You have been duped. Collecting rain water was not against the law. The guy was in a law suit with the state for years because he built a dam across channels on his property.
http://www.snopes.com/politics/crime/rainwater.asp
Imagine what can happen if private citizens can cut off water that flows through their property at will. They can sell it, blackmail people who need it, etc. It's not unreasonable to require a permit to building a reservoir on your property, because it collects not only rainwater falling on your property, but run-off from land you don't own.
The guy applied for a permit to build the dam, but it was revoked later. The guy manipulated the words to stir up public opinion in his favor.
