Mexico Center issue brief details challenges to Mexico’s next energy boon

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Mexico Center issue brief details challenges to Mexico’s next energy boon

HOUSTON – (Nov. 5, 2014) – A new policy brief from Rice University’s Baker Institute Mexico Center details the challenges that the Mexican government will face as it begins to tap Mexico’s offshore and onshore energy projects for the first time since 1938.

While the upcoming boon is well-known internationally, domestically it is still by and far unrealized by the Mexican public, according to the brief “Land Ownership and Use Under Mexico’s Energy Reform.”

The authors, Tony Payan, director of the Baker Institute’s Mexico Center, and Guadalupe Correa-Cabrera, associate professor and chair of the Government Department at the University of Texas-Brownsville, wrote that although the projects will offer enormous potential benefits for Mexico in the future, the country must overcome important challenges to fully realize its energy potential.

One challenge has to do with the land ownership and land-use regime in Mexico, Payan said.

“As the legislative debate this past summer on the new Mexican Petroleum Act and Federal Electric Utility Act proceeded, the Mexican Congress anticipated potential land-related conflicts associated with exploration and production activities associated with hydrocarbons and new energy-related infrastructure projects,” Payan said. “These potential conflicts stem from the fact that all of these projects will necessarily require the right of way to access and work on the resources in the subsoil of privately owned as well as on so-called ‘socially owned’ lands in regions targeted for energy development.”

Payan and Correa-Cabrera wrote that the Mexican Congress sought to avoid land-related conflicts by including language about land ownership and use in the new energy legislation. The legislation, however, may not be able to prevent such conflicts.

According to Article 27 of the Mexican Constitution, “ownership of the lands and waters within the boundaries of the national territory is vested originally in the nation, which has had, and has, the right to transmit title thereof to private persons.” It also states that “the nation shall at all times have the right to impose on private property such limitations as the public interest may demand.”

The 2014 energy legislation went even further in declaring that the new energy development projects are a matter of public and national interest. The projects take priority over any other use of the land. To enforce this priority, the lawmakers address the issue of land ownership and land use in Chapter IV, articles 100 to 117 of the Petroleum Act as it relates to energy development projects, the paper stated.

“These articles establish that all landowners and users, whether of private or social lands, are obligated to sell their property or to negotiate one of several types of agreements with the energy corporation that was granted the contract to carry out energy projects on the property,” Payan said. “In other words, landowners and users are to permanently or temporarily cede their property for energy projects.”

This new law and its implementation will likely surprise many private landowners, he said.

“Given the law’s prioritization of land use for energy-sector activities, the development of Mexico’s hydrocarbon resources will face challenges ranging from peaceful local protests to potentially violent social unrest associated with the displacement of farmers, ranchers and other land users,” Payan said.

There is also a good chance that challenges will be made against the new law, and energy exploration policies could end up in the Mexican court system, creating injunctions and drawn-out disputes, he said.

“There will likely be some such challenges to at least a few energy projects,” Payan said. “The government, anticipating this problem, has made it clear that amparo (a remedy for the protection of constitutional rights) would either not be allowed or their resolution would be expedited in the interest of energy development. However, these amparo resolutions are not up to the executive branch. Instead, they must be decided by the judiciary, a separate branch of government, even if the lines are sometimes blurred in Mexico.”

As for payment to the landowners, the authors wrote that the Mexican government has made it clear that landowners and energy companies can arrive at any of a broad number of agreements that surrender their lands for energy projects. “The legislation is relatively fair in that regard, even if refusal is not an option,” Payan said. “The question, however, is whether this will be enough to stave off potential resistance from landowners.”

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Image courtesy Rice University/ThickStockPhotos.com.

To read the complete policy brief, go to http://bakerinstitute.org/media/files/files/d8d25a6a/BI-Brief-102914-LandOwnership.pdf

Follow Payan on Twitter at @PayanTony.

Follow the Mexico Center on Twitter at @BakerMexicoCtr.

Follow Rice News and Media Relations on Twitter at @RiceUNews.

Founded in 1993, Rice University’s Baker Institute ranks among the top 15 university-affiliated think tanks in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at www.bakerinstitute.org or on the institute’s blog, http://blogs.chron.com/bakerblog.