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Excerpted From: Guillermo J. Garcia Sanchez, When Drills and Pipelines Cross Indigenous Lands in the Americas, 51 Seton Hall Law Review 1121 (2021) (391 Footnotes) (Full Document)
In the summer of 2015, Sempra Energy announced that it had been awarded a natural gas transportation contract worth $108 million in northern Mexico. The project was one of the earliest results of the opening of Mexican energy markets to foreign investment. The pipeline was to start in Arizona, stretch down 833 kilometers cutting through the Sonora Desert, and provide U.S. natural gas to a combined-cycle power generation plant of the Mexican state-owned company in Chihuahua. The project exemplified the continuing integration of U.S. and Mexican energy markets. For this, and many other projects, Mexico's Minister of Energy, Pedro Joaquin Coldwell, received the 2015 “Minister of the Year” award.
A year later, two members of the Loma de Bacum Yaqui indigenous community in Sonora were murdered, and three hundred others were up in arms protesting against the construction of a nine-mile stretch of the pipeline over their lands. The Loma de Bacum Yaqui community complained that the government did not respect their rights to be consulted before approving the pipeline project and that the crossing of the infrastructure through their lands was a violation of their ancestral way of life. The community further rejected the company's monetary compensation for their losses and the employment offers to its members. By the spring of 2019, the pipeline had been sabotaged several times, and no agreement was in sight. Even though the pipelines were either idle or incomplete and not delivering gas, the Mexican government had to pay investors the regular rate because the delays and circumstances were beyond the foreign investors' control. Under the force majeure contract terms, circumstances out of Sempra's control included sabotages, challenges to the consultation processes with indigenous people, land title issues, and local authorities' permits. In the summer of 2019, the bill piled up to around three billion dollars, and Mexico's new administration announced that it would pursue an arbitration proceeding against the companies in an effort to redefine the contract's terms. The announcement brought down Sempra's shares by 1.1% and its Mexican subsidiary's shares by 4%. After months of negotiation between the state-owned company and Sempra, the State signed an agreement to lower the bill but promised to continue with the project. The Yaquis were left with no other option but to continue their protest. Unfortunately, the Yaquis' story is not unique to Mexico but rather a phenomenon present in the Americas and connected to a deeper energy integration process.
Energy integration in the northern hemisphere is now possible because of Mexico's 2012 decision to open up its sector to private parties and the renegotiation of the North America Free Trade Agreement (NAFTA), now replaced by the U.S.-Mexico-Canada Agreement (USMCA). The old NAFTA framework lacked any protection for U.S. or Canadian companies making deals with Mexico in the production, transportation, and exploitation of hydrocarbons. The state-owned companies, Comision Federal de Electricidad (CFE) and Petroleos Mexicanos (PEMEX), reserved authority over energy production and hydrocarbon development, respectively. Moreover, the construction of energy infrastructure and the integration of the region are part of a broader conversation involving strategic investments in Central America in order to boost their economies and reduce migration flows. An energy integration strategy that begins in the Tar Sands of Canada and continues all the way down to the Amazonian region is a key component to rebuilding governance in the Americas.
All of these discussions surrounding energy integration are happening while the three nations are debating the way energy investments affect vulnerable communities. In the case of Mexico, one only needs to remember that the Zapatista indigenous rebellion started the day NAFTA entered into force, and the exclusion of their rights in the treaty was one of the elements that triggered the uprising. In the case of the U.S., the Keystone XL and the North Dakota pipeline conflicts with the Sioux tribes are recent reminders of the tensions that emerge among companies, authorities, and communities. The same can be said of indigenous communities' anti-fracking opposition to the “Idle No More” movement in Canada, during which they were violently confronted by the Royal Canadian Mounted Police in New Brunswick. According to data from the Environmental Justice Atlas, ninety active social conflicts involving fossil fuels and climate justice/energy conflicts have been reported in the three countries, representing approximately 25 percent of the total active social conflicts in the three nations combined.
Government negotiators often treat free trade, energy, and indigenous rights as separate fields, but in practice, they interact with and affect each other. International legal scholars typically overlook this overlap as well. International business transactions courses and academic articles rarely include the study of community rights. On the other hand, human rights literature usually fails to include the study of international companies and their investment rights. The investment system and the human rights regime are traditionally studied as separate silos, where specialized courts develop principles and standards to bring consistency and systematicity to each regime. Scholars and adjudicators might borrow from other fields, but they do not see them as belonging to the same sphere. As stated by Professor Sergio Puig: “Except for the occasional shared conference or workshop, these fields are typically separated into distinct, often insular, epistemic communities.” The global efforts that have tried to attend this disparity focus on the duties that nonstate actors, such as international companies, have to respect human rights. Indigenous people's advocates focus on delineating the extent to which government responsibilities can be extended to powerful actors such as transnational corporations. In the same vein, investment law scholars who are interested in addressing the social implications of foreign investment advocate for the inclusion of amicus briefs by affected communities in the proceedings and for the inclusion of social corporate responsibility principles in investment treaties.
This Article follows the invitation of this new scholarship to reflect on whether energy projects, investor rights, and community rights should be analyzed as belonging to the same field. It invites the reader to see investment law, energy law, and community rights as different views of the same cathedral. But instead of shedding light on the arcs of duties that connect government and companies in a globalized economy, it takes us to the underground crypt of the cathedral--to the foundations of the State's right to extract natural resources. The development of energy projects depends on who owns the resources necessary to produce and transport energy, and on what types of relationships emerge from the “bundle of rights” created by property law. This Article takes the view that the three fields, investment, human rights, and sovereign rights over natural resources, give normative meaning to the way international law deals with property conflicts surrounding energy development projects.
The following Parts propose a novel way to view the cathedral's foundations. Part II describes the canons of the international legal fields that impact natural resource production on indigenous land: sovereign rights over natural resources, the human rights regime, and the investment regime. Sections A-D review how each field studies and defines the protection of the right to property from third-party interference and how the regimes resolve the clash of rights. Part III looks at representative cases where the regimes clash leaving the State trapped in the middle. Finally, Part IV defines how a paradigm in the energy academia, energy justice, creates ways of understanding the value of natural resources and the interests of the actors involved in their development.
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The international treaties analyzed in this Article show how international law recognizes a State's sovereign right to extract its natural resources for the benefit of its citizens. States have “absolute” authority to determine the most effective and efficient way to develop and build infrastructure to extract natural resources in their territories. These treaties subtextually conceive of resources as tools for development. In the case of energy projects, it is necessary to drill wells to extract oil and gas, and to construct pipelines to transport them, to secure the flow of energy products to achieve long-term “development.” In the name of undefined development, the State can infringe on the property rights of individuals, companies, and/or communities. The remedy left to the affected parties under international law is to receive monetary compensation for the infringement upon their rights.
International law, as such, recognizes both a liberal and utilitarian conception of property rights that fails to incorporate other social values not connected to the resources' economic potential. This liberal and utilitarian version of property rights obscures the fact that some property rights conflict with social values not shared by the majority of the population, particularly indigenous people. The conflict with these other noneconomic values is not resolved by granting land titles to the communities and forcing them to defend their properly rights against third-party interference. The international system places the interests of the State to develop the resources above those of the indigenous community and grants the affected tribes remedies that monetize the value of their property.
The consequences of these liberal and utilitarian conceptions of property rights in international law are even clearer when the clash between the State and the communities also involves foreign investors extracting resources on behalf of the States. When foreign energy companies are added into the equation, international treaties provide them with remedies that are more attuned with their shareholder values. The investment regimes grant foreign investors multimillion-dollar damages compensations when the State fails to protect them. When the communities and the foreign investors' interests collide, the regime leaves governments in an intractable position to decide who to compensate, the communities or the investors. The decision becomes a cost-benefit analysis that compares the value of the investment against the value of tribal-ancestral land. One is quantifiable by nature, the other is not.
The international instruments that protect indigenous rights are insufficient to fully tame the liberal and utilitarian conceptions behind the sovereign rights of the State to extract natural resources. The international laws that protect indigenous rights, including the IACtHR's case law, reinforce the idea that communities have the right to a consultation that accounts for their particularities, such as language and cultural accommodations and attempts to aid the communities' understanding of an investment's consequences. They emphasize the fact that the indigenous communities have a right to receive title to their property, and so it must be protected by the State. This Article, however, moved the debate to the perspective of the State facing challenges from both investors and indigenous rights. Instead of focusing on the best practices for conducting a prior and informed consultation process with indigenous communities, it invited the reader to see the conflict that emerges when government officials must decide who to protect when a conflict occurs between communities and investors. The cases presented here show how the indigenous-rights regime collides with the investment regime in the execution of energy-related projects when they are executed and not in their planning stages. This Article argued that, notwithstanding the advancements in international indigenous rights, the regime does not fully tame the State's sovereign rights to extract natural resources for the benefits of energy projects.
Even assuming that the pre-extraction consultation process respects the principles established by international law, the remedy is to compensate monetarily for the loss. When international courts like the IACtHR find violations of the right of consultation, the remedy is usually to compensate the communities, along with other public remedies such as public declarations, monuments, and creations of programs to protect their culture. But the pipeline ultimately gets constructed, the drills perforate tribal land, and roads are built around the energy infrastructure. The regime allows the State to monetize the indigenous communities' interests and compensate them when the resources located in their lands are affected by energy projects. Even if it mitigates the exercise of sovereignty, the indigenous-rights regime also recognizes the State's right to exploit their lands for a “public benefit.” The clash with foreign investors emerges when the State acts through private parties, a key characteristic of energy-related projects, to develop the natural resources. The concessions, contracts, and licenses are protected investments in international bilateral treaties. As such, governments receive pressure to protect those investments against community unrest.
By exposing how energy projects on indigenous lands create a clash of rights, this Article sets the stage for future research. The Article invites the reader to redefine property in a way that addresses the interests of all the parties involved and the social, cultural, and spiritual relationships that natural resources create with different parties. The redefinition of property rights over mineral and energy resources should address contemporary needs like community concerns, sustainable production of energy, and the protection of companies' long-term financial interests. Perhaps we could borrow ideas from the existing literature on energy justice to address these goals and avoid a clash of interests among all the parties involved. Energy justice advocates for the inclusion of communities in the decision-making process, share the benefits of sustainable production, and include their spiritual and cultural values in the way projects are designed.
Energy-justice advocates argue that energy production should be democratized and foster social relations. As a new paradigm guiding the planning of energy projects, energy justice aims to ensure that decisions are made in a democratic and socially inclusive manner. The process is not binary like the right of consultation but rather a course of action that requires continuous engagement. How do we involve communities in the benefits of energy transition? How can they participate in the process of deliberation to balance different sources of energy production? These are all questions that need to be addressed as part of the process, and which go beyond the current proposals to codify further the right of consultation, expand the use of social corporate responsibility principles, or include amicus briefs in investment arbitral proceedings.
Energy transition through the lens of energy justice offers communities an opportunity to own and control clean energy resources while reducing localized environmental and health impacts associated with burning fossil fuels. This transition is an opportunity for governments and companies to implement equity-centered energy policies. It further offers an opportunity to reshape the socioeconomic relationships created by energy choices. As opposed to a clash of rights being litigated in separate international tribunals, we can start thinking about different ways in which property rights over energy sources create social relationships and opportunities to produce renewable energy in a socially distributive way. Moreover, we can begin a conversation about ways in which the State can democratize the decision-making process for energy projects, as opposed to relying exclusively on economic considerations.
Finally, as this Article explained, we should also abandon false narratives regarding the ways in which communities benefit from economic development that results from international trade and investment agreements. If we continue to emphasize the monetary benefit of energy production over any other social value, as the current treaties do, communities will be affected and, in many cases, will never see the benefits that they are being promised. If there is one thing that we have learned from NAFTA, it is that international trade agreements are not the magic formula that ends poverty, migrations, and underdevelopment. The Zapatista indigenous rebellion in Chiapas, Mexico--which began the same day that NAFTA came into effect--warned us of this fact, and we ignored it. Twenty years later, the same underdeveloped regions of Mexico-- Oaxaca, Guerrero, Chiapas, Tabasco--are coincidently home to most of the nation's indigenous communities, who still face high levels of poverty and exclusion. They have not seen the trickle-down benefits of the trade and investment agreements. Yet, this time, the USMCA and Mexican energy reform are bringing foreign investment to their doorsteps.
Asspciate Professor, Texas A&M University School of Law; S.J.D., Harvard Law School; LL.M., Harvard Law School; LL.M. in International Law, Fletcher School of Law and Diplomacy; LL.B. in Law and LL.B. in International Relations, ITAM.
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