GOLDEN WATER: ISSUES AND TRENDS RELATING TO THE USE OF WATER IN CHILE

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development and Investment
(Apr 2009)
CHAPTER 3A
GOLDEN WATER: ISSUES AND TRENDS RELATING TO THE USE OF WATER IN CHILE
Juan F. Mackenna
Partner and Co-Head
Natural Resources and Environment Group
Carey & Cia Ltda. Abogados
Santiago, Chile

Juan Francisco Mackenna is a Partner at Carey y cia Abogados from Santiago, Chile, firm that he joined in 1997 inmediatelly after graduating from the School of Law of the Catholic University of Santiago. In 2000 he obtained a Master in Laws (L.L.M.) from Duke University Law School. He worked at Cleary, Gottlieb, Steen & Hamilton, New York, during 2000-2001. In 1998, he acted as an Assistant Professor of Civil Law at the Universidad Diego Portales School of Law and is currently an Assistant Professor of Mining Law at the Universidad de Chile School of Law. Mr. Mackenna is the co-head of Carey y Cia.'s Natural Resources and Environment Group and his practice focus areas are mining, water rights, real estate and land use, development, financing, sale and purchase of and general advise in Industrial, energy and natural resources projects. Mr. Mackenna is a founder and vicepresidentof the Chilean Association of Small and Midsize hydropower projects, he is also vicepresident of the Chilean Australian Chamber of Commerce, he is a member of the CHilean Bar Association and the Legal Counsel of the National Mining Society.

Abstract: This paper briefly provides an overview of the importance of water, the current situation in connection with water consumption and needs in the world and in Chile, the conflicts that arise among the different users and interested parties in connection with water due to scarcity, contamination, overexploitation and inefficiency. The paper further summarizes the legal framework and water management policies in Chile based in a market mechanism that has been an effective solution to the challenges of an equitable and sustainable use of water, while providing a sense of reality as to the value and needs in connection with this most precious natural resource.

I. THE IMPORTANCE OF WATER.

As global population and economies continue to grow, and global warming and environmental change threatens both the quantity and quality of the world's fresh water resources, attention has increasingly focused on the state and management of one and likely the most important of natural resources: WATER.

All along history the most important philosophers, artists and politicians have recognized the fact that water is the beginning and could be the end of all things

"Water is the beginning of all things"

Tales de Mileto.

"Water is the vehicle of nature"

Leonardo da Vinci.

"The person capable of solving the water issues should deserve two Nobel Prizes, the Peace and the Science ones"

John F. Kennedy.

"The only reason I would go to war again with Israel would be for water"

Anwar El-Sadat.

Water covers three quarter parts of the Earth's surface. An estimate indicates that the total water supply of the world is 1,360,000,000 km3, of which: 97.2% is in the oceans;

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1,8% is in glaciers, ice-caps and ice-sheets; 0,9% is groundwater; 0,02 % is fresh water in lakes, isolated seas and rivers, and 0,001% is atmospheric water vapor at any given time.¹

Water is a fundamental resource for all kinds of life in earth. It represents between 50 and 90% of any living being (approximately 75% of the human body is water; in the case of seaweeds the percent is about 90%).

If one thinks about the uses of water, the list is endless, we drink and use water to clean up ourselves, water is fundamental in agriculture to produce food, renewable hydropower energy is produced with water,² many industries require water in their process like the simple production of paper, organic reactions are usually quenched with water or a water solution of a suitable acid, base or buffer; water is used for recreational, rehabilitation, religious and environmental purposes. The truth is that the water uses are too many to try naming everyone.³

II. WORLD'S WATER NEEDS.

"While the world's population tripled in the 20th century, the use of renewable water resources has grown six-fold. Within the next fifty years, the world population will increase by another 40 to 50 %. This population growth - coupled with industrialization and urbanization - will result in an increasing demand for water and will have serious consequences on the environment".⁴

The above statement represents a simple recollection of a basic fact which is that world's needs of water are increasing as humankind develops and grows due to food security which has been significantly increased in the past thirty years, higher water withdrawals for irrigation which represent 66% of the total withdrawals and up to 90 % in arid regions. The remaining 34% of total water withdrawals is being used by domestic households (10%), industry (20 %), or evaporated from reservoirs (4%).⁵

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Some observers have estimated that by 2025 more than half of the world population will be facing water-based vulnerability, a situation which has been called a water crisis by the United Nations.⁶

III. CHILEAN WATER NEEDS.

3.1. Introduction to Chile's Geography.

The Republic of Chile occupies a long and narrow coastal strip wedged between the Andes Mountain and the Pacific Ocean. It borders Peru to the north, Bolivia to the Northeast, Argentina to the east, and the Drake Passage at the country's southernmost tip.

The Pacific forms the country's entire western border, with a coastline that stretches over 6,435 kilometers. Chilean territory extends to the Pacific Ocean which includes the overseas territory of Juan Fernández Islands, the Sala y Gómez Islands, the Desventuradas Islands and Easter Island located in Polynesia Chile's historical claims of territory in Antarctica are of 1,250,000 km (482,628 sq mi).

Chile's unusual, ribbon-like shape - 4,400 km long and on average 175 km wide - has given it a hugely varied climate, ranging from the world's driest desert - the Atacama - in the north, through a Mediterranean climate in the centre, to a snow-prone Alpine climate in the south, with glaciers, fjords and lakes.

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The northern Chilean desert contains great base and non metallic mineral wealth, principally copper, silver, gold, nitrate and lithium. The relatively small central area dominates the country in terms of population and rich agricultural resources which form an important part of Chile's main exports (fruits, wine, olive oil, etc). This area is also the cultural and political center from which Chile expanded in the late 19th century, when it incorporated its northern and southern regions. Southern Chile is rich in forests and grazing lands and features a string of volcanoes and lakes. The southern coast is a labyrinth of fjords, inlets, canals, twisting peninsulas, and islands where another of our most important industries, salmon farming, is based.

Since the 19th century Chile has been increasingly developing the mining northern and desert regions where 40% of the World's copper reserves are located. Finally, as Chile lacks hydrocarbons 40% of its energy installed capacity is dependent on hydropower generation.

3.2. Chilean Water Needs.

Chile's mining, agricultural and salmon farming business activities, which represent 68% of the total GDP depend, directly and importantly, on water. Additionally 40% of our total installed power capacity is based on hydropower making it, therefore, imperative for our country to keep progressing in the development and regulation of water resources. The average of water availability in Chile is 5,200 m3 per person in the year, and the world average is 7,100 m3 per person in the year.⁷

3.2.1. Mining and Water in Chile.

The mining industry is an activity of utmost importance in Chile, representing a high proportion of the national exports. The most significant mineral deposits (copper, silver, gold, iodine, salt, nitrate, etc) in Chile are located in the northern part of the country.

Copper production is the pillar of Chile's economy. Codelco is the proprietary state company of important deposits, like those of Chuquicamata and El Teniente; nevertheless, the private sector produces near 60% of the national total of copper. Among the most relevant deposits on private hands are Doña Inés de Collahuasi (Region of Tarapacá), Gaby and La Escondida (Region of Antofagasta), Los Pelambres (Region of Coquimbo) and El Soldado (Region of Valparaiso). In 2007, the copper production reached 5.59 million metric tons of fine copper, which, at world-wide level, meant a little more 35% of the total. It locates Chile as the world's largest copper producer followed by the United States and Peru.

A. Water needs in mining.

Water plays an important role in the mining activity production. In fact, as of today the mining industry is responsible for about 5% of the total water demand in Chile. What is

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most relevant though is that out of this proportion the biggest part is demand on the locations were the resource is more scarce, namely, the driest dessert in the world.

Since 1980 water consumption for mining purposes has increased between 30 - 80%, although in the same period of time mining production has grown three times. This evidences the great efficiency that the mining industry has created around water use. Additionally, new water has been obtained from underground sources which has created an intensive rush of exploration activity by both mining companies and water resources development companies, a reality that is reflected in the many water rights that have been requested in the last 10 years in Chile.⁸

B. Water availability for mining and conflicts.

Mining is highly dependent of water resources, and the most significant mining projects are located in the very dry northern region...