New company seeks to green up NM's oil patch - Albuquerque Journal

New company seeks to green up NM’s oil patch

Copyright © 2021 Albuquerque Journal

A group of veteran oil and gas industry insiders hope to green up New Mexico’s oil patch by building solar facilities for local producers through a new Roswell-based company, Blue Sierra Power LLC.

Blue Sierra’s four founders have formed a strategic partnership with renewable energy developer Diode Ventures, a wholly owned subsidiary of global engineering and construction giant Black & Veatch. That gives Blue Sierra ready-to-go financial, engineering and construction power to offer local oil and gas producers upfront financing to rapidly build on-site solar generation that can help clean up their operations, said Blue Sierra co-founder and Managing Member Jim Manatt.

It’s a novel approach by industry veterans to accelerate decarbonization among New Mexico oil and gas producers as the nation and world move to a low-carbon economy, said the longtime Roswell oilman. The company’s mission reflects the immense pressure now coming to bear on fossil fuel producers to lower, and eventually eliminate, if possible, carbon emissions in field operations.

Switching from natural gas and other carbon-based electricity to renewable generation to power operations can help do that, Manatt said.

“Blue Sierra Power is a company built by industry insiders, all with 40-year industry management backgrounds, to help re-power the oil patch with state-of-the-art solar systems and back-up batteries,” Manatt told the Journal. “We call it ‘Re-Powering the Patch.'”

New state regulations and forthcoming federal rules and laws are pushing oil and gas companies to lower methane and other carbon emissions in their operations.

Battery containers and solar panels in Albuquerque. (Adolphe Pierre-Louis/Albuquerque Journal)

At the same time, producers are facing growing pressure from investors and financial institutions to adopt environmentally-friendly practices as a pre-condition for financing going forward. That reflects a novel but rapidly emerging investor emphasis on environmental, social and governance issues, or ESG, whereby financing entities weigh the risks companies face as climate change and social concerns move to the forefront of public scrutiny, said Brad Barnds, a Blue Sierra partner based in Houston.

“The ESG movement is everywhere,” Barnds said. “You can’t move into any setting now without paying attention to it. Money (from investors) will not come if you don’t lower your carbon footprint and incorporate green development.”

ESG first emerged about 20 years ago, contributing to policy changes among some major companies like BP and Shell, which are now investing much more in sustainable energy development. But in the last year or so, the focus on ESG has greatly accelerated, forcing many more public and private companies to include ESG concerns in their decision-making process.

Blue Sierra’s partners saw the writing on the wall, Manatt said. That encouraged them to launch the company this year to help firms adopt environmentally friendly technology.

“From inside the industry, it feels as if ESG is coming at us like a fast freight train in the night,” Manatt said. “Many in the industry are still grasping the magnitude and speed of change coming upon us.”

Major companies in the Permian Basin in southeastern New Mexico have deeper pockets to finance and manage their own environmental efforts.

EOG Resources, for example, became the first oil company to build its own 8-megawatt solar array in New Mexico. It came online in November 2020 in Red Hills, in the heart of New Mexico’s Permian Basin operations, to help power electric motor-driven compressors that provide the pressure needed to move natural gas through pipeline infrastructure. That offsets the gas-fired, carbon-emitting engines that typically run the compressors around the clock.

But smaller companies need assistance to green-up their operations, and that creates opportunities for Blue Sierra. “These (smaller companies) know they have to get green and they don’t know how to do it,” Barnds said. “We’ve come up with a plan to install solar generation to lower emissions while also reducing their operating costs.”

The key is Blue Sierra’s new partnership with Diode Ventures, which has built many solar facilities in other states, but not yet in New Mexico. Through the business alliance, Blue Sierra partners will draw on their own decades of industry connections and knowledge to recruit oil and gas companies here for solar development.

The company will then turn those projects over to Diode Ventures and its parent, Black & Veatch, to manage all the work, including everything from initial feasibility studies and permitting and planning to building the solar arrays and even operating them if the customer doesn’t want to directly take over the facility itself.

And Diode can offer upfront financing.

“They’ll bring early-development funding and they’ll do all the heavy lifting to develop the project,” Barnds said. “They have all the engineering and technology capacity in place to hit the ground running.”

New Mexico offers ideal conditions for solar projects, said Paul Ksiazek, senior project director at Diode Ventures.

“New Mexico has great solar irradiance, and if you go into the eastern areas, the terrain is flatter, making it easier to build,” Ksiazek told the Journal. “Leasing and owning land there is also relatively inexpensive.”

In addition, Blue Sierra and Diode say they can build renewable energy projects of up to 80 MW for local customers in half the time it might otherwise take a utility to build a renewable facility under a power purchasing agreement with a customer. That’s because utility-scale renewable projects that send all the electricity produced directly to a customer – rather than to a utility grid – are not required under federal rules to do a lengthy grid-interconnection study before building.

New Mexico has created state enabling rules for developers like Blue Sierra and Diode to take advantage of that federal exemption, Manatt said.

“As a result, we can get a project built in a year to 18 months, compared with about three years for grid-tied projects,” Manatt said. “That significantly reduces costs.”

Under the Blue Sierra-Diode strategy, all renewable energy credits generated by solar projects will also go back to the customer to redeem them on the market, lowering project costs even more, Manatt said.

Environmentalists support industry efforts to lower carbon emissions through renewable generation, as long as those efforts don’t derail long-term goals of transitioning fully away from fossil fuels over time, said Western Environmental Law Center Executive Director Erik Schlenker-Goodrich.

“Renewable electrification in the oil patch is important to help decarbonize that sector and reduce harm pending a transition to 100% renewable energy,” Schlenker-Goodrich told the Journal. “If they can do it, that’s fantastic. … But it can’t be a substitute for the full, long-term transition to renewables.”

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