The U.S. District Court in Fresno Tuesday refused to stop Millerton Lake water from being sent to wildlife refuges and farmers with historic rights on the Valley's west side.
East San Joaquin Valley farmers, facing a zero allocation of Millerton water, asked the court last week to stop the flow.
Federal officials this month began releasing water, and about 200,000 acre-feet is expected to be released to the west side by late August.
The lawsuit, filed by Friant Water Authority, was aimed at the U.S. Bureau of Reclamation, which supplies water to refuges and landowners with historic rights.
In rejecting the bid for a temporary restraining order, the court said the water allocation is a result of the way Congress wrote laws, not government regulators prioritizing fish and wildlife above farmers and the economy.
Friant Water Authority leaders said they were disappointed in the court's decision, but they still will get their day in court.
"This is an interim ruling by the court and not a final decision on the merits," leaders said. "So FWA will still have a chance to prove its case."