This tension between Western states was anticipated by John Wesley Powell, the great frontier explorer and head surveyor of the West for the federal government back in the 1880s. (You might remember him from history class as the one-armed maniac who lead the first European American expedition down the then-ferocious Colorado River through the Grand Canyon.)
Powell saw that water management—mostly for irrigation—would be a pivotal issue throughout the arid Southwest, one that state governments would be wrestling with forever. So he proposed state boundaries based on watershed, as seen on his map below.
From today's bone-dry Western perspective, it seems like Powell's proposals would've made for much less strife and conflict between states. One of his warnings, delivered at an irrigation conference in 1883 (PDF), seems particularly prescient: "Gentlemen, you are piling up a heritage of conflict and litigation over water rights, for there is not sufficient water to supply the land."
As Frank Jacobs writes on Strange Maps, "Those borders might look pretty alien right now, and Powell's proposal far-fetched, but he was hardly operating from the lunatic fringe."
Powell was convinced that only a small fraction of the American West was suitable for agriculture. His Report proposed irrigation systems fed by a multitude of small dams (instead of the few huge ones in operation today) and state borders based on watershed areas...
Powell foresaw that irrigation issues would be the principal bone of contention in the West. He therefore proposed that drainage districts, as shown on this map, should be the fundamental unit of government in the West.
Unfortunately, the rail companies had a different idea, lobbying for large-scale settlement and massive agricultural development. One dissenting supporter of Big Agriculture argued that, "the rain follows the plough."
History (and climate change) have made a mockery of that theory. Alas, Powell's concept for state or district borders defined by watersheds will remain one of that biggest "What If's" in our nation's history.