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US-Mexico Transboundary Hydrocarbons Agreement enacted as part of the budget act

23 December 2013

The US-Mexico Transboundary Hydrocarbons Agreement, which establishes a framework for US offshore oil and gas companies and Mexico’s Petroleos Mexicanos (PEMEX) jointly to develop transboundary reservoirs (earlier post), was enacted today as part of the Bipartisan Budget Act (H.J.Res.59) which President Obama signed into law.

The Transboundary Agreement removes uncertainties regarding development of transboundary resources in the resource-rich Gulf of Mexico. As a result of the agreement, nearly 1.5 million acres of the US Outer Continental Shelf will now be made more accessible for exploration and production activities.

The Transboundary Agreement sets clear guidelines for the development of oil and natural gas reservoirs that cross the maritime boundary. Under the Agreement US companies and PEMEX will be able to voluntarily enter into agreements jointly to develop those reservoirs. In the event that consensus cannot be reached, the Transboundary Agreement establishes the process through which US companies and PEMEX can individually develop the resources on each side of the border while protecting each nation’s interests and resources.

The Transboundary Agreement also provides for joint inspection teams from the Bureau of Safety and Environmental Enforcement and the Mexican Government to ensure compliance with applicable laws and regulations. Relevant agencies on both sides of the boundary will review all plans for the development of transboundary reservoirs, and additional requirements may be set before development activities are allowed to begin.

Estimates by the Department of Interior’s Bureau of Ocean Energy Management (BOEM) indicate this area contains as much as 172 million barrels of oil and 304 billion cubic feet of natural gas.

The agreement also opens up resources in the Western Gap that were off limits to both countries under a previous treaty that imposed a moratorium along the boundary.

boundary
The US-Mexico maritime boundary (and Western Gap) in the Gulf of Mexico. Source: Richard McLaughlin. Click to enlarge.

In May 2010, Presidents Obama and Calderon committed to reaching an agreement for the joint development of reservoirs that were determined to be transboundary. Since that time, representatives from the US Department of State, the US Department of the Interior, and Mexico’s Foreign Ministry and Ministry of Energy worked to negotiate an agreement that can be implemented while respecting each nation’s legal framework.

In February, 2012 then-Secretary of the Interior Ken Salazar joined Mexican President Felipe Calderon, Secretary of State Hillary Rodham Clinton, Mexican Minister of Foreign Relations Patricia Espinosa, and Mexican Minister of Energy Jordy Herrera in Los Cabos, Mexico to sign an agreement on the exploration and development of oil and natural gas reservoirs along the United States’ and Mexico’s maritime boundary in the Gulf of Mexico. Mexico’s legislature passed the legislation in April 2012.

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