The federal government's partial shutdown didn't keep the US Senate Energy and Natural Resources Committee from discussing the pending US-Mexico transboundary hydrocarbons agreement on Oct. 1. But the hearing barely mentioned the main obstacle to its being ratified.
Chairman Ronald L. Wyden (D-Ore.) twice mentioned his desire to see the treaty adopted "quickly and cleanly," but did not specify what the main problem was. There obviously was one since the hearing was to consider two separate bills: S 812, which he introduced on Apr. 25, and HR 1613, which US Rep. Jeff Duncan (R-SC) introduced a week earlier and the House passed on June 27.
It fell to one of the witnesses—Carlos Pasqual, special envoy and energy affairs coordinator at the US Department of State—to explain the problem: While the Obama administration supports ratifying the treaty, it dislikes a provision in Duncan's bill that would waive Section 1504 of the Dodd-Frank Act requiring US companies to disclose payments to foreign governments.
Duncan has said this is necessary to get US companies to invest in joint ventures with Mexico's state-owned Petroleos Mexicanos. Others argue that the hydrocarbons potential within the two countries' Gulf of Mexico maritime border may be enough to encourage the necessary outside investment if the US ratifies the treaty.
"We believe the agreement would help facilitate the safe and responsible management of offshore petroleum reservoirs that straddle our maritime boundary and strengthen our bilateral relations overall," Pasqual testified on Oct. 1.
Mexico ratified the treaty soon after it was signed in 2012. The country's new president, Enrique Pena Nieto, proposed energy regime reforms earlier this year that would allow contracts between Pemex and outside companies for the first time since 1938.
Pull-back consequence
"By pulling back instead of advancing, it would be negative not only for the United States as a whole but also for US companies which would want to participate in a reformed Mexican energy system," Pasqual said.
US producers would welcome the prospect of being able to reach unitization agreements with Pemex to develop border-straddling resources, according to US Bureau of Ocean Energy Management Director Tommy P. Beaudreau, who also testified. The agreement also encourages Mexico and the US to use common safety and environmental standards while preserving their sovereignty, he said.
A third witness, American Petroleum Institute Upstream Operations Director Erik Milito, noted that API saw a sincere desire to move ahead when it hosted a delegation of Mexican senators in Washington recently. "Swift implementation of the agreement would provide US companies certainty," he said.
Congress will need to resolve whether to waive Dodd-Frank Section 1504 first, however.
