The basic principle of an offset program is that a developer or homebuilder implements, or pays a fee in-lieu of implementing, actions that offset the impacts of their proposed project on water resources.
Offset programs are often implemented when there are water supply shortages or concerns about meeting future growth with currently available supplies.
To address concerns that conservation by existing users may fuel growth, the program must be carefully constructed so it is clear that new development is paying its way, which can be done by having an offset ratio that exceeds a simple one to one exchange. An offset program can take a number of forms, including water conservation, groundwater recharge, and wastewater management, though most programs focus on demand management. Programs tend to evolve over time as communities adjust to changes in where water savings can be realized and in program implementation method.
Offset programs allow developers to pay for the costs of mitigating the impacts of new development on water resources when water supplies are strained.
A water demand offset policy should have comprehensive requirements with sound methodologies for estimating the water demands of new development, and for calculating credits resulting from the savings of water efficiency measures. An offset ratio greater than 1:1 helps ensure that sufficient savings are achieved and accounts for projection error. However, large ratios may make offsets difficult to realize over time as savings potential is reduced. It is also important to ensure that the water efficiency measures are permanent.
While offset programs typically involve residential and commercial development, they can be designed to address other water uses such as new agricultural use. Areas of severe depletion can be targeted with specific offset requirements in order to manage groundwater resources. This involves ongoing groundwater monitoring to assess water resource conditions.
Development offset programs are adopted by ordinance and require a mechanism to implement the offset. Administrative aspects, including monitoring and accurate measurement of savings, are essential. The Alliance for Water Efficiency’s (AWE) report “Water Offset Policies for Water Neutral Growth” researched 13 communities and found that, while effective, there is need for a clear water savings methodology. To improve use of offset strategies, AWE is developing a model ordinance template, part of the Net Blue initiative to advance water neutral growth. While some offset programs require the developer to implement the offset (e.g. replace inefficient fixtures in existing homes), offset mechanisms may include the following:
- Offset Fees or “in-lieu” fees paid by the developer
- Water Conservation Bank
- Water Allocation Policy
In the Verde Valley, the Verde River Exchange is a new pilot program intended to allow groundwater users to voluntarily offset the impact of their use. Administered by Friends of Verde River Greenway, the Exchange resulted from several years of careful planning and collaboration among local stakeholder and community leaders, working with conservation organizations and regional experts. As the first water offset program in Arizona, the Exchange is introducing and testing the concept both in the Verde Valley and through broader conversations in the state.
The Exchange aims to reduce the amount of water removed from the Verde River and its connected groundwater system through a voluntary offset mechanism, modeled after “groundwater mitigation” programs in other states. To create credits, a water user volunteers to reduce their usage through an agreement with Friends of Verde River Greenway and partners. This unused water is then recorded as a “Water Offset Credit” – water that has been returned to the Verde River system. Another groundwater user in the Verde Valley can then purchase the Water Offset Credit to help reduce their water “footprint.” Through this balancing mechanism, total impact of groundwater pumping on the river system is reduced. As of spring 2017, the Exchange program had accomplished two initial demonstration projects, with plans to increase the number of projects and program participants in the coming years.
The Exchange is a completely voluntary, locally administered program. While the program is in its early stages, its initial success may create opportunities to pursue further formalizing or expanding the offset concept in the Verde watershed or other Arizona communities. Moreover, the Exchange serves as an example of a potential voluntary water management tool for local jurisdictions, and an idea to consider and learn from as water management solutions are being developed in the Verde River watershed and beyond.