The Sala IV constitutional court has decided that the country is not obligated to sign a contract with Mallon Oil Co. of Denver. The firm wants to explore for petroleum in the northern part of the country.
The oil firm had appealed a decision by the Sala Primera and the Tribunal Contencioso Administrativo. The firm argued that the Sala Primera and the Tribunal have not considered a 2010 Sala IV decision.
Mallon now appears to have exhausted its options for arguing the case in the Costa Rica courts. The firm was invited by Costa Rica when it accepted six bids in 1999 covering about 2.3 million acres. Since then, the political winds have changed, and the current Laura Chinchilla administration is opposed to petroleum fuels.
In addition, a number of the opposition parties in the legislature do not want to see petroleum exploration. Costa Ricans pay more than $5 a gallon for gasoline, all of which is imported as petroleum. However, the country has been involved in negotiations with the People’s Republic of China to rebuild the refinery on the Caribbean coast.
That, too, has become a political football with the nation’s budget watchdog rejecting a contract due to presumed close connections between the Chinese firm and a firm doing a feasibility study.
Mallon is a subsidiary of Black Hills Exploration & Production, Inc. The firm is likely to seek international arbitration to recover its 14 years of expenses and anticipated profits.
The experiences of Mallon and also of Industrias Infinito S.A. are being cited by foreign business sources. Infinito is the subsidiary here of a Canadian gold mining firm and also faced an adverse court decision that caused it to lose its concession for a major open pit gold mine in northern Costa Rica.
Mallon faces new rules after it cleared years of legal hurdles erected by environmentalists. For one thing, the government tightened the environmental rules and sought more studies.