BY Jolene Hansen

May 10th 2022

Financial PerspectivesIndustries

Sustainable Groundwater Management Reshapes Farming in California’s Central Valley

May 10th 2022

Few laws stand to have as significant an impact on California’s Central Valley farmers as the Sustainable Groundwater Management Act (SGMA). In response to decades of diminishing groundwater supplies, the act requires local agencies to keep their groundwater basins in balance, which can only be done by replenishing groundwater supplies or using less water.

SGMA is already galvanizing attention on groundwater management, and it is sure to reshape finances, farmland, and ways of life for years to come. The transition to operating under SGMA will not be easy or painless. But as growers are increasingly acknowledging, the alternative—a winners-take-all battle for dwindling water—would likely be worse, especially for small-scale farms. The new regulations instead offer a managed, fair, and inclusive process that gives growers the opportunity to help shape their own future at the local level.

“We have historically—for the last 25 or 30 years—been pumping more out of the ground than has been replenished. You just can’t continue to do that,” says Dan Dooley, a water lawyer and principal at Fresno-based strategic consulting firm New Current Water and Land.

“We have historically, for the last 25 or 30 years, been pumping more out of the ground than has been replenished. You just can’t continue to do that.”

—Dan Dooley, principal at New Current Water and Land

The act’s initial deadlines for comprehensive local plans that would bring groundwater into balance by the early 2040s proved ambitious. So far, the state has approved fewer than 10 percent of these plans, known as Groundwater Sustainability Plans (GSPs). The state’s review of GSPs continues, but the legislation’s impact and potential outcomes aren’t waiting.

Central Valley agriculture has entered a new reality with SGMA. Having survived and thrived through more than a century of droughts and subsidence, Valley farmers face changes in the near term, medium term, and for generations to come.

Near Term: Pumping Caps and Shifting Land Values

Across California, 94 basins accounting for around 98 percent of the groundwater pumping were required to form Groundwater Sustainability Agencies, or GSAs, and submit plans (there are 515 groundwater basins and sub-basins in total). So far, the state has approved just eight groundwater plans, and none from San Joaquin Valley has won approval. The valley is home to 11 of California’s 21 critically overdrafted groundwater basins, which were given a deadline of January 2020 to submit plans to the state.

The deadline for GSAs in the high- and medium-priority basins just passed in January 2022, but initial state decisions on the 2020 submissions triggered wide-ranging reactions. GSAs behind plans rejected as “incomplete” have six months to make adjustments and resubmit.

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For fourth-generation California farmer Jay Mahil, the state’s rejections deepen long-running uncertainty surrounding SGMA’s effect on farming operations. Many farmers share his frustration in seeing initial plans kicked back, says Mahil, owner of Creekside Farming Co., a Madera-based agribusiness that operates in five counties.

With local pressures at play in these early stages, not all stakeholders anticipated the rigor the state would apply to these plans. Multiple GSPs seemingly relied on the same drop of water to meet their basin’s needs. Now, growers and other GSA stakeholders are starting to think differently about the process as the impacts of SGMA and water scarcity begin to emerge.

Agriculture uses about 40% of California’s water, urban usage is 10% and 50% goes to environmental uses.

Even though many initial plans were not approved, “incomplete” doesn’t necessarily mean “inaction” for Central Valley farmers in 2022. GSAs can’t delay coordinating plans to manage basins and demonstrate to regulators how they’ll avoid the undesirable environmental consequences that the SGMA aims to avert. Some GSAs are therefore proposing caps on pumping this year.

“That will have a fairly dramatic effect on some producers,” Dooley says.

More appraisers and lenders are evaluating water supplies as part of their risk and valuation assessments. Land values are rising where surface water is available and dropping in groundwater-reliant parts, known as white areas. Some producers have launched strategies to aggregate available water for higher-value crops. For some, this means buying additional acreage to fallow and applying that water elsewhere. Others are fallowing land they already own.

Regulators aren’t expected to suddenly hammer farmers with pumping restrictions—review of the 180-day resubmissions will take time. But consequences for insufficient plans will eventually materialize. For GSAs unable to address plan deficiencies, the California State Water Resources Control Board—the ultimate arbiter of whether local plans meet the mark—could put in place more rapid and stringent requirements than the GSAs might prescribe themselves.

Mid Term: Land Use, Land Value, and a Wild Card

Regardless of SGMA’s goal of balancing groundwater use in the next 20 years, weather remains a wild card. December 2021’s promising snowpack—followed by two consecutive driest-on-record months—underscores surface water’s unpredictability.

From drought to wet years, extreme weather events and shifting climate patterns complicate water scarcity issues. For GSAs already struggling to bring groundwater into balance, trying to factor in erratic weather patterns and still keep Valley farms operational complicates planning even more.

The next three to four years under SGMA are likely to bring significant pumping reductions. Critically overdrafted basins concentrated in the southern portion of the Central Valley will be hard hit, increasing the urgency to determine which lands—and farms—stay in production or go fallow. Throughout the Central Valley, trends in shifting land values will intensify.

One way or another, groundwater basins will come into balance, says Dooley, a former chair of the California Water Commission. Without legislation to manage the process of achieving that balance, only the biggest and strongest would survive. SGMA can minimize the negative effects—though restrictions and increased consolidation do put family farms at risk. With farmland already being pulled from production, more fallowed land is inevitable.

Analyses by the Public Policy Institute of California (PPIC) in 2019 put the best-case scenario at 500,000 acres of fallowed land over the next two decades under SGMA, about 2 percent of California’s 24.3. million total acres of farmland. The worst-case scenario puts fallowed acreage at one million acres, or 4 percent of the state’s farmland.

Where final counts fall and how soon the Valley hits those numbers rest on how well people implement water supply solutions and what happens with climate in coming years, says Ellen Hanak, vice president and director of the Public Policy Institute of California (PPIC) Water Policy Center. The last 15 years have been drier on average than the 30-year time frame behind PPIC’s figures. If that trend holds, the less-rosy one million-acre estimate draws closer.

While SGMA is a 20-year plan, Hanak points out, it comes with guardrails. GSAs must submit updated plans every five years and show actual, not just theoretical, progress toward groundwater balance. If the Valley stays dry, pressure on producers will escalate as restrictions accelerate.

An almond grove outside Tranquility, Calif. The state produces 80% of the world’s almonds.

Mahil hears the clock ticking. His farms focus on perennial, high-value, high water-use crops, including almonds, citrus, pistachios, raisins, walnuts, and wine grapes. With SGMA looming, he’s diversifying crops and contemplating land acquisitions farther north. He’s also diversifying beyond agriculture, as well as considering investments outside California. “That’s what we’re looking at just to prepare for the next five, 10, 15 years because we don’t know what’s going to happen,” he says.

Long Term: Infrastructure and Grower Involvement

Everyone touched by SGMA implementation would prefer to solve shortages through more water supply instead of pumping restrictions and fallowed land. But California’s aging water infrastructure wasn’t designed to support today’s population levels, current agricultural practices, or altered hydrology complicated by recurrent drought.

As snowpack moves to higher elevations, early runoff from rain is largely lost. Improved infrastructure to capture water and convey it to where it’s needed is essential to long-term groundwater and agricultural sustainability.

But, given the 42-year gap since the last dam was completed in California, the solution most likely won’t come from expansive infrastructure initiatives. Environmental concerns and funding issues make surface reservoir projects lengthy to complete. One project, however, stands out as promising: the Sites Reservoir project. Four decades in the planning, the Sacramento Valley project could capture and store wet-year water and get it where it’s needed most in dry years. But ground-breaking on the Sites project is still at least a few years away.

The San Joaquin Valley has attracted investment in more than 120 solar energy projects.

In contrast, groundwater recharge projects are fast to build and impactful. These smaller, faster-moving, local projects promise to make notable differences in the Valley’s water supply.

Recharge research, like that underway at UC’s Kearney Agricultural Research and Extension Center, seeks ways to optimize the potential of intentionally flooding fields to recharge groundwater supplies. But conveyance and distribution projects remain critical to getting captured water destined for recharge or other uses where it needs to go.

Projects like the current Friant-Kern Canal repair will increase the ability to move water—when there’s water to move—for recharge or other purposes. Others, like Kern County’s Cross Valley Canal, which enables moving water between the Friant-Kern on the east and the California Aqueduct on the west, can contribute significantly to getting water to Valley farmers.

Some additional east-west conveyance projects, if approved, could be completed in three to five years or less, according to Dooley. With added capacity to convey water from east to west within the Valley, farmers’ ability to bank and trade water locally—an important economic advantage—will improve dramatically.

Solving long-standing water scarcity issues demands creative solutions—and folks are looking to farmers. “The state isn’t going to be able to come up with the creative ideas for what needs to happen,” says Hanak.

“The state isn’t going to be able to come up with the creative ideas for what needs to happen.”

—Ellen Hanak, vice president and director of the Public Policy Institute of California (PPIC) Water Policy Center

She believes this is where growers and others need to “figure out the smart plays” on infrastructure investments and land transition, so the most productive lands keep going and fallowed lands deliver maximum benefit. Possible uses include transitions to solar farms, like the Central Valley’s 20,000-acre Westlands Solar Park, or habitat restoration.

Whatever the solution, involvement for farmers starts with their local GSAs, which have the potential to get state and federal funding to bring creative solutions to pass.

Mahil believes farmers should get involved and stay involved, despite frustrations—and he’s seeing that engagement begin to happen. “People who didn’t know about surface water are starting to explore how to use it, how it works, and start to utilize it more,” he says.

As farmers think more strategically about what, where, and how they farm, California agriculture is being transformed.

“California agriculture is going to be no less significant 20 years from now as a result of all these evolutions than it is today,” Dooley says. “But those people who are engaged in the process are going to be far better off than those people who sit on the sidelines and let it happen to them.”

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Jolene Hansen

Jolene is an Iowa-based freelance writer who can't resist old stone houses and native blooms. She covers commercial horticulture, agriculture, sustainability, and anything that connects people with plants and food.

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