Energy Production, Transportation and
Demand in the Transborder Region:
Opportunities and impacts % I
Nineteenth Report of the
Good Neighbor Environmental Board
to the President and Congress of
the United States
December 2019
Environmental Advisors Across Borders
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About the Board
The Good Neighbor Environmental Board (GNEB or Board) was created in 1992 by the
Enterprise for the Americas Initiative Act, Public Law 102-532. The purpose of the Board is to
"advise the President and the Congress on the need for implementation of environmental and
infrastructure projects (including projects that affect agriculture, rural development, and human
nutrition) within the states of the United States contiguous to Mexico to improve the quality of
life of persons residing on the United States side of the border."
The Board is charged with submitting an annual report to the U.S. President and Congress.
Management responsibilities for the Board were delegated to the Administrator of the U.S.
Environmental Protection Agency by Executive Order 12916 on May 13,1994.
GNEB does not carry out border region activities of its own, nor does it have a budget
to fund border projects. Rather, its unique role is to serve as a nonpartisan advisor to the
U.S. President and Congress and recommend how the federal government can most
effectively work with its many partners to improve conditions along the U.S.-Mexico border.
The Board operates under the provisions of the Federal Advisory Committee Act, and
membership on the Board is extremely diverse. By statute, GNEB comprises representatives
from:
(1) the U.S. government, including a representative from the U.S. Department of Agriculture
and representatives from other appropriate agencies;
(2) the governments of the states of Arizona, California, New Mexico and Texas; and
(3) private organizations, including community development, academic, health, environmental
and other nongovernmental entities with experience on environmental and infrastructure
problems along the southwest border.
The Board also includes representatives from tribal governments with lands in the border region.
The recommendations in this report do not necessarily reflect the official positions of the
federal departments and agencies that are represented on the Board, nor does the mention of
trade names, commercial products or private companies constitute endorsement. Following
historic precedent, the federal departments and agencies represented on the Board have
recused themselves from this report.
This report uses the terms "resilience" and "resiliency" interchangeably, as the "term of art"
differs among agencies.
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Table of Contents
About the Board i
List of Figures vi
List of Tables vii
Transmittal Letter ix
Executive Summary x
1. The Border Socio-Economic and Environmental Context 1
1.1 Other Factors 5
1.2 Energy Access, Energy Poverty and Energy Insecurity 5
1.3 Indigenous People Border Region Energy Issues 7
1.4 Overarching View of Climate Change 9
1.5 Energy Efficiency and the Border Region 10
1.6 Energy Efficiency in U.S. Border States 13
1.7 Resilience 14
2. Overview of the U.S. Energy Sector 15
2.1 U.S. Energy Market 15
2.1.1 Oil and Gas Production 15
2.1.2 The Natural Gas Sector 16
2.1.3 The Electricity Sector 17
2.2 U.S. Energy Regulation 18
2.2.1 Oil and Gas Production 19
2.2.2 The Natural Gas Sector 19
2.2.3 The Electricity Sector 20
2.3 U.S. Environmental Regulation and Programs 22
2.4 Environmental Impacts of Energy on Air, Water and Land 23
2.5 One Federal Decision 25
3. Overview of the Mexican Energy Sector 27
3.1 The Mexican Energy Market 27
3.1.1 The Lead Up to the Mexican Energy Reform 28
3.1.2 The Mexican Energy Reform 28
3.1.3 President Lopez Obrador's New Energy Policies .30
3.1.4 Mexico's Energy Balance of Trade 33
3.2 Mexican Energy Regulation 33
3.2.1 Oil and Gas Production 33
3.2.2 Sale of Gasoline, Diesel and Other Petroleum Products 34
3.2.3 The Natural Gas Sector 34
3.2.4 The Electricity Sector 35
3.3 Energy-Efficiency Efforts 36
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Table of Contents
4. U.S.-Mexico Cross-Border Energy Relations: The Legal and Institutional Framework 37
4.1 U.S.-Mexico Cooperation for Oil and Gas Production in the Gulf of Mexico 37
4.2 NADB and Financing of Renewable Energy Generation in the Border Region 38
4.3 Cross-Border Infrastructure—Presidential Permits 39
4.4 Cross-Border Infrastructure—Natural Gas Pipelines 40
4.5 Export Infrastructure—The Case of Liquefied Natural Gas Facilities 42
4.6 Cross-Border Trade in Energy 42
4.6.1 Petroleum Products 43
4.6.2 Natural Gas Exports and Imports 43
4.6.3 Electricity 45
4.7 Cross-Border Trade in Renewable Energy 45
4.8 Cross-Border Cooperation in Energy Regulation—NERC and Mexico 46
4.9 State and Local Cooperation to Foster Energy Trade and Efficiency 47
5. U.S. Border Energy 49
5.1 California Border Region: San Diego and Imperial Counties 49
5.1.1 Overview of San Diego 49
5.1.2 Current Energy Sector in San Diego: Demand and Sources of Energy 50
5.1.3 Cost and Prices of Current Energy Use 51
5.1.4 Factors Influencing Future Demand 52
5.1.5 Overview of Imperial County 52
5.1.6 Energy Use 55
5.1.7 Air Quality Issues in Relation to Power Generation 56
5.1.8 Renewable Energy Growth and Role of Wind and Solar 56
5.1.9 Unique Relationship Between California and Baja California 57
5.1.10 Energy Efficiency and Energy Poverty 57
5.2 Arizona Border Region 59
5.3 New Mexico Border Region 61
5.3.1 New Mexico at the International Border: Paso del Norte and Dona Ana County 61
5.3.2 Energy Sector in New Mexico's Border Region 63
5.3.3 Cost and Prices of Current Energy Use 64
5.3.4 Environmental Impacts of the Energy Sector 64
5.3.5 Future Demand for Energy 65
5.3.6 Structure of New Mexico's Energy Sector 65
5.3.7 Energy Use by Sector 66
5.3.8 Renewable Energy 66
5.3.9 Energy Efficiency 67
5.4 Texas Border Region 68
5.4.1 Electric Reliability Council of Texas—ERCOT 68
5.4.2 The El Paso Exception 69
5.4.3 Cross-Border Electrical Grid Interconnections 69
5.4.4 Oil and Natural Gas Production From the Eagle Ford Shale Formation in South Texas 69
5.4.5 Oil and Natural Gas Production From the Permian Basin Shale Formations in West Texas 70
5.4.6 Wind and Solar Energy 70
5.4.7 Cross-Border Natural Gas Pipelines 71
5.4.8 Energy Efficiency: Property Assessed Clean Energy Program in the Border Region 72
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6. Mexican Border Energy 73
6.1 Baja California 73
6.1.1 Current Energy Infrastructure and Use 73
6.1.2 Energy Resources 75
6.1.3 Cost and Prices of Energy in Baja California 75
6.1.4 Environmental Impacts of the Energy Sector 76
6.1.5 Future Energy Demand 76
6.1.6 Potential for Renewables 76
6.1.7 Energy Needs for Water 77
6.1.8 Binational Desalination Initiatives 79
6.1.9 Cross-Border Energy Trading 79
6.2 Sonora 79
6.3 Chihuahua 80
6.4 Coahuila 80
6.4.1 Shale Gas Reserves 81
6.4.2 Coahuila Energy Cluster 81
6.4.3 Solar and Wind Energy Resources 81
6.4.4 Energy Audit of the Piedras Negras Water Treatment Facility 81
6.5 Nuevo Leon 82
6.6 Tamaulipas 82
6.6.1 Wind Energy Projects 82
7. The USMCA and Energy Trade and Investment in the Border Region 83
7.1 Energy Import Duties Under the USMCA 83
7.2 Limitations on Import and Export Restrictions; Exception for Mexico Hydrocarbons 84
7.2.1 Export Licensing 85
7.2.2 Export Duties, Taxes or Other Charges 86
7.3 USMCA Chapter 8 Specifically Recognizes the Mexican State's Ownership of
Hydrocarbons in the Ground 86
7.4 Special Investor Dispute Resolution Mechanism Under USMCA Annex 14-E 86
8. Recommendations 89
References 92
Appendix 1: State Regulatory Agencies 107
Glossary of Abbreviations and Acronyms 113
2018-2020 Members of the Good Neighbor Environmental Board 114
Acknowledgments 117
Endnotes 118
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List of Figures
The U.S.-Mexican Border Region as defined by the La Paz Agreement, North American Development
Bank and border counties and municipalities 2
U.S. tribal communities located in the U.S.-Mexico border region 8
Southwest average yearly temperatures have increased 1.9°F (0.9°C) between 1901 and 2018 9
Southwest annual precipitation 10
Fuel sources as a percentage of total electric generation. 1998-2018 18
Installed generation capacity by type of permit at December 31, 2018 29
Installed generation capacity by type of technology at December 31, 2018 (70,053 megawatts) 29
The structure of the U.S. Section of the International Boundary and Water
Commission (USIBWC) permitting process 41
California operational power plants. May 2018 49
San Diego Gas & Electric's average residential rates 51
Imperial County renewable energy power plant locations 53
Net Imperial Irrigation District system sales 56
Imperial Irrigation District 2018 load forecast 56
Actual/anticipated 2017-2020 renewables mix 56
Proposed and achieved energy savings targets. 2014-2023 58
High- and low-emissions scenarios. A2: High-emissions scenario, B1: Low-emissions scenario 59
Arizona energy consumption by end-use sector. 2017 60
New Mexico 2017 energy consumption 61
New Mexico net electricity generation by source. March 2019 61
Map of New Mexico's international border. 62
Monthly crude oil production in New Mexico since 1981 63
New Mexico energy consumption by end-use sector. 2017 66
Electric Reliability Council of Texas interconnection maps 68
Cross-border interconnections 69
Wells permitted and completed in the Eagle Ford Shale Play as of January 1, 2019 70
Wells permitted and completed in the Permian Basin area as of January 2019 70
U.S. natural gas trade by pipeline by port of entry (imports; green arrows) or exit (exports; blue arrows) 72
Monthly U.S. natural gas trade (January 2016 through February 2019) in billion cubic feet per day 72
Capacity of the interconnections in the 53 regions of the National Electric System 73
Main Power Plants in Baja California. Mexico 74
Historic production of energy in Baja California 74
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List of Tables
U.S. and Mexican Border States Population 3
U.S. Border States and Counties Population. 2017 3
Elements of Mexico's Energy Balance of Trade 33
North American Development Bank Energy Projects 39
San Diego Gas & Electric s 2017 Power Content Label 50
System Average Rates Associated With Conforming Portfolio (2016USS) 51
Imperial County 2017 Power Content Label 52
Small Hydroelectricity Production by Imperial Irrigation District. 2010 and 2018 54
Resources Untapped in the Imperial Valley 57
Weatherization Assistance Program Border State Distribution Amounts 57
Average Energy Cost and Price Per Energy Sector 64
Electricity Conservation Potential and Impacts in New Mexico 67
Electricity Sales Volume in Baja California. 2012-2016 75
Atmospheric Emissions of Thermoelectric Plants Located in Baja California 76
Additional Gross Capacity by Technology in Baja California 76
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Transmittal Letter to the President and Congress From the Good Neighbor Environmental Board
President Donald J. Trump
Vice President Michael Pence
Speaker Nancy Pelosi
On behalf of your Good Neighbor Environmental Board, I am submitting to you our 19th Report, Energy
Production, Transportation and Demand in the Transborder Region: Opportunities and Impacts. In this
year's report, the Board addresses the dynamic energy sector in the U.S.-Mexico border region that is driv-
en by increased energy production in the U.S. border states, growing energy trade across the border with
Mexico and uncertainty regarding Mexico's energy policies under President Andres Manuel Lopez Obrador.
GNEB's report concludes that, although Mexico has announced policies to reduce energy imports and
expand domestic production, it will continue to be a strong market for U.S. natural gas (including lique-
fied natural gas), refined petroleum products and energy-related technology. As energy trade with Mexico
increases, new and expanded cross-border pipelines and electrical connections wiil be required, and
shipments of petroleum products and liquefied natural gas by rail and by tank trucks on the region's high-
ways will increase. Local border communities will need to be engaged early in the process of cross-border
energy infrastructure expansion to reduce unnecessary delays for appropriate projects. The One Federal
Decision program —designed to improve the timeliness, predictability and transparency of the federal envi-
ronmental review and authorization process for covered infrastructure projects, including energy projects-
will facilitate these important energy investments.
There is also opportunity for expansion of renewable energy in the border region. Investment in renewables
is ideal for U.S. border communities that are rural and/or are underserved, including border tribes. Recap-
italization of the North American Development Bank should be a priority to build on the bank's excellent
record of lending for renewable energy projects in the border region.
GNEB developed recommendations that include research and incentives, regional sustainability planning,
and binational collaboration as key principles that federal agencies and Congress should apply to direct
federal resources toward building a sustainable new border energy economy.
Thank you for the opportunity to examine these issues and apply the Board's many years of collective
experience in addressing border infrastructure matters. Our lives, communities, livelihoods and heritage are
rooted along the border we share with Mexico, and we are committed to preserving and protecting them.
Sincerely,
Paul Ganster, Ph.D.
Chair, Good Neighbor Environmental Board
Institute for Regional Studies of the Californias
San Diego State University
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Executive Summary
Overview
Energy in the U.S.-Mexico transborder region is
the topic of the 19th Good Neighbor Environmen-
tal Board (GNEB) report to the U.S. President and
Congress. This report begins with a review of the
socioeconomic and environmental context of the
U.S. border region, pointing out that it is the poorest
region of the country and has much to gain from en-
ergy development. At the same time, the transbor-
der region faces threats from the effects of energy
infrastructure projects and transportation across the
region and border.
The overview of the U.S. energy sector included in
this report documents the remarkable expansion of
production of natural gas and petroleum nationally
and in the border region, as well as the rapid growth
of renewable energy production in the border area,
which likely will accelerate in the future.
Mexico's recent partial opening of the energy sector
to foreign participation and more recent policy
adjustments point to continued uncertainty in terms
of investment policy. Mexico, however, clearly will
continue to buy significant amounts of natural gas
and petroleum products from the United States
during the next decade.
This report reviews the legal and institutional frame-
work for cross-border energy trade. It comments
on the mix of bilateral agreements, federal rules and
regulations, and different U.S. state regimes that
constitute border energy governance. Each of the
border states has a distinct mix of renewable and
nonrenewable energy production and consumption.
Texas is the largest source of gas and oil production
in the nation with 38 percent of the total, and Cali-
fornia (5%) and New Mexico (5%) also are important
producers. Texas leads the United States in wind
energy. California has significant installed capacity in
solar and wind generation. Renewables are growing
components of the energy portfolios of Arizona and
New Mexico.
Mexico's six northern border states have an energy
mix dominated by nonrenewable sources with slow-
ly emerging renewable sectors. Coahuila has major
coal reserves, and Tamaulipas is a major oil and gas
producer. All of the Mexican border states have new
investments in solar and/or wind energy projects,
but renewables remain a small portion of Mexico's
energy picture.
The report's section on the energy component
of the United States-Mexico-Canada Agreement
(USMCA) details the provisions that potentially affect
the bilateral energy trade. Importantly, there are
no duties for electricity, natural gas, oil, gasoline or
diesel fuel.
GNEB developed recommendations that include
research and incentives, regional sustainability plan-
ning, and binational collaboration as key principles
that federal agencies and Congress should apply to
direct federal resources toward building a sustaina-
ble new border energy economy.
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Energy Production, Transportation and Demand in the Transborder Region: Opportunities and Impacts
Sections of the 19th Report
1, The Border Socioeconomic, Energy and Environmental Context
The U.S.-Mexico border region is different from
other regions in the United States. These differences
include rapid economic and population growth;
rapid urbanization; shared transborder natural
resources such as biota, rivers, groundwater and
airsheds; economic, cultural and political differences
and asymmetries with Mexican communities across
the border; burgeoning international commerce
and trade flows; high rates of poverty; and diverse
ethnic identities. Overall, the Southwest border is
significantly poorer and more urbanized than the
rest of the United States. The U.S.-Mexico border
region has a hot, dry climate. Changing climate
is projected to cause increasing temperatures,
decrease total precipitation, decrease streamflow,
produce more extreme weather events, cause more
frequent and intense wildfires, and drive sea-level
rise and more intense storm surges in this region.
These changes are expected to affect not only the
natural environment, but also the economy and
other human systems, including the energy sector.
The existing energy infrastructure was designed to
perform well under certain historical conditions and
may no longer be able to cope with the expected
changes in temperature, precipitation, wildfires,
hurricanes and sea-level rise.
The demand for energy within the U.S.-Mexico
border region likely will grow substantially in the
future, driven by population growth, economic
development, and greater demand for cooling and
for moving and treating water because of historically
increasing average ambient temperatures. The
areas of natural gas, crude oil and renewables
represent a significant potential for energy
development in the U.S.-Mexico border region.
There is substantial potential for growth in cross-
border energy trade as the result of high natural gas
production in the United States and high demand
for that gas in Mexico. Constitutional and regulatory
changes in Mexico affecting the energy sector
also are likely to foster increased energy trade.
Potential for increased development of renewables
in Mexico and increased electricity export to the
United States also exists. These developments
present opportunities for trade and investment
and improving energy security and quality of
life. They also present significant challenges for
border communities as a result of inadequate
transportation and border crossing infrastructure
and the potential environmental and other impacts
of energy-related projects.
2. Overview of the U.S. Energy Sector
The United States derives most of its energy from
oil, natural gas, nuclear fuel and coal, although
renewables such as solar energy and wind continue
to increase in importance. Each of these energy
sectors has substantial participation from private
companies, with thousands of businesses involved.
Recently, the United States has witnessed huge
growth in oil and natural gas production through
increased use of hydraulic fracturing and horizontal
drilling. Most of the newly booming oil- and gas-
producing areas that benefit from these new
technologies are in Texas, North Dakota and
Pennsylvania, with growth in New Mexico as well.
The increase in oil production has reduced the United
States' dependence on imports of petroleum, as
net imports of petroleum (including both crude oil
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Executive Summary
and petroleum products) have declined substantially
in recent years. With respect to natural gas,
the increase in production and additions to gas
reserves—now estimated at 80 years of reserves -
have led to a re-orientation of the natural gas industry
toward an export-oriented model. Taking into
account the reduction in net imports of petroleum
and the growing exports of natural gas, the
U.S. Energy Information Administration projects that
the United States will become a net energy exporter
in 2020 for the first time since 1953.
The United States also has significant and growing
quantities of renewable energy resources such as
solar and wind. More than half of U.S. states now
require a certain percentage of their electricity to
come from renewable resources, and seven aim to
have more than half of their electricity generated from
renewable sources within the next few decades. Cali-
fornia is planning to obtain 100 percent of its electric-
ity from decarbonized sources by 2045. The demand
for renewables in the U1S.-Mexico border region may
lead to imports of renewable energy from adjacent
regions in Mexico.
Energy regulators in the United States have placed
great emphasis on energy efficiency (i.e., harnessing
advancements In technology to use less energy to
provide the same or higher level of energy service).
Energy-efficiency policy is effectuated by a mix of
federal, state and local governments. The effects of
increased energy efficiency can be substantial. For
example, between the establishment of initial appli
ance energy-efficiency standards in 1987 and the
year 2030, the United States is expected to attain
US$2 trillion in cumulative operating-cost savings.
3. Overview of the Mexican Energy Sector
The Mexican energy sector, prior to recent reforms,
was directly managed and operated by the Mexican
federal government, primarily through the Secretaria
de Energia (Ministry of Energy); Petroleos Mexicanos
(PI Ml X), the Mexican national oil and gas company;
and the Comision Federal de Electricidad (Federal
Electricity Commission, known as CFE), the Mexican
national electricity company. The central role of
the federal government in the energy sector was
based on historical traditions of economic and
political nationalism and rejection of foreign or private
ownership of key resources such as minerals,
petroleum or water and public services such as
electricity.
PEMEX was the sole legal producer and supplier of
oil, which was then the most important source of
energy and foreign exchange for the country, with
a limited supporting role for the private sector. The
electricity sector in Mexico also developed as a
state-owned monopoly. CFE was formed in 1934,
and during the next several decades, CFE acquired
privately owned regional concessions. The electricity
sector was fully nationalized by 1960.
Inefficiencies in the Mexican energy sector led to
reforms under President Enrique Pena Nieto
(2012-2018) and a 2013 amendment to the
constitution to permit a greater role for private
parties in hydrocarbons and electricity. Legislation
in 2014 that enabled constitutional changes was
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far-reaching and effected a major overhaul of the
Mexican energy sector.
Emerging policies of Mexico's current President,
Andres Manuel Lopez Obrador (elected in 2018), left
much of the energy reform intact, but auctions for
oil and gas exploration and development as well as
auctions for the purchase of renewable energy have
been cancelled or delayed while amendments and
changes to the original reforms are considered. In
the meantime, the Mexican energy sector remains
under the full control of the federal government, and
President Lopez Obrador's energy policy is focused
on boosting the energy sector via government initia-
tive, with the private sector taking a subsidiary role.
4. U.S.-Mexico Cross-Border Energy Relations: The Legal and
institutional Framework
Bilateral agreements and federal reviews form the
backbone of the legal and institutional framework
for cross-border energy exchange between the
United States and Mexico. One instance in which
the two countries have directly cooperated is the
Agreement Between the United States and Mexico
Concerning Transboundary Hydrocarbon Reservoirs
in the Gulf of Mexico, which facilitated production of
transboundary oil and gas reservoirs is in the Gulf of
Mexico beginning in 2014.
Although initially focused on water and wastewater
for border communities, the North American Devel-
opment Bank (NADB) has expanded its portfolio to
include projects for renewable energy sources and
for reducing energy consumption. NADB can facil-
itate small border energy projects for communities
and tribal entities.
Generally, the construction, operation and mainte-
nance of facilities that cross the U.S.-Mexico border
must be authorized by the U.S. federal government
through the issuance of a Presidential Permit in
accordance with requirements set forth in a series
of executive orders. The Presidential Permit process
involves interagency coordination to ensure that
physical interventions of the international border
zone are in the national interest of the United States.
Under the North American Free Trade Agreement
(NAFTA), there are no import duties on energy
products such as oil, petroleum products
(e.g., gasoline, diesel fuel), natural gas and electricity
for trade between the United States and Mexico.
This will remain the case under the yet-to-be-
approved USMCA.
The North American Electric Reliability Corporation
(NERC) is charged specifically with overseeing the
bulk power system in the United States, and it has
established a broader North American strategy in
recognition of the increasingly international scope
of the grid. As there is more integration between
the U.S. and Mexican grids, it can be expected that
NERC will take a greater role in Mexico's reliability
strategy for its grid, and Mexico will take a great-
er role in NERC. In the case of California, the law
permits renewable resources located in Mexico to
satisfy California's renewables requirement.
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Executive Summary
5. U.S. Border Energy
Each of the four U.S. border states has a unique
mix of renewable and nonrenewable sources of
energy production, as well as energy distribution
mechanisms with Mexican producers and users.
The U.S.- Mexico border area features different
types of energy production and transmission at
an impressive scale. The states of California and
Texas are enormous producers and consumers
of fossil fuels and renewable energy that exert
tremendous force on energy markets. Three U.S.
border states are in the top five U.S. states in terms
of oil and gas production: Texas, California and New
Mexico. Texas produces the most wind power of
any U.S. state and has a growing solar portfolio.
California, which for some time has been in the
forefront of adoption of renewable energy standards
and policies, imports wind power and natural
gas-generated electricity from Baja California and
power generated at Arizona's Palo Verde Nuclear
Generating Station (3.3 gigawatts), which is the
largest producer of electricity in the United States.
6. Mexican Border Energy
Mexico's six border states lead national produc-
tion statistics in renewable energy, including wind,
solar, geothermal and biomass. These states have
a mix of renewable and nonrenewable sources of
energy and are tied to the United States through
northbound and southbound distribution systems,
predominantly across the Texas-Mexico border.
Baja California has an abundance of renewable
energy sources, of which wind and geothermal
predominate, with solar, biomass and ocean-related
sources playing a smaller role. Wind generation
continues to grow with new projects developed by
Sempra [Energy (II nova in Mexico) in the Sierra de
Juarez mountain range and existing projects near
the town of La Rumorosa. The state's electricity grid
is not connected to the larger Mexican grid, but Baja
California and California share two interconnection
transmission lines. The state of Sonora relies on
gas imported from the United States and oil from
other Mexican states for most of its electrical supply,
although it has some hydroelectric and solar power
stations. Thirteen solar power projects currently are
under construction. Chihuahua recently had four
solar plants come online in 2018, and three more
are under construction.
Coahuila is one of Mexico's most energy-abundant
states, with large wind and solar potential and shale
gas reserves. Coahuila has 95 percent of Mexico's
coal reserves, and 13.7 million tons of coal are
mined in Coahuila annually for steel and electricity
production. Approximately 12 percent of Mexico's
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national wind-power potential and 8 percent of its
national solar energy potential come from Coahuila.
Currently, 24 solar-energy projects and 10 wind-
energy projects are authorized in Coahuila. The
state of Nuevo Leon is a tremendous user of energy
for its industrial sector, PEMEX operates a refinery
for crude oil in Cadereyta, Nuevo Leon, which
7. The USMCA and Energy Trade and
In 2018, the United States, Mexico and Canada
signed a new trade agreement known as the
accounts for 16.2 percent of national production.
The state of Tamaulipas is a major oil, gas and
wind-energy producer, with several large-scale wind
projects located in the state, including a project to
produce 184 gigawatt hours of electricity per year
that was certified by NADB in 2015.
investment in the Border Region
USMCA, which is envisioned to replace NAFTA. To
become effective, the USMCA must be ratified by
the three parties. The USMCA has a number of
provisions that potentially affect energy trade in
the cross-border region. Importantly, there are no
import duties for electricity, natural gas, oil, gasoline
or diesel fuel for either the United States or Mexico.
The USMCA provides for some reduction in investor
protections as compared to NAFTA. If U.S. or
Mexican investors in oil and gas or in electricity
production, however, have claims against Mexico
or the United States, respectively, there is less of a
"cut-back" of investor protections than for investors
in other business sectors.
Recommendations of the 19th Report
Below are the GNEB recommendations for federal agencies and Congress to help build a sustainable new
border energy economy.
Research and Incentives
To enhance resilience and support economic development needs specific to the U.S.-Mexico border
region, federal agencies and Congress should provide for research and program incentives that are
informed by known research gaps and regional vulnerabilities.
1. Support: research on energy topics on the
U.S.-Mexico border, such as where energy
needs are most acute, quantifying econom-
ic costs and benefits, and identifying oppor-
tunities. For example, the Texas border area
is unique as compared to other parts of the
state. Border-specific original research is
lacking.
2. Support research especially related to colo-
nias and tribal areas, which lack adequate
energy-related infrastructure. The absence
of recent research on colonias makes it a
challenge to form policy solutions. For ex-
ample, research support could be valuable
to answer such questions as how effective
microgrids could be to extend electricity to
colonias or how to finance infrastructure.
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Executive Summary
3. Promote incentives and funding for trans-
mission line and microgrid projects, in con-
junction with regional energy sustainability
plans (described below), that create resilient
border communities by locating energy
investments in the border region that benefit
those communities.
4. Establish the U.S. Environmental Protec-
tion Agency (EPA) as the lead agency, in
coordination with other federal agencies—
including but not limited to the U.S. Depart-
ment of Energy (DOE), U.S. Army Corps of
Engineers, Bureau of Reclamation and the
U.S. Section of the International Boundary
Water Commission—to conduct research
and develop new programs, policies and
incentives to promote water conservation
and reuse in energy production throughout
the U.S.-Mexico border region, much of
which is arid and drought-prone. EPA and
other agencies should leverage partners
and action items in the Water Reuse Action
Plan, scheduled to be finalized and released
in 2020. For more information on EPA's de-
velopment of the Water Reuse Action Plan,
see www.epa.aov/waterreuse/water-re-
use-action-plan.
5. Support sustained and strategic research
barriers to energy efficiency, particularly in
existing buildings, in the U.S.-Mexico bor-
der region. Support incentives to promote
efficient cooling and lighting technologies in
areas and building types with the greatest
potential for increasing energy efficiency.
Regional Sustainability Planning
To provide for a more resilient future energy supply for communities along the border, there must be
federal leadership to promote policies and programs that support development and implementation
of regional energy sustainability plans that liaise with Mexican communities.
6. Establish a regional energy sustainability
planning process for federal agencies
to collaborate and communicate with
local, state and tribal governments to
increase resiliency, provide for strategic
economic development, and advance
energy-efficiency projects that improve
communities. Regional energy sustainability
planning requires effective transborder
communication and cooperation.
7. DOE should be the lead agency in multi-
agency projects that evaluate existing frame-
works for sustainable energy planning at the
regional scale, adopt a framework after input
from the public and the regulated commu-
nity, and then integrate the planning frame-
work into how energy production projects
demonstrate eligibility for federal funding and
how projects meet regulatory requirements
for permits and other approvals.
XVI
8. Integrate the following into the new frame-
work for development and implementation
of regional energy sustainability plans:
(a) Delineate border communities (U.S. and
Mexico) and benefits/costs of energy
development and trade and identify infra-
structure planning that considers sensitive
and rural populations along the border,
including tribal communities, to aid in
regional planning and the most efficient
use of governmental assistance.
(b) Actively coordinate with the Border 2020
Program managed by EPA and its Mex-
ican counterpart agency when federal
agencies (federal contractors) are devel-
oping and implementing policies that af-
fect energy production and transportation
along the U.S.-Mexico border, especially
as they relate to energy. Actively leverage
resources, projects and expertise toward
-------
addressing vulnerable populations associ-
ated with environmental and public health
challenges in the energy sector.
(c) Invest in and support the successor
program to the U.S.-Mexico Border
2020 Program, which has proven valu-
able to California, Arizona, New Mexico,
Texas and the six neighboring Mexico
states. Congress, EPA and other execu-
tive branch agencies should encourage
improvements to the program based on
stakeholder input.
(d) Continue and expand support for the
binational NADB, an important source of
water and energy infrastructure invest-
ment and economic development along
the U.S.-Mexico border. Grants and loans
to border communities continue to be val-
uable to binational goals in water quality,
Binational Collaboration
air quality and protection of the shared
border environment, which enhance the
quality of life of border residents.
(e) Encourage rational provision of energy
and energy-efficiency services for border
communities. Locate energy projects
in border communities, including tribal
areas, when it makes economic and
environmental sense.
(f) Require federal agencies to consider
household energy vulnerability ("energy
poverty") and low-income status for re-
ceipt of federal programmatic funding.
(g) Promote the use of NADB funds to sup-
port energy transmission and generation
in areas with little existing infrastructure,
especially rural communities and tribal
areas.
To provide for greater marketability and prosperity, projects must be binational, bi-state and broad-
cast on a national level.
9. Support export of petroleum products to
Mexico and monitor Mexico's efforts to
expand its own refining capacity.
10. Support export of natural gas to Mexi-
co and support private sector efforts to
complete cross-border pipelines that will
support such exports. Evaluate the safety
and effects on border communities resulting
from increased exports of liquefied natu-
ral gas by rail and tank trucks on regional
highways.
11. Foster the development of renewable en-
ergy, particularly solar and wind, in border
states.
12. Actively support development of
U.S. electricity-generation projects built for
the purpose of making cross-border deliver-
ies of electricity to Mexico.
13. Increase efforts by NERC to include Mexi-
co within NERC and also increase NERC's
efforts to incorporate cross-border flows
to protect and improve the reliability of the
bulk electrical system throughout North
America.
14. Support binational projects that increase
the reliability and efficiency of the shared
grid.
15. Promote the promulgation of efficient
cooling and lighting technology in the
border region. Support binational projects
that promote energy-efficient building
standards compliance, data collection
(monitoring, reporting and verification),
demand-side management, and the
introduction of reach codes for high-energy-
use areas and buildings.
-------
The Border
Socio-Economic
and Environmental
Context
The U.S.-Mexico border area is defined by the
1983 La Paz Agreement as the area stretching
100 kilometers (km) (62 miles) from either side of
the international boundary, which is 1,954 miles
(3,145 km) in length. For purposes of the North
American Development Bank (NADB), the border
zone is 100 km into the United States and extends
300 km (186 miles) into Mexico from the boundary.
The border region also has been defined as the
U.S. counties and Mexican municipalities
contiguous with the international border because
socioeconomic data are available for these
administrative units. This enables data-based
description and analysis of the region. At times,
the border zone definition includes U.S. counties
and Mexican municipalities that do not touch the
border but are partly within the 100 km zone to
the north and south of the boundary. Finally, Texas
includes additional counties within its border zone.
These different demarcations of the border region
are illustrated in Figure 1.
The U.S. border region with Mexico is different from
other regions in the United States. These differenc-
es include rapid economic and population growth;
rapid urbanization; shared natural resources such as
rivers, groundwater and airsheds; economic, cultural
and political differences and asymmetries with Mex-
ican communities across the border; burgeoning
international commerce and trade flows; high rates
-------
Figure 1. The U.S.-Mexican Border Region as defined by the La Paz Agreement, North American Development Bank and border counties and municipalities.
Source: Pamela Cruz, The Baker Institute (Payan and Cruz 2017).1
of poverty; and diverse ethnic identities. Overall, the
Southwest border is poorer and more urbanized
than the rest of the United States. These features
present multiple challenges that other regions of the
United States often do not have to overcome.2
Since the 1940s, the population of the 10 U.S.
and Mexican border states has grown more rapidly
than the national averages and, at the same time,
the populations of the counties and municipalities
along the border have grown faster than the
states in which they are located. Driven by internal
migration, the populations of Mexican municipalities
typically have grown at twice the rate of their U.S.
counterparts. By 2010, some 14.4 million people
resided in U.S. border counties and Mexican
border municipalities. By 2017, nearly 100 million
individuals resided in the U.S. and Mexican border
states (Table 1), and nearly 8 million residents
inhabited the U.S. border counties (Table 2). By
-------
The Border Socio-Economic and Environmental Context
Table 1. U.S. and Mexican Border States Population
U.S. BORDER STATES, 2017*
State
Population
California
39,536,653
Arizona
7,016,270
New Mexico
2,088,070
Texas
28,304,596
Total
76,945,589
MEXICAN BORDER STATES*
State
Population
Baja California
3,315,766
Sonora
2,850,330
Chihuahua
3,556,574
Nuevo Leon
5,119,504
Coahuila
2,954,915
Tamaulipas
3,441,698
Total
21,238,787
Total border states
98,184,376.00
* U.S. Census Bureau (2019c) 2017 estimate.
t Institute Nacional de Estadistica y Geogratia (Mexico's National Institute
of Statistics and Geography) 2015 estimate, ;uentame.ineai.org.mx/
monoarafias/default.aspx?tema=me.
2020, the border population is projected to reach
19.5 million. Most of the border's population resides
in 15 paired U.S. and Mexican interdependent sister
cities, including seven along the Texas border with
four Mexican states (Ganster and Lorey 2016).
Of the 26 U.S. federally recognized Native American
tribes in the border area, some have tribal members
living in adjacent areas of Mexico and several occupy
large reservations along the international boundary
(EPA 2011). The Tohono O'odham tribal reservation
is located in Arizona along about 65 miles (105 km)
of the border with Mexico. Other tribes with strong
cross-border connections to Mexico include the
Yaqui, Kickapoo Traditional Tribe of Texas and
Kumeyaay of California. Hispanics constitute the
largest ethnic group in the border region, are the
largest minority group in the United States, and are
a majority of the population in 19 of the 24 counties
along the international border with Mexico. In 2015,
82 percent of the population of the border counties
was Hispanic, excluding San Diego (California) and
Pima (Arizona) counties, where the percentages were
33.9 and 37.3 percent, respectively.
The 24 U.S. counties bordering Mexico (again
excepting San Diego and Pima counties), if
Table 2. U.S. Border States and Counties Population, 2017
STATE & COUNTY
2017 ESTIMATE
California
39,536,653
San Diego
3,325,468
Imperial
181,574
Total CA counties
3,507,042
Arizona
7,016,270
Yuma
207,534
Pima
1,022,769
Santa Cruz
46,212
Cochise
124,756
Total AZ counties
1,401,271
New Mexico
2,088,070
Hidalgo
4,305
Luna
24,148
Dona Ana
216,186
Total NM counties
244,639
Texas*
28,304,596
Brewster
9,337
Brooks
7,235
Cameron
423,725
Crockett
3,564
Culberson
2,231
Dimmit
10,418
Duval
11,273
Edwards
1,953
El Paso
840,410
Frio
19,600
Hidalgo
860,661
Hudspeth
4,408
Jeff Davis
2,280
Jim Hogg
5,202
Kenedy
417
Kinney
3,745
La Salle
7,584
Maverick
58,216
McMullen
778
Pecos
15,634
Presidio
7,156
Real
3,429
Reeves
15,281
Starr
64,454
Sutton
3,767
Terrell
810
Uvalde
27,132
Val Verde
49,205
Webb
274,794
Willacy
21,584
Zapata
14,322
Zavala
11,948
Total TX counties
2,782,553
Total U.S. border county
population
7,935,505
'Includes counties on the border or within 100 km (62 miles) of the border.
Source: U.S. Census Bureau, ata.census.aov/cedsci.
-------
considered a state, would rank 51st—or dead last
among U.S. states—in poverty rate, percentage
of persons under 65 without health insurance,
percentage of high school or higher graduates, and
per capita income. In some cases, the differences
are staggering. For example, only 69.1 percent of
residents of these counties older than age 25 are
high school graduates compared to 84 percent for
the United States overall (Soden 2006). All of these
are indicators of poverty. Poverty and ethnicity
coincide in the U.S.-Mexico Porder region, where
the health effects of deteriorated environmental
conditions also harm the population.
Because of rapid urPan growth and scarce
infrastructure funding, U.S. and Mexican Porder
communities have chronic deficits of basic urban
services, including potable water, sewage treatment
and proper solid-waste disposal. In all states of the
U.S. border region, principally in Texas and New
Mexico, residential communities called colonias
developed without standard infrastructure. Colonias
are located in rural areas of counties and lack basic
services such as water, sewage, electricity and
often paved roads. The Texas Secretary of State
found that in 2014 nearly 38,000 residents in the
six largest border counties in Texas with colonias
lacked potable water or sewer services.
Although the North American Free Trade Agreement
(NAFTA), which began in 1994, produced a large
increase in trade and investment, it did not create
widely shared prosperity in U.S.-Mexico border
communities. NAFTA stimulated international
commerce and created many jobs along the
border, but those jobs tended to be low-skill and
low-paying, while U.S. border communities lost
higher paying assembly and manufacturing jobs
that moved into Mexico and elsewhere offshore.
Trade growth brought increased vehicular crossings
that saturated the border infrastructure and
overwhelmed communities along the major trade
corridors with increased air pollution, producing
health as well as safety concerns (Quintana et
al. 2015, Rincon 2003). Regions throughout
the United States benefited from the growth of
NAFTA-related trade and investment, but border
communities absorbed a disproportionate share
of the environmental costs related to congestion.
Federally funded programs associated with NAFTA,
such as the NADB and the U.S. Environmental
Protection Agency's (EPA) border environmental
program (in conjunction with Mexico's environmental
agency), were established to address the many
border environmental problems. Although significant
strides were made to address border environmental
issues, those programs have not been adequately
supported in recent years.
Expanding trade and commerce, along with continued
urban growth on both sides of the border and aging
environmental and urban infrastructure, have produced
an environmental crisis in many border communities.
Sewerage infrastructure has exceeded its useful life in
many of these communities, resulting in frequent spills
of contaminated wastewater. Border law enforcement
agencies in San Diego and elsewhere indicate this
has produced dangerous working conditions for field
personnel (Moreno Ducheny 2019, U.S. Customs
and Border Protection 2017). Sewage flows into the
ocean can cause unsafe water quality for recreation
along beaches in San Diego and Tijuana, resulting in
transboundary beach closures and economic impacts.
Air quality in the border region is affected by pol-
lutants from a number of sources, most related to
energy. Motor vehicles, electric-generating plants,
industrial facilities, agricultural operations, mining,
dust from unpaved roads and open burning all affect
urban and regional air quality along the U.S.-Mexico
border. The most common and harmful pollutants
from these sources include suspended coarse
and fine particulate matter and ground-level ozone
(Quintana et al. 2015).
Although substantial improvements have been made,
air quality still is a major concern throughout the bor-
der region. The pressures associated with industrial
and population growth, differences in governance
and regulatory frameworks across the border, and
topographic and meteorological conditions combine
to present a challenging context in which to address
air quality management. Traffic congestion at ports of
entry adversely affects air quality in the surrounding
sister cities, especially in local communities close
to the border crossings. In addition, some U.S. and
many Mexican border cities, including Ciudad Juarez,
lack a robust or sustainable air-quality monitoring
program. Without basic air-quality data, effective pol-
icies cannot be implemented to resolve public health
issues (EPA 2011).
-------
The Border Socio-Economic and Environmental Context
1.1 Other Factors
A number of national parks in both countries-
including Big Bend National Park in Texas, Organ
Pipe Cactus National Park in Arizona, and the
Maderas del Carmen Biosphere Reserve and El
Pinacate y Gran Desierto del Altar Biosphere Reserve
in Mexico—are spectacular and remote. Other
large areas of the border region are protected and
managed by federal, state or local agencies; tribal
authorities; or nonprofit organizations. Of the
1,954 miles (3,145 km) of the boundary, almost
780 miles (1,255 km; 40%) are along U.S.
Department of the Interior lands. Texas has the
most land along the border that is privately owned,
although Big Bend National Park, other federal
lands and state parks are important. Deserts,
mountains and riparian areas help to provide
significant diversity in plant and animal species and
contribute to ecotourism. The border has areas
of great natural beauty and value. Some of these
areas are compatible with energy development and
transmission infrastructure; others are problematic.
The natural environment and climate of the border
region provide many challenges for environmental
quality and sustainability of communities. The
border is mostly arid, and water is an extremely
limited resource in many parts of the border
region. Population growth—along with growth in
agriculture and other economic activities, including
energy production—places increasing stress on
water quantity and quality. As the Good Neighbor
Environmental Board (GNEB) described in its 17th
report (2016), the historic increases in ambient
temperature and long-term drought point to
continuing decline of fresh water supply in the border
region. Some energy development in the border
region has the potential to affect water resources
through use of fresh water and contamination of
water resources. Protecting the quantity and quality
of water sources is important for ecological, human
and economic health in the region.
The effects of a changing climate on energy supply,
delivery and demand also are of concern, espe-
cially for the border region where the projected in-
creases in energy expenditures likely will be among
the highest in the United States by the end of the
century. For example, the Fourth National Climate
Assessment notes three significant issues that
likely will necessitate greater energy expenditures:
(1) how the United States' energy system already
is being affected by extreme weather events;
(2) how changes in energy technologies, markets
and policies are affecting the energy system's vul-
nerabilities; and (3) the actions already being taken
or considered to enhance energy reliability and
resilience (Zamuda et al. 2018).
1.2 Energy Access,
Energy Poverty and
Energy Insecurity
One characteristic of the U.S.-Mexico border region
is the high rate of poverty suffered by urban and
rural inhabitants. One consequence of poverty is
energy poverty or insecurity (i.e., "the inability to
adequately meet basic household energy needs"
[Hernandez 2016, 2019]), often defined as a
household spending more than 10 percent of its
income on utility costs (Wilder et al. 2016). For these
low-income border residents, the cost of the energy
consumption needed to maintain a healthy lifestyle
creates a significant or unnecessary economic bur-
den (Harmon, Haley and Funkhouser 2017). Energy
insecurity has been "linked to health and other hard-
ships [and]... children in moderately and severely
energy insecure homes are more prone to food in-
security, hospitalizations, poorer health ratings, and
developmental concerns than children in 'energy
secure' homes" (Hernandez 2016).3 GNEB's 17th
report (2016) details the health effects of increased
temperatures on low-income border populations.
A California "climate gap" study found that households
in the lowest income bracket use more than twice
the proportion of their total income on electricity than
households in the highest income bracket (Morello
Frosch et al. 2009). In Texas, a study found that almost
half of the families with extreme (0-30% Area Median
Income4) and very low (30-50% Area Median Income)
income faced difficulties in paying electricity bills.
Participants sacrificed mostly clothing and food to pay
electricity bills, and in extreme circumstances, they cut
transportation, medicine and housing needs. In border
counties, the energy burden rate ranges from 8 to
18 percent (Harmon and Moss 2019).
-------
Energy insecurity is a serious problem nationwide, and
according to the U.S. Energy Information
Administration (EIA), close to one in three households
in the United States cannot meet its basic energy
needs (EIA 2015). This issue, however, is exacerbated
in areas with high levels of poverty, as in the border
region. Low-income households spend significantly
more of their income on energy costs because of
structural issues with housing (e.g., substandard
housing, lack of weatherization) and the high cost of
energy. Insufficient cooling and heating systems are a
major concern for low-income households in the
border region. In Texas, one of every three people
(32.5%) are below 200 percent of the poverty line. In
2017, despite the obvious need, only 4.7 percent of
Texans received Low Income Home Energy
Assistance Program (LIHEAP) funding (Harmon, Haley
and Funkhouser 2017). In New Mexico, for example,
residents on average spent US$3,520 to meet their
energy needs in 2017 (EIA 2019). For the 20 percent
of New Mexicans living at or below the poverty line,
this translates to at least one-quarter of their income
being put toward energy expenses.5
Although energy poverty is an under-researched
field, its importance is increasingly evident given
the existing arid climate of the border region and
projections for future climate change. As noted
above, border communities have higher rates of
poverty and are more ethnically diverse than the
U.S. population on average. At the same time,
border communities are subject to disproportionate
adverse effects from increasing temperatures and,
in some cases, increasing severe weather events.
Low-income households with children or elderly
people are particularly at risk for energy poverty.
Race, ethnicity and immigration status are related
to higher risk of energy poverty. The consequences
include tradeoffs for basic necessities (food, medical)
and adverse health consequences (e.g., heat-related
illness and mortality). Minorities and the poor are
more likely to live in urban centers with less tree cover
to reduce heat and more concrete and pavement to
trap it. They also have less access to air conditioning
and are less likely to own cars to escape extreme
weather events (Morel lo Frosch et al. 2009).
Air conditioning dominates electricity use, except
in the higher altitude regions of the Southwest. As
Southwestern states with semi-arid warm climates
in their lower altitudes, Arizona and New Mexico of-
ten are ignored in discussions about high per-capita
energy consumption and costs. In terms of absolute
and average outlays per capita, that impression
is correct: In 2009, household energy expendi-
ture in Arizona was US$1,959 and in New Mexico
A heat and health project was conducted during the summer of 2018 with low-income families living in colonias
in San Elizario, Texas (Garfin et al. forthcoming). An interdisciplinary team from The University of Arizona, The
University of Texas at El Paso, the National Oceanic and Atmospheric Administration, and the Adult and Youth
United Development Association, Inc. community center designed a train-the-trainer curriculum for promotoras
(community health workers) on how to reduce the health effects of extreme heat and how to cool houses through
passive cooling techniques. Once trained, the promotoras conducted door-to-door visits to almost 260 families
to ask questions and provide recommendations and materials. Almost all participants thought that summers are
getting hotter. Only one-third acknowledged that their personal health risk from high temperatures was low or
very low. One-third of the participants were satisfied with the cooling systems in their homes. Although families
reported some health symptoms during the summer, such as headaches, muscle cramps, dizziness, nausea and/
or vomiting, only 24 percent of those who suffered symptoms sought medical care.
The intervention revealed that some families had implemented passive cooling changes, such as insulation
in walls, covered porches, and solar films or screens on windows. During focus groups, families recognized
that they are unable to afford household improvements for cooling and expressed feeling stressed because
increasing temperature forecasts will mean higher electricity bills. This project provides an overview of personal
beliefs, energy burdens and strategies to keep a home safe and comfortable during the summer (Garfin et al.
forthcoming).
-------
The Border Socio-Economic and Environmental Context
US$1,802, below the national average (US$2,024)
and at the low end of the range of all states for
average annual energy expenditures (EIA 2012).
Energy costs per square foot, however, are slightly
higher, and inequalities in income across the region
mean there are many people who are energy-poor
in relation to their income and needs.
An important federal program to address energy
insecurity is LI HEAP,6 administered by the
U.S. Department of Health and Human Services
(HHS) pursuant to the Low-Income Home Energy
Assistance Act of 19817 LIHEAP provides block
grants to states, tribes and tribal organizations,
and territories to assist low-income households in
meeting their home energy costs, depending on
annual appropriations from Congress. HHS released
approximately US$3.65 billion of regular block grant
funding to LIHEAP grantees on October 26, 2018.
Approximately $3.32 billion of regular block grant
funding for federal fiscal year 2020 was released to
LIHEAP grantees on November 1, 2019 (HHS 2019).
In Arizona, the number of households eligible for en-
ergy assistance under LIHEAP has risen in the last
decade to 686,900 by 2017, although only 24,000
households received assistance in 2017, and this
was mostly for heating rather than cooling (Na-
tional Energy & Utility Affordability Coalition 2019).
Three-quarters of these households were below the
poverty threshold, and one-third were homes oc-
cupied by elderly residents. In New Mexico, one of
every five families is estimated to be in energy pov-
erty, using 20 percent of household income for utility
bills (Wilder at al. 2016). In 2010, only US$35 million
of an estimated need of US$222 million was availa-
ble for energy assistance for LIHEAP-eligible families
in Arizona (Wilder et al. 2016).
Another program that addresses energy insecurity
is the U.S. Department of Energy's (DOE) (2019a)
Weatherization Assistance Program (WAP), which
reduces energy costs for low-income households
by increasing the energy efficiency of their homes.8
Under this program, DOE (2019b) awards grants
to state governments, which then contract with
local agencies to deliver weatherization services to
eligible, low-income residents who apply for assis-
tance. DOE funding for WAP for fiscal year 2019
was US$257 million (Garcia 2019).
The states play an important role in implementing
LIHEAP and WAP. For example, the New Mexico
Human Services Department implements benefits
under LIHEAP and provides energy assistance for
homes qualified to participate in other social ser-
vice programs, such as the state's Supplemental
Nutritional Assistance Program. Currently, the New
Mexico Human Services Department considers
households that are at or below 150 percent of the
federal poverty level guidelines or 60 percent of the
state median income to be in poverty. A point sys-
tem is used for the complete analysis, and the cut
off levels for assistance may differ, depending on the
assistance (e.g., 200% for low-cost weatherization
assistance). According to the New Mexico Human
Services Department monthly statistical report for
January 2019, there were 8,540 cases for LIHEAP
assistance, averaging US$295 per case, at a cost
of more than US$2.5 million (a 14.5% increase
compared to January 2018). Out of the 19,842
recipients that benefitted, 8,279 (44%) were children
(New Mexico Human Services Department 2019).
HHS has assembled state-by-state information on
LIHEAP and related state programs, including those
offered by the state public utility commissions.9
HHS also has assembled information on each of the
state's policies/programs regarding disconnections,
with respect to inability to pay and/or medical con-
dition, which can be found at iheapch.acf.hhs.aov/
Disconnect/disconnect, htm.
1.3 Indigenous People
Border Region
Energy Issues
Twenty-six federally recognized tribes are located
in the U.S. portion of the border region, and seven
Baja California and eight Arizona Sonora indigenous
communities are recognized by the government of
Mexico. Figure 2 highlights the location of U.S. trib-
al communities located in the U.S.-Mexico border
region. Tribes hold approximately 24 percent of the
lands within the U.S. border area; the large Tohono
O'odham Nation reservation in Arizona shares
approximately 65 miles (105 km) of boundary with
Mexico. The biologically diverse tribal areas encom-
pass urban and rural areas, deserts, mountains,
-------
U.S.-Mexico Border Region - Region Fronteriza Mexico-Estados Unidos
Figure 2. U.S. tribal
communities located in the
U.S.-Mexico border region.
Source: U.S. Environmental
Protection Agency Border
2020 Program, www.epa.
aov/sites/production/files/
documents/Border2020-
map.pdf.
ARIZONA
NEW MEXICO
i to* c--- s WtSST
I \i
Pacific Ocean
BAJA
CALIF.
TEXAS
Gulf of
California,
SONORA
CHIHUAHUA »
Pechanga
Pauma
Pala
Rincon
San Pasqual
Mesa Grande
Barona
Capitan
Viejas
La Jolla
Torrps-
. Martinez
v ^ Los Coyotes
Santa Ysabel
Inaja
Ewiiaapaayp
Manzanita
Vo*
/ m
* \ XJ*.
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COAHUILA
i
Quechan ^
Cocopah
in orange are U.S. tnbal communities located In the border region.
Gulf of
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NUEVO
LEON
TAMAUUPAS
wetlands, rivers and aquifers. The Tohono O'odham
of Arizona recognize one indigenous community in
Mexico as an extension of their own tribal commu-
nity. In the border region, California has 18 federally
recognized tribal reservations and two recognized
tribes without reservations, Arizona has four tribal
reservations, and Texas has two reservations (San
Diego County Water Authority 2013).
Tribes have existed for thousands of years in the
border region and have thrived using their cultur-
al practices for hunting, planting and harvesting.
Tribes became modernized as basic services that
make life easier, such as running water, electricity,
telecommunications and so forth, became availa-
ble in tribal areas. Along with those services came
tribal concerns about the effects of energy pro-
jects—whether located on or off tribal lands—on the
air quality, water quality, wildlife and habitat of the
natural environment. Tribes also became concerned
about the effects of these development projects on
sacred sites and traditional cultural practices. These
concerns apply not only to fossil-fuel projects, but
also to green-energy projects. Rights-of-way, leases
and other agreements that allow energy projects to
be located on tribal lands, or that have the potential
to affect tribal resources and communities, must be
negotiated in consultation with tribes to minimize
harm and maximize benefit. Increasing outreach and
communication between tribal governments and
federal, state and local government agencies are
priorities for tribes.
Most border tribes are economically disadvantaged
with high levels of poverty. Although renewable
energy projects have the potential for economic
development and to provide electrical power to low-
income residents, including tribal members, border
tribes face many challenges to be able to develop
alternative energy projects to benefit the community
(DOE 2004). These challenges include complex
land use issues, inadequate access to transmission
systems, and financing and cost barriers. Tribal land
ownership categories include:
• Federal lands owned by a tribe;
• Allotted lands that are individually owned federal
trust acreage; or
• Fee lands that are nontrust individuals who could
be Indians or non-Indians who own lands on
reservations.
A number of federal agencies are involved in the leas-
ing process for tribal energy projects. The Bureau of
Indian Affairs reviews leases and reclamations issues.
The U.S. Department of the Interior's (DOI) Office of
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The Border Socio-Economic and Environmental Context
Natural Resources Revenue (formerly the Minerals
Management Service) reviews royalty rate provisions
to ensure clarity of calculations and distributes royal-
ty payments. DOI's Office of Surface Mining Recla-
mation and Enforcement reviews mining leases.
Because many reservations are located in remote
rural areas, access to transmission systems is a
problem for siting an energy project. Infrastructure
costs for connecting to the grid can be cost-
prohibitive, especially if the energy project is not a
large one.
Another financial barrier relates to tax incentives
or subsidies for alternative energy projects. The
sovereign status of tribes limits their use of these
mechanisms in project development. Investors may
be taxed by both the state and tribe (depending
on whether energy is used by nontribal custom-
ers). This makes it less feasible to use tribal energy
resources to power nontribal areas. Other financial
barriers for tribal energy projects exist. The National
Environmental Policy Act (NEPA) process can be
costly for a project on a large scale, especially when
a tribe does not have tribal members qualified to
conduct the environmental review. The required
tribal and federal administrative processes also add
cost and delay to projects. Finally, if a tribe cannot
fund a project through its own resources, finding
external funding can be difficult.
Some options are available, however, to increase al-
ternative energy projects in tribal communities. Tribal
community colleges are a valuable option for training
the workforce in the energy sector. For example, the
Tohono O'odham Community College offers electri-
cian training for students. Curricula could be expand-
ed to include solar- and wind-installer training. This
could provide opportunities for students to pursue
internships with tribal utilities, which would help to
address the issue of high unemployment among
tribal members in the U.S.-Mexico border region.
1.4 Overarching View of
Climate Change
The U.S.-Mexico border region is generally
characterized by a hot, dry climate. Global
climate change is projected to cause increasing
temperatures, decreased total precipitation,
decreased streamflow, more extreme weather
events, more frequent and intense wildfires, and
sea-level rise and more intense storm surges in this
region (GNEB 2016). These changes in climate are
expected to affect the environment, as well as the
economy and other human systems, including the
energy sector.
Figure 3 illustrates the general increase in average
temperatures in the Southwest United States. The
average annual temperature of the Southwest
increased 1.6°F (0.9°C) between 1901 and 2016
(Vose et al. 2017). This trend is projected to contin-
ue (Hawkins and Sutton 2011).
Southwest, Average Temperature. January-December
Figure 3. Southwest average yearly temperatures have increased 1,9°F
(0.9°C) between 1901 and 2018. Temperatures reflect data from the
Southwest region as defined by the National Oceanic and Atmospheric
Administration, which includes the states of Arizona, New Mexico, Colorado
and Utah.
Source: National Oceanic and Atmospheric Administration
Climate at a Glance, www.ncdc.noaa.aov/caa/reaional/
time-series/107/tava/12/12/1895-2019?base
prd=true&firstbasevear=1901 &lastbasevear=2018.
Precipitation is projected to become more varia-
ble, with dry areas becoming drier and wet areas
becoming wetter (GNEB 2016, Satija and Malewitz
2015, U.S. Bureau of Reclamation 2013, Wilder et
al. 2013). An overall decrease in precipitation, how-
ever, is expected. Figure 4 highlights the changes
in average precipitation in the Southwest United
States during the last century. Heat waves and peri-
ods of drought along the U.S.-Mexico border region
are projected to become extended and more severe
and to occur more frequently, whereas cold waves
may become less intense (GNEB 2016, Kunkel et
al. 2017, Wilder et al. 2013). Extreme weather and
flood events may occur more frequently and be-
come more severe, with property losses and public
safety increasingly threatened by urbanization and
the increase of impervious surfaces (GNEB 2016,
Kloesel et al. 2018, Satija and Malewitz 2015).
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Southwest, Precipitation, January-December
aS' ~~~ Pn*,p
Figure 4. Southwest annual precipitation. Precipitation reflects data from
the Southwest region as defined by the National Oceanic and Atmospheric
Administration, which includes the states of Arizona, New Mexico, Colorado
and Utah.
Source: National Oceanic and Atmospheric Administration Climate at a
Glance, www.ncdc.noaa.aov/caa/reaional/time-series/107/pcp/12/12/1895-
2019?base prd=true&firstbasevear=1901 &lastbasevear=2018.
The effects of climate change on natural resources
are expected to affect energy systems in the
border region. Three main characteristics of a
region determine the design of its energy systems:
available resources (e.g., water, solar, wind,
biomass); energy demand (e.g., requirements for
heating and cooling, population); and technology
and operations (e.g., cooling water intakes and
effluent systems for thermoelectric power plants,
transformers equipped with cooling systems to
prevent overheating) (DOE 2013). All three factors
are affected by climate patterns. As regional
climates begin to change, however, energy
infrastructure that has been designed to perform
well under certain historical conditions may no
longer be able to cope with the projected changes
in temperature, precipitation, wildfires, hurricanes
and sea-level rise (DOE 2015a, Kloesel et al. 2018).
Along the U.S.-Mexico border, the reliability of
energy systems is increasingly threatened by
higher temperatures, declining water availability
and greater risk of wildfire (DOE 2013, Kunkel et
al. 2013, Melillo et al. 2014, Zamuda et al. 2018).
Higher temperatures and more frequent and severe
heat waves, in addition to increased population,
are anticipated to amplify demand for cooling
energy and lead to stresses in energy provision
during peak demand (Melillo et al. 2014, Kinkel et
al. 2013, Sathaye et al. 2012, Wilder et al. 2013).
The additional pressure placed on already severely
stressed water systems as a result of climate
change threatens the existing water supply and
affects energy infrastructure. Drought could limit the
water available for power plant cooling and oil and
gas operations (Cook 2013, DOE 2013, Melillo et
al. 2014, Sathaye et al. 2012, Zamuda et al. 2018).
Reductions in streamflow and shifts in streamflow
timing will affect hydropower resources (Aspen
Environmental Group and M. Cubed 2005, Cayan
et al. 2013, Kunkel et al. 2013, Melillo et al. 2014,
Zamuda et al. 2018). Finally, electricity transmission
lines are vulnerable to projected increases in
wildfires, whereas increased temperatures may
reduce the transmission capacity of power lines
(DOE 2013, Melillo et al. 2014, Sathaye et al. 2012).
1.5 Energy Efficiency and
the Border Region
Energy efficiency entails harnessing advancements
in technology to use less energy to provide the
same or higher level of energy service. In this way,
people can receive the benefits of energy services,
such as lighting, heating and air conditioning, while
using less energy. Energy-efficiency measures are
usually designed to be cost-effective. The overall
goal is for the energy-efficiency measures to pay
for themselves: the sum of the dollar savings from
the reduced energy use should be equal to or
greater than the cost of installing the measure.
In addition to lowering end-users' energy costs,
energy efficiency has benefits for the energy grid
and society. It is more cost-effective to reduce
energy use through energy-efficiency measures
than to switch out energy sources (e.g., between
electricity or gas), accounting for the cost of energy
generation, transmission and distribution. Energy
efficiency is particularly helpful to the electricity
grid. Because the cost of electricity storage is high,
the grid generally needs to be built to serve the
highest load of the year. In the border region and
other cooling-dominated climates, peak electrical
load occurs during the summer. Energy-efficiency
measures help to reduce the need for electricity
for cooling, thus reducing system peaks and the
need for investment in generation, transmission
and distribution. Energy-efficiency measures can
take the form of government-issued codes and
standards for appliances, such as ENERGY STAR®,
and for construction of new buildings, such as
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The Border Socio-Economic and Environmental Context
Leadership in Energy and Design (commonly known
as LEED). Energy-efficiency programs targeting
upgrades in existing buildings often are operated by
utilities in conjunction with government regulators.
Energy-efficiency measures also result in other
nonenergy benefits, including enhanced comfort,
indoor air quality, health and productivity. Energy-
efficiency programs also create jobs, such as those
in the construction industry (DOE 2017b).
In the United States, energy-efficiency policy is
effectuated by a mix of federal, state and local
governments. Often, a significant source of
energy-efficiency savings comes from programs
administered by utilities, and such programs can
be overseen by state public utilities commissions.
Federal energy-efficiency policy implementers focus
on reviewing and updating national appliance- and
equipment-efficiency standards to meet federal
technological and economic objectives. The federal
appliance standards pertain to a number of product
categories. The standards are designed such that
the energy savings are equal to or greater than
the initial costs of implementing each standard.
This federal program yields numerous benefits:
cost-effectiveness, technological improvement,
reduction in energy waste, economies of scale
and streamlined access to product operating-cost
knowledge. Since the initial 1987 standards, the
United States is expected to reach US$2 trillion
in cumulative operating-cost savings by 2030
(DOE 2017b). The border region has benefitted from
the more efficient use of energy brought by these
standards.
Energy-efficiency policy in Mexico is a mix of federal
and local policies. The Comision Nacional para el
Uso Eficiente de la Energfa (National Commission for
the Efficient Use of Energy), part of the Secretaria de
Energia (Ministry of Energy), establishes appliance-
efficiency standards that apply nationwide. Mexico
does not have a robust system in place to require
efficient buildings, although some municipalities
have adopted building energy standards.
-------
In the United States, energy-
efficiency policy is effectuated
by a mix of federal, state and
locai governments. Often, a
significant source of energy-
efficiency savings comes from
programs administered by
utilities, and such programs
can be overseen by state
public utilities commissions.
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The Border Socio-Economic and Environmental Context
1.6 Energy Efficiency in
U.S. Border States
Arizona has energy standards for public buildings
and encourages the use of energy-savings
performance contracts. Building-efficiency
standards in Arizona are set at the local level;
however, the majority of new construction in Arizona
occurs in areas that have adopted the 2012 or 2015
International Energy Conservation Code (IECC)
standards. The Arizona Corporation Commission,
Arizona's public utilities commission, through its
Arizona Energy Efficiency Standards ordered in 2010
that all public utilities were to achieve 1.25 percent
annual electricity savings, measured in kilowatt hours,
starting in 2011, ramping up to 2 percent beginning
in 2013, with the ultimate goal of achieving
22 percent cumulative savings by 2020. At the time,
this order was one of the most aggressive energy-
efficiency standards in the United States (Haeri
and Morris 2012). Appliance standards have been
in effect in the state of Arizona since 2012, many
of which have subsequently been pre-empted by
federal standards, except for standards for pool
pumps, pool pump motors and electric spas that
became effective in 2012 (American Council for an
Energy-Efficient Economy 2019a).
Texas requires public buildings to be energy-efficient
and benchmarks energy use in state buildings to
this end. Single-family residential new construction
must comply with the 2015 International
Residential Code efficiency standard. All other
new construction must comply with the 2015
IECC efficiency standard. State-funded building
construction must comply with ASHRAE Standard
90.1-2013. Texas law requires electric utilities to
meet energy-efficiency goals. In 2010, the Public
Utilities Commission of Texas established a goal
to meet 25 percent of growth in demand in 2012
through energy efficiency and is requiring utilities to
meet peak-demand energy-efficiency targets. Utility
energy-efficiency program investments and savings
in Texas are below the national average (American
Council for an Energy-Efficient Economy 2019b).
Residential and commercial buildings in New
Mexico must comply with the 2009 IECC efficiency
standards. New Mexico requires its investor-owned
utilities to acquire cost-effective and achievable
energy-efficiency and load-management resources.
Electric investor-owned utilities must spend 3
percent of customer bills, whereas gas utilities
shall not spend more than 3 percent of total annual
revenues. Electric investor-owned utilities have a
statutory goal of saving 8 percent of 2005 retail
sales through their energy-efficiency programs
by calendar year 2020 (American Council for an
Energy-Efficient Economy 2019c). The state currently
is evaluating upgrading the state's building code to the
2018 IECC for all buildings in the state. Effective on
April 15, 2019, New Mexico is implementing Executive
Order 2019-003, "On Addressing Climate Change
and Energy Waste Prevention," which includes a
commitment to develop a regulatory framework to
reduce methane emissions in the oil and gas sector
and to reduce statewide greenhouse-gas emissions
by at least 45 percent by 2030 as compared to 2005
levels (Lujan Grisham 2019, State of New Mexico
Office of the Governor 2019).
California offers incentives for energy-efficiency
investments to schools, industry, residential
consumers and the public sector, as well as through
the Property Assessed Clean Energy financing
mechanism (DOE 2019c). Like Texas, California
requires state buildings to be energy-efficient and
also benchmarks energy usage in state buildings
to this end. California has a statewide building
energy disclosure requirement that applies to large
commercial and multifamily residential properties.
California first adopted its Building Energy Efficiency
Standards in 1978 and updates them on average
every 3 years. California's energy code is considered
one of the most aggressive and best-enforced energy
codes in the United States. California's standards
also require field verification and acceptance testing
for measures prone to improper installation to ensure
that expected energy-efficiency savings are achieved.
California will require high-performance attics and
walls and onsite photovoltaic installations in low-
rise residential new construction as part of its 2019
Energy Standards, effective January 1, 2020. This
requirement helps the state meet its goal of having all
new residential buildings be zero net energy by 2020.
California's investor-owned utilities efficiency
programs are overseen by the California Public
Utilities Commission (CPUC) and are considered
-------
some of the most robust in the nation, investor-
owned utilities are decoupled by CPUC order,
meaning that the utilities do not earn more money
by selling more energy and in turn are compensated
for providing energy-efficient programs that reduce
ratepayers' energy use. Responding to Senate
Bill 350,10 the California Energy Commission
has adopted targets to double energy-efficiency
savings in the state by 2030. California was the
first state in the country to adopt appliance- and
equipment-efficiency standards, effectuated by the
Warren-Alquist Act, the foundational legislation of
the California Energy Commission, in 1974. Since
then, California has adopted standards on more
than 50 products, many of which have subsequently
become federal standards. California has
collaborated with other countries to set harmonized
standards for products that have a worldwide
market, beginning with external power supplies
in 2007. The California Energy Commission has a
Modernized Appliance Efficiency Database System
that allows manufacturers to certify their products
online (American Council for an Energy-Efficient
Economy 2019d).
1.7 Resilience
Resilience for this report is defined as the ability of
an entity (e.g., asset, organization, community, re-
gion) to anticipate, resist, absorb, respond to, adapt
to and recover from a disturbance. With respect
to the services provided by the energy sector, the
objective of resilient energy infrastructure is to pro-
tect against economic and social dependencies by
providing reliable, affordable energy in an equitable
manner—regardless of income, geographic or other
issues—while minimizing environmental harm.11
During the past 25 years, the world has seen
a rise in frequency of natural disasters.12 Major
disaster declarations by the Federal Emergency
Management Agency for the United States
increased by a factor of five from 1953 through
2013 (Brusentsev and Vroman 2017). Texas ranks
highest among U.S. states in terms of variety
and frequency of natural disasters (California
Institute of Technology 2017). More than ever,
people and critical infrastructure are at risk from
natural and manmade disasters, with those in
developing countries particularly at risk. Because
of the interconnectedness of the energy and water
infrastructure with other critical infrastructure
systems, infrastructure failures can lead to
cascading and escalating consequences. These
consequences can result in immeasurable losses in
terms of lives, livelihoods and damage to a nation's
economy. The threat of these consequences has
led to a strong policy emphasis on the creation of
resilient infrastructure. Superstorm Sandy in 2012,
the Northeast Blackout in 2003, and the 2011
Southwest Blackout, which occurred in the Baja
California-California-Arizona border region, are
examples of critical energy-infrastructure failures.
Failure of the electric power grid can have wide-
spread consequences. For example, the 2011
Southwest Blackout was caused by the accidental
shut down of a transmission line in Arizona, trigger-
ing 23 distinct events on five separate power grids
in a span of 11 minutes that affected portions of
southern California, Arizona and Baja California and
left 7 million customers without power for about
12 hours (Kucher and Baker 2011). Public schools,
universities and federal courts remained closed the
following day (Perry et al. 2011). The losses from
the discarding of perishable food by grocery stores,
restaurants and households were estimated to be
up to US$18 million (Jergler 2011). The outage
also caused some sewage pumping stations to
fail, resulting in contaminated beaches and
potentially unsafe water supplies in several areas
(KPCC 2011). Because of the failure at the sewage
pumping stations, seven diesel generators were
installed at five pumping stations at a cost of
US$17 million (Ojeda 2012). Had the blackout
occurred during a heat wave with a disruption for
a longer period, there would have been significant
negative health effects on the affected population.
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\~
J
Overview of the
U.S. Energy Sector
15
This chapter will briefly discuss the U.S. energy mar-
ket and U.S. energy and environmental regulation.
This chapter also will review the new One Federal De-
cision program designed to improve the timeliness,
predictability and transparency of the federal environ-
mental review and authorization process for covered
infrastructure projects, including energy projects.
2.1 U.S. Energy Market
The United States derives most of its energy from oil,
natural gas, nuclear and coal (EIA 2019b), although
renewables such as solar and wind continue to in-
crease in importance (EIA 2019c). Each of these en-
ergy sectors has substantial participation from private
companies, with thousands of businesses involved.
2.1.1 Oil and Gas Production
Recently, the United States has witnessed huge
growth in oil and natural gas production through
increased use of hydraulic fracturing and horizon-
tal drilling (Robert Strauss Center for International
Security and Law 2019). Most of the newly booming
oil- and gas-producing areas that benefit from these
new technologies are in Texas, North Dakota and
Pennsylvania.
The increase in oil production has reduced the United
States' dependence on imports of petroleum, as
net imports of petroleum (including crude oil and
petroleum products) have declined substantially in
recent years (EIA 2019d).13 With respect to natural
gas, the increase in production and additions to gas
reserves—now estimated at 80 years of reserves-
have led to a re-orientation of the natural gas industry
toward an export-oriented model (EIA 2019e). Taking
into account the reduction in net imports of petroleum
and the growing exports of natural gas, EIA (2019f)
projects that the United States will become a net en-
ergy exporter in 2020 for the first time since 1953.
The natural gas industry's new focus on exports has
led to the authorization of many new liquefied natural
gas export terminals along the East and Gulf Coasts
(Zaretskaya 2018)—10 since 2012 (FERC 2019)14-
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and an expansion of the cross-border gas pipeline
network for delivery of natural gas to Mexico
(EIA 2018). The pipeline expansion has produced
conflict with border communities affected by these
large infrastructure projects (Mufson and Oldrunnipa
2019). Gas exports to Mexico have risen from
50 billion cubic feet (1.4 billion cubic meters [m3]) in
1994 to 1.7 trillion cubic feet (48 billion m3) in 2018
lynch 2019). This has helped play a role in boosting
the U.S.-Mexico energy relationship, which already
is characterized by its interdependent nature. As an
example, although Mexico sends crude oil to the
United States, Mexico lacks the refining capacity to
turn its oil into fuels—such as gasoline, diesel and
jet fuel—for use in Mexico's economy. Therefore,
Mexico is dependent on the United States for refined
petroleum products even though it is an exporter of
crude oil. According to Mexican estimates, the total
value of refined petroleum products imported into
Mexico for 2016, primarily from the United States,
was US$20.7 billion (including US$15.2 billion for
gasolines and naphtha and US$4 billion for diesel),
whereas the value of Mexican exports of crude oil
for that year was only US$15.9 billion (Comision
Nacional de Hidrocarburos 2018).
2.1.2 The Natural Gas Sector
According to the American Gas Association (AGA)
(2019a), natural gas comprises more than one-
fourth of all primary energy used in the United
States. Natural gas service extends to nearly
69 million homes, 5.5 million businesses, 185,400
factories and 1,825 electric generating units (AGA
2019a).
The system for delivery of natural gas to end-users
has several elements (AGA 2019b):
• The gathering system is the collection of pipelines
that carry natural gas from production wellheads
to transmission lines or processing plants, with
the assistance of field compressors.16
• The transmission system is the network of
large-diameter steel pipes that move natural gas
from the producing regions to local distribution
companies, with the assistance of compressors
located approximately every 50 to 60 miles along
each pipeline.
• Gate stations are receiving points for local distri-
bution companies.
• The distribution system consists of "mains" and
"service lines." From the gate station, natural gas
moves into "mains" that range from 2 inches to
more than 24 inches in diameter. Natural gas
then runs from the main into a home or business
through "service" lines.
The U.S. Department of Transportation Pipeline and
Hazardous Materials Safety Administration (Pt I MSA)
provides annual reports on the mileage of each type
of natural gas pipeline. PHMSA (2019a,b) reports
that as of 2018, there were 17,954 miles of
16
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Overview of the U.S. Energy Sector
gathering lines (11,754 miles onshore and 6,201
offshore), 301,562 miles of transmission pipelines
(298,390 onshore and 3,172 offshore),
1,307,796 miles of distribution main lines, and
an estimated 930,892 miles of distribution service
lines, for a total of 2,558,204 miles altogether.
In terms of industry participants, trade associations
representing various elements of the natural gas
delivery system report as follow:16
• The Interstate Natural Gas Association of America
states that it "is comprised of 28 members, rep-
resenting the vast majority of the U.S. interstate
natural gas transmission pipeline companies."
• The AGA states that it "represents more than
200 local energy companies that deliver clean
natural gas throughout the United States. There
are more than 73 million residential, commercial
and industrial natural gas customers in the United
States, of which 95 percent—over 69 million cus-
tomers—receive their gas from AGA members."
• The American Public Gas Association represents
publicly owned natural gas distribution systems. It
states that it has more than "700 members in
37 states. Overall, there are nearly 1,000
municipally owned systems in the United States
serving more than 5 million customers."
2.1.3 The Electricity Sector
Thousands of participants in the U.S. electricity
sector play a role in the production, transmission,
distribution and/or sale of electricity in the country
(DOE 2015b, U.S. Department of Homeland
Security 2019). According to the U.S. Energy
Information Administration's (EIA) electric power
sector survey data, almost 3,000 electric utilities were
operating in the United States in 2017 (EIA 2019g).
EIA classifies utilities into three ownership types:
investor-owned utilities, publicly run or managed
utilities, and cooperatives. ElA's data show that in
2017, 168 investor-owned utilities served 110 million
customers, 1,958 publicly owned utilities served
24 million customers, and 812 cooperatives
served 20 million customers (EIA 2019g). Out of
this universe of customers, investor-owned utilities
served roughly 72 percent, publicly owned utilities
served roughly 15 percent, and cooperatives served
roughly 13 percent.^ Other important players in the
electricity sector are non-utility power producers—
which accounted for 46.5 percent of installed
generating capacity at the end of 2018 as compared
to 32 percent accounted for by investor-owned
utilities (Edison Electric Institute 2019b)—and retail
power marketers, which serve as intermediaries
between electricity generators and large consumers
(EIA 2018b). The federal government has a role in
energy production and distribution, through federal
power marketing administrations such as the
Western Area Power Administration, that is limited
to the sale of wholesale electricity from federal
hydropower projects18 and through the Tennessee
Valley Authority (2019), a unique government power
company established by an act of Congress in
the 1930s. The International Boundary and Water
Commission, U.S. and Mexican Sections, maintains
hydropower units at Falcon and Amistad dams on
the lower Rio Grande River, but they are not operated
to maximize power production (IBWC 2019).
With respect to transmission, utilities in each of the
categories described above may have their own
transmission lines. In addition, regional transmission
organizations and independent system operators,
described in more detail in Section 2.2.3, play a crit-
ical role in the management of transmission systems
at the state or, more typically, regional level.
The recent increase in production of natural gas
discussed above has caused a steady move toward
gas over coal as the most-used energy resource
for power generation. EIA (2019h) reports that as
of 2018, 35.1 percent of the country's electricity
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now comes from natural gas, with 27.4 percent
from coal. The decreased price of natural gas and
stringent regulations on coal have led to the closure,
even premature closure, of many coal-powered
plants, once the mainstay of U.S. energy
(Marcacci 2017). One example is the Navajo
Generating Station on the Navajo Nation Indian
reservation in Arizona—once a supplier of critical
levels of power to Nevada and Arizona—powered
down on NovemPer 18, 2019 (Silversmith and
Randazzo 2019). America continues to export
large amounts of coal, however, with the majority
destined for Asia and Europe (EIA 2019i).
Historically, nuclear power plants have played an
important role in the U.S. electricity sector, provid-
ing about 19 percent of total electricity generation
(EIA 2019h), as well as a reliable base load power
source, contributing to the reliability of the distri-
bution systems. Arizona's Palo Verde Generating
Station and Texas' South Texas Project Electric
Generating Station are two of the largest in the
country by electricity generated and are located in
or near the border region (EIA 2019j). One nuclear
plant in the California border region, the San Onofre
Nuclear Generating Station, ended operations and
began decommissioning in 2013 because of aging
equipment, missteps by the operator, and intense
public pressure (Wald 2013).
More than half of U.S. states have passed laws or
adopted voter-backed initiatives to require certain
percentages of the state's electricity deliveries to
be derived from renewable sources, and seven aim
to have more than half of their electricity generated
from renewable sources within the next few dec-
ades (Cleveland 2019, National Conference of State
Legislatures 2019). This will force many electric
power providers to switch their sources to solar,
wind, hydro and other renewables in a shift away
from fossil fuels. California, the largest border state,
is planning to obtain 100 percent of its electricity
from decarbonized sources by 2045.1920
Figure 5, prepared by the Edison Electric Institute
(2019a) from data provided by EIA, shows the
changes in the mix of fuel sources for U.S. power
generation during the period from 1998 to 2018.
In recent years, energy-efficiency and load-
management programs have become important
Figure 5. Fuel sources as a percentage of total electric generation,
1998-2018. This chart highlights the rapid decline of coal and the growth
in natural gas as fuel sources, as well as the steady growth in "other
renewables" (renewables other than conventional hydro) during the
1998-2018 period.
Source: U.S. Energy Information Administration.
elements of utility energy resource portfolios,
supplementing the traditional focus on generation.
Among other goals, state regulators increasingly
promote energy efficiency—obtaining the same or
better service from technology for less energy—
as a goal of private utilities (e.g., by establishing
utility revenue incentives for energy efficiency)
(Cleveland et al. 2019). Load management, or
"demand response," leverages technology to allow
consumers, on a compensated basis, to reduce their
individual demand for electricity in lieu of receiving
electricity from a power plant. Benefits can include
relieving stress on the grid during peak hours
and extreme weather events, with a concomitant
potential increase in operational complexity for the
utility making use of demand response resources.
Certain states, including California, require utilities
to include demand response resources in long-
term procurement and integrated resource plans
(Andersen and Cleveland 2019).
2.2 U.S. Energy
Regulation
In the United States, the legal and regulatory land-
scape for energy includes the federal and state laws
and regulations applicable to the various energy
sectors, as well as other laws and regulations that
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Overview of the U.S. Energy Sector
affect development of energy infrastructure. This
section provides a review of the regulatory frame-
work applicaPle to the various energy sectors, at
both the state and federal levels. The subsequent
section will discuss regulation with respect to
environmental matters. The regulatory bodies for
energy and the environment for each of the border
states of California, Arizona, New Mexico and Texas
are described in the tables of state energy-related
agencies contained in Appendix 1.
2.2.1 Oil and Gas Production
Oil and gas in the United States are produced from
privately and publicly owned land. Oil and gas rights
on privately owned land are governed by state law,
which also governs leases and other assignments of
oil and gas rights. The law in some states provides
legal means for collective exploitation of oil and gas
rights, such as pooling agreements and unitization
agreements (voluntary and mandatory).21 Generally,
state law and regulations will require an approval
permit for drilling of wells.22 Drilling will be subject to
measures for conservation and avoidance of waste
such as spacing requirements for wells® and in
some cases establishment of a "maximum efficient
rate" for extraction of oil and gas to prevent damage
to a reservoir.2*
With respect to production of oil and gas from fed-
eral lands, there are two separate federal regulatory
processes depending on whether drilling will take
place onshore or offshore. The U.S. Department
of the Interior's (DOI) Bureau of Land Management
grants oil and gas leases for onshore lands on a
competitive basis under the Minerals Lands Leasing
Act.25 DOPs Bureau of Ocean Energy Management,
acting for DOI, is responsible for granting oil and
gas leases on federal offshore lands under the Outer
Continental Shelf Lands Act,26 Federal offshore
lands consist of the outer continental shelf beyond
the jurisdiction of the states, ' which is generally
3 geographical miles (3.5 miles or 5.6 kilometers
[km]) outward from shore at the mean low tide (with
different rules for Texas, Louisiana and the west
coast of Florida) out to a boundary of 200 miles
(322 km) from shore.
A state lands commission or a state's public re-
sources department through a competitive bidding
process generally handles oil and gas leases on
state publicly owned land.2®
2.2.2 The Natural Gas Sector
State regulatory bodies supervise and regulate the
in-state operations of privately owned gas utilities
that sell to the public. The applicable regulatory
bodies for the four border states as to regulation of
gas utilities are the California Public Utilities Com-
mission (CPUC; www.CDuc.ca.aov): Arizona Corpo-
ration Commission, Utilities Division (ACC Utilities;
www.azcc. gov/uti I it ies): New Mexico Public Regu-
lation Commission, Utility Division (NMPRC Utility;
www.nmprc.state.nm.us/utilities/index.html): and
Railroad Commission of Texas fwww.rrc.state.tx.us/
gas-services). State regulation of privately owned
gas utilities covers such matters as rates, consumer
-------
protection, safety and reliability of service, and the
construction and operation of in-state pipelines.29 A
substantial amount of local gas distribution is carried
out by municipal gas utilities, which are generally
supervised only by their governing bodies.
With respect to federal regulation, the Federal Ener-
gy Regulatory Commission (FERC) has authority
under the Natural Gas Act of 1938 to regulate
"transportation of natural gas in interstate com-
merce."30 FERC's jurisdiction includes interstate
natural gas pipelines, gas storage facilities,31 and
facilities for liquefied natural gas that are either
onshore or "near shore" (i.e., within the offshore
jurisdiction of the states as described above).32
FERC is charged with ensuring that the rates, terms
and conditions of service by interstate natural gas
pipelines, storage facilities and liquefied natural gas
facilities under its jurisdiction are just and reasonable
and not unduly discriminatory.33 In addition, FERC
authorizes construction and operation of such facil-
ities on a finding of public convenience and neces-
sity34 and must approve abandonment of facilities.35
Section 3 of the Natural Gas Act authorizes the
U.S. Department of Energy to regulate imports and/
or exports of natural gas, including liquefied natural
gas, from and/or to a foreign country.36
In the past, interstate pipeline companies provided
both transportation services and sales of natural
gas. FERC, however, has taken steps to separate
transportation and sales. FERC Order 436, issued
in 1985, required that natural gas pipelines provide
open access to transportation services, enabling
consumers to negotiate prices directly with producers
and contract separately for transportation.37 In 1992,
FERC issued Order 636, which mandated unbundling
of supply and distribution services from transporta-
tion services, providing customers with choices as to
providers, who were then forced to compete.38
Within the deregulated wholesale natural gas
market, gas is supplied and traded by private-
sector companies, pursuant to privately negotiated
transactions. Pricing and trading take place at
locations across the United States, primarily at the
intersections of major pipeline systems known as
hubs. Although FERC does not set prices in these
transactions, it has authority pursuant to the Energy
Policy Act of 2005 to issue rules to inhibit market
manipulation and facilitate price transparency in
natural gas markets.39
FERC also has "exclusive authority to approve or
deny an application for the siting, construction,
expansion, or operation" of a liquefied natural gas
terminal within the scope of its jurisdiction."40 Lique-
fied natural gas facilities are subject to an exception
to the general rule of open access for natural gas
facilities. Under a 2002 FERC decision, liquefied
natural gas facilities no longer are subject to open
access rules, and the facility operator can offer
access to customers of its choosing at prices and
terms and conditions to be negotiated.41
2.2.3 The Electricity Sector
Each U.S. state has a regulatory body that
regulates the in-state operations of privately owned
electric utilities and is responsible for making siting
decisions for electric utility facilities. The applicable
regulatory bodies for California, Arizona and New
Mexico as to regulation of electric utilities are the
same as for regulation of gas utilities (i.e., CPUC,
ACC-Utilities and NMPRC-Utility). In the case of
Texas, the Public Utilities Commission of Texas
has jurisdiction over electric utilities, subject to a
role for Texas municipalities in regulating electric
utilities within those municipalities.42 In the case of
Arizona, ACC does not have authority over electric
service provided by a city, municipality, irrigation
district, electric district or utilities operated by tribal
authorities. As a general matter, their governing
bodies will supervise publicly owned utilities.
Regulation of privately owned utilities covers such
matters as rates; adequacy, safety and reliability
of service; adequacy of facilities; construction of
new facilities; and the generation or procurement
of electricity43 State regulation also includes
authorization for utilities (and other private parties) to
construct transmission facilities and distribution lines.44
As previously discussed, state regulation has come
to include mandates for use of renewable energy,
programs to foster energy efficiency, programs
to incorporate electric vehicles, and mandates to
include demand response resources in long-term
procurement and integrated resource plans.
The states as a general matter have deregulated the
electricity sector so that services are "unbundled"
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Overview of the U.S. Energy Sector
(American Coalition of Competitive Energy Suppliers
2019, ElectricityPlans.com 2019). For consumers,
this means that, subject to various restrictions, they
can purchase electricity from non-utility providers
at negotiated rates rather than from a single utility,
while the local utility still will provide such services as
transmission and distribution of electricity. Utilities are
permitted to procure electricity and transmission ser-
vices from third-party providers at negotiated rates,
although it may be necessary for state regulators to
approve utility procurement contracts for the costs
incurred by the utilities under such contracts to be
fully recoverable in the rates charged by the utility.45
The management of the transmission system at the
state or, more typically, regional level and the balanc-
ing of generation and load will be through a regional
transmission operator or an independent system
operator for a region, generally a nonprofit corpo-
ration under supervision by both state and federal
authorities and/or by electric utilities acting within
such utilities' respective territories (EIA 2016).46 If a re-
gional transmission operator or independent system
operator is in place, it also will act as the operator
of a wholesale electricity market within the regional
transmission operator or independent system opera-
tor's territory.47 The Electric Reliability Council of Texas
(ERCOT) and California Independent System Opera-
tor operate primarily within the context of one state,
which is unique in the national system.
Generally, the federal government does not make
siting decisions for electric power lines, except in
cases where an electric facility would cross federally
managed public lands. Section 368 of the Energy
Policy Act of 2005 directs the Secretaries of Agricul-
ture, Commerce, Defense, Energy and the Interior to
designate corridors for siting oil, gas and hydrogen
pipelines and electricity transmission and distri-
bution facilities on federal lands in 11 contiguous
Western states (including Arizona, California and
New Mexico).48 As agency-preferred siting loca-
tions, the energy transport corridors ("Section 368
Corridors") are intended to provide industry and the
public with greater certainty in energy infrastructure
planning and development on federal lands with the
least amount of environmental effects.
Federal regulation of electricity in interstate com-
merce is carried out exclusively by FERC under the
Federal Power Act, which grants FERC authority
over the "transmission of electric energy in interstate
commerce," the "sale of electric energy at wholesale
in interstate commerce," and "all facilities for such
transmission or sale of electric energy."49 Under
this jurisdiction, FERC regulates the rates, terms
and conditions of transmission and wholesale sales
of electricity in interstate commerce.50 In addition,
FERC has jurisdiction over the companies that own
or operate the facilities subject to FERC jurisdiction.51
Where transmission facilities are interconnected and
capable of transmitting electric energy across a state
boundary, they are deemed to fall within interstate
commerce, even if the parties to a transmission
contract and the electrical pathway between them are
within one state52 This gives FERC jurisdiction over
almost all transmission systems and transmission
system operators (including independent system
operators) in the country. One significant exception
pertains to Texas, where ERCOT, the independent
system operator for most of the state, administers a
transmission grid that is located solely within the state
of Texas and is not synchronously interconnected to
the rest of the United States. El Paso and parts of west
Texas, however, are linked to New Mexico and not part
of ERCOT. FERC does not have plenary jurisdiction
over the ERCOT transmission grid, although it does
regulate ERCOT in other respects.53
As the U.S. electrical system has become increas-
ingly interconnected, FERC has taken a greater
role in guiding that system through its regulation
of transmission planning and transmission opera-
tors. This is reflected in major initiatives such as the
requirement for open, nondiscriminatory access
to transmission systems within FERC Order 88S54;
establishment of transmission planning and cost
allocation requirements for public utility transmission
providers described in FERC Order 100055; estab-
lishment of independent system operators and other
regional transmission operators within FERC Order
200056; and removal of barriers to the integration
and participation in the interstate transmission sys-
tems of variable energy (i.e., from renewable energy
sources) within FERC Order 76457 and demand
response resources described in FERC Order 745.58
Apart from its responsibilities under the Federal
Power Act, FERC also is responsible under
-------
provisions of the Energy Policy Act for regulating the
reliable operation of the U.S. "bulk power system"
(i.e., the interconnected electric grid).®9 FERC
appointed the North American Electric Reliability
Corporation (NERC) as the electric reliability
organization for purposes of the Energy Policy
Act (FERC 2006),6<) NERC's area of responsibility
includes the continental United States, Canada
and the northern portion of Baja California, Mexico
(NERC 2019). NERC oversees six regional reliability
entities that carry out the standards and has the
authority to enforce those standards on power
system entities operating in the United States, as
well as several provinces in Canada.
2.3 U.S. Environmental
Regulation and
Programs
Many federal environmental laws and regulations
apply to energy production and transportation
projects in the United States, including along the
U.S.-Mexico border. These federal programs, which
are implemented through a combination of federal,
state and tribal agencies, regulate a wide range of
processes, including air emissions, process water
discharges, solid waste disposal and underground
injection into wells. Many aspects of these federal
programs are well-established under laws passed
in the 1960s and 1970s, including the Clean Air
Act, Clean Water Act, Resource Conservation and
Recovery Act, National Environmental Policy Act
and Safe Drinking Water Act.61 Some portions of
these programs, particularly as they relate to energy
projects, continue to evolve as the science and
technology associated with energy production and
delivery evolves and as more is known about how
to monitor and treat for emerging contaminants
associated with industrial processes.
A detailed summary of federal laws applicable to
oil and gas extraction activities can be found in
Chapter VI of Profile of the Oil and Gas Extraction
Industry (USEPA2000). Although some regulatory
requirements for this sector have changed since
the Sector Notebook was last updated in 2000,
the summary still is a useful reference point for
information about which federal programs apply.
Similarly, the EPA Office of Compliance Sector
Notebook Project: Sector Notebook for Fossil
Fuel Electric Power Generation (USEPA 1997) is
a reference document for federal programs that
govern environmental and public health protections
associated with this sector. The Federal Permitting
Dashboard (www, permits. performance .gov).
discussed further in Section 2.5, is an online tool for
federal agencies, project developers and the public
to track the government's environmental review
and authorization processes for large or complex
infrastructure projects, including energy sector
infrastructure.
The Environmental Review Toolkit also references
Executive Order 13807, Establishing Discipline and
22
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Overview of the U.S. Energy Sector
Accountability in the Environmental Review and Per-
mitting Process for Infrastructure, which is discussed
in further detail in Section 2.5. Executive Order 13807
was signed on August 17, 2017, and was promulgat-
ed "to ensure that the federal environmental review
and permitting process for infrastructure projects is
coordinated, predictable and transparent" to foster
"more efficient and effective federal infrastructure
decisions" (Trump 2017a). The Environmental Review
Toolkit website fwww.environment.fhwa.dot.gov)
provides quick public access to information about
Executive Order 13807 and its implementation, in-
cluding subsequent agreements, fact sheets, memos
and guidance on agency processes.
2.4 Environmental
Impacts of Energy on
Air, Water and Land
The lands located along the U.S.-Mexico border
are home to many flora and fauna, endangered and
endemic species, and migrating wildlife that travel
along its historic corridors and flyways. In Texas and
other border states, as farm income and profitability
fluctuate and decline, the risk of these operations
converting to nonagricultural use increases, thereby
losing those valuable ecosystem services and other
benefits derived from ecologically healthy private
lands. Large power generation projects may have
effects on air quality, water quantity and quality, and
the land. Pipeline and electric transmission line con
struction potentially can destroy native plant com-
munities and cause erosion, affecting water quality
and quantity. The individual footprint of solar and
wind projects likewise tends to affect large areas
of land. Oil and gas extraction projects can disrupt
native landscapes with pads for pumping facilities,
roads and spills.
The U.S. Department of Agriculture's (USDA) Natural
Resources Conservation Service (NRCS) implements
a number of initiatives and projects to address land-
impact issues by the energy industry. Texas and New
Mexico have vast open landscapes and a diversity
of renewable resources. Both states have massive
amounts of energy development potential. Some
areas, however, have landscapes and ecosystems that
might be affected by energy and other infrastructure
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- '4
tif*
The lands located along the
U.S.-Mexico border are home
to many flora and fauna,
¦ endangered and endemic
species, and migrating wildlife
that travel along its historic
corridors and flyways.
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Overview of the U.S. Energy Sector
development projects. USDA-NRCS Kika de la Garza
Plant Materials Center in Kingsville, Texas, has worked
with native plant species in southern Texas to focus
on recent efforts in finding, estaPlishing, testing and
developing native parent seed crops of native grasses
and forPs. This has created a supply of seed sources
to allow private industry to sell native seed mixes for
re-estaPlishing pipeline, roadways and other disturPed
areas associated with wind, oil and gas exploration
activities.
Texas and New Mexico have implemented
conservation practices, and in some cases suites
of practices have Peen applied to mitigate resource
effects caused Py the energy industry. Energy
companies are teaming up with the National Fish
and Wildlife Foundation and USDA-NRCS to fund
new haPitat conservation and species research for
the unique wildlife species found in riparian corridors
of the Chihuahuan Desert, which are home to many
species found nowhere else in the world.
Some examples of these restoration and conserva-
tion efforts include:
• The Luna Energy Facility near Deming, New Mex-
ico, is now eligiPle for the Conservation Steward-
ship Program and the Grazing Lands Initiative.
The facility originally acquired the land to oPtain
water rights to cool its gas-powered plant.
• Pad sites and other disturPed areas within the
Porder regions of Texas have Peen re-seeded
with native and introduced vegetation for erosion
control purposes.
• DisturPed areas in the Texas Porder region have
Peen re-vegetated with native trees and shruPs to
enhance ocelot haPitat.
• The Monarch Butterfly Environmental Quality
Incentives Program priority area, created to
promote the installation of pollinator haPitat, lies
within the Eagle Ford Shale area of Texas. This
landscape is part of the species' central migration
route into Mexico.
Conservation program participation in these regions
have yielded results that include:
• Improved and enhanced wildlife haPitat from cre-
ating an "edge" effect Py estaPlishing native and/
or improved grass species and creating diversity
in the vegetative plant community.
• Increased water quantity and quality from
re-seeding previously disturPed areas with native
and/or improved grass species.
• Increased ocelot haPitat for cover Py planting
Prush and shruP species.
• Improved ecosystem with cleaner water, food and
fiPer production Penefits, and ecological diversity
and wildlife haPitat Penefits.
Over time, energy production companies have
Pecome more engaged in re-vegetating disturPed
areas in their leases with private landowners Py
using native seed mixes, which now are more widely
availaPle. This increases the chance that native plant
communities will Pecome re-estaPlished in previous-
ly disturPed areas. Evolving corporate policies and
state and federal regulations have encouraged these
efforts.
USDA-NRCS' field office employees provide private
landowners, contractors and/or energy companies'
personnel with technical assistance. This expertise
is availaPle to assist in finding site-specific seeding
recommendations and other conservation practice
options to address negative environmental effects
and restore and enhance the land and its resources.
USDA-NRCS conservation programs are an addi-
tional Penefit in planning and implementing practices
to help improve the landscape and health of natural
resources in these regions.
2.5 One Federal Decision
Beginning in 2017, President Donald J. Trump
issued several executive orders streamlining the
environmental review process for infrastructure
projects. The Executive Orders 13766 (Trump
2017b), 13783 (Trump 2017c) and 13807 (Trump
2017a) focus on high-priority infrastructure
projects, developing domestic energy sources,
and shortening the timeframe for conducting
environmental reviews, respectively. These were
issued as part of an overall effort by the Trump
Administration to reform the infrastructure permitting
process. The implementation of these and other
administration efforts toward streamlining project
review is underway and potentially could affect
the construction of cross-border energy infra-
structure, including pipelines and transmission lines.
One Federal Decision is the name of the policy
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established in Executive Order 13807, Establishing
Discipline and Accountability in the Environmental
Review and Permitting Process for Infrastructure
Projects, signed in August 2017. This was an
attempt to synchronize environmental reviews
and permitting decisions for major infrastructure
projects. It builds on Title 41 of the Fixing America's
Surface Transportation Act,62 signed in 2015,
which created a new governance structure, set
of procedures and funding authorities designed
to improve the timeliness, predictability and
transparency of the federal environmental review
and authorization process for covered infrastructure
projects. It also established the Federal Permitting
Improvement Steering Council (FPISC, composed
of agency representatives from across the federal
government).63 The Office of the Executive Director
of FPISC maintains the Federal Environmental
Review and Authorization Inventory on the
Federal Permitting Dashboard.64 The inventory is
a valuable tool that contains a comprehensive list
of federal licenses, permits, approvals, findings,
determinations or other administrative decisions
issued by a federal agency that should be
considered for inclusion in a permitting timetable for
major infrastructure projects.
The One Federal Decision framework strives to
ensure a coordinated, predictable and transparent
environmental review for permitting decisions of
major infrastructure projects by streamlining the
process and clearly defining federal agencies' roles.
Under Executive Order 13807, federal agencies
are directed to utilize a One Federal Decision
approach to develop an environmental review
and authorization decision schedule for a major
infrastructure project. For each major infrastructure
project, agencies work together to develop a
single Permitting Timetable for the necessary
environmental review and authorization decisions
utilizing the FPISC Permitting Dashboard, prepare
a single Environmental Impact Statement, sign a
single record of decision, and issue all necessary
authorization decisions within 90 days of issuance of
the record of decision, subject to limited exceptions.
Executive Order 13807 sets a goal for agencies
of reducing the time for completing environmental
reviews and authorization decisions to an agency
average of not more than 2 years from publication
of a Notice of Intent to preparation of a Final
Environmental Impact Statement.
A memorandum of understanding implementing One
Federal Decision was signed by participating depart-
ments, councils and commissions on April 9, 2018
(White House 2018). The memorandum establishes
concurrence points in the process and a cooperative
framework for partner federal agencies to process
environmental reviews and authorizations for major
infrastructure projects. FPISC works with federal
partners to implement the memorandum, maintain
the Permitting Dashboard, educate potential project
sponsors, and prepare an annual report to Congress
assessing agency compliance and best practices.
Federal agencies are encouraged to replicate the
One Federal Decision model and adopt the best
practices to streamline environmental review reported
to Congress by FPISC.
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Overview of the Mexican
Energy Sector
27
3.1 I he Mexican Energy
Market
The Mexican energy sector, prior to recent reforms,
was directly managed and operated by the Mexican
federal government, primarily through the Secretaria
de Energia (Ministry of Energy, known as SENER);
Petroleos Mexicanos (REMEX), the Mexican national
oil and gas company; and the Comision Federal de
Electricidad (Federal Electricity Commission, known
as CFE), the Mexican national electricity company.
The central role of the federal government in the
energy sector was founded on Mexico's radical,
nationalist spirit of the 1930s, reflected particularly
in the expropriation of foreign-owned oil assets in
1938.
Prior to 1938, foreign capital controlled all extrac-
tion, processing and exporting of oil in Mexico. In
1938, however, following labor conflicts between the
foreign-owned oil companies and oil workers, and
other disputes with the oil companies over whether
Mexico was receiving sufficient benefits from its oil
resources, the Mexican government under President
Lazaro Cardenas expropriated all oil-related assets
in the country and formed PEMEX®
PEMEX became the sole legal producer and suppli-
er of oil, then the most important source of energy
and foreign exchange for the country, with a limited
supporting role for the private sector. During much
of the early- to mid-20th century, Mexico was one
of the largest oil exporters in the world, with most of
the oil coming from the Bay of Campeche in south-
ern Mexico (EIA 2017a).
The electricity sector in Mexico also developed as
a state-owned monopoly in accordance with the
same centralizing, nationalistic spirit reflected in
the expropriation of foreign-owned oil assets and
the formation of PEMEX. CFE was formed in 1934
with the mandate of regulating the private elec-
tricity monopolies and also of supplying the areas
that the private sector had neglected because they
were perceived as unprofitable. During the 1940s
-------
and 1950s, CFE acquired privately owned regional
concessions, and then in 1960, the electricity sector
was fully nationalized (Bonetto and Storry 2010).
3.1.1 The Lead Up to the Mexican
Energy Reform
By the early 2010s, it had become clear that PEMEX
and CFE were not performing to the level that Mexico
needed. Beginning in 2004, PEMEX suffered a major
decline in oil production, dropping from 3.4 million
barrels per day in 2004 to 2.5 million barrels per
day in 2013, a drop of 26 percent. Indicative of this
decline, Mexico's "super-giant" Cantarell oil field in
the Bay of Carnpeche, which was Mexico's largest oil
field for many years, saw its daily production decline
81 percent in the 10 years between 2004 and 2014
(McNeece, Save and Hindus 2014).
Similarly, CFE had failed to keep up with Mexico's
needs in the power sector by not building new gen-
eration capacity and other needed energy infrastruc-
ture (e.g., improvements and additions to Mexico's
transmission and distribution systems) at a pace
adequate to meet Mexico's growing needs. A major
reason for this failure was that CFE, as the state-
owned power company, was dependent on con
sistently inadequate federal budget allocations for
capital investment. There was only a modest scope
for private investment through limited exceptions to
CFE's monopoly on generation for (1) independent
power producers, (2) self-supply arrangements,
(3) cogeneration projects, (4) small power produc-
tion (< 30 megawatts [MW]), and (5) generation for
import or export. All electricity produced by these
generators and not used for self-supply was sold
to CFE. Nevertheless, even with these exceptions
supplementing CFE's own generation capacity, CFE
could not keep up with demand (Save, Hindus and
McNeece 2014).
3.1.2 The Mexican Energy Reform
In response to these challenges, under President
Enrique Pena Nieto, who was elected in 2012, Mex-
ico adopted a 2013 amendment to its Constitution
to permit a greater role for private parties in hydro-
carbons and electricity. It subsequently adopted
"secondary," or enabling, legislation in 2014 to im-
plement the constitutional changes. These changes
to the constitutional and legal framework for energy
in Mexico, known as the "Energy Reform," were
dramatic and far-reaching. They effected a major
overhaul of the Mexican energy sector.'*
With respect to hydrocarbons, the Energy Reform
opened oil and gas exploration and drilling to private
and foreign investors through contracts for profit- or
production-sharing to be awarded by auction. Inter-
national oil and gas companies responded favorably
to these changes (Reuters 2014). In addition, the
Energy Reform for the first time gave the private
28
-------
Overview of the Mexican Energy Sector
sector the right to participate in the treatment and
refining of oil and in the transport, storage and
distribution of oil, natural gas, gasoline, diesel and
other oil products in Mexico, including ownership of
pipelines, storage facilities and gas stations (Embas-
sy of Mexico to the United States 2014).
With respect to electricity, the Energy Reform
permitted the private sector to generate power in
Mexico for sale in a competitive wholesale electric-
ity market and/or under long-term contracts with
marketers of electricity, including CFE, which was
restructured as a "state-owned enterprise." The
private sector also was permitted to sell electricity
directly to specified large-scale consumers in Mex-
ico and enter into contracts with the Mexican state
or CFE for the financing, construction and opera-
tion of infrastructure needed for the transmission,
distribution and generation of electrical power (Save,
Hindus and McNeece 2014).
In the electricity sector, CFE stills plays the largest
role in power production. Other participants in the
power sector include independent power produc-
ers, self-supply generators, cogenerators, small
power producers, and importers and exporters
(i.e., the "exceptions" under the old regime to CFE's
monopoly on generation), as well as new generators
authorized under the Energy Reform. Figure 6
shows the relative size of each of these participants
in power production, in terms of installed capacity
In terms of the technologies used in generation,
natural gas, through combined cycle and turbine
gas generation, provides the largest percentage of
generation capacity as of December 31, 2018, at
41.1 percent, as shown in Figure 7. Conventional
thermal at 17 percent is an older technology and
may include the use of fuel oil and diesel as well as
natural gas. Clean energy according to Mexican
criteria includes wind, solar, geothermal, bioelectrici-
ty, hydro, nuclear and efficient cogeneration, and
these total 33.2 percent of total capacity.
Natural gas continues to grow in importance within
Mexico's overall energy portfolio, as it is cleaner
and less expensive than alternative fuels such as
fuel oil and diesel. Production of natural gas in
Mexico, however, has fallen in recent years, whereas
demand has increased substantially. This has
resulted in substantial Mexican imports of natural
gas from the United States. Mexico's imports of
U.S. natural gas averaged 5.2 billion cubic feet
(147 million cubic meters [m3]) per day in 2018,
between gas delivered by pipeline and liquefied
natural gas delivered by ship, at a total cost to
Mexico for the year of US$6.2 billion.®' It is likely that
Mexico's use of natural gas will continue to increase
and that U.S. exports to Mexico will grow.
Currently, alternative energy is mandated to make
up 35 percent of Mexico's energy production by
2024, according to the 2015 Energy Transition
Law (DeFilippe 2018). Clean energy's 33.2 percent
of total installed capacity in 2018 reflected in
Figure 7 shows that Mexico is well on its way to
meeting the 35 percent goal by 2024. President
CFE
59 a%
2.6* Nucteoelettrica
PP f COG AU
0.1% 3.8% 1,1H
Figure 6. Installed generation capacity by type of permit at December 31,
2018. CFE—Comision Federal de Electricidad; IPP—independent power
producer; GEN—power plants with generator permits; COG-cogenerator;
PP—power producer.
Source: Secretaria de Energia (Mexico Ministry of Energy, known as
SENER), Figura 5.4, www.aob.mx/cms/uploads/attachment/file/475497/
PRODESEN V.pdf.
Figure 7. Installed generation capacity by type of technology at
December 31,2018 (70,053 megawatts).
Source: Secretaria de Energia (Mexico Ministry of Energy, known as
SENER), Figura 5.3, www.'.iob.inx/cms/uploads/attachment/file/475497/
PRODESEN V.pdf.
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Andres Manuel Lopez Obrador, however, recently
suspended planned auctions for the purchase
of clean energy by CFE (Davison 2019). Though
the suspension may just be a temporary move as
the new administration reviews decisions made in
the prior presidency, President Lopez Obrador's
aversion to private sector participation in the energy
sector could potentially slow down Mexico's move
to embrace renewable energy on a larger scale.
3.1.3 President Lopez Obrador's
New Energy Policies
Energy sovereignty has been the stated goal of
President Lopez Obrador since his inauguration on
December 1, 2018, making it clear that significant
changes would be in store for Mexican energy
policy. President Lopez Obrador has moved to
implant his vision of energy and its role in Mexico
through a combination of reviewing aspects of the
energy reforms of his predecessor and moving in
new directions. The administration's actions are not
always clear and have increased the level of uncer-
tainty of the business community and called into
question plans for investment in Mexico's energy
sector. Although there have been pledges to retain
the constitutional structure of the energy reform of
the previous administration, which led to significant
openings for the private sector, strengthening the
central role of the longstanding government entities
of PEMEX for oil and gas and the CFE for electricity
now appears to be the priority. Clearly, Mexico has
entered yet another period of energy policy transi-
tion, although it is too soon to discern how enduring
this shift might be.
President Lopez Obrador appointed Rocio Nahle
Garcia, a chemical engineer with a career back-
ground in the petrochemical industry at PEMEX
plants and in the private sector, as Secretaria de
Energia (Secretariat of Energy). She had been
elected to the federal Chamber of Deputies in 2015.
As head of SENER, Nahle has engaged with the
international energy and finance sectors to reassure
investors and lead efforts to secure the financial sta-
bility of PEMEX. In January 2019, a top-level delega-
tion sent to New York City to meet with key financial
institutions was perceived as a failure.
To lead PEMEX, President Lopez Obrador selected
Octavio Romero Oropeza, who had been a longtime
ally and had worked in a top position for President
Lopez Obrador during his term as mayor of Mexico
City from 2000 to 2005. Romero Oropeza is from
Tabasco, as is President Lopez Obrador, and an
agronomist.
Manuel Bartlett Diaz, a veteran politician, former
cabinet member and senator, was chosen to head
the CFE. He immediately expressed support for
increasing the government utility's ability to generate
its own power rather than encouraging purchases
from the private sector. The CFE had played a
central role in the previous administration's energy
reform in encouraging the development of privately
owned large-scale renewable, combined-cycle
gas turbine and cogeneration plants, as well as
in the expansion of Mexico's natural gas pipeline
infrastructure relying on the private sector.
In further signs that the new administration seeks
to defuse the effects of the Energy Reform, it has
moved to weaken the regulatory agencies that had
received additional staff and authority in the previous
administration. Juan Carlos Zepeda, president of
the Comision Nacional de Hidrocarburos (Nation-
al Hydrocarbons Commission, known as CNH),
stepped down from his post early, and two other
commissioners resigned before the end of their
terms. Similarly, Guillermo Garcia Alcocer, the last
remaining head of a federal government institution in
the energy sector whose appointment dated to the
previous administration, resigned in June as pres-
ident of the Comision Reguladora de Energia (En-
ergy Regulatory Commission, known as CRE). He
released an open letter noting that the commission's
new majority-held views on regulation are incom-
patible with his. Garcia Alcocer earlier had resisted
pressure to step down early from his post.
Following his election, President Lopez Obrador
has left much of the Energy Reform intact, but he
has cancelled or delayed auctions for oil and gas
exploration and development and auctions for
the purchase of clean energy while he considers
amendments and changes to the original reforms
(Chapa 2019a). The overall emphasis of Mexican
energy policy is to shift to boosting the sector via
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Overview of the Mexican Energy Sector
illfli
government initiative with the assistance of the private
sector. In a move to appease markets, President
Lopez Obrador had made special mention of the
private sector's role in energy production, particularly in
the areas of know-how and cost reduction.
One of President Lopez Obrador's policy priorities
has been the stabilization of PEMEX to bring it back
to its respected position as the center of and even
a model for the rest of the Mexican economy, but
this will be a major challenge,68 In recent years,
oil production has continued to decline, down to
1.68 million barrels per day in May 2019 (Robinson
2019). Production of dry natural gas also has
declined, from a peak of 5 billion cubic feet
(141 million m3) per day in 2010 (SENER 2018) to
2.6 billion cubic feet (73 million m3) per day in May
2019 (SENER 2019). Further, PEMEX presently
has severe financial and debt issues, which will
make it difficult to modernize. In its 2018 annual
report: filed with the U.S. Securities and Exchange
Commission (2019) on April 30, 2019, PEMEX
reported as an ongoing concern the substantial
doubt as to its ability to continue, citing large net
losses for the years 2018, 2017 and 2016; negative
equity; negative working capital; substantial debt;
and the downgrading of its debt in early 2019 by
certain rating agencies. In early June 2019, two
credit agencies downgraded Mexico's rating, with
Fitch Ratings dropping it to BBB from BBB+ and
Moody's Investor Service from A3 to negative. The
top concern cited was the continuing increase in
the debt of PEMEX, the world's most indebted oil
company, with debt exceeding US$100 billion.
Additionally, former PEMEX leaders have been
accused of corruption and mismanagement, with
Mexico's attorney general recently indicting the chief
executive officer of PEMEX from 2012 to 2016 on
corruption charges (Reuters 2019). All of this has
undermined PEMEX's ability to effect a turnaround
in Mexico's oil and gas sector.
President Lopez Obrador has made it clear that he
plans to reinvigorate PEMEX and, through PEMEX,
Mexico's hydrocarbon sector. This is a key part
of his strategy of "energy sovereignty." It will be
PEMEX's responsibility to increase production of
oil and natural gas. As one of the few energy goals
in President Lopez Obrador's (2019) Plan Nacional
de Desarrollo 2019-2024 (National Development
Plan 2019-2024), Mexico's domestic production
of "primary energy," which includes crude oil and
other raw sources of energy prior to transformation,
is set to cover 100 percent of national energy
consumption by 2024, up from the current level
of 70 percent.
With respect to oil, President Lopez Obrador
has set a goal of increasing production from the
1.83 million barrels per day recorded for 2018 to
2.697 million barrels per day for 2024 (PEMEX
2019). For dry natural gas (gas in a form ready for
consumption), President Lopez Obrador has not
set a specific goal. Under his strategy of energy
-------
sovereignty, however, there is an implicit goal for
PEMEX to increase production from the 2.6 billion
cubic feet (73 million m3) per day recorded in
May 2019 (SENER 2019) to a figure closer to the
projected demand in 2024 of 8.9 billion cubic feet
(252 million m3) per day (SENER 2018).
In June 2019, construction began on a refinery at
the port of Dos Bocas in the southeastern state
of Tabasco—Lopez Obrador's home state—with
a planned capacity of 340,000 barrels per day
and a budget of 150 billion pesos (US$7.6 billion).
"We do not want to be the colony of any foreign
nation," President Lopez Obrador stated at the
construction's opening ceremony, broadcast in a
Webcast event. "This can only be achieved through
self-sufficiency." Plans call for refurbishing the six
existing refineries that have been operating at well
below half capacity; this refurbishing is intended to
reduce the need for fuel imports that have come
largely from the United States. It is not clear that
the investment required to meet ambitious goals to
increase production will be available.
A number of specific actions in the initial part of
President Lopez Obrador's administration include
the following:
• Cancellation of hydrocarbon auctions. Auctions of
production rights halted (approved and first imple-
mented during the administration of Enrique Pena
Nieto) in the border states of Tamaulipas and
Nuevo Leon, as well as the states of Veracruz and
Tabasco. The auctions would have included the
first areas in Mexico (in this case in Tamaulipas)
approved for hydraulic fracturing. That adminis-
tration also noted that it would review previous
auctions to ascertain whether companies were
making promised investments. President Lopez
Obrador determined that there would be no fur-
ther auctions until production started on contracts
already granted. Outside investors were surprised
by this announcement because exploration and
development require substantial time after con-
tracts are signed. Under normal timelines, it would
be impossible for production to have begun on
the contracts signed after initial hydrocarbon
auctions.
• Cancellation of renewable auctions. Continuing
with the emphasis on state control in the energy
sector, in early February 2019, the current admin-
istration cancelled renewable energy auctions,
and President Lopez Obrador noted that the
CFE would reclaim a more significant role in the
renewable energy sector. This has the potential to
directly affect border states that generate signifi-
cant amounts of renewable energy, such as wind
(i.e., Baja California and Tamaulipas) and solar
(i.e., Sonora, Chihuahua and Coahuila).
• Request for renegotiation of existing gas supply.7
pipeline contracts, CFE entered into a number
of transportation contracts with gas pipeline
developers to extend the national natural gas
infrastructure and support the construction of
pipelines that would bring U.S. natural gas into
Mexico. In February 2019, however, the director of
CFE, Manuel Bartlett, stated that CFE will seek to
renegotiate those contracts. The issue is that the
contracts require payments even when the prod-
uct is not being delivered. The Mexican, Canadian
and American companies involved took the posi-
tion that the contracts were properly granted and
should not be revised. At the end of August 2019,
President Lopez Obrador announced that an
agreement was reached that would save Mexico
US$4.5 billion. By early September 2019, the Sur
de Texas fuxpan pipeline began operations, the
first since the agreement was reached (Robinson
and Wyeno 2019).
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Overview of the Mexican Energy Sector
3.1.4 Mexico's Energy Balance of
Trade
Mexico's CNH, in a 2018 study, reported that
Mexico in 2016 had an energy balance of trade that
was substantially negative (i.e., the expenditures for
imports exceeded revenues from exports by roughly
US$10 billion). The elements of Mexico's 2016 en-
ergy balance of trade and their values (in millions of
U.S. dollars) are shown in Table 3.
Mexico's negative energy balance of trade is of
substantial concern to President Lopez Obrador,
and he has announced plans that would reduce this
negative balance of trade. These include building
a new refinery and rehabilitating six existing refin-
eries, as well as significantly increasing oil and gas
production.
3.2 Mexican Energy
Regulation
3.2.1 Oil and Gas Productior69
Under the Mexican Constitution, as amended by the
Energy Reform, the Mexican state retains complete
ownership of hydrocarbons in the ground.70 At
the same time, the Constitution opens oil and gas
exploration and production in Mexico to the pri-
vate sector through authorization of new contract
arrangements with the Mexican state or PEMEX.71
Under the reform, PEMEX was initially granted "as-
signments" of 83 percent of Mexico's "proved and
probable" reserves and 31 percent of prospective
resources,72 with the right to enter into "farmouts" in
the form of joint ventures with private parties for the
development of the assigned rights, subject to an
auction process for the granting of farmout contract
rights.73 The reform also provided for auctions for
production- and profit-sharing contracts with respect
to oil and gas resources identified by SENER, in
which both PEMEX and private parties could com-
pete.74 A few auction rounds for specified Mexican oil
and gas resources were carried out, but as previously
discussed, those auctions were suspended.
Once contracts are awarded, regulation of oil and
gas explorations and production operations in
Table 3. Elements of Mexico's Energy Balance of Trade
IMP0RTACI0NES
EXPORTACIONES
Carbon
Carbon
$ 503.29
$0.00
Coque de carbon
Coque de carbon
$ 227.94
$0.00
Petroleo crudo
Petroleo crudo
$0.00
$ 15,933.00
Coque de petroleo
Coque de petroleo
$ 349.98
$0.00
Gasolinas y naftas
Gasolinas y naftas
$15,169.00
$0.00
Querosenos
Querosenos
$ 700.04
$0.00
Diesel
Diesel
$ 4,046.96
$0.00
Combustoleo
Combustoleo
$413.98
$ 945.98
Gas LP.
Gas LP.
$1,543.97
$28.00
Gas seco
Gas seco
$4,059.00
$2.00
Total
Total
$27,014.18
$16,908.99
Source: Comision Nacional de Hidrocarburos (Mexico's National
Hydrocarbons Commission), El Sector de Gas Natural: Algunas Propuestas
para el Desarrollo de la Industria Nacional, Table 6-6, p. 134, vww.aob.mx/
cms/uploads/attachment/file/391881/Documento Tecnico GasNatural
CNH2018 1 .pdf.
Mexico is carried out by SENER and CNH.75 The
new Agencia de Seguridad, Energia y Ambiente
(Agency for Security, Energy and Environment,
known as ASEA) is responsible for regulating and
supervising industrial safety and environmental
protection with respect to the hydrocarbons sector,
including exploration and production activities, in
accordance with its own governing law.76
Overall, Mexico has a robust exploration and pro-
duction regulatory framework in place under the
Energy Reform that permits private participation in
oil and gas exploration and production subject to
regulation by the state. Under the Lopez Obrador
Administration, PEMEX now is the primary actor in
exploration and production, but if President Lopez
Obrador later decides that Mexico needs the finan-
cial and technical resources that the private sector
can provide, the regulatory framework now is able
to accommodate that.
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3.2.2 Sale of Gasoline, Diesel and
Other Petroleum Products
Under the Energy Reform, the private sector—in-
cluding foreigners—can transport, distriPute and
store gasoline, diesel and other petroleum products
and sell those products to the Mexican public, sub-
ject to receipt of a federal permit from CRE.77 There
is no regulation of the prices for sales of gasoline,
diesel and liquefied petroleum gas, which are to be
set by the market,78 nor is there regulation of pricing
for distribution of these products if not carried out
by pipeline (e.g., in the case of tank trunks that bring
gasoline to service stations).79 CRE, however, ap-
proves the maximum rates that may be charged for
transportation and distribution of these products via
pipeline.80 U.S. companies have taken advantage of
this opening. For example, ExxonMobil announced
at the end of 2017 that it planned to open 50 gas
stations under the Mobil name by the end of the first
quarter of 2018, to be supplied from ExxonMobil's
refineries in Texas, as part of ExxonMobil's "long-
term commitment to invest US$300 million in fuels
logistics, product inventories and marketing in Mexi-
co over the next 10 years" (ExxonMobil 2017).
3.2.3 The Natural Gas Sector
Natural gas transportation, distribution and storage
services are open to the private sector, subject to
a federal permit granted by the CRE.81 A number
of U.S. companies, through their Mexican affiliates,
are now providing these services on a large scale.
One example is Sempra Energy, based in Califor-
nia, which operates in Mexico through its lEnova
(2019) affiliate. Generally, natural gas transportation
and distribution pipelines and storage facilities are
required to provide open access without undue
discriminatory basis to any shipper that requests
the service, provided there is available capacity
in the system (e.g., after satisfaction of contract
obligations, for reservation of capacity by an anchor
shipper).82
Permits for transportation by gas pipeline are
granted by CRE for a specific "trajectory" (i.e., from
one or more points of origin to one or more points
of destination and for a specified capacity).83 Per-
mits for distribution by gas pipeline are granted by
CRE for a specific geographic zone, considering
the technical and economic characteristics (cost
structure) of the project to foster the profitable and
efficient development of the distribution network,
as well as urban development plans for the area.84
CRE approves the maximum rates that may be
charged for transportation and distribution service.85
Open-access transportation and distribution permit
holders are regulated and supervised by CRE and
also by ASEA with respect to safety and environ-
mental issues.86
The regulations for natural gas storage are similar to
those applicable to transportation and distribution.
A permit for storage from CRE will be for a specific
installation or set of installations and for a specific
capacity.87 As with gas pipelines, CRE approves the
maximum rates that may be charged for storage
services.88
Mexico does not currently have nationwide man-
agement of its natural gas transportation system.
Centra Nacional de Control de Gas Natural (National
Center for Control of Natural Gas), a government
agency, took ownership of the extensive gas pipe-
line network owned by PEMEX prior to the energy
reform and operates those assets as a transporta-
tion provider.89 In a second role, Centra Nacional de
Control de Gas Natural also acts as the manager of
Sistema de Transporte y Almacenamiento Nacion-
al Integrado de Gas Natural (National Integrated
Transportation and Storage System),90 which is
comprised of the former PEMEX pipeline assets
and certain private pipelines in Mexico (permitted
since 1995) that elected to join the system. Centra
Nacional de Control de Gas Natural has announced
a proposal to integrate all the pipelines in Mexico
under its management (Rodriguez 2019).
Historically, PEMEX was the sole marketer of nat-
ural gas in Mexico. Private parties, however, now
can engage in gas marketing activities (including
wholesale trading and retail transactions) subject
to permit and oversight by CRE.91 CRE will set the
maximum prices that can be charged.92 PEMEX and
private marketers are required to report information
about their gas-trading transactions on a daily basis
through an electronic platform to inform the market
and support the eventual creation of a Mexican
price index.93
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3.2.4 The Electricity Sector
CFE is a "productive state enterprise" under the
exclusive ownership of the federal government,
operating under a new law that specifically governs
CFE.94 Under the Energy Reform, CFE retains its
role as the sole provider of electricity for the general
public ("basic service"):,® subject to regulation of
its rates and the service provided.® Private par-
ties, however, are permitted to generate electricity
for sale to "qualified" buyers that have substantial
electricity needs, to CFE, and into a newly created
wholesale electricity market.92
Key objectives of the Energy Reform include
promotion of clean energy, diversification of energy
sources, and energy security.98 In accordance with
these objectives, SENER established a mechanism
for the Centro Nacional de Control de i nergia
(Mexican National Energy Control Center, known as
35
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CENACE), a government agency, to hold auctions
in which private sector bidders could participate.
CFE and other load serving entities would acquire
clean energy together with clean energy certificates,
each representing 1 megawatt hour (MWh) of clean
energy generation, as well as capacity. Three rounds
of auctions were held, the last in 2017. For the third
round, awards were granted for sales of clean energy,
clean energy certificates and capacity representing
2,562 MW of new generation and an investment of
US$2.37 billion (CENACE 2017). The third round
also resulted in record-breaking low prices (i.e.,
an average price to sellers of US$20.57 per MWh
of energy plus the corresponding clean energy
certificates, which was 38.5 percent lower than
average price of US$33.47/MWh plus clean energy
certificates in the previous auction in September
2016) (Newberry 2017). Nevertheless, as previously
discussed, once President Lopez Obrador was
elected, he suspended further clean energy auctions.
The Mexican state, through CFE, retains its owner-
ship of the transmission and distribution networks."
Subject to retention of ownership, however, the
Mexican state, directly or through state-owned en-
tities, may form associations or enter into contracts
with private parties for the financing, installation,
maintenance, management, operation and expan-
sion of infrastructure that provides transmission and
distribution services.100
CENACE manages the wholesale electricity market
and also is the operator of the national electrical
system, controlling the dispatch of electrical power
and operation of the national transmission grid and
general distribution networks for all of Mexico.101
CRE is the primary regulator of the electricity indus-
try in Mexico. Among its other responsibilities, it sets
rates for CFE's basic service, the tariffs for transmis-
sion and distribution services, and the fees for the
services provided by CENACE.102 It also establishes
and monitors terms for the operational and func-
tional separation of the various services provided in
the electric industry (i.e., generation, transmission,
distribution and commercialization) to foster efficient
operation of the electrical power industry, without
undue aggregation of market power.103
3.3 Enerqy-Efficiency
Efforts
Mexico's existing efforts toward energy efficiency
are spearheaded by the Comision Nacional para el
Uso Eficiente de la Energia (the Mexican National
Commission for the Efficient Use of Energy, known as
CONUEE). CONUEE acts as a regulator, a program
operator, a promoter, a provider of technical support
for third parties and a planning body. The agency's
work is described in the Roadmap for Building Ener-
gy Codes and Standards, a nonmandatory vision for
improving energy efficiency in buildings, with the aim
of achieving net zero emissions for all new buildings
by 2050. This lofty goal is advanced through Mexi-
co's increasingly stringent building codes, as well as
public-private partnerships, such as the Building Effi-
ciency Accelerator (World Resources Institute 2016).
The California Energy Commission has focused its
relationship with Mexico on expanding opportunities
for collaboration and engagement around energy
efficiency. Although Mexico lacks in substantial
national-level efforts around energy efficiency—partly
as a result of the recent leadership transition—
universities, states and cities have demonstrated a
continued commitment to advancing energy efficiency
through partnerships with U.S. governmental and
nongovernmental entities. Though these programs
are piecemeal compared to approaches in California
and the United States, they represent progress
toward realizing the reliability, infrastructure, health
and economic benefits conferred by robust energy-
efficiency solutions. Mexico ranks 12, immediately
following the United States and Canada, in the
American Council for an Energy Efficient Economy's
2018 International Energy Efficiency Scorecard, an
improvement from its two prior rankings.
The next chapter discusses the legal and institution-
al framework in the United States and Mexico with
respect to cross-border energy relations. Although
Chapters 2 and 3 present information about the
United States and Mexico separately, this next chap-
ter focuses on a series of specific topics pertaining to
cross-border energy relations and in each case
discusses the applicable law and institutional ar-
rangements for both the United States and Mexico.
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U.S.-Mexico
Cross-Border Energy
Relations: The Legal and
Institutional Framework
37
4.1 U.S.-Mexico
Cooperation for Oil
and Gas Production
in the Gulf of Mexico
One instance in which the United States and
Mexico have directly cooperated to facilitate
production of oil and gas involves the Agreement
Between the United States and Mexico Concerning
Transboundary Hydrocarbon Reservoirs in the Gulf
of Mexico (referred to hereafter as the Agreement),
signed on February 20, 2012, and effective
July 18, 2014 (U.S. Department of State 2012).
According to the Bureau of Ocean Energy
Management (2019), which resides within the U.S.
Department of the Interior (DOI), the Agreement
"establish[es] a framework for the cooperative
exploration and exploitation of hydrocarbon
resources that cross the United States-Mexico
maritime boundary in the Gulf of Mexico (excluding
areas under the jurisdiction of Texas)."
Among other things, the Agreement allows
leaseholders on the U.S. side of the boundary to
cooperate with Petroleos Mexicanos (the Mexican
national oil and gas company, known as PEMEX) in
the joint exploration and exploitation of hydrocarbon
-------
resources through "unitization" of transboundary
reservoirs. In cases where a unitization agreement
is not reached, the Agreement allows for unilateral
production by each side, up to the amount of
hydrocarbons that exist on its side of the boundary.
In addition, the Agreement provides a mechanism
to resolve disputes regarding the development
of specific reservoirs. Finally, it establishes an
inspection regime, whereby each side regulates
activity on its side of the boundary but also has
the ability, under an inspection system to be
developed, to inspect activity that takes place under
the Agreement on the other side of the boundary
(Bureau of Ocean Energy Management 2019).
Notwithstanding these broad terms established by
the Agreement, it is fundamentally a framework,
with many details, processes and procedures to
be devised. Implementation now is underway.
In the United States, the Bureau of Safety and
Environmental Enforcement and Bureau of Ocean
Energy Management, both within DOI, are the
relevant agencies. In Mexico, the Agreement will be
implemented by the Secretaria de Energia (Ministry
of Energy, known as SENER), Comision Nacional de
I lidrocarburos (National Hydrocarbons Commission,
known as CNH), and Agencia de Seguridad,
Energia y Ambiente (Agency for Security, Energy
and Environment, known as ASEA) (Sebastian
2015).
4.2 NADB and Financing
of Renewable Energy
Generation in the
Border Region
The North American Development Bank (NADB)
is a binational financial institution established by
the United States and Mexico that is capitalized in
equal parts by the governments of the United States
and Mexico and managed by a 10-member Board
of Directors, five of whom are appointed by the
U.S. government and five appointed by Mexico's
government (NADB 2019a). According to NADB
(2019a), its purposes are "to provide financing to
support the development and implementation of in-
frastructure projects, as well as to provide technical
and other assistance for projects and actions that
preserve, protect or enhance the environment to
advance the well -being of the people of the United
States and Mexico.''
Although initially focused on water and wastewater
for border communities, NADB has expanded its
portfolio to include projects for renewable energy
sources and for reducing energy consumption. As
with all NADB projects, these must be located in
the "border region" (i.e., within 100 kilometers [km]
[62 miles] north of the international boundary in the
four U.S. states of Texas, New Mexico, Arizona and
38
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U.S.-Mexico Cross-Border Energy Relations
Table 4. North American Development Bank Energy Projects
TYPE OF
NO. OF
TOTAL
NADB FINANCING
STATUS
PROJECT
PROJECTS
mmw
Approved
Contracted
Biofuel
1
-
3.69
3.69
1 in operation
Biogas
2
3.0
5.38
5.38
2 in operation
Efficiency
1
-
50.00
25.00
1 underdevelopment
Solar
18
780.0
559.92
559.92
-16 in operation
- 2 under construction
Wind
14
2,091.8
919.33
919.33
-12 in operation
- 2 under construction
Total
36
2,874.8
$1,538.31
$1,513.31
- 31 in operation
- 4 under construction
-1 underdevelopment
MW—Megawatt
Source: North American Development Bank.
California and within 300 km [186 miles] south of
the border in the six Mexican states of Tamaulipas,
Nuevo Leon, Coahuila, Chihuahua, Sonora and Baja
California) (NADB 2017). Table ' shows NADB's
energy projects as of June 2019, including the
financing committed by NADB.
The 116th U.S. Congress104 proposed legislation
that would recapitalize NADB to address the grow-
ing environmental infrastructure deficit in the border
region. This effort would support expansion of water
and wastewater treatment capacity and replace-
ment of aging infrastructure. It also would increase
NADB's ability to finance energy projects for the
benefit of border communities, including tribes.
4.3 Cross-Border
Infrastructure-
Presidential Permits
Generally, the construction, operation and mainte-
nance of facilities that cross the U.S.-Mexico border
must be authorized by the U.S. federal government
through the issuance of a Presidential Permit in
accordance with requirements set forth in a series
of executive orders (Vann and Parfomak 2017). The
Presidential Permit process involves interagency
coordination to ensure that physical interventions
of the international border zone are in the national
interest of the United States. Three main actors
(U.S. Department of State [DoS], U.S. Department
of Energy [DOE] and Federal Energy Regulatory
Commission [FERC]) drive the process for energy
projects, whereas many other agencies interact with
the process depending on the type of infrastructure
under review. There is no corresponding permit pro-
cess in Mexico necessary to authorize an interna-
tional border crossing of energy infrastructure.
Cross-border electricity transmission facility Pres-
idential Permit applications are received by DOE's
Office of Electricity.105 Cross-border natural gas
pipeline Presidential Permit applications are received
by FERC.106 For cross-border facilities exporting
or importing petroleum, petroleum products, coal
or other fuels to or from a foreign country (but not
including gas pipelines), applications are received by
the Secretary of State.107 The President is the ulti-
mate decision maker for Presidential Permits issued
for oil pipeline crossings at U.S. borders,108 which
President Donald J. Trump authorized on March 29,
2019, in response to the application for a pipeline to
import oil from Canada to the United States filed by
TransCanada Keystone Pipeline, L.P (Trump 2019).
Generally, to apply for a Presidential Permit, an ener-
gy project proponent (applicant) must include the
development of a project description by a specific
applicant (a state, county, municipality, public utility
or a private-sector entity), a review of impacts from
the proposed project to resources in the United
States,109 and completion of necessary studies to
determine project feasibility. Following a review and
determination of all application materials by the
corresponding lead agency, applicants may amend
a Presidential Permit application based on feedback
from the determination.
-------
Interspersed in a Presidential Permit process are
puPlic Federal Register notices, review Py the
puPlic, and review and favoraPle recommendation
Py "BOSAS" (Pureaus, offices, services, agencies
and state/suPnational), including the U.S. Section of
the International Boundary and Water Commission
(USIBWC). The Presidential Permit decision con-
cludes with a determination Py the relevant agency
that authorization of the suPject facility is in service
to national (or puPlic) interest110 and permit issuance
Py the appropriate executive agency official.
USIBWC also is involved in the permit process for
infrastructure that crosses the international Poundary.
USIBWC is a federal agency whose mission is to
provide Pinational solutions to issues that arise during
the application of U.S.-Mexico treaties regarding
Poundary demarcation, national ownership of
waters, sanitation, water quality and flood control
in the Porder region.111 As part of the mission, the
USIBWC, along with its counterpart from Mexico, the
Mexican Section of the IBWC, reviews projects that
cross the Porder, whether they are Porder-crossing
infrastructure, pipelines or power. The purpose of the
IBWC review is to assure appropriate positioning of
the crossing and appropriate construction in areas
where the two countries have Puilt levee systems,
dams, reservoirs, wastewater treatment facilities and
Porder demarcation monuments.
USIBWC has a license and lease program that
tracks projects that affect federal property or cross
the international Poundary. Under the 1970 Bound-
ary Treaty112 and the 1944 Water Treaty,113 USIBWC
reviews projects that cross the international reach of
the Rio Grande or Colorado Rivers to maintain the
international Poundary, demarcate the Poundary on
new structures, and ensure that new infrastructure
does not cause any changes to the international
Poundary or water surface elevation nor deflect ad-
ditional flows to either country. For the land Pounda-
ry, USIBWC reviews projects to maintain the Pound-
ary and line of sight and ensure that the character of
transPorder flows is not affected.
For the U.S. review process, USIBWC reviews
transPorder energy projects during the Environmental
Assessment/Environmental Impact Statement
process and provides feedPack to the project
sponsor during this phase through the DOE, DoS
or FERC. Following on issuance of a Presidential
Permit, project plans are sent for technical review
and exchanged with the Mexican counterpart. Plans
for the infrastructure to Pe Puilt in Poth countries is
exchanged and reviewed Py the U.S. and Mexican
sections of the IBWC. Once the technical review is
completed, the IBWC Commissioners exchange
letters signifying approval of the project for the
U.S. and Mexican infrastructure that makes up the
Porder crossing or facility. Each project sponsor
(United States and Mexico) is formally notified of
approval of the project and issued a license that is
kept on record Py USIBWC ( gure!).
4.4 Cross-Border
Infrastructure-
Natural Gas Pipelines
In addition to a Presidential Permit, a natural gas
pipeline that crosses the U.S.-Mexico Porder requires
a permit under the Natural Gas Act of 1938. In
particular, the National Gas Act prohiPits natural gas
imports or exports to or from the United States without
a DOE order.114 Although this speaks to imports
or exports of gas, rather than to the infrastructure
carrying the gas, the President Py executive order
determined that the pipeline itself would also require a
DOE permit under the Federal Power Act.115
The approval process is different for countries with
which the United States has a free trade agreement
(FTA) and for countries that have not signed an FTA
agreement with the United States ("non-FTA coun-
tries"). Under Section 3(a) of the Natural Gas Act,116
"[N]o person shall export any natural gas from the
United States to a foreign country or import any
natural gas from a foreign country without first
having secured an order of the [DOE] authorizing
it to do so. The [DOE] shall issue such order on
application, unless, after opportunity for hearing,
it finds that the proposed exportation... will not
Pe consistent with the puPlic interest."
Section 3(c) of the National Gas Act,117 however,
limits DOE's discretion with respect to countries that
are signatories to an FTA with the United States:
"For purposes of suPsection (a), the impor-
tation of natural gas... or the exportation of
-------
U.S.- Mexico Cross Border Energy Relations
USIBWC Permitting Process
USIBWC Received
Notice of Presidential Permit
application and EA for
tranchnrrlar anorm# nmiort
EA
Updated
NEPA process
continues
No
Updated
Returned to
Plans
Project Sponsor
t
Plans need
revision
Presidential Permit
process continues
Exchange of plans
between USIBWC
and MxIBWC
IBWC approves U.S.
and Mexican
sponsored plans
Approved license
sent to U.S. and Mexican
Project Sponsors
Figure 8. The structure of the U.S. Section of the international Boundary and Water Commission (USIBWC) permitting process.
Source: USIBWC.
-------
natural gas to a nation with which there is in
effect a free trade agreement requiring na-
tional treatment for trade in natural gas, shall
be deemed to be consistent with the public
interest, and applications for such importation
or exportation shall be granted without modifi-
cation or delay."
This means that approval for all imports and
approvals for exports to countries with FTA
agreements are essentially automatic. Mexico
is a signatory to the North American Free Trade
Agreement (NAFTA), which has a requirement for
national treatment covering natural gas. Mexico
therefore is entitled to take advantage of the
foregoing language, whereby natural gas exports
are deemed to be in the public interest, and the
approval for exports of natural gas to Mexico
essentially will be automatic.118
4.5 Export
Infrastructure—The
Case of Liquefied
Natural Gas Facilities
As previously noted, FERC has "exclusive authority
to approve or deny an application for the siting, con-
struction, expansion, or operation" of a liquefied nat-
ural gas terminal within the scope of its jurisdiction."119
Because a liquefied natural gas facility is built
specifically for the purpose of exporting or import-
ing natural gas, however, it is subject to a separate
permit from the DOE for that export/import activity,
as discussed in Section 4.4. Within DOE, the power
to grant an export authorization is delegated to the
Assistant Secretary for Fossil Energy.120
As discussed in Section 4.4, approvals for all im-
ports and approvals for exports to countries with
FTA agreements are essentially automatic; how-
ever, liquefied natural gas facilities generally seek
authority to sell to both non-FTA countries and FTA
countries.121 With respect to non-FTA applications,
the application process for export permits is more
complicated, allowing a broad inquiry into whether
exports of natural gas are in the "public interest."
For non-FTA applications, the DOE interprets Sec-
tion 3(a) as creating a rebuttable presumption that
a proposed export of natural gas is in the public
interest, unless opponents overcome that presump-
tion by making an affirmative showing of inconsist-
ency with the public interest.122 DOE historically
has reviewed economic factors and environmental
factors in evaluating claims that proposed exports to
non-FTA countries are not in the public interest.
The economic factors pertain to the domestic need
for the natural gas proposed to be exported, any
potential threat to the security of domestic natural
gas supplies, the effects of exports on domestic
prices, and the benefits of international trade. With
respect to these factors, economic studies commis-
sioned by DOE show that exports do not adversely
affect domestic supply, have minor effects on pric-
ing, and are generally beneficial to the economy.123
As to environmental factors, DOE (2014) prepared
the Addendum to Environmental Review Documents
Concerning Exports of Natural Gas From the United
States (Addendum), which addresses unconvention-
al natural gas production in the nation as a whole
and the impact of such production on water quality
and quantity, air quality, climate change/greenhouse
gas emissions, land use and induced seismicity. Re-
lying on studies of economic factors, environmental
studies and the Addendum, DOE has granted a
number of non-FTA export permits.124
4.6 Cross-Border Trade
in Energy
A fundamental point with respect to cross-border
trade in energy is that energy products subject to
trade (i.e., oil, petroleum products such as gaso-
line and diesel fuel, natural gas, and electricity) are
treated as "goods" for purposes of NAFTA, which
sets the tariff rates for trade between the United
States and Mexico. Under NAFTA, there are no
import duties on any of these energy products.
This means that the United States can sell each
of these products to Mexico without the buyers
paying import duties. This is particularly important
with respect to gasoline and diesel fuel, natural gas,
and electricity because the United States sells large
quantities of these products to Mexico; however, it
also is necessary to determine whether other permit
requirements exist for the export of these products,
as there are for natural gas and electricity.
-------
U.S.- Mexico Cross Border Energy Relations
4.6.1 Petroleum Products
In the case of petroleum products, there are
no additional permit requirements. As Mexico's
production of oil has fallen, so has production of
gasoline, diesel and petroleum products. Imports,
particularly from the United States, have surged
as a result. In 2018, according to the U.S. Energy
Administration (EIA), the United States exported
to Mexico 440,975 thousand Parrels of petroleum
products, of which 188,790 thousand were
finished motor gasoline, 107,611 thousand were
distillate fuel oil with less than 15 parts per million
of sulfur (diesel fuel), 51,144 thousand were
liquefied petroleum gases, and 47,819 thousand
were propane (EIA 2019k). To give a sense of
the magnitude of these numbers, the exports of
gasoline alone cost Mexico approximately
US$15.4 billion for 2018„126
4.6.2 Natural Gas Exports and
Imports
As previously discussed, the National Gas Act
prohibits imports or exports of natural gas to or
from the United States without an authorization
from DOE. For exports to FTA countries such as
Mexico, however, the permit is granted essentially
automatically. U.S. exports of natural gas to Mexico
averaged 5.2 billion cubic feet (147 million cubic
meters) per day in 2018, between gas delivered
by pipeline and liquefied natural gas delivered by
ship, at a total cost to Mexico of US$6.2 billion for
the year.126 Export of liquefied natural gas by tanker
truck to customers in Mexico not served by natural
gas pipelines is growing, as liquefied natural gas
provides a less expensive alternative to diesel. The
Trump Administration has proposed that shipping by
rail also be permitted, a practice long banned in the
United States because of safety concerns
(Chapa 2019b).
Under Mexican law, exporting or importing natu-
ral gas requires a permit from SEN ER.127 SENER
also regulates such exportation and importation in
accordance with Mexico's Ley de Comercio Exterior
(Foreign Trade Law), with support from the Secretaria
de Economia (Mexican Minister of the Economy).128
-------
A fundamental point with
respect to cross-border
trade in energy is that energy
products subject to trade
are treated as "goods" for
purposes of NAFTA, which
sets the tariff rates for trade
between the United States ,
and Mexico. /
-------
U.S.-Mexico Cross-Border Energy Relations
4.6.3 Electricity
There is no licensing requirement for imports of
electricity into the United States. Exporting electricity
to a foreign country, however, requires an export
order from DOE under Section 202(e) of the Federal
Power Act. This section of the act states that DOE
"shall issue such order on application unless, after
opportunity for hearing, it finds that the proposed
transmission would impair the sufficiency of electric
supply within the United States or would impede or
tend to impede the coordination in the public inter-
est of facilities subject to the jurisdiction of [DOE]."129
DOE has issued numerous orders authorizing
electricity exports in accordance with the law and
following a determination that certain requirements
are met. The first requirement (i.e., no impairment
of sufficiency of electric supply) is satisfied where
the wholesale electricity market is in place, reliability
of delivery is established by an effective regulatory
framework, and the applicant is a power marketer
and is not obligated to serve a franchised territory.
The second requirement—pertaining to the
operational reliability and security of the domestic
electric transmission system—is satisfied based
on (1) existing industry procedures for obtaining
capacity on the domestic transmission system
and (2) the reliability standards applicable to cross-
border power flows and technical studies presented
to DOE. In each case, an export order is issued
subject to conditions designed to protect the
reliability of the domestic transmission systems.130
Under the Mexican Ley de la Industria Electrica
(Law of the Electrical Industry), both importing and
exporting electricity require authorization from the
CRE.131 To be connected to Mexico's national grid,
imported electricity must be generated by power
plants connected exclusively to the Mexican grid132
(i.e., power plants located in the United States pro-
viding power to the Mexican grid can provide power
only to the Mexican grid). Electricity exported from
Mexico is permitted only where the export is carried
out without use of the Mexican transmission grid or
distribution networks.133
4.7 Cross-Border Trade
in Renewable Energy
Each state located along the southern U.S. border
has imposed requirements on electric utilities that a
certain percentage of the utilities' electricity deliv-
eries come from renewable sources. In the case
of California, the law permits renewable resources
located in Mexico to satisfy this requirement under
specified circumstances.
California has set a target for electricity utilities to
generate 20 percent of total retail sales of electricity
in California from eligible renewable energy resources
by December 31, 2013; 33 percent by December
31, 2020; 50 percent by December 31, 2026; and
60 percent by December 31, 2030.134 In addition,
Senate Bill 100135 requires a 100 percent carbon-free
grid by December 31, 2045. This is known as the "re-
newables portfolio standard."136 An electrical gener-
ation facility that uses a permitted form of renewable
energy need not be in California to be an eligible re-
newable energy resource, so long as it meets certain
criteria. One of those criteria is that it be "near the
border of the state with the first point of connection
to the transmission network of a balancing authority
area primarily located within the state."137
This means that if a renewable energy facility in
Mexico has its first point of connection to a transmis-
sion grid where the grid is managed by a California
balancing authority such as the California Independ-
ent System Operator, and that first connection point
is in California, then that Mexican facility can be an
eligible renewable energy resource for purposes of
the California renewables portfolio standard.
San Diego Gas & Electric (SDG&E) has taken ad-
vantage of these provisions to purchase renewables
portfolio standard-eligible electricity from a wind
farm located in Baja California that delivers electric-
ity directly to the California grid. In the decision of
the California Public Utilities Commission (CPUC)
to approve the transaction, CPUC found that the
electricity to be purchased by SDG&E under the
agreement met the renewables portfolio standard
requirements; it also held that the SDG&E expendi-
tures under the agreement would be fully recovera-
ble in rates (2012a, b).
-------
4.8 Cross-Border
Cooperation in
Energy Regulation —
NERC and Mexico
As the energy flows of the United States and Mexi-
co become more integrated, there is a correspond-
ing need to ensure that the regulatory framework is
adequate to manage those flows. This is particu-
larly the case with electricity because a failure in
the electric grid in one location can cascade and
cause failures across a large swath of the grid. This
is what occurred in 2003 during the widespread
power outage throughout parts of the Northeastern
and Midwestern United States and the Canadian
province of Ontario (Barron 2003). Of course, the
failure can extend across an international border
when the grid crosses the border, as occurred with
Mexico in the 2011 Southwest Blackout (Kucher
and Baker 2011).
As discussed in Chapter 3, the North American
Electric Reliability Corporation (NERC) is the organ-
ization appointed by FERC as the Electric Reliability
Organization (ERO), responsible for overseeing the
reliable operation of the U.S. bulk power system
(i.e., the interconnected electric grid for the United
States).138 To carry out this responsibility, "NERC
develops and enforces Reliability Standards; annually
assesses seasonal and long-term reliability; monitors
the bulk power system through system awareness;
and educates, trains, and certifies industry personnel"
(NERC 2019).
Although NERC is charged specifically with oversee-
ing the bulk power system in the United States, it
has established a broader North American strategy
in recognition of the increasingly international scope
of the grid. In this regard, NERC has incorporated
Canada into its efforts. "In Canada, NERC standards
are adopted as mandatory and Canadian stake-
holders make significant contributions to standards,
assessments, and compliance through established
collaboration mechanisms" (NERC 2017). NERC
also is subject to oversight by governmental author-
ities in Canada (NERC 2019). Now NERC is placing
more focus on integration of Mexico into the NERC
process.
In its long-term planning document, ERO Enterprise
Long-Term Strategy: November 2017, NERC (2017)
points out that "[proposed increases in cross-border
electricity trade and rapid expansion of interconnec-
tion ties with Mexico will require increased coop-
eration in evaluating and addressing reliability and
security considerations" (p. 3). To this end, NERC
reports that "On March 8, 2017, NERC, the Comision
Reguladora de Energia, and the Centro Nacional de
Control de Energia signed a memorandum of under-
standing that outlines a framework for a cooperative
relationship between NERC and Mexico to further
enhance the reliability of the North American BPS
[Bulk Power System], The ERO Enterprise will work
with Mexican counterparts to develop and implement
the framework outlined in the memorandum with the
goal of supporting Mexico in its ongoing efforts to en-
sure reliability as it reforms and modernizes its electric
system" (NERC 2017, p. 3).
According to the NERC long-term planning docu-
ment, NERC has established "Recommended Stra-
tegic Focus Areas," which are "intended to guide
operations planning, resource allocation, and annual
budgeting to support the ERO Enterprise in both
preserving its current progress and achievements
and adapting to meet the new challenges" (NERC
2017, p. 12). One of those Recommended Strategic
Focus Areas is to "strengthen engagement across
North America." With respect to Mexico, "the ERO
will complete a full integration of Mexico into the
ERO and ensure that Mexico is engaged with NERC
and relevant Regional Entity technical committees
and initiatives, including:
• Analysis of reliability standards and process devel-
opment;
• Assessment of reliability performance and risks;
• Identification and assessment of risks related to
critical infrastructure protection, cyber and physi-
cal security; and
• Sharing of relevant reliability information associ-
ated with Mexico's accelerated development of
renewable energy resources and transmission
infrastructure" (NERC 2017, p. 12).
NERC's North American strategy reflects the ne-
cessity of using cross-border cooperation as the
means for incorporating Canada and now Mexico
into supervisory efforts for the interconnected electric
-------
An example of a planning effort that takes
account of contemplated U.S.-Mexico energy
trade is the Texas-Mexico Border Transporta-
tion Master Plan (BTMP), which explicitly incor-
porated consultation with Mexico.139 According
to the Texas Department of Transportation, the
BTMP has been defined and supported by the
United States-Mexico Joint Working Commit-
tee on Transportation Planning and Program-
ming, which includes the following:
• U.S. Department of Transportation;
• Secretaria de Comunicaciones y Transposes
(the Mexican Secretariat of Communications
and Transportation);
• U.S. Department of State;
• Secretaria de Relaciones Exteriores (the Mex-
ican Secretariat of Foreign Affairs);
• Four U.S. southern border states, including
Texas;
• Six Mexican northern border states, includ-
ing Chihuahua, Coahuila, Nuevo Leon and
Tamaulipas;
• U.S. General Services Administration; and
• U.S. Customs and Border Protection.
Some key elements of the Texas BMTP and
the planning process used for its development
are as follows:
• One element will be the accommodation of
trade flows, which includes energy trade.
• A key consideration will be the anticipated
increase of economic activity in Mexico's
northern border (especially oil and gas).
Among the identified issues and challeng-
es is an increase in wind, shale gas and oil
volumes.
• The BTMP will be multimodal and include
pipelines.
• Texas is consulting with public officials and
the private sector in Mexico to obtain input
for development of the BTMP. During a Jan-
uary 2019 visit to Mexico City, members of
the BTMP task force met with the Comision
Nacional de Hidrocarburos (Mexico's National
Hydrocarbons Commission) and representa-
tives in the Mexican private sector involved in
solar energy projects.
U.S.-Mexico Cross-Border Energy Relations
grid. The United States, Canada and Mexico are
sovereign nations and have exclusive jurisdiction over
their respective territories, but the grid increasingly
crosses the international borders between the United
States and Canada and the United States and Mex-
ico. Canada has elected to cooperate with NERC by
participating in NERC processes and using NERC
standards that it helped to establish, and the Cana-
dian government now plays a supervisory role with
respect to NERC. Mexico now participates in NERC
with a portion of northern Baja California (NERC
2019). As there is more integration between the
U.S. and Mexican grids, it can be expected that
NERC will take a greater role in Mexico's reliability
strategy for its grid, and Mexico will take a greater
role in NERC.
4.9 State and Local
Cooperation to Foster
Energy Trade and
Efficiency
The increased energy integration between the
United States and Mexico has effects on trade
flows and transportation systems at the local level.
It is accordingly prudent for U.S. state and local
governments in the border region to account for
U.S.-Mexico energy integration in their planning
efforts, particularly transportation planning. For
U.S. state and local government officials this
means, among other things, consulting with their
counterparts in Mexico to understand Mexican
forecasts of trade flows and the planning efforts
taking place on the Mexican side of the border.
The growth of liquefied natural gas shipments by
truck across the Texas border is a key example.
Increasingly, the number of gas pipelines into
Mexico to meet long-term demand will have
a considerable effect on border communities,
and local authorities need to plan for this new
infrastructure.
-------
The California Energy Commission currently is work-
ing with the University of California, Davis and the
Mexican state of Jalisco to build a Center of Lighting
Technology (Centra de Tecnologia de lluminacion)
at the Universidad Autonoma de Guadalajara. Its
design is based on the California Lighting Technolo-
gy Center at the University of California, Davis. The
Center's mission is to transform the lighting industry
in Mexico, directing it toward more efficient, higher
quality lighting. The project is funded by SENER
(2017) and Consejo Nacional de Ciencia y Tec-
nologia (the Mexican National Council of Science
and Technology).
The Lawrence Berkeley National Laboratory's
Mexico Energy Initiative has facilitated cross-border
partnerships that seek to accelerate Mexico's tran-
sition to cleaner energy. Through the Mexico Energy
Pathways Initiative, researchers from Lawrence
Berkeley National Laboratory work with Mexican
policymakers to elevate the profile of energy efficien-
cy, among other energy-related missions. Partner
institutions in Mexico include SENER, the Comision
Nacional para el Uso Eficiente de la Energfa (the
Mexican National Commission for the Efficient Use
of Energy), and a range of universities and research
organizations. Additionally, former Lawrence Berke-
ley National Laboratory researcher Claudia Shein-
baurri Pardo was elected Mayor of Mexico City in
July 2018. During her tenure at Lawrence Berkeley
National Laboratory, Sheinbaum Pardo examined
energy efficiency in the building, transportation and
industry sectors and is likely to bring her nuanced
and science-based perspective to managing Mexico
City's growing energy needs.
The Mexico Cooling Initiative, which represents a
subprogram of the Mexico Energy Initiative, aims to
reduce energy demand from cooling by 50 percent
and save US$100 billion by 2050 through coordi-
nation among the Mexico Energy Initiative's partner
organizations and government agencies. The Mexico
Cooling Initiative posits a cohesive plan to achieve
its lofty goal that includes targets for research and
development, program implementation and capacity
building, and coordination. Funded by the
U.S. Agency for International Development and
the Kigali Cooling Efficiency program, the initiative
launched in 2018 in the aftermath of the Summit on
Space Cooling Research Needs and Opportunities
in Mexico.
-------
U.S. Border Energy
5.1 California Border
Region: San Diego
and Imperial Counties
5.1.1 Overview of San Diego
Three large power plants fueled Py natural gas
account for most of the installed in-region genera-
tion of 3,117 megawatts (MW) (Figure 9).
Factors driving energy demand in the California
border region, which consists of San Diego and
Imperial Counties, are population growth, geology,
weather, water availability and environmental issues,
particularly air quality. The region is located in the
southwestern corner of the United States, far from
major electricity supply centers and natural gas
sources. A small portion of Arizona, including the
cities of Yuma and San Luis, often are included
as part of the California border region in terms of
energy. The geographical location helps explain the
very high electricity rates for San Diego compared
to other parts of the country. The region also is
vulnerable to the grid impacts of natural disasters
such as earthquakes, fires, and Other potential Figure 9. California operational power plants, May 2018.
California
Operational Power Plants
May -2018
® MSW
® Natural Gas
® Nuclear
® Solar PV
0 Solar Thermal
© Wind
® Battery
® Biomass
® Coal
® Digester Gas
® Geothermal
© Hydro
$ Landfill Gas
-------
energy future of California is largely framed by state
mandates and policy. California's Senate Bill 100140
calls for utility providers to source 50 percent of
their retail sales from renewables portfolio standard-
compliant resources by 2026, 60 percent by 2030,
and 100 percent from carbon-free resources
(including large hydro) by 2045.
As of 2016, San Diego County has 3.33 million res-
idents, and Imperial County has 187,157 (California
Department of Finance 2016). Population growth is
high in the region, with San Diego County expected
to reach 4 million by 2050. In addition to population
growth, other factors related to energy use in this
region include population shifts to inland regions
away from the coast, resulting in greater demand for
air conditioning; extreme weather events, especially
fires and heat waves; climate change; and air quality
issues, especially in the Imperial Valley but also in the
coastal region.
For the purposes of this analysis, the California bor-
der region is divided into two zones: western (San
Diego County) and eastern (Imperial County).
5.1.2 Current Energy Sector in San
Diego: Demand and Sources
of Energy
The primary sources of energy used for electricity
generation in San Diego County are renewable
resources and natural gas, which are brought to the
region via pipeline from other parts of the United
States. According to San Diego Gas & Electric's
(SDG&E) publicly available 2017 power content label
(Table 5), renewable sources accounted for
44 percent of SDG&E's power mix (primarily wind
and solar), and natural gas accounted for 39 percent.
"Unspecified sources of power" account for the
remaining 17 percent; this category encompasses
a mix of resource types that cannot be traced to a
specific generator and may include renewables and
imported power.
Table 5. San Diego Gas & Electric's 2017 Power Content Label
2017 POWER CONTENT LABEL
San Diego Gas & Electric (SDG&E)
Energy Resources
2017 SDG&E
Mi* Power
Mix
2017 SDG&E
EcoChoice Mix
2017 CA Power
Mix**
Eligible Renewable
44%
100%
29%
Biomass & Biowaste
2%
2%
2%
Geothermal
0%
3%
4%
Eligible Hydroelectric
0%
3%
3%
Solar
21%
100%
10%
Wind
21%
10%
10%
Coal
0% 0% 4%
Large Hydroelectric
0% 0% 15%
Natural Gas
39%
0%
34%
Nuclear
0% 0% 9%
Other
0% 0% <1%
Unspecified Source of Power*
17% 0% 9%
Total
100%
100%
100%
^"Unspecified sources of power" means electricity from transactions that are not traceable to
specific generation sources.
**Precetnages are estimated annually by the California Energy Commission based on the electricity
sold to California consumers during the identified year.
For specific information about this electricity product, contact:
For general information about the Power Content Label, please visit:
For additional questions, please contact California Energy
Commission at:
San Diego & Electric
800-411-7343
www.energy.ca.gov/pcl/
50
-------
U.S. Border Energy
Table 6. System Average Rates Associated With Conforming Portfolio (2016US$)
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
0/kWh
21
21
21
21
21
20
20
20
20
20
20
20
20
Rev.
Req.
SB
3.11
3.14
3.16
3.22
3.15
3.11
3.09
3.06
3.04
3.07
3.10
3.11
3.10
kWh—Kilowatt hour
Thus, for more than half of its electric energy
needs, San Diego County is dependent on sources
outside of the region (39% natural gas and 17%
unspecified). If the target of 50 percent renewaPles
is reached Py 2030, Pecause most of these renew-
aPles are likely to Pe located within San Diego and
Imperial Counties, dependence on imported sourc-
es of energy for power production will likely fall to
50 percent or Pelow. It also is likely that natural gas
will remain a major component of power generation
in the region for the foreseeaPle future, at least until
2030. This is Pecause the price of natural gas prob-
aPly will remain relatively low, and natural gas power
plants can support reliability as more renewable
resources are integrated into the grid.
The California Energy Demand 2018-2030 Re-
vised Forecast (Forecast) predicts a 4 percent
decline in electricity sales between 2020 and 2030
in SDG&E's service area, equating to an average
annual decline of 0.4 percent. Expected electricity
demand in 2020 is 17,984 gigawatt hours (GWh),
and 17,321 GWh in 2030. The Forecast predicts
stable demand during the same period in the Impe-
rial Irrigation District's (IID) service area, remaining at
approximately 3,440 GWh between 2020 and 2030.
These projections are based on 2017 data and ex-
clude losses and consumption served by customer
generation. Most of the decline in electricity sales is
a result of the ramping up of energy-efficiency pro-
grams and customer-installed solar rooftop systems
(Kavalec et al. 2018).
5.1.3 Cost and Prices of Current
Energy Use
According to the U.S. Energy Information
Administration (EIA), California's electricity retail rates
are the second highest in the United States, and the
average residential retail rates are seventh highest.
According to SDG&E's 2018 Integrated Resource
Plan, system average rates are approximately
21 cents per kilowatt hour (kWh) and are expected
to stabilize at 20 cents per kWh by 2030—a
calculation based on 2016 dollars and assumptions
of revenue requirements for transmission,
distribution, demand-side management and
generation costs ( ble ) (SDG&E 2018).
A 2016 San Diego Union-Tribune article highlights
that SDG&E's average residential rates between
2014 and 2018 were notably higher than those of
California's other investor-owned utilities, the Pacific
Gas and Electric Company and Southern California
Edison ( igure 11) (Nikolewski 2018). Utility officials
attribute SDG&E's high rates, which are determined
through the California Public Utilities Commission's
general rate case process every 3 years, to its
smaller customer base, costs attributed to wildfires,
and maintenance of its underground power lines.
Going up... and up
The price per kilowatt-hour for residential tiered rate plans for
California's three investor-owned utilities on Jan. 1 of each year.
— San Diego Gas & Electric Summer
—— San Diego Gas & Electric Wintw
— Pacific Gas & Electric
— Southern California Edison
Baseline up to 100%
101%-130% of baseline 131%-200% of baseline 201%-400% of baseline
Figure 10. San Diego Gas & Electric's (SDG&E) average residential rates.
Sources: Public Advocates Office; San Diego Gas & Electric; Southern
California Edison; Pacific Gas and Electric Company.
Unbeholden to shareholders as a public agency
and lacking a revenue requirement, IID is able to
maintain lower average retail rates for its customers.
The IID (2015) rate schedule demonstrates the rate
structure of its general service, which amounts to a
US$12.00 flat monthly charge, and a per-kilowatt
hour price that ranges between 11.69 and 12.31
U.S. cents—substantially lower than those of
SDG&E.
-------
As both load service providers seek to meet the
energy-efficiency targets laid out by Senate Bill
100,141 they will need to ensure that their efforts to
reduce energy demand do not result in substantial
rate increases, particularly for any low-income and
disadvantaged communities in their customer bases.
5.1.4 Factors Influencing Future
Demand
The Southern California region faces unique energy
reliability issues. Several factors have combined to
create a prolonged period of heightened concern
about reliability in the Southern California region,
including the outage of two San Onofre Nuclear
Generating Station units in 2012, the decision to
retire San Onofre in 2013, the massive gas leak
discovered in 2015 at the Aliso Canyon natural gas
storage facility, the expected compliance-related
closure of several Southern California coastal power
plants that used ocean water for cooling, and the
ongoing natural gas pipeline outages in the South-
ern California Gas Company system because of
maintenance. The factors contributing to concerns
about reliability of the Southern California energy
system are ongoing (California Energy Commission
2018a).
Factors influencing future electricity demand in San
Diego County include:
• Population shifts. The population is expected to
shift to inland regions where average tempera-
tures are higher than in the coastal zone, resulting
in a higher air-conditioning load.
• Replacement of natural gas with electricity. As
California moves toward a decarbonized energy
sector, electricity gradually will replace natural gas
in areas such as transportation (electric vehicles),
space heating, and water heating and cooking.
This will increase the demand for (carbon-free)
electricity production.
• Energy for water-related needs (known by the
term "watergy"). As demand for water increases,
especially in the inland and desert areas, reuse
and desalination of brackish and sea water likely
will increase. Along with this growth in demand for
reused and desalinated water will be an associat-
ed need for more electricity.
5.1.5 Overview of Imperial
Count\142
As described in Section 5.1.1., the population
of Imperial County is much smaller than that of
San Diego County, and thus its energy usage is
considerably lower than San Diego's. The structure
of the energy sector in Imperial County also is quite
different from that of San Diego County. In contrast
to San Diego County's one investor-owned utility
(SDG&E), Imperial County's electricity is provided
by IID, a community-owned entity. IID supplies
both power and water to the Imperial Valley and
is governed by a five-member board of directors
that is elected by the public, with each director
representing one of the five political divisions within
the Imperial Valley. IID's service territory covers
6,471 square miles (16,760 square kilometers
[km2]) and includes all of Imperial Valley and parts of
Riverside and San Diego Counties.
The sources of electricity for Imperial County in
2017 were natural gas (34%), renewables (29%),
coal (15%), large hydroelectric (4%), nuclear (3%)
and unspecified (17%), as shown in Table 7.
Table 7. Imperial County 2017 Power Content Label
2017 POWER CONTENT LABEL
Energy Resources
Power Mix I 2017 CA Power Mix1
Eligible Renewable
29%
29%
Biomass & Biowaste
10%
2%
Eligible Hydroelectric
5%
3%
Solar
11%
10%
Wind
0%
10%
Coal
15%
4%
Large Hydroelectric
4%
15%
Natural Gas
32%
34%
Nuclear
3%
9%
Other
0%
<1%
Unspecified Source of Power*
17%
9%
Total
100%
100%
'"Unspecified sources of power" means electricity from transactions that are not
traceable to specific generation sources.
Percentages are estimated annually by the California Energy Commission based
on the electricity sold to California consumers during the identified year.
For specific information about this electricity product, contact Imperial Irrigation
District at 1-800-303-7756.
For general information about the Power Content Label, contact the: California
| Energy Commission at 1-800-454-2906 or Afw.enerav.ca.aov/Dcl/.
Renewable sources of power consist mostly of
biomass, solar and wind, but not geothermal
energy, which is surprising given that Imperial
Valley contains rich geothermal energy sources.
Geothermal energy is exported out of the valley.
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U.S. Border Energy
Imperial County Renewable Energy
US Highways ¦ Town Sites
N
HI
Power Plant Locations Index
1 I CHtes • Wind Turnings
A
Sola? Farms
Figure 11, Imperial County renewable energy power plant locations.
Source: Imperial County Planning and Development Services, www.icpds.com/CMS/Media/flll-Renewable-Power-Proiects-11-1-13.pdf.
Imperial County has solar, wind, geothermal, micro-
hydroelectric and thermal power plants (Figure 11).
The county has marketed itself as having the potential
to generate 42,283 MW from renewable energy
sources. In an analysis commissioned by the IID,
the Renewable Energy Feasibility Study Final Report
(Summit Blue Consulting 2008), solar has the greatest
potential at 28,600 MW; second is low-speed wind at
9,555 MW, and third is geothermal at 2,488 MW.
Power Transmission
The current power transmission links from Imperial
County include the 500 kilovolt (kV) transmission
line, called the Sunrise Powerlink, which moves
electricity generated in Imperial County by renewa-
bles and by two combined cycle plants in Mexicali,
Baja California, to San Diego County. This line trav-
els 117 miles (188 kilometers [km]) with a 1,000 MW
capacity and went into operation in 2012.
Additionally, the IID's transmission system is linked
to the north through the California Independent
System Operator (CAISO)/Southern California Edi-
son, to the west through CAISO/SDG&E, and to the
east though the Western Area Power Administra-
tion/Arizona Public Service. Current proposals seek
to develop a new connection to the south to the
Comision Federal de Electricidad (Federal Electricity
Commission, known as CFE) in Mexico. In 2018,
IID and CAISO settled a lawsuit that claimed that
CAISO was seeking a monopoly in the transmission
service and operations, which limited the full export
rights of IID as a balancing authority area. As part of
the agreement, CAISO will upgrade IID's S-Line from
the Ei Centra substation to the SDG&E's Imperial
Valley substation. CAISO also agreed to help pro-
mote geothermal development around the Salton
Sea, and a joint committee was formed to help
coordinate issues important to both entities.
IID has developed a Strategic Transmission Ex-
pansion Plan that proposes to build a 2,200 MW
230 kV collector system. This system would allow
for the export of 1,100 MW to CAISO and another
1,100 MW to the WestConnect Planning Region for
-------
energy. Additional future upgrades to the system will
allow for a total export of 4,100 MW. The estimated
cost of the Puild-out of the transmission system is
US$431 million to US$1.7 Pillion.
To Petter integrate solar power and enhance grid
staPility, ID in collaPoration with General Electric
Company, Consolidated Edison, Inc., ZGIoPal
and Coachella Energy Storage Partners has Puilt
a lithium-ion Pattery storage system that can store
20 MW of power for some time and 30 MW of peak
power for very short times. This storage facility is the
largest in the western United States, allowing for the
startup and synchronization of the El Centra Gen-
erating Station, a 128 MW comPined cycle natural
gas plant. This provides staPilization to the system
and can Pe used in the event of a system Plackout.
Additional storage capacity still is needed, and this
topic is Peing discussed in the region.
Combined Cycle Natural Gas
IID's El Centra Generating Station replaced a 44 MW
plant at the same site in 2012. The natural gas for
this system is provided Py a Southern California Gas
Company pipeline that runs from the Niland regulating
station. The annual water consumption for cooling of
the facility is approximately 1,125 acre-feet.
Micro Hydroelectric
Imperial County has a 92.5 MW capacity of
micro-hydroelectric generation. In 2018, the
seven micro-hydroelectric plants had an output of
139,136 megawatt hours (MWh) ( ble ). This
reduction of approximately half of what was Peing
produced in 2010 resulted from the Drop 1 plant
Peing taken offline with the lining of the Ail-
American Canal as part of the water transfer
agreement with San Diego County. The Drop 4 plant
has Peen down since 2015 for a major refurPishment
and should Pe operational again in 2019.
Solar
A numPer of new solar projects have Peen approved
and are operating in the Imperial Valley. Examples
include:
• The Mount Signal Solar Project, developed Py
Silver Ridge Power (formally AES Solar) and
8minute Solar Energy. This 206 MW plant went
online in 2014, providing power to SDG&E under
a 25-year purchase agreement. When the project
is completed, it will have the capacity to produce
aPout 800 MW. With the second of its three solar
farms having come online in DecemPer 2018, the
project now produces 1.29 Pillion kWh of power
(8minute Solar Energy 2018).
Table 8. Small Hydroelectricity Production by Imperial Irrigation District, 2010 and 2018
EIA
CEC
Plant Name
Sate
2010
2018
Plant ID
Plant ID
Gross MWh
Net MWh
Gross MWh
Net MWh
585
H0147
Drop 1
CA
5.9
20,074
20,074
1,791
1,664
385
H0149
Drop 2
CA
10
49,394
49,394
44,107
43,437
386
H0150
Drop 3
CA
9.8
49,065
49,065
42,121
41,903
387
H0151
Drop 4
CA
19.6
99,453
99,453
3,423
3,282
314
H0152
Drop 5
CA
4
14,111
14,111
11,341
11,264
586
H0160
East Highline
CA
2.4
3,706
3,706
4,160
4,047
388
H0385
Pilot Knob
CA
33
25,161
25,161
32,193
31,763
84.7
260,964
260,964
139,136
137,360
MW—Megawatt; MWh—Megawatt hour.
Source: California Energy Commission, fw2.enerav.ca.aov/almanac/renewables data/hvdro/inde:
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U.S. Border Energy
• Tenaska Imperial Solar Energy Center West and
South are two photovoltaic plants producing
150 MW and 130 MW, respectively. The South plant
was built in 2013, and the West plant was built in
2016. These plants cover approximately 2,000 acres
and are owned by affiliates of Tenaska Solar Ven-
tures. The electricity generated will be sent to San
Diego under 25-year power purchase agreements
with SDG&E (Tenaska Solar Ventures 2019).
Rooftop solar projects are promoted by the ID with
more than 4,000 systems connected to the local
grid (IID 2019).
Wind
A 265 MW wind farm covers 12,346 acres of land
administered by the Bureau of Land Management. It
came online fully in 2013 and has a purchase power
agreement with SDG&E for 20 years.
Geothermal and the Salton Sea
Currently, approximately 600 MW of geothermal en-
ergy is generated from 17 sites throughout Imperial
County. This region generates the second largest
amount of geothermal electrical power in the United
States. It has been projected that the region has a
total capacity of 2,330 MW (Quintero and Sweedler
2005).
Water transfers to San Diego, Los Angeles and
Coachella have led to fallowing and irrigation
conservation, which is reducing the amount of
water flowing into the Salton Sea. A number of
environmental externalities will occur with the
exposed lakebed, but the possibility for increased
geothermal production exists. Currently, 10 plants
around the Salton Sea generate 338 MW. These
geothermal plants are owned and managed by
CalEnergy (BHE Renewables 2019), a subsidiary of
Berkshire Hathaway Energy.
The Salton Sea Restoration and Renewable Energy
Initiative has set a goal of 1,700 MW of new geo-
thermal generation in this region. This initiative is
sponsored by IID as part of the plan to mitigate the
reduced flow of water to the Salton Sea. It currently
has California support with the State Water Control
Board Revised Order WRO 2002-0013. This order
resolved many outstanding issues from the water
transfer to San Diego agreement (Quantification
Settlement Agreement) of 2001.
No state or federal incentives support the development
of new geothermal plants, and lack of funding exists
to support projects to mitigate dust and other environ-
mental effects around the Salton Sea resulting from the
lower water levels and more exposed lakebed, which
could account for the slow progress in the construc-
tion of new geothermal plants in the region.
The Bureau of Land Management and the Desert
Renewable Energy Conservation Plan143 recognize the
area around the Salton Sea also as having potential for
solar energy, and research currently is being conduct-
ed into biofuels from algae around the Salton Sea.
"Hell's Kitchen Lithium," a lithium carbonate plant,
and "Hell's Kitchen Power," a geothermal plant,
are two projects being developed in the Imperial
Valley by Controlled Thermal Resources (2019a).
The geothermal plant will provide the power for the
lithium extraction. The project developer expects
the lithium plant to produce its first 15,000 tons
of lithium carbonate-equivalent products in 2023.
Controlled Thermal Resources (2019b) expects the
plant to produce about 75,000 tons of battery-grade
lithium carbonate products annually thereafter. The
developer reports that the total resource potential
for the Hell's Kitchen project is 300,000 tons of
lithium carbonate equivalent annually (Controlled
Thermal Resources 2019c).
5.1.6 Energy Use
As stated previously, energy sales in IID's service
area are expected to remain stable between the
years 2020 and 2030 (assuming the mid-demand
baseline case and the mid-case for additional
achievable energy-efficiency savings). IID's 2018
Integrated Resource Plan demonstrates a less
optimistic view of the potential for savings from
energy efficiency, as portrayed by IID's Expected
Case in :igure 12. Further projections of the
system's demand requirements are demonstrated
in :igure 13. In total, IID's energy demand forecast
projects a 1.2 percent annual average increase in
load from 2019 to 2030, which more closely tracks
the California Energy Commission's high-demand/
low-achievable energy-efficiency and photo-voltaic
scenarios.
-------
5.000.000
4,000,000
^ 3,000,000
2,000.000
1,000,000
Net IID System Sales (expect/high/low/AAPVEE/ZNE cases)
6.000.000
Figure 12. Net Imperial Irrigation District system sales.
Source: Imperial Irrigation District, www.iid.com/Home/
ShowDocument?id=17371.
According to 2017 customer data, commercial sales
comprise 40 percent of IID's business, whereas
residential sales comprise 46 percent. The remain-
ing 14 percent of sales are attributed to agricultural,
industrial and other sectors.
5.1.7 Air Quality Issues in Relation
to Power Generation
IID's 2017 power content label reveals that natural
gas comprises 34 percent of its generation, where-
as imported coal power accounts for 15 percent.
Additionally, the region experiences high concentra-
tions of particulate matter resulting from agricultural
burning and natural events exacerbated by climate
change (e.g., high-wind dust events, wildfires).
According to the California Air Resources Board's
(2018) Working Group Draft of the Imperial
County—Mexican Air Quality Work Plan to Improve
Air Quality in the Border Region, "Imperial County's
air quality ranks as among the worst in the State of
California" because of high levels of large particulate
matter (e.g., dust) and fine particulate matter, a
more hazardous type of particulate matter that is
generated from human sources. The California Air
Resources Board's plan to improve air quality at the
California-Mexico border focuses on monitoring and
regulating agricultural burning practices, reducing
emissions from vehicles by tightening Imperial
County's smog-check program, and strengthening
control over emissions from stationary sources such
as buildings and power plants.
Figure 13. Imperial Irrigation District 2018 load forecast.
Source: Imperial Irrigation District, www.iid.com/Home/
ShowDocuinent?id=17371.
5.1.8 Renewable Energy Growth
and Role of Wind and Solar
The Imperial Valley has become one of the country's
largest sites for renewable generation, especially
solar and wind. It is common to see miles of solar
arrays and wind turbines on land that was previously
used for agriculture or characterized by native
vegetation. Much of this renewable energy is export-
ed out of the region, mostly to the Los Angeles,
Riverside and San Diego areas. IID plans to increase
its use of renewables, as seen in Figure 14.
The renewable resource base is considerable, as
can be seen in Table 9. These are very large num-
bers (the total capacity for California is about
80,000 MW).
144 MW
85 MW
15-18 MW 2
4|mw
28.6
PERCENT
¦ Biomass ¦
MW—Megawatt
Figure 14. Actual/anticipated 2017-2020 renewables mix.
Source: Imperial Irrigation District, www.iid.com/enerav/renewable-enerav.
w
ISO M
55 MW
-23
\1 M
35
'ERCENT
180MW
86 MW
I
70-73 MW 75-88
41M
47 M
48.8
PERCENT
180 MW
86 MW
48.8
PERCENT
eothermal ¦ Eligible Hydro BSolar
-------
Table 9. Resources Untapped in the Imperial Valley
Geothermal
2,488 MW
Solar
28,946 MW
Wind
10,755 MW
Biomass
94 MW
Total Potential Capacity
42,283 MW
MW—Megawatt
Whether these renewable resources ever will be
developed depends on state and federal policies,
economics (particularly the price of natural gas), and
other factors (e.g., carbon tax implementation).
In terms of cross-border energy trading, renewable
energy development in the Imperial Valley likely will
compete with similar projects in Mexico. If, however,
California stays on target to have 100 percent
renewable generation by 2045, the demand for wind
and solar power will be so great that projects in
Imperial County and Mexico could be cost-effective
on both sides of the border.
5.1.9 Unique Relationship
Between California and
Baja California
Baja California is the only state of Mexico that is not
connected with Mexico's main national electricity
grid nor with oil and natural gas pipelines, but it is
interconnected with a U.S. border state, California.
The northern part of Baja California has two Cali-
fornia grid connections—Otay Mesa and Imperial
Valley (both also known as Path 45), but it is not
connected to Baja California Sur or the mainland.
Centra Nacional de Control de Energia (Mexico's Na-
tional Energy Control Center, known as CENACE), a
public agency, controls Mexico's electric system and
manages the wholesale electricity market as it transi-
tions to a fully competitive market. The grid operator
dispatched 68,044 MW of electricity in 2015, using
more than 33,000 miles (53,108 km) of high-voltage
power transmission lines. CENACE has had a long,
productive relationship with the independent system
operator, as the two entities coordinate the manage-
ment of these interconnected electricity grids.
Mexico energy policies mandate a renewables portfolio
goal, including hydroelectricity, of 25 percent in 2018,
30 percent in 2021 and 35 percent by 2024 (including
hydroelectricity). It should be noted, however, that
under the new Mexican administration of President
Andres Manuel Lopez Obrador, energy policy in gen-
eral and at the border is under review and likely will be
quite different than what exists in mid-2019.
5.1.10 Energy Efficiency and Energy
Poverty
As discussed earlier in this report, energy
efficiency is a key strategy for addressing energy
poverty. Investments in the efficiency of housing
for low-income groups/communities can reduce
energy bills and result in increased comfort,
air quality and health. The U.S. Department of
Energy (DOE) administers several programs
aimed at targeting energy-efficiency measures
at low-income individuals, including the Low
Income Home Energy Assistance Program,
which provides direct assistance to households
spending a disproportionately large part of their
monthly budgets on energy expenses, and
the Weatherization Assistance Program, which
supports the installation of energy conservation
and efficiency measures in low-income households.
The Weatherization Assistance Program, which is
a substantial driver of energy efficiency across the
United States, disbursed US$223,641,325 to state
administrators in 2017. Of that total, approximately
US$14 million (about 6% of funds) were allocated to
U.S.-Mexico border states ( )le 1C).
As noted previously, SDG&E's electricity sales
through 2030 are expected to decrease by 4 per-
cent despite the growing consumption portrayed by
SDG&E's 2016 Electricity Resource Planning Forms.
SDG&E forecasts an increase of 1,031 GWh in total
Table 10. Weatherization Assistance Program Border State Distribution
Amounts
STATE
2017 ALLOCATION*
California
US$6,215,232
Texas
US$5,480,562
New Mexico
US$1,745,551
Arizona
US$1,268,072
TOTAL
US$14,619,417
'Includes funding for training and technical assistance.
Source: U.S. Department of Energy, www.enerav.aov/sites/prod/
files/2017/06/f35/wpn-17-2-arantee-final.pdf.
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Energy Production, Transportation and Demand in the Transborder Region: Opportunities and Impacts
energy consumption between 2020 and 2026 and a
concurrent increase of additional achievable ener-
gy efficiency of 1,025 GWh during the same time
period, resulting in a net increase of only 6 GWh in
adjusted demand.
IID's demand forecast is similarly modest, projecting
stable demand through 2030 because of anticipated
progress toward additional achievable energy-
efficiency targets. IID's 2018 Integrated Resource
Plan demonstrates its short-term projection of
proposed and achieved energy savings targets,
which take into account existing buildings and new
construction across the residential, commercial and
industrial sectors ( igure 1 ).
MWh—Megawatt hours
Figure 15. Proposed and achieved energy savings targets, 2014-2023.
Source: Imperial Irrigation District, vww.iid.com/Home/
ShowDocument?id=17371.
Senate Bill 350144 called on the California Energy
Commission to double the state's energy-efficiency
savings by 2030 through a variety of mechanisms,
including:
• Maintenance of funding for utility-operated
energy-efficiency programs,
• Rewards for energy-efficiency programs that
facilitate market transformation and attract private
investment
• Improvements in code compliance,
• Institutional support for reach codes,
• Improvement of energy-efficiency installations
through application of workforce standards,
• Enforcement of regular tracking and reporting of
achieved progress, and
• Close analysis of the effects of energy-efficiency
targets on disadvantaged and low-income com-
munities (California Energy Commission 2019).
Implementation of the above measures will ensure
that electricity demand in SDG&E's service area—
and beyond—remains stable and serviceable, even
as buildings and appliances shift away from natural
gas and toward electricity consumption.
According to the California Energy Commission's
(2018c) September 2018 Tracking Progress report
on energy efficiency, California is on track to achieve
more than 70,000 GWh of electricity savings
through building standards, appliance standards
and consumer behavior as incentivized by energy-
efficiency programs. The Low-Income Barriers Study,
which was mandated by Senate Bill 350,145 provides
essential context for the discussion around energy
efficiency at the California-Mexico border (California
Energy Commission 2016). Of the 30 percent of
California households in the low-income category,
19 percent are single-family homes, 7 percent are
market-rate multifamily homes, 2 percent are rent-
assisted multifamily homes, and 1 percent are mobile
homes. Additionally, only 26 percent of low-income
households represent owner-occupied homes,
whereas the remaining are renters. This demographic
information may translate to challenges in meeting
the bill's energy-efficiency target in low-income
communities, such as:
• Utilities' energy-efficiency programs can be
inaccessible or insufficient for renters, particularly
those in multifamily homes.
• Renters may lack the property rights to install
energy-efficient appliances and upgrades.
• Energy-efficient upgrades may increase proper-
ty values, resulting in increased rents, causing
low-income renters to be priced out of their
homes and neighborhoods.
Centering disadvantaged and low-income
communities in energy-efficiency efforts requires
market transformation and innovative thinking
around energy-efficiency project finance. Some of
those solutions, which include community solar
investments, Pay-As-You-Save programs, and
reallocation of California Alternate Rates for Energy
(commonly known as CARE) funds, are summarized
Proposed and Achieved Energy Savings Targets
2014 - 2023
30,000
25,000
20,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
¦ Proposed MWh ¦ Achieved MWh
-------
U.S. Border Energy
in the 2018 Low-Income Barriers Study and may
represent appropriate pathways to reducing energy-
efficiency costs in the Porder region.
Looking Forward: Opportunities for Energy Efficiency
at the California-Mexico Border
The California-Baja California region represents a
particularly compelling opportunity to expand energy
efficiency Pecause of its climate and demographic
conditions. The area has a growing population
(increasing at more than 2% per year) and expanding
economy, Poth of which will represent a strain on the
grid aPsent careful planning (CityPopulation.de 2019).
Space cooling needs are expected to grow as a
result of rising temperatures in the Baja California-
Southern California region. Future temperature
projections are illustrated according to high- and
low-emissions scenarios in Figure 16.
By expanding on the collaPorative efforts illustrated
aPove, California's roPust energy-efficiency infra-
structure and policy expertise may Pe leveraged to
support similar progress in Baja California. Through
roPust national and state-to-state partnerships,
increased customer adoption, and improvements in
cost-effectiveness through strategic policy design
and market transformation at the Porder region, the
Penefits of energy efficiency may Pe realized more
on the Mexican side of the Porder.
(a) Baja California/Southern California
Figure 16. High- and low-emissions scenarios. A2: High-emissions
scenario, B1: Low-emissions scenario.
Source: Figure modified from: Cavazos.T., and S. Arriaga-Ramirez.2012.
"Downscaled Climate Change Scenarios for Baja California and the North
American Monsoon During the Twenty-First Century."
Journal of Climate 25:5904-5915.
5.2 Arizona Border
Region
Arizona is one of the few states in the United States
that relies on nuclear power for a plurality of its
electricity production. Currently, coal, natural gas
and nuclear power produce roughly equal thirds of
electricity produced in the state, with much smaller
amounts coming from hydro and other renewa-
Ple sources. Arizona is currently a net-exporter of
electricity, with most excess electricity flowing to
California, Texas and New Mexico (EIA 2019m).
Although not home to significant reserves of coal,
natural gas or petroleum, Arizona has ideal condi-
tions for renewaPles such as wind and solar and will
need more energy-production capaPilities as coal is
phased out, and the state population continues to
grow (EIA 2019n).
The Palo Verde Generating Station, located west of
the Phoenix metropolitan area, is the largest nuclear
power plant, the largest net generator of electricity,
and the second largest power plant Py capacity
of any kind in the country (EIA 2019m). It provides
close to three-tenths of the electricity produced
in the state and provides suPstantial amounts to
neighPoring Porder states as well. Coal produces
close to the same amount of electricity in the state;
however, this has Peen in a steep decline 2001,
when coal had close to a 50 percent share of elec-
trical production (Popovich 2018). Coal has slowly
Peen edged out in the state Py cheaper natural gas
and tighter regulations.
The coal-powered Navajo Generating Station, in
northern Arizona, was the state's second largest
power station, Put was closed in NovemPer 2019
(Salt River Project 2019, Silversmith and Randazzo
2019). The Central Arizona Project, which supplies
most of Arizona's population centers with water
pumped from the Colorado River, relied on the
Navajo Generating Station for power. One of the
challenges for the state will Pe to find enough sources
of power to make up for the loss of the Navajo
Generating Station, with the Central Arizona Project
pushing to expand solar energy products and find
other suppliers in the state (Randazzo 2018). Natural
gas is the third largest electricity source in the state
and has risen largely since the shale and hydraulic
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fracturing boom in other parts of the country reduced
the price of natural gas. Most of Arizona's natural
gas is imported from Texas and New Mexico through
pipelines (EIA 2019n). Hydro and solar make up the
rest of the electrical generation in the state, at still
comparatively small levels.
The majority of the state's population receives its
electricity from four main utility companies: Arizona
Electric Power Cooperative, Arizona Public Service,
Salt River Project and Tucson Electric Power. Arizona
Public Service is by far the largest, serving most
of the Phoenix metropolitan area and many urban
centers in other parts of the state. Arizona Public
Service and Tucson Electric Power are investor-
owned utilities, Arizona Electric Power Cooperative is
a rural generation and transmission cooperative, and
Salt River Project is a community-based not-for-profit
water and energy company. These utility companies
own most of the electrical transmission and
generation capability in the state, with Arizona Public
Service owning the Palo Verde Generating Station,
Salt River Project owning the Navajo Generating
Station, and Arizona Electric Power Cooperative
and Tucson Electric Power owning other generating
facilities in the state. Recently, the role of Arizona
Public Service in state politics has been controversial,
with Arizona Public Service spending millions of
dollars in political campaigns to help their preferred
candidates change net metering arrangements for
homeowners with solar systems and influence other
policies (Randazzo 2019).
In Arizona, the largest energy consumer among
end-use sectors is transportation ( igure 1 ).
Current state policy aims to have electrical utilities
rely more on renewable energy, with a mandate of
15 percent of their total energy sourced from
renewable energy sources by 2025. In 2018, a
referendum on increasing that mandate to 50 percent
renewable electrical sales by 2030 failed to pass, with
two-thirds of the state voting against the measure.146
In addition, certain Corporation Commissioners who
set electricity rates and policies have increasingly
promoted additional requirements for utilities, such
as the Arizona Corporation Commission Energy
Modernization Plan, which requires an 80 percent
renewables portfolio standard by 2050, among other
requirements (Tobin 2018). The Arizona Corporation
Residential
Commercial
Industrial
Transportation
Figure 17. Arizona energy consumption by end-use sector, 2017.
Source: U.S. Energy Information Administration, State Energy Data System.
Commission, however, is planning to increase the
renewable mandate from the current 15 percent
by 2025. The three primary energy providers plan
to significantly increase solar and wind generation
during the next 10 years and respond with significant
investment in renewable generation. It is likely that
battery or other storage technology also will see
significant investment to support the increased
reliance on renewable resources.
Arizona's sunny weather makes it one of the most
promising states for future solar development to
meet future electrical needs. In 2017, Arizona
ranked second in the country in total solar gen-
eration (EIA 2019m). Currently, limited electrical
transmission lines, which have limited capacity, run
between Arizona and Mexico to deliver power (EIA
2013). Arizona is served most exclusively by the
San Juan and Permian gas basins in New Mexi-
co. Natural gas from these sources is transported
to Arizona and California through a northern and
southern pipeline system from New Mexico. Multiple
gas pipelines in the state, however, help to send gas
to the Mexican market (DOE 2019e, Kinder Morgan
2019a). One such project brought a new connection
from Arizona into Mexico to serve customers with
supplies of natural gas (Kinder Morgan 2019b). Ac-
cording to the Federal Energy Regulatory Commis-
sion (FERC), the Sierrita Pipeline Expansion Project
was developed as a way for Kinder Morgan to in-
crease its gas delivery service to an existing Mexico
customer, CFE International LLC, which serves
several power plants in Mexico (FERC 2018b). The
line was part of a larger project that included a new
compressor station, metering and piping. The pro-
ject was 61 miles (98 km) of 35-inch (89-centimeter)
27.2%
Residential
15.6% Industrial
24.1%
Commercial
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U.S. Border Energy
pipeline that extended from a system in Tucson,
Arizona, to the U.S.-Mexico Porder near Sasabe,
Arizona (Kinder Morgan 2019a). The new project
was announced in 2016, and the original line was
placed into service in 2014 (Kinder Morgan 2016).
There was great interest, however, in expanding the
capacity of that line, which resulted in CFE Interna-
tional LLC agreeing to enter into a binding bid to se-
cure an increase in expansion capacity. This project
provides an interconnect with an existing natural gas
pipeline in Mexico owned by lEnova. This project
provides Mexico with natural gas to ensure the abili-
ty to serve industrial customers.
5.3 New Mexico Border
Region
New Mexico is a key supplier of energy to the
United States, and the state's economy is highly reli-
ant on the industry. Energy-related jobs are estimat-
ed to contribute 6.4 percent of employment in the
state and support approximately 14 percent of New
Mexico's gross domestic product (GDP). According
to the New Mexico Energy, Minerals and Natural
Resources Department (NM EMNRD), in 2016 New
Mexico was the eighth-largest net supplier of energy
nationally, mostly from fossil-based energy sources
(NM EMNRD 2019a). New Mexico is among the top
10 natural gas-producing states and has more than
6 percent of U.S. total proved crude oil reserves. In
2017, it became the fifth-largest oil-producing state,
accounting for 5 percent of the country's crude oil
production, in part due to the Permian Basin, which
spans western Texas and southeastern New Mexico
Petroleum-Fired
Natural Gas-Fired
Coal-Fired
Nonhydroelcctric Renewables
0 200 400 600 800 1,000
thousand MWh
Source: Eneigy Information Administration, Electric Power Monthly
MWh—Megawatt hour
Figure 18. New Mexico 2017 energy consumption.
Source: U.S. Energy Information Administration, State Energy Data System.
and is one of the most prolific petroleum-producing
areas nationally and globally (EIA 2019o). In New
Mexico, this area is approximately 100 miles
(161 km) east of the city of Las Cruces, in Dona Ana
County, New Mexico, and 150 miles (241 km) north
of Ciudad Juarez, Mexico.
In 2017, the state accounted for 2 percent of
U.S. coal production. Coal-fired power plants provide
more than half of New Mexico's in-state net electricity
generation; natural gas-fired power plants account
for more than one-fourth, and renewable resources,
primarily wind, provide almost all of the rest. In fact,
New Mexico is shifting its electricity sector to a
different fuels mix. Renewable energy (geothermal,
hydroelectric, biomass, solar and wind) sources
created 9 percent of New Mexico's electricity in 2015
and increased to 14 percent in 2017 (EIA 2019o). In
2017, wind energy contributed almost 14 percent
of New Mexico's electricity generation with almost
1,800 MW of installed electricity-generating capacity
from more than 1,000 wind turbines.
Figures 18 and 19, illustrate New Mexico energy
consumption estimates (2017) and net electricity
generation by source (2019), respectively (EIA 2019p).
5.3.1 New Mexico at the
International Border: Paso
del Norte and Dona Ana
County
The New Mexico counties that border Mexico
(geographically from west to east) are Hidalgo, Luna
and Dona Ana. New Mexico has three ports of entry
Coal
Natural Gas
Motor Gasoline excl. Ethanol
Distillate Fuel Oil
Jet Fuel
HGL
Residual Fuel
Other Petroleum
Nuclear Electric Power
Hydroelectric Power
Biomass
Other Renewables
Net Electricity Imports
Net Interstate Flow of Hectricity
-150 -100 -50 0 50 100 1 50 200 250 300
Trillion Btu
el? Source: Energy Information Administration, State Energy Data System
HGL—Hydraulic Grade Line; Btu—British thermal unit
Figure 19. New Mexico net electricity generation by source, March 2019.
Source: U.S. Energy Information Administration, Electric Power Monthly.
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into Mexico, overseen by the New Mexico Border
Authority (Figure 20).147 These ports of entry are
located at Antelope Wells (Hidalgo County),
Columbus (Luna County) and Santa Teresa (Dona
Ana County). Santa Teresa and Columbus serve
commercial traffic.
The Paso del Norte area148 is a binational metropol-
itan area of more than 2.3 million people, encom-
passing the cities of El Paso, Texas; Cuidad Juarez,
Chihuahua, Mexico; and Las Cruces in Doha Ana
County, New Mexico (Rooney and McKenzie 2018).
The Santa Teresa, New Mexico, Port of Entry indus-
trial area, also known as the "Borderplex," is located
42 miles (68 km) south of Las Cruces (New Mexico's
second-largest city), and 20 minutes from down-
town El Paso, Texas. From this port of entry, Inter-
state iO is 12 miles on the Pete Domenici Highway,
the newest Borderplex multilane transportation link.
During the last 4 years, Paso del Norte and Border-
plex areas in Dona Ana County have experienced
high growth, partly because of established logistics
parks with rail spurs located in and around Santa
Teresa, Interstate 10 (which connects the East and
West Coasts of the United States), and increased
water and road infrastructure investments.
Doha Ana County, bordered to the south by El Paso,
Texas, and Chihuahua, Mexico, encompasses
3,804 square miles (9,852 km2)—an area larger than
the states of Delaware and Rhode Island combined.
Doha Ana County has the second-largest
population in the state with 217,522 individuals
(U.S. Census Bureau 2019a), mostly distributed
along the Rio Grande corridor—a narrow band
that runs approximately 90 miles (145 km) north
to south. Slightly less than one-half of the county
population (approximately 90,000 people) reside in
37 colonias and the surrounding rural area. Colonias
are communities on the U.S side of the international
border that have been formally designated as
lacking critical infrastructure with negative health
and quality-of-life impacts on residents. Doha Ana
County's 2010-2014 median household income
was US$38,426 with a 27.9 percent poverty rate as
compared to 19.7 percent for the state (Doha Ana
County 2017, U.S. Census Bureau 2019b).
New Mexico Gas Company (2019a) operates and
maintains 12,000 miles (19,312 km) of natural gas
pipelines throughout the state. Doha Ana County
is one of 23 counties in which New Mexico Gas
Company oversees gas lines and ensures basic
service to residential, commercial and transportation
customers.
Local business interests have cited a need to
upgrade electrical service in the Sunland Park and
Santa Teresa areas in Doha Ana County. These
businesses say that without service upgrades,
commercial development requiring reliable supplies
of "clean" electrical output cannot proceed (Camino
Real Regional Consortium 2015).
Doha Ana County is a U.S. Foreign Trade Zone
administered by U.S. Customs and Border
Protection, and in 2016 the southern part of the
county and most of Luna County were designated
as Opportunity Zones. Therefore, tax incentives
may provide for leveraging opportunities for
energy infrastructure. The New Mexico Economic
Development Department (2019) administers
the FUND IT program, providing a process for a
community to present its energy infrastructure
needs and receive input about potential funding
sources from a wide range of state and federal
agencies at one time. It also serves as a platform
for community planning, including a webinar series
for the funding agencies to learn more about how
to leverage their programs with other resources and
community planning.
Figure 20. Map of New Mexico's international border.
Source: www.nmborder.com/uploads/lmaaes/lnternatioivBorder-Map.ipa.
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U.S. Border Energy
5.3.2 Energy Sector in New
Mexico's Border Region
The Paso del Norte region is developing its renew-
able energy resources. Dona Ana County lies in the
major solar resource area in the country for flat-plate
and concentrating solar collectors, and Las Cruces
is home to the Southwest Technology Development
Institute, a renewable energy research and develop-
ment center located at New Mexico State Univer-
sity (Mesilla Valley Economic Development Alliance
2015). In addition to solar power plants, the border
region of New Mexico includes several natural gas
power plants, one geothermal resource area and
one biomass power plant (EIA 2019o, Open Energy
Information 2015). Both Las Cruces and Radium
Springs, in Dona Ana County, were identified as
sites that potentially could utilize geothermal energy
for district heating and other applications. Wood
burning continues to be widely used across New
Mexico, and Las Cruces is using anaerobic diges-
tion of sludge to generate methane gas for produc-
tion of electricity and heat to power its wastewater
facilities (Mesilla Valley Economic Development
Alliance 2015).
As a result of activities in the Permian Basin (Del-
aware Basin), New Mexico oil production has
increased by 400 percent in the past 10 years,
making New Mexico the third-highest oil-producing
state behind Texas and North Dakota (Figure 21).
The Wolfcamp Shale and Bonesprings Formation
together potentially contain 46.3 billion barrels of
oil and 281 trillion cubic feet (8 trillion cubic meters
[m3]) of natural gas, and 20 billion barrels of natu-
ral gas liquids. Gross value of oil production now
exceeds US$1.5 billion each month, and oil and gas
production provided an approximately US$1.2 billion
state-budget surplus for 2019 (NM EMNRD 2019b).
Technology has made production of these "uncon-
ventional" resources possible through lateral drilling
and hydraulic fracturing. The domestic extraction of
natural gas and oil has increased dramatically, and
prices have fallen as a result .
Energy markets are significantly altering the tradi-
tional ways in which fuels are transported, including
in the border region, with railroads seeing significant
growth of unit train movement of petrochemicals,
even as several pipeline routes are being evaluated.
The railroad industry has been able to respond to
growth in the energy sector more quickly as com-
pared to the pipeline industry (NM EMNRD 2019a).
j
l=
8 —
1-
Jz
Figure 21. Monthly crude oil production in New Mexico since 1981.
Source: New Mexico Energy, Minerals and Natural Resources Department's
Oil Conservation Division (0CD). See also www.emnrd.state.nm.us/
EneravPolicv/newmexicoenerav.html.
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With these and other sector expansions, however, it
is not certain that border area roads and infrastruc-
ture are ready for growth in truck traffic; many of
these roads are owned or maintained by counties
and will eventually require repair and replacement as
overweight truck volumes increase.
The state's new and planned electricity-generating
capacity will use renewable energy or natural gas.
New Mexico has recognized an economic interest
in selling more electricity to other states, particularly
electricity generated from its renewable resources
(NM EMNRD 2015, p. 28). Projects underway to
move those electricity supplies include new trans-
mission lines that take advantage of the state's
location at the edge of the three U.S. electrical
grids—the Eastern, Western and Texas Interconnec-
tions—and of the Four Corners power trading hub,
located at the Four Corners coal complex in north-
western New Mexico (EIA 2019o).
5.3.3 Cost and Prices of Current
Energy Use
Natural gas prices in New Mexico are lower than the
national average, as are electricity rates for residen-
tial, commercial and industrial users ( ible 1 ). In
terms of overall energy consumption, New Mexi-
cans use more than the national average, primarily
because of driving, and by contrast, they consume
less residential electricity and natural gas than the
country at large (NM EMNRD 2019a).
Table 11. Average Energy Cost and Price Per Energy Sector
5.3.4 Environmental Impacts of the
Energy Sector
Environmental issues associated with energy pro-
duction primarily include emissions, water quality
and solid-waste management. New Mexico's energy
industry generates by-products, including sulfur
dioxide, hydrogen sulfide, oxides of nitrogen, fine
and coarse particulate matter, air toxics, hazardous
air pollutants, and greenhouse gases, including car-
bon dioxide and methane. Half of the state's overall
carbon dioxide emissions originate in the conversion
of coal and natural gas into electricity. The state has
achieved a 17 percent reduction in the state's
energy-related carbon dioxide emissions between
the years 2000 and 2016 (NM EMNRD 2019a).
More information is available in Section 5.3.7.
According to the New Mexico Environment
Department (NMED), Dona Ana County currently
has two air nonattainment areas as a result of
particulate matter and ozone pollution: Anthony,
New Mexico, which lies on the border of Texas
and New Mexico, and a portion of Sunland Park.
NMED currently is developing an Emissions
Inventory for the nonattainment area to be
submitted to the U.S. Environmental Protection
Agency by August 3, 2020. In addition, NMED must
review its nonattainment permitting rules and adopt
revisions if required to comply with federal law by
August 3, 2021 (NMED 2019).
Petroleum
New Mexico
U.S. Average
Period
Domestic Crude Oil First Purchase
US$41,85/barrel
US$47.85/barrel
Jan-19
Natural Gas
New Mexico
U.S. Average
Period
City Gate
US$3.45/thousand cu ft
US$4.09/thousand cu ft
Jan-19
Residential
US$6.48/thousand cu ft
US$9.43/thousand cu ft
Jan-19
Coal
New Mexico
U.S. Average
Period
Average Sales Price
US$34.72/short ton
US$33.72/short ton
2017
Delivered to Electric Power Sector
US$2.67/million Btu
US$2.10/million Btu
Jan-19
Electricity
New Mexico
U.S. Average
Period
Residential
12.21 U.S. cents/kWh
12.47 U.S. cents/kWh
Jan-19
Commercial
9.54 U.S. cents/kWh
10.29 U.S. cents/kWh
Jan-19
Industrial
5.21 U.S. cents/kWh
6.58 U.S. cents/kWh
Jan-19
The average energy cost and price per energy sector (data as of January 2019) in New Mexico. Except for coal, all prices are less than U.S. averages.
Btu—British thermal unit; cu ft—cubic foot; kWh—kilowatt hour.
Source: U.S. Energy Information Aaencv. www.eia.aov/state/print.php?sid=NM. May 8.2019.
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U.S. Border Energy
In addition to sulfur dioxide and nitrogen oxide, New
Mexico's energy enterprise was estimated to have
generated 48 million metric tons of carbon dioxide
in 2016—half coming from the conversion of coal
and natural gas to produce electricity (NM EMNRD
2019). Transportation contributes most of the rest
of the carbon dioxide emissions. The transporta-
tion sector contributes 14 million metric tons, the
residential and commercial sectors each contrib-
ute 2 million metric tons, and the industrial sector
contributes just more than 7 million metric tons (NM
EMNRD 2019).
In 2015, New Mexico was ranked 37th nationally
in terms of carbon dioxide emissions. The coal
and natural gas conversion process (for producing
electricity) generated 7,000 metric tons
(7,716 U.S. tons) of sulfur dioxide and 35,000 metric
tons (38,581 U.S. tons) of nitrogen oxide in 2016,
both numbers representing decreases of 36 percent
and 17 percent, respectively, from 2014 levels. The
state achieved a 17 percent reduction in the state's
energy-related carbon dioxide emissions between
the years 2000 and 2016, and 2016's emissions
decreased from the 2014 and 2015 levels (NM
EMNRD 2019).149
This year, New Mexico Governor Michelle Lujan
Grisham signed into law the New Mexico Energy
Transition Act of 2019, which requires the New
Mexico Environmental Improvement Board150 to limit
carbon dioxide emissions of certain electric gener-
ating facilities.151 It is anticipated that regulations will
soon be proposed to implement the new law.
Water is required to extract, produce and deliver
energy. Surface and groundwater are used for oil
and gas production, and these processes generate
produced water, which must be managed to protect
fresh water supplies, public health and ecosystems.
Groundwater contamination is a concern with energy
or mineral extraction (NM EMNRD 2019a). In New
Mexico, including the border region, the relationship
between energy production and water quality
protections is regulated under state and federal
laws that are administered by EPA, NM EMNRD and
NMED. Produced water in New Mexico is estimated
at 900 million barrels in 2017 alone (NM EMNRD
2019a). Much state and national attention has been
devoted to reusing produced water in oil and gas
activities and to treating produced water for other
purposes, including agriculture, dust control and
other industrial processes, such as manufacturing or
electric utilities. In 2019, EMNRD and NMED began
to implement a new state law, the Produced Water
Act (House Bill 546),152 that encourages the oil and
natural gas industry to favor reuse, recycling and
treatment options over the reliance on New Mexico's
limited fresh water resources and directs the state to
establish regulations for the use of treated produced
water, treated product, or any byproduct of the
produced water.
5.3.5 Future Demand for Energy
In New Mexico, energy demand has remained
relatively flat because of slow population growth and
increases in energy efficiency. National fuel economy
and appliance standards account for these efficien-
cy gains, along with the New Mexico Efficient Use of
Energy Act of 2005. For southeastern New Mexico,
unprecedented growth in the Permian Basin has
tested the local economy (e.g., housing, workforce,
education, roads, wastewater infrastructure, the
environment) (NM EMNRD 2015).
5.3.6 Structure of New Mexico's
Energy Sector
The state is located at the intersection of three of
the North American Electric Reliability Corporation
(NERC) regional entities and three electricity mar-
ket organizations (NM EMNRD 2019a). Regional
transmission organizations and independent system
operators coordinate electricity delivery and gener-
ation functions. New Mexico's location complicates
the number of interfaces required by electricity
providers who operate in the region. The absence of
federally regulated power lines (transmission) in the
eastern and west central areas of the state is both
a challenge and an opportunity. One critical trans-
mission path includes pairs of high-voltage (345 kV)
transmission lines originating at the San Juan and
Four Corners generating stations in the northwest
corner of the state. These lines serve the central part
of New Mexico. Additional lines run east and south.
Several transmission expansion projects with New
Mexico connections have been proposed or are in
some stage of development (as of August 2018) (NM
EMNRD 2019a). In the border region, El Paso Electric
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supplies electric services to southern Dona Ana
County and West Texas; New Mexico Gas Company
and Zia Natural Gas Company supply natural gas. In
2012, the City of Sunland Park (2018) and Dona Ana
County comPined to form the Camino Real Regional
Utility Authority via a Joint Powers Agreement and
share planning and zoning authority.
The electricity sector also uses large quantities of
water for cooling of thermal (coal and natural gas)
and nuclear generation facilities. Although there are
no nuclear generating facilities in New Mexico, Pub-
lic Service Company of New Mexico (2019a) owns
and purchases power from Palo Verde, a nuclear
generating station in Arizona. Natural gas steam
turPine plants (generally peaking power plants)
consume the most gallons per MWh of electricity
generated, with nuclear and coal-fired electricity
generating stations Peing the second and third larg-
est consumers. Solar and wind technologies do not
require any water for operation.
Passed and signed in 2019, House Bill 546, which
includes the Produced Water Act,153 comPined two
pieces of legislation—one to estaPlish an adminis-
trative enforcement process for NM EMNRD's Oil
Conservation Division and the other to clarify the
regulation of produced water, including the emerg-
ing efforts to recycle and treat produced water for
potential reuse in and outside of the oil patch.154 The
act clarified that if produced water is recycled and
reused in the oil patch, then that is the Oil Conser-
vation Division's jurisdiction; however, if treated for
use outside of the oil and gas well site, then it is
NMED's jurisdiction.
5.3.7 Energy Use by Sector
The industrial and transportation sectors account for
more than 65 percent of energy consumed in New
Mexico, as shown in Figure 22.
5.3.8 Renewable Energy
The following facts detail renewaPle energy in New
Mexico from the Solar Energy Industries Association
(2019a):
• Solar installed: 792.0 MW (94.6 MW in 2018),
enough to power 203,000 homes.
• National ranking: 16th (21st in 2018).
• Percentage of state's electricity from solar:
4.72 percent.
• Solar joPs and ranking: 2,168 joPs, ranked 29th in
2018.
• Solar companies in state: 107 companies total,
including 15 manufacturers.
• Total solar investment: US$1.75 Pillion
(US$144.18 million in 2018).
• Price declines: 47 percent during the previous
5 years.
• Growth projections and ranking: 950 MW during
the next 5 years (ranks 18th).
Below are some notaPle projects in the state:
• Alta Luna Solar Farm, in Luna County, has the ca-
pacity to generate 28.1 MW of electricity—enough
to power more than 7,035 homes in the state
(Solar Energy Industries Association 2019b).
• At 70 MW, Chaves Solar in Roswell is among
the largest solar installations in New Mexico.
Completed in 2016, this photovoltaic project has
enough electric capacity to power more than
17,525 homes (Solar Energy Industries Associa-
tion 2019b).
• Eubank Landfill Solar is one of the first major
corporations to go solar in New Mexico with
its 2-MW project in Albuquerque (Solar Energy
Industries Association 2019a).
By the passage of the New Mexico Energy Transi-
tion Act of 2019, New Mexico anticipates doubling
renewable energy use in the state by 2025, requir-
ing 50 percent renewable energy by 2030, and
100 percent carbon-free electricity generation by
2045.155The Act provides for".. .new requirements
Figure 22. New Mexico energy consumption by end-use sector, 2017.
Source: U.S. Energy Information Administration, State Energy Data System.
33.5%
17.9%
Commercial
16.4%
Residential
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U.S. Border Energy
and targets for the renewable portfolio standard
for rural electric cooperatives and public utilities."156
New Mexico, through the growth of its portfolio of
renewables and the local expertise of its engineer-
ing and science public universities and national
laboratories, also has the capacity to become a
national leader in energy innovation and a center for
next-generation electrical-system technologies and
grid-modernization efforts. Energy storage is one
prospect, with the laboratories running several pilot
projects in the state. New Mexico has the opportu-
nity to lead the development, integration and growth
of this energy technology by creating a robust,
in-state energy-storage industry and incorporating
its use into legislation. The main challenge for the
state in taking full advantage of renewable energy
resources is infrastructure (Center for Strategic and
International Studies 2018). New Mexico Executive
Order 2019-003, which addresses climate change
and energy waste prevention, expressly identifies
renewable energy transmission in Directive III,5.d:
"Collaboration with Renewable Energy Transmission
Authority to identify transmission corridors needed
to transport the state's renewable energy to market"
(Lujan Grisham 2019).
5.3.9 Energy Efficiency
In 2005, the State of New Mexico instituted the Ef-
ficient Use of Energy Act, which established energy
savings requirements for investor-owned electric
utilities of 5 percent of 2005 total retail kWh sales by
2014 and 8 percent of 2005 total retail kWh sales by
2020. In 2013, the Efficient Use of Energy Act was
revised to establish a fixed budget level of 3 percent
of annual revenues for energy-efficiency programs
(customer's demand-side management surcharge is
capped at US$75,000 per year).157 The Efficient Use
of Energy Act was amended in 2019, as discussed
below.
Electricity Demand-Side Management. The
state's three investor-owned electric utilities, Public
Service Company of New Mexico, Xcel Energy
(Southwestern Public Service Company) and El
Paso Electric offer their customers a wide range of
energy-efficiency programs. State legislation adopted
in 2008 establishes energy-savings requirements
for the electric utilities and amendments that the
legislature adopted in 2013 direct utilities to spend
3 percent of their retail sales revenues on demand-
side management programs. Total spending on
electric utility energy-efficiency and load-management
programs was US$36 million in 2015 (Public Service
Company of New Mexico 2019b). The electricity
conservation potential, as well as impacts, of the state
are shown in Table 12.
Table 12. Electricity Conservation Potential and Impacts in New Mexico
Savings Potential in 2020
24%
Avoided New Power Capacity
970 MW
Net Dollar Savings (2010-2030)
$1.7 B
Increases in Jobs by 2020
2,330
Water Savings by 2020
4.6 B gallons/year
MW—Megawatt; B—Billion
Source: /ww.swenerav.ora/Data/Sites/1/media/documents/publications/
factsheets/nm-factsheet.pdf.
Natural Gas Demand-Side Management. The New
Mexico Gas Company (2019b) implements some
natural gas energy-efficiency programs for its cus-
tomers. The utility's energy-efficiency budget was
about US$4 million as of 2015.
State Building Energy Codes. New Mexico adopted
a statewide energy code, the 2009 International
Energy Conservation Code (IECC). DOE (2018) esti-
mates that homeowners of new homes built in New
Mexico complying with the 2009 IECC rather than
the 2006 version will save US$216-251 per year on
energy costs.
Recent Legislation. On April 3, 2019, Governor Lujan
Grisham signed changes to the Efficient Use of Energy
Act to establish decoupling. Under decoupling, utilities
are able to recover only the costs that they set along
with a set amount for profit, but nothing beyond that,
which will incentivize them to drive more efficiency in
their customers' energy usage.158 The aim is to remove
the disincentive for utilities to conserve energy, as well
as boost energy-efficiency funding by 67 percent. The
legislation is the continuation of a 2005 law allowing
electric and gas utilities to implement energy-efficiency
programming (Morehouse 2019).159 Although Public
Service Company of New Mexico is the largest
utility in the state, Xcel Energy and El Paso Electric
also operate in New Mexico, and their combined
programming has reduced electricity demand by
7 percent since the projects' launches in 2008 to
2017. Although this bill is not under the umbrella of
a January 2019 executive order by Governor Lujan
-------
Grisham, which tackled a wide sweep of climate
change initiatives, including building energy-efficiency
standards, it is part of a broader package for New
Mexico's energy future. The state in 2019 became the
third in the country to commit to 100 percent carbon-
free energy. The bill followed Governor Lujan Grisham's
January 2019 Executive Order 2019-003, which
commits New Mexico to the U.S. terms under the
Paris Climate Agreement and directs state agencies
to set emissions standards for vehicles and power
plants, as well as to identify transmission infrastructure
needed for renewable energy growth.1®
5.4 Texas Border Region
5.4.1 Electric Reliability Council of
Texas—ERGOT
Texas is the only state in the United States with an
intrastate electricity grid. The independent system
operator, the Electric Reliability Council of Texas
(ERCOT), manages and operates the grid for the
Texas side of the border with Mexico, except in
El Paso County and Hudspeth County, which is part
of the Western Interconnection (Figure 23). ERCOT
falls under the governance of the Public Utility
Figure 23. Electric Reliability Council of Texas interconnection maps.
Source: Electric Reliability Council of Texas, www.ercot.com/news/mediakit/
maps.
Commission of Texas and the Texas Legislature, and
it complies with NERC standards (ERCOT 2019a).
Under the U.S. Federal Power Act, ERCOT does
not fall under federal jurisdiction because there is no
transmission of electricity across state lines (FERC
2018a). ERCOT serves approximately 90 percent
of Texas, or 25 million customers (ERCOT 2019b).
The majority of Texas customers live in competitive
markets for electricity,
so customers
Hatch Solar Energy Center
Energy Projects in Rural Communities—An Economic Development Case Study
The Hatch Solar Energy Center is
an example of a renewable ener-
gy project that is generating reve-
nue for the small rural community
of Hatch (with a population of
1,648) in Dona Ana County
(U.S. Census Bureau 2019c).
The Hatch Solar Energy Center is
a 5-megawatt solar energy plant
using concentrating photovoltaic
systems (Milliard Energy 2019),
constructed on 41 acres of
village-owned property (Village
of Hatch 2019). Operated by a
subsidiary of NextEra Energy
Resources, the facility has a
25-year purchase power agree-
ment to sell the energy produced
to El Paso Electric, a major elec-
tricity provider in southern New
Mexico and west Texas (El Paso
Electric Company 2019b).
The Village of Hatch receives
yearly lease payments as part
of the solar park's 30-year lease
with the Village. The Village
authorized an Industrial Revenue
Bond for the project, abating the
property taxes but establishing
a payment in lieu of taxes to be
made yearly for the life of the
lease. Combined payments total
more than US$40,000 per year.
Projects such as these present
opportunities for rural border
communities to participate
in economic opportunities
generated by growth in the
renewable energy sector.
Although solar parks are not large
job-generating projects, utilizing
vacant municipal-owned land for
energy projects can produce a
reliable income stream for rural
border communities as long as
transmission iines are available.
-------
U.S. Border Energy
purchase from a market of available retailers. Fifteen
percent of Texans purchase electricity from public-
or investor-owned utilities or cooperatives, which
have received permission from the Public Utility
Commission of Texas to exclude retailer competition
(ElectricityPlans.com 2017). ERCOT maintains
reliability for more than 46,500 miles (74,834 km)
of high-voltage transmission lines. Record peak
demand for electricity consumption within ERCOT
comes from a variety of sources, led by natural gas.
Following is a summary of consumption, which
totaled just more than 73.4 GW in 2018, by source:
• 44.4 percent natural gas power
• 24.8 percent coal
• 18.6 percent wind
• 10.9 percent nuclear
• 1.3 percent from other sources such as landfill
gas, biomass and hydropower (ERCOT 2019a)
5.4.2 The El Paso Exception
El Paso County and Hudspeth County are part of
the Western Interconnection of the electricity grid.
Historically, far West Texas was separate from
ERCOT because of transmission costs and utility
territories that crossed into New Mexico (Galbraith
2011). Electricity customers may be served by
utilities such as the Rio Grande Electric Cooperative
(2019), which has the "largest service territory of
any electric cooperative in the contiguous United
States, serving 18 counties in Texas, and 2 counties
in New Mexico," or El Paso Electric Company.
El Paso Electric Company (2019a) serves more
than 415,000 customers in a 10,000 square mile
(25,900 km2) service territory. Utilities in far West
Texas fall under the governance of the Public
Utility Commission of Texas as well as the Texas
legislature, but may also be subject to regulations
from New Mexico Public Regulation Commission,
the New Mexico legislature and FERC.
5.4.3 Cross-Border Electrical Grid
Interconnections
Cross-border interconnections exist between
ERCOT and the CFE grid in northern Mexico. These
include transmission line asynchronous interconnec-
tions of American Electric Power Texas to CFE in
the Texas cities of Eagle Pass, Laredo and Mission,
which are part of ERCOT. An interconnection also
exists between El Paso Electric, not part of ERCOT,
and CFE's Norte region (Rosales, Sarmiento and
Rodriguez 2011). AEP Texas, part of the American
Electric Power system, submitted a request to
FERC and received permission in 2018 from DOE to
transmit power between Texas and Mexico using its
connections (Kleckner 2018). FERC did not suggest
that ERCOT would fall under its jurisdiction as a
result of the cross-border electricity flows (Sanders
2018). Using interconnections in the Rio Grande Val-
ley and Tamaulipas, a combined cycle gas powered
plant in Mission, Texas, has been selling all of the
power it generates to industrial consumers in
Mexico since 2015. The plant must, however, make
its power supply available to ERCOT customers in
an emergency (ERCOT 2014, Matalon 2019,
Mexico News Daily 2015). In its Quadrennial
Energy Review, DOE (2017a) found that "The Elec-
tric Reliability Council of Texas could benefit from
greater integration with Mexico, through access to
enhanced imports or as a business opportunity for
power exporters." Eight interconnections along the
Texas-Mexico border exist for emergency and relia-
bility purposes ( igure 2 ) (Kleckner 2018).
Cross-Border Interconnections
- Tijuana-Miguel (CA) I
La Rosila- | 8C
Imperial Valley (CAIJ
t
:a Juarez-El Pa&o(TX)~l_ jQOMW
Cd. JuArez-El Paso (TXlJ
Piedras Negras-Eagle Pass (TX). 36 MW.
i- Nuevo Laredo- Laredo (TX), 100 MW.
11 Nuevo Laredo-Laredo (TX), 100 MW
11 t—— Presa FalcOn-Falcon (TX), 150 MW
r— CurrtresPlanla Ftortwa (TX). 100 MW
I Cumbres-Rail Road (TX), 150 MW
I II I Malamoios-Milrtary H. (TX), 180MW
' III | Matamoros-Brownswlle (TX). 46 MW
r~ '
f
MW—Megawatt
Figure 24. Cross-border interconnections.
Source: RT0 Insider, toinsider.com/ferc-aep-ercot-mexico-dc-tie-
connections-97152.
5.4.4 Oil and Natural Gas
Production From the Eagle
Ford Shale Formation in
South Texas
The Eagle Ford Shale extends northeast from the
Texas-Mexico border in Webb County, north of
Laredo toward East Texas. The geological formation
is approximately 50 miles (80 km) wide and
400 miles (644 km) long (Railroad Commission of
Texas 2019d). Oil and natural gas production in the
Eagle Ford Shale grew rapidly with the decreasing
-------
costs of hydraulic fracturing in the 2010s. The
Railroad Commission of Texas (2019e), the state
regulatory agency for oil and gas drilling, issued its
highest number of permits in the Eagle Ford Shale
in 2014, at 5,613 permits (Figure 25). In 2015, oil
production in the Eagle Ford Shale hit its peak at
1,196,974 barrels per day (Railroad Commission
of Texas 20191). The highest gas production in
the Eagle Ford Shale also hit its peak in 2015,
at 6.1 billion cubic feet (172 million m3) per day
(Railroad Commission of Texas 2019g). Since then,
production in the Eagle Ford Shale has averaged
close to 900,000 barrels per day of oil and
5.4 billion cubic feet (153 million m3) of natural gas
per day (Railroad Commission of Texas 2019g).
5.4.5 Oil and Natural Gas
Production From the Permian
Basin Shale Formations in
West Texas
The Permian Basin Shale extends from roughly
40 miles (64 km) north of the Texas-Mexico border
in Terrell, Val Verde, and Edwards Counties north
toward the Panhandle and west into New Mexico.
A dozen geological formations in the Permian Basin
cover an area 250 miles (402 km) wide and 300
miles (483 km) long (Railroad Commission of Texas
2019a). The Railroad Commission of Texas (2019b)
issued its highest number of drilling permits in the Texas
Permian Basin in 2014 at 10,966 permits (Figure 26).
Natural gas production in the Texas Permian Basin
has increased every year since 2012. In 2018, it
produced 8.5 billion cubic feet (240 million m3) of
natural gas per day. In February 2019, the production
in the Texas Permian was 8.4 billion cubic feet
(238 million m3) per day (Railroad Commission
of Texas 2019c). Total natural gas production
for the Permian Region was 14.2 billion cubic
feet (402 million m3) per day as of May 2019
IA 2019q). As a result of reduced costs and
technological advancements in hydraulic fracturing
and directional drilling, the Permian Basin continues
to produce from oil fields previously thought to
be unrecoverable. In December 2018, the U.S.
Geological Survey announced that the Wolfcamp
Shale and Bone Spring Formation in the Permian
Basin have the largest unconventional oil and gas
resource potential ever assessed (U.S. Department
of the Interior 2018).
Figure 25. Wells permitted and completed in the Eagle Ford Shale Play as
ot January 1,2019.
Source: Railroad Commission of Texas, www.rrc.state.tx.us/media/49772/
eaalefordshaleplav2019-01-la.ipg.
Figure 26. Wells permitted and completed in the Permian Basin area as of
January 2019.
Source: Railroad Commission of Texas, www.rrc.state.tx.us/media/49783/
pb-area-201901-la.ipa.
5.4.6 Wind and Solar Energy
Texas is one of the leading states in renewable
energy generation. In 1999, Texas legislators
created renewable portfolio standards to mandate
the production of 10,000 MW of renewable energy
by 2025, which the state was able to accomplish
early—in 2009 (Sixel 2019). In 2007, Texas invested
RAILROAD COMMISSION OF TEXAS
Wells Per milled and Completed
in the Permian Basin Area
Jin 2019
Will Ujond
-------
U.S. Border Energy
US$7 billion to construct transmission lines to con
nect wind farms in West Texas to the state electricity
grid. The construction of the lines was completed in
January 2014 (Malewitz 2019). In 2018, the cumula-
tive installed wind generating capacity in Texas was
24,895 MW (DOE 2019d). 5,322 MW of additional
capacity is under construction on pace with the
10,000 MW of capacity that ERGOT forecast to be
installed in 2018-2019 (ERCOT 2017). According to
the U.S. Geological Survey (2019), several clusters
of wind turbines are installed near the South Texas
border with Mexico near the Texas cities of Del Rio
and Laredo and the Rio Grande Valley. Texas gen-
erates nearly 20 percent of its electricity from wind
and solar energy (Fares 2018).
Texas is one of nine southwestern and western
states with the greatest potential for solar
photovoltaic-generated electricity in the country
(USEPA 2019). In 2017, the solar power generated
in Texas more than doubled, from 96 GWh to 199
GWh (Graves and Wright 2018). At this time, solar
energy accounted for just 1 percent of electricity
generation in Texas (ERCOT 2019a). In January
2019, the ERCOT grid had 1,500 MW of installed
utility-scale solar capacity, with more than 4,300
MW of capacity expected to be in service by
2020 (ERCOT 2019c). The Texas border with
Mexico has the highest solar resource potential in
the state, especially along the Texas-Chihuahua
border (National Renewable Energy Laboratory
2017). Declining costs of solar technology, as well
as streamlined permitting processes, continue to
expand solar power generation in Texas (Graves
and Wright 2018). ERCOT estimates that up to
20 GW of utility-scale solar power could be added
to the grid by 2032 (Golnas 2018).
5.4.7 Cross-Border Natural Gas
Pipelines
Texas exports more natural gas to Mexico than
any other state. Gas exports go through the "Rio
Grande/Roma" point of exit in the Rio Grande Valley.
Exports from the Permian Basin in West Texas have
dramatically increased in the past few years with
its production boom, new gas-fired power plants
in Mexico, and pipeline expansions in South Texas.
Between 2017 and 2018, natural gas exports
to Mexico from the United States via pipeline
increased by 1 billion cubic feet (28 million m3)
per day (Figure 27) (EIA 2019r). New gas pipeline
construction for export to Mexico has been met
with concerns and opposition by some local Texas
communities and landowners.161 Federal, state and
local governments, as well as energy companies,
need to do a better job of proactively informing
and providing information to local stakeholders
who might be affected by these large infrastructure
projects.
-------
Monthly U.S. natural gas trade (Jan 2016-Feb 2019)
billion cubic feet per day
Eastporl
u
Port of
Moi^an Sherwood
III
Noyes f
Sault Ste. Marie
St. Clair^|
Detroit
Pittsburg
Highgate % J
\ Calais
Grand Island
basabe
M m Douglas
* # I^Sai
^^Cln
Volumes at pipelines transporting under
30 million cubic feet per day not shown
I
Figure 27. U.S. natural gas trade by pipeline by port of entry (imports; green
arrows) or exit (exports; blue arrows).
Source: U.S. Energy Information Administration, www.eia.aov/
todavinenerav/detail.php?id=39312.
Although liquefied natural gas exports are forecast
to rise, pipeline exports of natural gas to Mexico,
mainly through Texas, currently make up the largest
share of U.S. natural gas exports globally (EIA 2019r).
Liquefied natural gas also is exported to Mexico by
truck to areas not served by Mexican pipelines, and
this export has increased dramatically from 2016
(Figure 21) (EIA 2019s). The increase in liquefied
natural gas trucks transiting through U.S. border
communities presents risks to local residents.
M gross exports
of liquefied natural gas
by pipeline to Canada
by pipeline to Mexico
—
of liquefied natural gas
efa1
Figure 28. Monthly U.S. natural gas trade (January 2016 through February
2019) in billion cubic feet per day.
Source: U.S. Energy Information Administration, www.eia.aov/
todavinenerav/detail.php?id=39312.
5.4.8 Energy Efficiency: Property
Assessed Clean Energy
Program in the Border
Region
The Texas legislature created the Property Assessed
Clean Energy Program in 2003 to incentivize
Texas' property owners to finance energy-efficiency
improvements, such as insulation and air sealing, cool
roofs, and water-efficiency products at a low fixed
interest rate. Through this program, property owners,
including owners of multifamily residential properties of
five units or more, gain access to private, affordable,
long-term financing (typically 10 to 20 years) that is
not available through traditional funding avenues. The
Texas PACE Authority administers the program on
behalf of local governments.
The Texas PACE Authority completed the Plaza Hotel Property Assessed Clean Energy project
in downtown El Paso in April 2019. The Plaza Hotel is a 5,308 square foot historic hotel built
in 1930 that has been out of service since the 1990s. The rehabilitation and energy-efficiency
upgrades transformed the hotel into the first 4.5-star luxury hotel in El Paso and preserved the
hotel's Pueblo Deco (which fuses elements of Art Deco and Pueblo Revival design) by acclaimed
architect Henry Trost. All of the building systems were updated as part of the building rehabilitation,
including HVAC, elevator, lighting and plumbing. An investment of US$9,200,353 funded these
improvements.
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Mexican Border Energy
73
6.1 Baja California
6.1.1 Current Energy Infrastructure
and Use
The Sistema Electrico Nacional (National Electric
System of Mexico) is comprised of four isolated
electric systems: (1) Sistema Interconectado
Nacional (National Interconnected System),
(2) Sistema Interconectado Baja California (Baja
California Interconnected System), (3) Sistema In-
terconectado Baja California Sur (Baja California Sur
Interconnected System), and (4) Sistema Electrico
Mulege (Mulege Electric System). The Baja California
Interconnected System is the system that covers all
of the cities in Baja California (Ensenada, Tijuana,
Tecate, Mexicali and Rosarito) and also includes San
Luis Rfo Colorado in Sonora. This system is isolated
from the other three that exist in Mexico, but inter-
connected with the Western Electricity Coordinating
Council in the United States. The Baja California
Interconnected System has interconnections with
different capacities; the Tijuana-Ensenada intercon-
nection has a capacity of 255 megawatts (MW) and
Tijuana Mexicali of 520 MW, whereas the intercon-
nection between Mexicali-San Luis Rio Colorado is
315 MW (Figure 29).
V>
,Ji J
W *£- —12
V V S
\X\t I
¦ Hasta 499 MW "V. & \T.
Oe 500 a 999 MW ^
' D« 1.000 i 1.500 MW Jjf J "5j
1 Mayor a 1.500 MW *!&
MW—Megawatt
Figure 29. Capacity of the interconnections in the 53 regions of the National
Electric System,
Source: Secretaria de Energia (Ministry of Energy, known as SENER), Map
2.2, www.aob.mx/cms/uploads/attachment/file/236866/Electricitv Sector
Outlook 2016-2030 P.compressed.pdf.
In an effort: to connect the Baja California electrical
system to the Mexican national grid, an open call for
tenders ("licitacion publica") was issued in 2018 for
the management and operation of a direct-current,
500 kilovolt (kV), 1,500 MW transmission line. The
line would cover a distance of 700 kilometers (km)
(435 miles). This project, however, was cancelled
in March 2019 by the new Mexican administration
(Proyectos Mexico 2019).
-------
Baja California's energy infrastructure is divided into
two zones: Zona Costa, which is formed by the
cities of Tijuana, Ensenada, Tecate and Rosarito;
and Zona Valle, which includes Mexicali. By 2017,
the Baja California Interconnected System had
35 generation units distributed by various types
of technology as follows: nine combined cycle,
one thermoelectric, four turbo gas, 12 interna!
combustion, two wind, four geothermal, two
photovoltaic solar and one cogeneration. All large
power plants in Baja California now burn natural
gas, an improvement in terms of air pollution
compared to the former fuel oil. The natural gas
used in the power sector is imported from the
United States. This is a good example of how cross-
border energy trading can be a win-win case in that
Baja California has access to relatively less polluting
natural gas from the United States (compared
to heavy fuel oil). The main power plants in Baja
California are described in Figure 30.
For 2017, the approximate totals of electrical gen-
eration and installed capacity were 20,234 gigawatt
hours (GWh) and 4,641 MW respectively, approxi-
mately 6.1 percent of the overall values in the
country in both generation and capacity (SENER
2018). Between the years 2013 to 2017, Baja
California generated on average 12.3 million mega-
watt hours of energy per year, or 4.8 percent of the
national generation (Figure 31).
Electricidad lOlyfundamentosdel Energiaparaei bieneslar
, BAJA CALIFORNIA
mercado v
Figure 30. Main Power Plants in Baja California, Mexico
Source: David Munoz, Diurna Energy.
Baja California
Energy Generation
13.COO.OOO
12.SOD.ODD
12.COC-.000
^ 11.500.000 -I
jET
> 11.COO.OOO
p 10.503.000
m
c
10,C03:
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Mexican Border Energy
Table 13. Electricity Sales Volume in Baja California, 2012-2016
Sector
Sales Volume
GWh (2012)
Sales Volume
GWh (2013)
Sales Volume
GWh (2014)
Sales Volume
GWh (2015)
Sales Volume
GWh (2016)
Total
9,657
9,403
9,791
9,987
10,432
Domestic
3,166
3,088
3,173
3,264
3,430
Street Lighting
1,201
101
949
103
94
Bombeo of Drinking Water and Sewage
46
45
48
52
56
Agricultural
252
259
306
313
323
Industrial and Services
6,073
5,910
6,169
6,254
6,528
GWh—Gigawatt hours
Bombeo is the pumping of drinking water and sewage.
Source: Institute Nacional de Estadistica y Geografia (Mexico's National Institute of Statistics and Geography).
6.1.2 Energy Resources
Baja California is a region with an abundance of
indigenous solar, wind, geothermal, bioenergy and
ocean-related energy resources that have not been
fully exploited. Baja California is home to the largest
geothermal plant in Mexico: Cerro Prieto, near
Mexicali, with an installed capacity of 570 MW and
generating 3,709 GWh in 2016. The geothermal
fields at Cerro Prieto have been declining over
the years from a peak capacity of 820 MW. Wind
generation continues to grow, with new projects
developed by Sempra Energy (lEnova in Mexico) in
the Sierra de Juarez mountain range and existing
projects in the town of La Rumorosa. The Sierra
San Pedro Martir mountain range is believed to
have significant wind resources as well. Energy and
power resources of 400 GWh per year and
166 MW, respectively, were in place in 2016.
Baja California has a high level of solar insolation,
especially in the state's capital, Mexicali, where
summer temperatures are very high, and electricity
demand from the use of air conditioning is signif-
icant. There has been a relatively slow growth of
solar projects, however, compared to the resource,
with one large project of 41 MW developed by
lEnova.
Bioenergy is a potential energy source because
of the large quantities of waste generated in Baja
California, as well as agricultural and animal wastes.
An example of biogas generation is the dairy company
Pasteurizadora Jersey del Noroeste, located near
the Transpeninsular Highway, which implemented
technologies for the generation of biogas from animal
waste as its main energy resource (Munoz et al 2012).
Baja California does not have indigenous natural
gas and imports natural gas via pipelines from
the United States. The state potentially can utilize
natural gas from the large liquefied natural gas
facility just north of Ensenada, known as Energia
Costa Azul (2019), and owned by lEnova.
During the past few years, several global companies
associated with the manufacture of photovoltaic cells
have been established in the region (e.g., Sunpower),
creating an opportunity for low-cost solar system
components in the local market and the formation of
small regional companies for the installation of solar
systems. It also creates demand for a well-trained
labor force and technicians in the field.
6.1.3 Cost and Prices of Energy in
Baja California
The pricing of electricity in Baja California is
complex, with many different categories of service.
The largest sector is the industrial and services
sector, which in 2017 used 63 percent of generated
electricity. This was followed by the domestic sector
at 33 percent. These numbers reflect the underlying
economy of Baja California, which has a growing
industrial sector primarily centered in the cities of
Mexicali and Tijuana. The sales volume in Baja
California from 2012 to 2016 is shown in Table 13.
The prices for electricity vary by region and sector.
In general, electricity is expensive in Baja California,
especially in the eastern section of the state,
where summer temperatures are very high, and air
conditioning loads are significant. Prices also are
high in California in the San Diego Gas & Electric
territory, although lower in Imperial County, and
energy costs for power generally are not a major
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Table 14. Atmospheric Emissions of Thermoelectric Plants Located in Baja California
Plant Name
Location
Carbon Dioxide
(Ton)
Sulfur Dioxide
Oxides of
Nitrogen
Coarse
Particulate
Matter
Fine Particulate
Matter
Presidente Juarez
Rosarito
1,925,417.15
6,952.11
5,118.06
730.67
648.67
Termoelectrica
Mexicali
Mexicali
1,095,489.82
5.48
3,822.99
364.05
364.05
Energia AztecaX
Mexicali
915,235.91
4.58
3,193.94
304.15
536.62
Energia de Baja
California
Ensenada
560,296.41
2.8
1,955.29
186.2
186.2
CTG Mexicali
Mexicali
6,131.67
0.06
25.94
2.27
2.27
CTG Cipres
Ensenada
2,225.66
0.02
9.42
0.82
0.82
Data source: Commission for Environmental Cooperation, www.cec.ora/sites/default/napp/en/countrv-profiles/mexico/view-emissions-data.php.
factor in decisions regarding location of industrial
facilities on either side of the border.
6.1.4 Environmental Impacts of the
Energy Sector
The biggest environmental impacts resulting from
power generation are associated with fossil fuels
and treatment of brines that are part of geothermal
production in the Mexicali Valley. The main power
plants in the state are located in Rosarito and Cerro
Prieto, near Mexicali. The Rosarito plant uses natural
gas as a fuel, and Cerro Prieto exploits the geother-
mal fields in the region. Two other natural gas-fueled
(thermoelectric) plants exist near Mexicali. Emissions
from these plants are shown in Table 14.
6.1.5 Future Energy Demand
Projections of future demand in Mexico—from 2018
through 2032—were developed by the Secretaria
de Energia (Ministry of Energy, known as SENER)
(SENER 2018). The analysis showed that an
additional capacity of 66,912 MW would be needed
by 2032. The analysis concluded that 45 percent
would be supplied by conventional resources and
the remaining 55 percent by renewable energies. In
Table 15, the additional capacity for Baja California
can be seen by type of technology; conventional
technologies will contribute 80.55 percent, whereas
renewables account for the remaining 19.44 percent.
Baja California's future expansion of the electrical
power is heavily weighted toward natural gas-burning
facilities, with wind energy next. Surprisingly, little
consideration is given to solar energy generation,
despite the very good solar resource available in
the region.
6.1.6 Potential for Renewables
Baja California has significant potential for the
development of both solar- and wind-generated
electricity. Qualitatively, it is clear that both of these
resources hold major potential to become a large
factor in Baja California's energy mix.
Table 15. Additional Gross Capacity by Technology in Baja California
Year
Municipality
Technology
Capacity
(MW)
2019
Mexicali
Solar
41
2020
San Luis Rio Colorado
Turbogas
340
2022
Tijuana
Bioenergy
4
2022
Ensenada
Combined Cycle
565
2023
Mexicali
Combined Cycle
337
2023
San Luis Rio Colorado
Combined Cycle
1,186
2025
Mexicali
Combined Cycle
516
2026
Tijuana
Hydroelectric
11
2027
Mexicali
Combined Cycle
130
2028
Tijuana
Hydroelectric
17
2028
Tijuana
Bioenergy
3
2028
Tijuana
Bioenergy
16
2028
Ensenada
Bioenergy
5
2028
Mexicali
Bioenergy
11
2028
San Luis Rio Colorado
Combined Cycle
290
2029
Ensenada
Eolic
400
2030
Tijuana
Eolic
58
2030
Tijuana
Eolic
46
2030
Tijuana
Eolic
100
2030
Tijuana
Eolic
100
| Total
4,176
MW—Megawatt
Source: Secretaria de Energia (Ministry of Energy, known as SENER), base.
eneraia.aob.mx/Prospectivas18-32/PSE 18 32 F.pdf.
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77
Mexican Border Energy
6.1.7 Energy Needs for Water
Contemporary civilization depends on water and
energy for survival. Baja California has two critical
issues related to the water-energy nexus: the lack
of sufficient water resources to meet social needs,
and depletion and salinization of aquifers in food-
producing areas (in Mexico, agriculture represents
around the 70% of water consumption).
The San Quintin Valley, located about 225 km
(140 miles) south of the border, is the main producer
of tomato and berries in the state, most for export.
It has an annual average rainfall of 200 millimeters
(7.9 inches), and there are no permanent rivers. Of
the eight aquifers, three are overexploited, and anoth-
er three are salinized. In 2017, at least 67 desalination
plants are operating and registered with the Comision
Nacional del Agua (Mexico's national water authority),
and all use water from the salinized aquifers because
it is cheaper to process than seawater. It is difficult to
determine the total water extraction capacity of the
region because desalination plants are private and
are installed, operated and maintained by individual
ranches and farms.
The exact amount of energy needed to operate the
desalination plants in San Quintin valley is unknown,
but demand for electric power is assumed to be
very large. All facilities are connected to the regional
power grid because the federal government sub-
sidizes more than 90 percent of the cost of energy
used for agricultural purposes. The Special Energy
Program for Agricultural Use states that "...if the
regular cost of energy is 7.24 pesos per kVVh, and
the farmer signs the agreement, the daytime cost
will be 0.62 pesos per kWh and the nighttime cost
will be 0.31 pesos per kWh" (Azuz and Arreola
2019).
Because of water availability restrictions, from 2003
to 2017 the planted area in the San Quintin Val-
ley experienced a decrease of 30 percent, going
from roughly 9,000 to 7,000 hectares (22,239 to
17,297 acres). Despite this, the value of production
tripled, especially in the case of strawberry crops.
For this crop, recent studies estimate that the total
water demand for one agricultural cycle (between
5.2 and 6.8 months) is 19 million cubic meters (m3)
(670 million cubic feet) and the energy need for de-
salination is 122 MW (Azuz and Arreola 2019).
1/ / U-nf / UHl ,
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-------
Baja California has significant
potential for the development
of both solar- and wind-
generated electricity.
I®
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Mexican Border Energy
6.1.8 Binational Desalination
Initiatives
Binational desalination provides opportunities to
augment water supply in the U.S.-Mexico Porder
region Put has challenges, such as the need for
additional energy, which would increase greenhouse
gas emissions, and difficulties with sustainable
discharge of millions of gallons of brine concen-
trate daily. A desalination plant co-located with the
Rosarito Thermoelectric Plant at Playas de Rosarito,
Baja California, some 19 km (12 miles) south of the
international border, has been under discussion for
many years. The plant, if built, would produce about
378 million liters (100 million gallons) per day, which
would be twice the output of the currently operat-
ing plant located in San Diego County at Carlsbad,
California.
For many, desalination is an attractive option to
obtain water in Baja California or even southern
California, Arizona and elsewhere along the border.
Given its high energy use, high cost and environ-
mental effects, however, many believe that other
options should be implemented first, such as
increasing water treatment and reuse. For example,
20 percent of Tijuana's water is not treated. Of the
water that is treated, only 4 percent is reused; the
rest is discharged into the ocean.
6.1.9 Cross-Border Energy Trading
Baja California and California share two intercon-
nection electrical transmission lines. These lines are
managed by the Sistema Electrico Nacional through
the Comision Federal de Electricidad (Federal
Electricity Commission, known as CFE) in Mexico
and by the Western Electricity Coordinating Council
through the California Independent System Operator
in the United States. One connection is between
Tijuana-Otay Mesa, and the other is between Mexi-
cali (La Rosita)-lmperial Valley. The interconnections
between both systems in Baja California have a
capacity of 800 MW for both lines with a voltage of
230 kV (SENER 2015).
In 2011, San Diego Gas & Electric signed a 20-year
contract to receive power from wind farms operated
by Sempra Energy's wind farms in Baja California.
The farm has 47 turbines with a capacity of 155 MW
of wind power. The energy is 100 percent generated
in Mexico and connected to San Diego's substation
system (Sempra International 2016).
Baja California and California share three natural
gas pipelines with a capacity of 23.5 billion m3
(829 billion cubic feet) per day. The first
interconnection is located at the port of entry east
of Mexicali and feeds the residential and industrial
sectors. The second, the Baja Norte pipeline,
covers Tijuana and Rosarito and provides energy
to the Rosarito Electric Plant and San Diego Gas &
Electric. The third connection is in Los Algodones at
Valle de Mexicali, which supplies energy generation
plants in the area (Munoz et al 2012).
6.2 Sonora
Sonora is the second largest state in terms of land
mass in Mexico, and despite being sparsely pop-
ulated, it is home to important mining, farming and
manufacturing centers for the Mexican economy.
The state has some hydroelectric and solar power
stations but mainly relies on gas imported from the
United States and oil from other Mexican states for
most of its electrical supply. Around 5 percent of the
state's electrical needs come from renewable sourc-
es, with the rest from natural gas and other fossil
fuels (Comision de Energia del Estado de Sonora
2019). The transportation sector continues to be the
main destination for energy usage in the state and
one of the most important uses of oil in the state
(Comision De Energia del Estado de Sonora 2010).
Currently, one of Latin America's largest solar power
plants (Puerto Libertad Photovoltaic Plant) is under
development in Puerto Libertad, Sonora, and should
be producing electricity for the state sometime
in the next few years (Power Technology 2019b).
Thirteen solar power projects currently are under
construction, and the government of Sonora has
made it a priority to expand production of solar and
wind electricity generating plants in the state, espe-
cially because so much of the state is suitable for
solar energy production (Comision de Energia del
Estado de Sonora 2019). Solar likely will see large
amounts of growth in the state's energy portfolio as
the state invests in new programs and plants. The
government has and will likely continue to expand
and upgrade electrical transmission lines between
Arizona and Sonora (Wichner 2017).
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Thirty percent of the state's electrical consumption
takes place in the capital of Hermosillo (SENER
2016). Electricity distriPuted in the state still is
managed by the federal government of Mexico, with
state-level policy focusing on development of new
sources and encouraging the growth of renewables
and cross-border trade (Comision De Energia del
Estado de Sonora 2009). The state's Comision de
Energia helps formulate policy and encourage devel-
opment in the state, working with CFE. The federal
government manages energy prices depending on
multiple factors, including the region of the country,
its climate, and its usage level. Last year, the gov-
ernors of Sonora, Arizona and New Mexico signed
an accord to import natural gas to plants in Mexico
before transporting the finished liquefied natural gas
onward to Asian customers (Vanguardia 2018). The
majority of the natural gas coming into the state
through the U.S.-Mexican border goes to Sonora
and its more populous neighbor state, Chihuahua.
6.3 Chihuahua
Although the oil- and gas-producing geological
formations in the Permian Basin do not extend
into Chihuahua, manufacturers in the state have
benefitted from the West Texas production boom.
In 2016, a group of 40 companies formed the
Chihuahua Energy Initiative to spearhead investment
in energy industry activities, such as supplying tanks
and well controls (McEwen 2016). CFE also has
commissioned combined cycle gas-fired power
plants to take advantage of low-cost gas imports in
Chihuahua to generate electricity for industrial and
residential electricity needs (Buchanan 2017, Power
Technology 2019a). Mexico's former President
Enrique Pena Nieto promoted Ojinaga, Chihuahua,
as a possible location to build a manufacturing and
transportation hub to transport oil and gas from the
Permian Basin via pipeline to export markets (Marfa
Public Radio 2014).
In 2018, four solar energy plants in Chihuahua came
online—in Jimenez, Ojinaga/Camargo, Ascension
and Galeana (Gobierno de Chihuahua 2019). The
largest plant is operating in Galeana, at 170 MW.
Both plants in Jimenez and Ojinaga/Camargo are
operating at 30 MW, and the solar plant in Ascension
produces 60 MW. Three additional solar projects
with a combined capacity of 365 MW are under
construction in Ahumada and Delicias (Gobierno de
Chihuahua 2019). The renewable energy sector in
Chihuahua received US$725 million in foreign direct
investment in 2018 (Gobierno de Chihuahua 2019).
6.4 Coahuila
Coahuila is one of Mexico's most energy-abundant
states. In addition to high wind speeds, solar
radiation and shale gas, Coahuila has 95 percent
of Mexico's coal reserves; 7.3 million metric tons
(8 million U.S. tons) of coal were mined in Coahuila
in 2017 for steel and electricity production, and that
amount is increasing (Gobierno de Coahuila 2019c).
80
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Mexican Border Energy
6.4.1 Shale Gas Reserves
The Burgos Basin is a shale-rich basin that covers
an area of approximately 62,678 square kilometers
(24,200 square miles) onshore in Coahuila anq also
extenqs offshore towarq the continental shelf of the
Gulf of Mexico for aqqitional area (EIA 2017b). In
July 2017, SENER openeq the onshore portion of
the Burgos Basin for natural gas exploration anq
qevelopment by private companies (EIA 2017b).
This is the first time that nonstate entities were
offereq access to the Burgos Basin for qevelopment
since the creation of the national oil company
Petroleos Mexicanos (PEMEX) in 1938 (EIA 2017b).
SENER hopes that private investment will help to
reverse the qecline in natural gas proquction anq
offset qecreasing PEMEX investment in the region.
Proquction from the Burgos Basin accounteq for
15 percent of natural gas proquction in Mexico in
2016, anq the basin hoiqs the largest unqevelopeq
shale resources in the country (EIA 2017b).
The Burgos Basin is the southern extension of
Texas' Western Gulf Basin, which encompasses
the Eagle Forq Shale (EIA 2017b). PEMEX initiated
exploration activities in the Burgos Basin in 1942,
and it has discovered some 227 fields, mostly rich
in natural gas. The basin currently has more than
3,500 active natural gas wells in nonshale forma-
tions (EIA 2017b).
6.4.2 Coahuila Energy Cluster
The Coahuila Energy Cluster is a nonprofit associ-
ation that was formed through a network of busi-
nesspersons, universities, research centers and
authorities at the state and municipal levels, with
the goal of preparing the oil and gas stakeholders
in the state of Coahuila. Seventeen municipalities,
nine national and international universities, and
approximately 50 corporations have the capacity
or potential to provide services or participate as
suppliers within the sector. The cluster comprises
six committees (Infrastructure, Human Resources,
Supply, Superficial Rights, Technological Innovation
and Environment), which address important issues
related to the development of the energy sector in
Coahuila. The overall objectives for the cluster are
to build business networks and develop skills in the
oil, mining, manufacturing and business sectors to
enhance competition. Initiatives and services that
the cluster facilitates include supply chain integra-
tion, capital investment, mediation and infrastruc-
ture development (Consejo Nacional de Ciencia y
Tecnologia 2015).
6.4.3 Solar and Wind Energy
Resources
Approximately 12 percent of Mexico's national wind
power potential and 8 percent of its national solar
energy potential come from Coahuila (Gobierno
de Coahuila 2019b). Ten wind energy and 24 solar
energy projects currently are authorized in the state
(Gobierno de Coahuila 2019b). Governor Miguel
Angel Riquelme Solis is a vocal proponent of
reducing air emissions from energy production and
attracting foreign investment for renewable energy
in Coahuila, including US$500 million to install more
than 500 MW of solar capacity in the southeast
portion of the state (Gobierno de Coahuila 2019a).
6.4.4 Energy Audit of the Piedras
Negras Water Treatment
Facility
Municipalities in Coahuila have highlighted the
water-energy nexus by participating in energy-
efficiency projects with support from the North
American Development Bank (NADB), as well as
the U.S. Environmental Protection Agency's Border
2012 and Border 2020 Programs. Electricity costs
are the highest operating costs for wastewater
treatment facilities along the border. To reduce
costs, the local water utility in Piedras Negras
(Sistema Municipal de Aguas y Saneamiento)
conducted an energy audit for its wastewater
treatment plant from 2013 to 2014 in coordination
with the Comision Nacional del Agua (Border
Environment Cooperation Commission 2013).
Sistema Municipal de Aguas y Saneamiento's
Piedras Negras Manager Arturo Garza stated
that the audit identified energy-saving measures
that resulted in 6.5 million pesos saved during an
8-month period. Since then, Sistema Municipal
de Aguas y Saneamiento has participated in
training workshops with other water utilities in
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Coahuila as part of a statewide Energy Efficiency
Learning Network in Coahuila (Border Environment
Cooperation Commission 2016).
6.5 Nuevo Leon
Approximately 2.85 percent of Mexico's installed
electricity generating capacity at the national level
is located in Nuevo Leon. This does not account
for intrastate sales of electricity, which Nuevo Leon
generates at the second highest level in the country.
SENER anticipates that industrial energy consump-
tion will continue to grow the energy sector in Nuevo
Leon. Because Nuevo Leon has the second-most
highly educated workforce of any Mexican state,
second only to the Distrito Federal, the 2014 Energy
Sector Plan anticipates continued growth in energy
contriPution to gross domestic product. Universi-
ties such as the Tecnologico de Monterrey and the
Universidad Autonoma de Nuevo Leon contriPute
degree programs, resources and expertise to sup-
port the state's energy sector (Border Environment
Cooperation Commission 2016).
PEMEX operates a refinery for crude oil in Cadereyta,
Nuevo Leon, which accounts for 16.2 percent of
national production. Its products include asphalt,
luPricants and oils, polymers, gasoline, and coke.
Nuevo Leon produces 13 percent of Mexico's
asphalt at the Cadereyta refinery (Border Environment
Cooperation Commission 2016).
6.6 Tamaulipas
In 2017, Tamaulipas created a state energy com-
mission, the Comision de Energia de Tamaulipas,
to estaPlish policies and strategies to develop Poth
renewaPle and nonrenewaPle energy resources in
the state (GoPierno de Tamaulipas 2019a). In 2018,
the Comision de Energia de Tamaulipas organ-
ized the first International ENERTAM Expo, which
Prought 10,000 participants from Mexico's gloPal
energy sector and interested companies together to
Tamaulipas to network and exchange ideas (GoPier-
no de Tamaulipas 2019b).
6.6.1 Wind Energy Projects
Zuma Energia, a Mexico City-based wind and solar
farm developer, secured US$600 million in financing
in 2018 to build the largest wind farm in Reynosa.
The project will consist of 123 wind turbines that
will generate 424 MW of electricity for 900,000
residents. Renewable energy companies have built
more than six wind farms in Tamaulipas (Chapa
2018). Wind projects are under construction in the
state, such as a US$119-million project built by
Engie that is expected to start operations in 2020
and a 100 MW wind farm built by Enel Green Power
that was expected to begin operations in June 2019
(Mexico News Daily 2018).
NADB has financed more than US$125 million for
the construction of three wind farms in Tamaulipas
(Chapa 2018). The Victoria Wind Energy Project
in Guemez, Tamaulipas, was certified by NADB
(2019c) in 2015. The project consists of the
installation of 15 wind turbines and the construction
of one substation and a transmission line. The
project produces approximately 184 GWh of
electricity per year, which is equivalent to the annual
energy consumption of 25,733 households. In
2017, NADB (2019b) certified the Vicente Guerrero
Wind Energy Project in Guemez, Tamaulipas. The
project consisted of the construction and operation
of a 117.3 MW wind energy farm. It generates
approximately 452 GWh of electricity per year.
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The USMCA and Energy
Trade and Investment in
the Border Region
83
On November 20, 2018, the United States, Mexico
and Canada signed a new trade agreement, known
as the United States-Mexico-Canada Agreement
(USMCA), which is intended to take the place
of the North American Free Trade Agreement
(NAFTA). The USMCA will become effective on its
ratification by the three parties in accordance with
their respective domestic procedures. Once it is
effective, the USMCA will replace NAFTA, subject to
certain transitional provisions. This chapter reviews
the USMCA provisions that potentially affect energy
trade in the cross-border region.
7.1 Energy Import Duties
Under the USMCA
Under the USMCA, there are no import duties for
electricity, natural gas, oil, gasoline or diesel fuel for
either the United States or Mexico. Under Article
2.4 of the Agreement, "originating goods" of a party
(i.e., goods that originate in the respective signatory
countries in accordance with the rules of origin set
forth in Chapter 4 of the USMCA) are subject to
duties in accordance with the parties' respective
Schedules to Annex 2 B (Tariff Commitments). For
the United States and Mexico, their Schedules show
zero duties for each of the following originating
goods (references are to Harmonized Tariff Schedule
of the United States numbers in the United States
and to fracciones arancelarias TIGIE in Mexico):
• Electricity (United States 27160000; Mexico
2716.00.01)
• Natural gas (United States 27112100 [in gaseous
state] and 27111100[LNG]; Mexico 2711.21.01)
• Crude oil (United States 27090010 [< 25 de-
grees American Petroleum Institute gravity] and
27090020 [> 25 degrees American Petroleum
Institute gravity; Mexico 2709.00.02 -.99)
-------
• Gasoline (United States 27101215; Mexico
2710.12.08 -.91)
• Diesel fuel (United States 27101911; Mexico
2710.19.09 -.91)
More broadly, all goods under Chapter 27 of the
harmonized tariff system pertaining to mineral fuels
for the United States and Mexico has a zero tariff.
This would include such goods as liquid petroleum
gas, kerosene and jet fuel in addition to the energy
goods listed above.
7.2 Limitations on
Import and Export
Restrictions;
Exception for Mexico
Hydrocarbons
Article 2.11, clause 1 of the USMCA incorporates
by reference Article XI of the General Agreement on
Tariffs and Trade (GATT) 1994 (a part of the World
Trade Organization Agreement),1® which provides in
part as follows:
"No prohibitions or restrictions other than
duties, taxes or other charges, whether made
effective through quotas, import or export
licenses or other measures, shall be instituted
or maintained by any contracting party on the
importation of any product of the territory of
any other contracting party or on the exporta-
tion or sale for export of any product destined
for the territory of any other contracting party."
In Article 2.11 clause 2, the USMCA Parties state
their understanding that Article 2.11 prohibits the
following:
A voluntary export restraint inconsistent with
World Trade Organization provisions permit-
ting measures in response to unfair trade
practices (i.e., antidumping and countervailing
duty measures), in accordance with World
Trade Organization treaties;
An export or import price requirement, except
as permitted in enforcement of antidumping
and countervailing duty orders or price under-
takings; or
Import licensing conditioned on the fulfilment
of a performance requirement.
Among other things, Article 2.11 would forbid
restrictions on the export of energy goods (i.e., the
United States cutting off or placing export quotas
on exports of electricity, gasoline or natural gas to
gain a competitive or political advantage or Mexico
doing the same with respect to crude oil).163 An
example of such restrictions is shown in a World
Trade Organization report that found that China had
improperly imposed export duties and quotas on
-------
rare earths, tungsten and molybdenum in violation
of GATT Article XI and had unreasonably adminis-
tered licensing requirements to enforce these trade
restrictions, while favoring domestic entities over
foreign competition.,104
One major exception to the Article 2.11 limitations is
an exception taken by Mexico with respect to crude
oil, natural gas, gasoline, diesel fuel and certain
other hydrocarbon products.165 This means that the
Article 2.11 limitations are not applicable to Mexico
with respect to the identified hydrocarbon products.
The United States did not take an energy exception,
so Article 2.11 applies to all U.S. energy products.
7.2.1 Export Licensing
Article 2.14 of the USMCA requires transparency
in export licensing and by implication permits such
licensing. This is a USMCA exception to the general
rule set forth in GATT 1994 Article XI, which pro-
hibits export licensing as a restriction on the export
of goods. This may affect the U.S. export license
regime for natural gas, which would otherwise
potentially be subject to attack under GATT 1994
Article XI.
-------
7.2.2 Export Duties, Taxes or
Other Charges
Article 2.15 of the USMCA provides as follows: "No
Party shall adopt or maintain any duty, tax, or other
charge on the export of any good to the territory of
another Party, unless the duty, tax, or charge is also
applied to the good if destined for domestic con-
sumption." For the United States, this supplements
the existing restriction on export duties or taxes as
set forth in the U.S. Constitution, which provides at
Article I, Section 9, that "No tax or duty shall be laid
on Articles exported from any State." As an exam-
ple of the impact of these provisions, the United
States could not place an export duty on exports of
electricity, gasoline or natural gas. Similarly, Mexico
could not place export duties or taxes on the export
of crude oil.
7.3 USMCA Chapter8
Specifically
Recognizes the
Mexican State's
Ownership of
Hydrocarbons in the
Ground
As discussed in Section 3.1.3, the concept of
"energy sovereignty" is one that occurs at various
key times over the course of Mexico's history. It is
a concept with both nationalistic and budgetary
impacts. The Mexican Constitution of 1917
established the Mexican federal government's
dominion over subsoil rights throughout the
country. Oil Expropriation Day (Dfa Nacional de la
Expropriation), March 18, is a national holiday in
Mexico that marks the anniversary of President
Lazaro Cardenas' decision to expropriate the oil
industry in Mexico in 1938, a watershed event that
was followed by a nationwide effort to pay off debts
to foreign oil companies that involved even citizens.
Although the relative utility of a state-owned oil
company has been fiercely debated in Mexico for
decades, and two recent Administrations have
sought—with varying levels of success—to open
the sector up to foreign investment, the concept has
survived not only these efforts but also the free trade
era in Mexico that began in earnest in the 1980s.
The USMCA contains a pointed reference to this
political and policy reality. Chapter 8 of the USMCA
is titled "Recognition of the United Mexican States'
Direct, Inalienable and Imprescriptible Ownership
of Hydrocarbons." The second clause of article 8.1
notes that:
2. In the case of Mexico, and without prej-
udice to their rights and remedies available
under this Agreement, the United States and
Canada recognize that: (a) Mexico reserves
its sovereign right to reform its Constitution
and its domestic legislation; and (b) Mexico
has the direct, inalienable, and imprescriptible
ownership of all hydrocarbons in the subsoil
of the national territory, including the conti-
nental shelf and the exclusive economic zone
located outside the territorial sea and adja-
cent thereto, in strata or deposits, regardless
of their physical conditions pursuant to Mexi-
co's Constitution {Constitution Politica de los
Estados Unidos Mexicanos).
1A Special Investor
Dispute Resolution
Mechanism Under
USMCA Annex 14-E
One of the U.S. objectives in the negotiation of
the USMCA was to revise the NAFTA Chapter 11
investor-state dispute settlement mechanism to limit
the rights of the investors of one NAFTA country
to make direct claims through a binding arbitration
process against the government of another NAFTA
country. The ultimate outcome of the negotiations
was that under the USMCA, investor-state dispute
settlements no longer will be available for claims
against Canada or by Canadian investors, other
than certain "legacy" claims, and there are signifi-
cant limitations on investor-state dispute settlements
between the United States and Mexico. For United
States or Mexican investors in oil and gas or elec-
tricity, or certain other "covered sectors," with claims
-------
The USMCA and Energy Trade
against Mexico or the United States, respectively,
there was a less of a "cut-back" of investor protec-
tions than for investors in other business sectors,
however.
Under NAFFA Chapter 11, a private investor from
one NAFTA country is permitted to seek damages
through binding arbitration based on another NAFTA
country's failure to comply with its treaty commit-
ment, including obligations to treat investors fairly,
not to discriminate against them or their invest-
ments, and not to expropriate investments or take
measures amounting to expropriation without pay-
ing adequate compensation, as outlined in NAFTA
Article 1116 (claim by an investor on its own behalf)
and Article 1117 (claim by an investor on behalf of
an enterprise).
The NAFTA investor-state dispute settlement mech-
anism is terminated under the USMCA, except that
with respect to "legacy" investments, an investor
of a NAFTA country still can use the NAFTA inves-
tor-state dispute settlement mechanism against
another NAFTA country, so long as the claim is
made within 3 years after the termination of NAFTA,
per USMCA Annex 14 C. In this regard, a "legacy
investment" is one established or acquired between
January 1, 1994, and the date of termination of
NAFTA, and in existence on the date of entry into
force of the USMCA.186
The USMCA has a new investor-state dispute settle-
ment mechanism between the United States and
Mexico as set forth in USMCA Annex 14-D. The
investor-state dispute settlement mechanism under
Annex 14-D is less protective of United States and
Mexican investors than under NAFTA in two major
respects:
• Annex 14-D ISDS is available only for claims of
discrimination (i.e., violation of national treatment
and most-favored-nation obligations) and for claims
of direct expropriation, per Article 14-D-3. This
means that claims of unfair treatment, in violation
the duty of fair and equitable treatment under
international law, and claims of indirect expropri-
ation (e.g., as a result of environmental or other
regulatory proscriptions) are not permitted under
Annex 14-D. These latter claims were the most
prevalent claims in NAFTA investor-state dispute
settlement proceedings, so this cutback is a major
reduction in investor protections.
• Under Annex 14 D, a claimant must first litigate
the challenged measure "before a competent
court or administrative tribunal of the respond-
ent." The claimant must then pursue litigation until
it receives a "final decision from a court of last
resort" or 30 months have passed from the date
the local proceedings were initiated, as outlined
in Article 14.D.5, clause 1(a) and (b). The only
way that these requirements toward pursuit of
domestic remedies can be avoided is if they are
"obviously futile," per Article 14.D.5 footnote 25.
There is a 4-year statute of limitations for claims
under Annex 14-D, and there is no tolling of the
statute of limitation while the domestic remedies
proceed, except that the claimant can move to
-------
an investor-state dispute settlement if there is no
final decision within 30 months from the date the
domestic proceeding was initiated.
The investor-state dispute settlement mechanism
set forth in Annex 14 D for U.S.-Mexico investment
disputes is modified under Annex 14 1 for certain
"covered government contracts," pertaining to in-
vestments in "covered sectors," including "activities
with respect to oil and natural gas that a national
authority of [the United States or Mexico] controls,
such as exploration, extraction, refining, transporta-
tion, distribution, or sale," and "the supply of power
generation services to the public on behalf of [the
United States and Mexico]."
For U.S. or Mexican investors in the "covered
sectors," Annex 14-E negates the two Annex 14-D
cutbacks on investor protections described above.
In particular, Annex 14-E permits claims based on
any breach of USMCA Chapter 14, which would
include claims of unfair treatment and claims of
indirect nationalization or expropriation, per
Annex 14-E, section 2. Further, Annex 14-E does
not require pursuit of domestic remedies (i.e.,
judicial or administrative proceedings, before
proceeding to ISDS arbitration),®7 as detailed in
Annex 14-D, section 5 and footnote 32.
As a result, a U.S. investor who had either—
• an investment in exploration, extraction, refining,
transportation, distribution, or sale of oil and gas
in Mexico, which is under the control of Mexican
authorities, or
• an investment in the supply of power generation
services to the public on behalf of the Mexican
government,
would be permitted under Annex 14-E to move
directly to investor-state dispute settlement arbitra-
tion against Mexico under the procedures set forth
in Annex 14-D based on claims of unfair treatment,
discrimination, or direct or indirect expropriation.
Annex 14-E contains some unusual provisions.
In particular, Annex 14-E provides that it can be
modified or eliminated in the future by agreement
of the United States and Mexico, per Annex 14-E,
Section 5. Furthermore, Annex 14-E no longer will
be operative if the respondent state is no longer "a
party to another international trade or investment
agreement that permits investors to initiate dispute
settlement procedures to resolve an investment dis-
pute with a government," per Annex 14-E, clause 2.
(a)(i)(B) and clause 2(b)(i)(B). Therefore, if Mexico
was no longer party to another treaty or investment
agreement with investor-state dispute settlement
arbitration provisions (apart from the USMCA), then
the expanded scope of arbitration for "covered
government contracts" under Annex 14 E would no
longer apply to Mexico.
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8. Recommendations
GNEB identified research and incentives, regional sustainability planning, and binational collaboration as key
principles that federal agencies and Congress should apply to direct federal resources toward building a
sustainable new border energy economy.
Research and Incentives
To enhance resilience and support economic development needs specific to the U.S.-Mexico border
region, federal agencies and Congress should provide for research and program incentives that are
informed by known research gaps and regional vulnerabilities.
1. Support research on energy topics on the
U.S.-Mexico border, such as where energy
needs are most acute, quantifying econom-
ic costs and benefits, and identifying oppor-
tunities. For example, the Texas border area
is unique as compared to other parts of the
state. Border-specific original research is
lacking.
2. Support research especially related to colo-
nias and tribal areas, which lack adequate
energy-related infrastructure. The absence
of recent research on colonias makes it a
challenge to form policy solutions. For ex-
ample, research support could be valuable
to answer such questions as how effective
microgrids could be to extend electricity to
colonias or how to finance infrastructure.
3. Promote incentives and funding for trans-
mission line and microgrid projects, in con-
junction with regional energy sustainability
plans (described below), that create resilient
border communities by locating energy
investments in the border region that benefit
those communities.
4. Establish the U.S. Environmental Protec-
tion Agency (EPA) as the lead agency, in
coordination with other federal agencies-
including but not limited to the U.S. Depart-
ment of Energy (DOE), U.S. Army Corps of
Engineers, Bureau of Reclamation and the
U.S. Section of the International Boundary
Water Commission—to conduct research
and develop new programs, policies and
incentives to promote water conservation
and reuse in energy production throughout
the U.S.-Mexico border region, much of
which is arid and drought-prone. EPA and
other agencies should leverage partners
and action items in the Water Reuse Action
Plan, scheduled to be finalized and released
in 2020. For more information on EPA's de-
velopment of the Water Reuse Action Plan,
see www.epa.aov/waterreuse/water-re-
use-action-plan.
5. Support sustained and strategic research
barriers to energy efficiency, particularly in
existing buildings, in the U.S.-Mexico bor-
der region. Support incentives to promote
efficient cooling and lighting technologies in
areas and building types with the greatest
potential for increasing energy efficiency.
89
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Regional Sustainability Planning
To provide for a more resilient future energy supply for communities along the border, there must be
federal leadership to promote policies and programs that support development and implementation of
regional energy sustainability plans that liaise with Mexican communities.
6. Establish a regional energy sustainability
planning process for federal agencies to
collaborate and communicate with local,
state and tribal governments to increase
resiliency, provide for strategic economic
development, and advance energy-efficiency
projects that improve communities. Regional
energy sustainability planning requires
effective transborder communication and
cooperation.
7. DOE should be the lead agency in
multiagency projects that evaluate existing
frameworks for sustainable energy planning
at the regional scale, adopt a framework
after input from the public and the regulated
community, and then integrate the planning
framework into how energy production
projects demonstrate eligibility for federal
funding and how projects meet regulatory
requirements for permits and other approvals.
8. Integrate the following into the new
framework for development and
implementation of regional energy
sustainability plans:
(a) Delineate border communities (U.S. and
Mexico) and benefits/costs of energy
development and trade and identify
infrastructure planning that considers
sensitive and rural populations along the
border, including tribal communities, to aid
in regional planning and the most efficient
use of governmental assistance.
(b) Invest in and support the successor
program to the U.S.-Mexico Border 2020
Program, which has proven valuable to
California, Arizona, New Mexico, Texas
and the six neighboring Mexico states.
Congress, EPA and other executive
branch agencies should encourage
improvements to the program based on
stakeholder input.
(c) Continue and expand support for the
binational NADB, an important source of
water and energy infrastructure investment
and economic development along the
U.S.-Mexico border. Grants and loans
to border communities continue to be
valuable to binational goals in water quality,
air quality and protection of the shared
border environment, which enhance the
quality of life of border residents.
(d) Actively coordinate with the Border 2020
Program managed by EPA and its Mexican
counterpart agency when federal agencies
(federal contractors) are developing and
implementing policies that affect energy
production and transportation along
the U.S.-Mexico border, especially as
they relate to energy. Actively leverage
resources, projects and expertise toward
addressing vulnerable populations
associated with environmental and public
health challenges in the energy sector.
(e) Encourage rational provision of energy
and energy-efficiency services for border
communities. Locate energy projects
in border communities, including tribal
areas, when it makes economic and
environmental sense.
(1) Require federal agencies to consider
household energy vulnerability ("energy
poverty") and low-income status for
receipt of federal programmatic funding.
(g) Promote the use of NADB funds
to support energy transmission
and generation in areas with little
existing infrastructure, especially rural
communities and tribal areas.
-------
The USMCA and Energy Trade
Binational Collaboration
To provide for greater marketability and prosperity, projects must be binational, bi-state and broad-
cast on a national level.
9. Support export of petroleum products to
Mexico and monitor Mexico's efforts to
expand its own refining capacity.
10. Support export of natural gas to Mexi-
co and support private sector efforts to
complete cross-Porder pipelines that will
support such exports. Evaluate the safety
and effects on Porder communities resulting
from increased exports of liquefied natu-
ral gas Py rail and tank trucks on regional
highways.
11. Foster the development of renewaPle en-
ergy particularly solar and wind, in Porder
states.
12. Actively support development of U.S.
electricity-generation projects Puilt for the
purpose of making cross-Porder deliveries
of electricity to Mexico.
13. Increase efforts Py NERC to include Mexi-
co within NERC and also increase NERC's
efforts to incorporate cross-Porder flows
to protect and improve the reliability of the
bulk electrical system throughout North
America.
14. Support binational projects that increase
the reliability and efficiency of the shared
grid.
15. Promote the promulgation of efficient cool-
ing and lighting technology in the border
region. Support binational projects that
promote energy-efficient building standards
compliance, data collection (monitoring,
reporting and verification), demand-side
management, and the introduction of reach
codes for high-energy-use areas and build-
ings.
91
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Appendix 1
State Regulatory Agencies
k
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State Regulatory Agency Responsibilities
CALIFORNIA
Agency/Entity (Commonly
Known Acronym)
Responsibilities
Energy-Related Areas of Responsibility
California Department of
Conservation,
Division of Oil, Gas and
Geothermal Resources
(DOGGR)
Oversees the oil, gas and
geothermal industries in the
state.
The Idle Well Program administers the plugging and abandoning of
wells left unused for 2 or more years. The Underground Injection
Control Program administers state regulations for injection wells. The
Underground Gas Storage Program ensures that natural gas storage
operations are conducted safely. The Pipeline and Facilities Unit
regulates surface equipment.
California Public Utilities
Commission (CPUC)
Regulates investor-owned
companies (services
and utilities) providing
electric, natural gas,
telecommunication, water,
railroad, rail transit and
passenger transportation
services.
The Energy Division establishes service standards and safety rules
for the investor-owned energy utilities. The division plays a role in the
administration of the state's Renewable Portfolio Standard, overseeing
investor-owned utility compliance, and also oversees these utilities'
energy efficiency programs. The Public Advocates Office protects
consumers in utility rate and policy proceedings. The Office of the
Safety Advocate addresses utility safety concerns.
California Independent
System Operator (CAISO)
Responsible for maintaining
the reliability of the state's
electric grid.
This private 501 (c)(3) nonprofit organization regulates the wholesale
electric power market through the Western Energy Imbalance Market,
balances electricity supply and demand, oversees transmission line
operation, and plans for grid integration, expansion or improvement.
California Energy Commission
(CEC)
Oversees energy policy and
planning for the state.
The commission forecasts the state's energy needs, promotes energy
efficiency through appliance and building standards, and supports
deployment of renewable energy technologies. The agency plays a role
in administering the state's Renewable Portfolio Standard, overseeing
compliance for all energy producers outside the investor-owned
utilities. It licenses new power plants and regulates existing plants. It
provides funding for energy research and technology development and
also supports planning for grid reliability in a post-disaster context.
California Environmental
Protection Agency (CalEPA)
Develops, implements and
enforces environmental laws
that regulate air, water and
soil quality; pesticide use;
and waste recycling and
reduction.
The agency regulates air, water and soil quality, as well as pesticide use
and waste management. Under this agency, the Air Resources Board
regulates emissions for compliance with air pollutant and greenhouse
gas limits. Also, the State Water Resources Control Board balances the
state's water resources, including managing allocations of water to
hydroelectric power plants, and regulates discharges associated with
polluting activities that affect water quality (including energy projects).
Currently, Jared Blumenfeld, California Secretary for Environmental
Protection, chairs the California-Mexico Border Relations Council,
California's central organizing body for coordination and collaboration
on border issues, including energy projects.
California Coastal
Commission (CCC)
Protects the state's coast
through planning and
regulation.
Has authority over all development activities in the coastal zone as
established by the California Coastal Act of 1976. This includes offshore
oil and gas exploration, including power plants, marine terminals,
refineries, and pipelines.
California State Lands
Commission
Manages the state's Public
Trust lands and protects state
waters; ensures public access
to navigable waterways and
the coast.
Manages leasing of on-shore and off-shore state lands, including for oil
and gas development and other energy projects.
California Department of
Community Services and
Development (CSD)
Administers services using
state and federal funds
to support low-income
Californians.
Administers the federal Low-Income Home Energy Assistance Program.
Also administers the U.S. Department of Energy Weatherization
Assistance Program and California's Low-Income Weatherization
Program, a California Climate Investment.
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Appendix
ARIZONA
Agency/Entity (Commonly
Known Acronym)
Responsibilities
Energy-Related Areas of Responsibility
Arizona Department of
Environmental Quality (ADEQ)
Administers and enforces the state's environmental laws
and delegated federal programs to prevent air, water,
and land pollution and ensure cleanup; responsibilities
include waste, underground storage tanks, and
remediation.
The department ensures that energy
producers and consumers are in
compliance with environmental regulations.
Arizona Corporation
Commission (ACC)
Regulates public utilities and business incorporation
in the state, and five elected commissioners oversee
proceedings regarding rates and services for water,
electricity, telephone, natural gas resources, securities,
pipelines and railroads.
The commission has jurisdiction over the
quality of service and rates charged by
public utilities and inspects gas pipelines
for safety.
Arizona Power Authority
Allocates hydroelectric power from Hoover Dam to 39
power customers in Arizona, consisting of cities, towns,
irrigation and electrical districts, and the Central Arizona
Water Conservation District.
This government administration company
works with public and private-owned
utilities to make hydropower available to all
major load centers in Arizona.
Arizona-Mexico Commission
(AMC)
Serves as the principal mechanism for the management
of the state's relationship with Mexico.
This public/private 501(c)(4) nonprofit
organization has sixteen public/private
bilateral committees including Agribusiness
and Wildfire, Economic Development,
Energy, Environment and Water, and Mining.
The Energy Committee promotes renewable
energy projects. The Environment and Water
Committee focuses on water management
planning and environmental quality in the
Arizona-Sonora region.
Arizona Department of
Economic Security (DES)
Uses state and federal funds to administer services to
low-income and vulnerable Arizonans, including the
Supplemental Nutrition Assistance Program, Temporary
Assistance for Needy Families, In-Home Support
Services, and Workforce Innovation and Opportunity Act.
The Utility Assistance Division contracts
with local Community Action Agencies that
provide Arizonans access to the federal
Low-Income Home Energy Assistance
Program.
Arizona Department of Water
Resources (ADWR)
Administers all state water laws outside those relating
to water quality, implements the Groundwater Code,
supports the adjudication of water rights, implements
surface water laws, supports the adjudication of water
rights, ensures the safety of dams, manages floods,
surveys water resources, and oversees the Arizona Water
Banking Authority and Arizona Water Protection Fund.
The department ensures that long-term,
reliable water supplies are available in
Arizona.
Residential Utility Consumer
Office (RUCO)
Represents the interests of residential utility ratepayers
in regulatory proceedings involving public service
corporations before the Arizona Corporation Commission.
The office preliminarily reviews rate
increase applications and intervenes in
rate cases before the Arizona Corporation
Commission to represent ratepayers'
interests.
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NEW MEXICO
Agency /Entity
(Commonly Known
Acronym)
Responsibilities
Energy-Related Areas of Responsibility
New Mexico Energy
Minerals and Natural
Resources Department
(NM EMNRD)
Protects and conserves the state's natural
resources and includes a Youth Conservation
Corps and Divisions of Energy Conservation and
Management, Mining and Minerals, Oil Conservation,
State Forestry, and State Parks (non-federal, non-
municipal and non-tribal land). (The New Mexico
Department of Fish and Game is attached to EMNRD
for administrative support purposes.)
The Energy Conservation and Management
Division develops and implements renewable
energy and alternative fuel programs, including
wind, solar, geothermal, biomass, electric and
compressed natural gas vehicle programs. It also
oversees energy-efficiency programs, natural gas
transportation infrastructure, and safe transportation
of radioactive waste. The Mining and Minerals
Division oversees active mines, including coal mines.
It also identifies, regulates, safeguards and reclaims
abandoned mines. The Oil Conservation Division
consists of four district offices that issue drilling
permits, inspect wells, respond to spills, investigate
violations and institute enforcement actions, and
also three bureaus that handle administration and
enforcement of environmental rules.
New Mexico Environment
Department (NMED)
Protects and restores the environment through its
divisions and other sub-agencies, including the
Resource Protection Division (including the U.S.
Department of Energy Oversight, Flazardous Waste,
Petroleum Storage Tank and Solid Waste Bureaus),
Water Protection Division (including the Construction
Programs, Drinking Water, Ground Water Quality and
Surface Water Quality Bureaus), and Environmental
Protection Division (including the Air Quality,
Environmental Health, Occupational Health and
Safety, and Radiation Control Bureaus).
The department oversees permitting, compliance
and enforcement for air, water and waste regulatory
requirements associated with the energy sector,
including water generated by oil and natural
gas wells ("produced water"). The department
also investigates and remediates pollution from
contamination and hazardous waste and provides
oversight for U.S. Department of Energy cleanup.
New Mexico Office of the
State Engineer (NM OSE)
Has authority over the supervision, measurement,
appropriatio, and distribution of all surface and
groundwater in New Mexico, including streams
and rivers that cross state boundaries.
The office prosecutes all water right adjudications
brought on behalf of the state, including water
transfers for energy projects.
New Mexico State Land
Office (NM SLO)
Generates revenue from leases on state trust land
(surface and subsurface) for purposes including
energy projects, agriculture and mining; the office is
overseen by the elected New Mexico Commissioner
of Public Lands.
The energy projects carried out on state trust lands
through this office include renewable energy (wind
and solar) projects, oil and gas fields, and coal
mines.
New Mexico Economic
Development Department
(NM EDD)
Develops programs and initiatives to create jobs,
develop the tax base and provide incentives for
business development in New Mexico.
The department markets the state as a good
potential site for energy projects, including natural
gas, oil, wind and solar. It promotes the state's
Renewable Energy Production Tax Credit.
New Mexico Public
Regulation Commission
(NM PRC)
Regulates the utilities, telecommunications
and motor carrier industries to ensure fair and
reasonable rates and to assure reasonable and
adequate services to the public as provided by law.
The commission enforces state and federal
regulations for oil and natural gas pipeline safety
and manages consumer issues related to natural
gas, propane, investor-owned water and sewer
services, electric companies, telecommunication,
wireless marketing and electric cooperatives.
110
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Appendix
NEW MEXICO continued
Agency/Entity
(Commonly Known
Acronym)
Responsibilities
Energy-Related Areas of Responsibility
New Mexico Human
Services Department (NM
HSD)
Administers services using state and federal funds
to support low-income New Mexicans through
programs such as the Supplemental Nutrition
Assistance Program, Temporary Assistance for
Needy Families, and the Low-Income Home Energy
Assistance Program.
The Income Support Division administers the federal
Low-Income Home Energy Assistance Program.
New Mexico Border
Authority
Focuses on improvements to the state's ports of
energy and also serves the governor as an advisor
and liaison for those interested in opportunities at
the ports of entry.
This executive branch state agency does not have
explicit energy-related areas of responsibility other
than publicizing energy-related development along
the border.
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TEXAS
Agency/Entity (Commonly
Known Acronym)
Responsibilities
Energy-Related Areas of Responsibility
Railroad Commission of Texas
(RRC)
Regulates oil and gas,
pipeline safety, and mining.
The commission grants oil and gas drilling permits and sets allowable
production rates for wells; administers the abandoned well plugging
and abandoned site remediation program; conducts field inspections
and investigates complaints; oversees rates and safety for intrastate
pipelines; regulates safety for storage, transportation and use of
liquefied natural gas; regulates natural gas rates for consumers; and
regulates exploration, mining and reclamation for coal and uranium.
Public Utility Commission of
Texas (PUC)
Regulates electric utilities,
telecommunication, and
water and sewer utilities.
The commission regulates costs, rates and tariffs for wholesale and
retail electricity markets and transmission and distribution lines;
regulates siting for generation, transmission and distribution of
electricity; governs the intrastate electricity grid operator, Electric
Reliability Council of Texas; structures wholesale electric competitive
markets and conducts planning for Texas' interstate grids operated
by the Southwest Power Pool and Midcontinent Independent
System Operator; provides oversight of financial assurance and
decommissioning trusts for nuclear power plants; and implements
energy efficiency, reliability and other standards in determining energy
rates.
Texas Commission on
Environmental Quality (TCEQ)
Regulates environmental
quality for air, water and
waste.
The commission oversees air, water and waste permitting, compliance
and enforcement for energy-related facilities; conducts investigations
and responds to complaints; promotes energy efficiency through public
education programs, such as Take Care of Texas; issues guidance for
quantifying emission reductions from energy-efficiency and renewable-
energy measures in State Implementation Plans; groundwater impact
contingency plans for pipelines; and coordinates with federal agencies
under the National Environmental Policy Act.
State Comptroller
Regulates state fiscal affairs
including tax collection, state
accounts and government
revenue.
The State Comptroller administers the State Energy Conservation Office,
which provides energy-efficiency codes for buildings, loans for public
buildings' efficiency upgrades, research and educational programs.
The State Comptroller also collects economic data, provides forecasts
for sectors related to energy and transportation, chairs the Interagency
Task Force on Economic Growth and Endangered Species, and provides
special reports on government spending and accountability related to
energy and natural resources (e.g., a report on funding the state water
plan).
General Land Office
Manages land in the public
domain.
The office manages oil and gas leases on public lands and develops
renewable energy sources on public lands as diversification of revenue
for the Permanent School Fund, which has received $16.8 billion in total
revenue since its inception 1876.
Texas Parks and Wildlife
Department (TPWD)
Manages state parks,
hunting, fishing, boating and
wildlife conservation.
The department enforces regulations under the Endangered Species
Act on state-listed endangered species potentially impacted by energy
development, such as the Texas horned lizard and golden-cheeked
warbler.
112
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Glossary of Abbreviations and Acronyms
ACC-Utilities
AGA
ASEA
BMTP
CAISO
CENACE
CFE
CNH
CONUEE
CPUC
CRE
DOE
DOI
DoS
EIA
EPA
ERCOT
ERO
FERC
FPISC
FTA
GATT
GNEB
GW
Arizona Corporation Commission,
Utilities Division
American Gas Association
Agencia de Seguridad, Energfa
y Ambiente (Mexico's Agency for
Industrial Safety and Environmental
Protection for the Hydrocarbons
Sector)
Texas-Mexico Border Transportation
Master Plan
California Independent System
Operator
Centra Nacional de Control de
Energfa (Mexico's National Energy
Control Center)
Comision Federal de Electricidad
(Mexico's Federal Electricity
Commission)
Comision Nacional de Hidrocarburos
(Mexico's National Hydrocarbons
Commission)
Comision Nacional para el Uso
Eficiente de la Energfa (Mexico's
National Commission for the Efficient
Use of Energy)
California Public Utilities Commission
Comision Reguladora de Energfa
(Mexico's Energy Regulatory
Commission)
U.S. Department of Energy
U.S. Department of the Interior
U.S. Department of State
U.S. Energy Information
Administration
U.S. Environmental Protection Agency
Electric Reliability Council of Texas
Electric Reliability Organization
Federal Energy Regulatory
Commission
Federal Permitting Improvement
Steering Council
free trade agreement
General Agreement on Tariffs and
Trade
Good Neighbor Environmental Board
gigawatt
GWh gigawatt hours
HHS U.S. Department of Health and
Human Services
International Energy Conservation
Code
IID Imperial Irrigation District (California)
km kilometer
km2 square kilometer
kV kilovolt
kWh kilowatt hour
LIHEAP Low Income Home Energy
Assistance Program
LNG liquefied natural gas
m3 cubic meter
MW megawatt
MWh megawatt hour
NADB North American Development Bank
NAFTA North American Free Trade
Agreement
NERC North American Electric Reliability
Corporation
NM EMNRD New Mexico Energy, Minerals and
Natural Resources Department
NMED New Mexico Environment
Department
NMPRC-Utility New Mexico Public Regulation
Commission, Utility Division
NRCS Natural Resources Conservation
Service (U.S. Department of
Agriculture)
PEMEX Petroleos Mexicanos (Mexico's
national oil and gas company)
PHMSA Pipeline and Hazardous Materials
Safety Administration (U.S.
Department of Transportation)
SDG&E San Diego Gas & Electric
SENER Secretarfa de Energfa (Mexico's
Ministry of Energy)
USDA U.S. Department of Agriculture
USIBWC U.S. Section of the International
Boundary and Water Commission
USMCA United States-Mexico-Canada
Agreement
WAP Weatherization Assistance Program
113
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2018-2020 Members of the Good Neighbor Environmental Board
Nonfederal Members
Paul Ganster, Ph.D., Chair
Director
Institute for Regional Studies of the Californias
San Diego State University
Cornelius Antone
Environmental Protection Office Manager
Environmental Protection Office
Tohono O'odham Nation
Kimberly Collins, Ph.D.
Professor
Department of Public Administration
California State University, San Bernardino
Leonard Drago
Ombudsman/Tribal Liaison
Director's Office
Arizona Department of Environmental Quality
Bryan Early
Advisor to Chair Hochschild on Mexico Collaboration
California Energy Commission
Michelle R. Freeark
Executive Director of Legal and Corporate Services
Arizona Generation and Transmission
Cooperatives, Inc.
Tiffany Goolsby, AICP
Senior Planner
South Central Council of Governments
Patricia M. Juarez-Carrillo, Ph.D.
Coordinator/Research Associate
Center for Inter-American and Border Studies
University of Texas at El Paso
Justine M. Kozo, M.P.H.
Chief, Office of Border Health
Public Health Services
County of San Diego Health and Human Services Agency
Erik Lee
Executive Director
North American Research Partnership
Mario Lopez
External Affairs Manager
lEnova
Gregory F. Lucero
City Council Member
City of Nogales
Jonathan K. Niermann
Chairman
Texas Commission on Environmental Quality
Raul E. Perez
Executive Director of Economic Development
Maverick County Development Corporation
Rob Roy
Environmental Director
Environmental Protection Office
La Jolla Band of Luiseno Indians
Soil A. Sussman
Managing Director
S cubed Studio
Alan Sweedler, Ph.D.
Professor Emeritus
Sustainability Advisory Board
City of Del Mar
Brent Westmoreland
Executive Director
Camino Real Regional Utility Authority
Gadsden Administrative Complex
Kristine L. Yurdin
Senior Environmental Scientist
New Mexico Environment Department
Margaret Wilder, Ph.D.
Associate Professor
School of Geography and Development
Center for Latin American Studies
University of Arizona
114
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Federal Members
115
International Boundary and Water Commission Department of Homeland Security
Jayne Harkins, P.E.
Commissioner
U.S. Section
International Boundary and Water Commission
Department of Agriculture
Salvador Salinas
Texas State Conservationist
Natural Resources Conservation Service
U.S. Department of Agriculture
Department of Commerce—National Oceanic
and Atmospheric Administration
Jeff Payne, Ph.D.
Acting Director
Office for Coastal Management
National Oceanic and Atmospheric Administration
U.S. Department of Commerce
Teresa R. Pohlman, Ph.D., LEED, AP
Executive Director
Sustainability and Environmental Programs
Undersecretary for Management
U.S. Department of Homeland Security
Department of State
Hillary C. Quam
Border Affairs Coordinator
Office of Mexican Affairs
U.S. Department of State
Department of Transportation
Sylvia Grijalva
U.S.-Mexico Border Planning Coordinator
Office of Planning
Federal Highway Administration
U.S. Department of Transportation
Department of Energy
Catherine Jereza
Deputy Assistant Secretary
Transmission Planning and Technical Assistance
Office of Electricity Delivery and Energy Reliability
Office of Electricity
U.S. Department of Energy
U.S. Environmental Protection Agency
Sylvia Correa, Esq.
Senior Advisor
North American Program
Office of Regional and Bilateral Affairs
Office of International and Tribal Affairs
U.S. Environmental Protection Agency
EPA Headquarters Staff
Designated Federal Officer
Ann-Marie Gantner
Federal Advisory Committee Management Division
Office of Resources and Business Operations
Office of Mission Support
U.S. Environmental Protection Agency
Federal and State Agency Alternates
(Non-Board Members Who Support Their Agency's Participation)
International Boundary and Water Commission Department of Energy
Gilbert Anaya Julie A. Smith
Division Chief Management and Program Analyst
Environmental Management Division Transmission Planning and Technical Assistance
U.S. Section Office of Electricity
International Boundary and Water Commission U.S. Department of Energy
Department of Agriculture
Kristy Oates
State Resource Conservationist
Natural Resources Conservation Service
U.S. Department of Agriculture
Department of Homeland Security
Jennifer Hass, J.D.
Environmental Planning and Historic Preservation
Program Manager
Office of the Chief Readiness Support Officer
U.S. Department of Homeland Security
-------
Crystall D. Merlino
Resilience and Energy Manager
Office of the Chief Readiness Support Officer
U.S. Department of Homeland Security
Department of State
Thomas Moore
Energy, Science, Technology, Health and Energy Officer
Office of Mexican Affairs
U.S. Department of State
Arizona Department of Environmental Quality
Edna A. Mendoza
Office of Regional and Border Assistance Manager
Arizona Department of Environmental Quality
California Energy Commission
Alana Sanchez
International Relations Senior Advisor
California Energy Commission
New Mexico Environment Department
Kathryn S. Becker
Assistant General Counsel and Tribal Liaison
Office of General Counsel
New Mexico Environment Department
Rebecca Roose
Director
Water Protection Division
Office of the Secretary
New Mexico Environment Department
Texas Commission on Environmental Quality
Eddie Moderow
Border Affairs Manager and Colonias Coordinato
Communications and Intergovernmental Relations Division
Texas Commission on Environmental Quality
Jim Rizk
Senior Advisor to Chairman Niermann
Texas Commission on Environmental Quality
EPA Regional Office Contacts
Region 6
Arturo Blanco
Director of Environmental Justice
International and Tribal Affairs
Region 6
U.S. Environmental Protection Agency
Carlos Rincon
Director
El Paso Border Office
Region 6
U.S. Environmental Protection Agency
Region 9
Hector Aguirre
Director
San Diego Border Liaison Office
Region 9
U.S. Environmental Protection Agency
Jessica Helgeson
Environmental Health Coordinator and
Communications Lead
Border 2020: U.S.-Mexico Environmental Program
San Diego Border Liaison Office
Region 9
U.S. Environmental Protection Agency
Emily Pimentel
U.S.-Mexico Border Coordinator
Land Division
San Francisco Office
Region 9
U.S. Environmental Protection Agency
116
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Acknowledgments
David Muniz Andrade
CEO and Founder
Diurna Energy
Roberto Arreola-Sevilla
Centra de Ensenanza Tecnica y Superior Universidad
Mexico
Issac Azuz-Adeath
Centra de Ensenanza Tecnica y Superior Universidad
Mexico
Liz Bisbey-Kuehn
Bureau Chief
Air Quality Bureau
New Mexico Environment Department
J. Marie Britt
Energy Program Manager
U.S. Department of Homeland Security
Gail Cooke
Clean Energy Program Manager
Energy Conservation and Management Division
New Mexico Energy
Minerals and Natural Resources Department
Alejandra Cortez-Ruiz
Centra de Ensenanza Tecnica y Superior Universidad
Mexico
Sara Koeppel
Environmental Protection Specialist
U.S. Department of Homeland Security
Grant Laufer
Research and Analysis Intern
North American Research Partnership
Christine Logan
Region 5 Representative for Community
Business and Rural Development
New Mexico Economic Development Department
Louise Martinez
Director
Energy Conservation and Management Division
New Mexico Energy
Minerals and Natural Resources Department
John B. McNeece III
Senior Fellow for Energy and Trade
Center for U.S.-Mexican Studies
University of California
San Diego
Sara Moore
International Liaison
Efficiency Division
California Energy Commission
Elizabeth Porras
Clerk Treasurer
Village of Hatch (New Mexico)
Adrienne Sandoval
Director
Oil Conservation Division
New Mexico Energy
Minerals and Natural Resources Department
Melanie Scruggs
Program Coordinator
Border Affairs Intergovernmental Relations Division
Texas Commission on Environmental Quality
Kathryn Ust
Post Graduate Intern
Office of Legal Counsel
Arizona Department of Environmental Quality
Rick Van Schoik
Sustainability Portfolio Director
North American Research Partnership
Steve Vierck
Director of Special Projects
Assistant Commissioner
New Mexico State Land Office
Victor Wong
Program Coordinator
Border Affairs
Texas Commission on Environmental Quality
Darren Zigich
Engineering Technology Program Manager
Energy Conservation and Management Division
New Mexico Energy
Minerals and Natural Resources Department
117
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Endnotes
1 For maps of different methods of defining the bor- 13
der, also see Ganster and Lory (2016, pp. 12-13).
2 For the socioeconomic context of the border region,
see the 17th and 18th reports of the Good Neigh-
bor Environmental Board, which can be found at
www.epa.gov/faca/oood-neiohbor-environmen-
tal-board-aneb-reports-president-united-states.
Also see Ganster and Lorey (2016).
3 For an analysis of the impact of energy insecurity on
health, also see Hernandez (2019).
4 The Area Median Income is the midpoint of a
region's income distribution; half of the families in
a region earn more than the median, and half earn 15
less (Metropolitan Council 2018).
5 The U.S. Census determined that in 2017, 19.7% of
the New Mexico population lived below the poverty
level, factfinder.census.aov/faces/tableservices/
isf/paqes/productview.xhtml?pid=ACS 17 1YR
S1701 &prodTvpe=table. For a household with ^
one individual, the poverty threshold in 2017 was
US$12,488. www2.census.qov/proqrams-survevs/
cps/tables/time-series/historical-povertv-thresholds/
thresh17.xls.
6 For more information, see liheapch.acf.hhs.gov/
about.
7 For the full statute, see iheapch.acf.hhs.gov/pubs/
liheapstatute.htm.
8 For a detailed commentary on the Weatherization
Assistance Program, see the February 13, 2019,
testimony of Annamaria Garcia, Director, Office of
Weatherization and Intergovernmental Program,
Office of Energy Efficiency and Renewable Ener-
gy, U.S. Department of Energy, before the House
Appropriations Subcommittee on Energy and Water
Development, U.S. House of Representatives, docs.
house.gov/meetings/AP/AP10/20190213/108877/
HHRG-116-AP10-Wstate-GarciaA-20190213.pdf.
9 For additional information about the U.S.-Mexico
border states, see heapch.acf.hhs.gov/profiles/
California.htm. liheapch.acf.hhs.gov/profiles/Arizo-
na.htm. liheapch.acf.hhs.gov/profiles/NM.htm and
liheapch.acf.hhs.gov/profiles/Texas.htm.
10 S.B. 350, Calif. Leg., 2019-2020 Sess. leoinfo.
legislature.ca.gov/faces/billNavClient.xhtml?bill
id=201520160SB350
11 Definition modified from Carlson et al. (2012).
12 See, for example, ourworldindata.org/natural-disas-
ters.
For an overview of the United States' energy trade
balance as of 2018, see "The Changing U.S. Energy
Trade Balance Is Still Dominated by Crude Oil
Imports" in the U.S. Energy Information Administra-
tion's October 16, 2018, issue of Today in Energy.
www.eia.gov/todavinenergv/detail. php?id=37253.
Sabine Pass was the first lower-48 liquefied natural
gas liquefaction-for-export facility, approved by the
Federal Energy Regulatory Commission in 2012.
More information about Sabine Pass can be found
at /ww.bechtel.com/oetattachment/Bloo/technical/
June-2019/lng-import-export-case-studv/Cheniere-
Enerov-Sabine-Pass-LNG.pdf
The processing plant will remove impurities such
as water, carbon dioxide and sulfur, as well as inert
gases such as helium, which would reduce the en-
ergy value of the natural gas. The processing plant
also may remove so-called natural gas liquids such
as ethane, propane and butane, which then are
used for other purposes.
The three bulleted statements are quoted from
comments filed with the PHMSA and dated October
17, 2018, by the named trade associations as well
as the Association of Oil Pipelines and the American
Petroleum Institute, which can be found online at
www.aga.org/contentassets/5528e3e26e424e66b5
182790b3539948/aoa-apga-api-aopl-inoaa-indus-
trv-comments—phmsa-risk-modelino-report.pdf.
page 1, footnotes 5, 1 and 3, respectively.
The trade groups representing different types of
utilities present different numbers, focused on
numbers of persons served rather than "customers"
served. The U.S. Energy Information Administration
does not specify what it means by "customers" with
respect to the data provided, but it is reasonable to
assume that "customers" are measured by numbers
of meters for which a bill is sent. Persons served
could mean, among other things, the number of
persons who benefit from the electricity delivered.
Subject to this definitional uncertainty, the Edison
Electric Institute, representing investor-owned
utilities, states that U.S. investor-owned utilities
serve "about 220 million Americans" fwww.eei.org/
about/members/Paoes/default.aspx). The American
Public Power Association, representing utilities that
are "not for profit, community-owned" and "locally
controlled" (www.publicpower.org/public-power/
stats-and-facts). states that "approximately 2,000
public power utilities provide electricity to 49 million
people" fwww.publicpower.org/our-members). The
National Rural Electric Cooperative Association
states that U.S. electric cooperatives "serve 42
million people" fwww.electric.coop/wp-content/up-
loads/2019/04/Co-op Facts and Figures 4-2019.
-------
Endnotes
18 Western Area Power Administration is "one of four 28
power marketing administrations within the U.S.
Department of Energy whose role is to market and
transmit wholesale electricity from multi-use water
projects" per its website f www.wapa.gov/About/
Pages/about.aspx). The Western Area Power
Administration's service area includes the four U.S.
states on the Mexican border (
regions/Pages/Regions.aspx). 2g
19 S.B. 100, Calif. Leg., 2017-2018 Sess. leoinfo.
legislature.ca.gov/faces/billNavClient.xhtml?bill
id=201720180SE>100.
20 California Public Utilities Code § 454.53.
21 See, for example, California Public Resources Code
(Cal. Pub. Res. Code) §§ 3209 (pooling agreement),
3640-3681 (unit agreements); Arizona Revised
Statutes (A.R.S.) 27-505 (pooling of interests),
27-531 through 27-531 (integration of units and
spacing of units); New Mexico Statutes Annotated
1978 (N.M.S.A.) 70-2-18 (pooling), 70-7-1 through
70-7-21 (Statutory Unitization Act); Texas Natural
Resource Code (Tex. Nat. Res. Code) §§ 101.001
et seq. (voluntary cooperative agreements), §§
102.001 et seq. (voluntary and mandatory pooling).
22 See, for example, Cal. Pub. Res. Code § 3203
(requirement for approval); Arizona Revised Statutes
27-513 (permit to drill well); New Mexico Adminis-
trative Code 19.15.14.8 (permit to drill, deepen or
plug back); 16 Texas Administrative Code, Part 1, 32
Chapter 3, Rule § 3.5 (application to drill, deepen,
reenter, or plug back). 22
23 See, for example, Cal. Pub. Res. Code §§ 3600-
3609 (spacing of wells); A.R.S. 27-504 (establishing
units); N.M.S.A. 70-2-11 (prevention of waste), 70-
2-12.B.(10) (spacing of wells); Texas Nat. Res. Code
§ 85.201 (conservation and prevention of waste), 16
Texas Administrative Code, Part 1, Chapter 3, Rule
§ 3.37 (well spacing). 24
24 See, for example, Cal. Pub. Res. Code §§ 3450- 25
3451 (recommendation of maximum efficient rate).
36
25 This is pursuant to the Mineral Lands Leasing Act,
Public Law No. 66-146, 41 Stats. 437, as amended
by the Federal Oil and Gas Onshore Leasing Reform
Act, Public Law No. 100-203, 101 Stats. 1330. See
in particular 30 U.S.C. § 226 (lease of oil and gas
lands). 37
26 This is pursuant to the Outer Continental Shelf
Lands Act, as amended in 1978, 43 U.S.C. §§
1331-1356.
27 See 43 U.S.C. § 1331(a).
119
For example, in California, state lands are generally
subject to lease by the State Lands Commission.
With respect to oil and gas leases, see Cal. Pub.
Res. Code §§ 6826-6836 (oil and gas leases gener-
ally). §§ 6851-6855 (oil and gas leases on lands oth-
er than tide and submerged lands), §§ 6870-6879
(oil and gas leases on tide and submerged lands
and beds of navigable rivers and lakes).
For the California Public Utilities Commission;
Arizona Corporation Commission, Utilities Divi-
sion; New Mexico Public Regulation Commission,
Utility Division; and Railroad Commission of Texas,
key statutes setting forth their respective general
regulatory powers are as follows: California—Cal.
Pub Utilities Code §§ 451, 701, 702, 761, 762, 768,
770 and 1001; Arizona—Arizona Constitution, Art.
15, Sections 2 and 3, and A.R.S. 40-202, 40-203,
40-207, 40-281, 40-321, 40-322, 40-331, 40-336,
and 40-361; New Mexico —NMSA 62-6-4, 62-6-19,
62-6-20, 62-6-21, 62-6-24, 62-9-1 and 62-9-3;
Texas—Texas Utility Code §§ 102.001, 104.001,
104.252, 104.256, 121.151, and 121.201.
15 U.S.C. § 717(b). The statutory authority grant-
ed was to the "Federal Power Commission." This
authority, however, was transferred to the Federal
Energy Regulatory Commission under 42 USC
§7172(a)(1)(C).
See 15 U.S.C. § 717c(f).
See 15 U.S.C. § 717b(e) and 15 U.S.C. § 717a(11)
(definition of "LNG [liquefied natural gas] terminal").
15 U.S.C. § 717(c). See also 15 U.S.C. § 717f(e)
(requirements to be satisfied for grant of certificate
of convenience and necessity; right of Federal Ener-
gy Regulatory Commission to attach to the issuance
of the certificate "such reasonable terms and condi-
tions as the public convenience and necessity may
require.")
15 U.S.C. § 717f(c).
15 U.S.C. § 717f(b).
15 U.S.C. § 717f(b). The Department of Energy's
Office of Fossil Energy implementing regulations for
obtaining an authorization to import and/or export
natural gas or liquefied natural gas can be found at
10 CFR Part 590.
Regulation of Natural Gas Pipelines After Partial
Wellhead Decontrol, Order No. 436, 50 Fed. Reg.
42,408 (Oct. 18, 1985). FERC Order 436 was
vacated by a court decision, but then ultimately
readopted in substantial part by FERC in Order No.
500-H, 54 FR 52344 (Dec. 21, 1989), FERC Stats.
& Regs. [Regulations Preambles 1986-1990] H
30,867 (1989), reh'g granted in part and denied in
part, Order No. 500-I, 55 FR 6605 (Feb. 26, 1990),
FERC Stats. & Regs. [Regulations Preambles 1986-
1990] H 30,880 (1990), aff'd in part and remanded
in part, American Gas Association v. FERC, 912
F.2d 1496 (D.C. Cir. 1990), cert, denied, 111 S. Ct.
957 (1991).
-------
38 Pipeline Service Obligations and Revisions to
Regulations Governing Self-Implementing Trans-
portation; and Regulation of Natural Gas Pipelines
After Wellhead Decontrol, Order No. 636, 57 Fed.
Reg. 13,267 (April 16, 1992), FERC Stats. & Regs.
[Regs. Preambles January 1991-June 1996] H
30,939 (1992), on reh'g, Order No. 636-A, FERC
Stats. & Regs., Regulations Preambles Jan. 1991 -
June 1996 H 30,950, on reh'g, Order No. 636-B, 61
FERC H 61,272 (1992), on reh'g, 62 FERC H 61,007
(1993), aff'd in part, vacated and remanded in part,
United Dist. Cos. v. FERC, 88 F.3d 1105 (D.C. Cir.
1996), order on remand, Order No. 636-C, 78 FERC
H 61,186 (1997).
39 15 U.S.C. § 717c-1 (prohibition on market manip-
ulation in contravention of rules and regulations as
FERC may establish); 15 U.S.C. § 717t-2 (FERC
granted authority to establish natural gas market
transparency rules).
40 15 U.S.C. § 717b(e) grants the right of approval
to the Federal Power Commission. This authority,
however, was transferred to the U.S. Department of
Energy (DOE) under 42 USC §7151 (b). DOE then
delegated its power of approval to the Federal Ener-
gy Regulatory Commission (FERC) pursuant to DOE
Delegation Order No. 00-004.00A (effective May 16,
2006). As noted above, FERC's jurisdiction includes
liquefied natural gas facilities that are either onshore
or "near shore" (i.e., within the offshore jurisdiction
of the states). See 15 U.S.C. § 717a(11) (definition
of "LNG [liquefied natural gas] terminal").
41 Hackberry LNG Terminal, L.L.C., 101 FERC H
61,294 (2002). See also 15 U.S.C. § 717b(e)(3)
(B), which effectively codified the rule of Hackberry,
but made that rule mandatory only until January
1, 2015, and ceases to have effect on January 1,
2030, 15 U.S.C. § 717b(e)(3)(C).
42 See the Public Utility Commission of Texas website
on industries covered at /vww.puc.texas.gov/indus-
trv/Default.asp) and the links to regulation of the
electricity industry on that page.
43 For the California Public Utilities Commission;
Arizona Corporation Commission, Utilities Division);
and New Mexico Public Regulation Commission,
Utility Division, the same statutory general powers
exercised for gas utilities are also applicable to elec-
tric utilities. See footnote 48. For the Public Utilities
Commission of Texas, key statutory provisions set-
ting forth its general regulatory powers with respect
to electric utilities include the following: PUC-Texas,
Texas Utility Code §§ 32.001, 36.001, 37.051,
38.002, 38.005, 38.051, 38.071.
44 In California, for example, the California Public Util-
ities Commission, in accordance with its statutory
authority, has promulgated a general order that es-
tablishes the requirements (and related procedures)
for the construction of any transmission line (> 200
kV), power line (between 50kV and 200kV) or distri-
bution line (< 50 kV). CPUC, General Order 131 -D,
docs.cpuc.ca.aov/PUBLISI-IED/Graphics/589. PDF.
45 As an example of a procurement contract approval
for purposes of cost recovery, see the California
Public Utilities Commission resolution approving
renewable energy power purchase agreements
entered into by San Diego Gas & Electric, availa-
ble at docs.cpuc.ca.aov/published/Final resolu-
tion/168460.htm.
46 For an overview of the role and history of regional
transmission operators and independent system op-
erators, see "About the ISO/RTO Council" at isorto.
oro/#about-section.
47 For a discussion of regional transmission operators
and independent system operators as managers of
wholesale electricity markets, see Sergici, S. 2018.
"Status of Restructuring: Wholesale and Retail Mar-
kets." Presented to the National Conference of State
Legislatures on June 26. www.ncsl.ora/Portals/1 /
Documents/enerav/enerav markets SSeraici pres-
ent 32498.pdf.
48 Public Law 109-58 (August 8, 2005). Section 368
corridors on federal lands are intended for use by
oil, gas and hydrogen pipelines, as well as electric
transmission and distribution facilities. Information
on the identification and environmental review of the
federal effort supporting the siting of Section 368
corridors in California, Colorado, Idaho, Montana,
Nevada, New Mexico, Oregon, Utah, Washington
and Wyoming can be found at corridoreis.anl.gov.
49 16 U.S.C. § 824(b). The statutory authority grant-
ed was to the "Federal Power Commission." This
authority, however, was transferred to the Federal
Energy Regulatory Commission under 42 USC
§7172(a)(1)(B).
50 16 U.S.C. §§ 824d, 824e.
51 The companies that own or operate the facilities
subject to Federal Energy Regulatory Commission
(FERC) jurisdiction are identified as "public utilities"
for purposes of FERC regulation (with specified
exceptions), 16 U.S.C. §§ 824(e), and as such are
subject to FERC jurisdiction.
52 29 FERC H 61,140, at 61,291.
53 Federal Energy Regulatory Commission exercises
limited jurisdiction with respect to the Electric Reli-
ability Council of Texas under 16 USC 824i (Inter-
connection Authority) and 16 USC 824j (Wheeling).
See AEP Energy Partners, Inc., 164 FERC H61,056
(2018) at www.ferc.gov/industries/electric/indus-act/
rto/ercot.asp.
-------
Endnotes
54 Promoting Wholesale Competition Through Open 63
Access Non-Discriminatory Transmission Services
by Public Utilities; Recovery of Stranded Costs by
Public Utilities and Transmitting Utilities, FERC Order
No. 888, FERC Stats. & Regs. H 31,036 (1996);
FERC order on reh'g, Order No. 888-A, FERC Stats.
& Regs. H 31,048, order on reh'g, Order No. 888-B,
81 FERC H 61,248 (1997); FERC. 1998. order on
reh'g, Order No. 888-C, 82 FERC H 61,046, aff'd in
relevant part sub nom (1998); Transmission Access
Policy Study Group v. FERC, 225 F.3d 667 (D.C.
Cir. 2000), aff'd sub nom. New York v. FERC, 535
U.S. 1 (2002). www.ferc.gov/leaal/mai-ord-rea/land-
docs/order888.asp.
55 Transmission Planning and Cost Allocation by
Transmission Owning and Operating Public Utilities, 64
Order No. 1000,76 FR 49842 (Aug. 11,2011),
FERC Stats. & Regs. H 31,323 (2011); FERC order
on reh'g, Order No. 1000-A, 139 FERC H 61,132
(2012); FERC order on reh'g, Order No. 1000-B,
141 FERC H 61.044 (2012). www.ferc.gov/indus-
tries/electric/indus-act/trans-plan.asp.
56 Regional Transmission Organizations, Order No.
2000, FERC Stats. & Regs. H 31,089 (1999); FERC
order on reh'g, Order No. 2000-A, FERC Stats. &
Regs. H 31,092 (2000); FERC aff'd sub nom. Pub. 65
Util. Dist. No. 1 v. FERC, 272 F.3d 607 (D.C. Cir.
2001).
57 Integration of Variable Energy Resources, Order No.
764, FERC Stats. & Regs. H 31,331 (cross-refer-
enced at 139 FERC H 61,246) (2012). 66
58 Demand Response Compensation in Organized
Wholesale Energy Markets, Order No. 745, FERC
Stats. & Regs. 31,322 (cross-referenced at 134
FERC H 61,187) (2011).
59 16 U.S.C. § 824o.
67
60 Order Certifying NERC as the Electric Reliability
Organization (ERO) and Ordering Compliance Filing,
116 FERC H 61,062 (2006).
61 EPA presents an overview or summary of each of
these laws: www.epa.gov/clean-air-act-overview: 68
www.epa.gov/laws-regulations/summarv-clean-wa-
ter-act: www.epa.gov/laws-regulations/summarv-re-
source-conservation-and-recoverv-act: www.epa.
oov/laws-reoulations/summarv-national-environ-
mental-policv-act: and www.epa.gov/sdwa.
62 42 U.S.C. §4370M, etseq. 69
42 U.S.C. § 4370M, et seq. The U.S. Environmental
Protection Agency, U.S. Department of Agriculture,
U.S. Army Corps of Engineers, U.S. Department of
Commerce, U.S. Department of the Interior, U.S.
Department of Energy, U.S. Department of Trans-
portation, U.S. Department of Defense, Federal
Energy Regulatory Commission, Nuclear Regulatory
Commission, U.S. Department of Homeland Securi-
ty, U.S. Department of Housing and Urban Devel-
opment, Advisory Council on Historic Preservation,
Office of Management and Budget, and Council on
Environmental Quality are all members of the Fed-
eral Permitting Improvement Steering Council and
tasked with improving federal infrastructure permit-
ting.
The Federal Highway Administration (FHWA) also
has developed its Environmental Review Toolkit site
that, although focused on transportation infra-
structure projects, provides quick public access to
information about Executive Order 13807 and its
implementation, including subsequent agreements,
fact sheets, memos and guidance on agency pro-
cesses. The FHWA toolkit site is located at www.
environment.fhwa.dot.gov/nepa/oneFederal deci-
sion. aspx.
For a brief introduction to the history of the 1938 ex-
propriation, see the U.S. State Department's Office
of the Historian's Milestones: 1937-1948, "Mexican
Expropriation of Foreign Oil, 1938." hi story, state.
oov/milestones/1937-1945/mexican-oil.
For an overview of the Mexican Energy Reform, see
the "Key Elements of the Energy Reform" summary
prepared by the Mexican Embassy to the United
States, embamex.sre.gob.mx/eua/index.php/en/
fact-sheets/more-facts-sheets/1218-kev-elements-
of-the-enerov-reform-march-2014.
These figures are calculated using information from
the U.S. Energy Information Agency's "U.S. Natural
Gas Exports and Re-Exports by Country" (including
prices), which can be found at /vww.eia.oov/dnav/
ng/ng move expc s1 a.htm.
For an overview of President Lopez Obrador's plans
for PEMEX and the challenges presented, see Malk-
in, E. 2019. "To Halt Energy Slide, Mexico Turns to
a Trusted Provider: Mexico." New York Times, April
11. www.nvtimes.com/2019/04/11/business/ener-
ov-environment/mexico-oil-electricitv-oasoline.html.
For a more in-depth discussion of Mexican oil
and gas exploration and development under the
Energy Reform, see McNeece, J., E. Save and M.
Hindus. 2014. "Mexico's Energy Reform Provides
Significant Opportunities in Oil and Gas Exploration
and Production." Pratt's Energy Law Report 14(3).
www.pillsburvlaw.com/en/news-and-insiohts/mexi-
co-s-energy-reform-provides-significant-opportuni-
ties-in-oil-1 .html.
121
70
71
Mexican Constitution, Art. 27.
Mexican Constitution, Art. 27.
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72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 6.
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 13.
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Arts. 11, 23.
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Arts. 41-47.
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 129. The law governing Agencia de Seguridad,
Energfa y Ambiente is the Ley de la Agencia Nacion-
al de Seguridad Industrial y de Proteccion al Medio
Ambiente del Sector Hidrocarburos (Law of the
National Agency for Industrial Safety and Environ-
mental Protection for the Hydrocarbons Sector).
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 48. II, Art. 51.
Mexican Regulations for Title Three of the Hydrocar-
bons Law, Art. 77.
Mexican Regulations for Title Three of the Hydrocar-
bons Law, Art. 77.
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 82; Mexican Regulations for Title Three of the
Hydrocarbons Law, Arts. 77, 78 (rates to be estab-
lished are maximum rates).
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 48. II, Art. 51.
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 70.
Mexican Regulations for Title Three of the Hydrocar-
bons Law (Reglamento de las Actividades a que Se
Refiere el Tftulo Tercero de la Ley de Hidrocarburos),
Arts. 33, 2 XXI
Mexican Regulations for Title Three of the Hydrocar-
bons Law, Art. 39.
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 82; Mexican Regulations for Title Three of the
Hydrocarbons Law, Arts. 77, 78 (rates to be estab-
lished are maximum rates).
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 81.
Mexican Regulations for Title Three of the Hydrocar-
bons Law, Art. 21.
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 82; Mexican Regulations for Title Three of the
Hydrocarbons Law, Arts. 77, 78 (rates to be estab-
lished are maximum rates).
Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 68, Transitory Article Twelfth.
90 Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 66. Regarding the Centra Nacional de Control
de Energfa's (Mexican National Energy Control
Center) role as manager of Sistema de Transporte y
Almacenamiento Nacional Integrado de Gas Natural
(National Integrated Transportation and Storage
System), see www.aob.mx/cenaaas/articulos/con-
vocatoria-de-temporada-abierta-2016-85077.
91 Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 48. II, Art. 51.
92 Mexican Regulations for Title Three of the Hydrocar-
bons Law, Arts. 77, 78.
93 The electronic bulletin board is required under Ley
de Hidrocarburos (Mexican Hydrocarbons Law), Art.
70 and Mexican Regulations for Title Three of the
Hydrocarbons Law, Arts. 72, 73. On daily reporting,
see, for example, EIA. 2017. "Mexico Publishes First
Monthly Natural Gas Price Index After Moving to
Competitive Market." Today in Energy, August 30.
www.eia.aov/todavinenerav/detail.php?id=32712.
94 Ley de la Comision Federal de Electricidad (Federal
Electricity Commission Law). On the Comision Fed-
eral de Electricidad's status as a productive state
enterprise owned exclusivity by the federal govern-
ment, see Article 2.
95 Ley de la Comision Federal de Electricidad (Federal
Electricity Commission Law), Art. 10.
96 Ley de la Comision Federal de Electricidad (Federal
Electricity Commission Law), Arts. 12 IV, 137-139
(rates) 50 (conditions of service).
97 The amendments to the Mexican Constitution with
respect to electricity specified that only planning and
control of the national electric system and the public
service of transmission and distribution of electricity
pertain exclusively to the state, subject to such con-
tracts with private parties regarding such activities
as the law may permit, and that applicable laws will
determine the form in which the private sector can
participate in other activities of the electrical indus-
try. Mexican Constitution, Art. 27, paragraph 6, Art.
25, paragraph 5. For a discussion of the activities
that private parties can undertake under the Law of
the Electrical Industry and the other elements of the
Energy Reform, see Save, E., M. Hindus and J. Mc-
Neese. 2014. "Energy Reform Legislation in Mexico
Gives the Private Sector Unprecedented Opportuni-
ties in the Mexican Electrical Power Industry." Pratt's
Energy Law Report.
98 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Arts. 1, 4 V, 6 V.
99 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Art. 2.
100 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Art. 30.
101 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Art. 107-108.
122
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Endnotes
102 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Arts. 137-139.
103 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Art. 12 VI.
104 H.R. 132, 116th Congress, first session, (2019-
2020). www.congress.gov/bill/116th-congress/
house-bill/132/text.
105 This is pursuant to Executive Order 10485, 18 Fed.
Reg. 5397, Sept. 3, 1953, www.archives.aov/fed-
eral-reaister/codification/executive-order/10485.
htm . as amended by Executive Order 12038, 43
Fed. Reg. 4957, Feb. 3, 1978, www.archives.aov/
federal-reaister/codification/executive-order/12038.
htm . The power to issue Presidential Permits for
cross-border electricity transmission was delegated
to the Assistant Secretary for the Office of Energy
by Redelegation Order No. 00-006.50, issued on
November 17, 2014.
106 This is pursuant to Executive Order 10485, as
amended by Executive Order 12038. For refer-
ences, see the prior footnote. The power to issue
Presidential Permits for that portion of cross-border
gas pipelines crossing the border is delegated to
the Federal Energy Regulatory Commission under
Delegation Order No. 00-004.00A, effective May 16,
2006.
107 This is pursuant to Executive Order 13337, 69
Fed. Reg. 25299, April 30, 2004. www.federal-
reaister.aov/documents/2004/05/05/04-10378/
issuance-of-permits-with-respect-to-certain-ener-
gy-related-facilities-and-land-transportation. The
delegation of authority was made pursuant to U.S.
Department of State Delegation of Authority 118-2
of January 26, 2006, and Delegation 415 of January
18, 2017.
108 On April 10, 2019, President Trump issued Execu-
tive Order 13867, Issuance of Permits with Respect
to Facilities and Land Transportation Crossings
at International Boundaries of the United States,
which rescinds Executive Order 13337 and requires
the U.S. Department of State to update its pro-
cedures for making Presidential Permit decisions.
Executive Order 13867 establishes a new process
for cross-border infrastructure, including pipelines,
and makes it clear that the President is indeed the
final decision maker on whether or not to issue the
permit (84 FR 15491), April 15, 2019.
123
109 In accordance with Council on Environmental
Quality guidance on analyses of impacts from
actions that take place outside the United States
(i.e., "extraterritorial actions"), an appropriate review
under the National Environmental Policy Act would
not necessarily address potential effects on envi-
ronmental, cultural and human resources in Mexico
because the government of Mexico applies its own
sovereign laws to analyze potential environmental
effects resulting from project activities occurring in
Mexico. For more information, see Council on Envi-
ronmental Quality. 1997. "Memorandum to Agencies
on the Application of the National Environmental
Policy Act to Proposed Federal Actions in the U.S.
with Transboundary Effects." Memorandum. July 1,
p. 4, at footnote 2.
110 Executive Order No. 13337 (69 FR 25230) provides
that after consideration of the application and any
comments received, "If the Secretary of State finds
that issuance of a permit to the applicant would
serve the national interest, the Secretary shall
prepare a permit, in such form and with such terms
and conditions as the national interest may in the
Secretary's judgment require, and shall notify the
officials required to be consulted ... that a permit be
issued." U.S. Department of Energy (DOE) Presi-
dential Permit decisions require a "public interest"
determination that incorporates considerations
around environmental and human health impacts
and potential for the project to impede the reliability
of the U.S. grid. DOE's Presidential Permit applica-
tion procedures are found at 10 CFR §§ 205.320.
111 The current form of the International Boundary and
Water Commission is an update to the International
Boundary Commission established pursuant to the
provisions of the Convention between the United
States and Mexico signed in Washington March 1,
1889. See 1944 Water Treaty, Article 2.
112 The official name of the 1970 Boundary Treaty is
the Treaty to Resolve Pending Boundary Differences
and Maintain the Rio Grande and Colorado River
as the International Boundary (T.I.A.S. 7313); it was
signed at Mexico City, Mexico, November 23, 1970,
and went into effect April 18, 1972.
113 The technical name of the 1944 Water Treaty is
the Treaty Between the United States of America
and the United Mexican States, signed in Wash-
ington, D.C., on February 3, 1944, relating to the
utilization of the waters of the Colorado and Tijuana
Rivers and of the Rio Grande (Rio Bravo) from
Fort Quitman, Texas, to the Gulf of Mexico, and
Protocol supplementary thereto, signed in Wash-
ington, D.C., November 14, 1944, www.ibwc.gov/
Files/1944Treatv.pdf.
114 11 U.S.C. §717b(a). The law originally provided that
the referenced order would be given by the Federal
Power Commission. This authority, however, was
transferred to the U.S. Department of Energy under
42 USC §7151(b).
-------
115 Executive Order 10485, as amended by Executive
Order 12038. The power to issue the order is dele-
gated to the Federal Energy Regulatory Commission
under Delegation Order No. 00-004.00A, effective
May 16, 2006.
116 11 U.S.C. §717b(a).
117 11 U.S.C. §717b(c)
118 The U.S. Department of Energy identifies Mexico
as a party to a free trade agreement that requires
national treatment for trade in natural gas. www,
enerav.aov/fe/services/natural-aas-reaulation/
how-obtain-authorization-import-andor-export-nat-
ural-aas-and-lna (Natural Gas Import & Export
Regulation —Free Trade Agreement (FTA) Countries
and Liquefied Natural Gas Exports).
119 15 U.S.C. § 717b(e). As noted above, the Fed-
eral Energy Regulatory Commission's jurisdiction
includes liquefied natural gas facilities that are either
onshore or "near shore" (i.e., within the offshore
jurisdiction of the states). See 15 U.S.C. § 717a(11)
(definition of "LNG [liquefied natural gas] terminal").
120 U.S. Department of Energy Redelegation Order No.
00-002.04D (November 6, 2007).
121 A current list of all applications for export of liquefied
natural gas from the lower 48 states and the status
of those applications is presented at 3nerav.gov/fe/
downloads/summarv-lna-export-applications-low-
er-48-states. Almost all applicants have submitted
an application for export to FTA countries and a
matching application to export to non-FTA coun-
tries.
122 See, for example, Sabine Pass Liquefaction, LLC,
DOE/FE Order No. 2961, FE Docket No. 10-111-
LNG, fossil.energv.gov/ng regulation/sites/default/
files/programs/gasregulation/authorizations/2011/
orders/ord2961.pd'. at 28 (May 20, 2011).
123 See, for example, NERA Economic Consulting.
2018. Macroeconomic Outcomes of Market Deter-
mined Levels of U.S. LNG Exports. June 7. Wash-
ington, D.C.: U.S. Department of Energy, www.
enerov.gov/sites/prod/files/2018/06/f52/Macroeco-
nomic%20LNG%20Export%20Studv%202018.pdf.
124 See the citations to approved non-FTA applications
for export permits in snerov.gov/fe/downloads/sum-
marv-lng-export-applications-lower-48-states.
125 The average bulk price in 2018 for gasoline (all
grades) in the United States was US$1.942 per
gallon fwww.eia.gov/dnav/pet/pet pri refmo dcu
nus a.htm). A barrel equals 42 gallons. There-
fore, a barrel of gasoline, at the bulk price, would
cost approximately US$81.564. At this price, the
188,790,000 barrels of gasoline exported to Mexico
in 2018 would cost US$15.4 billion).
126 These figures are calculated from information found
at the U.S. Energy Information Administration's "U.S.
Natural Gas Exports and Re-Exports by Country"
(including prices), which can be found at www.eia.
oov/dnav/no/ng move expc s1 a.htm.
127 Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 48.
128 Ley de Hidrocarburos (Mexican Hydrocarbons Law),
Art. 89 I.
129 6 USC § 824a(e).
130 For specific examples, please see the U.S. De-
partment of Energy's Office of Electricity Delivery
and Energy Reliability, Orders for Export to Mexico,
Order No. EA-466 (Dynasty Power, Inc.), May 15,
2019, www.energy.gov/sites/prod/files/2019/05/
f62/EA-466%20Dvnastv%20Power.pdf or Order No.
EA-442 (Fisterra Generacion, S. de R.L. de C.V.),
February 13, 2018, www.energy.gov/sites/prod/
files/2018/03/f49/EA-442%20Fisterra%20Genera-
cion%20%28MX%29 O.pdf.
131 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Art. 12 XXVIII.
132 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Art.17.
133 Ley de la Industria Electrica (Mexican Law of the
Electrical Industry), Art. 22.
134 California Public Utilities Code § 399.11(a).
135 S.B. 100, Calif. Leg., 2017-2018 Sess. leoinfo.
legislature.ca.gov/faces/billNavClient.xhtml?bill
id=201720180SE>100.
136 For purposes of the renewables portfolio standard,
renewable energy means electricity from "biomass,
solar thermal, photovoltaic, wind, geothermal, fuel
cells using renewable fuels, small hydroelectric
generation of 30 megawatts or less, digester gas,
municipal solid waste conversion, landfill gas, ocean
wave, ocean thermal or tidal current," subject to
various limitations. California Public Utilities Code
§ 399.11(a); California Public Resources Code §
25741(a)(1).
137 California Public Resources Code § 25741 (a)(2)(A).
See also California Public Utilities Code § 399.11(e)
(1) and (2) (generating resources located outside of
California that are able to supply renewables portfo-
lio standard-eligible electricity to California end-use
customers shall be treated identically to generating
resources located within the state).
138 Order Certifying NERC as the Electric Reliability
Organization (ERO) and Ordering Compliance Filing,
116 FERC H 61,062 (2006).
124
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Endnotes
139 A commentary from the Texas Department of
Transportation on the Texas-Mexico Border Trans-
portation Master Plan and its development was
presented to the Fifth Mexico Gas Summit in San
Antonio, Texas, on May 29, 2019. The commentary
is available at onedrive.live.com/?authkev=%21A-
CY9fvG5RsZmwlE&cid=8F763806468747CA&
id=8F763806468747CA%2148075&parld=8F-
763806468747CA%2148068&o=OneUp.
140 S.B. 100, Calif. Leg., 2017-2018 Sess. leainfo.
legislature. ca.aov/faces/billNavClient.xhtml?bill
id=201720180SB100
141 S.B. 100, Calif. Leg., 2017-2018 Sess. leainfo.
legislature. ca.aov/faces/billNavClient.xhtml?bill
id=201720180SB100
142 This overview was written using information from
the following websites: www.bherenewables.
com/aboutus oeothermal.aspx. www.enerav.
ca.aov/renewables/renewable links.html. www.
cthermal.com/hells-kitchen. www.cthermal.com/
hells-kitchen-power, www.drecp.ora. www.icpds.
com/?pid=2934. ww2.enerav.ca.aov/sitinacases/
pre1999 paoe/index.php?xkm=aidkha2385duh-
kasdl 55dsasid5598fhaikhs. ww2.enerav.ca.aov/
sitinacases/elcentro/index.html. www.waterboards.
ca.aov/waterriahts/water issues/proarams/
saltan sea. imperial.aranicus.com/MetaViewer.
php?view id=2&event id=849&meta id=111789.
www.zalobal.biz/proiects. cloud.3dissue.
net/5980/5962/5962/1689/index.html?421. www.
power-technoloov.com/proiects/mount-sional-so-
lar-power-plant-imperial-countv-california. and nww.
tenaskaimperialsolar.com/tenaska-imperial-solar-en-
erav-center-west.
143 The Desert Renewable Energy Conservation Plan is
a collaboration between the California Energy Com-
mission, California Department of Fish and Wildlife,
U.S. Department of the Interior's Bureau of Land
Management, and U.S. Fish and Wildlife Service.
The goal is to help align local, state and federal con-
servation plans with renewable energy development.
Renewable Energy Conservation Planning Grants
were awarded to the counties in the plan area by
the California Energy Commission.
144 S.B. 350, Calif. Leg., 2019-2020 Sess. leainfo.
legislature. ca.aov/faces/billNavClient.xhtml?bill
id=201520160SB350.
145 S.B. 350, Calif. Leg., 2019-2020 Sess. leginfo.
legislature.ca.gov/faces/billNavClient.xhtml?bill
id=201520160SB350
146 Arizona Prop. 127, Renewable Energy Standards
Initiative (2018).
147 The New Mexico Border Authority is an executive
branch state agency providing leadership in the de-
velopment of the state's international ports of entry
and serving as the governor's advisor and point of
contact for the ports of entry. This agency facilitates
new infrastructure, trade opportunities, job oppor-
tunities, job training capabilities and other activities
contributing to productive economy along the New
Mexico border. www.nmborder.com/About Us.aspx
148 The Paso del Norte is sometimes referred to as the
"Borderplex." The term Borderplex, however, more
commonly refers to the Santa Theresa Point of Entry
industrial area and maquiladora area.
149 Carbon dioxide emissions are estimated by the U.S.
EIA based on energy consumption quantities in
each sector and therefore do not include emissions
from vented or flared natural gas. U.S. EIA assigns
the emissions to the state that converts the source
into electricity or consumes the source directly. A
different metric may be desirable when discussing
New Mexico's energy import and export decisions.
150 The Environmental Improvement Board promulgates
rules and standards for food protection, drinking
water supply (including capacity development),
liquid waste, air quality management, occupational
health and safety, public swimming pools, radiation
safety, hazardous wastes, petroleum storage tanks,
and solid waste.
151 S.B. 489, 54th Leg., 1st Sess. (Nm. 2019). nmleois.
gov/Sessions/19%20Regular/final/SB0489.pdf.
152 H.B. 546, 54th Leg., 1st Sess. (Nm. 2019).
www.nmleois.gov/Leoislation/Leoislation7cham-
ber=H&legTvpe=B&legNo=546&vear=19.
153 H.B. 546, 54th Leg., 1st Sess. (Nm. 2019).
www.nmleois.gov/Leoislation/Leoislation7cham-
ber=H&legTvpe=B&legNo=546&vear=19.
154 NMSA 1978, Section 70-2-12.1.
155 S.B. 489, 54th Leg., 1st Sess. (Nm. 2019). nmleois.
gov/Sessions/19%20Regular/final/SB0489.pdf.
156 S.B. 489, 54th Leg., 1st Sess. (Nm. 2019). nmlegis.
gov/Sessions/19%20Regular/final/SB0489.pdf.
157 H.B. 267, 54th Leg., 1st Sess. (Nm. 2019). www.
nmlegis.gov/Sessions/13%20Regular/final/HB0267.
edf.
158 H.B. 291 54th Leg.. 1st Sess. (Nm. 2019). nmlegis.
oov/Leoislation/Leoislation?Chamber=H&Leo-
Tvpe=B&LegNo=291 &vear=19.
159 H.B. 291 54th Leg.. 1st Sess. (Nm. 2019). nmlegis.
gov/Leoislation/Leoislation?Chamber=H&Leo-
Tvpe=B&LegNo=291 &vear=19.
125
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160 H.B. 291 54th Lea.. 1st Sess. fNm. 2019). nmleais.
aov/Leaislation/Leaislation?Chamber=l-l&Lea-
Tvpe=B&LeaNo=291 &vear=19.
161 As an example, see www.sierraclub.org/texas/
bia-bend/trans-pecos-pipeline-mvths-texas-oil-and-
gas-want-vou-swallow.
162 The General Agreement on Tariffs and Trade 1994,
set out in Annex 1A to the World Trade Organization
Agreement, technically identified as the Marrakesh
Agreement Establishing the World Trade Organiza-
tion, signed at Marrakesh, Morocco, on April 15,
1994.
163 The General Agreement on Tariffs and Trade 1994
Article XX provides certain exceptions to the general
rule against prohibitions or restrictions on imports
or exports. The one exception that might plausibly
be applicable to energy trade pertains to restrictions
that relate to "the conservation of exhaustible natu-
ral resources if such measures are made effective in
conjunction with restrictions on domestic produc-
tion or consumption." The key limitation is that the
restrictions must apply to domestic activity, as well
to the foreign trade. In addition, other language in
the General Agreement on Tariffs and Trade 1994
provides that an exception cannot be "applied in a
manner which would constitute a means of arbitrary
or unjustifiable discrimination between countries
where the same conditions prevail, or a disguised
restriction on international trade."
164 Appellate Body Report, China—Measures Related
to the Exportation of Rare Earths, Tungsten, and
Molybdenum, WT/DS431/AB/R (August 7, 2014).
165 USMCA, Annex 2-A, Art. 2.A.3 1 (a).
166 USMCA Annex 14-C, clause 6(a).
167 For an Annex 14-E proceeding, there is a 3-year
statute of limitations as compared to the 4-year
statute of limitations under Annex 14-D, probably
because pursuit of domestic remedies is no longer
required. Annex 14-E, section 4(b).
1
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gGNEB
Environmental Advisors Across Borders
December 2019
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