Of course, even if they're taking from their own well they're draining the groundwater just as effectively. It's hard to see how a market based solution wouldn't turn into a tragedy of the commons without enforcing limits on the extraction.
There are limits on extraction going into effect [0], but it may be too late by the time they are supposed to happen.
[0] https://www.hcn.org/issues/46.19/californias-sweeping-new-gr...