Baja California could be a “window of opportunity” for investing in major energy projects for the cross-border region. But many challenges lie ahead.
That was the consensus at “Energy Opportunities in Baja California,” a forum organized by the Forum Fronterizo Council. The Fronterizo speaking series, underwritten by Sempra Energy, the Public Policy Institute and others, seeks to improve the global competitiveness of the San Diego/Baja California region.
Paul Boeker, president of the Institute of the Americas, said Baja California faces a huge opportunity for economic development , and energy infrastructure will play a part in that development.
The proximity of Baja California to the United States will help attract investment in energy infrastructure due to the “export component,” or the possibility that energy generated in Mexico can be sent to the United States, he said.
Right now, Baja California’s domestic economy needs a tremendous amount of power. Consumption of power is growing 7 percent per year, which means the need will double in 10 years, Boeker said.
That means by the year 2010, the region will need 2,800 megawatts of power capacity just for domestic needs. That would require a $50 billion investment in infrastructure to meet that demand, he said.
However, the promise of an export market will encourage companies to make the investment in plants, as well as the infrastructure needed to bring the gas to those plants. And the rewards would be great, Boeker said.
“There are great direct benefits to Baja California from all of these projects. We’re talking about projects that are over $1 billion in total investment that will bring probably 10,000 jobs in construction alone, and others in operation of these facilities, continuing revenue from taxes and so forth,” he said.
The greatest benefit, however, is that an inexpensive and reliable source of energy would in turn encourage industrial development.
“It’s a new frontier for Baja California, that with that ample availability of gas, will open up a number of industrial opportunities,” he said.
To make that happen, Baja California needs three things. First, the region must build a liquid natural gas import facility, so it doesn’t have to rely solely on U.S. gas. That would ensure that the fuel supply remains reliable and open to competition, Boeker said.
The region also needs permission from the Mexican federal government to export, and must also build the infrastructure to facilitate transportation of gas and electricity across the border, he said.
However, there are a number of challenges. Federico Ruanova-Guinea, attorney at law and coordinator of the Mexican Environmental Practice Group, said permit requirements have the potential to derail some projects.
Mexico’s environmental laws state that power plants and gas distribution facilities require only federal authorization prior to construction and operation. That gives state and municipal authorities little power to mitigate local air quality concerns and other environmental problems, he said.
Municipal authorities, however, do have the power to regulate land use , which empowers them to revoke a land use permit if some environmental requirements are not met, Ruanova-Guinea said.
Also, there are air quality concerns facing the cross-border region. Mexico’s air quality standards are less stringent than those in the United States , leading to concerns about how new power plants serving California would affect area residents, he said.
The Ministry of Environmental and Natural Resources, or SEMARNAT, technically can not coerce companies to comply with stricter regulations than the ones already on the books. However, it can take special actions in the interest of preserving and protecting the environment, Ruanova-Guinea said.
“SEMARNAT may induce companies to comply with voluntary standards that may be more stringent,” he said. “Although companies are not legally to comply above and beyond the law, in the interest of society and becoming good environmental citizens, they may enter into formal agreements whereby they agree to comply.”
These self-regulatory guidelines are also being incorporated into state and municipal environmental laws, Ruanova-Guinea said.
There are other barriers, as well. In Mexico, the government has very limited capacity to claim land under eminent domain. This makes it difficult to run natural gas pipelines across the country , unless the owner of the pipeline negotiates with each property owner, he said.
