In a decision rendered in November 2022 in the context of Direct Action of Unconstitutionality 4,529 (ADI 4,529) filed by the Attorney General's Office (PGR), the Supreme Federal Court (STF) ruled that a state norm was unconstitutional, as it provided less protection in relation to environmental licensing.

Through the referred ADI, the PGR intended to invalidate regulations of the state of Mato Grosso related to environmental licensing of hydroelectric projects.^[1] For better understanding of the controversy, please find below relevant provisions extracted from Complementary Law 38/95:

"Article 3 The Consema, a collegiate body of the State Environmental System - Sima, has the purpose of advising, evaluating and proposing to the government of the State of Mato Grosso guidelines of the State Environment Policy, as well as deliberating, within the scope of its competence, on rules and standards that are compatible with the ecologically balanced environment and essential to quality of life, having the following attributions:

(...)

XII – express its opinion on the environmental licensing of thermal or hydroelectric plants with a capacity above 30 MW, for which, mandatorily, the preparation of an Environmental Impact Study - EIA and presentation of the respective Environmental Impact Report -Rima will be required, depending on the validity of the approval license by the Legislative Assembly".

"Art. 24. The licensing of the implementation of the following environment modifying activities shall depend on the preparation of the EIA and its respective Rima, to be submitted for Fema approval:

(...)

VII- hydraulic works for the exploitation of water resources, comprising a flood area above 13 km² (thirteen square kilometers), sanitation or irrigation, opening of canals for navigation, drainage, rectification of watercourses, opening of bars and inlets, transposition of basins and dikes.

(...)

XI- electricity generation plants, whatever the primary energy source above 30 (thirty) MW" (emphasis added).

The wording of the abovementioned provisions implies exemption from the drafting of environmental impact study (EIA) and its respective environmental impact report (Rima) for all hydroelectric works with a potential of 10 to 30 megawatts and with an extension of flooded area inferior to 13 square kilometers. The PGR argued that the provisions would result in insufficient protection of the ecologically balanced environment, which would violate Article 225, caput and § 1, IV, of the Federal Constitution.

The PGR also argued that the legal regulations in question go against the Resolution 01/86 issued by the National Council for the Environment (Conama) – the authority competent to establish standards and criteria for the licensing of effective or potentially polluting activities according to Federal Law 6,838/81 (National Environment Policy - PNMA).

According to Resolution 01/86, "[i]t shall depend on the preparation of Environmental Impact Study and its Environmental Impact Report – Rima, to be submitted for the approval of the competent state agency, and the Special Secretariat for the Environment - Sema in a supplementary nature, the licensing of environmental modifying activities, such as: (...) VII - hydraulic works for the exploitation of water resources, such as: dam for any hydroelectric purpose, above 10 MW, sanitation or irrigation, opening of canals for navigation, drainage and irrigation, rectification of watercourses, opening of bars and inlets, transposition of basins, dikes" (emphasis added).

The PGR, therefore, argued that the rules of the state of Mato Grosso could not establish less protective parameters than those provided for in federal norm. The authority concluded that "[the] Member State, even though it has concurrent competence, must comply with the already set out standards in general rules, using it as a minimum standard. In such a way that it would only be authorized to act beyond such normative framework; never short of what has been previously established by law".

The unconstitutionality of the mentioned normative provisions would be based on two main points:

• the usurpation of the competence from the Federal Union, considering that Conama Resolution 01/86, general environmental regulation, does not authorize hydroelectric projects with a potential of more than 10 megawatts, even with a reduced flood area, to be exempt from the presentation of EIA and Rima; and
• insufficient protection of the environment and setback in the handling of the subject, by making the minimum protection parameter more flexible when the flood area is reduced – which would not be supported by federal legislation.

Amongst several other points, the reporting judge of the case, Minister Rosa Weber, pointed out in her majority opinion that the wording of Conama Resolution 01/86 "was elaborated as a way of giving density to the command provided by Article 225, § 1, IV, of the Federal Constitution and, therefore, enable the exercise of police power to control the effective or potentially polluting activities".

The minister also understood that the "State of Mato Grosso increased the minimum requirement for the conduction of the environmental licensing, since it modified its legal enforcement for projects with a primary energy source above 10 MW as provided for in Resolution 01/86, and established it as a compulsory requirement only for those enterprises with a capacity above 30 MW" and that it "inserted new criterion relating to requirement for licensing of hydraulic works for the exploration of water resources, i.e.: flood area above 13 km² (thirteen square kilometers), as stated in the original wording, or 300 ha, according to the current text" (emphasis added).

On the subject, concluded the minister that the state of Mato Grosso "did not limit itself to its role, within the framework of concurrent competences, of developing rules that are complementary to the general rules issued by the Union in environmental matters (Article 24, VI, §§ 1 and 2). In fact, it innovated, by increasing the minimum primary energy source suitable to create a presumption of significant environmental degradation, and by establishing a diverse licensing requirement, relating to the extent of flooded area. Created a different rule and exceeded, therefore, the federal legislation on the treatment of the subject. It has occurred, therefore, an invasion of the general competence of the Federal Union" (emphasis added).

Hence, the Minister decided on the "formal unconstitutionality of the contested provisions and expressions".

Minister Rosa Weber also addressed the unconstitutionality of the legal devices challenged by the PGR by the material perspective and stressed that "[the] exemption of licensing of potentially polluting enterprises violates article 225 of the Republic’s Constitution. That happens due to the fact that economic activities, such as the exploitation of water resources for hydroelectric purposes, shall only be considered lawful and constitutional when subordinated to the environmental protection rules" (emphasis added).

In the end, the minister pointed out that the normative action of the State of Mato Grosso entails "insufficient protection, in non-compliance with the principles of the prohibition of setbacks on socio-environmental issues, prevention and precaution" (emphasis added).

The decision of the Supreme Court is aligned with the latest trends and logic observed in the main courts when facing disputes involving environmental issues, such as the decision issued by the Superior Court of Justice (STJ) in the context of repetitive special appeals (Theme 1010/STJ), which discussed which rule should be taken into account for permanent preservation areas (PPAs) located in urban areas - Forest Code or the Urban Land Installment Law.

At the time, the STJ decided to enforce the most protective norm, that is, the prevalence of the Forest Code – which allows the conservation of a greater extension of ciliary PPAs.

The relationship between the subjects of environmental licensing and competence of the entities is constantly at the center of legal discussions and may present new developments in the future, considering that  ADI 4,757 has also been filed before the Supreme Court, by which the validity of various legal provisions contained in the Complementary Law 140/11 are being challenged.

These provisions include Article 14, §4, which, in summary, grants the extension of the term of licenses automatically in the event the request for renewal of a license was timely filed, until manifestation of the relevant authority. Article 17, § 3, is also under discussion, which established the supervisory competence of an enterprise to its licensing authority.

This discussion is viewed with concern by some sectors and there is great expectation regarding the outcome of the controversy, since Complementary Law 140/11 is one of the most relevant and consolidated norms that regulate the role of federative entities in the environmental sphere, playing an important part in settling conflicts of competence.

^[1] The provisions discussed in the ADI are Articles 3, XII, and 24, XI, complementary law 38/95 and subsequent Supplementary Law 70/00. The proceeding also involves the validity of the expression contained in Article 24, VII, of Complementary Law 38/95, both in the current wording, given by Complementary Law 189/04, and in Complementary Law 70/00.