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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.

 

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What’s wrong with the ETA?

The following appeared in the Santa Fe New Mexican on August 3, 2019. More details on Mr. Costello can be found here.

I have written and studied electricity markets and regulations for almost 40 years. As a New Mexico resident, I have some deep concerns about the Energy Transition Act, which passed the Legislature this year and is now being implemented.

The San Juan Generating Station in the Four Corners will be shut down in 2022 and hundreds of megawatts of natural gas electricity generation will be shut down in the years ahead as part of an effort (under the legislation) to be 50 percent “renewable” by 2030.

Instead of the ETA, what New Mexico needs is a rational dialogue on new technologies. This discussion has not taken place because politically powerful interest groups including environmentalists, unions and the Public Service Company of New Mexico — the “iron triangle” — got together to stick it to ratepayers who don’t have a real voice in Santa Fe.

One example is those groups that regard anything less than a maximum effort to address climate change as morally objectionable and a social injustice. This obsession with climate change can threaten other policy objectives, like reasonable and stable rates, economic growth and reliable electric service. We should not be dumbfounded if this happens in New Mexico.

What we know for sure is that the ETA won’t have any detectable effect on climate change. No state action — even in California, let alone in New Mexico — would accomplish much in reducing global temperature. This means that politicians and other ETA advocates are asking — more accurately, forcing — New Mexicans to squander their money on something that would have almost next to zero benefits from reducing climate change.

Surely we can find better ways to spend our money. Supporters of the ETA talk about social justice in terms of our obligation to future generations to combat climate change. What about the obligations to the current generation? Especially troublesome is the effect on low-income households that will be forced to pay higher electricity prices and suffer less reliable electricity service because of a government action pushed by those who want to promote their agenda.

The ETA represents classic rent-seeking, namely a “sweetheart deal” where certain groups leverage their political clout in gaining governmental favors at the expense of the general public. It guarantees PNM recovery of its costs as long as it complies with the act, and it appeases environmentalists by subsidizing wind and solar to replace fossil fuels such as reliable, affordable and abundant natural gas.

To wit, the act requires the majority of PNM’s customers to fund the advancement of social objectives through inflated electricity rates without compensatory benefits. Here we are talking about the socialization of costs for nontraditional utility activities, like assisting displaced workers or advancing technologies that are not cost-effective, that benefit only a distinct few. In a nutshell, that is the ETA.

The Energy Transition Act is also anti-consumer by eroding the authority of the Public Regulation Commission to disallow from rates PNM’s imprudent costs. This shift toward cost-plus regulation diminishes the incentives of PNM to minimize its costs in serving its customers by creating a “moral hazard” environment: PNM has little or no financial risk, yet it manages the assets and makes critical decisions that affect risk. This means less consumer protection from PNM’s monopoly power. New Mexico needs stronger consumer advocacy to protect electricity consumers from legislation like the ETA.

Energy policies generally overstate the problem being addressed, fail to recognize the role of market dynamics in mitigating the problem and understate the cost of policy initiatives — for example, the costs of mandating renewable energy and subsidies. The ETA has all of these defects, which have the effect of dragging down the New Mexico economy in the coming years.

Advocates perceive the Energy Transition Act as one of those energy acts where everyone stands to benefits and no one loses. Well, like most things, there are two sides. The side that ETA advocates shoved behind the curtain portrays a government action that not only has blemishes but warts that will likely inflict long-term harm to New Mexico.

Ken Costello is an adjunct scholar on energy policy with 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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NM should fully embrace its energy renaissance

New Mexico’s energy workers have almost single-handedly reshaped global oil markets. Oil field workers have pumped so much petroleum and natural gas from the Permian Basin, which runs through southeast New Mexico and southwest Texas, that America recently became a net oil exporter for the first time in decades.

Oil production in New Mexico has nearly tripled since just 2012 to a quarter of a billion barrels. This boom is just getting started. Oil production in the Permian is set to double again by 2023. It’ll account for 60 percent of the entire global increase in oil production. New Mexico is now the third largest oil producer in the country.

We’ve also become a top natural gas producer, accounting for about 4 percent of all domestic production.

Only one thing stands in the way of greater riches for New Mexicans — politicians who oppose the infrastructure needed to bring this oil and natural gas to market. Energy firms are rushing to build more pipelines. But State leaders increasingly oppose such infrastructure. Just last month, two Democratic members of our congressional delegation called for more burdensome regulations on New Mexico’s energy firms.

Such obstruction makes no sense. Building more energy infrastructure would enrich New Mexicans – and help us share our affordable, clean energy with the rest of the country.

The U.S. Geological Survey recently estimated the Permian Basin contains 46 billion barrels of oil and 281 trillion cubic feet of natural gas, making it the largest energy reserve in America.

We’ve been quick to develop it. Seemingly overnight, companies have transformed empty deserts into bustling micro-cities, with rigs, roughnecks, and truckers working all day and night.

The enormous wealth generated by our energy boom has benefited virtually all New Mexicans. Oil and gas support 100,000 local jobs. And the taxes, fees, and other government charges on energy operations have been transformational for the public budget, producing over $2 billion every year and accounting for a full third of the state’s general revenues.

Other states and nations are eager to purchase New Mexico-produced oil and gas. But they can’t do so unless we increase our pipeline capacity.

Currently, the infrastructure for turning the Permian bounty into commercial products — the rigs, roads, pipelines, and refineries — is relatively limited. Private developers are pouring investment into new infrastructure projects, including the recently opened Grand Prix Pipeline, which, once it hits full capacity, will transport up to half a million barrels of natural gas liquids every day from Lea County to Oklahoma and the Gulf Coast.

We need more investments like this. But they won’t materialize if politicians throw up roadblocks and push for onerous regulation on energy firms.

Revamping our energy infrastructure wouldn’t just funnel affordable energy to other parts of the nation — it’d also bring environmental gains to the rest of the world.

How so? For decades, many of America’s power plants ran on coal, a carbon-dense energy source.

But thanks to the recent production boom, natural gas prices have plummeted. Natural gas is now much cheaper than coal — and it’s also much cleaner, producing about 50 percent fewer emissions when burned.

New Mexico’s power plants have increasingly switched to natural gas. The fuel now accounts for a full third of our state’s electricity. Other states have witnessed a similarly dramatic shift.

Natural gas has helped drive U.S. carbon dioxide emissions to 20-year lows, even as global emissions jumped 50 percent since 1990. Sharing our natural gas widely could reduce emissions on a global scale.

New Mexico has emerged as one of the leading oil and gas producers not only in the United States, but in the world. Private industry can help New Mexicans reap the full rewards of our unprecedented energy bounty — as long as politicians get out of the way.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, 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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Albuquerque City Government Bag Ban Contradicts Own Goals

Radical environmentalists and (especially the politicians they elect) have a funny way of enacting policies that contradict each other. Take New York City Mayor DeBlasio’s desire to eliminate “steel and glass buildings.” But, as one green website notes, “About 77% of people in New York do not even own a car! This is the biggest reason for their notable eco-friendly ways, but there is more. New Yorkers have a lower electricity average than America as a whole.

So, those tall buildings allow for the density necessary so people can walk or take transit to work and whatever the merits of those “glass and steel” buildings, the City as a whole uses less electricity than most.

Then take the City of Albuquerque’s soon-to-be-implemented ban on so-called “single-use” plastic bags. Those bags are reused at least once 90% of the time, often for the purpose of collecting pet waste to keep said waste out of our river (thanks in part to a public campaign underwritten by Bernalillo County).

To make the point and as a means of attempting to spread the message that the City’s bag ban is foolhardy and unnecessary, the Rio Grande Foundation commissioned the following from local cartoonist Rex Barron. Look for more such cartoons in the near future.

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PNM’s zero carbon math problem

Not only did the Public Service Company of New Mexico (PNM) successfully lobby in the 2019 Legislature for a 50% renewable mandate by 2030, it has now put itself on record as saying it’s going to be “zero emissions” by 2040. And one actually neat feature is that at any given time you can find out how much electricity PNM is getting from so-called “renewables.” In looking at it over a few days that amount ranges up to the mid-30% range by day and drops to single digits at night.

Of course, we at the Rio Grande Foundation are highly skeptical of that transition and the costs it will foist on New Mexico rate-payers and we made that argument in committees and in the media during the legislative session. PNM’s website has some interesting graphics regarding the transition. You can find them below. The first shows how they are going to change their electricity portfolio in the decades to come:

Next, we see a chart showing more details. But what we don’t see is the math. That is where we have the problem.

So, we start out -286 MW for the shutdown of units 2 & 3 at San Juan Generating Station.

Add in 50 MW of solar coming online this year and we’re at -236 MW. We subtract another 562 with the total shutdown of San Juan (and we’re at -798 MW by 2022. Another 200 MW comes offline with the shutdown of Four Corners Power Plant in 2031 and we’re -998 MW total.

Finally, PNM wants to eliminate an ADDITIONAL 1081 MW of natural gas generation between 2028 and 2040. So, that means PNM will reduce electricity generation by 2,000 MW of traditional electricity generation between 2017 and 2040.

According to the chart below PNM’s capacity at the end of 2017 was 2,801 so PNM is swapping out more than 70% of its electricity generation and only has specific plans for 50 MW of that total. Of course PNM’s 2040 “zero carbon” goal is NOT synonymous with 100% “renewable,” but even if PNM rapidly ramps up on nuclear power from Palo Verde, where does all that “renewable” electricity come from? We don’t know. More importantly, while PNM claims that “renewables” will be cheaper, real-world experience indicates otherwise.