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UH Law Center helps train foreign students in an effort to bridge the 'energy gap'

UH Law Center helps train foreign students in an effort to bridge the 'energy gap.'

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If they held a legislative Olympics, the Mexican Congress would surely win the gold medal. In recent years, the Mexican Congress has passed more major law reforms and more constitutional amendments than most countries will see in a generation. Legal reform has become so habitual that the Mexican government has a website and Twitter account devoted to the topic. Only one major sector of the Mexican economy remained stubbornly immune from legal reform and from the competition and foreign investment that Mexico needs to ensure healthy economic growth - the energy sector.

This changed in December, when the Mexican Congress amended the Constitution to eliminate the government's monopoly over the production and sale of petroleum and electricity. Pemex and CFE, the government-owned oil and electricity companies, had been managed as political organs, rather than competitive businesses; hamstrung, they have been unable to meet the energy needs of a modern economy.

President Enrique Peña Nieto's solution was to abandon a hallowed political axiom: that Mexico's oil wealth belonged to the Mexican people and foreigners should keep their hands off. A new era of Mexican energy development is thus set to begin.

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Or is it? Legal reform is often a prerequisite to healthy economic change, but adopting new laws will not ensure productive change unless the Mexican government is prepared to provide the resources and policy infrastructure needed to administer the laws efficiently. Energy law in the competitive world that Mexico now enters is arcane and byzantine, both in its handling of property and contractual rights, as well as in governmental regulation.

With a closed energy market, Mexico has not had to develop a highly sophisticated corps of energy professionals in either the public or private sectors to mediate the public interest in energy production and consumption. This needs to change, and some of the solution may lie in Texas universities and law schools.

The biggest obstacle to the transition to a competitive energy market lies outside Pemex, in the challenges faced by Mexico's fledgling energy regulatory agencies. As a state monopoly, Pemex was an unregulated entity until 2008, when Mexico's Congress created a new federal agency, the National Hydrocarbons Commission (CNH, from its Spanish acronym), to regulate upstream oil and gas operations. The commission will play a key role in the energy opening, not only by regulating Pemex, but also by administering the process for receiving bids and approving contracts with foreign and domestic companies.

Unfortunately, CNH's staff is miniscule: with 120 employees, the agency is a mouse trying to regulate a herd of elephants -PEMEX, with more than 150,000 employees, and the scores of private companies that CNH will oversee. The new laws will also create a new environmental agency to ensure environmental protection and worker safety in the expanding energy sector, and two new agencies to oversee the distribution of gas and electricity.

A competitive market in a strategic sector like energy requires efficient regulation, but efficiency has not been a hallmark of Mexican economic regulation. For example, in 1988, Mexico adopted its first comprehensive environmental law, a state-of-the-art piece of legislation. But environmental protection depends on effective enforcement of the law, and the Mexican Congress has never appropriated sufficient funds to achieve that result.

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Fortunately, to develop the new energy sector, Mexico has access to a wealth of expertise that is readily available in Houston. The city's international law firms, energy consulting firms and energy companies are vying to market their expertise in energy contracting and energy regulation to Mexico's public agencies and private firms that will have to navigate the new, competitive environment in Mexico. One might also question whether private, foreign-owned firms will advance the best interests and practices needed to serve Mexican society.

Texas' universities offer valuable alternatives for providing the education Mexican lawyers, engineers and other professionals will need. For three decades, for instance, the University of Houston Law Center has educated lawyers from around the world in energy law and environmental regulation.

We have begun partnering with Mexican universities to provide educational programs that can bridge the "energy gap" between the competitive, open markets of the U.S. and the soon-to-be open markets of Mexico.

As nonprofit academic institutions, our programs are cost-effective, but they still will require funding from Mexican agencies. The Mexican government must appropriate the funds needed to hire and train the new energy regulators. If it does not, Mexican energy reform could turn out to be a costly failure.

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Zamora is the Leonard B. Rosenberg Professor of Law and director of the Center for U.S. and Mexican Law at the University of Houston Law Center.

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