In Mises Daily, Ryan McMaken discusses the effects of decades of Federal control over water in the American West:
Water shortages occur in the West not because too many people are flushing their toilets too often, but because agriculture, heavily subsidized through cheap water made possible by the federal government, continues to grow crops in places that would never support agriculture on a similar scale in a free market. Indeed, agriculture uses well over 80 percent of all the water used in Western states, and most of that water is stored, pumped, and diverted using dams, pumps, and aqueducts paid for by the U.S. taxpayer.
As a result, growers don’t have to face the real-life costs of transporting water to their farms. They only need consider the subsidized price, which is far below what it would be in a private market. Consequently, water usage for growers across the West is much greater than what it would be were there a functioning market for water in the region.