EPA and USIBWC provided the information necessary to help Representatives Filner and Bilbray craft their legislation.¹⁶

In 2000, Representatives Filner and Bilbray’s legislation became law. The law provides a framework allowing USIBWC to enter into a fee-for-services contract with a company to build and operate a wastewater treatment plant to be located in Mexico if the current facility in the U.S. (the South Bay International Wastewater Treatment Plant), which only provides advanced primary wastewater treatment, is not upgraded to provide secondary treatment.¹⁷ The advanced primary treated wastewater would be piped back into Mexico for secondary treatment at the Mexican facility, and any reclaimed water not sold back to Mexico would then be piped back to the United States and into the Pacific Ocean through an ocean outfall. When Public Law 106-457 passed in 2000, a new international agreement had to be reached. (Appendix A) That agreement, Minute 311, created the option to construct a facility in Mexico with U.S. funding. Unlike Minute 283, Minute 311 was an international treaty built around one company’s specific proposal, which limits the degree to which other companies could qualify for the contract.

It was clear from the beginning that the intent behind the legislation was for Bajagua to get a contract to treat wastewater. Representatives Bilbray and Filner have stated on numerous occasions (Appendix B) that their legislation was meant to deliver Bajagua a sole-source contract. For instance, in December 2000, Representatives Bilbray and Filner wrote to USIBWC stating, “The intent of the Act is to provide authorization to proceed with the Mexican facility (Bajagua) as soon as possible.” (Appendix B; parentheses in original)  Representative Filner also made his intent clear when speaking about Bajagua and the legislation to the San Diego Union-Tribune in 2004. “You can’t write them [Bajagua] in,” said Filner. “But it’s designed to make sure they’re eligible.”¹⁸

Legislative help also came from Representative Hunter. When Representatives Filner and Bilbray’s legislation (which had by then been attached to a larger omnibus bill) arrived in conference committee in 2000, the committee made a number of changes that were not to Bajagua’s benefit: the original bill did not set a cap on the amount of money that the government could spend on the private facility, so the committee set a cap of $156 million over five years (2001-2005) on the contract; it struck the language exempting the facility from the Contract Disputes Act; it changed the life of the contract from 30 years to 20; it required the facility’s owner to hold a 20 percent equity in the facility’s capital structure during the duration of the 20 year contract (according to the conference report, this was done “to ensure greater accountability with respect to the costs of developing, financing, constructing, and operating and maintaining the facility”); and it required all subcontracting to be competitively bid. (Appendix C)  Many of those changes were reversed in 2004 when Representative Hunter amended the legislation. His amendment removed the spending cap of $156 million and the requirement that Bajagua hold a 20 percent equity in the facility “throughout the term of the contract.”¹⁹  Representative Hunter’s bill also authorized the USIBWC to pay for insurance as part of payment for services to Bajagua in the event the U.S. government did not continue making appropriations to pay Bajagua for its services. (Appendix A)

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Putting the Cart Before the Horse

One of the biggest problems with the Bajagua legislation was that the U.S. approved funding for a private project in Mexico before the Mexican government had agreed with the plan. After the Bajagua legislation was introduced in the House, the White House’s Office of Management and Budget (OMB) addressed the legislation in a “Statement of Administration Policy” in September 2000.  The Statement accurately predicted the problems that would result from the passage of the Bajagua bill, such as how the previously-approved plan to clean Mexican sewage would be compromised and the legal complications in Mexico: 

The Administration supports the intent of H.R. 3378, which attempts to address the long-term sewage treatment needs of the U.S.-Mexico border region. The Administration, however, opposes H.R. 3378, because its approach raises serious foreign policy and legal concerns and will hinder our ongoing efforts to address the region’s wastewater treatment needs. 

The approach taken by H.R. 3378 will hamper the Administration’s efforts to implement its existing U.S. legal obligations with Mexico, which Mexico has repeatedly urged the United States to fulfill. Instead of authorizing the funding needed to fulfill these obligations, the bill attempts to legislate the terms of a new agreement. In addition, the bill provides for a 30-year contract that may be unenforceable in Mexico. (Appendix C) 

OMB’s stance echoed that of the EPA and USIBWC in their 1998-1999 Draft and Final Supplemental Environmental Impact Statements and Record of Decision, which considered and dismissed the Bajagua proposal.

Several letters from the Mexican section of the Commission illustrate the concerns of the Mexican government with the Bajagua project, including that the United States made a unilateral decision to award a contract for a facility to be built in Mexico; that aspects of the proposal “that may not be possible in practice [were] announced publicly”; and that “a plan for contracting and administration that the United States Section has not formally presented within the Commission [was] announced publicly.” (Appendix E)

Representatives Filner and Bilbray stated in a December 2000 letter to USIBWC that, “The Mexican facility is not a public project in Mexico. Therefore, public contracting law in Mexico is not relevant.” (Appendix B)  However, according to letters from the Mexican government to the USIBWC, Mexico does not see it that way. In a letter to the Principal Engineer of the USIBWC, the Principal Engineer of CILA wrote, “In the matter of a project in Mexico, the responsible Mexican authorities should have a decisive role in the approval of the different phases of the project, ... even the contracting and administration aspects of the project.”(Appendix E)  Though the Bajagua plan has been described as “win-win solution” by its promoters,²⁰ the issue of sovereignty should not be dismissed.  If the Mexican Congress passed a bill funding a private project in America by a Mexican company before the U.S. government agreed, there might be some problems, too.

But the biggest problem is the issue of ownership and the lack of competition. Public Law 106-457 exempted USIBWC from complying with the Federal Acquisition Regulation (FAR) for the secondary wastewater treatment plant, allowing the agency to award a sole-source contract for the ownership and operation of the plant. The exemption wasn’t necessary, however, because there were a number of other companies qualified to build and operate wastewater treatment facilities and interested in submitting bids. If, for instance, it turns out that building the treatment facility in Mexico is a better option than upgrading the current facility in the U.S., several other companies already own, operate, manage, and maintain wastewater plants in Mexico.²¹ According to the San Diego Metro Commission Meeting Minutes for February 23, 2001, there was at least one company other than Bajagua interested in bidding for the project. Had bidding been open, it is possible this or other companies would have put forward a better deal than Bajagua.

However, nothing in the law requires USIBWC to use the exemption from competition regulations, to grant Bajagua a contract on a sole-source basis, or even to award the contract to Bajagua at all. Instead, it allows the government to first solve the problem by upgrading the South Bay International Wastewater Treatment Plant (SBIWTP) to provide secondary treatment. Public Law 106-457 says that the USIBWC “is authorized and directed to provide for the secondary treatment of a total of not more than 50 mgd [million gallons per day] in Mexico ... of effluent from the IWTP if such treatment is not provided for at a facility in the United States.” (Appendix A)  If, however, there was a failure to provide a treatment upgrade at the IWTP, the Bajagua legislation mandates the private Mexican facility – the Bajagua option.

Until the Bajagua legislation passed, the plan was to build a treatment method called completely mixed aerated (CMA) ponds. The ponds would be located adjacent to the current SBIWTP and would provide the secondary treatment to wastewater required by California and U.S. environmental law.  Some community members around the planned site objected on the basis that the ponds would have a bad odor, though this assertion was disputed by the USIBWC and EPA. Furthermore, Representatives Bilbray and Filner both felt that the Bajagua solution was preferable because it could treat more wastewater with secondary treatment than the planned upgrade at the SBIWTP would.

To free up the estimated $54 million needed to build the CMA ponds, a cap on appropriations for the SBIWTP project had to be lifted.  According to a letter from the EPA, funds were available but not specifically authorized for upgrading the facility. Congress simply had to lift the cap through legislation: