Taxpayers foot the bill for Madrid and EU’s mistakes, paying €1.3billion to bail out failed Castor Project off Ebro Delta coast

Barcelona (ACN).- On Friday the Spanish Government announced that it will compensate Escal UGS, the company behind the controversial Castor project, a submarine facility built to store 1.3 billion tonnes worth of gas reserves off the Ebro Delta coast, which failed after it was found to have caused almost 1,000 small earthquakes in Southern Catalonia and northern Valencia. Because of a clause from 2008 in the agreement between Spain and the companies, in the event of the project failing to come to completion it will be entitled to compensation from the Spanish Government. This is all the more controversial, not only because it was partly funded through €1.4 billion worth of bonds from the European Union, but also because 66.7% of Escal UGS is owned by ACS, the President of which happens to chair Real Madrid. Therefore, Spanish taxpayers are bailing out a project they neither requested nor even approved.  Not only will this have grave financial implications for the country, it will also have a political impact and be an ecological scandal.

The Castor gas storage facility in front of the coast of Valencian town Vinaròs (just in the border between Catalonia and Valencia) was built amid much controversy last year. A project of the Spanish and Canadian owned company Escal UGS, it was funded using European Investment Bank project bonds. The project, which began in 2008, was temporarily shut down in October 2013, after the storage facility caused some 500 earthquakes measuring up to 4.1 on the Richter scale. After its closure, further small earthquakes were registered for a few weeks.

In October 2013, a project appears on the Valencian coastline to residents’ dismay

This month last year, work began on the Castor project, a scheme to store 1.3 billion cubic metres of reserve gas for Spain, in a former oil field located 1.8 km below the sea bed, under a layer of impermeable rock. The facility was to take and store gas from Spain's grid storage and pump it back into the grid when needed. To do this, the gas would have to be injected at high pressure to make it enter the cavity. The Spanish Industry Minister approved the project, ignoring a formal request by the Catalan Government for an earthquake risk report. Its potential environmental and seismic impact made the Catalan Executive reject the proposal, and Escal was denied permission to build the project in Catalonia's territorial waters.

The regional government of Valencia welcomed it however, and the offshore platform was set up in Valencian territorial waters, immediately next to Catalonia's, off the coast of Vinaròs. To residents' dismay, earthquakes began to rock the region, initially small in scale, but reaching 4.1 points on the Richter scale. After much controversy and protests, including a human chain of over four thousand residents from the coastal town of Vinaròs, a formal inquiry was launched, and geological experts confirmed that the high pressure required to move the gas, had created tension in the rock on top of the reservoir, causing the earthquakes and also highly likely to have activated a fault line.

Risks ignored and environmental report botched

Despite the misgivings and criticism from environmental groups, and the formal request for an earthquake report by the Catalan Government, the project ended in disaster, and was temporarily shut down by the Spanish Government last October. This is after the company in charge of the risk assessment proclaiming that no risk was to severe or critical, and taking no account of the seismic risk, despite studies clearly warning of the danger. After the gas facility was shut down by the Spanish Government, the Spanish Ministry of Industry commissioned further reports from a consultancy firm, the Det Norske Veritas (DNV), to perform a technical and financial audit of the Castor project. The details of the final report, a total of 500 pages, was finalized in January 2014 but has still not been made available to the public.

The project was rejected from the start by residents of the nearest town Vinaròs, who petitioned for its closure, forming a human chain of over 1,000 people in protest, after the earthquakes began in October. Residents complained they had no warning of the risks of the project, while local fisherman claimed lower yields of fish following the tremors.

Supreme Court rejects appeal

The Castor offshore submarine facility, meant to store 30% of Spain’s daily gas consumption, was the first project to be financed under the new Europe 2020 Project Bond initiative. This meant that the European Commission and the European Investment bank issued €1.4 billion worth of bonds to Escal UGS. In the 2008 Spanish law drawn up to clarify the administrative rights of the Castor facility, there was a clause that said the state would have to compensate the shareholders of the company, namely ACS of Spain and Dundee Energy of Canada, if the €1.7 billion project had to shut down. The Spanish Government petitioned against this appeal, which the Spanish Minister of Industry and Tourism José Manuel Soria called "clearly damaging to public interest", but the Spanish Supreme Court rejected them in an appeal made last October.

'Project Bond Initiative' announced with fanfare and ends in fracas

The failure of the Castor project has implications for Spain and the whole of Europe. The pilot-project of the ´Project Bond Initiative´, the facility funded by the European Investment Bank looks to end in a massive government bail-out by Spain's tax-payers.

The Project Bond Initiative was announced with great fanfare as a way to finance infrastructure throughout the EU, helping the economy and creating jobs. However, many experts think this initiative is the use of public money to support private projects, often on a large-scale and with grave financial and environmental risks.

In the case of the Castor project, it looks like the residents of Vinaròs, the same ones who protested against the facility, will be forking out for the President of Real Madrid's investment.