To sink or to swim: NM officials try again for water reuse dollars

In 50 years, New Mexico will have 25% less water. That’s the crux of why Gov. Michelle Lujan Grisham’s administration is pushing again for the Legislature to fund her strategic water supply proposal, which would channel money to industrial water reuse projects.

Policymakers in the most recent Legislature wouldn’t pass any money for the pitch, and some this time around still have doubts about the details — or lack thereof — backing the idea.

The strategic water supply is a way to commercialize the cleanup and reuse of saltwater — brackish water — or oil and gas wastewater — produced water — to go toward projects like green hydrogen, solar panel manufacturing and data centers.

That’ll help conserve the massive amount of freshwater those projects use and act as an economic boost, is the state’s line of thinking.

This year, the New Mexico Environment Department is approaching the Legislature with a $75 million proposal to support strategic water supply projects. The state would use that money to award grants and contracts and administer pilot and industrial-scale projects focused on treating produced water and brackish water.

It comes after the Legislature earlier this year didn’t pass even a $100 million appropriation request for a strategic water supply proposal. The state originally sought out $500 million, but policymakers stripped the request out of the capital outlay package.

In the time since the legislative rejections, NMED has issued a request for information, participated in various strategic water supply events around the state, presented its updated proposal to multiple interim legislative committees and released a feasibility study.

Everyone has learned more since the start of this year, state Environment Secretary James Kenney told the Journal. He envisions New Mexico with three to seven water treatment facilities cleaning up brackish and produced water.

“The science and technology and everything else is at the right moment for us to do this,” he said.

Leaders from the Legislature’s Democratic majority — who largely control getting funding past the legislative finish line — have yet to completely agree.

What is the strategic water supply?

The strategic water supply is part of New Mexico’s 50-year water plan and seeks to help solve the state’s water shortage that will only worsen. Over the next 50 years, the state is expected to have about 25% less water available in rivers and aquifers, according to NMED.

So, state officials think it’s time to incentivize the treatment and reuse of brackish and produced water for certain operations.

New Mexico has an estimated 652 trillion to 1,303 trillion gallons of brackish water in its brackish aquifers — likely more — and the oil and gas industry generates 85 million gallons of produced water per day, according to a feasibility study NMED and Eastern Research Group Inc. released last week.

These “major untapped water resources” could offset reliance on freshwater resources, the study found, in projects like green hydrogen production, data centers, semiconductor manufacturing, solar panel manufacturing, electric vehicle manufacturing, pumped storage hydropower, and cement and concrete production.

Some of the projects would require the discharge of treated water into the environment. That’s especially concerning to some environmental advocates, who point to potential negative human health and environmental effects, something the study also mentions as a possibility.

There’s no question about advocate Mariel Nanasi’s opposition to the strategic water supply. There’s no evidence it won’t harm the public and environment, said Nanasi, executive director of New Energy Economy.

“And so without evidence, we can’t move forward,” she said.

More research needs to be developed on produced water before New Mexico can determine its “beneficial reuse,” Nanasi said. She’d rather see money go toward updating water infrastructure.

There will always be people who don’t support the proposal, Kenney said.

“If you’re anti-fossil fuels, you may not ever get to a point where you could support that aspect of this bill,” he said.

But with an energy demand that’s only growing, especially as renewable energy production and generative artificial intelligence ramp up, Kenney described the strategic water supply as a “must-have.”

Where exactly projects like desalination plants would be located is still up in the air. The study proposes Santa Teresa and Albuquerque as areas that could develop brackish water resources, and New Mexico’s two major oil and gas-producing regions — the Permian and San Juan Basins — as suitable locations for produced water treatment facilities.

A new detail in the state’s most recent strategic water proposal could bridge the gap between the $500 million NMED originally wanted from the state and the $75 million it’s asking for now: a strategic water supply fund paid for by the oil and gas industry.

Kenney told lawmakers last week the legislation would establish a fee of 5 cents per barrel on any produced water generated in the state that’s not recycled or reused.

That’s estimated to generate about $68 million a year for a strategic water supply fund, which the state could use to award grants, contract or administer pilot and industrial-scale treated brackish and produced water projects.

The state also wants to incentivize private industry participation in the strategic water supply by offering subsidies to businesses that purchase treated water.

That would help offset the estimated costs, which range from $13 million to $667 million for produced water projects and from $3 million to $107 million for brackish water projects, according to NMED.

Indeed, business leaders have jumped to invest tens of millions of dollars in treatment projects, even after the strategic water supply bill didn’t pass the Legislature.

For instance, American West Water Advisors LLC and process patent investor Marvin Nash last week announced a patented process for water treatment in New Mexico. The patent would monitor and test whatever the reused water is being used for, helping appease health and safety concerns about the strategic water supply, said John D’Antonio, owner of American West Water Advisors and former New Mexico state engineer.

For example, he said, the process for irrigational uses of reused water would include testing soil, monitoring crops and then testing the crops once mature.

“The whole idea is you look at applying the conservation by design patent process — because it works with any technology — and you can verify by doing actual monitoring and observing, pre(-project), during project and post-project,” he said.

New Mexico will fall behind other states if it doesn’t fund the strategic water supply, he said.

“The governor’s strategic water supply will revolutionize water markets in New Mexico,” D’Antonio said.

Lawmakers didn’t support it before. Do they now?

The state listened to feedback submitted on its proposal, Kenney said, which is reflected in its smaller financial request and the broader project scope. The state is also much more focused on understanding the science and technology behind a strategic water supply, he said, which the feasibility study highlights.

Nobody disagrees that a lack of water availability is an issue, Kenney said, and he’s optimistic about how lawmakers will approach the strategic water supply come 2025.

“I think they’re digesting what we’re providing them,” he said.

Sen. Peter Wirth, D-Santa Fe, said in a statement to the Journal the newest proposal is “right-sized.” He added that he likes the proposed fee on barrels of produced water, which creates a recurring revenue stream.

“Key for me will be the guardrails in the bill, which we have yet to see,” Wirth said.

Rep. Matthew McQueen, D-Galisteo, held similar concerns. Though the financial ask has gotten much smaller, the proposal still needs more details, McQueen said.

He chairs the House Energy, Environment and Natural Resources Committee as well as the interim Water and Natural Resources Committee, where the state last week presented its updated strategic water supply.

“The original proposal was a really big number without any details, and so the number has gotten smaller — that’s probably a good thing — but we’re still looking for details,” McQueen said. “And they certainly added details, but I still want to understand how the whole thing would work.”

The legislators last week had a deficit of information, Kenney said, because the state didn’t at the time provide them with a draft bill. NMED aims to share a draft with the committee this week.

“So, of course, they need more details,” Kenney said.

Even still, $75 million is a big ask, McQueen said. Though New Mexico is flush with dollars in its budget now, particularly due to the oil boom, it won’t always be that way.

“So even though the current request is down to $75 million, it’s still $75 million — that’s still a lot of money,” he said.

With only 30- and 60-day-long sessions, it’s a rush to get things done, McQueen said.

“I’m always looking forward to hearing more details,” he said, “and we’re running short on time.”

Getting funding for the strategic water supply is more important now than ever as New Mexicans wait to see if President-elect Donald Trump will halt the flow of dollars the state has gotten for energy and infrastructure under President Joe Biden’s administration, Kenney said.

“You could think of the strategic water supply as shoring up the economic investments that President Biden and Congress brought into New Mexico,” he said.

Not everyone is convinced yet, including some of the most important players.

“If there is a feasible and responsible and safe way to increase the (water) supply, that’s something we should look at,” McQueen said. “But feasibility and safety remains to be seen.”