Biodiesel Laws and Incentives in New Mexico

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

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)

Biodiesel Blend Mandate

All diesel fuel sold for use in on-road motor vehicles to state agencies, political subdivisions of the state, and public schools must contain at least 5% biodiesel (B5). All diesel fuel sold to consumers for use in on-road motor vehicles is mandated to contain at least B5. The biodiesel blend mandate is currently suspended.

(Reference New Mexico Statutes 57-19-28 and 57-19-29)

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)

Biodiesel Blending Facility Loading Fee Deduction

In calculating the annual petroleum products loading fee, a facility owner may deduct the number of biodiesel gallons delivered to be blended into petroleum products. The total deducted amount must be documented in the tax return associated with the facility in a format the New Mexico Taxation and Revenue Department approves. For more information, see the Conservation & Preservation Tax Credits website.

(Reference New Mexico Statutes 7-13A-5)

Biodiesel Blending Facility Tax Credit

A tax credit is available for up to 30% of the cost of both purchasing and installing equipment used to produce biodiesel blends containing at least 2% biodiesel (B2). The tax credit is limited to $50,000 per facility and is claimed against gross receipts tax or compensating tax. Individuals or organizations must apply for and obtain a certificate of eligibility from the New Mexico Energy, Minerals, and Natural Resources Department before claiming the credit. The credit may be carried forward for four years from the date of the certificate of eligibility. For more eligibility and application details, see the New Mexico Economic Development Department Industry-Specific Tax Incentives website.

(Reference New Mexico Statutes 7-9-79.2)

Biodiesel Tax Deduction

Entities and individuals that receive or manufacture and deliver biodiesel within the state for blending or resale are eligible for a tax deduction for the fuel.

(Reference New Mexico Statutes 7-16A-10)

Biofuels Production Tax Deduction

The cost of purchasing qualified biomass feedstocks to be processed into biofuels, as well as the associated equipment, may be deducted in computing the compensating tax due under the New Mexico Gross Receipts and Compensating Tax Act. For the purpose of this incentive, biofuels include ethanol, methanol, methane, and hydrogen.

(Reference New Mexico Statutes 7-9-98)

Biomass Tax Credit

Dairy or feedlot owners may receive a tax credit of up to $5 per wet ton of agricultural biomass that is used to generate electricity or to make liquid or gaseous fuel for commercial use.

(Reference New Mexico Statutes 7-2-18.26)

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.

More Laws and Incentives

To find laws and incentives for other alternative fuels and advanced vehicles, search all laws and incentives.