Amended in Assembly May 11, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2304

Introduced by Assembly Member Levine

February 18, 2016

An act to add Chapter 7.5 (commencing with Section 485) to Division 1 of the Water Code, relating to water.

LEGISLATIVE COUNSEL’S DIGEST

AB 2304, as amended, Levine. California Water Market begin delete Exchange. end delete begin insert Clearinghouse. end insert

Existing law, the Costa-Isenberg Water Transfer Act of 1986, requires the Department of Water Resources to establish an ongoing program to facilitate the voluntary exchange or transfer of water and implement the various laws that pertain to water transfers. The act requires the department to create and maintain a list of entities seeking to enter into water supply transfers, leases, exchanges, or other similar arrangements and to maintain a list of the physical facilities that may be available to carry out water supply transfers. The act requires the department to prepare a water transfer guide with prescribed components.

This begin delete bill end delete begin insert bill, on and after July 1, 2018, end insert would establish the California Water Market begin delete Exchange, governed by a 5-member board, in end delete begin insert Clearinghouse as an independent office end insert begin insert within end insert the Natural Resources begin delete Agency. end delete begin insert Agency for the purpose of making the water transfer and exchange process more transparent and more efficient end insert begin insert and to enhance access to voluntary water market transactions, as specified. end insert This bill would require the begin delete market exchange, on or before December 31, 2017, end delete begin insert clearinghouse, on or before December 31, 2018, end insert to create a centralized water market platform on its Internet Web site that provides ready access to information begin insert that has been provided end insert about water available for transfer or begin delete exchange. end delete begin insert exchange and information about the process for transferring or exchanging water. The bill would require the Secretary of the Natural Resources Agency to convene a Water Market Clearinghouse Task Force, composed as prescribed, and would require the task force to make recommendations to the clearinghouse, as specified. The bill, on or before December 31, 2018, would require the clearinghouse to consider and act upon the recommendations submitted by the task force in order to establish administrative procedures under which state agencies would more expediently act upon proposed water transfers or exchanges and would prioritize projects that provide environmental and community benefits or have a demonstrated history of minimal potential impact to other legal water users or instream beneficial uses. The bill would require the clearinghouse to work in collaboration with other state agencies to make necessary changes in the rules and regulations governing water transfers and exchanges. end insert This begin delete bill, for end delete begin insert bill would require end insert all transfers begin delete and end delete begin insert or end insert exchanges of water occurring on or after January 1, begin delete 2018, would require the submission of certain data and information to the market exchange and end delete begin insert 2020, that require conveyance across the Sacramento-San Joaquin Delta or result in conveyance of water from one watershed to another end insert begin insert to be submitted to the clearinghouse and processed, as specified, and would require end insert the payment of an administrative fee to the begin delete market exchange, end delete begin insert clearinghouse for this processing, end insert as specified. begin delete This bill would require the market exchange to develop specified procedures in consultation with federal, state, and local agencies. end delete begin insert The bill, on or before December 31, 2018, would require the agency to create an Office of the Water Transfer Advocate within the clearinghouse and to appoint an advocate. end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert The Legislature finds and declares all of the
following: end insert

begin insert

(a) A more efficient water transfer process and a more
accessible water market can play important roles in reducing
uncertainty and water shortage impacts on the state’s economy
now and in the future.

end insert begin insert

(b) The California Water Action Plan calls for making
improvements to the water transfer process as part of a
comprehensive, long-term water management policy.

end insert begin insert

(c) While numerous water agencies and water users currently
participate in the water market, water transfer processes are
complex and water market information may not be readily
available to the public and all potential sellers and buyers.

end insert begin insert

(d) Providing greater transparency in and access to water
marketing will provide a needed tool to increase water supplies
by leveraging significant local and regional investments made
over the past two decades to increase water supply reliability.

end insert begin insert

(e) An enhanced water market, used in conjunction with
investments in conveyance, water use efficiency, including water
conservation and water recycling, surface and groundwater
storage, desalination, and other strategies, will add to the water
supplies that are available to help the state weather multiple years
of drought and protect economic and environmental uses of water.

end insert begin insert

(f) Voluntary water transfers are a proven and effective way to
help meet California’s water needs, as evidenced by the landmark
1991 Governor’s Emergency Drought Water Bank and numerous
subsequent water banks, exchanges, and short- and long-term
water transfers.

end insert begin insert

(g) Water markets can improve water use efficiency and pricing,
which in turn can contribute to increased water supply for
consumptive uses, enhanced stream flows, and more water for
wetlands and other environmental resources. This benefit would
be of particular importance during prolonged drought.

end insert begin insert

(h) Improving the water transfer process and enhancing access
to water markets can accomplish all of the following:

end insert begin insert

(1) Protect existing local and regional investments.

end insert begin insert

(2) Improve coordination among water agencies.

end insert begin insert

(3) Incentivize significant investments in water use efficiency
projects and programs.

end insert begin insert

(4) Increase water supply and water supply reliability for urban
and agricultural water users.

end insert begin insert

(5) Increase the quantities or improve the timing of water
available for transfers by providing information to sellers and
buyers who might not otherwise have sufficient information to
participate in water markets.

end insert begin insert

(6) Benefit the environment by enhancing the state’s water
supplies and increasing the amount or improving the timing of
water available for environmental uses.

end insert begin insert

(7) Benefit communities by bolstering water supplies and
reducing reliance on groundwater resources.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Chapter 7.5 (commencing with Section 485) is added
to Division 1 of the end insert begin insert Water Code end insert begin insert , to read: end insert

begin insert

 

Chapter   begin insert 7.5. end insert California Water Market Clearinghouse

 

begin insert 485. end insert   

This chapter shall be known, and may be cited, as the
California Water Market Clearinghouse Act of 2016.

begin insert 486. end insert   

It is the intent of the Legislature to create the California
Water Market Clearinghouse to do all of the following:

(a) Advance water sustainability, resiliency, and adaptability
to drought and climate change by promoting efficient water
markets.

(b) Provide important benefits and opportunities for
disadvantaged communities and environmental resources.

(c) Increase agency coordination, transparency, and
decisionmaking capacity.

(d) Facilitate water transfers and water user access to
exchanges by the establishment of a centralized market information
platform and better coordinated review and approval processes,
thereby streamlining the process. This can be achieved without a
significant increase in the overall transaction costs or regulatory
burdens associated with water transfer processes.

(e) Enable and encourage public and private investments in
water use efficiency and other water-saving measures through
participation in water transfers and exchanges.

(f) Promote and enable water transfers and exchanges as
effective mechanisms for management of sustainable surface and
groundwater resources in the state.

(g) Protect environmental resources, including groundwater,
consistent with the requirements of the Sustainable Groundwater
Management Act (Part 2.74 (commencing with Section 10720) of
Division 6).

(h) Protect drinking water supplies in areas of origin from
cumulative impacts of multiple or long-term water transfers and
exchanges.

begin insert 487. end insert   

(a) On and after July 1, 2018, the California Water
Market Clearinghouse shall operate as an independent office
within the Natural Resources Agency. The purpose of the California
Water Market Clearinghouse is to make the water transfer and
exchange process more transparent and more efficient and to
enhance access to voluntary water market transactions, in
particular those that provide environmental or social benefits.

(b) The director of the California Water Market Clearinghouse
shall be appointed by the Secretary of the Natural Resources
Agency.

begin insert 488. end insert   

(a) On or before December 31, 2018, the California
Water Market Clearinghouse shall create a centralized water
market platform on its Internet Web site that provides ready access
to information that has been provided about water available for
transfer or exchange and information about the process for
transferring or exchanging water. The platform shall be readily
available to the public and contain all water transfer or exchange
data and information collected by the California Water Market
Clearinghouse.

(b) On or before December 31, 2018, the California Water
Market Clearinghouse shall consider and act upon the
recommendations submitted by the Water Market Clearinghouse
Task Force and shall establish administrative procedures under
which state agencies shall more expediently act upon proposed
water transfers or exchanges. Those procedures shall require state
agencies to prioritize projects that provide environmental and
community benefits or have a demonstrated history of minimal
potential impact to other legal water users or instream beneficial
uses. The California Water Market Clearinghouse shall act
consistent with rulemaking procedures of the state and shall work
in collaboration with other state agencies to make necessary
changes in the rules and regulations governing water transfers
and exchanges.

(c) On and after January 1, 2020, all transfers or exchanges
that require conveyance across the Sacramento-San Joaquin Delta
or result in conveyance of water from one watershed to another
shall be submitted to the California Water Market Clearinghouse
and processed according to the procedures and standards
established, pursuant to subdivision (b), by the California Water
Market Clearinghouse in coordination with other state and federal
agencies.

(d) On or before December 31, 2018, the Natural Resources
Agency shall create within the California Water Market
Clearinghouse an Office of the Water Transfer Advocate and
appoint a Water Transfer Advocate.

(e) Nothing in this chapter provides authority to the California
Water Market Clearinghouse to approve or disapprove water
transfers or exchanges.

begin insert 489. end insert   

(a) In order to provide the California Water Market
Clearinghouse with appropriate recommendations to improve the
water transfer process and increase access to the water market as
part of a comprehensive, long-term water management policy, the
Secretary of the Natural Resources Agency shall convene a task
force, to be known as the Water Market Clearinghouse Task Force.

(b) The Water Market Clearinghouse Task Force shall make
recommendations, based upon the best available science, to the
California Water Market Clearinghouse regarding all of the
following:

(1) How to aggregate and disclose in a publicly accessible
manner the information required to be submitted in support of an
application to transfer water pursuant to Section 1725 or any other
law. The information should include, but not be limited to, all of
the following:

(A) The names of the water buyer and seller.

(B) The quantity of water to be transferred or exchanged.

(C) The price to be paid for the water transfer or exchange.

(D) The time and duration of the water transfer or exchange.

(E) The nature of the underlying right to the water proposed to
be transferred or exchanged.

(F) The origin and proposed point of use, place of use, and
purpose of use of the transferred or exchanged water.

(G) A description of the conveyance and storage facilities
necessary to complete the transfer or exchange.

(H) An identification of any third-party impacts including, but
not limited to, water quality impacts.

(2) The information required for water users and the public to
readily track the progress of a proposed transfer through agency
review to ensure expedient approval whenever possible.

(3) The type of information that the California Water Market
Clearinghouse should require to be submitted to it by state or local
agencies that approve a water transfer or exchange after the
transfer or exchange is completed. The information should include,
but not be limited to, all of the following:

(A) The quantity of water transferred or exchanged.

(B) The new place of use for the transferred or exchanged water.

(C) The new point of rediversion for the transferred or
exchanged water.

(D) The parties to the water transfer or exchange.

(E) The conveyance and storage facilities used to complete the
water transfer or exchange.

(F) The time and duration of the water transfer or exchange.

(4) Procedures and standards designed to provide for all of the
following:

(A) Better coordinated review of and action upon applications
or proposals to transfer or exchange water, or both.

(B) Priority for projects that provide environmental and
community benefits or have demonstrated a history of minimal
potential impact to other legal water users or instream beneficial
uses.

(C) Reduced transaction costs of water transfers and exchanges.

(D) Comprehensive evaluation of transfers that should be
eligible for expedited review, with consideration of drinking water
supply, environmental quality, and groundwater sustainability
benefits and impacts.

(E) Assurance that transfers and exchanges protect
environmental and community resources in areas of origin and in
recipient areas.

(F) Demonstration that a transfer will not adversely affect
groundwater conditions in any areas involved in the transfer.

(c) In addition to the recommendations required pursuant to
subdivision (b), the Water Market Clearinghouse Task Force may
consider and make recommendations, based upon the best
available science, to the California Water Market Clearinghouse
regarding any or all of the following:

(1) Consolidating places of use.

(2) Incentivizing and facilitating water use efficiency-related
water transfers, as well as transfers between environmental uses.

(3) Developing and facilitating pilot transfers based on crop
fallowing and other practices to quantify and validate consumptive
water use rates and incorporating findings into water transfer
guidelines.

(4) Providing transparency regarding Delta carriage water loss
analysis.

(5) Establishing or documenting conveyance access protocols.

(6) Creating market mechanisms for access to capital.

(d) (1) The Water Market Clearinghouse Task Force shall be
composed of the following members:

(A) One representative from each of the following state
agencies:

(i) The Natural Resources Agency. This representative shall
serve as the chair of the Water Market Clearinghouse Task Force.

(ii) The department.

(iii) The Department of Fish and Wildlife.

(iv) The Department of Food and Agriculture.

(v) The Office of Planning and Research.

(vi) The board.

(B) Representatives from academia, agricultural water suppliers,
municipal water suppliers, disadvantaged communities,
environmental and conservation organizations, and groundwater
management entities.

(C) Representatives from entities that have participated in water
transfers as sellers and buyers of water.

(2) The federal water and resources agencies shall be invited
to have representatives participate in the Water Market
Clearinghouse Task Force.

(e) The Water Market Clearinghouse Task Force shall conduct
three public meetings to consider public comments on draft
recommendations to the California Water Market Clearinghouse.
The Water Market Clearinghouse Task Force shall publish draft
recommendations at least 30 days before the public meetings. One
public meeting shall be conducted at a location in northern
California, one public meeting shall be conducted at a location in
the central valley of California, and one public meeting shall be
conducted at a location in southern California. The Water Market
Clearinghouse Task Force shall invite California Native American
tribes, environmental justice organizations, cities, counties, and
local production agricultural organizations to participate in the
public meetings.

(f) On or before January 1, 2018, the Water Market
Clearinghouse Task Force shall submit its recommendations to
the California Water Market Clearinghouse.

begin insert 490. end insert   

(a) Anyone submitting information pursuant to subdivision
(c) of Section 488 shall pay an administrative fee, established by
the California Water Market Clearinghouse, to recover the
reasonable costs of the California Water Market Clearinghouse
in administering this chapter.

(b) Fees imposed pursuant to subdivision (a) shall be deposited
in the California Water Market Clearinghouse Fund, which is
hereby created in the State Treasury. Moneys in the fund shall be
available, upon appropriation by the Legislature, to the California
Water Market Clearinghouse for the purposes of this chapter.

begin insert 491. end insert   

This chapter applies in addition to any other law relating
to water transfers and exchanges.

end insert

begin delete

SECTION 1.  

It is the intent of the Legislature in creating the
California Water Market Exchange that the market exchange do
all of the following:

(a) Create water sustainability, resiliency, and adaptability to
drought and climate change.

(b) Provide important benefits and opportunities for
disadvantaged communities and environmental resources.

(c) Increase transparency and decisionmaking capacity by better
integrating data collection and reporting.

(d) Facilitate water transfers and exchanges by the establishment
of a centralized exchange platform and streamline review and
approval processes.

(e) Enable and encourage public and private investments in
water use efficiency measures through participation in water
transfers and exchanges.

(f) Provide water transfers and exchanges as an effective
mechanism for sustainable management of surface and groundwater
resources in the state.

SEC. 2.  

Chapter 7.5 (commencing with Section 485) is added
to Division 1 of the Water Code, to read:

 

Chapter  7.5. California Water Market Exchange

 

485.  

This chapter shall be known, and may be cited, as the
California Water Market Exchange Act of 2016.

486.  

The following definitions govern the construction of this
chapter:

(a) “Disadvantaged community” has the same meaning as
defined in Section 79505.5.

(b) “Market exchange” means the California Water Market
Exchange established in Section 487.

(c) “Small community water system” has the same meaning as
defined in Section 116275 of the Health and Safety Code.

487.  

(a) The California Water Market Exchange is hereby
established in the Natural Resources Agency.

(b) The market exchange shall be governed by a five-member
board, composed as follows:

(1) The Secretary of the Natural Resources Agency.

(2) Four individuals appointed by the Governor.

(c) Each board member appointed by the Governor shall hold
office for a term of four years. The Governor shall stagger the
terms of the initial members appointed. A vacancy shall be filled
by the Governor by appointing a member to serve the remainder
of the term.

488.  

(a) On or before December 31, 2017, the market exchange
shall create a centralized water market platform on its Internet
Web site that provides ready access to information about water
available for transfer or exchange. The platform shall be readily
available to the public and contain all data and information
collected by the market exchange in order to ensure transparency
of information regarding the quantities of water available for
transfer or exchange and the prices paid for transferred or
exchanged water.

(b) Before a transfer or exchange of water, the market exchange
shall require the submission of data and information that includes,
but is not limited to, all of the following:

(1) The names of the water buyer and seller.

(2) The quantity of water to be transferred or exchanged.

(3) The price to be paid for the water transfer or exchange.

(4) The time and duration of the water transfer or exchange.

(5) The nature of the underlying right to the water proposed to
be transferred or exchanged.

(6) The origin location and proposed place of use of the
transferred or exchanged water.

(7) A description of the conveyance and storage facilities
necessary to complete the transfer or exchange.

(8) An identification of any third-party impacts that may result
from the transfer or exchange.

(c) After a transfer or exchange of water, the market exchange
shall require the submission of data and information that includes,
but is not limited to, all of the following:

(1) The quantity of water transferred or exchanged.

(2) The conveyance and storage facilities used to complete the
water transfer or exchange.

(3) The time and duration of the water transfer or exchange.

489.  

The Legislature intends that water transfers and exchanges
protect and enhance environmental and community benefits that
include the following:

(a) Instream flows and ecosystem water supply.

(b) Improved water monitoring and data networks.

(c) Ecosystem restoration projects benefitting aquatic and
riparian species.

(d) Improved drinking water supply and quality projects.

(e) Development of needed technical, managerial, and financial
capacity for disadvantaged communities.

(f) Acquisition through the market exchange of needed water
supplies for small community water systems.

490.  

On or before December 31, 2017, the market exchange
shall do both of the following:

(a) Develop procedures, in consultation with federal, state, and
local agencies with jurisdiction over water transfers or exchanges,
to streamline and expedite review and action upon applications to
transfer or exchange water and to prioritize projects that provide
environmental and community benefits as described in Section
489. The procedures shall recommend types of transfers and
exchanges that could be more routinely approved.

(b) Establish standards and procedures to ensure that transfers
and exchanges protect environmental and community benefits
consistent with Section 489 and to encourage projects that improve
environmental conditions, provide safe drinking water, and provide
other community benefits.

491.  

(a) Anyone submitting information pursuant to
subdivision (b) or (c) of Section 488 shall pay an administrative
fee, established by the market exchange, to recover the reasonable
costs of the market exchange in administering this chapter.

(b) Fees imposed pursuant to subdivision (a) shall be deposited
in the California Water Market Exchange Fund that is hereby
created in the State Treasury. Moneys in the fund shall be available,
upon appropriation by the Legislature, to the market exchange for
the purposes of this chapter.

492.  

(a) This chapter applies in addition to any other law
relating to water transfers and exchanges.

(b) This chapter applies to all transfers and exchanges of water
occurring on or after January 1, 2018.

end delete