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

June 2017

California’s Sustainable Groundwater Management Act potentially opens the door for local groundwater markets. However, it does not provide guidance about when such markets might be useful and appropriate management tools. This report outlines a set of considerations designed to help decision makers and stakeholders evaluate whether and under what conditions a local groundwater market might be a viable tool that contributes to sustainably managing a particular groundwater basin.

 

Copyright 2017 Nell Green Nylen
Overview of critical considerations for local groundwater markets under SGMA. These considerations are organized into three groups: (1) foundational considerations shared in common with other programs that limit groundwater pumping, (2) market-specific considerations, and (3) general considerations that are important for all groundwater sustainability programs.

Background

The Sustainable Groundwater Management Act (SGMA) calls for the creation of local Groundwater Sustainability Agencies (GSAs) and tasks them with developing and implementing plans to achieve sustainable groundwater management in their basins. 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 SGMA allows GSAs to assign groundwater extraction allocations to pumpers within their jurisdictions and to authorize transfers of these allocations under certain circumstances, it potentially opens the door for the development of local groundwater markets. In a local market, a willing seller might trade a portion of their groundwater extraction allocation to a buyer, allowing the buyer to pump groundwater in the seller’s stead.

While carefully designed and implemented groundwater markets could potentially contribute to sustainable management in some basins, success is not a foregone conclusion. Whether a local groundwater market might be a viable tool will depend on a host of factors that may vary significantly from basin to basin, as well as within a single basin. Used inappropriately, markets could have negative unintended consequences, including contributing to the undesirable results SGMA seeks to avoid. Therefore, where GSAs decide to employ local groundwater markets, careful design and implementation will be critical.

 

Considerations for local groundwater markets under SGMA

This report outlines a set of considerations designed to help GSAs, stakeholders affected by groundwater management, and state agencies with oversight and intervention responsibilities evaluate whether a local groundwater market might be a viable tool for sustainably managing a particular groundwater basin and, if so, what it would entail. We organize these considerations into three groups:

  1. Foundational considerations, shared in common with other programs that limit groundwater pumping,
  2. Market-specific considerations, and
  3. General considerations that are important for all groundwater sustainability programs.

We point out legal ambiguities, including groundwater rights issues, and other sources of uncertainty that may present challenges for those seeking clarity about market programs.

The stakes involved in SGMA implementation are high. Groundwater management decisions made today will affect everyone in a basin, now and well into the future. The full impacts of poor decisions may not be felt until long after they are made, and some impacts may be irreversible. Addressing the considerations raised in this report will empower GSAs to make better decisions that lead to more sustainable futures for the basins they serve.


This project is part of the UC Water Security and Sustainability Initiative and supported by the University of California Office of the President