Three major utilities supply treated water to the District of Columbia and surrounding suburbs in Virginia and Maryland: the Washington Aqueduct, a division of the U.S. Army Corps of Engineers; the Fairfax County Water Authority (FCWA), a local political subdivision of the Commonwealth of Virginia; and, the Washington Suburban Sanitary Commission, a bi-county agency of the State of Maryland. The Potomac River supplies 75% of their raw water. The boundary between Virginia and Maryland is at the low-water mark on the Virginia shore of the River. For the past two decades, the three major utilities have cooperated on matters involving water supply to meet the needs of the Washington Metropolitan Area. They are parties to an inter-jurisdictional agreement providing for an equitable allocation of water in times of low flow. They have shared the costs of construction, operation and maintenance of three upstream reservoirs containing in excess of 17 billion gallons of water supply storage. They conduct a 20-year demand forecast every five years, and they have agreed to an equitable formula to share the expense of constructing future water storage that may become necessary. Numerous observers have described their cooperative efforts as a model for the nation. Beginning in 1997, the State of Maryland, claiming ownership of the Potomac River to the Virginia shore, moved to block the FCWA from constructing an offshore drinking water intake on the Virginia side of the River. Even though the project was supported by the two other water utilities, it was vigorously opposed by a handful of environmental activists, by the Governor of Maryland, and by the Maryland legislature. This was the first time Maryland had ever tried to stop Virginia from withdrawing water from the River. The controversy ultimately led Virginia to file suit against Maryland in the Supreme Court to declare that Virginia has the right to withdraw water from the Potomac River without Maryland's consent. The Court accepted jurisdiction over the case and has appointed a Special Master to conduct further proceedings. This paper describes the background of this historic controversy and discusses the lessons it offers to water utilities about the political, regulatory and legal hurdles that can be confronted in developing critical water supply projects.