New Mexico governor unveils ‘all of the above’ energy strategy

New Mexico Gov. Susana Martinez on Sept. 14 unveiled a sweeping new energy policy and implementation plan for the New Mexico, entitled: “Seizing our Energy Potential: Creating a More Diverse Economy in New Mexico.”

Among other things, the blueprint calls for an “all of the above” approach to energy development that promotes the production of all sources of energy as a means of creating jobs, diversifying a key sector of our economy, and supporting our nation’s efforts to achieve energy independence. The encouragement of coal exports is recommended in the report, in part as a way to compensate for in-state coal unit shutdowns.

“New Mexico is one of the most energy-rich and energy-diverse states in the nation, and we have an excellent opportunity to utilize this position to grow our economy and create more jobs,” said Gov. Martinez. “Improving our energy infrastructure, responsibly developing and producing energy of all types, and better preparing our workforce for the needs of our energy sector are all critical components not only of a strong economic future, but of helping lead America to energy independence.”

New Mexico’s 2015 Energy Policy and Implementation Plan is the first comprehensive energy policy for the state in nearly 25 years. Key components or initiatives within the plan include:

  • Improving New Mexico’s Energy Infrastructure – From new rail lines to improved electric transmission, the state can better move energy and products to markets in Southwest and Southeast United States, and into Mexico and other global markets. In particular, rail from the Four Corners region to I-40 would reduce the cost of transporting coal, crude oil, and agricultural and other non-energy products from northwest New Mexico to markets throughout the state and beyond. Such improvements would also allow materials for energy production to be brought into New Mexico at a lower cost to producers. And as New Mexico’s port at Santa Teresa becomes a key corridor for trade between the U.S. and Mexico, opportunities exist to move New Mexico natural gas into Mexico, which creates new demand for an energy resource that has recently been in oversupply.
  • Promoting Greater Production of ALL Sources of Energy, Especially Low-Carbon Sources – An “all of the above” approach to energy development contemplates identifying and overcoming barriers to production that undoubtedly exist in each sector of the state’s energy economy. This may include exploring new energy storage options which would expand opportunities for wind and solar power. Also, reducing certain “soft” costs associated with solar production, or spurring greater demand for natural gas through the use of tax credits to incentivize natural gas refueling stations and the purchase of natural gas vehicles. At a much larger level, the plan also contemplates building upon New Mexico’s current renewable portfolio standard by establishing a low-carbon energy portfolio standard that would dramatically improve air quality by stimulating production of all types of low-carbon, cleaner energy sources.
  • Improving Energy Workforce Training at Higher Education Institutions – The energy sector has growing workforce demands that range from highly skilled to entry-level positions. Many jobs in the energy industry require science and technology training from the “STEM” (science, technology, engineering, and math) disciplines.
  • Reducing Fresh Water Consumption in Energy Production Processes – This plan will mark the first time that water and energy planning have been combined in New Mexico. Recommendations for a renewed focus on water re-use and conservation include using non-potable water in energy production and exploring opportunities to recycle water already utilized. New Mexico is home to significant reserves of brackish water, and more must be done to make utilizing this water resource more cost-effective.
  • Streamlining Regulatory Processes – Removing unnecessary burdens on energy industry operations will generate greater production, growth, and investment. For the oil and gas industry, this requires the state to assert itself as a primary regulator and work with other permitting entities with land ownership apart from the State of New Mexico to attempt to standardize forms and processes to the greatest extent possible. For newer energy technologies, it requires the state to monitor regulatory obstacles and increase clarity in permitting processes as the technology develops.
  • Exploring, and Potentially Seizing on, New Energy Opportunities – As technology improves and global demands for various types of energy shift over time, New Mexico must be prepared to take advantage of new opportunities. For example, new energy storage and battery technologies offer great promise for the capture and more efficient use of energy resources, and small modular nuclear reactors could one day provide a substantial amount of reliable and clean power to jurisdictions throughout the state. And, as the demand for coal in New Mexico wanes, opportunities to export coal in collaboration with the Navajo Nation to North American, European and Asian markets must be pursued.

“Energy produced in New Mexico is not only essential to powering our daily lives – it also provides essential revenue that supports our schools, hospitals, local governments, and communities,” said David Martin, Secretary of the Energy, Minerals and Natural Resources Department. “As the fourth highest net energy producing state in the country, we owe it to our state’s future – and indeed, our nation’s future – to expand our role as an energy leader.”

Clean Power Plan, California climate policy cited as issues for New Mexico coal

Notable is that New Mexico has a relatively low-Btu coal that has not generally been attractive to customers outside the state, except for in adjacent Arizona. The dominant non-captive producers of coal in the state are the Lee Ranch and El Segundo surface mines of Peabody Energy (NYSE: BTU). Much of New Mexico’s coal output is captive to a particular power plant, with no capability to get the coal onto rail for outside markets, like with the San Juan mining operation located next to the San Juan power plant.

Said the plan about coal: “In New Mexico, the coal mining and coal-fired power generation industries are under pressure on several fronts. The Environmental Protection Agency’s 111(d) rule, which sets carbon dioxide emissions targets for states from existing electricity generating units, is foremost. This rule has major implications for the power sector. California’s decision to end the purchase of coal-generated electricity in 2014 is also eroding the market base for New Mexico–supplied power from the San Juan Generating Station and Four Corners Power Plant, as well as for New Mexico–coal supplied power plants in Arizona.

“As electric utilities reduce coal consumption because of regulatory cost and transition to non-solid fuels, it is necessary to investigate alternative markets for coal, or find other means to support the economies of communities that host coal mines and coal-fired power plants. Within the coal sector, possibilities include converting coal to liquid fuels or gases, adopting clean coal technologies, and international coal exports. Coal-to-liquids is technically possible, but not cost-effective at current low natural gas prices. U.S. Department of Energy support for large-scale clean coal projects is also waning.

“Carbon capture and sequestration at power plants is not economic and is not anticipated to be until 2020 at the earliest, though there have been encouraging applications of carbon capture at industrial facilities and use in enhanced oil recovery operations. The most promising pathways for coal-producing communities are to export coal or find alternative economic activities to support jobs and revenue.

“San Juan Basin coal could be transported to foreign markets, including the European Union and Mexico, if an infrastructure project to extend freight rail service to San Juan County were realized. Transportation costs and quality ranking indicate that New Mexico coal could not compete in Asian markets.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.