CHAPTER 21 ARGENTINA: NEW HYDROCARBONS LAW MAINTAINS UNIFORMITY OF LEGISLATION AT THE FEDERAL LEVEL WHILE RECOGNISING EMINENT DOMAIN TO THE PROVINCES OVER OIL AND GAS RESERVES

• Jurisdiction: Derecho Internacional

Mining and Oil and Gas Law, Development, and Investment - Book 2
(Apr 2007)
CHAPTER 21
ARGENTINA: NEW HYDROCARBONS LAW MAINTAINS UNIFORMITY OF LEGISLATION AT THE FEDERAL LEVEL WHILE RECOGNISING EMINENT DOMAIN TO THE PROVINCES OVER OIL AND GAS RESERVES
José A. Martínez de Hoz (h.)
Perez Alati, Grondona, Benites, Arntsen & Martinez de Hoz (h) Abogados
Buenos Aires, Argentina

1. Introduction

Since the first discovery of oil in 1907 there has been an ongoing controversy between the Federal Government and the provinces regarding the eminent domain of the hydrocarbons reserves and the authority to legislate on the matter.

The Constitution delegated to the Federal Government (i.e. Congress and implementing regulations issued by the Executive Branch) the authority to establish the substantive rules governing the exploration and production of crude oil and gas, thus ensuring the uniformity of legislation. However, in spite of this uniformity in legislation, the eminent domain of the hydrocarbons reserves has shifted between the provinces and the Federal Government, and this has had practical consequences in relation to the granting of exploitation concessions and exploration permits, collection of royalties and the level of involvement of the national and provincial authorities.¹

Since the Constitutional amendment of 1994 (the "Constitutional Amendment") the provinces recovered the ownership rights over the natural resources existing in their territory. However, until the recent enactment of Law Nº 26,197 in December 2006, the provinces were not able to effectively exercise their rights due to implementation delays.

2. Ownership over hydrocarbons reserves

2. a) Historical background

The first attempt to create a hydrocarbons legislative framework took place in 1935 with the enactment of Law Nº 12,161. According to this law, the eminent domain of hydrocarbons reserves belonged to either the national or the provincial states, depending on the territory where they were located. This law remained in force until 1958, when Law Nº 14,773 was passed nationalizing the hydrocarbons reserves.

However, it was not until 1967 that Congress enacted a comprehensive legal framework for the oil and gas industry through the Hydrocarbons Law Nº 17,319 (the "Hydrocarbons

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Law") that still remains in force with certain amendments. The Hydrocarbons Law provided that the hydrocarbons deposits were part of the "direct domain of the National State". This ownership known as eminent domain does not impede the law from authorizing the government to grant concessions whereby private companies acquire the ownership and marketing rights over the oil and gas production.

After twenty five years of constant legal battles between the Federal Government and the provinces, in 1992, Law Nº 24,145 approved the transfer of the eminent domain of hydrocarbons reserves to the provinces where they are located. However, this law provided that the transfer was conditioned to the enactment of a law amending and adjusting the Hydrocarbons Law to the new situation. Nevertheless, with the de-regulation and privatisation of the oil and gas business...