“Use It or Lose It”: New Mexico Supreme Court Clarifies the Abandonment Test and Formally Adopts an Anti-Speculation Doctrine for Water Rights

Introduction

The decision in State ex rel. Office of State Engineer v. Intrepid Potash, Inc., No. S-1-SC-40182 (N.M. Jul. 2, 2025) marks a watershed moment in New Mexico water jurisprudence. After almost a century of intermittent litigation surrounding vast Pecos River water rights once held for industrial potash production, the Supreme Court has:

Re-affirmed that the South Springs test — not the more recent seven-factor list from Gray — is the controlling analytical framework for common-law abandonment.
Clarified the harmony between South Springs and Gray, explaining when and how evidence may rebut the presumption of abandonment.
Explicitly adopted an anti-speculation doctrine, holding that water rights may not be warehoused for future profit but must be placed to beneficial use.

These rulings not only resolve the decades-long dispute between Intrepid Potash and numerous state and local water agencies but also realign New Mexico law with the western states of Colorado and Nevada on speculation and provide a clear road map for future abandonment cases.

Summary of the Judgment

The Court unanimously affirmed the Court of Appeals and the district court, holding that Intrepid Potash had abandoned all but 150 acre-feet per year of its Pecos River surface-water rights. The core holdings are:

Abandonment Framework. The South Springs three-part test governs abandonment; Gray supplies a non-exclusive list of rebuttal evidence but does not displace South Springs.
Burden-shifting. Extended non-use creates a presumption of intent to abandon; the right-holder must rebut with concrete facts, not mere “expressions of hope.”
Speculation. Holding water solely as a marketable asset is inconsistent with beneficial use and supports an inference of abandonment. New Mexico now expressly embraces the anti-speculation doctrine.
Sufficiency of Evidence. Forty-plus years of non-use, dismantling diversion works, and minimal efforts to place water to use constitute clear and convincing evidence of abandonment.

Analysis

Precedents Cited

1. State ex rel. Reynolds v. South Springs Co., 80 N.M. 144 (1969)

Established the common-law abandonment doctrine: (i) intent + act; (ii) prolonged non-use creates a presumption of abandonment; (iii) presumption may be rebutted with facts excusing non-use. The present Court re-entrenches these principles as “definitive.”

2. State ex rel. Office of State Engineer v. Elephant Butte Irrigation Dist. (Gray), 499 P.3d 690 (N.M. Ct. App. 2021)

Provided a Colorado-derived seven-factor list indicating an intent not to abandon. The Supreme Court clarifies that Gray is illustrative — not a mandatory checklist — and must operate within South Springs’ burden-shifting structure.

3. Colorado Anti-Speculation Line (Vidler Tunnel, East Twin Lakes Ditches, etc.)

The Court imports doctrines from Colorado (and notes Nevada’s adoption) to declare speculation antithetical to beneficial use, aligning New Mexico with the regional approach.

4. Statutory Forfeiture, NMSA 1978, § 72-5-28

Distinguished from abandonment: forfeiture punishes illegality after four years of non-use with notice and a one-year cure period; abandonment is common-law, intent-driven, and does not afford an opportunity to cure.

Legal Reasoning

Constitutional Bedrock. Article XVI, § 3 ties every water right to beneficial use; possession exists only through use.
Intent Analysis. The Court reiterates that intent to abandon may be inferred from unreasonably long non-use unless countered by facts/conditions or acts inconsistent with abandonment — not by statements of desire.
Harmonizing Tests. Gray factors remain admissible evidence but cannot override the fundamental presumption stemming from non-use. Trial courts retain discretion to weigh all circumstances.
Anti-Speculation Doctrine. Water held merely for future sale contravenes beneficial use; such speculation supports an inference of abandonment rather than rebutting it.
Application to Intrepid.
- 44 years of non-use & dismantling works = unreasonable non-use.
- 25 OSE extensions, a nominal conservation lease, and abortive sale attempts showed no concrete plan to use water.
- Re-building hardware in 2016–2017 came decades too late.
- Thus, presumption of abandonment not rebutted.

Impact of the Decision

Abandonment Litigation. Establishes a clear, predictable framework: South Springs test first; Gray factors as potential rebuttal evidence.
Water-Right Portfolio Management. Entities can no longer rely on serial extensions or passive holding strategies; proactive beneficial use is now the only safe harbor.
Policy Alignment. Brings New Mexico in line with neighboring western states on anti-speculation, strengthening interstate compact compliance and basin management efforts.
Administrative Practice. The Office of the State Engineer will likely tighten scrutiny on extension requests and evaluate them through the lens of potential abandonment/speculation.
Economic Development. Signals that water markets must be tied to demonstrable, timely beneficial uses, potentially accelerating transfers to agricultural, municipal, or environmental purposes that meet that standard.

Complex Concepts Simplified

Prior Appropriation: “First in time, first in right.” Earlier water users (senior appropriators) have priority over later users (juniors) during shortages.
Beneficial Use: The constitutional rule that a water right exists only while the water is put to socially valuable purposes (e.g., irrigation, industry, municipal supply). “Use it or lose it.”
Abandonment vs. Forfeiture: Abandonment is common-law, requires intent (can be inferred), and no statutory notice or cure period. Forfeiture is statutory (§ 72-5-28), automatic after four years non-use unless cured within one year after notice; intent irrelevant.
Presumption of Abandonment: Once non-use becomes “unreasonable” (courts have found 18–35 years, here 44), the burden shifts to the owner to prove facts negating intent to abandon.
Anti-Speculation Doctrine: Principle that water cannot be hoarded for undefined “future” uses or profit; an appropriator must have a definite plan and ability to apply water to beneficial use in a reasonable time.

Conclusion

The Supreme Court’s opinion in Intrepid Potash is more than an affirmation of lower-court rulings; it is a doctrinal milestone. By cementing South Springs as the abandonment lodestar, clarifying the proper role of Gray, and expressly adopting an anti-speculation rule, the Court has tightened the nexus between paper rights and physical water use. Going forward:

Extended non-use is perilous; paper filings alone will not suffice.
Evidence rebutting abandonment must show concrete steps toward timely beneficial use or legitimate external impediments.
Speculating on water — holding it for future economic advantage — risks total loss of the right.

These principles reinforce New Mexico’s constitutional mandate that water be harnessed for “the greatest good to the greatest number,” ensuring that dormant rights do not impede active, beneficial use in an increasingly water-scarce West.