Joint U.S.-Mexico Gulf Oil Drilling Deal Held Up Over Disagreements In Congress

UNDATED: This Kerr-McGee handout photo shows the company's Gunnison spar truss oil facillity in the Gulf of Mexico. Oil prices are nearing $50 a barrel in part because oil facilities in the gulf stopped production due to an unusually active hurricane season. Worlers were evacuated from the platforms for Hurricane Ivan. (Photo by Kerr-McGee/John Manning via Getty Images) (Kerr-McGee)

Along with the budget and immigration, one more thing that the Senate and House can’t mutually agree upon is the proposed joint U.S.-Mexico effort to develop offshore oil and gas fields along the two countries' maritime border in the Gulf of Mexico.

Both the Mexican government and many in Washington want to nail down the agreement soon, but its ratification by the U.S. Congress has been delayed by a dispute between the House and Senate over whether oil and gas producers should be required to publicly disclose their payments to foreign governments.

Mexico almost immediately ratified the treaty but the agreement has stalled on Capitol Hill as the House-passed version exempts oil and gas companies from disclosing their payments.

"It is the hope that, through this Agreement and the proposed energy reforms in Mexico, the energy revolution the U.S. is currently experiencing can extend throughout the Western Hemisphere," Democratic Sen. Ron Wyden of Oregon said in a statement Tuesday during a meeting of the Senate Energy and Natural Resources Committee. "This would make our region more competitive and less reliant on politically tumultuous states for obtaining energy."

The U.S. and Mexico have tried for decades to figure out a plan for divvying up the oil and gas resources in the Gulf, but a 2000 moratorium was placed on drilling in the region to allow time for the development of a joint plan. From that point on the U.S. began expanding its drilling operations closer and closer to the maritime border in the Gulf, as Mexico grew increasingly concerned that the U.S. could be siphoning from deposits located on their side of the border.

The joint agreement is meant to set explicit guidelines for where each country can drill and provide the United States "substantial geopolitical, energy security and environmental benefits, while potentially helping the U.S. oil and gas industry gain access to a huge market that may offer jobs and gains across a long value chain,” the Brookings Institution stated earlier this year.

For Mexico, a ratified agreement would provide Latin America’s second-largest economy with new technology and investment needed to develop hard-to-reach regions along with giving a major boost to President Enrique Peña Nieto’s push for energy reform that includes opening the country’s state-run oil company –Pemex – to foreign investment.

"The motive for the U.S. is 'We’re ready to drill, but we don't want to drill ourselves into a legal nightmare,'" said George Baker, publisher of Mexico Energy Intelligence, an industry newsletter based in Houston, according to the Christian Science Monitor. "For Mexico, it’s 'We want to make certain our oil rights are protected so that if they start drilling on the U.S. side – and discover crossborder oil – we have architecture in place to protect our interests."

Besides the exemptions for oil and gas companies, the specter of the 2010 Deepwater Horizon oil spill looms heavy over drilling in the Gulf. Environmental activists argue that the U.S. and oil companies have not learned their lessons from the BP spill that left 11 people dead and dumped around 4.2 million barrels of oil into the Gulf of Mexico.

"[O]ur continued emphasis on expanding offshore drilling is slowing the necessary investment in clean energy projects that will stimulate the economy without the attendant risks, and help to alleviate the worst impacts of climate change," said Jacqueline Savitz, vice president for U.S. oceans at the conservation organization Oceana during Tuesday's hearing.

If finally approved, the agreement will be the first major test to Peña Nieto’s energy reform plan. The Mexican leader has already taken heat for his proposal to open Pemex up to foreign investment – with opponents claiming the move is tantamount to Mexico losing its sovereignty.

If the agreement is not ratified by Congress by Jan. 17, 2014 then the moratorium in place will expire and it is unlikely that either country will drill in the region.

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