A North State water agency has filed suit in federal court in Sacramento based on a 77-year-old state law that says water shall not be shipped from its area of origin unless and until the local water contractors’ thirsts have been quenched.In other words, they do not want "foreigners" to buy the water and take it elsewhere.
I got this context from an insider:
...this suit was filed by the Tehama Colusa Canal Authority members who have a similar contract as Westlands and others and are subject to shortages....they are using the State's Area of Origin laws to try and keep more water local to meet existing needs.Here's an update with more background.
...the courts are keeping everything in flux. Also, we have some real problems with the market working when infrastructure is lacking or it is not available due to regulatory restrictions; and the environmental review processes take too much time or are legally challenged...
Bottom Line: Barriers to trade have visible winners and invisible losers, but they always harm society overall (aka, highest and best use, assuming no externalities).