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Water Marketing and Groundwater Banking in California
Ellen Hanak Public Policy Institute of California
California Water Commission 11-20-13
What are these tools and why do they matter?
Water marketing: temporary, long-term or permanent trades of water-use rights
Groundwater banking: storage of surface water in aquifers in wet years for use in dry years
Why these tools matter for California:
– Reducing costs of drought – Accommodating shifts in demand – Adapting to a changing climate
2
Marketing and banking have requirements and constraints
Infrastructure – To connect source/destination – To get/store/retrieve water from banks
Protections – Shouldn’t sell someone else’s water (incl.
water for fish & wildlife) – Need to protect water in “bank accounts” – Aim to prevent local economic harm
3
California’s extensive infrastructure facilitates marketing and banking
4
Counties in the market
But Delta is a fragile hub for north-south and east-west transfers
5
State groundwater law has gaps; many rural counties restrict exports
6
Three phases in water market development
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Drought-related growth
(1987–94)
Environment-related growth
(1995–2002)
LT trade growth & overall deceleration
(2003–11)
Long-term and permanent trades now dominate the market
Mostly for cities But also for high-
value farms And some
environmental uses
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0.0
0.5
1.0
1.5
2.0
2.5
1987-1994 1995-2002 2003-2011
Wat
er tr
aded
(milli
on a
cre-
feet
) Short-term flows
Long-term flows
Permanent flows
Additional long-termcommitments
Additional permanent commitments
Slowing market was unable to provide much drought relief
Infrastructure constraints: Delta
Institutional constraints: complex, frequently changing approval process
In all, 500,000–600,000 acre-feet dry-year supplies from 2007–2010
9
0.0
0.5
1.0
1.5
2.0
2.5
2003 2004 2005 2006 2007 2008 2009 2010 2011
Wat
er tr
aded
(milli
ons
of a
cre-
feet
)
Dry years Short-term contractsLT & permanent flows Additional commitments
North-south trades are down; San Joaquin Valley is now net exporter
10
-250
-200
-150
-100
-50
0
50
100
150
200Sac Valley SJ Valley So Cal Bay Area
Net
wat
er im
ports
(exp
orts
) (ta
f/yea
r)*
1987-941995-20022003-11
* non-environmental trades (actual flows)
Purchases of water for the environment are now falling
Can lessen conflicts and raise efficiency
But cash running out (~50% was from state bonds)
11
0
50
100
150
200
250
300
350
400
450
500
Env
ironm
enta
l wat
er tr
aded
(taf
)
Salton Sea mitigation Other instream flows (§1707) Delta flows (EWA) San Joaquin/eastside flows (WAP) Wildlife refuges (DFG & WAP)
Several types of groundwater management and storage in CA
Formal: adjudicated basins and special districts with accounting for pumping/recharge (So Cal, Silicon Valley)
Informal: voluntary, price incentives but no accounting (most common)
Semi-formal: accounting for bank members, not for other local pumpers (Kern County)
Our focus: banking for off-site parties in Kern and So Cal
12
Formal systems: mainly in urban areas, rely on imported recharge
13
Kern County banks involving off-site parties
14
New groundwater banks were very useful during recent drought
Total withdrawals 2007–10: 1.9 maf (3x more than water market)
Rapid recharge thanks to post-drought rains
But some conflicts in Kern County over falling groundwater tables
15
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1994 1996 1998 2000 2002 2004 2006 2008 2010
Milli
ons
of a
cre-
feet
sto
red
Dry years Kern County (all parties) So Cal (Met)
How can we work out the kinks in these important tools?
Address infrastructure gaps Make institutional review process more
consistent, transparent, predictable Strengthen local groundwater management Develop models to mitigate local economic
impacts Pursue more environmental transfers Engage high-level leaders who can take needed
risks and break through barriers
16
For more information
Hanak and Stryjewski (2012) California’s Water Market, By the Numbers: Update 2012, Public Policy Institute of California. Available at www.ppic.org
17
18
Notes on the use of these slides
These slides were created to accompany a presentation. They do not include full documentation of sources, data samples, methods, and interpretations. To avoid misinterpretations, please contact: Ellen Hanak: 415-291-4433, hanak@ppic.org Thank you for your interest in this work.
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