Background

On April 30, 2014, the Federal Government of Mexico, through the Ministry of the Interior, submitted before the Senate a package enclosing the initiative of new laws as well as amendments to existing laws that will serve to implement and regulate the constitutional energy reform, published on December 20, 2013 (the "Secondary Laws").

Content of the Secondary Laws

The Secondary Laws comprises the enactment of 9 new laws, as well as amendments to 12 existing laws. The most relevant aspects of the Secondary Laws are the following: 

New laws:

  1. Hydrocarbons Law. This initiative will regulate Articles 25, fourth paragraph; 27, seventh paragraph and 28, fourth paragraph of the Mexican Constitution. It would repeal of the Regulatory Law of Constitutional Article 27 in Connection with Oil Matters. This initiative also proposes to regulate the hydrocarbon industry with regard to the following activities: (i) surveys and exploration activities and the exploration and exploitation of hydrocarbons; (ii) the processing, refining, sale, trading, transportation and storage of oil; (iii) the processing, compression, liquefaction, decompression and regasification, as well as transportation, storage, distribution and public retailing of natural gas; (iv) the transportation, storage, distribution and public retailing of liquefied petroleum gas; (v) the transportation, storage, distribution and public retailing of oil by-products; and (vi) pipeline transportation and storage related to petrochemical ducts.  
  2. Hydrocarbons Income Law. It intends to regulate the revenue that the Mexican State would receive as a result of hydrocarbon exploration and exploitation activities.
  3. Law of the Mexican Oil Stabilization and Development Fund. Its purpose is to provide the applicable regulation to the establishment and operation of the Mexican Oil Stabilization and Development Fund. The Fund will receive, manage and distribute revenue stemming from the assignations and agreements entered for the exploration and exploitation of hydrocarbons, with the exception of applicable taxes.
  4. Petróleos Mexicanos Law. Its purpose will be to regulate the organization, administration and operation of PEMEX among other activities. This new law proposes the merger on one part of PEMEX-Exploración y Producción with PEMEX-Gas y Petroquímica Básica; and on the other part, the merger of PEMEX-Petroquímica with PEMEX-Refinación. It also proposes to repeal the Petróleos Mexicanos Law, published in the Federal Official Gazette on November 28, 2008. 
  5. Federal Electricity Commission Law. Its purpose is to regulate the organization, management, operation, control, evaluation and the transparency of such entity.
  6. Law for the Coordinated Energy Regulatory Agencies. It contemplates the regulation of the organization and operation of the coordinated energy regulatory agencies (the National Hydrocarbons Commission or CNH and the Energy Regulatory Commission or CRE) and establishes their legal mandates. It is important to mention that the substantive attributions of these agencies would be set forth in the Hydrocarbons Law and the Power Industry Law. This initiative proposes the repeal of the Law of the National Hydrocarbons Commission and the Law of the Energy Regulatory Commission.  
  7. Power Industry Law. Its purpose is to regulate the planning and control of the national power grid, the public service of power transmission and distribution and other activities related to the power industry. This initiative considers the joint participation of private parties together with the Mexican State for the development of the power industry, in order to increase its productivity. Also, it provides certain obligations to the participants of the power industry regarding clean energies, open access, supply, general service and electrification. It proposes to repeal the Power Public Service Law. 
  8. Geothermal Energy Law. This new initiative has the purpose of providing a specific legal framework regulating the use and exploitation of geothermal deposits for power generation or for different uses, as well as the participation of the private sector in this type of productive activities. 
  9. Law for the National Agency for the Industrial Safety and Environmental Protection of the Hydrocarbons Sector. Its purpose is to create this new agency that will regulate and supervise matters regarding industrial safety, operational and environmental protection, facilities and activities within the hydrocarbons sector.

 Existing laws for which a reform, addition and/or partial repeal are being proposed:

  1.  Foreign Investment Law.
  2. Mining Law.
  3. Public Private Partnerships Law.
  4. Federal Law of Government Fees.
  5. Tax Coordination Law.
  6. National Water Law.
  7. Federal Budget and Tax Responsibility Law.
  8. General Law of Public Debt.
  9. Organic Law of the Federal Public Administration.
  10. Federal Law of State-Owned Entities.
  11. Acquisitions, Leases and Services of the Public Sector Law.
  12. Law for the Public Works and Services Related to Them.  

Conclusion

The Secondary Laws is the long-awaited next step for the implementation of the energy reform approved in December 2013 through Constitutional amendments. The Secondary Laws intend to implement the rules for the national energy industry, allowing a seamless interaction between public and private participants.

It will now be subject to analysis and discussion on the part of Mexico’s Congress.