As the Colorado River Crisis Deepens, UVA Darden Research Points to a Simple Fix

“The Colorado River Is on the Brink of Disaster.”

That was the dire warning published recently after years of drought and political posturing have pushed one of the most crucial water sources in the American West to the breaking point.

Following a winter of record-breaking heat, the snowpack in the Rockies that feeds the river has dropped to record lows. There was no relief in March, as the West suffered through a searing heat wave.

But what if a solution is hiding in plain sight?

Darden professor Peter Debaere Debaere is an international economist, with a focus on international trade, multinationals and trade policy.

Research highlighted in Ideas to Action in 2024 identified a simple solution that could put parts of the Colorado River Basin on a more sustainable path.

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,” Peter Debaere, professor of business administration at the University of Virginia Darden School of Business and lead author of the study, said at the time. This research is more relevant than ever as the river’s conditions worsen.

The researchers argue that eliminating this outdated rule could be an important step toward creating a more resilient water rights system, potentially easing the strain on the basin’s dwindling resources.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

How a Century-Old System Is Failing the West

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 such as 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 that is exacerbated by two factors: the river has been overallocated since the first Colorado River Compact was first signed, and the system lacks an explicit, agreed-upon cap on water usage that could adjust to changing water availability.

The seven basin states are still trying to figure out how to divide the Colorado River’s shrinking water supply after the previous operating guidelines expired at the end of 2025, with tensions continuing between Upper and Lower Basin states over who should bear the biggest cuts.

“Finding a compromise among the seven states will be difficult but closing the free river condition could be a way that Colorado might contribute to the process,” Debaere said in 2024. “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 Loophole

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 or the water scarcity issue in the Lower Basin.

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

The Fix

The researchers examined detailed water use and water rights records in Division 5, Colorado’s largest subbasin, and found that the system’s inadequately defined water rights create a significant loophole.

During “free river conditions” in 2017 — and in spite of downstream water challenges and declining reservoir levels — water users diverted an estimated 108 million cubic meters more than their water rights allowed. That is 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. Australia’s Murray-Darling Basin offers an instructive contrast.

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 set allowable diversion 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 said 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.

EDITOR’S NOTE: This is an updated version of a story that originally appeared on Darden’s Ideas to Action platform in August 2024. It has been revised to reflect current developments.