Mariposa County officials claim that in coming years the county will be entitled to a substantial portion of revenues from the New Exchequer Dam hydroelectric project.
The Merced Irrigation District, which owns the power generating project, disagrees.
In an effort to settle the dispute, MID officials have turned to the Merced County Superior Court to interpret a contract that dates to 1960.
"There's a lot at stake," said John Sweigard, the MID's general manager. "We're talking millions of dollars a year."
When MID officials proposed the power generation project on the Merced River in 1958, Mariposa County officials opposed the plan -- which sought to appropriate 900,000 acre-feet of water a year for power generation and irrigation. An acre-foot is the amount of water it takes to cover one acre, one-foot deep.
In an effort to win the support of the upstream community, the MID entered into negotiations with Mariposa County.
A final deal, which is the subject of the current dispute, allowed for Mariposa County to build water delivery infrastructure at the MID's expense.
Under the contract, payments on any water projects would come from 20 percent of the gross yearly hydroelectric project revenue or 25 percent of the projects' profits.
The payments were scheduled to continue for 50 years or until "the cost of financing construction of a project by the county to fully exercise and utilize the water from the South Forks of the Merced River ... has been repaid."
In 1992, Congress exempted from the Wild and Scenic Act, an eight-mile stretch of the South Fork of the Merced River, for the purpose of the Saxon Creek Project, which is permitted to pump 5,000 acre-feet of water a year.
MID officials have offered to pay for the Saxon Creek Project with revenue from the hydroelectric project to end the contract.
However, according to the court documents, Mariposa County expects the payments to continue even after the Saxon Creek Project is paid for, and that those payments would be used for purposes other than water projects.
"It's an extremely important issue for Mariposa County," said Rick Benson, Mariposa County chief administrative officer. "It would allow the county to maintain its level of service for law enforcement and other levels of county government."
The purpose of the contract was to allow Mariposa County to develop a project that met its water needs, Sweigard said. "I believe it's a water rights settlement. And they believe it's a royalty."
Mariposa County officials declined to comment Wednesday on the substance of the legal dispute.
Under the contract, the payments are scheduled to start one year after the MID takes control of revenue from the hydroelectric project in July 2014.
Reporter Joshua Emerson Smith can be reached at (209) 385-2486 or firstname.lastname@example.org.