Hearing examiner recommends that PRC reject controversial LNG storage facility

New Mexico Public Regulation Commission Hearing Examiner Anthony Medeiros recommended that the commissioners deny New Mexico Gas Company’s request to build, own and operate a controversial liquified natural gas storage facility in Rio Rancho. Medeiros released his decision, which is more than 150 pages long, on Wednesday. In his recommended decision, Medeiros writes that the […]

Hearing examiner recommends that PRC reject controversial LNG storage facility

New Mexico Public Regulation Commission Hearing Examiner Anthony Medeiros recommended that the commissioners deny New Mexico Gas Company’s request to build, own and operate a controversial liquified natural gas storage facility in Rio Rancho.

Medeiros released his decision, which is more than 150 pages long, on Wednesday.

In his recommended decision, Medeiros writes that the facility would not result in a net public benefit and, thus, should not be approved. He further states that New Mexico Gas Company’s justifications for why such a facility is needed “are not clearly demonstrated.”

The proposed facility would be located on a 160-acre parcel in southern Rio Rancho on the northwest side of Bernalillo County and within the Albuquerque metropolitan area. It would take up about 25 of those 160 acres. 

The area where it would be located is zoned for future industrial development.

New Mexico Gas Company hoped that the LNG storage facility would replace its current arrangement where it stores gas through a lease agreement at the Keystone Storage Facility in Texas that is owned by Kinder Morgan. The company says that it has concerns with the reliability and performance of the Keystone Storage Facility. In particular, the company pointed to the February 2011 storm that forced the utility to cut off service to more than 20,000 customers in northern New Mexico. New Mexico Gas Company officials say a LNG storage facility would make a repeat of that incident less likely. At the same time, the company did not have to cut off service to customers during a major winter storm in 2021. Instead, the utility purchased additional gas from the day-ahead and same-day markets due to Keystone not being able to provide enough stored gas. That resulted in New Mexico Gas Company spending $107 million more than it normally would have over a six-day period of time. 

The company also argues that the amount it pays to store gas at Keystone is increasing and there is some uncertainty about what Kinder Morgan might charge when the contract comes up for renewal once again.

Medeiros breaks with the PRC staff in his recommendation. The staff took the position that the PRC should approve the application.

The various intervening parties in the case unanimously opposed the proposed facility.

While Bernalillo County was not among the intervening parties, the county commission passed a resolution requesting that the PRC reject the proposed facility.

Medeiros wrote that the public opposition to the LNG storage facility “cannot and should not be ignored.”

Opponents say the facility could put nearby residents and schools at risk while also increasing the costs that customers pay in rates.

Additionally, they say that the transition away from fossil fuels will lead to the facility being obsolete before New Mexico Gas Company has finished paying for it and before it reaches the end of its useful life.

The LNG facility would be $100 million more expensive over its 30-year life than a continued lease with Kinder Morgan to store gas at Keystone, according to estimates New Mexico Gas Company presented during the case. 

But New Mexico Gas Company says that, by reducing the need to buy higher priced gas during extreme weather events, customers will benefit even in terms of economics.

However, the New Mexico Department of Justice, the new branding for the office of the Attorney General, argued that the facility costs are likely going to be higher than what the company presented.

Medeiros agreed with that assertion and wrote that during its first year of operation the facility would result in a net increase of $24.7 million on customers’ bills, which is substantially greater than the $3.3 million increase that New Mexico Gas Company touted.

Medeiros further notes that the potential earnings benefits of a LNG storage facility to New Mexico Gas Company’s parent company, Emera, Inc., are clearly documented, it is not as clear what the benefits will be for customers.

“While the proposed LNG Facility would undoubtedly be a more profitable venture for NMGC and its shareholders than continuing the Keystone Storage arrangement, the purported benefits to ratepayers reflected in this record are far less tangible or certain,” he wrote.

Medeiros did not address in depth the health and safety concerns regarding locating a LNG facility relatively close to schools and neighborhoods. He explained that, as he had already recommended rejecting the proposed facility, “such findings would be superfluous in any event.”

At the same time, he did note that the concerns are legitimate.

In another PRC case, New Mexico Gas Company is asking to raise customers rates. New Energy Economy filed a motion this week asking the PRC to either reject the rate increase or at least require the utility to send out a new notice to customers regarding the potential rate change. NEE says that New Mexico Gas Company’s notice provided inadequate or misleading information about the impact that the rate increase will have on customers’ bills.

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