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

SPONSOR SCONC

ORIGINAL DATE

LAST UPDATED

1/31/07

2/24/07 HB

SHORT TITLE Require Biodiesel in Motor Vehicle Fuel

SB 489/SCONCS

ANALYST Williams

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicate of HB 218/HTPWCS

SOURCES OF INFORMATION

LFC Files

Responses Received From

Higher Education Department (HED)

New Mexico Department of Agriculture (NMDA)

Energy, Minerals and Natural Resources Department (EMNRD)

SUMMARY

Synopsis of Bill

The Senate Conservation Committee Substitute for Senate Bill 489 extends the Petroleum

Products Standards Act to biodiesel. Biodiesel is defined. After July 1, 2010 and before July 1,

2012, all diesel fuel sold to state agencies, political subdivisions of the state and public schools

for use in motor vehicles on New Mexico streets and highways shall contain five percent

biodiesel. After July, 1, 2012, all diesel fuel sold to consumers for use in motor vehicles on the

streets and highways of New Mexico shall contain five percent biodiesel. These standards may

be temporarily suspended by the director, as discussed below.

The bill includes a “safety valve" which suspends the content requirement based on product

availability and price. The bill authorizes the Director of NMDA in consultation with the

Secretary of EMNRD to suspend sale of biodiesel for a period of up to six months under the

following circumstances: 1) when it is determined that sufficient amounts of biodiesel are not

available to meet the specified demand; or 2) the price of biodiesel blend fuel significantly

Senate Bill 489/SCONCS – Page

2

exceeds the price of diesel fuel for at least two months.

FISCAL IMPLICATIONS

The bill does not contain an appropriation.

SIGNIFICANT ISSUES

The Petroleum Products Standard Act is administered by the New Mexico Department of

Agriculture, within the New Mexico State University Board of Regents. Within this regulatory

framework, the board shall adopt rules and regulations necessary to administer and enforce the

Act. The Director may take appropriate actions and enforce the provisions of the Petroleum

Products Standards Act to include quality standards, tests, and methods of conducting analyses

on petroleum products manufactured, stored, kept, sold or offered for sale in New Mexico.

NMDA expresses a number of concerns regarding implementing the “safety valve" mechanism

as follows:

•

Knowledge of produce location during distribution

•

Compliance determination at retail level

•

Possible commingling of varying biodiesel percentages in retail storage

•

Commingling would make product analysis difficult; therefore, effective enforcement

would be compromised

Significant time and resources for the determination of market conditions, product location, and

dispenser labeling would be necessary when market “safety valves" are triggered.

Some of these concerns may be addressed through the rule making process, requiring

wholesalers and retailers to notify NMDA when market triggers had been hit.

PERFORMANCE IMPLICATIONS

Currently, under the regulatory function for the standards and consumer services division,

NMDA monitors the accuracy of over 25,000 fuel dispensers per year, and collects and analyzes

over 8,000 samples per year of petroleum products for compliance with state standards.

HED notes “as a member in the Chicago Climate Exchange, the State of New Mexico is required

to reduce greenhouse gas emissions or be forced to purchase credits." Both HED and EMNRD

note HB 218 supports Executive Order 2005-033, 2005-049, and 2006-69 requiring the increased

use of renewable fuels in New Mexico state government.

ADMINISTRATIVE IMPLICATIONS

NMDA notes the fuel will be routinely collected and analyzed through its regulation of

petroleum products. Also, the department notes the extension to biodiesel products in 2010

(2012 retail) may necessitate additional personnel. EMNRD notes there will be temporary

administrative implications to ENMRD in the rule-making process.

Senate Bill 489/SCONCS – Page

3

OTHER SUBSTANTIVE ISSUES

EMNRD notes:

“Biodiesel, specifically peanut oil, was the first fuel used by Rudolf Diesel in his demonstration

engines one hundred years ago. Biodiesel (B100) is a renewable fuel produced from domestically

produced oils such as soybean oil, animal fats or recycled cooking oil and can be blended with

diesel in any proportion with good emissions and lubricity performance. When blended with

Ultra Low Sulfur Diesel, biodiesel provides lubrication characteristics lost by reduced sulfur

content, benefiting fuel system and engine components. Lower friction because of higher

lubricity of biodiesel can improve fuel economy with power output and torque equal to

conventional diesel. Biodiesel has a higher cetane rating than conventional diesel as well as

higher oxygen content. Oil change interval frequency may be reduced. Biodiesel is non-toxic and

biodegradable. All diesel engine emissions are reduced depending on engine design; the

biodiesel fraction reduces greenhouse gas emissions. It is safer than conventional diesel because

of its higher flash point. Biodiesel reduces our dependence on foreign oil while benefiting

domestic agriculture. Biodiesel use in New Mexico will stimulate agricultural crop production

for biofuels feedstock and economic development in the agricultural sector. “

ALTERNATIVES

NMDA suggests “Letting the evolution of the industry, fuel requirements, auto manufacturers

recommendations, economics etc dictate what is needed in the future, would be a more

appropriate" mechanism, rather than mandating a content percentage in state statute.

AW/nt