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MEXICO: An Introduction to Mexico

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Practice Area Overview  

Mexico: Environment 

The landscape of environmental law in Mexico has drastically changed over the past few months. The policies enacted by President Andrés Manuel López Obrador under the current administration, the so-called “Cuarta Transformación” (also known as “4T”), may pose hurdles to ensuring compliance with and enforcement of environmental regulations regarding sizeable public works.

The government has broken ground on several infrastructure projects prioritised by the 4T – the Dos Bocas Refinery, the Mayan Train and the Santa Lucía Airport – without completing the required environmental impact assessments. As a result, it is impossible to determine the impact the construction and operation of these projects will have on the environment and the communities that surround them. In addition, the shutdown of public-private works, such as the New International Airport in Mexico City and the Constellation Brands brewery in Mexicali, have disturbed the appeal of investing in Mexico.

Moreover, the quick turnover of the heads of the Ministry of Environment and Natural Resources, including the position of Secretary of State that may change hands twice in only two years, has stymied a coherent government strategy for protecting the environment and the complementary policies that would foster long-term, sustainable development.

From an international standpoint, Mexico has a world-leading legal framework to combat climate change; however, the 4T favours policies that prioritise the production of energy using fossil fuels, choking investments in renewable energy. Proof of this can be found in the fact that, in addition to the production of petroleum from existing refineries, Mexico’s sulphur-rich petroleum produced at the Dos Bocas Refinery will be used to replace natural gas, a much cleaner fuel source, at the thermal power stations of the Federal Electricity Commission (“CFE”).

For example, the Tula Thermal Power Station (Hidalgo state) operates using oil and its impact on the air quality of Mexico City and the states of Hidalgo, México, Morelos and Querétaro harms the wellbeing of millions of Mexicans by diminishing their quality of life due to the hazardous particulate matter it produces.

The decision to favour oil as the primary source of fuel for energy generation will without a doubt disincentivise private investments in renewable energy, especially considering that the government has reduced its investment in this sector and that it does not possess the resources or technologies to produce clean energy.

The uncertainty surrounding renewable energy projects and private investment in Mexico and the economic impact of COVID-19 has dramatically altered the provision of legal services in the realm of environmental law. Until recently, this practice area had focused on supporting the development of infrastructure projects, particularly those related to renewable energy; now, the aforementioned policy decisions by the Mexican government have led to an assortment of strategies that have resulted in litigation against government actions.

Since the current Mexican government has modified the rules in renewable energy infrastructure, environmental legal services will more than likely need to evolve. The status quo of supporting infrastructure projects by obtaining the appropriate permits, licences, approvals and concessions is no longer enough. Environmental lawyers need to consider the possibility of a lawsuit, whether this is brought by social actors near the project site or by the government. Under these circumstances, lawyers should contemplate benchmarking the environmental conditions and services that a project must meet by the time the construction of the project begins.

Moreover, environmental legal counsel must always carry out a social impact assessment and a community plan that identifies the key interest groups, what their needs are and how they can be included in the development process of a project to ensure compliance with the “Principios de Ecuador” (4th Version).

Recently, several legal provisions have been issued and/or submitted to the legislative branch for review that may have a significant impact on the development of infrastructure projects.

The proposed law over water use (“Ley General de Aguas”) would enshrine access to drinking water as a human right, but it would also disincentivise the development of hydraulic infrastructure and the industrial use of water resources. Likewise, legislation over indigenous consultations establishes that a public consultation must be carried out prior to any government approval, which places any infrastructure project development to which this consultation may apply on an uncertain legal footing.

The Ministry of Energy, along with the National Centre for Energy Control (“CENACE”), have taken measures to favour electricity generation from the CFE, which, as previously stated, is phasing out natural gas for oil to produce electricity at its thermal power stations. Additionally, the Energy Regulatory Commission (“CRE”) will increase the transfer costs of renewable energy companies. These decisions will most certainly stop Mexico from fulfilling its commitment to source 35% of its energy from renewable sources by 2030.

The lack of knowledge of environmental matters by judges and the lack of value that they place on administrative approvals, that should technically be upheld until ruled otherwise, is a significant obstacle.

It is not uncommon for judges to rule that the construction of a project must be suspended, regardless of whether it already has the necessary permits. Unfortunately, federal judges have opted to disregard the presumption in favour of the validity of administrative resolutions and share the allegations – without technical basis – made by plaintiffs under the pretext of protecting the environment, even though the environmental and technical viability of the project has been determined through the resolutions in question.

Therefore, for as long as a trial lasts, the assumption that these permits are valid must hold as long as there is no technical evidence that challenges a project’s environmental compliance.

Mexico is at a crossroads and is in need of an economic recovery provided by both public and private investments. New projects, from their conception, must be designed and shaped by the practices of environmental sustainability and corporate social responsibility to ensure their long-term success. The realm of environmental law will change as practitioners account for greater complexity in their work and balance the needs and aspirations of multiple actors who often have conflicting interests.