Daily Development for Tuesday, February 5, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

WATER RIGHTS; APPROPRIATION RIGHTS; MINERAL LEASES:  Under most circumstances, including mining, water rights are not considered appurtenant to land under a lease. 

Hydro Resources Corp. v. Gray & Frost, 2007-NMSC-061, ____ N.M. ____, 173 P.3d 749 (N. Mex. 2007).

The two disputing named parties in this case traced their ownership of the disputed water rights to their predecessors-in-interest.  Hydro Resources Corporation's (Hydro) predecessor was Inspiration Development Company (Inspiration), and Harris Gray and William Frost's predecessor was the Copper Flat Partnership (CFP). 

On July 15, 1964, Inspiration (lessor) entered into a mineral lease with Corbin Robertson (lessee).  On June 9, 1980, Robertson assigned the lease to CFP.  On February 17, 1984, CFP drilled wells, thus appropriating underground water, and  filed water rights' declarations with the Office of the State Engineer for 6,462 acre-feet of water rights for use at the mill.  The Editor understands that New Mexico's appropriation system, which applies both to underground and surface water, confirms in appropriators a priority claim in a water source, so that if the water source depletes, others with lower priority will be required to curtail their use in order to protect the water access of prior appropriators.  In a dry state like New Mexico, such rights can have considerable value. 

In 1986, CFP ceased mining the claim and the lease terminated, so CFP returned the leasehold interest in the mine and physical improvements to Inspiration.  Shortly thereafter, on April 7, 1987, CFP conveyed its water rights to Gray and Frost.  Again, the editor assumes that this conveyance meant that Gray and Frost could appropriate from the same underground water source.  As they didn't own the land on which the wells were located, Gray and Frost would have to apply to the Engineer for permission to relocate the site of their access to the underground source. 

On August 24, 1987, Hydro entered into a mineral lease with Inspiration. The lease gave Hydrothe right to use all water rights and all other appurtenances.'

On January 8, 2001, Hydro filed a quiet title suit against Gray and Frost in state district court, seeking to quiet title to certain water rights allegedly associated with Hydro's mining claims.

First, Hydro argued that when CFP, a tenant under a mineral lease, obtained the water rights in question, it did so  as the agent of the landlord in obtaining the water rights. 

Further, Hydro took the alternative  position that water rights developed on Inspiration's mill sites wereappurtenant or otherwise necessarily linked' or indispensable to' associated patented and unpatented mining claims.  It claimed that appurtance was necessary because otherwise the mining claims could not be worked and the mining rights of those claims that were unpatented would lapse to the federal government.  (Some of Hydro's rights were patented, and others were patented.)  Thus, once CFP put the wells to use in connection with mills on the leasehold property, the water rights associated with those wells became part of the property rights, and reverted to the lessor when CFP's lease ended. 

The Court of Appeals agreed with Hydro on the agency argument.  It found that CPR had acted as agent for its lessor in obtaining the rights. 

The Supreme Court reversed.  It found that CFP was not the landlord's agent in obtaining the water rights:  The default position, absent evidence of a contrary intent, is that no agency relationship exists between the parties to a lease.  Id. =C2=B638

The Supreme Court then moved to the second argument, that the rights necessarily were appurtenant to the property on which they had been used.  The court noted that the well established water rights doctrine in New Mexico is thatwater rights are separate from the surrounding land and may be owned separately from the land, regardless of necessity. Water rights that are not appurtenant to land are separate items of property and must be separately conveyed. Consequently, when CFP applied for the water rights to be used in connection with its mining operations under the mineral lease, it obtained those rights in its own capacity, and they did not attach to the lessor's title.  They were separately conveyable, and in fact CFP did separately convey them to Gray and Frost.  The court noted that the absence of the water rights would not necessarily mean the loss of the federal mining claims, as there were other ways to protect those claims other than continuous operation of a mill si

The Court, therefore, remanded the case to the district court with instructions to quiet title to the disputed water rights in Gray and Frost.

Comment: Of course, water appropriate rules are state specific, and thewet half of the U.S. doesn't even bother with them - following for the most part classic common law rules that view the right to underground water as a part of ownership of the land.  Some, in fact, follow the rule that underground water belongs to the party that taps into it, whether a landowner or not. 

But in appropriation states, an elaborate statutory scheme, usually administered by a state agency (often the State Engineer) preempts the common law of water rights and, as shown here, severs the rights from the land.  The court noted that the New Mexico scheme preserves irrigation rights as part of the land, but not water used for other purposes.  As indicated, what this means is that the priority is protected wherever the user taps into the water source. 

In most states, water appropriation rights will be viewed as abandoned if they are not put to use continuously, so the Editor assumes that Gray and Frost had already started withdrawing water from the underground source at some other point.  The landlord continued to use the wells, possibly without a permit, but if the source depleted, the landlord or its tenants or successors will have to terminate withdrawal in order to permit continued access to water by those with higher priority. 

Readers are encouraged to respond to or criticize this posting.

Items reported on DIRT and in the ABA publications related to it  are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters.  The same is true of all commentary provided by contributors to the DIRT list.  Accuracy of data provided and opinions expressed  by the DIRT editor the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a
source that is readily accessible by members of
the general public, and should take that fact
into account in evaluating confidentiality


DIRT is an internet discussion group for serious
real estate professionals. Message volume varies,
but commonly runs 5 - 15 messages per work day.

Daily Developments are posted every work day.  To
subscribe, send the message

subscribe Dirt [your name]


To cancel your subscription, send the message
signoff DIRT to the address:


for information on other commands, send the message
Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only
commercial and general real estate matters but also focuses upon residential real estate matters.  Because real estate brokers generally find this service more valuable, it is namedBrokerDIRT.  But residential specialist attorneys, title insurers, lenders and others interested in the residential market will want to subscribe to this alternative list.  If you subscribe to BrokerDIRT, it is not necessary also to subscribe to DIRT, as BrokerDIRT carries all DIRT traffic in addition to the residential discussions.
To subscribe to BrokerDIRT, send the message

subscribe BrokerDIRT [your name]



To cancel your subscription to BrokerDIRT, send the message
signoff BrokerDIRT to the address:


DIRT is a service of the American Bar Association
Section on Real Property, Probate & Trust Law and
the University of Missouri, Kansas City, School
of Law.  Daily Developments are copyrighted by
Patrick A. Randolph, Jr., Professor of Law, UMKC
School of Law, but Professor Randolph grants
permission for copying or distribution of Daily
Developments for educational purposes, including
professional continuing education, provided that
no charge is imposed for such distribution and
that appropriate credit is given to Professor
Randolph, DIRT, and its sponsors.

DIRT has a WebPage at:
https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=3D http://www.umkc.edu/dirt/

Members of the ABA Section on Real Property, Probate
and Trust Law or of the National Association of Realtors can subscribe to a quarterly hardcopy report that includes all DIRT Daily Developments, many other cases, and periodic reviews of real estate oriented literature and state legislation by contacting Antonette Smith at (312) 988 5260 or asmith4@staff.abanet.org


To be removed from this mailing list, please go to
<https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=3D http://listserv.umkc.edu/listserv/wa.exe?SUBED1=3DBROKERDIRT%26A=3D1
or send an email message to the address listserv@listserv.umkc.edu,
with the text SIGNOFF BROKERDIRT in the body of the message. Problems
or questions should be directed to manager@listserv.umkc.edu.