PPIC Fact Sheet: California’s Water Market

From the PPIC:

Water marketing is an important tool for managing scarce supplies.

    • In California’s water market, buyers and sellers trade water through short- and long-term leases as well as permanent sales of their water rights. Trading enhances flexibility in water management.
    • Short-term transfers lessen the economic impact of shortages during droughts by shifting water to activities and places where the lack of water will be more costly. Long-term and permanent transfers accommodate geographic shifts in water demand as the economy changes and the population grows.
    • Today, most trading involves surface water. Some groundwater trading occurs within specially managed basins; this is likely to expand as groundwater users in other basins implement the Sustainable Groundwater Management Act (SGMA).

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The first SGMA groundwater market is trading: The importance of good design and the risks of getting it wrong

A groundwater market, which caps total pumping within one or more basins, allocates portions of the total to individual users and allows users to buy and sell groundwater under the total cap, is a promising tool for basins implementing California’s Sustainable Groundwater Management Act (SGMA).

While the benefits of a cap-and-trade system for both groundwater users and regulators are potentially very large, so too are the risks.

An electronic bulletin board that introduces buyers and sellers, like craigslist.org , is not a market. Nor is a sophisticated financial application that matches participants and executes financial transactions. A water market is a complex interaction of individuals and institutions — the product of a large number of people, structures, operational mechanisms and rules. Without careful design, a water market can do harm.. ... ”

Read more from California Agriculture here:  The first SGMA groundwater market is trading: The importance of good design and the risks of getting it wrong

A Craigslist for water trading? Learn how this new water management platform works

Eric Averett is general manager of the Rosedale-Rio Bravo Water Storage District in Kern County, California, which is one of 21 regions required by the state to balance groundwater demand and supply within 20 years under the Sustainable Groundwater Management Act. Rosedale is home to approximately 27,500 acres of irrigated cropland and 7,500 acres of urban development. Groundwater demand there exceeds supply by approximately 5,000 acre-feet per year. To inform landowners about their water budgets, Rosedale partnered with EDF, Sitka Technology Group, WestWater Research and local landowners to co-develop a new online, open-source water accounting and trading platform. We asked Eric to answer a few questions about how the platform will help local landowners and how it can be expanded to other parts of the Central Valley.

Click here to read this article.

GROUNDWATER MARKETS: A case study of the Fox Canyon Groundwater Market

The Nature Conservancy’s Sarah Heard goes through the mechanics of the market, the first to be formed since the passage of SGMA

A water market is much like a stock market for water​, but instead of ​trading stocks and bonds, sellers in water markets offer short- or long-term ​transfers of water.  Water ​trading can be an effective tool for water managers to provide flexibility in the allocation and use of water by moving water to where it is needed most, especially during times of drought. Water transfers can also help accommodate shifts in water demand over the long-term.  However, water markets must be carefully designed so they function effectively while avoiding adverse impacts to other water users or unreasonable impacts on the environment.

Sarah Heard is Director of Conservation Economics & Finance with the California chapter of The Nature Conservancy where she does market-based work on strategies to support the biodiversity of the lands, waters, and oceans by incorporating economic and financial tools.  At the Groundwater Resources Association’s Western Groundwater Congress, Ms. Heard gave this presentation on the Fox Canyon Groundwater Market, the first groundwater market since the passage of the Sustainable Groundwater Management Act.

Click here to read this article.

Rosedale-Rio Bravo Water Storage District launching new pilot program

“For years, water has been a hot topic of debate for many throughout Kern County and the Central Valley.  Farmers, in particular, have been engaged in a battle over their water usage for seemingly forever. That’s one reason why one local water district is trying a new approach.

“A water market, in essence, that allowed users or landowners within our district to manage the resource more effectively,” Eric Averett, of the Rosedale-Rio Bravo Water Storage District, said. … ”

Read more from Bakersfield Now here: Rosedale-Rio Bravo Water Storage District launching new pilot program

Market-based program would encourage farmers to buy, sell local groundwater

“A local water district is developing a novel, market-based groundwater trading program that, if successful, could be expanded or copied to help Central Valley farmers cope with new state restrictions against over-pumping the region’s aquifers.

The Rosedale-Rio Bravo Water Storage District’s pilot program, set for testing later this summer or early fall, would allow certain landowners to buy or sell groundwater to or from another property owner within the district. … ”

Read more from Bakersfield.com here: Market-based program would encourage farmers to buy, sell local groundwater

A winning approach for managing groundwater in the San Joaquin Valley

Alvar Escriva-Bou, Ellen Hanak, and Josué Medellín-Azuara write,

“The San Joaquin Valley is in a time of great change. Decades of groundwater overuse have caused drinking water and irrigation wells to go dry, increased the amount of energy required to pump water, harmed ecosystems, and reduced the reserves available to cope with future droughts.

Groundwater overdraft has also caused land to sink, damaging major regional infrastructure, including canals that deliver water across the state.  These problems spurred the enactment of the Sustainable Groundwater Management Act (SGMA), which requires local water users across California to bring groundwater use to sustainable levels by the early 2040s.

With California’s largest groundwater deficit, the San Joaquin Valley is ground zero for implementing SGMA. … ”

Read more from the PPIC blog here:  A winning approach for managing groundwater in the San Joaquin Valley

“All Hands on Deck” Approach Needed to Manage Growing Water Stress in the San Joaquin Valley

New report finds at least half a million acres of farmland will need to be fallowed to balance groundwater use with supply

The San Joaquin Valley, California’s largest agricultural region and an important contributor to the nation’s food supply, is on the brink of a major transition as it seeks to balance its groundwater accounts.

Implementing the state’s Sustainable Groundwater Management Act—which requires overdrafted groundwater basins to achieve balance between supply and demand by the 2040s—will bring great change to the valley’s agricultural sector, regional land use, and the local economy.

The pace of groundwater pumping accelerated during the 2012–16 drought. Over the past three decades, the valley’s annual groundwater deficit has averaged nearly 2 million acre-feet—or about one Don Pedro Reservoir’s worth of water a year.

Only about a quarter of this deficit can be filled with new supplies at prices farmers can afford. Ending overdraft could require taking at least 500,000 acres of irrigated cropland out of production.

These are among the key findings of a report released today by the PPIC Water Policy Center.

The new report breaks the issues into three key areas and presents priority actions for tackling them: balancing water supply and demand, addressing groundwater quality challenges, and fostering beneficial solutions to water and landuse transitions.

“The large and complex scope of the changes coming to the valley will require cooperative solutions that bring multiple benefits and get more ‘pop per drop’ from scarce water supplies,” said Ellen Hanak, director of the PPIC Water Policy Center and a coauthor of the report.

One promising solution is to increase water trading, which can significantly reduce the impacts of ending groundwater overdraft by allowing farmers to maintain the crops that generate the most revenue and jobs. If farmers can freely trade water within their basin, it will reduce the costs of this transition by nearly half. And if they can also trade more broadly across the region, it will cut their costs by nearly two-thirds.

In addition to water shortages, the valley must respond to serious water quality problems. More than 100 rural communities have persistently contaminated tap water. Valley farmers must also meet new requirements for protecting groundwater from the buildup of nitrate and salts. The most promising tool for augmenting supplies—groundwater recharge—poses some tradeoffs with water quality goals if not managed properly.

“The solutions to the valley’s water quality problems don’t fall neatly into traditional political and institutional boundaries―and with 120 new groundwater agencies, it’s gotten even more complex,” said Sarge Green, a coauthor of the report and director of the Center for Irrigation Technology at Fresno State. “Many players will need to be involved in devising long-term solutions to these complex problems.”

The lands fallowed to achieve groundwater balance could be converted to uses such as solar energy, groundwater recharge, and restored habitat. Getting the greatest benefit from idled lands will require new levels of planning and cooperation.

Governor Newsom focused on the valley’s groundwater, water quality, and poverty problems in his recent State of the State speech and included funds to address safe drinking water problems in his first budget.

The PPIC report recommends key areas where state leadership could help—including providing clarity on how much water is available for recharge, establishing a reliable funding source for safe drinking water challenges, and supporting broad planning processes, among others.

“Leadership from state and federal partners will be critical,” said Hanak. “But the valley’s future is in the hands of its residents. The stakes are high—but the costs of inaction are higher.”

The report, Water and the Future of the San Joaquin Valley, was supported with funding from the S. D. Bechtel, Jr. Foundation, the TomKat Foundation, the US Department of Agriculture, the US Environmental Protection Agency, and the Water Foundation. In addition to Hanak and Green, it was authored by Alvar Escriva-Bou, a research fellow at the PPIC Water Policy Center; Brian Gray, a senior fellow at the PPIC Water Policy Center; Thomas Harter, the Robert M. Hagan Endowed Chair in Water Management and Policy at UC Davis; Jelena Jezdimirovic, a research associate at the PPIC Water Policy Center; Jay Lund, director of the Center for Watershed Sciences at UC Davis; Josué Medellín-Azuara, associate professor at UC Merced; Peter Moyle, associate director of the Center for Watershed Sciences at UC Davis; and Nathaniel Seavy, a research director at Point Blue Conservation Science. A public event on the report’s findings will take place at Fresno State on February 22.

PPIC Seminar Fresno State February 22, 2019

Coverage by Don Wright, Water Wrights:

“The Public Policy Institute of California held a seminar on Friday, February 22, 2019 at California State University Fresno’s Satellite Student Union. “Water and the Future of the San Joaquin Valley” was the title of the day’s event. This is also the title of the report prepared by PPIC and FSU.

Things kicked off at 8:30am with delicious sausage, egg and cheese English muffin sandwiches and fresh pastries with coffee and orange juice. Why even mention this? I go to a lot of meetings and I notice when folks start with a decent breakfast the day really does go better. PPIC has a reputation for staging pretty good shows and starting with good food really tied the “ag thing” together. They did something right because the room was packed with folks standing in the aisles. There were more than 300 people is my guess. … “

Click here to continue reading at Water Wrights:  PPIC Seminar Fresno State February 22, 2019

Valley agriculture and environmental experts discuss potential water exchange program

From the Fresno State Collegian:

“Agricultural and environmental leaders spoke at the Water Market Exchange Symposium in the Satellite Student Union on Jan. 24 to share their perspectives on a water market exchange program.  The symposium featured speakers from water agencies, environmental interests, disadvantaged community interests and water market administrators.

According to Fresno State California Water Institute program manager Laura Ramos, the Sustainable Groundwater Management Act (SGMA) would result in reductions of the supply of groundwater, creating the need for a creative and innovative solution to efficiently manage it. … ”

Read more from the Collegian here:  Valley agriculture and environmental experts discuss potential water exchange program