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Lawmakers urge Biden to address concerns of US energy companies in Mexico

Highlights

Energy policies limit US companies' access to markets

Issue requires immediate and sustained attention: legislators

Viability of long-term investments in sector seen at risk

Mexico City — Twenty US Congress members have requested that President Joe Biden address the concerns of US energy companies operating in Mexico, which argue that the Andrés Manuel López Obrador administration is unfairly limiting competition in order to strengthen state companies.

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The government of Mexico recently enacted legislation cementing its protectionist energy policies and severely limiting US companies' access to the hydrocarbons and renewable energy markets, undermining the spirit of the US-Mexico-Canada trade agreement, the lawmakers said in a letter sent July 20.

In February, the administration introduced legislation to reform the power industry law, which gives dispatch preferences to CFE and removes competition. Later, Congress modified the hydrocarbons law, giving the government discretionary control over distribution, storage, and import and export of fuels.

The US lawmakers mentioned they had previously sent a first letter to the Trump administration regarding preferential treatment of Mexico's national energy companies Pemex and CFE, and delaying or canceling permits for US energy companies, which continue to be a serious problem.

"We were pleased to see Ambassador Katherine Tai raise this with her counterpart last month and believe this recent escalation requires your immediate and sustained attention and a timely solution," the letter said.

Allowing for competition

Addressing the situation is necessary not only to establish a level playing field for US companies operating in Mexico, but also to allow for competition in the energy market that will protect American jobs, the lawmakers said.

"Great uncertainty for North American companies that have investments in Mexico puts the viability of long-term investments in the sector at risk," they said.

The letter came one day after Mexican tax authorities announced they had suspended 58 companies from importing refined products. The list included the country's largest railroad operator Ferromex; the local unit of US railroad operator Kansas City Southern; World Fuel Services, the largest jet fuel provider in the country; and Repsol from Spain.

Data from the energy secretariat shows that the international companies with active import permits are TotalEnergies, Valero, ExxonMobil, Glencore, BP, Tesoro, Koch, Windstar, Shell and Trafigura.

Imported fuels' role

Mexico has increasingly depended on imported fuels to meet demand, something the Lopez Obrador administration has tried to reduce with the construction of a refinery and the recent acquisition of the 50% it did not already own in a refinery in Deer Park, Texas.

Data from the Energy Secretariat (SENER) shows Pemex, while still dominant, has consistently lost market share in the import business. At the end of June, imports of gasoline were 643,000 b/d, the highest reading since the coronavirus pandemic began, the data shows.

Among the lawmakers who signed the letter are Senator Ted Cruz, Senator John Cornyn, and House members Lizzie Fletcher, Vicente Gonzalez, Randy Weber and Henry Cuellar, all from Texas.

The letter was also sent to Secretary of State Antony Blinken; Secretary of Commerce Gina Raimondo; Secretary of Energy Jennifer Granholm; and Ambassador to Mexico Katherine Tai.