In her State of the State address, Governor Susana Martinez trumpeted the new energy plan her administration released last year, the state’s first since the early 1990s.
Saying that plummeting oil and gas prices had decimated the state budget, Martinez noted that the plan recommends the “increased development of every kind of energy we can produce in New Mexico." But a read of the 48-page document reveals a focus on the state’s oil, natural gas and coal industries. It also recommends nuclear energy as a “low-carbon” alternative.
The plan does talk of growing the state’s burgeoning solar and wind industries—including developing new businesses focused on energy storage in batteries—but many of the document’s recommendations concentrate around helping the state’s extractive industries.
The state’s plan, which is a roadmap more than a step-by-step, how-to manual, comes at a time when nations around the world are heeding scientists who for decades have warned of the impacts of greenhouse gases on the climate—and as other western states, including California and Washington, embrace climate change as an opportunity to diversify their energy economies.
Given the state’s historic and current reliance on fossil fuels, where revenue from the oil and gas industry help prop up the state budget, energy economist Janie Chermak says the new plan is a good start. A quick overhaul of the state’s energy mix and a massive switch to wind and solar resources is probably not economically viable.
But now, the state needs to take the long view—and plan for the switch to greater reliance on renewables such as wind and solar and study what effects that will have, says Chermak, who heads the Economics Department at the University of New Mexico. “Coming up with that path, I think might be a longer period of time than what the state energy plan is really looking at,”she says.
Neither the state’s Energy, Minerals, and Natural Resources Department Secretary David Martin nor Oil Conservation Division Director David Catanach responded to NMID’s request for interviews to discuss the plan.
Fossil Fuel Dependency
For decades, New Mexico’s budgetary bread and butter has been oil and gas production. Revenue from wells made up about a third of the state budget in 2014. As prices have dropped significantly in the last couple of years, so has that stream into the state’s coffers. Nonetheless, the industry is vitally important to New Mexico’s economy.
Due to dropping prices, natural gas drilling in the San Juan Basin declined by 20 percent between 2007 and 2014. And despite plans for an oil boom there, industry’s interest in reaching oil deposits from underground shale has also waned.
Oil production remains high—and 2015 was the highest it’s ever been in New Mexico—because of increased drilling efficiency, he says, and because the rigs that remain are in highly productive zones.Statewide, the number of rigs drilling new oil and natural gas wells is less than half what it was last year. But Wally Drangmeister, the New Mexico Oil and Gas Association’s vice president and director of communications, says that doesn’t mean the state’s oil industry is slowing down.
What will cut output, he says, are new regulations that bump the cost of doing business.
Both the US Bureau of Land Management and the US Environmental Protection Agency have released new rules calling for industry to cut its methane emissions. A greenhouse gas, methane’s pound-for-pound impact on climate change is 25 times greater than carbon dioxide.
Those rules will make drilling more expensive, Drangmeister says. “And in this low-price environment,” he says, “it’s an even bigger deal.”
But the Martinez administration is clear when it comes to regulations. According to the plan, the state should “maintain a reputation of streamlined regulatory processes” to attract energy-related businesses. Recommendations also include reinforcing state primacy over federal oil and gas regulations and making it easier for industry to work with the state’s regulatory agencies.
The plan also calls for creating and improving infrastructure related to the fossil fuel industry, including a newly proposed rail line that would connect the Four Corners to I-40, major investments in roads in southeastern New Mexico, and pipeline construction to relieve current bottlenecks.
But some within industry say the plan still doesn’t do enough to address the crunch oil and gas is feeling—especially with prices so low. In January, the price of oil per barrel fell below $30 for the first time in more than ten years.
“I just don't think, as a country, that we have our act together about what to do, when to do it, and how to do it,” says Bob Gallagher, who directed the New Mexico Oil and Gas Association for a decade and today has his own energy consulting firm.
The Martinez plan, which he calls ‘wonderful,’ is not going to fix New Mexico’s problems, either.
“It’s not a policy, it’s a thought-process,” he says.
When it comes to addressing the coal-dependency of communities in northwestern New Mexico, Martinez’s plan is straightforward: either find new markets – like Mexico or the European Union – that the coal can be shipped to via a new rail line, or start considering new economic activities.
New Mexico ranks 12th nationally for coal production, but that fuel has become an increasingly tough sell as its effects on the climate have become clear. New Mexico has tried to help the struggling industry, including through its tax code: the state allows companies that extract coal to exempt a certain amount of revenue from taxation once the companies reach specific thresholds. In fiscal year 2013, companies saved more than $27 million in taxes, up from $11.3 million four years earlier, according to the 2014 tax expenditure report.
This month, the US Department of the Interior announced a moratorium on new coal leases on federal lands, including 28,000 acres of leases in New Mexico. This follows on the heels of new federal rules that set carbon dioxide emissions limits from existing power plants; and a decision by one of New Mexico’s largest coal-markets, California, to end the purchase of coal-generated electricity.
In January, Arch Coal, the nation’s second largest producer of coal, announced it was declaring bankruptcy. Earlier, in 2013, international mining behemoth BHP Billiton announced it was selling its coal mine in New Mexico, the Navajo Mine which supplies the Four Corners Power Plant. (The Navajo Nation decided to purchase that mine for $85 million.)
Within the 48-page plan, authors make no mention of climate change, but do write that a post-2020 “low-carbon electricity portfolio” could include nuclear power.
The plan points to research on small modular reactors (SMRs). Not yet commercially available, these are small nuclear power plants built in factories then shipped via rail or truck that could provide “carbon-free” electricity and not raise the same cost, safety, and environmental concerns as large nuclear facilities.
Some climate scientists, including former NASA scientist James Hansen, say that nuclear energy must become a greater part of America’s energy mix if the nation is serious about cutting greenhouse gas emissions in time to avoid catastrophic climate change. Others doubt the wisdom of embracing a costly, water-intensive technology that has been plagued with accidents such those that occurred at Fukushima, Chernobyl, and Three Mile Island.
The nuclear issue is even more complicated in New Mexico, where citizens have an intimate relationship with the nuclear industry’s legacy. Uranium mining in western New Mexico that began in the 1940s sickened workers; many of those mines still contaminate land and water. The Navajo Nation has banned new uranium mines within its borders and a coalition of five southwestern tribes has opposed uranium mining on or near New Mexico’s Mount Taylor. And the nation’s only underground nuclear waste dump, southern New Mexico’s Waste Isolation Pilot Plant, or WIPP, still remains closed after an accident there two years ago.
Positive Energy Solar CEO Regina Wheeler, who was involved in drafting the plan, says it’s a good step in the right direction. “What is missing, however, are targets and action and strategies and commitment from the highest levels in the state.”While its “post-carbon” language is targeted toward nuclear energy, the plan does recommend expanding markets for solar and wind, primarily by improving storage technology and transmission infrastructure and reducing “soft costs” of solar installation at the local level related to permitting and other red tape. It also emphasizes the need to reduce the use of fresh water in oil and gas production; to increase energy efficiency of public buildings; and to ensure energy production doesn’t endanger public health.
Clean, efficient resources are here, Wheeler says, and technology is improving all the time—on everything from battery storage to electric vehicles. “The possibilities are extraordinary,” she says, but New Mexico is resisting changes that will allow solar and wind to become a greater part of the state’s mix.
Right now, despite the state’s sunny days, only about two percent of the electricity generated in New Mexico comes from the sun.
Wheeler says that resistance comes not only from Public Service Company of New Mexico (PNM), the state’s largest power company, but also the New Mexico Public Regulatory Commission and the Governor’s Office.
Renewable energy sources are going to become increasingly good investments—and an energy transition is going to occur. “It's going to happen,” she says. The question, she says, is whether New Mexicans will make that transition sooner or later.
For some, New Mexico has been too slow to embrace new energy opportunities.
In particular, New Mexico’s reluctance—or unwillingness—to diversify has been problematic, says Erik Schlenker-Goodrich, executive director of the Western Environmental Law Center.
New policies related to climate change and energy transitions require a lot of work, he says, especially within regulatory agencies such as the New Mexico Public Regulatory Commission and management agencies like the US Bureau of Land Management. Citizens must make sure to help agencies to shape new policies where industry already has a seat at the table, he says.
“If New Mexico’s communities sit on the sideline, politicians beholden to fossil fuel interests will carry the day and our energy future is a dark one,” he says. “If our communities take the field, anything’s possible, including a bright, blue-bird day powered by the sun and wind.”