In the case of State of Texas v. State of New Mexico (1989), the dispute revolved around water rights related to the Pecos River Compact, an agreement between Texas, New Mexico and the federal government regarding allocation and usage of water from this river. The Supreme Court was asked to resolve a disagreement over how much credit should be given for evaporative losses when calculating each state's share under this compact. The Special Master appointed by the court recommended that no credits should be awarded for these losses as they were not considered in original calculations during drafting or ratification stages of compact. However, he also suggested that some adjustments could be made if it can be proved that such losses have increased due to human activity after signing compact in 1948. Both states agreed with his recommendations but had different interpretations on how these adjustments should occur leading them back before Supreme Court again later.

In the dissenting opinion for the case of State of Texas v. State of New Mexico, Justice Stevens disagreed with the majority's decision to reject Texas' claim that New Mexico was violating a 1938 compact regarding water usage from the Rio Grande River. He argued that while it is true that states have sovereignty over their natural resources, they also have an obligation to honor interstate compacts and not harm neighboring states through their actions. In this case, he believed New Mexico had failed in its obligations under both principles by allowing excessive pumping of groundwater near Elephant Butte Reservoir which resulted in reduced river flow into Texas. He contended that such action violated both letter and spirit of 1938 Compact as well as equitable apportionment doctrine - a principle used by courts to resolve disputes between States over shared use of an interstate stream’s waters where there is no controlling congressional legislation or compact governing allocation among them.