U.S.–MEXICO BORDER
Long Way Home
The hard assets also take the form of pipelines, rail, port facilities and cement shipments. Along those lines, a truly NAFTA-wide project could be in the offing via an unlikely sequence of investments.
Central to the $2.6-billion, 300-employee refinery planned for Yuma Co., Ariz., by Arizona Clean Fuels Yuma (ACFY) – the first in the U.S. in almost 30 years – is an agreement that has been reached between the Secretariat of Energy of Mexico (SENER) and ACFY to allow construction of a $500-million crude oil pipeline from the coast of Sonora or Baja California to the refinery site in Yuma.
"We respect the vision and leadership shown by SENER in this project," said ACFY Vice President David Treanor, who led the negotiations in Mexico in November. "This understanding is a symbol of cross-border collaboration that will result in significant bi-national benefits."
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The company was permitted for the refinery in April 2005, at a site about 100 miles (161 km.) southwest of Phoenix. Expected to be complete in 2010, the facility was to get the crude through a long-term contract with Pemex, Mexico's state-owned oil company. But ACFY spokesman Ian Calkins tells Site Selection that, owing in part to the inability of Pemex to commit for longer than 10 years, a backup plan has been set in motion to get the crude from the oilsands of Alberta.
"That would not change the location of our planned offloading terminal, just south of Ensenada in Baja," says Calkins, reiterating that Pemex is still the preferred option. However, Pemex is also a pawn in a political battle, as Mexico's energy sector continues to be a game closed to foreign investors even as Pemex might benefit from such investors if it is to move forward with the kind of deepwater production it needs. A pending Mexican national election doesn't help.
If the Canadian connection works out, the Alberta oil would be pipelined to the B.C. coast, whence it would travel to Ensenada via tanker.
Ensenada just happens to be the location of a big LNG terminal project from Sempra. Calkins says the fact that such activity is already occurring there makes the prospect of additional investment in that area more promising.
"The biggest hurdle with that particular option was whether we could build a pipeline in Mexico and pump non-Mexican crude oil through it," says Calkins. "A few months ago we received a very favorable ruling from Mexico to pump Mexican or non-Mexican oil through the pipeline."
Now come the financing and permitting hoops. One in particular involves the actual point where that pipeline crosses the border.
"The most significant hurdle is we are required to get a presidential permit, which is essentially the U.S. State Department's permission to cross the border with some sort of infrastructure," explains Calkins, citing a similar procedure for a nearby border crossing upgrade project. "It's extremely difficult to get. I've heard horror stories of it taking several years to get that permit. However, with what's at stake here in terms of the ability to increase refining capacity, we don't anticipate that permit would take as long as it potentially could take. And we have to continue working on the Mexican side in securing their permission as well.
Calkins says the project has received tremendous support on Capitol Hill, notably from the Arizona delegation, as well as locally from the economic developers, labor unions and elected officials in Yuma County.
"They all view this project as critical to the future of the city down there," he says, "much more so than one would normally think. The general perception is that refineries are bad, but it's been the opposite for the refinery we are proposing. Ours is much different from existing refineries, and will be twice as clean as the cleanest existing refinery in the U.S."
