Cal Lutheran Launches State’s First Water Market

California’s first water market for individual landowners opened Tuesday in Ventura County, giving farmers on the Oxnard Plain a centralized channel for buying and selling groundwater. The launch is part of a pilot program involving the Fox Canyon Groundwater Management Agency and a coalition of municipal officials, environmental groups and roughly 50 farmers. Led by California Lutheran University faculty members Edgar Terry and Matthew Fienup, executive director of the school’s Center for Economic Research and Forecasting, the goal of the project is to establish a market-based solution to groundwater depletion in the region. Traditionally, California law forced farmers to either use the water on their properties or lose access to it in the future. Those who had more than they needed, as was sometimes the case during a certain stage of crop rotation, had no way of transferring it to other users. The issue reached a critical point three years ago when the state cut water allocations, which prompted Fienup and Terry to pursue the water market concept. Now, after months of building the necessary infrastructure – including an electronic data hub and a real-time automated metering system that tracks groundwater pumping – farmers can sell their surplus water to others in times of drought. All transactions will be overseen by the Center for Economic Research, which receives a 3 percent fee from each buyer and seller. Water prices will rise as it becomes more scarce, creating an incentive to conserve. No transfers have taken place yet, according to Fienup, who added that trading will likely be slow at first on account of the winter’s above-average rainfall. But when a drought does occur, the market will be ready, he said. “This has never been done anywhere before, so we have built it from the ground up,” Fienup said. “Ranch Systems, the (advanced metering) technology provider, has been an important and very effective partner in the establishment of the market.” The program’s first phase will officially end July 31. The next phase will likely include municipal and environmental water users as well as additional farmers, Cal Lutheran said, thanks in part to a $1.9 million grant from the U.S. Department of Agriculture. The funds will be administered through the Nature Conservancy, which hopes to use the Fox Canyon water market as a model for others in the state.