Most major agricultural and urban areas in New Mexico today lie along the narrow corridor of the Rio Grande as it cuts across the center of this predominantly desert state.

[1] The 1933–1934 Bunger Survey studied potential locations for diversions and storage reservoirs, and in 1939, the Rio Grande Compact was signed, dividing Rio Grande waters between Colorado, New Mexico, and Texas including allocations from a potential future diversion from the San Juan basin.

[2] When the Upper Colorado River Basin Compact was established in 1948, it also included provisions for the tentative diversion project under its water allotment to New Mexico.

[1][2] However, Reclamation ran into difficulties because the Navajo Nation asserted rights to about 900,000 acre⋅ft (1.1 km3) of water from the San Juan River, which runs through their traditional lands.

The dam was the only one built of a series of small independent irrigation units originally proposed under the project to serve Native American lands.

Heron Lake receives water from a catchment of 193 sq mi (500 km2), which has been augmented to over three times this size by the San Juan–Chama diversions.

The curved earthfill dam forms Nambe Falls Lake, which has a capacity of 2,023 acre⋅ft (2,495,000 m3) and controls runoff from a catchment of 35 sq mi (91 km2).

Its main purpose is to provide irrigation water for about 2,800 acres (1,100 ha) in the Pojoaque Valley, which is situated west and downstream of the dam.