This is actually rooted in two competing legal doctrines that were codified in the US, England, and Europe starting in the early 1800s. While I'll be focusing on the history of these doctrines, there's no avoiding getting into their definitions to give the necessary context for later developments.
Overview
Existing US water rights doctrine during Colorado's incorporation and admittance generally followed the riparian doctrine inherited from Roman civil law and expanded in French law. Riparian doctrine holds that water rights come with owning land next to water, which the landowner can make reasonable use of.
Colorado (and other western states) found riparian doctrine inadequate to govern water rights in an arid climate and developed a new doctrine based on prior appropriation. Prior appropriation in a nutshell (more detail below), is a doctrine that prioritizes water rights based on whoever first diverts some of their water for beneficial use.
There is not, in fact, any evidence that rain barrels significantly impact the amount of water that flows downstream, and they were never explicitly banned. The use of rain barrels was mostly a contentious legal issue that was never definitively ruled on because of the nature of prior appropriations and the complex system that enforces water rights.
The legalization of rain barrels occurred in 2016, so I'll not be discussing that due to the 20-year rule (and because it was/is a contentious use, and I don't want to get in a fight with anyone over my home state's water laws)
Riparian Doctrine
Definition
Riparian rights do not confer ownership of flowing water. Flowing water in a natural source is always a public good, like air. What riparian rights do confer is a right to allow water to naturally flow through a property and divert it for something called ordinary/primary uses and something else called extraordinary uses. These have different definitions, but riparian owners are generally entitled to use a reasonable amount of water flowing by their property, so long as it doesn't affect downstream neighbors (e.g. substantially reducing the amount, reducing the flow, or polluting the water).
History of Riparian Doctrine in the US
The sixth-century Institutes of Justinian was one of the earliest legal codes to touch on the riparian/prior possession/prior appropriation question. It codifies running water as res communes, the "negative community" or "things the property of which belongs to no person." Specifically, Title 1 Section 1 includes it in the "following things [that] are by natural law common to all—the air, running water, the sea, and consequently the seashore" (Title 1 Sec 1), while still recognizing that access to water is a right. Landowners were allowed to use and divert water, so long as they did not infringe on others' access, including rainwater - building a structure that obstructed a neighbor's rainfall, for example, was illegal.
However, the Institutes were ambiguous on who owns the right to use flowing water; this ambiguity continued throughout most of Europe, with water rights being governed largely by local laws, prescriptions, and historic customs.
The Napoleonic Code's establishment in 1804 was the watershed year (sorry) for water doctrine. It clearly laid out the foundation of modern riparian doctrine in Article 644:
- He who property borders on a running water... may employ it in its passage for the watering of his property. He whose estate is intersected by such water, is at liberty to make use of it within the space through which it runs, but on the condition of restoring it, at the boundaries of his field, to its ordinary course
US and English courts, lawyers, and legal treatises started referencing the concept of riparian rights in the early 1800s, citing rulings and writings both within and between the two countries, as well as Articles 644 and 645 of the Napoleonic Code. The word "riparian" as a legal term with a precise technical definition first appeared in English-language legal literature in 1833, with credit to others using it in non-published contexts (i.e. correspondence, notes, or spoken in conversation) a few years prior.
English courts went back and forth for a while on prior appropriation and riparian law until it was settled in Mason v. Hill (1833). US courts, however, adopted it very quickly – in part due to an intentional effort to consider more civil law, fueled by a post-Revolutionary closeness with France and reexamination of common law roots after the conflict with England.
Which brings us around to Colorado. The Territory of Colorado was incorporated in 1861, when riparian doctrine had been the established standard in the United States for thirty to fifty years.