Sustainable Groundwater Management Act (SGMA)
Definition
The Sustainable Groundwater Management Act (SGMA) is a three-bill California package enacted in 2014 (AB 1739, SB 1168 and SB 1319) that 'established a statewide framework to protect groundwater resources.' It requires local agencies in high- and medium-priority groundwater basins to form groundwater sustainability agencies (GSAs) and to adopt and carry out groundwater sustainability plans (GSPs) that avoid six 'undesirable results': lowered groundwater levels, reduced storage, seawater intrusion, degraded water quality, land subsidence, and depletion of interconnected surface water. Critically overdrafted basins must reach sustainability by 2040 and the other high- and medium-priority basins by 2042. The Department of Water Resources reviews the plans; when a plan is inadequate or a basin is unmanaged, the State Water Resources Control Board can intervene, first by placing the basin on probation and then, if needed, by imposing an interim plan.
Why it matters
Groundwater carried California agriculture through its droughts: the State Water Board says it makes up to 60% of the state's supply in dry years and up to 40% even in normal ones. SGMA is turning that open-ended supply into a managed, and in many basins shrinking, allocation over the years to 2040 and 2042. For an investor in San Joaquin Valley farmland, the basin's plan, its pumping allocations, any probation, and the parcel's share of sustainable yield are as important as the soil. A purchase price based on historical pumping can overstate the land's future productivity if the plan cuts pumping by a fifth or more.
Common misconceptions
- •SGMA does not end groundwater pumping. It aims to bring pumping into balance with recharge over 20 years.
- •A basin's plan is not the same everywhere in the basin. Allocations and rules can differ by GSA.
- •Probation is not a fine. It brings state reporting, fees and, possibly, an interim plan.
- •Low-priority basins are not covered by the main requirements. Check the basin's priority first.
- •A well's past output is not its future allowance. The parcel's allocation under the plan governs.
Technical details
How SGMA works (State Water Resources Control Board)
Enacted 2014: AB 1739, SB 1168 and SB 1319, signed by Governor Brown.
High- and medium-priority basins must form GSAs and adopt GSPs.
Deadlines: critically overdrafted basins sustainable by 2040; other covered basins by 2042.
DWR assesses plans; the State Water Board is the 'backstop' and can intervene in two phases, probation and then an interim plan.
A basin can be returned to DWR when GSAs fix the deficiencies.
Probation: what pumpers face
Annual extraction reports to the State Water Board, for each water year from October 1 to September 30.
Fees: generally $300 per well plus $20 per acre-foot in probationary basins; $25 per acre-foot in unmanaged areas.
De minimis exclusion: two acre-feet or less a year for domestic use only.
Tulare Lake Subbasin: probationary since April 16, 2024; first reports due May 1, 2026 for July 15, 2024 to September 30, 2025; a 20 acre-foot minimal-impact exclusion adopted April 7, 2026.
Questions for a California farm
Which basin and GSA is the parcel in, and what is the basin's priority?
What is the parcel's pumping allocation under the plan, and how will it change toward 2040 or 2042?
Is the basin on probation or under review by the State Water Board?
Does the farm have surface water or recharge credits to offset pumping limits?
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
- How does SGMA affect farmland values?
- By limiting how much groundwater a parcel can pump over time. In overdrafted basins, plans bring pumping down toward the sustainable yield, so land that relied on heavy pumping may have to grow less water-intensive crops, fallow part of its acres, or buy water. Land with a secure surface supply, or in a basin near balance, is less exposed. Farmland Partners notes it reviews the useful lives of its groundwater assets 'based on current state water regulations and depletion levels of the aquifers.'
- What happens when a basin is put on probation?
- The State Water Board takes a direct role. Most well owners must measure and report their extraction to the Board each year and pay state fees, generally a base fee of $300 per well plus $20 per acre-foot extracted in a probationary basin ($25 per acre-foot in unmanaged areas). Small domestic users pumping two acre-feet or less a year are excluded. If problems are not fixed, the Board may impose an interim plan.
- Which basins have been placed on probation?
- The State Water Board designated the Tulare Lake Subbasin probationary on April 16, 2024. As of August 2026 the Board says it is enjoined from enforcing probation in two GSA territories while litigation is pending, and all other areas remain subject to the requirements. Pumpers' first extraction reports were due May 1, 2026, and on April 7, 2026 the Board excluded pumpers who extract no more than 20 acre-feet a year and do not export groundwater outside the subbasin. The Board's basin list also shows the Tule Subbasin as probationary and the Pleasant Valley Subbasin under evaluation, and it has returned the Chowchilla, Delta-Mendota, Kaweah and Kern County subbasins to the Department of Water Resources.
- Does SGMA apply outside California?
- No. It is California law. Other western states manage groundwater under their own systems, such as Arizona's active management areas and Colorado's designated basins, which work differently.