House panel asks Obama to take energy steps with Mexico, Canada

Implementing the Trans-Border Hydrocarbons Agreement (TBHA) with Mexico should be as high a priority for the administration of US President Barack Obama as issuing a final decision on a cross-border permit for the proposed Keystone XL crude oil pipeline from Canada, members of a US House Foreign Affairs Committee subcommittee asserted.

Both should be completed sooner than later, the members said during a Mar. 14 hearing by the committee’s Western Hemisphere Subcommittee on improving US energy relations with its two closest neighbors.

“We already have vibrant commercial partnerships with Mexico and Canada,” Rep. Matt Salmon (R-Ariz.), the subcommittee’s chairman, said. “I’d like to see an enhancement of that already close relationship where we can expand on already existing bilateral trade agreements to achieve North American energy security and independence.”

To that end, Salmon said, he urged the White House to promptly submit to Congress for approval the TBHA—which it reached with Mexico in early 2012—as well as approve TransCanada Corp.’s application for a Keystone XL cross-border permit.

Rep. Albio Sires (D-NJ), the subcommittee’s ranking minority member, said US foreign policy toward other Western Hemisphere countries had gone by the wayside for too long, and relations with Mexico and Canada especially needed more attention.

“I believe the Keystone XL pipeline from Canada and the [TBHA] with Mexico would benefit the US,” Sires said. “Mexico is a key component in the US energy relations framework. It has committed itself to reversing its declining production and has opened itself to discussing joint ventures with its national oil company.”

Somewhat encouraged

GOP members of the subcommittee said they came away from Obama’s meeting with the House Republican Conference a day earlier somewhat encouraged about finally receiving TBHA. “The president was very kind to come meet with us yesterday,” said Rep. Trey Radel (Fla.). “If he’s listening now, please send us this agreement soon.”

Salmon said Obama told House GOP members at the meeting that while he thinks Keystone XL job creation estimates are overblown, the same seems true of predictions that the project would have dire environmental consequences, and promised there would be a decision in the near future.

The subcommittee also met with other administration officials on Mar. 13 who signaled that the White House supports moving forward on TBHA and discussed language that would be needed to implement it, according to Salmon. He said he talked with Sires about drafting that language, and has spoken with Rep. Doc Hastings (R-Wash.), who chairs the Natural Resources Committee, which would have jurisdiction, about starting the process.

Approving and implementing TBHA soon is very important, hearing witnesses told the subcommittee. “Approving the treaty will create new levels of legal certainty for US and Mexican firms operating in Gulf of Mexico border regions, encouraging them to engage in the risk-taking required to produce oil from deep water,” said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars.

TBHA also has far-reaching implications in terms of regulatory cooperation between the two countries that is fundamentally necessary in the aftermath of the 2010 Macondo deepwater oil well accident and spill, and is crucial for boosting Mexican standards, he continued. US ratification before Mexico begins its energy reform debate in earnest will encourage that process, while waiting until it is actually under way may complicate the debate, Wood said.

Facilitate joint ventures

Ratifying TBHA also would encourage US independents and Mexico’s state-owned Petroleos Mexicanos (Pemex) to jointly develop resources in the gulf, noted Kyle Isakower, American Petroleum Institute’s vice-president for regulatory and economic policy.

“This agreement will provide legal certainty to US [independents], which will encourage investment in new energy development, creating jobs and spurring economic growth,” he said. The president should resolve lingering uncertainty over whether he intends TBHA to be a treaty or an executive agreement, Isakower added. “Appropriate legislative action should then quickly be taken to ratify the treaty, if applicable, and pass implementing legislation,” he said.

When Salmon asked him if API members see chances to work with Pemex if Mexico makes the necessary reforms, Isakower replied: “I believe they see many opportunities going forward. [TBHA] is only the first step. Working with Pemex on trans-boundary projects is very important because it may provide opportunities to work with Pemex long-term on other plays.”

Full TBHA implementation matters most as a vehicle for cooperation between the two countries, suggested Daniel R. Simmons, regulatory and state affairs director for the Institute for Energy Research. “Mexico has an estimated 10.5 billion bbl of proven oil reserves, but that amount could double when unconventional and deepwater resources become proven reserves,” he said. “[TBHA] is important for the production of some of these deepwater resources.”

Michael A. Levi, who directs the Energy Security and Climate Change Program at the Council on Foreign Relations, agreed that TBHA is more important in terms of cooperating with Mexico on trans-boundary oil and gas drilling regulation than in significantly increasing US production. “Moreover, if opening Mexico’s hydrocarbons sector creates opportunities for deals, having worked with it on these issues will give the US an edge,” he said.

Contact Nick Snow at nicks@pennwell.com.

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