## Facts

- Texaco applied to the New Mexico State Engineer for permits to appropriate 700 acre-feet per year of groundwater from the Lea County Underground Water Basin for an oil-field waterflooding project.
- The Lea County Underground Water Basin had insufficient recharge to offset withdrawals, and the State Engineer managed it under a planned groundwater-mining program projecting controlled depletion over roughly 40 years.
- After administrative proceedings, the State Engineer found unappropriated water existed under the management plan and granted Texaco permits for 350 acre-feet per year.
- Existing groundwater appropriators (primarily agricultural users) protested, asserting the new appropriation would harm their wells.
- Evidence showed Texaco’s pumping would lower the water table for protestants, increase pumping costs, and shorten the period during which protestants could economically pump.
- The Oil Conservation Commission approved Texaco’s waterflooding project, which was expected to increase oil recovery by slightly over one million barrels.
- On appeal, the district court set aside the State Engineer’s order as contrary to the evidence and therefore arbitrary, unreasonable, and unlawful.
- Texaco and the State Engineer appealed to the New Mexico Supreme Court.

## Issues

1. Whether granting Texaco permits to appropriate 350 acre-feet per year would “impair existing rights” or otherwise violate statutory limits requiring that a permit not be contrary to conservation of water, detrimental to public welfare, or impair existing rights.
2. Whether the district court properly invalidated the State Engineer’s order as arbitrary and contrary to the evidence, given the basin-wide management plan and the administrative record.

## Decision

- The New Mexico Supreme Court reversed the district court and reinstated the State Engineer’s order granting Texaco permits for 350 acre-feet per year.
- The Court held that predictable declines in water levels, increased pumping costs, and a shortened economically feasible pumping period for existing users did not, by themselves, establish prohibited “impairment” in a planned-depletion (mined) basin.
- The Court concluded the State Engineer’s determinations were supported by the record and were not arbitrary, unreasonable, or unlawful.

## Legal Principles

- A permit to appropriate groundwater may be granted if unappropriated water exists and the proposed use will not (1) impair existing rights, (2) be contrary to water conservation, or (3) be detrimental to public welfare.
- In a mined groundwater basin managed under a planned-depletion program, “impairment” is assessed in relation to the basin-wide plan; effects inherent in the authorized depletion regime do not automatically constitute statutory impairment.
- Courts reviewing State Engineer permitting decisions must decide based on the administrative record and should not substitute their resource-management judgment where the Engineer’s findings are supported by substantial evidence and conform to law.

## Conclusion

The court upheld a limited new groundwater appropriation for oil-field waterflooding in a nonrecharging basin, reasoning that incremental harms inherent in planned groundwater mining did not amount to statutory impairment of prior rights and that the State Engineer’s basin-management determinations were entitled to judicial respect when supported by the record.


Mathers v. Texaco, Inc., 77 N.M. 239, 421 P.2d 771 (N.M. 1966)