By Hannah Grover
While oil, gas and mining industries pay severance taxes, renewable energy projects are not subject to those taxes. Some fear this will result in a lack of funds to support crucial services ass New Mexico transitions away from fossil fuels.
That is why Rep. John Block, R-Alamogordo, pushed for a renewable energy production tax. Block sponsored HB 45, which was tabled in its first committee this week on a 6-4 vote.
Block emphasized that the legislation would lead to an excise tax, not a severance tax. It would however be on par with what oil and gas companies pay in severance tax. The tax would not be applied to rooftop solar.
“As New Mexico continues to transition in our energy sector and continues to move toward our very ambitious goals, our budget really needs to be more diverse,” Block said.
It may be easy to say Republicans want to hamper renewable energy projects that compete with the fossil fuels industries, but Democratic legislators in 2020 introduced similar legislation. Block said the language in HB 45 is based on that previous bill. The 2020 legislation was found not to be germane. Even-numbered years have 30-day legislative sessions with limited topics.
A severance tax is applied to industries that “sever” something from the earth. For example, oil industries extract fossil fuels from deep underground, essentially severing them from the formation where they’re found.
Renewable energy projects do not sever anything from the earth, which is why they are not subject to severance tax.
However, renewable energy is a relatively young industry in New Mexico while the state’s oil production dates back to 1922.
Severance tax is not the only way oil and gas contributes to the state’s budget and the renewable energy projects are usually subject to other taxes. Those taxes include gross receipts tax, corporate income tax, personal income tax and property tax.
“There’s a lot of taxes already being paid on these projects and we believe right now to implement an additional tax would be premature and would not be in the best interest of the economic interests of the state,” Jim DesJardins, executive director of Renewable Energy Industries Association of New Mexico, said during public comment.
Block’s efforts to impose a tax on renewable energy projects may have failed this year — though it could be resurrected — but it is not going away.
“If renewables and cannabis are going to replace oil and gas, we’re going to have to have a serious conversation about [the state budget],” Rep. Mark Duncan, R-Kirtland, said during a House Taxation and Revenue Committee meeting on Wednesday.
