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PRIMING CALIFORNIA’S WATER MARKET PUMP

DIRECTED BY

REED WATSON

May 2–3, 2011Hoover Institution

Stanford, California

PRIMING CALIFORNIA'S WATER MARKET PUMP: A WORKSHOP FOR POLICY ENTREPRENEURSDirected by Reed Watson

Hoover InstitutionStanford, CAMay 2–3, 2011

PAGEAgenda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Participants.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5About PERC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7PERC Personnel.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Note Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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PRIMING CALIFORNIA'S WATER MARKET PUMP: AWORKSHOP FOR POLICY ENTREPRENEURSAn OverviewThe purpose of this workshop is to identify and discuss the institutional barriers to watermarketing in California. We have invited a mix of scholars, professionals, and policymakers with an expertise in the state's water market. Our expectation is that an opendialogue between these experts will produce specific policy reforms aimed at reducingthe transactions costs and increasing the gains from trade for California water users.Proposed outcomes: • Identify key institutional barriers to developing more robust water markets inCalifornia. • Identify policy entrepreneurs capable of proposing, selling, and implementingmarket-based reforms.

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PRIMING CALIFORNIA'S WATER MARKET PUMP: AWORKSHOP FOR POLICY ENTREPRENEURS

AgendaMONDAY, MAY 2All sessions and lunch to take place in the Herbert Hoover Memorial Building, Room 130.8:00 – 11:00 a.m. Arrival12:00 – 1:00 p.m. Lunch1:00 – 2:15 p.m. Session I: Performance versus Potential: Is There Room forImprovement?Discussion Leader: Terry Anderson2:15 – 2:30 p.m. Break2:30 – 3:45 p.m. Session II: Administrative Approval Process: Balancing Efficiencyand EnforcementDiscussion Leader: Brian Gray3:45 – 5:00 p.m. Session III: Third-Party Protections: California Water Code §386, theNo-Injury Provisions, and the Watershed Protection ActDiscussion Leader: Buzz Thompson6:30 p.m. Dinner, Caffe Riace200 Sheridan Avenue650.328.0407

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TUESDAY, MAY 39:00 – 10:15 a.m. Session IV: Uncertain Rights: Endangered Species Act and the PublicTrust DoctrineDiscussion Leader: Jim Huffman10:15 – 10:30 a.m. Break 10:30 – 11:45 a.m. Session V: Groundwater Banking and Active RechargeDiscussion Leader: Russ McGlothlin12:00 – 1:00 p.m. Lunch 1:00 – 2:15 p.m. Session VI: Monopoly Distortions: Buyers, Sellers, and ConveyanceDiscussion Leader: Scott Slater2:15 – 3:30 p.m. Session VII: Strategy Development for Policy ReformDiscussion Leader: Reed Watson3:30 p.m. Departure

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PARTICIPANTSTerry L. AndersonPERCJoya BanerjeeS. D. Bechtel, Jr. FoundationCarlee BrownWestern Governors' Association Zack DonohewBren School of Environmental Science &ManagementUniversity of California, Santa BarbaraEric EdwardsBren School of Environmental Science &ManagementUniversity of California, Santa BarbaraBrian E. GrayUniversity of California Hastings College of LawJames Huffman

Lewis & Clark Law SchoolRussell M. McGlothlinBrownstein Hyatt Farber SchreckDavid L. OsiasAllen Matkins Leck Gamble Mallory & NatsisLLPScott S. SlaterBrownstein Hyatt Farber SchreckC. Wesley StricklandBrownstein Hyatt Farber Schreck David L. SundingUniversity of California, BerkeleyBarton H. Thompson Jr.Stanford UniversityAllison Harvey TurnerS. D. Bechtel, Jr. FoundationDIRECTORReed WatsonPERC

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ABOUT PERCPERC is the nation’s oldest and largest organization dedicated to improving environmental qualitythrough property rights and markets. Established in 1980, PERC pioneered the approach known as “freemarket environmentalism” (FME). This approached is based on the tenet that private property rightsencourage stewardship of resources. When political solutions are called for, PERC providesmarket-based approaches rather than regulatory sticks.Over the past three decades, PERC has grown into an institution providing a complete package for freemarket environmentalism by combining research, outreach, and applied programs. Hence, we areincreasingly known as PERC University. At “PERC U,” research generates ideas and evidence of howmarkets and property rights improve environmental quality. Outreach takes research to opinion leadersand policy makers who can formulate positive changes incorporating free market environmentalism.Applied programs help conservationists and resource managers create value for their environmentalassets. These three components are bound together by the expertise of the PERC staff and the scholars,journalists, policy makers, and environmental entrepreneurs who converge at PERC University. Thiscombination offers a powerful force for improving environmental quality while expanding humanfreedom. PERC PROGRAMSRESEARCHLone Mountain Fellowships: Lone Mountain Fellowships offer a unique opportunity for scholars, journalists,policy makers, and environmentalists to advance our understanding of the role of markets and property rights inprotecting and enhancing environmental resources. Lone Mountain Fellows are in residence at PERC for periodsranging from a week to a year, depending on the nature of their projects.Graduate Fellowships: Graduate students and law students spend three months at PERC researching issuesrelated to natural resources and the environment.OUTREACHMedia Fellows: Media Fellowships are open to journalists interested in learning more about markets andenvironmental issues. Media Fellows spend a minimum of a week in Bozeman, Montana, where they visit withPERC researchers and explore topics of interest.Colloquium for Undergraduate and Graduate Students: A week-long seminar on free market environmentalismfor college students, offering the chance to look at other approaches to environmental issues.APPLIED PROGRAMSEnviropreneur Institute: A two-week educational experience in Bozeman, Montana, for environmentalentrepreneurs who want to have a better understanding of how business and economic principles can be appliedto environmental problems. The curriculum equips conservation leaders with the necessary tools of contracts,communication, property, and economic analysis to become more effective environmental stewards.Enviropreneur-in-Residence: An opportunity to spend up to three months at PERC developing an idea orbusiness plan that implements a market-based solution to an environmental problem.

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PERC PERSONNELEXECUTIVE DIRECTORTerry L. AndersonDEPUTY DIRECTOR OF DEVELOPMENT & OPERATIONSPete GeddesDEPUTY DIRECTOR OF FINANCEMonica L. GuentherDIRECTOR OF OUTREACHLaura E. HugginsDIRECTOR OF RESEARCHDonald R. LealDIRECTOR OF MEDIA RELATIONSLinda E. PlattsDIRECTOR OF APPLIED PROGRAMSReed WatsonOFFICE MANAGERDianna L. RienhartACCOUNTANTKayCee PulaskyCONFERENCE COORDINATORSColleen LaneRenee StormADMINISTRATIVE ASSISTANTSGenevieve KulaskiSharie Rucker

SENIOR FELLOWSDaniel K. BenjaminDavid D. HaddockP. J. HillDonald R. LealGary D. LibecapRobert E. McCormickRoger E. MeinersAndrew P. MorrissJane S. ShawRandy T. SimmonsRichard L. StroupWalter N. ThurmanBruce Yandle SENIOR RESEARCH FELLOWSH. Spencer BanzhafDominic P. ParkerKurt E. SchnierRESEARCH FELLOWSHolly L. FretwellLaura E. HugginsBrandon ScarboroughReed Watson