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Rules Formalized for Social Impact Assessments in Mexican Energy Sector

The Mexican government has issued rules and guidelines for assessing the social impacts of energy projects, formalizing a process that became mandatory in the sector with the rollout of the 2013-2014 reforms.

Earlier this month, the Energy Ministry (Sener) published in the Diario Oficial, the Mexican equivalent of the Federal Register, general provisions for social impact assessments (SIA) in the energy industry. SIAs are a compulsory part of the permitting process for project developers in Mexico’s electricity and oil and gas sectors, including upstream operators and pipeline companies.

The impact assessment mandate was included in Mexico’s new hydrocarbons and electricity laws, both issued during the energy reforms. Under the updated legal framework, Sener must evaluate and sign off on the SIAs submitted for each project before it gets underway.

Energy companies in Mexico have been conducting SIAs since the first post-reform projects were awarded, but the new rules "formalize the process for which companies present SIAs, as well as the criteria and time frames for evaluation," Daniela Fernandez de Cordova, managing partner at Impacto Social Consultores, told NGI’s Mexico GPI.

"Before the only thing that was binding were the provisions in the hydrocarbons law and the electric industry law, as well as their respective regulations," Fernandez de Cordova said. "However, the SIA requirements outlined in those documents were very generic."

The new regulations offer specific guidelines and terms for how companies conduct SIAs, as well as outlining the evaluation procedures and criteria for the Energy Ministry’s approval process. After the reforms, Sener created a specialized unit to review social impacts assessments.

The SIA authorization takes around 90 business days for hydrocarbons projects and 90 calendar days for power projects, according to Maria de las Nieves Garcia-Manzano. She is director of GMI Consulting, a Mexico-based environmental consultancy that specializes in the energy sector.

The document also includes methodologies for determining an energy project’s area of influence and identifying, characterizing, predicting and measuring its social impacts.

In the Mexican hydrocarbons sector, the SIA requirement is mandatory for most major upstream, midstream and downstream activities, including the construction and operation of pipelines, storage facilities and refineries, as well as retailing and distribution.

It does not apply to marketing activities or exploration and production (E&P) projects that have already conducted an impact assessment, according to the text of the regulatory document. Any SIAs begun before the new rules took effect on June 2 will continue under the previous regulatory framework.

"The SIAs will remain in force over the full life of the project, except when companies plan to carry out substantial modifications that would affect the area of influence or result in new social impacts," Garcia-Manzano said.

In the upstream oil and gas sector, E&P companies would need only to present an SIA during the project’s evaluation phase, according to the document. When an exploration project moves to the production and development stage, the operator would update the original assessment to incorporate the new activities.

The rules also include four separate templates for energy sector SIAs, each covering different projects or activities.

The first two templates, A and B, are less complex, intended for small-scale projects. SIAs following these templates do not involve fieldwork in communities, while the area of influence is limited to the physical project location, "which may be a 500-meters radius around the site or 100 meters on each side of a linear project," such as a pipeline, Garcia-Manzano said. "Nor is it necessary to propose project alternatives."

Projects and activities falling under this category include fuel retailing, some types of onshore oil and gas exploration, natural gas distribution and compression, small-scale power generation, and gas pipelines less than 10 kilometers in length.

Templates C and D, in turn, apply to larger, more complex infrastructure projects and activities. These include oil treatment and refining, medium and large-scale gas pipelines and power plants, offshore exploration, onshore E&P activities considered "invasive" or that require infrastructure, liquefied natural gas projects, electricity transmission and distribution, and storage of natural gas and oil products.

For these projects, companies must "conduct fieldwork with a participatory focus among the communities in the project’s area of influence," Garcia-Manzano said. Other requirements including mapping and identifying stakeholders, determining social impacts and designing a prevention and mitigation program, and describing the environmental risks associated with the project.

As part of the SIA process, energy companies would also determine whether their projects would affect indigenous communities. Mexico’s energy industry laws require that Sener hold consultations to obtain consent from any indigenous communities that could be impacted by an energy project.

These consulta previas, or prior consultations, are in addition to the mandatory social impact assessments. Although prior consultation is not new to Mexico, its application in the energy sector was inconsistent prior to the reforms. Moreover, legal uncertainties continue to cloud the process.

The Mexican government is working on a general law of prior consultation, as well as specific guidelines for the energy sector. Neither document is expected to be ready before the July 1 presidential elections.

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