Energy & Natural Resources
After several years of exchanging information, providing legal arguments and progressing with the Mexican Ministry of Energy, on March 26th, 2020, the Ministry published the official communication “Criteria to determine the method for the recognition and surface exploration to be subject to land use regulations” (the “Criteria”). Clyde & Co worked on behalf of a client to consult with the government and lay the ground work for this reform.
Prior to this reform being implemented, all seismic companies were required to comply with the procedure for Use and Superficial occupation established under the Law of Hydrocarbons and the corresponding guidelines before being able to start their activities. The procedure provided that all agreements executed with the owners of the land concerning seismic activities were required to be ratified by the Mexican Courts, and that these agreements needed to be delivered to the national Hydrocarbons Commission in order to prove the compliance of the seismic company with the provisions.
As the Mexican countryside is fragmented into small plots of land, it follows that seismic companies were obliged to execute and ratify hundreds if not thousands of contracts. These requirements created unnecessary, time-consuming and costly restrictions for onshore seismic data acquisition, which made it economically impossible to carry out such works. As a result, operations became no longer viable.
The new Criteria offers a solution. The purpose of the Criteria is to determine when the Chapter IV Surface Use and Occupation of the Hydrocarbons Law ("LH" for its acronym in Spanish) applies to certain recognition and surface exploration activities – which method of activity requires the LH to be enforced. Crucially, not all the methods used in the aforementioned activities require the installation of equipment and/or cause permanent damage to the land in which they are performed.
In determining which method must be subject to the provisions of Chapter IV Surface Use and Occupation of the LH, the duration of the activity, the type of technology used for that purpose and, consequently, its impact on land use were all considered.
Subsequently, the Criteria determined that the only method that must be subject to the LH is the method using seismic drilling and seismic repetition over time, because this method involves the installation of equipment and work in permanent facilities in land – that's as long as this method impacts the surface and consequently the use of the land.
Ultimately, this means it will not be necessary for seismic acquisition companies to comply with the provisions of surface use of occupation, unless they use the methods mentioned above, which means that a costly and lengthy permit process has been removed from seismic operations in Mexico.
Should you have any questions or comments, please do not hesitate to contact us.
Prepared by Garza Tello-Clyde & Co
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