This report provides an overview of the policy context for water marketing and the related practice of groundwater banking and summarizes recent trends in both areas. The water market enables the temporary, long-term, or permanent transfer of the rights to use water in exchange for compensation. The ability to transfer these rights adds flexibility to the state's water supply -- helping to address temporary drought conditions and to accommodate longer-term changes in the pattern of demand. Groundwater banking involves the deliberate storage of surface water in aquifers during relatively wet years, for use in dry years. Both tools are part of a modern water management portfolio that will enable California to manage its water resources sustainably, benefitting both the economy and the environment. Given the physical, financial, and environmental limits on expanding overall water supplies in California and the prospect of supply reductions caused by a warming climate, both tools are likely to become increasingly important. Although state and federal policies have supported the development of water marketing and groundwater banking, no official publications track their evolution in California. Since the early 2000s, PPIC has tracked these trends in an effort to fill this information gap. This report provides an update of the 2002 PPIC report California's Water Market, By the Numbers, with an expanded analysis of statewide water market trends from 1982-2011 and new information on groundwater banking in Kern County and Southern California.
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