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New Mexico State Engineer Continues to Build Anti-Speculation Policy

New Mexico State Engineer Hearing Examiner Uday V. Joshi issued a Report and Recommendation Granting Motions for Summary Judgement in the matter of Augustin Plains Ranch’s (“APR”) application to appropriate groundwater. Examiner Joshi found in favor of APR on certain procedural questions but ultimately denied the application as speculative.

The Report and Recommendation involves APR’s Corrected Application to appropriate 54,000 AF/year of groundwater from 37 wells in the Rio Grande Underground Water Basin. The place of use was identified as “parts of Catron, Sierra, Socorro, Valencia, Bernalillo, Sandoval, and Santa Fe Counties,” but did not specify any particular municipalities or end-users.

The Corrected Application follows a previous application to appropriate groundwater that was denied by the State Engineer in March 2012, with the court affirming the denial in January 2013.

Examiner Joshi held a hearing on Motions for Summary Judgement on the Corrected Application on December 13, 2017 and issued the Report and Recommendation dated July 31, 2018 and filed on August 1, 2018. Movants (the parties opposed to APR’s application) provided oral arguments asserting four major points: “1) the Corrected Application is incomplete; 2) the Corrected Application is no different than the previously dismissed application and should be denied on the principles of res judicata; 3) the Corrected Application is facially invalid and it does not provide a sufficient degree of specificity in order for it to be analyzed; 4) the Corrected Application is speculative and, therefore, contrary to sound public policy and is detrimental to the public welfare of the state.”

The first three arguments were rejected with the examiner noting that the application was administratively complete—all of the required information was provided on the application form—and that it was substantively different from the previous application.

On the issue of the Corrected Application being speculative, Examiner Joshi determined that the New Mexico Constitution, the water code, and the law of prior appropriation and beneficial use govern permit applications and looked to Colorado’s anti-speculation doctrine stating that it “may serve as guide for New Mexico to continue its development of the same.” Colorado’s anti-speculation law includes two key tests for determining if an application is for speculative purposes: the “specific plan test” and the “can and will test.”

The Specific Plan Test

The specific plan test prevents someone from tying up or making unavailable water supplies for a hypothetical sale of water to a party that has not been identified. In Colorado Water Conservation District v. Vidler Tunnel Water Co. (1979), the Colorado Supreme Court noted, “Our constitution guarantees a right to appropriate, not a right to speculate. The right to appropriate is for use, not merely for profit. As we read our constitution and statutes, they give no one the right to preempt the development of potential water for the anticipated future use of others not in privity of the contract, or in any agency relationship, with the developer regarding that use.”

Examiner Joshi postulates that there many parallels between Colorado’s specific plan test and New Mexico state law, specifically noting how both the specific plan test and New Mexico Statutes Annotated (“NMSA”) 1978, Section 72-1-9 distinguish between public and private enterprises in their definitions of “appropriation.”

The examiner further notes that New Mexico law states, “Municipalities, counties, state universities and public utilities supplying water to municipalities or counties shall be allowed a water use planning period not to exceed 40 years.” Because APR is not a 72-1-9 entity and does not have an agency relationship with a 72-1-9 entity, it is not afforded the 40-year planning horizon.  In addition, while the application identified parts of seven counties as the area of use, no specific municipalities were identified, no contracts have been secured, and there is not identification of how the water supply would be allocated among municipalities. Examiner Joshi maintained, “An application for a new appropriation of water of this size and nature for municipal purposes should, with specificity, identify for each municipality: reasonable, substantiated projections of future demand, and the respective quantities, purposes and place of use for each identified user.”

The Can and Will Test—A Diligence Requirement

Examine Joshi also noted that both Colorado and New Mexico require that a water right be perfected within a reasonable amount of time. The Colorado Supreme Court explained this diligence requirement in Vermillion Ranch Ltd., Partnership v. Raftopoulous Brothers (2013).

“[A]n applicant bears the burden to demonstrate that: 1) it has taken a ‘first step,’ which includes an intent to appropriate the water and an overt act manifesting such intent; 2) its intent is not based on a speculative sale or transfer of the water to be appropriated; and 3) there is a substantial probability that the applicant ‘can and will’ complete the appropriation with diligence within a reasonable time.” 

While APR has put substantial time and resources into conceptually developing the project and delivery pipeline, there is also a “need to demonstrate a specific plan, the probability of implementation, the requirement that water be applied to a beneficial use within a reasonable time, and the reasonably anticipated needs of any municipal entities involved.” Examiner Joshi notes, “All APR has established is that it wants to appropriate and convey water to uncommitted municipalities or entities in unknown quantities.” Further, “Here, there is a striking absence of information, namely agreements with specific end-users for specific quantities and purposes that APR could rely upon to defeat a claim of speculation…”

The Recommendation

Concluding the analysis, Examiner Joshi quoted from Colorado’s Vidler case, noting that approval of the application “would ‘encourage those with vast monetary resources to monopolize, for personal profit rather than for beneficial use, whatever unappropriated water remains,’” and further maintained that “approval of the Corrected Application would be contrary to long established principles of the law of prior appropriation…” Recommendations include approving the motions for summary judgement and denying the Corrected Application as speculative.

Examiner Johsi also addressed APR’s argument against summary judgement asserting that the State Engineer was required to hold an evidentiary hearing and must consider the full merits of the application. Examiner Joshi relied on the practice of the State Engineer since its inception, the lack of issues of disputed material fact, and that fact that parties both in favor of and opposed to summary judgement participated in the hearing to determine that dismissal on summary judgement conforms with New Mexico law.

Follow-On Actions

Following the Report and Recommendation, APR filed a Notice of Appeal De Novo and an Expedited Request for Post-Decision Evidentiary Hearing maintaining they are entitled to a full evidentiary hearing under New Mexico law.

In the Expedited Request, APR cites the New Mexico Supreme Court decision in D‘Antonio v. Garcia (2008) to note that “NMSA 1978, Section 72-2-16 provides a statutory right to a post-decision ‘full evidentiary hearing’ by ‘any person aggrieved by the decision,’ so long as the decision was made without a prior evidentiary hearing and the request for hearing ‘is made in writing within thirty days after receipt by certified mail of notice of the decision.’” APR maintains that they filed the Expedited Request in a timely manner as required, that they were aggrieved by the decision to summarily denied the Corrected Application, and that by not holding a full evidentiary hearing, they were not afforded the opportunity to present evidence.

The State Engineer subsequently denied the Expedited Request stating that the hearing that was held on summary judgement satisfies the requirement for a hearing under NMSA 1978, Section 72-2-16 and maintains that “no expedited hearing is needed before an appeal can proceed.”


Written by Marta L. Weismann