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F I S C A L I M P A C T R E P O R T
SPONSOR HAFC
ORIGINAL DATE
LAST UPDATED
2-26-07
2-28-07 HB 431/HAFCS
SHORT TITLE Greenhouse Gas Emissions Reporting Fee
SB
ANALYST Aubel
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
$200.0
$200.0 Recurring OSF/Air Quality
Permit Fund
(Parenthesis ( ) Indicate Revenue Decreases)
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08 FY09 3 Year
Total Cost
Recurring
or Non-Rec
Fund
Affected
$100.0 $100.0
$200.0 Recurring Air Quality
Permit Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
Relates to HB 386, HB 889
SOURCES OF INFORMATION
LFC Files
http://www.nmclimatechange.us
No Responses Received From
New Mexico Environment Department (NMED) (Pending)
Department of Finance Administration (DFA) Local Government Division
General Services Department (GSD) Building Services Division
New Mexico Municipal league (NMML)
Energy, Minerals, Natural Resources Department (EMNRD)
SUMMARY
Synopsis of Bill
The House Appropriations and Finance Committee Substitute for House Bill 431 amends the Air
Quality Control Act by adding a new section to provide for collecting fees to support the
reasonable costs of implementing a state greenhouse gas reporting and state greenhouse gas
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House Bill 431/HAFCS – Page
2
registry, two of the three enabling policy recommendations made by the New Mexico Climate
Change Advisory Group in its December 2006 report.
The bill authorizes the Environmental Improvement Board or local board to develop a schedule
of fees sufficient to cover the reasonable costs of:
1.
Preparing and maintaining a greenhouse gas emissions inventory; and
2.
Developing and maintaining a greenhouse reporting and registry program.
The schedule of fees will be calculated according to standardized quantification protocols and
procedures as described in 40 Code of Federal Regulations Part 75. The bill limits the fees
collected annually to $200.0 thousand each to a local agency and NMED.
The fees will apply to industrial, nonagricultural sources that emit more than 1,000 tones per
year of carbon dioxide or carbon dioxide equivalent, defined as the amount of carbon dioxide by
weight that would produce the same global warming impact as a given weight of another
greenhouse gas.
FISCAL IMPLICATIONS
Fees collected pursuant to HB 431/HAFCS by NMED will be deposited into the state air quality
permit fees fund. Those fees will be used to pay the cost of developing, preparing and
maintaining the greenhouse gas emission inventory and registry programs. The amount of funds
generated will depend upon rulemaking determinations of fee schedule, applicability of
mandatory reporting and the extent of participation in the voluntary registry. Until these fees are
determined, the amount of new revenue to the fund is unknown. However, it is limited to $200
thousand annually.
NMED estimated a recurring operating budgetary impact of $100.0 thousand to fund two clerk
positions with benefits and a modest allowance for travel, supplies, and equipment. The fees
collected for the program will support the program.
SIGNIFICANT ISSUES
The Air Quality Control Act gives the EIB and the local board authority to adopt rules requiring
any person emitting any air contaminant to submit reports regarding the nature and amount of
emissions (NMSA 1978, Section 74-2-5). The bill establishes a threshold for sources that will
pay fees and defines how other greenhouse gas emissions will be converted to carbon dioxide
equivalents.
The Climate Change Advisory Group (CCAG), composed of 37 stakeholders representing a
broad range of interests and expertise, developed a list of 69 policy recommendations in their
final report. HB 431 supports two of the three of the enabling policies, upon which the others
rest, and provides a means of funding these reporting and registry functions for greenhouse gas
(GHG) emissions. The consensus of the group was that these functions should be funded by the
participants in the programs.
According to the report, a rigorous GHG emissions reporting program is vital for several
reasons:
•
to map current GHG emissions;
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House Bill 431/HAFCS – Page
3
•
to identify where the best opportunities for emission reduction;
•
help quantify the cost/benefit analysis of remediation;
•
provide a baseline for measuring future progress in reduction;
•
help construct a state GHG inventory;
•
provide a precursor for sources to participate in voluntary reduction programs;
•
reduce risks associated with possible future GHG mandates, and
•
track accomplishments in GHG emission reduction.
New Mexico has a unique GHG emission footprint, which includes emissions from both
production and consumption sources. According to the CCAG report, GHG reporting reflects
the standardized measurement and reporting of GHG emissions at a statewide, sector, or sub-
sector level to support tracking and management of emissions.
The underlying consensus is that New Mexico’s economy, water supply, and quality of life could
be harmed if climate change caused by greenhouse gases continues unchecked. This bill does
not reduce greenhouse gas emissions directly but is expected to assist in meeting this goal by
encouraging management, and ultimately reduction, of GHG emissions.
PERFORMANCE IMPLICATIONS
NMED’s Air Quality Bureau has a legislative performance measure to reduce annual statewide
noxious emissions to a target level. Similarly, the Governor’s Accountability and Performance
contract contains goals for reduction of greenhouse gas emissions. Finally, the Governor’s
Executive Order on Climate Change also contains goals for reduction of greenhouse gas
emissions. To the extent that the HAFC Committee Substitute for HB 431 promotes emission
reduction will improve these performance measures.
ADMINISTRATIVE IMPLICATIONS
The EIB or local air quality board (Albuquerque-Bernalillo County Air Quality Control Board)
will be charged with setting and collecting an appropriate fee to fund the system. Both boards
have the demonstrated expertise and ability to perform this function.
NMED noted that administrative and staff requirements to implement GHG reporting and
registry programs would depend on the scope of the programs as determined by any rulemaking.
NMED estimates that for comprehensive programs with accurate, standardized protocols, 2 FTEs
to be funded by the fees authorized in HB 431/HAFCS could be required; fewer full time
employees (FTEs) would be required for limited programs.
RELATIONSHIP
Relates to House Bill 386, which addresses oil-and-gas-industry-related emissions.
Relates to HB 889, which proposes a Chicago-Climate-Exchange-type credit system for New
Mexico.
TECHNICAL ISSUES
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House Bill 431/HAFCS – Page
4
NMML pointed out that the word “may" (page 1, line 22) gives EIB or local board the option of
not adopting fee schedule for GHG emission reporting and inventorying.
OTHER SUBSTANTIVE ISSUES
The HB 431 HAFC Committee Substitute includes the six traditional GHG emissions; the
CCAG also includes black carbon to the extent possible. NMED noted that may sources in New
Mexico already report criteria pollutant emissions for compliance with various federal and state
regulatory programs. EMNRD maintained that adding GHGs in those cases would be a natural
extension.
Quantifying some GHG emissions from some sources remains uncertain but standards
quantifying protocols are rapidly being developed and accepted widely. Uncertainly also
remains regarding possible future federal requirements for GHG emissions and how they would
dovetail with those developed under this bill.
NMED stated that many businesses perceive benefits in reporting their greenhouse gas emissions
through participation in a government-approved registry, such as understanding the company’s
greenhouse gas “footprint", public and shareholder disclosure of greenhouse gas emissions and
potential liability, establishing a pre-regulatory emissions baseline, obtaining credit for early
reductions in greenhouse gas emissions and preparing for emissions trading. Many companies
have also realized gains in profitability as they identify and implement measures to increase
energy and fuel use efficiency. Both EMNRD and NMED noted that a government oversight of
the greenhouse gas registry ensures that all participants adhere to sound methods of measuring
and accounting so that reported emissions are credible and verified.
ALTERNATIVES
NMED suggested that the greenhouse gas emissions reporting and registry programs could be
funded by means other than greenhouse gas fees. However, NMED also pointed out that for a
voluntary registry, the disadvantage of this approach is that funding would not automatically
adjust to meet varying needs as the number of participating businesses increased.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
The HAFC Substitute for HB 431 codifies the intent of New Mexico to track and inventory GHG
emissions. Without this intent highlighted, baseline data for GHG emissions may not be
generated, which would make determining the state’s progress in reducing GHG emissions
difficult. The capability for NMED and the local agency to support such a program through a
schedule of fees would not be provided.
MA/nt