Rio Grande Basin

Four layers stack on top of each other, and any lease has to satisfy all of them.

Elephant Butte Reservoir held 27,461 acre feet on August 27, 2026, about 1.4 percent of its 1,960,900 acre foot conservation capacity, against 74,254 acre feet a year earlier. NASA reported it as the lowest level since 1971.

The 2026 irrigation season reflected that: the Caballo release was roughly 216,000 acre feet, the third lowest on record, and the Elephant Butte Irrigation District allotment was four inches per acre. Reclamation attributed the conditions to consecutive years of extreme drought and the earliest snowmelt on record.

To see how severe four inches is, compare it to a normal year. A full EBID allotment in a wet year is two acre feet per acre, with an option to buy a third, against Reclamation contracts covering 88,000 acres in EBID and 67,000 acres in El Paso County Water Improvement District No. 1. Four inches is one third of an acre foot, roughly a sixth of a full allotment.

Upstream, drying in the San Acacia reach began March 27, 2026, the earliest onset in three decades, and Albuquerque stopped drawing Rio Grande surface water on April 24, 2026, running entirely on groundwater.

Below Lake Amistad, Texas does not run conventional prior appropriation. Each water right is an account with a running balance, credited from usable storage in the Falcon and Amistad system, much like a bank account. Municipal accounts reset to their full authorized amount each year; irrigation accounts carry their balances forward, and that carry-forward is precisely what creates a leasable volume.

Allocation follows a set order: 225,000 acre feet is first set aside as a municipal, domestic, and industrial reserve, roughly one year of average municipal diversions for Texas users below Amistad, and the remainder is allocated to Class A and Class B irrigation and mining accounts.

Two distinct products result. Contractual sales, which are leases of a discrete volume out of your account for a period, reported to the watermaster on a form; and sales of the water right itself, which require a TCEQ amendment. Most Texas Rio Grande transactions are short-term leases of volume, not sales of the underlying right.

This is the single most consequential economic rule in the basin for an owner weighing a sale to a city against a lease within agriculture. Under Texas rules, converting an irrigation or mining right to municipal use reduces maximum diversions by 50 percent for Class A rights and 60 percent for Class B.

In plain terms: a city buying your irrigation right does not get to use all of it, so the price it can justify is discounted by the haircut. Leasing volume inside the irrigation class avoids the penalty entirely, which is why the lease market is deeper than the sale market here.

On May 26, 2026 the Supreme Court adopted a final decree in *Texas v. New Mexico*, ending litigation filed in 2013. The decree requires New Mexico to cut annual groundwater depletions in the Lower Rio Grande by 18,200 acre feet within ten years, half within five, and to maintain the reduction permanently, described as roughly 5 to 7 percent of current Lower Rio Grande groundwater use.

To meet it, the state stood up a Lower Rio Grande Water Rights Purchase Program to voluntarily buy and permanently retire groundwater rights, with $150 million allocated and a request for $50 million from the 2026 Legislature to begin. As of July 2026 a study was still underway to set a fair market price per acre foot, so no purchase price has been published.

Separately, and already paying, the Lower Rio Grande Groundwater Conservation Program compensates landowners for fallowing: $750 to $800 per acre depending on how long previously irrigated ground stays idle, with nearly 160 contracts covering roughly 8,000 acres in 2026.

There is also a standing public lessee most owners have never heard of. The New Mexico Strategic Water Reserve, created by statute in 2007, is expressly composed of leased, purchased, and donated water and storage rights held for compact compliance and endangered species purposes. It held roughly 1,085 acre feet of middle Rio Grande consumptive use rights in 2024, and the Interstate Stream Commission has stated it is working with Reclamation and water right holders to increase it. A reserve that is actively trying to grow is, in practical terms, a buyer taking calls.

In the San Luis Valley, non-exempt well owners must offset injurious depletions through one of seven groundwater subdistricts or an individual augmentation plan under State Engineer rules effective 2021.

The economics are actively contested: Subdistrict No. 1 proposed raising the groundwater pumping fee from $150 to $500 per acre foot, and the resulting Division 3 Water Court trial opened June 29, 2026. Until it resolves, San Luis Valley augmentation costs, and therefore the value of surface water that offsets pumping, are unsettled.

Three things. In Texas below Amistad, you likely hold a leasable account balance, and the watermaster process is built for exactly that, so short-term contract leases are the path of least resistance. Watch the class-conversion penalty before entertaining a municipal sale.

In the New Mexico Lower Rio Grande, a well-funded public buyer is entering with $150 million and a court deadline, and fallowing already pays $750 to $800 per acre. Owners there should know both the fallowing rate and the eventual purchase price before signing anything, because the purchase program price is still being set.

Everywhere in this basin, the shortage is the leverage. Reservoirs at 1.4 percent do not create buyers who negotiate patiently.