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Emissions-Cap Judgment Day

By Michael Hartranft
Copyright © 2010 Albuquerque Journal Journal Staff Writer
          The New Energy Economy petition to cap greenhouse gas emissions in New Mexico is back in the spotlight, with the state Environmental Improvement Board expected to rule on the controversial plan this week.
        Lengthy testimony on the petition was heard by the board over seven days in August and October. But it drifted a bit off the public radar last month when the EIB voted 4-3 to adopt another proposal to combat greenhouse gas emissions — the New Mexico Environment Department's plan for state participation in a regional cap-and-trade program. The board is expected to start deliberating a decision on the NEE petition today.
        Unlike the cap-and-trade strategy, which requires a partnership with other states and Canadian provinces, the NEE proposal affects New Mexico alone, requiring large emitters to reduce emissions by 3 percent a year, starting in 2012.
        "Ours would not go into effect unless the regional program is not implemented," said NEE executive director John Fogarty of Santa Fe, referring to a sunset provision in the proposed regulation. "It's really just a backup plan to keep New Mexico moving ahead."
        Like the NMED plan, NEE's proposal has been under fire from utility companies, lawmakers, the gas and oil industry, business groups and others. They claim it will drive up energy costs and imperil jobs, with little if any impact on global warming.
        A witness for the city of Farmington, consultant Jay Lillywhite, testified during the hearing in October the overall cost to the state could be $289 million to $1.7 billion between 2012 and 2020, with a substantial impact on San Juan County, a gas and oil hotbed.
        Gov.-elect Susana Martinez and Lt. Gov. Diane Denish are among the politicians who have opposed the plan.
        "As the governor-elect said during the campaign, these regulations make New Mexico an island in the middle of a sea of states that do not have similar regulations," Martinez spokesman Danny Diaz said. "Passing yet another cap-and-tax regulation will do nothing to create jobs and get New Mexicans back to work."
        The Public Service Company of New Mexico maintains the EIB lacks authority to regulate greenhouse gas emissions, spokesman Don Brown said.
        "In fact, the state Legislature has now twice rejected bills to grant the EIB that specific authority," he said. PNM favors addressing climate change at the federal level.
        Given that the EIB adopted the cap and trade rule, it is "absolutely unnecessary" to consider the NEE petition, Tri-State Generation and Transmission Association spokesman Lee Boughey said. "Layering in another complex rule will create more uncertainty for New Mexico businesses and could be nightmare for the state to administer."
        Proponents dismiss the criticisms as scare tactics that not only fail to appreciate the urgency of addressing global warming, but the positive economic potential for the state.
        "This is fundamentally about jobs and it's about creating a market signal that is going to stimulate new investment in clean-energy efficiency technologies, " said Fogarty, a physician who works at Cochiti Pueblo.
        The EIB, appointed by Gov. Bill Richardson, already supports the underlying premise in NEE's petition: Its list of reasons for approving NMED's rule includes statements there is compelling evidence climate change is real and causes severe impacts to public health.
        "It is a foothold to move carbon regulation forward and these industries are worried about it," said Steve Michel of Western Resource Advocates and principal architect of the NEE proposal. "But as a practical matter, the economic impacts are going to be trivial and pretty much unnoticeable."
        Michel, who testified the rule would increase electricity prices by less than 1 percent and a fraction of a percent for the oil and gas industry, said there is a cap on what a company would be required to spend to reduce emissions — $50 a metric ton starting in 2012, then increasing each year by $1 to keep up with inflation.
        It also provides an "off-ramp" for any company that could demonstrate the cost of compliance threatens their "financial integrity," he said.
        The NEE petition targets companies that emit 25,000 metric tons or more of carbon dioxide a year. Initially, the rule would apply only to the electricity generation sector — coal or natural gas plants — and the petroleum and natural gas sectors — refineries, processing and treatment plants and compressor stations.
        Starting in 2012, the regulated sources would be required to reduce emissions by 3 percent a year from 2010 levels, with the Environment Department re-examining the regulations in 2014 when it could expand them to other sectors or to update the rules.
        Although regulated companies wouldn't be able to buy or sell emissions allowances as the cap and trade program provides, Michel contended the NEE proposal affords them a "lot of flexibility" to comply with the regulation: Companies that voluntarily have reduced emissions since 2005 can receive "early" credits toward their reduction requirement; owners of multiple emissions sources can use excess reductions at one source to meet the requirements at another; companies can buy state-approved "offsets" from New Mexico sources not covered by the regulations; companies that reduce emissions more than needed would be able to "bank" those reductions for future years.

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