Re-Opening Mexico to Fracking Could Lead to More Corporate Lawsuits

Transnational corporations are heavily pressuring Mexico to open up its energy sector as part of the official review this year of the U.S.-Mexico-Canada Agreement. As La Jornada reported, Larry Rubin, head of the American Society of Mexico, recently emphasized the need for the trade pact to advance North American energy integration and establish clear rules for private investment in the energy sector.

At the same time, the Mexican government is moving toward reopening the country to hydraulic fracturing (fracking), claiming that this would help achieve “energy sovereignty” by reducing reliance on natural gas imports from the United States. President Claudia Sheinbaum’s plans to exploit “unconventional” gas reserves marks a significant shift from the previous administration’s critical position on fracking.

Mexican civil society organizations have voiced strong opposition to Sheinbaum’s plan, led by the Mexican Alliance Against Fracking, a coalition of over 40 organizations. Beyond the environmental risks, there is an obvious contradiction between national sovereignty goals and the opening of fracking to public-private projects that use “new technologies” from foreign companies.

The USMCA allows U.S. corporations to sue the government of Mexico over disputes related to the hydrocarbons sector (oil and gas) in international tribunals. If the government strikes fracking-related deals with U.S. firms, it would be vulnerable to even more potential lawsuits, in addition to the more than 20 pending cases worth billions of dollars Mexico already faces.

The fossil fuel industry has filed more of these “investor-state” lawsuits globally than any other sector. So far, oil and gas extraction companies have filed 93 lawsuits against governments in supranational courts, mostly at the World Bank’s International Center for the Settlement of Investment Disputes.

Industry groups claim that their “new technologies” reduce the adverse impacts of fracking. But scientists, health experts, and environmental organizations argue that these innovations are often a form of “greenwashing” that does not address fundamental risks.

“New technology is making fracking more dangerous, more profitable, and more attractive to fossil companies, but no less damaging to the environment and human health,” Greenpeace states.

Experts from the Yale School of Public Health point out that there is a lack of data on the toxicity of 65 percent of the chemicals used in the fracking process, meaning that claims of being “greener” may result from insufficient research.

The Yale experts also warn that fracking has been associated with negative health impacts for local residents, including increased adverse pregnancy outcomes and higher cancer, hospitalization, and asthma rates. They also note that some fracking-related operations have been located near low-income communities, “worsening their cumulative burden of environmental and social injustices.”

As Earthworks and others have concluded, the injection of oil and gas wastewater can also trigger earthquakes. Fracking even causes earthquakes. In Oklahoma, for instance, the number of earthquakes of magnitude greater than 3.0 has increased from an average of fewer than five per year (before fracking) to about 40 per year.

These types of serious problems could lead the Mexican government to eventually take protective actions that could, in turn, provoke expensive investor-state lawsuits. Other governments have already experienced this fate.

The U.S. company Lone Pine Resources sued Canada for $108 million under the North American Free Trade Agreement after the province of Quebec revoked permits for fracking in the St. Lawrence River. In the end, the tribunal ruled in favor of the government, but the case contributed to Canada’s withdrawal from supranational arbitration in the USMCA (see Amicus Curiae submitted by Boston University’s Global Development Policy Center).

The Energy Charter Treaty, which has more than 50 member countries, is also in crisis, as investors have resorted to its dispute settlement mechanisms to challenge fracking regulations. Many European countries have withdrawn or announced their withdrawal from the treaty.

Large corporations engaged in fracking, including SLB (formerly Schlumberger), Baker Hughes, and Halliburton, already maintain operations in Mexico. While Sheinbaum denies that her plan would involve “handing over resources” to these or other transnational companies, inviting them to be part of the business in Mexico raises serious concerns. The pursuit of “energy sovereignty” should not come at the expense of true national sovereignty or the sacrifice of the search for alternative energy sources.

As long as the Mexican government remains part of the investor-state regime, it will be inviting predatory companies to come into the country and threaten the environment and public welfare.