, economic guarantees are required (according to environmental regulations). It is obligatory to submit, one year after the authorization is issued, an environmental audit or compliance report, and subsequently in accordance with current regulations; in addition, the guarantees must remain in force during execution. It is established that in small-scale mining and artisanal mining with simultaneous exploration-exploitation activities, environmental administrative authorization is required and that, in small, medium and large mining, both exploration and exploitation require respective authorizations per phase according to the categorization of the Unified Environmental Information System .
10. Royalties: 3% to 8% on sales, expiration due to evasion and distribution of 60%
Article 93 is replaced to establish a royalty on sales of the main and secondary mineral between 3% and 8%, in addition to income tax, profits attributed to the State and VAT; the rate would be defined with criteria of progressivity, production volumes and type and price of mineral, in accordance with the General Regulations to the Mining Law. The constitutional rule of State participation no less than that of the concessionaire is maintained and it is affirmed that the evasion of the payment of royalties would be grounds for expiration, without prejudice to civil and criminal effects .
60% of the royalty would be allocated to social investment and territorial and productive development, with transfers to the Decentralized Autonomous Government (GADs) of the area of exploitation within the same fiscal year, distributed: 45% provincial GAD, 35% municipal, 20% parish, with specific destinations (roads, irrigation, watersheds, drinking water and sewage, waste, health equipment, education, sports, tourism, heritage, public spaces and participation).
In the Amazon, 60% would finance the Amazon Common Fund; “When the case warrants,” 50% of that percentage would correspond to government bodies of indigenous communities and territorial districts, prioritizing directly affected needs.
Before transferring the funds, the GADs must submit an Investment Plan to the sectoral Ministry with identification and prioritization of projects, amounts, deadlines and indicators; the Ministry would verify technical coherence and approve or observe within 30 days; in case of observations, it is allowed to adjust only once .
It is also established that small-scale mining would pay royalties of 3% on sales with reference to international standards; for non-metallic and construction materials, it would be calculated based on production costs; and royalties from aggregates and stones would be allocated entirely to the municipal and metropolitan GADs where they are generated .
11. Mining operation contracts in small-scale mining: ENAMI exclusivity and nullity
A Chapter IV on operating contracts is incorporated: the National Mining Company (ENAMI EP) would be the only holder authorized to sign and grant mining operation contracts exclusively with respect to its concessions registered in small-scale mining, without prejudice to the contracts that it may enter into in other regimes, such as medium or large-scale mining, in accordance with the applicable regulations; No other public or private entity could award operating contracts under the small-scale mining regime.
Contracts entered into in contravention of the above would be null and void, without prejudice to administrative, civil and criminal liabilities. In addition, before signing, ENAMI EP must request authorization from the National Mining Authority guaranteeing technical and environmental standards and transparency with respect to operators .
12. Artisanal mining: redefinition, exemptions, deadlines and restrictions
Article 134 is replaced to redefine artisanal mining as popular economic units and a single-person, family, domestic enterprises in free, temporary and transitory areas, with limited machinery in accordance with the instructions of the ARCOM, aimed at covering basic needs in their circumscription.
It is proposed that by its nature it does not pay royalties or patents, but it is subject to the tax regime. The Sectoral Ministry would grant permits for up to 10 years, non-extendable; once the term has expired, they are extinguished and cannot be renewed, and the extinct area may not be granted totally or partially for artisanal mining .
If the holder wants to continue, he must mandatorily take advantage of the small-scale mining regime before the expiry; associations or cooperatives are allowed, complying with technical, environmental, economic and administrative requirements. It is prohibited to grant a title to relatives up to the 4th of consanguinity and 2nd of affinity of the previous holder if the latter did not renew in time.
It is established that artisanal permits cannot affect the rights of a concessionaire in force; however, concessionaires of medium and large mining could authorize artisanal work in their concession through operating contracts regulated by the Sectoral Ministry, with the social purpose of formalization and progressive transition .
If the Ministry grants artisanal permits in areas concessioned in the public interest, it requires a favorable report from ARCOM and compliance with environmental, mining, labor, social and tax obligations falls exclusively on beneficiaries.
Limits are set: underground work up to 4 ha; open sky up to 6 ha; prohibition of more than one permit per person; and prohibition of work by non-local persons (directly or indirectly).
Simplification of procedures at no cost is ordered. As for environmental control, artisanal permits for metals (except alluvial) are limited to extraction and processing must be done in authorized plants with an environmental license; in addition, the owner must submit a production report according to ARCOM technical guidelines by March 31 of each year .
13. Special Galapagos Regime (general provision).
The Eighth General Provision of the Mining Law is replaced so that in Galapagos only permits for free use and permits for the extraction of aggregates and stones for construction can be granted within Sustainable Use Zones (ZAS) and outside the National Park, prioritizing circular economy .
14. Transitional (environmental) provision
An “Eighth” transitory provision is incorporated for the National Environmental Authority to update, within a maximum of three months from the entry into force of the law, the catalog of projects, works and activities related to exploration and activity .
15. Second General Provision
It is established that the provisions of the Law shall be interpreted and applied in strict observance of the results of popular consultations and referendums, when these have established prohibitions, restrictions, or territorial conditions on mining activities.
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This information is a summary of legal developments of interest, and therefore cannot be considered as provided advice. If you have any questions, please contact the AVL team.
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[1] Article 1.
[2] Article 2.
[3] Article 3.
[4] Article 4.
[5] Article 5.
[6] Article 6.
[7] Article 7.
[8] Article 8.
[9] Article 8.
[10] Article 9.
[11] Article 10.
[12] Articles 10 – 12.
[13] Articles 10 – 12.
[14] Article 10.
[15] Article 11.
[16] Article 12.
[17] Article 12.
[18] Article 12.
[10] Article 13.
[20] Article 14.