Country
Assessment
Article 44 of the Hydrocarbons Law, 2014 (see footnote 6), requires oil and gas producers to seek approval from the CNH for exploration and development plans. The CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons (see footnote 4) require the treatment of associated natural gas, including flaring, to be specified in exploration and development plans:
- Article 5 of the Technical Provisions states that the operator may utilize associated natural gas for the needs of its operation (e.g., as fuel for turbines, or to aid pneumatic pumping or other lifting systems that require gas injection).
- Article 10 requires the operator to submit to the CNH a program to use associated gas as part of the development plan for each assignment and contract area.
- Article 22 requires information on flaring facilities and volumes to be included along with a flaring program.
- Annex II of the provisions provides detailed instructions on all these requirements. Operators submit all information to CNH via the Programa de Aprovechamiento de Gas Natural Asociado (PAGNA).
The programs must include month-by-month forecasts for associated gas use during the first three years and annual forecasts thereafter. The CNH website provides examples of development plans that include approved programs using associated gas. One example is contract CNH-M4-ÉBANO/2018.
Article 72 of the LSH requires contractors to have their development plans approved by SENER. The plans must demonstrate how the operator will maximize the recovery factor, and details of natural gas exploitation program and measurement mechanisms.
The ASEA Guidelines for the Prevention and Comprehensive Control of Methane Emissions from the Hydrocarbons Sector (see footnote 2) require a Program for the Prevention and Integral Control of Methane Emissions (Programa para la Prevención y el Control Integral de las Emisiones de Metano, or PPCIEM) for all new and existing facilities. The first three annexes of the Guidelines provide templates for the various requirements of a PPCIEM.
Article 6 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons (see footnote 4) allows flaring only when technical and economic analysis shows that it is the only viable option. Article 11 requires operators to conduct a technical and economic analysis to develop alternatives for the use of associated gas, to be carried out in line with the targets established and the criteria detailed in Articles 4 and 5 of the Technical Provisions. The analysis should consider the composition and volume of the gas; the proximity of the processing, transport, and distribution infrastructure; the value of the gas; and the necessary investments to utilize it. The guidelines contain case-by-case evaluation elements. The regulator and operator are expected to work together to find the best solution for a particular field. If operators wish to modify their associated natural gas utilization program, their proposal to do so needs to be supplemented with an update of the technical and economic analysis, justifying the actions, alternatives, and where appropriate, a new target to be adopted.
Article 7 requires operators to maintain the financial resources to cover any damage caused by flaring. The allowed amounts of flaring are determined according to the Hydrocarbons Law, 2014 (see footnote 6), or the project-related contracts. The CNH website provides examples of implementation experience. Two examples are the Tierra Blanca and the Muro fields.
Article 16 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons (see footnote 4) requires the operator to follow the standards established in the CNH Technical Guidelines in Hydrocarbon Measurement, 2015, for measuring and reporting the volumes of the associated natural gas used. These guidelines were subsequently updated in February 2016, August 2016, December 2017, and February 2021.
Articles 23 and 24 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons require the operator to provide quarterly reporting of progress in implementing the associated gas use program. The report should follow the CNH format outline and include the volumes of associated gas used, justification for any deviations from the gas use program, and a summary of unscheduled events that had resulted in gas flaring. Article 25 requires the CNH to review the quarterly reports within 15 business days of receipt and authorizes the CNH to request additional information from the operator. The ASEA Guidelines for the Prevention and Comprehensive Control of Methane Emissions from the Hydrocarbons Sector (see footnote 2) require operators to identify the source and quantify the volume of methane emissions. The information must be reported annually.
According to the new LPTE, SENER, in coordination with SEMARNAT, will issue methodologies for quantifying emissions from supply chain activities associated with energy-intensive products, as well as avoided emissions due to actions taken on the energy transition and sustainable use of energy. At the same time, SEMARNAT, in coordination with SENER, will determine the causes and effects of environmental problems and best practices to prevent or mitigate pollution from energy sector activities, including resource extraction.
According to Article 70 of the LSH, SENER will issue regulations regarding the measurement of hydrocarbon production. The installation and verification of measurement systems must meet international standards and must be auditable by third parties with recognized international experience. According to Articles 75 and 119 of the LSH, contractors are responsible for damages caused by leaks, spills and other damage associated with their operations. Contractors must notify SENER, ASEA and, if applicable, other regulators of any incident with impact on public health and safety, environment or hydrocarbon production. They must also comply in a timely manner with information requests from SENER, ASEA or other regulators
Article 7 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons (see footnote 4) states that flaring of associated gas, a nonrenewable resource, outside of the approved utilization program would cause an economic loss to the nation and that operators must have the necessary financial resources to cover such losses. This compensation is in addition to any penalties that may be imposed under other laws and regulations. Article 34 provides that, based on monitoring and supervision, the CNH may initiate a sanctioning administrative procedure to determine whether there was noncompliance with the technical provisions. Article 35 provides that violations of these provisions will be sanctioned in accordance with Articles 85–87 of the Hydrocarbons Law, 2014 (see footnote 6), or specific contracts.
According to Article 85 of the Hydrocarbons Law, 2014, the seriousness of the violation will be considered when determining a sanction. SENER sanctions noncompliance with the terms and conditions established in the assignments and contracts, with a fine of 15,000–75,000 times the minimum wage. Operators failing to comply with an exploration plan or production development plan will be penalized with a fine of 150,000–3 million times the minimum wage. In the case of oil and gas development and production activities that do not have a measurement system approved by the CNH, a fine of three–six million times the minimum wage may be levied. The application of sanctions and payments are regulated by the Federal Law of Administrative Procedure, 2018. Article 25 of the ASEA Law, 2014 (see footnote 16), also provides for penalties up to 3 million times the minimum wage depending on the severity of the violation of the environmental mandates.
Article 91 of the LPTE allows SENER, the CNE and the energy efficiency regulator to impose fines of 100 to 1,000 times the value of the current Measurement and Update Unit (Unidad de Medida y Actualizacion [UMA]), or other measures, in case where regulated entities do not provide information required in the LPTE or provide false or incomplete information. These fines do not preclude civil, criminal, or fiscal liabilities. According to Article 94, repeat offenders may have their fines doubled.
Article 120 of the LSH lists various violations and sanctions during exploration and extraction activities that can be fined. For example, undertaking hydrocarbon development and production activities without measurement systems approved by SENER can be subject to a fine between 6,900,000 and 13,750,000 UMAs. Similarly, Article 121 of the LSH lists various violations and sanctions related to other hydrocarbon sector activities that can be fined. For example, failure to comply with regulations applicable to measurement of hydrocarbons as well as their quantity and quality can be fined between 138,000 and 690,000 UMAs.
No specific nonmonetary penalties for flaring or venting were found. However, Article 85 of the Hydrocarbons Law, 2014 (see footnote 6), states that within the scope of their oversight, SENER and the CNH should sanction serious or repeated violations of the Hydrocarbon Law with suspension or revocation of contracts or removal or disqualification of the personnel who provided their services to an operator, assignee, or contractor. Article 70 of the Federal Law of Administrative Procedure, 2018 (see footnote 33), states that administrative sanctions should be provided in the respective laws and may consist of the following:
- warning
- fine
- additional fine for each day the violation persists
- detention for up to 36 hours
- temporary or permanent closure, partial or total closure of facilities
- others indicated by the laws or regulations.
Article 99 of the Regulation of Hydrocarbons Law, 2014, details the procedures and timelines the administrative authorities must follow when imposing fines. Sanctions should be applied without prejudice to the civil, criminal, or administrative liability that results from the application of sanctions by other legal systems and, where appropriate, from the revocation of the assignment, permit, or authorization, or the termination of the contract.
According to Article 25 of the ASEA Law, 2014 (see footnote 16), ASEA can suspend or revoke licenses, authorizations, permits, or registrations in case of repeat or serious violations or nonpayment of financial penalties. However, ASEA reportedly favors a “corrective enforcement” scheme under which operators can find a solution to achieve the required reduction.
According to Article 89 of the LSH, SENER and the CNE may revoke permits in case of non-compliance with various rules, regulations or standards, including resolutions issued by ASEA.
Article 4 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons (see footnote 4) requires operators to conserve associated natural gas and sets technical standards. SEMARNAT and ASEA have technical and environmental standards regarding emissions from oil and gas operations. Articles 71–85 of the ASEA Guidelines for the Prevention and Comprehensive Control of Methane Emissions from the Hydrocarbons Sector (see footnote 2) cover emissions control measures, such as requirements regarding fugitive emission detection systems and equipment, including the following:
- quarterly comprehensive leak-detection-and-repair programs
- replacement or installation of zero-emitting venting equipment
- prioritization of capture technologies over flaring to reduce emissions from tanks and other equipment
- standards for monitoring and reporting.
No evidence regarding fiscal and other incentives for emission reductions could be found in the sources consulted. In fact, there is a disincentive to capture associated gas, because the value of associated gas calculated for royalty purposes is higher than the value of nonassociated gas until the contractual price of natural gas reaches a certain level. The formulas for calculating the value of associated and nonassociated gas can be found in Article 24 of the Hydrocarbon Income Law, 2014 (see footnote 6), which sets US$5.5 per mmBtu as the natural gas price above which associated and nonassociated gas attain the same royalty rates.
Mexico is working on an Emissions Trading System (Sistema de Comercio de Emisiones) Test Program. In 2018, an amendment to the General Law on Climate Change (under SEMARNAT) established an emissions trading system that promotes emission reductions at the lowest possible cost. A three-year trial program began January 1, 2020. Operators of the installations associated with the development, production, transport, and distribution of hydrocarbons can participate in the trading scheme. Only operators of those facilities with annual emissions of 100,000 tonnes of carbon dioxide or more can participate in the trial program.
The Pemex Law, 2008, created a new legal framework for the national oil company. At the same time, responsibility for upstream regulation was shifted to the CNH, and the functions of SENER and the Energy Regulatory Commission were strengthened. In 2013, amendments to Articles 25, 27, and 28 of the Constitution, 1917, were adopted. They allowed for the participation of private firms in activities previously reserved for the state. In 2014, additional transitory articles were signed into law outlining the main aspects of the secondary legislation needed to implement the different sector legislative changes. The Hydrocarbons Law, 2014 (see footnote 6), updated in 2021, reemphasizes the role of Pemex and empowers SENER and regulatory agencies to suspend activities. Pemex or other state entities may be allowed to take over suspended activities.
The 2014 secondary legislation created two bodies—the National Center for Control of Natural Gas (Centro Nacional de Control del Gas Natural) and the National Energy Control Center (Centro Nacional de Control de Energía)—to operate, monitor, manage, and coordinate the gas and electricity networks. The National Center for Control of Natural Gas was tasked with managing the old Pemex gas pipeline network. Pemex withdrew from natural gas transport, and private investors carried out a rapid expansion of the gas pipeline network. The pipeline transport capacity was tendered to interested shippers bidding through the open season process, and open access to the natural gas network was established. Interconnections with the US pipeline system were strengthened.
The new laws re-centers the control of the energy sector in the state via ministries, state-owned companies and a new energy regulator, replacing the CNH and CRE. SENER is responsible for coordinated planning of electricity and hydrocarbon sectors while ensuring a just transition to sustainable energy use. Under this new framework, Mexico may optimize the upstream, midstream, and downstream hydrocarbon sectors to increase supply chain efficiency, to reduce costs and pollution and to ensure energy access.
The Associated Gas Re-injection (Continued Flaring of Gas) Regulations, 1984, set criteria for when flaring is allowed. No evidence of enforcement is available in the sources consulted. The National Effluent Limitation Regulation, 1991, issued by the Federal Environmental Protection Agency, placed limits on the concentrations of hydrocarbons in atmospheric emissions. According to Section 12.3 of the Emissions Regulations , the regulator will establish biannually the gas flaring threshold for licensees, lessees, and facilities.