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Overview of key issues and policy recommendations
Energy Development on the U.S.-Mexico Border
June 14, 2002
This issue brief was adapted from the report "Conclusions and Recommendations of Border Institute III," by the Southwest Center for Environmental Research and Policy (SCERP). For more information, read the editor’s note following the article.
The counties and municipalities of the border region currently have a population of 12.5 million, a figure that will nearly double to 24 million by the year 2020. The region is among the fastest growing of North America, as has been the case for the past half-century. This growth is largely concentrated in U.S. and Mexican urban areas located across the international boundary from each other in sister city pairs.
The border region is arid, with fragile ecosystems and limited natural resources, and it is not capable of sustaining the current high rates of population growth and urbanization. The U.S. side of the border is also the poorest area of the United States, even including relatively well off San Diego County, and it continues to fall further behind the national average in per capita income. The Mexican side of the border is prosperous by Mexican national indicators, but the asymmetries with the adjacent areas in the United States are remarkable.
Both sides have lacked local financial resources and federal support to provide comprehensive planning, infrastructure, and public services required by the growing population. The huge increase in bilateral trade stimulated by the North American Free Trade Agreement (NAFTA) brought greater economic expansion to the border region, but not prosperity and development. The region has absorbed a disproportionate share of negative impacts of that trade.
Natural resource constraints, poverty, and rapid growth have combined to produce a range of environmental problems in border communities. A notable lack of infrastructure has resulted in deterioration of surface and underground water quality due to untreated wastewater or renegade sewage flows. Every border community faces an impending crisis in providing water for urban, industrial, and agricultural purposes. Natural resources, endangered species, and important ecosystems are threatened by rapid urbanization and industrialization. Many border communities cannot meet U.S. or Mexican air quality standards, and corresponding human health impacts are on the increase.
At the same time, the border region has also been marginalized by both nations from comprehensive planning, funding, and improvements.
The most recent infrastructure and environmental crisis to impact the border region relates to energy. The crisis is the result of poor long-term planning by power companies; flawed public policy decisions, such as energy deregulation in California; and lack of long-term binational planning mechanisms.
Mexican electricity demand is increasing nationally at 6.6% annually for a population that grew at an annual rate of 1.58% from 1995 to 2000. Much faster population growth in the border region (about 5.1% annually), coupled with an expanding middle class and a strong dependence in the region on energy-intensive maquiladoras translates into an even more rapid increase in electricity demand along the border, probably closer to 15% per year.
The capital requirements to meet Mexico’s medium- and long-term electricity needs are currently estimated at about $49 billion and cannot be met solely with domestic sources of financing. Similarly, the cost of meeting Mexico’s internal demand for natural gas by developing untapped reserves and building pipelines is estimated at $30 to $50 billion over the next 10 years. If Mexico is to export gas, another $50 to $60 billion in infrastructure development will be needed. These are enormous sums, given that Mexico’s annual federal budget is about $150 billion.
This reality translates into the need for major private sector investment. However, the current legal and regulatory framework in Mexico, the historic importance of energy as a domestic political issue, and the exemption of energy under the NAFTA process are all bottlenecks to the flow of private investment toward the Mexican energy sector. Improving the private sector investment environment in energy is a significant challenge for the Mexican administration and Congress.
Problems with current border energy development plans
The response to explosive U.S. energy demands is a rush to the border region in search of new capacity to supply regional or statewide needs. The Mexican border zone is considered desirable for siting new power plants due to adjacent U.S. energy markets, an easier permitting process than in the United States, and lower environmental standards on the Mexican side of the binational air basins. Mexican Energy Secretary Ernesto Martens, speaking at the 10th Annual Conference on Energy in Latin America at the Institute of the Americas, indicated in May 2001 that Mexico would approve any number of Baja California plants to serve consumers in the United States.
Another problem is that the power plant permitting and siting process does not include regional, or binational, planning and coordination. California and Baja California already have presented examples of this inadequate collaboration. Now other U.S. and Mexican border states are apparently beginning to experience problems similar if not worse. In Arizona, where the permitting process is easier and less complicated than in California, a significant number of new generating facilities are in the works, most destined to export power to California.
The California-Baja California Case Study
The current situation in the California-Baja California binational corridor with respect to power plants highlights the issues appearing everywhere along the U.S.-Mexican border.
The California side is currently experiencing a flurry of energy-related projects and plans:
The South Bay Power Plant (706 megawatts) is an older, dual fuel facility that has been operating at full capacity through most of the 1990s. San Diego area authorities had planned to demolish this facility since it is in a sensitive wetland. There is now interest in repowering and upgrading the facility to 1,000 megawatts.
The just approved Otay Mesa Power Plant, is to be located in San Diego, near the international border. With a base load plant of 510 megawatts, it has an application pending to increase capacity to 1,000 megawatts. The plant will use gas turbine combined cycle technology and will be air cooled–not the most efficient and least polluting technology available, especially given that it could use reclaimed water from the South Bay Water Reclamation Plant, which will soon be in plentiful supply.
Ramco has a new peaker power plant in Chula Vista with a capacity of 44 megawatts. An application is pending to add an additional 57.6 megawatts under the emergency permitting process.
Wildflower Energy’s Larkspur Facility, also on Otay Mesa, has been permitted under the California Energy Commission’s emergency process. This will be a 90-megawatt peaker plant.
CalPeak Power’s Lonestar No.4 Power Plant, is a 49.3-megawatt peaker plant to be located one mile from the Larkspur facility. It has received preliminary approval by the Air Pollution Control District.
Thus, within a short time, the southern part of San Diego County could be the location of 1,400 megawatts of existing and new power production, with the possibility of increasing to 2,241 megawatts within a few years.
There are a number of concerns with this situation:
The synergies of locating so many plants in the same area apparently have not been adequately considered.
The peaker plants avoid the stringent emissions and mitigation requirements that base load plants have to meet, and in some cases, are able to burn much dirtier fuels, including diesel, a source of carcinogenic fine particulate matter.
The population surrounding these facilities are heavily Hispanic and in the lowest income brackets of San Diego County, which raises serious concerns about environmental justice.
Although air pollution travels both ways across the international border, the predominant direction of the airflow in most seasons is north to south. Tijuana’s agencies and citizens were not fully involved in discussion and consultation about the significant impacts these plants will have on their air quality.
The Situation in the Imperial Valley and Mexicali Area
In the Imperial Valley-Mexicali segment of the California-Baja California border, poorly coordinated increases in electrical generating capacity also are causing serious concerns. Imperial Valley, with hydropower, natural gas, and geothermal facilities, is well supplied with electrical power. Meanwhile, Mexicali and Baja California, with significant increases in population and industry for the past decades, are facing potential electric power shortages.
Currently, a number of generating projects are planned for Mexicali.
InterGen is constructing a combined cycle, gas fired plant that will provide 750 megawatts when completed in 2003; 250 megawatts of this output are slated for export to Southern California. The InterGen plant is designed to use less than state-of-the-art pollution control technology.
Sempra Energy is moving forward with a 500-megawatt gas burning, combined cycle plant that is scheduled to go on-line in 2005. All of Sempra’s production will be sold to the United States.
American Electric Power has discussed a 269-megawatt plant to be on-line by 2005.
If all of these plants were put in operation, they would add significant amounts of pollutants to the Imperial Valley-Mexicali air shed. Imperial Valley currently is not in compliance with U.S. standards for particulates (PM10) and ozone.
While these new projects will help meet the energy demands in the border and elsewhere, they also pose the risk that the border region will suffer a disproportionate share of environmental damage due to the location of a large number of new facilities without proper evaluation of regional and transborder air quality impacts.
The border faces the threat of becoming a pollution haven for energy production, absorbing significant environmental costs for other regions. These plants will also place a severe strain on natural gas supplies, none of which are indigenous. If natural gas supplies are limited, power plants in Mexico might have to revert to high-sulfur fuel oil to produce energy, exacerbating troubles in already polluted air basins.
While the specific cases discussed here are for the California-Baja California area, similar issues and concerns are present and emerging elsewhere along the U.S.-Mexican border.
1. Increase cooperation and participation at a binational, regional level
The United States should create a Cabinet-level position of border coordinator to facilitate the involvement of all federal agencies in addressing border energy and other issues. This position would be the counterpart to one established by Mexican President Vicente Fox.
Policymakers and other stakeholders should build on existing institutions and arrangements rather than create new administrative mechanisms when developing solutions to coordinate energy and environment in the transborder region. Public participation, involvement of all sectors, and transparency should be central to such efforts.
The binational Border XXI process must be revived, with increased local and state participation. Under previous presidential administrations, United States and Mexico made considerable progress in addressing border environmental problems through the Border XXI program and its predecessor. But the establishment of a follow-up program has been on hold under the administrations of Fox and U.S. President George W. Bush.
A transborder environmental impact assessment process needs to be negotiated to protect border communities. Local and state participation is key in this process. Under previous presidential administrations, some progress has been made, but efforts need to be accelerated.
Binational pilot programs should be initiated to address energy and environmental issues in the border region. These programs should include extensive participation from stakeholders in many sectors, including private industry, NGOs, government agencies, and communities.
2. Strengthen Border Environmental Policies
An energy working group should be added to the working groups set up by Border XXI. Border environmental work groups should be instituted in Mexico’s state-run oil monopoly Petróleos Mexicanos (PEMEX), its Federal Electricity Commission (CFE) and its Energy Secretariat, as well as in the U.S. Federal Energy Regulatory Commission (FERC), and Department of Energy.
When coordinating and planning facilities, needs for water in future energy development should be taken into account. This water-energy connection is increasingly important in the arid border region. A holistic approach will result in more efficient use of water, energy, and other utilities.
Regulations for power plants should be harmonized upward for the border region to decrease air quality impacts and transboundary effects. That way, companies will be less likely to locate there to escape stricter regulations elsewhere.
A binational energy database should be developed for adequate planning and coordination purposes in the region and for both nations. This database will require and facilitate access to comparable crossborder data. Currently, no energy balances (identification and quantification of energy sources and uses) are available for Mexican states.
A process should be established to require that the most advanced and cleanest technology be used for plants located in the binational border region. Mexico should designate its border area a "critical zone" as it has for Mexico City. Accordingly, it should direct PEMEX to reformulate fuels for use in along the border.
3. Build a sustainable economy
More demand side management and energy efficiency measures should be utilized in the border region. A regional, binational approach needs to be developed to prohibit the export of used energy-wasting appliances, such as refrigerators and air conditioners. Additionally, a regional, binational program for retiring and scrapping old electrical appliances is needed. Electricity bills should include tiered rates based on meter readings that show consumers the differentiated costs of electricity usage patterns.
Stakeholders in the border region should capitalize on the renewable energy sources available in order to meet part of the demand for energy. For example, large new housing developments in U.S. and Mexican border communities could easily employ inexpensive and proven technologies for solar water heating.
The private sector must be included as a major part of the solution to the border energy and air pollution problems. Clear and consistent regulations, emissions trading programs, binationally harmonized incentive programs, and market based approaches will facilitate private sector action.
The current energy crisis in the border region should be taken as a signal of the dangers of thinking only with a short-term view, resolving immediate problems at the expense of the health and well being of border communities. Stakeholders in both countries need to accept the challenge of putting content and meaning into the word "sustainable." The futures of the two nations are tied together with multiple laces. Rising to the energy challenge is key in creating a realistic and equitable framework in which the well being of those living on the border is central. Resolving the energy crisis provides an opportunity for stakeholders to engage in long-term binational coordination and planning to create innovative solutions.
It is up to all stakeholders to promote appropriate environmental policies and build a sustainable economy to encourage future well being.
This issue brief was adapted from the report "Conclusions and Recommendations of Border Institute III," by the Southwest Center for Environmental Research and Policy. SCERP is a consortium of five U.S. and five Mexican universities, which serves U.S.-Mexican border residents by applying research information, insights, and innovations to environmental challenges in the region. Through its series of Border Institutes, SCERP brings local, state, national, and international planners and decisionmakers, academics, and other stakeholders together to meet, become informed of issues and options, and discuss best alternatives for the environmental future of the U.S.-Mexican border region. SCERP is online at www.scerp.org .
"Cross-border Energy Connections: Truth and Fiction" | borderlines , vol. 9, no 4, April 2001
"Electricity and the Environment" | North American Commission for Environmental Cooperation
"Powering up the Border: What’s the Rush?" | Americas Program Commentary, September 5, 2001
Report on Sempra Border Energy Development Plans | Greenpeace
Southwest Center for Environmental Research and Policy (SCERP)
Published by the Americas Program at the Interhemispheric Resource Center (IRC). ©2002. All rights reserved.
"Energy Development on the U.S.-Mexico Border," Americas Program Issue Brief (Silver City, NM: Interhemispheric Resource Center, June 14, 2002). Adapted from the report "Conclusions and Recommendations of Border Institute III," by the Southwest Center for Environmental Research and Policy (SCERP).
Web location: http://www.americaspolicy.org/briefs/2002/0206energy.html