Mexico – The House of Representatives Approves an Initiative to Amend the Hydrocarbons Law

Mayer Brown - Energy Forward

On March 26, 2021, the House of Representatives published an initiative from the executive branch to reform the Hydrocarbons Law (the “Draft of Reform”) in its Parliamentary Gazette.

Weeks later, on April 15, 2021, with 292 votes in favor and 153 against, the Draft of Reform was approved in the plenary session.

In a nutshell, the current draft aims to: (i) increase requisites for obtaining new permits, (ii) impose new conditions on existing permits and (iii) establish a mechanism to occupy the facilities of the infringing permit holder whose permit has been revoked or suspended. On the subject, the antitrust watchdog (Comisión Federal de Competencia Económica,“COFECE”) recommended, through its recently published opinion OPN-002-2021, not to approve the Draft of Reform in its current terms for the following reasons:

  1. The new conditions for permits create legal uncertainty due to the wide discretion of the authorities to revoke them. This will discourage the entry of competitors and reduce the offer of services in the hydrocarbons market.
  2. According to the current Hydrocarbons Law, the silence of the authority was considered a positive resolution (afirmativa ficta); however, the Draft of Reform modifies the above so that the silence would imply the request was legally denied.
  3. Lastly, the Draft of Reform establishes that, like the Permit requests, the resolutions requesting the assignment of permits will be considered denied when there is a lack of a response from the authority.

The COFECE opinion points out that especially the last two items create an incentive for authorities not to respond to permit or assignment of permits requests. In addition, avoiding the assignment of permits would hinder competition.

For more details on the Draft of Reform and its consequences, please see our latest Legal Update .

The next step will be for the Senate to approve the initiative and order its publication.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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