Gov. Michelle Lujan Grisham laid out her ambition to address climate change in New Mexico last year when she signed an executive order requiring the state to reduce its greenhouse gas emissions to 45% below 2005 levels by 2030.
Despite the pandemic, the state has carried out most of its plans for the year toward that mission.
The highest-profile environmental policy of Lujan Grisham's tenure so far has been adoption of the Energy Transition Act of 2019, which ordered the energy sector to move to 100% renewable energy by 2045.
Lawmakers have taken other steps toward reducing emissions in the last two years, including updating energy efficiency codes for new construction, creating solar development tax credits and investing millions in Volkswagen settlement funds into electric vehicle charging infrastructure.
It hasn't been nearly enough to reach the emissions reduction goal. A recent progress report by the governor's Climate Change Task Force found that on its current path, New Mexico would only get halfway there by 2045.
New Mexico produces more than twice the national average of harmful carbon emissions per capita. Electricity generation—which is the target of most recent climate change legislation—only accounts for 11% of the state's total emissions and ranks third on the list of the state's most polluting sectors.
At the top sits the oil and gas industry, which is responsible for 53% of the state's total emissions.
"If we can't reduce emissions in this sector, we are in trouble," New Mexico Department of Energy, Minerals and Natural Resources Secretary Sarah Propst said at an interim legislative committee meeting in November.
The transportation sector ranks second at 14%.
Unlike earlier estimates that were based on generalized national data with New Mexico factors built in, the task force created the new breakdown using a new analysis of localized information collected in 2018 by Colorado State University that found the oil and gas industry releases four times more emissions than previously thought.
"That is a jaw-dropping number, and it's staggering in terms of the implications for New Mexico's climate mitigation opportunities," said National Resources Defense Council Climate and Energy Program Director Noah Long at the same meeting. "It means that oil and gas sector emissions will need to be reduced at a much faster rate than earlier understood and it also means that every other sector in this state—whether it's buildings, the electric generation sector or transportation and industry—will also have to increase or accelerate its decarbonization if we have any chance of meeting science-based targets."
A profound conflict at the heart of the government compounds the issues. Oil and gas revenues account for nearly 40% of the state's budget and fund countless critical services, including the public education system. The state's heavy dependency on oil and gas money has for decades left legislators and governors alike reluctant to cross the industry.
On paper, a new proposed regulatory framework to curb methane emissions would go a long way toward addressing the problem, requiring the oil and gas industry to capture most of its methane emissions by 2026.
In reality, the combined impact of years of underfunding and disinvestment and the strain of COVID-19 has pushed the departments responsible for enforcing the new rules past their capacity to perform even the most basic regulatory functions.
New Mexico Environment Department Secretary James Kenney says new regulations would theoretically pay for themselves with fines and permitting fees, but his department needs legislative approval to raise fees or spend the money. The Legislature's track record of failing to support the department's other enforcement activities does not inspire optimism that the new rules will have the intended outcome after the 60-day lawmaking session that begins in January.
"I'm asking the Legislature to give me the authority to robustly hire as many people as possible," Kenney tells SFR in an interview.
"We have an oil-and gas-based economy. Issuing permits for wells but having no one to check on it is the same thing as asking someone to comply with the drinking water standard, but never testing for it. It's the same thing as issuing a hazardous waste permit and then never going out to see if they're in compliance," Kenney says.
His frustration is palpable even over Zoom.
"That's our history—that's what I'm fighting against."
Leaving Coal in the Dust
Moving away from coal toward renewables is a main focus of the Energy Transition Act. The state's largest utility, Public Service Company of New Mexico, aka PNM, even promised to reach zero carbon generation earlier-—by 2040.
However, the question of which technology will replace abandoned coal plants in the meantime—and who will foot the bill—is still up for debate. New Mexico's utilities are plunging ahead with plans to light up the state with cleaner energy.
Electricity here is largely generated by a collection of coal plants, gas plants and solar and wind farms located in the state, as well as a nuclear power plant in Arizona.
In addition to phasing out the coal-powered San Juan Generating Station by 2022 in accordance with state law, PNM recently announced its plans to ditch investments in coal at a second plant—the Four Corners Generating Station—by 2024. PNM's shares in the plant represent 10% of its energy production and are the company's last remaining investments in coal.
On Dec. 2, the New Mexico Public Regulation Commission approved a solar and battery power replacement plan for San Juan, though the plant may stay in operation under different ownership for another decade. Private energy developer Enchant Energy joined the City of Farmington in a proposal to purchase the plant and retrofit it with carbon capture technology to reduce its emissions.
In another unexpected turn, PNM announced in June that it would not purchase expiring leases at the Palo Verde Nuclear facility in Arizona in favor of pursuing cheaper renewable technologies.
When it comes to replacing the power from Palo Verde and Four Corners, PNM is leaning heavily toward a mix of gas and renewables.
PNM spokesman Raymond Sandoval tells SFR he foresees the debate over using gas as a "bridging fuel" will most likely occupy much of the public conversation about the energy transition in 2021.
Sandoval says the utility wants to invest in high-tech gas engines that would provide reliability and cost savings in the short term, and could potentially be converted to run on hydrogen in the future.
"It is not your grandfather's gas…We are not using gas to light a flame, to boil water and turn a turbine—these literally are jet engines," he says, explaining that the gas engines would turn on at peak hours or on overcast windless days when wind and solar farms can't provide enough energy to meet demand.
Yet, according to a series of articles by S&P Global about the overproduction of gas plants across the country, many utilities are far overestimating how much energy it will take to maintain grid reliability. They continue to build excess gas capacity despite the fact that one in seven gas plants built in the last two decades are rarely used.
Based on that author's analysis of projections from the US Energy Information Administration, at the current rate of gas plant construction, natural gas could be the dominant source of energy production by mid-century and the country's CO2 emissions would remain at equivalent levels to where they are today.
Meanwhile, Mariel Nanasi, director of the Santa Fe-based ratepayer advocacy group New Energy Economy, tells SFR ratepayers should not be forced to pay for PNM's abandonment of the Four Corners Generating Station because, she says, its original investment in the plant was found imprudent. She made a similar argument in a case regarding PNM's investments at Palo Verde that appeared before the New Mexico Supreme Court in 2019. The court ruled that ratepayers shouldn't bear the full cost in that case.
According to Nanasi, the Energy Transition Act itself may prevent the PRC from being able to protect ratepayers for the utility's unwise investments.
"We don't believe that there needs to be a conflict between renewable energy and protecting poor people," she tells SFR.
Nanasi plans to ask the Legislature to once again amend the act in the upcoming session to reinstate the PRC's power to determine the extent to which ratepayers must shoulder the cost for shutting down dirty energy plants.
For its part, PNM plans to officially file for abandonment of both the Palo Verde and Four Corners generating stations in early next year.
The Methane Problem
If New Mexico has any hope of reducing its greenhouse gas emissions enough to meet the goals of the governor's executive order, the state must tackle emissions from oil and gas production.
Most of the industry's emissions are in the form of methane plumes that hang above the Permian and San Juan basins and cause respiratory issues and asthma.
"There is a significant ozone problem in the state of New Mexico where people who live in these areas should not have compromised public health based on us being 110% of the national ozone standard—which is kind of where we are," Environment Secretary Kenney told the Legislative Finance Committee on Dec. 3.
The state Environment and Energy, Minerals and Natural Resources departments are developing regulatory frameworks for methane leaks and ozone levels. Both agencies released drafts of their proposals earlier this year, and will begin a formal public rulemaking process to assess the final versions early next year.
The proposed rules provide big targets for cutting emissions from the oil and gas industry, including a requirement that oil and gas producers reach a 98% gas capture target by the end of 2026 in the Permian and San Juan basins.
But officials admit significant hurdles to enforcement.
The rules proposed by the environment department would regulate ozone, and therefore methane, through its Air Quality Bureau. This bureau is entirely funded by the permitting fees and fines it collects from polluters, which means that, in theory, new regulations would pay for themselves. However, Kenney tells SFR, he still needs legislative approval to increase the amount of money he spends on staffing and other needs of the bureau—and right now, the funds he has are stretched too thin.
"We are now down to two air inspectors for the entire state of New Mexico for everything that we regulate," Kenney told legislators at an interim Water and Natural Resources Committee meeting Nov. 9.
The department's inability to enforce regulations due to funding and staffing shortages goes far beyond the oil and gas industry. According to a report by the Environmental Council of the States, New Mexico's environment department has experienced a greater decline in its budget since 2016 than the majority of other states, and the shortfall impacts every responsibility the department has.
"I believe that New Mexicans, as well as the Legislature, really haven't had a chance to see behind the curtain and understand what impact at least 10 years of a budget decline…has had on both staffing and our ability to implement the programs that the Legislature, the EPA, the Department of Labor and other agencies have given us the authority to do," Kenney tells SFR over Zoom.
NMED has recently fallen so short on funding that it stopped testing drinking water for contaminants such as excess chlorine and asbestos. In addition to regulating air and water quality, the department is also responsible for workplace inspections, but barely has enough OSHA inspectors to keep up with the demands of COVID-19, he said.
"COVID has stressed and strained the existing resources that were already stressed and strained," Kenney says.
While the state provided the department with emergency funds to hire 28 temporary workers to handle COVID-19 rapid responses, Kenney says, New Mexico only has eight fully trained OSHA inspectors who are qualified to investigate occupational injuries and deaths. The inspectors have been so preoccupied responding to the pandemic that there are non-virus related cases going unaddressed. Oregon, which has twice the population of New Mexico, has almost 10 times as many investigators.
Kenney says the department doesn't even have enough funds to take full advantage of federal grant matching opportunities.
"I'm a New Mexican, I'm a bit outraged that that money is sitting, waiting to be used simply because I don't have the ability to match it," says Kenney.
Last year, the Legislature poured $5 million into technologies such as those being developed by Santa Fe-based Descartes Labs that would make it easier to detect natural gas leaks, but have seemed hesitant to put pressure on the industry.
That might start to change this year as lawmakers try to diversify the state's economy to better withstand the boom and bust cycles of the oil industry that have taken a serious toll in the last year. If captured, the natural gas currently polluting the atmosphere could provide a valuable source of additional revenue.
When it comes to the state's role as an energy exporter, New Mexico has untapped resources besides fossil fuels. Diversification efforts could go toward making New Mexico a regional exporter of clean energy from renewable sources.
The oil-producing regions of southern New Mexico also happen to be among the sunniest and windiest. Rather than seeing renewable energy as a threat, some local governments are beginning to see it as an additional opportunity to capitalize on what the area has to offer.
Oil-rich Lea County is one.
"As we all know, Lea County is and has traditionally been focused on oil and gas," said Missi Currier, president and CEO of the Economic Development Corporation of Lea County, at a recent webinar hosted by ReNew New Mexico. "But we're also very excited about the opportunity to continue to bring in other opportunities for energy production as we build out the grid, as we find new ways for infrastructure to evolve, as we find new ways to diversify the economy."
Scaling Up Clean Energy
Rikki Seguin, executive director of the Interwest Energy Alliance, envisions New Mexico supplying the entire Western region with clean energy produced through its natural abundance of sun and wind.
"In this state we have an advantage…New Mexico is the most competitive marketplace for building renewable energy facilities in the West," she says, citing a recent study by the University of Wyoming. "In order for us to really capitalize on this big opportunity to build projects, we need to maintain that competitive advantage."
To achieve that vision, Seguin says, the state should modernize the grid and build the transmission infrastructure to transport energy through New Mexico and out across the nation.
Coming up with a grid modernization plan will be one of the items at the top of the list for the New Mexico Energy, Mining and Minerals Department in 2021, Cabinet Secretary Sarah Probst told an interim legislative committee in November. The department will host a public meeting about its plan on Dec. 17.
The Western Spirit Transmission Line is a massive renewable energy transmission project already underway in central New Mexico. The project expects to complete the final permitting steps in 2021 to allow construction to begin in 2022 with an anticipated operation to begin the next year. Backers estimate it will bring over $1.5 billion in new investments in renewable generation and transmission and involves building new transmission lines across 520 miles through the desert in Arizona and New Mexico.
Earlier this fall, PNM announced an anticipated merger with multinational corporate energy giant Avangrid, based in Spain. According to Seguin, this also indicates that New Mexico is about to step up its renewable energy game. Avangrid Renewables already started construction on a 306-megawatt wind project in the state this year.
Sandoval, the PNM spokesman, says that while the merger shouldn't have any noticeable impact on customers, it will allow the utility to leverage the full financing might of the larger corporation to invest in more large-scale renewable projects. Avangrid is known for its renewable energy portfolio and innovation in Europe and elsewhere.
New Mexico faces an alarming future if the state does not immediately and drastically reduce its emissions from the oil and gas industry, and an opportunity-rich window to realize the full potential of the wind and sun.
In the short term, at least, says Ben Kelahan, founder of ReNew Mexico, a coalition that promotes renewable energy as an economic driver in the state, via webinar, fossil fuels and renewables could play complementary rather than antagonistic roles in making “the pie bigger for all New Mexicans.”