Water in the West: A Systemic Crisis

Water shortages across the western United States are often most visible during drought: reservoirs decline, rivers run low and competition for available supplies intensifies. But the first discussion of the 2026 Marshall & Stevens Water Forum examined challenges that extend beyond any individual drought. The panel explored the relationship between surface water and groundwater, the long-term imbalance between water supply and demand, the implications of California’s Sustainable Groundwater Management Act (SGMA) for agriculture, and the potential role of alternative water sources such as desalination and water reuse.

The Forum was moderated by Jennifer Simmonson, MAI, Director in the Real Estate practice at Marshall & Stevens. She was joined by Megan Nicholas Harper, Director of Water Resources at Nuveen Natural Capital; Rosemary Knight, Professor in Stanford University’s Geophysics Department and Founding Director of the Center for Groundwater Evaluation and Management; Nati Louzon, VP of Global O&M at IDE Technologies; and Bobby Majumder, Partner at FBT Gibbons and Co-Head of the firm’s Energy Group. Together, the panel brought perspectives spanning groundwater science and management, institutional agricultural investment, water technology and operations, and energy and industrial development.

Surface Water and Groundwater Are Parts of the Same Challenge

Rosemary Knight began by distinguishing between the visibility of surface-water shortages and the much less visible condition of groundwater. Declining rivers, lakes and reservoirs can be readily observed. Groundwater, by contrast, is hidden beneath the surface, even though it is an important component of freshwater supply. Knight said groundwater levels are declining not only in the western United States but around the world.

That distinction shaped her proposed approach to water management. Rather than managing surface water and groundwater separately, Knight called for an integrated approach that considers both. Central to that approach is acquiring sufficient information about groundwater systems to understand how they function and how actions in one place can affect water elsewhere.

Advances in geophysical technology are expanding that ability. Knight described the use of satellites, helicopters and ground-based systems to map subsurface sediment types, identify where water is located, determine how groundwater systems are connected and examine how pumping in one location may affect a river elsewhere. She noted that California’s Department of Water Resources has acquired 25,000 line kilometers of data about groundwater systems.

For Knight, advances in technology and data science create an opportunity to improve water management even as the scale of the water challenge grows. She described Stanford’s work on a sensor-informed framework for freshwater management that combines advances in technology with advances in data science. Her emphasis throughout the discussion was on converting better information into better management decisions.

“We need data-informed decision making. That’s the way to move towards solutions.” – Rosemary Knight

Drought Is Not the Only Issue

From the perspective of institutional agricultural investment, Megan Nicholas Harper described drought as a stress test that exposes vulnerabilities that have accumulated over decades. She discussed California, the Colorado River and the Ogallala as examples of the broader challenge.

In California, Nicholas Harper pointed to the history of groundwater use before SGMA. She said California was the last state west of the Mississippi to regulate groundwater and described how the previous system allowed significant overdraft in many basins. SGMA is now requiring California to work through the effects of that history, but Nicholas Harper emphasized that problems developed over generations and will take time to address.

She also identified a supply-side component of the problem. River channelization, flood-control infrastructure, reservoirs and dams, and the separation of floodplains from their natural tributaries supported substantial economic and agricultural productivity, she said, while also reducing natural functions that historically helped recharge groundwater and buffer hydrological extremes.

Nicholas Harper summarized the resulting imbalance in direct terms:

“We have increased demand, and we have cut off input from the supply side, so just the imbalance of the system has been totally thrown out of whack.” – Megan Nicholas Harper

She described the Colorado River as another structural challenge, saying the system remains over-allocated and that its commitments exceed what the river can provide over the long term. She also pointed to the Ogallala as an example of the difference between managing water as a finite asset for future generations and extracting it until it is gone.

Nicholas Harper also discussed increasing climate variability and what she called “weather whiplash” between droughts and floods. In her assessment, however, these extremes act as accelerants rather than the underlying cause of the problem. The larger challenge she identified is bringing demand into alignment with sustainable supply while rebuilding natural resilience into the system.

SGMA Raises a Broader Question: Who Gets the Water?

The implementation of SGMA brings the groundwater imbalance into decisions about who will have access to water in California. Knight described the underlying problem simply: more water is leaving groundwater systems than entering them, causing groundwater levels to decline. She emphasized that decisions about addressing that imbalance need to account for the full range of consequences associated with overdraft.

Agriculture is one of those considerations. Knight emphasized the importance of supporting California agriculture and said eliminating its water supply would have major consequences for food supply across the United States. But she also identified other impacts that need to be considered when determining how groundwater is allocated.

Those impacts include shallow domestic wells going dry, particularly in underserved communities; land subsidence caused by pumping; damage to infrastructure such as aqueducts; degradation of water quality; and harm to natural ecosystems that depend on freshwater.

Knight used coastal groundwater pumping in Monterey as an example. She explained that extensive pumping from coastal aquifers to support agriculture has drawn saltwater onto land. This affects freshwater aquifers used by people while also altering the natural offshore movement of groundwater that delivers nutrients to coastal ecosystems.

Her position was that the needs of natural systems should be included alongside human uses when allocation decisions are made:

“Let’s be sure we give nature a seat at the table when we’re deciding who gets what.” – Rosemary Knight

What Will Differentiate Agricultural Assets Under SGMA?

Nicholas Harper approached SGMA from the perspective of agricultural assets and identified resiliency and adaptability as the characteristics that will separate better-positioned operations from those likely to struggle.

One factor is diversification of water supply. She said operations should not depend on a single source and identified groundwater, surface water, recharge and purchased water as components that can contribute to a water portfolio. As groundwater becomes increasingly constrained in agricultural regions such as the Central Valley, she said reliable access to surface water will be a significant advantage.

Groundwater banking and recharge provide another source of flexibility. Nicholas Harper described this as a transition away from simply extracting groundwater and toward actively managing and replenishing it. Farms able to capture water during wet years and help recharge aquifers can, she said, contribute to long-term resilience both for individual properties and for the larger system.

Crop flexibility also matters. Nicholas Harper described situations in which growers fallow acreage to manage groundwater use but can return some of that acreage to production during wetter years by leasing it to row-crop tenants. That gives operators additional options as water availability changes between wet and dry periods.

Local governance was another differentiator. Nicholas Harper emphasized that groundwater basins are not all alike. In her view, collaborative Groundwater Sustainability Agencies that establish practical paths toward sustainability can provide more certainty to growers and landowners than areas where governance remains fragmented or contentious. She also said small farmers can be particularly affected in contentious areas.

Finally, she pointed to capital investment in technology and infrastructure, including efficient irrigation systems, monitoring tools and data analytics, as a means of helping growers manage water more effectively. Her overall distinction was between assets actively managing water as a strategic resource and those that historically treated it as an unlimited input.

“Reliable access to surface water is going to be a significant advantage, particularly in this post-SGMA era that we’re in.” – Megan Nicholas Harper

Alternative Water Sources Can Be Part of a Broader Portfolio

The discussion then turned from managing existing groundwater supplies to expanding the range of available water sources.

Nati Louzon explained that increasing water challenges mean communities cannot rely on only one or two solutions. He identified desalination and municipal and industrial water reuse as increasingly important options and said technological advances have made both more practical and sustainable than in the past.

Among those advances, Louzon discussed improvements in membrane performance, energy recovery, plant recovery rates and other technologies designed to increase efficiency. Membrane technology, he noted, has progressed from something that was remarkable in desalination only a few years ago to an increasingly common water-treatment solution.

But he did not describe desalination or reuse as replacements for traditional sources. Instead, he positioned them as parts of a larger water-management strategy incorporating the resources available in a particular area.

“We need to use whatever we have.” – Nati Louzon

Louzon said desalination and industrial and municipal reuse can work alongside conservation and improved water management to help create more reliable and resilient supplies in the western United States and other dry regions.

Asked by Simmonson about San Diego and the Carlsbad desalination plant, Louzon pointed to desalinated water as one example of an approach that could provide a solution in other areas as well. He also acknowledged that costs must be considered.

Industrial Users Are Also Part of the Water Equation

Bobby Majumder closed the first topic by adding industrial users to a discussion that had focused substantially on municipal and agricultural needs. His point was that industrial users are drawing from the same scarce resource and therefore also belong in the discussion of water management.

At the same time, he said technological advances are helping industrial users improve water-use effectiveness and reduce their water footprints. Rather than viewing water demand only through the competing needs of municipalities and agriculture, Majumder noted that industrial users represent another major category that needs to be considered.

“We’re all competing for the same scarce resource.” – Bobby Majumder

A System That Requires Multiple Responses

The first Forum discussion did not identify a single solution to Western water shortages. Instead, the panelists addressed different components of the problem and different potential responses.

Knight emphasized integrated surface-water and groundwater management supported by measurement and data. Nicholas Harper described longstanding imbalances between demand and sustainable supply and identified diversification, recharge, operational flexibility, governance and technology as important considerations for agricultural assets under SGMA. Louzon described desalination and water reuse as additional sources that can complement traditional supplies rather than replace them. Majumder emphasized that industrial users must also be included when considering demand for scarce water resources.

Taken together, their comments describe the specific issues addressed in Topic 1: declining groundwater alongside visible surface-water shortages; longstanding supply-and-demand imbalances; the consequences of groundwater overdraft for agriculture, communities, infrastructure and ecosystems; the changing conditions facing agricultural assets under SGMA; and the potential for a broader portfolio of water sources and management approaches. Those were the dimensions of the Western water challenge the panel put forward before turning to the Forum’s second topic: Infrastructure and Technology Responses.