Lake Powell regulates the erratic flows of the Upper Colorado River, storing water in wet periods for use during multi-decadal dry spells. Reservoirs also integrate consumptive use (CU) at or above the reservoir. In colloquial terms, a reservoir retains a memory of all previous inflows, depletions and outflows and it preserves this memory until it spills or empties completely. This article describes and demonstrates the nature of reservoir memory, explores the physical effects of persistence of reservoir memory, and illustrates what those physical effects mean for intra-state water management in the Upper Colorado River Basin. The period between when Lake Powell spills and subsequently empties will typically be several decades in length, so a small increase in Upper Basin CU will accumulate over that period and eventually lead to a large deficit in reservoir storage. This leads to two policy consequences: 1) a small annual exceedance of the amount of water legally available for CU in the Upper Basin can lead to a disruptive curtailment of water use under the terms of the Colorado River Compact, and 2) it is impossible to avoid or comply with a curtailment using involuntary cutbacks under a prior appropriation water rights system. A “grand bargain” that involves proportional allocation, or a cap on Upper Division CU in exchange for forbearance of curtailment by the Lower Basin in the event of shortfalls to the Lee Ferry flow obligation would eliminate this complication. This problem will also affect credit/debit-based entitlements.