The Inflation Reduction Act brought a historic level of federal funding for clean energy projects, but the type of projects in New Mexico communities that currently rely on fossil fuels for an economic base do not necessarily come with long-term jobs. 

For example, three manufacturing businesses announced they would be opening up plants in New Mexico as a result of the new incentives. These facilities are all located in and around Albuquerque.

Meanwhile, wind and solar farms are being built in rural areas including places where fossil fuels have been the dominant economic driver. While these projects bring large numbers of construction jobs, those jobs are temporary. 

Manufacturing plants like Maxeon’s pending solar manufacturing center in Albuquerque have the potential to create hundreds or even thousands of long-term jobs with good wages. 

Long term jobs with good wages are the types of opportunities that the fossil fuel regions of New Mexico fear may be lost during the transition to clean energy. 

Gov. Michelle Lujan Grisham said New Mexico is achieving economic growth at an impressive rate for a state that has not seen a large increase in population.

She credits this to efforts her administration has undertaken to lay the foundation, invest in companies, address infrastructure needs, move toward an energy transition, diversify the economy and try new things.

At the same time, she said rural communities not just in the state but also nationally have been left behind because they tend to have economies based on agriculture or energy. 

“Those are two really hard sectors for sustainability,” she said. “And so when things are great, people stay and when things are bad, people leave. And that’s been the story of rural America. It doesn’t have to be the story of rural America, nor will it be the story of rural New Mexico.”

She said the state is working to create opportunities throughout New Mexico in various sectors and not just in the center of the state. She said only having new economic opportunities in and around Albuquerque “is not going to work for a healthy state.”

San Juan County Manager Mike Stark said the northwest corner of New Mexico is seeing those types of jobs “slowly eroding from our area.”

“We know a big part of our success as a county is to have those types of high paying jobs that, in some cases, you just need a high school diploma,” he said. 

While fossil fuels like coal are declining in San Juan County, Stark said there has been continued interest in developing renewable energy projects due to the access to transmission infrastructure. 

Tax credits

Claire Lang-Ree, an energy expert at the Natural Resources Defense Council, published a blog post where she analyzed tax credits available through the Inflation Reduction Act and how that could impact clean energy projects in communities that have relied on fossil fuels, particularly looking at New Mexico and Colorado. 

“The Southwest has an enormous opportunity to accelerate the shift from fossil to clean power,” she wrote. 

Those tax credits as well as some state incentives, she told NM Political Report, are “intended to be stackable and braidable.”

They also include the Energy Communities Tax Credit, which provides a 10 percent bonus on top of other tax credits for projects located in an energy community. That is defined as a place that is a Brownfield, meaning it has been contaminated, is a community impacted by closing coal mines or power plants or is a place where at least 0.17 percent of the population is employed in the fossil fuels industry.

Most of New Mexico is considered an energy community and is eligible for the Energy Communities Tax Credit. 

These tax credits, Lang-Ree said, have made renewables more affordable and realistic than ever before. 

She described them as one tool in a toolbox and said that efforts should focus on equity and prioritize disproportionately impacted communities.

Infrastructure

San Juan County has traditionally relied heavily on three types of fossil fuels: oil, gas and coal. 

Already it is seeing the impact of the transition. A coal-fired power plant closed last year and another will likely close within a decade. 

The power plant closures were among the factors that prompted San Juan County and its largest city, Farmington, to investigate ways that it could diversify its economy. 

The county faces several challenges that make economic development a bit more challenging than in other parts of the state.  

“As of right now, we have three big gaps when it comes to transportation: freight rail, lack of an interstate and commercial air service,” Stark said. “And so that does provide a slight hindrance, obviously, when you’re looking at trying to attract large companies of that nature (manufacturing) to your area.”

Commercial flights at Four Corners Regional Airport ended in 2017 when Great Lakes Airlines stopped flying in and out of the city, citing a pilot shortage. Now San Juan County residents drive to Durango, Colorado, or Albuquerque when they want to travel via plane. 

Farmington is working to bring airlines back and had an agreement in place with one airline before the COVID-19 pandemic hit. 

One big focus for San Juan County as it tries to close the transportation gap and make the area more attractive to businesses is to build a freight rail that would tie in with the Interstate 40 corridor and the rail lines near Gallup. The county is working with the Navajo Nation in that endeavor and received a $2 million federal grant for a feasibility study.

“When you’re moving a lot of product in and out of an area, it’s the most cost effective way to do it,” Stark said. 

A freight railroad would allow manufacturing businesses to transport products out of Farmington without sending them on trucks along state highways. 

Federal funding through both the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, also known as the bipartisan infrastructure package, may assist the county in making that a reality. 

Prior to the passage of federal packages like the infrastructure law and the Inflation Reduction Act, San Juan County believed it would likely need to find a business like a petrochemical manufacturing company to partner with to bring a railroad to the Farmington area. But that has now changed.

Stark said there are opportunities for funding that could allow the tribe and county to build that railroad. 

A railroad would not only make San Juan County more attractive to new businesses, it could also help existing businesses expand. 

In particular, Navajo Agricultural Products Industry, or NAPI, could better move its various crops like corn, beans and potatoes to customers throughout the country. 

Another thing that businesses like Maxeon look for when choosing a place to locate is a building that can meet their needs, which the company found in Albuquerque’s Mesa del Sol. 

San Juan County does have a large industrial building that in the past accommodated manufacturing. 

Stark said the county hopes to make it more attractive to businesses by expanding natural gas and broadband infrastructure out to the facility, which is located north of Farmington and south of Hesperus, Colorado. 

Having more access to resources like gas at the site could make it attractive to potential businesses. Over the years, there have been various proposals for businesses to locate there, including one that hoped to use coal fly ash to manufacture concrete. 

Increasing the ease of moving products to market and providing facilities that are ready for companies to move in and begin manufacturing are two ways that San Juan County hopes to build a more diverse economy as the state and country move away from fossil fuels. 

Stark said he hopes to present more proposals from businesses hoping to take advantage of the facility to the County Commission in the near future.

The site includes 30,000 square feet of industrial space with 50 foot ceilings and 15,000 square feet of office space. It also features 45 acres of fenced in land. 

Lujan Grisham also said that infrastructure is an important component of economic development that the state is working to expand. That includes broadband access, roads, water and fuels like propane. 

Without that infrastructure in place, it doesn’t matter if there’s a good workforce present to fill the jobs a company would create, she said. 

Hydrogen

Lujan Grisham said the workers in the Permian and San Juan basins have unique skills that translate well to other industries that New Mexico is working to attract. 

That includes her controversial push for hydrogen power, which can involve using natural gas to create hydrogen but also has opportunities for using water to create hydrogen. 

While sometimes touted as a clean source of energy that could complement renewables like wind and solar, hydrogen also has environmental advocates concerned. Many view it as an attempt to save the natural gas industry and continue extraction of fossil fuels to the detriment of human health and the environment. 

Lujan Grisham acknowledged those concerns.

“The goal that I have is to set the incentives for the lowest carbon intensity work so that you’re pushing the green hydrogen and innovation in that space,” she said. “So you tell companies what you want, give them predictability and partner, and that’s exactly what you get. My argument to many of the environmentalists, which I think is still sound, is if you don’t have a hub and you don’t set those standards, these companies will just come where you’ve got the materials and the workers that they need and they don’t care what color it is. They’ll do gray hydrogen.”

Hydrogen is broken down into different categories that have color labels. Green hydrogen is produced using water and is often considered the cleanest source of hydrogen. Gray hydrogen comes from natural gas and the carbon produced during the process is generally emitted into the atmosphere. Blue hydrogen, which is often discussed in New Mexico, involves using natural gas but capturing the carbon that is produced. 

Stark also pointed to hydrogen as potentially bringing opportunities to New Mexico. 

The state has partnered with several other Western states in an attempt to secure federal funding for a hydrogen hub. That initiative includes eight different hydrogen projects, three of which would be located in San Juan County.

The Inflation Reduction Act expanded tax credits of the capture and sequestration of carbon. This could make hydrogen more economically attractive. When the methane molecules from natural gas are broken apart, it produces both carbon and hydrogen. Several proposals call for using natural gas to make hydrogen power and capturing that carbon, which would then either be placed to use or pumped underground. 

“That may potentially be a game changer,” Stark said about the expanded tax credits known as 45Q.

Additionally, the Inflation Reduction Act created the 45V tax credit, or hydrogen production tax credit. This gives up to $3 in tax credits per kilogram of produced hydrogen that meet the criteria for low level of lifecycle greenhouse gas emissions. 

“We think that’s going to lead to companies looking at our area,” Stark said. 

It’s not just the San Juan Basin that could benefit from hydrogen production in terms of economics. 

“We’ve got a ton of workers in the Permian,” Lujan Grisham said. “This is a game changer for stability in both Lea and Eddy counties.”

Energy transition

A key part of the energy transition is to make sure the communities that have produced fossil fuels are not left behind. 

“If you didn’t have a transition, you would have a loss, somebody else would have a gain,” Lujan Grisham said. 

She said there are opportunities for the fossil fuels communities. 

Current efforts are sometimes focused on reducing the impact of fossil fuels extraction.

“Technology is going to be a big factor in the next phase of oil and gas, making it cleaner. New Mexico produces the cleanest barrel of oil in America,” she said. 

New state regulations regarding methane emissions have created job opportunities for methane technicians. These jobs tend to have high wages.

She said Lea and Eddy counties in particular will likely see more water innovators looking to create better solutions for produced water, a byproduct of fossil fuels extraction. 

Even when the extraction ends, jobs will continue cleaning up the sites including plugging orphaned and abandoned oil and gas wells. 

Other parts of the state could benefit from geothermal, which she anticipates will be a growing sector. 

The goal is that eventually hydrogen, geothermal and renewable energy may replace fossil fuels, Lujan Grisham said. 

“There’s no reason the state can’t see the same record revenues in energy matching or exceeding oil and gas in the decades to follow,” she said. 

Outside of the energy sector, the state and local communities are working to grow outdoor recreation and film as well as other sectors. 

Opportunities

James Povijua is the regional director for NRDC and a member of the Ohkay Owingeh Pueblo as well as vice chairman of the New Mexico Sustainable Economy Task Force, which was created through legislation in 2021. 

He views the energy transition as an opportunity for the state, including communities that are dependent upon fossil fuels. 

Povijua said New Mexico could be the bellwether for what it looks like to transform a state from reliance on fossil fuels to clean energy and thriving economies. 

That will include clean up of sites like orphaned wells and new job opportunities in areas like wind and solar where he believes New Mexico can be a national leader. 

He participated in a meeting this summer in Hobbs with oil and gas workers, many of whom said they did not want to leave their community but were concerned with the hazards inherent to their line of work. 

“There’s a real community demand for safe, healthy jobs,” he said. 

Clean energy can provide those, Povijua said. 

While the construction jobs may be temporary in nature, he said “it’s a fallacy to say clean energy jobs will go away.” 

To meet the increasing demands by utilities for clean energy, a build out phase of wind and solar projects will likely stretch on for years if not decades. 

“We want to ensure that our community can thrive, but also that our air, lands and water are protected,” he said.