It is the established policy of this state:
(1) That the use of water for domestic purposes is the highest use of water and takes precedence over all appropriative rights, if it is exercised in a manner consistent with public interest as provided in § 46-1-2;
(2) That the state may, through its institutions, facilities, and properties, and a water distribution system may acquire and hold rights to use water, which rights shall be protected to the fullest extent necessary for existing and future uses, but neither the state nor any water distribution system may acquire or hold any right to waste any water, to use water for other than its own purposes or to prevent the appropriation and application of water in excess of its reasonable and existing needs for useful purposes by other persons, subject to the rights of the state or a water distribution system to apply the water to use whenever necessity therefor exists.