Recent California Water Transfers: Implications for Water Management

Natural Resources Journal (University of New Mexico) | 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.

SGMA’s First Groundwater Market: An Early Case Study from Fox Canyon

Nature Conservancy | May 1st, 2019

In 2014, amid California’s most recent drought, the state passed the Sustainable Groundwater Management Act (SGMA). This new law regulates groundwater at scale for th

In 2014, amid California’s most recent drought, the state passed the Sustainable Groundwater Management Act (SGMA). This new law regulates groundwater at scale for the first time, requiring the state’s largest source of stored water to be managed for long-term resilience. SGMA delegates the responsibility of achieving sustainable groundwater management by 2040 to local Groundwater Sustainability Agencies (GSAs). GSAs must achieve sustainability for their groundwater basins by developing and implementing Groundwater Sustainability Plans (GSPs). Balancing groundwater basins to achieve sustainability will require increasing water supply to the basin and/or decreasing water demand. The Fox Canyon Groundwater Management Agency (FCGMA), in western Ventura County, is the first GSA to pursue a groundwater market as a tool to decrease water demand when implementing its GSP. This white paper outlines FCGMA’s experience—the steps taken and lessons learned—in developing the first groundwater market to emerge under SGMA. It is a combined effort of The Nature Conservancy (TNC), California Lutheran University’s (CLU’s) Center for Economic Research and Forecasting (CERF) and FCGMA, with the support of local growers and the Farm Bureau of Ventura County (Farm Bureau). This document is meant to serve as a resource for GSAs and other public agencies, organizations, practitioners and stakeholders involved in water resource management and contemplating the creation of groundwater markets to meet SGMA’s sustainability mandate. This report focuses on the design and testing of the Fox Canyon groundwater market; a companion report will likely follow to evaluate the performance and share additional lessons learned once the market has launched.

Sharing Groundwater: A Robust Framework and Implementation Roadmap for Sustainable Groundwater Management in California

Nicholas Institute for Energy, Environment & Sustainability (Duke University) | January 1st, 2017

This working paper offers a framework and roadmap for development of a robust groundwater-sharing system consistent with California’s Sustainable Groundwater Management

This working paper offers a framework and roadmap for development of a robust groundwater-sharing system consistent with California’s Sustainable Groundwater Management Act, which requires communities in priority areas to prepare groundwater sustainability plans. The proposed system draws on global experience. Robustness is its signature feature. Opportunities are maximized by a suite of robust local governance, allocation, and administrative arrangements. Additionally, the proposed system incentivizes innovation, stimulates investment, and facilitates low-cost adjustment to changes in groundwater demand. Among the dynamic components underlying this sharing system are a share register that records ownership and transfers of ownership in the basin’s available shares. These unit shares are fungible; each represents a proportional stake in access to the basin’s groundwater resources. Volumetric allocations are made in proportion to the number of shares held during determined periods throughout the water year. These allocations are recorded in bank-like water accounts, affording account holders an efficient means to manage their resource but also ensuring that they cannot use more than is available. Unused water can be saved for later use. At the start of the transition to the new system, users are given an allocation buffer so that they have flexibility and time to adjust. Those who want to can make quick non-contestable trades at low cost.

Strawberry Case Study: What If Farmers Had to Pay for Water?

New York Times | December 29th, 2023

While American farmers elsewhere have watered their crops by freely pumping the groundwater beneath their land, growers in Pajaro must pay hefty fees for irrigation water

While American farmers elsewhere have watered their crops by freely pumping the groundwater beneath their land, growers in Pajaro must pay hefty fees for irrigation water — making it one of the most expensive places to grow food in the country, if not the world. The cost: Up to $400 per acre-foot, a standard measurement equal to water covering one acre, one foot deep. The fees bring in $12 million a year, which is used to recycle, restore and conserve the region’s groundwater.

The futures market for water rights trading in California: Analyzing the emergence of a controversial experiment

Environmental Challenges (Elsevier) | March 29th, 2025

This paper presents a qualitative case study of the world's first water futures contract in California, a market that enables hedgers and speculators to bet on water pric

This paper presents a qualitative case study of the world's first water futures contract in California, a market that enables hedgers and speculators to bet on water prices. It is attempted to explain which factors shaped the emergence of the unique market by applying the Political Process Inherent Dynamics Approach (PIDA), an analytical framework from the field of environmental policy analysis. In addition, the topics of heated debate that have surrounded the new market are summarized and contextualized. To obtain the relevant information, expert interviews, complemented by online sources, were subjected to a Qualitative Content Analysis. It is concluded that the launch of the contract is an extreme case of private business actors shaping water governance, made possible by a longstanding market philosophy in the US, that gives leeway for actors of financialization to create facts. In the political-administrative realm, a lack of accountability and will to interfere seems to prevail. However, nongovernmental organizations (NGOs) and other actors have led efforts to abolish the market, criticizing water futures in ways that resonate with broader debates about privatization and food futures.

The Transfer of Water Rights In California: Background and Issues

Governor's Commission to Review Water Rights Law | December 1st, 1977

This paper is part of a series of background and issue papers prepared by the staff of the Governor's Commission to Review Water Rights Law. TABLE OF CONTENTS I. 

This paper is part of a series of background and issue papers prepared by the staff of the Governor's Commission to Review Water Rights Law. TABLE OF CONTENTS I.  Water is a Marketable Resource II.  Legal Impediments to Water Rights Transfers in California III.  A Selective Review of Recent Water Rights Transfers in California IV.  Issues

Trends and environmental impacts of virtual water trade

Nature Portfolio (Springer Nature) | November 5th, 2024

Water Partnerships between Cities and Farms in Southern California and the San Joaquin Valley

Public Policy Institute of California (PPIC) | October 29th, 2020

The San Joaquin Valley and urban Southern California are worlds apart in many ways. Yet each face growing water challenges and a shared interest in ensuring reliable, aff

The San Joaquin Valley and urban Southern California are worlds apart in many ways. Yet each face growing water challenges and a shared interest in ensuring reliable, affordable water supplies to safeguard their people and economies. Both regions’ water futures could be more secure if they take advantage of shared water infrastructure to jointly develop and manage some water supplies.  Increasing climate volatility is heightening concerns about droughts of the future. And two major shifts in California’s water landscape have generated new opportunities for collaboration between urban and agricultural interests. For urban areas, significant declines in water demand have reduced pressure on supplies during normal and wet years for many agencies, making reliability for future droughts the primary concern. For the overdrafted San Joaquin Valley, the requirement to manage groundwater sustainably has heightened interest in expanding water supplies and underground storage.  Partnerships between Southern California cities and San Joaquin Valley farms could help alleviate groundwater overdraft in the valley while building drought resilience in Southern California. More flexible supplies can help agencies adapt to changing conditions. By coordinating the location of infrastructure investments, agencies can use partnerships to bring the water where and when it is most needed, at least cost.  This report explores a variety of solutions that could benefit both regions. For the San Joaquin Valley, we look for ways to augment water supplies to ease the transition to groundwater sustainability, while for Southern California we explore options that would increase cities’ ability to deal effectively with extended droughts. By diversifying water supplies, building connections to share water more flexibly, and preparing for the extreme events to come, such partnerships would support Governor Newsom’s Water Resilience Portfolio, and pave the way for a shared effort to make the state’s water system more resilient to a changing climate. 

Water Transfers in Water Resource Systems

American Society of Civil Engineers (ASCE) | March 1st, 1995

Water transfers are a common component of many regional water systems and are being increasingly considered for meeting growing water demands and for managing the impacts

Water transfers are a common component of many regional water systems and are being increasingly considered for meeting growing water demands and for managing the impacts of drought.  Water transfers can take many forms and can serve a number of different purposes in the planning and operation of water resource systems. However, to be successful, water transfers must be carefully integrated with traditional water supply augmentation and demand management measures.  This integration requires increased cooperation among different water use sectors and resolution of numerous technical and institutional issues, including impacts to third parties.  This paper identifies the many forms that water transfers can take, some of the benefits they can generate, and the difficulties and constraints which must be overcome in their implementation.

Who Should Be Allowed to Sell Water in California? Third-Party Issues and the Water Market

Public Policy Institute of California (PPIC) | June 13th, 2003

Although significant water trading has occurred in California since the drought of the early 1990s, many localities have restricted water transfers because of the perceiv

Although significant water trading has occurred in California since the drought of the early 1990s, many localities have restricted water transfers because of the perceived harm to other users and the local economy. In Who Should Be Allowed to Sell Water in California? Third-Party Issues and the Water Market, Ellen Hanak examines water transfers in California, local resistance to them, and various approaches to resolving water disputes. Drawing on a new database of water transfers as well as interviews with state, county, and water district officials, the report calls for water management at the local level that balances the interests of other residents and the potential gains from transfers.