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Sempra's LNG Construction Steamroller Hits Bump in Mexican State Government

A disgruntled member of the Baja California Norte state Congress is "no problema" for Sempra Energy's billion-dollar liquefied natural gas (LNG) receiving terminal and related facilities at Energia Costa Azul, about 14 miles north of Ensenada, Mexico, the company said last week. Construction work is continuing and Sempra does not plan to issue any further statements on the Mexican state politician's call for a halt on construction.

To date, Sempra has all of the needed Mexican permits for building the project and there are no legal injunctions against it being built, a Sempra spokesperson told NGI Wednesday. There is no so-called "steel" in the ground yet, however, as access road work continues as it has since late last year, the spokesperson said.

"Folks opposed to the project appear to be misinformed and unaware of the benefits this project brings to the region," said Sempra spokesman Art Larson. "It is important to point out that we have complied every step of the way with the very rigorous and stringent permitting process down there on the federal, state, and local levels."

Larson said Sempra's management would be "happy to sit down with any official," and has done so, to talk about the extensive benefits of the project for the region. He said he was not aware of a company meeting with Guillermo Andrete, who is the chairman of the border committee of the Baja Congress and the official calling for project construction work to be halted.

Andrete was quoted by local news media as alleging that the people of Baja California have not been fully informed about the project, an allegation that Sempra has strongly denied.

While calling himself an advocate for more natural gas supplies in the Mexican state, Andrete said there are unanswered questions about the Sempra project that he thinks need to be addressed before construction continues.

For example, he raised the question about the project moving forward in an area that the Mexican state government has zoned for tourism, but Sempra said the site is 14 miles away from Ensenada, which traditionally has been a draw for American tourists, and most of the 400-acre site is designated as a "buffer zone."

Larson said Andrete tends to overlook current estimates that natural gas demand is expected to double by 2010 in the state, and natural gas-fired electric generation is the primary driver for that demand. Aside from Andrete, Sempra Energy lists more than 100 local Baja California officials who support the project. "It is obviously a billion-dollar investment with jobs and increased economic vitality attached to it," Larson said.

Andrete also publicly chastised Sempra for the pending multi-billion-dollar class action lawsuit against the company that goes to trial later this year. The lawsuit alleges that Sempra and its two principal utilities in California conspired to drive up wholesale natural gas prices at the California-Arizona border in the midst of the western energy crisis of 2000-2001.

Andrete's contention is that while Sempra is accused of wrongdoing in the United States, it should not necessarily be allowed to do business in Mexico, although he didn't mention that other Sempra subsidiaries have been involved south of the border for almost a decade, with a power plant, natural gas pipeline and several local natural gas distribution systems in place.

Regardless, Andrete is calling for the state legislative body to investigation the allegations and unanswered questions surrounding Sempra and its affiliates.

As of Wednesday, the LNG terminal project "continues to move forward," Larson said. Last week, the company held an internal "celebration" among company and community people involved in the project.

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