The essence of this case is: was his pond water entirely what fell on his land, or did he actually divert a stream that ran into the property from outside?
No. Water which falls on or runs under property is subject to first use or prior use claims. It is a property right which attaches to the property which can establish prior use in a timeline.
Most of the wells around Sedona, down through Cottonwood, Clarkdale, Lake Montezuma, Camp Verde, anywhere along the Verde Vally all the way to Phoenix are taking water which legally belongs to Salt River Project. SRP, if they wanted to be pissy, could shut them down or charge for the water and it may come to that at some future date. Right now SRP has bigger fish to fry but they are well aware of the depletion rate in the watershed.