The Settlement brings major uncertainty for people, businesses, and taxpayers
On May 26, 2026, the U.S. Supreme Court approved the negotiated settlement of Texas v. New Mexico, No. 141 Original ending thirteen years of litigation over sharing the waters of the Lower Rio Grande. The court disregarded City of Las Cruces and New Mexico State University briefs requesting negotiations be completed before approval to provide more certainty for their water supplies.
The State of New Mexico calls it a victory. The Governor, the Attorney General, the State Engineer, and the Interstate Stream Commission all described the settlement as bringing “certainty” to farmers, communities, and businesses. That description is misleading.
The one real certainty in this settlement is not the one the State advertised: New Mexico will comply because the settlement leaves it no choice. The settlement’s detailed requirements for measurement, formal annual accounting, and automatically applied escalating penalties guarantee New Mexico’s compliance with its obligations to deliver Texas’s and the United States’ shares of Caballo Dam releases to El Paso. New Mexico is also required to permanently decrease total groundwater use to partially restore river conveyance efficiency downstream from Caballo Dam.
Everything else — how the reductions will be achieved, who will go without water, and who will pay — remains uncertain. This article, a follow-up to our December 2025 analysis of the settlement’s compliance mechanisms, explains what that means for the water users the State’s press release addressed least honestly: municipal, university, and business uses, and the taxpayers who will fund compliance.
Reading the State’s press release
The State’s announcement is worth reading closely, because what it says and what the settlement requires are different.
Much of the release is true but empty of future meaning. That New Mexico exited more than a decade of litigation, that the settlement is a historic resolution that shielded taxpayers from billions in potential liability, that the State will “continue work already underway” — all accurate, and none of it tells a water user what will happen to their supply.
The emphasis is telling. The release leans hard on one word: certainty. Communities, we are told, now “have certainty about their water supply.” Businesses can “plan with certainty.”
That is the false part. The settlement provides a framework for measuring compliance and penalizing non-compliance. It also dramatically reduces certainty for New Mexico water users. The settlement establishes the Effective El Paso Index, a strict accounting of the water New Mexico must deliver at El Paso each year, backed by escalating penalties for underdelivery. New Mexico must acquire and permanently retire 18,200 acre-feet of groundwater depletions — 9,100 by 2031 and all of it by 2036. Water-delivery accounting begins in 2027, immediately after a dry 2026 in which irrigators kept pumping groundwater under the State’s unchanged generous limits — so New Mexico starts its path toward compliance with an even greater deficit. None of this tells Las Cruces, New Mexico State University, or the region’s businesses how much water they will have, or what it will cost. The only certainties are that New Mexico will pump less groundwater, that it will take years to remedy underdeliveries, and that large amounts of money will change hands.
What municipal and business uses face
Here is the collision the State is not describing publicly. There is not enough legally available water for all uses. Almost all municipal and business water rights in the Lower Rio Grande are junior to the Rio Grande Project’s 1903 priority date for all the federally developed Rio Grande Project water and much of the supplemental groundwater that irrigators have been pumping. In recent years this century (2013, 2021, 2022, 2025, and 2026), the total available surface water has been insufficient to satisfy Elephant Butte Irrigation District farmers who in reaction have pumped groundwater for a full supply. Even in 1995 when Elephant Butte Reservoir most recently filled to the brim and spilled, EBID farmers pumped more than 100,000 acre-feet of groundwater.
When water is administered by priority, junior uses are cut off first. That puts Las Cruces, New Mexico State University, and the region’s businesses in line to lose water. State water law provides that the EBID irrigators water rights first put to beneficial use are the most senior. State water law does not recognize that people have human rights to water, or that communities, hospitals, and schools have equitable rights. We think New Mexico courts will not cut off drinking water to people, hospitals, and schools. But that opinion is not a plan, and it is not certainty.
The settlement acknowledges this collision only indirectly. It requires the State, EBID, and the federal Bureau of Reclamation to negotiate with Las Cruces and NMSU to try to reach agreement over how the State Engineer will administer water rights. The deadline is about three months away. The goal is an agreed alternative to strict priority administration. The settlement authorizes up to 100,000 acre-feet per year of Elephant Butte Irrigation District water for lease to municipal and business users and for delivery to El Paso. The settlement gives EBID and Reclamation a cut of the proceeds.
In plain terms: junior users may be able to lease a legally available water supply, but they will likely have to pay for it. Municipal acquisition of EBID’s senior rights is not legally possible. Nothing about making these constraints work while preserving the Lower Rio Grande’s economy is certain.
What taxpayers face
Compliance will cost hundreds of millions of dollars. The State Engineer and Interstate Stream Commission told the Legislature last September that implementation of the settlement requires $150 million. Our analysis concludes that the mandatory acquisition and permanent retirement of 18,200 acre-feet rights will not get the river and groundwater back in balance or restore the efficiency of downstream deliveries. In other words, the settlement’s mandate for New Mexico to cut back 18,200 acre-feet of groundwater pumping, by itself, will not end the delivery-to-El Paso shortfall or sufficiently remedy the cumulative depletion of 1,500,000 acre-feet of groundwater storage that causes excessive river seepage and poor efficiency of downstream deliveries.
The settlement lists multiple mechanisms for New Mexico to comply by paying — buying Project water, leasing it, compensating farmers to forbear, and ordering compensated transfers of water to Texas. Every one of those routes spends public money, and most of them would spend it year after year. On December 11, 2025, the ISC approved $17.5 million to pay 163 farmers to fallow about 8,300 acres for one to three years. Those payments are buying nothing more than time.
Nothing about making these constraints work while preserving the Lower Rio Grande’s economy is certain.
Under Active Water Resources Management — the State Engineer’s program for water administration developed under a 2003 law and unanimously upheld by the New Mexico Supreme Court in 2012 — the State Engineer can administer diversions by priority or by an equivalent shortage-sharing agreement among water users. Using water that belongs to downstream users is illegal; the State Engineer has state law authority to stop it. Enforcing that authority should be routine. However, the New Mexico Office of the State Engineer, which holds the State’s regulatory powers over New Mexico’s water supplies and uses, is not an effective regulator. The necessary political will and agency culture, capacity and preparedness are absent. Instead, taxpayers pay to clean up problems created by unregulated overuse of river water owed to downstream users.
EBID’s game
From our perspective, the EBID board has outmaneuvered the other parties for decades. We see the EBID Board consistently exercising greater political power than the State Engineer. Governor Bill Richardson in the mid 2000s gave EBID’s pecan growers a unique crop-specific right to more water, thereby encouraging farmers to plant more pecan orchards. In the 2008 Operating Agreement, the EBID board gave away some of New Mexico’s river water to the Texas irrigation district to quiet its complaint about EBID farmers’ groundwater pumping. Nobody has stopped their massive overuse of groundwater; the U.S. Supreme Court now requires the State to do so.
The City of Las Cruces and NMSU have not been as focused. Most recently, they both asked the U.S. Supreme Court to delay approving the settlement pending completion of negotiations to provide greater security of their water supplies. The Court declined. Instead, the settlement requires an ongoing negotiation process due in October 2026 and a state compliance plan in 2028.
The choice ahead
The settlement dictates the two outcomes New Mexico must reach but says nothing about how it gets there or who absorbs the losses. The State can invest now in administering water according to law, or it can keep spending tens of millions to pay farmers not to use water.
That is the real message the press release buried under the word “certainty.” For the Lower Rio Grande’s munipalities, businesses, public university, and the State taxpayers, the settlement guarantees less certainty, less water, and a large bill. How that burden is divided, how the legally available water supplies are shared, and who ultimately goes short are the questions the State has not addressed — and will not be able to avoid much longer.