Surface Water vs Groundwater
Definition
Surface water is water taken from rivers, streams, lakes and reservoirs, usually delivered through canals by an irrigation district or diverted directly under a water right. Groundwater is water pumped from aquifers through wells on or near the farm. USDA's 2023 Irrigation and Water Management Survey found that 'Ground water from on-farm wells accounted for 54% of irrigation water applied to acres in the open,' with surface water and off-farm suppliers making up the rest. The two sources behave differently: surface water is cheap to deliver when it is available but depends on snowpack, reservoir levels and the priority of the right or contract; groundwater is available on demand but costs energy to lift, can decline as aquifers are drawn down, and in California is now regulated basin by basin under the Sustainable Groundwater Management Act.
Why it matters
The water source decides what happens to an irrigated farm in a bad year. A farm on a junior surface supply with no wells may have to fallow; a farm that relies only on groundwater in an overdrafted basin may face pumping limits, falling water levels, deeper wells and higher energy bills. For a landowner who collects fixed cash rent, those costs sit with the tenant until they threaten the tenant's ability to pay or renew; for a landowner who shares the crop or farms directly, they hit income at once. Knowing which sources a farm has, and how each performed in the last drought, is basic underwriting for western farmland.
Common misconceptions
- •A district contract is not a guaranteed delivery. Allocations are set each year from available supply.
- •A well is not a permanent supply. Water levels fall with heavy pumping, and wells may need deepening.
- •Groundwater is not unregulated in California. SGMA basins can impose reporting, fees and pumping limits.
- •Cheap surface water in wet years says little about dry years. Look at the record through a drought.
- •The two sources are not independent. Where they are connected, pumping can reduce stream flow.
Technical details
Comparison
Control: surface water depends on the right's priority or the district's allocation; groundwater on the farm's wells and the basin's rules.
Reliability: surface supplies fall in droughts; groundwater fills the gap but declines with overuse.
Cost: surface water carries district charges; groundwater carries pumping energy, well maintenance and, in probationary SGMA basins, state fees.
Regulation in California: surface rights are permitted, licensed or pre-1914; most groundwater is unpermitted but managed under SGMA.
USDA 2023 Irrigation and Water Management Survey (national)
On-farm wells supplied 54% of irrigation water applied to acres in the open.
Average water applied: 1.5 acre-feet per acre.
Farms using groundwater averaged 4.0 wells; 36% of wells had flow meters.
Average well depth 241 feet; average depth to water at the start of the season 96 feet.
Energy for pumping well and surface water: $3.3 billion, $20,698 per farm reporting it.
Questions for an irrigated farm
Which sources does the farm have, and what share of its water comes from each?
What were deliveries and pumping in the last dry years?
How deep are the wells, how old, and what has happened to water levels?
Is the basin under a groundwater sustainability plan, probation or pumping allocation?
How investors apply the term
Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.
The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.
Frequently asked questions
- Which is more reliable, surface water or groundwater?
- It depends on the year and the place. Surface supplies can fall to nothing in a drought: in February 2022 the Bureau of Reclamation allocated 0% of contract totals to Central Valley Project irrigation contractors both north and south of the Delta. Groundwater has historically filled that gap, which is why California's State Water Board says groundwater makes up to 60% of the state's supply in dry years, but heavy pumping lowers water levels and is now limited in many basins.
- Is groundwater more expensive than surface water?
- Usually in operating cost, because water has to be lifted. USDA's 2023 survey put energy for pumping well and surface water at $3.3 billion nationally, an average of $20,698 per farm that reported the expense, with an average well depth of 241 feet and depth to water of 96 feet at the start of the season. Surface water bought from a district has its own charges, which vary widely.
- Do you need a permit to pump groundwater?
- In California, generally not a water right permit: the State Water Board says 'To get a right to groundwater, you simply extract the water and use it for a beneficial purpose,' except for subterranean streams in known and definite channels. But well permits, local rules and, under SGMA, groundwater sustainability plans, extraction reporting and fees can limit how much a farm pumps.
- Why do farms keep both sources?
- Redundancy. A farm with a district surface supply and good wells can switch to wells when allocations are cut, and rest the wells in wet years. A farm with only one source carries that source's full risk.