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SGMA has gone awry in the Indian Wells Valley

Editors Note:  The News Review received this document, recently published by Hydrowonk Bloc, and believes that much of this information would be meaningful to our readers.

Hydrowonk Blog: An Open Intellectual Marketplace for the Water Industry–

The California Supreme Court can protect incentives for responsible groundwater management by agreeing to review an appellate court decision (Mojave Pistachios v. Indian Wells Valley Groundwater Agency) challenging Indian Wells Valley Groundwater Sustainability Plan (“GSP”).  The dispute is over whether the Sustainable Groundwater Management Act (“SGMA”) allows Indian Wells Valley to eviscerate a landowner’s (Mojave Pistachios LLC) groundwater rights without due process and impose unreasonable “fees” for a speculative GSP.  The future of reasonable groundwater management hangs in the balance.

This dispute has garnered widespread interest from parties interested in groundwater rights and responsible groundwater management.  Third parties supporting the challenge include the California Building Industry Association, Western Growers Association, California Farm Bureau Federation, American Pistachios Growers, Pacific Legal Foundation, Howard Jarvis Taxpayer Foundation, and individual landowners as far from Indian Wells Valley as Madera.  Hydrowonk is unaware of any third parties intervening on behalf of Indian Wells Valley.

The California Constitution and common law require groundwater basins to be managed towards maximizing the reasonable and beneficial use of groundwater, without causing an undesirable result.  SGMA codifies the definition of “sustainable yield” as the “maximum quantity of water, calculated over a base period representative of long-term conditions in the basin and including any temporary surplus, that can be withdrawn annually from a groundwater supply without causing an undesirable result.”

In Indian Wells Valley, the GSA utterly fails to consider any strategy to manage the Basin to maximize the beneficial use of groundwater.  Instead, it intentionally focuses on the elimination of agriculture.

Principles of Responsible Groundwater Management

Hydrowonk has followed the development of adjudicated groundwater basins in California for more than four decades.  This experience has revealed “rules” for effectively addressing groundwater overdraft.

Understand the dimension of the challenge.

This inevitably involves working through alternative analyses on the nature, extent, and urgency of meeting the challenges of groundwater overdraft.  “Dueling hydrologists” will provide alternative visions, although there are ways to separate “pepper from fly****.

Define a system of pumping rights.

By its very nature, addressing groundwater overdraft requires reductions in pumping relative to historical levels after the use of any temporary surplus in a basin.  A responsible system includes equitable treatment of existing groundwater rights.  Overlying users have priority over appropriators (those who pump groundwater for use off their lands), subject to prescription.  “Dueling lawyers” will advance alternative ways to balance competing rights.

In the end, adjudications involve proportionate reductions from a defined historical baseline, commonly with a “ramp down period” providing time for pumping to decline to long-term levels.

Develop an action plan.

A Groundwater Sustainability Plan must, ironically, be a plan.  Specific actions should address identified components of groundwater management.  Given the inevitable variability in hydrologic conditions and the less than “perfect knowledge” of underlying science, monitoring actual circumstances on the ground should guide improving groundwater management strategies and accessing their effectiveness.  Learning is inevitable and should guide refinements or even “rethinking” when the facts on the ground fly in the face of earlier conclusions, assumptions, presumptions, or wishes.

Fees and Assessment Must Be Related to the Costs of the action plan.

Reasonable fees and assessments must be tied to a specific plan.  Funding “aspirational” ideas not backed by substantive analysis of potential effectiveness doesn’t pass muster.

Indian Wells Valley Failure

Hydrowonk experienced first hard the arbitrary nature of Indian Wells Valley GSP when he was retained in 2021 by Mojave Pistachios LLC to comment on Indian Wells Valley then proposed plan and replenishment fees.

Indian Wells Valley’s Replenishment Fee is Unreasonable.

The replenishment fee is to fund the first phase of Indian Wells Valley “Groundwater Augmentation Project” (the purchase cost estimated at $2,112 per acre foot over five years) and an associated Shallow Well Mitigation Project (estimated at $17.50 per acre foot until imported water supplies are delivered no later than 2035) for a total Replenishment fee of $2,130 per acre foot.

The Groundwater Augmentation Project is inchoate.  There is a lack of a disciplined project plan.  Rather than set by the funding requirements of a disciplined project plan, the replenishment fee is set to speculatively raise a financial reserve over five years to fund assumed water acquisitions, not yet identified, with the presumption that Indian Wells Valley will “figure out later” how the water will be delivered, at what cost, and whether there are purchasers of imported water.

The replenishment fee must be tethered to the funding requirements of an executed project’s development and finance plans.  Standard commercial practice includes at least some evidence of the potential terms of water acquisitions and conveyance arrangements with specific parties.  Project plans lay out the timing of critical tasks (such as definitive agreements for acquisition of water and conveyance, environmental review, regulatory approvals, financing arrangements, and necessary construction schedules) and the required funding to reach each identified milestone.  Risk assessment identifies key risks and risk management strategies to manage identified risks as they materialize.  A finance plan identifies reasonable and prudent fees to pay the project’s life cycle cost at the least cost to ratepayers over time, who have a demonstrated demand for future replenishment water.

None of these elements are part of the GSP.  Rather than engage in responsible project development, Indian Wells Valley aspires to build a financial war chest without any concrete project or finance plans.  Therefore, $2,112/AF of the proposed replenishment fee of $2,130/AF is unreasonable and ultimately imprudent.

Replenishment Fee is Unprecedented.

Indian Wells Valley replenishment fee is an extreme outlier of replenishment fees levied in California.  The Mojave River Adjudication fees are less than $700 per acre foot, tied to the actual cost of replenishment operations.  The Antelope Valley Adjudication follows the same model, where the watermaster’s annual report includes Appendix O, “Financial Analysis of Replacement Water Assessment” showing how the rates are calculated from the cost of actual operations.

As required by Proposition 218, local agencies set replenishment fees based on the revenue requirements of actual operations that provide actual replenishment water.  Replenishment fees are not set to fund financial war chests for future, hypothetical ventures.

Replenishment Fee Renders Irrigated Agriculture Economically Unviable.

Mojave Pistachios LLC transformed 1,400 acres from alfalfa to pistachios before the California Legislature passed SGMA.  The movement towards higher-valued agriculture has historically been advocated on long-term public policy grounds.

Permanent crops represent significant investment and patience.  Pistachios take six years from the first year of planting before trees generate commercial yields that do not reach maturity until the ninth year.  Lack of water places significant investment at risk.  The economic value of pistachios trees increases until trees reach maturity and then decline with the age of trees.  Using data from the UC Davis Department of Agricultural & Resource Economics 2015 “tree loss calculator” for pistachios in the South San Joaquin Valley, pistachio trees reach a peak economic value of $80,000 per acre by the ninth year (full maturity) and starts declining over time (see “Economic Value of Pistachio Trees by Age of Trees”).