This happened in the land of the free and the home of the brave! Idiocy knows no bounds. Who owns the water that falls out of the sky on your land?
The falling rain belongs to God, once it hits the ground it belongs to whoever has prior water rights. The state is only a referee. You cannot usurp someone's water rights simply by moving in upstream or higher on the watershed. That water still belongs to someone else.
The law was designed to protect ranchers in eastern Colorado who found that their water was being diverted as people moved to the base of the mountains. To protect those rights they can confiscate rain barrels, breach catchments, plug wells, overturn buckets in someone's yard, even check your toilet to see if someone else's water is being used to flush. If someone has a prior claim they OWN that water.
That is the Colorado model and most western states' water laws are based on it. They are moving closer to it as competition for water increases.
If you want their water, buy it.