In the spring 2024 legislative session, New Mexico passed a bill for the creation of its own Low Carbon Fuel Standard, setting a program implementation deadline of no later than July 1, 2026. A discussion draft rule was released in December 2024, followed by the proposed rule unveiled on May 20, 2025. This latest proposal sets an earlier implementation date of February 1, 2026.
On May 16, 2025, the New Mexico Environment Department (NMED) Climate Change Bureau submitted a petition to the Environmental Improvement Board (EIB) to adopt the proposed rule. The EIB has scheduled hearings to begin September 22 and go through October 3. They have also scheduled November 17 as a date to resume hearings and to continue as long as needed to hear all evidence.
Next Steps in the Rulemaking Process:
• Public Comments: NMED has opened a public comment portal, allowing stakeholders to submit feedback prior to the public hearings.
• Rulemaking Hearing: NMED and other stakeholders will present testimony. Interested parties will also have an opportunity to provide comments during the hearing.
• EIB Decision: If the EIB adopts the rule, it will be filed with the New Mexico State Records Center and Archives (SRCA) and published in the New Mexico Register. The rule will take effect 30 days after filing, unless specified otherwise.
New Mexico’s CTFS is designed to achieve a 20% reduction in transportation fuel carbon intensity by 2030 and a 30% reduction by 2040, using 2018 as the baseline. Importantly, the legislation emphasizes technological neutrality, fostering a robust biofuels market while encouraging innovation in low-carbon fuel technologies.
Key Highlights from the Draft Rule
• Pathway applications begin July 1, 2026, for use in the 2027 compliance period
• Carbon Capture and Storage (CCS) is recognized as a Tier 2 pathway
• Record retention is required for 10 years
• Verification statements are due annually by September 15
• Book-and-Claim accounting is allowed for gaseous and liquid fuels
• Mandatory Firm Rotation, meaning that every 6 years, participants must find a new verification body to perform the validation and verification audits.
• Renewable Energy Certificates (RECs) are permitted to offset electricity carbon intensity emissions.
Exemptions from Deficits
Certain fuels and use cases are exempt, including:
1. Aircraft using petroleum-based jet fuel or aviation gasoline.
2. Railroad locomotives.
3. Military tactical vehicles and equipment.
4. Regulated parties with aggregate sales below 42.6 million megajoules.
5. Dyed fuels (exempt until 2029).
What This Means for Biofuel Producers
New Mexico’s proposed rule does not currently impose sustainability requirements on biomass-based fuels. However, industry stakeholders must remain vigilant against potential regulatory barriers, such as feedstock caps or excessive certification demands. A commitment to technology neutrality in the final program is essential to fostering innovation, maximizing emissions reductions and supporting a diverse energy market.
By actively engaging in the rulemaking process and advocating for supportive policies, renewable fuel producers can help ensure New Mexico’s CTFS drives economic growth while solidifying its role as a leader in the biofuels sector.
