BILL ANALYSIS Ó
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Date of Hearing: April 12, 2016
ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE
Marc Levine, Chair
AB 2304
(Levine) - As Introduced February 18, 2016
SUBJECT: California Water Market Exchange
SUMMARY: Beginning January 1, 2018, establishes the California
Water Market Exchange (Exchange) in the Natural Resources Agency
to create a centralized water market platform. Specifically,
this bill:
1) Establishes a governance structure for the Exchange.
2) Requires the Exchange to create a centralized water
market platform and make that platform readily available to
the public.
3) Requires the submission of specific data before and
after a water transfer to be placed on the platform.
4) Requires the Exchange develop procedures to expedite
water transfers and prioritize transfers that provide
environmental and community benefits.
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5) Creates the California Water Market Exchange Fund
supported by fees on transfers upon appropriation by the
Legislature.
EXISTING LAW:
1) Establishes a policy to facilitate the voluntary
transfer of water, and permits all water rights holders to
pursue a water transfer.
2) Provides water can be transferred where there is no
injury to any legal user of water, no unreasonable effect
on instream beneficial uses, and no unreasonable effect on
the overall economy or the environment of the county from
which the water is being transferred.
3) Requires access for a transferor to unused conveyance
capacity if fair compensation is paid.
FISCAL EFFECT: Unknown.
COMMENTS: Beginning January 1, 2018, establishes the Exchange
to create a centralized water market platform.
1)Author's Statement: There are opportunities to improve the
management of water in California if water markets are
enhanced. Today only 3% of water used in California comes
from water transfers. We must do better. A well-constructed
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market will provide benefits for buyers, sellers, farmers,
communities, and the environment. This bill will improve
transparency, increase market participation, and enhance the
environmental and community resources in our poorest
communities while providing for less burdensome water
transfers. This will allow us to create a market that is
robust and easily accessible to willing sellers and buyers.
2)Background:
Role of Transfers:
Water transfers involve a change in the place of water use,
from the water's historic point of diversion and use, to a new
location either within or outside the watershed of origin.
Water transfers can last up to a year (temporary), more than a
year but not permanent (long-term), or be permanent. Water
transfers are strictly voluntary, and must not create harm to
other legal water users, the environment, or the local economy
from which the water is being transferred.
Water transfers can be an effective water management tool.
Transfers are particularly useful for meeting critical needs
during drought periods. Transfers can only occur with "new
water" the surface water system will realize as a result of
changes in reservoir operation, groundwater substitution, crop
idling or shifting, and occasionally water conservation action
taken.
History of Transfers:
Water transfers in California date back to the Gold Rush.
1859 California Supreme Court decision found that water rights
can be transferred like any other property. In 1976 the
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Governor's Commission on Water Rights recognized the
importance of water transfers to the future of California's
water supply. Many of the recommendations of the commission
were adopted in the 1980's. There was additional legislation
in the early 1990's but little has changed in the last 20
years.
Transfers grew considerably during the 1987-92 drought and
continued to expand through the 1990's. Growth in transfers
slowed dramatically in 2000 and has remained relatively flat
or even regressed since 2010.
Big Year for Transfer Reform?
The current historic drought has highlighted major barriers to
water transfers. This has brought attention to the
complicated rules associated with trading water from different
sources. California's trading rules are fragmented, opaque,
inconsistent, and cumbersome. Often times several departments
and agencies across and between Federal, State, and Local
Government have a role in a transfer moving forward. As a
result a number of stakeholders including agricultural, water
purveyors, environmental, and local communities have begun to
come together to discuss ways in which trading rules can work
better.
In March, the Association of California Water Agencies
released principles recommending ways to improve the water
transfer process. The release of the principles has ramped up
the stakeholder process. There appears to be general
agreement among many on the need for improvement in the
governance and management of data associated with water
transfers. There is, however, quite a number of issues still
to be resolved. It seems likely that the next couple of
months will produce more refined proposals.
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Legislation on this issue should consider all aspects of
improving water transfers. The path to do that is dependent
on the discussions and outcomes of the stakeholder processes
that is currently underway. The final version of this bill
will no doubt be shaped by those stakeholder efforts.
Suggested Amendments
AB 1755 by Assemblymember Dodd also addresses, in part, water
transfers and governance. The author may wish to consider
amending this bill to join it to AB 1755 to help facilitate
the stakeholder process to bring all parties together.
Additionally, there is continued stakeholder discussion on how
governance of water transfers should be constructed. The
author may wish to consider amending this bill to, instead of
creating a new governance body, direct existing state agencies
to manage the market exchange and facilitate the approval of
water transfers.
3)Prior and Related Legislation: AB 1755 (Dodd) 2016, would
create the Open and Transparent Water Data Act. AB 1755 is
currently pending in this committee.
4)Supporting Arguments: Current rules governing the state's
water transfer process are opaque and highly complex,
preventing many stakeholders from participating in the market
or even accessing data on past water transfers. In addition,
the current water transfer process fails to adequately protect
and benefit the environment and local communities. A
centralized water market platform that compiles specified data
about transfers and allows the state and the public to better
monitor water transfers will improve market transparency and
increase market participation. Moreover, it would create
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these benefits more efficiently and more economically than
building expensive infrastructure.
5)Opposing Arguments: Significant statutory changes are not
necessary in order to improve the ability of willing sellers
and willing buyers to execute water transfers. The Department
of Water Resources, with existing staff, is capable of
providing a forum to facilitate transfers. A more
transparent, more efficient and more accessible water market
can play a vital role in reducing impacts on the state's
economy now and in the future. Improvements to the water
market process and mechanisms for approval of water transfers
should be part of a comprehensive long-term water management
policy. It is puzzling that water transfers based on
conservation are not standardly available. We are committed
to working with the author and other stakeholders to identify
statutory changes, regulatory, and institutional barriers that
hamper the execution of transfers.
6)Concerns: The Farm Bureau supports the movement of water
between public and/or private entities, on a voluntary basis,
when it is in the best interest of contracting parties to
change the place and/or purpose of water use and when the
potential impact on third party water rights, non-transferring
users and communities within the district, and appropriate
protection are assured. Additional statutory framework should
be the subject of careful deliberation and design, with a
process calibrated to effect the participation of all relevant
stakeholders. We are concerned this measure may overlay a new
and duplicative process and suggest a taskforce to make
recommendation to the Legislature on legislative action if
warranted.
REGISTERED SUPPORT / OPPOSITION:
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Support
Community Water Center (with amendments)
Environmental Defense Fund
Sonoma County Water Agency
Opposition
Valley AG Water Coalition
Analysis Prepared by:Ryan Ojakian / W., P., & W. / (916)
319-2096
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