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Frequently Asked Questions about our Water Banking Grants Pilot Program

This is the transcript from a pod cast discussing frequently asked questions about our new Water Banking Pilot Program. You can also listen to the audio version

Our water banking pilot program offers up to $14,000,000 to public entities who want to set up water banks to keep water in their local watersheds.

Since announcing our water banking pilot program on November 17, we’ve received a lot of interest in the program. We’ve also received a few questions.

Robin McPherson, who runs the pilot program on behalf of Ecology, has answers.

What is the Water Banking Pilot Grant program?

This past year, the Legislature provided money for Ecology to fund the local purchase of water rights. They did this in response to concerns about water rights being sold downstream out of rural headwater basins. The purpose of this funding is for local areas to buy water rights at fair market value and keep them local. Water can be bought with this money now, and banked to be used later. This is the first grant program of its kind.

Who can buy water with this grant money?

The funding is for “public entities” and their partners. For example, a local government like a county or public utilities district could use this money to buy some water that is for sale in their area. A private or nonprofit partner could also participate, but they have to be a partner with a public entity. That ensures that the water bank will be operated permanently, even if the non-public partner goes out of business or stops operating.

How much grant money is available?

Each applicant — each county, PUD for example — could receive up to $2 million of grant funding. There is a total of $14 million over the two years of the biennium; $2 million of this is earmarked for qualified applicants within the Methow River Basin.

What can the grant money be used for?

The grant money can be used, first and foremast, to buy water rights — that is, to pay a willing seller fair market value for their water. The final dollar amount will depend on the amount of water that’s valid for use. Grant money can also be used to establish the water bank, such as associated administrative costs, for instance.

What happens after a grant is awarded?

Ecology will work with successful applicants to develop a grant agreement. This will include specific tasks to be accomplished in order to purchase the water right and establish the water bank. In most cases, the water right will need to go through the change process to have its purpose of use changed to instream flow and mitigation, and to determine the quantity of valid water available for purchase. When this is done, the money will be available to the grant recipient to buy water from the seller. When the transaction is final, the water bank will be created by executing a water banking agreement that secures the water in the bank and makes it available for future use. Then 1/3 of each water right acquired will be dedicated to instream use.

What does the 1/3 In-stream dedication requirement apply to?

Like many grants, this funding has requirements and limitations attached by the Legislature. Water bought with the 2021-23 pilot grant funding, awarded through this program, has an in-stream dedication requirement. This means that for each water right purchased at fair market value, 2/3 of that water will be available for use through future banking. The other 1/3 needs to be dedicated instream. The stream dedication only applies to water purchased with this grant money. For other water banks established with other funding sources, there is no 1/3 stream dedication requirement. For water currently in the trust program — such as trust donations, or existing water in banks — the 1/3 requirement has no effect whatsoever.

Does this mean 1/3 of the water is lost forever?

No. First, this only applies to water purchased with these grant funds — and like most grants, this funding might not be the best fit for everyone. Secondly, the grant funds will pay for the full amount of valid water acquired. Last, the water instream will be a permanent dedication for habitat and instream values. It’s not lost. It will benefit not only fish and wildlife, but should also help local communities retain water rights for local use that could otherwise be sold downstream.

You mentioned this might not be the best fit for everyone. Who is it the best fit for?

I’d say this is the best fit for a public agency that has a water bank or is able to get one up and running and identifies water they want to buy. Review our guidance document and set up a consultation to see if it’s the right fit for you.

Is it possible the state could appropriate the 1/3 left instream for downstream areas that need new water rights, such as a growing city?

No. The water is going to be committed to the Ecology Trust Program. That’s legally controlled by the trust agreement. Ecology acts as the trustee of trust water. But we can’t do anything with the water that’s not in the trust agreement. That’s just a limitation of the law, like any trust agreement. In this case that trust agreement will specify 1/3 of the water to be dedicated in stream and 2/3 of the water be available for local banking.

When is grant funding available?

The funding is distributed through Ecology’s grants process (EAGL), which opened to grant applications November 17. We will review and award funding on a rolling basis as long as it’s available.

Will the proposals be publically viewable?

Yes. As the grant applications come in, we will be posting summaries on our web site. Those will be available for existing grant applications shortly.