U.S. Companies Get Tariff Break From Mexico
A Mexican government decision to eliminate a tariff on natural
gas imports July 1 was heralded as good news for U.S. pipelines and
Mexican consumers. Currently 4%, the tariff on U.S. gas imports,
was to be eliminated in 2003 following annual reductions of 1%. The
tariff went into effect at 10% with the signing of the North
American Free Trade Agreement (NAFTA). The tariff's elimination is
intended to boost gas availability to Mexico's northern region as
the country turns more and more to gas-fired power generation.
KN Energy was one of many U.S. companies that lobbied long and
hard for the tariff's elimination. "I think it's a welcome step in
the right direction for the free movement of energy across the
borders, and it's going to be advantageous to Mexican customers and
U.S. energy providers. And it's certainly going to enhance
competition along the U.S.-Mexico border," said Bill Garner, KN
Energy International executive vice president.
KN right now is evaluating acceleration of a 105-mile pipeline
project targeting Monterrey, Mexico. "It's going to accelerate the
project." KN also has an LDC in Hermosillo. Industrial customers
there will benefit from the tariff's elimination.
"It affords us additional market opportunities in the state of
Chihuahua. We're one of the major exporters of gas to Mexico now
through an interconnect in El Paso, TX, and this will open up
additional marketing opportunities, primarily industrial
Last June, the Interstate Natural Gas Association of America
(INGAA) in the face of Mexican opposition abandoned efforts to
eliminate the tariff. INGAA decided to temporarily shelve the issue
after natural gas was pulled from a list of agreed tariff
reductions in May 1998 following a NAFTA ministerial meeting with
Canada and Mexico. The action was taken when the United States
could not agree to the terms under which Mexico said it would
remove the gas tariff.
"We've been actively discussing this with Mexican and U.S.
Department of Commerce representatives for years," Garner said.
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