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

SPONSOR Vigil

ORIGINAL DATE

LAST UPDATED

2-1-2006

HB 778

SHORT TITLE Natural Gas Pipeline Condemnation

SB

ANALYST Dearing

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$70.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance & Administration (DFA)

SUMMARY

Synopsis of Bill

House Bill 778 appropriates $70,000 from the general fund to the Public Regulatory Commission

for expenditure in fiscal year 2007 for oversight of natural gas pipelines owned by municipal

utilities.

Additionally, House Bill 778 provides for the municipal condemnation of natural gas facilities

and amends two acts -- the Public Utilities Act, Sections 3-23-1 NMSA 1978 and the Gas Utility

Act, Sections 3-25-1 NMSA 1978. Essentially, the amendments create more instances in which

municipalities are permitted to condemn natural gas facilities and therefore simplifies this proc-

ess.

FISCAL IMPLICATIONS

The appropriation of $70,000 contained in this bill is a recurring expense to the general fund.

Any unexpended or unencumbered balance remaining at the end of fiscal year 2007 shall revert

to the general fund.

At the State level, this bill would have a second, minimal fiscal impact above and beyond the

House Bill 778 – Page

2

$70,000 recurring appropriation previously mentioned which would arise due to the necessity to

amend existing statutes and software in various state agencies. Additionally, there could be in-

creased costs to the judiciary due to an overall increase in civil actions, via lawsuits for injunc-

tions of condemnation proceedings.

SIGNIFICANT ISSUES

House Bill 778 enhances Section 3-23-3 NMSA 1978 to include more exemptions to the provi-

sions concerning specified actions and conditions prior to the condemnation of natural gas facili-

ties conducted by municipalities. As currently written, Section 3-23-3 NMSA 1978 stipulates

conditions and provisions for the acquisition and financing of such utilities, pursuant to the issu-

ance and sale of revenue bonds (Section 3-23-3 § a.) 1 & 2 NMSA 1978), requiring an appraisal

or other valuation mechanism; or engineer’s estimate in instances where new facilities are cre-

ated. Section 3-23-3 § b.) stipulates that no revenue bonds can be issued until all contractual

elements of the securities’ issuance are established by the Public Regulatory Commission.

Lastly, as currently written, Section 3-23-3 § c.) NMSA 1978 provides exemptions to these prior

sections ( a & b ) in the event that a condemnation by a municipality having a population in ex-

cess of 25,000 according to the 1990 federal decennial census of electricity, sewage and water

facilities.

Enactment of this legislation would have the effect of constructing a new Section 3-23-3 § d.)

NMSA 1978 such that the exemptions to the previously mentioned sections, (a & b) would be ex-

panded to those condemnations of natural gas facilities by municipalities, provided that the mu-

nicipality has owned and operated a municipal natural gas facility for a period of more than ten

years.

Section 3-25-2 NMSA 1978, Gas or Geothermal Utility—Authorization to Acquire—Charges, as

currently written specifies that where satisfactory natural gas supplies are not privately supplied

in sufficient quantity, a municipality may acquire and operate natural gas and geothermal energy

facilities to allow distribution of heat or natural gas.

Enactment of this legislation would have the effect of amending Section 3-25-2 such that the en-

acted version would remove the sufficiency of service clause, and construct a clause such that

municipalities may additionally, by ordinance, maintain, contract for and condemn for use as a

municipal utility, natural gas and geothermal facilities, regardless of private ownership, and in-

cludes language specifying applicability to transportation of gas & heat, in addition to distribu-

tion. Enactment of legislation includes language to specifically include pipelines within appli-

cable facilities.

Section 3-25-4 NMSA 1978, Financing Acquisition of Gas or Geothermal Utility, as currently

written specifies the requirements regarding issuance of bonds for financing the acquisition of

these facilities to include provisions found in Sections 3-30-5; 3-30-8; and 3-31-1 through 3-31-

12 NMSA 1978 and includes exceptions found in Section 3-23-4 NMSA 1978.

Enactment of this legislation would have the effect of amending Section 3-25-4 NMSA 1978 to

expand the aforementioned requirements of bond issuance to include the condemnation of such

facilities. Enactment of legislation includes language to specifically include pipelines within ap-

plicable facilities.

House Bill 778 – Page

3

Section 3-25-5 NMSA 1978, Gas or Geothermal Utility—Eminent Domain Power—Procedure,

as currently written, allows for the exercise of eminent domain powers within or without munici-

pal boundaries for the acquisition of such facilities or an interest in such facilities for the location

of or for the extension of the such facilities. Additionally, as written, this section stipulates that

actions enabling the condemnation for acquisitions of facilities are in accordance with the Emi-

nent Domain Code.

Enactment of this legislation would have the effect of amending Section 3-25-5 NMSA 1978, such

that the provisions of this section apply to condemnation of those facilities, regardless of private

ownership. Enactment of this legislation stipulates that municipalities may acquire, operate,

maintain and condemn natural gas, geothermal, and pipeline facilities and assets, provided that

these remain within the purview of PRC jurisdictional oversight. Enactment of legislation in-

cludes language to specifically include pipelines within applicable facilities.

Additionally, there are several linguistic changes proposed throughout the aforementioned stat-

utes. Lastly, the effective date of the provisions of this act would take effect immediately, as this

is determined to be an emergency.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to SB 389, HB 643

SB 389 is essentially the same legislation, with the exception that the intent of the senate bill

does not include natural gas and geothermal pipelines.

HB 643 is essentially the same legislative proposal, with the exception that HB 643 does not in-

clude the clause which states that municipalities may acquire, operate, maintain and condemn

natural gas, geothermal, and pipeline facilities and assets, provided that these remain within the

purview of PRC jurisdictional oversight, which is located in Section 35-25-2 a.) 2

Additionally, HB 778, while interrelated and nearly duplicative of HB 643 & SB 389, adds a

$70,000 appropriation from the general fund to the PRC for the oversight of natural gas pipelines

by municipal utilities.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Failure to enact would result in status quo with respect to when and how a municipality can con-

demn or exercise the power of eminent domain for the purpose of acquiring natural gas or geo-

thermal utilities. Additionally, there would be no appropriation of $70,000 for PRC oversight of

municipally owned and operated pipelines.

PD/mt