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Prior-appropriation water rights
Prior appropriation water rights are established on the appropriation doctrine developed in Western states. These water rights are different from riparian water rights, which are applied in eastern states. In the western states, water supplies are very limited and must be allocated sparingly based on the productivity of its use. The right is also allotted to those who are “first in time of use”

The appropriation doctrine originated in California around the time of the Gold Rush where miners were looking for ways to increase the amount of water available for mining operations. The Irwin v. Phillips case is what brought the water appropriation problems to light at this time. Matthew Irwin diverted a stream for his mining operation. Shortly after, Robert Phillips started a mining operation downstream and eventually tried to divert the water back to its original streambed. This case was taken all the way to the California Supreme Court where the court ruled in favor of the appropriation law.

Overview
The legal details vary from state to state; however, the general principle is that water rights are unconnected to land ownership, and can be sold or mortgaged like other property. These rights can be lost over time if non-use of the water source is demonstrated or if the water has not been used for a certain number of years. 

There are four essential elements: intent, diversion, beneficial use, and priority. The first person to use a quantity of water from a water source for a beneficial use has the right to continue to use that quantity of water for that purpose so long as intent in shown thrown the acquisition of a permit. Subsequent users can use the remaining water for their own beneficial purposes provided that they do not impinge on the rights of previous users; this is the priority element of the doctrine. In addition to this, a user may not change the intent in which he is appropriating water such that the change hinders the use by another. These Preservation of Conditions were granted to the second user after Farmers High Line v. City of Golden (CO 1954).

Beneficial use is commonly defined as agricultural, industrial or household use. Ecological purposes, such as maintaining a natural body of water and the wildlife that depends on it, were not initially deemed as beneficial uses in some Western states but have been accepted in some jurisdictions. The extent to which private parties may own such rights varies among the states.[4] Each water right has a yearly quantity and an appropriation date. Each year, the user with the earliest appropriation date (known as the "senior appropriator") may use up to their full allocation (provided the water source can supply it). Then the user with the next earliest appropriation date may use their full allocation and so on. In times of drought, users with junior appropriation dates might not receive their full allocation or even any water at all.

When a water right is sold, it retains its original appropriation date. Only the amount of water historically consumed can be transferred if a water right is sold. For example, if alfalfa is grown, using flood irrigation, the amount of the return flow may not be transferred, only the amount that would be necessary to irrigate the amount of alfalfa historically grown. If a water right is not used for a beneficial purpose for a period of time it may lapse under the doctrine of abandonment. Abandonment of a water right is rare, but occurred in Colorado in a case involving the South Fork of San Isabel Creek in Saguache County, Colorado.[5]

For water sources with many users, a government or quasi-government agency is usually charged with overseeing allocations. Allocations involving water sources that cross state borders or international borders can be quite contentious, and are generally governed by federal court rulings, interstate agreements and international treaties. Even though water markets are increasingly gaining ground, many have criticized the prior appropriation system for failing to adequately adjust to society's evolving values. For example, the vast majority of water in the West still is allocated to agricultural uses despite the cries for additional water from growing cities. Similarly, environmentalists and those who use rivers for recreational and/or scenic purposes have demanded that more water be left in rivers in streams. The prior appropriation system has in many ways inhibited these calls for change.[6]

Prior appropriation laws in other states
The appropriation doctrine was adopted in Colorado in 1872 when the territorial court ruled in Yunker v. Nichols, 1 Colo. 552 (1872), that a non-riparian user who had previously applied part of the water from a stream to beneficial use had superior rights to the water with respect to a riparian owner who claimed a right to use of all the water at a later time. The question was not squarely presented again to the Colorado Court until 1882 when in the landmark case, Coffin v. Left Hand Ditch Co., 6 Colo. 443 (1882), the court explicitly adopted the appropriation doctrine and rejected the riparian doctrine, citing Colorado irrigation and mining practices and the nature of the climate. The decision in Coffin ruled that prior to adoption of the appropriation doctrine in the Colorado Constitution of 1876 that the riparian doctrine had never been the law in Colorado.[1][2] Within 20 years the appropriation doctrine, the so-called Colorado Doctrine, had been adopted, in whole or part, by most of the states in the Western United States that had an arid climate.[3]

In 1967, Texas passed the Water Rights Adjudication Act in regards to surface waters such that the allocation of these waters was under a unified permit system. 

California, Kansas, Nebraska, North and South Dakota, Oklahoma, Oregon, Texas, and Washington recognize a hybrid system that recognizes both riparian and prior appropriation rights. Land owner’s have rights to water on their own land at a certain time at which it is then incorporated into the appropriation system. 

In these cases, riparian rights take precedence, unless they are not claimed by a certain date or are not used within a certain number of years.