NM Supreme Court rules Intrepid Potash abandoned Pecos water rights

A long-running legal dispute over a potash producer’s rights to Pecos River water in Eddy County was resolved by the state Supreme Court on Wednesday in a case hinging on the distinction between beneficial water use and speculation for future profit.

The ruling underscored a doctrine that New Mexico law does not permit holding beneficial water use rights without using them, in order to sell or lease the guaranteed water sometime in the future.

In 1973, Intrepid Potash closed its refinery in Loving after four decades of activity aided by river water diverted from Harroun Dam for cooling ore and rinsing waste salts, which qualified as beneficial use.

After a sales peak in 1963, the refinery’s production and water consumption declined. The company built a new refinery closer to its potash mine and secured groundwater rights for its operation, closing the Loving facility and dismantling its apparatus for moving river water in 1973.

Although water from the Pecos was not deemed suitable for the new refinery, the company held on to its water rights, first by negotiating with another company and then by applying for extensions of time to make beneficial use of the water. The Office of the State Engineer approved 25 extensions between 1978 and 2017, court documents state.

The state’s high court found, in an opinion authored by Justice C. Shannon Bacon, that for nearly 40 years, Intrepid “did not undertake efforts to put the water to beneficial use, rather it was only attempting to delay its use,” which also precluded other potential uses of the water.

The matter was litigated in a 2020 bench trial in state district court, after Intrepid made improvements to its diversion apparatus and sought to pump water from the river — claiming over 19,000 acre-feet per year — for potential lease to oil and gas companies.

Local water agencies challenged the claim, arguing that Intrepid had forfeited all but 150 acre-feet per year. They sued out of concern that Intrepid’s new operations would disrupt river flows, harm other water rights holders and even complicate New Mexico’s ability to meet its obligations to deliver water to Texas.

Intrepid argued that business conditions and water scarcity in some years, matters beyond its control, had inhibited its ability to put the water to beneficial use, and the facts did not support a conclusion that it had abandoned its rights.

The district court’s ruling was upheld by the state appeals court and, this week, by the state Supreme Court. In a clarification of how state courts evaluate possible abandonment, the court found, “it is at the discretion of the trial court to weigh the evidence of facts or conditions excusing nonuse along with actions or inactions demonstrating the water rights holder did not intend to abandon their water rights.”

Writing for the 5-0 unanimity, Bacon stated, “the desire of a water rights holder only to use the water later, when it is financially profitable, is the antithesis of beneficial use and is not an excuse for nonuse sufficient to rebut the presumption of abandonment,” upholding the Court of Appeals’ ruling.

Neither Intrepid Potash nor its lead attorney immediately responded to queries for this report.