From a San Francisco State U alum and ex-faculty member now in Poland:
"Whiskey is for drinkin', water is for fightin' over."

I had never heard it until recently, when the BBC World Service started
using it in their promos for a series on World Water Wars, past and to
come. I got curious enough to send an inquiry to the BBC's "One Planet"
program that the water series was on (I think), but they haven't yet
replied.
        The BBC attributes it to Twain, but they've gotten things wrong, and
sometimes exaggerate or make things up, like in their current feud with
Blair and Bush over Inspector Kelly and WMDs.

        If they answer soon, I'll send what they say to you and the list.
        You might write them also: BBC.CO.UK/WORLDSERVICE. Sometimes they're
slow with e-mail, so a real-mail letter to BBC World Service, Bush
House, London UK might actually get you a quicker response. I've heard
announcer sigh that they're getting overwhelmed by the volume of e-mail
they get). They pronounce the words with the end "g" -
/drinking/fighting/, of course.
        KALW-FM in your town has a full satellite link to the BBC, and might
tell you quickly if the series is still on, available to record, and the
name of the producer to write to.
        There are also a couple Twainiacs on the S.F. Chronicle features and
news staff - and they'd know or very quickly find out for you. Twain
wrote for The Chron, when it was The San Francisco Dramatic Chronicle,
and before that for The Call, which I think The Examiner bought and
killed off in the 1960s or so, but they probably archived it.

        My own guess is that if Twain wrote the quote he did so in San
Francisco or as Clemens in Virginia City. Either way, you're close to
the source. Water wasn't so much of an issue in New England -- at least
not then.

Richard Reineccius