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The Fox Canyon Water Market: A Market-Based Tool for Groundwater Conservation Goes Live

Posted by Havala Schumacher, NRCS Program Analyst in Conservation
May 11, 2020
The Santa Clara River
The Santa Clara River, Southern California’s last free-flowing river, is impacted by groundwater pumping. Photo Credit: Melinda Kelley, TNC

“In Ventura county, our whole strategy has been to protect the coastal and river habitat – and one way to do that is to support agriculture.”– Sarah Heard, Director, Conservation Finance, The Nature Conservancy

Ventura County, California, is an agricultural powerhouse. In 2017, its revenues from agriculture were an estimated $2.1 billion. It also faces extraordinary population pressure, with nearly 450 people per square mile – about five times the average population density of the United States. Both agriculture and infrastructure are dependent on, and impacted by, the availability of water – which has itself been impacted by California’s rapidly-diminishing groundwater reserves.

Groundwater is a critical resource for much of California agriculture, and in 2014 the state took steps to ensure the future sustainability of groundwater supplies by passing the Sustainable Groundwater Management Act (SGMA). This established a groundwater use framework across all sectors of society.

Following passage of SGMA, The Nature Conservancy (TNC) applied for and received a $1.8 million Conservation Innovation Grant from USDA’s Natural Resources Conservation Service (NRCS) to develop the Fox Canyon Water Market. This grant helped enable TNC, in turn, to provide essential support for Fox Canyon Groundwater Management Agency and project partner California Lutheran University in their effort to establish a market-driven and producer-lead approach to reduce groundwater pumping.

Under this cap-and-trade style system, agricultural producers in the Fox Canyon area are subject to fixed groundwater allocations based on historical use. Producers can then purchase or sell their unused allocation. If a producer can reduce their groundwater use, they can sell any unused portion of their allocation and realize income from their water savings. Some special features of this market are that it is online, anonymous, and uses an algorithm-driven matching platform, resulting in a level playing field and a fairer deal for farming operations of all sizes.

All markets need rules, stakeholder support and capacity to function, and the Fox Canyon Water Market is no different. The project credits several “enabling conditions” for its early success including:

  • Water scarcity – a limited supply and increasing demand for groundwater required innovative solutions;
  • Fixed allocations – participating producers voluntarily agreed to a fixed allocation of groundwater;
  • Agricultural stakeholder support – from the outset, this project was highly collaborative and producer driven;
  • Market design expertise – the project leveraged the experience of TNC and partners in designing environmental markets, and included robust pilot testing; and
  • Capacity and funding – enabled both by TNC’s robust planning and stakeholder engagement efforts and the support of funders including NRCS.

After years of development, the market exchange opened in March 2020. Still in a pilot phase, the market has already seen 58 acre feet of pumping allocations change hands, with more expected as the end of the water year approaches. Through this innovative project, TNC and its partners hope to demonstrate that market-based approaches can be a meaningful, fair, and sustainable way to achieve water conservation while engaging and supporting agricultural producers.

High-value crops from the Fox Canyon
The Fox Canyon produces high-value crops such as strawberries. Photo Credits (clockwise, L to R): Farm Bureau of Ventura County; Kiliii Yuan, TNC; Sarah Heard, TNC
Category/Topic: Conservation

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Comments

Jeanette Lombardo
May 10, 2020

There was little or no activity in the pilots. Given the food service sector of agriculture is non-existent after COVID-19-this may not have been the best time to launch.

Kioren Moss
May 10, 2020

Ventura County’s total land area of 1,843 square miles is owned by the U.S. government as to approximately half, and its population of about 823,000 is confined to 10 cities, the largest of which is Oxnard at about 200,000. Fairfax County Virginia, as a comparison, is about 1.147 million population within 406 square miles, 2,826 persons per square mile. The author improperly uses the US Population of about 328 million by its approximately 3.797 million square miles, or 86 persons per square mile, to conclude that Ventura County “faces extraordinary population pressure, with nearly 450 people per square mile—about five times the average population density of the United States.” Including the plains, Rocky Mountains, deserts, national forests in reaching an “average” density of the country for comparison to individual counties is improper. San Francisco County and City has about 18,800 persons per square mile; Los Angles has about 2,450. Ventura County does not face “extraordinary population pressure,” does not have high population density in any sense, and has had laws restricting household formation and population growth starting in 1969.

Ben Weaver
May 11, 2020

@Kioren Moss - thank you for your comment. The population density of the United States as a whole was 87.4 persons per square mile in 2010, relative to the 446.7 persons per square mile in Ventura County, and more dense than California as a whole, at 239.1 persons per square mile. (Source: Census Bureau data, available at www.census.gov/quickfacts). It is true that this population is concentrated in urban areas and that the county’s population grew at a somewhat lower rate than that of the United States as a whole. At the same time, the county’s nearly 850,000 residents and agricultural interests place substantial demands on the water supply. The author did not mean to imply that Ventura County is growing more rapidly than other areas of the country or state, but rather that the number of people present in populated areas places considerable demands on the water supply – similar to other parts of the country with a combination of large urban centers and agricultural infrastructure.

Ben Weaver
May 11, 2020

@Jeanette Lombardo - thank you for your comment. The Fox Canyon water trading market has been in the planning stages for years and launched prior to the COVID-19 crisis. Southern California’s water issues are persistent even in the face of COVID-19 and USDA is happy to partner with The Nature Conservancy and others to test solutions that are farmer-focused and forward-looking.

Rick Gooch
May 12, 2020

Hello - I am interested in the technical documents - e.g., umbrella agreement, rules of engagement, underlying technical basis for sustainability, the cap/trade system - are any documents available to review?

thanks

Gregg Young
May 12, 2020

Maybe I am naïve, but if one property owner saves 4 ac-ft/year, but sells it to another, who uses it, how is that conserving water?

jan h hobgood
May 12, 2020

Do they have anything like this in Georgia? We would like to use a grant to help us with our artesian well.
thanks,
Jan Hobgood

Boomer
May 12, 2020

We need to get rid of rules that limit the amount of time riparian water can be stored. Seems like it is 30 to 60 days? depending on circumstances. Why not remove water from riparian areas when houses are being flooded and store it until the next rainy season?

Some rules actually have the unintended? consequence of putting more strain on overtaxed groundwater. I say unintended with a question mark as there is too much self interest in the "compliance" industry, both public and private, providing jobs doing things that are multiple agency redundant, unneeded, and just plain counterproductive to storing groundwater.

Ben Weaver
May 13, 2020

@jan h hobgood - thank you for your comment. Unfortunately, we don’t have a project like this currently active in Georgia. We encourage potential new partners to apply for grants. See the Conservation Innovation Grants website for more information.