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Baja Officials Raise Concerns About Sempra’s LNG Plant

Audio

Aired 3/4/11

First, Ensenada Mayor Enrique Pelayo attempted to shut down Sempra's liquefied-natural-gas terminal in Baja after alleging that permits for the facility were improper. Now, Mexican federal lawmakers are calling for a review of the LNG plant's permits. We talk about why neighbors are concerned about the facility and why officials on both sides of the border are questioning Sempra's business practices in Baja.

First, Ensenada Mayor Enrique Pelayo attempted to shut down Sempra's liquefied-natural-gas terminal in Baja after alleging that permits for the facility were improper. Now, Mexican federal lawmakers are calling for a review of the LNG plant's permits. We talk about why neighbors are concerned about the facility and why officials on both sides of the border are questioning Sempra's business practices in Baja.

Guests

JW August, managing editor for 10 News

Ricky Young, watchdog editor for the San Diego Union-Tribune

Scott Lewis, chief executive officer of voiceofsandiego.org

Read Transcript

This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

ST. JOHN: It may be a story of political grandstanding and financially questionable practices, insider tips and corporate excesses. Or if may be simple he the story of Sempra's efforts to locate new sources of energy to meet the growing demands for our region. JW, you've been following this story pretty closely down there. And we just recently heard that the Mexican government, which previously supported the energy plant against local attempts to shut it down are now calling for a review of its permits. Can you fill us in on what led up to this frequent?

AUGUST: Well, you're right. You offered to option of it's option A, this thing has more back stories and intrigue going on, it's like -- it's a great movie, all the elements in it. This was kind of a left leaning legislature that once the whole thing investigated because the claims, and have been for some time, that the permits were not correct for the plant.

ST. JOHN: Now, this is a plant, just put us in the picture of the plant, was built down there in Ensenada 4 or 5 years ago.

AUGUST: Beautiful strip of land, right near the water, just maybe a 20-minute drive north of Ensenada, 15-minute DRIVE.

ST. JOHN: And you were down there just recently when this drama erupted, right.

AUGUST: Right. I actually got a tip and went in with the local police when they stormed the gates. And got very, very close to gaining full control of the property.

YOUNG: You did or the police did?

AUGUST: I can't do that. I'm just a neutral observer.

ST. JOHN: So what did you observe? You observe that there's a big difference between the locals and the federal agencies were approaching it at that time.

AUGUST: Right. There was confrontation that a series of gates, arguments about -- you don't have come right there, to be here. And attorneys for Sempra were there, and basically the city officials saying we have every right to be here, you're in violation, and you're on city land. And so they cut the padlocks off with these big bolt cutters, and they kept moving closer and closer to the plant. The plant sits off the main road some distance from the entree, the gates.

ST. JOHN: And just so we know why we should care about this, obviously Sempra is an American company, but do we get any of the energy from this plant?

AUGUST: Right. This LNG plant, this is the only operating LNG plant on the west coast in the United States. And the Russians buy from it, shell oil has a piece of it, it's a pretty big deal.

ST. JOHN: So why do the local politicians want to shut it down, and the federal ones, up until now, wanted to keep it open?

AUGUST: Well, depends on who you talk to. The locals say no permits, that there were some shenanigans going on, we've reported on alleged bribes of officials in order to gain control over certain areas around the plant. And Sempra takes the other position that the people involve order basically out of line, that everything's been on the up and up, and they have been running this place as it should be run, and you're gonna hurt long-term the relationship between United States and Mexico when it comes to investments.

ST. JOHN: So Ricky, your paper, the UT has done a bit of reporting on this -- a lot of reporting on this too. Are the up coming elections, I believe it's next year in Mexico, does that have any connection between the differing approaches to this plant in Mexico?

YOUNG: It's hard to say how much it is -- like a real discussion of energy and the environment and how much of it is politics. You mentioned the recent federal vote, you know, calling for investigations or shut do you happens or what not, which was fairly overwhelming, but the government in Baja where a lot of the votes to support Sempra and the plant and what they're doing there. And then the reason you have the Ensenada mayor taking the actions he took is because he's in line more with the federal, the PRI, as opposed to the PON, which is the governing body in Baja. So there's a lot of politics blowing around. There's also pretty interesting land dispute that kind of started all this with this guy named Sanchez Ritchie, who had like 600 acres that may or may not have been needed for a buffer zone for the plant for Sempra to get their hands on. This is the bribe that JW mentioned, the alleged bribe, that Sempra says was their payment of a government bond to evict him from the land for trespassing. They say they own the land, he thinks he owns the land, and this dispute has given the PRI the juice they need to put on the heat at the moment. Not sure who's gonna win that dispute, but Sempra basically paints Mr. Sanchez Ritchie as squatter on the land who's trying to extort money from hem, and the Ensenada mayor seems to have gotten in on the act, to some extent has said that this land is needed as a buffer, and Sempra now, their position now is that it's not needed as a buffer. This has gone on for years and years but has really just exploded early this year.

ST. JOHN: I know Michael Shames from you can, the utility consumers action network has called this political grandstanding on the part of the mayor, the local Ensenada mayor there. Do you think that's all it is, do you think it will sort of blow over? That it's mainly political grandstanding?

AUGUST: Well, we'll see. But there's also another track. That is that the federal government is investigating some allegations about Sempra's activities down there. That's because of the whistle blower allegations and the fact that the whistle blower was in a position to see the money moving around in Mexico involved with the plant, and he's making a series of allegations. And that's gotten the interests of the FBI, the U.S. attorney, and the securities and exchange mission.

ST. JOHN: Scott?

LEWIS: Well, I think some perspectives on the stakes involved with this would be good too. This is it a major investment for Sempra, Sempra believes that this liquid natural gas, which is natural gas which is chipped in from places like Indonesia, it's natural gas that's cooled to a point where it can become a liquid, and then can be transported and condensed, and it's not extending more energy to bring, in other words, than it is as far as energy to provide the area. And so the energy here was supposed to be distributed not only to the United States through pipelines and such, but also a good part of Mexico. This is I vast investment for Sempra. If it's not allowed to continue for some reason, not only will it hurt the company, but like JW said, they think that would be a big deal for other companies trying to do similar things. This area in Ensenada too was also key for a gigantic port and other sort of issues that they're trying to do and to become a major center for bringing commodities and this energy in. It's a vast and important issue. The.

YOUNG: Right, and in addition to the politics and the land dispute, there's also I think some competitive and market issues that we've been interested in, and haven't really figured out, which is to what extent some of the heat on Sempra is coming from people who did not get approval for their own plants to do similar thing, some competitors down there in Mexico.

ST. JOHN: So Mexican competitors as opposed to U.S.

YOUNG: Well, international companies that wanted to do business down there that got squeezed out by Sempra, which if nothing else has been very effective down there.

ST. JOHN: If you have any questions or insights about this, we'd love to hear from you, the number here at the Editors' Roundtable, is 1-888-895-5727. So JW, you were saying not necessarily? Do you have some insights into that?

AUGUST: Well, actually, I was rolling my eyes at Ricky and he was rolling his eyes at me. There's a terrific back story. We have to give credit to Mexican media, because the Mexican media has been on this longer than we have. And we started picking it up with the Ritchie case, but they have been down there --

ST. JOHN: Ritchie being the punish who had the land --

AUGUST: Right. And the Mexican media has been pounding this for some time. But I think we've caught up on this side of the border, and we are hearing from all sides. And there's many forces at working both local, national, and even international because there's a lot of grudges being played out. Big companies, lots of money involved. Of.

ST. JOHN: And it's interesting because, I mean, doing business south of the border is very different from being business north of the border both for environmental reasons and perhaps business practices are different. But this is a U.S. company doing business am whose rules should they be living by here?

AUGUST: Well, I think in the Carter administration there was a rule, a law passed that you can't bribe people or break laws.

YOUNG: There's a federal law called the foreign corrupt practices act which actually makes it illegal for a U.S. company to pay a bribe in another country. And JW mentioned that there's a couple of federal agencies that are looking into Sempra's business practices. They have had some meetings with the whistle blower who's a former Sempra executive from Mexico. And the people who attended those meetings were some experts from the SEC and the U.S. attorney's office on this specific law, the foreign corrupt practices act, which bans bribes in other countries. So this is some fairly serious stuff.

ST. JOHN: And a couple of our supervisors, county supervisors have gotten involved in this whole issue, haven't they? Perhaps not so much in the issue of possible bribery, but corruption or excesses has come up, I understand, on the part of Diane Jacob. Does --

YOUNG: Diane put forward a resolution that called on the state to investigate some of the same allegations against Sempra. I was frankly surprised to see it -- I think it passed unanimous he. There might have been one vote against it, you know, on our all Republican board of supervisors, you'd expect -- at least I would, I'm not sure why, but I would expect solid support for Sempra. But they've -- you know, Sempra's given I think a helicopter to the county or something. Or maybe that was the city. But they're a big corporate player in San Diego.

LEWIS: Well --

AUGUST: There's blood in the water. And when there's blood in the water, people change their position.

ST. JOHN: Scott?

LEWIS: Yeah, Diane Jacobs never withheld her scorn for Sempra.

YOUNG: Right, what was surprising me was her support elsewhere on the board.

LEWIS: Oh, right.

YOUNG: Yeah, you're right. She was been --

ST. JOHN: Because of the Sun Rise c.

YOUNG: Well, I think starting with the wildfires and moving into the Sun Rise Powerlink, and now in this, she is very -- I mean, she is not unbiassed on this --

AUGUST: Well, I don't think she'll go to the Sempra dinner this year, you know, their annual tribute.

ST. JOHN: So JW, you're not surprised that our all Republican county board of supervisors would take a position to condemn, possibly --

AUGUST: Well, I was too, like Ricky, I thought that was -- wow, I didn't think she'd garner that much support. And they've been meeting with Filner too, but he won't return out phone calls. He's still mad at us for a political story we did. But we know that the politicians from Mexico are meeting with him.

ST. JOHN: So Sempra is to some extent beleaguered here. We've got the federal government of Mexico sort of looking into them, even our local supervisors are censuring them. There's the environmental side of it of course as well, which I believe Ron Roberts has taken a stand on. What sort of environmental problems are the local people in Mexico concerned about, JW 1234.

AUGUST: That was the quality of the gas coming in. There was some concern that it would be dangerous when it was used in your stove because the stove wasn't equipped to handle this particular kind of gas.

ST. JOHN: Let's just take a call, we've got Daniel on the line. Thanks for calling, Daniel. Go ahead.

NEW SPEAKER: Yes, thank you very much, editors, and thank you for getting us up on this story. Even though we're a little bit late, thanks for coming up on it. I think it's really sad to see a big corporation here based out of San Diego chooses to run to a different country to be able to manipulate a system rather than just come on our side of the border, and if they want to generate energy for us, why not just come on our side of the border and do it within the U.S.'s realms and within its policies and regulations? It's very sad when you see this happen. And I don't know if you've known, but we've been beat up by SDG&E in this city for many, many, many years, and now the outlying areas have been beat up with fire storms so --

ST. JOHN: Thank you, Daniel. That's a strong perspective there. And JW, just to make it clear, how much is SDG&E actually involved in all of these allegations?

AUGUST: Well, it's the mothership of SDG&E. Sempra is the mothership.

ST. JOHN: But is SDG&E actually doing any of the operating out there?

AUGUST: No, no. It's Sempra international. Completely different. But it's under the same mothership.

YOUNG: And Daniel asked -- his questions was why didn't they build it on some side of the border. And I'm a little out of my depth here on that. But I seem to remember reading some stories that indicated the reason it's being built down there is because it wouldn't be allowed here. There are some fairly significant environmental implications to it.

ST. JOHN: Well, right. Exactly, that's why it's south of the border.

YOUNG: The other thing, Alison, you had asked about the environment, I think another environmental concern down there is it's simply a gorgeous coastline.

LEWIS: Right.

YOUNG: And this plant is taking up the fair amount of it. As it is, Casa Azul, the corporate retreat center that they build for 17 plus million dollars down there near the plant.

LEWIS: Right. The environmental group wild coast has long been concerned about the coast there. And sufferers in particular, there was a break, Harry's or something like that, that was extremely popular and beautiful, and it's been threatened.

ST. JOHN: We haven't even touched on the fact that there is this resort down there, $20 million resort that the executives of the company appear to be the main occupants of this resort. So there's a lot of different issues here, and unfortunately we've run out of time, but I'm sure we'll be able to get back to it. Stay with us here on the Editors' Roundtable, we will be right back.

And you're back on the Roundtable with the editors with JW August, Ricky Young, and Scott Lewis, and we're talking about the LNG plant south of the border. We want to take just a call before we move on to the next topic. So Jorge, thanks for holding. Go ahead with your point.

NEW SPEAKER: Yeah, I'm Jorge Núñez, I'm a Mexican citizen from Mexico, and this operation has been for a lot of years, and it's a mountain of corruption. Everybody here in Ensenada, and Mexicali, Tijuana, know all the corruption cases. Our ex governor, his second most valuable employer, Renaldo Martinez, who was a secretary general of the government, in our government, is the most important in our state government, now works -- he's in employment, and he's a Sempra --

ST. JOHN: He's employed by Sempra.

NEW SPEAKER: Yeah, he's an employer right now from the company Sempra. Just to see a citizen of this case, there's -- an ecology problem, there's the different owners.

ST. JOHN: The political problem, the corruption potential. Yes.

NEW SPEAKER: Yeah, it's a lot of interest, but we in -- here in Mexicali and Baja California think that if we go back to our ex governor, [CHECK AUDIO], and his second most valuable person in the government in that moment, Renaldo Martinez, we could find a lot of things that could straighten out some of these Sempra issue, no?

ST. JOHN: Jorge, thanks so much for making that point. JW, are you familiar -- have you spoken with people who have this position, if we change the governor, things would change?

AUGUST: Oh, absolutely, they're accusing the former governor of being on the payroll, and all that stuff's been flying around.

ST. JOHN: Okay, well, this just seems like a whole ball of wax. Of one last question, I wanted to ask you, JW, was whether there was actually a physical risk, is this a plant that could physically endanger people if it wasn't managed properly?

AUGUST: Oh, LNG. That was one fear. I remember them talking and putting out on the islands at one point, Coronado, some time ago, where they talked about different places, and if it isn't run right, it could take half of Baja with it. It's quite volatile.

YOUNG: Well, and I should mention just to represent Sempra's point of view to some extent, one reason they were so concerned with what the mayor of Ensenada did in trying to take over the plant or whatever was exactly that, that the workers there are trained to keep it safe. And if you interfere with that in a disorderly way instead of an orderly way, you could cause some problems.

ST. JOHN: A dicey situation. Okay, well, keep an eye on that.

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