1. WATER MARKETS IN WASHINGTON Presented by: Eugene N.J. St.Godard, P.G., C.HG. Principal Hydrogeologist/Owner Water & Natural Resource Group P.O. Box 28755, Spokane, WA 99228 509-468-4876, stgod@comcast.net

2. WASHINGTON STATE Water Markets: The Basics and Why you Should Care Most basins are over-allocated Most basins are over-allocated Ecology is not issuing many new water rights Ecology is not issuing many new water rights Closed Basins Closed Basins Instream Flows Instream Flows Growth = Water Growth = Water

3. WASHINGTON - IDAHO Both based on Western Water Law –“Similar but Different” Water Markets driven by Individual State Legislative Codes –Have shared basins –Washington downstream Water Availability is Primary Factor that drives Water Markets –Growth –Hydrogeology –Water Courses

4. Function of Water Markets Reallocate water supply based on value Create incentive to conserve and invest in water supplies Stabilize availability of water for competing demands

5. Factors Controlling Development of Water Markets Changing Conditions Urbanization/Environmentalism Supply and Demand Sellers and Buyers Infrastructure Storage and Delivery Systems Regulatory Framework Transferability

6. Forms of Water Markets Government or quasi- government entities Water banks Private conveyancesPrivate conveyances –Washington seems to favor this form of the market

7. WASHINGTON STATE LEGISLATIVE CODES RCW 90.03 – Water Code (1917)RCW 90.03 – Water Code (1917) RCW 90.14 – Water Rights Claim Registration and Relinquishment (1967)RCW 90.14 – Water Rights Claim Registration and Relinquishment (1967) RCW 90.16 – Appropriation of Water for Public and Industrial PurposesRCW 90.16 – Appropriation of Water for Public and Industrial Purposes RCW 90.22 – Minimum Water Flows and Levels (1969)RCW 90.22 – Minimum Water Flows and Levels (1969) RCW 90.44 – Regulation of Public Groundwaters (1945)RCW 90.44 – Regulation of Public Groundwaters (1945) RCW 90.46 – Reclaimed Water Use (1995)RCW 90.46 – Reclaimed Water Use (1995) RCW 90.54 – Water Resources Act (1971)RCW 90.54 – Water Resources Act (1971) RCW 90.66 – Family Farm Water Act (1977)RCW 90.66 – Family Farm Water Act (1977) RCW 90.80 – Water Conservancy Boards (1996)RCW 90.80 – Water Conservancy Boards (1996) RCW 90.82 – Watershed Planning Act (1998)RCW 90.82 – Watershed Planning Act (1998) RCW 90.90 – Columbia River Basin Water Supply Act (2006)RCW 90.90 – Columbia River Basin Water Supply Act (2006) Numerous Court DecisionsNumerous Court Decisions http://www.ecy.wa.gov/laws-rules/ecyrcw.htmlhttp://www.ecy.wa.gov/laws-rules/ecyrcw.html

8. Water Banking The most common way to create organized water markets May include water leased or sold 12 western states have active banks http://www.ecy.wa.gov/pubs/0411011.pdf

9. Washington - Water Resource Management Act, RCW 90.42 Creates trust water and water banks Trust water may be obtained by conservation projects, donation, purchase or lease Yakima water bank established to manage trust waters for supply needs subject to express limitations

10. HB 2860 Columbia River Bill (RCW-90.90) Creates the Columbia River Water Supply Inventory Creates the Columbia River Basin Water Storage and Supply Account Requires Specific Allocation of “New” Water Creates the Columbia Mainstream Water Resources Information System Seeks to construct water storage in tributary channels for “new’ water 1/3 instream – 2/3 out-of-stream

11. POSSIBILTIES? Surface water storage impoundments holding 1 to 3 million AF of water –Conducted study, narrowed from 21 sites to 2 Lower Crab Creek Hawk Creek Water delivery system into the Odessa or other declining basins via alternative feed routes? Aquifer Storage (Richland, others?) Water Storage in headwater drainages in which a downstream water market can be developed (lease water)?

12. PRIVATE MARKET SUPPLY – DEMAND in Washington State is driving the market No water rights being issued/basins currently over allocated Existing laws make the purchase and sale of water rights a viable market –quickest way to get water –certain legal and technical requirements have to be met to approve the transfer

13. PRIMARY WASHINGTON CODES AFFECTING WATER MARKET Surface Water RCW 90.03.380 –May change place and purpose of use or point of withdrawal No increase in Annual Consumptive quantity No injury or detriment to existing rights Ground Water RCW 90.44.100 –May amend the point of withdrawal and manner or place of use other existing rights shall not be impaired

14. WASHINGTON STATE LEGISLATIVE CODES ALLOW: Change in place of withdrawal (GW) / diversion (SW)Change in place of withdrawal (GW) / diversion (SW) Change/transfer in place of useChange/transfer in place of use Change in purpose(s) of use (e.g. irrigation, industrial, etc.)Change in purpose(s) of use (e.g. irrigation, industrial, etc.) Add points of withdrawal/diversion Add purpose(s) of use Other (e.g. consolidation, intertie, trust water) Combination of above

15. WATER MARKET CAN: Change/Transfer –Surface water to Surface water –Groundwater to Groundwater –Surface water to Groundwater Senior surface water rights due to first in time-first in right –Groundwater to Surface water Rarely done Same water source –Surface water primarily moves down stream Can move upstream if no impairment to others –Groundwater must be in the same body of water –Hydraulic Continuity for surface to groundwater

16. Water Right Change/Transfer in Washington State Directly through Ecology –May take a long time Through the Water Conservancy Boards –More timely and sometimes efficient –Fees apply and vary in each county

17. How to process a water right change/transfer File Application Public Notice (30 day) Investigation on Extent and Validity Prepare Record of Examination Record of Decision 30-day Appeal period Ecology has final approval of all transfer applications

18. KEY ANSWERS NEEDED Does the water right actually exists? –Is the water right to be transferred actually a valid right and is in Ecology’s database. Has the water right been put to beneficial use? –Did the allocated water be used for a beneficial use as described by Ecology, and has it been utilized since certificated or claimed. How much of the water right has actually been beneficially used? –This is the key question – did all or a portion of the allocated water be “beneficially used”. This is the quantity that the crops consumed, or industry process actually used. It is not the amount that was diverted or pumped.

19. NEEDS? Qi –The instantaneous rate of which water can be diverted/withdrawn Qa –The annual quantity of water allowed under the right Sometimes they don’t correlate and meet the needs........

20. THE AFFECTS OF THE WATER MARKET Water rights are moving downstream Water rights are being converted from agricultural to domestic and municipal uses Most headwater counties are agricultural counties –How does loss of water rights downstream going to affect economy of headwater counties in future

21. THE AFFECTS OF THE WATER MARKET Surface water to Groundwater –Good for instream flows? –Stressing the aquifers –Impairment to others –Deepening wells

22. PRIVATE MARKET Water market is thriving in eastern and central Washington Mostly changing agricultural rights to domestic/municipal/industrial

23. RECENT EXPERIENCES Colville, Washington(2005) –Groundwater/Irrigation to Groundwater Industrial – $300/AF Chewelah, Washington (2006) –Surface water/Irrigation to Groundwater/ nonag irrigation and municipal –>$2,000/AF Spokane, Washington (2008) –Groundwater/Irrigation to Groundwater/Residential –$1,200/AF Seven Bays, Washington (2008) –Surface water/Irrigation to Groundwater/Residential –$800/AF Fort Spokane, Washington (2008) –Groundwater/Irrigation to Groundwater/Irrigation –$500/AF CleElum, Washington (2008) –Surface water/Irrigation to Groundwater/Industrial –$4,800/AF CleElum, Washington (2008) –Surface Water/Irrigation to Groundwater/Residential-Municipal –>$4,000 AF

24. WHAT DRIVES MARKET PRICE Supply and Demand Location of water right –Buyer that is higher in drainage has a small market Fewer available water rights –Seller that is higher in a drainage has a large market Many potential buyers downstream Attributes of the Water Right

25. QUESTIONS?