Overview of the Twelve Objectives in New Mexico’s New Energy Plan

New Mexico Governor Susana Martinez unveiled the state’s New Energy Plan (“Plan”) on September 14, 2015.  The Plan, entitled “Seizing our Energy Potential: Creating a More Diverse Economy in New Mexico,” focuses on an “all of the above” approach to promote job creation and to encourage energy development in the state.  The Plan focuses on industries that the Martinez administration believes New Mexico is best suited to pursue, develop and promote.  The Plan supports expanding markets for the coal and natural gas industries, clarifying tax credits for all energy producers, streamlining and simplifying the regulatory process for permitting, and promoting infrastructure development to help transport oil, gas and electricity in and out of New Mexico.  For the first time, water policy is included in the Plan, emphasizing the need to consider water use, and New Mexico’s water supply, when planning energy development and generation projects in the state.

The Plan provides policy for twelve identified objectives.  This article provides a brief summary of the Plan’s twelve objectives and the recommendations to meet those objectives.

1. Energy Diversity

The Plan seeks to diversify New Mexico’s energy portfolio by considering all forms of energy production from the state’s different geographic areas.  The Plan encourages a diverse energy portfolio to “provide multiple pathways for economic success and hedge against changes in market conditions.”  To do so, the Plan recognizes that the state must have mechanisms to recognize changing market conditions and to evaluate the economic value and availability of different energy resources.  The Plan indicates that the state had commissioned an analysis of the state renewable energy production tax credits that considered both the costs incurred by the tax credits and the benefits of the tax credits.  The Plan recommends enacting a consistent tax policy to provide certainty for industries.

2. Natural Gas Market Enhancement

Falling natural gas prices have decreased revenue in New Mexico.  The Plan highlights the need for new markets to increase demand for natural gas, and proposes to attract petrochemical manufacturers to the state and to expand rail infrastructure to support this industry.  The Plan also proposes to promote the use of natural gas vehicles by improving the infrastructure needed to support these vehicles, such as natural gas fueling stations,and creating tax credits and vouchers for vehicle owners.  The Plan also suggests the state procure a fleet of natural gas vehicles.

3. Energy Market Expansion

The Plan states that, as federal regulations increasingly encroach upon coal-fire electricity markets in New Mexico, the state should look to other markets to promote its coal resources in order to support local communities that depend on coal mines and coal-fired power plants.  The Plan suggests evaluating converting coal to liquid fuels or gases, adopting clean coal technologies and exporting coal internationally.  Moreover, the Plan suggests that in order for Coal from the San Juan Basin to be exported to foreign markets, a freight rail service should be expanded to the region.

The Plan also promotes the development of small modular reactors (“SMRs”) as a viable pathway for New Mexico to provide carbon-free power.  The Plan identifies New Mexico’s established nuclear industries—including the US’s only uranium enrichment plant and the State’s Waste Isolation Pilot Plan—as reasons that SMRs are a viable new market for New Mexico to consider.  The Plan suggests putting together a taskforce to look at the feasibility of SMRs providing energy in New Mexico and developing hypothetical incentives for SMR developers.

The Plan identifies energy storage as a possible sector for economic growth in New Mexico.  The plan indicates that New Mexico is well suited to expand its involvement in energy storage because of the national laboratories located in the state and the state’s existing battery energy storage demonstration projects.  The Plan proposes to support a state initiative to establish an “Advanced Battery Chemistry and Materials Center”, to pursue more energy storage technology and development demonstration projects and to minimize the regulatory and permitting costs of energy storage financing and grid interconnection.

4. Regulatory Clarity for Existing & Emerging Industries

The Plan recognizes there is a need to streamline oil and gas regulation in New Mexico, and to discourage counties from regulating this industry.  The Plan also notes that the state has received feedback that local regulatory agencies at times act as impediments to energy project development.  The Plan recognizes a need to promote timely permitting for energy projects to facilitate financing, and to expedite revenue flow and job creation within the state.

Finally, the Plan acknowledges that the local regulatory costs for the solar industry are high.  It proposes that the state initiate an effort to encourage local jurisdiction of the solar industry in order to reduce the regulatory costs for solar PV installation.

5. State, Federal & Tribal Cooperation

Because of New Mexico’s checkerboard of private, federal, state and tribal lands, energy projects are often subject to permitting and regulation from multiple stakeholders.  The Plan identifies the need to collaborate with these stakeholders to expedite permitting decisions.  The Plan proposes to comment on federal rulemakings, NEPA processes and Resource Management Plans to promote streamlined processes.  It also recommends implementing agreements with the Bureau of Land Management to streamline permitting, operating, and inspecting requirements.

6. Infrastructure

The Plan acknowledges that the state’s infrastructure to transport oil and gas and electricity is out of date, and identifies specific areas in New Mexico where natural gas and oil products experience significant delays in transportation.  The Plan proposes to reallocate tax revenue in order to fund road repair and road construction projects.  The Plan also supports a feasibility study for a rail branch line that would extend from Interstate 40 to the Farmington Four Corners Region.

The Plan prioritizes upgrading the state’s electrical grid to promote economic development, to provide reliable electricity delivery, to increase renewable energy on the grid and to allow the state to export its solar and wind resources.  The Plan also proposes that New Mexico engage in regional transmission planning, consider installing smart meters to accommodate a basic smart grid, and incentivize electricity users to voluntarily curtail energy consumption during peak times.

7. Public Building Efficiency

The Plan recognizes that New Mexico’s public buildings have the potential to be energy efficient. The Plan offers to create a program for energy performance in public buildings that would require annual benchmarking of energy and water use for state buildings, disclosing energy use in benchmarked buildings, establishing energy performance targets for public buildings, and monitoring energy usage.  The Plan also endorses the energy savings performance contracting (ESPC) program, which establishes partnerships between government entities and energy service companies to retrofit buildings to save energy.

8. Public Health, Safety & The Environment

The Plan acknowledges public concern for health and safety implications in energy development (eg. concern about the impact hydraulic fracturing will have on groundwater supplies, and concern about the impact coal-fired power plants have on air quality in New Mexico communities).  The Plan recommends encouraging those in the oil and gas industry to voluntarily test baseline groundwater around drilling sites.  Moreover, the Plan supports accelerating the development of natural gas gathering pipelines to reduce flaring, and supports efforts to capture and sequester carbon dioxide from energy production.

9. Energy & Water

The Plan states that New Mexico should focus on reducing fresh water use, and suggests one way to do this is to recycle produced water in oil and gas operations.  The Plan also directs that alternative sources of fresh water should be used to meet the large need for water in power generation.  The Plan provides that the state should promote the study and use of brackish water resources, non-potable water, and reused produced water.

10. Energy Education

The Plan suggests that the state implement an education campaign to better inform the public on oil and gas operations, renewable energy development, uranium mining and nuclear power development.  The Plan provides that in order to make the most informed energy decisions, the state needs access to unbiased scientific information.

11. Workforce Training

The Plan acknowledges the state’s need for a workforce trained in engineering, geology and hydrology to meet the energy industry’s employment needs.  The Plan recommends encouraging colleges and universities to align their curricula with energy workforce needs and develop specialized degree and certification programs.  The Plan supports two-year college training programs in applied energy technologies, and encourages Science, Technology, Engineers and Mathematics (STEM) courses in college and high school.

12. Commitment to Energy Policy

This is New Mexico’s first formal energy policy in more than twenty years.  Given this history, the Plan suggests that the state review and implement an energy plan on a regularly scheduled basis.

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