This has been going on for years in Georgia, Tenessee and Florida but look for similar things to happen in Arizona, especially the Las Vegas/Reno areas and others.

http://www.ajc.com/metro/content/metro/stories/2008/03/08/apdrought_0309.html

"Associated Press
Published on: 03/09/08
Washington — Lawyers for Georgia, Florida and Alabama are gearing up again for battle, now that tri-state water negotiations have collapsed and the federal government says it will decide how to dole out water rights in the region.

At least eight lawsuits are pending involving the two-decade water feud, and state officials said they expect heavy activity in those cases this year."

http://www.ens-newswire.com/ens/feb2008/2008-02-05-093.asp

WASHINGTON, DC, February 5, 2008 (ENS) - The U.S. Court of Appeals in Washington today ruled that a secret settlement agreement entered into between Georgia, the U.S. Army Corps of Engineers, and Atlanta-area water users is illegal under federal law.
The agreement, which was signed in 2003, would have allocated nearly 25 percent of Lake Lanier, a federal reservoir on the Chattahoochee River in northern Georgia, to supply Atlanta's 470,000 residents with water.


The Buford Dam impounds Lake Lanier in northern Georgia. (Photo courtesy U.S. Army Corps of Engineers)

This would have resulted in major reductions in the supply of water reaching the downstream states - Alabama and Florida. These states fought Georgia's bid for more water, saying "the change would constitute a major operational change, which requires Congressional approval under the Water Supply Act."