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Interim Leg Watch: Energy Industry Wants Less Regulations, More Incentives

By Charlotte Chinana

“You’re preaching to the choir…we need to put people back to work – we need to put people back in [the] uranium mines.”

~ Sen. David Ulibarri (D – Grants) commenting on (while simultaneously commending) presentations from representatives from the mining, oil and gas industries in NM.

The interim Economic and Rural Development Committee recently held their July meetings (in Tucumcari and Santa Rosa), and I had the opportunity to take a little “legislative road trip” to sit in on a couple of agenda items – namely the “Energy Panel: Update on Projects, Tax Incentives and Laws and Regulations That Are Helping or Hurting Industry,” and the “Oil and Gas Energy Report.”

During the committee hearing, industry panelists took a moment to mention what their companies have done and/or will do for New Mexico – with regards to the number of jobs created and payments made to the state (by way of taxes, fees and royalties); they also spent the bulk of their presentations outlining what the state can (additionally) do for industry – specifically related to relaxing (if not entirely eliminating) regulations, while providing more incentives to do business in the state.

The Energy Panel Updates

Representatives from two of the state’s utility providers, Xcel Energy (an electric and natural gas company that operates in eight states – including NM), and Tri-State Generation and Transmission Association (a wholesale electric power producer/supplier that serves 44 rural electric cooperatives and public power districts in four states – with 12 in NM), spoke extensively about the reliability of service provided by their companies, as well as the importance of cost containment measures.

While each highlighted the need to keep and utilize a diverse energy portfolio, it was stressed that the companies pretty much only added solar and wind, because they were mandated to do it.

Sonia Phillips, the NM State Affairs Manager from Xcel Energy, noted the cost difference in terms of solar production, using the example that it costs her company about 13 cents to generate a kilowatt of solar, vs. 2 or 3 cents to generate that same kilowatt – using coal. Phillips also said that some “basic, good incentives” would be nice which, according to a handout from her company, would include:

  • Expedited permitting;
  • Transmission cost recovery riders;
  • Clean energy improvement riders; and
  • Less regulatory lag (as regulatory lag increases investment risk)

Sen. Clinton Harden (R – Clovis) asked if NM’s current electricity demands were being met, to which Phillips replied “yes,” and elaborated that utility companies in the state are meeting the demand “92% of the time.”

Phillips then when on to mention that her company has “customers who want power when they want it” – as part of a pitch for an investment in infrastructure modifications to the power grid/s that the state uses (which were built in the 70s), and that “customers have been able to enjoy low rates for over 35 years” – related to possible, future rate increases.

Rhonda Mitchell, from Tri-State Generation and Transmission Association, added that her company was doing what it can to educate their co-op members about the rising cost of energy production and transmission (i.e. why customers can expect to pay more), though it was unclear as to whether or not said education equally emphasizes energy conservation.

As for the reliability factor, she added that:  “Sometimes, we do too good of a job in being reliable … people [can] take it for granted.”

Rep. Debbie Rodella (D – Espanola), who represents parts of the state that were severely affected by the Feb. snow storms and subsequent power outages, asked about the transmission lines in her area – specifically if they are at capacity.

Mitchell, whose company provides service to constituents in Rodella’s district, said that she didn’t have the answer on hand, but would look into it and get back to her.

Carl Huslig, President of ITC Great Plains, ITC Holdings, which (according to the company website) “invests in the electricity transmission grid to improve electric reliability, expand access to markets, lower the overall cost of delivered energy and allow new generating resources to interconnect to its transmission systems,” also presented during the energy panel; he mostly talked about what his company does and how they’d like to be a part of the infrastructure modification process in NM.

Mike Bowen, Executive Director of the New Mexico Mining Association, also gave a brief update and summed up his industry’s hopes for the state’s energy future, with his take on an oil and gas catchphrase:  “build baby build.”

Sen. Carroll Leavell (R – Jal) mentioned URENCO (an enrichment facility set to be built in the US in 30 years), and how they either are, or will be importing uranium from Saskatchewan (aka Canada). He then added that, in his opinion, there’s “no good reason that [uranium] can’t come from northwestern New Mexico.”


The Oil and Gas Report

Deborah Seligman, of Energy Advocate, LLC – and Karin Foster, Executive Director of the Independent Petroleum Association of New Mexico – spent the majority of their presentation outlining “some of the challenges facing New Mexico oil and gas producers,” which were said to include:

  • An “overzealous regulatory framework” (with a specific reference to the Endangered Species Act),
  • Limited available opportunities to replace reserves (due to pesky things like wilderness initiatives and categorical exclusions);
  • Access to land (i.e. interference by expanding municipalities, county ordinances, and people not being particularly thrilled with drilling operations close to their homes – the “not in my back yard” phenomenon);
  • Public perception (in regards to hydraulic fracturing – also commonly referred to as “fracking” – a process by which a chemical compound is injected into the ground at a high pressure, to release the oil/gas deposits so that the product can be collected; some of the liquids used become trapped underground, and frequently include mixtures which contain fluids that qualify as hazardous materials and/or carcinogens); and last, but not least,
  • State and regional “GHG rule” (aka greenhouse gas reporting requirements)

Seligman would briefly mention the “environmental stewardship of the oil and gas industry” – without any qualifiers – save for a series of comments about how:

  • “Fracking” has been an important part of the oil and gas extraction process for over 20 years (“you couldn’t get the product out of the ground without it”);
  • Burning coal and gas are “supposedly a culprit in green house gases;” and
  • Generally dismissing the notion that high levels of CO2 can be a toxic – because dry ice is a solid form of carbon dioxide (no further elaboration was provided on this particular train of thought, so attendees were left to speculate as to the logic behind this statement).

Foster, for her part, took a moment to stress the industry’s desire to set requirements on “facts not fears” – adding the need to “come up with some ‘decent science’.” She then segued into talking about how things like the state’s pit rule “limits the ability of operators” to leave drill cuttings at drill sites, and mentioned that her company was working with the Oil Conservation District (OCD) to rewrite the pit rule.

“We’re not asking for the entire rule to be eliminated” – just that the state utilize “adequate science” – so that we’re not “throwing the baby out with the bath water,” said Foster.

She went on to talk about the oil and gas industry’s commitment to work on getting five new rules “on the books…hopefully by the fall”; the pit rule rewrite, one related to horizontal drilling, and three having to do with cap and trade.

“It doesn’t make sense for a small state” to adhere to cap and trade agreements, if the industry is successful in achieving its goal of not being a part of cap and trade programs altogether:  “Why do we have to spend money on reporting if we’re not going to have cap and trade rules?”

Sen. Leavell reiterated the industry’s positions on “regulatory restrictions” in NM, citing anecdotal stories about why companies chose to base their operations in neighboring states. Regulatory restrictions are “the only reason” businesses opt for Texas; the taxes are similar, but its “easier to get a permit in Texas.”

Sen. Ulibarri added that, from his prospective, the state isn’t responsive to the needs of industry, particularly when it comes to the time-frame it takes to get a permit. “We should be able to tell someone, ‘you can get [a permit] in 90 days, or 60days,” instead of the current process which, according to Leavell, includes “sending a plan to Santa Fe for approval, waiting for a list of questions,” and then answering said questions about said plan.

Sen. Mary Jane Garcia (D – Dona Ana) commented that, while she understands the importance of the oil and gas industry in our state, especially as it relates to financing education (that is, when the companies in question don’t circumvent the process – like these guys), she also thinks that environmental protections are in place for a reason.

Garcia went on to say that she personally hadn’t been to some of the state’s wilderness areas – like Otero Mesa – but she’d like to go there, and learn more about conservation efforts, in the vein that wilderness initiatives are most likely not the product of a diabolical scheme to deliberately thwart potential mining and drilling operations – as was suggested by the industry representatives.

Foster took the opportunity to offer to give Sen. Garcia, or any of the legislators who were interested, a tour of one of her company’s gas wells. Seligman added that lunch would be on them.

With its combination of natural resources and potential to be a national leader in terms of renewable energy, New Mexico is inherently and undeniably an “energy state.”  Add to that the projected increase in demand for energy (not expected to subside anytime soon), and it’s abundantly clear that energy is – and will continue to be – a major economic driver in the state. The direction we move in is still up for debate.

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