On April 30, 2014, the Federal Government submitted to the federal Congress a draft of supplemental laws related to the energy reform approved on December 2013, in order to allow the participation of the private sector on energy matters in Mexico.

The most important aspects of the Geothermal Energy Act (the "Act") are described below:

  • The purpose of the Act is to establish a legal framework that regulates the use and exploitation of the geothermal fields for the generation of electric energy or other uses, as well as the participation of the private sector in this type of activities.
  • The administrative permits required for the exploitation of the subsoil thermal energy may be granted to: the Federal Electricity Commission, public-private power associations, Mexican individuals or companies incorporated under the Mexican law.
  • The exploitation of the subsoil thermal energy consists of three stages: inspection, exploration and exploitation.
  • The inspection stage includes activities for identifying whether certain area or land may be a source of geothermal resources. This stage may be carried out after obtaining a registration with the Energy Department that will be in effect for an eight-month period.
  • The exploration stage includes activities to confirm the existence of a geothermal resource and limit the extension of the geothermal area, which may be carried out after obtaining a permit from the Energy Department, which will be in effect for three years and may be extended three more, only once.
  • The exploitation stage includes activities for commercial purposes whereby electric energy may be obtained or other uses can be made through the subsoil heat. Such stage may be carried out after obtaining a concession certificate from the Energy Department, which will be in effect for 30 years and may be extended at the Department's discretion.
  • The Law contemplates that companies participating in the inspection and exploration stages may also participate in obtaining a concession for the exploitation stage in the relevant geothermal area, as an incentive of its investments.

Deadlines

  • The President will have six months following the effective date of the Act to issue its Regulations.
  • The National Water Commission will have 30 business days following the effective date of the Act to send to the Energy Department all the information related to the concessions, registrations, permits or authorizations issued according to Chapter III of the National Waters Law.
  • The Federal Electricity Commission will have a maximum term of 120 business days following the effective date of the Act to request to the Energy Department a list of the geothermal areas in which the Department will be interested in continuing exploration and exploitation works.
  • Those projects that are not directly carried out by the Federal Electricity Commission may be developed either: (1) through public-private partnerships to which the Commission will provide information, expertise, infrastructure or qualified personnel and the private parties will finance the development of such projects, or (2) by tendering an offer so that the private sector will develop them.
  • The Federal Electricity Commission or private parties that, on the effective date of the Act, hold a concession certificates issued by the National Water Commission for the exploration or exploitation of a geothermal resource, will be automatically considered a licensee or concessionaire, as the case may be, and will have to comply with the obligations set forth in the Act and in its Regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.