NM to weigh proposal for low-carbon fuel in 2022

Jun. 14—SANTA FE — New Mexico lawmakers can expect a clean fuel standard on their 2022 agenda — a priority Gov. Michelle Lujan Grisham's administration pitched Monday as a matter of economic development.

The proposal would require a 10% reduction in the carbon intensity of fuel used for transportation by 2030 and 28% by 2040.

But companies that make, produce or refine fuels would also have the option of buying credits from producers of hydrogen or other low-carbon fuels or from businesses that reduce their emissions — creating a market, supporters say, that would spur investment in clean energy.

Economic Development Secretary Alicia J. Keyes said Monday that Lujan Grisham intends to add the legislation to the agenda of next year's 30-day session.

In New Mexico, lawmakers face limits on what bills they can take up during even-numbered years, with the governor empowered to help set the agenda.

"This is something that could really help those communities that have traditionally been reliant on coal to transition into something like hydrogen," Keyes said. "This will be a priority for us."

She said she didn't necessarily understand the gravity of the clean fuel legislation at first, but after its introduction in January, state agencies heard from national energy companies expressing interest in launching projects in New Mexico.

Keyes highlighted the legislation Monday in a presentation to lawmakers on the Economic Development and Policy Committee. The 2022 session starts Jan. 18.

A clean fuel proposal, Senate Bill 11, won approval in the Senate earlier this year but died in the House without a final vote. It had passed the Senate on a 25-14 vote along party lines, with Democrats in support and Republicans opposed.

Democrats hold majorities in both legislative chambers, and Lujan Grisham is a Democrat.

In an interview Monday, Sen. Steven Neville, R-Aztec, said he opposed the legislation because it could add to the costs of consumers and fuel producers.

"It would conceivably hurt our oil patch, which is our revenue generator," he said.

One way to meet the proposed standard, Neville said, would be to blend more ethanol into gasoline, which could have the effect of reducing a vehicle's fuel economy.

"I don't think it's the best thing for New Mexico overall," Neville said.

Senate Bill 11 was co-sponsored by Senate President Pro Tem Mimi Stewart of Albuquerque and Rep. Nathan Small of Las Cruces, both Democrats.

Stewart said the proposal would improve air quality in New Mexico and reduce greenhouse gas emissions, which contribute to climate change.

Its backers included private companies and the Greater Albuquerque Chamber of Commerce.

"It's good for the air. It's good for business," Stewart said of the bill.

The state Environmental Improvement Board would establish a "fair market for credit transactions," allowing companies to offset their high-carbon fuel by purchasing credits from other companies that reduce their emissions or generate low-carbon fuels.

Keyes, secretary of the Economic Development Department, told lawmakers that the bill would lead to a market-based approach to reducing carbon emissions. A similar law in California, she said, boosted employment in biomass, wind and solar.

"We really want to get it over the finish line next session," Keyes said.

California and Oregon also have clean fuel standards.

In New Mexico, the state Environment Department describes the transportation sector as the second-largest source of greenhouse gas emissions, following the oil and gas industry.

Maddy Hayden, a spokeswoman for the Environment Department said New Mexico is well-positioned to become "an international hub for clean fuels" given its proximity to California and other western markets, in addition to the state's geology and climate.