Texas And New Mexico – Politics Are Getting Into The Oil-Renewable Energy Dilemma

Big oil states like Texas and New Mexico are a microcosm of the world picture where fossil energies are giving way to renewable energies to achieve net-zero emissions of greenhouse gases (GHG) by 2050. Texas is #1 in oil production in U.S. while New Mexico is ranked #2. The article linked above connects to this article below.

For the record, Texas is by far the greatest emitter of emissions at 706 million metric tons per annum (MMtpa) and California is next at 358 MMtpa. All other states lie below 230 MMtpa. Emissions per capita is perhaps a better index for comparison. Texas is ranked #9, California #48, and New Mexico #13. States producing lots of fossil energy are situated near the top of this table, as expected.

Current data on the energy transition in these two U.S. states is a mixed scorecard, and nobody is completely happy with progress. With the existing tension between energy security and climate security, politics has seeped in — and this is the topic discussed here.

Political headwinds.

There are serious threats confronting Texas and New Mexico. On one hand is the threat of losing energy security spelled out as profits from oil companies and direct or indirect jobs supported by them.

On the other hand is the threat of weather extremes caused by climate change, such as heat waves, droughts, and wildfires. Some of these are headlines in the current news: from wildfires in Canada and Greece to droughts in the Horn of Africa to rain-floods last year in Pakistan.

Such threats can lead to calls for action, protests by people, and political intervention.

To see what’s going on in these two states, we shall discuss first, climate actions taken in Texas that assist the energy transition, and second, climate threats in Texas perceived by politicians. Then we shall apply the same approach to New Mexico.

Promising climate actions in Texas.

• Texas as a country is #5 in the world in wind production. If you drive on Interstate 40 past Amarillo you will see 50 miles of wind turbines on both sides of the city.

• Texas is a haven for energy transition in its easy capitalization of new projects, softly-regulated infrastructure newbuilds, high concentration of engineers, and top programs of higher learning.

• Bobby Tudor, who made a mint on shale fracking, has pulled together a big-name business coalition called HETI that is dedicated to the energy transition and that includes ExxonMobil
XOM
, Chevron
CVX
, and Shell.

• Houston, the oil-capital of the world, could receive $250 billion/year investments in green energy sectors by 2040.

• The Inflation Reduction Act (IRA) has become a game changer, as a massive amount of federal money is now available to invest in renewables.

• Just announced: Texas was awarded $600 million for projects involving direct air capture of CO2 – one of the first two recipients of $3.5 billion incentives from the IRA.

• Just announced: Occidental Petroleum, out of Texas, will buy for $1.1 billion Carbon Engineering, a company it has been closely working with for several years on direct air capture (DAC) technology. The transaction comes just days after Occidental subsidiary 1PointFive and another DAC-focused company landed $1.2 billion in funding from the U.S. Department of Energy.

Climate threats in Texas [downplayed by some].

• The fear of diminishing oil and gas enterprises is motivating some of the Republican-led legislature to oppose the growth of renewables, or because it’s a proxy for Democrats.

• They have introduced a raft of bills to hamper green energy but help traditional projects.

• Ten financial firms have been barred from doing business in Texas because of their ESG policies.

• It’s hard to transition energies when so much money can be made in oil and gas – up to 15% of state’s economic output at times in the past 50 years.

• If Texas refuses to give up any oil and gas profits and decides the energy transition is not what’s best for the world, the state may end up being less green and less prosperous than it could be.

Promising climate actions in New Mexico.

• In 2019 the governor, Michelle Lujan Grisham, set up goals for emissions over every economic sector to be net-zero by 2050.

• Also electricity to be 80% carbon-free by 2040. The latter is now at 65%, and this goal should be met.

• From 2021 and 2022, new regulations (strictest in US) will dramatically limit ozone and methane emissions from wells and flaring. Operators will have to capture 98% of the gas they produce by end of 2026.

• In 2023, the drilling boundaries of Chaco Canyon were extended significantly to further protect its Native American heritage.

• The New Mexico legislature pushed for expansion of hydrogen production in New Mexico. But the bill failed because the proposal focused on blue hydrogen which is not green and not clean.

• The governor didn’t give up and has enjoined New Mexico to nearby states to acquire massive funding from the IRA for one of eight regional hydrogen hubs.

• Just announced: Maxeon Solar Technologies, out of Singapore, will construct a facility to manufacture solar cells and panels opening in Albuquerque in 2025. It will be a 3GW plant with an investment greater than $1 billion and entails 1,800 jobs. Climate threats in New Mexico [over-emphasized by some].

• Virtually the entire state was in serious drought (30-year drought) until the winter of 2022.

• One consequence of the drought in 2022 was two massive wildfires, including the state’s largest ever – the Calf Canyon / Hermit’s Peak wildfire.

• Hydrogen production was pushed back in the legislature because it was based on blue hydrogen and therefore a distraction from the real task of reducing carbon emissions.

• Ozone and methane emissions limits were not enforced in power plants, oil refineries, and gas processing plants.

• A huge boost in production of oil and gas came from the Delaware basin. From March 2018 to March 2023 oil production almost doubled. This means more carbon emissions released in-state and more exported out-of-state.

• The state hasn’t done very well with wind, solar, and nuclear renewables – still less than 3% of total energy production. Governor Lujan Grisham has been criticized for her recent appointment to the executive committee of the U.S. Climate Alliance, for not doing enough to advance renewables.

Takeaways.

Big oil states like Texas and New Mexico are a microcosm of the world picture where fossil energies must give way to renewable energies to achieve net-zero emissions of greenhouse gases (GHG) by 2050.

Texas is the #1 oil state in U.S. and New Mexico is #2. Texas is by far the greatest carbon-emitter at 706 million metric tons per annum (MMtpa) and California is next at 358 MMtpa. All other states lie below 230 MMtpa.

There are serious threats confronting Texas and New Mexico. On one hand is the threat of losing energy security spelled out as profits from oil companies and jobs supported by them. On the other hand is the threat of weather extremes caused by climate change, such as heat waves, droughts, and wildfires.

This story screams loudly how difficult it is to get top oil states to embrace an energy transition that by definition means less production of oil and gas and more production of renewable energies. But its not either/or… the answer is both/and.

If these oil states, and the world, want and need energy to continue a century of economic progress, how will they deal with the dire predictions of climate change? This is an unresolved question.

But the injection of massive government funds within the U.S. is changing the economics of new technologies that will alter the balance between oil and gas and renewables, and oil and gas companies are joining the effort.