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Biden Energy Policies Will Make Blue New Mexico See Red

The following appeared at National Review’s website on December 1, 2020 6:30 AM

The former territorial governor of New Mexico (and author of Ben Hur) Lew Wallace once said, “Every calculation based on experience elsewhere fails in New Mexico.”

In so many ways Wallace was prescient about this beautiful, poor, and utterly unique state in the American Southwest. One “calculation” about modern politics that would perplex Wallace is the fact that a relatively poor, but oil-rich Western state elects politicians that are so directly at odds with its economic best interest.

After Texas and North Dakota, New Mexico is the 3rd– state in the US. The oil and gas industries combine to generate Furthermore, New Mexico’s oil and gas resources are heavily concentrated on lands managed by the federal government. The central role of energy, especially energy extracted within New Mexico’s borders and controlled by federal policymakers, might lead one to believe that New Mexicans would vote for pro-energy Republicans in federal elections.

Instead, New Mexico has become a safely blue state. It narrowly went for George W. Bush in 2004, but since then has gone for Democrats by wide margins. The situation is even more stark at the state level where Democrats have had “trifectas” (total control of both houses and the Governor’s mansion for 60 of the last 90 years. The GOP hasn’t had such governing authority in the State for a single year since 1931. Also, despite significant turnover, New Mexico has not elected a Republican to the US Senate since Pete Domenici retired in 2009. In 2020 Biden won the State 54.3 percent to 43.5 percent despite the very real fact that President Trump’s pro-energy policies were a boon to the New Mexico economy and the Biden Administration’s energy policies represents nothing less than a dagger aimed at the heart of New Mexico’s economy.

That “dagger” comes in the form of numerous, sometimes clear, often conflicting statements, candidate Biden made during the campaign. It is unclear what Biden will do regarding hydraulic fracturing or “fracking” which enables oil and gas producers to access previously-inaccessible oil and gas sources. He backed away from an outright nationwide ban late in the campaign. However, Biden has clearly stated that he would ban new gas and oil permits — including fracking — on federal lands.

Targeting federal lands would devastate New Mexico’s oil and gas industry and its economy due to the State’s large federal estate within its borders. According to the Institute for Energy Research, federal land represents 34.7 percent of the land in New Mexico. In fiscal year 2019, New Mexico received energy-related disbursement (from the federal Bureau of Land Management) at $1.17 billion, the highest payment made in any state (Wyoming was next with $641 million, and then Colorado on $108 million) This was the highest payment from the BLM in the state’s history and compares with $455 million in FY 2017. A vast majority of this increased revenue is due to the use of fracking.

Furthermore, data from the Global Energy Institute indicate that if energy production on federal lands were banned, New Mexico would lose 24,300 jobs (10,000 direct, 14,300 indirect and induced), a significant hit for a state with a workforce of around ). Making matters worse, a good number of the ‘direct’ jobs lost are good-paying, something that is not easy to find in New Mexico, a state that consistently ranks among the poorest in the nation and has been hard-hit by the  Closing New Mexico’s federal lands to energy production entirely  cost the State $496 million in annual royalty collections, representing eight percent of the state’s total General Fund Revenues.

Biden’s proposed fracking ban is even too much for New Mexico’s Democratic Governor Michelle Lujan Grisham has said she’ll ask for an exemption from any future drilling ban. Acknowledging the tax revenue contributions to education funding, Grisham explained to the New Mexico Oil and Gas Association conference in Santa Fe last October that “without the energy effort in this state, no one gets to make education the top priority.”

Far from being an opponent, Lujan Grisham, a Democrat, is broadly supportive of Biden’s energy policies. Both of them have stated that they would like to “transition out of fossil fuels” despite New Mexico’s financial dependence on the Industry.

Biden’s aggressive anti-fossil fuels stance as relates to federal land not only puts him at odds with New Mexico’s Democratic governor (who is also on the short list to join his administration), it puts him far to the left of President Obama on the issue. In a 2012 presidential debate, Obama  stated, “We’ve opened up public lands.  We’re actually drilling more on public lands than the previous administration… And natural gas isn’t just appearing magically; we’re encouraging it and working with the industry.”

President Obama was of course considered an environmentalist by political opponents and supporters alike. His support for natural gas right isn’t difficult to reconcile with his environmental track record. That’s because (when used in a new power plant) natural gas emits CO2 at rates from 50 to 60 percent  than does coal.

Obama understood the vast benefits of natural gas, including the fact that it was appropriate to drill for it on federal lands. During his tenure, from approximately 21 million cubic feet to more than 28.4 million cubic feet.

If he truly cares about the environment, Biden would be wise to follow his predecessor’s playbook. According to the EPA, more natural gas meant net greenhouse gas emissions went down by 10 percent  from 2005 to 2018.  But if natural gas prices rise – and a ban on federal leasing is likely to contribute to higher prices, this  positive developments could go into reverse.  The Energy Information Administration recently projected that higher natural gas prices would cause coal’s share of power generation to increase from 18 percent to 22 percent in 2021.

Obama also signed into law legislation that ended the US government’s restrictions on crude oil exports back in 2015.

During the campaign Biden faced tremendous pressure from the left wing of his political base to come out for policies like the Green New Deal and bans on fracking and other fossil fuel based energy production. Biden has never been associated with such hard-left stances against economic policy and growth in the past. As noted above, even Obama is to the right of where Biden campaigned.

Hopefully President Biden has a more realistic approach to energy than did candidate Biden. New Mexico’s economic future is at stake, but so is the recovery of our nation’s virus-hobbled economy.

Rather than instituting a blanket ban on production of oil and gas on federal lands, a better approach would be to recognize the benefits, and work to make sure that any production is handled responsibly and safely. The growing American energy sector and American energy independence have delivered wins for the environment, for consumers, and for the US and state economies like New Mexico’s. Let’s keep it that way.

Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility

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Time for an update on Michelle Lujan Grisham’s MPG mandate

The following appeared in the Farmington Daily-Times on October 7 and several other newspapers.

Recently, California Gov. Gavin Newsom made headlines with his announcement that by 2035 his State will ban the sale of gas-powered vehicles. That is an ambitious goal, but given the time line, it is hard to say what compliance will look like.

But for another, arguably even more ambitious car mileage proposal, one need look no further than New Mexico. Las September New Mexico Gov. Lujan Grisham announced that by just model year 2022 New Mexico would be increasing its fuel economy requirement for new cars to 52 MPG. The current average fuel economy rate is 25.1 MPG according to the EPA. 

As we noted at the time, Gov. Lujan Grisham (at the time) had “out California-ed California” by adopting even more stringent fuel economy standards than those on the books in California.

Will California’s decision spur Lujan Grisham to action? Perhaps more importantly, is New Mexico REALLY going through with the Gov.’s 52 MPG standard? This was put forth at a time of a record (oil-driven) economic boom in New Mexico. That boom has evaporated thanks to COVID 19 and the Gov.’s lockdown of the State’s economy. She MAY not be as enthusiastic about such radical plans at a time of serious economic challenges.

If you’re expecting to find legislation on this topic from the 2020 legislative session, don’t worry, nothing was even introduced. We have never even seen a formal executive order from the Gov. formalizing this requirement. In fact, after the initial round of media discussion (led off by the New York Times) the issue has been completely forgotten about.

And just to be clear, if the Gov. completely backed away from her plan, we would be more than happy to support such a move. The number of automobiles on the market right now that achieve such a standard is limited to about a dozen or so hybrid models. Considering that “light trucks” now account for 69 percent of the new car market, getting to that 52 MPG average is going to require one or more of the following:

  1. Unforeseen, drastic changes in automobile purchasing patterns among New Mexicans result in few trucks and more fuel-efficient vehicles being purchased;
  2. Massive taxpayer subsidies will have to be handed out to support the purchase of small/hybrid vehicles and massive taxes will be levied on larger vehicles and trucks.
  3. Large numbers of New Mexicans purchasing their vehicles in neighboring states and bringing them home (thus devastating New Mexico car dealerships and the State economy).

As much as our Governor desperately wants to virtue signal to radical environmental groups who so strongly support her, attaining 52 MPG is simply not realistic by 2022. California’s Gov. at least had the good sense to impose his regulations long after he will be out of office, but unless Biden wins the White House and picks her for a position in his Administration, she will have to make some hard decisions about whether to comply with this mandate (or not).

Perhaps it is already a forgotten promise that she never intended to honor in the first place? If so, that is certainly fine with us, but it would seem that New Mexicans should be given an honest explanation so they know what to plan for or expect the next time they walk into a car dealership.

Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility

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RGF recent radio appearances

This has been a big week for the Rio Grande Foundation on the air. Paul recently sat down with Bob Clark of KKOB 96.3FM. You can find that show here. Bob and Paul discuss numerous topics from the death of Ruth Bader Ginsburg and her legacy as well as well as Paul’s family’s efforts to home school their children.

Paul also sat down with Jim Williams at KNKT Radio 107.1 FM. We discussed numerous issues in their discussion. You can listen to that discussion at the link above or by clicking on the image below.

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California electricity woes a warning for New Mexico

Electricity and where it comes from is a very “hot” issue these days.

The following appeared in the Las Cruces Sun News on August 23, 2020

As with so many political issues of the left, California has put itself on the very edge when it comes to following the green agenda. It should come as no surprise, given the State’s “deep blue” politics, that California has some of the most aggressive renewable energy goals in the United States. As has been widely reported in the media, Californians are experiencing electricity shortages due in part to a heat wave hitting the State.

But, it is not just the heat, it is also the lack of reliability of these “green” power sources. And New Mexico is not far behind when it comes to mandating them. If it continues to follow California as mandated by the Gov., Legislature, and the PRC, we might see some of the very same problems as California has.

In California the law requires utilities to obtain at least 33% of its electricity from renewable resources. New Mexico is currently at 20% “renewable” but the Energy Transition Act (passed in 2019) requires 50% carbon-free electricity by 2030 and the Public Regulation Commission just required PNM to go with 100% “renewable” electricity in the future.

Will battery technology improve enough by the time New Mexico’s mandates are fully implemented to avert what is happening right now in California? PNM strongly supported the Energy Transition Act and its “renewable” mandates, but they have expressed concerns about grid reliability  as the PRC pushes them to embrace 100% “renewable” electricity generation. Only time will tell how that works out for PNM and its ratepayers, but how about El Paso Electric which serves Las Cruces?

As of December 2017, El Paso Electric’s generation mix was 36.6% natural gas and 48.7% nuclear with only 2.8% of their overall mix coming from “renewables.” The balance comes from various fuel sources and falls into the category of “purchased” power the exact provenance is not explained to the public.

The point is that El Paso Electric is going to be in for a massive shift in power generation sources in advance of the 2030 requirement that half of their power comes from “renewables.” And, while nuclear is “zero-carbon” and in many ways the most environmentally-friendly source of electricity, that is not how the radical environmental-left sees it.

In fact, given dim view of nuclear power on the part of radical environmentalists, it would seem likely that El Paso Electric could be forced to replace more than 3/4ths of its electricity generation within the next two decades. That is going to be expensive from a ratepayer perspective. California, a state with an ideal climate and many energy generation options, has some of the highest electricity rates in the nation with just 33% of its electricity coming from “renewables.”

As the mandated “renewable” percentage goes up, reliability and affordability will be increasingly problematic for both California and New Mexico ratepayers. As we have seen this summer in California, reliability becomes a challenge long before the 100% “renewable” targets kick in. Getting a steady supply of electricity produced at reasonable prices to customers when they want it may look easy, but it isn’t.

El Paso Electric actually has a rather “green” electricity generation portfolio that relies heavily on zero-carbon nuclear and natural gas which has half the CO2 emissions of coal. This was driven by mostly market decisions, not government mandates. Those “green” credentials will likely not placate the “environmental” movement and it will be Las Cruces ratepayers and the reliability of their power grid that take the hit.

For further information on California’s lighting regulations, click here.

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Rio Grande Foundation Policy Brief: On Balance Evidence Points to Appointed Public Regulation Commission

(Albuquerque, NM) – New Mexico’s Public Regulation Commission (PRC) has been at the center of a number of momentous and controversial issues (particularly the Energy Transition Act) in recent years. But bi-partisan momentum exists for reforming the powerful regulatory body and a Constitutional Amendment will be on this November’s ballot which will transform the PRC into a three member body appointed by the Gov.

Is this a good move? What evidence exists from other, similar regulatory agencies? In his new Issue Brief “Should the Governor Appoint PRC Commissioners?” which analyzes the issue and brings evidence from other states into the discussion, the Rio Grande Foundation’s Adjunct Scholar Kenneth Costello discusses the issue and offer his recommendations.

Ultimately, Costello concludes, “While it was not a “slam dunk,” the finding of this brief is that a three-member PRC appointed by the Governor, with input from the nominating committee, would be best for New Mexico.

His arguments in favor of the Constitutional Amendment include: the current Commission size of five commissioners is too many, moving to an appointed model would lead to better-qualified members on the Commission, and appointed commissions have a bigger pool of applicants than the relatively limited number who would run for office.

At the Rio Grande Foundation we expect to disagree regularly with the measures taken by the PRC (the decision to adopt a 100% “renewable” electricity portfolio is only the latest). However, those are often philosophical issues handed down by the Legislature for the PRC to more fully vet and implement.

Ultimately, given the choice between a five member elected PRC and a three member appointed body, the three member commission is the most sensible.

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Understanding the Rio Grande Foundation

The Rio Grande Foundation often comes under criticism from the left. But sometimes we come under fire from the right as well.

For starters we are designated as 501c3 “education and research” think tank. We don’t make endorsements and we don’t “carry water” for any political party or politician. Various media outlets have called us libertarian, conservative, and free market. We call ourselves “free market,” but we don’t waste our breath and time arguing the finer points of ideology because we believe that our work is self-explanatory.

For starters, New Mexico is a deeply challenged state. We believe that a vast majority of these issues are self-inflicted. New Mexico lacks economic freedom and remains poorer and less well educated than our neighbors. We also spend a VAST majority of our time focused on state and local issues as opposed to federal ones.

Those issues broadly include:

  1. Size of Government: New Mexico has long been a state driven by government. Data show that state/local spending is too high and that government regulations make doing business in New Mexico less attractive than doing business elsewhere. We’ve worked on this issue from all angles including: all forms of taxation, subsidies and corporate welfare (notably film subsidies), but also LEDA, JTIP, and “green” subsidies.
  2. Regulation: Rio Grande Foundation has led the charge for “right to work” repeal of NM’s”Davis-Bacon” law, reform of government employee pensions, and against numerous “nanny state” regulations like plastic bag bans. We have also done extensive work against “green” programs from the Energy Transition Act to costly “green” building codes.
  3.   School Choice/Education Reform: Across the political spectrum New Mexicans agree that our K-12 system is failing. While politicians of both parties typically opt for some combination of more money, more time in school (pre-K), and some form of top-down accountability, the Rio Grande Foundation believes that parents and (to an extent students themselves) are better able to decide on the educational options that appeal to them. Charter schools are a good start and should be expanded, but more options are needed.

Additionally, the Rio Grande Foundation supports the US and New Mexico Constitutions, we stand up for free speech, gun rights, private property, and open government.

We don’t take on immigration, gay rights, or abortion issues.

So, there you have it. We at the Rio Grande Foundation have our plates very full, but we are making a difference in New Mexico every day. If that appeals to you, please consider making a tax-deductible donation today!

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Talking New Mexico Budget/2020 session/Oil and Gas Downturn w/ Fred Martino on KRWG

RGF president Paul Gessing recently sat down with Fred Martino of KRWG TV in Las Cruces to discuss the aftermath of the 2020 Legislature and how things will likely shake out in the wake of the Coronavirus situation and the rapid decline in oil and gas prices.

 

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New Mexico’s legislative defenders of Freedom

Who in the Legislature voted in favor of freedom and personal responsibility in 2020? We tracked it all on our Freedom Index and you can find out for yourself by clicking the link and plugging in your address (if you don’t already know who your legislators are). While 2020 was another tough year in terms of government spending and taking our freedoms, here are a few of the points of light in the Legislature. We’ll be highlighting a few of the best and worst from this session in the days ahead.

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Electric Vehicle Tax Credit Would Further Divide New Mexicans

When Governor Michelle Lujan Grisham announced the formation of two tax advisory committees in the fall, she said they would “study the state’s tax system and recommend changes to ensure fairness, efficiency and equity.” Legislation to create an electric vehicle (EV) tax credit (such as Senate Bill 2 and House Bill 217), however, will have the opposite effect and make New Mexico’s tax code less efficient and more unbalanced.

If passed, the legislation would create a $2,500 tax credit for the purchase or lease of an electric vehicle, and another $300 giveaway for an at-home charger. This initiative, like similar policies at the national level, will function as a special interest carve-out for wealthy residents living in urban areas and only further alienate rural parts of the state.

Electric vehicle subsidies will benefit wealthier residents. Congressional Research Service data shows that nearly 80 percent of the federal EV tax credits are claimed by people who make over $100,000 per year. Both bills attempt to prevent the disparity in New Mexico by offering a higher credit for lower income buyers, but with an average price of $55,600, most electric vehicles would still be out of reach for many in our state where 400,000 receive federal food assistance.

In addition to tipping the scales toward high earners who can afford to buy cars without a tax credit, EV tax credit legislation also favors New Mexicans in urban areas. Of the 53 public charging stations in New Mexico, 39 are in the Albuquerque/Santa Fe area. The remaining 14 are scattered throughout our massive state, putting residents of the majority of New Mexico at a disadvantage. Designating more money for public charging and issuing $300 for home-charging investments aims to correct the problem, but it’s a solution that won’t work for a lot of people.

Beyond that, electric vehicles are also an impractical choice for thousands of farmers and ranchers who rely on their pickups to haul livestock and equipment, often in extreme temperatures. Many others rely on their vehicles to do jobs that electric vehicles simply aren’t cut out to do.

According to a just-released study by the non-profit Road Improvement Program, a nonprofit research organization, “more than half of major locally and state-maintained roads are in poor or mediocre condition,” which is costing us as much as $2,114 per driver.

Electric vehicle ownership only exacerbates the problem, because unlike other cars, EVs do not pay into our state’s road repair fund or the federal Highway Trust Fund, even though they contribute to wear and tear on our roads. Both EV tax credit bills would impose an annual registration fee on electric vehicles, but that falls far short of the $500 a typical New Mexico family pays in federal and state gas taxes each year.

Even without the subsidy, New Mexicans around the state are already subsidizing wealthier electric vehicle owners in Santa Fe and Albuquerque. If EV tax credit legislation passes and succeeds in its goal of putting more electric vehicles on the road, it will further tip the scales way from rural communities.

Coming on the heels of a 33-percent increase in New Mexico’s vehicle sales tax — which was supposed to fund road projects — it’s counter-productive to now consider providing tax refunds to the few people who can afford electric cars and to charge them less for infrastructure upkeep.

Electric vehicles have struggled to take off in New Mexico for reasons unrelated to federal or state subsidies. Fewer than 1,000 electric vehicles were sold in our state in each of the last two years, even with a federal incentive of up to $7,500. Adding a $2,500 rebate isn’t going to make our state more electric. Our policymakers have already hinted that they may follow in California’s footsteps and mandate that a minimum percentage of all state vehicle sales need to be electric. An electric vehicle tax credit is an ineffective and unfair precursor to that sort of extreme policy making.

 

 

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New environmental law would cripple New Mexico

The following article appeared in the Las Cruces Sun-News on December 23, 2019.

Times are tough for New Mexican business owners — and government regulations aren’t helping.

At a recent town hall meeting in Farmington, attendees worried that new state rules would harm small oil and gas firms. The owner of one such firm said that these regulations put him “on a death train, economically.”

These folks could soon face an even bigger threat, this time from Washington. Congress is considering the Methane Waste Prevention Act, a plan to reduce the amount of the potent greenhouse gas emitted from oil and gas wells.

Reducing methane emissions is an excellent idea, but this plan misses the mark. This bill would do little to help the environment. And it would drown New Mexico’s energy firms in red tape, robbing the state of crucial economic benefits.

This bill takes a one-size-fits-all approach to methane reduction. It would require all energy producers operating on federal and tribal lands to recapture 85 percent of methane their operations release within three years, and 99 percent within five.

That means small energy producers operating on Navajo tribal lands have to meet the same target as ExxonMobil’s $5.6 billion operation in Lea County. That doesn’t make sense — especially considering firms of all sizes already recapture methane.

After all, methane is a major component of natural gas. Recaptured emissions can be converted into valuable energy and sold to consumers. Firms don’t need regulations to tell them that.

That’s why America’s leading oil and gas companies formed the Environmental Partnership to share best practices on reducing leakage and waste. Thanks in part to industry-led efforts like this, methane emissions from natural gas dropped 14 percent between 1990 and 2017, even as natural gas production increased by more than 50 percent.

The Methane Waste Prevention Act does nothing to bolster these efforts. Its bevy of regulations could actually make it harder for the industry to continue its successful methane reduction strategies.

These new regulations would also raise costs on energy firms. For instance, increasing the mandatory comment period that accompanies applications for new oil and gas operations would cost companies hundreds of millions of dollars in compliance costs each year. That could put many small firms out of business. One report found that a proposal like this could lead to the closure of up to 40 percent of wells on tribal and federal lands.

Such closures would be devastating for our state. In 2017, the energy industry funneled over $820 million to New Mexico public schools and over $240 million to state colleges and universities. All told, revenue from oil and gas firms makes up over 14 percent of the state economy and supports more than 100,000 jobs.

If New Mexican oil and gas operations shut down, our state will lose this crucial revenue source. Just a 1 percent decline in royalty payments from these firms would cut millions of dollars in revenue the state could spend on schools, roads, and health care.

Undermining New Mexico’s energy industry would also compromise national security. Our state’s energy-rich Permian Basin plays a major part in making the United States the world’s largest producer of oil and natural gas. Our domestic energy supply has reduced our reliance on oil from Russia, Venezuela, and hostile nations in the Middle East.

The Methane Waste Prevention Act would compromise this progress, and force us import energy from hostile nations. It would also increase global methane emissions, since oil-rich countries around the world have subpar environmental regulations.

Domestic energy production supports New Mexico’s economy, keeps America safe, and protects the environment. The Methane Waste Prevention Act would compromise all three. If Congress wants to reduce methane emissions, they need to find a better plan.

Paul Gessing is president of the Rio Grande Foundation.