API seeks US intervention in Mexico discrimination against US fuel companies

Mexico City — The American Petroleum Institute has asked the US government to urge Mexico to uphold its commitments to the United States-Mexico-Canada Agreement and to stop discrimination against US companies in Mexico's fuel market.

In the June 11 letter, API CEO Michael Sommers complained that US companies are facing new regulatory actions which undermine the framework that allows the continued trade flows and capital investments in energy between Mexico, the US and Canada and encourage the US "to use diplomatic channels to engage with the president of Mexico" to solve this issue.

These regulations are either inconstantly applied or are inconsistent with past practice and include difficulties in getting permitting approval for new or rebranded fuel retail stations; arbitrary shutdowns at pumps for minor or non-existent infractions; new storage capacity requirements, and delays or rejections for gasoline and diesel import permits, Sommers said.

Mexico's Energy Regulatory Commission has "opaquely" removed asymmetric regulation applicable to Pemex which allows the state oil and gas firm "to unfairly and opaquely undercut the pricing of foreign competitors, giving the company a significant advantage in downstream pricing," Sommers said.

The government actions likely contravene Mexico's commitments to national treatment investment protection in the investment chapters of both NAFTA and USMCA, Sommers said. They also likely contravene Mexico´s commitment to non-discriminatory treatment in the state-owned enterprises and designated monopolies chapter of USCMA, with regards to state-owned Pemex, he said.

The letter was sent to US Secretary of State Michael Pompeo; Commerce Secretary Wilbur Ross; Energy Secretary Dan Brouillette and US trade Representative Robert Lighthizer,

Neither API nor Pemex responded to requests for comment.

The complaints by API members are in line with those by companies in other segments of the energy sector, like electricity generators and developers of pipeline infrastructure, which have voiced similar complaints regarding permits and regulations.

Mexican President Andres Manuel Lopez Obrador took office in 2018 with a campaign promise to strengthen former monopolies Pemex and CFE, the state utility, and ultimately gain sovereignty and independence in fuel and electricity generation.