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Wednesday, December 11, 2013

Legislation Proposed to Implement the U.S.- Mexico Transboundary Hydrocarbons Agreement - R43204

Curry L. Hagerty
Specialist in Energy and Natural Resources Policy

James C. Uzel
Geospatial Information Systems Analyst

The offshore areas of the Gulf of Mexico provide a setting for domestic and international energy production, U.S. military training and border operations, trade and commerce, fishing, tourist attractions, and recreation. These governmental, commercial, and cultural activities depend on healthy and productive marine and coastal areas for a range of economic and social benefits. Consequences of hurricanes and oil spills demonstrate that offshore areas in the Gulf of Mexico are governed by a number of interrelated legal regimes, including treaties and international, federal, and state laws.

A key congressional interest has been the federal role in managing energy resources in deepwater areas of the Gulf of Mexico, particularly in waters beyond the U.S. exclusive economic zone (EEZ), more than 200 miles from shore. In 2012, the United States and Mexico signed an agreement known as the U.S.-Mexico Transboundary Hydrocarbons Agreement (the Agreement). This Agreement could mark the start of an energy partnership in an area of international waters that the U.S. Department of the Interior’s (DOI’s) Bureau of Ocean Energy Management (BOEM) estimates to contain as much as 172 million barrels of oil and 304 billion cubic feet of natural gas. The main purposes of the partnership would be to lift a moratorium and to jointly develop reservoirs of oil and natural gas, referred to as “transboundary resources,” that exist in areas straddling the marine border of both countries. The Agreement stems from a series of bilateral treaties originating in the 1970s. Like other diplomatic measures, for the Agreement to take effect, it must be placed before each country’s national lawmakers for review. To date, Mexico has completed review and accepted the Agreement. The Agreement awaits the passage of implementing legislation in the U.S. Congress.

In the United States, implementing legislation involves the two main commitments of the Agreement. First, under the Agreement, the two countries establish a framework for jointly developing 1.5 million acres along a 550-mile border. Diplomats on both sides of the border claim that this framework achieves a mutual goal of greater options for energy production to help gain greater energy independence for both countries. A concurrent commitment is to dismantle a treaty-based moratorium on oil and gas development agreed to in 2000, encompassing 158,584 acres along a 135-mile portion of the border. Current treaty provisions establish that the ban will expire in 2014.

Implementing the Agreement faces hurdles in both countries. In the United States, among other hurdles, is the transitional status of U.S. safety reforms announced after the 2010 Deepwater Horizon spill. These reforms are being phased in and full implementation is not anticipated until later in 2013 and 2014. These regulations are considered by industry and U.S. regulators to be a more robust set of deepwater drilling standards than were in place prior to the Deepwater Horizon spill. Until they take full effect, the treaty-based moratorium is perceived by many as a necessary mechanism to protect against the risk of oil spills. In Mexico, although the Agreement has been accepted, implementation poses various constitutional and regulatory challenges.

U.S. legislation to approve and implement the Agreement includes H.R. 1613 and S. 812. On June 27, 2013, the House passed H.R. 1613 (H.Rept. 113-101). On October 14, 2013, the Senate passed S. 812. Absent a deadline for U.S. approval of the Agreement and consideration of implementing legislation, if any, it is difficult to predict the timing of further legislative action. Many in Congress have expressed the view that the expiration of the moratorium in 2014 will prove a catalyst for legislative attention during the remainder of the 113
th Congress.

Date of Report: November 6, 2013
Number of Pages: 31
Order Number: R43204
Price: $29.95

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