On August 6th, 2014, Congress reached the approval of the reform minutes to the secondary legislation derived from the constitutional energy bill that came into force on December 21st, 2013. It is only pending for the Federal Executive Branch to publish the same in the Official Gazette of the Federation.
This reform seeks to regulate the hydrocarbon sector, the electricity industry, geothermal energy, as well as the new legal regime for Pemex and CFE, and gives rise to a new chapter in the country's energy sector. In this manner, the modern history in the sector transits from a nationalism with a fierce governmental control over the energy resources (same which was somewhat watered down over the time with the issuance of secondary legislation by several State administrations') to a scheme being very close to a free market that will be discretionally controlled by the regulatory bodies of the State entitled to do so.
With this structural energy bill, Mexico opens its doors to private national and foreign investment in order to boost its oil, conventional and non-conventional gas resources, and supports the generation, marketing, transmission and distribution of electricity from various sources. The reforms will give rise to several disputes, mainly due to the ample discretion that was given to the new regulatory agents of the State regarding the implementation of economic, tax, contractual environmental risk clauses, as well as in connection with the potential occupation of lands of vulnerable social sectors for the execution of new energy projects. We will see if the economic success and social wellbeing suggested and publicized by the responsibles of the reform, at the end justify the wheeling in policy and legislation which the Mexican State has provided.
However, it is important to mention that against the tendency and preference that has been given to the development of renewable energy in more developed countries, the Mexican Congress has unfortunately temporarily set aside the discussion and approval of the appropriate reforms to specifically regulate and drive the energy from renewable sources. This leaves out, for the moment, the essence of the constitutional reform of last December, which is to promote the sustainability and generation of energy through clean sources. Approval of these reforms can be expected for the final quarter of this year.
One of the final main minutes that was approved by Congress was the one related to tax matters which provides the creation of the Hydrocarbons Income Act and the Mexican Petroleum Fund Act, in addition to several reforms and amendments to the applicable tax laws in the energy sector. Specific comments on the scope and implications from a tax point of view will be distributed shortly by our tax practice partner. A minute regarding the rescue of PEMEX's and CFE's labor passives was also approved.
To read our remarks and comments on each of the minutes that comprise this set of reforms to the secondary legislation of the energy sector, please click the following links:
Minutes 1 (Hydrocarbon Law and related)
Minutes 2 (Electricity Industry Law, Geothermal Law, and related)
Minutes 3 (PEMEX and CFE legal regime laws)
Minutes 4 (Regulatory Bodies and Agency for the National Hydrocarbon's Sector)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
