There are two different principles of water rights in the U.S.
In the eastern states water and land are linked.
In most western states, with a lot of irrigation, water rights are separable from land rights. In drought years, senior water rights holders have first rights to the water, and junior holders have their water cut off. It may not be that Big Government has the senior rights; government is simply enforcing the rights that the senior holders have.
To illustrate in a manner easier to understand, Mexico by treaty has a right to x amount of acre-feet of water from the Colorado River, even though Mexico contributes next to nothing to the flow of the Colorado. In a drought year junior water rights holders in the USA have to do without water so that Mexico and Mexicans can get the water they are entitled to.
For another view, check out the novel ‘The Milagro Bean Field War’ which is about someone in New Mexico taking water that they don’t have a legal right to.