Earlier quoted context omitted.
Scarce resources need to be exposed to market forces. The purpose of markets is to allocate scarce resources and price them appropriately.
Even when those resources could be bought by someone who will waste them? We're not talking about something like gold here, we're talking about a resource that is essential for human life. Would you really want someone who's wealthier than you to buy all the water around you just because they can?
If it was regulated and you used your buddy connections to appropriate all the water usage rights then you still have your buddy connections once you have taken my water.