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F I S C A L I M P A C T R E P O R T

SPONSOR Tripp

DATE TYPED 2/07/05

HB 346

SHORT TITLE Appeal of State Engineer Decisions

SB

ANALYST Aguilar

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Office of the State Engineer (OSE)

Attorney Generals Office (AGO)

Department of Agriculture (NMDA)

SUMMARY

Synopsis of Bill

House Bill 346 removes the option provided for under existing statute allowing the state engineer

to order a hearing before he enters a decision, takes action or refuses to act.

HB 346 also allows an aggrieved person to bypass the state engineer’s administrative review

process and take an appeal of a state engineer decision directly to district court whenever the

state engineer decision affects the “validity, quantity or priority date” of the aggrieved person’s

water right.

Significant Issues

Under current law, an aggrieved person must first exhaust his or her administrative remedies be-

fore the state engineer prior to appealing to district court.

The State Engineer points out that current law requiring administrative hearings before appeal to

district court helps ensure that technical and legal water permit issues are decided consistently

across the State. Allowing direct appeals to district court would increase the risk of inconsistent

determinations by the various district courts. Any such inconsistency in decisions would impair

House Bill 346 -- Page 2

the state engineer’s ability to perform his statutory duty to supervise the appropriation of the wa-

ters of the State.

The Attorney Generals Office notes the enactment of HB 346 could substantially impede the

ability of the State Engineer to administer water rights under Section 72-2-9.1 NMSA 1978,

which authorizes the State Engineer to administer water rights even when there has not been a

final adjudication of water rights in a particular basin or stream. The ability of the State Engi-

neer to administer water rights is critical to the State of New Mexico’s ability to comply with

interstate stream compacts.

PERFORMANCE IMPLICATIONS

Additionally, the Attorney General notes it is possible that the enactment of HB 346 could add to

the backlog in the district courts of New Mexico by making the district courts—instead of ad-

ministrative tribunals under the State Engineer’s Office—the venue in which initial evidentiary

hearing must be conducted on the issues in dispute. Under current law, Sections 72-2-16 NMSA

1978 and Section 72-7-1 NMSA 1978, when a matter is appealed to the district court from an

administrative hearing before the State Engineer, the district court has the benefit of a fully de-

veloped administrative record, including the technical basis for the State Engineer’s action or

decision, and the State Engineer’s Office’s technical evaluation of the pros and cons of the issue

presented. In addition, Section 72-7-1 NMSA 1978 provides that evidence presented in an ad-

ministrative hearing before the State Engineer can be received in evidence on appeal to district

court. Under HB 346, the evidence would have to be introduced for the first time in the district

court, adding to the time required to process appeals from decisions of the State Engineer in the

district court. Although most state district court judges have limited experience and expertise in

handling water law claims, if HB 346 is enacted, the district court judges would become the ini-

tial adjudicators in these cases and they would have to decide these cases without the benefit of a

fully developed administrative record, as now exists.

FISCAL IMPLICATIONS

HB 346 may require the State Engineer to increase litigation staff to accommodate the added re-

sponsibilities associated with this change in statute.

TECHNICAL ISSUES

The Office of the State Engineer notes a similar amendment to the water code to allow aggrieved

applicants for state engineer permits to go directly to district court for a hearing on the state en-

gineer’s denial of their application was found to violate of the separation of powers doctrine in

Fellows v. Shultz, 81 N.M. 496, 500 (1970).

OTHER SUBSTANTIVE ISSUES

Administrative hearings before the state engineer function as a form of alternative dispute resolu-

tion that is flexible and inexpensive for applicants and those protesting decisions. Hearing fees

for administrative hearings are nominal compared with the filing fees of district courts, and the

administrative hearing process is less formal and considerably more accommodating to parties

unrepresented by counsel than are formal proceedings in the district courts.

PA/sb