Speaking of that, The Economist has a good update of Water in the West. Here's the relevant bit:
Farmers use the great majority of the West's water, which they get at bargain rates. Even in California, by far the most populous state in the region, four times as much water is poured onto farmland as runs out of taps or is sprinkled over lawns. Farmers in the Imperial irrigation district, east of San Diego, pay $17 per acre-foot of water (that is, enough to flood an acre of land a foot deep, equivalent to 1.2m litres). In San Diego a household that used the same amount in a year would pay $1,311.
Bottom Line: Few places in the world do a good job at managing their water. The most common cause is treating water as a "common-pool" good (take what you want, we can all share) when it is really a "private" good (the water I get is the water you do not). Poor management under common pool guidelines eventually results in shortage. When this happens, institutions that previously "worked" cannot cope, and people fight. Look for the pattern -- you'll see it everywhere.