Water Rights in Chile changing soon

The Current Reforms in Legislation regarding Water Rights in Chile
October 2015

Many investors are concerned about proposed water code reforms in Chile. Currently, the prevailing social climate is one of conciliation to populist demands, and when it comes to water rights, the dominant belief is that water is a national resource that should be the property of all Chileans. It may be until next year until there is a final vote on a bill, but most certainly there will be a change to the existing water code. On the surface, it has the makings of an extreme shift in Chilean law, but it remains to be seen to what degree these efforts will succeed. This article attempts to outline the salient issues involved and what the effects might be on water rights in Chile.

The Bill to Reform the Water Code was initiated in March of 2011 but sat idle until September 2014 when it was revived by the executive branch and taken into review by the Water Resources Commission of the Chamber of Deputies.

Fundamental Issues of the Reform

The pending legislation aims to realize the declaration that “waters are national property for public use”[1] and strengthen the constitutional powers of government to control water use and to protect and prioritize essential services. Essentially, the nature of property rights with respect to water would be diluted and individuals granted rights only for use but not of outright ownership.

The proposed changes to the Code would read, “The waters, in any state, are national property for public use. Consequently, its control and use are by all inhabitants of the nation.”[2] Other reform efforts would eliminate the words “owner,” “ownership,” “property,” and “disposition” from various sections detailing use and enjoyment of water.

Opposition to proposed legislation argues that this reform equates to the “nationalization” of the waters, for which, they argue, there is no legal basis. Further, critics argue there are neither clear procedures to manage projects nor criteria to determine when rights expire or when they are extended. Moreover, critics believe the current legislation is an attack on the principle of constitutional supremacy, since the Constitution states that the “rights of private citizens over waters, recognized or constituted in conformity with the law, shall grant proprietorship to the owners thereof.”[3]

Principle Changes Proposed to the Water Code

Currently: Actively utilized water rights have no minimum term while unutilized water rights expire in 20 years.

Proposed changes: “The right of use of water consists of temporary use and enjoyment of it, in accordance with the requirements and limitations prescribed in the Code. This right arises under a concession or by operation of law only,” and any extensions are subject to a determination of available supply and/or the sustainability of the aquifer.[4]

Currently: Water rights are perpetual.

Proposed changes: Temporary rights limited to a maximum of 30 years, renewable, unless the Dirección General de Aguas (“DGA”) (www.dga.cl) determines that the water was used ineffectively. When water is not being used, expiration of rights occurs within a period of four to eight years.[5]

Other proposed regulations include:

• Increased powers and fewer requirements for the DGA to limit the exercise of the use of water rights in the public interest through temporary reductions or redistribution of water;[6]
• Explicit prioritization of water use for:

• First, human consumption and sanitation,
• Next, ecosystem preservation, and
• Lastly, productive use;[7]

• Language about establishing reserves of surface and groundwater;[8]
• Several expansions of power for the DGA to penalize violations of existing and proposed water use regulations;[9]
• New prohibitions in respect to water use in national parks, reserves, sanctuaries, wetlands, and heritage sites;[10]
• Strengthening the powers of the DGA to require the installation of flow systems (meters) and supporting information systems when extracting water from streams and aquifers;[11] and
• Modifications of procedures related to the auction of expired water rights.[12]

Unresolved Issues

The current draft leaves several issues unresolved. The current proposals do very little to strengthen sanctions for violations of the existing water code. Businesses and individuals currently extracting water excessively—or entirely illegally—will likely be able to continue to do so without an increased risk of detection. Furthermore, the draft provisions lack the creation of specialized courts to adjudicate water issues.Meanwhile, many smaller farmers will bear a hardship from uncompensated expenses of the new mandated equipment and technology, on top of which, the proposals do nothing to resolve issues of funding the process of improving water distribution infrastructure. What’s more, the proposed legislation does little to address the reclamation of unused water rights, the proposed legislation does not make it clear whether such reclamations of water rights will take the form of fair-market purchases from the owners of the rights in the manner of an “eminent domain” action or if Chile would simply confiscate water rights without consideration of decades of careful planning and investment on the part of the current owners. Finally, the legislation is not clear as to the proposed allocation of the subjected rights.

Takeaways

The constitutional reform proposes to give water the character of public property and could radically alter the regulatory landscape surrounding water rights and usage. Ambiguity abounds regarding the requirements and implementation of proposed reforms, what criteria constitutes “inefficient” water use, and whether current owners who lose their water rights will be compensated. Currently the proposed reforms are in Congress and a final draft to the bill is expected to take another few months. The end result may not be as broad as originally expected, but there will most certainly be an affect on unused water rights, at the very least. The primary takeaway from this article- whether you´re a big or small operation-  should be to be careful, in the current Chilean political climate, that you can show you are using your water, or, otherwise, there may soon be an institutional claim against it.

This page will be updated after there is a vote and the new water code is known.   https://chileproperty.wordpress.com/2015/10/06/water-rights-in-chile/

References:

FIJA TEXTO DEL CODIGO DE AGUAS  (Full Text Current Water Code)  http://www.leychile.cl/Navegar?idNorma=5605

Reforma el Código de Aguas Boletín N° 7543-12       https://www.camara.cl/pley/pley_detalle.aspx?prmID=7936&prmBoletin=7543-12

Constitution of the Republic of Chile with Amendments through 2012 https://www.constituteproject.org/constitution/Chile_2012.pdf

Further reading:

The Market of Water Rights in Chile: Major Issues, by Monica A. Ríos and Jorge A. Quiroz

Click to access 097riosa.pdf

Dirección General de Aguas

http://www.dga.cl/

water authority of Chile