PRC denies application for Rio Rancho liquified natural gas facility

A digital rendering of a proposed liquefied natural gas facility proposed for Rio Rancho. Public Regulation Commission voted 3-0 to deny the application. (Courtesy of New Mexico Gas Company)

In a unanimous vote Thursday, New Mexico utility regulators denied a permit for a proposed liquified natural gas storage facility in Rio Rancho. Public regulation commissioners said the projected $180 million price tag outweighed the potential benefits.

“It just doesn’t seem to me that the costs justify the benefits that you get from the project,” commissioner James Ellison said during the Thursday morning special meeting.

PRC member Pat O’Connell echoed concerns about “cost-effectiveness.”

The 16-page final order denying the permit found that the New Mexico Gas Company did not meet the net public-benefit standard, nor did the company prove that the facility was the most cost-effective alternative.

Tim Korte, a spokesperson for the New Mexico Gas Company, said no final decisions have been made regarding any appeal to the decision.

“We are disappointed,” he wrote in an emailed statement. “We proposed the (liquified natural gas) storage facility in the belief it would provide benefit to our customers, both in terms of reliability and price protection. We will be carefully reviewing the final order as well as the comments from commissioners at today’s open meeting.”

The application for a Certificate of Convenience and Necessity is required for constructing or operating new utility plants or systems, according to a media release from the Public Regulation Commission .

The 12-million-gallon storage facility was first proposed in 2022 by the New Mexico Gas Company. The company said that storage inside of New Mexico would “provide certainty about access to stored gas when needed most” on cold winter days or low supply. Officials also claimed it would protect customers from “market swings” on natural gas prices.

Currently, the company leases space at a salt cavern storage facility in Pecos County, Texas in the Permian Basin, to supplement gas supplies during winter storms.

Ellison noted the costs to taxpayers in response to the company’s analysis that a storage facility in the state would save people money. The study from the New Mexico Oil and Gas Company estimated that local storage during deadly Winter Storm Uri in February 2021, would have saved $14 million out of $107 million paid for higher gas prices, which shot up during supply shortages as pipelines froze.

That totals to about 15% in savings. Not enough to justify the costs, Ellison said.

“But we’ve got to pay $20 million a year, every year to have that insurance to have that capability,” he said.

Hearing examiner recommends regulators deny LNG storage in Rio Rancho

A hearing examiner (which acts as a judge in regulatory proceedings) previously found if the PRC accepted a separate rate hike based on the Winter Storm Uri costs and approved the Rio Rancho storage facility, New Mexico ratepayers could experience a rate hike “of over 35% by 2027.”

Mariel Nanasi, executive director of Santa Fe-based nonprofit New Energy Economy, celebrated the public regulation commission’s decision Thursday, saying the denial “was extremely clear and decisive.”

Nanasi, who’s nonprofit opposed the project and organized with residents in Rio Rancho said there was a “glaring omission” from commissioners about other risks raised by public commenters.

“The cost is a really big deal, especially when the risks are so high,” Nanasi said. “Those risks of health, safety and climate.”

The Final Order

The final order adopted by the Public Regulation Commission had some changes from the opinion issued last month by a hearing officer that also recommended denying the project.

That opinion in February, from PRC chief hearing examiner Anthony Medeiros stated that the gas utility failed to meet a higher standard of proof on the project, and found it to be a “discretionary,” project pursued by New Mexico Gas Company.

The commission declined to examine that argument in the final order, writing there was no need  since it concluded the New Mexico Gas Company proposed facility is “not consistent with public convenience and necessity.”

Medeiros also said the New Mexico Gas Company’s failure to “update time-sensitive elements of its analysis,” should be another reason to deny the application.

In a filing, the New Mexico Gas Company argued that the company “lacked proper notice for a new evidentiary burden” for some of the required documentation during the application, later calling the requirements “vague” and “untenable.”

PRC members rejected that, writing in the final order that timeliness concerns will not be ignored in these kinds of applications.

Finally, the order noted that while there was no cost-benefit analysis done for this project, and no strict requirements for companies to use them when pursuing these applications, the commission may consider using them in assessing future cases.

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