Ministry of Environment and Energy (Costa Rica)

Ministerio de Ambiente y Energía

Country

Location

Regulated area

Costa Rica

San José

Energy & natural resources

Useful pages on the regulator website

Key individuals

  • Andrea Meza Murillo: Minister of Environment and Energy
  • Rolando Castro Córdoba: Vice Minister of Energy
  • Franklin Paniagua Alfaro: Vice Minister of Environment and Natural Resources
  • Cynthia Barzuna Gutiérrez: National Technical Secretary of Environment

Regulatory oversight

The Ministry of Environment and Energy (MINAE) is the overall governing body for the environment in Costa Rica. As such, it has the competence to develop and enact all national public policies regarding natural resources, energy, mining, and environmental assessments and standards. As a result of its broad power to issue permits and licences, as well as to sanction all types of environmental damage, MINAE is a key regulator for all infrastructure and energy projects. However, apart from establishing the vehicle emission standards, MINAE does not have much control over transport in Costa Rica, since the Ministry of Public Works and Transport oversees that sector.

Both the legislative and institutional framework of MINAE is widespread and complex. The basis of its legislative framework is the Organic Law of the Environment (No. 7554), which details most of the sectors overseen by MINAE: water, forestry and mining resources; air quality, fossil fuels, energy, biodiversity, wildlife protected areas, climate change and emissions; environmental education and environmental protection in general. Deriving from this general framework is a widespread network of laws, regulations and guidelines touching on each of those sectors and detailing requirements and procedures. These requirements and procedures are applicable to, for example, the process of obtaining an environmental viability certificate for a development project or obtaining the permits to produce energy in Costa Rica.

The institutional framework of MINAE has expanded hand in hand with its legislative development, usually establishing a specific department for each of the main areas of oversight, such as a Water Department deriving from the Water Law (No. 276), a National Forestry Authority established through the Forestry Law (No. 7575), and a Geology and Mining Department to implement the Code of Mining (No. 6797), to name a few. The complete organisation chart can be accessed at https://minae.go.cr/acerca-de/organigrama.

Two of the most relevant entities under the oversight of MINAE are the National Environmental Technical Secretariat (SETENA) and the Environmental Administrative Tribunal (TAA). SETENA is the authority in charge of overseeing and approving all environmental impact assessments, a mandatory requirement for any type of infrastructure and energy project, regardless of its size. The TAA, on the other hand, is the only specialist tribunal for environmental issues in Costa Rica. Even though it may only impose administrative sanctions, its procedure is one of the main pathways to sanction a company for environmental damage.

The specific competences of MINAE, and the business it oversees, are very varied. First, it has the general authority to enact environmental public policies and to dictate mandatory regulations regarding the sustainable use of natural resources. Additionally, it oversees the whole energy industry, including fossil fuels and renewable energy projects. MINAE also has the authority to issue mining and logging licences. Even though the mining industry is highly restricted in Costa Rica, it is necessary to get a licence from the Mining Department of MINAE even to exploit construction materials such as sand, gravel and aggregates. The use of superficial or underground water is also conditional on the issue of a licence by the Water Department of MINAE. Finally, any industry or activity that creates any kind of environmental damage is subject to the overseeing and sanctioning powers of MINAE.

Reporting and disclosure obligations

As the watchman of the environment’s wellbeing in Costa Rica, MINAE has the authority to request a fair amount of information from people or entities holding licences or permits to use or exploit natural resources. The reporting and disclosing obligations vary, depending on the type of licence a company holds, but in general includes the following:

  • monthly or biannual report on the use or extraction of resources (water, forestry, mineral);
  • list of shareholders of the licensed company, and periodical report on changes to the shareholders’ composition;
  • report on the intention to sell, rent or transfer a permit or licence;
  • report of the findings of additional resources at the extraction site, and communication on the intention to expand a licence to exploit those resources;
  • maintaining a logbook of the daily activities at the extraction site;
  • report on the production, storage, selling or export of the resources; and
  • report on the compliance of environmental commitments acquired through the environmental impact assessment.

Monetary sanctions and recent behaviour

MINAE has sufficient authority to impose monetary sanctions, through an administrative procedure, following several laws.

First, the Organic Law of the Environment establishes a blanket provision of civil liability for any environmental damage caused that the MINAE can enforce. The owners or legal representatives of a company or entity that causes environmental damage can also be jointly liable for the damage and, therefore, responsible for the payment of reparations or compensation.

Additionally, many laws regulating the use and exploitation of natural resources, usually through permits or licences granted by MINAE, include several instances in which MINAE can impose a monetary penalty on the person or company who breaches its permit or licence obligations.

For example, the Code of Mining grants powers to the Geology and Mining Department at MINAE to impose fines and penalties to any licence holder that does not present regular reports on its extractive activities, extracts more or other materials than those authorised, or fails to comply with the sanitary and security protocols at the mine. The Geology and Mining Department of MINAE enforces these penalties regularly; however, the licence holder is usually notified of the fault before the sanction is imposed and, therefore, most licensees comply before the sanction is executed.

Another example is the fines detailed in the Regulation of the Rational Use of Energy Act (No. 7447), for any company with the obligation of implementing a rational use of energy plan that fails to meet its energy-saving goals. These fines are calculated based on the annual percentage of energy used, or on the amount of energy that the company failed to save.

A curious case regarding the monetary sanctioning powers of MINAE is the fines established in the Water Act of 1942. That law detailed the specific amounts of the fines imposed for non-compliance with the rules of water licences or any other general rule. After 78 years of being in force, the fines amount, nowadays, to about US$2 for serious offences, such as polluting water bodies, damaging vegetation in groundwater recharge zones, or use of more water than is authorised in the licence. Consequently, even though MINAE is empowered to impose monetary sanctions for violations to the Water Act, in practice those sanctions are irrelevant. There have been significant efforts to amend the Water Act, and there are currently a couple of bills being discussed at Congress that would significantly alter the amounts of fines as described by the current law. Most of the fines detailed in these Bills would range from US$2,000 to US$35,000, depending on the gravity of the offence.

It is important to note that many monetary sanctions established through environmental laws are penalties imposed for the commission of environmental crimes. Therefore, they must be imposed through the judicial system, not by MINAE.

Apart from the MINAE department oversight, monetary sanctions can also be imposed through a procedure at the TAA. However, procedures at the TAA tend to take a long time, even years, to be concluded, causing many of the organisations or communities that denounce environmental damage to prefer alternative means of halting the damaging activities.

It is important to bear in mind that both MINAE and the TAA are administrative entities and, as such, any of their decisions can be challenged at judicial tribunals. Consequently, the efficacy of their decisions is limited if a person or entity wishes to challenge the imposed sanction in court.

Non-monetary sanctioning powers and behaviour

MINAE has the authority to impose non-monetary sanctions if environmental regulations are breached, or if relevant environmental damage is caused. The definition of environmental damage is wide, including anything from pollution, draining of wetlands, damage caused to the vegetation in a groundwater recharge zone, or damage to a riverbed during an infrastructure project.

Some of the sanctions that the MINAE has the authority to impose are stated in Article 99 of the Organic Law of the Environment:

  • caution;
  • admonition, in line with the severity of the damage caused;
  • immediate order to halt the activities causing the damage;
  • partial or complete closure of activities causing the damage;
  • cancellation or annulment of licences, permits or authorisations granted to the company or person causing the damage. The cancellation of licences or permits could lead to the closure of establishments such as factories, offices, stores or industrial facilities of various types. Additionally, it could lead to the cancellation of state licences to exploit or use natural resources;
  • disqualification to apply for licences or permits for an extended period;
  • order to modify or demolish buildings or structures; and
  • obligation to compensate or stabilise the environmental damage.

Many of these sanctions are not commonly imposed by MINAE unless there is widespread and highly evident environmental damage occurring. This is because their implementation can have serious economic and social consequences for companies or communities, for example, the closure of a construction project, or the cancellation of a licence to exploit natural resources. However, they tend to be imposed more often when there is external pressure from environmental groups or organised communities. It is important to understand that MINAE, as a ministry under the direct oversight of the Presidency, is to some extent a political entity, aside from being a technical one. Consequently, it is possible that, in some cases, political factors will be taken into consideration when determining whether to impose a specific penalty.

As stated above, the Environmental Administrative Tribunal, as an administrative entity within MINAE, has the same level of authority to impose non-monetary sanctions as MINAE itself.

Even though it is not exactly considered a sanction, another power of MINAE is its authority to review and overturn the decisions made by the SETENA regarding the environmental viability of a project. In 2019, the case of a large agricultural company that obtained an environmental viability certificate from SETENA to plant 600 hectares of pineapple near the Caribbean coast of Costa Rica generated much controversy. As the site of the future plantation was near the Térraba-Sierpe Wetland, which is of national environmental relevance, various environmental organisations put forward challenges to the decision. Ultimately, MINAE, in its position as the appeals body for SETENA, decided to overturn the certificate issued by SETENA, therefore blocking the execution of the project. These situations are rare; however, it is important to be aware that large infrastructure projects can be halted by MINAE, regardless of an environmental viability certificate being issued by SETENA.

Recent and upcoming developments

The administration at MINAE has established itself as a champion for the National De-Carbonization Plan. As such, the current leadership at MINAE is prioritising projects that follow climate mitigation and adaptation goals, leaning strongly towards renewable energy and electric mobility projects. In this context, the Presidency and MINAE enacted a decree in 2019 that expanded the term of the moratorium of petroleum exploration and exploitation in Costa Rica until 2050.

As for future developments, there are several regulatory changes under way that may have a considerable impact in some of the sectors overseen by MINAE, mostly in the form of reforms to regulations that have become obsolete or too restrictive for new technologies and new uses of natural resources.

One sector that may undergo a major reboot in its regulation is water. The Water Act (No. 276) was enacted in 1942, when Costa Rica’s population was less than 1 million people, and the number of tourists was less than 0.2% of the current number of visitors. After 78 years of being in force, its provisions are completely outdated and even inapplicable in many instances. Therefore, for some years, there have been continued efforts to enact a new, comprehensive Water Act that can respond to the current needs of the country. There are currently some initiatives in Congress that may become the new Water Act, contributing to the organisation of the entangled web of regulations and institutions that govern water resources in Costa Rica.

The other sector that may see relevant changes in its regulation is energy. Currently, the generation, transmission, distribution and commercialisation of energy are controlled almost entirely by a public monopoly. The energy market is highly regulated, and the regulation governing it is outdated and does not foster the use of new technologies. Consequently, there is a lot of pressure from the private sector and civil society to ease the regulatory restrictions and allow the use of new technologies and mechanisms to produce renewable energy in affordable and accessible ways. Within the energy sector, at least one activity seems to be near to getting a new regulation: distributed generation. Presently, only a small percentage of systems may be connected to the national grid and, even then, under strict limitations. However, the recent publication by MINAE of a draft for a new regulation proposes important changes to the current rules and would allow the development of a dynamic private energy production sector, albeit remaining restricted to auto-consumption for now.

In addition to these possible structural changes in regulation, MINAE is also working on the development of safety standards and regulation for new technologies relating to energy production and electric mobility. For example, there are efforts to develop standards for the safe use and disposal of lithium batteries, and a process is being developed to propose a regulatory framework for the production and distribution of hydrogen in Costa Rica.

Finally, from an institutional perspective, it is important to consider the political nature of some of the higher positions at MINAE. Both the Minister and the Vice Ministers (of Natural Resources, Energy, and Water and Seas) are political positions and, as such, they can be removed and replaced at any given time. Furthermore, the individuals who hold these positions usually change with each new administration, so the focus of the public policies and broad goals of the Ministry tends to vary and fluctuate every four years.

Challenges

Under the complex mandate of protecting Costa Rica’s natural resources, while simultaneously ensuring their sustainable use and exploitation, MINAE has many challenges to overcome when it comes to effectively implementing its legislative and regulatory framework.

First, officials at MINAE are often caught between the demands of a very developed and organised conservation sector, clashing with the needs of a solid and ever-expanding production sector. Additionally, the interests of the communities at the local level and the government agenda of the administration must be taken into account, which sometimes results in conflicting or contradictory decisions stemming from an uncoordinated response from the different departments and regional offices.

Second, environmental regulation in Costa Rica is full of lengthy and complicated procedures to ensure compliance with all the legal requirements to avoid environmental damage. As a consequence, these processes take years to complete, becoming a tangible obstacle to many infrastructure and development projects. MINAE is heavily criticised for this and, therefore, one of its main challenges is to reduce processing times and improve its coordination between departments.

In the context of Costa Rica’s route to becoming a member of the OECD, the government has begun a process to reduce the number of requirements and procedures to develop or execute an energy or infrastructure project, and to reduce the processing times within its various departments. There is still a long way to go for the process to obtain a licence or permit from MINAE to be an easy and straightforward experience, but in the last couple of years, there has been a visible effort to cut the number of required procedures by most departments, with the result that some of the processing times have been reduced significantly.

Interacting with the regulator

The interaction between MINAE officials and members of the private sector usually involves procedures to obtain a licence or permit. It is important to be aware that procedures within the different departments of MINAE are long and can take several months to complete, if not years. Therefore, when a project involves getting a licence from MINAE, it is crucial to plan ahead and to start with the procedures from the very beginning.

Further, to follow up on the progress of the procedure, it is helpful to get the name and contact details of the official in charge of processing the case, allowing constant contact with a person who is familiar with the case and who can offer updates on its progress or lack thereof. It is advisable to follow up constantly on the procedures, to demonstrate the urgency of the case, and to ensure that the matter is acted on by the department.

For many procedures, it is necessary to hire a professional to act as an ‘environmental regent’ for a project, who must monitor the implementation of and compliance with environmental regulation. This can be a distinct advantage, as environmental regents are very familiar with the procedures at MINAE departments and can offer help in dealing with the public officials.

For most procedures, the presentation of physical documents used to be mandatory. However, some procedures and files are starting to become digital, especially since the covid-19 crisis. For example, all procedures at the Water Department can now be handled online, which may result in faster processing times. However, since these systems are only just starting to be implemented, some complications may arise during the transition. Finally, all procedures at MINAE are managed in Spanish.

Notes for foreign investors

Some of the regulations applicable to the resources and activities overseen by MINAE impose restrictions on foreign entities obtaining an exploitation licence or entering into a contract with the government.

For example, the Law that Authorises the Autonomous or Parallel Electric Generation (No. 7200), which allows private entities to produce and sell electricity to the national grid (albeit in a restrictive way), mandates foreign entities to establish a branch office in Costa Rica, with at least 35% of its shares being owned by Costa Rican nationals. Additionally, the branch office will be considered a Costa Rican entity, to all intents and purposes, and as such, the company forfeits any claim to diplomatic dispute resolution mechanisms should a conflict arise.

The same applies to any foreign company that wishes to exploit fossil fuels in Costa Rica. However, this activity is already highly restricted, especially through the above-mentioned moratorium of petroleum exploration and exploitation, which is in force until 2050. Therefore, the exploitation of fossil fuels in Costa Rica is a complicated activity, regardless of whether a foreign or a national company is trying to implement it.

Another activity that imposes restrictions on foreign companies is mining. A foreign entity wishing to acquire a mining licence must establish a corporation in the country and name a legal representative who resides in Costa Rica, with enough powers to contract rights and obligations on behalf of the company. Moreover, entities of which more than 50% of shares are owned by foreigners are not allowed to finance a mining project in more than 10% through the national banking system of Costa Rica.

Finally, compliance with environmental regulation has become an increasingly delicate matter for foreign entities investing in Costa Rica. In recent years, the government has been involved in several investment arbitrations, relating to the cancellation of mining rights or environmental viability certificates of real estate development projects for environmental reasons. It is highly advisable to get proper legal advice on environmental issues before executing any type of energy, transport or infrastructure project in Costa Rica, to avoid problems later.

Other regulators it works closely with

MINAE, as the main regulator of the use of natural resources and energy in Costa Rica, has to work in association with many other public entities in respect of its authority on energy, infrastructure and transport matters. Many of the entities listed below are in charge of supervising or directly managing the demand and supply of specific resources in Costa Rica, such as AyA (water), ICE (energy) and RECOPE (fossil fuels). The others are mostly ministries with overlapping or related functions.

Ministerio de Obras Públicas y Transporte
MOPT
Ministry of Public Works and Transport (Costa Rica)

Ministerio de Salud
MINSA
Ministry of Health (Costa Rica)

Ministerio de Agricultura y Ganadería
MAG
Ministry of Agriculture and Livestock (Costa Rica)

Autoridad Reguladora de los Servicios Públicos
ARESEP
Regulatory Authority of Public Services (Costa Rica)

Instituto Costarricense de Electricidad
ICE
Costa Rican Institute of Electricity

Refinadora Costarricense de Petróleo
RECOPE
Costa Rican Petroleum Refinery

Instituto Costarricense de Acueductos y Alcantarillados
AyA
Costa Rican Institute of Aqueducts and Sewerage

Secretaría Técnica Nacional del Ambiente
SETENA
National Technical Secretary of Environment (Costa Rica)

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