The System Expands: The Construction of McMillan Dam
The irrigation company quickly realized that Avalon Dam and reservoir were far too small to provide the needed water reserve for the canal system, and a second reservoir was needed to provide additional water storage. From the beginning, the company's long-term plans included two storage reservoirs just upstream from Avalon, and work began at the uppermost of these sites in October 1892. The new dam was initially known as "Seven Rivers Dam" or "Reservoir No. 1," although it soon received the permanent appellation "McMillan Dam."  The irrigation company considered both earthfill and rockfill dam designs for the new structure, eventually settling on the latter in a possible tribute to the perceived success of Avalon. The rockfill configuration was chosen even though its $175,000 projected cost was more than double the $82,500 estimate for an earthen dam.  The Argus reported that McMillan Dam would be rock-filled and faced with earth, 1,686 feet long and up to 51 feet high. The reservoir thus created could reportedly hold eight times as much water as Avalon, enough to completely supply the canal system for seventy-two days of irrigation. 
As the main storage reservoir for the Pecos Valley irrigation project, Lake McMillan was designed to hold water for release to Lake Avalon where it could then be diverted into the canals of the irrigation system. The Engineering Record claimed that Lake McMilan, on completion, was "probably the largest artificial reservoir in America and. . . one of the greatest in the world."  The dam itself continued to be listed as the second oldest surviving (Avalon was the oldest) and one of the most important composite (rock-fill with earth fill on upstream face) dams in the United States into the 1940s. 
Displaying either the typical boosterism of the period or a simple lack of understanding of the true nature of the reservoir site, the Engineering Record's claim was based on an assumed reservoir capacity of 138,000 acre-feet. An 1895 survey of the reservoir, however, listed a maximum capacity of only 82,644 acre-feet. Notwithstanding the possibility that the capacities of the other reservoirs on the list might also have been based on inflated figures, Lake McMillan still ranked second in size in the United States (only the Helmet Valley, California, reservoir ranked larger) and fourth in size in the world. 
McMillan Dam is a rockfill dam constructed under the supervision of Louis D. Blauvelt as chief engineer.  When completed, McMillan Dam had a maximum height of 55 feet and an average height of 37.8 feet. The structure was 1,686 feet long. The rockfill had a crest width of 14 feet with a downstream slope of 1.5:1. The upstream face was of hand-laid stone 2 feet thick with a slope of 0.5:1. The earth facing placed against the upstream slope of the rockfill had a 6-foot crest and an upstream slope of 3.5:1. Total width at the base was 290 feet.
The 1,100-foot-long outlet channel located at the east side of the dam was excavated through solid limestone to an elevation 35 feet below the dam's crest. The channel discharged water directly into the Pecos River below the dam. The outlet works consisted of six wooden gates, 4 feet by 8 feet, operated by screws. Total discharge capacity of the gates was 4,400 second-feet with water at 18 feet above the floor of the outlet works.
Early maps of McMillan Dam show a spillway located between the east end of the dam and the outlet channel, although this feature is not described in any of the contemporary technical articles on the dam. An 1895 survey, however, describes the spillway as a cut 220 feet wide at an elevation 10 feet below the crest of the dam. The spillway returned waters to the Pecos River near the toe of the dam; it was abandoned and blocked by the time the Reclamation Service acquired the property in 1905.  Two earth embankments were originally constructed to the west of the dam to close low spots in the limestone bluffs. These were constructed with a crest width of 10 feet and a base width of 100 feet. By 1895, these embankments had apparently been joined to form a single dike some 2,600 feet long and approximately 18 feet high. A 300-foot-long spillway was located at the east end of the embankment and provided with 64 gates, each 4 feet wide and 8 feet high. 
Interestingly, in 1893 the Eddy and Bissel Live Stock Company still owned much of the McMillan Reservoir site, as well as the land occupied by Avalon Dam and reservoir. By January 1893, the irrigation company had begun condemnation proceedings to acquire the McMillan site. In order to "settle amicably all disputes," representatives from the two companies met in New York City with an arbitrator. In the end, the livestock company received a $36,193 payment, water rights, and other considerations for the land the irrigation company had taken.  Hagerman funded the land purchase from his own pocket."
Most of the construction work on McMillan Dam had been completed by August 1893, when the valley's irrigation network suffered the first of a long string of damaging natural disasters. A series of seemingly endless, pouring rains attacked the Pecos Valley early in the month, raising the Pecos River to previously unknown levels and causing a tense, dramatic period at Avalon Dam:
The water level at Avalon Reservoir continued to rise until the dam was finally overtopped; when this happened the dam rapidly, inevitably, gave way:
The canal system, flume and railroad also received substantial damage from the floodwaters.
The destruction of Avalon Dam was a tremendous blow to both the irrigation company and the settlers it had drawn to the Pecos. The flood rendered the irrigation system useless, and the costs of repair were recognized to be enormous. The project's initial four years had already been a substantial financial drain on the company's investors, and many were growing weary of committing funds to an enterprise that had failed to bring them returns. Moreover, the flood occurred in the midst of the Panic of 1893; the financial uncertainty of the nation as a whole made securing corporate financing all the more difficult. It was apparent that Hagerman's personal funds were the project's only hope for salvation.
The collapse in silver prices that precipitated the Panic of 1893 was devastating to Hagerman, who had drawn much of his income from the silver mined at the Mollie Gibson. (Hagerman later stated that the Panic had reduced his worth by $2,400,000 in the course of one month. ) Nevertheless, Hagerman immediately decided to commit much of his remaining capital to the restoration of the irrigation company's infrastructure. His son later recalled:
Hagerman was sincere in his promise to rebuild the system as soon as possible. By the end of August, the irrigation company had contracted with the firm of Ward & Courtney to perform the needed repairs. By October, some 500 men and 165 teams were hard at work on both Avalon and McMillan Dams. The reconstructed Avalon Dam displayed an identical cross-section to its predecessor; the crest, however, was raised by five feet and the length increased by 65 feet to 1,135 feet. Hoping to avert a reoccurrence of the 1893 flood damage, the capacity of the spillway at the west end of the dam was increased and a third spillway added across an arroyo even farther to the west.
Other crews began reconstructing the flume and repairing canals; a contractor's salvage party scoured the river most of the way to Pecos, Texas, and returned some 60,000 board feet of flume timbering to its former site.  Repairs were largely completed by early 1894, and water turned into the canals in time for the irrigation season.
Although Hagerman persevered throughout the financial and natural disasters of 1893 and 1894, the setbacks and expenditures were the beginning of Eddy's final disillusionment with the region he had helped settle. The irrigation company's difficulties exacerbated the already-present tensions between Hagerman and Eddy, and the two differing philosophies were no longer able to reach a compromise. Eddy disposed of most of his Pecos Valley interests in 1894, and that April he resigned as general manager of the Pecos Irrigation and Improvement Company.  Although biographers sympathetic to Hagerman explained Eddy's departure by concluding that "Eddy had demonstrated that he was a promoter of the first magnitude, but a failure as an administrator," Eddy went on to become a multimillionaire builder of railroads and other corporate dreams in New Mexico and beyond.  In 1899, though, his historical stature in the Pecos Valley was symbolically reduced as the community of Eddy voted to change its name to Carlsbad. 
Although the Pecos Valley's irrigation system had resumed operation in time for the 1894 growing season, the valley remained in the economic doldrums for the remainder of the decade. The valley's recession was due, in part, to the economic problems of the nation as a whole, but local conditions were also contributing factors. The valley's farmers had experimented with a variety of crops, but most had not proven economically viable. Those crops that were grown proved difficult to market. The Pecos Valley Railroad was the area's only viable shipping route; unfortunately, it connected Eddy with Texas and the Southwest while the Midwest and East seemed to be more appropriate markets for the valley's products. Sensing this situation, Hagerman decided to divert his attention and resources towards expanding the Pecos Valley Railroad to the north and east. Extending the railroad from Eddy to Amarillo, Texas would provide a connection with the Atchison, Topeka & Santa Fe Railway (the "Santa Fe") and give the valley a direct rail route to the Midwest. Hagerman reasoned that this improved railroad route would provide an economic boost sufficient to rejuvenate the valley's flagging business atmosphere, and throughout the rest of the 1890s he devoted much of his energy to the railroad project. 
The first stage of this railway expansion, northward to neighboring Roswell, was well underway by the summer of 1894. The economic benefits of the Roswell line were disappointing, however, because the railroad's outlet was still to the south rather than the northeast. By this time Hagerman's personal financial resources were all but exhausted; the Pecos Valley Railroad went into receivership in 1896. In 1898, Hagerman was able to convince the Santa Fe to financially support his proposed line to Amarillo, and construction resumed. Under the corporate name "Pecos Valley & Northeastern," the new route was opened for through traffic early in 1899. The Santa Fe's financial involvement in the new route virtually assured the line's completion and eventual success, but it also presaged the complete acquisition of Hagerman's railroad by the Santa Fe. This occurred, for all intents, in 1901.  Interestingly, the Pecos Valley & Northeastern's principal competition came from a new rail line concurrently being constructed across New Mexico by none other than Charles B. Eddy. 
Although the irrigation company's canals continued to operate throughout the 1890s, the Pecos Valley languished economically and the company continued to be a monetary drain on its owners. As such, the company joined the ranks of most other large corporate irrigation efforts in the West. By 1900, some 90 percent of these companies were in or near bankruptcy. After the Panic of 1893, the traditional sources of investment capital for such developments largely dried up; even so, it is likely that the Panic only hastened the otherwise inevitable collapse of private reclamation efforts. Private irrigation companies faced a variety of obstacles, from landowners who were either unable or unwilling to pay their irrigation assessments to land speculators who obtained large tracts of public lands within a project area without subscribing to water rights. Bondholders became less enamored with investments in irrigation as they realized that dividends, if any, occurred only after massive amounts of capital investment and years of development.  Equally important factors stemmed from the companies' inexperience in adapting reclamation technology to the needs of the American West. This often resulted in underfunded projects, primitive, inappropriate designs and unrealistic overall expectations. Much later, Tracy recalled:
Although the irrigation company did not address the technical difficulties inherent in its reclamation system during the 1890s, it sought to improve its financial posture by actively seeking new farmers for the region's irrigable lands. This solicitation occurred through a variety of means, including local realtors and land promoters, the Pecos Valley Town Company, and the irrigation company itself. Hagerman and his Colorado investors also participated in land speculation. In 1895, the Coloradans incorporated the Upper Pecos Land Company, Middle Pecos Land Company, and Lower Pecos Land Company. Each of the companies was intended "to purchase, take, acquire, own, hold, improve, cultivate, plat, sub-divide, lay out, mortgage, lease, sell, and convey lands and interests therein, with water appurtenant thereto and water rights therefor, and, generally, to deal in lands and water rights...." 
The business of land promotion was actively supported by the New Mexico territorial government, which maintained an active Bureau of Immigration during the 1890s and early 1900s. This office published numerous brochures designed to showcase New Mexico agriculture and advertise the availability of new farmland. An 1897 booklet, for example, named the Pecos Valley "The Fruit Belt of New Mexico,"" and promised:
While the success of these efforts is unknown, the irrigation company's continued corporate hardship indicates that mere advertising could not solve the reclamation system's inherent problems.
Farmers who did settle in the Pecos Valley quickly found that much of the region's financial stagnation was due to a continued lack of success in finding an appropriate crop for the valley's farmlands. Hagerman, the irrigation company, and the project's other supporters experimented with a large variety of crops during the project's first decade. As early as 1890, the company established an experimental nursery in the valley under the direction of a "skilled French horticulturist."  The project quickly failed after a huge dust storm, which:
Other privately-funded experiments continued, however, often on the farms owned by company officials. The valley's warm, sunny climate made it seem an appropriate area for growing fruit, and numerous vineyards and orchards were planted. Most died within a few years, however, victims of wind and dust storms, an erratic water supply, or a root disease which attacked many of the valley's trees and crops. Alfalfa became something of a staple crop, though its yields were disappointing. Farmers experimented with more exotic crops, as well: Indian corn, kaffir corn, milo maize, sorghum, canaigre. These novelty crops met with mixed initial success, but as the years passed most succumbed to soil depletion or root-rot. 
The region's crop difficulties must have been extremely discouraging to Hagerman, but he continued to invest heavily in the region while assisting in the search for an appropriate local crop. Experiments in growing sugar beets during the 1890s initially seemed encouraging. By 1896 Hagerman was sufficiently enthusiastic about the crop that he persuaded a group of investors (associated with the Schlitz Brewing Company) to construct a sugar beet factory in Eddy. Again, though, crop yields were disappointing and the factory soon closed due to a lack of farmer support. In 1902, the facility mysteriously burned to the ground. 
Although Hagerman stoically continued to pump money into the Pecos Valley, by 1896 his personal discouragement with the area was becoming more and more visible. His biographers almost uniformly suggest that this change came about because Hagerman, for the first time, finally allowed himself to see the valley's faults. He now noticed the region's relatively poor soils, which were growing worse due to improper farming practices and over-irrigation. He also awoke to the irrigation system's rapid, slipshod construction, with its leaky reservoirs and canals, and high maintenance requirements. Almost certainly, Hagerman began to realize that he had been talked into investing most of his personal fortune in a seemingly hopeless venture, and that he, in turn, had convinced many of his associates to do exactly the same thing.  The first visible result of Hagerman's change of heart came on August 1, 1896, when he allowed the irrigation company to default on an interest payment to its bondholders. It marked the beginning of the end for the company Hagerman, Eddy, and the others had envisioned.
As Hagerman's disillusionment with the lower Pecos grew, he devoted less and less of his money and energy to the Eddy region and concentrated more and more on the company's Northern Canal near Roswell. Hagerman finally gave up on the lower Pecos near the end of 1897, when he and Otis gave notice to the irrigation company's Swiss and other bondholders that they would provide the company with no more money unless the bondholders also agreed to increase their investment. In what was probably a surprise to no one, the bondholders steadfastly refused. This precipitated a corporate financial crisis that was destined to rapidly force the company into receivership.
Responding to Hagerman's blunt announcement, a representative for the Swiss investors reportedly toured the Pecos Valley to evaluate the situation. This visit almost certainly brought the bondholders to the same realization that had finally struck Hagerman: that the Pecos Irrigation and Improvement Company's prospects for generating a profit for its backers were virtually nil. Hagerman feared that the Swiss investors would pursue litigation against him, since they thought him responsible for the crisis. Such litigation would be potentially disastrous to the valley, possibly resulting in the collapse of the pivotal Pecos Valley & Northeastern Railroad project, or even in the closure of the reclamation system itself. 
In order to prevent the collapse of Hagerman's Pecos Valley developments, all parties involved agreed to work toward a negotiated compromise. (Tracy later claimed much of the credit for convincing the two factions to negotiate. ) A preliminary agreement was hammered out at a May 1898 meeting in New York which included Hagerman, Otis, Tansill, and Tracy (acting as the Swiss bondholders' representative). In short, the agreement stipulated that Hagerman would pay off many of the company's outstanding bills and make a cash payment to the bondholders. In return, he would take full possession of the Northern Canal and forfeit all rights to the southern canals and reservoirs. The bondholders, through a receiver, would then reorganize the company's southern holdings into a new corporation in which their investments would be represented by equal amounts of bonds and stock. The new company would be capitalized at $650,000, suggesting the realization that much of the $2,300,000 previously invested would never be recovered. (By 1898 the company considered its southern canals to be worth approximately $650,000, while the Northern Canal was valued at $100,000.) 
This proposal was agreed to by all in attendance at the May meeting, although it was a significant monetary blow for Hagerman and the company stockholders affiliated with him. This stock represented $1,750,000 of the irrigation company's total capitalization. Both Hagerman and Otis had personally advanced additional funds to the company, as well. The company's stock, however, was an unsecured debt, subsidiary to the property mortgages held by the bondholders. Hagerman therefore had little choice but to accept the huge financial losses as an expensive lesson in business restraint. In all likelihood, Hagerman was simply happy to finally be rid of the irrigation company's southern canal system once and for all. He would then be free to devote his considerable business energies to the development of the Roswell area. By this time, Hagerman had already disposed of most of his personal holdings in Eddy and moved to the South Spring Ranch near Roswell.
A reorganization agreement based on the principles outlined at the May meeting was signed by the parties involved on August 27, 1898. For unknown reasons, however, the plan was not immediately implemented, and the bankrupt company limped into the twentieth century with Tansill operating it as receiver. Despite Hagerman's avowed disenchantment with the Carlsbad region, Tansill apparently spent substantial time in a vain effort to convince Hagerman to resume investing his dwindling assets on the project. 
Available documents do not fully disclose the additional corporate maneuvering that took place during the receivership years, although the bondholders' continuing resentment climaxed in a lawsuit filed in Illinois in 1900. The 1898 reorganization plan was finally implemented, and on August 17, 1900, the Pecos Irrigation Company was incorporated in New Mexico to assume the Carlsbad-area operations of the old Pecos Irrigation and Improvement Company. Tracy and Tansill were among the company's first directors, and Tracy became its general manager.  The Pecos Irrigation Company began operations on February 1, 1901, as the receivership of its corporate predecessor ended. 
1. McMillan Dam was named for W. H. McMillan, a wealthy man associated with C.B. Eddy and a brother of a United States Senator. See L.E. Foster to Charles Ethrige Minton, October 1, 1940, WPA File #201, "Eddy County Points of Interest," New Mexico State Records Center and Archives, Santa Fe.
6. "Lake McMillan Dam, Pecos River," 24. Although Lake McMillan had a reservoir capacity of about 89,000 acre-feet, actual capacity was limited by the lack of adequate embankments to the west of the dam. At a reservoir height 17 feet below the crest of the dam, McMillan held about 50,000 acre-feet.
8. "[Carlsbad] Project History from Inception of Project to December 31, 1913" ([Washington]: Department of the Interior, U.S. Reclamation Service), 13. Project histories were prepared annually by the U.S. Reclamation Service from 1912-1923, and by the Bureau of Reclamation from 1924-1951, and are on file in the Carlsbad Irrigation District Office, Carlsbad, New Mexico. Slight title variations occur among the years, and will be cited herein by title and date.
9. The earliest description of McMillan Dam appears in "Lake McMillan Dam, Pecos River." Descriptions can also be found in Schuyler, Reservoirs for Irrigation, 55-56. A site plan of the dam appears in "Field Notes of the Survey of the Pecos Irrigation & Improvement Co.'s Reservoir No. 1, Eddy Co., New Mexico" (the notes were sent to Washington, October 7, 1895), located at the Pecos Valley Projects Office, Bureau of Reclamation, Carlsbad, New Mexico. A similar plan with a cross section of the dam appears on the "Plat of the Pecos Irrigation and Improvement Co.'s Storage Reservoir No. 1," 1895, RG 49, Division F, "Canals and Reservoirs," National Archives, Washington, D.C.
19. The name "Carlsbad" is an Americanization of "Karlsbad," the site of a noted European mineral water spa. The Pecos Valley contains a mineral spring reportedly similar to the one at Karlsbad, and the town's name change was part of a futile attempt to promote the New Mexico springs. See Myers, The Pearl of the Pecos, 145.
22. Keleher, The Fabulous Frontier. The route Eddy constructed ran from northeast from El Paso, traveling through Alamogordo and connecting with the Chicago, Rock Island & Pacific in northeastern New Mexico. It is now operated as the "Golden State Route" of the Southern Pacific Railroad.
25. "Articles of Incorporation of the Lower Pecos Land Company," New Mexico State Records Center and Archives, Santa Fe. The State Records Center also holds the incorporation documents for the "Upper" and "Middle" land companies.
34. "Plan for the Settlement of the Affairs of The Pecos Irrigation and Improvement Company of New Mexico and for the Reorganization of a New Company by the Bondholders," RG 115, Entry 4, Box 1, File 25, National Archives, Washington, D.C.
36. The Pecos Irrigation Company's complete list of incorporators included Tansill, Tracy, Rufus S. Benson, Abram N. Pratt, and James O. Cameron. See "Articles of Incorporation of the Pecos Irrigation Company," New Mexico State Records Center and Archives, Santa Fe.
Last Updated: 01-Feb-2008