Cannabis in New Mexico: Understanding Water Sources & Regulations
By James Nechleba
Sep 1, 2022
Water is in high demand these days and those in the business of growing cannabis in New Mexico (producers) or processing it into various products through infusion and extraction methods (manufacturers) need a water source to function. In a rush to market, however, many cannabis producers and manufacturers did not sufficiently understand local water laws and regulations and, as a result, did not have adequate water supply to meet their needs. This proved to be an extremely costly and irreparable mistake.
The New Mexico Regulation and Licensing Department's Cannabis Control Division (CCD) is tasked with overseeing the commercial and medical markets within the state and has shaped the Cannabis Regulation Act's requirement concerning commercial water resources into extremely practical rules and policies, insisting that a business provides proof of adequate commercial water supply at the time of application.
Generally speaking, New Mexico cannabis establishments typically work with one of three institutions depending on the water source: a municipal water utility, the New Mexico Office of the State Engineer (OSE), or one of the 150+ acequia governing boards operating in the state. Water law in New Mexico is highly dense and complex, based upon claims and rights spanning over 300 years. The most effective way to understand how these three governing bodies operate in relation to cannabis is to understand water rights in the state.
Utilizing Water Sources Managed by New Mexico’s Office of the State Engineer (OSE)
The OSE manages the Water Resource Allocation Program (WRAP) in New Mexico. Their authority extends to most water sources in the state but exclude municipal water supplies, sovereign Native American territory, and acequias (to an extent). The OSE has some of the best publicly available information regarding what does and does not constitute a commercial water right for the purposes of growing cannabis. Of note, individuals and companies cannot use domestic wells, and water hauling is generally impermissible. This is because domestic wells aren't commercial, and it has been the agency's repeated experience that the source of the hauler's water is invariably a domestic source.
While the most plentiful water resources in the state are managed under the OSE through WRAP, the OSE's ability to respond timely to the current business needs of the nascent commercial cannabis market is a very significant issue. As stated previously, an applicant must show proof of their water rights at the submission to the CCD. Due to extreme staffing shortages and a backlog of almost 500 non-cannabis-related applications for water rights, however, OSE currently estimates an 8-12 month wait to generate this documentation for applicants. If there is any challenge or objection to the application for water rights, this period can range anywhere from 2-5 years.
Utilizing Acequias as Water Sources for Cannabis Cultivation
In contrast to the centrally run OSE, acequias are an ancient, decentralized, communal water system that find their roots in the Muslim world, being brought into western society by way of Spain in the Eighth Century, and then to the Americas in the 1600's. There are approximately 700 acequias in New Mexico alone, and this mutually managed irrigation ditch system largely relies upon runoff from seasonal snowpack originating from the mountains and flowing downstream. The individuals that own the rights to the water from a particular acequia are called parciantes, and they're responsible for electing a commission or board, as well as a mayordomo, who is responsible for managing the irrigation's infrastructure.
It's crucial to note that acequias can only really be used by cannabis producers if they're growing crop outdoors. Any indoor activity (which includes hoophouses or greenhouses) involves the OSE and their lengthy processing time for documentation of water rights. Moreover, the amount of water available in each period depends entirely on the prior year's snowfall, which is a substantial variable to consider.
Utilizing a Municipal Water Utility for Cannabis Cultivation
Finally, cannabis producers and manufacturers can purchase water relatively easily from select municipalities, depending on the source. The requirements to purchase, costs, and procedures vary from municipality to municipality, so it's essential to investigate thoroughly before settling into a particular location. The drawback to commercial municipal utility access is that most municipalities rely on federal funds to maintain their water systems, which can be a basis to deny or withdraw water services to a cannabusiness.
In summation, a cannabis producer or manufacturer in New Mexico should be weary of pursuing water rights that need verification through OSE due to delays caused by agency staffing shortages and backlogs. Acequias may award water to businesses quicker than the OSE, but likely in much smaller and less predictable quantities for crops that must be grown outdoors to avoid OSE's authority. Finally, while purchasing commercial access to municipal water utilities may promise the quickest and most consistent water source, requirements vary and businesses still are exposed to a cutoff risk based on existing federal law.
For more guidance on operating a compliant cannabis business in New Mexico, contact VS counsel James Nechleba.