Rough start for N.M. Democrats’ assault on oil emissions

Source: By Mike Lee, E&E News reporter • Posted: Wednesday, February 20, 2019

SANTA FE, N.M. — Since the November election, Gov. Michelle Lujan Grisham and other resurgent Democrats in New Mexico have vowed to cut down on greenhouse gas emissions and rein in the oil and gas industry.

The reality may turn out differently.

One of the first energy-related bills to face a legislative hearing in the state died in a committee Friday. While the bill wasn’t one of Lujan Grisham’s top priorities, its fate shows how local political considerations can overshadow environmental concerns, even in states controlled by Democrats.

It also provides a cautionary tale for the 21 governors who’ve pledged to reduce their states’ emissions as part of the U.S. Climate Alliance (Climatewire, Feb. 13, 2019).

“The politics of a lot of these measures are different at the state level,” said Daniel Raimi, a researcher at the think tank Resources for the Future.

New Mexico is unusual because it’s an energy-producing state that’s controlled by Democrats. In addition to winning the governor’s mansion and the state land commissioner’s office, the party held its majority in the Senate and picked up eight seats in the House.

Lujan Grisham is now pushing for a change in the state’s renewable portfolio standard to increase the amount of wind and solar power produced domestically, along with a proposal to crack down on methane emissions from the oil and gas industry.

Other Democrats in the New Mexico State Capitol are floating bills that would give regulators renewed authority to impose fines for oil and gas pollution, and there’s even a proposal to impose a four-year moratorium on fracking.

But none of those bills has gotten a hearing yet.

H.B. 398, which had backing from state Land Commissioner Stephanie Garcia Richard (D), would have raised the maximum royalties for oil and gas production on state lands.

The House Commerce and Economic Development Committee voted 7-3 to table the bill after more than two hours of testimony Friday, with three Democrats joining the committee’s four Republicans.

The royalty bill would have mainly affected oil production in the Permian Basin, the sprawling field that covers parts of West Texas and eastern New Mexico. It would have raised the royalty — the percentage of the sales price the state collects — from 20 percent to 25 percent on the most productive wells.

It also would have imposed a royalty on any natural gas that’s vented or flared instead of being sold. The bill would have only applied to newly drilled wells and only to the handful of tracts that haven’t already been leased in New Mexico.

Garcia Richard, a former state representative from Los Alamos, framed it as an issue of fairness. Producers on state lands in Texas have paid a 25 percent royalty since the 1980s. And if that weren’t enough, royalties from state lands in New Mexico go to an investment fund that’s dedicated to education, she said.

The oil industry has argued that most production on the New Mexico side of the Permian Basin happens on federal land, where the royalty rate is 12.5 percent. And while some land in Texas may have higher royalty rates (most production in Texas is on private land), drillers in Texas don’t pay a corporate income tax.

“Five percent is enough to push you to federal land or to Texas,” Robert McEntyre, a spokesman for the New Mexico Oil and Gas Association, said of the proposed royalty increase.

‘Best deal for our land’

Perhaps most importantly for legislators, the oil industry is one of the few bright spots in New Mexico’s economy. New Mexico is running a budget surplus this year, largely due to the Permian Basin oil boom.

State Rep. Antonio “Moe” Maestas, a Democrat from Albuquerque who chairs the House Commerce Committee, said in an interview before Friday’s vote he’d like to review New Mexico’s whole tax structure related to oil and gas. But for now, he said, “Members are cautious about doing anything that will add uncertainty or create disruption.”

Despite the setback on the royalty bill, Garcia Richard said she’ll continue to press for more oil and gas revenue and for other changes, like boosting renewable power on state land.

“I am just getting started on my effort to get the best deal for our land,” she said in a statement.

The vote on the royalty bill won’t affect Lujan Grisham’s broader energy program, Tripp Stelnicki, the governor’s communications director, said in an email.

“New Mexico under Gov. Lujan Grisham will lead in establishing comprehensive mitigation policies and also transitioning to clean energy as responsibly and expeditiously as is possible,” he wrote.

But others aren’t as confident. New Mexico’s short legislative session — 60 days this year — makes it difficult to pass bills under the best circumstances, said Matthew McQueen, the Democratic chairman of the House Energy Committee.

And Republicans aren’t inclined to negotiate. State Rep. James Townsend, who represents Eddy County in the Permian Basin, said Democrats seem determined to punish the oil industry.

“I haven’t had a single Democrat come to me and ask about these bills,” he said.

The bill to ratchet up the state’s renewable portfolio standard, S.B. 489, may stand a better chance, said Joe Monahan, a blogger in Albuquerque who’s followed the Legislature for more than a decade.

Environmentalists did a lot of homework after a similar bill died in 2017 and have come into the session with “a head of steam,” Monahan said.

If the bill fails this session, the governor can call a special session or order the Legislature to revisit the topic next year.

Lujan Grisham’s administration is already working on a plan to reduce methane emissions from the oil and gas industry. Two state agencies — the Department of Environment and the Department of Energy, Minerals and Natural Resources — are holding talks and could float a proposal by this fall.

Even with the uncertainty of the legislative session, green groups say they’re far more optimistic than the previous eight years under Republican Gov. Susana Martinez.

“I’m hopeful,” said Jim Mackenzie, co-coordinator for 350 New Mexico. After a pause, he added, “I’m not clairvoyant.”