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WESTERN GROUNDWATER CONGRESS: Rock, Paper, Physics: SGMA and Water Transfers

At the 3rd Annual Western Groundwater Congress, Anona Dutton with EKI Environment and Water gave a presentation on water transfers and the Sustainable Groundwater Management Act, providing an overview of how water transfers are typically implemented, some of the implications under SGMA, and then gave some case studies for additional information.

Water transfers are an important tool for managing California’s water supply, and the implementation of SGMA is only going to increase and incentivize the need for the development of new transfer markets,” she said.  “These water transfers can have impacts both at the origin of the transfer and at the receiving end of the transfer, which can present a challenge for GSAs for achieving sustainability.”

Methods of transferring water

Typical methods for water transfers are well established and involve the transfer of a water right or allocation.  Water can be made available by:

  • By fallowing land or other methods to conserve water, making the ‘conserved’ water available for transfer;
  • Groundwater substitution whereby the transferor uses local groundwater instead of surface water, making that volume of surface water available for transfer; and
  • Reservoir reoperation where reservoir operational rules are modified to make water available for transfer

The transferred water can be either used directly or put into storage.  However, Ms. Dutton noted that there could be impacts to both ends of the water transfers that will have to be considered as part of SGMA implementation.

When thinking about water transfers, one important consideration is what water system infrastructure is available to move the water.  Ms. Dutton noted that the state’s major arterial infrastructure systems essentially do facilitate transfers from north to south and other systems that move water east to west that is often used to facilitate transfers across regions or across the state.  However, most of the transfers are often more local such as within a basin or a region, and therefore are using more local infrastructure or regional infrastructure, or even no infrastructure, as in the case of groundwater transfer markets.

Water transfers likely to play an important role in SGMA implementation

There are 21 critically overdrafted basins identified, most of them in the San Joaquin Valley; these basins have a significant challenge ahead of them in terms of demonstrating sustainability over the next 20 years.

In all likelihood, water transfers are going to be an important part of that, and the development of water transfer markets may also be part of their plans to increase surface water supply and support supply reliability and groundwater sustainability,” Ms. Dutton said.

In the groundwater sustainability plans that were submitted in January of 2020, she noted that the collected overdraft was estimated in the Central Valley of about 1.4 MAF; other researchers think that the number might be higher – closer to 1.7 MAF to 1.8 MAF per year.  However, everyone is in agreement that climate change is only expected to increase that overdraft further.

Those same plans have identified a series of projects and management actions that will be implemented to address the identified deficit.  About 20% of those portfolios are around demand management and reduction; the remaining about 80% are focused on supply augmentation in surface water transfers and other ways to augment supplies and directly or indirectly conduct groundwater recharge.

The Department of Water Resources conducted a study to estimate how much water might be available in the state and identified 1.5 MAF.  The study also identified some of the challenges and opportunities associated with developing water transfers to support groundwater sustainability, ranging from institutional and regulatory barriers to issues such as water quality that could directly affect GSP performance.

Ms. Dutton noted that there are spatial and temporal issues in that most of the water supplies identified in the study are located in the northern part of the state, and most of the demand and need is in the southern part of the state and southern San Joaquin Valley.

How do you address that spatial disconnect? That’s where water transfers can really help,” she said.

The intersection of SGMA and water transfers

There is a large demand created for water transfers. With the advent of groundwater sustainability agencies and their significant powers, there are mechanisms in place that can support the development of groundwater transfer markets in particular.  Those mechanisms include the ability to establish groundwater allocations. Still, many new regulations can restrict the ability to transfer water both within and between basins and users.

This is because SGMA requires two tests of sustainability, Ms. Dutton said.  “The first is a simple water budget accounting method to sum your ins and outs and your deficits, and make sure that math essentially shows that you are in the basin sustainable yield, so it’s really a ledger accounting of your water balance,” she said.  “The second side of the equation is more difficult.  You have to do active monitoring of the groundwater system and key parameters to demonstrate that the basin has actually achieved sustainable condition.”

So while it’s clear that water transfers can support the accounting side of demonstrating sustainability, assuming there are enough supplies to meet demand, what is less clear and more uncertain is whether or not water transfers or developing a water transfer market can help achieve the physical demonstration of sustainability insofar as that a particular well in a particular location in that basin can meet the sustainability criteria, she said.

SGMA requires the groundwater sustainability agencies to develop a water budget, which accounts for the water supply sources and water usage with the basin.  “It’s clear that if you can increase your surface water inflows through a transfer, you’re going to have more water coming out of this side of the equation and hopefully less of a change in storage or other deficits shown,” she said.  “A water transfer is certainly going to help you with that test of sustainability in your basin and GSP.”

Then there’s the physical demonstration.  The GSA builds a monitoring network and establishes sustainability criteria for those wells. Every year, the GSA will have to show DWR and the public that the water levels stayed above the minimum threshold and that the basin is progressing towards or reaching the measurable objective.  So the projects and management actions that are being implemented are meant to support achieving that physical demonstration of sustainability.

Wherever the transfer is originating from, hopefully, the water transfer isn’t creating a significant and unreasonable decline in water levels, or it is not affecting other indicators like production, groundwater storage, or land subsidence and so forth,” Ms. Dutton said.  “On the receiving end of the water transfer, is it creating water quality degradation because you are introducing a different supply?  Maybe through recharge or inadvertently mobilizing naturally occurring constituents like arsenic or uranium?  Maybe you’re changing gradients, so you are mobilizing a plume?  These are all things that you need to take into account when you’re affecting your water transfer.”

She pointed out that in large basins such as the Central Valley, you can transfer water in one part of the basin and have no benefit or impact in another part of the basin.  So while the delivery of surface water to one portion of the basin will add water to a “paper” basin water budget, it does not necessarily mean that more groundwater will physically appear beneath the project proponent’s service area.  If the imported water does not migrate towards the correct extraction wells, it means that, despite what the paper water accounting may say, that volume of water may not be available for an entity to pump without generating local undesirable results.

A water transfer can show on your ledger that you’ve added more water to the system, but if that water is never going to get to those wells in that other part of the basin and they continue to plummet at historic rates that were unsustainable, it will be hard to avoid undesirable results,” said Ms. Dutton.  “There has to be a clear demonstration that your investment is going to make a difference in the parts of the basin that you need to make a difference in to achieve sustainability and avoid undesirable results.”

There also has to be consideration of third party impacts and ensuring that disadvantaged communities aren’t disproportionally impacted; there may be water quality, water levels, and other impacts related to water transfers or water markets that must be considered.  The transferor of the water must also consider the depletion of interconnected surface waters or other impacts to environmental uses.

All of this has to be taken into account now through the lens of SGMA when you’re thinking about water transfers,” she said.

Groundwater substitution transfers under increased scrutiny

This is especially relevant when considering groundwater substitution transfers when the transferor releases the surface water and pumps groundwater instead.  “The issue with that is if you’re pumping more groundwater, you’re potentially creating more depletion of interconnected surface waters, so there’s a double whammy hit to the basin,” Ms. Dutton said.  “This is something that that’s received a lot of scrutiny to date, particularly where there’s a long time of groundwater substitution transfers that have been occurring in Northern California. Now there’s a nexus to interconnected surface waters that has been brought to light, and it’s now required to be directly factored into any evaluation of transfers by groundwater substitution.”

She noted that several counties across the state have ordinances preventing this kind of transfer mechanism for the exact reason that they don’t water leaving their county, particularly if it’s also going to create undesirable results for declining groundwater levels locally and depletion of interconnected surface waters.

RELATED: Substituting groundwater for surface water – what could go wrong? A case study in Victoria, Australia, from the Global Water Forum

SGMA sets the stage for groundwater transfer markets

With the advent of the Sustainable Groundwater Management Act, GSAs can assign groundwater extraction allocations and authorize the transfer of those allocations, subject to certain conditions.

Historically, this concept really only happened in adjudicated basins, but now any basin that has a groundwater sustainability plan, determined a sustainable yield, determined how they are going to allocate that yield, and has determined that they want to set up a transfer market, so that’s all well and good,” she said.  “If you have an allocation, you have an asset.  Do you want to sell that asset?  Trade that asset?  As a landowner or pumper, what is going to be your opportunity in that scheme?

Ms. Dutton said that there are factors to be considered when designing and implementing a water market program.

It’s easiest to set up a water market in closed basins or places with well-defined boundaries and flows.  She noted that basins in the middle of the Central Valley could have many cross-boundary flow issues that can complicate the implementation of a local and effective water transfer system or market.  It’s also helpful if the sources of supply are known and well defined and that everyone understands the legal structure and the water rights structure of those supplies and who has rights to them and to what degree.

I think we’ll see this first in basins where there are no other options or limited options, such as the more isolated basins that aren’t connected to regional or statewide infrastructure,” she said.  “Following the model of adjudicated basins, there is likely to be a glide path, so that your groundwater pumping allocation is likely to decrease over time until the pumping from the basin matches what the sustainable yield says can be sustainably pumped.”

Markets are a process, so theoretically, the market will figure out how and where to use water most efficiently in a basin, she noted.  “It can be a relatively efficient way to support sustainability goals.  I’m not saying it’s easy to get there in terms of what is a fair and equitable allocation of the resource, but if you can do that and figure out what your glide path is, then you have a well-defined playing field that people can operate in.  You just have to make sure you have taken into consideration all the beneficial users, and there are no unintended consequences or third party impacts to the environment or other sensitive users in the basin.”

Besides determining the allocation, there has to be a way to measure how much water is being pumped, and there need to be rules in place to avoid undesirable results.  “Just because you have allocations and you can sell your allocation to another pumper in the basin, it doesn’t mean suddenly they can pump twice as much and not cause any undesirable results, because if they are in the part of a basin with already declining water levels, they may not be able to increase pumping significantly no matter how many other people’s groundwater allocations they purchase, just because of the physical nature of groundwater moves and flows in a basin.”

There has to be a transparent platform to conduct the trades. That has to be administered as any other market would be to facilitate the implementation and make sure that the market is functioning and rules are being followed.

Case studies

Ms. Dutton then suggested three case studies for more information:

The Oxnard Plain Subbasin has done some interesting things in terms of how they require measurements, how they establish duration of transfers, and how they’ve established rules to avoid undesirable results; their main concern is seawater intrusion.

RELATED CONTENTGROUNDWATER MARKETS: A case study of the Fox Canyon Groundwater Market, from Maven’s Notebook

Madera County investigates the use of groundwater allocations and transfers, which she noted will be very interesting to watch, given the cross-boundary flows and other issues present in that basin.

The Mojave Basin is an adjudicated basin with a system of groundwater allocations and trading since 1996 and a glide path for diminished allocations that have been a mechanism for them to move towards sustainability through a groundwater market and allocation system.

In conclusion …

SGMA is providing both an opportunity and a challenge for water transfers and the development of transfer markets,” Ms. Dutton said.  “I think we’re going to see a lot of activity in this space in the next 5 to 10 years as GSAs really grapple with how to achieve sustainability in their basins most effectively.  Ideally, the GSPs are being written to provide adaptive management and flexibility so tools like water transfer markets or trading and things can be built into the implementation scheme to try to achieve sustainability cost-effectively.”

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