On March 28, 2023, the President sent to the Chamber of Representatives an initiative to amend the law and regulations in the mining sector (the "Initiative").1
Purpose of the Initiative
Through the Initiative, the Mexican State will attempt to recover dominance over mineral and water resources and to regulate the obtainment, supervision and termination of mining concessions and water concessions for mining, with an approach of protecting the human rights to the environment, health and water of the Mexican people.
Main changes included in the Initiative
In connection with mining concessions:
- Establishment of a public bidding scheme for granting mining concessions, which replaces the current scheme of granting it to the first applicant with respect to an empty lot (terreno libre)
Currently, mining concessions are granted to the first applicant with respect to an empty lot. The Initiative proposes to replace such granting scheme for a public bidding scheme, in order to guarantee the best economic conditions for the Mexican State and the best benefits for the people.
- Replacement of the object of the mining concession: From certain empty lot (terreno libre) to certain mineral or substance
Nowadays, mining concessions are granted with respect to certain empty lot (terreno libre) and allows the mining of all minerals and substances within such empty lot (terreno libre). The Initiative proposes to grant mining concessions with respect to certain mineral or substance only.
- Reduction of the term of mining concessions
Now, mining concessions are granted with a term of 50 years, extendable one time. The Initiative proposes to reduce the term of mining concessions to 15 years, which can be extended once as long as the holder has complied with the obligations established therein.
- The grant of a mining concession will be conditioned to water availability
The Initiative proposes to subject the grant of a mining concession to the prior obtainment of a newly created water concession for mining use, which is described further down.
- Stricter regulation for the transfer of mining concessions
Currently, it is possible to transfer the rights of a mining concession through private agreements. The Initiative proposes that such private agreements would no longer be valid. Instead, the Ministry of Economy would be responsible to authorize the transfer of the mining concession; provided that the requirements established for granting it are met. Furthermore, the holder of the mining concession would not be allowed to use it as a guarantee of its obligations (i.e., for financing purposes).
- Establishment of new causes for cancelling the mining concession
The Initiative proposes to include, as causes for cancelling mining concessions i) the lack of reports about potential damages or risks to the environment by the permit holder, ii) lack of permits, concessions or authorizations required by other governmental authorities and iii) not having the closure program or the residues management program for the mine.
- Other changes
The Initiative proposes that land could not be expropriated in favor of holders of mining concessions to carry out mining activities. With respect to "assignment" titles (asignaciones) granted by the Ministry of Economy to carry out the mining exploration activity, the Initiative proposes that it could include the extraction of minerals and substances by state-owned enterprises.
In connection with social and environmental impact and water availability
- Creation of a new water concession for mining use
The Initiative intends to create a water concession for mining use with a term of five years, which can be extended for a term up to the term of the related mining concession; provided that the holder has complied with the restoration, closing and post-closing program for the mine and the obligations established in the water concession title. The water concessions for mining use may be revoked if an event of public interest occurs or if the holder has not complied with the restoration, closing and post-closing program for the mine, among other reasons.
- Establishment of new social and environmental requirements for the holders
The Initiative proposes that the holders of a mining concession must comply with new social and environmental requirements, such as: 1) the submission of a social impact study; 2) the submission of a restoration, closing and post-closing program for the mine; 3) the submission of a closure plan of the mine, which requires the submission of a letter of credit as collateral; and 4) the submission of a management program for the residues produced in the mine.
- Social impact study and indigenous consultation processes
The Initiative proposes that the winners of the public bidding processes to obtain mining concessions must carry out a social impact study with the purpose to determine the potential social affectations the mining activity may cause and to establish prevention, mitigation and compensation measures, guaranteed by a letter of credit. Furthermore, the Initiative proposes to include in the Law the right to consultation for indigenous people and communities, prior to granting the mining concession.
Most important provisions for current holders of mining concessions
According to the transitory articles of the Initiative, the term of the mining concessions for exploration and extraction granted prior to the Initiative entering into force (assuming that the Initiative is approved in its terms), would not be affected. Such mining concessions would have the term established therein.
However, the holders of mining concessions would have a term of 365 days to: 1) submit a letter of credit to guarantee the potential damages that may be caused during the performance of mining activities; 2) submit the restoration, closing and post-closing program for the mine; 3) remove from the deposits or final deposition sites, the mine tailings dams (presas de jales) or residues located within natural protected areas, wetlands, riverbeds, federal areas, protected areas or other places that may affect ecosystems or communities.
Furthermore, the holders of mining concession would have a term of 90 days to request the amendment of their water concessions for industrial use to the water concessions for mining use created by the Initiative.
The Initiative proposes to establish that the illegal extraction of minerals and substances, trafficking with minerals or substances extracted without a mining concession, undermining the safety of miners and the illegal exportation of minerals and metals, would be considered criminal activities.
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