ISSUE BRIEF 10.29.14 Land Ownership and Use Under Mexico’s Energy Reform Tony Payan, Ph.D., Françoise and Edward Djerejian Fellow for Mexico Studies, Rice University’s Baker Institute Guadalupe Correa-Cabrera, Ph.D., Associate Professor and Chair, Government Department, University of Texas at Brownsville

development. Thus, the Mexican Congress INTRODUCTION sought to avoid land-related conflicts by Mexico’s energy sector is now open to including language related to land ownership private and foreign investment in offshore and use in the new energy legislation. The and onshore projects for the first time since legislation, however, may not be able to 1938. The Mexican government expects prevent such conflicts. This issue brief will tens of billions of dollars in investment, explain why. a reversal of oil production declines, a shale gas boom, a steady creation of jobs, and ultimately a substantial increase in Constitutional Underpinnings of Mexico’s GDP growth. The reception of Mexico’s Land Ownership and Use Mexico’s energy sector opening has been Land ownership and use in Mexico is enthusiastic abroad, even as the Mexican framed by Article 27 of the Constitution. public is ambivalent about it. It states that “ownership of the lands Although there are enormous potential and waters within the boundaries of the benefits for Mexico in the future, there national territory is vested originally in the are also important challenges the country Nation, which has had, and has, the right to must overcome to fully realize its energy transmit title thereof to private persons.” potential. One of them has to do with the It also states that “The Nation shall at all land ownership and land use regime in times have the right to impose on private Mexico. As the legislative debate on the new property such limitations as the public Ley de Petróleos and the Ley de la Comisión interest may demand.” The article adds that Federal de Electricidad (Petroleum Act and “In the Nation is vested the direct ownership Federal Electric Utility Act)1 proceeded in of all natural resources of the continental the summer of 2014, the Mexican Congress shelf…all minerals or substances…deposits anticipated potential land-related conflicts of precious stones…solid mineral fuels; associated with exploration and production petroleum and all solid, liquid, and gaseous activities related to hydrocarbons and new hydrocarbons…”2 Essentially, Mexican energy-related infrastructure projects. citizens who are landowners are entitled to These potential conflicts stem from the fact the use of the surface of the land, but not to that all of these projects will necessarily any subsoil natural resources. require the right of way to access and work on the resources in the subsoil of privately owned as well as on so-called “socially owned” lands in regions targeted for energy RICE UNIVERSITY'S BAKER INSTITUTE FOR PUBLIC POLICY // ISSUE BRIEF // 10.29.14

land to most Mexicans and its significance The Social Land Regime in Mexico to the effective operation of the political Article 27 further frames the land tenure system. Indeed, land reform was pivotal in regime by recognizing three types of land settling social conflict in Mexico, but resulted ownership: private, public, and social. in the creation of vast swaths of “social” Private land ownership in Mexico is, as lands. In Mexico, such social lands comprise already stated, limited to the use of the 100.3 million hectares or 51 percent of the 7 surface of the land with no rights over total national territory. Moreover, there are 8 subsoil resources. Mexican law refers 31,514 “social land properties” in Mexico. A to public property as the land or assets total of 5,653,637 individuals live and work whose use is in the hands of governmental on these properties. agencies. Social land ownership, however, In addition to the potential conflicts with 9 is more complicated. It includes communal private property owners, there are 12 states lands, generally associated with indigenous where social land ownership and use in communities, and a uniquely Mexican Mexico could become a cauldron of conflict. form of collective ownership known as the All of these states contain large swaths of ejido. Ejido lands were distributed among social lands and major areas targeted for communities (mostly consisting of peasants) energy development projects because of their after the federal government expropriated rich hydrocarbon deposits. Figure 1 shows Under the new land from private owners as a result of the these 12 states and the areas likely to be developed first for energy production. legislation, energy Mexican Revolution.3 Initially, members of the ejidos, known as ejidatarios, were development projects entitled to use and work these lands to are a matter of public their benefit, but could not sell or use them The 2014 Energy Legislation and and national interest. for collateral. A reform of land tenure rules Land Ownership and Use in February 1992 gave ejidatarios “formal They take priority Under the new legislation, energy title to their land, enabling them to lease or over any other use development projects are a matter of public sell their plots if a majority of members of and national interest. They take priority of the land. their ejido agreed. No further land would be over any other use of the land. In order distributed, and joint ventures with private to enforce this priority, the lawmakers capital were legalized and encouraged.”4 address the issue of land ownership and Thus, in 1993, the Mexican government land use in Chapter IV, Articles 100 to began to “privatize” ejidos by allowing the 117 of the Petroleum Act as it relates to division of land among members and the energy development projects.10 These issuance of titles “to individual land parcels articles establish that all landowners to ejido members, enabling individuals to and users, whether of private or social sell or convey ownership in their parcels.”5 lands, are obligated to sell their property The intention was to initiate a major effort or to negotiate one of several types of to privatize land ownership, but only a small agreements with the energy corporation fraction of all land was actually subdivided that was granted the contract to carry and sold as intended. Most formerly ejido out energy projects on the property. In land remains ejido land. other words, landowners and users are to permanently or temporarily cede their property for energy projects.11 Landowners Land Ownership and Land Use in and users do not have the right of refusal. Mexico Today This combination of development priorities Land and land distribution has been a and the land ownership and land use regime major area of social contention in Mexico’s that developed in 20th century Mexico history.6 The agrarian reform initiated after creates an environment for potential land- the Mexican Revolution and formalized in related conflicts. the 1920s reflects the importance of the

2 Land Ownership and Use Under Mexico’s Energy Reform

Land Ownership and Land Use FIGURE 1 — Major energy development projects and Transfer under the 2014 Energy Mexican states involved Legislation

The enabling energy legislation establishes that: 1. Energy companies must inform landowners of their intentions to use their land and the nature of the project they wish to undertake. 2. The energy company must notify the Secretariat of Energy of its intention to initiate negotiations over a specific property. 3. The landowner can rent, lease, and yield the land’s temporary use, or sell or exchange the land.

4. All payments must reflect the commercial SOURCE Mario Hernández, using the ikiMap platform and imagery from ©OpenStreetMap contributors. market value of the property. 5. All payments to landowners should include the amount negotiated The implementation of energy reform for the sale or use of the land, necessarily means that landowners and plus environmental remediation users will be affected by energy projects compensation and the royalty fees agreed upon by the government and the agreed to by the parties. private and foreign companies bidding for specific investment projects. 6. Energy companies will pay property The legislation does not use the The development of owners royalty fees of between 0.5 word “expropriation,” and the Mexican Mexico’s hydrocarbon and 3.0 percent in the case of gas government has gone out of its way to developments and of 0.5 to 2.0 percent resources will face expunge the word from the law. Energy in the case of other energy projects, after challenges ranging from Secretary Pedro Joaquín Coldwell has the corresponding fees to the Mexican been categorical in saying that outright peaceful local protests Sovereign Oil Fund12 have been paid. expropriation of lands is out of the to potentially violent 7. Energy companies may offer other question, but that all landowners and social unrest associated types of compensation to landowners, users would be encouraged to negotiate with the displacement including resources for community with energy companies.13 However, the development projects and exclusive law itself appears to undermine Coldwell’s of farmers, ranchers, contracts assigned to landowners for assurances. Under the legislation, if and other land users, the purchase of goods and services from landowners and users and energy including indigenous them as compensation. In no case can companies do not achieve a negotiated peoples. energy companies pay landowners in agreement within 180 days, companies have kind, whether with oil or gas. the ability to ask a federal judge to force the 8. In their negotiations, communal cession of land use or to ask the Ministry of landowners can utilize the legal counsel Agriculture to initiate compulsory mediation of the Ministry of Agriculture, Livestock, on how the land will be ceded. In other Rural Development, Fisheries, and words, the law precludes the landowner’s Food. They can also use a third party to ability to say no and halt operations by negotiate, receive, and distribute royalty denying access to the property. payments.

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action until the constitutional nature of the Potential Social Conflicts action is determined by a court of law. There Given the law’s prioritization of land use for will likely be some such challenges to at energy sector activities, the development least a few energy projects. The government, of Mexico’s hydrocarbon resources will anticipating this problem, has made it clear face challenges ranging from peaceful that a) amparos would either not be allowed local protests to potentially violent social or b) their resolution would be expedited unrest associated with the displacement in the interest of energy development. of farmers, ranchers, and other land users, However, these amparo resolutions are not including indigenous peoples. At present, a up to the executive branch. Instead, they variety of civil society groups have already must be decided by the judiciary, a separate pointed out their concerns with energy and branch of government—even if the lines are land reform, especially its impact on both sometimes blurred in Mexico. small landowners and “social” owners, which include ejidatarios and indigenous Without such equity communities. Associations of landowners, Energy Reform’s Payment for and respect for environmental groups, human rights activists, Land Structure union members, and left-wing movements— current landholders, The Mexican government has made it clear including some members of political parties, the energy reform that landowners and energy companies such as the National Regeneration Movement can arrive at any of a broad number of faces considerable (MORENA) and the Party of the Democratic agreements that surrender their lands for hindrances despite Revolution (PRD)—have already begun to energy projects. The legislation is relatively protest the new energy legislation. They are the government’s fair in that regard, even if refusal is not an speaking out against the effects of the energy efforts to foster a more option. The question, however, is whether reform on land ownership and use. Recent this will be enough to stave off potential vibrant energy sector. protests and mobilizations, albeit still isolated, resistance from landowners. In other words, have already taken place in Ciudad Juárez even generous compensation may not and Puebla. Some of the most radical groups solve all potential problems, given the large have even been open about their intention symbolic nature of land tenure in Mexico’s to reverse the recently passed energy reform convoluted history. Some communities, and are calling for a nonbinding initiative particularly indigenous ones, may not at the ballot box to begin with. Resistance appreciate the concept of land cession movements, protests, social unrest, and even at market value, as they bestow a much individual and communal standoffs against deeper, nonmonetary value to the land.14 energy projects could arise in the near future. Potential social instability might undermine the expeditious implementation of the reform, delay construction of much-needed energy Conclusion sector infrastructure, and deter foreign Mexico is positioning itself to reverse its investment. decline in energy production. However, important challenges, including potential land conflicts, still confront the successful Land Reform and Judicial implementation of the country’s recent Remedies against Energy energy reforms. The government must Projects move to anticipate these disputes and resolve them in advance by establishing a Moreover, some of the cases related to land whole new regime on land ownership and disputes could end up in court, where the use that deepens property rights and puts powerful amparo, a unique judicial remedy, landowners and users on an equal footing may pose a threat to energy reform. In an with companies developing energy projects. amparo, an affected party can request an Legislating that energy projects have injunction on the implementation of a law, priority and that there is no right of refusal project, or governmental administrative 4 is a sure way to invite social conflict rather Land Ownership and Use Under Mexico’s Energy Reform

than resolve it, particularly when it comes 11. Presidency of Mexico, “Uso de Tierras to social lands. Without such equity and e Impacto Social.” See http://presidencia.gob. respect for current landholders, the energy mx/reformaenergetica/ - !leyes-secundarias. reform faces considerable hindrances 12. The Mexican National Sovereign Oil despite the government’s efforts to foster a Fund is a new institution created by the more vibrant energy sector. 2014 legislation. This fund, designed after a similar fund in Norway, will bankroll future development projects. ENDNOTES 13. Ministry of Energy, “La Reforma Energética Establece Condiciones de Equidad 1. For the full text of the new Petroleum para el Uso y Ocupación de la Tierra: Pedro Act and the new Federal Electric Utility Act Joaquín Coldwell” (press release, August see http://www.dof.gob.mx/nota_detalle. 27, 2014). See http://www.sener.gob.mx/ php?codigo=5355990&fecha=11/08/2014. portal/Default_blt.aspx?id=2948. 2. See http://www.oas.org/juridico/ 14. See Ethelia Ruiz Medrano, Mexico’s mla/en/mex/en_mex-int-text-const.pdf, Indigenous Communities: Their Lands and particularly pages 8-14. Their Histories, 1500-2010 (Boulder, CO: 3. Gabriela Sánchez Luna, “Algunas University Press of Colorado, 2011). notas en relación con la tenencia de la tierra en México,” Boletín Mexicano de Derecho Comparado 84 (1995): 1139–54. authors 4. US Library of Congress, “Land Tenure,” in Mexico: A Country Study (Washington, Tony Payan, Ph.D., is the Françoise and DC: GPO for the Library of Congress, Edward Djerejian Fellow for Mexico Studies 1996), accessed October 4, 2014, http:// and director of the Mexico Center at the countrystudies.us/mexico/70.htm. Baker Institute. Payan’s research focuses See more issue briefs at: 5. Social Security Administration (SSA), primarily on border studies, particularly www.bakerinstitute.org/issue-briefs “SI DAL01140.100 Foreign Property — Ejidos the US-Mexico border. His work theorizes in Mexico,” March 1, 2013, http://policy.ssa. on various topics regarding international This publication was written by a gov/poms.nsf/lnx/0501140100DAL. borders, including border governance, researcher (or researchers) who 6. See, for example, Neil Harvey, The immigration, border security, organized participated in a Baker Institute project. Chiapas Rebellion: The Struggle for Land and crime, and the manifestation of US foreign Wherever feasible, this research is reviewed by outside experts before Democracy (Durham, NC: Duke University policy at its borders. He received his it is released. However, the views Press, 1998). doctorate degree in international relations expressed herein are those of the 7. See http://www.sedatu.gob.mx/ from Georgetown University. individual author(s), and do not sraweb/noticias/noticias-2012/abril- necessarily represent the views of 2012/12166/. Guadalupe Correa-Cabrera, Ph.D., is Rice University’s Baker Institute for Public Policy. 8. See http://www3.inegi.org.mx/ an associate professor and chair of the sistemas/tabuladosbasicos/default. government department of the University of © 2014 Rice University’s Baker Institute aspx?c=15687&s=est. Texas at Brownsville. Her areas of expertise for Public Policy 9. Those states are Chihuahua, Coahuila, are US-Mexico border relations, immigration, Nuevo León, Tamaulipas, San Luis Potosí, and organized crime. She is the author This material may be quoted or Veracruz, Hidalgo, Puebla, Oaxaca, Tabasco, of Democracy in "Two Mexicos": Political reproduced without prior permission, provided appropriate credit is given to Chiapas, and Campeche. Institutions in Oaxaca and Nuevo León the author and Rice University’s Baker 10. Government of Mexico, “DECRETO (Palgrave Macmillan, 2013), and her current Institute for Public Policy. por el que se expide la Ley de Hidrocarburos research analyzes the sources of violence y se reforman diversas disposiciones de and organized crime in the Texas-Mexico Cite as: la Ley de Inversión Extranjera; Ley Minera, border region. Payan, Tony and Guadalupe Correa- Cabrera. 2014. Land Ownership and Use y Ley de Asociaciones Público Privadas,” Under Mexico’s Energy Reform. Issue August 11, 2014, http://www.dof.gob.mx/ Brief no. 10.29.14. Rice University’s nota_detalle.php?codigo=5355989&fec Baker Institute for Public Policy, ha=11/08/2014. Houston, Texas.

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