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New Mexico abandons pipeline investment deal Proposed line will move natural gas from San Juan basin to connections with major interstate lines; legal review found proposal didn’t meet statutory requirements for state investment because stock not listed on national exchange The Associated Press
New Mexico state officials have abandoned a proposal to investment millions of dollars in a natural gas pipeline in northwestern New Mexico after questions about the legality of the deal.
The state Investment Council in late August gave Kansas-based Earth Energy and Environment until Sept. 1 to answer questions raised by a legal review of the proposal. Investment Council spokesman Charles Wollmann said the company did not answer the questions by the deadline.
The company sought up to $150 million from the New Mexico state Investment Office for a pipeline from the San Juan Basin in the Farmington area to connections with major interstate pipelines. The request later was pared to $50 million after Gov. Bill Richardson said he was concerned about the larger figure.
The company said such a pipeline expansion could bring in more than $40 million in tax revenue to the state’s permanent funds and additional royalties from natural gas. Project will still go ahead Dennis Langley, president of Earth Energy and Environment, said through a spokesman that the company would go ahead with the pipeline despite the state’s decision.
“We’re disappointed, but we’ll still move on with the project,” Langley said.
The Albuquerque law firm of Sutin, Thayer & Browne, hired to review the proposed contract, wrote the Investment Council that the deal did not meet state requirements to invest only in companies whose stocks are registered on a national exchange.
“The legal opinion was that neither (the company) nor the project itself fit those requirements,” Wollmann said.
State Investment Officer Gary Bland decided not to go ahead with the contract based on the law firm’s review.
The law firm also told the council there is no independent proof that natural gas production in the San Juan Basin would benefit from increased pipeline capacity.
The proposal called for New Mexico to invest in Earth Energy and Environment securities. The stocks would be guaranteed by the pipeline project itself and by privately held Earth Energy and Environment, neither of which trades on public markets or has investment ratings, Wollmann said. The company “was unable to come up with any kind of deal structure that would have lived up to the requirements of the law,” he said.
The deal would have been among the largest investments made by the state. At least two legislative committees — although they do not set investment policy — requested briefings, and some lawmakers expressed reservations about the plan.
One supporter, council member and state Land Commissioner Pat Lyons, said he’d still like to see a pipeline built so more gas can flow out of the San Juan basin.
“If they didn’t meet the state statute requirements that’s the way it falls,” he said. “You have to meet all the requirements of the state Investment Council.”
The state Land Office and the New Mexico Oil and Gas Association, an industry group, have said a pipeline is needed because of limited access to large interstate lines.
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