WATER RIGHTS LEASE AGREEMENT This water rights lease agreement ( Agreement ) is made and entered into this day of, 2016, by and between the town of Silver City, ( Silver City ), a New Mexico municipal corporation, whose address is P.O. Box 1188, Silver City, New Mexico, and the Town of Hurley ( Hurley ), a New Mexico municipal corporation, whose address is 101 Cortez Avenue, Hurley, New Mexico (collectively the Parties ). Recitals WHEREAS, Silver City is the owner of Office of the State Engineer ( OSE ) File No. M-2846 permitted on December 7, 1982, which allows the diversion of 193.2 afy, which water right is not subject to this Agreement; WHEREAS, Silver City is also the owner of Permit for Groundwater Credit No. M-2846, dated November 26, 2014, ( Groundwater Credit Permit No. M-2846 ) which authorizes the diversion and additional diversion of not more than 747 acre-feet per year ( afy ) of water from Well Nos. M-2846 and M-2846-S ( Silver City M-2846 Wells ) under certain terms and conditions set forth in the attached Groundwater Credit Permit No. M-2846; WHEREAS, the Silver City M-2846 Wells are located in the general vicinity of the Grant County Airport, and the corporate boundaries of the Town of Hurley; WHEREAS, Hurley is in need of a municipal water supply to compensate for the termination of a private agreement that previously provided such water; WHEREAS, there exists a need for a long-term and dependable source of municipal water for the health, safety and welfare of the inhabitants of the Town of Hurley, and Silver City desires to respond to such need by leasing up to 270 afy of its water rights under Groundwater Credit Permit No. M-2846 to Hurley under the terms and conditions specified herein, which quantity is 1
derived from Hurley s 40-Year Water Development Plan based upon current use increasing to 270 afy in 40 years; WHEREAS, Hurley intends to develop a well field ( Hurley Well Field ) and related infrastructure to convey water from the Hurley Well Field to the Town of Hurley at its own costs; WHEREAS, the Parties acknowledge the Hurley Well Field and related infrastructure are intended to be the initial phase of the development of a regional water supply and transmission system for the benefit of the municipalities and unincorporated areas of Grant County ( Regional Water System ); WHEREAS, the Parties further acknowledge that the development of a Regional Water System is contingent on the receipt of funding from State and Federal agencies to finance the development of the Hurley Well Field and related infrastructure; WHEREAS, Silver City desires to lease up to 270 afy of its right to divert water associated with Groundwater Credit Permit No. M-2846 to Hurley, and Hurley desires to lease such water; and, WHEREAS, Hurley will file all appropriate and necessary applications with the OSE to accomplish the objectives of this Agreement. IT IS, THEREFORE, AGREED as follows: 1. The Recitals mentioned above are mutual covenants and are inducements for the making and execution of this Agreement. 2. Subject to the terms and conditions of Groundwater Credit Permit No. M-2846 and any necessary approvals from the OSE, Silver City does hereby lease up to 270 afy of its right to divert water under Groundwater Credit Permit No. M-2846 to Hurley. The quantity of water rights not used by Hurley on an annual basis under Groundwater Credit Permit No. M-2846 will 2
be available for use by Silver City. Hurley shall ensure Groundwater Credit Permit No. M-2846 has adequate recharge credits in any year prior to diverting groundwater under this Agreement up to its actual annual usage. Recognizing the desirability of a Regional Water System and Silver City s desire to assist in the success of that Regional Water System, Silver City will maintain discharges from the Silver City Waste Water Treatment Plan to the San Vicente Arroyo to the extent feasible. 3. The term of this Agreement shall be 40 years, with an option to renew for an additional 40 years upon written approval of both parties and as may be authorized by the laws of New Mexico and approval by the State Engineer. Silver City s approval of a lease extension will not be unreasonably withheld. In the event the Parties fail to act after 40 years, unless there is actual notice of termination, the lease shall be extended by one five-year term. There shall be no consideration or other compensation to be paid by Hurley to Silver City. 4. Groundwater Credit Permit No. M-2846 requires that groundwater diversions and discharge from the Silver City Waste Water Treatment Plant be metered and reported to the OSE by the 10 th day of each month. Hurley will install and maintain meters on any wells in the Hurley Well Field. Hurley will submit diversion records to the OSE by the 10 th day of each month, with a copy sent to Silver City. Silver City shall file a copy of its discharge amounts from the treatment plant with the OSE by the 10 th day of each month, with a copy sent to Hurley. 5. Hurley will file all appropriate and necessary applications with the OSE. Hurley will pay any necessary costs associated with any such application, including legal and technical fees. Hurley will pay all costs incurred in filing any such application and in defending any protest to the application, if a protest is filed, or in otherwise prosecuting the application but may cease prosecution of the application if it is protested. Hurley will consult and coordinate with Silver 3
City regarding the prosecution of any such application, and all decisions that could impact Groundwater Credit Permit No. M-2846 will be made by Silver City. Hurley will continue to pay all costs set out above until the proceedings on any such application are finalized, including the costs of appeal to the District Court, the Court of Appeals, and the Supreme Court of the State of New Mexico, if any. 6. Hurley affirms and warrants that it will do all acts required by law and regulation, and take no actions which would adversely impact Silver City s rights under Groundwater Credit Permit No. M-2846. If Hurley fails to comply with any existing and/or future OSE requirements under Groundwater Credit Permit No. M-2846, and if Hurley fails or refuses to comply or correct such default, then Silver City shall give notice in writing to Hurley of such default, specifying the nature and character thereof, and unless the default is corrected within 60 days after the receipt by Hurley of such notice, this Agreement may be terminated at the sole discretion of Silver City. 7. Hurley shall not assign this Agreement, or the benefits of this Agreement including any water diverted pursuant therefrom, without written permission from Silver City. 8. Hurley shall be entitled to derive revenue from the sale of the groundwater under this Agreement when sold for municipal purposes within its municipal boundaries and its potable water service area and for use in the vicinity of the Grant County Airport. 9. The Parties agree that the Hurley Well Field and related infrastructure will be designed and constructed for utilization in conjunction with the Regional Water System to be located exclusively within Grant County. The construction of the Hurley Well Field and related infrastructure is contingent on the receipt of funding from State and/or Federal agencies to finance the development of the Hurley Well Field and related infrastructure. Once funding is 4
secured, a booster station will be constructed within Hurley s corporate limits in order to convey fresh water to municipalities in the region, including, but not limited to, Bayard, Santa Clara, and Silver City. Hurley will operate and maintain the Hurley Well Field, the booster station, and the pipeline to the existing Hurley tanks. In this regard, Hurley and Silver City shall agree on the Hurley Well Field infrastructure designs and engineering plans prior to construction. Silver City may lease additional water rights, above 270 afy, to supply the Regional Water System. Hurley shall allow the attachment of other municipal and water association pipelines to its infrastructure which will become a portion of the Regional Water System, with each such entity paying for all necessary costs associated with the extension or expansion of the Regional Water System and paying their proportionate share of debt service, operation, maintenance, and repairs. If Hurley ceases to use the Hurley Well Field and related infrastructure for any reason, such improvements will automatically be conveyed to Silver City for the benefit of the Regional Water System. For purposes of this paragraph, if Silver City believes Hurley has ceased to use the Hurley Well Field and related infrastructure, it must send notice to Hurley and allow Hurley 30 days to provide evidence that Hurley is using the Hurley Well Field and related infrastructure before any infrastructure is conveyed to Silver City for the benefit of the Regional Water System. 10. Silver City has two permitted points of diversion authorized by Groundwater Credit Permit No. M-2846. Hurley and Silver City shall jointly enter into a lease with the land owner where the points of diversion are located for a period of 40 years, with the right to renew for an additional forty years. The leased land shall include the well field site and any necessary easements for delivery infrastructure related to the Regional Well System. Hurley will be responsible for the cost of any lease or easement with the landowner. 5
11. Notices related to actions regarding this Agreement may be made first by telephone or e- mail to confirm forthcoming notice. The periods of time related to notices and cures shall not accrue until an actual written notice is sent to the addresses set forth in this paragraph: Town Manager Town of Silver City P.O. Box 1188 Silver City, NM 88062 (575) 534-6358 E-mail: townmanager@silvercitynm.gov Town Clerk Town of Hurley P.O Box 65 Hurley, NM 88043 575-537-2287 E-mail: clerk@townofhurleynm.us 12. Any changes to this Agreement must be in writing and signed by the authorized representatives of the two municipalities. 13. This Agreement shall be interpreted under the laws and regulations of the State of New Mexico. If disagreement occurs as to the meaning or effect of any provision of this Agreement, the parties commit to good faith cooperation in resolving such disagreement. If, however, litigation arises, the prevailing party will be entitled to recover reasonable costs and attorney s fees. 14. The Parties are municipal entities in the state of New Mexico. The governing bodies of each entity have taken the necessary action at a properly noticed meeting of the governing body to authorize their respective executive officials to sign this agreement. 15. The Parties represent that they have carefully read and reviewed the terms of the Agreement and that they understand it. 6
16. The Parties further acknowledge that this instrument constitutes the entire Agreement and that all of the terms hereof are contractual and not mere recitals. 17. In the event that any provision contained in the Agreement shall be held void, unenforceable, invalid, or illegal by a court of competent jurisdiction, the remaining provisions of the Agreement shall not be held void, unenforceable, invalid or illegal and all such other provisions shall continue in full force and effect. 18. No provision of the Agreement is intended to create in the public or in any member thereof a third party beneficiary status or to authorize anyone not a party to the Agreement a right to enforce any provision of the Agreement. 19. This Agreement shall inure to the benefit of and be binding upon the Parties respective successors and assigns. 20. This Agreement may be executed in counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute one and the same instrument. This Agreement is made effective on the date first mentioned above. Alex C. Brown, Town Manager Town of Silver City Mayor Fernando Martinez Town of Hurley 7