LEGAL ISSUES IN MOVING NATURAL GAS ACROSS BORDERS IN THE SOUTHERN CONE
| Jurisdiction | United States |
(2001)
LEGAL ISSUES IN MOVING NATURAL GAS ACROSS BORDERS IN THE SOUTHERN CONE
Repsol-YPF
Buenos Aires, Argentina
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I. INTRODUCTION
Natural gas is one of the fuels with the least negative environmental impact and has thus created worldwide interest as a replacement for more polluting fuels. This has also occurred in the Southern Cone.
As in other parts of the world, natural gas reserves discovered to date in the Southern Cone are not located in all countries and, furthermore, do not represent a quantity proportional to the energy requirement of each one of these countries.
Consequently, it is worth differentiating between producing countries and non-producing countries or countries with an insufficient production level to meet their energy requirements.
In the integration process, which has taken place during the last few years among the countries of the Southern Cone, producing countries have assumed the role of exporting countries and those countries without proven natural gas reserves, or with an insufficient production level, have assumed the role of importing countries.
In such a context, Argentina and Bolivia appear clearly as exporting countries whereas Chile and Brazil appear as importing countries. In the future, Peru may join the group of producing and exporting countries depending mainly on the development of the reserves of the Camisea field.
Due to the characteristics of natural gas, the possibility of its displacement among countries depends on the existence of infrastructure, that facilitates the transportation of natural gas from producing countries to the consumption centers of importing countries.
In the last decade, the construction of important gas pipelines have not only facilitated the conclusion of natural gas purchase and sale transactions between companies based in different countries, but also that of domestic sale contracts within importing countries, as well as international transportation agreements. These projects include the pipelines which have interconnected Argentina and Chile in the Southern, Central and Northern areas of both countries; the Bolivia-Brazil Gas Pipeline interconnecting Bolivia's reserves with the consumption center of San Paulo in Brazil; the gas pipeline which interconnects Argentina with Southern Brazil through Uruguayana and its extension, currently under way, to Porto Alegre, Brazil; and the gas pipeline under construction which will interconnect Argentina with Uruguay.
The existence of these purchase and sale, as well as, transportation transactions and the impact that such transactions have on the domestic markets, both of importing and
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exporting countries, have demanded the development of agreements among the countries involved and the development of domestic legislation, which contemplates the issues created by these transactions.
Among said regulations it is important to differentiate the following: Multilateral Agreements, such as regulations with regard to the MERCOSUR; Bilateral Agreements, such as those entered into between Chile and Argentina, Argentina and Bolivia, Bolivia and Brazil, Argentina and Brazil, and Argentina and Uruguay, inter alia; and the domestic legislation of each of these countries regarding the importation and exportation of natural gas.
II. MULTILATERAL AGREEMENTS—MERCOSUR
The Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay signed the Asuncion Treaty on March 26th, 1991, creating the Southern Common Market, or MERCOSUR, by means of which they intended to accelerate their economic development projects in order to enlarge the dimensions of their respective national markets through integration.
Thus, the main target of the Asuncion Treaty is the integration of the four Party-Nations through the free circulation of goods, services and productive factors; the determination of a Common Foreign Tariff and the adoption of a common trade policy; and the coordination of macroeconomic and sector policies and the adjustment of different legislation in relevant areas, in order to strengthen the integration process.
At the Ouro Preto Summit of Presidents held in December 1994, an Additional Protocol to the Asuncion Treaty was approved — the Ouro Preto Protocol — through which the MERCOSUR institutional structure is established and is granted international legal status.
Said institutional structure is formed by: a) The Common Market Council (CMC), the governing body which exercises political management and is in charge of the adoption of joint decisions aimed at ensuring the formation of a Common Market, and is formed by the Ministers of Foreign Affairs and the Economy Ministers of the member countries; b) the Common Market Group (GMC), the body which executes CMC's decisions, formed by four regular members and four alternate members, which represent the Ministries of Foreign Affairs, Economy and the Central Banks.
GMC has the power to set up Working Subgroups for the fulfillment of the tasks outlined above.
GMC set up eleven Working Subgroups (SGT), including the Working Subgroup No. 9 —SGT9 — related to "Energy Policy."
SGT9 is managed by four national coordinators (one for each country) and their assistants. It also set up Task Groups to elaborate studies and prepare debate documents for the Subgroup plenary meetings, which are held quarterly.
Thus, at the end of 1992, a Consolidated Document of Energy Information about MERCOSUR was issued, which gathered information interchanged with regard to the energy systems of each of the member countries.
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In the same year, several Task Groups were created to carry out the tasks of diagnosis and identification of asymmetries, which could affect the integration process.
Among the Tasks Groups created, it is worth mentioning, due to its relation to the subject matter hereof, "Legal and Judicial Institutional Framework of the Electric and Hydrocarbon Sectors" and "Fuel Prices and their Tax Treatment."
At Ouro Preto the transition period ended and the fundamental instruments of the common trade policy were adopted, which govern the free trade zone and the customs union, which currently characterize the MERCOSUR, headed by the Common Foreign Tariff.
Thus, the Party-Nations began a new stage-the consolidation and in-depth implementation stage, where the free trade zone and the customs union constitute intermediate steps towards achieving a single market which generates a greater growth of their economies, taking advantage of the multiplying effect of specialization, economies of scale and the greater negotiation power of the bloc.
Subsequently, at the X Meeting of the Common Market Council held in June 1996, the "Presidential Declaration on the Democratic Commitment in the MERCOSUR" was signed, as well as, the Protocol of Adherence of Bolivia and Chile to said Declaration.
Specifically regarding the energy field, at present there are different Tasks Groups which continue working within the scope of the Working Subgroup No. 9, the conclusions of which are important in terms of the detection of remaining asymmetries and in the proposal of mechanisms that allow their harmonization.
Finally, in a meeting of Subgroup 9, held in Uruguay in August, 1999, the member countries, with the adherence of Chile, approved the text of a "Memorandum of Understanding related to Gas Interchanges and Gas Integration among the Party-Nations of the MERCOSUR" which was submitted to the GMC. In said document they agree to the following:
1) To encourage the competitiveness of the natural gas production market, without imposing policies which may alter the normal...
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