Mexico Pacific’s Saguaro LNG: “Wrong Project, Wrong Place”

Gray whale spouting, Gulf of California Credit: Robert Glenn Ketchum

There may never be a more certain prescription for destruction of a UNESCO World Heritage Site than the massive fossil fuel production project - called Saguaro Energia LNG ("Saguaro") -- that Houston-based Mexico Pacific Ltd. is planning for the Gulf of California. But the project would likely be infeasible without significant financial support from the project's principal equity owner Quantum Capital Group ("Quantum Capital"), a Houston and New York-based private equity firm with a portfolio substantially devoted to investment in fossil fuel projects.

With this in mind, and consistent with its December 9, 2024 letter to Mexico Pacific Ltd. opposing Saguaro, the Natural Resources Defense Council sent an Open Letter this week to Quantum Capital citing the inconsistency of its extensive Environment, Sustainability and Governance ("ESG") commitments with its active financial interest in the Saguaro project. Addressed to Quantum's Founder and CEO Wil VanLoh, the communication notes his recent Letter to Stakeholders and its prominent assertion that "sustainability and the environment" have been "at the core of [Quantum's] business since our inception more than 26 years ago."

Noting this and similar representations in the company's 2024 ESG Report, NRDC highlights the company's failure to disclose or address Saguaro's potential negative impacts on one of the most important regions of biodiversity on Earth - the Gulf of California - which has been repeatedly recognized by the United Nations and Mexico for its unique conservation value as the site of a World Heritage Site, a Biosphere Reserve, a Migratory Bird Refuge, and other Protected Areas under Mexican law. It is home to an exceptional diversity of species (including endangered species of blue (and other great) whales, whale sharks, and leatherback sea turtles), many of which will be threatened by the Saguaro project, its associated infrastructure, and related industrialization and shipping.

For good reason, renowned oceanographer Jacques Cousteau named the Gulf -- also known as the Sea of Cortez -- the "Aquarium of the World."

In the only reference to the Saguaro project, Quantum Capital's ESG Report, at 75, mentions its "shorter shipping route that avoids the congested Panama Canal," resulting in "cost savings, logistical advantages, and lower GHG emissions" for delivery of gas to Asia from the Permian Basin. Yet, the fact is nowhere disclosed that "the shorter shipping route" would traverse natural Protected Areas, a marine area of unique biodiversity, and one of the world's exceptional natural ecosystems.

With a caution to Quantum Capital and its investors about reputational risk, NRDC elaborates:

"No details of that route are provided, no mention is made of what environmental concerns it might pose, and no hint is offered of the opposition and, ultimately, condemnation that will legitimately attach to its use of the uniquely biodiverse Gulf of California as a shipping channel for the production and transport of fossil fuels. Given Quantum's significant financial role in support of the Saguaro project, this condemnation will inevitably extend as well to your company and its investors." (Emphasis added.)

Dolphins fleeing orcas, Gulf of California Credit: Robert Glenn Ketchum

NRDC's letter then goes on to quote not only UNESCO's description of the characteristics justifying its World Heritage Site designation but a November 2024 letter from leadership of the International Union for the Conservation of Nature ("IUCN") to Mexico's Environment Minister Alicia Barcena and Governor of the State of Sonora Alfonso Durazo Montano. In that letter, the Presidents of both the IUCN's Species Survival Commission and its World Commission on Protected Areas express their concern about the range of impacts that the Saguaro project would introduce into this exceptional ecosystem, including, for large whales and other cetaceans, ship strikes and increased acoustic impacts from undersea noise pollution.

More broadly, the IUCN leaders also note the stressors on the fishing industry and tourism, both at the heart of the economic wellbeing of the people and communities of the region.

None of these threats is mentioned in Quantum Capital's 2024 ESG Report. Indeed, although "biodiversity and habitat" are cited as important "ESG Factors," that factor seems not to warrant further mention, and it is not included on the list of environmental metrics by which, according to Quantum Capital's Report, its potential investment projects are allegedly measured.

Beyond these impacts on biodiversity and the economy of the region, NRDC's letter discusses other fundamental environmental and sustainability concerns, from climate change to impacts on protected areas to economic sustainability to investment risk. Taken together, as NRDC argued in its letter to Mexico Pacific in December, "there may never be a clearer prescription for destruction of a natural World Heritage Site than the plan that, with Quantum's support, Mexico Pacific is pursuing for industrialization of the Gulf of California."

Sunset over Gulf of California Credit: Robert Glenn Ketchum

Ultimately, NRDC concludes that Saguaro is "not a sound investment":

"Objectively, development of Saguaro in such a place is fraught with social, environmental, economic, and legal/regulatory risk - for the planet, for Mexico, for Mexico Pacific, and for Quantum and its investors. Objectively, it is a project whose transformational environmental impacts are irreconcilable with the core values identified in your ESG Report. . . . If Quantum is serious about its 26-year commitment to sustainability and the environment as "'core' business values - as you proudly note in your recent Letter to Stakeholders -- the Saguaro project has no place in its portfolio."

NRDC's Open Letter to Quantum Capital can be found here in its entirety.

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