January 12, 2021

Guv quietly looks to expand export markets for natural gas

Courtesy Sempra LNG

Energía Costa Azul regasification terminal in Baja California, Mexico

In July 2020, Gov.  Michelle Lujan Grisham signed onto a letter of support for a natural gas export facility being proposed in Baja California, Mexico. The letter, which was addressed to Mexico’s Energy Secretary Nahle Garcia, touted the facility as a potential “major North American west coast energy export hub” of natural gas to Asian Markets. 

“Energy demand is soaring in Asia, led by China, Japan, South Korea, Taiwan and India due to manufacturing and economic growth,” the letter reads. “All of these countries are using natural gas as a way to decrease their greenhouse gas emissions.”

The letter was signed by two other governors and the chairman of the Ute tribe in Colorado, on behalf of the Western States and Tribal Nations Natural Gas Initiative (WSTN). New Mexico joined the group in late 2019, with little media attention, when the state’s Energy, Minerals and Natural Resources Department (EMNRD) signed a Memorandum of Understanding with WSTN.

A few months after sending the letter, the facility was approved by Mexico’s regulators and Baja California joined WTSN. But email exchanges between the group’s members, provided to NM Political Report, reveal that the letter was drafted specifically at the request of Sempra LNG, the company that proposed the facility and which had joined WSTN just a few months prior to the letter’s writing. 

“This is classic pay to play,” said Itai Vardi, research and communications specialist at the Energy and Policy Institute, a fossil fuel watchdog group. 

Vardi said he thinks Sempra’s enrollment in the group—which came with a membership fee of $20,000—was critical to securing the letter from the group’s government members. 

“This is months after Sempra joined the group,” Vardi said, referring to the letter’s date. “So, what does Sempra get out of this? What do they get for their $20,000 joining this group? That’s a good investment. They got a lot of bang for their buck.”

The state’s membership in the group also raises questions about Lujan Grisham’s commitment to ending the state’s reliance on fossil fuels, a key part of her platform. 

NM Political Report asked the governor’s office about her support for the facility and how it relates to her climate goals. The governor’s press secretary, Nora Meyers Sackett, said in a statement that “Under Governor Lujan Grisham’s leadership, New Mexico is leading the country in transitioning to carbon-free energy and taking serious action to protect our climate.” 

“The governor remains absolutely committed to her climate agenda for New Mexico, including the development of renewable energy, as evidenced by her championing of some of the most progressive and ambitious state climate and energy policy in the nation,” Meyers Sackett continued.

NM Political Report also asked if the governor was aware the letter was drafted at Sempra’s request. Meyers Sackett said the governor “received the letter from WSTN,” but did not say whether the governor knew Sempra had asked for the letter to be written. 

Camilla Feibelman, director of the Rio Grande Chapter of the Sierra Club, said the state’s membership in the group is “out of alignment with our state’s climate goals.”

“What our state needs to be doing is urgently looking to diversify our economy, urgently looking to pass the strongest methane and ozone rules possible, and staying out of attempts to create new markets for climate- and community-impacting fracked gas,” Feibelman told NM Political Report

WSTN gas initiative 

The WSTN website states that its focus is “facilitating the global export of Western natural gas through LNG [liquid natural gas] facilities on North America’s West Coast.” But some consider the organization a natural gas front group, funded by a cadre of natural gas companies and organized by the well known PR firm with oil and gas ties, HBW Resources, and a related consumer-facing group that supports fossil fuels, the Consumer Energy Alliance.  

“HBW Resources has a history of creating front groups to promote the interests of the fossil fuel industry. They mainly push fossil fuels gas and oil pipelines,” Vardi said.  

WSTN formed in mid-2019, with HBW Resources partner Andrew Browning serving as president of WSTN. Browning is also chief operating officer of Consumer Energy Alliance. Over the past year and a half, the group’s membership has grown to include Baja California, Mexico, the state governments of Wyoming, Utah and New Mexico, the Ute Indian tribe and a number of counties in Colorado, Wyoming and Utah. 

“WSTN began as an MOU between the energy offices of former Governors John Hickenlooper of Colorado and Gary Herbert of Utah, and its sole governance to this day is reserved for government entities,” said Bryson Hull, an employee of HBW Resources and a spokesperson for WSTN. “States and sovereign governments are the sole entities entitled to board seats, and as such are the sole governance of WSTN.”

But the group, which Hull emphasized was “conceived, founded and led by governments,” also counts a number of oil and gas companies as members, including Caerus Energy, Dominion Energy, Laramie Energy, Sempra LNG, Terra Energy and TYR Group. 

What’s unusual about the group, Vardi said, is that the group’s public face is its government entities, while its private company members are hidden from view. 

“Often you see that these groups are backed solely by industry players that have a financial interest to promote certain projects, through the front group,” Vardi said. “The trick or the genius, if you will, of this particular front group is that HBW Resources decided to recruit state agencies.”

“I think that makes this particular front group even more problematic, by deceiving,” he said. “There is really no word publicly on the private entities that are behind this group.”

RELATED: Natural gas will play a big role in state’s energy transition

And the group has engaged in activities that have raised some eyebrows. In the summer of 2020, WSTN took out a full-page ad in The Oregonian, Oregon’s largest paper, urging Oregon Gov. Kate Brown to support the Jordan Cove LNG coastal export terminal. Email exchanges provided to NM Political Report also indicate the group’s interest in intervening in California’s Public Utility Commission rulemaking process in support of natural gas.

Hull said oil and gas companies and other, non-government members of the group are able to interact with WSTN’s staff, who then communicate to the government entities on the board. 

“The governments on the WSTN Board share a common vision of developing their natural resources in the most environmentally responsible manner to create economic development that benefits their citizens by generating tax revenue,” Hull said. “They also share WSTN’s belief that rapid global emissions reductions can be achieved by exporting to Asian nations the most responsibly produced natural gas in the world.”

Expanding natural gas markets 

Lujan Grisham tasked EMNRD with finding new market opportunities for natural gas in the San Juan Basin in northwest New Mexico. EMNRD spokesperson Susan Torres said that was the impetus behind the state signing the MOU with WSTN

The MOU “was signed to bring economic opportunities to New Mexico, particularly the San Juan Basin,” Torres told NM Political Report. She added that there are “very few markets for the gas that is produced” in the San Juan Basin, and that “causes depressed commodity pricing.” 

Torres also pointed to the Permian Basin, where a glut of natural gas has led to sky-high methane emissions in the area. Torres said that exporting natural gas to new markets would help the state further its methane reduction goals, too. 

“There is a lack of infrastructure and market to capture and sell the gas,” Torres said. “This group aims to find solutions to this problem by finding additional markets for captured vented and flared gas and the infrastructure necessary to transport.”

Meyers Sackett told NM Political Report that Sempra’s LNG facility offers “the potential to bring economic stability to the San Juan area as well as limit venting and flaring in the Permian Basin.”

Meyers Sackett said the governor “understands the need to ensure that gas currently being wasted by being vented and flared is safely contained and captured, resulting in additional essential funding for New Mexicans” and that the project “has the potential to expand the market for that recaptured gas, helping to provide a cleaner alternative than coal for power generation and reducing emissions globally while economically benefiting New Mexico as the state continues to push ahead with its nation-leading renewable energy transition.”

But it’s unclear how the San Juan Basin might benefit from this group’s efforts to expand markets for natural gas exports, according to Mike Eisenfeld, energy and climate program manager at the San Juan Citizens Alliance, an environmental non-profit in the San Juan Basin.

“We’re pretty remote, and we’re pretty depleted in terms of new production capacity. At the current prices of oil and gas, the San Juan Basin can’t really compete,” Eisenfeld said. “There hasn’t been a lot of production and infrastructure such as pipelines, [because] it is so expensive.”

“I’m not aware of any company that would have any financial incentive to get something from the San Juan Basin down to a port,” he added. 

And the idea of expanding natural gas extraction now—and locking in more greenhouse gas emissions decades into the future—doesn’t sit well with some environmentalists. 

RELATED: Report: New Mexico shale contributing to U.S. oil and gas expansion well beyond Paris climate goals

Feibelman said she’s skeptical that wider gas markets will fully materialize as the world grapples with shifting away from fossil fuels. Feibelman pointed to a recent decision by France’s Engie SA to pull out of a long-term supply agreement with the U.S.-based LNG developer NextDecade Corp. Engie SA is partly government-owned. 

“The idea that there’s always going to be a market for our gas is unrealistic,” Feibelman said. “Overall, we think that our state should not be seeking to build new markets for gas and, once again, causing us to rely on an unreliable source of income. What our state needs to be doing is urgently looking to diversify our economy and staying out of attempts to create new markets for climate- and community-impacting fracked gas.”

‘Time to take a clear stand’

The governor has long held that New Mexico is an “all of the above” energy economy, and has emphasized that oil and gas extraction is an important piece of the state’s economy. At the same time, she’s made reducing emissions and adopting a clean energy mandate for electricity major platforms of her administration. To some observers, these two policy stances seem contradictory. 

“I think she’s put herself in a difficult position by trying to juggle these two really opposing policy strategies,” Vardi said. “These facilities will be operational for decades and [will be] locking us in to something that we just cannot afford, if we are to avert the worst effects of climate change and stay within the 1.5 degrees rise of temperature [target] that the Paris Accord [set].” 

“I think it’s time to take a clear stand,” he added. “You have to decide at this point. Are you for cleaner renewable energy, or are you going to continue to lock us into present and future fossil fuels?” 

RELATED: Speakers tout NM’s climate leadership, but are quiet on oil and gas production

Fossil fuel extraction steadily ramped up in the state during the Trump administration, as the U.S. Department of Interior quadrupled the number of oil and gas lease sales on public lands in the state per year. 

Meanwhile, the state is facing a mounting methane emission issue. New research indicates greenhouse gas emissions are much higher than previously thought, according to a recent report released by the climate change task force Lujan Grisham formed earlier in her administration. 

Still, Feibelman applauded the governor’s methane emission reductions goals, and her commitment to ramping down fossil fuels in the state’s electricity generation. 

“It is worth recognizing that the state has taken major steps towards curbing our carbon emissions, especially on the electric side of things and that is in large part due to the leadership of the governor,” Feibelman said. “On the oil and gas extraction side, things are a little bit more complicated for the state.”

But she pointed to the major oil bust that occurred in 2020, which left state agencies scrambling to respond to a massive budget crunch.  

“This is the time where our state needs to seriously consider economic diversification. Our dependence on oil and gas and fossil fuels, in general, hasn’t improved our state’s overall well being. It’s not like there’s a correlation or even a causal relationship between the success of oil and gas and how our people in our communities are doing,” she said.

Eisenfeld agreed. 

“The San Juan basin has 40,000 existing natural gas wells, processing plants, central delivery points—leaking facilities—everywhere. And how does that come into future decision making processes?” he said. “Let’s not forget about the impacted communities, and that natural gas is not without its externalities, including methane and climate change impacts.”