Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

F I S C A L I M P A C T R E P O R T

SPONSOR Ezzell

ORIGINAL DATE

LAST UPDATED

2-21-07

3-08-07 HB 1278/aHAGC/aHENRC

SHORT TITLE Pecos River Settlement Water Rights

SB

ANALYST Woods

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

NFI

Relates to: HB 274 and SB 485, both of which appropriate money for additional acquisitions

under NMSA 1978, §72-1-2.4 (Pecos land and water-right acquisitions statute).

SOURCES OF INFORMATION

LFC Files

Response Received From (On HENRC Amendment)

New Mexico Attorney General

1

Office of the State Engineer

REVENUE (dollars in thousands)

*

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

Unknown

Unknown

Non-Rec

(Parenthesis ( ) Indicate Expenditure Decreases)

* OSE Estimates

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

*

FY07

FY08

FY09 3 Year

Total Cost

Recurring or

Non-Rec

Fund

Affected

Total

(360.0) (360.0) (720.0) Recurring

(Parenthesis ( ) Indicate Expenditure Decreases)

* OSE Estimates

1

Attorney General comments bear the caveat: “This analysis is neither a formal Attorney General’s Opinion nor an

Attorney General’s Advisory Opinion letter. This is a staff analysis in response to the agency’s, committee’s or

legislator’s request."

House Bill 1278/aHAGC/aHENRC – Page

2

SUMMARY

Synopsis of HENRC Amendment

House Energy and Natural Resources Committee amendment to House Bill 1278 (as amended)

reflects the following:

1. Strike House Agriculture and Water Resources Committee Amendment 7.

2. On page 2, between lines 24 and 25, insert the following new paragraph to read:

"(3) the purchase of water rights or rights to the delivery of water authorized by this

section and the subsequent use of the land to which the rights are appurtenant comply

with the provisions of Section 5D(1) and (2) of the settlement agreement dated March

25, 2003 entered in State v. Lewis; provided that the commission shall not be

responsible for the establishment of cover vegetation or the ongoing maintenance of

the land.".

3. On page 3, line 10, strike "shall" and insert in lieu thereof "may".,

House Energy and Natural Resources Committee amendment to House Bill 1278 (as amended)

adds no appropriation to the legislation. In commenting on the HENRC amendment, the

Attorney General’s Office (AGO) notes the following:

The Energy and Natural Resources Committee amendments to HB 1278 relate to the

amendments adopted earlier by the House Agriculture and Water Resources

Committee. In Amendment 1, the Energy and Natural Resources Committee struck

the House Agriculture and Water Resources Committee Amendment 7, and in

Amendment 2, inserted its own language in place of Amendment 7. However, the

only textual change between the two versions is that the Energy and Natural Resources

Committee version adds the following clause: “. . . provided that the [Interstate

Stream] commission shall not be responsible for the establishment of cover vegetation

or the ongoing maintenance of the land."

AGO adds:

In short, Amendment 2 makes clear that when the ISC acquires water rights in the

Pecos river basin without acquiring the ancillary surface land, the ISC is not

responsible for establishing cover vegetation on the surface acreage and is not

responsible for the ongoing maintenance of the land. Further, that Amendment 2 is

consistent with the common law. When water rights are severed from surface land,

the purchaser of the water rights has no legal obligation for maintaining the surface

acreage.

AGO concludes that the legislation relates to HB 274 and SB 485, both of which appropriate

money for additional acquisitions under NMSA 1978, §72-1-2.4 (Pecos land and water-right

acquisitions statute).

As updated on 3-8-07, the Office of the State Engineer (OSE) offers a number of observations on

the legislation, which are included in their entirety:

House Bill 1278/aHAGC/aHENRC – Page

3

1. The existing statute 72-1-2.4 NMSA 1978, requires the Interstate Stream

Commission to purchase land to which the water rights are appurtenant or the land

which has the right to the delivery of water when purchasing water rights to satisfy the

Pecos Settlement. This bill allows the Interstate Stream Commission to purchase water

rights without purchasing the land to which the water rights is appurtenant or the land

which has the right to the delivery of water. This is consistent with the Settlement

Agreement and is acceptable to the other settlement parties (the PVACD, CID and the

US).

2. This bill will also allow the Interstate Stream Commission to sell back the lands it has

so far acquired if the Interstate Stream Commission determines that all or any part of

the land is not necessary or desirable for permanent compliance with the Pecos

Compact or the Supreme Court’s amended decree, first to its original owner and if the

original owner is not interested, then to a third party at the current market price for the

land.

3. In addition, this bill amends 72-1-2.5, which established the Pecos River Basin Land

Management Fund to allow for income from the sale of land per 72-1-2.4 NMSA 1978

to go to this fund in addition to other sources of income already designated to this fund.

OSE notes that the amendments:

1. Provide for an emergency clause so that the law takes effect immediately.

2. Will require the Interstate Stream Commission to also enter into contract with

Carlsbad irrigation district in addition to the Pecos valley artesian conservancy district

and the Fort Sumner irrigation district as provided in the original bill. The purpose of

these contracts being to specify the actions the parties agree will be taken or avoided to

ensure that the expenditures will be effective toward permanent compliance with New

Mexico’s obligations under the Pecos River Compact.

3. Allows the Interstate Stream Commission to acquire water rights or rights to the

delivery of water without acquiring the appurtenant lands within the Carlsbad irrigation

district and in areas between the Acme gage and the Fort Sumner irrigation district in

addition to other areas mentioned in the original bill.

4. Requires that the purchase of water rights or rights to the delivery of water and

subsequent use of the land to which the rights are appurtenant comply with the

provisions of Section 5D(1) and (2) of the settlement agreement dated March 25, 2003

entered in State v. Lewis. This will assure that when water rights or the rights to

delivery of water are purchased without also acquiring the land, additional water

development, including from domestic wells, will be prevented on those lands unless

another valid water rights is transferred onto that land. The amendment also clarifies

that the ISC shall not be responsible for the establishment of a cover crop or ongoing

maintenance of the land when the land is not acquired.

OSE suggests that, “This bill benefits the Interstate Stream Commission because the commission

is required to pay the ongoing costs associated with land maintenance without having specific

House Bill 1278/aHAGC/aHENRC – Page

4

appropriations to do so. The bill reduces the amount of land the commission must purchase and

also increases the amount of funding the Pecos River Basin Land Management Fund may

receive." The cost of land management and maintenance will vary from parcel to parcel

depending on the original condition of the land and also based on rainfall conditions from year to

year. If the original condition is poor enough that it requires seeding and irrigation, the costs will

be higher. The annual land maintenance costs will be high if it is a wet year with frequent and

large rainfall that results in heavy weed growth. A rough estimate of the current costs is that it

will take about $20 per acre per year to maintain the land the commission is required to purchase.

If the Interstate Stream Commission acquires all of the 18,000 acres needed to fully implement

the Pecos Settlement, the annual land management costs will be about $360,000 per year. With

this bill, that obligation will decrease because the commission will not have to buy as much land

and can sell land it determines it does not need.

OSE adds that it is estimated that one full time employee will be needed to manage the lands

acquired by the interstate stream commission. Therefore, by not having to own the lands, the

Interstate Stream Commission will not only save a significant amount of money but also save

valuable staff time. On the other hand, if the Interstate Stream Commission does not own the

land from which it has acquired water rights, annual inspections may be needed to assure that

these lands remain fallowed and that the water rights sold to the Interstate Stream Commission

are no longer being diverted.

Additionally, OSE mentions the following considerations:

1. Because the settlement agreement provides that water cannot be applied to “dried up

acreage" unless allowed by law by subsequent transfer to the lands, and no wells

pursuant to 72-12-1 can be drilled, overall water depletions in the Pecos River Basin

will not be increased. The Interstate Stream Commission will ensure that the contracts it

enters into will prohibit drilling domestic wells on those properties in the future and

compliance with the other settlement requirements regarding water use.

2. The settlement provides that the Interstate Stream Commission shall withhold from

the transfer of water rights or shall obtain from another source, a quantity of water

sufficient for irrigation, not to exceed one irrigation season, in the minimum amount

necessary to establish such cover vegetation, to prevent erosion, thus minimizing the

possibility that a weed or dust problem would develop on the property that the water

rights are transferred away from.

3. Because the water rights that the Interstate Stream Commission may purchase in the

future may not have been appurtenant to land for some time, a stricter evaluation of

historical use will be needed to assure that the acquisition of water rights would benefit

compact compliance.

OSE concludes that, “This bill will result in significant savings in ongoing costs to the Interstate

Stream Commission related to land management. Because the ISC is no longer required to own

or maintain lands from which it has acquired water rights, the net savings to the Interstate Stream

Commission could be in the order of $360,000 per year." Moreover, the amendments allow the

bill to also benefit the Carlsbad irrigation district farmers as they can retain the land and only sell

the water rights to the interstate stream commission. The Interstate Stream Commission will

continue to pay the irrigation district assessments and stack its water rights on a small portion of

House Bill 1278/aHAGC/aHENRC – Page

5

the land that it will continue to own.

Synopsis of HAGC Amendment

House Agriculture and Water Resources Committee amendment to House Bill 1278 reflects the

following:

1.

Provides for an emergency clause so that the law takes effect immediately, upon signing

by the Governor.

2.

Will require the Interstate Stream Commission to also enter into contract with Carlsbad

irrigation district in addition to the Pecos valley artesian conservancy district and the

Fort Sumner irrigation district as provided in the original bill. The purpose of these

contracts being specifying the actions the parties agree will be taken or avoided to

ensure that the expenditures will be effective toward permanent compliance with New

Mexico’s obligations under the Pecos River Compact.

3.

Allows the Interstate Stream Commission to acquire water rights or rights to the

delivery of water without acquiring the appurtenant lands within the Carlsbad irrigation

district and in areas between the Acme gage and the Fort Sumner irrigation district in

addition to other areas mentioned in the original bill.

4.

Requires that the purchase of water rights or rights to the delivery of water and

subsequent use of the land to which the rights are appurtenant comply with the

provisions of Section 5D(1) and (2) of the settlement agreement dated March 25, 2003

entered in State v. Lewis

.

OSE notes that the amendment requiring compliance with Section 5D(1) of the settlement

agreement will make the Interstate Stream Commission responsible for maintaining vegetation

cover on the lands from which it acquires water rights on a long-term basis even if it does not

acquire or own the land. OSE states, “The Interstate Stream Commission may be able to pass on

this responsibility contractually to the owner of the land. If that happens, the Interstate Stream

Commission will still have to inspect these lands at least annually to assure compliance."

OSE additionally suggests the following language be added on page 3, line 20, “The offer shall

also include a notice that if the land is sold pursuant to this section, the Interstate Stream

Commission is not required to offer the water rights for sale at the original point of diversion and

for the original place and purpose of use." after “parties"

The amendment contains no appropriation language and OSE notes no fiscal impact.

Synopsis of Original Bill

House Bill 1278 seeks to enact a new section of Chapter 72, Article 1 NMSA 1978 to address the

following:

.

The existing statute 72-1-2.4 NMSA 1978, requires the Interstate Stream

Commission to purchase land to which the water rights is appurtenant or the land

which has the right to the delivery of water when purchasing water rights to satisfy

House Bill 1278/aHAGC/aHENRC – Page

6

the Pecos Settlement. This bill allows the Interstate Stream Commission to

purchase water rights without purchasing the land to which the water rights is

appurtenant or the land which has the right to the delivery of water. This is

consistent with the Settlement Agreement and is acceptable to the other settlement

parties.

.

This bill will also allow the Interstate Stream Commission to sell back the lands it

has so far acquired if the Interstate Stream Commission determines that all or any

part of the land is not necessary or desirable for permanent compliance with the

Pecos Compact or the Supreme Court’s amended decree, first to its original owner

and if the original owner is not interested, then to a third party at the current market

price for the land.

.

In addition, this bill amends 72-1-2.5, establishing the Pecos River Basin Land

Management Fund to allow for income from the sale of land per 72-1-2.4 NMSA

1978 to go to this fund in addition to other sources of income already designated to

this fund.

There is no appropriation attached to this legislation.

FISCAL IMPLICATIONS

The Office of the State Engineer (OSE) indicates that this benefits the Interstate Stream

Commission because the commission is required to pay the ongoing costs associated with land

maintenance without having specific appropriations to do so. The bill reduces the amount of

land the commission must purchase and also increases the amount of funding the Pecos River

Basin Land Management Fund may receive. The cost of land management and maintenance will

vary from parcel to parcel depending on the original condition of the land and also based on

rainfall conditions from year to year. If the original condition is poor enough that it requires

seeding and irrigation, the costs will be higher. The annual land maintenance costs will be high if

it is a wet year with frequent and large rainfall that results in heavy weed growth. A rough

estimate of the current costs is that will take about $20 per acre per year to maintain the land the

commission is required to purchase. If the Interstate Stream Commission acquires all of the

18,000 acres needed to fully implement the Pecos Settlement, the annual land management costs

will be about $360,000 per year. With this bill, that obligation will decrease because the

commission will not have to buy as much land and can sell land it determines it does not need.

OSE additionally indicates that it is estimated that one full time employee will be needed to

manage the lands acquired by the interstate stream commission. Therefore, by not having to own

the lands, the Interstate Stream Commission will not only save a significant amount of money

but also save valuable staff time. On the other hand, if the Interstate Stream Commission does

not own the land from which it has acquired water rights, annual inspections may be needed to

assure that these lands remain fallowed and that the water rights sold to the Interstate Stream

Commission are no longer being diverted.

SIGNIFICANT ISSUES

OSE raises a number of discussion points:

House Bill 1278/aHAGC/aHENRC – Page

7

1.

Because the settlement agreement provides that water cannot be applied to “dried

up acreage" unless allowed by law by subsequent transfer to the lands, and no wells

pursuant to 72-12-1 can be drilled, overall water depletions in the Pecos River

Basin will not be increased. The Interstate Stream Commission will ensure that the

contracts it enters into will prohibit drilling domestic wells on those properties in

the future and compliance with the other settlement requirements regarding water

use.

2.

The settlement provides that the Interstate Stream Commission shall withhold from

the transfer of water rights or shall obtain from another source, a quantity of water

sufficient for irrigation, not to exceed one irrigation season, in the minimum

amount necessary to establish such cover vegetation, to prevent erosion, thus

preventing the possibility that a weed or dust problem would develop on the

property that the water rights are transferred from.

3.

Because 72-1-2.4 requires the commission to offer the land and water rights it has

purchased to the original use at the original point of diversion and for the original

use, this bill should be amended to accommodate the prior statute and to allow the

commission to sell existing land with the approval of the original owner the

commission purchase the land and water rights from. An amendment is proposed

to address this issue.

4.

Because the water rights that the Interstate Stream Commission may purchase in

the future may not have been appurtenant to land for some time, a stricter

evaluation of historical use will be needed to assure that the acquisition of water

rights would benefit compact compliance.

5.

The bill should be amended to specify that the commission does not have to

purchase land within the Carlsbad Irrigation District and to expand the Fort Sumner

area to make it consistent with the requirements of the settlement agreement.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

OSE suggests that the Interstate Stream Commission will continue to own and manage the lands

purchased as required by 72-1-2.4.

AMENDMENTS

OSE suggests the following amendments:

1.

Page 2, line 15, add “the Carlsbad Irrigation District, the" after “Basin,"

2.

Page 2, line 16, add “between the Acme gage to and including" after “or"

3.

Page 2, line 25, add a new section “(3) The commission shall ensure further water

use at the land from which water rights are purchased, including water use

associated with § 72-12-1 through § 72-12-1.3, shall not occur without the

House Bill 1278/aHAGC/aHENRC – Page

8

subsequent transfer of a duly-adjudicated water right; provided that the commission

shall ensure that sufficient water is available to establish cover vegetation on that

land."

4.

Page 3, line 10, change the first “shall" to “may"

5.

Page 3, line 20, add “The offer shall also include a notice that if the land is sold

pursuant to this section, the Interstate Stream Commission is not required to offer

the water rights for sale at the original point of diversion and for the original place

and purpose of use." after “parties"

BFW/mt:csd