C (2:19)

And if people are looking for government to be a verb, then that's New Mexico.

D (2:30)

We are seeing across this country a lot of people asking, how can we build better? How can we build more in America? And that it's getting harder to build things across America. Whether that's permitting challenges, local fights, political gridlock at many levels. When you look at that picture, why is New Mexico different?

A (2:52)

Rob, we haven't been as partisan in a lot of those sort of conversations here in the state. It's about how do we actually deliver and improve people's lives. And being whether you're a Republican, whether you're a Democrat, whether you're from an urban area or a rural area, we all tend to lean in on how to do that. I think that is something that's culturally maybe unique to New Mexico, but it's allowed us to create unique structures like our Renewable Energy Transmission act, which has helped us deploy transmission much faster than other areas of the country. We've put that kind of culture into policy and I think that's why we're able to move faster.

C (3:36)

Is it that it's getting harder? Are people willing to get up from the table faster when they don't get their way? And I think there's a lack of sort of meaningful engagement and willing to solve problems. And I think what Rob is saying and what we're trying to show here out of the Environment Department is we won't be the first to get up from the table. Like we have to double down and work harder when the stakes are that much higher. So if we can't provide cheap and affordable or inexpensive and affordable energy to communities in New Mexico, then we have to sit at the table longer and work harder to find that solution. And that's what I think has sort of been a fleeting moment in America, is that people are willing to get up from the table and not find solutions. Right. And demonize each other as opposed to solve the problem. And that's not what happens at all here in New Mexico.

B (4:27)

In this episode, produced in collaboration with the New Mexico Economic Development Department, a conversation with Rob Black and Jim Kenney about how they're making government work for the clean energy economy. We'll talk about an approach that's helping attract billion dollar fusion projects, expand geothermal development, and invest the state's $65 billion sovereign wealth fund directly into clean energy and deep tech.

A (4:48)

We're really focused on how do we get to yes, and then what else can we do?

C (4:52)

You don't think of government as innovative, but I will say we've cracked the code on that here in New Mexico.

D (5:02)

When did you start really pursuing the clean energy market and what's at stake if you don't continue to attract these companies?

A (5:09)

The path to this policy approach around renewable energy started as a state Policy, really, with the Energy Transition Act, I believe in 2019, the governor led that as an effort to create a renewable portfolio standard, really set the stage to create a regulatory path for decarbonization of the electricity and energy sector. That was how we then said, here's now we're going to. We're going to build around this and we're going to focus on areas both from an R and D perspective, but also deployment perspective, where we're not only doing the research and development, which New Mexico has done really well for 100 years. I mean, when you look back to Sandia National Labs, Los Alamos National Labs, the things that we've built here, fission, fusion and fracking were all invented in New Mexico. And how do we integrate that into a lower carbon energy economy? And doing it in a way where we're doing the R and D here, but also then deploying the technology here. And so that I think from a state government perspective, really started in 2019.

C (6:21)

Yeah. And I would add what's at stake. We are in a climate crisis. We need to continue to reduce greenhouse gas emissions. And that effort does. Again, it doesn't have to be mutually exclusive. For from bringing those energy technologies to bear in New Mexico, you can reduce carbon emissions as well as diversify your energy portfolio. And here in New Mexico, diversifying away from those hydrocarbons, but not eliminating hydrocarbon production, but diversifying away from hydrocarbons while we continue to think about the ways in which energy will be deployed, not only for your baseload power, turning the lights on, your air conditioning, your heat, those essential necessities, but what about those users of heavy industrial applications where it's in an intermittent power source? Right. So we have to be able to power those peaker plants, we have to be able to power those electric arc furnaces. We have to be able to power anything that needs it on demand. So we really do need to be thinking about what other fuel can we bring into our portfolio and how do we still continue it to achieve the climate reductions as well as the localized air quality impacts that often come from combustion byproducts. And again, none of those things are mutually exclusive.

D (7:49)

Yeah. And as a result, you've been pretty diversified in your approach, focused on everything from fusion to geothermal to carbon capture to hydrogen. How would you characterize this overall portfolio strategy?

A (8:03)

I think we're really trying to take a practical approach at decarbonization and understanding that you have to have energy intensity as well for certain types of manufacturing, other types of activity, but that also Means we've passed the strictest oil and gas regulatory regime really in the country, if not the world, here in New Mexico. So we've got the lowest carbon intense barrel of oil and unit of natural gas anywhere. That was where we started because that's what the energy mix we had already. We're number two and in oil production, number three in natural gas production in the United States. We have the only uranium enrichment plant in the United States today is in New Mexico. We have the most productive geothermal well now operating in the US Happening in New Mexico. So we're looking at what are those needs around firm load? In particular, we've done great on wind, we do great on solar, but also where can we invest R and D side on deployment side that's going to create that firm load that really creates the opportunity for reshoring for whether it's data centers or other heavy users that allow us to grow our economy while ensuring we're meeting our climate goals as well.

C (9:22)

Everything that can be on the table that meets our legal requirements in terms of state law to reduce greenhouse gas emissions is on the table. So it's all of the above. Within the context of our very clear climate and innovative approaches nationally, we're having.

D (9:41)

This conversation about taking a strategic deregulatory approach to make it easier to build a wide variety of clean energy resources. How have you navigated regulation in New Mexico to both ensure the cleanliness of the oil and gas sector as much as possible, but also to make it easier to build and deploy a wide variety of resources. How have you navigated that in New Mexico?

C (10:04)

Yeah, on the regulatory part, you're right. There's a, there's a big deregulatory agenda going on and that's creating regulatory uncertainty. And you know, if there's one thing that industry likes, and we know that in government, is that certainty is, is the most powerful thing that you can provide from, from a government standpoint. And when we look at that pendulum swing, federal administrations pushing in either direction, here's New Mexico, steady, certain and moving forward to say that we are unwavering that we're going to pursue our climate goals. We're unwavering that we're going to collaborate with the oil and gas industry and other stakeholders to build out the most restrictive and pragmatic oil and gas regulations. So we've put all that into our state law, into our state rules, and we've insulated, isolated ourselves in New Mexico by having certainty through state law. That's been in place now since the governor started in 2019 and we've just continued to chip away and build that certainty for the regulated industry or for industry in general. I think also the fact that we have what I would call sort of anti backsliding measures, the things that we've codified into our state law gives industry certainty, that administration to administration here at the state level, we're going to continue to have that certainty. So you know, when you invest, the rug isn't going to be pulled out from under you in the next administration in New Mexico. I think those are really big points that we've been able to weather and promote here in New Mexico.

A (11:48)

The other thing we've done around this is focused on speed to market and you know, regulatory certainty is very important for business, but also so is speed. So in the last legislative session we passed several pieces of legislation that one, that create a site readiness program where we're able to pre deploy and certify a site as an economic development site, help put infrastructure in advance prior to a customer even being identified. And then if a utility comes to me and says I think this site would be really good for economic development, I have 60 days to review that, certify it as an economic development site and then if I do, it goes to the state public regulation commission and they will review that within six months to make a decision. So we've really tightened that timeline. Ability to deploy infrastructure quickly. We also passed a micro grid bill that allows users of over 20 megawatts. So I think large advanced manufacturing or hyperscalers to build micro grids very quickly in the state. And so we're really doing our best. They still have to meet 2045 carbon emissions standards, but we're really working on how do we help people deploy quickly so that we can be part of that economic development and that deployment of that next technology.

D (13:07)

And if I understand it correctly, New Mexico has the nation's second largest sovereign wealth fund. How big is that fund and how is it directly investing in like deep tech and energy? Energy innovation?

A (13:20)

Stephen, it's very exciting to talk about what the sic the State Investment Council is doing. So it's now about $65 billion in this fund. It is the second largest in the US only behind Alaska. And we think we'll probably surpass Alaska in the next three years or so. What they've done is they've taken about 2 billion of that and put it into a venture fund that is working with the 25 to 30 largest deep tech venture funds in the world. Think groups like Lower Carbon Antler Coleslaw up and they're investing in those areas that align with the state's strategy. Our strategy where we think we have the right to win in New Mexico is around advanced energy, advanced computing, edge computing, space and defense. These are all areas because of Sandia National Lab, Los Alamos National Labor, Air Force Research Lab, all located here. Our universities, we have a unique competitive advantage. So now the State Investment Council is funding these funds who have portfolio companies who are aligned with that strategy. Think Pacific Fusion. Pacific Fusion has three different funds that are funded by the State Investment Council funding that company. And part of the direction of the State Investment Council is give us a return but also deploy capital or create jobs in New Mexico. There are very few places in the world that have created this dynamic. And you're really thinking about Saudi Arabia, Abu Dhabi, Singapore and now New Mexico where you've paired a sovereign wealth fund with targeted investments aligned to a state strategy. So I think we're creating something that's very unique. It's also why XGS Geothermal chose to build 150 megawatt billion dollar geothermal plant in New Mexico because they were funded by a fund funded by the State Investment Council. So we're seeing incredible deal flow around deep technologies that we think will be part of changing the world.

C (15:24)

There's about $400 million in monies available right now simply around the water space. And one thing we know is that most energy sources have a degree of they're a little thirsty on occasions. And so we need to bring water to that energy market so that we can continue our economic development. So what we've done is put about 400 million in sort of set aside dollars available in different pots of money. Maybe it's to bring brackish water to more usable water supply. So it could go into like electrolyzers for hydrogen or maybe you could go into cement for, for wind turbines. Right. Because why should we use fresh water from our communities if we could use brackish water or other lesser valued waters in terms of building out our energy and infrastructure environment? So it's not about just that direct certainty and speed to market. I think it's about those flanking pieces that bring capital that increase the ability to have a robust ecosystem around economic development.

D (16:36)

So you've got this capitalization strategy. How does that pair with tax credits, R and D tax credits, jobs credits, equipment credits. How do you put this package together?

A (16:48)

That's a great question. And if you think about what happens with the State Investment Council, they're taking state dollars, putting them into company as equity investors. So now my job is to help that company be successful in New Mexico because that's going to give us a return to our investment, but it's also going to create jobs, it's going to create economic opportunity on the ground. So we, we have a research and development tax credit which can pay up to 10% on qualified research expenses. We have a high wage jobs tax credit that's refundable at 8 and a half percent of your employees wages for four years. We're going to pay between 50 and 90% of your employees wages for the first six months. They're in New Mexico on new hires, depending on where you do it and the type of job. And then we have industrial revenue bonds which can waive property and equipment taxes for up to 30 years. We also will help build capital infrastructure with our local Economic Development act program which could help you build a building, rent a building or make improvements. So when you layer all of those things on with a capital stack, that means if you leave California, you don't leave Silicon Valley capital, because we're going to make sure those folks are paying attention to you. It creates a really robust incentive structure.

C (18:07)

What we can do here at the Environment Department, if Rob comes to me as he's done in the past, and says we need water for this community or we need to think about treating the water from this industrial process. And what we at the Environment Department do, we also have a financing arm and we can bring low interest loans and grants to municipalities who want to be in support of that economic development, but we can also bring it to the private sector. So I'm typically sitting on about $100 million or more in 0.01% interest monies for municipal governments and 2.375% interest rate for the private sector. 30 year fixed beats any bond requirements typically. And we have that money available that we can stack. And I like the idea of this short stack of pancakes kind of forming here where we can bring that out as a financial package not only through economic development, but through the Environment Department and our tax and rev department and sort of say here's everything that we can do. Here's a financial strategy that supports your investment. So again, it's that whole of government coming together to solve a problem.

D (19:26)

I'm really interested to hear more about what is happening in fusion. You know, you want to make New Mexico the center of the fusion industry. What does that vision look like through the end of the decade and what kind of activity are you seeing right now?

A (19:40)

Well, we expect, we want New Mexico to be the center of fusion, if not for the US for the world. You know, we're very pleased to announce that Pacific Fusion was moving their R and D facility here. We're in conversations with a variety of other fusion companies and again this, this talks a little bit about how we're doing it. So just a month ago the State Investment Council created a new fund of over $300 million part with lower carbon energy to fund fusion and advanced energy projects in New Mexico. So you know, we're bringing that equity to the table. We've got San Diego National Labs and Los Alamos National Labs. So if you think about companies like Pacific Fusion who use magnet based fusion technologies based off of the Z machine, which again was the first place to do kind of fusion here on Earth, that alignment and that proximity to work with those scientists is a big draw for New Mexico. But Los Alamos National Labs on the other hand is really key to the laser based fusion approach. So I think bringing those sort of aspects together gives us a very powerful unique value proposition. Then you layer that on with access to capital and New Mexico becomes very attractive.

D (21:01)

Jim, how are you approaching fusion from the Environment Department perspective?

C (21:05)

We license fusion facilities here in New Mexico out of the Environment Department have shown with Pacific Fusion, and we're in the process of doing this is that we can be quicker, faster and just as productive as any other state in issuing the permit. So it takes us about five to six months to maybe get one of those permits out the door. And other states it's taking 18 to 24 months to get those permits out the door. Part of that is we've been very proficient in how we regulate those radioactive type based energy sources here in New Mexico. And the second piece is we have such deep and vast experience here in the Environment Department with radioactive type source material, whether that's in X ray machines or CAT scan machines. But we've also, you know, being that we're the birthplace of the nuclear industry, we're still dealing with some of the adverse impacts of nuclear issues here in New Mexico. So we recognize that the past needs to be validated. Like we need to continue to work in the past in cleaning up those nuclear type issues that are still plaguing New Mexico. But we've built up such an expertise in our department around these topics and we understand the future is in cleaner energy like Pacific Fusion will be developing and we again can regulate those and get those safe licenses out the door faster than most other states. So again, full service Full touch. Recognizing the past, but understanding that our clean energy future is going to be founded in these kinds of technologies.

D (22:53)

So we've talked about some of the building blocks. I want to hear more about what companies are looking for. And I know it's really highly dependent on the type of company and industry we're talking about. But are there any commonalities around when companies are looking at a place to locate their facilities, their headquarters, build their businesses, what do they need? And particularly in the clean energy industry.

A (23:16)

So they need access to power and they want green power. So again, having a renewable portfolio standard means if you're locating a company here, you're going to get that from in New Mexico. They need to be able to build and get to market quickly. So they want sites to be ready to go. And so that's why we've created a site readiness strategy where we're investing in advance even before a company shows up and making sure we've got industrial sites that can be quick to market. You know, less than a year to market as opposed to two or three years out. We mentioned regulatory certainty. That's really important if you're a renewable energy company. We've got a demand side for you as well. Right. Because we need help meeting our renewable portfolio standards. Our utilities do, our co ops do. So you've got a place to deploy here as well. And then I'm going to make you the best tax deal you can in the country to manufacture your equipment and I'm going to give you rail infrastructure that will get you to 75% of the United States population within two days. So we've got the logistics hub, we've got the tax structure for you and we've got a market for you. And then we layer that with capital.

C (24:33)

I think there's a couple other pieces that we're hearing from companies, and I'm hearing specifically at the Environment Department from companies. You know, many of the folks we're attracting to New Mexico are spending a significant amount of money on intellectual property, whether those are proprietary catalyst or their proprietary processes in the manufacturing and deployment of whatever it is. It could be electrons or it could be something else. And they want to understand that wherever they're setting up, that there is value, that the state government understands the value of that IP coming to that location. And in one instance a company said to me they were being courted by many other states and what they found in New Mexico was a deep rooted understanding that the intellectual property that they've spent millions and millions and millions of dollars on was going to be valued here in the state, not only by law and rule, but by the people that they're dealing with. Inherent in that is we have two of the nation's top leading national laboratories here. Los Alamos National Labs and Sandia National Labs. So from state government to the laboratory setting, there's a lot of understanding about what that intellectual property means and how we can safeguard and protect it. And I think we've created that again, that ecosystem where we're valuing the investment and we're valuing what people are bringing here and wanting to stand up to employ New Mexicans. And that's a great feeling.

A (26:19)

The other thing that businesses are really looking for is a workforce. And I think that's something that really is unique in New Mexico. While we have the highest density of R and D spend in the US here in New Mexico we also have the most PhDs per capita in the United States live here in New Mexico. But if you're going to do geothermal and you need to be able to drill holes really well, you won't find a better workforce for doing that than the Permian Basin and that we share that with Texas here in New Mexico. And so you've got a great workforce for geothermal. We have the nuclear history here with the labs and your Ranko Waste Isolation Pilot Plant. We have people are trained in those technologies, trained in nuclear cleanup, in Jim's shop, in the private sector. And so we have a really deep bench for workforce as well. That's something that employers really want.

D (27:18)

That brings me to another question. When we think about the availability of a skilled workforce. I mean, one of the challenges that you hear from manufacturers in the US is that it can be hard to find skilled workers or they can't afford to live in the place where they need to set up the manufacturing facility. And so it brings us this, to this bigger set of policies around childcare, college tuition, affordable living. How are you thinking about making New Mexico a more livable place to continue to keep the kind of skilled workers that you have in the state?

A (27:54)

It's something that we're very proud of. It's something that because of long term investments in the state that help build that sovereign wealth fund. That sovereign wealth fund not only invests in companies that are helping create jobs, it also pays for us as the only state in the country that provides free two and four year college tuition for anybody who graduates from a high school in New Mexico. You can go to free college in the state as well. Starting November 1st of this year we will provide universal free childcare and early education programs for any family in New Mexico, only place in the United States. So we've taken this cradle to career approach of investing in our people and that's going to create the workforce. And frankly, those are benefits that if you're hiring people or you're bringing your people from California or New York to live in New Mexico, that's a benefit you as a company now are giving to your employees without having to pay for it because the state's going to pay for it for you. And so those are some of the things that we think we've created a really unique value proposition in New Mexico, coupled with the fact that it's one of the cheapest places to buy a home, own a home, we have some of the lowest electricity rates in the country while still having a strong renewable portfolio. It's a place that allows people to thrive. And you can also get up on a ski slope very fast. So there's a lot of great, beautiful things about the quality of life as well.

D (29:26)

So I'm hearing. I mean there's so much thought and care that goes into this economic development strategy. What do you want to prove to the rest of the the country? I mean there are plenty of states where the cost of living is too high, maybe infrastructure is overly politicized. There's a lot of local opposition, whatever it might be. What are you proving to the rest of the country?

A (29:46)

In New Mexico, we can build the things we need to build. We can do it in a way that is equitable, that achieves our climate goals and our economic goals. That you can be a yes and environment. It doesn't have to be binary. It can be a lot of people can win.

C (30:07)

Yeah. And I'll add to that when I render it down. To answer your question, Steven, I think it's just simply this. What we're proving in New Mexico is that we're both white collar intellectual kind of people, but blue collar wrench turners here. Like we, we in government can think of the policies, get them caught up, but we know how to implement. We are an action oriented government who knows how to think, craft and implement policy. And that translates into the results. You just heard from Rob.

B (30:44)

Rob Black is New Mexico's Secretary of Economic Development. Jim Kenney is Secretary of New Mexico's Environment Department. This episode was produced in collaboration with the New Mexico Economic Development Department, which works to expand opportunity through innovation, infrastructure and investment across the state. To learn more, visit edd.newmexico.gov or just visit the link in the show notes.