The latest round in the controversy surrounding the New Melones Dam in California has resulted in a substantial legal setback to state efforts to plan water allocation. In a decision by Judge Duniway, the Ninth Circuit has held that the Federal Bureau of Reclamation need not comply with state water permit restrictions when it obtains unallocated waters. In effect, this decision allows the federal government to obtain unallocated waters regardless of state conservation priorities. The central issue in the expected appeal to the Supreme Court will be whether the court correctly decided that the effect of the federal-state relations provision of the Reclamation Act of 1902 is similar to those of the Clean Air Act and the Federal Water Pollution Control Act.