Water supply organizations control a large portion of agricultural water rights in the western U.S. This paper applies cooperative and club theory models to analyze the response of these organizations to potential rural-to-urban water transfers. Application of the models is to a proposed water trade between Southern California's Imperial Irrigation District and Metropolitan Water District. The analysis reveals that substantial intraorganizational conflict can emerge in response to specific transfer proposals, and this conflict may be sufficient to defeat or delay otherwise beneficial transfers. Poorly defined property rights and a failure to align these rights with operational control in the water supply organization are pinpointed as key sources of conflict.