Add hawksbill sea turtles and elkhorn coral to the list of things Puerto Rico has to worry about as it confronts its worst-ever financial crisis.
Endangered and threatened species are partly to blame for holding up construction of a liquefied natural gas terminal that the U.S. commonwealth needs to convert a plant with one-third of the island’s power-generating capacity to the cleaner-burning fuel from oil. Puerto Rico Governor Alejandro Garcia Padilla says the changeover will reduce electricity bills and boost the economy as the island seeks to trim its $70 billion debt load.
The conflict will come to a head April 16 when the Puerto Rico Electric Power Authority, known as Prepa, is supposed to start burning gas at the Aguirre power plant to meet a federal mandate to lower mercury and other toxic emissions. The LNG import terminal won’t open in time to make that happen, leaving the island caught between rules that protect the environment and the threat of power blackouts.
Possible Fines
“We’re here just waiting to see what happens,” Ivelisse Sanchez Soultaire, associate director of the power authority, said in a phone interview. “We could be facing the usual consequences, which are fines and possible orders to cease and desist.”
The authority could receive fines of $37,500 per day for each violation if the plant, the island’s largest, fails to win a second extension from the U.S. Environmental Protection Agency. The LNG terminal, more than two years behind schedule, failed to satisfy regulations protecting endangered and threatened species, including turtles, coral and manatees, according to the National Marine Fisheries Service.
“A shutdown would threaten reliability of the entire power grid and cripple our economic recovery,” the island’s governor said in a Jan. 8 letter to regulators.
Import Terminal
Excelerate Energy LP, based in The Woodlands, Texas, is developing the Aguirre Offshore GasPort with the island’s power authority. The terminal, about 1 mile (1.6 kilometers) from Jobos Bay, would deliver as much as 600 million cubic feet a day of gas, enough to heat 2.76 million U.S. homes for a day. The fuel will be sent to the power plant through an underwater pipeline, more than doubling supplies to the island.
An e-mail and calls seeking comment from Excelerate were not returned. Spokeswomen for the Federal Energy Regulatory Commission, the lead permitting agency, and the EPA declined to comment.
The switch to gas will lower electricity prices for the island’s 1.5 million customers, who pay about twice the U.S. average, according to the power authority. It will also eliminate toxic emissions and reduce the risk of oil spills.
Still, a local environment group is weighing a legal challenge to the LNG project. The Comite Dialogo Ambiental Inc. says the terminal could have “severe negative impacts” on species such as turtles in Jobos Bay, a federally protected nature reserve. The turtles face the permanent loss of areas to forage for food and are at risk of colliding with work vessels, regulators said in a February report.
Puerto Rico, with its abundant sun, should wean itself off of fossil fuels and turn to renewables, the environment group said.
Regulators “and the project developer have treated this unique marine environment as an afterthought,” Ruth Santiago, an attorney for the group, said in a statement. The group has held “discussions with Prepa and Excelerate to prevent, minimize and mitigate project impacts for about three years, but not much progress has been made."
Daily Penalties
The power plant is located in Salinas on the southern coast, about 25 miles east of Ponce. It was ordered to meet higher emissions standards by the EPA. It already has been granted a one-year extension to comply.
"We will probably be considered non-compliant, but Prepa continues conversations with EPA to see what’s the appropriate course of action," Sanchez Soultaire said. Without the LNG terminal, "we have to keep on generating with the fuel that we use."
The authority is now seeking to open the terminal in 2017. After regulators deemed potential adverse effects to be worse than anticipated, Excelerate was forced to make changes in the design, including running the gas pipeline below the sea floor instead of on top to limit impacts to coral reefs. No construction work has begun.
The delay is just one more example of the difficulties that the power authority has had in executing its overall strategy, Jeff Panger, a Standard & Poor’s analyst in New York, said in a phone interview.
“For them to turn things around in the long term will require them to convert to natural gas because until they do that, they can’t drive down their costs,” he said. “And until they can drive down their costs, they can’t change their rate structure.”
The average electricity price paid by businesses in Puerto Rico reached 20.36 cents per kilowatt-hour in December, double the amount paid by their counterparts in the U.S., data from the Energy Information Administration showed. Puerto Ricans consume less than two-fifths of the energy that mainland residents use, with most of it coming from petroleum, according to the agency.
“We can’t lose sight that once all the permitting gets done that Prepa continues to face a very difficult financial situation,” Julian Herencia, executive director of the San Juan, Puerto Rico-based Renewable Energy Producers Association, said in a phone call. “It’s going to become more and more difficult to secure financing for this project.”
--With assistance from Michelle Kaske To contact the reporter on this story: Jonathan Crawford in New York at jcrawford47@bloomberg.net. To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Jim Efstathiou Jr., Dan Stets
By: Jonathan Crawford
©2016 Bloomberg News
