Washington State has had specific statutory authority to perform water banking since July of 2003, through House Bill 1640. It authorized the Washington Department of Ecology (Ecology) to use the trust water rights program in the Yakima River basin for water banking purposes. In 2009, the Legislature amended the trust water statute significantly. It now clearly authorizes Ecology to conduct water banking activities statewide. Other new provisions in the bill allow groundwater rights to be placed in trust, clarify conditions for placing water rights in or out of trust, and provide further protection of trust water rights. New legislation in 2009 also authorized a pilot banking effort in Walla Walla. Despite the new legislation, Ecology recognizes that challenges remain in implementing water banking or making best use of water banking opportunities. In this report, Ecology identifies obstacles to implementing water banking: • The difficulty of valuing land and water separately. • The challenges of separating land from water purchases • The need to mitigate the economic impacts of inter-basin water transfers. • The need for support mechanisms to support water banking activities.