Selling and buying water rights

“Before we started, it was really difficult to identify those interested in buying or selling their rights,” says Richael Young, company president, and an expert in environmental engineering and agricultural economics. “We provide a central hub for people. Right now, they spend a lot of time either calling up people, seeing if someone is interested in trading, or hiring a realtor, which can take months, and still may not tell you whether or not a person is eligible to trade.”

Although the company is just getting started, the researchers see a future where the system will expand to other areas and natural resources.

“Part of our thinking is how we can scale this idea and broaden this scope to other environmental markets,” Brozovic says. “Beyond this relatively narrow market of trading groundwater rights, there are many other natural resources that have the same features where a similar system could work, such as habitat markets or wetland mitigation markets, storm water management in urban areas, water quality in waste water treatment plants.

“There is a broader move within environmental regulations to move to market based systems,” he adds. “If done correctly, it may be a cheaper way to achieve a better environmental outcome.”

There can be considerable complexity, however, in implementing environmental and resource use regulations using markets.

“For carbon, it’s a pretty simple process, since the atmosphere is well mixed so it doesn’t matter where carbon emissions occur,” Young says. “But when you think about ground or surface water, those are highly localized resources. You can’t have a trading scheme that allows people to trade wherever they are located, since there are physical laws that govern the movement of groundwater and surface water.

“So those are the kinds of rules we incorporate into the system to allow people to trade more effectively,” she adds. “Our goal is to help businesses operate more efficiently within existing regulations. For now, we are focusing on groundwater. In the future, we hope to enter into markets for surface water and air pollutants.”

One incentive for expansion to other areas is the fact that the market for trading groundwater permits is highly seasonal. “Once you’ve planted your seeds and made those decisions, you may not be interested in trading for more water rights,” Young says.

The release notes that the NSF has supported their efforts with a $50,000 Innovation Corps (I-Corps) grant, awarded in 2013, which provides a set of activities and programs that prepare scientists and engineers to extend their focus beyond the laboratory into the commercial world.

The goal of the I-Corps program is to help researchers translate their discoveries into technologies with near-term benefits for the economy and society. It is a public-private partnership program that teaches grantees to identify valuable product opportunities that can emerge from academic research, and offers entrepreneurship training to student participants.

Mammoth Trading recently completed its first deal, and is working on others. “We expected it would take time for people to become familiar with our system, and how it works,” Young says. “It surprised us how quickly people did hear about us. We got some trades earlier than expected, and we were able to get them through.”

Brozovic agrees. “We now have the first trades in our system, which is exciting,” he says. “Eventually we could do this nationwide, and potentially internationally.”