I hear that concern from outsiders all of the time. I saw the question being asked in a blog written by Jay and Francy Thompson.
Actually this is a myth. There is an abundance of water in the barren Nevada desert ground in the form of aquifers. Fortunately there are many studies about the quality of the groundwater, being conducted right now! Unfortunately, Mining may (or may not) have tainted some of these aquifers with mercury or lead. 
The Colorado Compact has also limited Nevada's use of Colorado water. Like a good double edged swored, the Colorado Compact both screwed the barren state of Nevada of it's water resources yet turned around and built Las Vegas to the gambling mecca it is today - with the building of Hoover Dam and bringing the railroad in.
One must always keep in mind that sensationalism always sells in the media.
When I go back home (Nebraska) people always ask about our water problem like we are going thirsty or something. There's no water, what are they going to do? The bottom line is that there is water and they are doing something about it. Let me say this one more time: The USGS is conducting extensive studies in regards to our extensive aquifer system, the quality of water and the geological effect of pumping that water out for public usuage.
We are recovering from a western drought. The Las Vegas Valley Water District has tight watering restrictions and the unaware homeowner can be slapped with a fine by (what I call) the water cops. Many responsible business owners have shut down or are shipping water in for their fountains & pools. Until we see Lake Mead full to the brim again, conservation and awareness is key!
Are we going thirsty? Nope! Will we go thirsty? Nope! Why? Nevada with their 4 electoral votes weren't paid much attention to until they got a whole whopping 5 electoral votes in 2001. Just wait for 2011 when we gain more electoral votes. They know, they are anticipating, that is why they are doing all the research now. They won't let us dry out!
All the Best,
Realtor®
Nevada Realty Solutions - Your Dream, Your Investment, You\'re Home!
8942 Spanish Ridge Avenue
Las Vegas, NV 89148
direct: 702-580-1783
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Renee@ReneeBurrows.com
http://www.ReneeBurrows.com
Thanks for a very interesting and educational post Renee. I learned something today! Media hype has a lot of limitations.
Facinating. Thanks Renee. This is part of what I love about AR - geography lessons & more.
Ozarks Joan
Thank you everyone for the comments!
Kaushik: Correctimundo!
What are the "rules" for car washes? Enquiring minds really want to know.
I've been to LV many times (its only a five hour drive from SD). Its next on my radar for investment. I never even considered water to be a problem. You get more rain (and snow) than we do. Maybe we have the water problem.
Southern California also benefits from the Colorado River Compact. But we did something more to solve our water problem. We constructed a man-made river from Northern California to bring their over abundance of water south. I figure that that type of solution is in LVs future. After all the snow melt on the Sierra Nevadas is massive.
Bill Roberts