State Eng'r of N.M. v. Diamond K Bar Ranch, LLC

• Decision Date: 22 September 2016
• Docket Number: NO. S–1–SC–35446,S–1–SC–35446
• Citation: 2016 NMSC 036,385 P.3d 626
• Parties: STATE ENGINEER OF NEW MEXICO, Plaintiff–Respondent, v. DIAMOND K BAR RANCH, LLC, and Raymond L. Kysar, Jr. and Patsy Sue Kysar, In their capacity as Trustees of The Raymond L. and Patsy Sue Kysar, Jr. Living Trust, Defendants–Petitioners.
• Court: New Mexico Supreme Court

385 P.3d 626
2016 NMSC 036

STATE ENGINEER OF NEW MEXICO, Plaintiff–Respondent,
v.
DIAMOND K BAR RANCH, LLC, and Raymond L. Kysar, Jr. and Patsy Sue Kysar, In their capacity as Trustees of The Raymond L. and Patsy Sue Kysar, Jr. Living Trust, Defendants–Petitioners.

NO. S–1–SC–35446

Supreme Court of New Mexico.

Filing Date: September 22, 2016

Victor R. Marshall & Associates, P.C., Victor Riton Marshall, Albuquerque, NM, for Petitioners.

Office of the State Engineer, Gregory C. Ridgley, Special Assistant Attorney General, L. Christopher Lindeen, Special Assistant Attorney General, Santa Fe, NM, Abramowitz, Franks & Olsen, Brett Justin Olsen, Special Assistant Attorney General, Fort Collins, CO for Respondent.

OPINION

DANIELS, Chief Justice.

{1} Water is both a scarce and a vital resource in New Mexico, and its responsible management is crucially important to all New Mexicans. In this appeal, we address the scope of the New Mexico State Engineer's regulatory authority over use of surface water in New Mexico when it has been diverted from the Animas River into an acequia in Colorado and accessed from that ditch by Petitioners and others in New Mexico.

{2} We reject Petitioners' arguments that the State Engineer lacks statutory authority over waters initially diverted outside of New Mexico and has no jurisdiction to enjoin Petitioners from irrigating an area of farmland not subject to an existing adjudicated water right or a permit from the State Engineer. We hold that the State Engineer is authorized by New Mexico law to require a permit for new, expanded, or modified use of this water and to enjoin any unlawful diversion.

I. FACTS AND PROCEDURAL BACKGROUND

{3} The Animas River, running south from Colorado into New Mexico, is a tributary of the San Juan River and part of the larger Colorado River system. In Echo Ditch Co. v. McDermott Ditch Company , No. 01690 (1948), the First Judicial District Court of New Mexico adjudicated water rights for the San Juan River and its tributaries in New

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Mexico, resulting in what is known as the Echo Ditch Decree. Among the rights adjudicated were those rights to water for irrigation from the Ralston Ditch. The Ralston Ditch diverts water from the Animas River at a headgate located in Colorado approximately one and one-half miles north of the New Mexico border.

{4} As recognized by the decree, the Ralston Ditch delivers Animas River surface water to irrigate 364.2 acres of land in New Mexico. The decree details the allowable purposes of water use. For each property owner with an adjudicated water right, the decree also specifies the allowable quantity of annual water use and notes that "the right to use of said water shall be confined to use upon the lands described" on the individual ownership forms. The Echo Ditch Decree gives the State Engineer, as statutory water master, exclusive authority to measure waters delivered from a main diversion or distributing system, to monitor waste, and to ensure water is delivered in "the respective quantities which the lands and said water users are entitled to receive."

{5} Petitioner Diamond K Bar Ranch, LLC (Diamond K), an asset of the Raymond L. and Patsy Sue Kysar, Jr. Living Trust, and trustees Raymond L. Kysar, Jr. and Patsy Sue Kysar (collectively Petitioners), own and operate a farm in San Juan County, New Mexico. The Diamond K farm property includes a large portion of the 364.2 acres of land and its appurtenant water rights for the Ralston Ditch adjudicated in the Echo Ditch Decree.

{6} The State Engineer filed a three-count complaint against Petitioners pertaining to their alleged illegal use of Animas River surface water. In the second count, the only count currently before this Court, the State Engineer sought to enjoin Petitioners' illegal use of Animas River surface water to irrigate additional acreage that was not part of the adjudicated acreage under the Echo Ditch Decree and for which Petitioners have no permit. See NMSA 1978, § 72–5–39 (1965) ("The [S]tate [E]ngineer may apply for and obtain an injunction in the district court of any county in which water is being diverted or the land affected is located, against any person, firm or corporation who shall divert water ... in violation of statute, or who shall cause or permit the application of said water upon lands or to purposes for which no valid water right exists.").

{7} Petitioners filed a motion to dismiss all three counts against them, primarily relying on Turley v. Furman , 1911–NMSC–030, 16 N.M. 253, 114 P. 278, to support their contention that the State Engineer lacks the authority to regulate the use of surface water from the Animas River for irrigation purposes when that water is diverted in Colorado and transported into New Mexico by the Ralston Ditch.

{8} Petitioners further argued that Article XVI, Section 2 of the New Mexico Constitution limits the State Engineer's regulatory authority over unappropriated "natural waters" flowing within New Mexico's boundaries and that any attempt by the State Engineer to exert jurisdiction over waters diverted from the Animas River in Colorado, which are appropriated and brought through a "constructed" ditch for beneficial use in New Mexico, violates Colorado's right to regulate diversions in its state.

{9} Finally, Petitioners argued that the Ralston Ditch, as a community ditch constructed in the 1880s, is exempt from the permit requirements of NMSA 1978, Section 72–5–1 (1941) as stated in NMSA 1978, Section 72–5–2 (1913). See § 72–5–1 (requiring application to the State Engineer for a permit to appropriate water); § 72–5–2 ("None of the provisions of the preceding [S]ection [72–5–1] ... shall apply to community ditches which are already constructed.").

{10} The Eleventh Judicial District Court denied the motion to dismiss, concluding that "the State Engineer has legal jurisdiction to enforce the [Petitioners'] adjudicated water right on the Ralston Ditch notwithstanding the Ditch's diversion point within ... Colorado." The district court reasoned that Turley was inapplicable to the facts of this case, stating that if there was ever a question whether Turley had any application to preclude the State Engineer's authority on the Ralston Ditch, the issue was resolved by the 1948 Upper Colorado River Basin Compact

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codified at NMSA 1978, Section 72–15–26 (1949) ; and the court confirmed that the Echo Ditch Decree explicitly recognized the exclusive regulatory authority of the State Engineer over " ‘waters to be delivered to any water user’ in the San Juan River Stream System, the Ralston Ditch included." See § 72–15–26 & Article XV(b) (determining the rights and obligations of each of the upper basin states of Colorado, New Mexico, Utah and Wyoming for the use and delivery of water of the upper basin of the Colorado River and its tributaries and affirming "the right or power of any signatory state to regulate within its boundaries the appropriation, use and control of water, the consumptive use of which is apportioned and available to such state by th[e] [C]ompact"). Nevertheless, the district court certified its ruling for interlocutory appeal on the grounds that "the meaning and application of Turley ... is a controlling question of law as to which there is substantial ground for difference of opinion and an immediate appeal from this order may materially advance the ultimate termination of the litigation."

{11} The Court of Appeals granted Petitioners' unopposed application for an interlocutory appeal but after full briefing by both parties decided to quash the appeal. See N.M. State Engineer v. Diamond K Bar Ranch , No. 34,103, order quashing interlocutory appeal, ¶¶ 8–10 (N.M. Ct. App. June 25, 2015). We granted Petitioners' unopposed petition for writ of certiorari to clarify the extent of the State Engineer's statutory authority to administer the use of Animas River surface waters when the waters are diverted into an acequia in Colorado and applied to lands in New Mexico in the absence of a vested water right or permit. See Davis v. Devon Energy Corp. , 2009–NMSC–048, ¶ 11, 147 N.M. 157, 218 P.3d 75 (granting a petition for writ of certiorari after the Court of Appeals denied interlocutory review).

II. STANDARD OF REVIEW

{12} We review de novo a district court's order granting or denying a motion to dismiss under Rule 1–012(B)(6) NMRA. Delfino v. Griffo , 2011–NMSC–015, ¶ 9, 150 N.M. 97, 257 P.3d 917. The district court's denial of Petitioners' motion to dismiss was based on its interpretation of the regulatory authority of the State Engineer. The State Engineer's power derives from statute and is " ‘limited to the ... authority expressly granted or necessarily implied by those statutes.’ " Tri–State Generation & Transmission Ass'n, Inc. v. D'Antonio , 2012–NMSC–039, ¶ 13, 289 P.3d 1232 (citation omitted). "We review questions of statutory and constitutional interpretation de novo." Id. ¶ 11.

III. DISCUSSION

A. Relevant Constitutional, Statutory, and Administrative Framework for Surface Water Rights in New Mexico

{13} Water law in New Mexico is governed by the doctrine of prior appropriation. Id. ¶ 40. "Under the doctrine of prior...