Mexico bets on cross-border a natural gas pipeline, but questions abound in U.S. - Inside Tucson Business: News

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Mexico bets on cross-border a natural gas pipeline, but questions abound in U.S.

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Posted: Friday, July 13, 2012 12:15 am | Updated: 9:18 am, Fri Jul 13, 2012.

A multi-million dollar plan would open northwestern Mexico to widespread use of natural gas, clean up power plants and lower electricity prices, but the plan is partially contingent on the not-so-certain assumption it will connect to a pipeline at the Arizona border.

The plan, announced three months ago, requires extension of a natural gas pipeline to the twin border towns of Sasabe, Arizona and Sonora, about 60 miles southwest of Tucson. From Sasabe, a subsidiary of Mexico’s oil company, Pemex, intends to create a multi-state grid that would clean up power production at several coastal generating plants and offer industrial gas as an option to residents and businesses which, up until now, have known only electricity and propane.

As often happens with cross-border projects, information disseminated in one country is at odds with that of the other country. Moreover, other natural gas projects in northern Mexico have been announced with fanfare, then scrapped. Yet this project may enjoy success precisely because it appears to fuse market forces and environmental stewardship.

The plan is moving briskly in Mexico, if slowly and quietly in Arizona, and jibes with economic and ecological realities in both countries. Bids have already been tendered in Mexico, and Kinder Morgan, which operates 75,000 miles of pipelines and 180 terminals, began in April what is called an “early environmental review.”

Its so-called Sasabe Lateral Project, presented to the U.S. Federal Energy Regulatory Commission (FERC), would parallel Arizona State Route 286 which runs from Three Points west of Tucson, either along an eastern routing through the Buenos Aires National Wildlife Refuge or a western routing along state and private property. The pipeline would initially move 160 million to 210 million cubic-feet per day and would have the ability to expand to 760 million cubic-feet. If approved, it would take nine months to build, create 500 temporary construction jobs and generate $3 million a year in property taxes its first year, the company said.

At the core of the plan is the inexpensive, abundant supply of natural gas in the U.S. selling at prices that are less than half of what they were a year ago and the energy derived from it at current prices equates to oil at $10 a barrel. Natural gas is available only sporadically throughout Mexico.

The project has been presented in Mexico as a fait acompli. From Sasabe, 625 miles of natural gas pipelines will distribute the product to several Sonoran cities and the coastal populations of Puerto Libertad and Guaymas and eastward to Chihuahua state.

The gas will replace fuel oil at generating plants run by the Federal Electricity Commission (Comisión Federal de Electricidad, or CFE). The plant in Puerto Libertad, less than 240 miles south of the Arizona border, generates 632 megawatts and emits a steady plume of black smoke over the Sea of Cortez. A bid was tendered for the 625-mile of pipeline and corollary services at the end of June and if it goes as scheduled, conversions of the CFE plants could begin in 2014.

What is happening on the U.S. side to facilitate the project, however, is not as clear.

Public hearings in June conducted by Kinder Morgan with FERC representatives produced only objections to both proposals. Otherwise, it’s mostly silence.

One organization, Altar Valley Conservation Alliance, a group of ranchers, cattlemen, beekeepers and tourism providers has come out against the pipeline.

Members “feel strongly that a pipeline fundamentally goes against what we we have been working towards in this valley,” said Sarah King, a rancher. Any new pipeline should be located alongside an existing line or on established rights-of-way, even if it means adding distance to the route, she said. Such a right-of-way already exists between Tucson and Nogales and could be taken west to Sásabe, Sonora, from Nogales, King said.

Members who attended both of the Kinder Morgan hearings, one in Arivaca and one west of Tucson, came away believing that “both environmental and safety concerns” put the project at odds with the region’s best interests.

“We are urging people to express their opinions, whatever they are, and we are working on our own position for FERC,” she said. These “pre-filing” steps precede a so-called “scoping meeting,” where impact on community and environment is discussed formally, will probably be held in September, King said.

Bill Dunn, a rancher active in the Southern Arizona Cattlemen’s Protective Association (SACPA) whose membership from Pima, Pinal and Santa Cruz counties is allied with the Altar Valley Conservation Alliance, said ranchers should not be portrayed as anti-development. “We are simply trying to be advocates for the resource that is in our care, as ranchers and as part of the community,” he said.

Officials at the Buenos Aires National Wildlife Refuge have not yet taken a formal position, but manager Sally Gall recently wrote Kinder Morgan saying a pipeline of this nature would clash with the refuge’s mandates.

It is unclear what Kinder Morgan would do if both proposals were denied and what, if any, action Mexico might take to relocate its source for natural gas.

Repeated inquiries to Pemex and Mexico’s Secretary of Energy were not answered this week. Richard Wheatley, who as manager, corporate communications and public affairs, represented Kinder Morgan at the two public hearings to date, said the company had no comment on goings-on with the company’s customers in Mexico.

Still, Arizona is not the only place along the border where natural gas would be available. Natural gas now flows to the border near Yuma and at several places in California. Another pipeline enters Mexico at Naco, Sonora, near Douglas and serves both a copper mine in Cananea and an industrial park in Hermosillo that is home to Ford Motor Co.’s stamping and assembly plant.

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