SGMA’s First Groundwater Market: An Early Case Study from Fox Canyon

In 2014, amid California’s most recent drought, the state passed the Sustainable Groundwater Management Act (SGMA). This new law regulates groundwater at scale for the first time, requiring the state’s largest source of stored water to be managed for long-term resilience. SGMA delegates the responsibility of achieving sustainable groundwater management by 2040 to local Groundwater Sustainability Agencies (GSAs). GSAs must achieve sustainability for their groundwater basins by developing and implementing Groundwater Sustainability Plans (GSPs). Balancing groundwater basins to achieve sustainability will require increasing water supply to the basin and/or decreasing water demand.

The Fox Canyon Groundwater Management Agency (FCGMA), in western Ventura County, is the first GSA to pursue a groundwater market as a tool to decrease water demand when implementing its GSP. This white paper outlines FCGMA’s experience—the steps taken and lessons learned—in developing the first groundwater market to emerge under SGMA. It is a combined effort of The Nature Conservancy (TNC), California Lutheran University’s (CLU’s) Center for Economic Research and Forecasting (CERF) and FCGMA, with the support of local growers and the Farm Bureau of Ventura County (Farm Bureau). This document is meant to serve as a resource for GSAs and other public agencies, organizations, practitioners and stakeholders involved in water resource management and contemplating the creation of groundwater markets to meet SGMA’s sustainability mandate. This report focuses on the design and testing of the Fox Canyon groundwater market; a companion report will likely follow to evaluate the performance and share additional lessons learned once the market has launched.