The SGMA is disrupting those professions tasked with managing water and the risk surrounding water-business decisions. Businesses and professions that work in and around water-dependent industries must assess the water risk of their operation. Identifying the risks stemming from SGMA can create strategic opportunities to weather future water supply volatility. 
Supply and Demand 
At its core, water economics relies on a market participant’s ability to move water and incentivize conservation practices. SGMA allows Groundwater Sustainability Agencies to create and enforce a GSP. The GSP will include new fees on groundwater pumping and restrictions on pumping based on the estimated capacity of the underlying groundwater basin. GSPs are designed to reach a “sustainable yield” for the basin and avoid six “undesirable results” summarized as the “significant and unreasonable” lowering of groundwater elevations, reduced groundwater storage, saltwater intrusion, water quality degradation, land subsidence, and the open-ended adverse effects on beneficial uses of interconnected surface water.  
Supply and demand are foundational to water management. Historically, California allowed unrestricted groundwater pumping. SGMA will cap that, and in areas like the Central Valley where groundwater offered an alternative source to drought-reduced surface supplies, available pumped groundwater will plummet. The rules promulgated by the GSAs will create risks and opportunities for all industries in the GSA and the broader region. 
Trading groundwater amongst overlying landowners is a common practice in many areas of the Western United States. However, it is prime for increased use in California. Typically, management practices in water follow a supply-side (surface water importing) or demand-side approach (exchanges and trading). Due to the increased severity of drought and the increased environmental concerns over climate change, a flexible demand-side approach can better handle water supply volatility. An oft-cited example is Australia as utilizing demand-side solutions to bolster a 31 billion dollar agricultural products export industry, and a 93 percent domestic food supply, in spite of being the driest human-inhabited continent in the world. Flexibility can mitigate unexpected water shortages and thereby reduce long-term water risk. 
When water pricing is outside of the realities of supply and demand, there is a lack of motivation to manage it responsibly. Creating the right incentives for increasing water use efficiency while keeping costs down is a real challenge in the age of water scarcity in the West. However, investing in data to understand how people are using the water, how surface and groundwater use impact a region, and which actions can have the most significant impact to reduce waste is essential. Without reliable data, proper incentives are more challenging to create and implement. Circling back to supply and demand principles, how do you ensure water supply is adequate and understand the heightened demand for surface and imported water under SGMA? Data analysis that is quick and easy to absorb is necessary to make decisions and take action. 
Gaining and Losing 
Nearly 700,000 acre-feet of water is lost on the Kings River system, and about 2 million acre-feet is lost on the San Joaquin River system each year. SGMA calls out unreasonable impacts on surface water supplies as an undesirable result. Moving forward, it will be critical for water managers, investors, farm credits, banks, and related professionals to understand the importance of surface water/groundwater connections.  
There are three categories of interactions between surface water systems and groundwater systems: “surface-water bodies gain water from the inflow of groundwater through their bed, they lose water to groundwater by outflow through the bed, or they do both, gaining in some reaches and losing in other reaches.” Groundwater pumping unchecked can turn a gaining stream into a losing stream which impacts surface water. SGMA requires addressing the surface water and groundwater interactions, and that connection requires a flexible approach to balancing competing priorities.  
A primary goal in the age of SGMA is to maintain a balance between surface water and groundwater supplies to reach sustainable yield targets that are forthcoming in GSPs; you must balance the budget. However, many of the basins supporting crucial agricultural operations are in deficit. The solution: recharge. 
Recharge describes the process of sending water back into the aquifer to replenish its stores. Recharge is accomplished through capturing high flows during wet seasons and pumping or spreading that water to areas optimized for receiving the water into the underlying aquifer. One method in determining whether an area is suitable for recharge is using the Soil Agricultural Groundwater Banking Index (SAGBI) which incorporates multiple factors of soil and climate characteristics to give a rating on recharge capabilities. Additionally, understanding the Stories Index, soil classification, and the Federal Emergency Management Agency (FEMA) Flood Zone datasets provide a clearer picture on an area of land’s capability as a water recharge site. 
In 2017, California recharged approximately 6.5 million acre-feet. Additionally, with proper infrastructure and data, the amount of potential recharge water available could be up to twice that amount depending on regulatory actions and climate. The ability to replenish aquifers faster, thereby reaching a balanced water budget in the basin in a quicker manner, is essential to achieving SGMA sustainable yield targets. 
Risk and Opportunity 
Often the term water manager is associated with water, irrigation, and now groundwater agencies. In reality, any business that touches water in some way needs to incorporate water management into their strategic thinking. At the core of water management is water risk. As water supplies increase in volatility, understanding the water risk is essential to forecast risk for your operation. While humans are working on solutions like groundwater recharge and demand-side market structures to mitigate risk, nature has a wicked curve that can throw us all off balance, unless you have done your research. Identify your water risk early, seek solutions to mitigate that risk, and take advantage of the strategic opportunities to position yourself for the future. 
AQUAOSO Technologies provides a research platform capable of delivering actionable data to assist you in identifying, understanding, monitoring, and mitigating your water risk.