February 19, 2021

Bills addressing water management and utility securitization pass committees

Rio Grande River, March 2009 (CC BY-SA 2.0) by gardener41

A bill that would require the New Mexico Office of the State Engineer (OSE) to consider climate change implications when making water rights decisions narrowly passed the House Energy, Environment and Natural Resources Committee Thursday. 

HB 95, sponsored by Santa Fe Democratic Rep. Andrea Romero, would require the State Engineer to conduct analyses on climate change-related impacts to the state’s water resources when approving or denying permits. The bill mandates the OSE to develop climate change impact rules based on the best available science to inform permit approvals. 

Dr. David Gutzler, a climate science expert and professor at UNM, speaking on behalf of the bill, pointed to a water resources study being conducted by the Interstate Stream Commission. Gutzler said he believed the study “could be leveraged as input to the development of a robust and science-based climate change assessment that could be used operationally by the State Engineer’s office.”

The original bill was replaced with a substitute bill on Thursday that Romero said incorporates feedback from the committee at an earlier hearing and that now better achieves the goals of the legislation of “ensuring that the Office of the State Engineer takes climate science into account as a rationale for why a permit is approved or denied.” 

The bill would also require the OSE to publish its rationale for approving or denying water rights permits “so that the public knows and understands how these decisions are being made.”

But State Engineer John D’Antonio told committee members that his office has concerns about the bill. He called the rulemaking provision of the bill an unfunded mandate that he said would conflict provisions in HB 9, a separate piece of legislation that’s currently under consideration in the House State Elections and Indian Affairs Committee. 

D’Antonio also argued that the state is addressing water scarcity through Gov. Michelle Lujan Grisham’s 50-year state water plan. 

“Climate change will affect New Mexico and our stream systems on a broad scale. The best way to address it is on a statewide or stream system basis,” D’Antonio said. He pointed to other ways that the OSE can manage the state’s water supply, including basin closures, creating critical management areas and placing other regional limits on new appropriations and transfers.

“We’re going to continue the implementation of our active water resource management strategy to address drought conditions and surface water shortages,” D’Antonio said. “That’s how we really put the administrative mechanism in place to deal with shortages—which is really the true answer I think to the climate variability.”

Lobbyists for Chevron, the New Mexico Oil and Gas Association, the Independent Petroleum Association of New Mexico, Occidental Petroleum and the New Mexico Farm and Livestock Bureau, spoke against the bill, citing concerns that the legislation would slow down permit approvals and that the bill contains broad definitions that would open up permits to more litigation. The San Juan Water Commission also opposed the bill.

Rep. James Strickler, R-Farmington, noted that the opposition to the bill was significant. 

“The opponents—water, [agriculture], business and industry—they probably represent half the state, in terms of employees,” he said. 

Rep. Larry Scott, R-Hobbs, raised concerns about how the bill might impact agriculture, which is the most water-intensive industry in the state. 

“What public policy, based on climate change, would we develop to, for example, prohibit or inhibit the planting and production of those very water thirsty crops in the state?” Scott asked. 

“We would be grossly irresponsible if we ignore the high likelihood that water availability will be diminished in coming [years],” Gutzler added. “We need to face that and manage it. And the sooner the better. Because if we do not, then, in my opinion, we will be setting ourselves up for a much worse problem.”

Romero also clarified that the bill doesn’t single out any industry.

“The reality of what we’re looking at is recognizing that climate change is real and that we should be managing the resource in that way,” she said. “This is absolutely a broader discussion that affects every industry that has been subject to what we’ve all been experiencing in our climate.”

The bill ultimately passed the committee 6-5, with Democratic Rep. Christine Chandler of Los Alamos voting with Republicans against the bill. It heads to the House Judiciary Committee next. 

Utility securitization bill 

The Senate Conservation Committee narrowly passed a bill that would expand securitization to include gas facilities and nuclear plants. 

Las Cruces Democratic Sen. Bill Soules sponsored SB 156, the Ratepayer Relief Act, which would enable utilities and the state’s Public Regulation Commission to use securitization for recovering undepreciated assets in gas and nuclear power plants. The bill would enable either the PRC or the utility to request securitization to recover costs associated with a stranded asset, which refers to a facility that is closed before the life of the facility is used up. 

“When you have a stranded asset with a utility—public or investor owned utilities have a right to recoup their investment, [and] that cost is borne by the ratepayers,” Soules said. “Securitization is the tool that provides a non-bypassable financial mechanism to get the lowest interest rates on those bonds.”

“That means that the ratepayer is going to pay the lowest cost for that stranded asset,” he added. 

“It does not require the PRC to do securitization. It does not require the utility to do securitization,” he said. “It is strictly the tool in the toolbox.”

Under the Energy Transition Act (ETA), utilities are only allowed to use securitization for coal plants. Soules said the legislation would enable utilities to use the financial tool to cover future gas and nuclear plant closures as the state decarbonizes its electricity generation. 

Much of the public opposition to the bill came from ETA supporters like the Sierra Club that were concerned about how the legislation might impact the ETA, and whether it would inadvertently incentivize utilities to build new natural gas plants.

Soules amended the bill to clarify that it would not impact the ETA. He also noted that the PRC has the authority to approve or deny new gas plants.   

Las Cruces Democratic Sen. Joseph Cervantes was very critical of the bill and argued that some provisions of the legislation were “unlawful.”

“I can tell the person that wrote the bill is not a lawyer,” he quipped. 

Soules responded that the bill was written by a securitization expert on the PRC staff, and added that it was based on a national utility securitization model. 

SB 156 ultimately passed the committee 5-4, with Cervantes voting with Republicans against it. It heads to the Senate Tax, Business and Transportation Committee next.