IP-3-2002 (October 2002)
Author: J. Craig Green

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Executive Summary

The subject of water rights in Colorado often generates confusion, anger and hysteria, even among those experienced in dealing with it. According to one old timer, “Whiskey’s for drinkin’. Water’s for fightin’.”

Colorado is notorious for the number of water lawyers it has, and it’s easy to criticize a system of law that generates so much conflict. However, much criticism of this system is based on a poor understanding of how and why it works. Some people believe Colorado should more closely follow the model of other western states where water allocation is more tightly controlled by government, and less by market forces. I argue in this paper that its free market origins and traditions are the strength of Colorado water law, based on protecting private property rights against all comers, public and private. This can work as well for streamflow protection as it has for power plants.

Origins

Early Colorado water rights were established through the hard work of pioneers who created a system of water allocation long before Colorado became a state. The Colorado constitution and courts later adopted and continued this tradition of protecting private property rights for using an important but scarce resource. Colorado water law has repeatedly upheld the “first in time, first in right” principle upon which the system is based. This means water rights established earlier (senior rights) get to take water first, and water rights established later (junior rights) are cut back when seniors are not satisfied.

Although the Colorado constitution proclaims that all water in the state belongs to the “people,” it allows for water to be claimed (“appropriated”) for private use. Water rights are created by using water not previously appropriated, recognizing the prior right of those who came before. Water rights so established are considered to be property rights, and may be transferred to different locations or types of use as long as other water rights are not injured in the process.

“Use it or Lose it” – Like Catching Wild Horses

Since water in a stream is a moving resource, water left unused by one person may be used by others. This simple fact produced the “use it or lose it” principle, based on using only as much water as you need and can use. It’s like catching wild horses as they run by – you don’t own the ones you don’t catch. Unused water rights may be reduced or lost, since other water users develop a reliance on water left in the stream. The “use it or lose it” principle is widely criticized by those who believe it encourages waste, inefficiency and inhibits environmental or streamflow protection. On the contrary, it is Colorado’s oldest and best recycling program, as explained in this paper.

Colorado water law has changed to recognize new kinds of water rights, including storage rights, conditional rights and instream flow rights. Storage rights allow water to be saved for later use in ponds and reservoirs. Conditional rights allow water users to claim rights for future water use and instream flow rights allow water rights to be dedicated to maintaining streamflows. The evolution of new kinds of water rights is clear evidence of the flexibility and adaptability of this system to meet changing needs.

All Colorado water rights have limits such as flow rates or volumes and specific types of use. In court cases involving changes of water rights, a historical use standard is imposed to prevent injury to other water users. Waste is not considered to be part of the water right, providing a disincentive for water users to waste water to maintain or enhance their rights. Of course, the system is not perfect. Abuses occur, but they pale in light of the accomplishments of a unique system of law and custom applied to a resource that doesn’t sit still while you think about grabbing it.

Colorado water law today represents a most elegant example of private property creation and protection because of the steadfast efforts of those who would not concede their “selfish” private interests to those who would take their property without compensation. Unique among western states, the State of Colorado maintains a healthy respect for the pioneer spirit and hard work of people who came before. This free market tradition should not be sacrificed on the altar of “public interest” to subsidize latecomers who prefer not to pay for their economic choices.

Ironically, working within the current water rights system may be the best means of accomplishing its critics’ goals, because the system would protect their future instream flow rights from attack. Senior water rights, purchased and converted to instream flow protection, would be protected during future droughts if they were acquired and transferred according to the same rules as everyone else. If, however, critics are successful in gaining special privileges for their new water uses, their new streamflow protection “rights” would likely be ignored, vilified and made practically useless when the next major drought comes along.

This paper explains the origins and traditions of Colorado water rights, and defends the principles upon which it is based.

“ While the prior appropriation doctrine and western water development has been lampooned and lambasted, no one has made a serious proposal for substitution of a water law system that would better serve the needs of humans and the environment with equal or greater security, reliability, and flexibility – these being the hallmarks of an effective resource allocation
system.”
– Colorado Supreme Court Justice Gregory L. Hobbs, Jr.