Baja Neighbors Balk at Proposed Gas Terminal
Amid questions about the environmental effect of its proposed $350-million liquid natural gas terminal in Baja California, El Paso Corp. went public Monday with new details of the project designed to fill the growing gas needs of California and Mexico.
Mexico and the Western United States are facing natural gas shortages in coming years as they need more fuel to produce electricity. A shortage of gas last winter was the primary factor in California’s energy crisis marked by occasional blackouts and skyrocketing electricity prices.
Big energy companies have eyed Baja California as a site for liquid natural gas terminals because of its proximity to energy-starved California and because of the perception that construction permits are easier to come by there than on the U.S. side of the border.
But there are signs that the Rosarito project, which El Paso would build in partnership with Phillips Petroleum Co., is already attracting environmental concern. The Rosarito municipal government recently denied the Houston-based energy giant a land-use permit for a 100-acre site it has acquired for the mega-plant.
“The plant has a reason to exist. It’s the location that’s the problem. It’s good for [El Paso] but not for the people,” said Rosarito Mayor Silvano Abarca Macklis. The mayor said the refusal is not a final verdict on the project from local government but a signal that the company should do a better job selling to local residents.
Rob Bryngelson, El Paso’s managing director for global liquid natural gas, downplayed the seriousness of the permit denial, saying his company still hopes to receive the necessary federal and local permits enabling it to start construction on the plant late next year. Operation could start as soon as spring 2005.
Bryngelson confirmed such details as El Paso has purchased a site directly east of the existing electric generating station in Rosarito about 20 miles south of the U.S.-Mexico border. The plant would create 2,100 construction jobs, but employ only about 65 workers once up and running.
The LNG plant would receive liquified gas shipped by boat from fields Phillips operates in Australia and elsewhere in the Pacific Rim, then regasify it. More than1 billion cubic feet of gas daily could then be sent via pipeline to customers in Baja and the United States. El Paso declined to discuss a possible pipeline to transport fuel, although one seems imperative.
The project is one of several similar proposals being discussed for Baja. This month, San Diego-based Sempra Energy announced its partnership with CMS Energy Corp. of Dearborn, Mich., to build a liquid natural gas plant farther down the Baja coastline about 60 miles south of the border. Sempra is parent of San Diego Gas & Electric and of Southern California Gas.
Neither El Paso nor Sempra has received a permit from the Mexican federal government because they have not applied. In fact, no application framework exists, because Mexico has never seen an LNG terminal. But the federal Energy Regulatory Commission has completed a draft version of the rules and a final set could be completed by the end of the year.
With other big energy companies, including Chevron Corp., British Petroleum Co. and Royal Dutch/Shell Group of Cos., also said to be interested in building a LNG facility in Baja, the state could be the scene of intense competition among companies to get their projects off the ground first. Although the Mexican government believes Baja could host two such projects, the first would have a big advantage.
In partnership with Shell Oil, El Paso Corp. also has proposed an LNG plant in Altamira on the Gulf of Mexico coast of Mexico’s Tamaulipas state. The facility could accept LNG from the Caribbean, South America and Africa.
El Paso’s shares closed at $50.74, up 78 cents, on the New York Stock Exchange.
