Background and Recent History of Water Transfers in California

California Department of Water Resources (DWR), State Water Resources Control Board | July 1st, 2015

The purpose of this paper is to provide a basic understanding of water transfers in California with an emphasis on transfers that move water through the Sacramento-

The purpose of this paper is to provide a basic understanding of water transfers in California with an emphasis on transfers that move water through the Sacramento-San Joaquin Delta (Delta). This paper provides an overview of various types of water transfers, their recent history, and the regulatory setting that governs transfers. In its 1976 report, the Governor’s Commission on Water Rights recognized the importance of water transfers to the future of California’s water supply and made recommendations regarding the need for specific changes to the Water Code to facilitate the transfer of water. Many of these changes were accomplished in the following years and are reflected in the discussions below. Water transfers involve a change in the place of water use, from the water’s historic point of diversion and use, to a new location either within or outside the watershed of origin. Water may be transferred from one user to another for a variety of purposes, including agricultural, municipal and industrial uses. It may also be transferred for environmental purposes such as in-stream flow augmentation and wildlife refuges. Water transfers and exchanges can be temporary (up to one year) or long-term (more than one year, but not permanent) or permanent. Water transfers can be an effective water management tool providing much-needed flexibility in the allocation and use of water in California. Transfers in California are primarily executed to meet dry-year demands rather than to obtain a primary water supply for either agricultural or municipal development. Transfers are particularly useful for meeting critical needs during drought periods. Transfers, however, must be carried out in a responsible manner in order to assure that they do not result in adverse impacts to other water users or unreasonable effects to the environment.

California Water Reallocation: Where'd You Get That?

Natural Resources Journal | March 8th, 2017

When thirsty, Californians often avoid going to the market for more water. Instead, they might borrow some from their rich neighbors, they might sue them or more commonly

When thirsty, Californians often avoid going to the market for more water. Instead, they might borrow some from their rich neighbors, they might sue them or more commonly, they simply take more from users without much of a voice (e.g. the fish or future generations). These alternatives are often superior to using markets. Within markets, a surprising detail emerges – it is uncommon for farmers to fallow fields in order to sell water to another user. Rather, many water transfers are structured so sellers can have their cake and eat it too. While some of these transfers rightly bring about jealousy and criticism, they likely do facilitate efficient water use. In discussing these points, I provide a more holistic description of how water users reallocate water as well as a richer understanding of how California’s water market actually works.

Chinatown: Owens Valley and Western Water Reallocation—Getting the Record Straight and What It Means for Water Markets

Texas Law Review | June 1st, 2005

In this Article I examine the notorious Owens Valley water transfer to Los Angeles. Not only was it one of the largest private water exchanges in U.S. history, but it rem

In this Article I examine the notorious Owens Valley water transfer to Los Angeles. Not only was it one of the largest private water exchanges in U.S. history, but it remains pivotal in the political economy of western water reallocation. It involved negotiations over land and water rights between representatives of the city of Los Angeles and approximately eighteen hundred farmers and town lot owners between 1905 and 1935. By 1935, Los Angeles had acquired 95 percent of the farm acreage and 88 percent of the town properties in the valley. The water transferred from Owens Valley, a marginal agricultural area, made possible the growth of Los Angeles, and Owens Valley remains the largest single source of water for the Los Angeles Basin. Yet, the Owens Valley transfer has a very negative legacy and has hindered subsequent efforts to reallocate water from agriculture to urban and environmental uses. The negotiations for water rights and land took thirty years to complete and were often acrimonious. I analyze the negotiations between representatives of Los Angeles and Owens Valley farmers to determine the sources of bargaining conflicts. I also evaluate the economic impact of the exchange on both parties to show that each party was made substantially better off. Yet, the notion of “theft” remains. To explain this, I examine the distribution of the economic benefits of the water and land sale. Distributional issues take on greater importance when there are valuation disputes and the gains from trade are shared very unequally. With these insights, I conclude with lessons for contemporary western water reallocation. 

Colorado River Basin Environmental Transfers Scorecard

Stanford Woods Institute for the Environment and the Bill Lane Center for the American West | March 16th, 2017

The Colorado River and its tributaries support more than 35 million people and irrigate more than four million acres of farmland. At the same time, the river supports 30

The Colorado River and its tributaries support more than 35 million people and irrigate more than four million acres of farmland. At the same time, the river supports 30 fish species found nowhere else on earth and inspires millions of visitors and residents alike with its sheer beauty. However, growing water scarcity caused by increased water use, hydrologic variability and climate change loom over all the Colorado River provides. Click here for follow-up report.

Economic Efficiency of Water Use and Allocation in California: A Scoping-Level Analysis

Delta Vision | July 1st, 2008

This report identifies key issues related to the economic efficiency of water development, allocation and use in California and discusses general policy changes that migh

This report identifies key issues related to the economic efficiency of water development, allocation and use in California and discusses general policy changes that might improve economic efficiency. Policy options focus on water pricing, water transfers, water use efficiency (i.e, conservation) and State development and enforcement policies. Analysis is provided at a scoping level of detail. Some important empirical issues that weigh on the relative merits of potential policy changes are not addressed. Efficiency of water use has never been more important in California. There is a need to save water and money. California has recently made progress in improved economic efficiency of water use, but major issues remain. Also, recent changes in the amount and location of supplies suggest a review of allocation efficiency. There are two important efficiency topics that this paper does not address in detail. First, economic efficiency of water use for ecosystem purposes is a viable concept, but it is difficult to apply given the state of Delta ecosystem science and the current range of possible futures. We can not quantify the relationship between water and ecosystem functions and values. Therefore, our ability to prescribe efficiency changes related to Delta water for ecosystem purposes is limited. Second, this paper also does not address the economic efficiency of major new storage or Delta conveyance facilities. The efficiency of specific water supply projects including regional or local conjunctive use and groundwater storage projects are also not considered. These are being addressed in different forums. This report focuses on other types of uses, allocations and development of water. A variety of potential actions and policies that might improve efficiency in the allocation, use and development of water resources are discussed. Some of the efficiency issues are • Are water allocations under California’s water rights systems efficient? • If there are inefficiencies, could an effective water transfer market increase efficiency? • Are there barriers or constraints to water transfer markets that should be removed? • How could water pricing be changed to increase efficiency? • How could California encourage efficiency in the use and development of water through incentives such as grants and loans, and through enforcement? In all cases, our findings represent potential improvements from the perspective of economic efficiency alone. There are usually other, non-economic considerations which would play into the larger question of the laws and policies that might be changed.

Information for Parties Preparing Proposals for Water Transfers Requiring Department of Water Resources or Bureau of Reclamation Approval

California Department of Water Resources, U.S. Bureau of Reclamation Mid-Pacific Region | December 1st, 2015

Recent California Water Transfers: Implications for Water Management

Natural Resources Journal | December 1st, 1995

The 1991 and 1992 California Drought Emergency Water Banks were the first large water transfer programs in the nation in which the State served as the predominant

The 1991 and 1992 California Drought Emergency Water Banks were the first large water transfer programs in the nation in which the State served as the predominant broker for water trades. Although the State-sponsored Water Banks have drawn widespread attention, there have been a great number of water transfers and exchanges taking place in California independently of the State. These non-State transfers illustrate well the widespread applicability of transfers in managing water resource systems, as well as the multiple mechanisms available for effecting water transfers. This paper focuses on California's recent experiences with water transfers, and offers a series of potential lessons for federal, state, and local managers for integrating water transfers in regional water resource systems.

The 1991 Drought Water Bank

California Department of Water Resources (DWR) | January 1st, 1991

This report, produced by the Department of Water Resources, provides a retrospective of the operations of the 1991 Drought Water Bank.

This report, produced by the Department of Water Resources, provides a retrospective of the operations of the 1991 Drought Water Bank.

The Role of Water Transfers in Meeting California's Water Needs

Legislative Analyst's Office | September 9th, 2008

If water transfers are to help the state meet its water needs, we think that the Legislature should address a number of issues, including impediments to transfers and sta

If water transfers are to help the state meet its water needs, we think that the Legislature should address a number of issues, including impediments to transfers and stakeholder concerns about potential negative impacts of transfers on "third parties." Statutory policy on water transfers should be clarified and made more consistent.

Trading Sustainably: Critical Considerations for Local Groundwater Markets Under the Sustainable Groundwater Management Act

University of California at Berkeley, School of Law | June 1st, 2017

The Sustainable Groundwater Management Act (SGMA), passed in 2014, is changing the way California manages its groundwater resources. SGMA calls for the creation of loc

The Sustainable Groundwater Management Act (SGMA), passed in 2014, is changing the way California manages its groundwater resources. SGMA calls for the creation of local Groundwater Sustainability Agencies (GSAs) and tasks them with developing and implementing Groundwater Sustainability Plans (GSPs) to achieve sustainable groundwater management. SGMA offers GSAs a broad palette of tools to choose from and significant flexibility to tailor their management activities to local conditions and needs. Because it allows GSAs to assign groundwater extraction allocations to pumpers and to authorize transfers of these allocations under certain circumstances, SGMA potentially opens the door for the development of local groundwater markets. In such a market, a willing seller might trade a portion of their groundwater extraction allocation to a willing buyer, allowing the buyer to pump groundwater in the seller’s stead.