California’s first formal, centralized market for individual landowners to buy and sell groundwater has been launched on the Oxnard Plain, and the United States Department of Agriculture has awarded a $1.9 million grant to expand the pilot project later this year.

California Lutheran University faculty members Matthew Fienup, executive director of the university’s Center for Economic Research and Forecasting (CERF), and Edgar Terry, who is also president of Terry Farms, spent more than a year guiding about 50 farmers, city representatives and environmental stewards in the development of recommendations for the market-based remedy for groundwater depletion. The Fox Canyon Groundwater Management Agency (FCGMA) Board of Directors approved the pilot involving water users on the prime agricultural land bordered by the cities of Camarillo, Oxnard and Ventura. CERF is managing all aspects of the exchange including enrolling participants, matching buyers with sellers, and executing and reporting groundwater transfers.

The market allows farmers to transfer unused groundwater allocations to other farmers for financial compensation, thus enabling them to profit from conservation in their fields. Under California law, farmers traditionally have had to use water on their property or lose access to it in future years.

Unprecedented challenges posed by the reduction in water available to Ventura County cities and farmers during the drought prompted the pilot. When water allocations were cut, users simply had to get by with less water. There was no way to transfer water use from one piece of land to another or from one user to another.

The market will cause the price of water to go up as it becomes scarcer, increasing the incentive to conserve. The water market also gives users the flexibility to adapt to uncertain or declining availability and ensures that water is utilized for purposes users deem most valuable, rather than simply as a means of retaining access to it.

An advanced, automated metering system built by Ranch Systems LLC is providing real-time, electronic monitoring of groundwater pumping among participants. This represents the most thorough monitoring of groundwater extraction in the state and the first time universal advanced metering technology has been required in California.

The Nature Conservancy, one of the stakeholders that provided input for the pilot, will administer the $1.9 million Conservation Innovation Grant from the Natural Resource Conservation Service. After the pilot’s first phase ends on July 31, CERF staff will collaborate with The Nature Conservancy to make recommendations for an agencywide, permanent water market. The pilot’s second phase, slated to begin Oct. 1, will likely include municipal and environmental water users as well as additional farmers. CERF and The Nature Conservancy hope to use the Fox Canyon water market as a model for other groundwater basins throughout the state.