1. Agricultural Stakeholder Committee August 3, 2011 DWR’s Discussion Paper on Proposed Methodology for Quantifying the Efficiency of Agricultural Water Use

2. Discussion Paper A1 provides DWR staff’s initial thoughts for discussion  Provides context for DWR’s approach  Outlines DWR’s current understanding and approach  Highlights key questions * Presentation and discussion paper should not be viewed as DWR’s official position 2

3. Legislature developed and passed SBx7-7 adding CWC§10608.64, stating The department, in consultation with the Agricultural Water Management Council, academic experts, and other stakeholders, shall develop a methodology for quantifying the efficiency of agricultural water use. Alternatives to be assessed shall include, but not be limited to, determination of efficiency levels based on crop type or irrigation system distribution uniformity. On or before December 31, 2011, the department shall report to the Legislature on a proposed methodology and a plan for implementation. The plan shall include the estimated implementation costs and the types of data needed to support the methodology. Nothing in this section authorizes the department to implement a methodology established pursuant to this section. 3

4. DWR believes the methodology will look at “efficiency” as something to measure, not something to achieve  Efficiency can have different applications Efficiency as a goal: Achievement of a desired outcome with a minimum of waste Efficiency as a goal: Achievement of a desired outcome with a minimum of waste Efficiency as a measurement: A ratio that indicates the level of results achieved relative to the level of effort Efficiency as a measurement: A ratio that indicates the level of results achieved relative to the level of effort 4

5. A traditional indicator of “efficiency” is Irrigation Efficiency – which allows measurement of water “use” to water “applied”  Though this is a useful ratio, it has significant limitations Spatial scale - limited to farm fields only and associated with the existing crop and irrigation system/management Spatial scale - limited to farm fields only and associated with the existing crop and irrigation system/management Encompassing – does not accommodate other important factors associated with “practical use” of water at the field level to achieve the desired outcome of productivity Encompassing – does not accommodate other important factors associated with “practical use” of water at the field level to achieve the desired outcome of productivity  Need additional indicators that accommodate the delivery and application of water at various spatial scales

6. A “methodology” is a particular procedure or set of procedures  When combined with the meaning of “efficiency,” DWR staff believes the statute directs the development of a set of standard procedures that allows for varied assessments that measure and account for an array of factors associated with the management, delivery, application and use of water for irrigated agricultural 6

7. The methodology would develop standard procedures to describe the use, application, and delivery of water at varying spatial scales  Incorporate varied “indicators” – sets of data inputs and equations appropriate for each scale  Accommodate the variety of physical, economic, and agronomic circumstances in the management, delivery, application and use of water  No single indicator can be used to quantify the efficiency of agricultural water use

8. Spatial scales should relate to traditional boundaries associated with the management, delivery, application and use of water  DWR staff suggests the following scales Field – evaluate an individual irrigation system for a particular crop at a particular point in time Field – evaluate an individual irrigation system for a particular crop at a particular point in time Water supplier – indicate the relations between water brought into the boundaries of an agricultural water supplier and the effectiveness of the supplier to meet its primary goal Water supplier – indicate the relations between water brought into the boundaries of an agricultural water supplier and the effectiveness of the supplier to meet its primary goal Regional – focus on the water balance elements of an area encompassing fields, suppliers, and other elements Regional – focus on the water balance elements of an area encompassing fields, suppliers, and other elements 8

9. The methodology provides information that can be used by a farmer, water purveyor, or policy maker  Help maintain or improve water management for conservation, energy and environmental benefits, water quality protection, and green house gas reduction  Understand existing conditions to guide projects, programs, and policies at local, regional, and state levels  Recognize historic investments and the benefits and limitations of current systems and management practices  Evaluate the benefits and limitations of change 9

10. The objective at the field-level is to manage available water to meet the desired outcome – irrigated agricultural productivity  May be self-supplied or delivered by water supplier  Operational considerations may include crop, irrigation system, management, soil, climate, environment, economics and water supplier delivery capabilities  No single indicator can fully inform the user and supplier at this scale 10

11. DWR staff suggests three primary field- level indicators would provide valuable results to farmers and water suppliers  Irrigation System Distribution Uniformity  Consumptive Use Fraction  Irrigation Sagacity (incorporates “practical uses”)  Questions: Are there other primary indicators to add or replace? Are there other primary indicators to add or replace? What frequency should data be gathered to quantify these indicators What frequency should data be gathered to quantify these indicators 11

12. At its core, a water supplier exists to manage and distribute available water to field-level operations  Operational considerations Often involves reuse among fields Often involves reuse among fields May include inter-seasonal storage (surface and/or ground) to improve long-term reliability May include inter-seasonal storage (surface and/or ground) to improve long-term reliability May not control all water applied (e.g. private pumping) May not control all water applied (e.g. private pumping) Must work within regulatory and legal constraints Must work within regulatory and legal constraints May include environmental objectives and other programs not directly tied to irrigated agricultural production May include environmental objectives and other programs not directly tied to irrigated agricultural production 12

13. DWR suggests collecting data for two primary indicators at the water supplier scale  Fraction of total into boundary vs. out of boundary (including storage) as running 3- or 5-year average  Modification of above to account for change in storage for single year  Questions: Are there other primary indicators to add or replace? Are there other primary indicators to add or replace? What frequency should data be gathered to quantify these indicators What frequency should data be gathered to quantify these indicators 13

14. Regional-scale suggested approach would mimic DWR’s water balances computed as part of regional planning  One primary indicator to reflect the net movement of water into and out of a boundary – water balance  Compute on a running 3- or 5-year average to account for variations in supplier-level management, changes in groundwater use, hydrologic conditions, and other factors 14

15. Discussion and Direction from ASC  Possible direction from ASC could include: A1 subcommittee develop additional or refine suggested indicators A1 subcommittee develop additional or refine suggested indicators DWR revises proposed approach to set “efficiency” as a goal, instead of a measurement of conditions DWR revises proposed approach to set “efficiency” as a goal, instead of a measurement of conditions Other thoughts? Other thoughts? 15

16. Should Economic Efficiency Quantification Methods be Considered? 16

17. Topics  Ways to define efficiency  Evidence from SBx7-7  What is economic efficiency?  Possible indicators of economic efficiency  Discussion and direction from ASC 17

18. Defining Efficiency Dictionary definitions:  Efficiency as a goal: Achievement of a desired outcome with a minimum of waste  Efficiency as a measurement: A ratio that indicates the level of results achieved relative to the level of effort 18

19. Evidence from SBx7-7  Efficiency is not defined within SBx7-7  SBx7-7 generally focuses on quantifying physical water use, not on the economics of water use, e.g.: Urban targets are based on water use, not economics Urban targets are based on water use, not economics 10608.8(c) refers to “economic productivity” as distinct from water use efficiency 10608.8(c) refers to “economic productivity” as distinct from water use efficiency 10608.12(k) also seems to distinguish between an economic criterion (cost-effectiveness) and agricultural water use efficiency: 10608.12(k) also seems to distinguish between an economic criterion (cost-effectiveness) and agricultural water use efficiency: 19

20. Staff’s Conclusion  Methods to quantify economic efficiency of agricultural water use probably not envisioned by SBx7-7  But not clearly excluded either. 20

21. What is Economic Efficiency?  Generally defined as the conditions of an economic sector or a particular activity (like the use of water to grow crops) in which producers are making the “best” use of limited resources  If the conditions of efficiency are met, then certain relationships should hold between the rates of use and the rates of trade-off between inputs and outputs  Definition of “best” is crucial – what are the objectives, the constraints, and the perspective (whose costs and benefits are considered) 21

22. How is Economic Efficiency Quantified?  Economic efficiency is not a quantity measured on a scale of, say 0 – 100%  However, there are indicators of whether the conditions of economic efficiency appear to be satisfied or not 22

23. Some Potential Indicators of Economic Efficiency  Productivity-based indicators Average productivity (AP) of water – crop production divided by applied water Average productivity (AP) of water – crop production divided by applied water Value of AP of water – value of crop production divided by applied water Value of AP of water – value of crop production divided by applied water  Problems: Averages can be misleading Averages can be misleading Implication that water is the only important input to production Implication that water is the only important input to production Value of AP jumps around as real crop prices change Value of AP jumps around as real crop prices change 23

24. More Potential Indicators of Economic Efficiency  Net returns to water  Comparison of existing water use (or application rates) relative to an estimate of the use needed to achieve a specific objective  Benefit-cost analysis is an appropriate way to assess the efficiency effects of changes  (All of these require substantial analytical work beyond data gathering) 24

25. Summary  Economic efficiency is different than most traditional measures of WUE – it is a set of conditions, not a quantity measured on a scale of 0-100%  Indicators of economic efficiency can be developed, but all have pros and cons  Unclear that SBx7-7 envisioned economic quantities in its methods for quantifying efficiency 25

26. Discussion and Direction from ASC  Possible direction from ASC could include: DWR submit a discussion paper to A1 subcommittee for consideration and recommendation DWR submit a discussion paper to A1 subcommittee for consideration and recommendation DWR staff prepare a concise proposal for economic indicators and submit to A1 subcommittee DWR staff prepare a concise proposal for economic indicators and submit to A1 subcommittee Economic indicators, while perhaps useful, do not belong as part of this methodology Economic indicators, while perhaps useful, do not belong as part of this methodology 26