Monday, February 2, 2009

Congress Brings Fonpetrol to Life

Disregarding the warnings of environmentalists and the silence of the executive branch, Congress released the official journal of the Petroleum Fund Act, which distributes royalties from oil production in Guatemala, but also extends the oil extraction contracts.

The new law is called the Law of the Fund for Economic Development of the Nation, to be known from now on as "Fonpetrol" under Decree 71-2008, which enters into force tomorrow.

The legislature considers that the law allows the state to encourage the use of the wealth of the country, mainly the oilfields.

Royalties that the oil exploiters must pay will be set at 5 percent. 20 percent of the funds will be distributed between the Departmental Development Councils in each department of the country in proportion to their population. 3 percent will go to the agencies responsible for monitoring and remediation of protected areas, and the rest will go into a government pool.

The new law also decrees "The contract for oil shall be 25 years. The MEM may approve a single extension of up to 15 years, if the economic terms are favorable to the State."

Environmental groups warned that it was not possible to extend all contracts automatically because some are located in sensitive areas of the Maya Biosphere.

The president refused to sanction or veto the law in question, so he left everything in the hands of Congress.

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