Is Water-banking the Key to California’s Water Woes?

by |March 20, 2009

It’s been a bad stretch of years for farmers in California…and things don’t look like they will be getting better any time soon.

Photo property of Scott Anger

Photo property of Scott Anger

Three years of consecutive drought in the state have ravaged the agricultural industry, leading Gov. Arnold Schwarzenegger to declare a state of emergency. The announcement was accompanied by pleas for municipalities to cut their consumption by 20% – or potentially face mandatory rationing.

Yet, because agriculture accounts for up to 80% of water use in some areas of the state, it is both the cause of the problem and one of it’s largest victims.

As a result, some farmers have turned to water banking . Water banking is a tool for leasing water for a limited period of time on a voluntary basis between willing water rights holders and users. Under such a system, upstream users are paid to abstain from using their water, so that more water will be available for higher priority users downstream. Yet, the owners of the land are not required to permanently sever their water rights from their land.

It’s a plan that could potentially alleviate water shortages in parts of the state, while providing economic incentive for those who have more water than they need to conserve.

Lawmakers have been pushing for the creation of a water banking system in California to ensure that municipalities, and other high priority users, will not be left in the lurch. There have been calls for the creation of a water bank that could transport as much as 600,000 acre-feet of water from willing sellers in the north to areas in the south that are experiencing severe water shortages. (For more information on water banking measures in California for 2009, follow this link.)

Yet, water banking can be complex and there are questions regarding how effective the system will be in the face of increasingly severe drought. We will explore some of the challenges associated with water banking in the following posts. Stay tuned for more updates on this topic, coming soon!

(This is the first in a multi-piece story regarding measures to cope with the ongoing drought in California.)

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Dan Stellarksj2110Julie Arrighi Recent comment authors
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Julie Arrighi
Julie Arrighi

Very interesting, I look forward to reading more of your analysis, specifically, as you mentioned, your thoughts on how well this will work under severe drought conditions. It would also be interesting to know what range of estimates is out there regarding how high the price of water might become. Thanks for the intriguing article!


The prospect of a formalized, statewide water banking system is intriguing. It is, however, undoubtedly difficult to put this idea into practice. This is especially true in the face of climate change. Many questions arise: How will the increasingly unreliable supply of freshwater be quantified so that water stocks can be traded? Will this “paper water” actually represent tangible quantities of water that will be stored for the owner’s future use? Is the concept of water banking an idea fundamentally imbedded with too many theoretical ideals to be effective in practice? Or, is water banking a forward thinking concept that… Read more »

Dan Stellar

Very interesting and I look forward to reading more about both water banking and the California drought. As others mentioned, I too wonder how well this could work under severe drought conditions. And the practical challenges really are immense. My gut reaction is that, while water banking could be a stop-gap measure, it’s not sufficient to really address the underlying issue, which is massive overconsumption of water resources. Groundwater reserves have been drawn down for too long, and now we’re paying the price. While water banking and other creative solutions can be helpful, what’s really needed is a way to… Read more »