The Colorado River Basin covers seven states and parts of Mexico, a drainage area of over 244,000 square miles. Precipitation ranges from 30 to 45 inches in mountainous headwaters areas to less than five inches in desert areas. The historic flows of the Colorado River have varied considerably, both seasonally throughout the year and in dry as opposed to wet periods.

Wide seasonal and yearly fluctuations in Colorado River flows created problems for communities, that depended on Colorado River water for multiple uses, including agriculture, recreation and domestic. In the early 1900's disastrous Colorado River floods caused significant damage to land and communities in the Lower Colorado Basin. California, Arizona and Nevada, the three Lower Colorado River Basin states, grew more rapidly in population and agricultural use than the four Upper Colorado River Basin states of Colorado, Utah, Wyoming and New Mexico. The decision of the United States Supreme Court in the case of Wyoming v.Colorado established the legal principle that the doctrine of prior appropriation controls regardless of state boundaries. When the other states of the Colorado River Basin realized that rapidly growing California had an opportunity to grab the major share of the flow of the Colorado River, the Upper Basin states were concerned to preserve their fair share of Colorado River water. The Upper Basin States, therefore, opposed new major water development in the Lower Basin without assurance of their share of the River.

The water of interstate streams may be allocated by U.S. Supreme Court decree, by federal legislation, or by interstate agreement executed by the affected states and ratified by Congress. After the Wyoming v. Colorado decree, the seven Colorado River Basin states entered into negotiations to better manage the Colorado River, including flood control and water storage, to equitably allocate the Colorado River and to improve water conservation. Delph Carpenter, the Colorado member to the Colorado River Commission, was a key exponent of dividing the water of the Colorado River between the two Basins.

The Colorado River Compact, forged by the states and ratified by the U.S. Congress in 1922, is the foundation for the allocation and management of Colorado River water. In the Compact, the water of the Colorado River is divided at Lee Ferry, just below the present site of Glen Canyon Dam. The compact was written so that it would appear that the waters of the Colorado River would be divided on a 50-50 basis between the Upper and Lower basins. Article III(a) apportions 7,500,000 acre-feet ("AF") of water annually to the Upper Basin and Lower Basin respectively "in perpetuity." In Article III(b), however, the Lower Basin claims it was "given the right" to increase its consumptive use of water by one million AF annually, which might have been innocuous except for Article III(c) of the Compact concerning future deliveries of water to Mexico. In computing any deficiency in deliveries to Mexico, the Lower Basin has held that its total use is 8,500,000 AF, while the only use accorded to the Upper Basin is 7,500,000 AF, a claim to which Colorado has continuously objected.

Based on an estimate of 17 million acre-feet as the annual flow in the Colorado River, under the Colorado River Compact the Upper Basin must deliver 75 million AF over a ten year period to the Lower Basin states. Given the quantification of the United States* delivery obligation to Mexico of 1.5 AF of Colorado River water annually, under the 1944 treaty between Mexico and the United States, and because the average annual Colorado River flow has now been determined to be closer to 13.5 million AF, the Upper Basin's Colorado River yield is less than an average annual 7.5 million AF. The Mexican Treaty, however, could become the subject of protracted litigation among the Colorado River Basin states. There is unlikely to be any agreement between the Upper and Lower Basins concerning the "deficiency" in deliveries to Mexico as defined in Article III (c) of the Colorado River Compact.

The Colorado River Compact, by its terms, provides that it is not effective until approved by the legislatures of each of the signatory states. After the execution of the Compact, California renewed its battle to obtain Congressional authorization for the construction of the Boulder Dam project. The refusal of the Arizona legislature to ratify the Compact, despite the urging of its commissioner, was solved by the Boulder Canyon Project Act of 1928 ("BCP Act"), which specified that the Compact would become effective when ratified by the legislatures of six states. To placate Arizona, the BCP Act provided that the Compact would not become effective until the California legislature had irrevocably agreed to limit California's consumptive use of Colorado River water to 4.4 million acre-feet annually.

The BCP Act also authorized the states of Arizona, California and Nevada to enter into an interstate compact to divide the 7.5 million acre-feet of water apportioned annually to the Lower Basin by the Colorado River Compact. Arizona's refusal to enter into a Lower Basin compact was at least partially laid to rest by the Supreme Court decision in the case of Arizona v.California, and by certain provisions of the Colorado River Basin Project Act of 1968.

The BCP Act also gave Congressional approval for the four Upper Basin states to negotiate a compact dividing among them the 7.5 million AF apportioned to the Upper Basin by the Colorado River Compact. In 1948, the four Upper Basin states agreed in the Upper Colorado River Basin Compact to the allocation of the Upper Basin's share of the Colorado River water on a percentage basis to enable a consistent method of determining allocation, regardless of the varying water supplies of the River as follows: Wyoming = 14%, Utah = 23%, New Mexico =11.25%, and Colorado = 51.75%. Only about 20% of the Colorado River Basin lies within Colorado, but about 70% of the Colorado River flow originates with this state. As a result of the various compacts and the accurate projections of river flows, approximately 3 million AF of depletions is available to Colorado annually under the "Law of the River."

As part of the 1948 Upper Colorado River Basin Compact, Colorado agreed to deliver water to New Mexico from the San Juan River and its tributaries. The state of New Mexico is entitled to approximately 700,000 AF per year from the San Juan River. Over 60% of the surface water in New Mexico flows through San Juan County, including the confluence in Farmington, New Mexico, of the Animas and San Juan Rivers. Approximately 465,000 AF of water is utilized annually by New Mexico water users, including the 110,000 AF transferred through the SanJuan/Chama diversions on the Navajo and Rio Blanco in Colorado to the Rio Grande valley.

Authorized by Congress in 1968, the Animas-La Plata Project ("A-LP Project") would provide water to the Southern Ute Indian and Ute Mountain Ute Tribes in Colorado in settlement of a portion of their reserved water rights claims, and municipalities, industries and agriculture in Colorado and New Mexico. Municipal and industrial water for the towns and industries in San Juan County, New Mexico would total 34,000 AF annually from the A-LP Project.