Andrews Kurth LLP 1350 I Street, NW 3:20, Feb. 10, 2016 ... · Andrews Kurth LLP 1350 I Street, NW Suite 1100 Washington, DC 20005 +1.202.662.2700 Phone +1.202.662.2739 Fax andrewskurth.com

Andrews Kurth LLP

1350 I Street, NW

Suite 1100

Washington, DC 20005

+1.202.662.2700 Phone

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andrewskurth.com

Kenneth L. Wiseman

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[email protected]

WAS:278917.1

Austin Beijing Dallas Dubai Houston London New York Research Triangle Park The Woodlands Washington, DC

February 10, 2016

SUBMITTED VIA EMAIL TO [email protected]

Ms. Larine A. Moore U.S. Department of Energy FE-34 P.O. Box 44375 Washington, DC 20026-4375

Re: Application of Energía del Caribe, S.A. for Long-Term Authorization to Export Natural Gas by Pipeline to Mexico FE Docket No. 16-18-NG

Dear Ms. Moore,

Please find attached for filing Energía del Caribe, S.A.’s (“Energía”) application for long-term authorization to export natural gas by pipeline to Mexico in an amount up to the equivalent of 9.4 billion standard cubic feet of natural gas per year (“Application”). An original and fifteen copies of the Application have also been mailed to you at the above address, as described below. The hard copies of the Application include paper copies of the confidential gas transportation agreements submitted under seal (Appendix C), described below, and a check in the amount of $50.00 made payable to the Treasurer of the United States. The electronic copy of the Application, submitted via e-mail includes a photocopy of the $50.00 check, but does not an electronic copy of the confidential gas transportation agreements (Appendix C).

Energía requests that Appendix C to the Application be afforded confidential treatment pursuant to 10 C.F.R. § 590.202(e). Appendix C provides two gas transportation agreements. These agreements and the information they contain should be afforded confidential treatment and exempted from public disclosure because they (1) have been held in confidence by the counterparties, (2) are of a type customarily held in confidence, (3) are being transmitted to DOE/FE in confidence, (4) are not publicly available, and, (5) if disclosed, may cause substantial harm to the competitive positions of the parties to the agreement. See 10 C.F.R. § 590.1004.11(f).

Please acknowledge receipt of this Application by email to [email protected]. Should you have any questions, please do not hesitate to contact me at (202) 662-2715 or Bill Rappolt at (202) 662-3063.

3:20, Feb. 10, 2016

February 10, 2016 Page 2

WAS:278917.1

Respectfully submitted,

/s/ Kenneth L. Wiseman Kenneth L. Wiseman Andrews Kurth LLP 1350 I Street, NW Suite 1100 Washington, DC 20005 Tel: (202) 662-2700 Fax: (202) 662-2739 Email: [email protected]

One of Counsel for Energía del Caribe, S.A.

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UNITED STATES OF AMERICA DEPARTMENT OF ENERGY OFFICE OF FOSSIL ENERGY

In the matter of:

Energía del Caribe, S.A., ) FE Docket No. 16-18-NG

APPLICATION FOR LONG-TERM AUTHORIZATION TO EXPORT NATURAL GAS TO MEXICO

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UNITED STATES OF AMERICA DEPARTMENT OF ENERGY OFFICE OF FOSSIL ENERGY

In the matter of:

Energía del Caribe, S.A., ) FE Docket No. 16-18-NG

APPLICATION FOR LONG-TERM AUTHORIZATION TO EXPORT NATURAL GAS TO MEXICO

Pursuant to Section 3 of the Natural Gas Act (“NGA”), 15 U.S.C. § 717b, and Part 590 of

the Department of Energy’s (“DOE”) regulations, 10 C.F.R. Part 590, Energía del Caribe, S.A.,

(“Applicant” or “Energía”) respectfully requests that the DOE, Office of Fossil Energy

(“DOE/FE”) issue an order granting it long-term authorization to export to Mexico up to 9.4

billion cubic feet (“Bcf”) per year of natural gas for a 15-year term to commence on the earlier of

the date of first commercial export or a date 3 years from the issuance of an order granting the

requested authorization.

Under NGA Section 3(c), “the exportation of natural gas to a nation with which there is

in effect a free trade agreement requiring national treatment for trade in natural gas, shall be

deemed to be consistent with the public interest . . .”1 The United States has in effect a Free

Trade Agreement (“FTA”) with Mexico requiring national treatment for trade in natural gas.

Therefore, the authorization sought by Applicant “to export natural gas to Mexico, a nation with

which a free trade agreement is in effect, meets the section 3(c) criterion and, therefore, is

consistent with the public interest.”2

1 15 U.S.C. § 717b(c). 2 See Techgen S.A. de C.V., DOE/FE Docket No. 14-94-NG, Order No. 3521 at 4 (Oct. 10, 2014).

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I. COMMUNICATIONS

Communications regarding this Application should be directed to:

Steffan Lehnhoff Project Director Juan Buitrón General Manager and Legal Representative 7a. Avenida 6-53 Zona 4 Edificio El Triangulo, 3er. Nivel, Oficina “W”, 01004 Guatemala City Guatemala Central America Tel: (502) 23317461 – (502) 52050224 Tel: (502) 23317461 – (502) 59450810 Email: [email protected] Email: [email protected]

Kenneth L. Wiseman Mark F. Sundback William M. Rappolt Andrews Kurth LLP 1350 I Street, NW Suite 1100 Washington, DC 20005 Tel: (202) 662-2700 Fax: (202) 662-2739 Email: [email protected] Email: [email protected] Email: [email protected]

Doris Rodriguez 600 Travis Suite 4200 Houston, TX 77002 Tel: (713) 220-4258 Fax: (713) 238-7185 Email: [email protected]

To the extent necessary, Applicant requests waiver of 10 C.F.R. § 590.202(a) to allow

each of the persons listed above to be named to the official service list.

II. APPLICANT

The exact legal name of Applicant is: Energía del Caribe, S.A. (“Energía”). Energía is a

sociedad anónima3 organized under the laws of Guatemala on February 25, 2011. Its corporate

purpose includes, but is not limited to, generating, selling, and distributing electric energy from

any and all sources; importing and exporting equipment, supplies and other materials used or

useful in the electric power industry, and all other purposes permitted by law. Energía is owned

99.99% by Gala Assets Corporation, a corporation organized under the laws of Panama (“Gala”),

3 A sociedad anonima is similar to a corporation in the United States.

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and 0.01% by Kalliope Capital Ltd., a company organized under the laws of the British Virgins

Islands (“Kalliope”). All or substantially all (99.9%) of the equity interests of all three of these

companies (i.e., Gala, Energíِa and Kalliope) are owned by Gala Global Assets Corporation, a

corporation organized under the laws of the British Virgin Islands.

III. PROJECT DESCRIPTION

Energía is exporting gas to Mexico solely for use by its affiliate, Central Generadora

Eléctrica Huinalá, S. de R. L. de C. V. (“Huinalá”). Huinalá is a socidedad de responsabilidad

limitada de capital variable4 organized under the laws of Mexico. Huinalá is in the final stages

of completing the construction of a 142MW combined cycle natural gas fueled power generation

plant comprised of seven 18V50SG Wartsila engines with turbo generation located in the

Mexican state of Nuevo Leon (the “Power Plant”). Huinalá will use the Power Plant, inter alia,

to generate electricity that it will export from Mexico to Guatemala in satisfaction of its

obligations to supply electric power to Energía pursuant to a Power Purchase Agreement by and

between Huinalá and Energía (the “PPA”). Such electric power will be exported by Huinalá

from Mexico to Guatemala where it will ultimately be sold to consumers in Guatemala.

Operation of the Power Plant will require up to 25,000 million British Thermal Units

(“MMBtu”) of natural gas per day, equivalent to approximately 25.6 million cubic feet

(“MMcf”) per day.5 Projected over a year, the requested export volumes of natural gas are

approximately 9,400 MMcf, or 9.4 Bcf.

4 A Mexican sociedad de responsabilidad limitada de capital variable is similar to a limited liability company in the United States.

5 Conversion from MMBtu to Mcf is based on a heat content of 975 Btu per cubic foot, which is the lowest heating value permitted under the natural gas transportation service agreement entered into by Energía.

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IV. FUEL SOURCE

Natural gas for the project will be produced in the United States and will be exported to

the Power Plant pursuant to applicable DOE/FE authorizations. Applicant has agreed to the

terms of, and is in the process of executing a supply agreement (“Gas Supply Agreement”) with,

Kinder Morgan Texas Pipeline LLC (“KM Texas”), an intrastate pipeline regulated by the

Railroad Commission of Texas.6 Under the Gas Supply Agreement, KM Texas will provide

Applicant with 25,000 MMBtu of gas per day on a firm basis at a delivery point in Webb

County, Texas. Applicant’s understanding is that KM Texas has the flexibility to acquire such

gas from any producing field in Texas consistent with the intrastate nature of the KM Texas’

pipeline. The initial term of the Gas Supply Agreement is for one year beginning on the Services

Commencement Date under the Firm Transportation Agreement.7 In addition, under the Gas

Supply Agreement, Applicant will have an option, exercisable at its sole discretion, to extend the

term of the Gas Supply Agreement for up to two additional years. As of the date of this

application, the Gas Supply Agreement has not been entered into (although, as mentioned above,

the terms have been agreed to by the parties). Consistent with DOE/FE policy,8 Energía agrees to

file with DOE/FE, under seal, all executed long-term supply agreements associated with the

export of natural gas under this authorization, within 30 days of execution, including the Gas

Supply Agreement when it is executed. 6 The Buyers under the Gas Supply Agreement include the Applicant (Energía) and two of its affiliates: Huinalá

and Gala. As described below, Energía, without its two affiliates, also has entered into a gas transportation agreement to have the gas that will be purchased under the Gas Supply Agreement transported on KM Texas’ system from Webb County, Texas to the U.S.-Mexican border for export. Because Energía is the only entity that has a contract to have the gas transported to the U.S.-Mexican border where it will be exported from the United States, only Energía has been identified above as the applicant for this license. To the extent, if any, DOE/FE requires that Huinalá and Gala also obtain export authority due to their right to purchase gas under the Gas Supply Agreement, please consider this application as a joint application for Energía, Huinalá and Gala.

7 As described below, the Services Commencement Date under the Firm Transportation Agreement is the date when Energía notifies KM Texas that service is to commence, but not later than September 1, 2016.

8 See Techgen S.A. de C.V.., DOE/FE Docket No. 14-94-NG, Order No. 3521 at 5 (Oct. 10, 2014).

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Subsequent to the termination of the Gas Supply Agreement, Applicant will negotiate

supply agreements with KM Texas and/or natural gas producers in production areas in Texas to

meet its fuel supply needs. Following termination of the Gas Supply Agreement, consistent with

other export authorization applicants,9 Applicant also may acquire fuel for the Power Plant

through short-term agreements and spot market purchases. Maintaining flexibility to acquire

natural gas prospectively from multiple producers will allow Applicant to access diverse supplies

of natural gas based on terms that are consistent with then-current economic conditions. This

will help ensure the viability of the project over the duration of the long-term authorization

requested herein.

Energía entered into a 15-year gas transportation agreement with KM Texas for firm

capacity on its pipeline system to transport up to 50,000 MMBtu per day of natural gas from

production areas in Texas, including but not limited to Webb County, Texas, and across the U.S.-

Mexico border at a single export point approximately 4 miles south of the town of Salineño, in

Starr County, Texas (the “KM Texas GTA”). The Services Commencement Date under the KM

Texas GTA is the date when Energía notifies KM Texas to commence service, but not later than

September 1, 2016. Currently, the KM Texas GTA states that service thereunder will terminate

on May 31, 2030. However, the parties to the KM Texas GTA have agreed to amend the KM

Texas GTA such that termination would occur on February 28, 2031. When that amendment is

executed, Energía will file it with the DOE/FE.

9 See, e.g., Freeport LNG Expansion, LP, DOE/FE Docket No. 10-161-LNG, Order No. 3282 at 11 (May 17,

2013) (“FLEX states that, although some of the proposed export supply may be secured through long-term contracts, it expects to draw large volumes of natural gas for itself and for its LTA customers from the spot market.”); Sabine Pass Liquefaction, LLC, DOE/FE Docket No. 13-42-LNG, Order No. 3307 at 5 (Jul. 12, 2013) (“SPL notes that this supply can be sourced in large volumes in the spot market, or else pursued under long-term arrangements.”); Venture Global LNG, LLC, DOE/FE Docket No. 13-69-LNG, Order No. 3345 at 5-6 (Sept. 27, 2013) (“Venture Global states that this supply may be sourced in requisite volumes in the spot market or pursued under long-term arrangements.”).

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Huinalá entered into a complementary transportation services agreement to transport

natural gas from the U.S.-Mexico border to the Power Plant site on the pipeline system of an

affiliate of KM Texas, Kinder Morgan Gas Natural de Mexico, S. de R.L. de C.V. (the “KM

Mexico GTA,” and together with KM Texas GTA, the “KM GTAs”). The KM Mexico pipeline

system is regulated by the Comisión Reguladora de Energía. The Services Commencement Date

under the KM Mexico GTA also is the date when Huinalá notifies KM Mexico to commence

service. Service under the KM Mexico GTA also terminates on February 28, 2031. The KM

GTAs were entered into prior to the need to export natural gas from the United States in order to

reserve capacity on the KM Texas and KM Mexico pipeline systems.10

Consistent with DOE’s regulations at 10 C.F.R. §§ 590.202(e) and 1004.11, Applicant is

filing confidential versions of the KM GTAs (Appendix C) under seal due to the sensitive

commercial terms contained in those agreements.

V. REQUESTED AUTHORIZATION

Applicant requests long-term authorization to export to Mexico up to 9.4 Bcf per year of

natural gas for a term commencing on the earlier of the date of first commercial export or a date

3 years from the issuance of an order granting the requested authorization and ending on

February 28, 2031. The requested volume of 9.4 Bcf per year of natural gas is derived from the

calculated volume of fuel required to operate the proposed output capacity of 142 MW, or

25,000 MMBtu per day. The term for the export authorization would run concurrently with the

term of the KM Texas GTAs. While a long-term authorization need not be limited by the terms

10 To the extent Energía enters into an agreement to purchase natural gas in excess of the 25,000 MMBtu

available to it under the Gas Supply Agreement, Energía would have such additional volumes transported on the KM Texas system to the U.S.-Mexican border for export through the use of its remaining reserved capacity on KM Texas, and Energía will file for export authority separate from the authority it requests herein.

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of associated long-term agreements,11 the term requested here is fully consistent with Applicant’s

15-year KM GTAs.

Applicant requests commencement of the long-term authorization upon the earlier of the

date of first commercial export or a date 3 years from the issuance of an order granting the

requested authorization so that Applicant may begin first commercial export upon the

commercial operation of the Power Plant.

Applicant does not have any existing DOE/FE long-term or short-term authorizations and

is not aware of any other related matters being considered by the DOE/FE or the Federal Energy

Regulatory Commission (“FERC”).

VI. PUBLIC INTEREST

The requested long-term authorization to export natural gas to Mexico is consistent with

the public interest. Section 3(a) of the NGA requires that the DOE/FE authorize natural gas

exports unless “it finds that the proposed exportation . . . will not be consistent with the public

interest.”12 Under NGA Section 3(c), “the exportation of natural gas to a nation with which there

is in effect a free trade agreement requiring national treatment for trade in natural gas, shall be

deemed to be consistent with the public interest” and applications for such exportation “shall be

granted without modification or delay.”13 The United States has in effect an FTA with Mexico

requiring national treatment for trade in natural gas. Therefore, exports to Mexico, as proposed

herein, are deemed consistent with the public interest.14

11 See SB Power Solutions Inc., DOE/FE Docket No. 12-50-LNG, Order No. 3105 (Jun. 15, 2012) (granting 25-

year authorization without coextensive long-term agreements). 12 15 U.S.C. § 717b(a). 13 15 U.S.C. § 717b(c). 14 See Energia Chichuahua, S.A. de C.V., DOE/FE Docket No. 13-120-NG, Order No. 3348 at 3 (Oct. 24, 2013)

(finding authorization request “to export natural gas to Mexico, a nation with which a free trade agreement is in effect, meets the section 3(c) criterion and, therefore, is consistent with the public interest.”).

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VII. ENVIRONMENTAL IMPACT

Granting the long-term authorization will have limited environmental impacts.

Transportation of natural gas within the United States, across the U.S.-Mexican border, and

within Mexico will occur over existing pipeline facilities operated by KM Texas or its Mexican

affiliate. The KM Texas border facilities were originally authorized by order of the Federal

Energy Regulatory Commission (“FERC”) in 1996,15 and this authorization was most recently

amended in 2013 to reflect expanded capacity.16 The only newly constructed pipeline facilities

associated with the proposed project will be relatively short plant lines in Mexico to connect the

plant to existing pipeline infrastructure.

VIII. APPENDICES AND ENCLOSURES

Accompanying this application, Applicant has included the following appendices in

compliance with the DOE’s regulations and in support of the requested authorization:

Appendix A Verification of Authorized Representative

Appendix B Opinion of Counsel

Appendix C Confidential version of KM GTAs

Filed under seal pursuant to 10 C.F.R. § 590.202(e).

Appendix D Certification of Andrews Kurth LLP

Applicant will send under separate cover Appendix C and a check payable to Treasurer of

the United States in the amount of US $50 (fifty dollars) to cover the application filing fee.

15 See MidCon Texas Pipeline Corp., 77 FERC ¶ 61,205 (1996). 16 See Kinder Morgan Texas Pipeline LLC, 143 FERC ¶ 61,245 (2013) (amending a presidential permit and NGA

Section 3 authorization for the border facilities, allowing for an increase in throughput to 700,000 Mcf per day).

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IX. CONCLUSION

WHEREFORE, because export of natural gas to Mexico is deemed to be consistent with

the public interest under NGA Section 3(c), Applicant respectfully asks that DOE/FE issue

without modification or delay an order granting the requested long-term authorization to export

up to 9.4 Bcf per year of natural gas to Mexico for a term commencing on the earlier of the date

of first commercial export and ending on February 28, 2031.

11 HOU:3629645.11

Respectfully submitted,

/s/ Kenneth L. Wiseman___

Steffan Lehnhoff Project Director Juan Buitrón General Manager of Energía del Caribe, S.A. 7a. Avenida 6-53 Zona 4 Edificio El Triangulo, 3er. Nivel, Oficina “W”, 01004 Guatemala City Guatemala Central America Tel: (502) 23317461 – (502) 52050224 Tel: (502) 23317461 – (502) 59450810 Email: [email protected] Email: [email protected]

Kenneth L. Wiseman Mark F. Sundback William M. Rappolt Andrews Kurth LLP 1350 I Street, NW Suite 1100 Washington, DC 20005 Tel: (202) 662-2700 Fax: (202) 662-2739 Email: [email protected] Email: [email protected] Email: [email protected]

Doris Rodr ِíguez 600 Travis Suite 4200 Houston, TX 77002 Tel: (713) 220-4258 Fax: (713) 238-7185 Email: [email protected]

Attorneys for Energía del Caribe, S.A..

February 10, 2016

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APPENDIX A

VERIFICATION

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APPENDIX B

OPINION OF COUNSEL

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APPENDIX C Confidential Gas Transportation Agreements

Between Energía del Caribe, S.,A. and Kinder Morgan Texas Pipeline LLC; and

Huinalá S. de R.L. de C.V. and Kinder Morgan Gas Natural de Mexico, S. de R.L. de

C.V.

Filed under seal pursuant to 10 C.F.R. § 590.202(e)

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APPENDIX D CERTIFIED STATEMENT

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CERTIFIED STATEMENT OF AUTHORIZED REPRESENTATIVE

Pursuant to 10 C.F.R. § 590.103(b) (2015), I, Kenneth L. Wiseman, hereby certify that I

am a duly authorized representative of Energía del Caribe, S.A., and that I am authorized to sign

and file with the Department of Energy, Office of Fossil Energy, on behalf of Energía del Caribe,

S.A., the foregoing document in the above-captioned proceeding.

Dated at Washington, D.C., this 10th day of February, 2016.

/s/ Kenneth L. Wiseman___ Kenneth L. Wiseman Andrews Kurth LLP 1350 I Street, NW Suite 1100 Washington, DC 20005 Tel: (202) 662-2700 Fax: (202) 662-2739 Email: [email protected]