From High Country News:

Conservation advocates, including many utilities, have embraced the idea of using water collected from roofs, and stored in cisterns or rain barrels, to reduce reliance on dwindling surface water or groundwater supplies. Yet in Utah, Colorado and Washington, it's illegal to do so unless you go through the difficult -- and often impossible -- process of gaining a state water right. That's because virtually all flowing water in most Western states is already dedicated to someone's use, and state water officials figure that trapping rainwater amounts to impeding that legal right....

Kris Holstrom, who runs an organic farm outside Telluride, Colo. ... asked the Colorado Division of Water Resources for a permit to collect runoff from building roofs -- and was denied. "They felt that the water belonged to someone else once it hit my roof," she says. "They claimed that the water was tributary to the San Miguel River" -- which runs some three miles from her place and is fully allocated to other users downstream....

Elsewhere, the practice thrives underground. In July, a store in Durango, Colo., [the Eco Home Center,] hosted about 30 people at a presentation about water harvesting. Laurie Dickson, owner of the ... Center ... readily acknowledges that she regularly sells such water-harvesting supplies as rain barrels and filters. "It's not illegal to sell the parts. It's kind of like 'don't ask, don't tell.'" ...

Thanks to Prof. Robert Sheridan for the pointer.