Mexico City, January 9 2025.
1. Initiative. On November 12, 2024, the initiative with a Draft Decree was submitted to enact the General Water Law (hereinafter, “Initiative” and/or “LGA” for its acronym in Spanish, indistinctly), which seeks to repeal the National Water Law, establishing new guidelines, challenges and significant changes in the regulatory framework of national waters.
The proposed Initiative will have a profound impact on all industrial sectors that depend on the use of water in their production processes. This includes key industries such as agribusiness, mining, energy, manufacturing, and the trade and services sectors. The need for proper water management is fundamental for economic development and has a strong link to social and environmental sustainability, as required by the new legislation.
2. Central goal of the Initiative. To transform the regulatory framework on water management in Mexico to guarantee equitable and sustainable access to water, establishing an approach based on human rights and complying with the commitments of the United Nations 2030 Agenda.
In this sense, the most significant change is that the new legislation will be regulated by Article 4° of the Mexican Constitution. This implies that, although the resource remains the property of the Nation, its administration will be focused on the collective benefit.
I. Key Changes in Current Legislation and their Implications for the Industry.
1. One of the most relevant aspects of the Initiative is the explicit recognition of human rights in water management; since it means that water users must guarantee that their projects will not infringe on the access to water of the most vulnerable populations, such as indigenous peoples and communities.
2. The most significant changes introduced by the Initiative could affect both the current operations of water users and their future projects.
a) Concessions. The characteristics of the Concession Title changed with the new regulations, the most important of which are as follows:
- Duration. The Initiative reduces the maximum term of Concession Titles from 30 years to 15 years.
- Extension. Concession Titles may only be extended once.
- Annual review. The National Water Commission (hereinafter, “CONAGUA”) will annually review the concessions granted and will have the power to decrease the volumes granted in cases of overexploitation and inequitable access to national waters.
b) Reserves, Expropriation, and Temporary Occupation. The Initiative foresees an expanded power of CONAGUA to reserve, expropriate, or temporarily occupy water resources.
c) Socio-Hydric Impact and Mandatory Ruling. The requirement to submit a Socio-Hydric Impact Assessment will oblige companies to evaluate the impact of their projects on communities, ecosystems, and water availability. This will include prior consultations with affected communities, which could delay project approval.
d) Specialized Regional Water Chamber. The creation of a new Specialized Chamber in the Federal Court of Administrative Justice, which will exclusively handle water-related trials.
e) Water Rights Transmission Center. The concessionaire companies must return treated wastewater to a Water Rights Transmission Center that will be created for its transfer to others that do not require first quality water.
f) Desalination. The construction and operation of desalination plants will oversee the public administration and will be operated to provide an exceptional source of water supply for personal and domestic use.
g) Elimination of partial transmission and supply practices. The Initiative only regulates the total transfer of the volumes of water granted in concession, which may be done on a definitive or temporary basis in favor of CONAGUA.
Thus, the LGA eliminates the figure of partial transfer, as well as the provisional supply of concessioned water to third parties contemplated in Article 23 Bis of the National Water Law, which means that the only way to access national waters will be through the concession granted by CONAGUA.
3. Transitional Provisions. The Initiative intends to enter into force the day after its publication, while maintaining the conditions of the permits and concessions issued before entering into force, if they do not oppose the provisions of the Initiative, for which it is important to consider the following deadlines, among others:
- 3 years, for the concessionaires to regularize and comply with the new obligations and conditions outlined in the Initiative.
- 1 year, to review and, if applicable, revoke Concessions issued in (i) Protected Natural Areas, (ii) overexploited aquifers, and/or (iii) contaminated waters.
- 18 months, to review and, if applicable, revoke Concessions issued in prohibited and reserve zones that do not allow the safeguarding of the water security of the corresponding basin; and,
- 5 years, for concessionaires or permit holders to implement water reuse and saving strategies.
II. Conclusion: Preparing for Regulatory Changes.
1. The Initiative represents a momentous shift in the way Mexico will manage water resources in the future, which will directly affect industries. The key for companies will be to anticipate regulatory changes and adapt their processes and technologies to comply with the new obligations in terms of water management and environmental sustainability.
Companies that align themselves with the principles of responsible water management will not only be able to comply with the new regulations but also position themselves as leaders in environmental, social, and governance (ESG) practices.
It is essential that industries begin to reevaluate their short-, medium- and long-term investment plans and projects, integrating the new legal requirements into their financial and operational projections.
2. The legislative process of the Initiative is still ongoing, so the content of the Initiative could be modified, however, this brief provides a foundation for industries to begin planning the transition, in a gradual manner.
At Basham, Ringe y Correa, S.C., we are ready to advise you on any issue related to regulatory, environmental, and national water matters.
Sincerely,
Juan Carlos Serra Campillo
Jesús Manuel Colunga Victoria
César Augusto Reyes López
Marina Fernández Lozano
mfernandez@basham.com.mx
