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California could likely save a lot of water by subsidizing desired water products instead of the water itself. However, this is difficult to implement because transferring water diverts reclaimable runoff and groundwater recharge in many cases.

Recently there has been renewed interest in reducing water waste. In light of this, has any research organization or government entity studied moving California to a system where water users are reimbursed for reclaimable water runoff by those who use the runoff?

This proposal would have several differences from the current system. For example:

  1. Payment would be conditioned on actual reclaimable runoff at the point of upstream use, and the actual existence of a rights holder downstream of that runoff point. For example, an almond farmer in an isolated groundwater basin that drains his fields to the flood control system receives no runoff reimbursement. (However, he still receives the proposed direct subsidies for his almonds.)

  2. The downstream users of the water would reimburse the upstream users. (Existing downstream rightsholders would receive a one-time payment for their existing rights when they transition to the new system. Existing upstream sources would make a corresponding one-time payment to absolve them of their existing obligations.)

  3. Payment would be made to all outdoor water users -- agricultural or urban. The only condition is that there is a downstream rights holder.

  4. Both the one-time transition price and reimbursement price would be set by private negotiation between the upstream runoff producer and the downstream consumer.

To transition to the new system, existing downstream rightsholders need an incentive to make a deal, but should also be fairly compensated for their current rights by the upstream runoff producers who are now no longer obligated to use their water locally. This could be achieved by maintaining the legacy rights until a cutoff date that is announced at enactment time. The further in the future, the more up-front value the legacy downstream rightsholders can recover, but the slower the transition. If no deal is made, the automatic fallback is that the downstream rightsholder has his rights continued for many years (until the cutoff date). This results in the legacy downstream rightsholder receiving most, but not all, of the value of his current rights (since most of the economic value of a service provided in perpetuity is delivered within 25 years, due to the time value of the service).

Depending on the cutoff date chosen, the remaining fraction of legacy rights may be small enough that the water-saving benefits of the new system simply outweigh the loss of value to existing downstream users. If not, the remaining fraction could be potentially settled via new state policy that requires some kind of one-time payment corresponding to the perpetual value of what remains, based on prices observed during the transition period.

But the overall cost of settling these fractional legacy rights would be tiny in comparison to the water that would be unlocked by the new system. This is because most water delivery is from high lakes, not runoff. Furthermore, many water users are both downstream and upstream of other users, so the net payments under the new system are comparatively small. Therefore, the benefits pertain to all water - making all water transferable - while the costs are about settling some fraction of the legacy net runoff rights.

Despite these differences from the current system, it seems likely, at first glance, that a proposal could be made that enables water transfers while considering existing rights. Given the renewed interest in reducing waste, what are the potential political factors working against water runoff reimbursement proposals?

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    You might want to consider writing your questions in another tool and review/revise it there for a bit to reduce the number of edits. Having to edit it at least 13 times in about 2 hours since posting it isn't a good sign.
    – Joe W
    May 17, 2022 at 21:07
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    You may be interested in, California Water Plan - UPDATE 2018 - MANAGING WATER RESOURCES FOR SUSTAINABILITY. "The California Water Plan (Water Plan) is the State’s strategic plan for sustainably managing and developing water resources for current and future generations."
    – Rick Smith
    May 17, 2022 at 22:46
  • @Rick Thanks for the reference. It appears to describe how to improve storage and transportation infrastructure. However, my question is about how to enable water transfers in cases where the infrastructure already exists, but cannot proceed due to downstream rights issues. I do not see anything in the 2018 water plan about water rights. For example, it says that groundwater basins should be recharged, but doesn't propose paying me if I recharge a groundwater basin. So I don't see a market-based approach. May 18, 2022 at 18:53
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    @Joe Interesting idea. I've opened a meta question about it. May 18, 2022 at 19:01
  • Generally speaking, when you have a 5-paragraph and 4-bullets proposal, it's more like a legislative agenda/reform than a simple question on a single point. So this reads more like: has anyone proposed my rather non-trivial reform for water allotment in CA? The answer is almost surely no, not as such. Apr 18, 2023 at 15:57

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The downstream users of the water would reimburse the upstream users.

Californians are probably extremely unlikely to consider this over their first-in-use, first-in-right system/doctrine because of the huge advantages the latter provide them over the neighboring US states, particularly when it comes to the waters of the Colorado river and their use in the Imperial Valley. They are downstream from almost everyone else (except Mexico) but have superior/senior rights. And it's not just the farmers, water from the Colorado also goes to the MWD in LA. Case in point, CA recently rejected a proposal by 6 other US states on solving the current shortage in that area, hopping for the "bullet proof" chances in court instead, it seems.

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