10 cents a gallon, it says, and they haul it themselves.

Yes, they were buying water that the municipality could sell. And they got that water. The article suggests that the municipality is rationing its residents' water, so they don't have excess water to sell to outsiders.

Basically, the idea that I'm required to sell something is silly. No one said any contracts were broken. People got what they paid for.

Right, but the system needed maintenance, and people would still need to ration water and not water their lawns, even if the water they sell to outsiders (less than 1%) stopped.

It is silly on the towns part as they lost far more. The rural restedents were paying a lot more than the locals.