top of page

Highlights from the LNG hearing: the plant was proven uneconomic and unsafe

It's been a big week for a climate news. In a first, a Rhodium Group report found that emissions from the United States dropped 1.9% in 2023 even as the economy expanded, indicating the decoupling of economic growth from fossil fuel emissions for the first time. Important! But the report also notes that in order to reach the country's emissions reduction goal of 50% by 2030, we need to be moving three times as fast. Then in today's news the International Energy Agency announced that renewable energy expanded more than 50 percent last year compared to 2022, potentially putting the international goal of tripling capacity by 2030 in sight. In other words, we are starting to see the shift in momentum towards a renewable energy economy.

That is why the case we are litigating this week to reject New Mexico Gas Company's proposed LNG plant in Rio Rancho is particularly important. As numerous critics have pointed out, the proposed plant is extremely likely to end up a $180M (or more) stranded asset that New Mexico gas ratepayers will end up on the hook to pay for. And most importantly:

  • it will not reduce risk from price volatility and may even increase risk

  • it will not increase reliability in any meaningful way and may even increase exposure to reliability issues

  • the purpose of the plant is to, in NMGC's own words, "become a key component of NMGC future capacity expansion plans and revenue generation." Rather than turning to electrification the company wants to expand into the "LNG transportation markets" and expand revenues via other states "in the Southwest and Mexico transportation corridors." This LNG storage would allow the company to "pursue future growth and obtain new revenue."

During the hearing this week New Energy Economy's lawyer Christopher Dodd exposed the weaknesses in the testimony of New Mexico Gas Company's expert, an expert who is being paid $1000 an hour, has racked up more than $500,000 in fees already, which ultimately will be borne by ratepayers once the gas company seeks cost recovery in its next (pending) rate case. Our cross examination revealed that a real world analysis of how the proposed plant would have been used during a winter storm like Uri, the impetus for this proposed plant, dramatically differs from NMGC projections.

The gas company went from saying that operation of the LNG plant in any similar weather event would save ratepayers $44M - already a suspect tradeoff at a cost of $180M! - to $13.8M by the time the hearing came around, to an admission during our cross examination that having the LNG plant during that storm could have been dramatically more expensive and left us more vulnerable to high market prices. In fact, had the LNG plant been in place, the lowest possible cost of gas during that week would have resulted in equivalent or maybe even double the exposure to spot gas prices.

We know already that the impetus for this proposed plan is the addition of hundreds of millions to rate base so that Emera, NMGC's Canadian parent company, can get more guaranteed Return on Equity interest from ratepayers to pay shareholder dividends.


Our evidence revealed that NMGC's ratebase (the amount of money they expect to get from us) would nearly DOUBLE in five years as a result of this plant from $833M to $1 billion two hundred-twenty-nine million. As NMGC's own document claims: NMGC's "higher income primarily resulting from the construction and ownership of the LNG storage facility, and other capital spending to support safety, reliability, and customer growth." What other associated capital spending? Having to comply with at least twenty required permits for environment and regulatory standards (e.g., pollution controls, safety berms, - no problem, more capital expenditures to add to rate base!).

The hearing has also explored important issues of safety at the plant, including the fact that the proposed site of the LNG plant is located directly within a seismically active fault zone that requires special building considerations. Nowhere in the application or supporting documents is this flaw addressed, and the estimated $180M construction costs does not include the cost of engineering necessary to protect against earthquake damage. The true costs of the plant could end up significantly higher after all is said and done, an injustice to ratepayers and another reason for the PRC to reject the proposed plant, which we have already proved would not be cost effective!

We also raised our concern that if there were some kind of catastrophic event at the facility, not only would the nearby communities face potentially significant dangers and health hazards, but the company would be left without any storage for gas and be even more vulnerable to price swings. Last time there was a significant incident at an LNG storage facility in Plymouth, WA, for example, it was offline for two years.

It remains to be seen what the Hearing Examiner will recommend. New Mexico Gas Company's most persuasive argument is that its current gas supplier could curtail deliveries again, and that having a storage facility could protect against any such potential situation. We continue to maintain that the small risk of a hypothetical potential shortage of supply significant enough to affect service is not worth the substantial cost to ratepayers, the significant dangers to the local community and the potential for an enormous stranded asset as the energy transition begins to accelerate.

There are other options NMGC hasn't sufficiently explored: hedging and other contractual alternatives to add security and redundancy; if increasing revenues wasn't the motivation a prudent company would investigate other options before it invested in a high-cost, super risky, environmentally and climate dangerous,  likely stranded asset!

Now that the hearing has concluded, each party will submit a Brief in Chief and responses. The Hearing Examiner is expected to make his recommendation to the PRC in February, and ultimately the PRC will vote whether to approve or disapprove the Certificate of Necessity and Convenience for the LNG plant, usually about a month after the Hearing Examiner's recommendation is made.


  • Black Facebook Icon
  • Black Instagram Icon
  • Twitter
bottom of page