Energy and Natural Resources

Helping the industry innovate in a changing environment

Accelerating the energy transition will require virtually every business, particularly those in the energy and natural resources industry, to innovate and adapt to build a better future. We support you in tackling these challenges, seizing opportunities in an uncertain environment.

“We are both advocates for our clients and players in the industry. So we know what it’s like to walk in your shoes.”

In Chile

In an ever-changing energy, oil, and gas market, DLA Piper in Chile leverages its local knowledge of the Chilean marketplace with DLA Piper’s highly experienced global Energy Sector.

DLA Piper in Chile provides services in all areas related to the development of energy and natural resources projects, with a team specialized in these matters, incorporating lawyers from other practice areas to solve legal needs comprehensively. Our experience allows us to identify the key aspects when developing a project in Chile and further the applicable laws. The advice provided by DLA Piper in Chile includes regulatory matters related to energy projects and their development and operation; obtaining sectorial permits and approvals for the development of the project; communications with relevant authorities; compliance with environmental regulations and interconnection requirements; and, in general, all kind of regulatory matters related to energy projects, such as tolls payment, interconnection requirements, regulatory claims, among others.

We also advise clients on the due diligence processes of energy projects, identifying if the project has secured the relevant assets for project development and agreements needed for its operation and energy sale. Our team is experienced in aiding in negotiating and drafting all the relevant documents and agreements required for the project acquisition, including stock purchase agreements and shareholders agreements, among others. Further, we advise clients on the negotiation and drafting of all relevant documents and agreements needed for the project development, such as Development Agreements, Leases or Easements, Engineering, Procurement and Construction (EPC), EPCM, Balance of Plant (BoP), Operation and Maintenance (O&M) agreements, and subcontracts related to the projects.

DLA Piper in Chile also provides advice in negotiating and drafting Power Purchase Agreements (PPAs) to be subscribed before executing the project and in power bidding processes for the supply of electrical energy for consumers subject to regulated prices. We have assisted clients in developing projects from diverse energy sectors, such as solar, hydro, wind power, and biomass generation and transmission projects.

ESG and Energy and Natural Resources

More than 35 countries around the world have declared a state of climate emergency, with many jurisdictions, among them Sweden, the UK, France, Denmark and New Zealand, having legislated net-zero emissions targets.

The International Energy Agency’s (IEA) recent “Net Zero by 2050, A Roadmap for the Global Energy Sector” report confirms the critical role the sector plays. Currently the sector is the source of around three-quarters of greenhouse gas emissions, yet also holds the key to averting the worst effects of climate change. Based on the IEA’s scenario, deep emission cuts until 2030 must come from existing commercially available technologies. This will require the deployment of all available clean and efficient energy technologies and a massive scale up of solar and wind technologies. In addition, hydropower and nuclear, the two largest low-carbon sources available today, will be an essential foundation for the transition. After 2030, the biggest innovations and opportunities will be found in advanced batteries, hydrogen, electrolysers, and direct air capture and storage.

Other key sustainability and ESG issues affect the energy and natural resources sector (ENR) in profound ways and environmental factors are only part of the picture: social and governance elements are also key drivers of success. For some companies, protecting human rights, protecting a watershed, and considering long-term impacts on local communities is crucial. Actions such as linking executive remuneration to delivery of sustainability and ESG targets is currently best practice and demonstrates commitment. The spectrum of issues is broad and the geographic location and specific asset characteristics essential. The risks themselves are also dynamic and non-linear, introducing additional challenges in identifying and addressing them ̶ unless they are viewed through an integrated sector lens.

Accelerating the transition to a decarbonized, climate resilient economy also comes with an essential requirement: a just and fair transition. This ‘’just transition’ needs to support affected workers and vulnerable communities, so no one is left behind.

Our Sustainability and ESG team within the ENR sector is well versed in these complexities. We understand that each company's needs differ enormously, depending on sector, strategy and context. We can address those challenges and provide tailored advice in areas of sustainable finance, climate change, corporate PPAs, human rights, worker protections, supply chains and community inclusion. We know that companies are seeking to demonstrate that they are incorporating sustainability and ESG into their strategies and operations and that they recognize the hazards and material risks which may arise from inadequate prioritization of sustainability and ESG concerns.

RENEWABLES
The transition to a net-zero economy means renewable energy solutions are in high demand. However, for renewable energy companies, climate change issues are only part of the story. Even renewable energy can be unsustainable if it does not adequately integrate sustainability and ESG factors. Aspects such as supply chain management, data security, human rights and materials sourcing, among others, need to be carefully considered. For instance, supply chain issues for solar projects are substantial: panels may be manufactured in another country, even in another hemisphere, and then shipped around the world to the solar park location. Similarly, developing wind farms often means constructing and maintaining facilities in remote locations, and therefore addressing health, safety and employment issues, in addition to environmental and supply chain concerns. A recycling plant can be a great initiative, but is it sustainable if the waste trucks run on diesel fuel and the drivers are paid below the minimum wage? The need to consider sustainability and ESG exists throughout the life cycle of a renewable energy project, be it in planning, developing, operating or decommissioning.

OIL AND GAS
The energy transition aims to transform the global energy sector from fossil-based to net-zero greenhouse gas emissions by 2050. We are witnessing major integrated oil and gas companies committing to aligning their portfolios with the Paris Agreement goals, with many energy majors investing more and more in their renewable energy offerings.

Forward-thinking companies in the industry understand that being sustainable means reviewing all parts of the business, including health and safety issues on rigs, product design to ensure the safe and effective transportation of substances at all stages of the process, and transparent risk mitigation and management.

When we advise energy majors on sustainability issues, generation of energy from renewable sources is a benefit, yet by no means the sole element of the approach to sustainability.

MINING
For the mining sector, transitioning to net-zero emissions is also a key element. Mining operations need to be taken into account, but so do the indirect emissions that occur in the value chain, including both upstream and downstream. In addition, businesses will need to improve their collaboration with customers to become resource efficient and to reuse and recycle energy-intense commodities and minerals, such as steel and copper.

Furthermore, the ever-growing demand for new technology components and energy storage solutions means that the mining sector is experiencing a shift in demand toward higher production of key minerals. This change comes hand in hand with environmental and social impacts that need to be mitigated and managed appropriately and transparently. Human rights and local community engagement are vital elements of sustainability.

Shifting investor and consumer expectations are also a key driver. Investors are increasingly calling for reporting and transparency requirements regarding a company's material ESG factors and how these integrate into the company's governance, strategy, risk management, metrics and targets. Access to capital and the cost of capital are also being progressively linked to ESG performance and impacts.

WATER
Building water resilience and providing for water security are essential issues around the world. A product's efficient use of water over its lifetime as well as the water footprint of its production are factors that will grow in prominence as water shortages, climate perils and chronic impacts of climate change increase.

Another aspect of industrial consumption of water arises from water pumping and distribution, which generate significant levels of emissions. Using renewable energy for these operations will become important for the water sector. Payment for ecosystem services and nature-based solutions (aiming to help protect watersheds and secure access and supply) are policies that are already gaining traction in large jurisdictions such as the European Union.

To discuss the implications of these issues for your business, please contact our ESG leaders.