East vs. West: Understand Water Rights Before Buying a Ranch

By John Anderson, Broker

Understanding the history behind the Law of Prior Appropriations is not only interesting, but also important when investing in a ranch.

There are two main types of water right systems actively used in the United States today: the Riparian system and the Law of Prior Appropriations. Many eastern states utilize the Riparian water rights system, which states that an owner whose property abuts a waterway has an inherent right to use that water in allocated amounts. Western state property owners don’t have that inherent right and must establish a water right to utilize any water. Residential users are normally exempt and can use water for domestic purposes.

Water right laws in the United States

The history of Western water rights is colorful and interesting. John Wesley Powell, born in New York in 1834, enlisted in the Union Army in 1861. He served and fought in the Civil War and eventually was promoted to a rank of major. After the Civil War, American society was eager to assert itself on the world stage. People from all societal levels envisioned a nation that extended from sea to shining sea. Rumors of mystical beasts, huge gold deposits and fertile soil ran rampant throughout everyday conversations. This movement became known as Manifest Destiny. The majority of Americans believed that it was the destiny of the nation to expand all the way to the Pacific Ocean. There was a huge political movement focused on making this happen. In 1869, Congress sent John Wesley Powell and his expedition to map and inventory the natural resources available in the western part of North America. Powell and his comrades became legends, as they were the first Europeans to build rafts and float the Colorado River. Imagine taking on a rogue river in the middle of the wilderness. Those men showed uncommon grit and the will to survive nearly unthinkable conditions.

John Wesley Powell was an acclaimed scientist and provided Congress with a detailed assessment of the natural resources of western North America. The report highlighted the lack of water for establishing large settlements and outlined recommendations on how to deal with the arid landscape. One of the primary suggestions was that all water rights should be owned by the United States government. Powell was so concerned about the lack of water that he suggested the boundaries of any new western state be based upon geographical watersheds. History tells us that Congress did listen to some of his recommendations, but the political pressure wouldn’t allow a methodical approach to western settlement. The law of Riparian water rights, if enforced, would be a complete disaster, so there had to be a better way.

Benchmark court cases can give birth to new rulings when there is a loophole in the law and/or no legal precedent. This was the case in 1855 when the California Supreme Court listened to arguments between Irwin v. Phillips. The case, in a nutshell, is as follows: Matthew Irwin diverted a stream for the benefit of his mining operation. Later, Robert Phillips started a mining operation further downstream from Irwin. Phillips wanted more water and tried to divert the stream back to its original streambed course. An intense argument ensued. The court found that Phillips was the first person to use the water for a beneficial use and therefore had priority over future users. Courts across the western landscape based their decisions on the logic employed in the California Supreme Court ruling. The birth of the Law of Prior Appropriations had occurred. The law is basic and reflects the no-nonsense demeanor of the western frontier. Four basic elements comprise the Law of Prior Appropriations: intent, diversion, beneficial use and priority. Essentially, first-in-time, first-in-use established a priority over all future users.

To this day, the California Supreme Court decision continues to impact water right disputes throughout the western United States. Although the cases are much more complicated compared to the Irwin v. Phillips case, the basic legal concepts are still in play.

Ranch brokers are knowledgeable regarding water right issues in their communities, but it is always the best policy to hire an expert. Water rights experts research water rights professionally, testify in court frequently, have a grasp of the current political trends, and are knowledgeable about issues that may affect your water rights in the future. These experts are essential to any real estate investment involving water rights. Their reports typically provide an outline of your water rights history, points of diversion, delivery and potential non-compliant issues.

For more recommendations when buying a ranch, read our earlier post, “Don’t Kick the Cows Off: Recommendations for Ranch Buyers.”

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