IBP2087_17

FACING THE CHALLENGES OF ENVIRONMENTAL

LICENSING IN PETROLEUM AND GAS PROJECTS IN
BRAZIL
Vasconcellos, Renata Brandão1
Barroso, João2

Copyright 2017, Brazilian Petroleum, Gas and Biofuels Institute - IBP

This Technical Paper was prepared for presentation at the Rio Pipeline Conference & Exhibition 2017, to be held from October,
24 to 26, 2017, in Rio de Janeiro. This Technical Paper was selected for presentation by the Technical Committee of the event. The
material as it is presented does not necessarily represent Brazilian Petroleum, Gas and Biofuels Institute’ opinion or that of its
members or representatives. Authors consent to the publication of this Technical Paper in the Rio Pipeline Conference &
Exhibition 2017.

Abstract

Review of the environmental licensing process in Brazil is a fundamental measure at a time the Brazilian government
is working on the development of infrastructure and the attraction of foreign investment as tools for the resumption of
economic growth. Legal basis for sustainability and environmental protection, the licensing process will be efficient if
it comes with legal security, and its results bring immediate benefits to the population. The objective of this work is to
analyze the current situation and the alternatives for the improvement of the process in the short, medium and long
terms, seeking an efficient environmental licensing process. There is a deliberate focus on oil and gas projects for their
ability to yield significant investments for the country at this time of need. This article also highlights the
opportunities that international cooperation may represent in the resolution of bottlenecks in management, training
and technical analysis. The article discusses the current legislative proposals before the Brazilian National Congress;
and suggests structural changes to the administration for the long run.

1. Introduction

Brazil is facing the worst economic recession in its history. The country's Gross Domestic Product - GDP has
been shrinking since 20101. In the last 7 years, a key objective of the government has been combating the effects of the
economic crisis and implementing public policies that allow gradual resumption of growth.

Despite the efforts of past governments to enforce a successful economic model, there is no long run progress
without a robust infrastructure system. Investments in infrastructure allow cycles of sustainable development so much
needed in Brazil now2. However, the current legal framework presents major challenges to companies and investors –
one of them is the cumbersome process of environmental licensing.

Among various aspects of the legal environment that burden companies operating in Brazil 3, the difficulties
in obtaining environmental licensing discourage domestic and foreign private sector investments. Those obstacles are

1
See Contas Nacionais Trimestrais: indicadores de volume e valores correntes. IBGE. Available at
ftp://ftp.ibge.gov.br/Contas_Nacionais/Contas_Nacionais_Trimestrais/Fasciculo_Indicadores_IBGE/pib-vol-
val_201604caderno.pdf. Accessed on July 11, 2017.
2
See Financiamento e Garantias para a Infraestrutura. ABDIB. Available at https://www.abdib.org.br/wp-
content/uploads/2017/07/Report-Semin%C3%A1rio-Financiamento-e-Garantias-2017.pdf. Accessed on July 11, 2017.
3
See Mapa Estratégico da Indústria 2013-2022. CNI. Available at https://static-cms-
si.s3.amazonaws.com/media/filer_public/49/4a/494a3629-50be-489a-9983-36a2a6a22cbd/caderno_indicadores_2016.pdf.
Accessed on July 12, 2017.

______________________________
1
Renata Brandão Vasconcellos is senior policy director at the Brazil-U.S. Business Council. An attorney admitted to
practice law in Brazil and in the United States, she identifies and analyzes policy issues affecting U.S. business in both
countries.
2
João Barroso is the government affairs senior advisor for the Brazil-U.S. Business Council. As an attorney in Brazil,
he works on the bilateral agenda and the dialogue between private sector and the federal government.
 Rio Pipeline Conference & Exhibition 2017
frequently associated to delays in the analysis of processes, uncertainty regarding the technical criteria applied by the
environmental agencies, and the multiplicity of government actors and jurisdictions involved in the process.

A systematic review of the environmental licensing process is a key requirement for the development of
economic infrastructure projects and for greater attraction of foreign investment to the country. Environmental
protection is a constitutional matter in Brazil 4. The National Environmental Policy - Public Law nº 6.938/19815 -
introduced the licensing process in 1981. Various other regulatory provisions have come into force to supplement its
application based on this basic Constitutional protection. However, the lack of clear and consolidated regulation
burdens, financially and operationally, the various sectors of society interested in the process.

The environmental licensing process has lost its focus as an instrument of sustainable development, whether
due to regulatory issues or due to agencies’ budgetary restraints. An example of the kind of problem created under the
Brazil model, in addition to its delays and legal uncertainty, is reliance on the personal responsibility of public
officials, which has become a barrier to pragmatic decisions.

Of particular interest is the oil and gas sector in Brazil – an area of utmost importance to the country's future.
Due to its nature, the sector has attracted stricter regulations in the licensing process. The efficiency of the
environmental licensing process is even more sensitive and relevant, as this industry requires enormous investments in
long cycles of operation. Under these conditions, the investor needs more legal security and predictability - and
expects any given project to be executed within its estimates of cost, schedule and results.

Starting with a critical overview of the environmental licensing process and focusing on the particularities of
the oil and gas sector, this article presents reflections on the above-mentioned challenges, specially the convoluted
regulatory framework and resources restraints. The paper presents short, medium and long-term recommendations -
involving integrated efforts of the Executive and Legislative branches for a modern legal environment conducive to
more sustainable investments in Brazil’s infrastructure.

2. Current Landscape for Environmental Licensing

Environmental licensing6 in Brazil has, as its main objective, the control of implementation and operation of
potentially polluting activities, seeking to estimate project risks and possible mitigation and compensation measures to
avoid environmental degradation, aiming at the lowest possible environmental impact 7. With this environmental
protection concept in mind and, at the same time, without discounting the need to develop the country’s infrastructure
and resources, the process is inevitably complex. Some problematic areas have been identified, where change would
provide some relief to interested government and private sector actors.

2.1. Overlap of Jurisdictions and Muddled Regulatory Framework

The Brazilian Constitution grants the union, states and municipalities competence over the protection of the
environment in Brazil8 9. That Constitution mandate causes states and municipalizes to feel empowered to be involved
in the licensing process, which can result in a positive or negative interference10. Other pieces of regulations also
4
Brazilian Constitution, Arts. 23 and 225.
5
BRAZIL Law no. 6.938/1981 provides for a National Policy on the Environment, its purposes and mechanisms for formulation
and application, and other measures. Diário Oficial da União, Brasília 1981. Available at:
http://www.planalto.gov.br/ccivil_03/leis/L6938.htm.
6
Art. 10 of law 6.938 / 1981, as amended by complementary law no. 140/2011, establishing that "the construction, installation,
expansion and operation of establishments and activities users of environmental resources, effective or potentially polluting , or
able, in any form, to cause environmental degradation, will depend on prior environmental licensing." (Faucets).
7
MARCHESAN, Ana Maria Moreira; STEIGLEDER, Annelise Monteiro; CAPPELLI, Sylvia. Environmental law. Porto Alegre:
Verbo Jurídico, 2008. p. 64.
8
Brazilian Constitution, art. 23, VI.
9
At this point, it is imperative to point out that "(...) the division of legislative powers, made with the clear intention to
decentralize environmental protection, implies the existence of a complex legislative system and does not always work in an
integrated manner (. ..)."ANTUNES, Paulo de Bessa. Environmental Law. 8th Edition. Rio de Janeiro: Lumen Juris, 2005. p.108.
10
At this point, it is imperative to point out that "(...) the division of legislative powers, made with the clear intention to
decentralize environmental protection, implies the existence of a complex legislative system and does not always work in an
integrated manner (. ..)."ANTUNES, Paulo de Bessa. Environmental Law. 8th Edition. Rio de Janeiro: Lumen Juris, 2005. p.108.

2
 Rio Pipeline Conference & Exhibition 2017
provide the union and states with supplementary, cumulative and sometimes “default” responsibilities to formulate and
enforce the national environmental policy11. States and municipalities often play a role in the licensing process
formally and/or informally by creating regulations 12 and norms affecting in most cases their strongest productive
sectors. Other agencies also interfere in the process either by providing technical analysis or requesting the inclusion
of license conditions based on their respective protective missions13.

The challenge of the complex regulatory framework should not be minimized. A 2015 study14 by the
Brazilian Chamber of Deputies indicated that, at that time, more than 30,000 legal instruments were in force
regulating environmental licenses in Brazil. Of that number, many are believed to be contradictory or overlapping,
generating insecurity and legal uncertainty for all.

It is true that the overlap in responsibilities is less of a problem on the licensing of maritime activities in the
oil industry,15 (especially offshore exploration and production) which is carried out by Brazilian Institute of the
Environment and Renewable Natural Resources (IBAMA)16. However, IBAMA may still resort to technical analysis
done by the environmental agencies of the states and municipalities, especially for onshore, midstream and
downstream projects. 1718

It is important to recognize that some improvements have been achieved with the enactment of
Complementary Law 140/2011, which regulates the Constitution mandate and more recently with Public Law nº
13.334/2016, which creates the Program of Investment Partnerships (PPI) 19. Law 140/2011 establishes specific criteria
for federal, states and municipal licensing competence. It also regulates supplementary competence, in cases of
omission or administrative incapacity of the competent agency. The PPI law provides that agencies working on PPI
projects have the duty to act jointly and efficiently, so that all administrative acts, including the issuance of
environmental licenses, are completed in a uniform, economical and timely fashion compatible with the projects’
national priority. The PPI law also creates a forum for discussion among federal, state, district and municipal
administrative bodies with competence over permits.

The contribution of states and municipalities to a federal agency in charge of issuing licenses is of significant
value. One might say that the joint action of different agencies is essential to achieve environmental protection.
However, it must be done via an effective and coordinated structure that does not cause unpredictability and insecurity
to the actors involved. Despite recent progress, this does not appear to be the case with the current Brazilian legislative

11
See e.g. Complementary Law 140 (2011), Arts. 7, 8, 9 and 15, and CONAMA resolution 237 (1997).
12
See e.g. State Law 5101/07, creating the State Institute of Environment of Rio de Janeiro (INEA) with jurisdiction to issue
licenses related to “other activities that may potentially cause significant environmental degradation…”. Art. 5 § 1. See also State
Law nº 41628/09.
13
For the argument that federal agencies like the Brazilian Indian Foundation (FUNAI), the Brazilian Historic Landmark and Arts
Institute (IPHAN) and Ministry of Health provide technical analysis and recommend license conditions. See Gargalos no
Licenciamento Ambiental Federal no Brazil, Rose Miriam Hoffmann, Consultoria Legislativa da Câmara dos Deputados, 2015, p.
37, available at: http://www2.camara.leg.br/publicacoes-e-acervos/estudos-e-notas-tecnicas/areas-da-
conle/tema14/2015_1868_licenciamentoambiental_rose-hofmann.
14
Gargalos no Licenciamento Ambiental Federal no Brazil, Rose Miriam Hoffmann, Consultoria Legislativa da Câmara dos
Deputados, 2015, available at: http://www2.camara.leg.br/publicacoes-e-acervos/estudos-e-notas-tecnicas/areas-da-
conle/tema14/2015_1868_licenciamentoambiental_rose-hofmann.
15
See CONAMA resolution nº 23, of Dec. 7, 1994.
16
See Guia para o Licenciamento Ambiental das Atividades Marítimas de Exploração e Produção de Petróleo e Gás Natural. ANP.
Available http://www.anp.gov.br/meio/guias/guia_licenciamento/capitulo02.htm. Accessed on July 12, 2017. See also
Complementary Law 140 (2011).
17
See Guia para o Licenciamento Ambiental das Atividades Marítimas de Exploração e Produção de Petróleo e Gás Natural. ANP.
Available http://www.anp.gov.br/meio/guias/guia_licenciamento/capitulo02.htm. Accessed on July 12, 2017.
18
See e.g. Complementary Law 140 (2011), Art. 8 (state) and 9 (municipalities). See e.g. INEA Norm No. 633(2015) creating a
working group for an impact analysis study for the installation of a natural gas distribution channel. Accessed on July 12, 2017.
Available at
http://200.20.53.3:8081/Portal/ResultadoLegislacao/index.htm&ssUserText=&ssUserText3=&filtro=&tipo=&termo=&data_ini=&d
ata_fim=&editoria=&regionais=&fragment39_NextRow=5&lang=PT-
BR&termos=g%C3%A1s%20natural&assuntos=&ano_de=&ano_ate=.
19
Public Law 13334/2016, Art. 17. Available at: http://www.planalto.gov.br/ccivil_03/_ato2015-2018/2016/lei/L13334.htm.
Accessed on May 28, 2017. Accessed on July 14, 2017.

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 Rio Pipeline Conference & Exhibition 2017
framework yet. Not surprisingly, entrepreneurs see the confusion over jurisdictions as one of the most damaging
aspects in the application of Brazilian environmental legislation 20 21.

Without an initiative to unify the process and simplify the regulatory framework, it is essential that federal,
state and municipal agencies communicate with each other in an orderly fashion and that they aim for a less
duplicative and not so onerous process for all parties involved.

2.2. Lack of Resources for Public Environmental Agencies

Also problematic are the operating difficulties faced by the public environmental agencies, which, even if
relying on good technical qualifications of agents, still grapple with budgetary challenges that hinder analysis and
efficiency.22 23This reality implies the need for a speedy adjustment. 24

It is imperative that stakeholders be aware of the need to change the current scenario of budget constraints.
Investing in capacity, training and equipment for IBAMA and its agencies is the first step. Such an investment in a
model federal agency will certainly pay for itself, given the importance of improving the process for investors and for
civil society in general.

2.3. Public Servant’s Liability

Another factor that interferes with the licensing process is the criminal responsibility imputed to public
agents25 over the licenses they issue, which, of course, adds to the uncertainty of the procedure and maintains a
conservative bias when it comes to analysis.

The analysis of environmental impact should be unbiased and focused on eventual impacts based on technical
information. The rigor of the analysis should not be underlined by any concern by the agent vis-à-vis criminal liability.
This concern results in delays and/or non-commitment or ultra conservative decisions by the public official. It is very
detrimental to the licensing process.

2.4. Peculiarities of the Oil and Gas Industry

Norms in the licensing of Oil and Gas projects, 26 regulated by the National Petroleum Agency27 (ANP), are
even more complex due to the environmental risks and the nature of exploration. Additional requirements specific to
the oil and gas industry in many cases increase the costs and the variables of an investment.

The Oil and Gas industry not only submits to onerous environmental standards 28, but also follows a very
20
Antunes, Paulo de Bessa. Environmental Law. 8th Edition. Rio de Janeiro: Lumen Juris, 2005. p. 108.
21
The 2013-2022 Strategic Industry Map, published by the National Confederation of Industry (CNI), identified the lack of order
and predictability in the environmental licensing process as one of the main structural problems reducing competitiveness and
increasing investment costs in the country. Available at http://www.portaldaindustria.com.br/cni/institucional/mapa-estrategico-da-
industria-2013-2022/. Accessed on July 14, 2017.
22
See also ANDRADE, Robson Braga de. The state of Sao Paulo. Oct 14 2016. Available
in: http://economia.estadao.com.br/noticias/geral,licenciamento-ambiental-e-crescimento,10000082026. Accessed on 17 May 2017
23
The main obstacles are the lack of public servants, poor structure of licensing, political influence in the decisions of public
managers and the difficulty in implementation of environmental legislation. SOARES, Sebastiao Roberto. Management and
environmental planning. ENS 5125 2001/2. Santa Catarina. UFSC, 2000.
24
CNI. Environmental licensing: proposals for improvement. Brasília: CNI, 2014. 91 p. Available
in: www.arquivos.portaldaindustria.com.br. Accessed on: 18 May 2017.
25
Article 66 of Law 9.605/98 provides for crimes against the environmental administration, prescribes penalty of three years in
prison for the civil servant who makes "false or misleading statements, omits the truth, withholds information or technical and
scientific data in environmental licensing or authorization procedures."
26
CONAMA Resolution no. 23, dated December 7, 1994, regulates the special procedures for licensing exploration, drilling and
production activities for oil and natural gas.
27
Law No. 9.478/1997 provides for national energy policy and activities related to the oil monopoly. Article 8 states that the
purpose of the National Petroleum Agency (ANP) is to promote the regulation, contracting and supervision of economic activities
in the oil industry, being responsible for enforcing good practices for the conservation and rational use of oil, oil product s and
natural gas, and for the preservation of the environment.
28
In this context, see resolution of CONAMA no. 237 of December 19, 1997.

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 Rio Pipeline Conference & Exhibition 2017
systematic federal29 licensing process, which could be streamlined by the government. The licensing procedure in the
sector is established by IBAMA, within the scope of the General Coordination of Oil and Gas Licensing (CGPEG). In
general, licensing is divided into parts - before and after production. The seismic survey permits and the drilling
license for well drilling are the first steps and unique to this sector. At the outset of actual production, other permits
are required: the prior license, the installation permit and the final operating license.

Considering the major investments and long cycles of this industry, delays 30 caused by the imposition of
additional terms and conditions by the licensor and/or judicial review of the licensing process have a significant and
differentiated negative economic impact on oil & gas projects.

3. Recommendations

The multiplicity of actors and jurisdictions involved in the licensing process, the muddled legal framework,
the budgetary difficulties and the possibility of criminal prosecution of licensing authorities, taken together, are facts
that delay license issuance. The delays have a ripple effect on the schedules of strategic projects for the development of
the country’s infrastructure, in particular oil and gas projects.

The following suggestions are offered as ways to increase the efficiency of the environmental licensing
process in Brazil, with a balanced view of protecting the environment and stimulating development.

3.1. International Cooperation

The challenges of the environmental licensing process are not inherent to Brazil. Various countries
experience similar problems and in many there is room for process improvement. As inhabitants of the same planet,
and human beings developing comparable infrastructures within similar environments, joining forces and
collaborating on best practices in this area makes a lot of sense

Stimulating international cooperation may be a short-term measure capable of improving the licensing
process in Brazil. In that case, there is no need to reinvent the wheel: both the Organization for Economic Cooperation
and Development (OECD)31 and the Inter-American Development Bank (IADB)32 have initiatives and/or guidelines
on environmental licensing processes. In the bilateral sphere, the United States could be a strategic partner for
strengthening the process in Brazil.

The collaboration of international organizations with previous experience in assisting countries in this area
could also be a positive initiative for Brazil. With Brazil's recent intention to join the OECD, it should be noted that
the organization maintains Guiding Principles of Effective Environmental Permitting Systems 33 and encourages key
initiatives like: a review of environmental legislation, effective stakeholder cooperation; designation and coordination
of competent permitting authorities; institutional capacity building; and, participation in the international exchange of
experience in reforming environmental permitting systems.
29
Decree n. 8437/2015 that regulates the Complementary Law 140, established the types of projects and activities whose
environmental licenses are the responsibility of the Union and its federal agencies, in particular the exploration and production of
oil, natural gas and other fluid hydrocarbons.
30
Gargalos no Licenciamento Ambiental Federal no Brazil, Rose Miriam Hoffmann, Consultoria Legislativa da Câmara dos
Deputados, 2015, pp. 39, 41, available at: http://www2.camara.leg.br/publicacoes-e-acervos/estudos-e-notas-tecnicas/areas-da-
conle/tema14/2015_1868_licenciamentoambiental_rose-hofmann.

31
OECD Global Science Forum. Opportunities, Challenges and Good Practices in International Research Cooperation between
Developed and Developing Countries Opportunities. Available in: https://www.oecd.org/sti/sci-tech/47737209.pdf. Accessed on 26
May 2017.
32
Consultation on licensing and environmental compliance in Latin America: Second Regional Dialogue on Policies on
Environmental Licensing and Control in Latin America - See more at: https://publications.iadb.org/handle/11319/8067. Accessed
on 27 May 2017.
33
The OECD developed, in 2007, a document entitled "Guiding Principles of Effective Environmental Permitting Systems", whose
preamble stated the following: "(...) create a reference that will help governments to identify key features of an effective and
efficient permitting system; high-level political and institutional support for permitting reform in individual countries; guide the
gradual transition to a new environmental permitting system; and facilitate international cooperation on environmental
permitting."

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Also important is the work of the Inter-American Development Bank (IADB)34 towards a productive
discussion and technical assistance on environmental compliance and sustainability goals in Latin America. The
IADB was the first multilateral bank to adopt an Environment Policy in 1979 and continues to have a strong
assistance program to member countries. IADB works closely with the South American Network for Environmental
Enforcement and Compliance35 created on November 2013, whose goal is to improve environmental enforcement and
compliance in the region by inter pares dialogue and cooperative commitment. The IADB and the network work
together to develop indicators associated with environmental control and compliance at the regional level, strengthen
the capacity of professionals through training, as well as share international practices. In that respect, Brazil’s role and
engagement with the IADB and the South American network has been timid and unjustifiable in view of the country’s
environmental resources and regulatory challenges.

With regard to bilateral initiatives, Brazil and the United States have a long history of cooperation in several
areas, with 27 dialogues existing between them. One of the most important dialogues is the presidential level US-
Brazil Strategic Energy Dialogue (SED)36 led by the U.S. Department of Energy and the Brazilian Ministry of Mines
and Energy (MME). Also worth noting is the possible renewal of the memorandum of understanding (MOU) signed
between the U.S. Environmental Protection Agency (EPA) and the Brazilian Ministry of the Environment (MMA)
covering environmental matters37. Both the SED and the MOU can be used as instruments for a potential formal
cooperation and engagement by the respective regulatory agencies (U.S. Federal Energy Regulatory Commission and
ANP) on environmental licensing procedures. The exchange of technical impact analysis studies, methodology and
best practices on process and the development of joint programs can benefit the environmental agencies of the
countries involved. The United States already has experience in this type of international collaboration, via programs
with Central American countries on Guidelines for Technical Review of Environmental Impact Assessment (EIA) for
certain priority sectors38 such as energy, mining and tourism.

3.2 New Regulatory Framework

In parallel to the international cooperation, and as a medium-term measure, the effective adoption of a new
regulatory framework for environmental licensing in Brazil would be positive to the business environment and the
development of an economic infrastructure. Numerous bills39 are currently before the Brazilian National Congress
suggesting adjustments to the process – most of them with the purpose of making procedures faster and more
transparent and, thus, stimulating investment.

The main piece of legislation currently under discussion is bill nº 3.729/2004, which is an advanced state of
debate in the Brazilian parliament under an ‘urgency’ procedure. The bill aims at cutting red tape and providing
greater transparency and standardization in administrative licensing procedures. The latest version pending in the
Brazilian Congress contains an important provision that suppresses criminal liability40 of licensing agents and
recognizes the autonomy of the licensing body, and establishes simplified procedures and deadlines for the
environmental agencies to conclude the process.

Among the modifications found in the current legislation, bill nº 3.729/2004 changes the legal framework of
the licensing process on key issues. For example, it establishes: different licensing rites for each type of project –
according to the size, nature and pollutant potential; licensing waivers, based on the activity; environmental
compensatory measures; deadlines of 4 to 8 months for the agencies to decide about the licensing, according to the
type of license; autonomy of the licensing agency; a requirement for environmental studies with a single reference
34
http://www.iadb.org/en/topics/environment/environment-in-latin-america-and-the-caribbean,1663.html
35
See http://www.redsufica.org
36
See US and Brazil Launch the Strategic Energy Dialogue. Available in: https://energy.gov/articles/us-and-brazil-launch-strategic-
energy-dialogue. Accessed on: 26 May 2017.
37
Memorandum of Understanding signed between the EPA and the MME, in force until April 2017, with the objective of
improving its institutional capacities through technical cooperation in environmental management. Available at
https://www.epa.gov/international-cooperation/epa-collaboration-brazil. Accessed on 27 May 2017.
38
Technical Review Guidelines for Environmental Impact Assessments in the Tourism, Energy and Mining Sectors. EPA,
International Cooperation. Available in: https://www.epa.gov/international-cooperation/technical-review-guidelines-environmental-
impact-assessments-tourism. Accessed on 24 May 2017.
39
For example, the following bills are currently on the docket in the Brazilian Congress: 3729/2004; 3957/
2004; 5435/2005; 5576/2005; 1147/2007; 2029/2007; 358/2011; 1700/2011;2941/2011; 5716/2013; 5918/2013;
6908/2013; 8062/2014; 1546/2015; 3829/2015; 4429/2016; 5818/2016; and 7143/2017.
40
The bill suppresses criminal liability as in art. 67 of Law 9605/1998 - Law of Environmental Crimes.
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term for each type of company; Environmental Impact Studies and Environmental Impact Reports for certain projects;
the digital automation of processes with access to the public; and at least one mandatory public hearing for ordinary
rites of licensing. The current version of the bill is a result of 13 years of ample discussion between institutions from
private and public sectors, mediated by the executive branch. If approved, the new framework would increase
efficiency and technical consistency of the environmental licensing process. It would also raise social control over
protective, mitigating and compensatory measures, not only prior to the licensing issue, but throughout the economic
operations.

It is also worth highlighting Senate bill nº 401/2013, which establishes the obligation of public bidding
documents to include, as an annex, the environmental installation license. This proposal is supported by both the
National Confederation of Industries (CNI) and the Federal Court of Auditors (TCU), which apparently agree on the
need for the installation license to be issued at the same time as bidding documents, ensuring security to companies
and transparency regarding the feasibility of projects41. The Court’s understanding is solid in the sense that licensing
must be issued before biddings, taking into account that the status of environmental requirements is decisive in the
private sector’s investment decision. The bill establishes a more efficient licensing process with less bureaucratic
barriers that currently burden private agents. Together with Public Law nº 13.334/2016, the approval of this bill, and
concrete implementation of its provisions, would represent real progress on environmental licensing in Brazil.

Other minor advancement would be accomplished by Senate bill nº 654/201542, as it defines special and
expedited environmental licensing processes for infrastructure projects considered strategic for Brazil’s economic
infrastructure development, citing energy sector projects and others explicitly (i.e. transportation, ports, airports,
energy and natural resources projects). According to the bill, each type of project would follow predetermined rites
before the federal environmental agency, via executive branch decrees. It also prescribes a 230-day deadline from
submission of the project to the licensing decision – including manifestation of the public agents involved. Consent
would be implied if the agency is not able to comply with the deadline.

It should be noted that bill nº 654/2015 lacks precision as to the definitions of target areas for projects,
clarification of what would be direct and indirect areas of influence of the companies and could also benefit from more
detailed provisions on the required impact studies and reports, as well as on the validity of licenses.

It is expected that, with a review of the regulatory framework, environmental licensing will no longer be
taken as a bureaucratic barrier to investments in Brazil. A new law coupled with modern administrative practices
based on international standards and cooperation would substantiate a legitimate instrument of economic, social and
environmental planning, allowing accurate assessment of the distribution of burdens and benefits arising from each
economic activity.

3.3. Addressing Priorities and Reviewing Budget Allocation

Regardless of the short-term measures resulting from potential international cooperation, and the medium-
term effects that the bills pending approval may generate, in the long term it is necessary to change structurally the
budget and management priorities of the public administration, with a focus on investments in the environmental
licensing area. This means building better institutional capacity for the environmental control and inspection bodies,
by encouraging training of human resources and allocating financial resources to the responsible governmental
entities. Goals are adapting the public machine to the new legal reality that is intended with the redefinition of the
applicable legal framework, allowing rapid and informed decision-making, timely compliance with legal deadlines
and, ultimately, the issuance of licenses in an efficient, predictable and transparent way.

4. Final Considerations

Environmental licensing in Brazil still represents an obstacle to the attraction of investments, to the
implementation of infrastructure projects and, ultimately, to the development of the country. It is necessary to
reformulate the complex balance between environmental protection and economic and social development, in order to

41
CNI. Industry Legislative Agenda 2017 – Priority Projects. P. 158. Available
at: < www.arquivos.portaldaindustria.com.br >. Accessed on: 18 May 2017.
42
CNI. Industry Legislative Agenda 2017 - Minimum Tariff Projects. P.96. Available
at: < www.arquivos.portaldaindustria.com.br >. Accessed on: 18 May 2017

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foster sustainable development mechanisms through a coherent and harmonious set of legal norms.

The instruments of international cooperation are already a reality for Brazil, including in environmental
matters and, in the short term, should be encouraged and implemented. International participation in the exchange of
best practices in the reform of the licensing system should be stimulated. In this sense, the strengthening of the SED
between Brazil and the United States could be an important step; the same is true for renewal of the MOU between the
U.S. Environmental Protection Agency and the Brazilian Ministry of the Environment.

Regarding legislative proposals currently under way in Brazil, the hope is that the definition of a new
regulatory framework will bring more transparency and efficiency to the environmental licensing process as a whole,
accelerating infrastructure projects and attracting the attention of investors. This would be a key driver for the
resumption of economic growth in the country.

In the long term, the need for investment in the Brazilian government's structural sectors, in particular in the
main environmental agency, IBAMA, is highlighted. It is essential to maintain a better-equipped agency, in alignment
with the dictates of speed mandated by Law nº 13.334/2016 and the upcoming new regulatory framework.

Finally, the country’s engagement in international cooperation initiatives, a substantial change in legislation,
and investments in the restructuring of the public system responsible for environmental licensing will progressively
increase security and investor interest, leading to a more sustainable form of development for the country and a
rebound for the Oil and Gas sector - and, in general, for Brazilian infrastructure.

5. References

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