State: Chevron water rights 'don't exist'

After the Chevron Questa Mine closed in 2014, the company prepared to divest itself of surplus land and water rights accumulated decades ago by the mine's previous owner, Molycorp. But the Office of the State Engineer's denial last month of two water rights transfer applications — one to an El Rito family with dreams of creating a small commercial farm and one to Wild Earth Llama Adventures — has Chevron and Questa officials wondering if their efforts to further northern Taos County's and Questa's economic development goals are under threat.

Patrick Shaw, who along with his wife, Jennifer Kostecki-Shaw, gave Chevron a down payment towards a heavily-discounted water right of 4 acre feet of groundwater per year, said his family was trying to do the right thing by purchasing a commercial water right before expanding their family farm: It wouldn't be legal for them to simply use a portion of their residential water right to grow food for sale.

"You're not allowed to sell anything," Shaw said.

The Office of the State Engineer, however, denied the Shaw's application, putting the family's enterprise on hold.

Ramona Martinez, district manager for Water Rights District 6, said the applications were denied because the water rights in question "simply don't exist" anymore "because they weren't put to beneficial use because the mine shut down."

"Chevron submitted proof of beneficial use, which means they're providing us with documentation of all the water they beneficially used," Martinez said. "From 2014 to 2016 they put 1,264 acre feet per year down to beneficial use, and the remaining 1,433 acre feet were not put to beneficial use."

She also said Chevron already knew the two water rights in question were no longer valid.

"All was explained on Day 1," said Martinez, who worked closely with Chevron to "rearrange their water rights" in 2016.

She said the company at the time "requested the OSE make an exception and recognize those unused acre feet under the basis that they wanted to be good neighbors and help the community."

But "we don't make exceptions," she continued, adding that the basin in which Taos County sits is "a fully-appropriated basin, meaning all the water is allocated."

"There is no water left in that system [and] the 1,433 acre feet doesn't exist," she said, emphasizing that the water isn't being used — even on paper — to satisfy downstream water obligations. "Allowing them to use it would take an extra 1,433 acre feet from the system, it would be an increase in the system," she said.

Chevron disagrees with the state's finding and said it will appeal the two decisions.

"It is Chevron's belief that the recent denials reflect the current position of the OSE, because in May, 2020, OSE staff shared with us an internal draft memo arguing that these rights are valid," said Christian Isely, Chevron's economic development advisor in Questa, adding that "the reasoning was that 'circumstances outside the control of Chevron prevented them from fully using the water rights.'"

Isely said the circumstances beyond the control of the company were the "permanent closure of the mine in 2014."

State: Chevron water rights 'don't exist'

The owners of the Top of the World Ranch in the San Luis Valley withdrew that application before it could be approved or denied by the state.

The bigger question for Chevron and officials in Questa is whether the company will be able to move forward with something that's been talked about for some time: two transfers of water rights to the village itself, which has accrued a water debt with the state totaling 1,800 acre feet.

Chevron wants to offer a one-time, $1 lease of 1,800 acre feet to clear that debt, and also donate a water right representing 120 acre feet of water annually. It's part of the company's effort to support the economy and people of Questa, where it was once a major employer.

"Chevron recognized the need that after the mine closed the economic and social impacts are huge, obviously, for jobs, local businesses, tax revenue, you name it," Isely explained. "And so my charge was to help diversify the Questa economy, and we use a substantial amount of what we call social investment to do so."

While Chevron's ongoing mine reclamation projects and Superfund cleanup work require significant amounts of water, the company wants to return the surplus water to the surrounding community, including nine mutual domestic water associations, and the Village of Questa, which for years consumed more water than its water rights permit.

"We have sold 133 acre feet [of water rights] to nine mutual domestic water consumer associations here in the Taos area," Isely said, "but those applications are taking forever to get approved."

Martinez said the rights Chevron wants to transfer to the mutual domestic associations are valid, and lauded Chevron's efforts to support Questa.

"If Chevron wants to be a good neighbor and help the village of Questa and support economic development in Taos County, they should use their 1,263 acre feet of valid water rights instead of attempting to circumvent appropriate channels and processes set in place to protect our water resources and the citizens of New Mexico, our water users," she said, adding that the Office of the State Engineer "doesn't prejudge applications."

Isely said the mine needs the 1,263 acre feet of water rights for its ongoing activities.

"Regarding Chevron’s 1,263 proven up rights, Chevron needs to retain those rights in order to complete its mine remediation and reclamation projects as overseen by the United States Environmental Protection Agency, New Mexico Environment Department and the New Mexico Mining and Minerals Division," he said. "As such, they will not be available for divestment for decades."

Chevron and Questa haven't submitted the applications for the one-time 1,800 acre-feet donation or the annual water right that would add 120 acre feet to Questa's allowable consumption, so the Water Rights Division can't assess whether the rights in question are valid or not.

From Isely's description, though, the state will find parts of the applications problematic, since the company proposes to transfer some of what Chevron calls "future use" water rights, which are in the same category as the rights that the state says "simply don't exist" anymore.

"The 120 acre feet to be donated to the Village, and the 1,800 acre feet also to be leased to the Village should be defined by the OSE as valid," Isely said. "The donation is 100 percent future use rights while the lease is a combination of both future use and proven up. Chevron will submit those applications shortly, in partnership with the Village."

Mark Gallegos, mayor of Questa until April 1, said his village is desperate for the additional water.

"If they give us an additional 1,800 acre feet, it will give us an even wash and wipe away our debt," he said. "Then if they donate 120 acre feet that would go into our annual use per year, which would give us the opportunity if the community grows, or, if a hotel or car wash or laundromat came in, we would be able to provide the water to them" without adding to the village's current water crisis.

"If we had an additional 120 acre feet dedicated to the village, we could put in an additional well," Gallegos added. "It would cause less stress on the system to spread it out across three wells and maybe two different [depths of the] aquifer. It would give us generational security."