Propane Laws and Incentives in New Mexico

The list below contains summaries of all New Mexico laws and incentives related to propane.

Laws and Regulations

Alternative Fuel Definition

Alternative fuels are defined as natural gas, propane, electricity, hydrogen, fuel mixtures containing not less than 85% ethanol or methanol, and fuel mixtures containing not less than 20% vegetable oil, or a water-phased hydrocarbon fuel emulsion in an amount not less than 20% by volume. Biodiesel is defined as a renewable, biodegradable, mono alkyl ester combustible liquid fuel that is derived from agricultural plant oils or animal fats and meets current ASTM pure biodiesel (B100) standards.

(Reference New Mexico Statutes 13-1B-2 and 57-19-27)

Alternative Fuel Vehicle (AFV) and Hybrid Electric Vehicle (HEV) Acquisition Requirements

A minimum of 75% of state government and educational institution fleet light-duty vehicles purchased must be HEVs or bi-fuel or dedicated AFVs. Vehicles must meet or exceed the federal corporate average fuel economy standards. Certified law enforcement pursuit vehicles and emergency vehicles are exempt from this requirement. The New Mexico Energy, Minerals and Natural Resources Department may grant additional exemptions based on the availability and suitability of vehicles, as well as fuel availability and cost.

(Reference New Mexico Statutes 13-1B-1 through 13-1B-7)

Alternative Fuels Tax

Alternative fuels subject to the New Mexico excise tax include propane, compressed natural gas (CNG), and liquefied natural gas (LNG). The excise tax imposed on propane is $0.12 per gallon, and the excise tax imposed on CNG and LNG is $0.133 and $0.206 per gallon, respectively. A gallon is measured as 3.785 liters of propane, 5.66 pounds (lbs.) or 126.67 standard cubic feet of CNG, and 6.06 lbs. of LNG. Alternative fuel purchased for distribution is not subject to the excise tax at the time of purchase or acquisition, but the tax is due on any alternative fuel at the time it is dispensed or delivered into the tank of a motor vehicle. Alternative fuel distributors must be licensed by the state. For tax forms and instructions, see the New Mexico Taxation and Revenue Department website.

(Reference New Mexico Statutes 7-16B-1 through 7-16B-10)

Energy and Fuel Cost Savings Contracts

Government fleets may finance alternative fuel vehicles or related infrastructure through guaranteed utility savings contracts where vehicle operational and fuel cost savings pay for the capital investment. Guaranteed utility savings contracts must show that the cost savings resulting from the alternative fuel and infrastructure projects are equal to or higher than the annual contract payments.

(Reference New Mexico Statutes 6-23-2 and 6-23-3)

Low Carbon Fuel Standard

The New Mexico Environment Improvement Board must implement rules to establish a Clean Transportation Fuel Standard Program (Program) that reduces the overall carbon intensity of transportation fuels used in the state by at least 20% below 2018 carbon intensity levels by 2030 and at 30% below 2018 carbon intensity levels by 2040. The Program must go into effect no later than July 1, 2026. For more information, see the New Mexico Environment Department Clean Fuel Standard website.

(Reference House Bill 41, 2024)

State Incentives

Alternative Fuel Tax Exemption

Alternative fuel distributed by or used for federal government, state government, or Indian nation, tribe, or pueblo purposes is exempt from the state excise tax.

(Reference New Mexico Statutes 7-16B-5)

Diesel Emission Reduction Funding

The New Mexico Environment Department (NMED) provides U.S. Environmental Protection Agency Diesel Emission Reduction Act (DERA) funding for heavy-duty on-road new diesel or alternative fuel repowers and replacements, as well as off-road all-electric repowers and replacements, with priority to hydrogen fuel cell projects. Vehicles that qualify for replacement or repower include:

• School buses;
• Class 5 transit buses;
• Class 5-8 heavy-duty vehicles; and,
• Non-road engines, equipment, or vehicles used in construction, cargo handling, agriculture, mining, or energy production.

For more information, see the NMED DERA website.

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