The conflicts and control of water in California have been the source of political careers, personal fortunes, and Hollywood movies. Water has characteristics of both public and private property. Over the past century, water management and development have shifted from small local institutions to predominately large public agencies. The impetus for changing institutions came from physical, economic, and technical shifts; the implementation was manifest political power.

This chapter presents a brief overview of the physical and economic characteristics of California's Central Valley, followed by a historical overview of economic development in the valley, including water law and the major actors in the development and management of water. Emerging problems in the Central Valley water industry are then presented, and the policy solutions to these problems are developed. These conclusions lead to the prediction that California's water institutions are about to change substantially again.

Physical and economic setting

Hydrologically, the Central Valley is divided into three basins, the Sacramento, San Joaquin, and Tulare Lake, based on the drainage areas of rivers and streams. In their unimpaired state, all Central Valley rivers drained to the ocean through the Sacramento–San Joaquin Delta and San Francisco Bay. Owing to reservoir and aqueduct construction, the Tulare Lake Basin is closed, with outflows occurring only in extremely wet years.

Interbasin transfers have concentrated on moving water from the northern half of the state, which receives 75 percent of the precipitation, to the southern half, which receives only 25 percent but contains two thirds of the population.