When buying or selling a ranch property, it’s important to understand the rights you have for water sources on or near the land. Should you plan to drill a well or develop farming, livestock, or recreation endeavors that require water, you need to be sure that any water right included in the property allows for your desired usage. If it does not, understanding how a water right or well permit is acquired can give you the confidence to move forward with your plans. It is important to note that not all water rights are included in a property sale. In some states, a water right can be bought and sold irrespective of the affected property owner.
Water right systems differ by state. However, there are two predominant systems used in the United States — Appropriative and Riparian.
Appropriative Water Right System
Appropriative systems delegate water rights based on a priority ranking. This priority is determined by the date in which an individual first applies for a right to take water from a given source.This means that the first individual to utilize the water and obtain a water right gains seniority. Other parties may acquire a water right for the same water source, but their usage defers to the senior water right holder.
A senior right holder can always utilize their full allotment of water, regardless of how much water that leaves less-senior right holders. This is particularly pertinent for circumstances in which drought or seasonal changes affect the flow of a river or volume of a water table. In cases where water sources are over-appropriated, there is not enough water to ensure that all right holders receive their listed allotment. This is where seniority becomes especially valuable. In general, appropriation rights can be bought, sold, or leased.
Riparian Water Right System
Riparian systems distribute rights and outline usage based upon a property’s proximity to sources of surface water, such as a river or lake. Under a riparian system, landowners with property that borders a river or lake have a right to use that water. These rights generally cannot be bought, sold, or leased, and are bound to the property itself. Any exchange of property ownership usually includes the riparian right.
With these two systems in mind, here is an overview of water rights for three states with quality ranch properties — California, Colorado, and Montana.
California is a unique state in that it utilizes both an appropriative and riparian water rights system. The riparian rights are generally older, and usually have priority over any appropriative rights established on the same water source. However, the interaction between these rights is often complex and particular to each circumstance.
In California, a riparian right is only lawful when the water is used on land that drains back to the original water source. Any water that is taken and used in a different watershed requires an appropriative right.
All water rights in California are subject to “The Reasonable and Beneficial Use Doctrine.” This doctrine aims to prevent wasteful and inefficient water use by regulating and enacting resource conservation efforts for individuals using large amounts of water. This is often relegated to agricultural operations, and includes a framework to improve water delivery and irrigation practices.
Colorado water rights generally function under an appropriative system. Over the years, a number of water sources in Colorado have been over-appropriated, which gives rights with seniority high value.
Acquiring a water right in Colorado depends largely upon the intended usage. In general, wells meant for use in irrigation, commercial, municipal, and industrial endeavors that require large volumes of water must adhere to the appropriation system. In turn, attaining a well permit for these needs — particularly if the water source is over-appropriated — may involve an augmentation plan to replenish a portion of the water used.
Conversely, wells intended for small-scale use, such as providing water for a household or a limited amount of livestock, are often deemed exempt from the appropriation system and extensive administration from the Division of Water Resources. Exempt wells still require permits.
Like Colorado, Montana utilizes an appropriative system. Therefore, senior water right holders hold the most value in areas of high water use.
When applying for a surface water right or well permit that pumps more than 35 gallons a minute, Montana’s Water Rights Bureau requires a somewhat extensive application process. During this process, the administration will determine how feasible it is to incorporate the new water right into the appropriative system. The analysis and hearings involved can take multiple years to complete, so it’s best to begin the process as soon as possible.
Exemptions come in the form of individual wells that pump no more than 35 gallons a minute. Unlike Colorado, these wells do not require a permit at all. A “Notice of Completion of Ground Water Development” form must be filed, and a $125 fee paid, and then the well is legal and exempt from the appropriative system.
Water rights are an important part of our daily lives, particularly within the realm of ranch properties. The laws and systems involved can be complex and highly specific to an individual circumstance. Understanding these complexities is vital when considering the sale or purchase of any ranch property. At Ranch Marketing Associates, we have extensive experience navigating water law in multiple states across the American West. We specialize in ensuring that all your ranching endeavors are feasible, whether recreational or commercial. Contact us today and discover how we can take all the stress out of buying or selling a ranch.