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Plan Too Costly, Would Drive Jobs Out of State

By Michael Hartranft
Copyright © 2010 Albuquerque Journal Journal Staff Writer
          A crowd of 100 people marched outside the Environmental Improvement Board chanting "No Cap and Trade!" and "Save Our Jobs!" on the late summer day the state's Environment Department began presenting its plan to reduce greenhouse gas emissions.
        About half of the protesters were from the Farmington area, home to the oil and gas industry and two giant coal-fired power plants that produce thousand of megawatts of electricity.
        "By New Mexico being a lab rat in this experiment, all we're doing is pushing investment outside of our state with no true environmental benefit," Farmington City Councilor Jason Sandel said at the time.
        How big is the impact of regional cap and trade from the opponents' point of view? Huge.
        In testimony opposing the plan, they say it would drive up electric rates for consumers and kill thousands of jobs. They put the economic loss in excess of $3 billion.
        Sandel hit a recurring theme among those who oppose the NMED measure.
        Much of the opposition has come from the oil and gas industry, business groups, the state's electric utilities and state lawmakers.
        Both gubernatorial candidates, Susana Martinez and Diane Denish, have taken positions against the measure.
        Gov. Bill Richardson appoints both the head of the Environment Department and members of the board hearing the request. Some critics contend this is the governor's attempt to burnish his environmental legacy and leave either Denish or Martinez with a fait accompli.
        "There have been five versions of the NMED proposed rule since it was filed in June," said Lee Boughey, senior manager of communication for Tri-State Generation and Transmission. "There appears to be a rush to get a rule in place before the next administration comes into office."
        The state's largest utility company, Public Service Company of New Mexico, does not dispute the climate change science but doesn't think NMED's proposal is the way to go.
        "We've been supporting federal legislation because that's the way to achieve a meaningful reduction in greenhouse gases at the lowest cost," said Patrick O'Connell, project manager with PNM's generation planning and development group.
        PNM was a prominent supporter of a national cap and trade bill that passed in the House last year but stalled in the Senate.
        "We're only talking about less than one-half of 1 percent of the national greenhouse gas emissions potentially being regulated by (NMED's) rules and that's not even how much would be reduced," O'Connell said in an interview.
        "It's such a small amount that you're not achieving the goal of affecting the potential effect of climate change."
        O'Connell contends NMED's projections — that there would be modest, likely positive, impact on the state's economy — were based on participation by all seven of the states that signed onto the Western Climate Initiative cap and trade model.
        Among the WCI states, only California and New Mexico are moving ahead with regulations at this point.
        "If you just look at cap and trade in isolation, it will have a cost to New Mexico's economy," he said. "It decreases the gross state product, reduces jobs and, from our point of view, also adds a driver to electric costs that won't exist in neighboring states. That leads to disadvantage."
        Tri-State, which provides electricity to 12 electric cooperatives in New Mexico, raised similar points about the NMED analysis.
        Citing what she considered deficiencies in it, Tri-State witness and economist Anne Smith testified that cap and trade could cost New Mexicans $3.7 billion between 2012 and 2020.
        Another Tri-State witness, Ed Cichanowicz, testified there are no proven means to control or remove significant amounts of carbon from coal-fired power plants that can be applied in the next several years.
        New Mexico Oil and Gas Association witness, Paul Bachman of the Beacon Hill Institute in Massachusetts, said the economic models he used showed that by 2025, the cost of the state's cap and trade program could result in job losses ranging from 5,200 to 15,700 with corresponding wage losses of $500 million to $1.5 billion. The oil and gas industry itself could lose 800 to 2,300 jobs, he said.
        Opponents of the cap and trade proposal have tried to block the proposal on other fronts.
        In September, Rep. William Gray, R-Artesia, sought an attorney general's investigation into whether certain members of the Environmental Improvement Board had conflicts of interest that would prevent them from making an impartial decision.
        The Republican caucus in the state House asked for a similar investigation. It cited board chair Gay Dillingham, who it called a "known environmentalist." She is co-founder of Earthstone International, which was the beneficiary of money from the State Investment Council, which the governor chairs. The caucus also mentioned Environmental Improvement Board member John Horning, who is executive director of the WildEarthGuardians.
        Responding to Gray's letter last month, assistant attorney general Stephen Vigil, the EIB's legal counsel, held there was no conflict to warrant disqualification of any member.

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