Water rights under scrutiny in Chile’s Atacama Desert

In one of the world’s driest deserts, the battle for water is heating up.

Mining companies sifting northern Chile’s Atacama Desert for copper, lithium, and other minerals are increasingly finding water is their most precious resource.

Vital to processes such as concentrating and leaching, miners typically extract the water they need from aquifers located high in the Andes Mountains having obtained the necessary rights from Chile’s water authority.

But their ability to exercise those rights is increasingly being challenged by environmentalists, farmers and the authorities who say the huge expansion of mining activity and climate change have shrunk water supplies.

The trouble is that the rights have often been granted without regard to their environmental impact, argues Benjamin Perez, a mining lawyer at Santiago law firm Guerrero Olivos.

In July, Chile’s biggest copper producer Codelco suspended a US$1.2 billion mining project at its Salvador division after lawyers for the Chilean state accused the operation of causing irreparable environmental damage.

Water pumping around the Salar de Pedernales, a high-altitude salt-flat which has supplied water to Salvador for almost a century, has dried up 60 hectares of ecologically sensitive wetlands, says the State Defense Council, an autonomous public entity.

The Rajo Inca project, which will extract the remaining resources in Salvador’s Indio Muerto deposit, is designed to produce 93,000 tonnes a year of copper, expanding and extending production at Salvador by several decades.

Following intervention by Mining Minister Baldo Prokurica, the council has agreed to suspend the action to give time for a viable solution to be worked out with Codelco and other authorities. But they do not have long.

Should construction of Rajo Inca not begin later this year, it could spell the end of operations at Salvador, with the loss of thousands of jobs, Codelco executives warned the Senate Mining Commission last month.

A desalination plant for BHP’s Escondida mine in Chile. Credit: BHP Sustainability Report, 2017.

It is not the first time the lawyers have involved themselves in water-related cases. In April, they presented a similar suit against BHP-controlled Minera Escondida for alleged damage caused by its water wells to another salt-flat, Salar de Punta Negra. BHP (LSE: BHP) is also facing a fine of up to US$5 million for breaching the terms of its environmental license. BHP rejects the charges and is planning to appeal.

However, the legal action does not represent an existential threat to the world’s largest copper mine. Earlier this year, BHP announced that Escondida had stopped extracting groundwater following a massive expansion of its desalination capacity. Another plant to supply its Spence mine is due to be commissioned later this year.

It is not the only mining company turning to the ocean.

Over the last decade, a dozen mining companies, including copper producer Antofagasta (LSE: ANTO), iron ore miner CAP Minería and Lundin Mining (TSE: LUN) have all built desalination plants to reduce pressure on scant or nonexistent ground and surface water supplies.

As water resources dwindle and legal challenges mount, more are expected to follow.

On Sept. 6, Antofagasta announced that it plans to double the size of a desalination plant currently under construction to 800 litres per second that will allow its Los Pelambres copper mine, the fourth largest in Chile, to reduce consumption of freshwater by around 95%.

The commitment will help defuse local opposition to the company’s ambitious expansion plans.

New mine projects in development, such as Codelco’s plan to develop sulfide ores at its Radomiro Tomic mine and Newmont (TSX: NGT; NYSE: NEM) and Teck Resources’ (TSE: TECK.A, TECK.B; NYSE: TECK) Nueva Union joint venture, have included desalinization plants from their conception.

A report published the Chilean Copper Commission in December 2019 found that desalinated water will rise from just over a quarter to almost half of the water consumed by the country’s copper mines between now and the end of the decade.

But desalination is not a viable solution for everyone, experts say. Processing and pumping water hundreds of kilometres inland and thousands of meters up into the Andes Mountains is an expensive affair and not all mines have the cost structure to bear it, says Perez.

When a judge closed wells supplying its Maricunga gold mine in 2016, again due to damage to wetlands, Kinross Gold (TSX: K; NYSE: KGC) had little choice but to suspend operations.

The options are even more limited for Chile’s lithium industry whose business depends on pumping huge volumes of brines from beneath the Salar de Atacama and evaporating it to extract the minerals they contain.

Although the brine is undrinkable, local communities say their actions have dried up local water tables hitting agriculture and local wildlife, such as flamingos.

Last year, following a challenge by Atacameño communities, the First Environmental Court ordered authorities to rewrite a US$25 million remediation plan agreed with SQM (NYSE: SQM) for damage caused by its lithium operations, including excessive brine pumping.

Chile’s environmental regulator SMA says it is now working on a comprehensive management plan for the Salar de Atacama, ostensibly covering both SQM and rival lithium producer Albemarle (NYSE: ALB).

Tighter regulation could hobble both companies’ plans to ramp-up lithium production over the coming years, although SQM has brushed off the threat.

“We are sure that we are going to obtain all the necessary approvals for the new plant in the coming months,” SQM chief executive Ricardo Ramos told analysts on a conference call.

But even building one’s own desalination plant is not without challenges.

Legislation working its way through Congress would extend water’s status as a public good to desalinated water, which could allow authorities to force mining companies to redirect some water to farmers during a drought.

More change is coming down the pipeline.

On Oct. 25, Chileans will vote to decide whether to change the country’s constitution.

Agreed at the height of last year’s violent protests over social inequalities, many see the referendum as a chance to eliminate constraints imposed on the country’s politics 40 years ago by military dictator General Augusto Pinochet.

Alongside allowing a role for the state in society and more representation for indigenous communities, the issue of who controls the country’s water is one of the most pressing, Claudio Huepe, a specialist in sustainable development at Santiago’s Diego Portales University, said in an interview with The Northern Miner.

“It is no longer acceptable for many people that water can be traded like private goods,” he says.

As a result, the new constitution, which will be drawn up by an elected constituent body over the next two years, will almost certainly weaken the protection of water rights as a form of private property.

“This will trigger a radical change in the legislation,” Huepe says. “This is definitely going to happen.”