José Juan González Márquez Universidad Autónoma Metropolitana

I. Introduction 1. In 2013 an important Constitutional reform was passed in Mexico by Federal Congress and 31 Local Congresses. 2. The reform makes possible new schemes of private participation in Energy Sector. 3. Secondary legislation implementing constitutional amendment is currently being discussed by Federal Congress. 4. It focuses more on hydrocarbons than on renewable sources of energy. 5. It includes few but insufficient environmental considerations. 6. Environmental regime could result inefficient to deal with negative environmental impacts resulting from new and more intensive activity in energy sector

I. New Schemes for private investment By 2013 Mexican constitution forbids private participation in energy sector (oil and electricity industries). In nineties secondary legislation was modified to open up opportunities for private companies: Oil sector: contracts of multiple services (PEMEX with Private companies) Activities of transport and storage of natural gas were privatized Electricity: independent producer of energy (private companies generates electricity to complement Energy generated by CFE). They can not sell electricity directly to consumers.

Strategic character of Energy Sector  Mexico is a carbon based economy Oil Industry is the main source of revenue  Electricity industry is fully integrated to north and central American markets.  Energy sector is the main generator of:  regional and national development  social welfare( CFE and PEMEX: employees)

Why an energy reform? Mexican energy sector start losing self-sufficiency:  Mexico passed from exporter to importer of gasoline and natural gas.  Poor development of renewable sources of energy.  Oil reserves started to decline.  Importing natural gas made electricity more expensive. PEMEX supported a heavy tax regimen Energy sector required investments that PEMEX and CFE can not afford. Exploration and exploitation of shale oil/gas and hydrocarbon resource placed in deep waters of Gulf of Mexico required technologies that PEMEX did not have. So, private investment was seen as the best solution to maintain Mexican oil production in the level it had at the end of XX Century.

What the reform consist of? Constitutional reform of reduces the state monopoly just to exploration and exploitation of hydrocarbons but: Makes possible private participation in all those activities trough contracts Any other activities of oil industry were privatized. Reduces the state monopoly just to transmission of energy but privatized all other activities related to this sector. Constitutional reform is too simple. It modified few words of articles 25,27 and 28. However, it made possible what has been impossible during last 30 years.

II. Secondary Legislation April 2014: Mexican President sent to Federal Congress 9 bill of new energy laws and a proposal to modify 12 currently in force laws. New Laws: 1. Law of Hydrocarbons 2. Law of Electricity Industry 3. Law of PEMEX 4. Law of CFE 5. Law on hydrocarbons revenue 6. Law on Geothermic Energy 7. Law of Mexican Oil Fund for development and Stability 8. Law on regulatory Bodies of Energy Sector 9. Law of the National Agency of Industrial Security and Environmental Protection of Hydrocarbons Sector, Initiatives are addressed to strength productivity an financial viability. Agreements on these initiatives seems to be not easy. Transitory provisions has already defined the content of secondary legislation.

III. Renewables: the pending reform There are two currently in force laws: Ley of Removable energies and and Support of energy Transition Law for sustainable use of Energy. 2008: Both of them are just programmatic pieces of legislation without regulatory content. Proposal of Law of Geothermal Energy. It contains big mistakes. So, Mexican Energy Reform consist of a more intensive exploitation of hydrocarbons.

IV. Environmental analysis of the reform Mexican Energy sector is the main responsible of green house gases and it has caused the most catastrophic environmental accidents: Ixtoc (1979), San Juanico (1984), Guadalajara (1992). New Agency but same old instruments of environmental regulation. Land use regulations (environmental and social conflicts). Environmental impact assessment. Emissions control. New Agency just for Hydrocarbons Sector. Any activity generates land use conflicts. New Electricity Act. Exploitation of shale oil/gas offers new challenges: Subsurface use regulations Cujus est solum Roman Maxim

Conclusions Mexican energy reform focuses more on privatization that on sustainability. Arguments behind the reform hold that alternatives for Mexican Energy Sector are exploitation of both; shale gas/oil and hydrocarbons placed in deep watters of Gulf of Mexico by private companies. An scenary of more intensive exploitation of hydrocarbons demands more efective environmental controls: By addapting traditional instruments By including new schemes for payment of externalities. It is necessary an environmenta liability regime for energy sector. Redefining frontiers between: land property Subsurface property Natural resources placed into subsurface Thus, Environmental Energy Reform is still pending.