A Report That Became a Roadmap
In June 2025, Project InnerSpace, in collaboration with New Mexico Tech and the New Mexico Bureau of Geology and Mineral Resources, published “The Future of Geothermal in New Mexico.” The 238-page report documented a striking finding: New Mexico has the potential to produce 163 gigawatts of geothermal power, more than 15 times the state’s installed electricity capacity. It found that some form of geothermal development, whether power, heating, or cooling, is possible in every location across the state.
The report did not stop at potential. It identified 15 targeted policy recommendations for closing the legal, regulatory, and financial gaps standing between New Mexico’s resources and real development. Since its release, the Legislature and the State Land Office have been working through them. The legislation that has advanced in 2025 and 2026 reflects ideas that are directly traceable to the report’s recommendations.
“New Mexico is already leading the nation in energy innovation, and we’re just getting started,” said Gov. Michelle Lujan Grisham the day of the report’s release. “Geothermal is the next frontier, and Project InnerSpace’s report confirms we have the renewable resources and momentum to lead.”
What Two Sessions Have Built
InnerSpace Action has been working in New Mexico across two legislative sessions, building directly on the report’s findings and recommendations. We have accomplished a great deal — and there is more to do.
New Mexico’s legislature meets for 60 days in odd years and 30 days in even years, with the short sessions limited to budget matters and Governor-approved priorities. That constraint makes the progress of the past two years more notable, not less.
2025: The Legislature passed House Bill 361, the Well Repurposing Act, creating a framework for converting existing oil and gas wells into energy storage or geothermal energy facilities. New Mexico has nearly 2,000 orphaned wells across the state. HB 361 transforms that liability into an asset and directly reflects one of the report’s key recommendations: leveraging the state’s existing oil and gas infrastructure for geothermal development. The 2025 budget also appropriated $10 million to the Geothermal Projects Development Fund for grants to political subdivisions, state universities, and tribal nations to support mapping, feasibility studies, and early project development.
2026: The Legislature continued its pattern of sustained financial commitment: the General Appropriation Act of 2026 included another $10 million for the Geothermal Projects Development Fund, a signal that support for the program is durable across sessions. The session also advanced a significant tax credit bill. HB 62 and its Senate companion SB 163 would have expanded and restructured the state’s geothermal electricity production tax credits, raised the credit caps, enabled limited transfers, and included set-asides for tribal and small businesses. Importantly, the bill also extended credits to industrial heat applications, a significant step: the existing credit covers only electricity generation, and expanding eligibility to industrial heat would have opened the door to a much wider range of geothermal projects serving industrial and commercial users. HB 62 passed out of the House Energy, Environment and Natural Resources Committee with a bipartisan Do Pass recommendation, co-sponsored by both Democratic and Republican members. It did not clear the House Taxation and Revenue Committee before the 30-day session ended. That is a bill to watch in 2027.
State Land Office: The most consequential action of the past year may have come outside the Legislature entirely. On April 22, 2026, State Land Commissioner Stephanie Garcia Richard announced a new geothermal leasing rule, effective May 1, 2026, modernizing the framework for geothermal development on state trust lands for the first time since 1984. The rule gives the land commissioner broad authority to set royalty rates and bonding requirements based on fair market value, enables larger projects to be developed on state lands, and directly responds to growing developer demand. The previous rule dated to 1984 and had only two active leases, both issued in 1986.
“Our new geothermal rule is going to open up a whole new world for 24-7-365 energy development on state lands,” Commissioner Garcia Richard said. “New Mexico has all the right conditions to become a national leader in geothermal production.”
The Opportunity Behind the Policy
The policy progress is taking shape against a backdrop of real market activity. In June 2025, Governor Lujan Grisham announced that XGS Energy and Meta had entered a partnership to develop a 150 MW geothermal plant to power Meta’s Los Lunas data center. The project, expected to be fully operational by 2030, will use XGS Energy’s proprietary technology to generate electricity without consuming operating water, a critical advantage in an arid state.
XGS Energy’s vice president told a state legislative committee that the Meta project represents “only a fraction” of the broader opportunity in New Mexico, estimating the company’s potential in-state market at several thousand megawatts over the next five years. The main constraints, he said, are not geological. They are the pace of permitting and the ability to connect projects to the grid.
That is exactly the terrain where the report’s remaining policy recommendations focus, and where InnerSpace Action continues to work.
What Comes Next
The tax credit expansion that did not pass in 2026 is not gone; it is deferred to the 2027 long session, where the fuller 60-day calendar creates more room for complex fiscal legislation. The report’s recommendations also include modernizing the state’s regulatory framework to support next-generation geothermal development and expanding geothermal’s access to the grid, both areas where work continues.
New Mexico has the geology, the workforce, the financial tools, and a growing project pipeline. What the next phase requires is continued follow-through on the remaining recommendations in the roadmap. InnerSpace Action will keep working with our partners in Santa Fe to make that happen.