Huasco Water, page-27

30Mar23 Daniel Weinstein - Chile is a country with a longshoreline and a scarcity of fresh water in the regions where most of the miningactivity is developed.¹ Therefore, desalinization appears asthe perfect solution to meet the rising demand for water, especially in the miningindustry. Chile currently has 24 desalinization plants operating, with acombined capacity of 8,000 liters per second. As per the Chilean Copper Council(Cochilco), by the year 2033, 71% of the water used for the mining of coppershall be desalinated water. To meet that demand (plus the demand of desalinatedwater for other uses), several desalinization plants will have to be built inthe coming years.

However, Chile does not have a comprehensive regulatoryframework for desalinization. This creates a degree of uncertainty forinvestors, which could potentially obstruct the development of the industry.Furthermore, the lack of regulation and the ensuing uncertainty affectthird-party project developers' ability to obtain financing, as banks oftenseek for a higher degree of certainty.

In practice, the lack of a special regulatory framework meansthat the developer of a desalinization plant must request a myriad of permitsto different governmental agencies which, in the majority of cases, werethought for projects other than desalinization plants. Similarly, whoever isextracting seawater and producing desalinated water must comply with allapplicable laws, which are dispersed throughout different legal bodies andregulations. There may be significant repercussions depending on how a nationregulates (or does not regulate) the right to use desalinated water. In somecountries -like Chile-, desalinated water is regarded as an industrial productthat belongs to its producer, either due to a specific regulation or becausethere is none. This means that the developer of the desalinization plant hasthe right to deliver the desalinated water to the mine without the need of aspecial concession granted to allow it.

The ownership and/or right to utilize desalinated water,however, may be restricted in some jurisdictions, and in certain circumstances,the authority may order that water intended for the mine site be diverted foruse elsewhere, like for residential use. In these cases -and especially inthose cases in which these powers do not have clear limits, the potentialdeveloper or financer of a desalinization project will ponder carefully thislimitations before investing on it, as it may not obtain the projected gains orbenefits.

A nation might promote investment in the sector, guarantee theviability of desalinization initiatives, and give its people access todependable and clean water supplies by setting clear legislation fordesalinization. The following are some suggestions to encourage theconstruction of desalinization facilities in Chile:

1. A thorough regulation that takes into account every stage ofthe desalinization procedure.

Desalinization plant development may be encouraged bysystematized regulations that take into account the extraction of seawater, thegeneration of desalinated water, its transportation, and its final usage. Doingso could incentivize the development of desalinization plants, as building theplant will no longer require dozens of permits from different sectorialauthorities. Moreover, this could decrease the time needed to get all thepermits and give certainty to the developers and financers.

2. Regulation of the case in which a third-party build, owns andoperates a desalinization plant, which sells the desalinated water to a mine.

A challenge for the development of desalination projects is theabsence of recognition and regulation of the situation in which the developerof a desalinization plant is not the final user of the desalinated water. Thesechallenges are mostly caused by a lack of understanding that, in somecircumstances, the company developing a desalinization plant is a third partywho is not acting on behalf of the end user, that is, the mine.² Inthis instance, a developer funds and constructs the facility, which will beowned by it and not by the mine. The lack of acknowledgement of this scenariocould imply, for instance, that certain permits to build the desalinizationfacility are required by the local authorities to be requested by the mine, orthat the mine is considered jointly and severally responsible by the courts forcases in which they have not intervened, as it is considered that the mine isthe owner of the facility and the developer just a contractor.³

3. The right to use the desalinated water by its final user mustbe guaranteed and secured.

A significant investment is needed to build a desalinationplant, which may not be financially feasible if the project developer isuncertain that its right to use and/or sell the water will be safeguarded.Desalinated water is a result of an industrial process rather than an elementpresent in nature. Desalination plant developers, end users, and financiersmust therefore be assured that their investment will be safeguarded, eitherthrough ownership of the desalinated water or through a right of use that cannotbe revoked or altered except in extraordinary circumstances, and always payingthe corresponding amount as compensation. This does not mean that the developerof a desalinization project cannot, voluntarily, agree with the nearbycommunities to give them a portion of the desalinated water free of charge.Even more, it should be considered a good practice, which allows the projectdeveloper and/or the mine to obtain a social license to operate.

Although the desalinization industry in Chile is advanced incomparison to other countries of Latin America, there is a need of hugeinvestments in desalinization plants in the coming years, both for the miningindustry but also for residential use. To remain attractive to investors, Chileshould enact regulation that incentivize and promote the construction ofdesalinization plants, as we cannot put in risk neither the mining industry northe human consumption due to a lack of available water.

* The author has led the legal negotiation of contracts andadvised in the construction phase of three desalination plants for the miningindustry in northern Chile.