Trading Sustainably: Critical Considerations for Local Groundwater Markets Under the Sustainable Groundwater Management Act

The Sustainable Groundwater Management Act (SGMA), passed in 2014, is changing the way California manages its groundwater resources. SGMA calls for the creation of local Groundwater Sustainability Agencies (GSAs) and tasks them with developing and implementing Groundwater Sustainability Plans (GSPs) to achieve sustainable groundwater management. SGMA offers GSAs a broad palette of tools to choose from and significant flexibility to tailor their management activities to local conditions and needs. Because it allows GSAs to assign groundwater extraction allocations to pumpers and to authorize transfers of these allocations under certain circumstances, SGMA potentially opens the door for the development of local groundwater markets. In such a market, a willing seller might trade a portion of their groundwater extraction allocation to a willing buyer, allowing the buyer to pump groundwater in the seller’s stead.