The Legislative Finance Committee held its September meeting at Spaceport America, surrounded by cattle ranches and seemingly endless expanses of mesquite. On Thursday afternoon, legislators were updated on an issue that doesn’t involve rockets or space travel—but is critically important to the state’s future: the Texas v. New Mexico lawsuit in the lower Rio Grande.

In 2013, Texas sued New Mexico and Colorado in the U.S. Supreme Court, alleging that New Mexico was taking water that legally should flow to Texas under the terms of the 1938 Rio Grande Compact by allowing farmers to pump groundwater connected to the river.

Were the Supreme Court to side with Texas, it could force some southern New Mexico chile, pecan and cotton farmers to stop pumping groundwater. Or, the state could even wind up paying Texas up to $1 billion in damages. For perspective’s sake, the state’s operating budget for 2017 was $6.1 billion, and the Land Grant Permanent Fund currently has $16 billion.

But New Mexico State Engineer Tom Blaine, the state’s top water official, painted an optimistic picture for LFC last week, saying settlement discussions are moving forward.

Blaine said he and Texas’s Rio Grande Compact Commissioner, Patrick Gordon, “talk about issues that would have to be considered for settlement.”

He also told the 18 members present and LFC director David Abbey that one of the “most  noteworthy accomplishments” of his office in recent years has been building relationships in and outside the state. “Previous engineers have referred to the Lower Rio Grande as ‘Compact Texas,’ meaning ‘We don’t really represent you in New Mexico,’” Blaine said of southern New Mexico farmers who irrigate below Elephant Butte dam. “I am trying to change that paradigm, trying to build a coalition where everybody south of Elephant Butte and north of Texas, you’re in New Mexico.”

Blaine said he’s made “deliberate efforts to build relationships” with the Elephant Butte Irrigation District, or EBID.

That’s the irrigation district stuck smack dab in the middle of the lawsuit.

An ‘island’ between New Mexico and Texas

Under the Rio Grande Compact, New Mexico gets its annual share of the river’s water from Colorado based on how much flows past a streamgage near the state line. With New Mexico’s deliveries to Texas, things work differently. New Mexico doesn’t deliver the water to Texas, but to Elephant Butte Reservoir, about 100 miles north of the state line.

When drought intensified in the 21st century, things got even trickier.

Texas said that by allowing farmers in New Mexico south of Elephant Butte to supplement their irrigation water with groundwater pumping, New Mexico was sucking water from the Rio Grande that should have been flowing to Texas.

To address the problems, in 2008 the U.S. Bureau of Reclamation, EBID and the El Paso County Water Improvement District No. 1 signed an agreement that the two irrigation districts would share water during drought—and Texas backed off its complaints about groundwater.

But three years later, then-New Mexico Attorney General Gary King sued Reclamation over the deal, saying New Mexico’s water was being given away to Texas.

In response, Texas sued New Mexico and, as with all lawsuits between states, the case went to the U.S. Supreme Court. New Mexico filed a motion to dismiss, but the court’s special master—appointed to research the issues and report to the court—recommended the court reject that motion and allow the case to proceed.

EBID Manager Gary Esslinger did not return calls before publication, but earlier this year he and the district’s attorney both told NM Political Report the irrigation district is an island between the two states. Geographically, the farmers are in New Mexico, but in terms of water politics, they’re in Texas.

“We are in a no man’s land,” attorney Steve Hernandez said earlier this year. “We’re not totally represented by Texas, but we’re not totally represented by New Mexico.”

It’s not just the Lone Star State

In his report to the Supreme Court, the special master also recommended that the court hear claims against New Mexico by the federal government, which built and paid for Elephant Butte Dam more than a century ago to store and deliver water to southern New Mexico, Texas and Mexico.

Now, the U.S. says New Mexico has interfered with its ability to deliver water to downstream users, including Mexico.

As part of Texas v. New Mexico, the U.S. government alleges that by allowing farmers to divert water from the river and pump it from below-ground, New Mexico is illegally allowing people to either use water they don’t have rights to or use more water than they’re allowed.

But during the LFC meeting, Blaine indicated to LFC that the federal government might be willing to help New Mexico. The state engineer said he had spoken the night before with the deputy commissioner for Reclamation, and they had a “very good and very productive conversation.”

“The final question I asked of him was, ‘Would the Bureau of Reclamation be willing to participate from a financial standpoint on developing a project that would solve some of the regional water problems?’” Blaine said. “His answer to me was ‘yes,’ and I asked him ‘Would that be a million dollars, ten million dollars, a hundred million dollars, a billion dollars?’” The State Engineer said their conversation was interrupted before the federal official answered. Blaine joked with the LFC members that the federal government’s commitment could be “somewhere between a million and a billion dollars.”

‘Frank talk between parties’

Blaine also briefed the LFC about how the state, southern New Mexico and Texas water users have come together for discussions about a possible settlement. A court-issued confidentiality order allows for “very candid and frank talk between all the parties,” Blaine said.

Water users recognize that groundwater needs to be managed in the lower Rio Grande, he said, and more work needs to be done in order to better understand how groundwater interacts with surface water rights.

“One of the elements that was recognized by the user groups is they need to manage pumping,” he said, listing two ways ways the dispute could end: “We can solve the problem internally and figure things out and do self-management and self-regulation, or you can have the special master come in with a hammer and set the law down and say, ‘This is what you have to do, even if you have to have curtailment,” he said, referring to cutting off water users.

Solving the problem is going to involve figuring out how water is divided between EBID and the El Paso irrigation district, he said, and the 2008 operating agreement could be the guiding document.

“But we really need absolute certainty and provisions for changing weather conditions,” he said. “There needs to be some kind of drought factor, where we can adjust the allocation with respect to how much water is in the system.”

A ‘holding pattern’

Assistant Attorney General Tania Maestas with the New Mexico Office of the Attorney General also briefed LFC on the lawsuit, explaining that the state is currently in a “holding pattern.”

When Texas filed its lawsuit, she explained, New Mexico filed a motion to dismiss. In response to the special master’s report, New Mexico filed exceptions which Maestas said clarified inaccuracies and corrected where the special master “misstated” the history of the case.

This summer, the City of Las Cruces and the New Mexico Pecan Growers Association filed amicus briefs in support of the state, as well.

According to the Las Cruces brief, the special master’s recommendations ignore the city’s historical and present water use, and lock New Mexico and Las Cruces into 1938 water use conditions. The brief also says that his recommendations take away New Mexico’s authority over surface waters and groundwaters in the lower Rio Grande, put the city’s groundwater rights in jeopardy and create confusion over water rights in the lower Rio Grande.

Currently, everyone is waiting for the Supreme Court, Maestas said, which could call for oral arguments or issue an order, in which case New Mexico would have 45 days to respond.

“We’re working at the Attorney General’s Office to have that answer prepared, so we will be able to file within the required 45 days,” she said. “If the Supreme Court asks for oral argument, we’re getting ready for that.”

Legislators on the committee had few questions for Maestas or Blaine that were related to the Supreme Court lawsuit, though Sen. George Muñoz, a Democrat who represents Cibola, McKinley and San Juan counties, appeared distressed that EBID was siding with Texas because they’re “going to get a better deal.”

Maestas pointed out that while only states can be parties to the lawsuit, “If they were to align themselves with New Mexico, we would happily welcome them.”

The state has already spent more than $15 million on the litigation since 2014.