| WASHINGTON, April 29
WASHINGTON, April 29 More than a year after the
United States and Mexico signed a much-lauded deal that would
remove obstacles to expanding deepwater drilling for oil in the
Gulf of Mexico, the agreement still has not been finalized by
the United States.
The delay, for which people close to the administration
blame Congress while Republicans in Congress blame the
administration, is certain to be discussed when President Barack
Obama visits Mexican President Enrique Pena Nieto in Mexico City
Mexico immediately ratified the pact in April 2012, but the
United States has so far been unable to pass a simply worded,
one-page law to put the agreement into force.
The deal, formally known as the Transboundary Hydrocarbons
Agreement, provides legal guidelines for deepwater drilling in
the 1.5 million acres (600,000 hectares) of the Gulf that
straddle the U.S.-Mexico boundary.
It is seen as the key to opening a new era of cooperation on
oil production between the two countries. Mexico's state-owned
oil company Pemex needs technology and investment to
boost its stagnant production, and U.S. companies are eager to
"The U.S. has a real opportunity now to put energy back on
the agenda with Mexico in a way that it really hasn't been able
to be on the agenda for the last several years," said Neil
Brown, who worked on the issue during the last Congress as lead
Republican international energy aide in the Senate.
But the final step of implementing the deal has languished.
"I'm not aware of strong opposition to it. I think it's been
a little more inertia," said Jason Bordoff, a top energy
official at the White House until January who now runs Columbia
University's Center on Global Energy Policy.
In the past several weeks, there have been some signs that
the implementing legislation may move forward, but there also
could be new complications related to disclosure requirements.
DEAL COULD OPEN THE DOOR
Oil is critical for the Mexican economy, paying for a third
of the government's budget. But production peaked in 2004 at 3.4
million barrels per day and has slipped below 2.6 million bpd.
PEMEX says it can revive production with deepwater wells in the
Gulf, but needs technical and financial help.
The cross-border agreement would be the first step toward
joint projects for reservoirs that cross the boundary, providing
a way for PEMEX and other oil companies to share production and
creating a framework to solve disputes that could arise.
"Without the agreement, it creates a barrier to investment,"
said Erik Melito, a director at the American Petroleum
Institute, the oil industry's lobby group.
The agreement could help calm Mexico's fears about what is
termed the "popote" or drinking-straw effect - fears that U.S.
oil companies are going to drain reservoirs that extend into
Mexico's side of the border, robbing Mexico of its share, said
David Goldwyn, a former State Department official who helped
"This has been an urban myth in Mexico for decades," said
Goldwyn, now president of Goldwyn Global Strategies, a
Pena Nieto is working toward reforms for PEMEX that would
allow for more production and cooperation in projects generally
- a delicate issue in a country where PEMEX and oil are symbols
of national pride.
"If they can see some success here (with the transboundary
deal), that's going to change the political conversation in
Mexico," Goldwyn said.
Failing to implement the deal, though, would be a major
setback for U.S.-Mexico energy relations, former U.S. Senator
Richard Lugar warned in December, in one of his final reports as
the top Republican on the Senate Foreign Relations Committee
before he left Congress.
NEW TWIST IN THE DEAL
To finalize the deal, Congress needs to pass legislation
that gives the Interior Department the authority it needs to
implement the technical aspects of the agreement.
But in the Senate last year, dissension over an unrelated
Law of the Sea treaty and the heated politics of the U.S.
presidential election effectively put the deal on hold.
In the waning days of the last Congress, Democrats in the
Senate thought they had found a vehicle to move the bill, but
they were foiled by procedural objections, said former Senator
Jeff Bingaman, a Democrat who at the time was the chairman of
the Senate Energy Committee.
The administration has sent its proposed text to the
Republican-led House of Representatives, which is in favor of
expanded oil drilling.
Lawmakers from two House committees, natural resources and
foreign affairs, promptly crafted a bill.
"It was the administration that failed until five weeks ago
to give us the guidance that we needed to implement the
language," said Doug Lamborn, a Republican congressman from
Colorado, at a House natural resources hearing with
administration officials last week.
In a new twist, the bill includes a measure that would
exempt U.S. oil companies drilling in the area from certain
disclosure rules that were part of the 2010 Dodd-Frank financial
reform law. Those disclosures are strongly backed by the White
House and Democratic senators.
Aimed at curbing corruption, the rules require oil and
mining companies to report payments to any foreign government to
the Securities and Exchange Commission. Oil and business lobby
groups are fighting the rules in court.
Interior and State Department officials did not directly
comment on the provision at a hearing last week, saying only
that the administration wants to work with the House on details
of the bill so that the deal can be in place in time for the
next sale of drilling leases for the Gulf, expected to be held
Bingaman said the exemption "complicates things
significantly" for quick passage of the bill. "They've added in
some things that are going to make it difficult to pass in that
form," he said, referring to the exemption.
Last week, the Senate energy committee quietly filed a
one-page bill reflecting the administration's suggested
language, word for word, with no mention of the disclosure
The timing of next steps is unclear.
"It would really be unfortunate if that process proved to be
a protracted one," said Michael Bromwich, Obama's former U.S.
offshore drilling regulator, who helped negotiate the deal.
"There's no purpose that's served by further delaying."