New Mexico Supreme Court Resolves Long-Standing Water Dispute

In New Mexico, the Public Regulation Commission (PRC) grants licenses to and regulates various utilities who want to operate within the state including water utilities. Back in 1983 the PRC issued Moongate Water Company, Inc. (“Moongate”) a certificate of public convenience and necessity (CCN) which authorized the company to provide water to a specific area – known as the “certificated area”- located outside the city limits of Las Cruces.  When the City of Las Cruces later annexed three undeveloped tracts of land which happened to lie in a portion of this certificated area, the City further decided that its own municipal utility would provide water to residents and users in the newly-annexed area.

Moongate took the position that its rights to provide water in that area, pursuant to the CCN, were exclusive and thus improperly impaired by these actions of Las Cruces. It sued the City seeking an injunction stopping Las Cruces from serving as the water provider in the area covered by the CCA as well as compensation for what it deemed Las Cruces’ inverse condemnation and regulatory taking of its exclusive rights to serve the affected subdivisions. The ensuing legal battle lasted several years culminating with the New Mexico Supreme Court ruling last year that the City of Las Cruces had the authority to provide water in the disputed area and, that, under the specific circumstances of this case, did not have to pay damages to Moongate.

The State Supreme Court relied on the plain statutory language of the Public Utilities Act (the PUA) which gives the PRC the authority to establish and maintain a regulatory structure governing municipal water provision. It found two exceptions to the law which frees up Las Cruces to serve the disputed area. First, municipalities must elect to come within the auspices of the PUA. Las Cruces never made such an election. Second, the PUA does not apply to cities with a population of less than 200,000. The population of Las Cruces falls into that category. Accordingly, the City could serve the water users in the certificated area which falls within the City’s expanded limits. The alleged exclusive right granted to Moongate by the PUA does not alter that prerogative of the City.

Nor can Moongate recover monetary damages from the City for its decision to provide water to the residents in the affected area. While the Court did not foreclose the notion that such action may constitute a “taking” from a private utility, such as Moongate, it found that Moongate had yet to serve any customers in the annexed portion of the certificated area. Nor had Moongate invested in any significant infrastructure to serve that locale. As damages can only be awarded for actual losses and not speculative ones, Moongate could not recover compensation from the City of Los Cruces.

For advice on land use, water rights issues or farming matters before making any purchase or transaction or when dealing with a regulatory authority, contact the attorneys at Giddens & Gatton Law, PC Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico. Call the office at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com should you have any questions concerning the use of any land for farming or other purposes.