After the Blackout, A NAFTA For Energy?

August 30, 2003

After the Blackout, ¿A NAFTA For Energy?

Sucking Up Mexico's Power

By JOHN ROSS

MEXICO CITY.

Although the historic August 14th blackout shut down crucial industrial and financial centers in two out of the three North American Energy Alliance nations, and virtually killed the prospects for the privatization of electricity in a third, consolidating that strategic alliance continues to be a dominating Bush-Cheney policy goal.

George W. Bush first proposed the creation of a "North American Energy Market" during his 2000 presidential campaign and quickly obtained endorsement from Mexican president-elect Vicente Fox. Integral to the deal was the privatization of Mexico's state-run electricity generating and petroleum sectors and both initiatives came to form the building blocks of Fox's energy program which, as later revealed by the national daily La Jornada, was partially designed by the late Enron Corporation whose former CEO, Kenneth Lay, was a long-time Bush crony.

Not unexpectedly, the creation of a North American Energy Alliance (NAEA) has been a key Bush White House project. In May 2001, the White House-directed "North American Energy Alliance Working Group", chaired by veep Dick Cheney, the once and future chief honcho of the Halliburtan oil empire, issued a report that since has become administration energy policy, urging Mexico and Canada to formally join a North American Energy Alliance. Creation of the NAEA would provide the United States with a "stable" source of energy and insure "U.S. energy security" Cheney Inc. concluded.

One example of such "stability": under Alliance strictures, the price of oil supplied by Mexico and Canada would be fixed below the world market price. Mexican critics of the proposed alliance, often described as "a NAFTA for Energy", argue that such energy integration serves Washington's needs at the expense of the delivering countries. The U.S. is the fattest energy hog on the planet, snorkling up a quarter of the world's daily petroleum output every 24 hours - 20,000,000 barrels.

Flanked by cabinet ministers, business bigwigs, and officials of the government's Federal Electricity Commission (CFE) this past August 14th, Vicente Fox utilized a ribbon-cutting ceremony at a Tamaulipas state electricity generation plant constructed by private enterprise, as a springboard to launch his annual pitch for the privatization and deregulation of Mexico's electricity industry. The new facility, which will add 10,000 kilowatts to the nation's generating capacity, is one of 17 being built by private sector consortiums that include such transnationals as Mitsubishi, Westinghouse, and Siemens.

With 70% of its generating facilities set to reach 30 year operating longevity capacities by 2010, Mexico needs $60 billion USD in private sector investment over the next decade just to stay abreast of the demand for electricity, Fox warned at the Tamaulipas ceremony. pleading for increased private sector investment.

Not an hour after the Mexican president wrapped up his pep talk on the wonders of privatization, the privatized and deregulated U.S. electricity infrastructure collapsed into unprecedented blackout, a $6 billion a day catastrophe that spread chaos and panic throughout North America without Al Qaeda even having to lift a finger. "Allah has sent a thunderbolt" one Baghdad resident told the New York Times - that city has, of course, been on permanent blackout since the U.S. invaded.

Under the Mexican constitution, electricity generation is the exclusive domain of the CFE but a 1992 modification imposed by then-president Carlos Salinas as a stepping stone to the North American Free Trade Agreement, opened the door for major corporation participation in the construction of generating facilities to run their own factories and manufacturing operations - with the stipulation that all excess energy be sold back to the CFE for general public distribution.

Under Fox's proposed changes, private energy producers would now be able to sell their own juice to a select group of customers. Opponents of the reform like the very vocal and venerable Mexican Electricity Workers Union (SME) insist this schema would permit private producers to walk away with the CFE's 400 largest consumers, decapitalize the public sector, and create a two-tier delivery system with low-end Mexicans being left in the dark. At present, 7% of Mexican households have no electricity and for millions more, climbing rates limit illumination to a single dim light bulb.

Fox's fixation with the privatization and deregulation of Mexico's energy sector first emerged in a much-heralded "Plan for the Reorganization of the National Electricity Industry", a document which incorporates verbatim chapters of an Enron proposal entitled "Clear Rules for Energy Development." Before its collapse, the Houston megacorp operated 64 subsidiaries in Mexico, most of them incorporated in the Caiman Islands, and Fox's political opponents insinuate that Enron partially financed his winning 2000 presidential campaign.

Despite Fox's pleas for privatization, the President continues to run head-on into a legislative road block thrown up every year by a congress in which the once-ruling Institutional Revolutionary Party (PRI) and the left-center Party of the Democratic Revolution (PRD) play the nationalism card to beat back efforts by Fox's out-numbered National Action Party (PAN) to push through the reforms. Now the colossal August blackout on the east coast of North America, attributed as it is to infrastructure deficiencies aggravated by deregulation and private energy speculators, has once again driven a coffin nail through the president's plans.

Nonetheless, a worried SME decries the "silent" privatization of the industry. Between 15 and 30% of Mexico's electricity generation is now in private hands and CFE documents obtained by the union speak of an eventual 50% share. Such inroads are a key Bush-Cheney North American Energy Alliance goal.

But the NAEA is conceived of as a two-way street, both of them leading right back to the U.S. Not only are U.S. transnationals moving into Mexico with an eye to dominating the distribution of electricity to Mexicans, much as Anglo-American entrepreneurs did under dictator Porfirio Diaz a century ago - but now these energy giants have carte blanche to set up south of the border and sell energy back to U.S. customers.

Despite an acute deficit in electricity distribution throughout rural northern Mexico, U.S. energy corporations are now pumping tens of thousands of kilowatts from that region further north into California to keep San Diego households whirring with the latest modern appliances. U.S. per capita consumption of kilowatts is seven times that on the Mexican side of the border.

This August, the California-based Sempra Energy conglomerate's 600 megawatt generating plant went on line out in the scrub desert west of Mexicali Baja California - all of the power generated will flow north to what Mexicans call "the Other Side." The Sempra project is one of 20 that such energy kings as Shell, British Petroleum, Phillips, and El Paso Natural Gas have on the drawing board for this stretch of the northern border.

Sempra and Inter-Gens, whose Mexican subsidiary Azteca Energy X is about to inaugurate a pair of huge generating plants a few miles from the Sempra facility, say they came to Mexico because construction costs were low, labor cheap, licensing quick, and environmental regulations lax. "That's what free trade is all about" an unidentified Inter-Gens executive recently told the New York Times.

According to Greenpeace studies, in addition to drying up what little water remains under the desert, the Sempra plant alone will generate 180 tons of Carbon Monoxide emissions annually (Mexico has no Carbon Monoxide limits) and 200 tons of Sulfur Dioxide ("acceptable" Mexican levels are twice as loose as they are a few miles north on "The Other Side.) "These energy maquiladoras are one more example of environmental racism" charges J.P. Ross, California Greenpeace spokesperson. San Diego Democratic congressperson Bob Filner is even more explicit, labeling the Sempra and Inter-Gens operations "19th Century Imperialism."

Both Sempra and Inter-Gens have admitted their culpability in the notorious 1999 California energy swindle which has cost the state an estimated $60 billion USD and driven Governor Gray Davis into a suicide recall. While other perps like Enron have gone belly up, Sempra and Inter-Gens continue to sell energy to California - although they had to move to Mexico to do so. During the 1999 skam, energy speculators deliberately held electricity off line to cause power blackouts, so they could inflate the price of their product.

Beach heads in the North American Energy Alliance, the Mexicali facilities will be powered by natural gas delivered from Bolivia and Indonesia to soon-to-be-built liquid natural gas re-gasification terminals along the pristine Baja California coastline between Tijuana and Ensenada. Marathon Oil of Houston already holds permits for the construction of port facilities and LNG terminals in the tourist corridor north of Ensenada. What natural gas is not sold to Sempra and Inter-Gens, will be pipelined up to southern California.

The prospect of LNG terminals in their own backyard alarms the locals. LNG regasification is considered so volatile that no such terminals have been opened in the U.S. since the 9/11 terror attacks because they are so vulnerable to sabotage. "We used to be the center of the tourist trade" cracks Tijuana congressional rep Jaime Martinez Veloz (PRD), "now we will be the center of the terrorist trade." Martinez Veloz speculates that Bush could use the pretext of the proposed North American Energy Alliance to send in the Marines to safeguard the LNG terminals.

Natural gas interconnection between Mexico and the U.S. are another vertebrae of the NAEA and the silent and not-so-silent privatization and deregulation that accompany the Alliance.

Despite Fox's repeated pledges never to privatize PEMEX, whose purview includes natural gas development and production, the national petroleum monopoly now contracts with 300 transnational corporations for services it cannot afford to perform for itself. Now with drilling about to begin in the enormous Burgos dry gas fields, a tri-state region along the northeastern border, PEMEX is promising transnationals "Multi-Service Contracts" (MSC) - constitutionally outlawed "risk" contracts in which the driller takes home a percentage of the find.

Among those U.S. transnationals participating in the Burgos project are Fluour Daniel (which also won a $300 million contract to drill in the revived Chicontepec oil fields), and the ubiquitous Halliburton Corporation. In addition, Halliburton, whose KBR division is making out like Ali Baba in "reconstructing" Iraq after an invasion designed by the company's ex-CEO, has won a $23 million contract to build a gas separator in Reforma, Chiapas, not far from rebel Zapatista autonomous zones. Zapatista "autonomias" in the Lacandon jungle sit on PEMEX-proven deposits of natural gas.

Off-shore, Halliburton has become the chief purveyor of technology for the Cantarell complex out in the Sound of Campeche, Mexico's most abundant oil field. Some critics complain that PEMEX's Exploration and Development division has virtually been taken over by Halliburton.

All of this activity is heartwarming news for Dick Cheney and George Walker Bush, the architects of the North American Energy Alliance. Access to Mexican oil is very much what the NAEA is all about - although such access has hardly been denied by Fox.

For much of 2002-03 during the run-up to the Iraq invasion, Mexico was Washington's number one petroleum supplier but curiously, after Bush declared victory in May, the Saudis once again became the top dogs in the oil basket. Together, Mexico, Saudi Arabia, and Canada account for 52% of all U.S. imports - the U.S. imports more than half its oil from 13 petroleum-producing nations and this July sucked up a record-breaking 320 million barrels.

Although Fox heeded Bush's injunction to up export production quotas to fuel the U.S. war machine and keep gas prices within reason at the pump up north, Washington yearns for more direct control over Mexico's oil industry in order to "insure (the) U.S. energy security" which is at the core of the Cheney-Bush North American Energy Alliance. But such control may be short-term. According to recent PEMEX studies, Mexico's proven reserves are expected to give out in the next 11 to 13 years at the current rate of extraction.