State regulators deny controversial LNG storage facility

It’s just not worth it financially.

That’s the main reason for the New Mexico Public Regulation Commission’s denial on Thursday of a request from New Mexico Gas Co. to create a liquefied natural gas (LNG) facility in Rio Rancho.

The decision largely aligns with a recommendation from PRC hearing examiner Anthony Medeiros last month to deny the facility.

New Mexico Gas Co. spokesperson Tim Korte said in a statement the utility is carefully reviewing the final order and the commissioners’ discussion during Thursday’s meeting. Parties can still appeal the decision, and Korte said the gas company hasn’t made any final decisions about potential next steps.

“We are disappointed,” he said. “We proposed the LNG storage facility in the belief it would provide benefit to our customers, both in terms of reliability and price protection.”

New Mexico Gas Co. has argued its proposed LNG facility in Rio Rancho would help protect against price spikes and secure energy stability. A big impetus to set up the new gas storage was the 2021 Storm Uri, which caused extraordinarily high gas prices.

The state regulators ultimately decided the LNG facility wouldn’t be a cost-effective measure. The storage facility would have cost about $180 million.

Commissioner James Ellison said the storage facility would cost $20 million more a year initially for New Mexico Gas Co. to run, costs that would fall back on customers, compared to current operations. Relative to that, he said the LNG facility would have saved about $14 million of the $107 million extraordinary costs New Mexico Gas Co. paid for gas because of Storm Uri.

“It seems like a fairly hefty price tag to pay for something that should occur on a relatively infrequent basis,” he said.

All three state regulators voted to deny the LNG facility request.

The denial is a victory for the hundreds of people who submitted written public comments or attended the three-hour-long public comment opportunity in November to ask the PRC to deny the request. Environmental advocates, statewide residents and local and state elected officials had concerns about potential negative environmental and safety consequences.

The commissioners didn’t address these safety worries in Thursday’s discussion. Cara Lynch, attorney for Coalition for Clean and Affordable Energy, said the regulators did take the concerns into account.

“Even though the commissioners did not specifically address those risks, those are factors that contribute to the commissioners’ deciding whether a project is a net public benefit,” she said.

She also said future examinations on the public benefits of other proposals should consider greenhouse gas emissions as well as impacts on vulnerable populations.

The details

In December 2022, New Mexico Gas Co. asked for the PRC’s permission to construct a 25-acre LNG facility on a 160-acre property in Rio Rancho. The utility requested that regulators approve a “certificate of public convenience and necessity,” or CCN, which is necessary before a public utility can set up or operate a new utility plant or system.

According to the PRC, it has to assess whether a new utility system is worth it for the public when considering a CCN request. A utility has to prove a few things to convince the commission of the need: there’s a “net public benefit,” the company considered alternative options and the project is cost-effective.

Ultimately, the three state regulators didn’t think New Mexico Gas Co.’s application proved these points and ruled there wouldn’t be enough public benefit to set up the facility.

Commissioner Pat O’Connell said the project didn’t seem cost-effective.

“I’m sitting here balancing the certainty of an expensive facility against uncertain benefits. And so it’s hard to say yes to that,” he said.

He said it was persuasive that the Department of Defense, the only consumer advocate in the case, adamantly opposed the LNG facility. He noted that no transportation customers — customers who face the same reliability risk as a residential customer— intervened.

“And they didn’t come to say, ‘Hey, this is important enough that I am willing to pay more in my bill for the benefit that this facility provides,’” he said.

Ellison said it was a different set of commissioners that originally saw the gas company’s interest in an LNG facility. He also said he would like to see more discussion earlier on with similar projects.

“I think in this case, it really could’ve saved a lot of time and expense,” he said.

Cydney Beadles is the senior attorney and New Mexico clean energy manager at Western Resource Advocates. She said the commissioners brought up good points in Thursday’s discussion.

“I feel like the commissioners took a close look at this proposal and came to an outcome that is in the public interest and reflects good public policy,” she said.

The context

The proposed Rio Rancho LNG unit would have been the first facility of its kind in New Mexico.

Over 200 gas facilities under state jurisdiction don’t have LNG units, according to the PRC. There are two underground natural gas storage facilities subject to federal jurisdiction, PRC Chief of Staff Cholla Khoury said.

More than 20 states have similar LNG storage facilities to the one New Mexico Gas Co. proposed, according to the utility.

New Mexico Gas Co. currently leases storage in Texas at Keystone Gas Storage. The LNG facility would have replaced that storage with the facility in New Mexico, with gas company staff constantly monitoring the facility, according to the company.

The last time a utility asked the PRC for permission to set up an LNG facility in New Mexico was 2012, also from New Mexico Gas Co., after a 2011 winter storm. The company withdrew its request in 2013.