Monday, April 20, 2009

Mining and Oil & Gas Opportunities and Challenges in Latin America

BUENOS AIRES -- The major theme of the first day of the 7th Biannual Rocky Mountain Mineral Law Foundation International Institute in Buenos Aires, Argentina, was marked with a series of presentations about how "community relations" issues are becoming increasingly important in oil and gas and mining development projects.

As one speaker said, "It doesn't matter if you have the legal right to develop and open a facility if the local community doesn't want you there."

Luke Danielson, the principal of Sustainable Development Strategies in Gunnison, Colorado, and a globally known leader in the sustainable development of natural resources arena, gave one of the day's leading presentations.  He pointed out that today's challenges for the natural resources industry are different from yesterday's.  

"There was a time we struggled for safety," he said.  "We seem to have learned a lot and while no amount of accidents can be deemed acceptable, the progress is enormous.  We are in the middle of the road with the environment, but there has been considerable progress.  On the other hand, we are still largely very baffled about how to get along with the communities in which the companies operate.  We lack a clear conceptual framework and a clear understanding of our objectives in terms of working with local communities."
Putting it more bluntly, he said, "This may be the key issue confronting the industry."
Mr. Danielson identified several fundamental questions:

  • What is law?  "It doesn’t do any good to comply with the law if at the end of the day you can’t move ahead on projects," he said.
  • What is development?  "If the objective is to create sustainable development around mining operations, we have to define what is development."
  • What are the alternatives to how business has traditionally been carried out.

His thesis contains three parts. First, natural resource development brings accelerated change to regions with traditional cultures, subsistence livelihoods, and natural ecosystems.  Second, these are often areas with weak local governments and institutions.  And third, there is often a lack of capacity to manage this change to achieve a positive form of development.

Revenues are needed, he said, to compensate for impacts on livelihoods.  They are needed to provide basic services such as public health, security, education, potable water, and electrification.  Above all, revenues are needed to strengthen the institutions that manage this process of change. 

The "essential elements" of any sustainable development effort must be:

  • Ability to plan and manage the development process.
  • Ability to resolve disputes and conflicts.
  • Ability to respond to community sentiment.
  • Accountability for success or failure; the people who make decisions are held accountable by the community. 

Distilling all of his observations, Mr. Danielson pointed to three challenges:

  • Impacts begin long before there are revenues.
  • The “off again, on again” flow of revenues associated with developed projects.
  • Impacts continue after the revenues end; a huge social need remains after revenues end. 

"These are very difficult challenges and in many places local government is not able to manage them effectively," he said.



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