In accordance with the 2013 Energy Reform, regulatory bodies were restructured or given new attributions with the purpose of implementing the Reform within all energy related activities. It also aimed to coordinate those bodies to enable consistency in terms of energy regulation. Such is the case regarding upstream activities, for instance E&P offshore operations that are developed both on shallow or deep waters and onshore ones developed on conventional and unconventional fields. As mentioned before, 2 regulatory bodies that existed before the Reform were significantly modified according to the new legislation, them being the Energy Regulatory Commission ("CRE" for its acronym in Spanish) and the National Hydrocarbons Commission ("CNH" for its acronym in Spanish). Another pre-existing regulator greatly modified by this Reform is the National Agency of Industrial Safety and Protection of the Environment of the Hydrocarbons Sector (ASEA for its acronym in Spanish), for which the Environment Ministry as the ASEA parent entity, has also published accordingly its own new regulation consisting of the ASEA law¹ along with diverse guidelines and Mexican Official Norms.

The ASEA within its jurisdiction has adopted a few core values, contained in the ASEA Law to ensure the physical integrity of the persons in matters of operative and industrial safety as well as the integrity of the facilities and the protection of the environment. The scope of it has covered from the design stages up until the well abandonment and site restoration. It has also focused to ensure that the best available industry practices are being employed.

The ASEA through its new regulation establishes a management system for industrial safety, operational safety and protection of the environment ("SASISOPA" for its acronym in Spanish), which is a risk management, prevention and remediation system. All regulated entities within the sector shall comply with the regulation in order to mitigate potential risks that could be posed on people, facilities and/or the environment. The aforementioned system is regulated through the ASEA, for this purpose the SASISOPA guidelines² were issued, being mandatory for all infrastructure operators within the energy sector.

For the Energy Reform to be successfully implemented, the regulatory bodies need to coordinate between them since some of their attributions are concurrent and its articulate coordination is crucial to be in line with a broader government strategy that aims to coordinate all entities and bodies to simplify and facilitate the permit granting, the development of regulated activities and to allow the adequate supervision of the relevant procedures. An example of the increased effort towards coordination is the "Ventanilla Única" online platform, which concentrates various government procedures into one single system.  This feature avoids double registries and allows the various involved State bodies to share information regarding the permit holders, with the aim to modernize, simplify and allow efficiency in the administrative system. That level of coordination is also sought on regulatory strategies and on the supervision of the permit holders, not just on the permit request process but also i.e. instance regarding industrial safety and environmental protection within the energetic sector. It is noteworthy to mention that although the ASEA is the principal supervisor for its regulation, directives and guidelines, it coordinates mainly with the CRE, the CNH and the water authorities, as well as having a clear line for its Authorized Verifiers to follow or comply with.

The recently published Guidelines by ASEA regarding onshore E&P operations on conventional³ and unconventional⁴ fields are complementary to the SASISOPA and expand the scope of the regulation on this particular subject. It is noteworthy to mention that it includes the option to submit equal or better standards, subject to ASEA's, approval than those already established on the ASEA guidelines or Mexican Official Norms. Regarding this particular point, the CNH and the National Water Commission ("CONAGUA" for its acronym in Spanish) are working coordinately with ASEA regarding application procedures.

It is interesting to highlight some key objectives of the above-referred Guidelines:

• The prevention of water pollution in the surface or groundwater zone from the drilled hydrocarbons or the fracturing liquid. It establishes not only minimum distance from the wells to the water bodies but also address maintenance (preservation) protocols to ensure the proper containment of the hydrocarbons and fracturing liquids.

The Guidelines also set norms and standards to handle chemical additives. An issue worth mentioning is that it is compulsory for the regulated entities to make public the list of additives, including chemical composition and quantities used in the fracturing liquid.

• The prevention of soil contamination by leaks of any kind also has some noticeable obligations, such as the ban to build dams or pits to store returned fluids. Instead, it is required to store the liquids in closed containers to ensure their proper containment. The operator must build physical barriers to contain and prevent possible leaks.
• Another objective is sought to avoid the release of polluting gases into the atmosphere. This is achieved through the implementation of procedures contained within the CNH provisions published on January 7th, 2016, which are aimed to avoid gas leaks, and by installing equipment to detect any gas leaks, in case they occur. It restricts the gas venting and flaring to strictly emergency situations or for system testing; in the latter case venting limits have to comply with the CNH programs. The CNH aims to achieve a measurement of resource conservation, meanwhile the ASEA focus is on pollution and safety matters.
• Another sought objective is to prevent the risk of induced earthquakes by controlling the fluid injection. The regulated shall register the volumes of the fluids being injected and it aims to ensure the integrity of the wells. It establishes a ban against drilling on deep fault sites in order to mitigate the induced earthquake risk.
• These Guidelines seek to achieve that the regulated activities cause the less possible damage to the environment in accordance with the SASISOPA Guidelines, through the implementation of effective risk assessment measures, while preventing deforestation and habitat fragmentation.

This new regulation, comes along with additional requirements and regulatory challenges compared to other oil producing countries. However, in accordance with ASEA´s criteria, it also increases safety and minimizes risks to drilling personnel as well as the population established on surrounding areas of the operation site, the facilities and the environment. As mentioned before the ASEA uses as regulatory base the best international oil industry practices. Particularly focusing on known risks: those with a higher probability of occurrence as well as those that would cause a greater damage to the people, environment and the facilities. Another important approach contained in this guidelines is the certification of certain activities and facilities through the ASEA or through an Authorized Verifier, these Authorized Verifiers will aid the ASEA implementing the supervision and vigilance regarding the compliance of ASEA´s regulation. Although Mexican regulation regarding E&P activities may be perceived as being stricter, in terms of regulatory standards and practices than that of other countries, i.e. the regulation of the EPA⁵ regarding oil and gas extraction, the current Mexican regulation is not so restrictive in terms of additional incurring costs or onerous charges required for its implementation.  The ASEA seeks to ease the implementation of this regulation through the Authorized Verifiers. They will act in accordance with the best of their knowledge and within ASEA guidelines to match or reach the best prevailing practices within the industry. It is expected that this new regulation will foster and enable improvements in the subsector of a modern and responsible Mexican E&P activities, in line with the prevailing international energy environment.

Footnotes

1. The National Agency for Industrial Safety and of Environmental Protection of the Hydrocarbons Sector Law (Ley de la Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos) published on August 11th, 2014 in the Federal Official Gazette of the Federation.

2. The General Administrative Provisions that establish the Guidelines for the establishment, implementation and authorization of the Industrial Safety, Operational Safety and Environmental Protection Systems applicable to the activities of the Hydrocarbons Sector (Disposiciones administrativas de carácter general que establecen los Lineamientos para la conformación, implementación y autorización de los Sistemas de Administración de Seguridad Industrial, Seguridad Operativa y Protección al Medio Ambiente aplicables a las actividades del Sector Hidrocarburos que se indican) published on May 13th, 2016 in the Federal Official Gazette.

3. The General Administrative Provisions that establish the Guidelines regarding Industrial Safety, Operational Safety and Environmental Protection to carry out the activities of Surface Recognition and Exploration, Exploration and Extraction of Hydrocarbons. (Disposiciones administrativas de carácter general que establecen los Lineamientos en materia de Seguridad Industrial, Seguridad Operativa y Protección al Medio Ambiente para realizar las actividades de Reconocimiento y Exploración Superficial, Exploración y Extracción de Hidrocarburos.) published on December 9th, 2016 in the Federal Official Gazette.

4. The General Administrative Provisions that establish the Guidelines regarding industrial safety, operational safety and environmental protection to carry out Hydrocarbon Exploration and Extraction activities in Non-Conventional Onshore Reservoirs. (Disposiciones administrativas de carácter general que establecen los Lineamientos en materia de seguridad industrial, seguridad operativa y protección al medio ambiente para realizar las actividades de Exploración y Extracción de Hidrocarburos en Yacimientos No Convencionales en tierra.) published on March 16th, 2017 in the Federal Official Gazette.

5. United States Environmental Protection Agency ("EPA").