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Introduction

The energy reform in Mexico, promoted by the Enrique Peña Nieto administration, is possibly the most important structural change in the country over the past 70 years. The only comparable event was General Lázaro Cárdenas’ 1938 oil expropriation announcement. The new legal regulations permit, among other things, the participation of private capital under more flexible contractual modalities in the hydrocarbons, electricity, and renewable energy subsectors. The objective of this reform, according to the federal executive branch, was to promote a sector that no longer covered the country’s economic growth needs and no longer followed the logic dictated by international best practices. Therefore, the new energy sector regulations create opportunities in terms of additional economic growth as well as greater competitive supply, which, together with a more complex infrastructure, can lead to a drop in energy prices—which will help to make other industries in the country more competitive—and promote the diversification of Mexico’s energy portfolio, covering its need to transition toward energy sources that cause less contamination and focus on environmental protection and utilizing natural resources.

Since this reform modifies the structure of a sector that is both complex and significant for the economic, political, and social dynamics of the country, it was to be expected that a number of critical voices would point out the details not addressed in an adequate manner to reach the expected goals and what the pertinent modifications might be to achieve them. Among the “small print” noted during discussion and implementation of the reform, the still lax capacity of the regulating bodies to guarantee competition in the new markets as well as the existing risk of an incomplete transition of Petróleos Mexicanos (PEMEX) and the Federal Electricity Commission (CFE) from quasi-State companies to productive State companies were mentioned. It was also pointed out that it was not advisable to convert the ministries of Energy and Treasury and Public Credit to factotums of the industry. Nonetheless, the risk, which until now, has not been the focus in different discussion forums or to the legislators who approved the energy reform, is related to the impacts of the energy reform on the country’s natural resources and environment. As a matter of fact, with the current structure framed by the constitutional regulations and at the regulatory laws level, the energy reform may not favor the development of the hydrocarbons sector with a sustainable focus that combines the need to protect the environment with the generation of revenues through the use of the natural resources associated with the energy sector.

The package of regulatory laws for the new energy sector considers the establishment of the Security, Energy, and Environmental Agency (ASEA), which, among other tasks, will be in charge of protecting the personnel, environment, and infrastructure of the hydrocarbons sector. It also creates a regulatory framework setting the rules for surface use and occupation of the land where energy resources are located, as well as directions regarding the process to determine the economic impact of the potential damage the exploration, exploitation, and processing of such resources entails throughout the entire value chain. Nonetheless, and by virtue of the fact that there is no certainty regarding the effective counterweight the ASEA can exercise as the guarantor of environmental safety in the energy sector, this element could, on the one hand, suppose the breakdown of the constitutional state, considering that the conduct of the participants in the new energy markets might not be guided by the law and that some regulators’ efforts to interpret and apply the laws consistently may be rendered difficult; on the other hand, the laxness of the environmental regulations may represent an obstacle to achieving the expected benefits of the energy reform, since this suggests that a poor understanding persists regarding the relationship between natural resources and productive development in the country.

Taking the identification of the areas of the country that are subject to a change in soil use due to their abundance of energy resources that may be exploited by the energy reform as a starting point, this chapter points out the red lights of possible conflict in terms of access to and handling of natural resources and an environmental impact with considerable consequences on Mexico’s natural capital—and on certain productive activities. Likewise, I will analyze the possible impact on natural resources and ecosystems, which may entail a conflict over location, an issue that is already subject to vulnerabilities.

This chapter is organized in the following manner: the next section indicates the opportunities the energy reform offers the country insofar as the exploitation of resources is concerned. Special attention will be paid to those energy resources that are most attractive for the new organization of the Mexican energy sector, meaning oil and gas located in deep waters of the Gulf of Mexico as well as shale oil and gas. Section three delimits the natural resources and ecosystems which match, in terms of location, the energy resources described in the preceding section and examines their environmental functions as well as, in some cases, their state of fragility. Section four explores the environmental challenges posed by the implementation of the energy reform; the focus of this section is that its economic and social benefits depend to a large degree on adequate regulation and application of the law that protects some key natural resources and at the same time promotes models for the use of the same resources for sustainable productive purposes. Finally, the last section presents conclusions and identifies possible lines of action to confront such challenges in a more expedient and effective manner.

This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s), and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.