In the early 20th century the valley became the scene of a struggle between local residents and the city of Los Angeles over water rights. William Mulholland, superintendent of the Los Angeles Department of Water and Power (LADWP) planned the 223 miles (359 km) Los Angeles Aqueduct, completed in 1913, which diverted water from the Owens River. Much of the water rights were acquired through subterfuge, with purchases splitting water cooperatives and pitting neighbours against each other. The purchases led to anger among local farmers, which erupted in violence in 1924, when parts of the water system were sabotaged by local farmers.
Eventually Los Angeles acquired a large fraction of the water rights to over 300,000 acres (1,214.1 km2) of land in the valley such that inflows to Owens Lake were almost completely diverted. This acquisition was made following negotiations in which Los Angeles and the Owens Valley farmers were engaged in a bilateral monopoly. By modern estimates, Los Angeles would have been willing to pay up to $8.70 per acre-foot of water. Eventually the average actual transaction price was near $4.00 per acre-foot, as the next best option was continuing to use the land for agricultural uses, which fetched a much lower price. As a result of these acquisitions, the lake subsequently dried up completely, leaving the present alkali flat which plagues the southern valley with alkali dust storms.
In 1970, LADWP completed a second aqueduct from Owens Valley. More surface water was diverted and groundwater was pumped to feed the aqueduct. Owens Valley springs and seeps dried and disappeared, and groundwater-dependent vegetation began to die.
Years of litigation followed. In 1997, Inyo County, Los Angeles, the Owens Valley Committee, the Sierra Club, and other concerned parties signed a Memorandum of Understanding that specified terms by which the lower Owens River would be re-watered by June 2003. LADWP missed this deadline and was sued again. Under another settlement, this time including the state of California, Los Angeles promised to re-water the lower Owens River by September 2005. As of February 2005, LADWP announced it was unlikely to meet this extended deadline. As of 2008, Los Angeles has re-watered the lower Owens River.
In July 2004, Los Angeles mayor James Hahn proposed barring all future development on its Owens Valley holdings, by proposing a conservation easement for all LADWP land. As of October, 2004, Inyo County officials seem to be resisting the offer of the easement, perhaps due to the prior history of mistrust over LADWP actions.