Mexico City, March 29th, 2021.
On March 26th, 2021, the Mexican President sent to the Chamber of Deputies a bill of amendments to modify the Hydrocarbons Law.
With the referred bill of amendments, the main purposes of the federal government are: (i) to strengthen the State-Owned Productive Company known as PEMEX (“PEMEX”), and (ii) for government to have more control over the oil activities, including exploration and production.
Among the most relevant amendments proposed in the referred bill are:
- Granting of permits based on the Hydrocarbons Law Regulations to State or private oil companies will be subject to having evidence proving that petitioner has: (i) a design of installations or equipment’s aligned with applicable regulations and the best industry practices; (ii) appropriate conditions to guarantee the continuity of the permitted activities; and (iii) storage capacity, which will be determined by the Energy Ministry (“SENER”) and must be aligned with the provisions included in the Public Policy related to the Minimum Storage of Oil Products, published in the Federal Official Gazette on December 06, 2019.
- SENER or the Energy Regulatory Commission (“CRE”) will be entitled to revoke permits for the sale of hydrocarbons whenever the permit holders recommit in the following conducts: (i) fail to comply with the terms of their permits, mainly in connection with the quantity, quality and measurement of hydrocarbons and oil products sold to final users; and (ii) expenditure instruments, systems, installations, or supply equipment’s are altered. Additionally, it is included as a new cause for the revocation of the permit whenever a permit holder commits smuggling activities.
- The two first assumptions referred herein aim to protect final consumers from receiving less quantity of oil products (mainly gasolines and diesel) from the permit holder selling such products.
- Provides the possibility for SENER and CRE to temporarily suspend permits issued in favor of private parties whenever they foresee an imminent danger to the national security, energy safety or national economy. Under these scenarios, the governmental entity that issued the permit may take over the administration and operation of the permit holder by either using permit holder employees, hire a new operator or a combination of both.
- Should the energy authorities omit to provide a response to any petition to issue a specific permit, such petition should be understood as if it had been denied.
The bill of amendments will be analyzed by the Chamber of Deputies and subsequently will be analyzed and voted by the Mexican Senate.
Although the bill of amendments is of high priority for the Federal Government, same was not filed under the preferential scheme provided in the Mexican Constitution. For this reason, the bill of amendments will follow the usual legislative path for its discussion and approval. The bill could be either discussed and analyzed during this legislative period (which ends on April 30, 2021) or during an extraordinary legislative period (which would need to be called by the Chamber of Deputies and the Senate) specifically to analyze, discuss and vote the referred bill (to be called after April 30, 2021).
Should the bill of amendments be approved, it is expected that several amendments to the Hydrocarbons Law Regulations, as well as to the administrative provisions that are currently in force in connection with hydrocarbons matters issued either by SENER or CRE, will have to be also modified as to align them to the amendments referred herein.
Finally, should the amendments be approved by the Mexican Congress, such approval would open the possibility to: (i) file an action of unconstitutionality (accion de inconstitucionalidad) which could be filed either by 33% of the Senators or Deputies or by those individuals / entities allowed as per article 105 of the Federal Constitution, or (ii) amparo appeals (juicios de amparo) by any individual / company suffering any negative or adverse effects from the new legal provisions included in the Hydrocarbons Law or any amendments to the applicable regulations derived from such modifications.
The lawyers of the energy, infrastructure and administrative area at firm are available for any questions or comments on the above.
S I N C E R E L Y,
Juan Carlos Serra
Jorge Eduardo Escobedo