In the 1988 case California et al. v. United States et al., the state of California and several irrigation districts challenged a federal reclamation law that limited water delivery to certain lands, arguing it violated their rights under prior contracts with the government. The Supreme Court ruled in favor of the U.S., stating that Congress had not intended for these contracts to limit its ability to make future changes in policy regarding land use or water allocation. Therefore, even though some farmers would no longer receive federally subsidized water due to this new legislation, they were not entitled to compensation because their original agreements did not guarantee uninterrupted access regardless of subsequent laws passed by Congress.

In the dissenting opinion for California et al. v. United States et al., Justice O'Connor, joined by Chief Justice Rehnquist and Justices White and Scalia, argued that the majority's decision to uphold federal regulations on state water projects was an overreach of federal power. They contended that Congress did not intend for such a broad interpretation of its powers under the Federal Power Act (FPA). The dissenters believed that states should retain control over their own resources unless explicitly stated otherwise in legislation. Furthermore, they pointed out inconsistencies between this ruling and previous cases regarding similar issues with other natural resources like gas or oil reserves. Ultimately, they disagreed with the majority’s view about how much authority Congress intended to give to federal agencies in managing state-owned water projects.