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F I S C A L I M P A C T R E P O R T

SPONSOR Balderas

ORIGINAL DATE

LAST UPDATED

2/3/06

HB 282

SHORT TITLE Renewable Fuel Standards Act

SB

ANALYST Hoffmann

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

Energy, Minerals and Natural Resources Department (ENMRD)

Department of Transportation (NMDOT)

SUMMARY

Synopsis of Bill

House Bill 282 would enact the “Renewable Fuels Standards Act.” The Act would require that

all sales of gasoline include 10% ethanol (known as “E10”) and that all sales of diesel include

2% biodiesel (“B2”), statewide by Jan. 1, 2009.

The requirement can be temporarily suspended if:

•

The EMNRD Secretary “…determines that sufficient amounts of denatured alcohol

(ethanol) or biodiesel fuel are not available to meet the requirements of …” the Act, or

•

The Governor determines that an emergency or disaster has caused or appears likely to

cause a disruption in the price or supply of gasoline or diesel fuel.

Section 4 provides for reporting requirements specifying that fuel distributors and dealers report

the price and amount of ethanol and biodiesel fuel available to the distributor or dealer for blend-

ing; the amount of ethanol-blended gasoline and biodiesel-blended diesel fuel sold by the dis-

tributor or dealer; and any other information deemed necessary by the New Mexico Taxation and

House Bill 282 – Page

2

Revenue Department (TRD). The TRD shall establish rules, reporting dates, and provide report-

ing forms to fuel distributors and dealers. TRD shall consult with EMNRD and the New Mexico

Department of Agriculture (NMDA) to determine that sufficient amounts of ethanol and bio-

diesel are available to comply with the minimum ten percent content requirement for ethanol and

the two percent content requirement for biodiesel.

Section 5 of the legislation includes provisions that if any person violates the Act the person is

guilty of a petty misdemeanor and shall be sentenced in accordance with Section 31-19-1 NMSA

1978. In addition, EMNRD shall establish a system of administrative penalties for violations of

the Act. Administrative penalties may be assessed in lieu of or in addition to other penalties pro-

vided by law. EMNRD will solicit public input, provide public notice and hold a public hearing

in order to adopt rules that meet minimum requirements of the Act. Administrative penalties

shall not exceed $1,000 dollars for one violation of the Act. Violations of administrative penal-

ties shall be clearly defined along with a scale of administrative penalties relating to the amount

of the administrative penalty to the severity and frequency of the violation. EMNRD will provide

proper notification of administrative hearings, right to discovery of charges and evidence and

appeal procedures. Appeals from decisions made by EMNRD regarding the assessment of an

administrative penalty shall be to the district court pursuant to the provisions of Section 39-3-1.1

NMSA 1978.

SIGNIFICANT ISSUES

According to the Energy, Minerals and Natural Resources Department, enactment of this legisla-

tion would ensure that New Mexico does its part in reducing our nation’s dependence on foreign

oil, continues to stimulate renewable fuels production enterprises, and promotes healthy air qual-

ity, particularly in New Mexico’s urban areas. The City of Albuquerque already requires E-10

usage during the winter months (November through February) to maintain urban air quality and

comply with Environmental Protection Agency air quality standards. Use of renewable fuels in

New Mexico would continue to stimulate renewable fuels production within New Mexico.

Use of renewable fuels in New Mexico will also help to achieve other goals such as reduction of

greenhouse gas emissions. With the State’s membership in the Chicago Climate Exchange, we

are required to reduce greenhouse gas emissions or be forced to purchase credits.

PERFORMANCE IMPLICATIONS

ENMRD notes that House Bill 282 is in direct support of Governor Richardson’s Executive Or-

der 2005-049 requiring the increased use of renewable fuels in New Mexico state government.

EMNRD with cooperation and assistance of the General Services Department (GSD), Depart-

ment of Public Safety (DPS), and the Department of Transportation (DOT) are responsible for

facilitating and reaching the goal of the fifteen percent renewable fuels usage for state fleets.

The bill could increase the output of EMNRD programs by greatly expanding the renewable fu-

els infrastructure.

House Bill 282 – Page

3

ADMINISTRATIVE IMPLICATIONS

The Taxation and Revenue Department notes that it would be required to design new reports to

be completed by gasoline distributors and special fuel dealers. These reports would need to con-

tain the price and amount of ethanol and biodiesel fuel available to them, and the amount of

ethanol-blended gasoline and biodiesel-blended diesel fuel sold by them, along with any other

information needed to determine whether sufficient amounts of these fuels are available to meet

the requirements of the Act. Since there are no appropriations in the proposal, these functions

will have to be funded out of the Department’s regular operating budget.

According to the Energy, Minerals and Natural Resources Department (ENMRD), they will have

the responsibility of developing administrative procedures and enforcing requirements of this

legislation. This legislation will have an immediate impact if passed due to the development of

administrative procedures and enforcement of those procedures. EMNRD believes that their re-

sponsibilities under this legislation could be accomplished with existing staff resources if ECMD

positions are funded to the level requested in the Executive budget.

TECHNICAL ISSUES

According to the Taxation and Revenue Department, to facilitate ease of compliance, the pro-

posal should probably specify the content requirements by saying “at least ten percent” and “at

least two percent” so that it is clear that the fuel does not have to have an exact percentage blend.

OTHER SUBSTANTIVE ISSUES

The Department of Transportation notes that in Section Four, “REPORTING

REQUIREMENTS, there is no mention of fuel quality control by means of independent labora-

tory testing. An addition should be made to strengthen this area of the Renewable Fuels Stan-

dards Act otherwise fuel may be falsely certified to meet specifications by dealers and distribu-

tors and provide a substandard quality fuel product.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

According to the Energy, Minerals and Natural Resources Department, without this bill the state

of New Mexico will not achieve the objectives of Executive Order 2005-33 regarding climate

change and greenhouse gas reductions nor the requirements of the Chicago Climate Exchange.

The requirement to meet this initiative is a four percent reduction by the end of calendar year

2006. Expansion of alternative fuel infrastructure and increased alternative fuel use will not be

realized

CH/nt