"Regrettably, it will necessarily be a solution being directed to the states instead of our much hoped for solution coming from the states," he wrote in the letter released Saturday.
Kempthorne said the talks, which began last fall, yielded more progress in three months than at any time during the last 18 years. "We have achieved some, but not all, of our objectives," he said.
Kempthorne said it was "unfortunate" the states will move forward with ongoing litigation while the federal agencies proceed.
"It is our hope that developments in the courts will not frustrate further progress in resolving the remaining technical issues we face together," he said.
The three states have been feuding for nearly two decades over water rights in the Apalachicola-Chattahoochee-Flint and the Alabama-Coosa-Tallapoosa river basins.
Georgia is fighting to hold back more water in federal reservoirs around Atlanta to serve its growing population.
Florida and Alabama argue that Georgia hasn't adequately planned for its growth. The extra withdrawals, they argue, would damage the environment and dry up river flows into their states that support smaller municipalities, power plants, commercial fisheries and industrial users like paper mills.
With a record drought gripping the region last fall, President Bush dispatched Kempthorne to try to settle the dispute.
But the talks appeared doomed from the start, with Florida almost immediately backing away from an initial agreement to allow Georgia to temporarily hold back more water in Lake Lanier outside Atlanta as the governors worked toward a longer-term pact by Feb. 15.
After a series of meetings, the governors missed that deadline but said they would continue talking until March 1.