Bill Aims To Establish Clean Transportation Fuel Standard In New Mexico

January 16, 2024

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by Erin Voegele (Ethanol Producer Magazine) Legislation introduced in the New Mexico House of Representatives on Jan. 3 aims to establish a technology-neutral clean transportation fuel standard (CTFS) that would reduce the carbon intensity (CI) of transportation fuels by at least 30 percent by 2040.

The CTFS would phase in, requiring the CI of transportation fuels used within the state to achieve a 20 percent reduction below a baseline 2018 CI level by 2030, ramping up to 30 percent by 2040. The legislation defines transportation fuel to mean electricity or a liquid, gaseous or blended fuel, including gasoline, diesel, liquefied petroleum gas, natural gas, hydrogen and electricity sold, supplied, used or offered for sale to power vehicles or equipment for the purposes of transportation.

The bill, HB 41, directs the New Mexico Environmental Improvement Board to promulgate rules to implement a CTFS program no later than July 1, 2026. Those rules would, in part, establish technology-neutral mechanisms for generating, obtaining, trading, selling and retiring credits among transportation fuel producers, fuel distributors and other individuals or entities in the transportation fuel market, including additional credit opportunities from activities and projects that support the reduction of greenhouse gas (GHG) emissions associated with transportation in the state.

The Low Carbon Fuels Coalition on Jan. 9 issued a statement in support of the legislation. A primary advantage of the CTFS would be to incentivize cleaner options at the pump, said Robin Vercruse, executive director of the LCFC. “This policy is already proven in other states,” Vercruse added. “Experience shows that the CTFS will result in lower-priced fueling options for consumers when gasoline prices rise due to the latest geopolitical drama, demand spike or supply crunch in the oil market."

Companies already doing business in New Mexico are supporting the legislation, according to the LCFC. “A Clean Transportation Fuels Standard will increase biodiesel availability throughout the state, offering New Mexicans the benefit of price competition and reduced air pollution,” said Jed Smith, chief operating officer of Rio Valley Biofuels, which supplies biodiesel and other renewable fuels to customers in Texas and New Mexico. “Making renewable fuels more readily available lets drivers use cleaner fuels in their existing vehicles, which will be great for the state of New Mexico and the environment.”

Additional information on HB 41 is available on the New Mexico Legislature website. READ MORE

Related articles

Clean fuel standards bill clears first hurdle (New Mexico Political Report)
New Mexico LCFS advances on party-line votes (Argus Media)
Cleaner fuels legislation would spark economic growth for New Mexico from renewable fuels (Low Carbon Fuels Coalition/Adalante Consulting/Carlsbad Current Argus)
New Mexico House Passes Bill To Create Clean Transportation Fuel Standard (Ethanol Producer Magazine)

Excerpt from New Mexico Political Report: Legislation that would enact new standards for gasoline and vehicle fuel in New Mexico cleared its first committee on Saturday.

The Clean Transportation Fuel Standards, HB 41, passed the House Energy, Environment and Natural Resources Committee on a 7-4 party-line vote. It now heads to the House Judiciary Committee.

The bill would require the Environmental Improvement Board to adopt standards that would reduce the carbon intensity of transportation fuels by 20 percent from the 2018 levels by 2030 and 30 percent by 2040.

Those who exceed standards can purchase credits from the clean fuel market. Those credits are sold by entities that generate clean energy and have fuels below the standards. That could include utilities, school districts, renewable diesel companies or public transit districts.

The bill is sponsored by Rep. Kristen Ortez, D-Taos, Christine Chandler, D-Los Alamos., and Sen. Mimi Stewart, D-Albuquerque.

According to the fiscal impact report, HB 41 could lead to increased investments into alternative fuel production as well as distribution infrastructure. That could include gas stations that provide ethanol, hydrogen fuel cells or charging stations for electric vehicles. READ MORE

Excerpt from Argus Media: Democratic lawmakers in New Mexico have advanced a proposed state-wide low-carbon fuel standard (LCFS) through two committees within a week on party-line votes.

New Mexico's Clean Transportation Fuel Standard would target a 20pc reduction in transportation fuel carbon intensity by 2030, from a 2018 baseline, and a 30pc reduction by 2040. The bill has raced through two state House of Representative committee hearings in the opening days of the state's 30-day 2024 legislative session.

Lawmakers carrying the bill have shifted strategies for the concept's fourth consecutive attempt since 2021. Representative Kristina Ortez (D) emphasized credit opportunities for the state's dairy operations to win over rural skeptics, a key stumbling block in previous sessions. This year's bill added cost-containment mechanisms and other ideas from existing programs to address fears about rising retail prices to warnings that New Mexico would lose green investment to other states.

"They are literally driving through New Mexico taking clean fuels to California, Oregon and Washington," Ortez said yesterday in the bill's second committee hearing. "I want to see those clean fuels right here in New Mexico, benefiting New Mexico companies and New Mexicans."

But hours of public comment showed that the program faces continued skepticism from rural constituents more sensitive to fuel prices.

LCFS programs require yearly transportation fuel carbon intensity reductions. Conventional, higher-carbon fuels that exceed the annual limit incur deficits that suppliers must offset with credits generated from the distribution of approved, lower-carbon alternatives. California operates the largest and oldest US LCFS, followed by Oregon and, last year, Washington. Canada last year launched a federal LCFS, while British Columbia continues to operate its older provincial LCFS program.

Unlike the US Renewable Fuel Standard, the LCFS programs do not mandate specific volumes of fuels to meet annual compliance. The additional incentives offered by programs along the west coast helped spur a growing build out of renewable diesel production capacity, including at HF Sinclair's refinery in Artesia, New Mexico. State incentives would attract new fuels and electric vehicle charging infrastructure to New Mexico's smaller transportation fuel market. Bill supporters include Chevron, ExxonMobil and Neste, as well as national environmental organizations and the American Biogas Council.

Republicans in both committees have questioned the likely cost of the program, predicting California retail fuel prices for New Mexico drivers. Proponents have repeatedly stated through the hearings that an LCFS does not increase fuel costs, but used as evidence studies that show that the LCFS credit markets have no correlation to gasoline markets.

"Nobody knows how gasoline pricing works — it goes into a black box," New Mexico Environmental Protection Division director Michelle Miano said yesterday.

California uses a distinct, more expensive gasoline blendstock than New Mexico, levies larger taxes and has multiple other environmental programs that affect the state's retail prices. Costs of LCFS compliance added to California gasoline blended with ethanol have averaged about 9¢/USG so far this month.

New Mexico agricultural and dairy advocates remained skeptical of the program, which has allowed dairies in other states to sell California LCFS credits generated from harvested biogas.

Dairies in arid New Mexico lack the digester technology that has allowed that biogas participation for other operations, advocates said. The detail surprised bill sponsors. In-state dairies appeared more concerned about potential cost increases for transporting their product than the potential for biogas credits.

Environmental groups that oppose the LCFS testifying in the hearings said it would not cut carbon fast enough or would risk leaving vulnerable communities in pollution hotspots.

The bill advanced out of House Judiciary and House Energy, Environment and Natural Resources committees on 7-4 votes, with all Republicans opposed. Democrats control nearly two-thirds of the state's House and Senate seats.

A near-miss in the concept's inaugural session in 2021 failed after Republicans gained support from rural Democrats concerned that constituents who must travel long distances across the state would face higher costs. Republicans have made clear they will continue to hammer on that theme as the proposal works toward broader discussion.

"I am worried we are sort of taking a top-down approach and, I think, at the end of the day, punishing the poorest among us who are fighting to make ends meet," state representative T. Ryan Lane (R) said in yesterday's hearing. READ MORE

Excerpt from Low Carbon Fuels Coalition/Adalante Consulting/Carlsbad Current Argus: Similar technology-neutral, market-based programs have exceeded expectations in other states. In a decade, California and Oregon have seen dramatic GHG reductions, less air pollution resulting in fewer health effects and lower associated costs, and more diverse fueling options including replacement of more than 50% of conventional diesel fuel at the pump. The fuel standard has been responsible for 77% of all carbon reductions since 2012 in California.

The well-documented environmental benefits have also come with significant new economic development. HB41 creates the same strong market incentive to entice low-carbon and renewable fuel producers to invest in New Mexico. This legislation could be a game-changer. We estimate that over 1,600 permanent jobs and $470 million in wages would be created over the next five years, with $240 million of investment in New Mexico’s low-carbon fuels production.

Also, think about what this would mean for consumers. Rather than being subject to whatever causes the next oil price spike, fuels will have to compete for our dollars. Market competition brings prices down. Simple economics tell us that. With new fuels that are free from the whims of the world oil market, drivers will be able to opt for cheaper AND cleaner alternatives when prices rise. Claims otherwise are contradicted by actual evidence in other states.

A clean transportation fuel standard is the logical next step in New Mexico’s transition to cleaner fuels and a more diverse energy economy. The transition to electric transportation will take many years, so it makes sense to lower carbon intensity in the fuels we are using now (and will continue to use for quite some time). Passing HB 41 will mean that our treasured skies are less polluted from our transportation sector. It will also establish this state as a dynamic leader in the transition to renewable fuels and reap the economic benefits that come with that. READ MORE

Excerpt from Ethanol Producer Magazine: The New Mexico House of Representatives on Feb. 3 voted 36 to 33 in favor of a bill that aims to establish a technology-neutral clean transportation fuel standard (CTFS) that would reduce the carbon intensity (CI) of transportation fuels by at least 30% by 2040.

The proposed CTFS would phase in, requiring the CI of transportation fuels used within the state to achieve a 20% reduction below a baseline 2018 CI level by 2030, ramping up to 30% by 2040. The legislation defines transportation fuel to mean electricity or a liquid, gaseous or blended fuel, including gasoline, diesel, liquefied petroleum gas, natural gas, hydrogen and electricity sold, supplied, used or offered for sale to power vehicles or equipment for the purposes of transportation.

The bill, HB 41, was introduced in the New Mexico House of Representatives on Jan. 3. The bill passed out of the House Energy, Environment and Natural Resources committee on Jan. 22, and a substitute version of the bill passed out of the House Judiciary Committee on Jan. 31.

The legislation directs the New Mexico Environmental Improvement Board to promulgate rules to implement a CTFS program no later than July 1, 2026. Those rules would, in part, establish technology-neutral mechanisms for generating, obtaining, trading, selling and retiring credits among transportation fuel producers, fuel distributors and other individuals or entities in the transportation fuel market, including additional credit opportunities from activities and projects that support the reduction of greenhouse gas (GHG) emissions associated with transportation in the state. The version of the bill passed by the House includes several amendments to the administration of the proposed CTFS, including those related to requirements for utilities that elect to participate in the program.

New Mexico’s 2024 legislative session closes Feb. 15. For HB 41 to have a chance at becoming law, the state’s Senate would have to pass the legislation before that deadline.

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Additional information on HB 41 is available on the New Mexico Legislature website. READ MORE