New Mexico is blessed with plentiful natural resources making it a large net exporter of energy, generating 2,261 trillion BTu in 2011. While mineral extraction has been the primary, sustained economic driver for the state for 150 years, the oil and gas sector has been booming with returns of more than $2 billion in taxes and other revenue to the state annually.
The San Juan Basin, located in northwest New Mexico and southwest Colorado, is the largest proven natural gas reserve in the country. This 26,000 square mile geologic feature is a major source of oil and gas, and it provides approximately 70 percent of the gas produced in the state. The Permian Basin covers southeastern New Mexico. It’s estimated that only 27 percent of the available resource has been extracted from the Basin, and that there are 45 billion barrels of residual oil and 30 billion barrels of mobile oil available today.
New Mexico is also one of the leading regions in the United States for renewable energy resources, possessing the country’s second greatest solar potential, eleventh greatest wind potential, and seventh greatest geothermal potential. Currently, there are 774 megawatts (MW) of wind and 160 MW of solar operating in New Mexico, with additional projects forthcoming.
However, a strong renewable resource base is only as valuable as the business climate and workforce that accompanies it. So, New Mexico has implemented a strategy of providing companies with aggressive incentives and a low cost business environment in which to grow energy businesses. The state’s renewable portfolio standard requires that 20 percent of all electricity sold by investor-owned electric utilities, and 10 percent sold by cooperatives, come from renewable energy resources by 2020; in 2011, renewable energy supplied 6.5 percent of electricity generated in the state. There are specific carve-outs for different technologies such as wind, solar or geothermal.
- New Mexico is the 2nd largest natural gas producer in the nation, producing 10% of the nation’s natural gas supply.
- The state is also the 6th largest producer of crude oil in the continental U.S., excluding Federal offshore areas, ranking 4th in crude oil reserves.
- The San Juan Basin, in the northwestern part of the state, is the most productive coal-bed methane basin in North America.
- New Mexico is the nation’s largest supplier of potash.
- The state uses less electricity per capita than two-thirds of the nation and the state is a net supplier of electricity to neighboring states.
- The state posses the 2nd greatest solar potential, 11th greatest wind potential, and 7th greatest geothermal potential.
- In 2013, New Mexico ranked fifth in the nation in utility-scale electricity generation from solar energy.
- The Tres Amigas SuperStation is a planned project to unite North America’s two major power grids, the Eastern Interconnection and the Western Interconnection, and one minor grid, the Texas Interconnection, with the goal to enable faster adoption of renewable energy and increase the reliability of the U.S. grid.
- New Mexico is also home to a major portion of the SunZia Corridor, a 515-mile transmission corridor being developed by federal and state agencies that will enable renewable development on and across federally held lands.
- Abengoa Bioenergy
- Sapphire Energy
- Key Energy Services
- URENCO / National Enrichment Facility
- Joule Unlimited, Inc.
- BHP Billiton
- Aztec Well Servicing Family
- Incitor Inc.
- Riley Industrial Services, Inc.
- Western Refining
- Philips Oil Company
- Yates Energy Corporation
Advanced Energy Deduction and Advanced Energy Tax Credit
Receipts from selling or leasing tangible personal property or services that are eligible generation plant costs to a person that holds an interest in a qualified generating facility are deductible from gross receipts and compensating tax. In addition, a taxpayer who holds an interest in a qualified generating facility in New Mexico that files a corporate income tax return may claim a credit for six percent (6%) of the eligible generation plant costs of a qualified facility.
Alternative Energy Product Manufacturer’s Tax Credit
Manufacturers of certain alternative energy products may receive a tax credit not to exceed five percent (5%) of qualified expenditures for purchase of manufacturing equipment used in the manufacturing operation. This credit is designed to stimulate the development of new alternative energy manufacturing facilities.
Biodiesel Blending Facility Tax Credit
An operator of a refinery in New Mexico, any person who blends special fuel in New Mexico, or the owner of special fuel stored at a pipeline terminal in New Mexico, who installs biodiesel blending equipment for the purpose of establishing or expanding in a facility to produce blended biodiesel fuel is eligible to claim a credit against gross receipts tax or compensating tax. A certificate of eligibility must be obtained from the Energy, Minerals, and Natural Resources Department to apply for this credit. The credit is equal to 30% of the purchase cost of the equipment plus 30% of the cost of installing that equipment. The credit cannot exceed $50,000 with respect to equipment installed at any one facility. The credit may be applied against the taxpayer’s gross receipts tax liability or compensating tax liability. The credit may be carried forward for four years from the date of the certificate of eligibility.
Biomass-Related Equipment and Materials Deduction
The value of equipment such as a boiler, turbine-generator, storage facility, feed-stock processor, interconnection transformer or biomass material used for bio-power, bio-fuels, or bio-based products may be deducted in computing the compensating tax due.
Renewable Energy Production Tax Credit
A corporate or personal taxpayer who owns a qualified energy generator is eligible for a tax credit in an amount equal to one cent (.01) per kilowatt hour of electricity produced by the qualified energy generator using a qualified energy resource in the tax year. A variable rate of credit is added for electricity produced using solar energy. The rate starts at 1.5 cents in the first year of operation and increases in increments of ½ cent each of the next five years, to a maximum of four cents, and then will decline by 1/2 cent per year in the next four years to two cents in the tenth year of operation. The one cent per kilowatt hour rate applies for all other qualified energy generation facilities. The facility must generate a minimum of one megawatt. The total amount of electricity that can qualify for the corporate and individual income tax credits is two million megawatts for wind and biomass with an additional 500,000 megawatt hours allowed for solar-generated power.
For more information on all incentives New Mexico has to offer, click here.
Brochure: New Mexico Oil & Gas
Brochure: New Mexico Renewable Energy
Map: Oil & Gas Resources
Map: Wind Power Resources
Map: Mining Districts
Map: Biomass Resources