by Jay Lund

Summary:  This post reviews some lessons from portfolio water management in California and identifies roles for state government in facilitating development and implementation of effective portfolios.  To better align state regulations and funding with these goals, a more adaptable structure for state planning is suggested.  Effective integration of local, regional, and state water management goals must more flexibly employ regulations to support environmental operations as components of local, regional, and state water management portfolios.

Recently Governor Newsom issued a call for a state portfolio of actions to manage water under rapidly changing climate and other conditions.  Portfolio approaches attempt to integrate and balance a variety of actions (supply and demand management, surface water and aquifers) for single purposes (water supply, floods, safe drinking water) and often for multiple benefits, involving multiple interests.  A previous essay reviewed the successes and limitations of portfolio approaches to water management in California.  Overall, where applied well, mostly at local and regional levels for single purposes, portfolio approaches have been quite successful.

Portfolio approaches are especially good for adding flexibility to water management infrastructure and institutions.  Like a diversified financial portfolio, water management portfolios employ a broader range of options to improve stability, adaptability, and performance.  Moreover, the thinking and discussions needed to establish and manage portfolios is a good basis for improving integration within and among water agencies and preparation and adaptability for inevitable extreme events and major changes.

Many of California’s local and regional agencies have developed highly effective and cost-effective portfolios of activities for water management.  The 2012-2016 drought’s limited economic impacts (despite some difficult local impacts and some devastating ecosystem impacts) illustrate the effectiveness of local water supply portfolios of water supply and demand actions since the 1987-1992 drought (Lund et al. 2018).  State efforts and funding have helped support local and regional water management portfolios (such as IRWMPs), but overall, state agencies have been less effective (and less well funded) in developing effective portfolio approaches for managing ecosystems and other areas of water management.

Outside of California, the Louisiana coastal master plan is particularly good at taking a multi-time scale approach and the European Union’s Water Framework Directive basin plans provides diverse examples of developing multi-benefit plans for locally-adaptable regulatory frameworks.

How might California better employ water management portfolio approaches, expanding on local and regional successes for single purposes to broader multi-purpose successes regionally and statewide?  This essay summarizes some lessons and useful roles for State activities regarding water portfolio management, and makes a modest proposal for modernizing and integrating State and regional water planning.

Some lessons

1. Portfolio management employs a range of supplies and demand management activities in an integrated and balanced way. Diversification usually brings flexibility, adaptability, and value.
2. Most newer portfolio elements, such as water conservation, conjunctive use, interties, and water reuse, are better implemented locally and regionally. State roles for these newer efforts are important, but more in supportive roles of regulatory and technical support than instigation and implementation leadership.
3. Portfolios of actions (especially preparations for extremes) commonly involve outside water agencies and partners, both nearby and far away. Portfolio management gives opportunities to make and keep friends.
4. Analytical efforts are important, despite being always approximate. MWDSC, SDCWA, and other local and regional agencies base their portfolios on modeling efforts often more sophisticated than state efforts. Statewide portfolio modeling shows good promise (CALVIN).  These efforts rest on well-organized and available data.
5. Areas lacking in portfolio management (such as for ecosystems and rural drinking water) have been performing more poorly than areas that have performed comparatively well (such as urban and agricultural water supplies). This may require major changes in thinking, funding models, and perhaps legislation.
6. Adaptability will be needed for California to prepare for unavoidable changes in climate, population, economic structure, ecosystems, and technology, as well as normal and increasing extreme wet and dry years. Resistance to change and extremes is futile, and portfolio approaches prepare for changes and opportunities in water management.
7. Integrating regulatory and system planning and operations into a broader portfolio is promising for accomplishing diverse water system purposes. This seems especially important for successful ecosystem management. The Delta’s co-equal goals and voluntary settlement agreements for environmental flows are efforts in this direction.  Continuing separation of infrastructure and operation plans from environmental management seems far less effective and increasingly untenable.

State Roles in Water Portfolio Management

Important state functions in portfolio water management include:

1. Supporting local and regional fund-raising legally and administratively. Water management and infrastructure are expensive, and local governments have considerable ability and accountability for funding such projects.  State funding can rarely have more than a nudging role.  Propositions 218 and 26 are examples of how State policies can undermine self-funding of local and regional efforts.
2. Common water accounting, science, and technical support across state agencies, is a foundation for public discussions, coherent management, agreements among agencies, and water trading. This includes integration of local and regional data collection efforts (often using SCADA systems) with state and federal water data collection, management, modeling, and analysis. Texas, Colorado, and other western states act more centrally in these roles.
3. Bringing statewide interests in sustaining ecosystems and public health into local and regional water management portfolios. Historical state reliance on environmental regulations and permits have not brought desirable levels of environmental progress and rural drinking water supply.  Additional means are needed.
4. Integrating portfolios across regions and agencies. Establish frameworks and incentives for local agencies to work together regionally, and for state agencies to cooperate in such efforts.  This includes facilitating flexibility in operations and projects, including trades and transfers, in operational, planning, and policy contexts. SGMA, environmental flow management and the Delta are examples where better organized state water planning could usefully parallel regional organization of local agencies and interests.

Separating environmental regulations from water infrastructure, operations, and management has not been successful enough.  Environmental management must become more than regulations, to become more operationally focused on the active operation and development of habitats and water for ecosystems, often involving land owners and other agencies.  Environmental regulations are a central part of state, regional, and local water management portfolios.  If environmental regulations are not shaped to be compatible with other actions, such as infrastructure design and operations and the management of water demands, then the collective portfolio will be at best sub-optimal and at worst a failure.

A Modest Proposal

The state needs a new vision for the California Water Plan, compatible with SGMA/groundwater planning, voluntary environmental agreements, Prop 1 storage project implementation, drought preparedness, and the many other well-intended state and regional efforts.  Under the current state planning and regulatory framework all these efforts face a brutal, expensive, and impossibly slow incrementalism that impedes effective portfolio development and implementation.

Figure 1 shows a potential framework for water and regulatory planning in California. This new framework would place development and approval of a statewide interagency plan under the California Water Commission, perhaps modestly reconstituted, with the plan becoming part of the budget process for the major state agencies involved.  In recent years, the California Water Commission has developed a reputation and role as a neutral party crossing agency and stakeholder lines.  This interagency plan would also become a nexus for reconciling regulatory actions and rolling up local and regional plans.

Supporting this interagency plan, and the activities of state agencies would be a common California Water Science and Technical Program.  The isolated development of science and technical work in separate agencies and programs has not been serving California well.  A common science and technical program is needed to support, integrate, and balance agency efforts, the administration of multi-agency plans for SGMA and groundwater, the Delta, and ecosystems.

Most of a new California Water Plan would consist of multi-agency regional plans for 11 hydrologic regions.  These plans would involve the SWRCB, RWQCBs, DWR, CDFW, CDFA, and local counties and water agencies, focusing on regional coordination of local plans as well as coordinated regional plans for state interests in ecosystems, economic development, and public health.  Regional integrated water plans would be a framework for neighboring agencies to work together; the pairing of the Santa Ana Watershed Project Authority with the State’s Regional Water Quality Control Board 8 (Santa Ana) is perhaps today’s closest equivalent.  Regional offices of state water agencies would be re-aligned for this purpose.  These regional planning efforts would be supported by regional water science and technical efforts to support local and regional SGMA, water quality, ecosystem, and environmental justice plans and efforts.

This approach would preserve what local, regional, and state agencies are already doing well, while bringing agencies together to make improvements and better address areas that lack integration and well-developed portfolios.  Each state role in portfolio planning would be strengthened.

Figure 1. Integrating Local, Regional, and State Water Plans, supported by public science

Areas where portfolios have lagged include: environmental management; integration across water management purposes; groundwater; and safe rural drinking water. Extending portfolio planning to and across these areas should help, although it may require changes in how agencies view planning and operations. Regional integration is most important, particularly for obtaining multiple benefits and integrating projects and regulations with portfolios.  Common science and technical information are fundamental here.

Implementation of the Sustainable Groundwater Management Act and new environmental flow regulations together provide an excellent opportunity for modernizing California’s water planning and regulation functions into a more integrated portfolio-based framework.  Some fundamental changes in state regulation and planning would better prepare California for developing and operating effective water management portfolios in an era of rapid change.

Further Readings

Central Valley Joint Venture. http://www.centralvalleyjointventure.org/partnership/what-is-the-cvjv

Escriva-Bou, A., H. McCann, E. Hanak, J. Lund, B. Gray (2016), Accounting for California’s Water. Public Policy Institute of California, San Francisco, CA.

Hanak, E., J. Lund, A. Dinar, B. Gray, R. Howitt, J. Mount, P. Moyle, and B. Thompson (2011), Managing California’s Water:  From Conflict to Reconciliation, Public Policy Institute of California, San Francisco, CA.

Lund, J. (2019), “A water portfolio planning report card for California,” 26 May, CaliforniaWaterBlog.com

Lund, J. (2019), “Portfolio Solutions for Safe Drinking Water – Multiple Barriers,” 7 April, CaliforniaWaterBlog.com

Lund, J. (2019), “Portfolio Solutions for Water – Flood Management,” 3 March, CaliforniaWaterBlog.com

Lund, J. (2019), “Portfolio Solutions for Water Supply,” 10 March, CaliforniaWaterBlog.com

Lund, J.R., J. Medellin-Azuara, J. Durand, and K. Stone, “Lessons from California’s 2012-2016 Drought,” Journal of Water Resources Planning and Management, October 2018. (open access)

Pinter, N., J. Lund, and P. Moyle (2019), “The California water model: Resilience through failure,” Hydrologic Processes, March, and blog post.

Bruun, B. (2017), “The regional water planning process: a Texas success story,” Texas Water Journal, Volume 8, Number 1.

White, Gilbert (1966), Alternatives in Water Management, Publication 1408, National Academy of Sciences – National Research Council, Washington, DC, 52pp.

Jay Lund is a Professor of Civil and Environmental Engineering at the University of California, Davis.