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New Mexico Energy Policy and Implementation Plan - Energy Background

New Mexico´s Energy

Nearly every possible energy source exists in New Mexico in relative abundance: oil, natural gas, uranium, solar, wind, and geothermal resources are found across the state's geography. One of the state's greatest assets, the energy sector provides revenue that funds schools, hospitals, and state government and lessens the tax burden on New Mexico's citizens. This wealth of energy resources also creates economic development opportunities for New Mexico, from attracting manufacturing, to using energy in more productive and efficient ways, to additional opportunities for energy export.

EnergyConsumtionbySource and Sector 2011

Energy Geography

Energy resources and opportunities exist in all of New Mexico's 33 counties. There are rich natural gas deposits in the northwestern (San Juan, Sandoval and Rio Arriba Counties) and southeastern (Lea, Eddy, and Chaves Counties) corners of New Mexico. The Permian Basin in the southeast is a principal oil producing region of the United States. Coal is most abundant in the San Juan Basin, and uranium deposits also cluster in northwestern New Mexico (Cibola and McKinley Counties); both are geologically shared with the Navajo Nation. The eastern half of New Mexico has some of the best wind resources in the country, while solar energy statewide has the third highest state resource potential in the nation. Geothermal resources also underlie the southwestern and north-central portions of New Mexico. There is a cluster of interest in algal biofuels in the southern half of the state. Energy efficiency opportunities are most pronounced in population centers, but also are applicable to the entire state.

Energy Resources

New Mexico is an energy export state. Natural gas, oil, and electricity are sent outside of the state's borders via pipeline, transmission lines, highways, and rail. In 2012, New Mexico produced 2.4 times the amount of energy it consumed and exported energy primarily to Texas, Arizona, California, and Utah.

Table 1. NM energy production rankings
U.S. Ranking
Net energy supplier to nation 3
Total energy production 10
Oil Production 6
Natural gas production 7
Coal production 12
Wind installed capacity 19
Solar installed capacity 10
Renewable power generation * 40
*Excluding hydropower
Table 2. NM energy resource rankings
U.S. Ranking
Proved oil reserves 5
Proved natural gas reserves 8
Recoverable coal reserves 9
Wind Potential 11
Solar potential 3
Geothermal resources 6
Uranium reserves 2


Advancements in oil and gas extraction technologies—primarily in the areas of horizontal drilling and hydraulic fracturing—have created the “shale revolution” in the last decade. This has fundamentally changed the nation’s energy economy and prospects for energy security, while invalidating prior oil projection forecasts.

Between 2007 and 2013, oil production increased 68% in New Mexico. The Permian Basin in southeastern New Mexico is the major oil producing region in the state. Since 1920, 20 major oil plays have been exploited in the basin, which contains 3 of the largest 100 oil fields in the United States. The Delaware and Bone Spring sands and Penn and Wolfcamp shales are New Mexican plays with horizontal drilling on a scale that qualifies as a boom or bonanza. While there is currently less oil production in northwestern New Mexico, oil and gas companies are exploring the Mancos shale and Gallup sand in the San Juan Basin with capital investment planning that confirms a significant oil play. Canada’s largest public company—an oil and gas company—has made its Mancos operation one of three major oil activities in North America.

NM Oil Production

Natural Gas

Total natural gas production in New Mexico declined 21% between 2007 and 2013, primarily because U.S. overproduction of shale gas lowered natural gas prices and depressed production. The San Juan Basin, which extends from northwestern New Mexico into Colorado, is one of the largest fields of proved natural gas reserves in the United States. Approximately 20% of the natural gas produced in New Mexico is consumed in the state, while the rest is sent via pipeline to Arizona and Texas and on to natural gas markets across the West and Midwest. Increased New Mexican natural gas output depends on higher prices at the wellhead, which could result from expanded demand for electricity generation and new applications for natural gas.

Natural Gas Production


New Mexico's coal production has fluctuated over the years, but for the past decade the general trend has been downward. There are four operating coal mines in the state, all of which are located in the San Juan Basin. Two of the mines are dedicated to supplying major coal-fired electricity generation stations: the Four Corners (1,540 megawatts [MW]) and San Juan Generating (1,683 MW) Stations. The Navajo coal mine attached to the Four Corners Generating Station has reserves and resources of over 6 billion tons of coal for electricity generation. New Mexico coal that is not used in the state is sent to Arizona for power generation.

New Mexico Coal Production


New Mexico has the second largest uranium reserves in the United States, with nearly one-third of all U.S. uranium resources within its borders. The state was the leading producer of uranium from the 1950s to the 1970s, but production plunged in the early 1980s and virtually no uranium has been mined in the state since 1990. In 2013, there was renewed interest in uranium mining in New Mexico in Cibola County near Grants.

NM Uranium

Renewable Energy

Renewable electricity production in New Mexico has grown steadily over the last decade, driven in part by the state’s Renewable Portfolio Standard, which requires investor-owned utilities (IOUs) to supply 20% of electricity from renewable energy by 2020 and rural electric cooperatives to source 10% of electricity from renewable energy in the same timeframe. In 2013, New Mexico’s wind resources generated 6% of all electricity consumed in the state. Of the total renewable electricity produced, nearly 80% is from wind and the rest is largely solar and hydropower. On a per capita basis, New Mexico is among the top states in distributed grid-connected solar photovoltaic (PV) capacity. In addition, the first commercial geothermal electricity facility opened in late 2013 near Lordsburg in the state’s boot heel, adding 4 MW of baseload geothermal capacity to the state’s renewable electricity mix, with another 6 MW planned.

The state also is a hub for algal biofuels, and in addition to ongoing research by Sandia and Los Alamos National Laboratories, Las Cruces hosts Sapphire Energy's Research and Development Facility, the largest photosynthetic, fully integrated, algae-to-energy testing facility in the world. Waste-to-energy projects are also proposed near Roswell, where manure from dairy farms can be turned into methane gas.

NM Renewable Energy

Energy Efficiency

Nationwide, cars and appliances are becoming more efficient, largely due to national fuel economy and appliance standards. In 2013, national electricity consumption fell to 2001 levels, and this trend is expected to continue. Energy efficiency gains in New Mexico over the past decade are due to both the influence of the national standards and to energy efficiency standards required by the 2005 New Mexico Efficient Use of Energy Act. The act requires investor-owned utilities to reduce energy use 8% by 2020. Each year electricity and natural gas utilities develop energy efficiency plans that include a number of programs designed to reduce energy use and costs to residential, commercial, and industrial consumers.

An important component of energy efficiency is building codes, which set minimum energy efficiency provisions for commercial and residential buildings. New Mexico has energy codes that are based on the International Energy Conservation Code (IECC) 2009 standards. A state Sustainable Building Tax Credit has also incentivized growth of energy efficient home and commercial construction. This credit requires homes be 40% more efficient than the national average, whereas commercial buildings are required to be 60% more efficient.

Energy Infrastructure

Energy infrastructure includes the network of pipelines and transmission lines that transport energy to consumers and facilities that turn raw energy resources into useful products. Transportation corridors such as roads and railways are critical energy infrastructure networks.  Record oil production and increased activity has stressed road and rail infrastructure networks in New Mexico’s oil and gas producing regions.


Electricity Transmission

The majority of electricity transmission lines in New Mexico were built in the 1960s and 1970s, with some system improvements made since that time. Inadequate transmission access has long been cited at the primary hindrance to New Mexico renewable energy development, as some of the best wind resources, in particular, are located far away from electricity markets.

There are a number of electricity transmission projects on the drawing board in New Mexico, though planning times are lengthy and it is unclear how many projects will be built. The New Mexico Renewable Energy Transmission Authority (RETA) was established in 2007 to help expedite transmission projects, specifically for transmission lines that will carry at least 30% renewable energy. RETA has financed a wind energy facility and is working in conjunction with transmission developers to move transmission infrastructure forward in the state.


Pipelines, Refineries, Hubs, and Nuclear Infrastructure

There are nearly 13,700 miles of oil, gas, and other pipelines in New Mexico (not including gas distribution lines). These pipelines carry oil and gas to refineries and markets. While some oil is transported via truck or rail, virtually all natural gas is transported via pipeline. There are two oil refineries in New Mexico—the Gallup Refinery (~23,000 barrels per day) and the Navajo Refinery in Artesia (~100,000 barrels per day). A biodiesel refinery in Clovis that will produce 1,000 barrels per day is expected to come online in 2014, and there is also a 2,000 barrel per day ethanol production facility in operation in Portales.

Other energy facilities of note in New Mexico include the significant natural gas connection and trading point, the Blanco Hub in the San Juan Basin, through which a large percentage of Rocky Mountain natural gas passes. Although there is currently no uranium mining or nuclear power generation facility in New Mexico, there is some nuclear infrastructure: the only domestic operating uranium enrichment plant in the United States is located in Lea County (URENCO USA), and the Waste Isolation Pilot Plant (WIPP), a defense-generated transuranic nuclear waste disposal facility, is also located in southeastern New Mexico.

Energy and the Economy

Total energy revenue in New Mexico, specifically revenue derived from the oil and gas sector, has grown over the past decade, as has energy revenue's relative proportion of the state General Fund. This demonstrates increased reliance upon natural resource development.

In Fiscal Year (FY) 2013, production taxes, royalties, and other direct sources of state revenue from the oil and gas industry accounted for 31.5% of New Mexico's General Fund. Oil and gas is directly responsible for 86% of the Severance Tax Permanent Fund and 96.6% of the Land Grand Permanent Fund. In FY 2014 the New Mexico State Land Office generated a record $726 million in revenue from oil and gas royalties alone for the state's public schools, universities, and hospitals.

In addition, the oil and gas industry expansion accounts for unprecedented job growth. It is estimated that in 2012 9% of all employment in New Mexico, or 68,800 jobs, were directly or indirectly related to the oil and gas industry. In oil-producing counties such as Lea County, the December 2013 unemployment rate was 3.8%, compared to the state average of 6.4%. Lea and Eddy Counties also had the second and third highest wages by county in 2013, with an average annual salary of $50,230, compared to the state average of $40,610.

While oil and gas production revenue is primarily generated in the southeastern and northwestern regions of the state, the revenue from oil and gas production benefits all reaches of New Mexico through general fund disbursements, capital funding projects, gross receipts taxes, and ad valorem taxes that go to the counties.

oil and gas production and revenues by county oil and gas production and revenues by county

Beyond oil and gas, there are other sources of revenue and jobs in the energy sector. Coal mining has traditionally been a significant source of revenue and jobs for northwestern New Mexico, and in FY12 the coal industry returned $25 million in revenue to New Mexico and employed over 2,000 people. Renewable energy and energy efficiency industries are also contributing to New Mexico's economy: in 2013 $131 million was invested in New Mexico to install solar for home, business and utility use through 87 solar companies that employ 1,900 workers. Annual land lease payments from wind energy generation in New Mexico—which primarily is paid to the state land office or rural landowners—is estimated to be over $2.9 million.

Water and Energy

Water and energy are inextricably linked and mutually dependent, with each affecting the other’s availability. Water is needed for energy development and generation, and energy is required to supply, use and treat drinking water and wastewater. Water and energy are also essential to health, quality of life, and economic growth, and demand for both of these resources continues to rise. 

For the oil and gas industry, water is used for drilling and hydraulic fracturing. The growing practice of multi-stage hydraulic fracturing has increased the amount of water used per well in recent years, which in New Mexico can range from 500,000 gallons to 8,000,000 gallons per well. While this amount of water used by the oil and gas industry represents a small fraction of overall water use in New Mexico, there can be localized strain on freshwater supply in high production areas.

When oil and gas are produced, water is also extracted from the well, and this water is known as “produced water.” Produced water quality varies between wells and regions, but generally is highly brackish. In 2013, 103,600 acre feet of water were produced from oil and gas wells, primarily in southeastern New Mexico. Most of this water is reinjected underground for disposal. As water becomes increasingly scarce, this produced water may become an important new supply that industry could treat and reuse to meet some of its water needs. The oil and gas industry in particular is turning toward recycling and reusing produced water in its drilling and completion operations.


Note: NW = McKinley, Sandoval, Rio Arriba, and San Juan Counties; NE = Colfax County; SE = Chaves, Lea, Eddy, and Roosevelt Counties

The electricity sector also uses large quantities of water for cooling of thermal (coal and natural gas) and nuclear generation facilities. While there are no nuclear generating facilities in New Mexico, Public Service Company of New Mexico (PNM) owns and purchases power from Palo Verde, a nuclear generating station in Arizona. IOUs report water use through their Integrated Resource Planning process. Natural gas steam turbine plants (generally peaking plants) consume the most gallons per megawatt-hour (MWh) of electricity generated, with nuclear and coal-fired electricity generating stations the second and third largest consumers. Solar and wind technologies do not require any water for operation.

Power Generation Use Intensity PNM, 2011-2013, avg

Note: The plants employ the following technologies: Afton and Luna (combined cycle natural gas); Delta and Valencia (natural gas peaking plants); Four Corners and San Juan (coal); Lordsburg (natural gas combustion); NMWEC (wind); Palo Verde (nuclear, located in Arizona); PNM Solar (photovoltaics); Reeves (natural gas steam turbine)

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