South Texans Take Water Fight With Mexico to Canada Court

WASHINGTON — Texas’ longstanding water war with Mexico has a new battlefield: that other NAFTA country, Canada.

The South Texas farmers and irrigation districts that sued Mexico more than three years ago have taken the rare step of appealing a NAFTA ruling. Under terms of the lawsuit, the appeal must be heard in a neutral country.

Unfortunately for the farmers, their own federal government hasn’t been neutral in the dispute. Last summer, just before a NAFTA tribunal ruled against the Texans, the U.S. State Department filed a notice supporting Mexico, which argued that the farmers didn’t qualify for redress through NAFTA.

"I would be very unhappy and very concerned if they [U.S. officials] filed another brief in this appeal, basically dropping us in the grease again," said Texas Comptroller Susan Combs, who has hired a Canadian lawyer to help advocate for the farmers in a court in Toronto.

At stake: more than $660 million in damages claimed by South Texans who say Mexico’s hogging of water during the 1990s drought violated a 1944 water treaty and decimated the Rio Grande Valley’s agriculture.

Ms. Combs, who now controls the state’s treasury, says the water dispute was an economic disaster for Texas that could happen again if the state goes through another drought.

She has dogged Mexico over the allegations of stolen water since she was the state’s agriculture commissioner; she once handed satellite imagery to Vicente Fox, then Mexico’s president, showing that his country had water in its Rio Conchos, a Rio Grande tributary, that should have been shared with Texas.

Mexican officials have denied the allegations and pointed out that many of their own farmers and ranchers struggled throughout the drought.

Stephan Becker, a Washington attorney who has represented Mexico in the dispute, said the Texans’ case is fatally flawed; NAFTA doesn’t allow parties to air complaints about violations of other treaties, he said.

"Mexico is opposing the judicial review, and we are confident that the request will be rejected," Mr. Becker said.

Three years ago, Mexico agreed to transfer more water to reservoirs to make up for its so-called water debt. But the Texas farmers and water districts insist they should be compensated for the period when not enough water was delivered.

Many farmers struggled through the long drought. Some are believed to have left the Valley. Others couldn’t borrow money without being able to show they had water to grow crops.

Last week, Ms. Combs asked Texans in Congress to press the U.S. State Department to stay away from the dispute.

"I think Susan is going to find bipartisan support from the Texas delegation," said U.S. Rep. Henry Cuellar, D-Laredo. "We have to have a system where the Mexicans stop rolling up these big water debts that hurt us in the Rio Grande Valley."

Even lawmakers whose districts have few ties to Mexico said they were distressed to learn about the government’s position.

"When I heard that the United States had entered the fray on the side of Mexico, that concerns me," said U.S. Rep. Louie Gohmert, R-Tyler. "I expect to do some looking into that."

Other case

A State Department spokeswoman declined to state why the government intervened in the case and wouldn’t say whether its attorneys would get involved in Toronto. The proceeding there is scheduled for March 25.

Ms. Combs said she believes the department was motivated by concerns that the farmers’ claims resemble a case filed by Canadian cattle ranchers, in which the U.S. was the defendant. The cattlemen argued that a decision by the U.S. to prohibit cattle from Canada — because of concerns about a case of mad cow disease in Canada — breached the free-trade agreement.

A NAFTA panel ruled against the Canadians last month. In its decision, the tribunal drew a distinction between the Canadian case and the water case, saying the two were factually different.

Nancie Marzulla, an attorney for the farmers, said the State Department was originally hostile to her clients’ claim.

"They seemed to want to fight us on the beaches, in the air and on the sea," she said. But since the Canadian case was resolved, the State Department’s stance has softened, she said. "I said to them that based on that proceeding, it seems to me you no longer have a dog in this hunt," Ms. Marzulla said.

Mexico has argued that the plaintiffs can’t invoke NAFTA because the farmers don’t have any investments in Mexico.

The farmers argue that their rights to water from the Rio Grande’s tributaries, stipulated by the 64-year-old treaty with Mexico, are an investment. The treaty requires Mexico to send at least 350,000 acre-feet of water per year, or about 113.8 billion gallons, from six rivers that flow into the Rio Grande. Mexico controls that water through a system of dams.

In exchange, the U.S. sends water to Mexico from the Colorado River.

"If Mexico believes that its failure to adhere to the treaty produces a finding of damages, then that gives some teeth to the treaty," Ms. Combs said. "The treaty has no teeth as it is right now."

Damage range

The plaintiffs have estimated their damages at between $320 million and $667 million, a range that is somewhat misleading. Those figures represent the impact of water shortages on statewide business activity, not just Valley farmers, said John R.C. Robinson, a Texas A&M University economist whose study was cited by the plaintiffs.

Ms. Marzulla said the farmers would get a "more refined analysis" if they establish that Mexico was responsible for their losses.

To do so, they must score a rare reversal of a NAFTA tribunal’s ruling.

The bar for challenging such rulings is high, said Todd Grierson-Weiler, a Canadian lawyer who has argued a dozen NAFTA cases. The party appealing a case must show that the tribunal grossly mishandled its task.

Since NAFTA was enacted, courts in one of the three NAFTA nations have reviewed only six investment-dispute rulings. One ruling was partly overturned.

A victory in Toronto would echo beyond the Rio Grande Valley. The case exemplifies the evolution of international law toward a system in which individuals can sue to enforce agreements between nations, Mr. Grierson-Weiler said.

"The notion that water rights in Mexico, which are owed to an individual, derive from an international treaty obligation — that is cutting edge," said Mr. Grierson- Weiler, who represented the Canadians in the cattle case. "And I personally think it has a lot of merit."

Mr. Grierson-Weiler said he agrees with Ms. Marzulla that the three-member NAFTA tribunal, which included former U.S. Attorney General Edwin Meese, went beyond its scope when it dismissed the claim, ruling that that Texans didn’t have investments in Mexico.

The tribunal was supposed to decide only whether the farmers’ claim was the type of complaint that should be handled by NAFTA, Ms. Marzulla said.

"We didn’t get a fair day in court, is what our case boils down to," she said.

Joe Barrera, general manager of the Brownsville Irrigation District, said the case is especially important because water demands will rise as the Valley’s population grows. The water shortage was so acute during the 1990s that some irrigation districts told cities that they might not be able to deliver water for residents, Mr. Barrera said.

"If we lose," he said, "there are a lot of us who feel we are sunk."

HOW THE PROCESS WORKS

The U.S. and Mexico share water from the Rio Grande and its tributaries. More than three years ago, Texas farmers used the North American Free Trade Agreement to sue Mexico over water that wasn’t delivered to them during a long drought. A NAFTA tribunal ruled against the farmers. Their appeal has landed them in a Canadian court.

Here’s how the system works:

– Investors file a notice for arbitration with NAFTA, asking a tribunal to settle their dispute with a NAFTA government (in this case, Mexico).

– After the tribunal’s ruling, the losing party may appeal, a process known as an application for annulment.

– The appeal is heard in a court in one of the three NAFTA countries (in this case, the Ontario Superior Court).

– If the award is set aside, the case may be heard again by a NAFTA tribunal. Otherwise, it may be appealed further. A previous NAFTA case, in 2005, was decided by the Ontario Court of Appeal.