What is “Water Banking”? Water banking is the practice of forgoing water deliveries during certain periods, and “banking” either the right to use the forgone water in the future, or saving it for someone else to use in exchange for a fee. It is usually used where there is significant storage capacity to facilitate such transfers of water.
In 2013, the Utah Farm Bureau Federation adopted policy stating, “We support the concept of Water Management Authorities for the purpose of voluntarily banking of water for the benefit of agriculture as long as the control is maintained locally by the irrigation companies.”
At that same time and since then, there was/is growing discussion among both rural and urban stakeholders to incentivize water conservation and efficiency. Much of this discussion led to the July 2017 Governor’s Water Strategy Report. This 200-page report includes 11 chapters outlining issues and recommendations to address Utah’s water demands as the population continues to increase. Several chapters recommend Water Banking as one tool to increase water conservation and efficiency.
For two years now, both Senator Iwamoto (D-Salt Lake City) and Rep. Hawkes (R-Centerville) have led the legislative interim efforts to pull the necessary stakeholders together for the purpose of drafting water banking legislation. The Utah Farm Bureau Federation is an active, regular participator in these working groups along with approximately 10 others, including: Trout Unlimited, Utah’s Department of Agriculture and Food, Water Conservation Districts, The Nature Conservancy and Municipal Water Suppliers. The working group is now meeting twice/month nearing the final draft stage. The hope is to have draft legislation available for additional stakeholder input this summer (2019). The Utah Farm Bureau Federation is already working with select Irrigation and Canal Companies to solicit input on the draft legislation. Senator Iwamoto is hoping for a consensus bill going into the 2020 Legislative Session.
We now commonly see across the West, regions using the “buy-and-dry” approach to urban sprawl and development. For example, in the Lower Arkansas Valley, Colorado, the population is expected to grow 78% from 2008 to 2050. Thus far, the “buy-and-dry” transfers of water have fallowed one-fourth of the area’s agricultural lands – 100,000 acre-feet. If population trends continue, 50% of farmland could be fallowed by 2050 to supply urban growth.
Cowley County, Colorado is another example. In recent years, 70,000 acre-feet of water have been transferred to municipal use, particularly in Pueblo and Colorado Springs. Once 50,000 irrigated acres is now reduced to 5,000 acres. Municipal and Industrial (M&I) users now owns 90% of water in key reservoirs. Noxious weeds and dust storms are on the rise. Loss of agriculture production in local, rural economies raises serious concerns, including: statewide and local economic impacts, food security, cultural heritage and impacts to the environment.
Non-voluntary water conservation or reallocation through regulation would be time and resource intensive. Mandates seldom produce the most efficient or effective resource management outcomes. Alternative transfer mechanisms like leases, rotational fallowing, split-season uses, and water banks can help avoid permanent dry-up of agricultural land, and the many economic and environmental impacts that can occur when land goes out of irrigated agriculture forever.
Effective market alternatives to “buy-and-dry” transfers must include the following:
- Ensure that agriculture keeps ownership of the water rights (most important)
- Incentivize agriculture participation (dollars)
- Protect agriculture rights against abandonment and forfeiture (certainty)
- Be locally created and managed (local control)
- Be voluntary (effective solutions aren’t forced)
- Provide mechanisms in which urban and environment needs can acquire water to address their demands (provide a “relief valve”)
- Low transaction costs (easy and cheap to use)
One positive example where water banking has worked is the Arkansas Valley Super Ditch Company. This example represents 7 irrigation companies with 8 ditches and 2 reservoirs. The company negotiates on behalf of farmers to make water available for other uses through banking, leases or interruptible supply agreements. No buy-and-dry is allowed. Farmers voluntary participate in the program and they can fallow up to one-third of their fields every 3 out of 10 years.
The stated goal of the Water Bank Working Group is “To better support Utah’s agricultural needs and meet increased social, environmental, and economic water demands. Water banking is a market tool designed to facilitate low cost, voluntary, and temporary transactions that may provide both income to water right owners and greater access to water.”
Senator Iwamoto sponsored and passed SJR 1 during the 2019 Legislative Session. The Resolution essentially does two things: 1) tees up legislation for next year that aims to formalize water banking in Utah, and 2) funds a Pilot Program for Water Banking at $400,000. These funds will serve as seed money to secure a three-year grant with the Bureau of Reclamation. Draft legislation, combined with this grant money, is designed to create a Utah focused water banking concept that allows local water users to share information and facilitate voluntary willing lessor and willing lessee water transactions.
The Utah Farm Bureau Federation and several Working Group attorneys presented this Water Banking draft legislation concept at the March 2019 annual Utah Water Users Conference in St. George, Utah. The Water Bank Working Group is committed to creating a water banking model that is 1) Voluntary, 2) Temporary and 3) Local.