Colorado's 'Free River' Loophole: A Simple Fix for Complex Water Woes

As the Colorado River Basin struggles with ongoing water stress, researchers have uncovered a simple solution that may be hiding in plain sight: eliminating an outdated legal loophole that allows unlimited water withdrawals during times of abundance.

In Colorado, when the river carries enough water to meet everyone's needs, the "free river condition” applies. During these periods, anyone — regardless of whether they own water rights — can take as much water as they want from the river.

"Closing this loophole in Colorado's water rights system could save millions of cubic meters of water and be the state's modest contribution to solving water stress in the Colorado River Basin," says Peter Debaere, professor of business administration at the University of Virginia Darden School of Business and lead author of a new paper published Monday in the journal "Water Resources Research."

The researchers argue that eliminating this outdated rule could be an important step towards creating a more resilient water rights system, potentially easing the strain on the basin's dwindling resources.

The Background

The 1,450-mile Colorado River is a lifeline for the American West. It quenches the thirst of 40 million people across seven states, more than 25 Native American tribes and parts of Mexico. It also irrigates some of the country's most productive farmland and generates hydropower used across the region.

But this vital resource is under threat: the amount of water flowing into the Colorado has been shrinking as rising temperatures have increased evaporation and reduced the snowpack that feeds the river. At the same time, demand from farms and cities has been rising.

Things came to a head in mid-2022. Water levels in Lake Powell and Lake Mead, the two major reservoirs on the Colorado River, dropped so low that they threatened the intake of water for hydropower. The situation was dire enough for the Biden administration to step in.

Finding a (temporary) compromise proved difficult, however. California, Arizona and Nevada only agreed to major water cuts in exchange for federal funding. Fortunately, Mother Nature provided some relief. An unusually wet winter in 2022-2023 plus conservation efforts have eased the immediate crisis.

Earlier this month [Aug 15], government officials said Lake Powell and Lake Mead were still only at 37% capacity. In 2000, they were nearly full.

Water Rights

Water rights in the Colorado River Basin follow a system called "prior appropriation," which has existed for more than a century. It's often summarized as "first in time, first in right."

The seven states using Colorado River water are divided into two groups: Upper Basin (Colorado, Wyoming, Utah, New Mexico) and Lower Basin (Arizona, Nevada, California). Within each state, water users like farms or cities have their own rights to a fixed amount of water, with earlier users having stronger claims.

During shortages, users with older water rights have priority. They receive their allocation first and can claim water from users with newer rights, who consequently receive reduced amounts or no water at all.

This long-standing system is increasingly under strain due to climate change. The strain is exacerbated by two factors: first, the river has been overallocated since the first Colorado River Compact was signed; and second, there is no explicit agreed-upon cap on water usage, Moreover, the system lacks a cap that could adjust to changing water availability.   

The seven states are currently negotiating how to share the shrinking supply, as some current (inadequate) guidelines for how the basin will share water expire at the end of 2025.

“Finding a compromise among the seven states will be difficult but closing the free river condition could be a way in which Colorado might contribute to the process,” says Debaere. “Abolishing the free river condition will not only reduce water use but also prepare the water rights system for future reforms, and help upper Colorado implement fallowing programs.”

While water stress affects the entire Colorado River system, it is most severe in the Lower Basin. 

The Big Idea

In Colorado, the concept of "free river conditions" allows unlimited water diversion under specific circumstances. This occurs when senior water rights holders have enough water and do not need to draw from junior rights holders’ allocations. (It is known as making a “call” on water from more junior rights.) This legal provision originated during a period of relative water abundance. It focuses narrowly on Colorado’s water situation and does not consider the broader Colorado River Basin and the issue of water scarcity issue in the Lower Basin.

The authors thus call the free river condition “an antiquated rule” that also hinders necessary reforms and worsens water scarcity issues. Closing it is a “pragmatic step” in addressing the long-term supply-demand imbalance, says Debaere.

“The free river loophole is a classic case of improperly defined and/or enforced property rights under the theory of ‘no harm, no foul’ which we contend is no longer valid,” the authors state.

What the Research Found

The researchers examined detailed water use and water rights records in Division 5, Colorado’s largest subbasin, and found a loophole in the system that shows the inadequacy of its water rights system.

During “free river conditions” in 2017 —and in spite of downstream water challenges and lowering reservoir levels, for example — water users diverted an estimated 108 million cubic meters more than their water rights allowed. Water that could have been stored in Lake Powell.

The current system of imprecisely defined water rights in Colorado is not as effective for sustainable water management as it could be. For example, Australia's Murray-Darling Basin uses a different approach that does a better job of managing water in a sustainable way.

Following the severe Millennium Drought of the late 1990s and 2000s, Australia imposed a permanent cap on the volume of water that could be diverted from the rivers and instead of allowing a fixed amount of water to be diverted, set the amount allowed as a fraction of the available water.

Why it Matters

The excess water use under "free river conditions" in Colorado exemplifies a larger issue: the failure to adequately manage the Colorado River's water resources.  Given climate change and growing demands from farms and cities, this water rights loophole intensifies water stress and undermines efforts to establish sustainable long-term water management practices.

Debaere says that while the annual excess water taken during free river conditions is significant but not exorbitant, closing this loophole is crucial for other reasons.

It would better define water rights and prevent withdrawals beyond legal limits. This is important for future reforms, such as capping overall water use or introducing programs to leave fields fallow. These efforts won't work if unlimited water access is occasionally allowed.

Closing this loophole could also be Colorado's contribution to easing water stress in the Colorado River Basin, especially as the seven basin states struggle to agree on reducing overall water use. 

UVA Darden Professor Peter Debaere and co-authors discuss Colorado’s free river condition in the article “Closing Loopholes in Water Rights Systems to Save Water: The Colorado River Basin” published in the journal "Water Resources Research." on 26 August 2024.