How do water rights work in the US? Priority dates, paper water and the 2027 Colorado River cuts
Because western states fill water rights in order of their priority date, an 1890 farm right outranks a 2020 city right whenever a river runs short. The rule is called prior appropriation, and the Colorado River cuts that begin on January 1, 2027 show it still deciding who is cut after Arizona, California and Nevada negotiated a split that departs from it.
Prior appropriation
Prior appropriation gives the first person who took water from a stream for a beneficial use, such as irrigating a field, the first right to it. The Colorado Division of Water Resources (the state's water agency) ranks every later user behind that person in a list ordered by date. In a dry year the agency works the list from the oldest date, and each right is filled before the next receives anything. The volume on a right is the most it may divert, and older rights are called senior and newer ones junior.
About 31 states, most of them in the East, use the riparian doctrine instead, under which the owner of land along a stream may make reasonable use of it and a shortage is shared by all users.
Paper water
California's active water rights allow a maximum use of 370 million acre-feet, a University of California analysis found in 2014, while the state has 70 million acre-feet of surface water in a good year. An acre-foot covers one acre to a depth of one foot. The volume written on a permit or contract is called paper water, and the volume that arrives in a dry year is called wet water. A California appellate court described contract entitlements in the State Water Project (the state-owned canal system) as water "not of the 'wet' variety".
The State Water Project set its 2026 delivery at 45 percent of the amounts its contracts list. In August 2021 the State Water Resources Control Board (the state's water regulator) curtailed every post-1914 right in the Delta watershed, the rivers draining to the Sacramento-San Joaquin Delta. A post-1914 right is one held under a state permit, and curtailment is an order to stop diverting. The Sacramento basin cutoff date of 1883 shut off an 1890 claim alongside every permit issued in 2020.
For a utility, a developer or a data center holding western water, the date or contract class behind each source and the volume that source delivered in the last curtailment year decide what it is worth. A contract based on a State Water Project Table A amount (the maximum annual volume an agency's contract lists) or on a post-1914 permit is junior unless the contract says otherwise. In my view its volume is a maximum, while its supply is whatever that date delivered in the last dry year. Gasilov Group's water strategy advisory work starts by reading a portfolio by those two measures.
Colorado River priority
Congress authorized the Central Arizona Project (CAP, the canal that carries river water to Phoenix and Tucson) in 1968. Section 301(b) of the Colorado River Basin Project Act, the law that authorized it, cuts CAP's diversions first in any year the three Lower Basin states (Arizona, California and Nevada) have less than 7.5 million acre-feet. Arizona accepted that junior priority as the condition of the authorization. The clause places California's 4.4 million acre-feet and every pre-1968 Arizona and Nevada user ahead of CAP when cuts are made.
The Bureau of Reclamation (Reclamation) projects CAP to deliver an average of 1.5 million acre-feet of Arizona's 2.8 million acre-foot apportionment (the share the Supreme Court's decree assigns each state). Because Phoenix draws roughly 40 percent of its drinking water through that canal, that share of the city's supply carries the canal's 1968 priority.
On the California side, the Imperial Irrigation District (IID), which irrigates the Imperial Valley, holds a right of 2.6 million acre-feet dated 1901 in the Supreme Court's decree. Under the shortage rules that expire on December 31, 2026, the shortage declared for 2026 cuts Arizona by 512,000 acre-feet and California by nothing, while the 1968 priority behind those rules remains in force.
The Department of the Interior (Interior) issued guidelines on August 21, 2026 that reduce Lower Basin deliveries by 1.25 million acre-feet a year in 2027 and 2028. Arizona takes 760,000 acre-feet of that and California 440,000, if the three states execute their sharing agreement. Without the agreement, the Record of Decision (Interior's August 2026 framework for 2027 through 2036) allocates shortages under applicable law, including the Supreme Court's decree, unless entitlement holders (users with decreed or contracted shares) reach voluntary arrangements. Applicable law includes the 1968 priority, under which the whole cut is taken from CAP before California loses an acre-foot.
California's 440,000 acre-feet is water the law did not require it to give, and I believe it gave the water to keep the priority. A federal default that emptied the canal serving Phoenix would have invited a court challenge to Section 301(b) itself. A 2026 Arizona State Law Journal article already argues the clause is unconstitutional. A seniority that survives intact through 2036, when the Record of Decision expires, is worth more to California than one enforced in full for two years.
State | Apportionment (acre-feet) | Priority basis | 2026 cut under current rules | 2027 cut under the states' agreement | Share of apportionment cut in 2027 | 2027 cut under strict 1968 priority |
Arizona | 2,800,000 | CAP junior under Section 301(b), 1968 | 512,000 | 760,000 | 27% | 1,250,000 |
California | 4,400,000 | Senior under Section 301(b), IID priority 1901 | 0 | 440,000 | 10% | 0 |
Nevada | 300,000 | Pre-1968 users protected by Section 301(b) | 21,000 | 50,000 | 17% | 0 |
Analysis: Gasilov Group, from the 1968 Act, Reclamation's 2026 shortage volumes and the 2027-2028 Operating Guidelines, with percentages our arithmetic.
Figure 1. Lower Basin cuts by state for a chosen reduction, under strict 1968 Act priority and under the 2027 and 2028 shares. At 1.25 million acre-feet, Arizona loses 760,000 acre-feet (27 percent of its apportionment) by agreement and 1.25 million (45 percent) under strict priority. California loses 440,000 or nothing. Analysis: Gasilov Group, our arithmetic, as of October 2026.
Buying seniority
Cities respond to junior priority by buying water held under older dates, and the San Diego County Water Authority takes 200,000 acre-feet a year of IID's conserved water under a 2003 agreement running through 2047. The transfer moves part of a 1901 right to a county of 3.3 million residents. Farmland fallowed to free up water for such a transfer tends to stay out of production once a buyer has permanently outbid farming for that water, as I told the Food Institute in August 2026.
Developers in the west Phoenix suburbs have been buying existing water rights since 2023, when new subdivisions on unreplenished groundwater lost access to Arizona's assured water supply certificate (proof of a 100-year supply). That competition is adding to the cost of each lot, as I told Realtor.com in May 2026.
The 2027 split applies through 2028, and Interior must begin work on the guidelines that replace it by October 1, 2027. The Record of Decision allows Lower Basin cuts of up to 3.0 million acre-feet in any later interval. Nevada sued on August 24, 2026 to set that framework aside, because it could cut Nevada's apportionment by up to 213,556 acre-feet. I would plan on whatever figure replaces Arizona's 2027 share being split by priority again, unless the three states agree otherwise.
If you are not sure where to start, the two-week water exposure screen is the first step. If you already know what you need, get in touch and we can scope it.
Arif Gasilov is partner for Natural Resources & Built Environment at Gasilov Group, where he works on energy regulatory analysis, water governance, utility rate cases, and the resource footprint of large development. Meet Our Partners →
Frequently Asked Questions (FAQ)
Can a water right be lost if it is not used?
In Colorado, ten years of nonuse while water was available creates a presumption of abandonment, and the division engineer (the state official in charge of each water division) files a list of abandoned rights with the water court every ten years. Because the Supreme Court's 1908 Winters decision dated a reservation's water right to the year the reservation was created, tribes hold the oldest dates on many western rivers, and those federal and tribal reserved rights cannot be lost through nonuse.
Does Mexico take a cut when the Lower Basin is short?
Mexico's deliveries under the 1944 treaty are reduced under separate agreements called Minutes, decided through the International Boundary and Water Commission (the US-Mexico treaty body), apart from the three states' apportionment. Under the first-level shortage (the mildest shortage tier) in effect for 2025 and 2026, Mexico's reduction was 80,000 acre-feet, about 5 percent of its allotment.
