Oil Royalties in Brazil: Constitutionality X Unconstitutionality

Abstract

The purpose of this article is to analyze the constitutionality of the distribution of oil royalties in Brazil to federated entities. Oil royalties are financial compensation received by the state and municipal oil-producing areas for the environmental damage caused by oil exploration. Art. 20 1º§ of the Federal Constitution of the Republic of Brazil of 1988 defines the legal nature of royalties, which is the compensatory form for the use of non-renewable goods by the States, Federal District, and Municipalities. Article 14 of Law 6.938/1981 established the strict liability regime for repairing and indemnifying damages caused to the environment and affected third parties. The legal system that regulates the matter of oil royalties is clear when it exposes the net and true right of the producing areas to financial compensation for environmental, social, and economic damages. The Supreme Federal Court decisions are consistent with the Federal Constitution and the NEP - National Environment Policy, Law No. 6938/1981. The methodology is based on bibliographic research on printed books, electronic articles, the 1988 Federal Constitution, and relevant legal norms. According to the Federal Constitution, legal norms, legal scholars, and the Supreme Federal Court, the allocation of royalties should be paid to the federal entities directly affected by the exploratory activity, which bear the various damages and risks of oil exploration.