U.S. President-elect Joseph R. Biden Jr. will take over the White House at a time of deepening energy integration between the United States and Mexico, the No. 1 destination for U.S. petroleum products and a growing market for U.S. natural gas exports.

energy trade

Tension has been growing between the two countries, however, over the state-centric energy policies of Mexican president Andrés Manuel López Obrador.

A bipartisan group of U.S. legislators sent a letter to President Trump last month warning of “concerning actions by the government of Mexico that threaten U.S. energy companies’ investment and market access and undermine the spirit of the United States-Mexico-Canada Agreement (USMCA).”

López Obrador has indicated he will pursue legislative action to at least partially undo the liberalizing 2013-2014 energy reform of his predecessor, which opened the formerly state-dominated energy sector to private investment.

Highly publicized contractual disputes between Mexico’s government and multinational natural gas pipeline developers, and uncertainty over who will operate the Zama oil discovery made by Houston-based offshore explorer Talos Energy Inc. in Mexican waters have only exacerbated the unease.

López Obrador still had not acknowledged Biden’s victory as of Monday afternoon, saying he preferred to wait until the election was “legally resolved.” 

U.S. Rep. Joaquin Castro (D-TX) called López Obrador’s refusal to recognize Biden’s win “a stunning diplomatic failure” on Twitter, while Rep. Jesús Garcia (D-IL) tweeted to López Obrador, “American voters have spoken and Joe Biden is our President Elect.”

Biden’s victory heralds a seismic shift in energy policy from the White House, which could put further pressure on López Obrador to reevaluate Mexico’s energy policies.

Biden has pledged to rejoin the United Nations landmark climate change accord, aka the Paris Agreement, and to put the U.S. on track to a carbon-free power sector by 2035.

López Obrador’s government, meanwhile, has suspended new auctions for clean energy capacity and transmission lines, sought to halt the entrance into operation of previously awarded renewable projects, and urged regulators to give priority to state power company Comisión Federal de Electricidad (CFE) in the electricity dispatch order over privately owned wind and solar plants.

Industry Responds

Oil and gas industry groups including the Interstate Natural Gas Association of America (INGAA) and American Petroleum Institute (API) welcomed Biden and vice president elect Kamala Harris. INGAA stressed the importance of natural gas in facilitating the energy transition.

“We congratulate President-Elect Biden and Vice President-Elect Harris and look forward to working with their administration to ‘build back better’ and invest in domestic infrastructure,” said INGAA President Amy Andryszak, referring to Biden’s $2 trillion climate plan.

“Roughly one-third of America’s energy needs are currently met by natural gas, and most credible projections show that trend continuing for decades to come,” she said. “The President-Elect acknowledged the importance of natural gas during his campaign, and any serious plan to both address global climate change and develop a modern, reliable and affordable energy system must include natural gas as a foundational fuel.”

API President Mike Sommers also congratulated Biden and Harris, noting the central role that energy policy played during the campaign.

“America’s natural gas and oil companies haven’t waited for governments to act on climate — we have driven progress through technology, innovation and constant reinvention, and will support bipartisan policies that build on that progress,” he said. “We stand ready to work with members of both parties to forge those bipartisan solutions.”

Biden has pledged to ban new onshore and offshore drilling on federally owned tracts and to immediately issue an executive order to rejoin the United Nations landmark climate change accord, aka the Paris Agreement. He also has signaled he wants to put the United States on a path to a carbon-free power sector by 2035 and a carbon-neutral economy by 2050.

A Biden administration also is likely to reinstate and strengthen Obama-era environmental regulations that have been dismantled or weakened in the past four years on issues such as oil and gas methane emissions, and vehicle fuel efficiency standards.

However, Biden has stopped short of endorsing the Green New Deal championed by the more left-leaning faction of the Democratic Party. He also has repeatedly asserted that he would not pursue a blanket ban on hydraulic fracturing, aka fracking