Geothermal development incentives on governor’s desk - Albuquerque Journal

Geothermal development incentives on governor’s desk

Legislative initiatives to promote geothermal energy development in New Mexico received overwhelming bipartisan support in this year’s session and are now awaiting the governor’s signature to become law.

Both legislative chambers approved a new Geothermal Resources Development Act (House Bill 365) with virtually no opposition, passing 37-0 in the Senate and 63-3 in the House.

If signed by Gov. Michelle Lujan Grisham, the act would expand Energy, Minerals and Natural Resources Department duties to promote the industry in New Mexico through newly established accounts that EMNRD would manage to offer grants and loans for public and private-sector projects around the state.

It also establishes a new state-funded geothermal “center of excellence” at the Institute of Mining and Technology in Socorro, with $400,000 for the first year of operations included in the Legislature’s proposed budget for fiscal year 2024, now pending Lujan Grisham’s approval.

Albuquerque Democrat Sen. Jerry Ortiz y Pino helped usher the act through both chambers, after forming a working group in early 2022 that spent a year developing the proposal and building bipartisan backing for it.

“This was a bipartisan effort with strong support from the legislative leadership,” Ortiz y Pino told the Journal. “People recognize the tremendous opportunity that geothermal development represents for the state.”

Standing from left is Tom Solomon, Sen. Jerry Ortiz y Pino, and Shari Kelly of the Bureau of Geology and Mineral Resources in the House Energy and Natural Resources chambers on Feb. 14 after that committee voted to approve the Geothermal Resources Development Act. Bill co-sponsor, Rep. Patricia Roybal Caballero, is seated in foreground. (Courtesy of Tom Solomon)

Geothermal generation is experiencing a major renaissance, thanks to new deep-drilling technology to tap into hot rock beds that traditional developers couldn’t reach before. Industry investment is now surging to build electric facilities that pump liquids deep underground to heat them with geothermal energy and create steam to turn turbine generators.

Industry also wants to tap underground hot rocks for residential, commercial and industrial heating and cooling systems.

In addition to the development act, legislators also approved new tax incentives, including:

• An electric production tax credit that offers a 1.5-cent offset on personal and corporate income taxes for every kilowatt hour of electricity generated by new geothermal facilities built before January 2028, up to an aggregate annual cap of $5 million.

• A gross receipts tax reduction for geothermal electric facility construction costs incurred prior to January 2028.

• A 30% tax credit of up to $9,000 for purchase and installation of ground-based geothermal pumps installed before year-end 2028 to heat and cool homes and buildings, with an annual aggregate cap of $4 million.

Ortiz y Pino’s working group wanted the Legislature to earmark $25 million for EMNRD grants and loans for geothermal projects. But the Legislative Finance Committee didn’t include that among its budget priorities when it met over the summer, because the proposed geothermal act was still under development, said environmentalist and working group facilitator Tom Solomon.

“We were too late to get that financing into the LFC budget, but we’ll work hard this summer to get it included for the next session in 2024,” Solomon told the Journal. “We did get the basic legislation approved through the development act to establish these funds, so we don’t have to do that again. Now, it’s just getting the appropriations to put into those funds.”

For now, EMNRD is expected to apply for federal money to help finance projects in New Mexico, since the working group has identified more than $600 million in federal assistance currently available for geothermal development nationwide, Solomon said.

Meanwhile, the new center of excellence at NM Tech will work to identify potential projects to finance once funding in approved, such as applying new geothermal technology to modernize and relaunch a now-defunct system to heat and cool buildings on the New Mexico State University campus in Las Cruces, said Shari Kelly, a senior geophysicist with the state Bureau of Geology and Mineral Resources at NM Tech. It will also install new software to make the bureau’s database on New Mexico’s geothermal resources accessible to the public, and convoke a forum for geothermal experts and enthusiasts in academia, the national labs and industry to build a statewide consortium for geothermal development.

Lujan Grisham is expected to sign the new legislation into law.

“The governor hasn’t spoken on this issue, but her staff and the EMNRD secretary have told me she’s all on board,” Ortiz y Pino said.

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