SGMA California

The Comprehensive Guide For Agriculture and Land Professionals

INTRO – Impacts Of California’s Sustainable Groundwater Management Act – SGMA

Climate change unearths new challenges that humanity must face. Adapting to a new normal means securing natural resources that we all rely on. As we learn what the changing landscape means to each of our industries, we know that variability and extremes in climate conditions will increase. Reliance on the status-quo way of managing water and making decisions can no longer operate in this new normal. This 

California’s approach to groundwater regulation is an experiment in local, state, federal, and landowner cooperation. Due to the waning health of groundwater basins throughout California, the government created the Sustainable Groundwater Management Act (SGMA). SGMA’s presence is already impacting how agricultural farming, lending, real estate, and management operations think about the future of their organization. The inevitable land fallowing and groundwater pumping restrictions will change California agriculture forever. How will SGMA impact you?

This resource will provide perspective on SGMAs reach across the agricultural business landscape and the communities that depend on a vibrant ag economy. This resource does not give opinion on policies or regulations. We shed light on what is coming down the pipe backed by research and analysis. More importantly, this resource is a call to action. Take responsibility by increasing your water security and start your journey to identify, understand, monitor, and mitigate water risk. That journey begins today!

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Background

In 2014, California became the last state in the U.S. to formally regulate groundwater. Groundwater regulation had various forms before 2014. Prior to SGMA, California saw groundwater adjudications that brought competing interests together for a court-supervised negotiation and settlement over groundwater rights in a basin. California also created voluntary groundwater regulation through AB 3030 and other programs in the 1990s that encouraged but did not mandate aggressive groundwater regulation and management. These efforts had positive impacts in specific areas in California but did not address the statewide crisis of overdrafted groundwater basins.

What is SGMA?

After years of debilitating drought, the state of California enacted SGMA to ensure sustainable annual withdrawals by  measuring sustainability metrics in groundwater basins. Local agencies, known as Groundwater Sustainability Agencies (GSAs), were given authority to regulate groundwater subject to stakeholder input. GSAs are mandated to develop a Groundwater Sustainability Plan (GSP) for approval by the California Department of Water Resources (DWR).

The goals of SGMA are to:

  • Develop regulations to revise groundwater basin boundaries
  • Adopt regulations for evaluating and implementing GSPs
  • Identify basins subject to critical conditions and overdraft
  • Identify water available for groundwater replenishment
  • Publish best management practices for the sustainable management of groundwater.

Under SGMA, groundwater users will be required to report their water use, which may be unwelcome by some water users. A balancing act is at play between data collection, groundwater management and the burden of providing data to local and state governments. 

Groundwater Sustainability Agencies (GSAs)

GSAs possess broad authority to regulate groundwater to reach sustainable yield for their designated groundwater basin, including the ability to regulate exchanges of water and the health of a groundwater basin. They are also responsible for preventing further harm, referred to as “undesirable results,” in the groundwater basins that are currently overdrafted and labeled as “high” or “medium” priority.

Undesirable results include:

  • Chronic lowering of the groundwater levels within a basin
  • Significant and unreasonable reduction of groundwater storage
  • Seawater intrusion
  • Degraded water quality
  • Land subsidence that substantially interferes with surface land uses
  • Depletions of interconnected surface water that have significant and unreasonable adverse impacts on beneficial uses of the surface water.

The GSA may implement fees to achieve the sustainable yield objective required by SGMA and combat these undesirable results. The powers are broad, but SGMA requires a GSA to issue a Groundwater Sustainability Plan by 2020 for basins in overdraft, and 2022 for medium- and high-priority basins.

Groundwater Sustainability Plans (GSPs)

The GSP is meant to clarify how the GSA intends to wield their powers. GSAs must consult with water right holders, agricultural operations, and relevant stakeholders as part of the GSP creation process. Failure of the GSA to engage all stakeholders will likely result in a rejection of the GSP by DWR until proper stakeholder input is gathered.  The powers granted to GSAs allow them to restrict groundwater pumping and impose new fees on groundwater extraction.

For a more detailed look at GSP’s we have  part blog series on them for your review:

Currently, the broad powers afforded to GSAs create uncertainty for the Ag Community. An opportunity exists to shape the outcomes in the GSP by educating GSA decision makers through accurate data collection and information sharing. Though GSPs are under review for critically overdrafted basins, there are many GSAs that are high and medium priority engaging in stakeholder outreach throughout California. There is still time to shape policies and regulations impacting agricultural groundwater.

A GSA’s lack of land use authority for future water and agricultural development impacts the agricultural community. Depending on how the local government is participating in the GSA, there is potential conflict on land use restrictions. Existing general plans, potential developments, and zoning modifications may conflict with a GSP. GSPs for critically overdrafted basins have addressed relevant general plan elements and sections that relate to a GSP as a starting point for identifying potential issues. Without reliable data sources or mutual agreement on development practices, conflicts may result in costly, lengthy battles between local agencies and agricultural stakeholders.

SGMA Impacts on California Agriculture, Farming and Lending

Understanding water risk in the time of SGMA is a crucial element of success as a lender, investor, or grower. The world’s changing climate creates a new water environment which, in turn, creates pressing issues. The earth’s water resources are painfully finite and growers and agricultural investors are faced with intense competition and a ticking clock. They are forced to make rapid decisions to claim their spot at the forefront.

What it boils down to is the ability to make educated decisions about portfolios in regard to water risk; a portfolio that was created with a lack of relevant water data is a recipe for blind decisions. Blind decisions harm the positions of lenders, investors, and growers, and only catalyze the issue of water scarcity.

—>Read our full article on the SGMA Impacts on California Ag, Farming, and Lending here

SGMA Impacts on Water Management

In the wake of SGMA, a sustainability-driven mindset when considering water management and security is important. Having a sustainable, data-centric strategy will set businesses apart from one another, particularly given recent regulations. The Sustainable Groundwater Management Act (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.

Good water management strategies involve understanding current water economics, the relationships between surface water and groundwater, and water sustainability. Identifying the risks stemming from SGMA can create strategic opportunities to weather future water supply volatility. In short, water security is increased by a diverse and flexible management strategy that is informed by the right data in the appropriate context.

—>Read our article on the SGMA Impacts on Water Management here

SGMA Impacts on Real Estate

Real estate brokers and appraisers have a fiduciary duty to their client to truthfully represent all material facts related to a transaction. Appraisers must also take into account the environment and water availability when appraising agricultural property. In our new world of water scarcity, satisfying these duties becomes increasingly complex, especially for agricultural real estate.

As the Sustainable Groundwater Management Act (SGMA) restricts a farmer’s last reliable source of water, agricultural real estate transactions will be highly scrutinized based on the water resources available or not available to the property. SGMA not only impacts the valuation of the property but also what needs disclosure in order to avoid post-sale problems.

So, it is important for every party who is involved with parcels to be aware of all the facts. Data, information, and measurement all play critical roles in this.

—>Read our article on the SGMA Impacts on Real Estate here

7 Ways to Protect Your Water-Driven Business Post-SGMA

California has historically gone through periods of wet and dry years. State, federal and local water suppliers have all adjusted their deliveries over the years based on the weather conditions. Now, in an era defined by more frequent extreme weather events, farmers who have historically relied on groundwater to supplement their operations will soon be forced to limit their groundwater withdrawals.

Farming in the age of SGMA requires new strategies to build water resiliency into the agricultural economy. Many of these strategies require collaborations, additional capital, and advanced planning. We will explore seven strategies to mitigate water risk in the age of SGMA, which include:

1 – Innovative irrigation technology solutions

2 – Groundwater recharge

3 – Groundwater banking

4 – New water sources

5 – Conjunctive uses

6 – Water markets

7 – Deep partnerships

—>Read the full article on Protecting Your Water-Driven Business Post-SGMA here

GSP Sections – Plan Area and Basin Setting

The Sustainable Groundwater Management Act (SGMA) requires Groundwater Sustainability Agencies (GSAs) to submit Groundwater Sustainability Plans (GSPs) that include mandatory sections discussing how the GSA intends to bring the underlying groundwater basin into sustainable yield. For the agricultural sector, some of the biggest questions surrounding groundwater regulation are answered by the GSP including:

  • What is the sustainable yield for the basin?
  • Will there be restrictions to groundwater pumping for agricultural purposes? If so, what are those restrictions?
  • Are there land use impacts due to overdraft?
  • Are there groundwater quality concerns in the basin?
  • Are there new fees?

—>Read the full article on GSP Sections – Plan Area and Basin Setting

GSP Sections: Sustainable Management Criteria

The Sustainable Management Criteria section of a GSP is designed to utilize the data provided in the Plan Area and Basin Setting sections to characterize what the undesirable results are for the basin, measures used to ensure the basin operates within its sustainable yield, and how the GSA plans to reach the sustainability goal in 20 years.

This guide includes information that is designed to assist you in understanding what might be included in the Sustainable Management Criteria section and what that means for agricultural lenders, investors, appraisers, and other professionals in the ag community.

—>Read the full article on GSP Sections – Sustainable Management Criteria

Looking Forward To The Future

The future will present new challenges in climate variability and adaptation. Today we see new regulatory and management practices to comply with that require assessment of risks and a strategy to boost water security. The GSPs provide insight into risks associated with limits on groundwater pumping on some agricultural operations. However, there are also efforts to implement management practices and develop existing water supplies that may mitigate some of the risks.

You can’t track what you don’t measure. Many in the ag industry find themselves barely treading water when it comes to due diligence research that incorporates changes from both climate and regulation. Locating the right data to track changes in water risk is a key component to fulfilling modern due diligence research requirements and provides an opportunity to compare different regions. Without comparing the right trended datasets, due diligence becomes a dangerous guessing game.

—>Read the full article on Looking Forward To The Future

Uncertainty As The New Norm

The most significant impact of SGMA on water users and related industries is uncertainty. GSA’s are a new concept in California. Until the GSP’s are in place for a few years, there are many layers of unknown issues that may arise. Litigation is certain; new partnerships are needed. Yet, the best counter to an uncertain future is preparation.

Though uncertainties exist, SGMA is a reality. Changes to agricultural lending, real estate, farming, and water management are imminent as deadlines for GSPs of the high and medium priority basins are coming up January 31, 2022. Taking the time to review your organization’s potential risks through identifying, understanding, monitoring, and mitigating water risk is critical. Leveraging trusted relationships, expertise, and technology will pay dividends for years to come. SGMA will have significant impacts, but you can be ready.

Prepare for uncertainty by:

  • Organizing your data, because you can’t measure what you don’t track
  • Understand the context of your data and how global, regional, and local events impact your portfolio and organization.
  • Build relationships with other stakeholders and local government staff to share your insights from both data and broader perspective on how water regulation impacts your organization and the broader community.
  • Create a water security strategy based on data and identify a few key indicators for water that best represent water risk to your operations.

With these basic steps you can begin to reduce the noise of uncertainty and boost the signal of actionable steps to mitigate water risk and enhance overall water security.

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The AQUAOSO Water Security Platform was built with SGMA in mind.

You can research and map by parcel or portfolio of parcels and get a clear picture of your water risk. Be prepared.

Start by utilizing our free water map. Learn can also about the regions we serve beyond California and take action with your new-found knowledge by forming the plans and partnerships needed. You can get ahead of SGMA and we can help. Get a demo or talk to a water expert today!

 

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