Open Source Content Management

On August 6th, 2014, Congress reached the approval of the reform minutes to the secondary legislation derived from the constitutional energy bill that came into force on December 21st, 2013. It is only pending for the Federal Executive Branch to publish the same in the Official Gazette of the Federation.This reform seeks to regulate the hydrocarbon sector, the electricity industry, geothermal energy, as well as the new legal regime for Pemex and CFE, and gives rise to a new chapter in the country's energy sector. In this manner, the modern history in the sector transits from a nationalism with a fierce governmental control over the energy resources (same which was somewhat watered down over the time with the issuance of secondary legislation by several State administrations') to a scheme being very close to a free market that will be discretionally controlled by the regulatory bodies of the State entitled to do so. With this structural energy bill, Mexico opens its doors to private national and foreign investment in order to boost its oil, conventional and non-conventional gas resources, and supports the generation, marketing, transmission and distribution of electricity from various sources. The reforms will give rise to several disputes, mainly due to the ample discretionally that was given to the new regulatory agents of the State regarding the implementation of economic, tax, contractual environmental risk clauses. As well as in connection with the potential occupation of lands of vulnerable social sectors for the execution of new energy projects. We will see if the economic success and social wellbeing suggested and publicized by the responsibles of the reform, at the end justify the wheeling in policy and legislation which the Mexican State has provided.However, it is important to mention that against the tendency and preference that has been given to the development of renewable energy in more developed countries, the Mexican Congress has unfortunately temporarily set aside the discussion and approval of the appropriate reforms to specifically regulate and drive the energy from renewable sources. This leaves out, for the moment, the essence of the constitutional reform of last December, which is to promote the sustainability and generation of energy through clean sources. Approval of these reforms can be expected for the final quarter of this year.One of the final main minutes that was approved by Congress was the one related to tax matters which provides the creation of the Hydrocarbons Income Act and the Mexican Petroleum Fund Act, in addition to several reforms and amendments to the applicable tax laws in the energy sector. Specific comments on the scope and implications from a tax point of view will be distributed shortly by our tax practice partner. A minute regarding the rescue of PEMEX's and CFE's labor passives was also approved.To read our remarks and comments on each of the minutes that comprise this set of reforms to the secondary legislation of the energy sector, please click the following links: MINUTES #1 Oil and Gas Law [Ley de Hidrocarburos] ("LH or Law")Defines the administrative act called "Entitlement" provided under article 27 of the Constitution, through which the Executive Branch will grant exclusively to an Entitlement Holder (PEMEX or any other State productive enterprise), for a specific time period, the right to engage in oil and gas exploration and extraction activities in a specific area with the surface area and depth that the Ministry of Energy [Secretaría de Energía] ("SENER") will establish.In addition to the Entitlements, contracts for exploration and extraction are regulated, (the "Contracts") also provided under article 27 of the Constitution, which the National Oil and Gas Commission [Comisión Nacional de Hidrocarburos] ("CNH") will execute with PEMEX, any State productive enterprise, a Mexican entity, individually, in consortium or partnership, in order to carry out the exploration and extraction of oil and gas in an area ("Contractual Area") established by the SENER for a specific time period. The types of Contracts that may be executed are confirmed, which will be (i) services, (ii) profit sharing, (iii) shared production, or (iv) licenses. The Law does not provide further explanation of the different types of Contracts, it only provides that the SENER will establish the contracting model for each contractual area that is bid on. More specifically, from this Law the conceptual difference cannot be distinguished, if there is any, between a license and a concession, the latter of which is expressly prohibited for the oil and gas industry under article 27 of the Constitution. We expect that the different types of Contracts will be regulated in more detail in the Regulation of the Law that will have to be issued within 180 days from when the Law enters into force. The Contracts will be awarded through public tender offers, the procedure for which is in the Law itself. Those interested in presenting proposals will have to comply with various technical, financial, execution and experience requirements that the SENER will establish with the favorable opinion of PEMEX or the State productive enterprise. The CNH will have powers to administratively rescind the Contracts for serious causes such as the suspension of activities for more than 180 continuous calendar days without a justified cause, if the Contractor assigns the operation or the rights conferred in the Contract without the authorization of the CNH or presents false or incomplete reports on more than one occasion, etc. The number of causes of rescission is significantly less than those established for the rescission of services agreements entered into with PEMEX according to the law applicable to them. Among other things, the failure to deliver guarantees, the loss of technical, financial or operative capacities that were shown for the awarding of the contract, etc. are eliminated. In case of the rescission of the Contracts, a final settlement is provided. It is established that commercial arbitration will be the dispute resolution mechanism for the Contracts, except for the cases of administrative rescission. This, unfortunately leads to the potential creation of parallel litigation that will hinder the rapid and efficient resolution of cases.Both the Contracts and the Entitlements must contain a clause referring to the minimum percentage of national content. The Ministry of Economy will determine the minimum percentage of national content and will publish it no later than 180 calendar days from the entrance into force of the Law.It is also provided that Entitlements, once granted, could be transitioned into Contracts. In these cases, PEMEX and the State productive enterprises may enter into alliances or partnerships with Mexican entities through competitive biddings. The partnerships or alliances will be governed by civil law. The CNH must authorize in advance the alliances or associations in which "corporate and management control of the Contractor is assigned". In the cases in which the Contractor has a change in the structure of its corporate stock that does not involve a change in its corporate or management control, it will only have to give notice to the CNH within 30 days after it was carried out. If the entities are listed on the Mexican Stock Market, the provisions of the Securities Market Law will apply in those cases.Public private partnerships are prohibited with the private sector for the activities of exploration and extraction. The difference between the Entitlements and the Contracts is that SENER grants the Entitlements to PEMEX or the CFE and it does so exceptionally, whereas the CNH enters into the Contracts with a Mexican entity, PEMEX or the CFE. The contracts for construction, services, supply or operations, the comprehensive exploration and productions contracts and the financed public works contracts executed with PEMEX prior to the entrance into force of the LH, will continue in force according to their original terms and will not be modified. Parties to exploration and production and financed public works contracts may request their early termination without penalty and their transformation into an Entitlement or Contract without going through the bidding process. It is established that the CNH may grant authorizations for Surface Prospecting and Exploration to investigate the possible existence of oil and gas in areas that are not subject to an Entitlement or a Contract. Automatic approval exists in the event that the CNH does not issue a response within the term established in the LH regulation. Having this authorization does not imply priority for being awarded a Contract.The SENER will establish Protection Zones, in which exploration and extraction will be prohibited, as for example the Protected Natural Areas.PEMEX, any other State production company, government owned or private entities may hold permits for the treatment and refining of oil, the processing of natural gas, and the export and import of oil and gas and petroleum issued by the SENER or permits for the transport, storage, distribution, compression, liquefaction, decompression, re-gasification and sale to the public of oil and gas, petroleum or petrochemicals issued by the Energy Regulatory Commission [Comisión Reguladora de Energía] ("CRE"). Whoever currently carries out the mentioned activities must request their permit no later than June 30, 2015 to the SENER and December 31, 2015 to the CRE.The requests for authorizations and permits that have been submitted prior to the entrance into force of the Law, will be processed according to the law in force at that time. In general, the penalties mentioned in the LH are considerable (fines from 7,500 to 7'500,000 times the minimum wage). One of the most controversial topics has been the disappearance of expropriation and its replacement by a mechanism for temporary use and occupation. The temporary occupation does not establish the transfer of ownership, but rather the transfer of possession. Nevertheless, the duration of this temporary occupation is not established which will obviously create legal uncertainty for owners subject to this temporary occupation and will give rise to lawsuits in this field. The possibility is established of the authority negotiating with the owners or holders of the lands, goods or rights "necessary" for carrying out the Exploration and Extraction activities. This suggests that the owner of the property is not obligated to accept the confiscation; however, if an agreement is not reached within 180 calendar days from the initiation of negotiations, the Permit Holder or Contractor may file before a District Court or an Agrarian Unitary Court, as applicable, for the creation of a "legal oil and gas easement". If it is not achieved by this means, the legal oil and gas easement will be declared administratively. The term of the easement cannot exceed that of the Contract or Entitlement.The compensation for the temporary occupation will be negotiated by the Permit Holders/Contractors with the land owners and they will also be granted a percentage from 0.5% to 2% (3% for natural gas) of the income obtained by virtue of their Contracts or Entitlements. Only the Natural Gas Exploration and Extraction Contracts contained in the coal seam and produced by it may be directly awarded to the current holders of mining concessions, without bidding. For this, the concession holders must request the award within 90 calendar days from the entrance into force of the Law and evidence that they have economic solvency and the technical, administrative and financial capacity to carry out the mentioned activity. Furthermore, for the activity of natural gas exploration and extraction associated with coal that is carried out without exploiting the coal, and the activity related to oil and gas that exist in the area corresponding to the mining concession that are not associated with coal, a bidding process will be required, for which it is not established that the concession holder will have a preference. In the event that, once the bid is concluded, the rights of the mining concession holder are affected, 90 days are granted for the Permit Holder or Contractor and the mining concession holder to reach an agreement on the coexistence of the two activities in the same area and the payment of compensation to the mining concession holder. If an agreement is not reached, the CNH will determine the compensation which will be from 0.5% to 2% of the profit of the Permit Holder or Contractor.The Eighth Transitory article of the Law provides that from its entrance into force and until December 31, 2017, the CNH may directly award to PEMEX or the CFE a contract for the sale of oil and gas; however, beginning on January 1, 2018, these services will be contracted through competitive bidding. The permits granted prior to the LH related to the oil and gas industry will continue in force according to their terms, while the permits for recovery and exploitation of natural gas associated with coal fields will become invalid 180 calendar days from the entrance into force of the Law.Regarding the price of gas and diesel, from January 1, 2015 to December 31, 2017, the Executive Branch will establish the regulation of prices by ruling taking into account the evolution of the international market. Beginning on January 1, 2018 the prices will be determined "under market conditions". The permits to import gasoline and diesel will be granted only to PEMEX until December 31, 2016. Beginning on January 1, 2017 they may be granted to any interested party if market conditions permit it. The permits for the sale to the public of gasoline and diesel will be granted by the CRE beginning on January 1, 2016.The franchise agreements with PEMEX will cease to be obligatory and PEMEX can no longer rescind them unilaterally. The mandatory participation of Petróleos Mexicanos is established in those contractual areas in which there is the possibility of finding cross border fields, which are understood as those fields that are within national jurisdiction and have physical continuity outside of it or those that are shared with other countries according to international treaties to which Mexico is party.A decentralized governmental body is created called the National Center for Control of Natural Gas [Centro Nacional de Control del Gas Natural] (CENAGAS), whose purpose will be to guarantee the continuity and security of supply of gas in Mexican territory.Foreign Investment LawForeign investment is permitted in specific areas of the oil and gas industry such as in basic petrochemicals, retail sale of gasoline and distribution of liquid gas, and the requirement is eliminated of having an authorization from the National Foreign Investment Commission to hold more than 49% of stock, in activities that involve the construction of pipelines for the transportation of petroleum and its derivatives, as well as for the drilling of oil and gas wells.Mining Law The review of SENER is contemplated before the granting of mining concessions in order to establish that the possibility of oil and gas exploration and extraction does not exist which would have preference over the possible mining concession.Public Private Partnerships Law The implementation of public-private partnerships is permitted in the activities of oil refining and natural gas processing, as well as in the transport, storage and distribution of oil and gas, liquid petroleum gas, petroleum products and petrochemicals, or the generation of electricity, within the national power industry.
MINUTES #2Electricity Industry Law [Ley de Industria Eléctrica] Private participation in the generation and sale of electricity is permitted. The Federal Electricity Commission [Comisión Federal de Electricidad] ("CFE") is restructured as a State productive enterprise. The Ministry of Energy [Secretaría de Energía] ("SENER") will coordinate the restructuring of the electricity industry, will define the restructuring timeframes and will establish the policies and actions required to lead the implementation processes thereof.The decentralized public agency known as National Energy Control Center [Centro Nacional de Control de Energía] ("CENACE") is created/restructured, such agency shall be responsible for the operation of the National Electricity System and will identify the components of the National Broadcasting Network and the General Distribution Networks and operations thereof corresponding to the Wholesale Electricity Market.A scheme of obligations for the acquisition of Clean Energy Certificates ("Certificates") is created. It basically consists of a document issued by the Energy Regulatory Commission [Comisión Reguladora de Energía] ("CRE") which evidences the generation of a certain amount of electricity through clean energies. In this regard, the SENER still has to issue the requirements for the acquisition of these Certificates, as well as the criteria for granting thereof in favor of different types of clean source electricity generators. The CRE will be the authority in charge of granting the Certificates and then will issue the regulation to verify compliance with the obligations related thereto. A new Wholesale Electricity Market [Mercado Eléctrico Mayorista] is defined, which will be run by the CENACE and where Market Participants will be able to carry out electricity transactions such as sales, related services, power or products that secure resources to meet the demand for electricity, importing and exporting of these products, financial transmission rights, Clean Energy Certificates and other related products.Market Participants are those individuals who enter into the corresponding contracts with the CENACE as Generators, Sellers, Suppliers, Non-Supplying Sellers or Qualified Users. The transitory provisions of the Electricity Industry Law set forth that the load centers comprised in the Interconnection Agreements that have been executed prior the date of entry into force of the Electricity Industry Law may be included in the registry of Qualified Users. During the first year of validity of this Law, load centers reporting a demand greater than or equal to 3 Megawatts may be included, and this volume will be decreased in the following two years until a cap of 1 Megawatt is reached.The CRE is empowered to authorize the operational provisions of the electricity market, the model agreements that will be executed by the CENACE with Market Participants, the agreements between the CENACE and transporters and distributors, the interconnection and sales model agreements that will be executed with the tax-free generators, and the sale model agreements that will be executed by basic supply users.The concept of Clean Energies is included, defined as those energy sources and power generation processes, which emissions or waste, if any, do not exceed the legally permitted limits. Among them, some of the following are mentioned: solar, wind, bioenergy, oceanic, geothermics, those originated from the use of methane and other gases in waste disposal sites, livestock farms and wastewater treatment plants. Nuclear energy is now considered as a clean source, which seems a little off the context of clean energies, because of the waste generated by this technology, which is one of the most dangerous and polluting sources of waste and it takes thousands of years to degrade.It is set forth that the CRE shall be in charge of issuing the methodologies to calculate and adjust the fees for the provision of the basic supply services, transmission, distribution, and operation of the CENACE.The procedure, requirements, and formalities to occupy or cause superficial damage to buildings, real estate, lands, goods, or rights necessary for the development of the activities of the electricity industry are established.The transition of widespread subsidy schemes to targeted support schemes is provided.Permits issued pursuant to the abrogated law will be respected. In the transitory articles, it is anticipated that the permits for self-supply, co-generation, small-scale production, independent production, importing, exporting, and own continuous uses will maintain their original validity term, and their holders will be able to carry out the activities under the terms authorized by such permits. In the same way, an option is envisaged to enable the holders of these permits to change them for unique generation permits, if they desire to do so, in order to carry out their activities under the new Electricity Industry Law.The terms of Legacy Interconnection Agreements will be respected, until their termination, including the acknowledgement of self-supplied power, postage stamp rate, energy bank, and other conditions granted for generation projects with renewable energy and co-generation. The applications for permits of self-supply, co-generation, independent production, small-scale production, importing or exporting, submitted prior to the entry into force of the new Electricity Industry Law, will be solved on the basis of the previous Law of Public Electricity Services. Geothermal Energy LawThe mechanisms for the exploitation and exploration of geothermal resources for the development of the subsoil's thermal energy are established. The figure of Concession as the legal act by which the SENER will give an individual, the CFE, or to another State productive enterprise, the rights for the exploitation of geothermal resources of a certain area with the aim of generating electricity or for allocating it to diverse uses.The permits for the exploration of potential geothermal areas will have a maximum length of 150 km2, a validity of 3 years which may be extended once, which gives plenty of room for the execution of exploratory activities in this sector. Permits do not grant property rights to its holders and will only create temporary rights for exploration.Activities regulated by this Law are of public utility, and are preferable over any other use or way of exploitation of subsoil in those lands, except for those related to the hydrocarbon industry. The SENER will be the responsible authority for regulating and promoting the exploration and exploitation of geothermal areas, as well as the rational use and preservation of the Nation's geothermal fields. The SENER will be in charge of the Geothermal Energy Registry, which will contain all the aspects with respect to the concessions granted to individuals for the exploitation of geothermal fields.The Round Zero mechanism is established, under which the CFE may request for the geothermal deposits in which it has an interest to continue the exploration or exploitation works, taking into consideration the SENER's opinion.Amendments and additions to the National Waters LawThe areas of competition between the National Water Commission ("CONAGUA") and the SENER are defined, to ensure a close coordination and securing the integrity of geothermal deposits during the exploration phase, and to maintain the sustainability of the resource as well.There is a new obligation to obtain a permit issued by the CONAGUA for the execution of works or wells in geothermal deposits. A water concession title issued by the CONAGUA will be required, and, if applicable, a wastewater discharge permit, for the exploitation, use, development, and return of underground water contained in hydrothermal geothermal deposits, as well as an environmental impact authorization. 
MINUTES #3Petróleos Mexicanos (PEMEX) Law and the Federal Electricity Commission Law1 [Ley de Petróleos Mexicanos y Ley de la Comisión Federal de Electricidad]The Federal Electricity Commission ("CFE") and Petróleos Mexicanos ("PEMEX") are defined as State productive enterprises, which implies that both shall become the exclusive property of the Federal Government and that the latter will change from being an administrator of their resources to executing the following owner functions:To define their purpose and main activities;To appoint the members of the Boards of Directors and determine their compensations;To appoint its external auditor;To define the dividend to be delivered to the Federal Government, based on their financial results;To assess their performance and that of their Boards of Directors, andTo receive periodic reports on the progress of each company.Both CFE and PEMEX will have their own legal personality, their own assets, and will enjoy technical, operational, and managerial autonomy. The CFE will have the purpose of providing the public service of transmission and distribution of electricity on behalf of the Mexican Government, while PEMEX will have the purpose of exploration and extraction of oil and solid, liquid, or gaseous hydrocarbons, as well as their collection, sale, and trading.Both PEMEX and CFE will be led and managed by a Board of Directors and a CEO. The CEO shall be appointed by the Federal Executive Branch. The Board of Directors shall be composed of ten Directors, including the Secretary of Energy (who shall preside the Board and will have a casting vote), the Secretary of Finance and Public Credit, three members from the Federal Government appointed by the Federal Executive Branch and five independent members for PEMEX and four for the CFE. The latter shall be appointed by the Federal Executive Branch and ratified by the Senate, they shall exercise their functions on a part-time basis and will not serve as public servants. Also, the Board may have Audit, Human Resources and Remuneration, Strategy and Investment, Acquisitions, Leasing, Works and Services Committees that will assist in the accomplishment of its functions.The figure of subsidiary production companies is created, which shall have legal personality and their own assets. Those related to PEMEX, will carry out activities for the exploration and extraction of hydrocarbons, while those related to the CFE shall undertake the activities for transmission and distribution of electricity. In addition, in both cases, they will carry out the activities determined by PEMEX and CFE's Boards of Directors.The figure of affiliate production companies is created, which includes those where PEMEX or CFE will have a direct or indirect stake of more than 50% of their social capital. The companies may be Mexican or foreign and their legal nature shall conform to the private law of their place of incorporation. They will not be considered state-owned entities.The creation, merger, or division of subsidiary and affiliate production companies where PEMEX or CFE have a direct stake, will be authorized by the Board of Directors, upon recommendation by their CEO and in accordance with the regulations established by the Board itself.Both PEMEX and CFE shall be governed on a supplementary basis by principles of private law and those determined by their governing bodies and private commercial and civil laws will be applicable to the same, instead of administrative laws as it was provided previously. By virtue of the new legislation, the Boards of Directors are entitled to determine the corporate structure that best suits them to carry out their business purposes by optimizing human, financial, and material resources, streamlining processes, and attentive to transparency and to the best corporate governance and business practices at a national and international level. The following are some of the most important functions of the Boards of Directors: The central leadership and strategic direction of business, economic, and industrial activities;To approve, review, and, if applicable, annually update the Business Plan, which will be elaborated and updated with a 5-year horizon, and will contain at least CFE or PEMEX's objectives, lines, and business opportunities, the main commercial, financial and investment strategies, large-scale and technological improvement projects, priority acquisitions, a diagnosis of their operational and financial status, their performance results and indicators, as well as the main strategic and commercial risk scenarios.To set and adjust the prices of the goods and services produced or provided by PEMEX and CFE and their subsidiary production companies;To approve and issue PEMEX and CFE's General Regulations, by proposal of their CEOs;In the case of PEMEX, to set forth the policies and general bases to determine the profitability factor with which PEMEX and its subsidiary production companies will participate in the tenders to award contracts for the exploration and extraction of hydrocarbons.Some of the most important functions of the CEOs are the following: To manage and legally act on behalf of the company, with the most extensive authority for acts of ownership, administration, litigation, and collections, including those that require a special authorization or clause;To formulate and submit for approval of the Board of Directors the Business Plan and the annual operational and financial annual work program;To authorize extraordinary payments, donations in cash or in kind that PEMEX or CFE or their subsidiary production companies grant, in terms of the guidelines issued by the Board of Directors;To manage the companies' assets and manage their goods in accordance with the provisions of both laws and with the policies and authorizations issued for such purpose by the Board of Directors.A new model of monitoring and auditing to be defined by the CEO of PEMEX and CFE is set forth, and shall be independent of the Internal Audit Bodies of public entities, within which several units will be established, such as an Audit Committee and both an external and internal Auditor. Among the most important functions of these bodies there are the following: To follow up PEMEX or CFE's management, their subsidiary productive enterprises and affiliate companies.To verify and certify the reasonableness and adequacy of the accounting and financial information;To schedule and require, at any time, investigations and audits as deemed necessary, except concerning the performance of the Board of Directors.To establish mechanisms that anticipate, identify, manage, monitor, and evaluate the risks that may arise from the development of the activities by PEMEX and CFE.A new scheme for acquisition, leasing, services, and works for the State production companies is created, to which neither the provisions of the Law of Acquisitions, Leasing, and Services of the Public Sector nor those of the Law on Public Works and Services Related Thereto will apply.The Board of Directors of both companies shall issue the provisions to which PEMEX and CFE shall abide, as well as their subsidiary productive enterprises regarding acquisitions, leasing, procurement of services, and execution of works with individuals, which procedures are established in article 134 of the Constitution. In procedures other than open tenders, parties with the financial, technical, operational, and other capacities to comply with the contracts, and with the experience in the activities or works to be performed, will be invited.The minimum requirements to be met by the interested parties for the execution of agreements with State productive enterprises and their subsidiary productive enterprises, as well as the mechanisms for their evaluation, shall include the following, among others:Technical and financial capacity for the implementation of the project;Previous experience that proves the capacity for the implementation of the contractual obligations; andThe status of their tax and labor obligations.Government dividend is set forth, through which PEMEX and CFE will pay the government on an annual basis the following: In July of each year, the Board of Directors will submit to the Ministry of Finance and Public Credit a report on:The financial situation of the State productive enterprises and of their subsidiary productive enterprises, as well as the plans, options and investment and financing prospects.Taking into account the above, the Ministry of Finance and Public Credit will determine the amount to be paid to the Federal Government as a government dividend.The contracts, agreements, and other legal acts for acquisitions, leasing, and procurement of services and works entered into by CFE and PEMEX and its subsidiary bodies with individuals of the private sector, which are still force at the moment these two laws enter into force, the same will be honored in the terms agreed upon. Notwithstanding the foregoing, the State productive enterprise and its former subsidiary bodies or their subsidiary productive enterprises may agree their modification in order to adjust the same with the provisions of new Laws and other laws which may be applicable.The Federal Law of State-owned Entities, the Law on Acquisitions, Leasing, and Services of the Public Sector, as well as the Law on Public Works and Services Related Thereto are amended in order to exclude their applicability to PEMEX and the CFE. 
MINUTES #4Law of Coordinated Regulatory Bodies in Energy Matters [Ley de Órganos Reguladores Coordinados en Materia Energética] ("Law of Regulatory Bodies")The National Commission of Hydrocarbons [Comisión Nacional de Hidrocarburos] ("CNH") and the Energy Regulatory Commission [Comisión Reguladora de Energía] ("CRE") (collectively the "Regulatory Bodies") are constituted as Coordinated Regulatory Bodies in Energy Matters, with technical, operational, and management autonomy, with legal personality and which may dispose of revenue derived from the fees and royalties established in the Federal Duties Act or applicable laws for the services they render according to their functions and authority. Their main functions include the following:Regulate, monitor, inspect and impose sanctions related to the matters under their jurisdiction;Request information to holders of permits, licenses, and authorizations, as well as others related third parties;Perform technical studies within the scope of their competence to improve the development of the energy sectors and hydrocarbon sectors;Hire consulting, advising, research, and investigation services that are required for the activities of the hydrocarbons and the energy sectors.The Regulatory Bodies will be formed by a Governing Body composed of seven Commissioners, including its Chairman, and an Executive Secretary.Regulatory Bodies will have to make all their decisions public, including dissenting votes, where applicable, minutes of meetings, administrative criteria on which they base their decisions, and publish a gazette for informational purposes, at least on a quarterly basis. The Coordination Council of the Energy Sector (the "Council") is created, as a mechanism to align the objectives and activities of Regulatory Bodies in favor of the compliance with the energy policy.The Council will have several functions, which include the following:Issue recommendations on the annual programs of the Federal Executive Branch in the field of energy and energy policy matters;Analyze specific cases that may affect the development of public policies from the Federal Executive Branch in the field of energy; and propose coordination mechanisms among the Federal Executive Branch, the related Ministries in the field and the Regulatory Bodies.The general rules, acts, or omissions of Regulatory Bodies may be challenged only through an indirect amparo claim and will not be subject to suspension. Only in cases where fines are imposed, these will be enforced until the amparo claim, if any, is resolved. When dealing with resolutions from these Regulatory Bodies, deriving from a procedure followed as a judicial trial, the final resolution may only be challenged in case of procedural violations.The execution of contracts with Regulatory Bodies and the granting of authorizations and permits by the same for the exploration and extraction of hydrocarbons, laying of pipelines and electric power infrastructure, etc. will involve a declaration of public utility in the sites at which they are located and will be subject to the Federal Law Against Corruption in Public Procurement.The CRE and the CNH may manage the revenues derived from contributions and fees paid by individuals for the issuance of licenses, authorizations, or permits resulting of their services, via a public trust.In addition to the powers set forth in the Hydrocarbon Law, the CNH will be in charge of the following features, among others:To regulate and supervise the surveying and exploration of surfaces, as well as the exploration and extraction of hydrocarbons, including their collection from production points and up to their integration into the transportation and storage system;To provide technical advice to the Ministry of Energy. In addition to the powers established by the Hydrocarbon Law and the Electricity Industry Law, the CRE shall regulate and promote the efficient development of the following activities:Transportation, storage, distribution, compression, liquefaction, and re-gasification activities, as well as the sale of petroleum, natural gas, liquefied petroleum gas, petroleum products, and petrochemicals to the public;Transportation through pipelines, storage, distribution, and sale of bioenergy to the public;The generation of electricity, public electricity transmission and distribution, electricity transmission and distribution that is not part of the public service and marketing of electricity, consisting of the service of providing electricity by individuals and which shall be subject to new standards of competition in the market.The normativity and regulations issued by the CRE and CNH, prior to the entry into force of the Law of Regulatory Bodies that do not contravene the provisions therein, will continue in force, regardless of them being reformed, amended or replaced, in terms of the provisions of this Law and other applicable laws. The internal regulations of the CNH and the CRE will be issued within 180 calendar days following the entry into force of the Law of Regulatory Bodies.The Organic Law of the Federal Public Administration is amended to include and empower Regulatory Bodies.Law of the National Agency for Industrial Safety and Environmental Protection of the Hydrocarbon Sector (the "Agency Law")The National Agency for Industrial Safety and Environmental Protection of the Hydrocarbon Sector (the "Agency") is created and will regulate and supervise industrial and operational safety, as well as environmental protection on the facilities and activities in general terms and specifically the dismantling and abandonment of facilities of the hydrocarbon sector, as well as the integrated control of waste and pollutant emissions from the hydrocarbon sector. The Agency Law will be enforceable throughout the national territory and in areas in which the Nation exercises sovereignty or jurisdiction. Thanks to the efforts by the Mexican Bar Association, as well as to the efforts made by Von Wobeser y Sierra's lawyers in various political and legal forums, the scope of the Agency Law, now includes those areas where the Nation exercises its sovereignty, and not only national territory, as it did in the original proposal submitted to Congress. This is of great importance, as the Agency will also have jurisdiction in the exclusive economic zone, which is where most of the exploration and extraction of hydrocarbons in deep waters will take place.The activities of the hydrocarbon sector to which the Agency Law shall be enforceable are the following: The surveying and exploration of surfaces, exploration in deep areas, and extraction of hydrocarbons; The processing, refining, sale, marketing, transportation and storage of oil;The processing, compression, liquefaction, decompression and re-gasification, as well as the transportation, storage, distribution, and sale of natural gas and petroleum products to the public;The transportation, storage, distribution, and sale of liquefied petroleum gas to the public;The transportation through pipelines and storage that is linked to petrochemical pipelines as a result of the processing of natural gas and oil refining.The functions of the Agency include the following: To regulate, supervise, and impose sanctions on industrial and operational safety and environmental protection matters;Establish, process, and resolve environmental impact and risk authorizations; authorization for odors, gases or solid or liquid particles' emissions to the atmosphere; approvals for hazardous wastes in the hydrocarbon sector; authorizations of the proposals for remediation of polluted sites; authorizations on wastes that require special handling (notwithstanding the fact that these type of wastes are of local jurisdiction, this law provides that the Agency will grant permissions in connection thereto); Instruct the adoption and observance of technical national and international standards in industrial security, which involves prevention and containment of spills, as well as the physical and operational integrity of the facilities;Characterization and classification of hazardous and non-hazardous waste and hazardous waste management generated in the hydrocarbons sector. It is worth mentioning that, in spite of the fact that the Agency Law does not mention the obligations of the permit, authorization, or license holders in non-hazardous and hazardous waste matters, these matters are regulated but only in connection to the authority. The figure of Industrial, Operational Safety, and Environmental Protection Management Systems (hereinafter the "Management Systems") is created, which will be implemented by each company of the hydrocarbon sector for the prevention, control and improvement of industrial and operational safety, and environmental protection.The companies in the hydrocarbon sector must implement an area responsible for the implementation, evaluation, and improvement of the Management System.The Ministry of the Environment and Natural Resources, the Ministry of Energy, the CNH, and the CRE will continue to take the matters under their jurisdiction according to the previous legislation, until the entry into force of the Agency's Internal Regulations, which will be within 270 days following the entry into force of the Agency Law. In matters related to obtaining permits, authorizations, or licenses that are pending before the entry into force of the Agency's Internal Regulations, the authority which is responsible for them shall decree a suspension of the procedure and will submit the same to the Agency in a term not exceeding fifteen business days to continue with the processing thereof under the guidelines established in the previous laws.      

As long as general administrative provisions and Mexican Official Standards are not issued by theAgency, all the guidelines, technical and administrative provisions, agreements, criteria, and MexicanOfficial Standards issued by the Ministry of Environment and Natural Resources, the Ministry of Energy,the CNH, and the CRE shall remain in force and will be binding for all those that need to comply with suchregulations, as long as they are not contrary to the provisions of this Law, to the Hydrocarbon Law, theElectricity Industry Law, and to any other applicable laws.