The case studies presented from California illustrate the benefits of water storage from wet years to partially offset deficiencies during drought years. They also represent cooperative, mutually beneficial arrangements between the urban and agriculture sectors. The conjunctive use of surface and groundwater supplies is well illustrated in the Arvin-Edison water storage program. Although the urban-agricultural water exchange directs water from agriculture to the urban sector, the farmers receive payment for their water to offset some of the losses that naturally occur during drought periods. Several instruments are available to minimize, but not completely eliminate, the economic losses associated with an extended drought period.