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The major sources of energy production in Mexico are: hydrocarbons, including petroleum and natural gas; electricity, including hydro and geo-energy; coal and biomass. Renewable or alternative energies have become increasingly important in Mexico.
Constitution. The constitutional provisions on energy are found in the economic chapter of the Political Constitution of the United Mexican States (Constitución Política de los Estados Unidos Mexicanos) (hereafter Mexican Constitution), comprising Articles 25, 27 and 28. Mexican Government has dominion over all natural resources in the country, including the energy reserves. Article 27 of the Political Constitution of the United States of Mexico (hereinafter Constitution) grants exclusive ownership to the Nation of all combustible solids; petroleum; and solid, liquid, and gaseous hydrocarbons. Moreover, the Constitution grants to the Nation the exclusive right to exploit and regulate the use of nuclear fuels for the generation of nuclear energy.
The industries related to petroleum; basic petrochemicals; radioactive minerals; and the generation of nuclear and electric energy are all considered "strategic activities" which are reserved exclusively to the public sector under the control of the Federal Government. These exclusive state industries are specifically excluded from the application of anti-trust legislation. There is currently much political discussion about the opening up of these strategic industries to private domestic and foreign investors.
Legislation. The Congress of the Union (Congreso de la Unión) is granted the power to issue legislation regulating these strategic state energy industries. The major pieces of legislation are:
Regulations. Both the Petroleum Law and the Electric Energy Law have one or more important implementing regulations. In the area of petroleum, there is the Regulation to the Law Regulating Article 27 of the Constitution in the Area of Petroleum (Reglamento de la Ley que reglamenta el artículo 27 de la Constitución en Materia Petrolera) (hereinafter Petroleum Regulation) and the Petroleum Works Regulation (Reglamento de los Trabajos Petroleros). In the area of electricity there is the Public Service Electric Energy Law Regulation on Contributions (Reglamento de la Ley del Servicio Público de la Energía Eléctrica en materia de aportaciones). Energy industries are regulated more specifically through Official Mexican Standards (Normas Oficiales Mexicanas (NOMs)) and through the issuance of authorizations and permits.
Ecology Law. Article 1 (V) of the General Law of Ecological Balance and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección al Ambiente) (hereinafter Ecology Law) provides that the sustainable use of natural resources, including energy resources, should be in accordance with the economical use and conservation thereof, without harming or altering the ecosystems. Article 15 (VIII) provides that the exploitation of nonrenewable natural resources must be done so as not to deplete them or have negative environmental effects.
Energy Secretariat. The Energy Secretariat (Secretaría de Energía (SENER)), previously the Secretariat of Energy, Mines and Parastate Industry (Secretaría de Energía, Minas e Industria Paraestatal (SEMIP)), is the chief administrative authority over matters related to energy. The responsibilities of SENER include the following, among others:
SENER is divided into substantive, administrative and support areas, as well as autonomous agencies.
Undersecretariat for Hydrocarbons: Comprising the General Bureaus for Financial Operations in the Hydrocarbon Subsector; for Industrial Development of Hydrocarbons; for Hydrocarbon Exploration and Exploitation; for Liquefied Petroleum Gas (LPG); and for Safety and Environmental Protection.
Undersecretariat for Electricity: Comprising the General Bureaus for Financial Operations in the Electricity Subsector; for Production Operations in the Electricity Subsector; and for Electrical Facilities and Nuclear Resources.
Undersecretariat for Energy Policy and Technological Development: Comprising the General Bureaus for Energy Policy Development, and for Research, Technology Development and Environment.
General Bureaus: Human Resources; Planning and Budget; General Resources and Services; Information Systems and Telecommunications Unit.
General Bureaus: Legal Affairs; International Affairs; Public Liaison Unit; and Internal Control Unit.
National Commission for Energy Conservation (Comisión Nacional para el Ahorro de Energía (CONAE)).
Energy Regulatory Commission (Comisión Reguladora de Energía (CRE)).
National Commission of Nuclear Security and Safety (Comisión Nacional de Seguridad Nuclear y Salvaguardias) (hereinafter Nuclear Safety Commission).
Regarding environmental protection, SENER is specifically directed to adhere to environmental legislation in its oversight of parastatal energy industries and in its promotion of private participation in the generation and exploitation of energy sources. Within the administrative structure of SENER are 9 important offices and commissions. One of the main goals of the current administration, as stated in the National Development Plan (Plan Nacional de Desarrollo) 2001-2006, is to attain environmental management that consolidates the path to sustainable development in economic and social matters, in harmony with the environment. The challenges for national development include the government's and society's capacity to design and execute programs, policies and instruments that transform production and consumption practices, in order to reverse the deterioration and depletion of natural resources and the environment, while promoting economic growth and social welfare.
The Energy Sector Program 2001-2006 (Programa Sectorial de Energía (PROSENER)) sets the general goal to guarantee a timely, high-quality supply of energy resources that enable the country's sustainable development and protection of national resources. The general environmental goal for the sector is to be a leader in environmental protection. For this purpose, the following strategies are set forth in PROSENER:
The National Program on the Environment and Natural Resources (Programa Nacional de Medio Ambiente (PNMARN) has five central topics:
Since energy industries in Mexico are reserved almost exclusively to the State, they are both operated and regulated by government entities. SENER does not directly participate in the petroleum and the Electric energy industries, but rather, oversees the activities of the parastatal state industries such as PEMEX and the Federal Electricity Commission (Comisión Federal de Electricidad (CFE)), which do. SENER does, however, play a direct role in the operation and regulation of the nuclear energy industry. SENER may grant permits to private parties for the self-storage, cogeneration, independent production, small-scale production or for the import or export of electric energy.
PEMEX. Pursuant to Article 4 of the Petroleum Law, the Nation is to carry out oil exploration and exploitation and all other activities deemed strategic under Article 28, fourth paragraph of the Constitution. Such undertakings are carried on through Petróleos Mexicanos (PEMEX), a decentralized body under the federal public parastate administration, with its own legal personality and coordinated by SENER. Both PEMEX and SENER are entrusted with the development and regulation of the Mexican petroleum industry, including:
These activities are considered to be in the public interest and have preference over any other use of the land. PEMEX has been granted exclusive ownership and control over hydrocarbons. All acts, agreements and contracts of PEMEX and its subsidiaries are governed by federal law.
Federal Electricity Commission (CFE, like PEMEX, is a decentralized parastatal entity coordinated by SENER, which has its own legal personality and capital. The CFE is exclusively responsible for providing the public service of electric energy, which includes its generation, conduction, transformation, distribution and supply.
Depending on the source of electrical energy generation, CFE may act alone or in coordination with other government authorities to manage electric energy plants. CFE is authorized to enter into agreements and contracts with the states, municipalities or sub-state authorities, parastatal entities or private parties to carry out activities related to the public service of electric energy. For fossil fuel generated electricity, CFE is the primary authority. CFE also has many responsibilities in overseeing the generation of electricity from the nuclear fuels and in regulating the design and construction of the nuclear electric plants.
In addition to complying with the environmental standards, CFE has assumed the following environmental protection commitments:
National Water Commission (CNA). For hydro-generated electricity, CFE shares administrative authority with the National Water Commission (Comisión Nacional del Agua (CNA)) which is under the Secretariat of the Environment and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales (SEMARNAT)). The National Waters Law (Ley de Aguas Nacionales) charges CNA with the administration of all national waters, including their use for the generation of electricity. The CNA grants assignments to the CFE that establish the volume of waters needed for the generation of electricity and the conditions for its use. The CNA and CFE enter into agreements for the operation and administration of hydroelectric installations. The CNA is also authorized to establish national water reserves necessary for the generation of electricity.
Nuclear Energy Authorities. In addition to the Energy Secretariat (SENER), the National Commission of Nuclear Security and Safety and CFE, there are two additional organizations, which play an important role in the development and administration of nuclear energy. They are the National Institute of Nuclear Research (Instituto Nacional de Investigaciones Nucleares), a decentralized parastatal entity coordinated by SENER, formed to assist in the research of nuclear energy, and the Mineral Resources Counsel (Consejo de Recursos Minerales), an autonomous agency under the Secretariat of the Economy (Secretaría de Economía (SE)) which holds all assignments for and has exclusive rights to the exploration, exploitation and processing of radioactive minerals.
Pursuant to Article 25 of the Mexican Constitution, the State is to assist and regulate the public and private use of productive resources in the public interest and in according with principles of social equity in order to conserve such resources and protect the environment. According to the Energy Conservation Program issued by SENER, under the National Development Plan, the federal government is to generate, transmit, distribute and conserve electric energy at a very low cost to the consumer. In order to achieve this goal, the program calls for the:
CONAE, an autonomous agency of SENER, is responsible for: evaluating and coordinating governmental actions in the area of energy conservation; serving as a technical consultant to the government in the area; and designing national energy conservation programs.
State Industry. The Mexican Constitution grants to the Nation exclusive ownership of all natural reserves of combustible solids; petroleum; and solid, liquid, and gaseous hydrocarbons as well as the exclusive right to participate in the strategic industries of petroleum and basic petrochemicals. Rights to combustible solids, petroleum and hydrocarbon resources may not be granted to private parties through concessions or contracts. The Constitution does permit, however, private parties to participate in the activities of exploration, exploitation, use and development of such resources through authorizations granted by the federal executive in conformity with the corresponding legislation and official standards.
Basic Petrochemical Industry. PEMEX is granted the exclusive right to participate in the basic petrochemical industry which generally includes the exploration, exploitation, refining, transportation, storage, distribution, and first-hand sale of petroleum, natural gas, by-products obtained from them, and basic petrochemicals. Generally, basic petrochemicals are those chemicals derived from the first physical or chemical transformation of crude oil and natural gas.
Petroleum Assignments. In order to carry out the investigation and superficial exploration of lands with potential oil reserves, PEMEX must receive an assignment from SENER. The exploration and exploitation of petroleum resources also require an assignment from SENER. The Petroleum Regulation (Reglamento Petrolero) describes the general application procedure, application information required and the rights and obligations of the assignment holder. SENER may deny applications for petroleum assignments, partially or in full, when it is determined that the requested area should be or is incorporated in a national reserve zone or when the rights and obligations of third parties would be severely damaged. Article 8 of the Petroleum Law states that the Federal Executive shall establish oil reserve zones on lands whose oil potential so warrants, in order to ensure the country's future supply. The inclusion and exclusion of lands in reserves shall be made by presidential decree, based on the respective technical reviews.
Authorizations for Petroleum Facilities and Works. In order to construct or operate any facilities or works for the exploration and exploitation of petroleum, PEMEX must solicit permission from SENER.
Petroleum Industry Adherence to Environmental Regulations. The petroleum industry is subject to federal regulations, standards and environmental regulations. PEMEX has the general obligation to maintain all its installations in a good sanitary state, and may not abandon materials, equipment, tools or devices that could be used for other works or that could cause environmental contamination. PEMEX must also immediately notify SEMARNAT in the case of an accident that could affect the ecology or contaminate the environment.
Regulation of the Petroleum Industry Under the Ecology Law. Article 5 (XIV) of the Ecology Law states that the regulation of the exploitation of subterranean resources are matters of federal interest and that non-renewable natural resources are to be utilized in such a way as to avoid their exhaustion or adverse ecological effects. Pursuant to the Ecology Law, the exploitation of natural resources and secondary productive activities, including public works, must consider the relevant ecological zoning plans. Public works for the petroleum and petrochemical industries are also required to submit environmental impact assessments. Furthermore, SEMARNAT is authorized to issue the NOMs necessary for environmental protection from the exploration and exploitation activities of non-renewable natural resources.
Environmental Impact Assessment in Petroleum Activities. Article 28 (II) of the Ecology Law provides that an environmental impact authorization is required from SEMARNAT to carry on activities relating to the petroleum industry. An environmental impact authorization is also needed for activities involved in the construction and installation of oil and gas pipelines.
Expropriation of Private Lands. In order to use private lands for the realization of petroleum industry operations, PEMEX must request SENER to issue an expropriation or temporary occupation declaration. The general expropriation procedure is described in the Petroleum Regulation. The owner or possessor of the property that is subjected to the exploration or exploitation operations may make a formal complaint to SENER. Upon hearing the parties, SENER will grant the permission only if PEMEX is able to prove that it indemnified the affected persons for damages and economical losses.
Petroleum Registry. The General Office of Hydrocarbon Operations (Oficina General de Operaciones de Hidrocarburos) within the SENER is to maintain the Petroleum Registry (Registro del Petróleo). The Registry keeps the official record of the status of all petroleum assignments and oil reserve zones.
Oil Reserve Zones. The Federal Executive may establish oil reserve zones in order to assure the future supply of the country.
Oil Record. The SENER Undersecretariat for Hydrocarbons, through the General Bureau for Hydrocarbon Financial Operations, keeps the Oil Record (Catastro Petrolero), which is the official record of all oil assignments and oil reserve zones.
State Industry. As stated above, the public service of providing electricity in Mexico is considered a strategic activity and is reserved exclusively to the federal government. Operation and administration of hydroelectric plants and related facilities is charged primarily to the CFE in cooperation with the CNA. The SENER General Office of Energy and Radioactive Resources (Oficina General de Energía y Recursos Radioactivos) oversees and coordinates these operations.
General Regulation of the Electric Energy Industry. The public service of electric energy is regulated by the Electric Energy Law and its Regulation and the Ecology Law. CFE is responsible for enforcing the Electric Energy Law and its Regulation. It adopts technical standards regarding the generation, transmission and distribution of electric energy and maintains electric energy installations. CFE is also required to submit to SENER, at least once a year, a Prospective Document (Documento de Perspectivas), which is a report of the developments in the Electric energy sector as well as a report of the programs it plans to implement. As part of this Report, CFE must include a description of the actions and programs related to energy conservation as recommended by CONAE.
CFE is further authorized to expropriate or to occupy on a temporary, partial or total basis those public or private lands necessary to fulfill its mandate to provide electricity to the Mexican public. Electric energy projects are required to submit an environmental impact assessment and must comply with the applicable NOMs, including those regarding air emissions and wastewater discharges. National water uses and discharges are regulated by the CNA within SEMARNAT.
Specific Regulation of the Hydroelectric Industry. As hydroelectric plant operations require the use of national waters, they fall under CNA jurisdiction. The use of national waters for electricity generation requires a water title assignment issued by CNA. Administrative authority over hydroelectric facilities is shared between CFE and CNA. These two commissions enter into agreements to establish their specific responsibilities in each hydroelectric facility.
CNA also has the authority to transfer to private individuals or companies the construction or operation of hydroelectric facilities by means of concessions. Note, an assignment is for government entities while a concession is for private parties. "Small-scale" operations however, do not require a concession. The concession holders are responsible for the administration and operation of such facilities. Applications to CNA for such concessions must describe the facility to be constructed; the place where the water will be returned; and the actions, which will be taken for the control and preservation of water quality. The application must also identify the environmental impact of the project and the preventive measures, which will be taken to avoid affecting current flows.
Plants utilizing fossil fuels for the generation of electricity are operated exclusively by CFE.
State Industry. The Constitution grants to the Nation the exclusive right to exploit nuclear fuels for the generation of nuclear energy. Industries involved in the exploitation of radioactive minerals and nuclear energy are considered strategic and are reserved exclusively to the State. Such activities include the exploration and exploitation of radioactive substances and minerals and the production and use of nuclear fuels.
Legislation. The principle piece of legislation for the regulation of nuclear energy is the Nuclear Energy Law (Ley de Energía Nuclear). Also important is the Law of Civil Responsibility for Nuclear Damages (Ley de Responsabilidad Civil sobre Daños Nucleares) (hereinafter Nuclear Liability Law), the Ecology Law and the Mining Law (Ley de Minería). Mexico is also a signatory to several international treaties in the area of nuclear energy.
In reference to nuclear energy, Article 154 of the Ecology Law states that SENER shall work in cooperation with the Nuclear Safety Commission and, where applicable, the Health Secretariat (Secretaría de Salud (SSA)), to establish standards to identify nuclear, radioactivity and physical state standards to regulate the exploration, exploitation and development of radioactive minerals, as well as the use of nuclear fuels in the generation of nuclear energy. Article 28 (III) of the Ecology Law identifies SEMARNAT as the central authority in charge of evaluating the environmental impact of these activities.
The generation of electricity from nuclear fuels is carried out exclusively by CFE under SENER. The CFE, with the assistance of the National Institute of Nuclear Investigations (Instituto Nacional de Investigación Nuclear (ININ)), is in charge of the design and construction of nuclear-electric plants. While the exploration, exploitation and development of radioactive minerals is reserved exclusively to the Mineral Resources Counsel (Consejo de Recursos Minerales), only SENER may produce nuclear fuel under the supervision of the Nuclear Safety Commission. In 1988, Mexico completed construction and began operations of its only nuclear reactor facility for the generation of electricity called "Laguna Verde" in the State of Veracruz.
Through the Nuclear Safety Commission, SENER oversees the compliance of the Nuclear Energy Law and issues authorizations to parties wishing to engage in the import/export, possession, use, transfer, transport, storage and final disposal of radioactive material. The Commission also conducts inspections of nuclear facilities and has the authority to order the temporary or permanent closure of those that pose an immediate risk. In addition, parties may also be subject to civil, penal or labor damages for any damages caused.
The regulation of activities related to nuclear fuel reprocessing and the storage, transport and final disposal of radioactive wastes are discussed in Ch. 12.3.2. of this Report. Basically, all activities relating to the life cycle of nuclear fuel, including reprocessing, are under SENER authority. The reprocessing of nuclear fuels is defined as the series of chemical processes to recuperate non-utilized uranium. SENER is responsible for carrying out such activities under the inspection of the Nuclear Safety Commission.
The temporary storage, transport and final disposal of nuclear fuels is regulated by the Regulation to the General Law of Ecological Balance and Environmental Protection in Hazardous Waste Matters (Reglamento de la Ley General de Equilibrio Ecológico y Protección al Ambiente en Materia de Residuos Peligrosos) (hereinafter Hazardous Waste Regulation). In addition to the requirements of the Ecology Law and Hazardous Waste Regulation, a party intending to engage in any of these activities must also obtain a license from the Nuclear Safety Commission. Nuclear fuel reprocessing and disposal facilities are also subject to applicable NOMs and regulations for environmental impact assessments (EIAs), air emissions and water discharges.
Liability for damages resulting from nuclear accidents is established by the Nuclear Liability Law. The nature of liability for damages from nuclear accidents is different from that of general civil liability because of the participation of the State. Under Articles 5 and 6 of the Nuclear Liability Law, the "operator" of the nuclear facility is the party responsible for damages resulting from a nuclear accident in the facility and from non-authorized and official shipments of nuclear substances up to the point where such liability is contractually transferred. The operator of a nuclear institution is the person designated by the state in which the institution is located. Liability may be transferred to an authorized holder or transporter of such materials.
Liability, however, is limited. An authorized operator, holder or transporter may not be liable for more than one hundred million pesos (approximately US$10 million). Also, operators are not liable for damages from nuclear accidents directly caused by actions of war, invasion, insurrection or natural catastrophes. The operator may be partially or totally excused from liability if he can show that the nuclear accident was produced or contributed to by the inexcusable negligence, action or inaction of the person who suffered damages. The rules for indemnifying operators for damages caused by employees are established in the Federal Labor Law (Ley Federal del Trabajo). Generally, an injured party has ten years from the nuclear accident in which to make a claim for damages caused. This term may be extended for five years when the accident did not produce death and it was not discovered immediately.
According to the agreement adopted at the CONAE Ordinary Session of 16 March 1995, CONAE is responsible for promoting the use, application and development of renewable energies in Mexico. The importance of these energies lies in their potential to reduce the consumption of fossil fuels, which enables the conservation of nonrenewable resources and the reduced environmental impact of activities relating to the generation, distribution, and end use of the energy.
Along with the National Solar Energy Association (Asociación Nacional de Energía Solar, A.C. (ANES)), CONAE organized the Forum for the Evaluation of Nonconventional Sources of Energy in Mexico, on 18 November 1996. The Forum began a joint effort between government and civil society, which resulted in the Mexican Renewable Energy Promotion Advisory Board (Consejo Consultivo para el Fomento de las Energías Renovables en México (COFER)). COFER's mission is to focus on a free market, promote, and further the use of renewable energies in Mexico, setting the basis for an appropriate governmental policy in this regard.