New Mexico is like a desert oasis riddled with oil and gas wells that are difficult to shake off, regulate or shut down. It's a love, hate relationship with a lot of jobs on the line, off the scale pollution of the Land of Enchantment’s air and fresh water and revenue—2020 tax year 2.8 billion vs 2019 tax year of 3.1 billion in revenue for the state. Thanks to Biden, the U.S. is back in the climate change game again—a game New Mexico never left. After being exposed by NASA imaging as having a methane cloud in the Four Corners area the size of the state of Delaware, New Mexico set out to prioritize the health of its residents and their environment. At the same time, the state is trying to diversify the bottom line of its economy, 40 percent of which is heavily dependent on the price of a barrel of oil.
A “clean up and get carbon free” mandate from Governor Michelle Lujan Grisham has kept the state on its roll through the Trump era while it works to establish the Land of Enchantment as an example to the country. Multitasking alongside cleanup and getting carbon free is "How can the state get control over the black gold industry that dominates its economy?"
New Mexico became a state in 1912, a little over a decade before the first commercial oil well was drilled in southeastern New Mexico in 1924. The State Land Office received its first royalty payment of $125 for oil produced on state land. Fast forward 88 years of oil and gas revenues under its belt, the state ranks among the lowest in the country for per capita income. Many in the rural pockets of the state didn’t feel the Great Depression as they grew or raised everything they needed except for coffee and sugar.
Military, tourism and oil and natural gas are the major industries in the state, and they provide most of the jobs and account for a large amount of the government spending. COVID-19 has put tourism at a near standstill and highlighted the vulnerabilities of the oil and gas industry and its long-term ability to fuel the state’s economy. The regulatory rollbacks and handouts at the EPA by the Trump administration have done little to slow the downward slide of the industry.
According to the U.S. Energy Information Administration's "International Energy Outlook 2019", the global supply of crude oil, other liquid hydrocarbons and biofuels is expected to be adequate to meet the world's demand for liquid fuels through 2050. "The Global Energy Perspective 2021 report" finds that while coal demand peaked already, peaks in demand for oil and gas are not far behind–projected to fall in 2029 and 2037, respectively. In less than two short decades, oil and gas will be yesterday’s dinosaurs.
With the pandemic accelerating the rapid shift to lower-carbon energy systems, this legislative session will have lawmakers looking at several bills designed to lay the foundation for an expanded economy away from a boom-or-bust oil and gas economy while still regulating an industry that has primarily been unregulated by the state until recently. The first step to opening your own brick-and-mortar local economy—or since it's New Mexico, an adobe and straw economy—that the big bad virus or the cost of crude can’t huff and puff and blow away could be starting the state’s own public bank.
The Public Bank For New Mexico bill, sponsored by Senator Jeff Steinborn (D-Doña Ana), is legislation that would authorize a public bank owned by the state of New Mexico that finances its infrastructure projects, energy projects, small businesses and economic development. According to supporters a public bank would keep much more of New Mexico’s money in the hands of local communities. The state currently loses half of the money it spends on debt service to interest payments for big banks. If the state’s revenue and fees were deposited in a New Mexico Public Bank, the state and local communities could also avoid having to use so many expensive bonds to pay for large projects.
Oil and gas bills abound this session. The Increase Penalties for Oil and Gas Violations bill being advanced by N.M. Environmental Law Center, would increase penalties for oil operation violations and is another way for the state to generate income. It would help provide the revenue needed to oversee new regulations on produced water and methane emissions spills. NM HB 76—EIB Permit Denial For Poor Compliance, an environmental act amending the Air Quality Control Act that would allow the Dept. of Environment to deny a permit application based on a history of poor compliance.
The Strengthen Language in the NM Air Quality Act and Water Quality Act, advanced by New Mexico Environmental Law Center, would remove language in the Air Quality Act and the Water Quality Act that forbids the state from creating more restrictive regulations governing water and air quality than are included in the federal regulations. The bill would no longer leave the state at the mercy of whatever administration is in power at the federal level.
HB 50—Private Right of Action for Certain Statutes, sponsored by Representative Georgene Louis (D-Bernalillo), also advanced by New Mexico Environmental Law Center, would enable citizens to file suit against gas and oil operators that cause them harm. At present such action must come from the state.
Water rights, energy tax credits and solar bills overflow the legislative agenda this session. Protecting Our Water Act (a.k.a. Produced Water Act amendments), sponsored by Senator Sedillo Lopez (D-Bernalillo), prohibits fresh water use in fracking, provides consequences for spills, directs that fines for spills pay for public compilation of oil and gas data, mandates rules to protect against oil and gas pollution, requires tracking of produced water, requires public disclosure of contaminants in produced water that is spilled or offered for reuse for non-oil and gas purposes and sets forth legal requirements for rules governing use of treated produced water for reuse outside the oil field.
The Energy Transition Act Amendment, advanced by Senators Bill Tallman (D-Bernalillo) and Liz Stefanics (D-Bernalillo), would revise current bill language that allows PNM to shift financial responsibility, estimated by PNM to be $1 billion, to ratepayers for all toxic economic liabilities from coal at the San Juan Generating Station, Four Corners Power Plant and all its nuclear and gas investments.
Local Choice Energy, sponsored by Senators Jeff Steinborn (D-Doña Ana) and Benny Shendo (D-Bernalillo), authorizes a municipality, county, Indian nation, tribe or pueblo to pool the electricity demand of multiple customers and procure power from an alternative supplier while still receiving transmission and distribution service from the existing utility, which opens electricity markets to competition and gives communities control over which entity supplies their energy.
The Community Solar Act sponsored by Sen. Liz Stefanics and Representative Patricia Roybal Caballero (D-Bernalillo), authorizes development of community solar facilities by cities, counties, pueblos, tribes and solar developers, as well as non-governmental organizations supporting low-income housing and neighborhoods.
The Electric Vehicle Tax Credit, sponsored by Sen. Bill Tallman, proposes personal income tax credits as an incentive to purchase or lease electric or plug-in hybrid vehicles and the purchase and installation of an EV charging unit.
The Sustainable Building Tax Credit would create incentives for more efficient new residential and commercial buildings. While language is still being developed, the incentive would most likely be tax credits, with the size of the credit dependent on the potential energy/emission savings of construction choices.
The Residential Building Retrofit Tax Credit bill is still being developed and would create incentives for residential homeowners to increase the energy efficiency of their homes and should include measures that can be taken to update/replace appliances and improve overall energy efficiency of residential residences.
The Expanded Electrification bill is sponsored by Senator Bill Soules (D-Doña Ana). No language is currently available; however, Soules has indicated he’ll introduce two bills expanding electrification of new school buildings and state vehicle fleets.
HB 51—Environmental Database Act is sponsored by Senator Mimi Stewart (D-Bernalillo) and Representative Gail Chasey (D-Bernalillo). It establishes a web-based information portal hosted by the Museum of Southwestern Biology at UNM to facilitate city, county and public access to state environmental data. It provides for governmental transparency, agency cooperation, information sharing and access to current scientific data. Among sources of data that could be collected are New Mexico Energy, Minerals, and Natural Resources Department oil and gas wells and pipelines, active mines, utility-scale solar and wind projects on state land, rare plant data, locations of permits for sources of air pollution, surface waters, state superfund sites, state trust land leases and active Rights of Way across state trust land. Health impact assessments, poverty levels by zip code, child asthma rates by zip code, critical habitat for threatened and endangered species, wildlife corridors and important bird/plant areas and fish management waters could also be gathered and shared.
Crude oil prices are determined by global supply and demand. The COVID-19 pandemic triggered a market collapse in oil prices, dropping New Mexico’s income from oil and gas over a billion dollars last year. While there will be a lot of money coming in for a few decades from oil and gas, the pandemic has shown New Mexico can no longer afford to wrap its economy around the ailing industry, regardless of what regulations it puts in place. Moving forward, whatever dollars come into the state from the industry need be invested in diversifying the local economy, job development and training and the health and wellbeing of its residents and the state’s environment.
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