Water Banks in the United States

Draft ReportPrepared Jointly by:

WestWater ResearchWashington Department of Ecology

Public Sector Participants

Private Sector Market Participants

WaterBankSM Trust

Acquisition Types by Region

0

20

40

60

80

100

120

140

160

Pacific Northwest Southwest Rockies

No.

Acq

uist

ions

DonationPurchase Lease

Source: Landry 1998

Environmental Water Acquisitions Leases, Purchases and Donations

No. Acquisitions46

No. LeaseNo. PurchasesNo. Donations

Total Quantity AcquiredP. Northwest 1,234,57 af

California 536,323 af

Southwest 306,658 af

Rockies 286,482 af

Source: Landry 1998

Environmental Water Acquisition Expenditures and Quantity 1990-1997

Source: Landry 1998

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

1990 1991 1992 1993 1994 1995 1996 19970

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Acre

-feet

Expenditures Quantity

Environmental Water Leasing Programs

N

EW

S

Note: Map depicts representative location of water right place of use and groundwater restricted area. Exact location and acreage may differ. This map is intended for illustrative purposes only and should not be Used for any other purpose. Deschutes Water Exchange

Dugeness Water Leasing ProgramEnvironmental Water AccountMontana Leasing Programs

Oregon Water Trust Walla WallaLeasing Program

Salmon Creek Leasing BankUSBR Klamath Leasing ProgramYakima Drought BankUSBR Lemhi River LeasesSnake River Leases

Water Banks in the West

StateInitial

Bank ActivityArizona 1996California 1991 & 2001Colorado 2002Idaho 1932 & 1979Montana -Nevada 2000 & 2002New Mexico 2002Oregon 2003Texas 1993 & 2001Utah -Washington 2001Wyoming -

Water Bank DefinitionInstitutional mechanism that facilitates the legal transfer

and market exchange of various types of surface, groundwater, and storage entitlements.

Water BankForms contracts with suppliers

Forms contracts with demandersActs as intermediary with clients

and regulatorSet Price

Manage the bankMarket-maker/clearinghouse/broker

Water Supply Clients Water Demand Clients

1

2

3

Multiple clients sell/lease water to the bank Regulatory Body

Regulates bank operationsCertifies water quantity A

B

C

Multiple clients purchase/lease water from the bank

Water Bank Formats

• Water Banks are designed around specific sources or water entitlements

• Common Bank Formats– Institutional Banking– Surface Storage Banking– Ground Water Banking– Conjunctive Use Banking

Purpose of Water Banking• Creating reliability in water supply during dry years• Creating seasonal water reliability• Ensuring water supply for farmers• Promoting water conservation by encouraging right

holders to conserve and deposit rights into the bank• Acting as market mechanism• Resolving issues of inequity between groundwater and

surface-water users• Ensuring compliance with intrastate agreements of

instream flow

Bank Administrative Functions• Registry of water rights or entitlements• Price setting and regulation• Policies administration and daily operations • Water right verification• Quantifying the bankable water• Specifying who can purchase or rent from the

bank• Administering transfer or contract terms• Provide regulatory reporting or oversite• Resolving disputes

Market Structure of Water Banks

• Clearing House– Online Bulletin Boards– Office Posting Boards

• Standing or Fixed Price• Option or Contingent Markets• Auctions

CaliforniaDrought Emergency Bank Profile

• Location: Statewide• River Basin: Statewide, Primarily SWP and CVP service areas• Established: 1991• Year Active: 1991, 1992, 1994• Bank Format: One-year leasing program • Market Structure: Clearinghouse • Participation: Supply – Northern California users;

Demand – SWP and CVP contractors south of Delta• Activity: High• Pricing: Administrative• Price Range ($/AF/YR): $68-$175• Regulatory Oversight: Streamlined transfer process • Administrator: California Department of Water Resources (DWA)• Environmental Objective: Ensure minimum stream flows through the Delta

CaliforniaDrought Emergency Bank Activity

Supply/Use1991 1992 1994

AF $/AF AF $/AF AF $/AF

Water Source   $125   $50   $50 Fallowing 410,000   0   0  

Groundwater 246,000 152,000 187,000

Stored Water 164,000 38,000 33,000

Total 820,000   190,000   220,000  

Delta Requirements -160,000   -30,000   50,000  

Net Available 660,000   160,000   170,000  

Allocations   $175   $72   $68 Urban Uses 297,000   40,000   25,000  

Agricultural Uses 99,000 96,000 145,000

Environmental Uses 0 24,000 0

Carryover Storage 264,000 0 0

Total Allocated 660,000   160,000   170,000  

IdahoStatewide and Rental Pools

Statewide Bank• Location: Statewide• River Basin: Statewide• Year Established: 1979• Year Active: 1995• Bank Format: Institutional water

bank • Market Structure: Clearinghouse • Participation: Supply – Open;

Demand – Open• Activity: Moderate• Pricing: Market Based• Price: $11/AF/YR• Regulatory Oversight: Idaho

Department of Water Resources• Administrator: Idaho Department

of Water Resources• Environmental Objective: None

Rental Pools• Six Established Banks• Year Active: 1932 – Snake River• Bank Format: Leasing stored water• Market Structure: Clearinghouse • Participation: Supply – Stored

water; Demand – Open

• Activity: Low to High• Pricing: Administrative• Price: $3.00 for in- basin

$10.50 out-of-basin • Regulatory Oversight: State• Administrator: Water District #1• Environmental Objective: None -

Instream transactions encumbered by “last fill” policy

Water BankingUpper Snake River Rental PoolThe Problem of Fixed Pricing

0100,000200,000300,000400,000500,000600,000700,000800,000900,000

1,000,000

1979 1981 1983 1985 1987 1989 1991 1993 1995

Acre

-Fee

t

Supplied Sold

Dry Years

OregonWater Banking Profile

• Emerging Water Bank Programs– Klamath Basin Water Lease Bank– Walla Walla Water Lease Bank– Deschutes Basin Groundwater Mitigation Bank

• Bank Format Varies– Lease Banks are Predominate Structure– Lease Banks Operate Under Existing Regulatory Structure

• Market Structure: Bilateral Trades• Participation: Supply – Open

Demand – Bank Administrator• Activity: Low to High• Regulatory Oversight: State• Administrator: Federal and Nonprofit• Environmental: Yes

Water Banking:Six Important Considerations

• What is the legal authority of the bank?– Does the bank have authority to execute trades?– Is legislation required?

• What are the banks objectives and purpose?– Enhancing stream flow– Providing drought year water supplies

• Who can participate in the bank?• What is the market area served by the bank?• How is water priced?

– Fixed Price– Market Based

• How will community acceptance and participation be encouraged?

Laramie Office:121 Grand Avenue, Suite 222Laramie, WY 82070Tel: (307) 742-3232Fax: (307) 742-3996

Houston Office:1100 Louisiana, Suite 2675Houston, TX 77002Tel: (713) 652-2450Fax: (713) 652-2452

WestWater Research