In Mexico, the environmental statutes are administered, as set forth in the Mexican Constitution, in partnership between the federation, states and the municipalities. Consequently, there is a vast amount of legislation ruling environmental matters owing to the federation, states and municipalities having powers to redact and enact their own environmental laws, regulations and standards. In this regard, the Mexican environmental legal framework is complex and extensive, especially as the environment is a cross-disciplinary topic with subjects such as corporate, civil, contracts, criminal, banking and finance, and infrastructure, just to name a few.
During this year, there have been several significant modifications to the Mexican legal framework, as follows.
The approval of diverse local laws and regulations prohibiting or imposing strict limitations to the commercialisation, distribution, delivery, even free-of-charge, of single-use plastics, plastic items, etc., except when they are compostable or biodegradable or necessary to comply with health requirements. Towards the end of 2019, 17 states and nine municipalities approved laws or regulations on the matter.
On 1 October 2019, the 'Accordance by means of which the Preliminary Basis of the Emission Trading System Test Program are established' was published in the Federal Official Gazette. The Accordance was issued in compliance with the dispositions set forth in Article 94 of the General Act for Climate Change, which empowers the Ministry of Environment and Natural Resources (SEMARNAT) to establish, in a progressive and incremental manner, an Emission Trading System.
With the implementation of this Emission Trading System Mexico became the first Latin American country with a mandatory Emission Trading System in force. In the judicial sphere, the Supreme Court issued a relevant ruling stating that the states have the power to pass environmental taxes.
It is well known that during mid-2013, there was a major reform in the energy sector. One of the most important contributions in said reform was the creation of a new government entity specifically to regulate and verify compliance of all environmental and safety matters and regulations within the hydrocarbon sector, the National Agency for Industrial Safety and Environmental Protection (ASEA). Since its creation, ASEA has issued and continues to issue the required regulations and norms to provide the technical elements for the industrial and operative security, as well as the protection of the environment for the development of hydrocarbon activities, to promote, leverage and develop such activities in a sustainable way.
Ii LEGISLATIVE FRAMEWORK
The main environmental statutes and regulations currently in force that set forth the basis for federal, state and municipal enforcement are as follows:
- the Mexican Constitution;
- the General Law for Ecological Balance and Environmental Protection (LGEEPA), and its regulations;
- the General Law for the Prevention and Comprehensive Management of Waste (LGPGIR) and its regulation;
- the Federal Environmental Liability Law;
- the National Water Law and its regulation;
- the General Law for the Sustainable Forestry Development, and its regulation;2
- the Wildlife Law, and its regulation;
- the Law of the National Agency for Industrial Safety and Environmental Protection for the Hydrocarbons Sector;
- the Biosecurity of Genetically Modified Organisms Law and its regulation;
- the General Law on Climate Change and its regulation; and
- the Mexican Official Standards (NOM) and Mexican Standards (the former are mandatory and the latter voluntary, unless there is no NOM published on the subject).
In addition, at a local level, states and municipalities have their own legal framework in accordance with the federal legal framework.
IIi THE REGULATORS
The federation, the states and the municipalities may enforce their regulations through their own environmental authorities. However, at the federal level, the most important environmental authority is SEMARNAT and the agencies with specific powers on environmental matters, such as:
- the Federal Environmental Protection Agency (PROFEPA) with regard to verification, vigilance and enforcement of the law;
- ASEA with regard to verification, vigilance and enforcement of the law in the hydrocarbon sector;
- the National Water Commission (CONAGUA) with regard to verification, vigilance and enforcement of the law concerning water consumption, wastewater discharge and occupancy of federal property; and
- administrative offices that aid SEMARNAT in the enforcement of the law, such as the National Forestry Commission and the National Institute of Ecology and Climate Change.
The enforcement of environmental matters is a federal, state and municipal joint task. At the federal level, SEMARNAT is in charge of ensuring environmental compliance and sustainable development.
To exercise its authority, it is supported by the following agencies:
- PROFEPA: its main function is to ensure compliance with environmental laws and contribute to sustainable development by conducting environmental audits, inspections and imposing sanctions.
- ASEA: it regulates, supervises and even imposes sanctions regarding environmental protection related to hydrocarbon activities, including air emissions, waste and environmental impact aspects.
- CONAGUA: its main purpose is to administer and preserve national waters to achieve the sustainable use of this resource. It grants permissions and concessions for the use of water resources and has the power to inspect to monitor compliance with regulations related to water and water pollution.
At the local level, both states and municipalities have environmental ministries or offices aided in many cases by environmental protection agencies (following PROFEPA's structure).
The enforcement of environmental regulations is mainly executed through the following methods.
i Permits and licences
There are a number of mandatory permits and licences to be obtained by private parties depending on the characteristics of the project or activity to be executed by said party, which are granted by the regulating authorities whenever the projects comply with certain conditions and requirements (legal requirements). The detection of irregularities in the requirements necessary for granting permits and licences is the first assessment of environmental legal compliance.
ii Terms and conditions
Regulating agencies impose certain terms and conditions when granting permits and licences, aimed at observing the principles of environmental protection and reduction of pollution, which holders of said permits and licences must observe while they carry out their activities.
The regulating agencies are empowered to order inspections to determine if environmental regulations are being observed and complied with. If not, authorities may require the inspected party to immediately adopt corrective or urgent measures needed to comply with applicable laws and regulations or begin administrative proceedings for the imposition of sanctions; or even inform the Public Prosecutor about any violations observed during the inspection that may constitute a criminal offence.
Currently, authorities at the federal, state and municipal levels develop their inspections and visits in accordance with the procedures established by their own applicable laws. However, as this situation has proven to be unhelpful with regard to the legal certainty of the individuals during the development of the inspection visits, there was an Amendment Initiative of the LGEEPA (Amendment), which was approved by Mexican senators on 28 September 2017 and discussed by the Chamber of Deputies. This Amendment Initiative was concluded by the board of the Chamber of Deputies on 11 October 2018.
This Amendment had the purpose, among others, of consolidating the administrative procedures of environmental inspections to allow the environmental authorities at all governmental levels to use a sole and single inspection procedure to verify compliance with the law that each authority has the power to enforce.
Although declared as concluded, the subject could be presented for analysis again by means of a new amendment initiative.
iv Sanctions and remedies
As a result of administrative proceedings, the authorities may impose sanctions, such as:
- fines up to 50,000 units of measure and update (UMAs) (approximately US$211,225);
- closures (temporary or definitive);
- administrative arrest for up to 36 hours;
- seizure, suspension or annulment of permits and authorisations; and
- confiscation of instruments, specimens, products or byproducts directly related to infractions relative to forest resources, species of flora and fauna or genetic resources.
The statute of limitation for environmental authorities to initiate inspection processes and impose sanctions on private parties or persons is five years counted from the date in which the violations were committed, when the violations' effects are instantaneous; or from the date at which the effects end, if they were deferred over time. Furthermore, if a person is determined to have caused environmental damage, it can be phased with the imposition of penalties over environmental liability that could rise to a maximum of US$211,225 for individuals and US$2,534,700 for legal entities. The latter, in addition to the obligation of remediating, repairing or compensating the damage caused.
v Judicial proceedings
Environmental proceedings can be civil, criminal or administrative in nature. The majority of proceedings are administrative in nature. Therefore, the Administrative Court has created 'Special Halls on Environmental and Regulatory Matters' to provide technical and specific attention to environmental cases. Judicial proceedings can be accessed both by private parties against regulators for infringement of their rights or by regulators themselves (i.e., environmental damage and environmental liability actions).
vi Collective actions
Owing to the reform in 2011 of the Federal Code of Civil Procedure, civil actions were incorporated into the Mexican legal framework (the Fifth Book of the Code). These actions proceed in two matters: consumer protection matters: 'consumption of assets and services, public or private'; and environmental matters: 'the environment'.
In this regard, collective actions can be brought to protect diffuse and collective rights and interests (i.e., those held by undetermined individuals that belong to a group owing to factual or legal reasons) and to protect individual rights and interests with a collective incidence (i.e., those held by determined individuals that belong to a group owing to legal reasons).
vii Environmental liability actions
On the other hand, owing to the creation and publication of the Federal Environmental Liability Law in June 2013, both private and public parties were granted the right to enforce environmental liability actions against parties causing environmental damage so that the latter can be repaired or compensated, and the responsible party judged for causing it.
Both actions (collective and environmental liability actions) empower NGOs to enforce them on behalf of either the affected communities or on behalf of the individuals belonging to an affected community, that is, on behalf of those whose rights were violated as long as certain conditions are met (i.e., they were legally incorporated one year prior to exercising the action).
The statute of limitation for claiming the reparation or compensation of environmental damages is 12 years counted from the date in which the violations were commited, when the violations' effects are instantaneous; or from the date in which the effects end, if they were deferred over time.
viii Public consultations
This is a preventive incidence method granting NGOs and particular parties the right to be involved in the administrative process of approving the development and operation of certain project or activity. Environmental legislation foresees stages when proceedings are opened to the public so that they can submit their opinion on the matter (i.e., environmental impact assessments or social impact assessments), especially when concerning indigenous peoples in respect of the ILO 169 Convention on Indigenous and Tribal Peoples and the right to a free, previous and informed consent (FPIC), which must be conducted in good faith and sufficiently. Projects or activities that must comply in their approval process with public consultation stages face complex difficulties when this stage is not properly followed and attended. On 5 September 2018, the Supreme Court ruled against a mine tailings dam project authorised by SEMARNAT because the proper consultation process was not followed, and an indigenous community adjacent to the area where the project was to be developed filed an amparo action following the violation to their FPIC. Consequently, the project is suspended until the public consultation process is duly followed and attended.
In addition, non-government organisations have always played a strong role in influencing environmental policy and legislation as they collaborate, either formally or informally, with our legislative powers (both federal and local) to prepare and push for initiatives to be approved and enforced. Their influence has arguably increased recently owing to social media platforms.
V REPORTING AND DISCLOSURE
Holders of environmental permits or authorisations are required to file reports before either federal or local environmental authorities on a regular basis with the purpose of proving the fulfilment of the conditions set forth in such permits and authorisations. At the federal level, this report is filed through federal annual operating reports, and at the local level, similar reports have been implemented.
Technical evidence supporting the information included in the report must also be filed before the authority for its review (i.e., wastewater or atmospheric emission tests that are carried out to determine if these emissions are within the maximum permissible levels of pollutants set out in the applicable Mexican Official Standards). When the technical evidence shows that the maximum permissible levels of pollutants have been exceeded, then they can be used by the authorities as a basis to initiate an administrative law procedure against the holder and impose a penalty for the violation.
Pursuant to the regulation ruling the transfer of polluted land, the party who transfers the ownership of a polluted land is required to disclose to the prospective purchaser the information concerning the environmental conditions of the land to be transferred. The statement of the landlord on the environmental conditions of the land must be incorporated in the agreement by means of which the ownership is transferred. Prior to transferring the ownership of polluted land, both parties are compelled to obtain a polluted site transfer authorisation from SEMARNAT.
Likewise, the generator of or person responsible for handling hazardous waste or materials are obliged to notify PROFEPA on the releases, infiltrations, discharges or leaks of any of these materials or waste that occurred by fortuitous events or force majeure, unless the affected surface is under 1 cubic metre. This notice must be given immediately after the event occurred and filed in writing no later than three business days from the day on which the event took place.
Vi ENVIRONMENTAL PROTECTION
The Mexican Environmental Legal Framework comprises a set of both federal and local dispositions ruling the permitting regime. Being that natural resources and environmental protection is the subject of concurrent jurisdiction, as set forth in Article 73 of the Mexican Political Constitution, the federation, states and municipalities are empowered to rule and issue legal dispositions on different topics of said subject. The LGEEPA sets forth the topics and boundaries of the scope of action that the federation, states and municipalities have. In addition, all of the regulations regarding environmental protection, regarding the hydrocarbons sector, have been covered exclusively by ASEA; therefore, specific permits for the development of activities in such sector must be handled and obtained from ASEA.
In this regard, the main topics for which specific permits are required are the following:
- environmental impact;
- environmental risk;
- air emissions;
- hazardous waste;
- special handling and solid waste;
- water; and
- wastewater discharge.
i Integrated permitting regime
There is an integrated permitting regime at the federal level for sources under federal jurisdiction that covers air emissions, national water consumption and wastewater discharge into bodies of water under federal jurisdiction, as well as generation of hazardous waste. This integrated permitting regime is covered by the sole environmental licence, which is granted by SEMARNAT on a permanent basis unless there is a modification to increase production, extend the facilities or change the corporate name.
Nonetheless, the activities executed by sources under federal jurisdiction must present activity reports on an annual basis. These reports are known as annual operating reports (COAs).
ii Separate permitting regime
If an activity does not cover all of the above-mentioned topics, separate permits must be obtained to comply with the legislation:
- an environmental impact and risk authorisation;
- an accident prevention plan approval (for high-risk activities as set forth in the first and second lists of high-risk activities);
- registration as a hazardous waste generator;
- a hazardous waste-handling plan;
- a concession title to extract national waters; and
- a federal permit to discharge wastewater.
In addition, and as previously mentioned, states and municipalities have their own permitting regimes covering the subjects under their jurisdiction (i.e., local environmental impact and risk, special handling and solid waste, wastewater discharge into municipal drainage systems), except for those regarding environmental protection in the hydrocarbons sector, which is now being administered exclusively by the federal authorities (ASEA). Some states and municipalities do have integrated permitting regimes (i.e., Mexico City through the local sole environmental licence or the state of Mexico in several municipalities through the municipal environmental licence) while others grant separate permits for each subject.
iii Air quality
The Mexican environmental legal framework protects air quality from both fixed and mobile air emission sources. As set forth in Sections II and VI, both the federation and the states have power to regulate on the matter. The federation regulates the following activities and industrial sectors: hydrocarbons, chemical, painting and ink, metal, automotive, cellulous and paper, asbestos, glass, electric energy generation and hazardous waste treatment.
States are empowered to rule on fixed sources that are not part of the aforementioned sectors under federal jurisdiction as well as mobile sources located within their territories.
Fixed sources are compelled to secure the permits as follows.
Federal fixed sources must secure the federal sole environmental licence, which, as identified above (see Section VI), is granted by SEMARNAT on a permanent basis unless there is a modification to increase in production, facilities' extension or change in corporate name and is actually a comprehensive permit covering, in addition to air emissions control, topics such as environmental impact and risk, hazardous waste generation and national water extraction.
In addition, activities executed by sources under federal jurisdiction must present COAs annually.
Local fixed sources must secure local environmental licences that are commonly under a separate permitting regime and must be renewed on an annual basis. Since each state is autonomous, laws, permits and authorisations may vary from state to state.
At a local level, activity reports must also be submitted on an annual basis before the environmental agencies of the corresponding states.
Notwithstanding the foregoing, all fixed sources must comply with certain obligations, such as monitoring its air emissions and carrying out periodic analysis to confirm compliance with Mexican Official Standards that set forth the maximum permissible levels of pollutants that fixed sources are allowed to release.
Finally, and deriving from the United Nations Framework Convention on Climate Change, the Kyoto Protocol, the 2014 COP20 in Lima, Peru, and the 2015 COP 21 in Paris, in November and December 2015, the Mexican legal framework is also regulating said emissions by incorporating a national database of greenhouse gas emission sources, the National Emissions Registry, and by obliging said sources to present an annual report through the COA when generating greenhouse effect gases and compounds in amounts equal to or above 25,000 tons of carbon dioxide.
iv Water quality
In accordance with Article 27 of the Constitution, bodies of water within the Mexican territory are national assets. In this regard, and as set forth in the National Waters Law, the primary regime for water consumption and water pollution, the following activities require authorisation from the National Water Commission:
- national water consumption (superficial and underground water);
- wastewater discharges into bodies of water under federal jurisdiction; and
- occupation of federal property.
To carry out said activities, concession titles must be obtained, which are granted to private entities and individuals interested in carrying out the activities enlisted above for periods commonly going from 10 to 30 years.
On 30 August 2017, SEMARNAT published the guidelines containing the general provisions and requirements to protect and preserve national waters and inherent public property during the exploration and extraction of hydrocarbons in non-conventional oilfields. These guidelines became effective on 31 August 2017. Such guidelines must be met and implemented by any individual or business entity engaged in the exploration and extraction of hydrocarbons in non-conventional oilfields, such as oil and gas in shales, compact rocks, methane hydrate, etc. These guidelines set forth further and additional requirements to those set out in the National Waters Law for granting such concessions and permits for other activities. For instance, individuals and business entities engaged in exploration and extraction of hydrocarbons in non-conventional oilfields must implement measures for environmental protection, including, among others, those that prevent: the infiltration of polluting substances in the underground and the aquifer by installing impermeable layers; and the drilling of wells for the hydrologic exploration and for the integration of local and regional monitoring networks, as well as for the determination of the base line of water, etc., in accordance with best international practices and the guidelines.
Once the holder of a concession title, there are certain obligations to be observed, as detailed.
v National water consumption
Quarterly consumption reports must be prepared and filed before the National Water Commission.
Governmental fees for national water exploitation must be covered on a quarterly basis.
If the concessionaire does not extract the total volume of water granted under concession for a period of two consecutive years, a non-cancellation guarantee fee must be covered and an application for a cancellation interruption certificate must be filed before the National Water Commission to avoid said authority cancelling the unexploited volumes.
The Mexican Congress has been holding regional forums since May 2019 and will continue to hold them during 2020, to discuss the General Law on National Water, a project that is aimed at substituting the National Water Law.
vi Wastewater discharge permit
To be granted a wastewater discharge permit it is necessary to comply with the Mexican Official Standards that set forth the maximum permissible levels of pollutants to be discharged into bodies of water under federal jurisdiction3 or with the specific discharge conditions imposed in the permit. On 5 January 2018, SEMARNAT published a draft for an updated version of the Mexican Official Standard NOM-001-SEMARNAT-1996.4 This new standard foresees new pollutants to be measured (Escherichia coli and faecal Enterococci) stricter maximum permissible levels of pollutants in wastewater being discharged and the proceeding to be followed to obtain the certificate of conformity with the standard. At the time of writing, this standard continues to be in the project stage.
Periodic analysis of the wastewater being discharged must be carried out and the wastewater must be treated prior to the discharge.
Government fees in the event of discharging wastewater with surplus pollutants must be covered and a COA must be filed on an annual basis.
With regard to water supply and sewerage and drainage services, permits and agreements must be obtained or entered into with the local authorities (either state or municipal organisms); however, obligations also arise as follows.
vii Water supply
The terms and conditions of the water supply agreement must be complied with and the government fees for the water supply service covered.
viii Local wastewater discharge permit
The Mexican Official Standards, which set forth the maximum permissible levels of pollutants to be discharged into sewerage and drainage systems,5 or the specific discharge conditions imposed in the permit must be complied with.
Periodic analysis of the wastewater being discharged must be carried out and the wastewater must be treated prior to the discharge.
Government fees in the event of discharging wastewater with surplus pollutants must be covered.
SEMARNAT published in 1990 and 1992, respectively, the First and Second Listings of High-Risk Activities, which set forth those activities that are considered as high-risk activities because of the use of hazardous substances and materials in amounts exceeding the thresholds foreseen in said listings.
Those wishing to engage in high-risk activities must secure various authorisations, approvals and insurances to comply with the applicable legislation and to work in preventing any potential hazard or damage to the environmental or to human health.
Those wishing to carry out high-risk activities must prepare, prior to starting operations, an environmental risk study and an accident prevention plan. Said plan must be submitted for SEMARNAT's review for it to determine if the actions foreseen within are sufficient to attend any accident, incident or contingency that may arise because of the handling of the hazardous substances and materials.
An environmental liability insurance policy must be hired to cover any accident, incident or contingency potentially arising from the daily activities and operations with hazardous substances and materials.
The aforementioned permits are independent from any other permit, licence, authorisation or record that the activity may require in regard to civil protection and safety in the workplace, which are subjects ruled on locally by the civil protection agencies and by the Ministry of Labour.
Finally, activities using hazardous materials and substances in amounts below the thresholds set forth in the First and Second Listings of High-Risk Activities will not be under federal jurisdiction, but nonetheless, they are regulated by state authorities and must secure the corresponding permits and authorisations from the environmental agencies on the jurisdiction where they are located.
x Solid and hazardous waste
Waste generation is ruled, in accordance with the General Law for the Prevention and Comprehensive Management of Waste and its Regulation, by both SEMARNAT and local environmental agencies as follows.
Hazardous waste is a subject under federal jurisdiction and, as such, all generators of hazardous waste must:
- register as hazardous waste generators;
- obtain hazardous waste handling plan approval (if the entity or individual generates 10 or more tons of hazardous waste per year); and
- have an insurance policy (if the entity or individual generates 10 or more tons of hazardous waste per year).
The aforementioned records and approvals may be secured through the sole environmental licence (see Section VI) or individually.
In addition, obligations are triggered to:
- keep a generation logbook;
- hire the services of companies authorised by SEMARNAT to provide the services of recollection, transport and disposal of hazardous waste;
- keep a record of recollection, transport and disposal of hazardous waste provided by the hired providers of services; and
- file the COA on an annual basis (if the entity or individual generates 10 or more tons of hazardous waste per year).
Solid and special handling waste is regulated by local authorities and, therefore, the permitting regime may vary from state to state; however, the most common permits and obligations for solid and special handling waste generators are as follows.
It is necessary to register as a solid and special waste generator and to have a solid and special waste handling plan (when generating 10 or more tons of waste).
Obligations for permit holders are to:
- keep a generation logbook;
- hire the services of companies authorised by local environmental agencies to provide the services of recollection, transport and disposal of waste;
- keep a record of collection, transport and disposal of waste provided by the hired providers of services; and
- file on an annual basis the local annual operating report (if the entity or individual generates 10 or more tons of waste per year).
xii Contaminated land
The subject of contaminated land with hazardous waste or materials is under the jurisdiction of SEMARNAT, the agency responsible for granting the authorisations required to clean up contaminated land, which works jointly with PROFEPA as the agency in charge of enforcing the provisions set forth either in the applicable legal provisions or in the authorisations themselves.
As a general rule, the party causing the pollution of land is responsible for implementing the necessary actions for its remediation; however, the fulfilment of these obligations can also be claimed from the owner or tenant of the polluted land, since they are jointly and severally liable for the fulfilment of this obligation by provision of law. When the pollution is not caused by the owner or tenant, they have grounds to claim from the polluter the reimbursement of the costs and expenses associated with the remediation actions; however, they cannot cast off from any responsibility before the authorities.
The party responsible for carrying out the remediation actions is obliged to file a remediation plan proposal for its review and approval before SEMARNAT. Once the plan is approved, the responsible party is authorised to implement it through a service provider duly approved by SEMARNAT. The execution of the remediation plan is supervised by PROFEPA.
To minimise the risk of acquiring the liability of remediating a polluted land by a third party, it is always advisable to conduct Phase I and II environmental site assessments, the later only if required, as part of the due diligence process for real estate transactions, complemented with strict environmental clauses in the corresponding agreements.
The reparation or compensation of the damage caused to the environment or any of its elements (i.e., atmosphere, water, soil, biodiversity, etc.) can be claimed under the provisions set forth by the Federal Law of Environmental Liability independently of any other liabilities that may arise.
The action ruled by the Federal Law of Environmental Liability can be filed before a judicial court by PROFEPA, the local environmental protection agencies, individuals who live in the community within or adjacent to the area where the damage occurred and Mexican NGOs focused on the protection of the environment, only when representing a member of the affected community.
Because of this action, the person responsible for causing the damage could be sentenced by the court, first and foremost, to repair the damage. Only when the damage cannot be repaired, either totally or partially, must the responsible person compensate it, totally or partially. In addition, when the damage derives from a wrongful wilful conduct, the court can impose fines of up to approximately US$2.4 million.
VII CLIMATE CHANGE
On 10 October 2012, the Climate Change General Law entered into effect, which broadly rules the mitigation and adaptation measures for climate change, creates the National Emission Registry and promotes the transition towards a competitive, sustainable and low-emission economy.
Most of the provisions set forth by the law do not foresee obligations to be observed by private parties but rather goals to be achieved by the governmental agencies.
The only obligation that private parties must comply with is related to providing information to the National Emission Registry (RENE), in which the greenhouse gas emissions produced by certain fixed sources must be recorded when they are equivalent to 25,000 tons of carbon dioxide per year. The list of fixed sources of pollution that falls into the scope of the Climate Change General Law (LGCC) is contemplated by its regulations and they belong to the energy, industrial, transportation, agriculture, waste, trade and services sectors. The greenhouse gas emissions that must be recorded are, among others, carbon dioxide, methane, nitrous oxide, black carbon, fluorinated gases, sulphur hexafluoride, nitrogen trifluoride, halogen ethers, halocarbons, any mix of the before mentioned gases as well as other gases identified by the Intergovernmental Panel on Climate Change. This report must be filed through the federal annual operation report.
Since 2015, all fixed sources generating 25,000 tons or a higher amount of carbon dioxide per year are obliged to submit an emission report through the COA annually; in addition, every three years they are obliged to submit an expert opinion prepared by a verification unit authorised by SEMARNAT, and law enforcement has been incremental. Until now, industries subject to registration needed only to self-determine their greenhouse gases and compounds emissions and report them to the RENE. However, for 2018 and 2019, most establishments subject to reporting will be required, additionally, to have a verification report issued by a verification agency approved by PROFEPA. The LGCC contemplates economic sanctions of up to US$15,402 for all establishments that do not present said report to the RENE, and a fine of up to US$51,340 for the establishments that report wrongful information.
On 13 July 2018, certain reforms and additions to various dispositions of the General Law on Climate Change were published and, on 14 July 2018, entered into force. The objectives of this reform were to:
- establish an emissions commerce system to be implemented progressively and gradually, to promote the reduction of the emissions generated by Mexico with the least possible costs while in a measurable, reportable and verifiable manner;
- carry out the adjustments or modifications to the sceneries, trajectories, actions or goals committed to in the National Strategy on Climate Change;
- set forth the reduction goals assumed as national determined contributions (NDCs) committed by Mexico during the UNFCCC Conference of the Parties on its 21st session. As per the committed NDCs, Mexico shall reduce, for 2030 and in a non-conditional way, its greenhouse gas emissions in a 22 per cent and its black carbon emissions in a 51 per cent with regard to the baseline. This commitment will imply a 40 per cent reduction in the intensity of emissions per GDP unit between 2013 and 2030. The 22 per cent reduction on greenhouse gas emissions translates itself in a reduction, per participating sector, of 18 per cent for transport, 31 per cent for electric generation, 18 per cent for residential and commercial, 14 per cent for petroleum and gas, 5 per cent for industry, 8 per cent for agriculture and farming, and 28 per cent for waste; and
- set the basis for the elaboration of the National Adaption Policy within the frame of the National System for Climate Change and an Early Warning System.
Further, on 6 November 2018, ASEA published in the Federal Official Gazette general administrative dispositions establishing the Guidelines for the Prevention and Comprehensive Management of Methane Emissions in the Hydrocarbon Sector, which entered into force on 7 November 2018. The Guidelines' purpose is to set forth the actions and mechanisms that the parties executing activities of the hydrocarbon sector shall adopt to prevent and control the methane emissions generated in their facilities. The obligations for these parties, among others, are to identify the sources and potential sources of methane emissions within their facilities and prepare a methane diagnosis for report and prepare a Programme for the Prevention and Comprehensive Management of Methane Emissions within the Hydrocarbon Sector.
To comply with the tasks set forth in article 94 of the General Law on Climate Change that entered into force on 14 July 2018, SEMARNAT published on 1 October 2019, the 'Accordance by means of which the Preliminary Basis of the Emission Trading System Test Program are established' (herein after the 'Accordance') in the Federal Official Gazette, which entered into force on the second of the same month and year.
The most relevant aspects of the Accordance are as follows.
A Testing Programme for the SCE is implemented (Testing Programme) same that will run for 36 months, which commenced on 1 January 2019 and will end on 31 December 2022.
The pilot phase of the Testing Programme was launched and will run during the first two years, that is, from 1 January 2020 to 31 December 2021. The transition phase of the Testing Programme to the Operational Phase of the SCE will commence during the third year.
The Testing Programme will have no economic effects, that is, no monetary penalties will be imposed to the participants and the assignment of emission rights will be gratuitous, in proportion to the emissions that the participants have been historically reporting before the RENE. Nevertheless, the Accordance foresees penalties for those participants who do not observe the rules set forth in the Testing Programme.
The entities obliged to participate in the Testing Programme will be:
- facilities conducting activities in the energy and industry sectors, when generating an amount amounting or surpassing 100 thousand tons of direct carbon dioxide in any of the following years: 2016, 2017, 2018 or 2019; and
- facilities that amount or surpass 100 thousand tons of direct carbon dioxide emissions as of 2020, same that will be classified as new participants.
The above-mentioned will be determined on the basis of the annual reports that the participants have submitted before the RENE by means of the COA.
Broadly speaking, the Testing Programme will be conducted as follows:
Before the Testing Programme begins, SEMARNAT will define and publish: the maximum amount of emission rights to be issued for the three compliance periods of said programme; and the emission rights to be assigned gratuitously to the participants in these periods.
The former, on the basis of the criteria set forth in the Accordance itself.
No later than 1 November each calendar year, the participants of the Testing Programme must submit before SEMARNAT a number of emission rights equivalent to the reported and verified emissions of the immediate previous year.
The participants complying with the above-mentioned obligation in a timely manner will be able to use their exceeding emission rights in their accounts to carry out transaction with third parties that need them to comply with their obligations; or comply with their own obligations in subsequent compliance periods, during the SCE Testing Programme.
Participants not complying with this obligation before November 15 of each year will not be allowed to use its emission rights as set forth in the previous paragraph.
An Emission Rights Tracking System (System) has been set up, in which the emission rights of the participants will be managed. Through the System, the assignment and cancelation of emission rights, among other operations, will be conducted; and transactions such as trading, acquisition by means of auctions, etc. will be validated and recorded.
Participants whose carbon dioxide annual emissions surpass the number of emission rights will be allowed to compensate up to 10 per cent of their emission surplus by means of compensation credits assigned to mitigation projects or activities being developed under the terms set by SEMARNAT or in mitigation projects or activities that have received external compensation credits before the implementation of the Testing Programme.
The possibility that SEMARNAT implements emission rights auctions as of the second year of the Testing Programme is also foreseen.
Each year, participants must submit a Report and Positive Verification Ruling of the emissions to be reported and that were generated in the immediate previous year. The emission verification must be conducted each year, between 1 January and 30 June, by a Certification Organism, as per the RENE Regulations.
In addition, participants must present their emission report, as per the dispositions set forth in the RENE Regulations, through the COA.
For purposes of the Testing Programme, participants must record the number of emissions resulting from the verification process mentioned above, no later than 30 September of each year, in the System.
VIII REGULATIONS FOR THE HYDROCARBONS SECTOR
In 2013, there was a major reform in the energy sector. One of the most important contributions in said reform was the creation of a new government entity specifically created to regulate and verify compliance of all environmental and safety matters and regulations within the hydrocarbon sector, the ASEA. Since its creation, ASEA has issued the required regulations and norms to provide the technical elements for the industrial and operative security, as well as the protection of the environment for the development of hydrocarbon activities, to promote, leverage and develop such activities in a sustainable way. The following regulations and norms have been issued by ASEA:
- An executive agreement regarding the content of the regulations, Mexican Official Standards and other dispositions for air emission, discharges, use of natural resources and, in general, all the relevant environmental impacts that may occur as a result of facilities and activities performed in an liquefied petroleum gas service station, to be presented in a preliminary report with regard to the Environmental Impact Evaluation (Service Stations).
- General executive rules that establish guidelines for:
- the development, implementation and authorisation of administration systems of industrial, operative and environmental security and protection, applicable to certain hydrocarbons sector activities;
- the minimum requirements of insurances that the regulated parties require for the development of works and activities of exploration and extraction of hydrocarbons, as well as the treatment and refining of petroleum and natural gas processing;
- the authorisation, approval and evaluation of the performance of third parties regarding industrial and operative security and environmental protection in the hydrocarbons sector;
- informing ASEA about incidents and accidents (first format, event control information, monthly consolidation information, immediate notice, formalisation of the notice);
- the regulated parties that develop investigations on the causes of incidents and accidents that occurred in their facilities;
- industrial and operative security and the environmental protection in the activities of recognition and superficial exploration, exploration and hydrocarbons extraction, same that were last modified on 7 June 2019;
- external audits of the operation and development of administration systems of industrial, operative and environmental security and protection;
- industrial and operative security and environmental protection in the activities of exploration and hydrocarbons extraction in non-conventional deposits in land, land transport by means of pipelines of petroleum, petroleum products and petrochemicals;
- the conformation, implementation and authorisation of administration systems of industrial, operative and environmental security and protection, applicable to the activities of public sale of natural gas, distribution and public sale of LPG and petroleum products;
- the prevention and comprehensive control of methane emissions in the hydrocarbon sector for the latter to achieve the goals and implement the necessary actions to reduce methane emissions; and
- the comprehensive management of special handling waste generated within the hydrocarbon sector, which contemplates the complete chain of management (generation, collection, transport and disposal);
- the elaboration of the emergency response protocols for the activities of the hydrocarbon sector; and
- the design, construction, prestart, operation, maintenance, closing, dismantling and abandonment for the transfer installation and operation associated with the activities of transport or distribution of hydrocarbons or petroleum, or both, by means different from pipelines.
- Mexican Official Standards for:
- NOM-001-ASEA-2018 (criteria to classify special handling waste from the hydrocarbon sector, determine which are subject to a handling plan as well as the elements to prepare and manage said handling plans applicable to both hazardous and special handling waste);
- NOM-EM-001-2015 (construction, maintenance and operation of service stations using diesel and gasoline associated with auto consumption);
- NOM-004-ASEA-2017 (gasoline gas recovery system for the control of emissions of service stations for the public sale of gasoline-test methods for the determination of efficiency, maintenance and operation parameters);
- NOM-005-ASEA-2016 (design, construction, operation and maintenance of the service stations for the storage and sale of diesel and gasoline);
- NOM-EM-005-ASEA-2017 (establishing the criteria to classify the special management waste of the hydrocarbons sector activities, and determines which ones require a handling plan);
- NOM-006-ASEA-2017 (technical specifications and criteria for operative security and environmental protection for the design, construction, prestart, operation, maintenance, closing and dismantling of land facilities for the storage of petroleum products and petroleum, except for LPG);
- NOM-007-ASEA-2016 (natural gas, ethane and mineral carbon associated gas transportation by pipelines);
- NOM-EM-002-ASEA-2016 (establishing the test methods and operation parameters, maintenance and efficiency of gasoline gas recovery in service stations for the public sales of gasoline, for emissions control);
- NOM-EM-003-ASEA-2016 (specifications and technical criteria for industrial and operative security, and environmental protection for the design, construction, prestart, start and maintenance of the land storage facilities of petroleum products, except for LPG);
- NOM-EM-004-ASEA-2017 (specifications and requirements of the service stations for the public sale of LPG by partial fulfilment and portable pressurised containers);
- NOM-003-ASEA-2016 (distribution by pipelines of natural gas and LPG);
- NOM-010-ASEA-2016 (natural compressed gas, minimum requirements for security of the charging terminals and discharge terminals of portable storage modules and supply stations for automobiles);
- NOM-006-ASEA-2016 (on the design, construction, operation and maintenance of service stations for storage and public sale of diesel and gasoline); and
- NOM-009-ASEA-2017 (administration of the integrity of pipelines for the recovery, transport and distribution of hydrocarbons, petroleum products and petrochemicals).
IX OUTLOOK AND CONCLUSIONS
The Mexican environmental legal framework is vast and complex, but it does provide comprehensive legal provisions for each of the most common means of pollution. Indeed, legislation can always be improved and is subject to constant changes and modifications as society demands them.
Perhaps the most important challenge for Mexico and, specifically, for its regulators will be to enforce the legal framework even against the same government that has begun to undergo relevant but controversial infrastructure projects, such as the construction of a new refinery and the construction of Maya train both located in the southeast of the country, as well as the construction of a new international airport.
Further, as per Mexico's commitments through NDCs, and greenhouse gases and compounds emissions, efficiency and effectiveness are even more relevant. The implementation of a mandatory Emission Trading System from 2020 will be an important tool to help Mexico to comply with its international commitments adopted due to the Paris Agreement.
1 Ricardo Eloy Evangelista Garcia is a senior associate and Mariana Arrieta Maza is a junior associate at Basham, Ringe & Correa, SC.
2 New regulation for the General Law for the Sustainable Forestry Development, published 5 June 2018, is still pending and should have been issued no later than 180 business days following the publication of the law in the Federal Official Gazette. The draft version was published by SEMARNAT on 6 March 2019, however, it is still pending to be approved and published in the Federal Official Gazette to take effect.