Spreck Rosekrans is an Economic Analyst at EDF.

Yesterday, Lester Snow, California’s Director of Water Resources, announced the formation of the “2009 Drought Water Bank” that would facilitate market transactions of our limited water supplies in the event that 2009 is California’s third consecutive dry year.

The initiative makes a lot of sense to us. If we do not have a decent snowpack next year, at least we will have the Snow Bank, which will provide communities and businesses an opportunity to purchase needed supplies. The market will, in turn, encourage potential sellers to use their supplies as efficiently as possible.

We wonder why we do not do this every year. The distribution of water throughout California is based on a historically derived water rights system that does not well serve today’s economic, social or environmental needs. While a State-run water bank may be most useful and active in a drought, it would provide incentives in all years to make long-term investments in conservation that are necessary to support our growing state’s economy while protecting our environment.

Of course, there are water banks every year. Farmers and water districts within the San Luis and Delta Mendota Water Authority for example, routinely buy and sell water. Not surprisingly, buyers and sellers alike within SLDMWA have been in the forefront of installing highly efficient drip irrigation on their row crops and in their orchards.

We trust that the State’s role will be to facilitate transactions and allow use of its extensive conveyance system. The State should not control prices, because such control eliminates the incentives that a market is supposed to provide.

We do appreciate that the State has a role in protecting communities from being dried up by overzealous sellers and also making sure that all residents have access to a reasonable supply of high quality water at a fair price. But most of California’s developed supplies go to the important business of farming. The more efficient our farms can be, the less the need to extract water from our beleaguered rivers.

We hope to have the snowpack back next year. But whether 2009 is wet or dry, there is no reason not to proceed with the Snow Bank.