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Taxpayers outrage at €1.35 billion bailout of failed Castor Project on Ebro Delta coast

Indignation at the Castor Project has increased due to the €1.35 billion payment issued by the Spanish Government to Escal UGS, the company behind the controversial offshore gas platform. The amount will be charged through gas bills to consumers over the next 30 years, starting on April 2016, making individual citizens pay the private-business bailout, partially funded through €1.4 billion worth of bonds from the European Union. This business project failed after a gas injection caused almost 1,000 small earthquakes in Southern Catalonia and northern Valencia. The Spanish Executive has been forced to compensate the company due to clause 14 of the 2008 Royal Decree, according to which the state would pay for the bailout in the event of the project failing to come to completion. 

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23 January 2015 05:45 PM

by

ACN / Marina Force Castells

Barcelona (ACN).- Indignation at the Castor Project has undergone exponential growth since last November, when the Spanish Government issued a €1.35 billion compensation package to Escal UGS, the company behind the controversial submarine gas facility. This business project failed after triggering almost 1,000 small earthquakes on the coast of Valencia and Catalonia’s Ebro Delta.  The Spanish Executive has been forced to compensate the company due to clause 14 of the 2008 Royal Decree, according to which the state would accept the responsibility in the event of the project failing to be completed. To add more fuel to the fire, the amount of the bailout will be charged through consumers’ gas bills over the next 30 years, starting in April 2016. In other words, Ebro Delta citizens will foot the bill for a project they rejected from the start and that is partially funded through the issue of debt bonds totalling €1.4 billion from the European Investment Bank (EIB). 


Demonstrations have become a leitmotiv in the nearby territories of the offshore platform, located in front of the coast of Valencian town Vinaròs, on the border between Valencia and Catalonia, since the seismological activity started, back in September 2013.

The residents of Vinaròs and the Catalan coastal town of Alcanar (nar the Ebro Delta) have held numerous rallies. The biggest demonstration involved 1,500 people forming a human chain so as to express their worries concerning the seismic hazard and to demand the closure of the Castor facility.  

People’s dismay at the earthquakes, caused by the gas injection and measuring up to 4.1 on the Richter scale, has turned into outrage after the payment issued on 11 November, 2014  by the Spanish Government-owned Enegás to Escal UGS (66.7% of which is owned by the Spanish construction company ACS and the remainder by Canadian Dundee Energy).

A Funeral March

Almost 400 people, dressed in mourning, took to the streets of Alcanar on 11 January to protest against the payment. The aim of the demonstration, organised by the social association which has led the opposition to the Castor Project, ‘Plataforma Ciutadana en Defensa de les Terres del Sènia’, was to ask for the definitive closure of the offshore facility, which was temporally shut down by the Spanish Government in late 2013, after the quakes started to rock the region.

Association Spokesperson, Cristina Reverter, put in words the feeling of many Spanish people: “citizens should not assume the compensation because the benefits were going to be for a private company”, she said.

During the demonstration the protesters burned €650 worth of fake notes, the estimated cost of the bailout per gas consumer, which were named ‘Florentinos’, referring to Florentino Pérez, the Chairman of Real Madrid football club and the President of the company ACS, the main actor of Escal UGS.

The Castor Project fiasco

The Castor Project consists of a submarine facility that started to be built in 2008 to store 1.3 billion cubic metres of reserve gas for Spain, in a former oilfield located 1.8 km below the seabed under a layer of impermeable rock. It was meant to contain 30% of Spain’s daily gas consumption.

The offshore gas reservoir was the first to be financed under the new Europe 2020 Project Bond Initiative. Escal UGS turned to the European Investment Bank (EIB) so as to secure funds and the lending institution granted €1,400 million worth of bonds to the company.

This was exactly the credit that Escal UGS had to return to the investors before December 2014 and the amount that the Spanish Government issued to the company, due to a clause in the 2008 agreement between them in which it was established that the state would compensate shareholders if the project had to shut down, even if the reason was negligence or deceit traceable to Escal UGS.

The Spanish Government made a futile attempt to reverse this clause appealing to the Spanish Supreme Court on May 2012, but it was rejected. Therefore, taxpayers have now to foot the bill for the mistakes of the Spanish Government and the European Union.

The legal fight

After considerable controversy and protests, the Catalan Government, which has shown its opposition to the Castor Project since its approval, asked the European Commission to analyse the financing granted by the European Investment Bank (EIB). Moreover, it appealed the compensation granted to Escal UGS, which could exceed €4,700 million according to estimates by the Spanish Organisation of Consumers and Users, to the Spanish Constitutional Court.   

Aside from this, the Public Prosecutor’s Office of the Valencian Province of Castelló has filed a complaint against the Spanish Geological Institute, ‘Institut Geològic Miner’; the Spanish Ministries of Industry and Agriculture; and the company Escal UGS, because they all have allegedly “committed crimes against the environment and perversion of justice”. The case will be heard in court in Vinaròs.

Last but not least, the Chairman of the Terrassa-based employer’s association Cecot, Antoni Abad, has announced that it will file a complaint to the European authorities against the contract process and the bailout of the Castor Project. Hence, the list of judicial disputes will grow these next few months while social protests do not seem to slacken. The future of Castor Projects looks grim indeed. 

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  • Many citizens outraged about the Castor project in 2015 (by A. Mayor)

  • Many citizens outraged about the Castor project in 2015 (by A. Mayor)