For at least 25 years, California has been developing an informal “spot market” for water. Cities or farmers looking for more water can often buy it from water districts that have more senior water rights and may not need all the water they get from state or federal water projects. But the state’s extreme drought is pushing the limits of that market. Supply is so constricted that even traditionally water-rich districts aren’t always willing to sell. 

“If we’re water-short in our area, we’re not going to sell water outside of our area,” Ted Trimble says.  Trimble, general manager of the Western Canal Water District, says the rice farmers in his northern California district and some others recently opted out of a tentative deal to sell their water to the Metropolitan Water District of Southern California. That’s because they found out their own water allocations from the state would be cut in half.

Right now, the California water market is “very supply-constrained,” says Tim Quinn, executive director of the Association of California Water Agencies.  “So when a market gets highly constrained, the number of transactions contracts and prices goes up. And that’s what’s happening in California.”  

MWD was willing to pay $700 an acre foot for the rice farmers’ water.  That’s twice as much as the going price five years ago, according to Trimble.  An acre foot is the amount of water it takes to cover an acre one foot deep in water, or roughly the water supply used by two families of four in one year.