Monday, August 29, 2016

TransCanada Crosses the Sierra Tarahumara

TransCanda gas pipeline construction project in Sierra Tarahumara near Divisadero and rim of Barrancas del Cobre
/ Photo Tom Barry

TransCanada is blading a 50-ft. swath across the Sierra Tarahumara – one of the most rugged, inaccessible regions of Mexico. The energy transfer and story corporation is clearing a path of natural destruction to lay a 30-inch gas pipeline.

When completed, the pipeline will carry natural gas – a product largely of hydraulic fracturing (fracking) – from U.S. drilling fields. Connecting with the Tarahumara Pipeline that runs from the U.S.-Mexico border to south of Chihuahua City, the new TransCanada pipeline – Encino-Topolobampo Pipeline--will channel U.S. gas surpluses across the Sierra Tarahumara to fuel new electricity -generating plants on the west side of the mountain range.

In Mexico, TransCanada operates with the blessing of the Mexican government. As Mexico has opened up its energy market to foreign investors and foreign energy, TransCanada has jumped in with $5 billion in energy-infrastructure investment. The new gas pipeline across the mountains and canyons of the Sierra Tarahumara in the border state of Chihuahua is one of more than two-dozen gas pipelines or gasoductos that are being constructed across northern and central Mexico.

In the United States, TransCanada became known as a dirty-energy company because of its project to build the Keystone XL Pipeline. The Keystone XL Pipeline would have pumped carbon-heavy crude oil from Canadian oil sands across mid-America to energy refineries on the coast of the Gulf of Mexico.

Under pressure from environmentalists from around the world, the Obama administration denied TransCanada permission for the controversial pipeline project, noting that it wouldn’t serve U.S. national interests and would contribute to global climate change.

In contrast, the Mexican government argues that the TransCanada project in the Sierra Tarahumara and the many other transnational and transregional gasoductos serve the country’s national interests and reduce carbon emissions. Most observers agree with the government’s argument in favor of a massive network of U.S.-sourced gasoductos.  Advocates of transferring U.S. natural gas to Mexico point to the relatively low cost of natural gas imports, the absence of dependable Mexican gas production, and the advantages of converting the country’s generating plants from coal and oil to cleaner natural gas.

Neither in the United States nor in Mexico has there been much public discussion or policy debate about the rapidly changing transborder energy market. Mexico’s new tapping of U.S. gas reserves has precipitated a frenzy of pipeline construction both in the United States and in Mexico. For the most part, the new U.S.-Mexico pipelines cross sparsely inhabited arid regions in the Sonoran and Chihuahuan Deserts. As such the massive construction projects have sparked little public reaction.

- Tom Barry

                               Photo of the Tarahumara Pipeline / FERMACA Pipeline 

Wednesday, February 3, 2016

Electricity Across the Border

(The following is an excerpt from the introduction o forthcoming TransBorder Policy Report.)

The national electricity system in Mexico is undergoing a radical overhaul. Proponents assert that the reform will ensure a more fiscally and environmentally sustainable system.

The market-oriented reform enjoys widespread support because of the embarrassing dysfunction of the government-owned grid. Electricity prices, losses because of faulty infrastructure, losses from theft, and annual budget deficits make Mexico’s electricity system one of the most expensive and least efficient in the developed world.

Political and populist pressures have created a clunky system burdened by exorbitant subsidies. What is more, electricity generation has long been dependent on especially dirty fuels, notably low-quality coal and oil.

The future of electricity generation, transmission, and service is uncertain as the government opens up all facets of the electricity system to private companies, including foreign corporations such as General Electric.

The reform of Mexico’s national electricity system has been the subject of little public attention, political dispute, or congressional debate. Rather than being introduced as a separate bill, the Peña Nieto administration folded the proposed liberalization of the electricity system into the national energy reform bill, which became law in December 2013.

The contentious debate over the highly controversial energy reform focused on Mexico’s oil sector, which since the late 1930s has been managed by the state-owned Petróleos Mexicanos (PEMEX). The nationalization of foreign oil companies by President Cuauhtémoc Cárdenas and the subsequent creation of PEMEX were among the most heralded accomplishments of the post-revolutionary regime controlled by PRI political party.

The PRI controlled Mexico for seven decades, losing the presidency to the National Action Party (PAN) in 2000. In December 2012, the PRI -- with Enrique Peña Nieto as its presidential candidate -- reassumed its position as ruling party after two sexenios (6-year terms) by PAN presidents. Although traditionally opposed to the privatization and free market ideas advocated by the conservative PAN, the PRI since the 1980s has increasingly advocated the liberalization of the Mexican economy through free trade agreements and the transfer of state-owned corporations to private investors.

President Peña Nieto’s proposed liberalization of the national energy system counted on near-total support of the nation’s two largest political parties, namely PRI and PAN. As expected, the reform – which for the first time substantially opened the industry to private (including foreign firms) investment and control – encountered strong opposition from the left parties, principally PRD and the newly constituted MORENA, as well as from the powerful and shamelessly corrupt PEMEX workers’ union STPRM. 

The government of President Enrique Peña Nieto promises that the liberalization of Mexico’s national electricity system will increase efficiency and lower prices. But the sordid history of the liberalization of other previously state-owned sectors –most notoriously banking, mining, communications, and railways in the 1980s and 1990s – justifies some skepticism.