Mexico has tightened the social filter for energy projects, raising the cost of taking them from paper to the ground. Hydrocarbon, electricity, biofuel, or geothermal companies must now not only comply with technical and environmental requirements but also demonstrate that they have managed their potential impacts on the communities where they seek to operate. This involves consultation processes with groups, especially indigenous or Afro-Mexican ones, in addition to building agreements in areas that have sparked conflicts, such as the laying of gas pipelines, hydraulic fracturing extraction, or the installation of wind farms.
In practice, the Social Impact Statement for the Energy Sector (MISSE) can block or make unviable projects that fail to overcome community resistance or that fail to offer credible compensation and mitigation plans. Thus, it goes from being a simple procedure before the Ministry of Energy (SENER) to becoming a social license to operate, while shifting the decision-making axis: economic viability is no longer enough, the real breaking point is popular acceptance.
The measure comes at a time when President Claudia Sheinbaum’s Government is trying to incentivize private investment in crude oil, gas, and electricity projects, such as unconventional exploration of shale gas deposits or increased crude oil pumping in non-shallow fields. In this sense, MISSE seeks to prevent protests, blockades, and delays, as a reminder that, from civil society sectors, communities, and academia, there has been opposition to strategic megaprojects such as the pipeline that seeks to connect the United States with Mexico to export liquefied gas to Asia, the exploration of fracking in the north or wind farms, as well as the Maya Train and the Trans-Isthmic Corridor in the Isthmus of Tehuantepec, between Oaxaca and Veracruz, generating intense protests by indigenous peoples who denounce the non-compliance with prior, free, and informed consultations.
However, complying with the new provision will generate additional costs. The measure affects private companies, but also state-owned companies such as the Federal Electricity Commission (CFE) and the indebted Pemex. It includes the need for a detailed Social Management Plan, with investments that cover the entire useful life of the plan and weigh the culture of the communities and their real needs; not only those affected in the core area, where a project is promoted, but also in the areas of influence, which can cover a radius of up to 15 kilometers. In this way, the authority also seeks to avoid proposals whitewashed by social marketing, such as tree planting days in areas of water stress or the installation of computers in villages without electricity. It implies that, the larger the operation, investors will have greater obligations, raising the caliber of assignments to highways, irrigation systems, or security booths.
“This changes the strategy a lot. We are talking about everything from small projects, like a gas station, to much more complex things like a fracking megaproject. It will be quite interesting to see how the social impact is managed – and let’s leave aside for now the environmental part, which is still controversial – in the sense that projects must be very clear in materializing the conscious use of resources for people,” clarifies Guillermo Gómez, director of the sustainable consultancy G2H. “It is tremendously changing the rules. We have approached the financial areas of companies, some are our clients, and they tell us ‘I don’t understand what the authority, or this instrument, is calling social impact, this investment of accumulated benefits.’ And yes, further development and clarifications are still needed.”
Government Authorization
Without permission for explorations, constructions, or excavations, the project cannot start. The measure, issued in February through a General Administrative Provision (DACG), will be managed through a digital window of the SENER. The manifesto replaces the Social Impact Assessment (EVIS) which, according to the sector, was relatively easy to comply with and was also not binding when issuing operating permits. Nor was it a necessary procedure for investments in biofuels, such as biodiesel or ethanol, or in geothermal energy, which uses heat from the subsoil to convert it into energy.
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“This is a broad and delicate regulatory framework that requires a very deep level of knowledge,” says David Hernández, secretary of the Mexican Association of Service Station Providers (AMPES), the group that provides technology and infrastructure services to gas stations. “It is also creating a very deep level of surveillance by the authorities,” he adds.
Business owners fear that the new obligation will add to their cost structure, at a time when gas station owners are maneuvering with the rising cost of energy due to the war in Iran, wage increases, and compliance with agreements with the federal government to keep fuel prices anchored, amid accelerating inflation. The president has reiterated that she will not allow gas station owners to raise the price of diesel and gasoline, without ruling out sanctions or fines, and arguing that the treasury is subsidizing prices.
“Undoubtedly, regulatory aspects, but also operational, logistical, commercial, and now international aspects end up impacting the price of fuel and the profitability of the gas station owner,” adds Hernández. He recalls that, although the voluntary agreements reached with the Administration stipulate national prices — 24 pesos per liter for Magna gasoline and 28.8 for diesel — not the entire country operates under the same commercial rules: a service station in a rural community, with a smaller market, has to cover the same operational and regulatory costs as one in an urban area with much greater car traffic.
Experts agree that the new obligation responds to a reality and a historical demand dragged on by years of oil exploitation, which left old oilfield areas desolate, with displaced and impoverished populations, but it will also constitute a new barrier to capital, already hesitant given the voracity of organized crime, high political exposure, and doubts about legal certainty.
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