In the second half of 2018, a total of 32.10 AF of Type 2 non-irrigation grandfathered groundwater rights changed hands within Tucson Active Management Area (“AMA”). There were no transfers in the Phoenix, Pinal, Prescott or Santa Cruz AMAs. The price was $2,500/AF, compared to the previous market rate of $2,000/AF. Because the price was determined from a single transfer, future activity will determine whether the market has changed or the increase was driven by unique circumstances of that private party deal.
Type 2 rights were established under the 1980 code to cap and manage groundwater use. The rights are based on the maximum annual volume pumped for non-irrigation use between 1975 and 1980. They can be used for municipal, industrial, or domestic purposes, and frequently are acquired by golf courses, dairy operators, and industrial users. Type 2 rights are not sought for development and are only occasionally acquired by water suppliers because of the state’s Assured and Adequate Water Supply Programs. The programs, which call for demonstration of a 100-year water supply when a subdivision is developed, require the use of renewable water supplies and allow use of only limited groundwater.
Type 2 and LTSC Transfers by AMA (June 2018- December 2018)
|Type 2 Non-Irrigation Rights||Long-Term Storage Credits|
|AMA||Volume (AF)||Price ($/AF)*||Volume (AF)||
|Phoenix||—||—||11,469.78 AF||$160/AF – $400/AF
(average of 225.85/AF)
|Tucson||32.10 AF||$2,500/AF+||51.72 AF||$238/AF|
*Because transactions are usually completed between private entities, some prices are estimated based on information provided by Journal of Water sources.
Arizona also has a viable market for long-term storage credits (“LTSCs”). LTSCs are created when water is recharged and stored underground for a year. A certificate issued by the Arizona Department of Water Resources becomes a tradeable instrument. A total of 12,021.50 AF of LTSCs changed hands in the second half of 2018. Transfers of LTSCs also occurred in only the Phoenix, Pinal, and Tucson AMAs.
Prices for LTSCs ranged from $160/AF to $400/AF. (See table above for breakdown of volume and price by AMA).
Written by Marta L. Weismann