On 28 August 2026, Mexico’s Supreme Court issued several binding precedents defining the boundary between municipal powers over urban development and federal authority over hydrocarbons and the electricity sector.
The key takeaway is not that energy projects are exempt from municipal permits. The distinction is narrower: municipalities retain authority over land use, urban development, and construction permits. They may not, however, use operating licences, environmental registrations, risk assessments, or renewals to technically supervise, authorise, or charge fees for activities regulated at the federal level.
These precedents are relevant to projects and investments in the power and hydrocarbon sectors, as well as real estate transactions involving assets that have their own energy infrastructure or are connected to federally regulated facilities.
What the Court Held?
In constitutional controversies 42/2025, 52/2025, and 59/2025, the Court struck down municipal charges for environmental-control registrations, environmental licences, and operating licences applicable to LPG sales and distribution facilities. The Court held that these measures went beyond local administrative control and entered the field of technical and environmental regulation of hydrocarbon activities, which is reserved to the federal government.
In constitutional controversy 68/2025, the Court struck down charges for operating licences and renewals applicable to plants, substations, transformers, towers, and masts associated with electricity infrastructure. The Court found that these requirements regulated the operation of electricity-sector facilities rather than construction or land-use matters.
The relevant holdings became binding on 31 August 2026.
Implications for Energy Projects
For owners, developers, acquirers and financiers of assets in the hydrocarbons or power sectors, these precedents require careful review of any municipal charges, requirements or restrictions that may condition or otherwise affect the operation of the relevant infrastructure.
There is a material risk where a municipal permit, registration, or fee:
- is required to operate, maintain, distribute, store, market, or sell LPG, natural gas, refined products, or other hydrocarbons;
- requires a technical, environmental, or safety assessment that is intrinsic to the regulated energy activity;
- is imposed on the operation of plants, substations, transformers, towers, masts, pipelines, or other electricity-sector infrastructure; or
- duplicates, replaces, or conditions permits or supervision that fall within federal authority.
The label given to the measure is not determinative. A charge described as an operating licence, renewal, registry entry, environmental registration, or assessment may be invalid if, by its purpose and effects, it regulates a federally regulated activity.
This does not mean that every municipal requirement associated with projects in these sectors is necessarily improper or unenforceable. In particular, building permits, land use approvals, urban development requirements, public works permits, civil protection matters and other authorizations that genuinely fall within municipal jurisdiction must be analyzed separately, provided they do not encroach upon federally regulated technical matters applicable to the relevant sector.
Implications for Real Estate Assets and Projects
For developers, owners, operators, buyers, and lenders of real estate assets, the rule is different. These precedents do not reduce the ordinary obligation to obtain local authorisations applicable to the property or development.
Depending on the applicable legislation and project, municipal and local permits relating to land use, zoning, construction, completion of works, subdivision, condominium regime, signage, urban impact, civil protection, operation of non-reserved businesses, and real estate taxes remain relevant.
The distinction becomes particularly relevant when a property incorporates or hosts energy infrastructure subject to federal regulation. For example, a power generation facility, substation, energy storage system, pipeline, LPG facility or private electricity distribution network may require a differentiated analysis: the municipality may retain zoning and urban development authority over the property, but it may not condition the operation of the federally regulated activity or impose charges tied to its federal technical regulation.
In other words, the criterion does not provide a defense against ordinary real estate or land-use permitting requirements. Rather, it serves as a benchmark for identifying municipal requirements that go beyond the real estate sphere and, in substance, amount to regulation of the power or hydrocarbons sectors.
Transactional and Financing Implications
In share deals, asset acquisitions, and real estate portfolio transactions involving energy components, the due diligence process should distinguish between: (i) valid urban-planning, construction, and real estate authorisations; and (ii) municipal permits, registrations, renewals, or charges that may improperly affect a federally regulated activity.
Transaction documents should reflect this distinction. In particular, closing conditions, representations and warranties, permit-related covenants, regulatory-cost allocation, and indemnities should identify the competent authority and avoid automatically treating a municipality-issued authorisation of questionable validity as a closing requirement or seller breach.
The review must be conducted asset by asset and municipality by municipality. The precedents struck down specific provisions of local revenue laws; they do not automatically invalidate previously issued permits, past payments, or every similar municipal provision. They also do not eliminate applicable federal permits or replace the environmental, regulatory, real estate, civil-protection, or rights-of-way analyses required for a particular project.
Recommended Actions
- Review permit matrices and municipal obligations applicable to energy assets and real estate assets with energy infrastructure.
- Determine whether a municipal requirement governs the property and its urban development, or instead regulates the technical operation of a federally regulated activity.
- Assess the validity of payments, renewals, and potential challenges to municipal charges that exceed local authority.
- Revisit regulatory-risk allocation in acquisitions, developments, long-term leases, financings, and operating agreements.
- Preserve as closing conditions those municipal authorisations that genuinely apply to land use, construction, and urban development.
PCG can assist in reviewing regulatory matrices, structuring conditions precedent, and allocating contractual risks in power, hydrocarbons and real estate projects.
If required any further information regarding the content of this Alert, please contact:
Omar Aguilar | Partner: oaguilar@pcga.mx
Cecilia Curiel | Partner: ccuriel@pcga.mx
