Energy research by James Coleman and Guillermo García Sánchez

Our Faculty Advisory Board Member James Coleman and our Research Fellow Guillermo García Sánchez recently completed their research about how energy law changes in the U.S. and Mexico present challenges to cross-border energy trade.

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Deep in the Heart of North America: Texas & the Future of North American Energy Trade

by: Guillermo J. Garcia Sanchez & James W. Coleman

Texas, the heart of North American energy markets, has recently emerged from history’s biggest oil boom, and is becoming the crossroads for an increasingly two-way trade in oil and gas. Texas and Mexico, in particular have much to gain from expanded energy trade. Texas has become a global center of natural gas and light crude oil production that can meet growing demand for power for Mexican consumers and fuel for Mexican refineries. And Mexico’s wind power resources in Tamaulipas would be most valuable if that power could be exported to centers of urban and industrial demand in Texas.

Yet there is an increasing danger that this potential will be squandered. Growing movements against eminent domain, infrastructure permits, and energy exports in the United States and moves to re-nationalize the energy sector in Mexico are making energy companies increasingly wary of investing in the future of Texas-Mexico energy trade. Ironically, politicians on both sides of the border accuse each other of being the source of uncertainty for the future of the North American energy industry.

This report shows how energy law changes in the U.S. and Mexico present under-studied dangers to cross-border energy trade and will set an agenda for legal reform to enable mutually beneficial fuel and power trade. This report is the result of a two-year research supported by the Mission Foods Texas-Mexico Center grant. With the help of the grant, we were able to interview policy makers, practitioners, and stakeholders involved in U.S.-Mexico energy relations. The findings of our research and the interviews, set the grounds for the key recommendations proposed in the report. The key final recommendations propose a set of energy principles that could be adopted either by the United States Mexico Canada Agreement USMCA partners or by direct negotiations between Texas and Mexico to secure the benefits of increased energy trade and increase cooperation in energy and climate policy. These principles could be the basis of an international agreement, but could also be adopted through other transnational norm instruments, such as letters of intent or memorandums of understanding among the key stake holders. Regardless of the adopted form, we believe they serve as a guideline to regulate the already integrated energy region and bring transparency, and efficiency to this relationship.