Colombia’s changing regulatory landscape

Colombia

Patricia Arrázola Bustillo, legal partner and director of the Energy & Natural Resources practice at Gómez Pinzón Abogados, and Lina Correa Posada, the firm’s environmental director, talk to The Energy Year about the attractiveness of Colombia’s extractive industry given the current government’s policies. Gómez Pinzón Abogados is a law firm with expertise in various legal areas.

How attractive is the extractive industry in Colombia given the current government’s policies?
Patricia ARRÁZOLA BUSTILLO: While the current government’s E&P policies will remain restrictive, Colombia’s GDP is heavily fuelled by the extractive industry, particularly hydrocarbons and mining. We need to look at Colombia with a long-term perspective. The country still has significant resources, and hydrocarbons remain necessary for life.
With the country’s gas-reserves lifetime at only six years, the government has realised the need to invest in developing offshore fields and is working on regulations to promote investment in these areas.
In mining, companies are working against the Ministry of Environment’s position, which currently opposes the exploration and exploitation of new reserves because of their environmental and social impact. However, many communities understand mining’s importance for local development.
The current administration initially spoke about focusing on transition minerals, but we haven’t seen significant developments in this regard. For example, as far as copper is concerned, we already have copper mining companies here that are struggling because of the government’s inaction.

What are the main environmental and community challenges for extractive projects in Colombia?
Lina CORREA POSADA: We face two significant challenges: environmental issues related to biological diversity, protected areas and strategic ecosystems, and the complexities arising from our ethnic diversity.
Colombia has a comprehensive and established legal regime that provides clear rules. As long as companies comply with specific requirements and conduct thorough studies, they should be able to carry out projects with manageable challenges.
However, the new director of ANLA [National Environmental Licensing Authority] has higher demands, often going beyond the established norms, which has led to delayed project timelines.
Prior consultation with ethnic communities has become a significant challenge. Colombia has taken ILO Convention 169 and developed it to such an extent that communities now have considerable power to obstruct projects, although they cannot veto them outright.

What services does Gómez Pinzón provide in the energy and natural resources sector?
PAB: Gómez Pinzón has been deeply involved in the electricity, mining and hydrocarbons sectors since 1994, coinciding with the introduction of public services and electricity laws in Colombia. Our services are comprehensive, covering the entire lifecycle of energy and natural resource projects. We provide support from regulatory and environmental perspectives, which sets us apart from firms that focus solely on transactional work.
Regarding project development – whether in energy, mining or hydrocarbons – we get involved in regulatory and legal aspects, contract types, environmental issues, real-estate matters and all other necessary areas.
Moreover, we provide advice prior to exploration activities to help companies identify all potential risks and ensure compliance with regulations. When an incident occurs, we assist with all aspects of reporting, advising on when and how to inform the authorities.
Currently we’re seeing high demand for advice on tax incentives, particularly for renewables. We work closely with our tax team to design effective structures for clients. Our experience allows us to provide clients with a holistic service backed by in-depth knowledge of the sector.
We’ve advised on major projects such as the construction of the Ocensa pipeline and have been involved in mining operations in La Guajira since the 1990s.

How do you advise foreign investors looking to develop renewable energy projects in Colombia?
LCP: Our approach to advising foreign investors on renewable energy projects is comprehensive and starts from the very inception of the project idea. We’ve developed a thorough survey of the requirements for a project from its conception, involving various areas of our firm at each stage.
We begin by advising on the appropriate vehicle to set up in Colombia, considering the tax situation to maximise benefits and profitability. We help structure the operation depending on who is coming to do the project and in which area it should be developed. Our advice covers title studies, community licences, environmental permits, brand registration and all energy regulatory issues.
Sometimes, foreign investors partner with local developers and may adopt a more informal approach, which can lead to problems down the line. Our recommendation is always to seek established legal counsel from the beginning to anticipate and mitigate potential issues.
We also have strategic allies who can provide technical expertise beyond the legal aspects, allowing us to offer truly comprehensive advice from the project’s conception. This approach ensures that we can guide investors through all aspects of project development, from regulatory compliance to community engagement, maximising the chances of project success in Colombia’s complex environment.

What are Gómez Pinzón’s key objectives for the next two to five years in the energy sector?
PAB: Our primary objective is to provide the best possible service to our clients. We aim to help them navigate and solve problems in Colombia’s changing regulatory landscape. Additionally, we’re focused on broadening our client base. This is particularly important in a sector increasingly affected by rising costs due to investigations, regulatory requirements and other challenges.
Moreover, we’re taking a more regional and international approach. As part of the Affinitas alliance, which brings together four firms from Mexico, Chile, Peru and Colombia, we’re working to promote investment opportunities in each of our countries. We’re actively engaging with current and potential clients, including those that one firm in the alliance may have but others do not, to present a comprehensive view of the energy sector across these markets.
We’re encouraging companies in the sector to voluntarily adopt sustainability practices. We believe this approach, combined with supportive government policies, is the way forward for Colombia’s energy sector and economic development.

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