Attorney Jesse J. Richardson, Jr., advisor to the Water Systems Council and an Associate Professor of Urban Affairs and Planning at Virginia Tech, and his colleague Tiffany Dowell of the Department of Agricultural Economics at Texas A&M, have prepared an excellent summary and analysis of the recent Bounds v. New Mexico decision by the New Mexico Supreme Court. They have graciously allowed me to post their work here.
Here is a copy of the New Mexio Supreme Court's decision:
I have pasted the Richardson-Dowell document below; here is a PDF:
Summary of Bounds v. New Mexico
New Mexico Supreme Court
Decided July 25, 2013
Jesse J. Richardson, Jr.
Disclosure: Jesse J. Richardson, Jr. and Tiffany Dowell authored and filed a “friend of court” brief in the Supreme Court of New Mexico in this case on behalf of seventeen clients, supporting the position of the State Engineer.
On July 25, 2013, the Supreme Court of New Mexico released its much awaited decision in Bounds v. State of New Mexico. Bounds, a farmer with senior water rights, challenged the legality of the domestic well statute (DWS). The DWS requires the State Engineer to issue a permit for domestic water wells when an application is filed, without any further analysis or consideration. In short, the court found that the DWS does not violate the prior appropriation doctrine or the due process clause of the New Mexico Constitution. This summary briefly discusses the main points in the court’s decision.
As Applied v. Facial
Before delving into the case itself, one must understand the distinction between “as applied” and “facial” legal challenges. Most cases involve “as applied” challenges. In these cases, the complaining party acknowledges that the law is generally valid, but asserts that as applied to their particular situation, the law violates either the state or U.S. Constitution, or another law that takes legal precedence. In deciding an “as applied” challenge, court look at the specific facts of the case before it.
“Facial” challenges argue that the law itself “on its face”, without looking at a particular situation, violates the state or U.S. Constitution or a superior law. Facial challenges are rare and very difficult to win, since these challenges are only upheld if there are no circumstances under which the law could be constitutionally applied.
Here, Bounds brought a facial challenge. The court found, in a unanimous decision, that the statute was facially constitutional. However, the court added an unusual twist. Instead of merely finding the statute facially constitutional, the court further analyzed the case assuming application of the statute in a fully appropriated and fully adjudicated basin. This addition is powerful. Going forward, it is likely that for anyone to successfully challenge the statute in an as applied situation, they will be required to show actual impairment, regardless of the overall status of water allocation in the basis.
Prior Appropriation and the Bounds Case
This case involves interpretation of the prior appropriation doctrine. This doctrine is used by most Western states to allocate water during times of scarcity. In essence, prior appropriation means “first in time, first in right”. The first person that establishes a regular use of water for a beneficial purpose has first priority for that water. The second person has second priority, and so forth. During times of scarcity, water is allocated to the most senior users, each in their full amounts, until no more water is left. If water runs out before a junior user’s share is given, he or she receives no water.
Facts and Background
Bounds is a rancher and farmer in the Mimbres Basin in southwestern New Mexico. The basin is fully appropriated and adjudicated. This means that all of the water in the basin has been allocated to users and the order of priority has been established. Bounds and the New Mexico Farm and Livestock Bureau filed this lawsuit, claiming that the DWS, which requires the State Engineer to issue a permit for a domestic well for anyone requesting one, is unconstitutional. The lawsuit claimed several constitutional violations, but the only claims considered in the Supreme Court of New Mexico are claims that the DWS violates the prior appropriation doctrine and the due process clause of the New Mexico Constitution. In its most basic form, Bounds’ argument was that if the Mimbres Basin was fully appropriated, all water in the basin is allocated to an existing user. No excess water exists for new users. When the State Engineer grants domestic well permits, as he is required to do, the domestic well users harm his rights as a senior water user by taking his water, even though the new users are less senior. In essence, the Bounds argued that the domestic well users are “butting in line”.
Bounds could not show impairment (that the issuance of domestic well permits reduced the amount of water that he received under his senior water right), so the case proceeded as a facial challenge. The District Court ruled in favor of Bounds. On appeal, the New Mexico Court of Appeals reversed, finding that the DWS did not violate the prior appropriation doctrine or the due process clause. Bounds and the New Mexico Farm and Livestock Bureau appealed to the Supreme Court of New Mexico. Oral arguments were held in October of 2011.
Supreme Court of New Mexico Decision
The Supreme Court considered two issues on appeal. First, the court addressed whether the DWS “creates an impermissible exception” to the prior appropriation doctrine in New Mexico because the State Engineer must issue the permit when requested, regardless of whether unappropriated water is available. The second issue involved the question of whether the failure to provide notice to and opportunity to be heard PRIOR to issuance of a domestic well permit violates due process rights.
Does the DWS Violate the Prior Appropriation Doctrine?
As to the first issue, Bounds claimed that since the Mimbres Basin is closed, no water exists to appropriate. Therefore, issuance of a domestic well permit must infringe upon existing senior water rights in the basin in violation of prior appropriation. The prior appropriation doctrine is part of the New Mexico Constitution, which provides that “priority of appropriation shall give the better right.”
When a Constitutional challenge is mounted, the court will uphold a statute “unless [the court is] satisfied beyond all reasonable doubt that the Legislature went outside the bounds fixed by the Constitution in enacting the challenged legislation” (Slip Opinion ¶ 11). The court relied heavily on Mathers v. Texaco, Inc., 77 N.M. 239, 245-46, 421 P.2d 771, 776-77 (1966), a case cited only by the Water Systems Council brief, and the ruling in Mathers that impairment cannot be assumed, but must be shown as a matter of fact in each particular case.
The Court found that language in Article XVI, Section 2 of the New Mexico Constitution —“[p]riority of appropriation shall give the better right”— describes how water should be allocated in times of shortage, not to how one acquires a water right or to a particular permitting procedure” (Slip Opinion ¶¶ 26-27). On the other hand, domestic well permits are administered in exactly the same manner as other water rights. All water rights in the state are conditioned on the availability of water, including rights under the DWS (Slip Opinion ¶ 31). Thus, although domestic wells may be administered in a different procedural manner, the water from these wells remains subject to the prior appropriation doctrine.
In reaching this conclusion, the court recognized another point that the Water System Council brief focused on-- that “exempt well” is a misnomer. “Today, domestic well permits are more regulated and integrated into the administrative system than ever before” (Slip Opinion ¶ 32). Domestic wells are not exempt from permitting or regulation, they are merely excused from certain onerous requirements of the permitting process under New Mexico law.
The court also explained that a host of options are available to a senior water user who is able to show actual impairment, including a priority call, requesting curtailment of domestic wells by the State Engineer, creation of domestic well management areas, or by bringing “as applied” legal challenges. The court also pointed to legislative and administrative action that has already been taken to protect senior water rights holders from domestic wells, including regulations restricting the amount of water allowed to be taken from a domestic well to 1 acre foot/year and new legislation preventing issues surrounding subdivision developers utilizing domestic wells. These limitations are discussed more fully below.
In summary, the court found that “[t]he Legislature codified this simpler permitting process as a policy choice, something that the New Mexico Constitution generally empowers our Legislature to do” See N.M. Constitution art. XVI, § 2 (“[U]nappropriated water . . . [is] subject to appropriation for beneficial use, in accordance with the laws of the state.” (emphasis added)) (Slip Opinion¶ 40). Therefore, the DWS statute does not violate the prior appropriation doctrine.
Does the DWS Violate Due Process?
The court quickly dismissed the notion that the DWS violates due process rights. Due process rights only exist where a person has been deprived of property. Bounds was unable to show that the DWS impaired his water rights. Therefore, no due process right existed here (Slip Opinion ¶ 52).
Caveats to the Court’s Decision
As mentioned above, the court emphasized the plethora of laws and regulations that give the State Engineer authority to limit domestic wells. By regulation, the State Engineer has already reduced the default maximum allowable diversion from three acre-feet to one acre-foot per year and per well per household. See 220.127.116.11(D)(1) NMAC (Slip Opinion ¶ 33). Regulations also provide for the creation of “Domestic Well Management Areas,” (Slip Opinion ¶ 34). Domestic wells are “subject to curtailment by priority administration as implemented by the state engineer or a court.” 18.104.22.168(B)(11) NMAC (Slip Opinion ¶ 35).
“The drilling of the well and amount and uses of water permitted are subject to such limitations as may be imposed by the courts or by lawful municipal and county ordinances which are more restrictive than the conditions of this permit and applicable state engineer regulations.” 22.214.171.124(B)(6) NMAC (Slip Opinion ¶ 38). Senior users also may make a priority call against junior users if actual impairment or impending impairment is shown. In that situation, an as-applied challenge to the statute can also be made (Slip Opinion ¶ 45)
In addition, the court recognized two recent legislative enactments. The first requires “either State Engineer approval of sufficient water or proof of water rights acquired by means other than a domestic well permit, before a subdivision plat may be approved if water rights have been severed from the land upon which the subdivision will sit” (NMSA 1978, Section 3-20-9.1; Slip Opinion ¶ 42). This statute appears to address the “double-dipping” problem, where a landowner strips the property of water rights, then develops the property using exempt wells.
Another legislative action, an amendment to NMSA 1978, Section 47-6-11.2,“requires proof of service from a water provider and approval from the State Engineer, or a right to use water other than by a domestic well, for any subdivision of ‘ten or more parcels,any one of which is two acres or less,’ before the subdivision can be approved” (Slip Opinion ¶ 43). This provision prevents dense developments that rely on exempt wells.
Finally, the court addressed a portion of the Court of Appeals’ opinion that had caused quite a stir in the water law community. Namely, the statement that “[t]he Constitution’s priority doctrine establishes a broad priority principle, nothing more” (See Bounds v. New Mexico, 2011-NMCA-011, ¶ 37). The Supreme Court opined that that statement “goes too far” and that the priority doctrine is more than just an “aspiration, subject to legislative whim” (Slip Opinion ¶ 47).
The Supreme Court of New Mexico unanimously ruled that the DWS does not violate the prior appropriation and does not violate due process rights. Further, the statute is constitutional even when applied in a fully appropriated, fully adjudicated basin.
In our opinion, future litigation over the DWS in New Mexico is unlikely. Challengers face the difficult, if not impossible, task of proving impairment by a single domestic well pumping a small amount of groundwater. The huge cost of litigation, along with the long odds on prevailing, will shift the focus to the legislature and the State Engineer’s Office. The result may also discourage litigation on exempt wells in other states.
In other states, like Washington and Montana, the battle has already shifted to the legislature and the regulators. In Bounds, the court made a point of essentially transferring these matters to the Legislature and State Engineer in New Mexico. “We urge our Legislature to be diligent in the exercise of its constitutional authority over—and responsibility for—the appropriation process. We equally urge the State Engineer to fulfill its superintending responsibility by applying priority administration for the protection of senior water users. Our courts remain available, based upon sufficient evidence, to intervene in appropriate cases to ensure that “priority of appropriation shall give the better right.” (Slip Opinion ¶ 46).
One should also consider the recent regulatory and legislative changes in New Mexico that vitiated many of the largest concerns with respect to exempt domestic wells. The amount of water allowed to be used was reduced from 3 afy to 1 afy, the problem of “double dipping” was addressed and the State Engineer was granted extensive authority to further regulate exempt wells in many situations.
The Supreme Court of New Mexico recognized, as the writers here have said before, that “exempt well” is a misnomer. Most states impose extensive regulation on exempt wells, but regulation that is less burdensome than the regulation imposed on other water withdrawals. As in most states, the court also reaffirmed that domestic wells are not “exempt” from priority, but merely administered in a different way.
The unusual decision of the court to consider some facts in addressing a facial challenge strengthened the result for the owners of domestic wells. However, the court made clear that domestic wells remain subject to regulation and subject to priority. In conclusion, a unanimous, powerful decision, tempered by caveats that the domestic wells in New Mexico are far from “exempt”.
"Battles over water in the West are always about something more. At their most elemental, they are about survival." - Bettina Boxall, 2007 (thanks to the Northwest Kansas Groundwater Management District No. 4)