The canal was surveyed and built under the direction of Colonel Nettleton, who was the Fountain Colony engineer.

The dam for the canal was 1.5 miles up-stream from Colorado City, and the canal was 11 and a half miles long. "The first ditches in the city were made by a plow turning a single furrow".

The canal was completed on November 27th, 1871 and on the 28th, water was let in. The water broke through where one of the flumes (or aquaducts) were, and created a lake on where Thorndale Park is now.

Colorado City was against the canal, for they felt it depleted their water supply, and also felt that it presented a danger to the children. On January 13, 1872, the canal ran water all the way through town, and people began plans to plant trees, gardens and lawns in the spring.

The canal was six feet wide and two and a half feet deep. It had a capacity of twenty million cubic inches of water and had irrigating heads on a grade of four feet to the mile. It had a right-of-way of ten feet on each side. Its number was twenty-eight and it had a priority of thirty; which means that the canal's water was to be used for domestic and irrigating purposes.

In the spring of 1872 General Palmer hired Mr Sweet to go to Canon City and dig up six thousand Cottonwood trees. The work was started in April, and the trees were planted twenty-five feet apart on the sides of the canal and its tributary ditches. Workers received ten cents for each tree planted, and after they were planted an ordinance was passed prohibiting the trees from being used as hitching posts. Since then, most of the original trees have died, and have been replanted.

In 1872 General Cameron, Superintendent of the Fountain Colony, delivered a series of proclamations to keep the water in the ditches clean. He asked people not to throw refuse, to rake up shavings, and other trash, and to not let swine run loose in the streets. He also urged, that since the water was sometimes used for laundry, that people should expectorate (spit) on the sidewalks, and not in the ditches.

Since the canal water was not used for drinking, drinking water had to be brought from the springs in Manitou and those in Monument Valley. Wells were dug in town, and were about sixty-five feet deep, and were lined with planks. In 1883, locusts plagued the residents, and clogged the wells, leaving the town was almost completely dependent on mineral and spring water. In 1878 a pipe was laid and mountain water was brought to the town.

In 1872, Boulder Street reservoir was built to receive the overflow from the canal, but filled in with dirt, and planted in 1900, and is now Boulder Park. In 1874 the City Council constructed six cisterns in the business district, holding 100 barrels of water apiece, to be used in case of fire. These cisterns were slowly filled in about 10 years later.

The Colorado Springs Company gave up their rights to the canal to the city on August 25, 1877, and the city paid one dollar for the quit claim deed, which in part read:

"That certain irrigating ditch or canal as now located and constructed and known as the El Paso Canal commencing with a ditch head on the Fountain qui Bouille."

The Colorado Springs Company still retained the right to use the water free of charge when it passe over land owned by the company. The deed also stated that the city could only charge tax for upkeep, superintendence, or enlargement of the canal; and were not allowed to make a profit from the canal.

In 1878 a pipeline was constructed for $80,000 to connect Ruxton Creek with the Colorado Springs. A reservoir was constructed on top of the mesa, above the canal. It held 1,250,000 gallons, and the excess was drained into the canal.

Between 1877 and 1880 many attempts were made to get Monument Creek water into the city irrigation system, but after flumes broke down, the city gave up the idea.

The canal started to lose its usefulness, because of new water systems coming from Pikes Peak. There were frequent leaks and flumes broke down regularly. Sometimes, the rules were broken; for example, fire hydrants using canal water were drained:
"Water Commissioner Frost gives us to understand that the ordinance in reguard to the use of water from the hydrants for irrigation will be strictly enforced. He has, since the main ditch has been out of repair, winked at the violators of this ordinance, but as the reservoir was almost empty, drained, yesterday he will have to be careful."

In 1886 a new flume was built over Monument Creek to replace the old one. It was the largest flume every to be erected for the canal. It was 175 feet long and was well above the high water mark. People did not like the canal to be stopped for all these repairs and improvements. It affected people's gardens and lawns, and sometimes the water would be off for as much as 23 days for repairs.

In the early 1900's the canal started to go underground as parts were covered by cement, replaced with pipes, and parts discontinued. The water stopped flowing totally about 1954 and the city gave up their rights to all the parts for the canal in 1971.