PUB00020

• Year: 2000
• Title: Layperson's Guide to Water Marketing
• CWCB Section: Interstate & Federal
• Author: California Water Education Foundation
• Description: Layperson's Guide to Water Marketing
• Publications - Doc Type: Other

To alleviate the disparity
between supply and
demarul, the federal and
state governments built a
complex water storage and
distribution system.

1

California is entering a new era of water use. Just as
the landscapes have been transformed from desert
and swamplands to farmland, and Gold Rush towns
into metropolises, the method by which water users
obtain this precious commodity is evolving.

Agriculture in California remains, as it has since the
late 1800s, a primary consumer of water in the state.
And as a $27 billion industry, agriculture is
undoubtedly a major backbone of California's
economy. However, landscapes again are changing
and with them, how water is used. Populations in
California continue to expand at a rapid rate and
some farmland - especially in the Central Valley - is
beginning to grow subdivisions instead of crops. With
this growing population comes increased urban water
use. Additionally, some water previously consumed
by farmers and urban areas (such as Silicon Valley)
is now being called on to restore endangered fish
populations. With these changes, both past and
present, one question has remained constant how
do you get water to where it is needed? For increas-
ing numbers of people, water transfers are seen as
a sol ution.

About two-thirds of the state's water supply origi-
nates in northern California, while around two-thirds
of the state's population lives in southern coastal
areas with much of the farming for the state in
between. The majority of the state's annual runoff
flows into the Sacramento and San Joaquin rivers,
which run through the Central Valley and meet in
the Sacramento-San Joaquin Delta. To alleviate the
disparity between supply and demand, the federal
and state governments built a complex water storage
and distribution system. The combined projects trans-
port surface water from northern California to the
Delta. Water is then pumped from the Delta and
transported up to hundreds of miles south,

The federal Central Valley Project (CVP) delivers
about 7 million acre-feet of water in a normal year-
about 20 percent of the state's total developed water.
Traditionally, approximately 95 percent of CVP water
is used for irrigation, principally in the Central Valley,
and 5 percent for urban use. Likewise, the State
Water Project (SWP) delivers 3 million acre-feet of
water in an average year, with about 70 percent
allocated to municipal and industrial use, and 30
percent to agricultural purposes. (However, in recent
years, increased portions of water from both these
projects have been allocated to the environment

creating a reduction in the amount of water going to
agriculture.)

The largest supply of water to southern California is
the Colorado River, of which, California has been
using up to 5.2 million acre~feet in recent years
(though California is being prompted by the secre-
tary of the tnterior to reduce its use of the Colorado
River [see page 18j). Additionally, the city of Los
Angeles receives water from the Owens Valley via
its own Los Angeles Aqueduct. As with other water
systems, these projects transfer water from one
location to another.

In spite of the state's vast and complex distribution
systems, meeting California's water demand contin~
ues to be problematic because of cycles of drought,
flooding, and growth. Estimates of California's
population in 1999 pushed the number of residents
over 34 million, According to Department of Water
Resources (DWR) figures (Bulletin 160-98), the state
population is expected to top 47 million by 2020,
priming California for a possible water shortfall of
2.4 million acre-feet in normal years and up to 6.2
million acre-feet in drought years.

At the same time, the traditional source of new water
supplies - storage via construction of dams and
reservoirs - has been significantly curtailed because
of high costs, lack of support for public funding, and
environmental concerns. Recent laws and court
decisions also have redirected more water for
protection and restoration of the environment.

One of the newer tools available to help meet
demand is water marketing. Water marketing is the
transfer, lease or sale of water or water rights from
one user to another and may involve a sale of land
with water rights attached. Though many transfers
occur around the state on a daily basis, there is no
formal market in which water is bought and sold. Most
exchanges involve a transfer of the resource and not
a transfer of the water right. Correspondingly, water
markets do not create a new resource for use but
rather a reallocation of an existing resource; moving
water from one location to another.

The majority of water transfers in California to date
have been short-term (less than a year) - so-called
spot market transfers - and between agricultural
interests, who use about 80 percent of the state's
developed water. However, long-term transfers that
would take water from rural, agricultural areas and
move it to urban sectors (ag-to-urban) have been
growing rapidly. Additionally, in recent years, entre-
preneurial private companies have been looking to