TEXAS v. NEW MEXICO

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Argument of Charlotte Uram

Chief Justice Rehnquist: We will hear argument next in No. 65 Original, Texas versus New Mexico.

Ms. Uram, you on behalf of New Mexico, I understand, may proceed whenever you are ready.

Mr. Uram: That's correct.

Thank you, Mr. Chief Justice.

Mr. Chief Justice, and may it please the Court, the heart of the current controversy under the Pecos River Compact lies in two issues.

First, whether the Court may decide the critical, the ultimate issue in this case, did man's activities in New Mexico cause all or part of the shortfall at the state line on the basis of inference or presumption?

Unknown Speaker: I take it New Mexico accepts the determination of the shortage--

Mr. Uram: Yes, Your Honor.

Unknown Speaker: --or the shortfall?

Mr. Uram: The master found that there were 340,000 acre feet departure.

We do not take exception.

Unknown Speaker: So we can start there.

Mr. Uram: That's correct.

The second issue is whether the Court should order New Mexico to pay in the future water in excess of its compact obligation to make up for a shortfall from 1950 to 1983 when New Mexico's obligation was unknown.

As Justice White pointed out to the Court the master did recommend a 340,000 acre foot shortfall be determined here.

We take no exception to that.

What New Mexico does take exception to is that the master recommended that that entire amount of shortfall be presumed or inferred due to man's activities in New Mexico.

New Mexico also takes exception to the master's proposal for relief.

The master proposed actually four items for relief.

First, he proposed that there be prospective relief, and we do not take exception to that.

That is required under the compact.

But then he went on to propose, to recommend that New Mexico also be required to pay water and to pay in water for shortfalls from 1950 to 1983.

He recommended that New Mexico be required to pay that amount of water in a maximum time period of 13 years when the shortfalls accrued over a 34-year period.

And finally, he recommended that the Court order New Mexico to pay water interest at Treasury bill rates if New Mexico falls too far short.

Unknown Speaker: How would that be determined?

Mr. Uram: He said it was to be determined according to the Treasury bill rate on the day when New Mexico is found to be--

Unknown Speaker: Yes, but what would the interest rate be applied to?

Mr. Uram: --It would be applied to the 340,000 acre foot amount, whatever had been short.

Unknown Speaker: What do you do?

You say 10 percent of 320,000 or so many acre feet?

Mr. Uram: That's correct, Your Honor.

He established a system in which--

Unknown Speaker: You mean the interest would be paid in water?

Mr. Uram: --The interest would be paid--

Unknown Speaker: Or in money?

Mr. Uram: --in water.

It would be an interest payment in water that he recommended.

And New Mexico takes exception to not the prospective relief but all aspects of the retroactive relief.

Unknown Speaker: Why do you call this retroactive relief?

I find that a curious terminology for this.

In that sense any relief in an ordinary contract claim you would consider to be retroactive relief?

You break a contract with me and I sue you for the breach, for the damages that I have suffered.

You would consider that retroactive relief?

Mr. Uram: No, Your Honor, we feel that this case is different, and we do use the word "retroactive" with the intention of pointing out that New Mexico's obligation, exactly what that amount of water is, is not known until man's activities are determined by this Court.

So at that point we will know the obligation.

It is as if--

Unknown Speaker: You don't even say the same in a contracts case.

I mean, sometimes you don't know definitely what your obligation was until there is a lawsuit and the court tells you precisely what it was.

But you had it.

It was there.

Mr. Uram: --That may very well be, Your Honor.

We are not... it doesn't matter whether one calls it retroactive or something else.

The point is that we are being asked to pay back water for shortfalls that occurred over 34 years.

New Mexico did not know its obligation at that time.

Unknown Speaker: But is your conclusion from that that you shouldn't have to pay it back at all?

Mr. Uram: That's correct, Your Honor.

We should not have to pay back any water under the compact.

Unknown Speaker: Well, what good is a compact like this if, you know, you and Texas enter into an agreement that says you will only use a certain amount of water coming down the Pecos, and in fact New Mexico uses what it probably in good faith things it has a claim to but which later a master interpreting the contract says, no, you didn't have a claim to.

Do you say, well, we will just kiss and make up, and from now on we will obey the compact?

Mr. Uram: I understand the Court's difficulty.

But the compact is--

Unknown Speaker: It is a considerable one.

Mr. Uram: --Well, the compact does provide relief, and the compact specifically provided this prospective relief for two reasons, and that prospective relief is real, Your Honor.

The foundation of the question of what good is this compact is the assumption that there is no relief unless there is relief for past water due.

Unknown Speaker: What is the relief?

Mr. Uram: The relief is future water.

In this case, for example--

Unknown Speaker: Well, I know, but suppose we said prospective relief is all you can get, and then New Mexico promptly doesn't deliver the water again?

Mr. Uram: --Well, then New Mexico--

Unknown Speaker: Then you are back in court, and you say only prospective relief.

Mr. Uram: --That may be a different point, Your Honor.

At that point it is possible that the court could order different relief, but at this point the compact does not permit it.

Unknown Speaker: I don't see... well, with due respect, Ms. Uram, it is just like saying, if, you know, somebody's dog bites me and I try to sue and you say, well, you know, you will get relief, we will prevent him from biting you again.

That is not relief for the first bite.

You are saying here the first bite is free.

Mr. Uram: Let me sort out the stages, and perhaps we will see that it is not a bite.

There are two stages that one is concerned with under the compact.

The first stage is the one that the Court is now approaching.

What is New Mexico's obligation?

That is the first stage.

The compacting parties have specifically considered whether at that stage they should provide for retroactive relief for debit-credit accounting, and they said no.

They said no for two reasons.

The first reason is that they felt that they wanted to leave the compact flexible to accommodate change in the future, and so when they selected a method which required such complicated analysis, they said, we don't know enough about this river.

This is an extremely difficult river.

Let us leave it open in the future to change, to correction of the method, to replacement of the system to more accurately define the obligation.

And if we tie it to a debit-credit system it would be impossible for the parties, it will make it very difficult for the parties to make the changes that are required that should happen in the future in this dynamic compact.

So that was the first reason that they said when we are arriving at New Mexico's obligation in the first instance, when we are trying to define man's activities, when we are coming to that point, in that instance there will not be retroactive relief, and they had a second reason which is related to the first.

That second reason is that New Mexico cannot know exactly what its obligation is until the obligation is determined in light of the man's activities finding.

It cannot know in advance exactly what that amount of water will be.

So there is no wrong.

There is no wrong--

Unknown Speaker: Excuse me.

Excuse me.

It doesn't have to--

--That is true about a requirements contract or lots of other kinds of things that aren't in the area of interstate compact.

Someone agrees to take all of his requirements.

Now, there may be arguments what those requirements are.

Ultimately a court may tell that person, your requirements were different than you thought they were, but the contract would nonetheless be enforced, don't you think?

Mr. Uram: --Yes, and there is enforcement here, and that enforcement is prospective at this point.

At a later point if there is a violation of the compact which we do not have here, if there is a violation of the compact, perhaps other relief would be appropriate.

Unknown Speaker: I don't really understand this point about New Mexico not knowing what... New Mexico is supposed to be pouring water into the river if the level isn't at a proper flow.

The requirement was very simple.

Don't take any water out of it by man's activities.

Wasn't that the sum total of the requirements imposed on New Mexico?

Mr. Uram: Well, the requirement is actually quite complicated, Justice Scalia.

It is not simple to administer and it is not simple to know.

That is why this litigation has taken so long.

It is according to the depletions as it appeared on the river in 1947.

That is the first step.

You have to determine the depletion on the river as it occurred in 1947.

The second step is, you have to determine by a fairly complicated inflow, outflow method the second step, the extent to which there were shortfalls.

And then there is the third step, which is the ultimate issue in this case, the issue that sets New Mexico's obligation, and that is to what extent did man's activities in New Mexico cause the departure.

Unknown Speaker: Yes, but as far as New Mexico's obligations were concerned, what obligations did New Mexico have other than not to take away from the river by man's activities any more than had been taken away by man's activities in 1947?

Mr. Uram: That is the obligation, but to do that you have to go through fairly complicated mathematical--

Unknown Speaker: No, you don't.

All you have to do is conduct no additional man's activities after 1947.

Mr. Uram: --No, Your honor, that's not correct, because the standard is not tied to uses in New Mexico in 1947.

In other words, New Mexico cannot maintain all of the uses that it had on the river in 1947.

It is tied to depletions which had appeared on the river, and rivers, particularly this river, which is tied to two separate aquifer systems, don't show depletions right away.

It takes a while for the water to get there, and different rainfalls may cause different effects, and changing where a well is located may cause different effects.

So it is not as simple as it sounds.

As a factual matter it is extremely difficult to know exactly how much water you need, exactly what you need to do to remain in compliance with the standard.

And I would point out, Justice Scalia, in light of your concern, didn't New Mexico know and didn't New Mexico do what it needed to do, the answer is that in 1961 and '62, when this commission made findings, New Mexico believed that it was in compliance according to those commission findings, and so it did continue to administer the river according to the commission findings at that period.

It regulated all uses.

It didn't let people make new uses which would have an effect on the river.

It took all those steps in order to assure that it would remain in compliance with the commission findings.

Unknown Speaker: Counsel, where is the language that says this is all prospective?

Mr. Uram: Oh, yes, Your honor.

Unknown Speaker: Where is the language?

Mr. Uram: The language is in Senate Document Number 109 at Pages... I would refer the Court to Page 124--

Unknown Speaker: Is it printed here before us?

Mr. Uram: --It is stipulated Exhibit 1 in this case.

Unknown Speaker: Where is it?

Is Exhibit 1 in any of these volumes?

Mr. Uram: I don't know if Exhibit 1 is in the volumes that are before the Court, but it should have been transmitted to the Court as part of the record.

Unknown Speaker: You don't know whether it is here or not?

Mr. Uram: I am sorry, Your Honor.

I don't know if it is at--

Unknown Speaker: Pages what?

You started to say and were interrupted.

Mr. Uram: --It is Pages 124 and 125.

Unknown Speaker: Exhibit Number 1?

Mr. Uram: Yes.

And--

Unknown Speaker: What about the payment of monetary damages in lieu of water itself for any amount found overused by New Mexico?

Mr. Uram: --Your Honor, that is an option that we think the Court should consider if the Court does not agree with us that--

Unknown Speaker: Did you propose that or object to payment in kind in water below to the master?

Mr. Uram: --Yes, Your Honor.

We said that retroactive relief was not permissible under this particular compact at this stage.

Unknown Speaker: Well, did you suggest if the master wanted to impose retroactive relief that he consider monetary damages?

Mr. Uram: We stipulated to his authority to do so, but he did not believe he had the authority, but, Your Honor, we... the compact, as we say, at this stage--

Unknown Speaker: You asked that he do so instead of giving water relief?

You may have stipulated that he had authority to do so, but did you ask that instead of giving water relief, he give monetary relief?

Mr. Uram: --We did not specifically ask.

We asked for a hearing on--

Unknown Speaker: That is what Justice O'Connor was asking.

You are asking us to... you are asking now to have damages given rather than water.

Mr. Uram: --We are asking for the alternative, Your Honor, and the reason we are asking for the--

Unknown Speaker: The damages.

Mr. Uram: --For the alternative.

Unknown Speaker: Money.

Money.

Mr. Uram: Money.

We are asking for, if the Court decides that some relief must be given, and we do not think such relief is appropriate in this case for several reasons, but if... and I will explain those reasons, but if the Court thinks some relief is appropriate, then we think that the Court should consider the alternative of monetary damages.

And the reason is that if the Court is going beyond the compact to order equitable relief in this case, then let us look at the equities of this situation.

The master's, the relief that the master has recommended would cause so much greater hardship to New Mexico than--

Unknown Speaker: Where would you get the water to deliver this extra amount?

Would you have to condemn it?

Mr. Uram: --We would have to curtail the junior users, all the junior users, some of which go back to 1890, in the Roswell basin.

We would have to cut off, Justice White, a minimum of 112,000 acres of land in New Mexico to benefit a maximum--

Unknown Speaker: Well, you wouldn't have to if you went out and condemned some other water rights.

Mr. Uram: --We wouldn't have... there are alternatives, but those alternatives, Justice White, are speculative.

They require further--

Unknown Speaker: Well, they would only cost you money, but then you would be taking the water away from maybe even priority users.

Mr. Uram: --That's correct, Your Honor.

They exact their own dislocations.

Even if one could do any of the alternatives, and there is substantial question whether we could, they exact their own dislocations.

We would be closing down the earliest surface water users in that basin.

Unknown Speaker: Who will benefit from the water, the increased water usage?

Suppose you delivered the extra 34,000 acre feet a year into Texas.

Is that water distributed according to a water system in Texas, priority?

Is that it?

Mr. Uram: I assume so, Your Honor, but the record does not provide any testimony of exactly how Texas will use the water.

The only testimony that was provided was one anecdotal witness, and from her testimony we can calculate that if it were applied to the land, the most acreage that it could benefit is in the 4,000 to 10,000 acre range.

So you would be shutting down a minimum of 112,000 acres in New Mexico to benefit a maximum--

Unknown Speaker: What about municipalities in Texas?

Do they need water?

Mr. Uram: --I assume they need water, Your Honor, but we have heard no testimony about how Texas is going to use the water, nor, would I point out, have we heard testimony about what Texas's harm has been in the past.

Unknown Speaker: Whatever they are going to use it for, it is hard to believe that they wouldn't accept a certain amount of money for the water instead.

I mean, there is no reason you can't get out of this by paying money.

It is just a question of whether you are going to have to buy the water from Texas or whether the special master is going to have to figure out how much a foot acre of water is.

Did Texas stipulate to damages if the... or did they oppose... they want water rather than money.

Is that right?

Mr. Uram: I believe Texas wants water rather than money.

Unknown Speaker: Well, they will only have the extra water for ten years.

Mr. Uram: That's correct, Your Honor.

Unknown Speaker: They wouldn't accept any kind of... any amount of money for that water?

That is hard to believe.

Mr. Uram: It is not a--

Unknown Speaker: That is very irrational behavior.

Not many economists would think that that is a possible scenario.

Of course, you can still settle monetarily, whatever we do here.

Mr. Uram: --We can settle if the other party is settling for money.

Unknown Speaker: That is right.

Mr. Uram: And, Your Honor, it is a matter of public record, although not a matter of this record, that Texas is not settling for money.

Unknown Speaker: Well, you two states have had a chance to settle this controversy over, I don't know, forever.

Mr. Uram: That's correct.

Unknown Speaker: You haven't been able to do it.

Mr. Uram: That's correct, Your Honor, and we have continued to try to settle this controversy, but the controversy sticks now because the relief, the relief that the master has recommended is so onerous, it is such an extended hardship to New Mexico--

Unknown Speaker: When you say we have tried to settle, you mean New Mexico or both of you?

Mr. Uram: --Both states.

Both states have tried to settle, but the relief is so onerous, and that is where we stand.

Unknown Speaker: That is just what I can't believe.

I mean, I don't care how much water they are getting.

I am sure they will accept a monetary settlement for the water.

It may have been in Texas's economic interest to get a water judgment first and then have New Mexico bargain with Texas about how much New Mexico will pay instead of the water, but I have no reason to believe that Texas would behave so irrationally as not to... if in fact the water is worth more to you than to them, I am sure they would come to an economic adjustment in dollars.

Mr. Uram: Justice Scalia, there was an exchange that addressed the issue of monetary payment in lieu of water, and there was a letter written from counsel of the State of Texas in response to New Mexico's offer to pay water, and the response is dated October 28, 1986.

It is not a matter of this record but it is public knowledge and public record, and it says,

"Texas has considered whether any amount of money might compensate Texas for the water owed us. "

and then it continues,

"We have determined that the answer must be no. "

"Only payment of the debt in water will suffice to compensate Texas. "

"The minimum acceptable payment must be 340,100 acre feet coupled with specific guarantees of future compact compliance. "

We are not settling on the basis of money to compensate New Mexico for that reason.

But the basic question is, if there were to be any equitable relief for Texas, how would anyone know what it is to be?

We do not even know what the hardship might have been to Texas in all these years for lack of water.

Unknown Speaker: Of course, ordinarily if you breach an agreement you don't look so much at the hardship of the other party as the value of the performance of the person who breached.

Mr. Uram: You do look at both of those factors.

That is correct, Your Honor.

But see, here the relief that would be granted if it looks back is equitable relief and not contract relief.

Unknown Speaker: Well, but specific performance is a form of equitable relief and it simply require you to do what you said you would do.

Mr. Uram: That is correct, Your Honor, but if I understand correctly, you know, the analysis on the payment for anything past due if there is to be such payment is not within the framework of a contract, because this contract, the contracting parties here specifically rejected retroactive or any kind of payback system.

They rejected that for reasons having to do with the way they wanted this compact to work, and those reasons are still valid.

So it is only if the Court goes beyond and equity intervenes that the Court... it is within that equity authority that the Court would be looking to consider any other sort of relief.

Unknown Speaker: Did you make to the special master this argument that the compact didn't contemplate what you call retroactive relief?

Mr. Uram: Yes.

Unknown Speaker: And what did the special master say about it?

Mr. Uram: He said he believed it was without foundation.

But, Your Honor, we feel that the compact is quite solid on this point.

There is a reason why the compact evolved that way, and the reason was to protect these other concerns that the compacting parties had.

Unknown Speaker: xxx even if the contract contemplates specific performances, so to speak, it would be inequitable to order it in this case.

Mr. Uram: Yes.

Yes, we did.

But the--

Unknown Speaker: Yes, but he said I don't have any authority about damages.

But did you say that... did you make this argument that nobody knew what this obligation was until recently?

Mr. Uram: --Yes, we argued that nobody knew what the obligation was, that Texas should have to present--

Unknown Speaker: And the fundamental argument that went on for so many years when Judge Brightenstein was special master was, what was the 1947 condition.

Mr. Uram: --That's correct.

Unknown Speaker: And there was a major difference between you two states, and that question came up here twice, didn't it?

Mr. Uram: That's correct.

Let me turn quickly to the question of man's activities, but let me make one more point on hardship, and that is, there is no evidence of any hardship in this record to Texas.

The sole testimony is from one anecdotal witness, and her testimony suggests that in fact her hardships were unrelated to any activity by New Mexico.

On the question of the basic man's activities determination, the reason that New Mexico is before the Court on this question is that this is the first time that the man's activities issue is being decided, and it is of critical importance to us that this precedential issue be done in the way New Mexico bargained for when New Mexico entered into this compact.

When New Mexico agreed to this compact at the outset of the negotiations in 1943 New Mexico made it plain that because this river was so variable, and because the calculations required were so extremely difficult to do correctly, New Mexico wanted to ensure that it would never be charged for any losses which were not found due, which were not shown due to man's activities in New Mexico.

The problem here is that what the court, what the master heard evidence on was not man's activities in New Mexico.

He never heard evidence, what are man's activities in New Mexico and how do they affect the river?

Now, what would this hearing have looked like if he had heard such evidence?

Well, it would have--

Unknown Speaker: He found that they weren't due to natural causes.

Mr. Uram: --That's correct.

Unknown Speaker: And so you then say, well, those weren't due to natural causes, now let's have a hearing to decide what they were due to?

Mr. Uram: That's correct, because the departure--

Unknown Speaker: What is one of the possibilities other than man if it isn't nature?

Mr. Uram: --There are unknowns, but that doesn't answer your question, Justice White, because--

Unknown Speaker: So there is a third category, unknown?

Mr. Uram: --There is a third category but that still doesn't answer the question you raise, which is, if we have accounted for natural losses, why do we have to consider man's activities, and the reason is that the accounting for the natural losses is done on the basis, as this Court noted in 1983, of speculation about what some of those entries are to balance the books, and as this Court also noted in 1983, the inflow-outflow analysis which enables anyone to look and to make those determination does not say a thing about causes.

It doesn't address causes.

It lumps everything together.

So you cannot tell, as this Court noted, as Judge Brightenstein noted in his two previous reports, you cannot tell from looking at any information through the inflow-outflow method what happened in New Mexico on man's activities.

Unknown Speaker: I thought the master conducted a hearing on this very question, Texas had a burden of proof and submitted whatever it was, Exhibit Number 79 or whatever, yes, Texas Exhibit 79, which purported to account for the loss in water, and New Mexico didn't produce anything in opposition, and the master made his decision.

What is the matter with that?

Mr. Uram: The thing that is wrong with it is that what the master heard at the hearing was the second stage analysis, departures and adjustments to departures.

In other words, he considered what was not man's activities, so he said here are the departures.

Unknown Speaker: That was what Texas put on.

Ne Mexico put on nothing of its own, and the master made the decision.

Mr. Uram: No, that's not correct, Your Honor.

Both parties put on evidence as to what was not man's activities.

New Mexico was of the understanding that there was to be further consideration of New Mexico's position, which is that you need to have your affirmative evidence on the extent to which man's activities in New Mexico might have caused these departures.

Unknown Speaker: If you needed that affirmative evidence, would there have been any need to compute the 1947 flow.

What was the purpose of that?

Mr. Uram: Because the standard against which everything is measured, you do the 1947 flow and all those computations annually.

Unknown Speaker: And the conditions.

Mr. Uram: That's correct, you do that annually, and if you see a trend of departures between the two, then you look at man's activities, and that is the obligation.

Unknown Speaker: But why?

I mean, if each of man's activities has to be proven, you are wasting time to go Pack and figure out what the... the whole purpose of computing the '47 flow was to see if there is any decrease from that flow, and in order... and when you find a decrease you then find what was naturally caused, and the rest is man's activities.

Otherwise you are going to have to show man's activities diverted so much water this year, man's activities diverted so much water the next year.

If that must be proven, you have wasted a whole lot of time figuring out anal the '47 flow was, haven't you?

Mr. Uram: That's not correct, Your Honor--

Unknown Speaker: Okay, tell me--

Mr. Uram: --because of the nature of this particular river.

This particular river is so difficult, and if the rains come in at one place as opposed to another place it has a whole different effect on the river.

Because of the difficulty of this particular river the parties set up a very complicated scheme.

And they agreed at the time, and the Federal representative agreed at the time that this scheme was the fairest way to administer such a difficult river.

Unknown Speaker: --I guess I am not making myself... why do you need that... it seems to me you have said that what Texas has to show is that man's activities diverted so many acre feet of water each year.

If Texas has to show that, what difference does it make what the 1947 flow was?

You are wasting--

Mr. Uram: Because that is the basic standard that the compact says--

Unknown Speaker: --But you don't need a standard.

If you have to prove each individual man's diversion one by one, you don't need a standard.

Mr. Uram: --New Mexico recommended in the negotiations that there be no standard but Texas wanted a standard, and so as a consequence we do have a standard, and then a further limitation to man's activities under the standard.

Unknown Speaker: Well, it seems to me the whole purpose of the standard is to figure out what the natural flow of the river was, and then you can deduct from that standard whatever natural diversions had occurred in the interim and all the rest would be man's activities.

Mr. Uram: The natural flow is not that reliable.

Even the master has recommended that there be a 20 percent good faith margin set on delivery to account for the variability of this river.

Look at the numbers in Table 2 of Texas's Exhibit 79 that is attached to our brief.

Variations like that do not occur on a regular river with regular uses, with regularly accounted for natural losses.

The losses here, the natural losses are estimated.

If the water, if the rain comes in, for example, Justice Scalia, at the top of the river it will still be counted in the analysis but it will never make it to the same... to the state line.

If it comes in toward the bottom of the river it will make it to the state line and it will be counted the same, so you will have two different consequences, and the same numbers go in, and the only difference being where does the rain fall.

Natural losses account for a great deal of the variation in this river.

Thank you.

Argument of Renea Hicks

Chief Justice Rehnquist: Thank you, Ms. Uram.

We will hear now from you, Mr. Hicks.

Mr. Hicks: Mr. Chief Justice, and may it please the Court, I think on the question of what New Mexico has termed retroactive relief, which is really giving Texas the water that it failed to deliver over all those years, the 1983 unanimous decision of this Court has already settled that question.

New Mexico has offered the Court no reason to revisit that decision.

In 1983, at the conclusion of the opinion, the Court returned the case to the special master to conclude the proceedings, which is what this special master now has done, and said determine first... there are two subsidiary questions that you need to determine.

First, for each year of the period in dispute, and it is 1950 to 1983, under the 1947 condition, what is the difference between the... well, what is the difference between the amount of water New Mexico is supposed to deliver under the 1947 condition and the amount it actually delivered.

And the second question is, to what extent were any underdeliveries under that, in the answer to that question due to man's activities.

The special master and the parties have spent the four years since then answering these questions, and New Mexico has asked you all now to turn that into nothing but a very expensive academic exercise that is just to train people in hydrology or something.

I am not sure why they want it that way.

This is water that Texas bargained for in the compact in 1950 or in 1949 when the compact was approved by Congress.

If Texas had wanted--

Unknown Speaker: Mr. Hicks, do you say that the master can and that this Court can consider the equities involved in ordering any relief by virtue of the shortfall?

Is this a case in which equities can be considered in determining what is to be done about the shortfall?

Mr. Hicks: --I want to give the careful answer to that, and it is important.

This is compact case, not an equitable apportionment case.

And in determining what the extent of the shortfalls is, this Court... there are no equities involved.

This case has been to determine those amounts.

And it has now been done.

Unknown Speaker: What about the remedy stage?

Mr. Hicks: Now, at the remedy stage I suppose that Texas could have tried to insist that it is our water, it has been determined that it is our water, deliver very bit of it right now in New Mexico.

Texas has not chosen to push that issue.

Unknown Speaker: No, I am asking whether the Court in your view and the master have power to consider the equities in determining the remedies.

Mr. Hicks: Only to a limited extent.

There is a realistic geographical, geological limitation on how much can come down in one year, and in fact how much can be used in one year, I suppose.

If all 340,000 acre feet came down in one year, I don't think it could happen, first, and secondly, if it did you would wipe out--

Unknown Speaker: There isn't that much water in the river.

Mr. Hicks: --Excuse me?

Unknown Speaker: There isn't that much water in the river.

Mr. Hicks: That's right, so to that extent the equities can be taken into account in ordering the relief.

The equities, I think, have been taken into account in the recommendations made by the special master.

He gave very careful consideration to those.

Unknown Speaker: Well, I mean, let's suppose, and this isn't your situation, I guess, but let's suppose that we have existing, preexisting uses in New Mexico and land being farmed for many generations, and dependent upon the water, and we have land in Texas which has never received the water that it says it was entitled to receive, and it has no immediate consequence of a delay in receiving the shortfall.

Now, is that a concern that we can be considering in determining what to do about it?

Mr. Hicks: No, I don't think so.

Unknown Speaker: I would have thought we had some residual equitable power to be concerned about this.

Mr. Hicks: In the courts... I think the only equitable considerations that the Court can give are realistically how much time should New Mexico be given to get this water down given the circumstances in the basin, and it isn't the individual economic circumstances of the people that live along the river, because you have to remember there used to be farmers in Texas farming this land.

After the compact was entered the water has essentially quit flowing.

They still do some farming.

They are there and ready to come back.

There is testimony to that effect.

So any harm that the Court sees--

Unknown Speaker: Up to a maximum of 10,000 acres ready to receive it, right?

Mr. Hicks: --They are ready to receive for the past, the payback, the debt, 34,000 acre feet a year.

And this would be over 17 years, essentially, not over ten, as New Mexico has depicted it.

On top of that, it is very important to Texas, and I think it is the only way this case can ever end is that there be an injunction against New Mexico for the future to abide by the compact, a very specific injunction, and--

Unknown Speaker: How about monetary damages in lieu of water to make up the shortfall?

Mr. Hicks: --I don't think the compact allows that.

Texas, as Justice Scalia--

Unknown Speaker: Why not?

Mr. Hicks: --Well, water in the west is a unique resource, and--

Unknown Speaker: It has a value.

It has a monetary value.

Mr. Hicks: --It is very difficult to determine, and when you begin looking over 34 years of failure to deliver, the hearing, the evidentiary hearing which would be required and which New Mexico has waited until after the proceedings are over to ask for so that it would further delay the case, the hearing would be extremely complicated to determine what the value was in 1950 of the water they failed to deliver, the water in '51, in '52, the consequential damages not just to the Pecos River basin in Texas but to all of Texas.

I think there are just unbelievable difficulties in that.

I think--

Unknown Speaker: Of course, it doesn't really solve that problem, because in fact giving you however many hundred thousand acre feet of water in 1995 is not the same as giving you the same number in 1933.

It may be worth much more in 1995 than it was in 1932.

I mean, superficially it looks as though the fairest way is to give you the water you didn't get, but in fact when you didn't get it back in 1952 it may not have been worth nearly what it is going to be worth when you finally do get it.

Mr. Hicks: --But it may be worth more, too.

Unknown Speaker: May be.

Mr. Hicks: And I think the observation you made that the opportunity at the end of this case... there is a three-year grace period under the recommendation of the special master.

There is an opportunity for Texas and New Mexico to negotiate, to substitute--

Unknown Speaker: I was wondering about that.

I thought Texans had had sort of a reputation of being enterprising, let's cut a deal kind of folks, and have you really said that you would not, no matter what, you want the water and you won't take any kind of money for the water?

That seems--

Mr. Hicks: --I wrote the letter that Ms. Uram read.

I can answer the question that way.

I said what she said.

I suppose everything has its price.

That is what economists say.

And I don't know what may happen.

Unknown Speaker: --That's what the French say, too.

But the annual... forget amount the damages or forget about the payback.

The amount that you are supposed to deliver under the compact, that was increased over, well, the 340... the annual delivery is higher than New Mexico thought it was by about what, 10,000 acre feet?

Mr. Hicks: It is higher than New Mexico delivered.

There is no evidence in the record--

Unknown Speaker: All right, let's take it that way.

They are going to have to, even without the payback they are going to have to send more water down than they have been delivering.

Mr. Hicks: --Yes.

Unknown Speaker: And so they are going to have to get that somewhere.

Mr. Hicks: Yes.

Unknown Speaker: And where are they going to get that?

Mr. Hicks: From the same place, I suppose, that they can get the water they have to pay back.

Unknown Speaker: Didn't the special master say that is about 10,000 acre feet?

Mr. Hicks: You can't predict exactly--

Unknown Speaker: No, I know, but it--

Mr. Hicks: --but if you look over the 34-year period--

Unknown Speaker: --But that is what he said.

Mr. Hicks: --it would average 10,000 feet a year extra in addition to the payback.

Yes.

Unknown Speaker: Yes, so--

Mr. Hicks: But it is really difficult to tell, but they have the same sources to obtain that water that they have to obtain the water that they have kept from us all these years.

Unknown Speaker: --They are going to have to start doing that right away, aren't they--

Mr. Hicks: Yes.

Unknown Speaker: --as soon as we affirm the special master if we do?

Mr. Hicks: Yes.

They will have to do it--

Unknown Speaker: That three-year grace period doesn't apply to that.

Mr. Hicks: --That's right, it does not.

These numbers are computed, by the way, on three-year running averages--

Unknown Speaker: Yes.

Mr. Hicks: --so it can average out over three years that that... it is hard to discuss this simply and make any sense with it.

That 10,000 acre feet, maybe it would just be 1,000 acre feet the first year.

It may be 12,000 acre feet the next year and 3,000 acre feet the next year.

It is really... it is hard to tell in advance on the future deliveries.

Unknown Speaker: Mr. Hicks, I gather that Texas doesn't want damages, it wants specific performance, doesn't it?

Mr. Hicks: Yes.

Unknown Speaker: And usually aren't equitable considerations appropriate in connection with the remedy of specific performance?

Mr. Hicks: It is an equitable remedy, but I don't think the courts that order specific performance in contract cases, for instance, decide how long you have to pay back what you owe.

It is a decision that equity demands specific performance in this case because of the particularly unique resource, and that is the situation here.

It isn't an equitable decision to say New Mexico has 50 years to pay it back.

Unknown Speaker: Well, I take it the master's time table, the three years and all the rest of it, smacks somewhat of equitable considerations, doesn't it?

Mr. Hicks: I am in somewhat of a box here, because it is true, just as a realistic matter it all can't come down in one year and we don't want it to come down in one year.

We couldn't use it.

The farmers there couldn't use it.

As much as farmers in the west would take any kind of rain they can get, they don't want it all at once.

Unknown Speaker: What are you going to do with 34,000 acre feet a year for ten years and then you won't have it?

Mr. Hicks: I think what I just said is a good example.

There is no farmer anywhere in the west that would turn down ten good years of rain knowing that in the eleventh year they may not get as much rain, and that is the--

Unknown Speaker: They may have to go on to Oregon.

Is that it?

Mr. Hicks: --They might move back up to New Mexico to get that 34,000 acre feet that quit coming down.

I don't know.

Unknown Speaker: As a matter of fact, that is not economically very efficient, to tell New Mexico farmers who will be able to use it after the payoff is done that they have to get out and come back 15 years later, or whenever the... 17 years later, okay, and to tell Texas farmers you can come in and farm for ten years but you've got to know you can set up this farm but after ten years there is just not going to be water for it.

That just isn't very efficient and I wouldn't... I frankly wouldn't favor it if I didn't think that if it is that senseless it wouldn't be economically favorable for the two of you to get together and work it out in money.

Mr. Hicks: I don't think the Court has a choice on that.

Otherwise, New Mexico is put in the position where it can always violate the compact if every time we come back here after going through these very complicated mathematical formulas to get the answers they can always say, but it isn't economically efficient for us to pay it.

Unknown Speaker: We could make up a money figure.

We could make up a money figure.

Mr. Hicks: I think that as you suggested, economic reality, if it is all that difficult and all that inefficient, I am not an economist, but the theory is--

Unknown Speaker: There has to be a price.

Mr. Hicks: --that there is a price, and it is going to be a price that both New Mexico and Texas somewhere along the way their value of the water--

Unknown Speaker: Well, I take it that the special master has got some... for some things they are going to have to determine good faith.

Mr. Hicks: --In his recommended decree he said an 80 percent level for good faith.

Unknown Speaker: Yes, good faith.

Good faith.

Good faith.

Mr. Hicks: Yes.

It could have been another term, but I think he just used good faith.

I don't know if it is an easy term to use.

Unknown Speaker: Well, if it is possible to determine good faith, then I suppose it would be possible to say that anybody who isn't in good faith is going to be held in contempt.

Mr. Hicks: But he... I am not sure I understand the question, but--

Unknown Speaker: What is wrong with... there is some way of... there is certainly some way of enforcing an injunction besides giving water, giving more water.

Mr. Hicks: --I suppose the New Mexico Water Authority person could be put in jail until they start delivering it, but he could be in jail at least a year.

Unknown Speaker: Don't you think that has any force at all?

That is usually the way courts enforce injunctions.

Mr. Hicks: I don't think it realistically does because I don't think anybody in New Mexico realistically expects that somebody would be kept in jail a year while we do the calculations to find out if he should be, and I just don't think that is realistic, and I think that is what New Mexico has counted on all along in this case, go be quite honest, is that they have thought that when the judiciary's back is against the wall to order relief in this, it is going to be so massive in their view, as they are going to depict it, that it is going to hurt to do it, and the court is going to see that and say let's find an easier way.

The special master has found a very fair way.

Unknown Speaker: What is the remedy what does the special master recommend as a remedy if the State of New Mexico just doesn't deliver the underlying annual amount?

Mr. Hicks: The future compliance question.

Unknown Speaker: Let's assume that 15 years from now New Mexico has paid back all the shortfall, and then it just begins not to deliver the annual amount that the decree calls for.

What is the remedy then?

Mr. Hicks: Well, they would be... if the decree were entered that he recommended, they would under an injunction to vote at the commission meeting for the formulas that they have stipulated to.

Unknown Speaker: Right.

Mr. Hicks: And if they refuse to vote--

Unknown Speaker: Right.

Mr. Hicks: --I suppose we could say hold them in contempt, please, and make them vote that way.

The next question is, can you make them turn off the spigots to the farms--

Unknown Speaker: Well, anyway, those are the normal ways to enforce an injunction.

Mr. Hicks: --But if we have to wait so long Texas will never get this water.

It will be a few years until we can find out, and I don't think the Court wants us running back after every year to say they missed it by a little bit, hold them in contempt.

Unknown Speaker: I know, but if the payback were not in water but in money, then you would be starting out now from the point I hypothesized of 15 years later, and New Mexico would just have the obligation to pay the annual amount and if it didn't, you would have to find some way of enforcing the injunction.

Mr. Hicks: I can't... a payback in money is much easier for this Court to administer and for everyone to administer.

I don't know what the taxpayers at large in New Mexico might think about that, and I don't know what the farmers that wouldn't get the water and only part of the money most likely in Texas would think about that, and I don't think--

Unknown Speaker: We would know what they had thought about it if they had the choice of either doing it the way the special master recommends or paying an amount of damages that the special master might recommend.

Mr. Hicks: --The difficulty with this is, New Mexico waited until the case was over to... it didn't even raise this issue until it wrote a brief to you all in this case.

Unknown Speaker: What, on money?

Mr. Hicks: Yes.

The special master said what about money, and we all scratched our heads and said it would be difficult, and nobody said, yes, money.

New Mexico... the first time they asked was after the case is over.

Unknown Speaker: Well, now, they said they stipulated that the master had that power.

Mr. Hicks: But they... they did--

Unknown Speaker: And the master said he didn't.

Mr. Hicks: --but they didn't do it.

Unknown Speaker: The master, though, as I read him in his recommendation, thought that he did not have the power, and I really read him, his report as wishing he did.

Mr. Hicks: Your Honor, Texas in some sense wishes he did.

That is... in some sense.

It is a difficult question.

Unknown Speaker: Did you have that impression, that the master thought he just lacked the power to consider money damages but wished he did?

Would you agree with that?

Mr. Hicks: Yes, I agree.

The problem with that is, it is going to delay Texas ever getting any relief by at least five years.

It would take five years to adjudicate this, I am convinced, and New Mexico waited until the end.

It would delay further for a reason that is independent of the two states in a way that would only harm Texas.

It would delay our relief when, on the other hand, if the Court ordered that water be repaid, then it puts for the next three years while New Mexico is getting its house in order to do the payback, it puts us in a position where each state has to begin to evaluate how much is it--

Unknown Speaker: Wait a minute.

You would be getting... the river would be coming up to the 47 agreement immediately.

I mean, that part of all of this would be affirmed, right?

Mr. Hicks: --That is what they were suppose to have been doing for the last 34 years and they haven't done it.

Unknown Speaker: All right, but the level would now be established and that would be squared away.

You might be getting the money payment... let's assume you get the money payment five years from now, but you would get it all at once.

You can consume all the money at once.

You can't consume... the water, the final water payment you say won't be in until 17 years.

Maybe you'd rather have all the money in five rather than the water trickled out, so to speak, over 17 years.

Mr. Hicks: I don't disagree with your evaluation of it.

I don't disagree with the difficult position I think the Court finds itself in in seeing that in a way it is less painless to give money.

Unknown Speaker: It isn't our water, it is--

Mr. Hicks: I know, but I suspect the Court is reluctant to order a State to disrupt--

Unknown Speaker: --You wouldn't have any tougher time distributing money than you would the water.

How do you know who is entitled to this water?

What would you do with the money if you got money?

Mr. Hicks: --On the question about who is entitled to the water, there is an adjudication that has gone through the administrative process on the river and has determined who has the water rights there, so that settles that question.

As to the money, it is very difficult to determine, because in a sense it is because of all the consequential damage questions.

Does the fact that the farmers--

Unknown Speaker: It would be a lot of money, would it?

Mr. Hicks: --Excuse me?

Unknown Speaker: It would be a lot of money?

Mr. Hicks: It would be... another problem with this is, I think it would be so much money that New Mexico couldn't pay it.

It would bankrupt New Mexico.

Unknown Speaker: I gather Texas could use it these days.

Mr. Hicks: These days we would love to have it, and don't think there hasn't been a debate in the state government about this issue.

There has been.

Unknown Speaker: Is there any claim on the part of individual landowners to this money, or can Texas just plant a bunch of tree farms over around Marshall with it if they want to?

Mr. Hicks: This is... I don't know.

I simply don't how how this would be done.

It would be like one of the most complicated class action distributions you can imagine.

Unknown Speaker: Well, if it is too much money, of course, they could... I guess New Mexico could offer to sell you water from the Pecos River instead.

Mr. Hicks: I agree... I don't disagree with any of these speculations.

It is just that I don't see what standards the Court has about it.

I think if the pressure is put on through the order of the repayment of water, as the compact requires--

Unknown Speaker: Why not do what you did with the oil money in Alaska?

They gave it to everybody.

Mr. Hicks: --That also is difficult, because I think this Court had to hear a constitutional case on the way that was distributed.

Unknown Speaker: Yes, but they added it up, they got it.

Mr. Hicks: I want in the short amount of time I have--

Unknown Speaker: I hesitate to say the ingenuity of people cannot find a way of spending money.

Mr. Hicks: --It would be no trouble.

I have a fear that my paycheck won't be coming in September if the deficit continues.

On the question of whether there was a hearing on man's activities, which is the second crucial issue New Mexico raises, it is clear there was a hearing on man's activities.

It could not be clearer in the record.

The special master in a discussion with the attorney for New Mexico at the conclusion of all these hearings on May 21st observed to that counsel that he had told them over a year ago of how this particular exhibit, 79, the crucial exhibit, would be treated, how he viewed its working, and Exhibit 79 is kind of the end of an evolutionary process, because the parties exchanged documents, as New Mexico says in its brief, the precursors to this exhibit, for a year before the final hearing.

New Mexico was on notice.

On May 22nd of 1985 the special master entered an order that in Paragraph 7 said in November there is going to be a hearing on man's activities, and there was a hearing in November on man's activities.

Unknown Speaker: They may have put it that way but I think their real complaint was not that there was not a hearing, but that the hearing was not one at which the master said, okay, show me what man's activities have taken out of the river.

Rather, the hearing was one in which he said, you show me why when you deduct all the natural diversions from the original flow everything else isn't man's activities.

It is really a burden of proof complaint they have, isn't it?

Mr. Hicks: The special master's recommendations are that you find that Texas met... shouldered the burden of proof and met it, and it did.

There is testimony to that effect.

New Mexico's real complaint is that it failed to put on any evidence and it wants a second chance.

It had the opportunity.

It was on notice and it did nothing.

I don't know why it did nothing.

Unknown Speaker: It didn't have the opportunity in November, did it?

Mr. Hicks: It did have the opportunity in November.

That is when--

Unknown Speaker: I thought the master said, we are just going to hear kind of oral argument from lawyers.

Mr. Hicks: --No, November 18th and 19th and December 3rd and 4th were the days of the hearings on the causes of depletions, all of the causes of depletions, man's activities, natural causes, and also the legal adjustments that had to be made.

The parties went out as the record demonstrates, and we spent all day on December 18th reaching agreement on numerous technical matters that have to do with the man's activities question, and we--

Unknown Speaker: Well, in theory Texas had the burden of proof?

Mr. Hicks: --I don't think Texas had the burden of proof.

I think the--

Unknown Speaker: Texas wasn't the claimant below?

Mr. Hicks: --Texas was the claimant, but I think the burden of proof on man's activities should shift to New Mexico, but I think the Court doesn't have--

Unknown Speaker: Is that how it was handled in effect?

Mr. Hicks: --No.

Unknown Speaker: Texas didn't shoulder the burden of proof on man's activities.

Mr. Hicks: No.

Texas did... what I was going to say is, Texas did shoulder the burden of proof, notwithstanding its view that it didn't have to.

It shouldered the burden of proof--

Unknown Speaker: You did it in a negative sort of way.

You said here are the natural causes, and everything else has to be a fortiori man's activities?

Mr. Hicks: --That is true, and there is no other way to do it.

What New Mexico wants is something that is irrelevant under the compact, and that is, it wants not a generic determination of whether man's activities caused the depletions, which is what Texas did through Exhibit 79.

What it wants is to be able to trace each activity of man to its origin, to see if Farmer Jones when he irrigated his alfalfa crop caused X amount of depletion.

That is irrelevant under the compact.

It might be helpful to New Mexico in deciding how it wants to readjust the flows to Texas.

It might be helpful to determine that, but it is irrelevant to the proceeding before this Court.

It has nothing to do with the case.

That is what this problem about unknowns is.

It is like a sinister force or something.

There is no... it has to be either nature or man's activities.

New Mexico... Texas has proven that it is man's activities.

New Mexico in essence really wants to say it is this activity of man.

Unknown Speaker: You didn't prove anything unless you proved it in the 1947 assessment, because all you came in and proved was the natural causes that you know of, but the natural causes that you know of, but the natural causes... that is nonproof.

Mr. Hicks: That is proof.

Unknown Speaker: Suppose you hadn't put on any natural causes.

Then you would have proven even more man's activities, wouldn't you?

Mr. Hicks: No, because our proof was, we have take care of every known natural cause that there is.

In fact, it is all based on stipulations.

And there is nothing left by logic except human causes, and that is not a failure of proof.

That is a proof.

It is the way a lot of things are proved.

And I don't think there is anything wrong with it.

There is no other way to ever have this compact work except that way.

I don't think it is at all improper.

On the water interest I wanted to mention that the water interest, if New Mexico fails to act in good faith as defined under the special master's recommended decree, the water interest does not run on the whole 340,100 acre feet.

It runs on the undelivered balance remaining, and it also never starts running until at least 12 years--

Unknown Speaker: xxx any shortfall on the 1947 condition delivery, interest doesn't run on that, does it?

Mr. Hicks: --I am sorry, it there is any shortfall--

Unknown Speaker: Let's assume--

Mr. Hicks: --Yes, the future... for the future there is no interest running, so Texas... the equities, I think, in terms of delivery of the payback, the equities have been so fairly balanced.

Texas doesn't get any interest if New Mexico acts in good faith.

It is only a contingent interest.

Even if they get interest it doesn't start running until 12 years after the last adjudicated violation.

On top of that, New Mexico has known for at least 13 years since the litigation began that Texas is challenging what they have done, and they have taken absolutely no steps to adjust the activities along that river.

Their chief water authority testified that he wouldn't do it unless you all ordered him to.

Unknown Speaker: --By what percentage did the determination of the amount owed under the compact each year under the '47 condition, by how much will that increase the flow at the state line?

By what percentage?

Half?

How much--

Mr. Hicks: I think the average flow is approximately 75,000 acre feet over the last 30 years, and this would increase it on an average of 10,000--

Unknown Speaker: --Yes, on 10,000 acre feet.

All right.

Mr. Hicks: --So one-seventh.

Unknown Speaker: But then if you add on top of that adding 34,000 acre feet a year, 34,000 acre feet isn't far from half of the average annual flow.

Mr. Hicks: That is true.

Unknown Speaker: You add ten onto that, so you are going to be... it is going to be quite a different river, isn't it, at the state line?

Mr. Hicks: It should be because it would then be the river that we bargained for.

It wouldn't be the river as New Mexico has configured it for the last 34 years.

That is the reason it is so important for the Court to keep in mind that this is not an equitable apportionment case but a compact case.

If Texas had come before the Court in 1920, as it started to, and sought an equitable apportionment, and let's say the order had been entered that would divide the river up as we ultimately did in the compact, there wouldn't be any question right now about is it fair to New Mexico to have to pay back water it withheld.

What you, Justice White, are comparing the situation in the future to if they have to comply with the compact is to a situation where they weren't complying with the compact.

Unknown Speaker: I am not making an argument.

I am just asking for information.

Mr. Hicks: I understand.

I guess I got too involved in the argument.

I have no further--

Chief Justice Rehnquist: Thank you, Mr. Hicks.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until Monday next at ten o'clock.