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

“If you focus with pride in building the best water allocation system you possibly can have, rather than saying SGMA is a problem, you’ll see it as the smartest thing you ever got into,” says Mike Young

Undoubtedly for some, the specter of the implementation of the Sustainable Groundwater Management Act is a fearsome and expensive thing, fraught with difficulties and expensive science.  But what if there was actually a simpler way to manage groundwater in a way that can provide opportunity and wealth for the community?  At a recent presentation in Bakersfield hosted by the Water Association of Kern County, Professor Mike Young gave his framework for creating such a system.

I’m here to talk to you about something that is frightening, scary for many of you, but it’s critically important to your future,” began Professor Young.  “More than anything else, water matters, and getting that right is critically important.  Water matters, and groundwater matters.  The state has just recently given you the Sustainable Groundwater Management Act, or SGMA.  I think SGMA is an important opportunity, but to make it an important opportunity, you have to do much more than what SGMA does.  And that’s to get the basics right.”

SGMA puts together a framework that requires agencies manage groundwater basins to avoid unreasonable and undesirable results.  “You all know that’s been happening in various ways, not all of them here.  It goes into a lot of detail in the guidelines that come out of the Department that tell you how to work out the science and the physics of what’s going on.  But it’s completely silent on what you have to do, and that worries me.”

SGMA provides an opportunity to form an agency to prepare plans to prevent the unreasonable and undesirable results from occurring.  “That’s great as far as it goes, but it leaves the details of it to you,” he said.  “It’s completely silent on things that I think are actually important.  What are your water rights?  The thing I notice when I talk to people here is nobody really knows what their water rights are.  A lot of discussion and a lot of debate, but when you really sit down and say, can you specify exactly what it is, can you do the things that we can do in Australia easily and cheaply?  The answer is no.  And there’s a challenge in terms of working out what you have to do and how you might do it.”

Mr. Young recalled how two years ago, he went to Eureka, a small town in Nevada halfway between Carson City and Salt Lake City, that was having problems with their groundwater.  He met with farmers there who asked him what to do.  “I said, ‘I’ve heard that the value of all your farms is going down, and you’re finding it harder and harder to sell.’  And they all nodded wisely and looked down.  The reason was because their groundwater tables were going down rapidly, and nobody knows how they’re going to solve the problem.  The community knew that within about 30 to 40 years, there will be no groundwater left.  So the question is, what do you do?

I put to them a framework along the lines of what I’m going to suggest to you today,” he continued.  “I had been talking about half an hour and the committee said, ‘let’s do it.’  And to my delight and pride, that community now has a spring back in its heart as it’s going through the difficult processes of making this work, confident that they are rebuilding their future and that’s what I want to talk to you about today.”

Last year, Professor Young and his colleague, Bryce McAteer, wrote a mock up draft plan that agencies could easily modify to their own circumstances.  There’s a lot of detail in it, because the details matter, the fine print really matters, he said.  “What you have now is a system which doesn’t work very well,” he said.  “It’s not something which you can proudly recommend to the rest of the world because it’s flawless and it creates wealth and prosperity and it’s solves a lot of problems.  I have a vision of what we tried to do in the road map is to give you something that would make you the world leaders.  Don’t focus on building a water market; focus instead on making a system that works.

The really interesting thing about things that work is they have a lot of value,” he said.  “Instead of having a car that breaks down every time you get to a stop light, you have a car that always works and you can get in and confidently drive and it’s got all the latest technology in it.  Then you own something that has a lot of value and everybody will want to buy it because it has value.  When you build systems that have that value, you’ll prosper and do incredibly well.”

The road map provides a mock up to create a system that works.  “It’s written to help you think through what such a system might look like, and see the key elements, tease them out and get them right, and that’s for you to work out how to do that.  But it envisages a pathway that is about prosperity, not those undesirable results.  That becomes irrelevant because you know you are doing what you need to do to create wealth.”

Drawing on an example for the mockup, he said that Section 14 of the mock up says that shareholders will be free to choose whether or not to use, save, or by way of transfer, sell allocations made to their water account.

I assume you all have a bank account and you can look up on web and you’ll find and see how much money is in there,” said Mr. Young.  “Can any of you look up on a water account and see how much water you have left?  How much groundwater have you got left?  If not, why not?  You know this is the way you manage things of value.  One of the sensible things you’d expect in a water management system is to be able to look up somewhere and see how much water you have left, how much is yours, and if you decide to save it for another year, it’s still there.”

If anyone here would like to transfer so money to me in Australia, I can give you my bank account details and now, and tomorrow your American dollars will be converted into Australian dollars and be in my account in Australia, and I can look on my phone and see it’s there.  Why don’t you have that system for water?  If you could build a system that did that, you’d be able to manage your water very cleverly and very astutely.  You can’t do it now.  And the framework that I want to talk to you about does that.”

The framework sets up a sharing system.    “Essentially what you need to understand that you have to cut the cake,” Mr. Young said.  “And if you’re going to cut the cake, you need a sharing system.  The state of art in developing ownership of these sorts of systems is to issue shares.”

He likened it to holding shares in a company.  “The rule is simple:  if you want a bigger share, you’ve got to find somebody to have a smaller share.  If you have a robust water accounting system and a robust water allocation system, you’d do the same.  You give all the people shares; the shares will be in perpetuity and you all understand there will be no more shares, and water will be allocated in proportion to the number of shares you have to your water account.  You can trade shares and you can trade allocations.  It’s very simple.  Why don’t you do it in water?  If there’s a better system, please adopt it.  But from all the work that I’ve done, something like that is the best way to do it.

Mr. Young noted that if one looks at the international experience in setting up water management systems around the world, people will talk about markets.  “But if you want to understand markets, don’t talk about markets; talk about systems that have credibility.”

Many of you here grow oranges,” he said.   “All of you would be horrified if you had oranges and the  person next door went on to your field and picked your oranges.  You’d be furious.  The person would probably be run out of town.  But right now, you’re basically doing the same thing.  At the moment you tolerate a system where there’s no real allocation of groundwater, so while you can see the oranges on the top, it’s quite acceptable for somebody to pump water that should have been yours to grow their oranges, and that’s why all the problems exist.”

Think back to the bank model and your bank accounts, he said.  “Would you let your neighbor have the pin code to your account and credit cards so they can go and take money out of your bank account?  Why do you let them do that with your water account?  If you really want a robust system, you account for water and have a sense of ownership and you understand when water is allocated and shared, you’re not allowed to steal water from your neighbor.  It’s a system that has integrity.”

A robust system would bring these simple concepts and technology together.  He presented a graph and noted that when they went to the new system, the value of water went up 20% per annum on average.  “It never went under 15%,” he said.  “Our water was mismanaged; we had a car that kept on breaking down.  Suddenly, we committed to a framework that everybody said, this is going to work and the bank started lending money against it.”

So how do you cut your groundwater cake?  And how do you build a system which understands that value matters and that you have to create opportunity and manage risks?

If I look at SGMA, there’s a huge amount of effort put into working out sustainable yield,” Mr. Young said.  “Why would you do that?  You know the number’s going to be wrong, unless you can do two things: you can predict the future price of oranges, grapes, and all the other products that are grown here, and you can predict what sorts of innovations are going to come because the type of irrigation practice you use to determines how much water goes back in to the groundwater.  Put changes in climate variability on top, and you know you’re going to be wrong.  You cannot promise and guarantee a volume of water.”

At the end of the day, you need a system to manage the risk,” he continued.  “You don’t want a system worked out in Sacramento; you want a system that each one of you can determine how much risk you want to take and that means you have to have local control.”

Mr. Young said that the better the system that you have, the greater the opportunities and the better off this community will be.  “I would hate to see depressed struggling communities, fighting over what to do with water, not being able to resolve it, and spending money on lawyers and people, not solving the problem.  Great for the lawyers, but it’s not great for you.”

Rather than just doing the minimum to comply with SGMA by building a computer model and reporting on what you might do and how much you have to change, why not build something at essentially grows the cake, he said.  “It can be slightly wrong, and you can have a fight over how many shares you get, but I can assure you, the sooner you get the share allocation problem behind you, the more money you’ll make.  And it’s worth thinking of in terms of creating prosperity and getting it approximately right, rather than comprehensively wrong.”

The proposed system in the roadmap builds on eight fundamental ideas:

1-Issue shares to all existing water users.  “This is a really important concept and it’s relatively simple.  If somebody wants a larger share, you have to find somebody to take a smaller share.  No county, no city, no one can create more shares.  So you have a system that starts to have integrity.”

2-You make annual allocations of volumes of water available to all the shareholders.  “The rule is simple; if you have a share, you must have a water account.  And on say the first of September, or the first working day after, in September at 9am, the head of the Authority will make an announcement of the allocation per share might be 2.68 acre-feet per share.  And on the first of September at 9am, it’s credited to your water account, and you could look at your water account at 9:01 and it would be there.  And it would be added to what you had there previously.  Very simple, very obvious.

3-Groundwater users must have a permit. Because you need a system that has integrity, you need another simple rule that says that any person who has a well must have a permit or license and you can only take water out of your well if and only if you have a water account that has water in it. … That’s a system that has credibility.  Systems like that are really important and if water matters to you, and I expect it does, you would want a system that has the same rule.”

4-You need an unambiguous plan with statutory approval. You need a plan that really guides the management of the system as a whole,” he said.  “There are two ways you can write a plan.  You can write a plan the way SGMA writes it, which is strong on the science and the hydrology but is silent on how it’s going to be managed, or you can write all the rules into the management system.  When the rules are written into a management system and are approved by the state and by the Department of Water Resources under SGMA, they become like state laws.”

This means that the shares can be exchanged with very little legal argument.  “As I understand, what happens in your water transactions at the moment is that you spend $50,000-$100,000 or even more, trying for several years to get permission to move water from one side of an area to another, and with all sorts of complications,” he said.  “I can imagine a system for you where that’s essentially free.  And there is zero risk of a legal argument.   Everybody understands the rules so when we’re working out whether the exchange rate is going to be .85 we really focus on it because it matters.  For some areas, exchange rate might be 0.  You can also put limits on the volume of water that can be put through, but you build the detail into the plan, and you get approved so it’s like legislation.  Take the lawyers out of it.

What’s happening at the moment is you’re spending a lot of money essentially not making decisions when the state of art in the world is that these sorts of things can be worked out quickly and finely,” Mr. Young said.  “That will increase the value of all your farms, increase the profits you make, and bring confidence back, not only to the farms themselves, but also into the community as you get the investment that follows.”

5- Trusted independent Basin Authority appointed by the GSA.  “Another part of that which is critically important which is community trust and respect for what’s going on.  Trust matters and integrity matters.  The state of the art in the world for doing that is you have a small group of 4 to 7 people who are trusted and appointed to get things right.  You expect them to get it right. …  If you look at the state of the art, best managed companies in the world, best organizations, they are always run by small teams of people who are very proud of the skill with which everything’s managed and the timeliness of the decisions.  It has integrity and trust, and that’s what you need for water.  If you do that, as I showed you in Australia, you get a rate of return of 20% per annum.  20% sounds like quite a bit, but it means that every 5 years, the value of what you earn doubles and within ten years, it’s worth 4 times what it’s worth today.  That happened in Australia as water from whoever it was allocated to was taken out of the system.  The returns on smart management are massive and they are really worth chasing.”

6-A watermaster employed by the Authority.  “You also need a watermaster; a chief executive officer who is trusted and respected.  He is somebody who is there running the system, and who makes things work on a day to day basis and makes it work with integrity.  This might sound obvious.  But all of this detail is important.”

7-Robust value adding share registers and water accounts.  “You need registers of essentially your groundwater shares that have integrity.  The state of the art is not what you have.  You should not have a piece of paper.  When we started in Australia, we all had bits of paper which was called a water license and water right … every time somebody want to trade one of these papers, it was a nightmare, and sometimes you couldn’t even find them.  What we moved to was a system which was built on the Torrance Title System where essentially in the good old fashioned day when Sir Robert Torrance invented it, there was a book, and the only way you could own – it used to be land, but now also with water – was if your name was in the book.  And if you wanted to sell it to somebody else, the only way you could sell it was to change the name in the book.  It’s now an electronic book, but you can see the concept.”

What they did in Australia is they allowed banks to record mortgages in the share register so water shares could be pledged as collateral against loans.  “Then you can go into the bank and say I’ve got $2 million worth of water shares.  Can I borrow a million dollars?  And the bank managers say, yes, sure sign here, and you walk out with a line of credit in your bank account for a million dollars.  These shares are so liquid and so valuable that they funded all the innovation that occurred in Australia. …  Suddenly farmers had an asset that was very liquid.  If farmers got to the end of the year and they couldn’t repay, they could sell water shares to repay the bank.”

Mr. Young said that it drove the revolution.  “Farmers quickly worked out that if they had a low cost mortgage and responsibility to manage an asset that was rapidly rising value, they would invest, and often they would bring in a new irrigation system, new control systems, borrow $300,000-$400,000 to pay for it, because they didn’t need the water anymore.  They had become more efficient, smarter, faster, whatever and they didn’t need it.  So these simple little features create wealth and opportunity.  And are really worth thinking about.”

You also need water accounts that work like bank accounts and that are trusted and nobody steals water from each other.  “Where everybody understands that when people are using more water than is available, you’re actually stealing from each other; that’s not the sort of system that builds respect, integrity, and prosperity.”

8-  Low cost administrative systems with integrity.  “It’s better to be approximately right than very, very expensively precise.  When I read the guidelines that are coming out of the Department at the moment, it requires you to be very precise and very expensively precise about one bit – the hydrology, but it doesn’t care less about how you run the system that builds the integrity that’s critical to your future.  You need water accounting systems that have integrity because they are simple and easy to explain.”

With respect to water rights, Mr. Young said that there are two ways of doing it.  “One is we can try and interpret what your existing water rights are, in your language, perfect them or run an adjudication process that will take years and it’s very expensive,” he said.   Or you can build another system that sits on top of the existing water rights system. … You can bring in a share system that sits over the existing right, whatever it is, and you don’t have to go through trying to work out what it is.”

It also means you can build a new system and if it doesn’t work, you can scrap it, and you go back to what you had before which is what you have now, and I think that’s a very important option,” he said.  “What happened in Australia when we went to the new system is within the few years, nobody wanted to go back to the old system.  We still do have incredibly intense arguments about how much water is available and the fine print rules and all, but that’s for one reason.  This stuff is so valuable that everybody cares about it, and so we really pay attention, because if the numbers are wrong or if things are wrong, it affects people’s wealth and livelihoods, so we spent a lot of time trying to get the detail right.”

SGMA sets a goal that requires sustainable groundwater management by 2040, or 2042, depending upon the basin, and that the basin must be managed to avoid the six undesirable results, or all the undesirable results that are occurring in the basin. “It’s silent on things like maximizing profits.  It’s silent on how you might make money out of this, how you might drive things like investment, how you ensure compliance, how you build systems that have integrity and respect.  It doesn’t talk about encouraging and rewarding conservation.  If somebody saves water, says it would wiser to use groundwater next year rather than this water year, why can’t you do it?  If I want to save some money and use it next year, I can.  And a well managed water resource will allow you to do the same thing.  That’s critically important.  You need to facilitate continuous adjustment as circumstances change.”

When designing the system, you need to maximize value and talk about investment, he said.  “As part of the transition, you need to avoid massive disruption, and avoid fear of massive disruption.  When I talk to local communities and local people quietly, they are all really worried that suddenly someone might come in and take away 20% or 30% of the water that they’ve been using in the last few years, and bring a real shock into the community.  That would be a disaster, so you need to have a rule that says we start by recognizing where we are, we might adapt and change things, but you need a start up buffer so that everybody can decide when they want to start changing and how they want to change.

You need to have rules that enable people to save and carry forward unused water,” Mr. Young said.  “You need to encourage people to prepare for drought and have low-cost trading systems, and you need importantly to have a system that enforces whoever is responsible for running this system, particularly the government, to respond in a timely manner. … If things are not working out properly, you need to fix it up, as you all know in your farms and your livelihoods, when things are not working, you don’t keep on tolerating mismanagement, you fix it.  Fixing problems makes sense.”

You need to keep the whole thing simple and affordable.  “The jargon is, you have is an unbundled entitlement system, so you have shares that manage your long-term interests, you have water allocations, you have permits, and a lot more detail in the plans, but by building something that’s simple and having enough things to give you control, you get clear control,” he said.  “It’s a good reason why a car has a steering wheel and a brake and all the other controls.  Each one has a purpose, and it does that thing alone, and it’s the combination of all that gives you the outcome you’re after, which is the drive here to this meeting safely.  You’re water system doesn’t have enough controls; in fact, it’s unmanageable at the moment.  You need controls and you need lots of levers so you get control.”

The road map document contains this graph, which is a scenario.  The orange colors are the total volume of acre-feet that is going to have to be reduced.  “SGMA says that somehow you have to come back to what they call sustainable yield, but you don’t know what sustainable yield is,” he said.  “So to keep it simple, why don’t you just manage depth to groundwater?  Set three numbers: the preferred average depth and every one can plan around that.  Then you set a preferred maximum depth, and when you’re getting close to that maximum, you start reducing allocations per share pretty quickly.  And then an absolute maximum.  You say as a community, we will never let groundwater depth in this management area go below that.  Then everybody knows when you’re sinking wells and doing those sorts of things, how deep you have to put your well.  You don’t have to put it a lot deeper on the chance that it’s going to go on being mismanaged.”

Mr. Young pointed out that pumping water is expensive.  “Every time this community lets the groundwater table drop a bit, it’s going to cost you all a lot more.  The more it drops, the more it’s going to cost, so there’s a very honest transparent discussion that we had which is about how deep do you really want the groundwater table to go.  The shallow it is, the more money you make; the deeper it is, the less money you make.  There are a lot more considerations to be made, but talking openly and honestly about at what stage do you want to say, it’s better to have less water and not spend the cash to get access to the water.  It’s a good conversation to have.”

So build a simple management system that has simple rules.  For example, a rule that says every time depth to groundwater drops, allocations per share must drop 1.5%.  “In the Diamond Valley, the community wanted a rule that says it can never be cut by more than 6%, so you can add those sorts of rules in.  It’s all part of giving you confidence.”

He said you also need another rule that might sound a bit scary, but it’s very important.  “You put in a rule that says if you get to the minimum depth, allocations per share go to 0.  With the caveat that anybody who has saved water gets to have access to that water, so anything that’s bankable is there forever until you use it.  But then you have to return the aquifer back up to the minimum depth so you make a binding community commitment to stay within the limit.”

It’s also important to have a start up buffer, he said.  “You give everybody water in their account which is there to use whenever they want to, and that’s part of having no disruption.  Then, because you’re trying to guarantee people confidence, you start slowly.  In the mockup we put together, there’s a guarantee that for the first two years, the rate of reduction will be small, and that’s done so that people get time to think and learn.”

You might be able to bring in some more water, Mr. Young said.  “The strength of shares is if you find more water or get things wrong, then allocations can go up as well as down.  If you get a run of wet years, then allocations would go up.  That’s all part of building a dynamic system that works well.”

He presented a sample statement of a water account, noting that it’s similar to a bank account.  There is an opening balance; water is credited to your account at the beginning of the year, and transactions are recorded.  “This is the sort of system that a well managed resource would have,” he said.  “If you build systems that are like this, it becomes very easy to trade and to sell allocations to one another, and everybody knows what they’re worth.  In Australia, depending on the year, an acre-foot of water which you can use this year is worth somewhere between $400 and $700, depending on the year and the stuff gets traded backwards and forwards continuously.  And every farmer is involved in doing it.  And water is managed with great respect and great care.  And lots of opportunities have emerged out of these sorts of systems.

KEY DECISIONS

Gross or net accounting systems

The hardest decision to talk through is whether to use a gross accounting system or a net accounting system.  If you measure or somehow track the volume of water that’s taken out of an aquifer, and you don’t account for how much goes back down, you have a gross accounting system,” he said.  “What that does is when water becomes valuable, people say I’m going to move from flood irrigation to drip or something or like that, and when you do that, you actually can as much as double the amount of water that’s taken out of the aquifer because half of it’s no longer being returned.  So you have a gross system.  But when you do that, then everybody else has to reduce the amount that’s allocated next year or else the aquifer goes down.  That’s a gross accounting system.  In this community, it might be smarter to just have a gross system and everybody starts investing in improving efficiency.  It’s very low cost to run, no arguments over it.”

A net accounting system tries to account for the amount of water which has actually evaporated or transpired up into the air farm by farm and field by field.  “There is now really good satellite information that you can use and there are also rules of thumbs can be done.  Which is right for which district?  You can talk about, but it’s one of the things I’d invest a lot in if I was asked to set up a local agency and build a system with integrity.  With gross accounting systems, essentially you average what’s called the return flow; net accounting systems do it field by field.”

Gross accounting systems need meters, Mr. Young said.  “The state of the art in the world is to get the agency to wire all the meters in and to install the same meter everywhere.  One of the things I’ve stressed to you is really important is integrity.  Having a uniform metering system and have all the meters with tamper-proof seals on them is really important.  That way everybody trusts what’s going on.  There might be an error but it’s uniform.  Meters are only indexes; it doesn’t matter what the real volume is.  What matters is that you all have a fair and equitable accounting system.”

The satellite based systems are still in their infancy but the technology is advancing rapidly.  “It’s possible that these will be cheaper.  Ultimately, though, I suspect in most districts you’ll need a mixture of the two.”

If you have surface water coming in, if you go to separate surface water and groundwater, at least one half is going to have to be metered, or you’re going to have to have some clever way of working out what’s surface and what’s groundwater, but this is detail.

Governance

With respect to governance, the general trend in California is to establish Groundwater Sustainability Agencies through an election process.  Many of the people quite frankly don’t know a lot about all the stuff I’ve just been talking about.  If I was trying to build a water accounting system, I’d go to somebody who built banking software and knew how to do it and was really good at those sorts of things.  … Really you want a small board of people who are entrusted to make sure the system works well and creates a lot of wealth and opportunity for you.”

Studies have shown that with groups of five to seven people; every time you add somebody, the quality of decision making goes down by about 20%.  “If you want to prosper, the smaller the board you have and the more expertise on that board, the more prosperous you’ll be; if you want a dysfunctional system, have a board between 10 and 15 people who don’t understand the data.”

It’s important the management group present a public face that they members believe in the system they are running.  “The worst thing a board member can do is present a public face to all of the people who rely on what they’re doing that they don’t believe in the system they are running.  We get this right, and if you don’t like it, you resign.  And if the GSA doesn’t like it, then they sack the board.  And we’ve had to replace people along the way because they have got particular communication wrong.”

You have commitment to getting it all right, and when things go wrong, you replace them,” he said.  “That’s why you have a watermaster who is there who runs the system.  So essentially you can replace the board, bring in a functional board, and the watermaster will keep things running.  The only one who can sack the watermaster is the board.  The GSA can’t, because the GSA plays politics, and will at times want to get rid of the board, but at the same time, you need a system which can still be used to water your crops and supply all the water you need day by day, an accounting system that you trust and which the banks and everybody else that underwrites what you do trusts as well.  I can’t stress the importance of having systems that have that respect.”

Domestic use and disadvantaged communities

An important and sensitive issue are what to do about domestic users and disadvantaged communities.  The suggestion is to have groundwater shares held on behalf of these relatively smaller users.

There are two ways of doing it.  One is you can give shares to each household, but they all get a tiny share, but it’s very expensive to administer and very expensive to monitor,” he said.  “The alternative is to have a simple framework where the city or the county has to hold enough shares on behalf of all the domestic water users, and they have to keep account for all of that use in positive balance.  If somebody approves a subdivision in another 30 houses come in and they all put a well out, then the county or the city has to go and buy some more shares.  It won’t take them long to learn and say you want to get subdivision approval?  As part of the approval, you’re going to have to give us another ten shares or whatever it is.  You run at getting it approximately right rather than comprehensively wrong, but also making sure that the integrity of the sharing system holds.  You need to have urban, industrial, mining, and all the other uses there.”

At times, a city might aspire to grow, and see an opportunity to buy some shares at a reasonable price, and it will.  But will it do with the water that it doesn’t need?   “They can leave it in the aquifer, it might do that, or more likely, what we found in Australia is that they buy the shares and then immediately sell the water back into the irrigation center until they need it.  These sorts of things create wealth, create opportunity, and force the community to recognize the populations grow and circumstances change.  And these are really important things.  They might decide to invest in sewage recycling or something else, rather than continuing to just grow use, because discipline forces people to think through these things.”

Accidental overuse

There is a need to have a rule for accidental overuse that if somebody accidentally overuses and overdraws their account, they have 30 days to make good.  You want a system that forces them to make good,” he said, telling the story of an irrigator who meant to come home and turn his sprinklers off but had a car accident on his way home.  “It would be unfair to discipline somebody and throw the book at them, so I said look, you’ve got time to make good, and that’s fair.  You all know that you can make mistakes you can get over; you need time to make good.  At least part of the detail that needs to be in there.”

Ultimately you need a system that says if you don’t make good within 30 days and after lots of warning, the watermaster has to go into the water market and make good for you, and we have a simple rule that says we charge you two and sometimes three times the cost of doing that, and guess what.  They’ve never had to do it,” he said.  “The road map includes a capacity if the system is absolutely desperate, you can borrow from next year’s account, but intentional overuse, somebody who is routinely going over is not allowed to keep on doing that.  You need systems that are respected.”

You require the Department of Water Resources to be as disciplined.  “If you have to make decisions within 30 days, then so does everybody else.  If you can’t, then stay out of the room.  Essentially deal with across the board, who is running this system, to make sure it has integrity and respect.

Issuing shares

Mr. Young acknowledged that issuing shares is probably the hardest part of all, and there will be those who are passionate about what they think is the right set of rules.  Is it going to be on area basis, something that’s based on the volume of water you’ve used in the last x years, or based on best management practice?  You might have a massive fight, but actually if you break it up, it’s much easier than a lot of people think it is.”

The first thing is to work out who is eligible.  He acknowledged it’s not a trivial issue; there’s a lot of stuff to be sorted through.  “You have to determine the eligibility criteria.  Then you have to design and build the database that’s going to be used to build the share system.  … I’ll bet your systems, whatever they are, have got lots of errors and holes in it, and if you try to discover who owns what, you’ll discover it’s a non-trivial exercise, it needs to be cleaned up and any system that has integrity needs to go through that, so building that, assembling, and validating that the database is really important.”

Another important step of working out what the allocation formula is going to be.  “You can fight forever and ultimately it comes down to a judgment, but you need to go through a process,” he said.  “The fishing industry, when faced exactly the same problems you’re facing where fisheries have been overexploited, decided they had to work out how to allocate shares and the board appoints a group of three or four people to go ahead and study it and consult with everybody, drive around and talk to everybody, come up with a set of rules, think through all the issues, listen carefully to the lawyers and everybody and come up with a formula.  They then release it as a draft and then a final formula after getting all the comments, and then the board responsible for running this either adopts that formula or makes minor changes.  That process maintains the respective integrity of those people.”

It’s  very important to get that done and get it done efficiently, he said.  “Once you’ve agreed on the formula, you build the share register, record financial interests, and deal with your local cities and counties,” he said.

Mr. Young cautioned that the value of land will drop because the value of the water shares is now separate.  “At the moment, the value of the farm is really the value of the implied share, whatever it is, plus the land.  When you’ve got two, you’ll have to revise your database somehow, and it’s an interesting exercise.  The value of land and the shares will go up because you have a better system, but there’s some administrative stuff which will drive some people nuts, but it’s a good argument to have.  Then you have to confirm the accuracy.”

In the road map, there is a default formula, but he wouldn’t expect it to necessarily be adopted.  “The golden rule is to start with what you have,” Mr. Young said.  “If there is agreement in the community that you should allocate more water to people who are currently taking water, then you can build in rolling mechanisms or transition mechanisms to get that right.  And you can build in special reserves, possible for example, that people here who normally use surface water are dependent on having access to groundwater occasionally and you can build in mechanisms to cope with that.”

IN CONCLUSION …

In closing, Mr. Young said he has a vision that California can have the world’s best allocation system.  “If you focus with pride in building the best one you possibly can have, rather than saying SGMA is a problem, you’ll see it as the smartest thing you ever got into,” he said.  “It could even flow through to thinking in the surface water management as well … In Australia, we have made millions of dollars in mistakes, doing things the wrong way and getting things wrong, and then having to fix them up.  We were lucky enough to be led by people who were prepared to fix them up, and we ultimately got it roughly right.  We still have work to do.”

I urge you to go carefully through the blueprint that we’ve put together and see it as a template,” he said.  “It raises a lot of issues which you need to work through and get right, and if there are things in there wrong, please fix them up.  This is your future, and your opportunity.  I’d like to think that something in there makes sense.  If I can leave with you opportunity, that’s what I’d like to do, so thank you for listening.”

FOR MORE INFORMATION …

UPCOMING PRESENTATIONS BY MIKE YOUNG

  • August 3rd, 7:30am to11am, Bakersfield, presented by the Water Association of Kern County.  The presentation will be a follow up to the presentation I covered here.  Click here for more information.
  • August 3rd, 4pm to 6pm, Porterville, hosted by Tulare County Farm Bureau and Eastern Tule GSA  Click here for more information (see event on August 3). RSVP: Call Tulare County Farm Bureau, 559-732-8301

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