Countdown to clean fuels: New Mexico targets 2026 for new standards

SANTA FE — New Mexico could implement new standards for more environmentally friendly transportation fuels, everything from gasoline to electricity, as soon as next year if the state Environment Department gets the OK.

Meanwhile, efforts are afoot in Washington to block state requirements around clean cars, something Republican legislators in New Mexico hope will successfully trickle down to transportation fuels, too.

Gov. Michelle Lujan Grisham last year signed off on legislation to establish a statewide program around clean transportation fuel standards. The law requires annually reduced transportation carbon emissions — the top greenhouse gas emitter in the U.S., according to the U.S. Environmental Protection Agency — in the coming years.

The New Mexico Environment Department this month submitted proposed rules for the transportation program, and the rulemaking process is set to continue in early June. If approved, New Mexico would become the fourth state in the nation to adopt clean fuel standards.

“Under Gov. Michelle Lujan Grisham’s leadership, New Mexico is diversifying its economy while addressing climate emissions — proving once again you don’t have to choose between the two,” NMED Secretary James Kenney said in a statement.

How it works

The 2024 Democrat-backed legislation, House Bill 41, amended the Environmental Improvement Act to allow a state board housed within NMED, the Environmental Improvement Board, to enact a clean transportation fuel standard.

NMED has spent the last year drafting the rules. The department submitted its proposal to the board two weeks ago, a draft that spanned more than 100 pages.

Essentially, it sets up a market around transportation fuels, which are considered gasoline, diesel, petroleum gas, natural gas, hydrogen and electricity.

Fuel producers and importers who bring in a fuel that exceeds the state’s carbon intensity standard — a set measure of carbon dioxide and other greenhouse gases — would have to buy “clean fuel credits” from those who produce below the standard. Entities can then sell, trade, retire or generate the credits.

The clean fuel standard itself follows a 2018 baseline from carbon intensities generated by gasoline, diesel and jet fuel. The proposed rule would mandate annual carbon intensity reductions in fuels, to meet legally required milestones: at least 20% below 2018 levels by 2030, and at least 30% below 2018 levels by 2040.

“This is a hefty rule,” said Michelle Miano, director of NMED’s Environmental Protection Division.

There are already entities waiting to participate in the market, Miano said. Participation is voluntary for entities generating credits, like utility companies.

Public Service Company of New Mexico has voiced its support for the program, and other companies — like clean energy business 3Degrees and automotive tech and manufacturing company Rivian — that operate in other clean transportation fuel markets in the U.S. participated in a public comment period in January to support and influence how New Mexico’s program will work.

NMED officials also touted new economic opportunities that could come with the $3 billion alternative fuels market, attracting investments in industries like clean hydrogen or renewable propane.

Not everyone is eager for the program rollout, though.

House Republican Minority Leader Gail Armstrong of Magdalena warned the program risks higher fuel prices. It’s an argument reminiscent of those during last year’s legislative session, though Miano said larger market forces and oil prices drive rates at the pump, not clean fuel programs.

“House Republicans had serious concerns about HB 41 from the start — and what’s unfolding now confirms those concerns,” Armstrong said in a statement to the Journal. “The governor’s push for a clean transportation fuel program creates a costly new regulatory burden that builds an unnecessary framework of credit trading and compliance rules.”

She also said she’s closely watching federal efforts to overturn mandates like this.

Last week, the U.S. Senate passed multiple resolutions overturning waivers that allow states to adopt emissions standards more ambitious than at the federal level. It specifically targets mandates around advanced clean cars, trucks and heavy-duty engines — though not fuels.

In response, a group of 11 governors, including New Mexico’s, launched the Affordable Clean Cars Coalition of the U.S. Climate Alliance. It’s an effort to defend states’ clean transportation standards.

“The federal government and Congress are putting polluters over people and creating needless chaos for consumers and the market, but our commitment to safeguarding Americans’ fundamental right to clean air is resolute,” the 11 governors said in a joint statement.

Miano said since the clean transportation fuels program is state-based, it’s largely insulated from “federal uncertainties.”

“That’s the great part about this program, is that it is a state program and a state market,” she said, “and that it will ensure that New Mexico is the place that receives the clean fuels and clean energy economic investments that are uncertain in other parts of the country.”