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U.S.-Mexico Transboundary Agreement Clears Senate

The Senate on Saturday passed legislation that would give the Interior Department secretary authorization to implement a transboundary agreement between the U.S. and Mexico governing the development of oil and natural gas resources along the two countries' maritime boundary in the Gulf of Mexico (GOM).

The Mexican Senate ratified the agreement in April 2012, and the U.S. House passed legislation in June (see Daily GPIJune 28). The U.S. Senate and House versions of the bill are different and will need to reconciled. The House bill contains a provision that would exempt companies participating in the transboundary development from complying with a Dodd-Frank requirement to report payments associated with resource extraction to the United States or foreign governments. The Obama administration has said it could not support the House bill because of that exemption. The Senate bill does not give companies a pass on reporting their extraction payments to the the federal government.

"We're hopeful that a solution will be worked out between the House and Senate versions of the bills to expand energy development in the Gulf of Mexico that will create new American jobs, lower energy prices, and generate tens of millions of dollars in new revenue," said Michael Tadeo, a spokesman for the House Natural Resources Committee, which sent the House bill to the floor.

The dispute over the Dodd-Frank reporting requirement may be moot, given that the Securities and Exchange Commission (SEC) in September said it would not appeal a U.S. Court for the District of Columbia ruling tossing out the Dodd-Frank reporting requirement. However, the SEC has indicated that it may attempt to rewrite the rule, which was approved by the SEC in August 2012 (see Daily GPIAug. 23, 2012).

Both bills would:

  • Lift the moratorium on oil and natural gas leasing in the Western Gap;
  • Provide legal certainty for development along the entire transboundary area;
  • Open access to more than a million new acres on the Outer Continental Shelf, which is expected to result in hundreds of millions of barrels of oil, and billions of cubic feet of natural gas; and
  • Encourage the promotion of common safety and environmental standards, while ensuring that each country retains authority over activity in its respective waters.

Sen. Lisa Murkowsksi of Alaska, the ranking Republican member of the Senate Energy and Natural Resources Committee, immediately applauded the Senate's action. The "ratification of the transboundary agreement establishes important ground rules for developing the oil and gas reservoirs along our shared maritime border with Mexico," she said.

The Interior Department's Bureau of Ocean Energy Management estimates that the border area contains as much as 172 million bbl of oil and 304 Bcf of natural gas. 

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