New Mexico Copper Corporation, Turner Ranch Properties and Hillsboro citizen group await imminent Appellate Court decision

The parties involved in a water fight that may determine if the New Mexico Copper Corporation can obtain sufficient water to process ore at the Copper Flat Mine in Sierra County are awaiting an Appellate Court ruling on a lower court’s decision, which could be handed down around the end of this month.

The mine, which is located about six miles east of Hillsboro, off Highway 152, adjoins Ted Turner’s Ladder Ranch and overlooks Animas Creek to the south. It last operated in 1982.

Stakeholders in NMCC’s water acquisition efforts went through four years of legal battle in the Lower Rio Grande River Basin Adjudication Court, overseen by Judge James Wechsler, starting in 2014. On Feb. 28, 2018, Wechsler handed down a ruling that granted NMCC and water-right sellers Harris Gray and William Frost the use of nearly 900 acre feet of water, far less than the nearly 7,500 acre feet a year they claimed were due them.

According to Bureau of Land Management environmental impact statements, the mine needs about 6,100 acre feet a year to operate.

NMCC entered into an option agreement with Gray and Frost around 2010, agreeing to purchase the right to nearly 6,500 acre feet of water a year, to be drawn from four production wells at the mine site. (NMCC also claims the right to more than 1,000 acre feet a year associated with the mine’s 12 subsidiary wells.)

The agreement with Gray and Frost specified there were no guarantees NMCC would be able to exercise the option, for which the company paid $2.5 million. According to Adjudication Court documents, NMCC’s remaining payment to Frost and Gray was $700,000 when the court’s ruling came down in 2018.

NMCC and Gray and Frost appealed Wechsler’s ruling, stating the lower court erred in not awarding them 7,500 acre feet a year.

Turner Ranch Properties appealed Wechsler’s award of 900 acre feet a year to NMCC and Frost and Gray. 

Fourteen individuals in Hillsboro, working in concert, also appealed Wechsler’s award of 900 acre feet a year.

The New Mexico Court of Appeals heard oral arguments presented by the three parties via an internet video conference on April 1. No members of the public or press were allowed to attend the hearing, but an audio recording of the proceedings was posted on the court’s website two days afterward.

Hillsboro resident Max Yeh (who is—full disclosure—president of the Sun’s board of directors) has dedicated thousands of hours to researching and evaluating legal information to aid the Hillsboro stakeholders over the last 10 years. He attended the April 1 hearing online and encapsulated for the Sun the import of the session that took less than two hours:  

“Everything said at the oral arguments depended on one, an enormous amount of factual information (almost 10,000 pages of information) and two, pretty subtle and complex legal reasoning coming out of almost 200 case decisions.” 

Yeh also provided a mini-lesson on how appellate cases are determined:

“You must remember that an appeals court does not retry the matter at issue. Its job is very strictly limited to the lower court’s findings of fact and conclusions of law. The arguments are not directed at each other’s position, but both sides are directed at the lower court. The issues are whether as fact finder the lower court found all the facts correctly, whether the lower court applied the right laws with the right understandings to the right facts it found. If the appeals court finds that the lower court had ‘sufficient evidence’ to come to its conclusions and decisions, then an appeals court cannot change the lower court’s decision, even if there is new evidence or even if enough evidence was found by the lower court to come to another decision. So the appeals arguments have to be specifically directed at an articulated end. Each side has to say there was an insufficiency of evidence or there was a misinterpretation of law, or, as we said, the court applied the wrong law to the wrong facts.” 

ATTORNEYS AND JUDGES

NMCC and Gray and Frost are represented by Tanya Scott, attorney with Law & Resource Planning Associates, Albuquerque.

The Hillsboro citizens group is represented by Kenneth Dugan of Martin, Dugan and Martin, Carlsbad.

Turner Ranch Properties is represented by Tessa Davidson of Davidson Law Firm, Corrales.

The New Mexico Court of Appeals judges were retired New Mexico Supreme Court Justice Richard Bosson, retired Appellate Court Judge Michael Bustamante and Appellate Court Judge J. Miles Hanisee. Bosson and Bustamante were assigned the case as substitutes for sitting appellate judges who were indisposed. 

ADJUDICATION COURT’S DECISION

The basis of New Mexico and Western water law is “beneficial use,” as stated in New Mexico’s Constitution. No one owns the water, but may use it, with the permission of the state. The right to use water is put at risk if the water is not put to continuous beneficial use. 

The New Mexico Office of the State Engineer, in September 1982, “declared,” or created, the Lower Rio Grande Water Basin, bringing it into its administrative control. The basin extends from Elephant Butte Dam to the borders of Texas and Mexico. Western and New Mexico water case law allow pre-basin water claims that were never used to be used in post-basin times under certain conditions. Claimants must show they notified competing water users that they were pursuing a particular plan to put the water to beneficial use—in this case, to operate a copper mine.

Most of the nearly 7,500 acre feet a year in NMCC’s and Gray and Frost’s claimed water right is water that was never put to use, judging by Copper Flat Mine’s estimates of the capacities of the mine’s four production wells and the 12 subsidiary wells. Most of these wells were drilled in the 1970s.  

The Adjudication Court ruled that the plan to mine at Copper Flat was pursued by previous mine owners before the basin was declared and was terminated before the basin was declared; therefore the claim of nearly 7,500 acre feet a year in pre-basin water right was “extinguished.”

The mine owners at the time used only about 900 acre feet of water for the three months the mine was in operation before the basin was declared. The company then went into default on its loan with the Canadian Imperial Bank, which took over ownership of the mine.

The bank subsequently applied to the OSE to permanently transfer the mine’s claimed water right to wells outside of Las Cruces to be used for a non-mining purpose. The application failed. The Adjudication Court found that the transfer attempt signaled the mine owner’s intent to permanently close the mine.

The bank sold all the mining equipment and reclaimed the land according to Bureau of Land Management requirements. The Adjudication Court found that these actions indicated a permanent abandonment of the plan to mine copper at the site.

The bank then sold the mine’s claimed water rights to Gray and Frost for $20,000 with no guarantees. The Adjudication Court found that the sale separated water right, if any existed, from the land.

Gray and Frost later tried to transfer the water right from the Las Cruces groundwater wells to a surface water lake within a proposed nearby residential development. Although the application was unsuccessful, the Adjudication Court found this to be further evidence that the copper-mining plan had been abandoned, thus extinguishing the pre-basin water right claim to put the water to beneficial use at Copper Flat Mine.

The Adjudication Court ruled NMCC and Gray and Frost had a vested water right of nearly 900 acre feet a year—water used during the three months of copper mining in 1982. The court excused the water’s nonuse during the 30-year period roughly between 1982 and 2010, around the time when NMCC took over ownership of the Copper Flat Mine.

The lower court’s decision was largely based on Gray and Frost’s showing that they had fought a legal battle over water rights for seven of the 30 years with one of the many subsequent Copper Flat Mine owners. Case law requires those seeking to retain rights to water that has not been put to beneficial use to provide specific justifications for not doing so, but the ruling excused the nonuse for vague reasons:

“The economic, financial, and logistical difficulties of CFP [Copper Flat Mine Project] and the legal challenges of Gray and Frost excuse the long period of nonuse of the vested [900-acre-feet-a-year] water rights.”

NMCC’S AND GRAY AND FROST’S ARGUMENT

Tanya Scott, representing NMCC and Gray and Frost, said the Adjudication Court erred in extinguishing her clients’ 7,500 acre feet of pre-basin water right and asked the Appellate Court to reverse the ruling.

Noting that the attempts to transfer the water right didn’t succeed, Scott asserted that, “to this day, the water can only be used for the copper mine.” The subsequent and current owners of the mine have pursued the same plan, with nearly the same footprint, therefore there was no abandonment of the plan, and pre-basin water claims should be awarded, she argued.

Scott pointed out that the Adjudication Court excused about 900 acre feet of water from over 30 years of nonuse because of “legal, economic, financial and logistical difficulties.” These reasons should also excuse the nonuse of the additional water right claimed by her clients.

Judge Bosson asked whether the copper mine could operate with only the right to about 900 acre feet a year, “if we affirm the lower court’s ruling.”

“No,” Scott said. More water is needed and appropriating or leasing water is unlikely to succeed “because people do not want a copper mine in their backyard.” NMCC has applied to the OSE to lease about 2,400 acre feet a year, Scott said, and some 70 parties are protesting the application.

TURNER RANCH PROPERTIES’S ARGUMENT

Tessa Davidson, attorney for Turner Ranch Properties, said the Adjudication Court was correct in finding the claim to 7,500 acre feet a year of pre-basin water right was “extinguished.” However, the lower court was incorrect in its ruling that 900 acre feet a year of water right remains.

Citing case law, Davidson said the lower court was required to have NMCC and Gray and Frost give evidence that the reasons they could not put the 900 acre feet to beneficial use for more than 30 years was “beyond their control.”

The Adjudication Court’s decision is “protecting economic interests in water,” Davidson said, giving paper ownership of a water right precedence over the “beneficial use” or “constitutional use” of water.

Davidson asked the Appellate Court to remand the issue of whether her clients have a vested right to 900 acre feet a year back to the Adjudication Court in order to have NMCC and Gray and Frost provide a reason “beyond their control” for more than 30 years of nonuse.

THE HILLSBORO GROUP’S ARGUMENT

Kenneth Dugan, representing the Hillsboro litigants, agreed with Attorney Davidson that the Adjudication Court was correct in extinguishing the pre-basin water right claims. And he, too, argued that the lower court’s ruling granting rights to 900 acre feet a year was incorrect.

Dugan drew the distinction between owning the water right and fighting to retain ownership, on the one hand, and owning water works and fighting to put the water to beneficial use, on the other.

Gray and Frost did not own water works and could not put the water to beneficial use, Dugan argued, and their long nonuse of the water prohibited other water users from putting it to beneficial use. New Mexico and Western water law do not “allow a dog in the manger,” he stated, using a colorful metaphor for a person who keeps something that he or she does not really need or want so that others may not use or enjoy it.

Gray and Frost were water speculators, Dugan said—that is, water right owners not interested in the beneficial use but only the profitability of water right ownership. Speculating in water for a profit is not allowed by Western water law. Dugan hammered home his dog-in-the-manger metaphor by noting that Gray and Frost fought Hydro Resources—one of Copper Flat Mine’s many owners—in court for seven years, prohibiting them from putting the water to beneficial use.

Dugan asked the Appellate Court to reverse the Adjudication Court decision to award NMCC and Gray and Frost 900 acre feet a year. They had the “burden of proof” to provide a legal excuse for more than 30 years of nonuse of water—and had not.