Questions And Answers

What does the project involve?

New Mexico Gas Company is seeking to construct an on-system Liquefied Natural Gas ("LNG") storage and liquefaction facility ("LNG storage facility"). A request for approval is currently before the New Mexico Public Regulation Commission. 

What is NMGC proposing to build?

The proposed LNG storage facility will consist of: 

• A steel storage tank that can hold 1 Bcf (billion cubic feet) of natural gas in liquid form.
• The ability to liquefy natural gas from our system into LNG so it can be stored.
• The ability to vaporize LNG back into gaseous form for use on NMGC's distribution system when needed.

Also, the storage tank can be filled from and provide natural gas to tanker trucks for delivery as needed througout New Mexico to support our normal and emergency operations. The facility will be connected directly to NMGC's pipeline system, and it will provide natural gas during storms or as needed to back up the Company's natural gas purchases. 

The LNG storage facility does not contain a compressor station. 

Where will the storage facility be located?

The site is about two miles north of Double Eagle II Airport on the west side of the Albuquerque metro area. The location is within the Rio Rancho city limits and northwest of the volcanos at Petroglyph National Monument. The facility itself will occupy only about 25 acres on a 160-acre property west of Atrisco Vista Boulevard. 

What is Liquefied Natural Gas?

LNG is natural gas that has been coooled to a liquid, shrinking its volume by about 600 times. This process is known as liquefaction. LNG is cooled to minus-260 degrees Fahrenheit for safe storage or transport. The process of warming the liquefied product to return it to its gaseous state is called regasification or vaporization. 

How does the LNG storage facility work?

During the summer when natural gas prices are low, NMGC will buy gas and move it from our system into the LNG storage tank by cooling it (liquefaction). In the winter or at other times when gas prices are high or when gas is needed by NMGC for its operations, the Company can vaporize the liquid from the tank back into a gaseous state and deliver it to customers. The intent of the LNG storage facility is to help alleviate two conditions which sometime affect NMGC's operations and customers -- high prices for natural gas or interrupted natural gas supply. 

How large is the tank?

The storage tank, when filled, will hold about 1 billion cubic feet of LNG. The tank will be about 100 feet tall. In addition, there will be buildings for a plant that can liquefy natural gas for storage and later re-gasify it for distribution to customers. There will also be a control building and roads leading to the facility. 

Is it safe?

Yes. LNG has been produced, transported and used around the world since the early 1960s. This faciity will use the latest technology and it will be built using industry best practices. Many similar projects operate safely and reliably throughout the United States. 

Will the LNG storage facility, during normal operations, release methane?

No. The LNG storage facility is designed as a closed system and it will not normally emit any methane into the atmosphere. As designed, the facility takes natural gas from our system, liequefies it, stores it for later use, and then reintroduces it to our system for use by customers, all without the release of methane.

Will the LNG storage facility, during normal operations, release "toxic chemicals"?

No. Despite some rumors to the contrary, the facility will not normally emit toxic chemicals. Again, the facility operates as a closed system that takes natural gas from our distribution system, stores it, and then when needed returns it to the distribution system for use by customers. The facility is designed to have no environmental impact during normal operations. 

When will the LNG storage facility begin operating?

Our plan is for construction to begin in 2024 and for the facility to go into service by late 2026. 

How many jobs will the facility support?

We expect the construction phase will employ about 100 to 200 workers. After the facility goes into service, NMGC will have it staffed 24/7/365 using a total of four to five employees. 

Why does New Mexico Gas Company need an on-system storage facility?

The facility will provide NMGC-owned storage on our distribution system, which will help shield customers from high gas prices and improve system reliability. By way of example, in February 2021 NMGC was unable to receive all of the natural gas we owned and held in leased underground storage in West Texas. For this and other reasons, replacement gas had to be purchased on the open markets at extraordinarily high prices. As a result, NMGC spent more than $100 million in just one week of February 2021 to purchase gas. By comparison, that's the same amount we spent on gas for customers during all 12 months of 2020.

Shortly after the February 2021 storm, the New Mexico Public Regulation Commission asked us to explore storage solutions available to protect customers from extraordinary price swings. This facility came from that exploration. 

How do customers benefit if NMGC owns its own natural gas and its own storage facility?

All gas utilities need stored natural gas to assist normal operations. All gas utilities have access to stored natural gas. Currently, NMGC has gas stored in underground salt caverns in West Texas. Operating an on-system storage facility will give NMGC greater control over the ability to supply customers by allowing us to directly manage the supply of stored gas, rather than relying on a third party. This will help mitigate the impact of market swings for the price of gas like those we experienced in February 2021. The storage tank will primarily be filled with gas during low demand periods when gas prices are lower, such as during the summer months. Then, during the winter or when we experience price spikes or supply disruptions, the gas can be returned to our system for customer use. 

In effect, owning and operating this facility will allow us to relocate our storage from West Texas to a facility right here in New Mexico -- close to many of our customers -- where natural gas for customers will be available as needed without the time lag currently required to access it and transport it. Additionally, avoiding the ongoing costs of that lease will help offset the cost to customers for building the LNG storage facility. 

How much will the facility cost to construct and operate? What will customers need to pay?

The cost of constructing the LNG storage facility is estimated at about $181 million and it will cost between $3 million and $4 million a year to operate it. NMGC will not seek to recover the cost of construction until after the facility becomes operational in 2026, so initial approval by the PRC will not trigger a rate increase. Once the facility goes into service, NMGC will seek to recover the approved cost of the facility through customer rates. 

Where does the project stand right now?

We have secured the property for the facility and we are developing eningeering plans while seeking required regulatory approvals. We presented information about the project to the City Council in Rio Rancho, which in June 2022 provided a resolution of support. An application for approval was filed with the New Mexico Public Regulation Commission in December 2022 and we expect the approval process will probably take about a year. A hearing is scheduled for October 2023.