During the last couple of days, the process for approving the energy reform’s secondary legislation has experienced a unique promptness. However, although it is believed that this legislative timing will be concluded in a short time, this does not necessarily mean that the uncertainty regarding some of the reform’s most delicate aspects will be over. Critics still point out, among other issues, the lax powers of regulating entities for guaranteeing competition in new markets; the organizational makeup that will not truly turn PEMEX and CFE into productive companies as well as the major risk that it is to transform the Secretariats of Energy and Public Finance into industry factotums. On the other hand, there are other matters in which the future is more certain. For instance, the environmental issues within the reform, where there is a lack of long-term vision on sustainable development that would harmonize environment with the profits resulting from the sector’s liberalization.
Within the 20 secondary laws included in the energy reform, only one deals with the environmental issue – and it does not do it in a thorough manner – : the National Agency of Industrial Security and Protection for Environment of the Hydrocarbons Sector. Theoretically, the new agency would seek to protect workers, environment of facilities within the hydrocarbons sector by regulating and supervising industrial security, operational security, residue and emissions monitoring as well as other issues derived from hydrocarbons exploitation. Although legislators have decided to grant the agency with powers such as dealing with two different matters – industrial security and environment protection – its core concurs with that required of a modern energy industry. If everything up to here seems to be working correctly, what is the risk?
There are at least two crucial matters that link energy liberalization with the environment: one, the opportunity of improving the regulatory framework for an eventual transition towards cleaner energy sources; two, the land impact due to hydrocarbon exploitation as well as electric infrastructure. The first point has not been addressed due to the delay of the proposal of the Energy Transition Law. It turned out the latter was not a priority for legislators. Regarding the second factor, there are two key elements to analyze: the rules for the use and superficial occupation of lands as well as the economic compensation for damages derived from the latter.
Although the new agency, in charge of industrial security and environmental protection, would be in charge of economic compensations for communities, farmers and landowners due to damages in the ecosystems that are used for hydrocarbon exploitation, the exact procedure is not clear at all. “The devil is in the detail”, and the details of potential environmental impact within the energy reform are to be found in the chapter of “land use and occupation” of the Hydrocarbons Law. It is true that the law comprises a compensation for affected communities in case there are damages to the environment caused by the production processes of land occupation. Despite of the aforementioned, establishing a fair payment for affecting an ecosystem whilst also considering all the environmental services provided to different communities is practically impossible. Even the popular and controversial example of potential environmental damage caused from the exploitation of shale gas due to fracking, there is still no consensus between experts on the problem’s true scope. If that is the case, how to determine what is the payment that one or several communities – which are already economically vulnerable – should receive for all the benefits they will not enjoy due to the impact associated with hydrocarbon production? And what certainty can be offered for a landowner for a fair negotiation with a private entity interested in occupying, take advantage or acquiring his property?
There are too many questions regarding the impact of the energy reform on environmental issues, it is true. However, environment regulation in Mexico is not seen as a key issue of a long-term economic development. This fact is even more highlighted when liberalization favors a renter-like vision rather than one that enhances growth. If the narrow and positive link that exists between the protection of Mexican environment and economic development is not established, all related issues will continue to be hollow and awkward political rhetoric.
CIDAC
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