WASHINGTON, D.C. – IER State and Regulatory Affairs Director Dan Simmons testifies today before the House Natural Resources Subcommittee on Energy and Mineral Resources in a hearing titled “U.S.-Mexico Transboundary Hydrocarbon Agreement and Steps Needed for Implementation.” The text of Simmons’ introductory remarks, as prepared for delivery, follows:

Mr. Chairman, Ranking Member Holt, and Members of the Subcommittee,Thank you for the opportunity to talk today about the Transboundary Hydrocarbon Agreement.

First some context:

The United States and Mexico are energy rich countries. Total recoverable oil in North America exceeds 1.7 trillion barrels.  To put that in perspective, at the U.S.’s current rate of use, this is enough oil for 242 years. The total recoverable North American natural gas is approximately 4.2 quadrillion cubic feet—enough for 176 years at the U.S.’s current rate of use. And North America has over 497 billion short tons of recoverable coal—enough coal for nearly 500 years at our current rate of use.

North America is not limited by energy resources, but instead by access to these vast energy resources. Trade between the United States and Mexico only makes our nations stronger and raises our combined economic welfare.
In 2011 Mexico was the second largest source of oil exports to the United States behind Canada and Mexico is the largest recipient of U.S. gasoline exports.

Mexico’s heavy oil production is falling, but hopefully the Transboundary Hydrocarbon Agreement can help turn Mexico’s oil production around.

Transboundary Hydrocarbon Agreement

The Transboundary Agreement could lead to oil and natural gas production on 1.5 million acres in the Gulf of Mexico that was previously off-limits because of border issues. This production alone will not lead to a revolution in hydrocarbon production for the United States and Mexico. But more important than the oil and natural gas resources along the border is the potential for cooperation between the United States and Mexico.

Mexico has long been a leading oil producer, but oil production in Mexico is falling. This is not from a lack of resources. Mexico has an estimated 10.5 billion barrels of proven oil reserves, but that amount could double when unconventional and deepwater resources become proven reserves.

The United States is the leader in accessing unconventional and deepwater resources, as seen by huge new oil discoveries in places like offshore Brazil  that were made using technology developed in the U.S.  Working together, we can increase Mexico’s oil production and reverse their oil production decline. This is especially true if U.S. hydraulic fracturing technologies are used to access Mexico’s shale oil and gas resources. For example, one of America’s most prolific shale fields, the Eagle Ford, extends into Mexico, but all of the activity is on the U.S. side of the border.

The Obama administration finalized negotiations on the Transboundary Hydrocarbon Agreement last year. Hopefully Congress will now act to finalize the agreement.

One important note:

While the Transboundary Hydrocarbon Agreement is a good agreement that will aid both the United States and Mexico, one potential problem is a conflict between Article 20 of the agreement and the Security and Exchange Commission’s Rule 13q-1 regarding disclosure of Resource Extraction Payments.

Possible conflict between Rule 13q-1 and Article 20 of the Transboundary Hydrocarbon Agreement, at very least, create some uncertainty about compliance with both Mexican and American disclosure laws. This uncertainty and potential disclosure conflict would place foreign state-owned oil companies, who are not regulated by the SEC, at a competitive advantage to the companies which operate in the United States are regulated by the SEC.

Also, much of the transboundary area in the Gulf is in deepwater, it would require multi-billion dollar investments to produce the hydrocarbon resources. Any addition uncertainty makes these large investment decisions harder and helps to impede additional exploration and production.

Therefore, the authors of HR 1613 are to be commended for recognizing this uncertainty and taking proper steps to isolate this unique agreement from the uncertainties surrounding Rule 13q-1.


There is much more that could be done to benefit our continent, which happens to sit on the largest sources of hydrocarbons in the world.  Affordable, reliable and secure energy is our common bond, and the U.S and Mexico can all benefit from its development. Positive movement on Transboundary Hydrocarbon Agreement will help other energy projects move forward, to the benefit of all of our people.

Thank you for your time and I will gladly answer any questions.

To read the full testimony, click here.


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