Intrepid Potash lost almost all its rights to Pecos River water this week per a ruling from the Fifth Judicial District Court.
Intrepid, one of two major potash-producing companies in the Carlsbad area was locked in legal battle for about two years over its Pecos River water rights with the Carlsbad Irrigation District (CID) and Otis Mutual Domestic Water Consumers and Sewage Works Associations, which represent rural water users in southern Eddy County.
Potash is an ore used in a range of products from makeup to gunpowder; today it is chiefly used as fertilizer.
Potash helped boost Carlsbad economic growth
Carlsbad was one of the first places in the North American where the mineral was found, and it defined the city’s economic growth in the decades before oil and gas production came to the region.
But as demand for potash shrunk in recent years and it was discovered and mined elsewhere, Intrepid sought to respond to the market shifts by diversifying its operations to include the sale of water to oil and gas companies for use in hydraulic fracturing.
The company recently claimed about 35,000 acre feet (AF) of water rights on the Pecos River for non-consumptive use and about 19,000 AF for consumption for both its potash refining operations and water sales to the oil and gas industry.
Intrepid Potash trial:Trial on Intrepid Potash’s Pecos River water rights concludes, parties await verdict
Opponents to Intrepid’s claim who initiated the litigation argued that amount of water, if taken by the company could lead to severe restrictions on other local water users such as for agriculture, and that Intrepid and its predecessors had previously forfeited the water rights completely.
Fifth Judicial District Judge James Wechsler in Chaves County sided with the CID and Otis Water Associations, finding Intrepid only had claim to about 150 AF for salt processing.
A look at the Intrepid Potash ruling
In his decision, Wechsler wrote the company had alternative sources of water to sustain its operations in augmentation wells and the Caprock formation in neighboring Lea County, and that of its about 8,000 AF of water rights in the Caprock, Intrepid and its predecessors never used more than about 3,000 AF.
The Judge also found that Intrepid’s efforts to alter the use of the water rights from potash to oil and gas sales was not grounds to establish use of the water rights because changing the purpose of use was not properly authorized.
Starting in 2017, the New Mexico Office of the State Engineer issued multiple authorizations to allow Intrepid to pump water from the Pecos for sale to the industry.
Those authorizations were deemed illegal and Intrepid was ordered to stop pumping in April 2020 in a separate case by Carlsbad District Judge Ray Romero, who argued the company lacked public input required ahead of such activities.
The non-use and existence of alternatives to the Pecos River water meant those water rights Intrepid claimed were abandoned, Wechsler ruled, despite multiple time extensions issued by the State Engineer during which the company and predecessors failed to put the water to “beneficial use.”
Intrepid Potash expects to appeal
“There is clear and convincing evidence that Intrepid and its predecessors abandoned their Pecos River water rights before 2017,” read Wechsler’s verdict. “Intrepid’s efforts to lease or transfer water rights to places of use for oil and gas operations beginning in 2017 are not relevant to the court’s analysis.”
In a statement following the verdict, Intrepid leadership said the company could appeal the decision and were considering further legal options.
“Intrepid was very disappointed in the Judicial Court’s recent ruling regarding our Pecos River water rights. We are proud of our long history of responsible operations in Southeast New Mexico and will continue to serve our customers and support the local economy,” the statement read.
“We are reviewing our options with our legal team and reserve the right to appeal the ruling.”
Carlsbad Mayor Dale Janway said the City was also reviewing the court decision.
The City of Carlsbad entered an agreement with Intrepid in February 2020 to stay out of the litigation in exchange for the company agreeing to not make a priority call on the city’s Pecos River water rights.
A priority call is used in times of scarcity to restrict newer or “younger” water rights in favor of providing access to the holder of older or “senior” water rights.
“Due to the complexities of this ruling, we are reviewing all documentation in order to make certain we understand the details of this decision,” Janway said in a statement.
Former-Carlsbad City Administrator Steve McCutcheon who in the past worked closely with Intrepid and the State of New Mexico on water rights said the ruling constituted a taking of private water rights which he said was “contrary” to historical water rights policy.
McCutcheon worried the ruling could set a precedent allowing water rights to be taken from private holders in the future, and dissuade other companies from doing business in New Mexico.
“I know of no other instance in the history of the State of New Mexico where water rights were taken from a citizen, or farmer, or industry in this manner,” McCutcheon said.
“Decisions such as this will negatively impact the willingness of many employers and companies to invest in New Mexico. I hope that further judicial action will correct this misapplication.”
Attorney for the CID and Otis Water Associations Ken Dugan said the judge’s decision made it clear that Intrepid had no claim to use Pecos River water for any reason.
Pecos River water rights ‘are gone’
“All the Pecos water rights are gone,” Dugan said. “The judge issued a 50-page opinion with ground after ground on why they (Intrepid) abandoned their water rights. The Otis water board and the CID are ecstatic.”
Dugan said he was confident Wechsler’s opinion would be upheld on appeal.
“He ruled their excuses weren’t legitimate. It’s airtight from an appeal standpoint,” Dugan said. “It was an absolute landslide decision.”
Looking ahead, Dugan said both parties in the case could negotiate any future access to the river for the company.
“The big issue for use will be how do we get Intrepid to come together. They’ve got nothing,” Dugan said. “I’m sure discussions can focus on if there’s a limited amount they would take.”
Also at issue, Dugan said, was about 12,000 to 14,000 AF he said Intrepid pumped from the river while its authorizations were in place ahead of Romero’s ruling.
He said that water should be returned to the river by Intrepid.
“They’re going to have to give that water back,” he said. “They’re going to have to dump it back into the Pecos. I don’t sympathize with them trying to change industries and take the Pecos River with them.”
Read the final verdict on Interpid Potash’s Pecos River water fights from Fifth Judicial District Judge James Wechsler.
Adrian Hedden can be reached at 575-618-7631, [email protected] or @AdrianHedden on Twitter.