A state panel on Tuesday dismissed a $1.55 million fine it levied last year against a Delta-area agency accused of ignoring an order to stop diverting water during the drought.

State water regulators alleged last June that Byron-Bethany Irrigation District in the southern Sacramento-San Joaquin Delta defied a state order issued to dozens of senior water rights holders. The order told them to stop pulling water from streams and rivers due to extremely dry conditions.