NM Gas Co. LNG facility denied by PRC

The New Mexico Public Regulation Commission denied New Mexico Gas Company’s proposed liquified natural gas facility in Rio Rancho during a special meeting March 14.

For the PRC, it is a matter of time and money. Commissioners each took a turn talking about why the project would not be cost effective and not sufficient to meet the terms of the application.

The decision largely aligns with a recommendation from PRC hearing examiner Anthony Medeiros last month to deny the facility.

“The company’s own testimony is that it is more expensive than the status quo … Will this solve the risks? The testimony is that it doesn’t solve the big risks. You know, very expensive customer bills like what we saw last winter … Also the risk of loss of supply. That comes from the interstate pipe system … I’m sitting here balancing the certainty of an expensive facility against uncertain benefits. And so it’s hard to say yes to that,” Commissioner Pat O’Connell said.

Commissioner James Ellison agreed but added that he wished NM Gas company had come to the commission with the proposal sooner. He said the gas company also failed to consider alternatives like the “benefits of financial hedging,” adding the storage facility would cost $20 million more a year initially for New Mexico Gas Co. to run, costs that would fall back on customers, compared to current operations. Relative to that, he said the LNG facility would have saved about $14 million of the $107 million extraordinary costs New Mexico Gas Co. paid for gas because of Storm Uri.

“It just doesn’t seem to me that the cost justifies the benefits of the project,” he said. “It seems like a fairly hefty price tag to pay for something that should occur on a relatively infrequent basis.”

The other commissioner, Gabriel Aguilera, says he understands what the company was trying to do but thinks the denial is the best decision because it doesn’t meet the standards of the application.

The state regulators ultimately decided the LNG facility wouldn’t be a cost-effective measure. The storage facility would have cost about $180 million.

New Mexico Gas says the company is disappointed in the outcome.

“NMGC is disappointed, having proposed the facility with the belief it would enhance the reliability of our system and help protect customers from spikes in the market price of natural gas. We appreciate the comments, feedback and support that the project has received,” it said in a release.

New Mexico Gas Co. spokesperson Tim Korte said in a statement the utility is carefully reviewing the final order and the commissioners’ discussion during Thursday’s meeting. Parties can still appeal the decision, and Korte said the gas company hasn’t made any final decisions about potential next steps.

“We are disappointed,” he said. “We proposed the LNG storage facility in the belief it would provide benefit to our customers, both in terms of reliability and price protection.”

New Mexico Gas Co. has argued its proposed LNG facility in Rio Rancho would help protect against price spikes and secure energy stability. A big impetus to set up the new gas storage was the 2021 Storm Uri, which caused extraordinarily high gas prices.

However, environmental advocates, statewide residents and local and state elected officials had concerns about potential negative environmental and safety consequences.

The climate activist group, New Energy Economy, was pleased with the outcome, saying people’s health, safety and economic security will be better off.

“We applaud the commission for their decisive rejection of the proposed plant and for their careful consideration of the facts in this case — that an expensive and dangerous plant was being proposed without proof of any real benefit to customers. Ultimately the climate crisis requires that we shift away from fossil fuels and towards efficiency, electrification and 100% renewable energy to heat our homes,” Mariel Nanasi, executive director of New Energy Economy, said.

The commissioners didn’t address these safety worries in Thursday’s discussion. Cara Lynch, attorney for Coalition for Clean and Affordable Energy, said the regulators did take the concerns into account.

“Even though the commissioners did not specifically address those risks, those are factors that contribute to the commissioners’ deciding whether a project is a net public benefit,” she said.

This decision comes two days before the PRC’s deadline to make a decision on the project. Due to the PRC’s public meeting dated past the deadline, they had to call a special meeting to make the decision.

The details

In December 2022, New Mexico Gas Co. asked for the PRC’s permission to construct a 25-acre LNG facility on a 160-acre property in Rio Rancho. The utility requested that regulators approve a “certificate of public convenience and necessity,” or CCN, which is necessary before a public utility can set up or operate a new utility plant or system.

According to the PRC, it has to assess whether a new utility system is worth it for the public when considering a CCN request. A utility has to prove a few things to convince the commission of the need: there’s a “net public benefit,” the company considered alternative options and the project is cost-effective.

Ultimately, the three state regulators didn’t think New Mexico Gas Co.’s application proved these points and ruled there wouldn’t be enough public benefit to set up the facility.

Commissioner Pat O’Connell said the project didn’t seem cost-effective.

“I’m sitting here balancing the certainty of an expensive facility against uncertain benefits. And so it’s hard to say yes to that,” he said.

He said it was persuasive that the Department of Defense, the only consumer advocate in the case, adamantly opposed the LNG facility. He noted that no transportation customers — customers who face the same reliability risk as a residential customer— intervened.

“And they didn’t come to say, ‘Hey, this is important enough that I am willing to pay more in my bill for the benefit that this facility provides,’” he said.

Ellison said it was a different set of commissioners that originally saw the gas company’s interest in an LNG facility. He also said he would like to see more discussion earlier on with similar projects.

“I think in this case, it really could’ve saved a lot of time and expense,” he said.

Cydney Beadles is the senior attorney and New Mexico clean energy manager at Western Resource Advocates. She said the commissioners brought up good points in Thursday’s discussion.

“I feel like the commissioners took a close look at this proposal and came to an outcome that is in the public interest and reflects good public policy,” she said.

The context

The proposed Rio Rancho LNG unit would have been the first facility of its kind in New Mexico.

Over 200 gas facilities under state jurisdiction don’t have LNG units, according to the PRC. There are two underground natural gas storage facilities subject to federal jurisdiction, PRC Chief of Staff Cholla Khoury said.

More than 20 states have similar LNG storage facilities to the one New Mexico Gas Co. proposed, according to the utility.

New Mexico Gas Co. currently leases storage in Texas at Keystone Gas Storage. The LNG facility would have replaced that storage with the facility in New Mexico, with gas company staff constantly monitoring the facility, according to the company.

The last time a utility asked the PRC for permission to set up an LNG facility in New Mexico was 2012, also from New Mexico Gas Co., after a 2011 winter storm. The company withdrew its request in 2013.