Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR
Reps. Dixon, Chatfield, and Small/Sens.
Sharer and Lanie
r
LAST UPDATED
ORIGINAL DATE 2/20/2025
SHORT TITLE Carbon Dioxide Storage Stewardship Act
BILL
NUMBER House Bill 458
ANALYST Davidson
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
Metric
Ton
storage
fee
revenue
Up to $675.0
Up to
$1,175.0
Up to
$1,675.0
Up to
$2,175.0
Recurring
Geologic
carbon
dioxide long-
term
stewardship
fund
Parentheses ( ) indicate revenue decreases.
*Amounts reflect most recent analysis of this legislation.
Is a companion to House Bill 457
Sources of Information
LFC Files
Agency Analysis Received From
New Mexico Attorney General (NMAG) Energy, Minerals and Natural Resources Department (EMNRD)
State Land Office (SLO)
New Mexico Institute of Mining and Technology (NMIMT)
Agency Declined to Respond
New Mexico Environment Department (NMED)
SUMMARY
Synopsis of House Bill 458
House Bill 458 (HB458) proposes to create the Geologic Carbon Dioxide Long-Term
Stewardship Act and fund, with the act outlining how the Oil Conservation Division (OCD) of
the Energy, Minerals and Natural Resources Department (EMNRD) would promulgate rules for
the enforcement of the proposed act and regulation of geologic carbon sequestration.
The bill also institutes a 10 cent fee for each metric ton of carbon stored. The fee revenue would
be deposited into the fund the bill creates for long-term stewardship of the sequestered carbon
dioxide (CO2).
House Bill 458 – Page 2
The bill further enables the State Land Office (SLO) and other state agencies that own land to
grant certifications of closure of sequestration projects.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns if enacted, or June 20, 2025.
FISCAL IMPLICATIONS
House Bill 458 creates a new fee of 10 cents per metric ton of carbon dioxide injected for
storage, with the fee paid by operators of sequestration projects. LFC’s estimated revenue from
House Bill 458 is based on information provided by the New Mexico Institute of Mining and
Technology.
According to the Petroleum Recovery Research Center at the New Mexico Institute of Mining
and Technology (NMIMT), four operators in the state have combined federal permits for up to
6.75 million tons per year of CO2 sequestration. Analysis from NMIMT notes there is already 15
million tons per year of CO2 storage identified or in development in the San Juan Basin.
LFC estimates, using the amounts for the four operators, initial revenue from the passage of
HB258 could be up to $675 thousand. This could increase as more operators and more
sequestration projects begin. LFC’s longer term estimate, based on all 15 million tons of CO2
storage identified or in development in the San Juan Basin, sets revenue at up to $2.2 million a
year. Due to this development realistically happening over an extended period, LFC’s estimate
for the revenue is based on an additional 5 million tons of CO2 stored per year rolling scale, with
the full 15 million of storage estimate reached in FY29.
The State Land Office (SLO) notes the agency does not have the leasing instruments, financial
assurances, or other instruments to perform the leasing activity the bill discusses. Due to this,
SLO reports it would need additional personnel and resources. Its analysis did not provide an
estimate of the quantity of additional personnel or resources the agency would need. Due to this,
LFC estimates SLO could need two additional positions at the agency’s average salary of $118
thousand to implement the bill.
SLO analysis further notes the bill could have significant fiscal implications to the state after
completion of CO2 injection operations. SLO indicates:
Once a certificate of closure is issued by OCD or a land-managing agency, the operator is
absolved of liability (absent certain defined special circumstances, such as fraudulent
misrepresentation by the operator), with liability shifting instead to the state, i.e., New
Mexico taxpayers. The bill does not indicate which specific agency or other entity must
bear the financial costs of long-term legacy issues, to the extent monies from the long-
term storage stewardship fund are insufficient or unavailable. To the extent that the State
Land Office would be forced to carry any costs on behalf of the “state” for harms or
liabilities associated with CO2 sequestration facilities on or near state trust land, revenue
from state land trust beneficiaries (public schools, universities, hospitals and other public
institutions) would be impaired.
SIGNIFICANT ISSUES
House Bill 458 – Page 3
NMIMT’s Petroleum Recovery Research Center notes the primary goal of storage is to sequester
CO2 in the earth rather than have it emitted to the atmosphere, or in the case of direct air capture,
to remove CO2 already emitted.
Analysis from NMIMT provides a breakdown of when CO2 is sequestered in the earth:
When CO2 is put into the earth, it is put into pores that contain very salty water (in New
Mexico, at least as salty as the ocean and as much as 6 times saltier). When CO2 meets
this salty water in the pores, roughly 1/3 of it soon becomes dissolved into the water,
effecting a dramatic reduction in mobility of the CO2. Over decades and centuries,
another 1/3 of the CO2 will mineralize and turn into rocks, also removing its mobility.
The remaining free CO2 is what could potentially leak during stewardship. In order for
free CO2 to move, an opening to the surface, or another formation must form. The most
likely way this could occur is a well failure while the well is actively injecting. This risk
is moderated by comprehensive monitoring of well-bore health, and if a failure were to
occur during operations it would be the responsibility of the operator to repair the well.
NMIMT notes stewardship typically starts at either a minimum of five years after injection
ceases, or the wells are permanently closed, or monitoring has shown no signs of movement for
at least five years. NMIMT notes this results in the risk potentially being heavily mitigated
before stewardship comes into play. Most stewardship funds will be used to continue regular
monitoring of sites, with a reserve for any remediation efforts that could occur in the future.
EMNRD suggests House Bill 458 is one of the steps necessary for the state to obtain Class VI
“primacy,” essentially enabling the state the ability to enforce existing federal regulations, in this
case regarding the federal Safe Drinking Water Act. Another aspect of this is the long-term
liability for any sequestered carbon dioxide (CO2) would become the liability, i.e. the
stewardship obligation, of the state.
To administer a CO2 sequestration project requires OCD to gain Class VI Underground Injection
Control Primacy, an application it must send io the U. S. Environmental Protection Agency
(EPA). The application is currently under review by EPA, so in the interim OCD will mirror its
process with the current federal review process. Once OCD’s application for Class VI primacy is
approved, OCD anticipates review of CO2 sequestration projects will be faster.
Analysis from the New Mexico Attorney General (NMAG) notes House Bill 457 would greatly
expand OCD’s authority and performance obligations. This has the potential to increase the
agency’s legal exposure as well.
SLO notes HB458 authorizes the agency and other applicable state agencies to grant CO2
sequestration operators “certificates of closure” but does not require CO2 sequestration projects
be permitted by any agency. SLO notes the bill does not clarify which entity or agency could be
held financially responsible for legacy issues, which would imply the obligation would fall onto
the state. As a result, SLO suggests the bill should clarify the potential impact these legacy issues
could have on the state and who would ostensibly deal with the potential litigation and financial
issues.
SLO reports the bill does not require operators of sequestration facilities to create or provide
emergency response plans in their applications. SLO notes plans of that nature are standard
practice in applications for acid gas injection wells, which OCD reviews, and the agency notes House Bill 458 – Page 4
such a requirement should be included in the bill. SLO further notes pipeline ruptures have the
potential to cause serious injury.
SLO notes the bill deliberately shifts liability and long-term responsibility for monitoring and
remediation of sequestration projects to the state. SLO notes this obligation is largely based
solely on the operators’ statement the injections are complete, which SLO contends would the
state responsible for long-term duties and liabilities on behalf of private parties without
necessarily acquiring anything of value in return. Due to this, SLO notes this bill and this
specific provision may be in violation of the state’s Anti-Donation Clause.
SLO expresses concern due to the bill not containing safeguards to ensure CO2 injected into
sequestration facilities is not contaminated by impurities such as volatile organic compounds.
SLO notes uses of the fund created by the bill include the long-term monitoring of geologic
sequestration facilities, an obligation SLO believes should be incumbent on the operator, not the
state. SLO notes use of the fund in this manner should be only when an entity cannot be located.
SLO also notes the uses of the fund by OCD for training and personnel should be removed,
limiting the use of the fund for remediation, plugging, emergency response, leaks, and
monitoring. Without this, SLO believes the fund could be depleted and not available when
needed.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
House Bill 458 is a companion to House Bill 457, with the regulatory framework created in
House Bill 458 in essence dependent on passage of House Bill 457.
House Bill 458 relates to House Joint Memorial 4, which requests the New Mexico Institute of
Mining and Technology to study the costs and benefits of CO2 capture and sequestration.
House Bill 458 relates to Senate Bill 215 from the 2024 legislative session, with both bills
aiming to create a framework for sequestration projects.
TECHNICAL ISSUES
NMAG notes minor formatting and grammatical differences between the definitions of carbon
dioxide and geologic sequestration used in HB457 and HB458. Due to the companionship of the
two bills, consistency between the two would improve implementation. NMAG further notes
HB457 and HB458 have key differences between each bill’s definition of sequestration facility.
In particular, HB457 excludes class II wells, while HB458 excludes stratigraphic wells.
SLO notes the bill should ensure that, prior to OCD granting certification of closure and then
transfer of stewardship to the state, the operator must initially receive, if state lands are part of
the sequestration project, a certificate of closure from SLO.
NMAG notes HB458 grants SLO the ability to grant an operator a certificate of closure for a
sequestration project on lands subject to the agency’s jurisdiction and, if “the storage has
demonstrated long-term security [and] monitoring of the site has not shown significant risk of
future leakage.” NMAG analysis expresses concern due to the bill not being clear as to who House Bill 458 – Page 5
would hold stewardship responsibilities in this scenario. NMAG also notes the bill is unclear
whether agencies other than SLO or OCD “have the authority to issue a certificate of closure
with terms allowing for the transfer of stewardship to the state.”
NMAG also notes the bill defines both certificate of closure and certification of completion of
injection operations, with possible confusion due to the bill using the terms interchangeably.
NMAG questions whether these are in fact different conclusions to a sequestration project or if a
certificate of completion is then followed by a certificate of completion of injection or vice versa.
Clearly defining the differences and usage would alleviate confusion.
NMAG analysis further notes payment and management of the geologic carbon dioxide long-
term stewardship fund is unclear. NMAG questions if the State Treasurer remits the fees or if it
is operators directly, or whether OCD collects from the operators and then remits the proceeds
into the fund. NMAG also notes it is not clear which party is responsible for monitoring the
amount of CO2 injected and, thus, collecting the correct fee amount.
AD/hj/hg