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Texas Legislators Seek White House Intervention on Mexico Energy Policies
A bipartisan group of Texas legislators has asked the Biden administration to intervene on behalf of U.S. energy companies operating in Mexico amid the latter country’s increasingly nationalistic energy policies.
Sens. John Cornyn and Ted Cruz, along with 18 of the state’s 32 U.S. representatives, signed a letter Tuesday (Oct. 19) to U.S. Ambassador to Mexico Ken Salazar expressing concern with “recent actions taken by the Mexican administration to favor state owned enterprises (SOEs) and push out American investment.”
Through a proposed legislative overhaul, Mexico President Andrés Manuel López Obrador is seeking to roll back provisions of Mexico’s landmark 2013-2014 constitutional energy reform, as well as private sector participation schemes in the power sector in place since 1992.
The proposed changes, if enacted, would see upstream oil and gas regulator Comisión Nacional de Hidrocarburos (CNH) and midstream, downstream and electricity regulator Comisión Reguladora de Energía (CRE) disappear. Power grid operator Centro Nacional de Control de Energía (CENACE) would be absorbed by state power utility Comisión Federal de Electricidad (CFE).
The law would mandate that CFE supply 54% of the country’s electricity, with private sector generators supplying the remainder.
In addition, it would prohibit self-supply contracts for large electricity consumers, effectively forcing them to purchase power from CFE.
The reforms “would increase state control of the electricity industry and severely limit private investment,” the letter’s signatories said.
The legislators also cited recent modifications to Mexico’s hydrocarbons law, “which allows Mexican officials the power to suspend and revoke key permits for private operations,” as well as the operatorship dispute over the Zama shallow water oil field between Houston-based Talos Energy Inc. and Mexican state oil company Petróleos Mexicanos (Pemex).
These actions “violate the spirit and letter” of the United-States-Mexico-Canada Agreement (USMCA), the Texas delegation said, “and need to be addressed.”
The lawmakers implored Salazar “to engage directly with senior Mexican government officials to ensure that American energy firms are able to export goods fairly and can continue to drive private investment and job growth throughout the region.”
The Texas lawmakers are not alone in citing López Obrador’s policies as violating the USMCA.
Talos management said last month that the company had filed notices of dispute with the Mexican government over the decision by energy ministry Sener to grant operatorship of Zama to Pemex, despite the fact that a Talos-led consortium made the discovery.
The Asociación Mexicana de Suministradores Calificados (AMSCA), or Mexican association of qualified suppliers, on Wednesday joined a chorus of business groups speaking out against the proposed changes in the power sector.
Qualified suppliers are electricity providers who compete against CFE in the wholesale power market under the framework of the 2013-2014 reform.
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The proposed reform, by canceling existing contracts and permits, would amount to an expropriation, the group said.
What’s more, it would “eliminate competition, and therefore the right of Mexicans to access competitive electricity prices,” AMSCA said.
Numerous trade groups also have voiced opposition to the reform on environmental grounds.
The Asociación Mexicana de Energía Eólica (AMDEE) and the Asociación Mexicana de Energía Solar (ASOLMEX) in a joint statement said the reform would amount to a de facto cancellation of the energy transition in Mexico by voiding existing renewable energy supply contracts and giving priority treatment to CFE.
Against this backdrop, U.S. Special Presidential Envoy for Climate John Kerry visited Mexico this week to observe Mexico’s Sembrando Vida tree-planting program and stress the urgency of the climate crisis ahead of the 26th Conference of the Parties (COP26) climate summit in Glasgow in November.
In a speech, Kerry made no mention of the proposed reforms or the grievances of U.S. energy companies doing business in Mexico.
“During the visit, President López Obrador shared his decision to begin a structured transition toward the greening of Mexico’s energy sector and the strengthening of its energy independence,” the countries said in a joint statement.
The statement added that Mexico plans “to cooperate closely with the United States to accelerate Mexico’s deployment of renewable energy, including wind, solar, geothermal, and hydroelectric power, as a major step in Mexico’s commitment to strengthen the ambition of its Nationally Determined Contribution under the Paris Agreement next year.”
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