CRE establishes the regularization and continuity procedure in requests for transfer of hydrocarbon permits

Executive Summary:

• The Agreement was published on January 12, 2024 No. A/080/2023 by which the Energy Regulatory Commission establishes the procedure to regularize the unfulfilled obligations of hydrocarbon permit holders and guarantee the continuity of the service for the benefit of the public interest.
• The Agreement focuses on allowing the CRE to continue its regulated activities, regulate the market and protect the interests of end users. 
• The Agreement is applicable to those permit holders who voluntarily wish to regularize non-compliance or offer to transfer their permit.

On January 12, 2024, the Agreement was published in the Official Gazette of the Federation (“DOF”) No. A/080/2023 (the “Agreement”) by which the Energy Regulatory Commission (“CRE”) establishes the procedure to regularize the obligations unfulfilled by the permit holders and guarantee the continuity of the service for the benefit of the public interest, in the attention of requests for transfer of permits for sale to the public, through a service station for the specific purpose of petroleum products, Natural Gas or Liquefied Petroleum Gas, as referred to in Article 53 of the Hydrocarbons Law.

The Agreement aims to establish an efficient regularization mechanism for hydrocarbon sales permit holders. It focuses on allowing the CRE to continue its regulated activities, regulate the market and protect the interests of end users. 

The Agreement is applicable to those permit holders who voluntarily wish to regularize non-compliance or offer to transfer their permit, provided that they comply with the requirements established in the Hydrocarbons Law (“LH”). If this is not the case, it is emphasized that the CRE will retain its supervisory and sanctioning powers, including the revocation or fine of permit holders who act in an irregular manner.

In accordance with the Agreement, it is emphasized that the transfer of permits or regulated activities, as provided for in article 53 of the LH, requires prior authorization from the CRE. To obtain this authorization, it is necessary that the permits are valid, the transferor has complied with all obligations and the transferee meets the requirements to be a permit holder. In addition, transfer requests must be processed through a permit modification request, following the procedure established in article 48 of the LH Regulations (“The Regulations”).

Under the Agreement, it is noted that the LH, the Regulation and the permit title establish the obligations of permit holders in the regulated activities. The analysis of the Hydrocarbons Unit reveals that the majority of permit holders with pending transfer applications have failed to comply with regulatory obligations. Among the most common breaches are:

• Lack of insurance contracting.
• The omission of annual opinions on compliance with Mexican Official Standards.
• Failure to pay the annual supervision fee for the fiscal year corresponding to the date on which the request for modification due to transfer of the Permit is submitted, as well as for other previous fiscal years with debts.
• Making transfers without the corresponding authorization. 

These breaches are considered infractions under the LH, which gives the CRE the power to impose administrative sanctions, such as revocation or fines, in accordance with articles 56 and 86 of the LH.

The regularization procedure includes steps such as notification of the origin of the adhesion, the statement of allegations by the permit holder and the accreditation of compliance with the sanction. An exception is established for regularization, limiting its benefit to a single occasion for each permit. The transfer of permits in cases of succession is also addressed, ensuring the legal designation of executors or heirs to comply with the obligations.

Furthermore, in situations where the transfer of the permit is authorized under this Agreement, a new transfer will only be possible after a period of five years from the notification of the document certifying compliance with the corresponding sanction. This approach aims to ensure the continuity of the regulated activity and prevent speculation and improper practices that could affect users.

Finally, the initiative imposes strict requirements for the transfer of permits, highlighting the need to comply with regulatory obligations. It also underlines the CRE's ability to impose sanctions in the event of non-compliance, promoting responsibility and transparency in the sector. The temporary restriction on new transfers is intended to prevent speculation and improper practices. 

In summary, this Agreement reflects CRE's commitment to effective regulation and the protection of public interests in the hydrocarbon sector.

Link to publication: 

• https://dof.gob.mx/nota_detalle.php?codigo=5714262&fecha=12/01/2024#gsc.tab=0