Sempra Energy: The Dark Side of Energy Policy in Mexico

May 28, 2014 (San Diego)

Sempra Energy was founded in 1998, and came together from the merger of two other private investor based companies. The company is based in San Diego, CA and it’s goal is to participate in emerging markets, as well as to enhance “shareholder value.”

Sempra has participated in the Mexican Market since Mexico opened the field to foreign investment, even before the Energy policy reforms of 2013. In fact, it entered the Mexican market in 1997. These energy policies now are emphasizing more green developments in energy fields, though both Petróleos Mexicanos (PEMEX) and the Comisión Federal de Electricidad (CFE) are still the primary  energy suppliers.

Sempra entered the Mexican market to both participate in local infrastructure, particularly with Liquid Natural Gas (LNG) development, and to export energy to California, the 8th largest global economy. This is the case with the Costa Azul development in Ensenada, which is an LNG plant. This is also the case for the Sierra Juarez wind development. But from the beginning both plants have been under legal challenge.

Costa Azul is considered of strategic importance to the United States. It is the only LNG plant on the West Coast, since Sempra, and other energy companies, could not obtain the necessary permits to install one of these in Eureka, Vallejo, Oxnard, Long Beach or even San Diego Bay. Sempra was quite thankful that the Mexican government allowed them to open this plant in Ensenada.

The plant provides energy to Southern California, and it will do so as well as far as Mexico City when the infrastructure is built. The legal challenge on lands surrounding Costa Azul, presented to the Mexican courts, by Ramón Eugenio Sánchez Ritchie were paid by José Susumo Azano. The latter helped to fund the legal case that went all the way to the Mexican Supreme Court.

According to reporting in 24 horas in Mexico during the transition of power between former President Felipe Calderon and current President Enrique Peña Nieto:

“Calderon himself, during the cabinet meeting with the transition team, informed Peña Nieto’s staff, that the businessman (Azano) had become a threat to bilateral relations, and that the Sempra case was a national security case.”

It is also said that Sempra’s objective was to control the distribution of LNG in Mexico. This is according to the sources close to Azano Matsura.

As early as 2009 the Sempra case reached as high as the Mexican Congress. Congressman Jose Nieto Cespedes, a member of the Democratic Revolution Party (PRD for it’s Spanish acronym) brought the case to the Mexican Congress. In the official paper of Congress we read that:

“There is evidence of complicity between Federal (Mexican) and State authorities of the previous administration. (Calderon, PAN) and some of the current ones, as well as the CFE (Comision Federal de Electricidad,) making Baja California an experimental field, to establish businesses at the edge of the regulatory environment, under the cover of economic integration. They were given land, and money, permitting foreign intervention in national matters, and gave rights to both Sempra Energy and Shell, as the exclusive users of LNG, for the Southern California market.”

This led to hearings, where among other objectives the Mexican Congress found out how Baja became the source of energy for California. It also led to a general review of operations by Sempra in Ensenada.

Of note, the Mexican Congress referred this case to the United States Department of State as a violation of U.S. Law, regarding the Foreign Corrupt Practices Act as early as 2009.

Mexican Congressional Hearings:

In April of 2011 members of the Subcommittee Following the Sempra Energy at Costa Azul S. de R.L de C.V issued a full report to the Mexican Congress Regarding the Ensenada plant.

The report included a full review of all documentation, including government regulatory material, as well as that supplied by Sempra Energy. On January 20, 2011 the Secretary of the Environment and Natural Resources, Engineer Juan Elvira Quesada testified before the Permanent Committee for the Environment.

During the testimony Secretary Quesada said that the company promised to mitigate the risks to people living around the plant, specifically to the north of the project. They were also required “to buy lands to be destined to preserve and protect species that exist there, both plant and animal life.”

The Secretary also said that as of June 30, 2005 that part of the government agreement with the plant was no longer in effect. This was done after the Company promised to move two of the tanks from the northern part of the project to prevent “a negative effect in case of an accident.” They (Sempra) promised that the new placement would limit the effects of an accident to the plant itself.

Sempra Energy sent a delegation to the Mexican Congress in Mexico City who’s members were Tania Ortiz Mena, Vice-President of External Affairs, Engineer. Álvaro Muñoz, General Manager of Costa Azul Operations, Dr. José Antonio Ortega, General Director of Environmental Specialists and Esteban Gorches Guerrero, external consultant to Sempra.

The Mexican Congress asked specific questions regarding the risk to the population as well as the permitting process. Sempra stated that the proper authorities were involved in the review and authorization process. They mitigated the environmental effects, including transferring animals to other areas of Ensenada. They also participated in the reforestation effort, and that they do have an environmental quality control program.

They reminded the Committee that the plant has been in operation since 2008. (Though it was closed by orders of the local government and opened later that night by the Army. They have been in the Courts ever since.)

Charges:

Charges were filed on October 3, 2012. In the documents Sempra Energy Executives Donald E. Felsinger, Debra L. Reed, Jeslee Knight and others were named. The charges were for money laundering, smuggling, and tax evasion, among other charges. A Jpeg of the first page of the complaint can be found at the Jornada link.

The status of this legal case is not clear yet. But we have a lot of discontent with operations of the company in Mexico. The San Diego Reader has also reported that the FBI is taking a look at violations of the Foreign Corruption Practices Act. Yet, other industrial energy developments, such as Sierra Juarez wind project on the Mexican side, and the Gas Lines that the CFE needed  have been approved.

But the reason for the charges is actually found in the documents presented to Congress. In their testimony, Sempra said that they sell 92% of LNG to the Compañia Federal de Electricidad in Baja California and only 8% goes to California. Therefore, they provide all the needs for the CFE for electricity production. The charges state that Sempra sells this to the CFE but if they do not use it, they have to sell it back. Sempra buys it back at 20% less than it bought for. This has cost Mexico 23 million dollars over nine years, according to reporting in Jornada. This is where the money laundering and tax evasion charges are coming from.

While the case is not settled in Mexico, Sempra is in the process of changing it’s name from Sempra Energy to Ienova, and now is under Mexican management. Yet, the Mexican company is still part of the Sempra Energy group. This is not expected to go away anytime soon, and there is a lot of contention in Mexico regarding not just Sempra, but any and all foreign energy operations.



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5 replies

  1. My name is Susumo Azano and I willing to give you the whole story of your article email me sazano43@gmail.com

Trackbacks

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