Water marketing is the transfer or sale of water or water rights
from one user to another, typically from an agricultural to an
urban water agency, often without investing in new infrastructure
As COVID started to spread, farmers and large cities in
Southern California were hit with another blindside last March.
Fires, drought, and the planting season drove up the price of
California’s water market, over 220 percent in just three
months. Crops failed and pastures were lost. In September, CME
Group Inc vowed to create a new market to help with the
risk of these price swings. Last month, the first contract
connected to the future price of California’s $1.1 billion
water market was inked. -Written by Will Rinehart, a senior research fellow at the
Center for Growth and Opportunity at Utah State
University.
The old axiom goes, “Whiskey’s for drinkin’ and water’s for
fightin’” — it reflects the never-ending horse-trading that
involves distribution of water in the arid Southwest and the
tug of war between the region’s agricultural communities and
the ever-growing urban centers, including Las Vegas, Phoenix
and areas of Southern California. Traditionally, water rights
have been brokered by state and local governments, as well as
regional water districts. This is changing, though, as private
equity firms have been purchasing water rights in localities
along the Colorado River, from the Western Rockies through the
valleys of Southern California.
There is a myth about water in the Western United States, which
is that there is not enough of it. But those who deal closely
with water will tell you this is false. There is plenty. It is
just in the wrong places…Transferring water from agricultural
communities to cities, though often contentious, is not a new
practice. Much of the West, including Los Angeles and Las
Vegas, was made by moving water. What is new is for private
investors — in this case an investment fund in Phoenix, with
owners on the East Coast — to exert that power.
The San Joaquin Valley, which can be regarded along with arid
urban Southern California, as the table on which this game is
to be played, has always rested on two absolute poles: every
inch of farmland is for sale; and water runs uphill to money.
This derivative market, far from “rationalizing” water
distribution in the state, is going to disturb the magnetic
field that is the Prime Mover and Original Cause of all
economic activity in our region. -Written by Bill Hatch, who lives in California’s Central
Valley and is a member of the Revolutionary Poets Brigade of
San Francisco.
It’s not just Californians paying attention to the state’s
water supply anymore. It’s Wall Street. In a sign of the
growing value of water in a warming world, investors began
trading futures of the coveted commodity, tied to California
water prices, for the first time last week. The novel
marketplace allows speculators to make money betting on future
prices of California water while allowing farmers, businesses
and municipal suppliers to hedge against price swings and
stabilize their costs.
The United Nations said Wall Street’s new water futures risk an
essential public good being treated like gold and oil, leaving
the market vulnerable to a speculative bubble.
For the last 100 years, water in the American west has rarely
been priced on the open market. Water rights were bought and
sold through private contracts and government deeds, and public
agencies doled out most of the coveted commodity. On Dec. 7,
trading began in the first futures market for water. Farmers,
businesses, and investors can now pay to lock in the future
price of water in California.
Farmers, hedge funds and municipalities alike will be able to
hedge against — or bet on — potential water scarcity starting
this week, when CME Group Inc. launches contracts linked to the
$1.1 billion California spot water market. The contracts, a
first of their kind in the U.S., were announced in September as
heat and wildfires ravaged the U.S. West Coast. They are meant
to serve both as a hedge for California’s biggest water
consumers against skyrocketing prices and a scarcity gauge for
investors worldwide.
Join us as we guide you on a virtual journey through California’s Central Valley, known as the nation’s breadbasket thanks to an imported supply of surface water and local groundwater. Covering about 20,000 square miles through the heart of the state, the valley provides 25 percent of the nation’s food, including 40 percent of all fruits, nuts and vegetables consumed throughout the country.
This virtual experience focuses on the San Joaquin Valley, the southern part of the vast region, which is facing challenges after years of drought, dwindling water supplies, decreasing water quality and farmland conversion for urban growth. The tour gives participants an understanding of the region’s water use and issues as well as the agricultural practices, including new technologies and water-saving measures.
Getting water through a tunnel under the Sacramento-San Joaquin
Delta would be pricey. So pricey, some Kern County water
districts were looking for an “off-ramp” by potentially selling
their main state water supply out of the county. The request
was shot down on Nov. 6 by the Kern County Water Agency, which
holds the contract for state water on behalf of 13 area water
districts.
There’s a concept called “demand management” in the news in
Colorado, and here’s a simple definition: Landowners get paid
to temporarily stop irrigating, and that water gets sent
downstream to hang out in Lake Powell. It’s an idea long talked
about because of increasing drought and the very real danger of
both Lake Mead and Lake Powell dropping into “dead pool” where
no hydropower can be generated.
Mexico is obligated under a 1944 treaty to deliver to the
United States a set amount of water from the Rio Grande and its
tributaries over a five-year period. … The last-minute
agreement signed Oct. 21 settles the conflict. Mexico will
transfer ownership of water stored in two border reservoirs to
the United States to make up the deficit.
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.
Water itself isn’t just an economic policy issue and risk
arising from population growth and climate change. Julie Moret,
our global Head of ESG, outlines how water is impacting the
day-to-day operations of investee companies and how they are
thinking through their own business models and business risk.
Protecting the health of California’s rivers, estuaries, and
wetlands has been the grandest—and perhaps thorniest—of the
many challenges facing the state’s water managers. The San
Joaquin River watershed, the state’s third largest and an
important water source for irrigating farmland in the San
Joaquin Valley, epitomizes this challenge. Yet California is
making progress here, bringing a glimmer of hope.
The supply and demand of California water are geographically
and seasonally disconnected, a trend that could be exacerbated
by climate change. Agriculture, urban and environmental use
compete for limited supply in the state’s $1.1 billion water
market.
At the Western Groundwater Congress hosted online by the
Groundwater Resources Association, Audrey Arnao, an associate
with WestWater Research, gave the following presentation on
California’s surface water market, covering prices and trading
activity in recent years and providing a forecast of spot
market transfer prices in 2021.
To inform landowners about their water budgets, Rosedale-Rio
Bravo Water Storage District in Kern County 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 general manager Eric Averett to
answer a few questions about how the platform…
The Georgetown Divide Public Utility District reported Sept. 23
that its release of 2,000 acre-feet of water from Stumpy
Meadows Reservoir to be transferred to the Westlands Water
District has been successfully completed.
Climate change is affecting natural resources in California,
with water being one of the most important in the state. Water
source is critical for municipalities, agriculture, industry,
and habitat/environmental purposes. Will future supply meet
future demand? How will the economic value of water change over
this century?
Investors will be able to make wagers on the price of water
later this year with the launch of futures contracts, which are
expected to better balance supply and demand for the commodity
and hedge price risks. … The index, itself, sets a weekly
spot rate price of water rights in California, the majority of
which are owned and managed by water districts that deliver
water to individual farms…
By 2030 we will be water positive, meaning we will replenish
more water than we use. We’ll do this by putting back more
water in stressed basins than our global water consumption
across all basins. … We will focus our replenishment efforts
on roughly 40 highly stressed basins where we have
operations….Our new Silicon Valley campus, opening later this
year in California, features an on-site rainwater collection
system and waste treatment plant to ensure 100% of the site’s
non-potable water comes from onsite recycled sources.
There is a new product allowing businesses in California —
mostly farms and other agricultural businesses that rely on
water — to lock in prices for water. But there are plenty of
questions as to how this will actually work. To state the
obvious, it’s just not that easy to transact in water. It’s not
a block of gold, or even a barrel of oil.
If the record heat and wildfires ravaging California weren’t a
clear enough sign that the climate is changing, then consider
this: Wall Street is about to start trading futures contracts
on the state’s water supply. … They are intended to both
allow California’s big water consumers—like almond farms and
municipalities—to hedge against surging prices and can act as a
benchmark that signals how acute water scarcity is becoming in
the state and, more broadly, across the globe.
Dr. Ellen Bruno is a Cooperative Extension Specialist in the
Department of Ag and Resource Economics at UC Berkeley. At a
recent Silver Solutions webinar, she shared some of the
preliminary results on a paper she is working on… The study
considers the impacts of agricultural water pricing and the
effect on water use and land use change.
Roughly a thousand acre-feet of water won’t make or break the
Colorado River. But for many who live in counties that border
the river, even losing a few drops of water to central Arizona
poses a major threat to their way of life.
Irvine Ranch Water District and Rosedale-Rio Bravo Water
Storage District had just begun environmental review for their
joint banking project this past April when TCP reared its head.
… TCP (trichloropropane) is a carcinogenic leftover from a
nematode pesticide made by Shell Oil and Dow Chemical that was
liberally applied to Central Valley farmland from the 1950s
through the 1980s.
Indian Wells Valley Groundwater Authority voted 4-1 to pass the
replenishment fee despite significant public opposition. …
Although residential users will see an estimated $24 per month
increase, Searles Valley Minerals will see a 7,000-percent
increase in water costs.
With all permits in place, on Aug. 20 the Georgetown Divide
Public Utility District announced the State Water Resources
Control Board Division of Water Rights approved the temporary
transfer of up to 2,000 acre-feet of GDPUD’s water to the
Westlands Water District. The transfer of the water began Aug.
19 and is expected to continue until Sept. 23.
Crops require water to grow. By importing water-intensive
crops, countries essentially bring in a natural resource in the
form of virtual water. Agricultural virtual water is the amount
of water needed to grow a particular crop in a given region.
Now research led by scientists at PNNL has projected that the
volume of virtual water traded globally could triple by the end
of the century.
Central Arizona has been booming – more people, more houses,
more need for water. There’s also a long-term drought and less
water to buy from the Central Arizona Project canal system.
It’s leading Phoenix exurbs to cast about, looking for new
buckets. Other regions of the state are saying: Don’t come
here.
The company’s long-term goal is still to complete a project to
allow the transfer of up to 1.6 billion gallons of water a year
from an aquifer under its land to six Southern California water
agencies. But for the short-term, Cadiz is looking toward
agricultural development on its 45,000 acres of land about 30
miles northeast of Joshua Tree National Park.
As California navigates a critically dry water year, many
business-as-usual elements are getting a second look. One such
transaction is a proposed water sale by the Merced Irrigation
District. The district … filed an application with the State
Water Resources Control Board in March to transfer as much as
45,000 acre-feet of water to a bevy of water districts across
the state.
Taking the opportunity to bring in some extra revenue, the
Georgetown Divide Public Utility District Board of Directors
approved the sale of up to 2,000 acre-feet of water to
Westlands Water District at a price of $350 an acre-foot.
South Feather Water & Power Agency proposes to transfer the
water from July through November 2020 to participating agencies
of the State Water Contractors and the Central Valley Project
(CVP). The transfer would involve up to 5,000 AF of water
previously stored in Little Grass Valley Reservoir under Permit
1267, and up to 5,001 AF of water previously stored in Sly
Creek Reservoir under Permit 2492.
The water transfers could occur on an annual basis sending
water from willing sellers north of the Sacramento-San Joaquin
Delta to water users south of the Delta and in the San
Francisco Bay Area. Based on annual approvals, the transfers
could occur through 2024. In addition, the transfers could
occur by various methods, including groundwater substitution,
cropland idling, reservoir releases and conservation.
This report, “Scaling Corporate Water Stewardship to Address
Water Challenges in the Colorado River Basin,” examines a set
of key corporate water stewardship actions and activities, with
associated drivers and barriers, to identify how the private
sector could help tackle Colorado River water challenges.
Central Valley farmers may soon have another crop to sell along
with almonds, tomatoes and peppers — the groundwater beneath
their land. Proposed groundwater markets have popped up in just
about every groundwater sustainability plan filed with the
state Jan. 31.
Another block of water has been offered for sale in Kern County
at $950 per acre foot. With a dry January and extremely dry
February, California’s water outlook has worsened. And that has
bumped the price of water for those who have it to sell.
The Chino City Council on Tuesday night approved selling
3,500-acre-feet of surplus groundwater to the Fontana Water
Company for more than $2 million. … As of June 2019, the city
of Chino’s stored groundwater reserves totaled approximately
120,000-acre-feet, which is equivalent to 31.1 billion gallons
of water.
California is by far the United States’ most populous state, as
well as its largest agricultural producer. Increasingly, it is
also one of the country’s most parched places. But Edgar Terry,
a fourth-generation farmer in Ventura County, just outside Los
Angeles, thinks he has a key to reversing worsening water
stress: establishing tradeable rights to shares of
fast-depleting groundwater aquifers.
Aside from advanced economies and Mediterranean climates that
sustain long growing seasons, California, Spain and Australia
share an intermittent feature that reshapes their overburdened
water systems every time it rears its ugly head: drought.
Sarah Heard is Director of Conservation Economics & Finance
with the California chapter of The Nature Conservancy… At the
Groundwater Resources Association’s Western Groundwater
Congress, Ms. Heard gave this presentation on the Fox Canyon
Groundwater Market in Ventura County, the first groundwater
market since the passage of the Sustainable Groundwater
Management Act.
The successes and failures of Australia’s recent reform of the
Murray-Darling Basin hold valuable lessons for policy makers in
California and elsewhere who are likely to grapple with the
environmental repercussions of extreme drought in the future.
The newly formed water market would create a place where
farmers in the Rosedale district can buy and sell water based
on their needs. So if one farmer has too much for his crops in
a certain year, he’d be able to sell it on the market to
another who might not have enough.
This event guided attendees on a virtual journey through California’s Central Valley, known as the nation’s breadbasket thanks to an imported supply of surface water and local groundwater. Covering about 20,000 square miles through the heart of the state, the valley provides 25 percent of the nation’s food, including 40 percent of all fruits, nuts and vegetables consumed throughout the country.
This virtual experience focused on the San Joaquin Valley, the southern part of the vast region, which is facing challenges after years of drought, dwindling water supplies, decreasing water quality and farmland conversion for urban growth. The tour gave participants an understanding of the region’s water use and issues as well as the agricultural practices, including new technologies and water-saving measures.
South Coast agencies purchased more than 27,000 acre-feet of
supplemental water during four drought years to make up for
lowered allocations from Lake Cachuma and the State Water
Project, and for most of those deals, payback includes water in
addition to money. Agencies’ so-called “water debt” means that
when the city of Santa Barbara purchased from the Mojave Water
Agency last year, for example, it was committing to paying back
1 acre-foot of water for every 4 acre-feet it purchased.
Last month, the Environmental Protection Agency published a
memo encouraging states, tribes, and local governments to look
to markets for help in solving stream quality issues. … Water
quality trading can lower costs and, thereby, unleash new
opportunities to improve water quality.
Cove, which is launching later this month, is packaged in a
bottle made from a biopolymer called PHA. If the bottle
ends up in a compost bin or landfill–or even the ocean–it will
fully biodegrade. … The company, which is a public
benefit corporation, has guidelines that say it won’t source
from areas that are currently in a drought.
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.
Congressmen John Garamendi and Doug LaMalfa have reintroduced
legislation to provide farmers access to discounted rates under
the National Flood Insurance Program. The
bipartisan Flood Insurance for Farmers Act of
2019 (H.R.830) would also lift the de
facto federal prohibition on construction and repair of
agricultural structures in high flood-risk areas designated by
the Federal Emergency Management Agency.
In the universe of California water, Tim Quinn is a professor emeritus. Quinn has seen — and been a key player in — a lot of major California water issues since he began his water career 40 years ago as a young economist with the Rand Corporation, then later as deputy general manager with the Metropolitan Water District of Southern California, and finally as executive director of the Association of California Water Agencies. In December, the 66-year-old will retire from ACWA.
This tour ventured through California’s Central
Valley, known as the nation’s breadbasket thanks to an
imported supply of surface water and local groundwater. Covering
about 20,000 square miles through the heart of the state,
the valley provides 25 percent of the nation’s food, including 40
percent of all fruits, nuts and vegetables consumed throughout
the country.
We ventured through California’s Central Valley, known as
the nation’s breadbasket thanks to an imported supply of surface
water and local groundwater. Covering about 20,000 square
miles through the heart of the state, the valley provides 25
percent of the nation’s food, including 40 percent of all fruits,
nuts and vegetables consumed throughout the country.
We ventured through California’s Central Valley, known as
the nation’s breadbasket thanks to an imported supply of surface
water and local groundwater. Covering about 20,000 square
miles through the heart of the state, the valley provides 25
percent of the nation’s food, including 40 percent of all fruits,
nuts and vegetables consumed throughout the country.
Groundwater overdraft in the San Joaquin Valley – producer of
half the state’s agricultural output – has averaged roughly 1.8
million acre-feet annually since the mid-1980s. Even before the
start of the most recent drought in 2011, a few San Joaquin
farmers recognized the dire need for sustainable water
management and started individually pioneering a groundwater
recharge practice that has since gained
statewide traction.
On the edge of the Mojave Desert, beneath 1,800 acres of
scrubland and tumbleweeds, California’s giant public pension
fund is trying to make a killing in the water business.
As storms hit California and the Sierra Nevada snowpack keeps
building after years of punishing drought, water managers on
the San Joaquin Valley floor are replenishing groundwater
supplies while the getting is good.
San Joaquin County water commissioners took the first formal
step Wednesday toward approving an innovative experiment to
store water below ground and share a portion of it with Bay
Area residents.
It’s too late for the current drought, but an ambitious water
bank project in the southern San Joaquin Valley would give
farmers a supplemental supply in future dry spells.
The Oakdale Irrigation District expects to reap $13.75 million
selling Stanislaus River water to buyers from the Fresno area
and on the Valley’s drought-scarred West Side, according to a
sales agreement unanimously approved Tuesday by the OID
board.
[Disque] Deane [Jr.] is not a rancher or a farmer; he’s a
hedge-fund manager who had flown in from New York City the
previous night. And as he appraised the property, he was less
interested in its crop or cattle potential than in a different
source of wealth: the water running through its streams and
coursing beneath its surface.
The Bureau of Reclamation has released for public review an
Environmental Assessment on a proposal to place temporary pumps
along a joint-use portion of the California Aqueduct. The pumps
would reverse flow so the Santa Clara Valley Water District can
recover previously banked Central Valley Project water. …
Normal operations of the Santa Clara Valley Water District’s
previously approved banking and exchange program is not
possible due to severe drought conditions.
Drought is rampant these days in many parts of
the American West, so consider this a pretty sweet gift:
You’ve just been given the rights to some water. … Your
job is to turn around and use that resource in the most
valuable way possible.
This printed issue of Western Water looks at California
groundwater and whether its sustainability can be assured by
local, regional and state management. For more background
information on groundwater please refer to the Foundation’s
Layperson’s Guide to Groundwater.
Although some water districts have coordinated use of surface
water and groundwater for years ,conjunctive use has become the
catchphrase when it comes to developing additional water supply
for the 21st century. This article focuses on conjunctive use. It
includes background information explaining how conjunctive use
works, discusses the potential storage capacity, provides an
overview of the hurdles that must be overcome to develop a
successful project, and profiles several projects.
The 20-page Layperson’s Guide to Water Marketing provides
background information on water rights, types of transfers and
critical policy issues surrounding this topic. First published in
1996, the 2000 version offers expanded information on groundwater
banking and conjunctive use … Colorado River transfers,
CALFED’s Water Transfer Program and the role of private companies
in California’s developing water market.
Order in bulk (25 or more copies of the same guide) for a reduced
fee. Contact the Foundation, 916-444-6240, for details.
The 28-page Layperson’s Guide to Water Rights Law, recognized as
the most thorough explanation of California water rights law
available to non-lawyers, traces the authority for water flowing
in a stream or reservoir, from a faucet or into an irrigation
ditch through the complex web of California water rights.
Water marketing is the transfer or sale of water or water rights
from one user to another, typically from an agricultural to an
urban water agency, often without investing in new infrastructure
Most exchanges involve a transfer of the resource itself, not a
transfer of the right to use the water.
Reallocating the available water on a supply-and-demand basis is
viewed by proponents as the best financial, political and
environmental means of accommodating an increase in population.
