The State Water Resources Control Board is dramatically raising its fees on groundwater recharge permits. The added compliance costs are creating tension for water districts as they plan for California’s hotter, drier climate future.
The water board had offered a generous discount on the fees to incentivize more recharge efforts. But this fell on the backs of other fee payers and ran against the agency’s principles of equity.
The current state budget, meanwhile, adds more staff to administer the permits, meaning more salaries to cover and a greater need to recoup the costs.
Water board members believe the agency has its hands tied and is at the mercy of the Legislature and its many regulatory mandates. Yet farmers, wineries and other stakeholders feel they are hitting a breaking point with the cumulative impact from a slew of water board fees, at a time when input costs, inflation and low commodity prices have already trimmed profit margins.
The new changes return the fees to the standard set in 2003, which is 50% of the application fee for temporary permits. The board drops that to 35% if the application is filed 120 or more days before the recharge period. Despite the increase, the added fee revenue still falls short of financing the entire cost for staffing.
Erik Ekdahl, the board’s deputy director for water rights, explained to Agri-Pulse that previously a typical permit for smaller projects recharging 10,000 acre-feet over the span of 180 days was about $6,000. That was about 3-10% of the fee the board would charge for standard projects, which divert about 40,000 acre-feet for recharge and require the same amount of staff time for processing the permits.
“It's being hugely subsidized,” said Ekdahl, noting the policy shifted the costs to all other fee payers in the water rights system. “When we set these fees really low it means everyone else has to essentially pay more to get that same level of work done.”
Erik Ekdahl, state water boardFollowing a record year for recharge in 2023, a budget trailer bill this legislative session authorized the board to hire five more staff members to the program, at a cost of $1.2 million. The added expenditures put pressure on the board to recover its costs.
Under the fee structure approved last week, a project diverting 10,000 acre-feet for recharge would pay $28,000, if filed more than 120 days in advance. The fee would jump up $20,000 if the applicant files within the 120-day window.
“One of the things we've seen is people wait until it starts to rain and then they say, ‘Oh, let's apply for one of these permits’,” said Ekdahl. “Well in that case two months have gone by and you're already in February before we even get the permit. It just doesn't lead to as many opportunities for diversion and it creates a little bit of a financial disincentive for the applicant.”
The board is also attempting to encourage a shift from the 180-day permits to the version covering five years. Under the new structure, the fees are about the same for both permits. Ekdahl described it as getting five for the price of one.
It’s easy to be “in the know” about what’s happening in Washington, D.C. Sign up for a FREE month of Agri-Pulse news! Simply click here
He stressed that while the cost is high for a permit, the potential benefit is immense. During the last drought, water was selling for as much as $2,000 per acre-foot or more. That means a 10,000-acre-foot project would reap $20 million down the road — but only if California has a wet enough winter during the permit period to recharge that much water.
During comments on the fee increases at the hearing last week, Noelle Cremers, who directs regulatory and environmental affairs at the Wine Institute, pointed out a major challenge for wineries. Only local groundwater sustainability agencies are eligible for the five-year permits.
That spurred Amanda Montgomery, who heads the board’s water rights division, to clarify that no individuals have ever applied for the five-year permit and, if they did, they would have to perform a time-intensive and costly analysis to adhere to the California Environmental Quality Act. Most applicants for 180-day permits have instead taken advantage of a series of CEQA exemptions the Legislature has granted going back to 2015, at the peak of an earlier extreme drought.
Michael Miiller, a policy advocate at the California Association of Winegrape Growers, raised a broader issue with the fee increases. This month Gov. Gavin Newsom celebrated 10 years of the Sustainable Groundwater Management Act by promoting his “ambitious goal” of increasing annual groundwater recharge capacity by 500,000 acre-feet.
“What we have here, though, is the reality that when you increase these fees you are discouraging that action,” said Miiller. “Groundwater recharge is already very expensive.”
The increased fees, he added, would undermine the board’s efforts to encourage recharge in the Clear Lake watershed. The porous soil means recharging the aquifer stabilizes the surface water and supports habitats for an endangered fish known as the Clear Lake hitch.
Miiller also took issue with the economics behind the boost in fees, reasoning that making recharge cost-prohibitive would reduce the number of projects and drop the revenue generated by the fees, further exacerbating the underlying budget problem.
Bob Gore, Gualco Group“We don't have anywhere else to go,” responded board Chair Joaquin Esquivel. “We're a fee-based organization here.”
Esquivel struck a compromise by phasing in the fee increases over the next two years, raising them to 15% for early applications and 25% for those within the 120-day timeframe.
Bob Gore, however, pushed for more. As a senior advisor at the Gualco Group representing several water districts, Gore has long pressed for a more active role for stakeholders in the fee-setting process. He proposed broadening the existing work group to include more regulatory programs at the state water board and to bring in regional boards, with the aim of striking a balance between water goals and the proper cost of compliance.
Gore also sought to establish performance metrics for the investments. That could mean tracking how quickly the state water board’s Administrative Hearings Office is clearing its permit backlogs and setting a target for the number of new permits created from the additional staff.
He believed stakeholders could offer valuable insights to help the board avoid sticker shock with ratepayers from the sudden fee bumps. Gore hoped the collaborative effort would better inform the Department of Finance with understanding fee impacts before it drafts another trailer bill proposal. To that end, he urged board members to direct their legislative staff to educate lawmakers “on the costs of their ideas and new bills.”
And more fee increases in the years ahead are a certainty. Jonathan Bishop, the board’s chief deputy director, warned that Esquivel’s phased approach to increasing fees will only delay the pain and create more problems for fee payers next year, when the board must once again increase recharge fees.
“Next year would be also a large increase,” said Bishop. “It's not like it goes away.”
For more news, go to Agri-Pulse.com.
