AGGREGATE MARGINAL RETURNS FROM WESTERN IRRIGATED AGRICULTURE1

ABSTRACT: Pressure is increasing in the western United States to reallocate water from irrigated agriculture to other competitive uses. Since water is normally allocated through water rights and not necessarily by the price system, the question of economic efficiency is a continual concern. Study results show that returns per acre-foot of water used in western irrigation are quite high and are closely tied to the livestock industry. Returns per acre-foot of water used for crops ranged from $60 to $1,500. When water was used to support livestock, returns per acre-foot ranged from $100 to $600. Clearly, losses of water supply that reduced irrigation production could also lower farm income significantly. Estimated returns also show what alternative uses would have to pay for water under competitive market conditions. Production elasticities are also shown for various states.     

A TRADE-OFF ANALYSIS OF ALTERNATIVE WATER USES1

ABSTRACT: In the western United States, hydropower and agriculture often cempete for surface waters. Since water markets are imperfect, allocations are often made through institutional arrangements and policy The purpose of this paper is to compare the gross water returns from agriculture with hydropower in terms of water use in Idaho. For the year 1986, returns from agriculture averaged $200 per acre-foot, and returns from hydropower averaged $8.00 per acre-foot.     

WATER PRICE RESPONSIVENESS OF COMMERCIAL ESTABLISHMENTS1

ABSTRACT: Pricing policy in water allocation has become of more concern as some areas find water is indeed a scarce resource. Demand estimates, where the quantity purchased-value in use relationships are of concern, have been made in other studies for residential, industrial, and agricultural uses in many areas of the country. The price-quantity relations for water use in commercial firms are estimated and discussed for several different types of stores in this study. A derived demand model is used to estimate commercial demand in the Miami, Florida, area. The price elasticity was generally low (inelastic) for all groups studied except for department stores. This group was found to have an elastic demand for water at all prices above $0.93 per thousand gallons purchased per month, where the mean price for this part of the sample was $1.24. The major implication of the study is that commercial establishments may be responsive to price changes over the long run, much as has already been shown for other types of user groups in other studies.     

POTENTIAL IMPACT OF IRRIGATION ON WATER RESOURCES IN THE LITTLE WABASH BASIN OF ILLINOIS1

The level of water demand for supplemental irrigation and the impact of such demand on water supplies were estimated, as a function of the price of corn (Zea Mays L.). The method of estimation was based on an economic analysis of irrigation practice which assumed constant irrigation costs, profit maximizing behavior on the part of irrigators, and which was deliberately structured to underestimate the level of irrigation water use. The analysis was applied to and used data from the Little Wabash basin in Illinois. No irrigation was predicted at a corn price below $3.50 per bushel. Between $3.50 and about $6.50 per bushel, irrigation was estimated to be profitable for a small region of the basin where acceptable groundwater was available. Above about $6.50 to $7.50, irrigation was found to be profitable in the remainder of the basin, where impoundment storage was required. The potential impact on the water resources of the basin is significant. For a corn price between $3.50 and about $6.50, the probability of a shortfall, defined as the event where the potential demand exceeds the supply, was estimated to be between 2 percent and 20 percent during the growing season. Above about $7.50, this probability was found to be about one-third. The development of policies to control withdrawals for irrigation and other uses is endorsed.     

VALUING URBAN WATER ACQUISITIONS1

ABSTRACT: Municipalities typically seek additional water supplies whenever prospective population and economic growth suggests the inadequacy of currently available water supply. The benefit of supply enhancement is usually construed as avoiding debilitating water scarcity. A more effective approach to planning is to compare the benefits and costs of supply augmentation. The net present value of benefits for a supply increase in a representative Texas community is calculated for alternative scenarios relating to population growth, rate growth, and the temporal distribution of the increased supply. Consumer surplus measures are sensitive to all three of these factors and vary from $0 to over $4000 per acre-foot. A notable finding is that the added supply may offer zero values in cases where real water prices increase at an annualized rate of 4 percent (or greater) which is half the rate occurring in Texas from 1981–1985.     

THE ECONOMIC VALUE OF GROUND WATER RECHARGE FOR IRRIGATION USE1

ABSTRACT: Artificial recharge as a means of augmenting water sup plies for irrigation is a management alternative which policy makers in ground water decline areas are beginning to consider seriously. A conceptual model is developed to evaluate the economic benefits from ground water recharge under conditions where the major water use is irrigation. The methodology presented separates recharge benefits into two components: pumping cost savings and aquifer extension benefits. This model is then applied to a Nebraska case to approximate the value of recharge benefits as a function of aquifer response. discount rate, and commodity prices. It was found that recharge benefits vary from less than $2 to over $6 an acre foot recharged.     

AN IMPLICIT APPROACH TO PRICING AGRICULTURAL WATER TRANSFERS TO URBAN USES1

ABSTRACT: The increased agricultural efficiency of the American farmer has been a substantial impetus to this nation's rapid urbanization. In many western regions where total water supplies are limited, urbanization has required the transfer of heretofore agricultural water rights to the urban use. A major problem in such transfers has been the value or price of the water. A management level model of a typical urban water system was developed to optimize water supply, distribution, and wastewater treatment alternatives. The values of agricultural transfers were determined as the cost advantages of increasing allowable reuse levels of urban effluents which imply the use of a downstream right. This procedure is justified by the economic theory of alternative cost. Results for a test application to the Denver, Colorado area indicate values on the order of $1,000 per acre-foot of transferable water depending on effluent water quality restrictions and operational policies.     

POTENTIAL WATER USE AND AGRICULTURAL PRODUCTION PATTERNS UNDER ALTERNATIVE WATER PRICES1

Out study deals with the demand for water and alternative agricultural production and land use patterns under varying prices for both surface and ground water. We derive irrigation water demands for both the United States and regions of it. Not only is a different amount of water used at each set of water prices but also a different mix of crops, livestock, and production technology develops among the different regions. Under the highest set of prices used, more than fourteen million acres are converted into dryland farming. Total irrigated water use decreases by more than 25 million acre-feet. Irrigated crop yields are reduced and cropping patterns shift away from irrigation. Commodity shadow prices increase as much as 15 percent under high prices for both surface and ground water. A redistribution of farm income occurs between irrigated and dryland regions.     

PRICE BEHAVIOR IN THE WATER MARKET OF NORTHEASTERN COLORADO1

ABSTRACT Past prices of Colorado-Big Thompson water shares were analyzed using an asset pricing model which incorporated the growth rate in real returns to irrigation water and the value of potential urban water uses. A real growth rate in the returns to irrigation water was estimated at 5.3 percent. Nevertheless, market values for water shares have exceeded capitalized agricultural values since 1969. Historically, urban use potential was heavily discounted, but the implicit discount rate fell rapidly in the last decade. The expectation that water shares will eventually be sold to municipal or industrial consumers now appears to be reflected fully in water prices.     

THE PRODUCTION OF WATER FROM GEOTHERMAL RESERVOIRS: SOME ECONOMIC CONSIDERATIONS1

ABSTRACT: Liquid dominated geothermal systems are expected to account for most of the growth in geothermal energy production in the coming decades. Production of water from such systems could significantly augment fresh water supplies. The feasibility of water exploitation is clouded by potential problems related to seismic impacts, land subsidence and the composition of geothermal brines. If these problems can be overcome at little cost, desalination of brines may be feasible. Estimates of water production costs are presented for a variety of desalination technologies, plant sizes and brine water compositions. These estimates show that production costs will range from $139.10/A.F. to $436.00/A.F. at the plant boundary. Economies of scale and brine composition are important determinants of cost. Production costs are substantially in excess of the value of water in alternative uses. However, in certain unique situations, it may be efficient to desalt brines for use in upgrading the quality of municipal water, industrial process water and irrigation water. Unique situations aside, geothermal brines are not likely to provide an economical source of fresh water in the absence of striking changes in the patterns of supply and demand for water.     

RESOURCE DEMANDS FOR ENERGY DEVELOPMENT IN THE YELLOWSTONE RIVER BASIN1

ABSTRACT: This paper reports on the development of a mathematical model for forecasting energy development in the Yellowstone study area for the years 1985 and 2000, and determining the associated economic demands for water, land, labor, capital, and mineral resources. The study was prepared for use by the Missouri River Basin Commission in conducting a comprehensive, “Level B” planning study of the water and related land resources in the Yellowstone River Basin. The study results indicate that the amount of coal development in the Yellowstone study area will depend primarily upon state and federal energy policies and regulations. Policies related to slurry pipeline transportation of coal will be particularly important in determining the level and pattern of future energy development in the area. Coal production under the “most probable” scenario is expected to increase from about 40 million tons in 1976 to 163 million tons per year by 1985, and 513 million tons in the year 2000. Consumptive water use for energy development in the study area could be as much as 556,000 acre-feet per year by the year 2000 (under the high scenario). A parametric analysis was conducted on the 1985 most probably scenario to determine the influence on the study results of variations in the delivered price of water. Water requirements were reduced by nearly one-fourth as water costs increased from zero to over $750 per acre-foot.     

ECONOMIC IMPACTS OF THE LIMITED IRRIGATION-DRYLANI) (LID) FURROW IRRIGATION SYSTEM'

ABSTRACT: Changes in cropping patterns, water use, and profitability of producing sorghum with the LID (Limited Irrigation-Dryland) furrow irrigation system were compared with conventional irrigation practices. A recursive linear programming model was used to assess the economic impacts over a ten-year period. The analysis of various water resource situations in the High Plains of Texas indicated the LID system increased irrigated sorghum acreage over conventional practices. Although less irrigated and dryland wheat was generally produced, present value of returns increased from about $18 per acre to $50 per acre. Water use was slightly higher in most situations when using the LID system.     

Economic Value of Instream Flow for Non-Commercial Whitewater Boating Using Recreation Demand and Contingent Valuation Methods

Whitewater river kayaking and river rafting require adequate instream flows that are often adversely affected by upstream water diversions. However, there are very few studies in the USA of the economic value of instream flow to inform environmental managers. This study estimates the economic value of instream flow to non-commercial kayakers derived using a Travel Cost Method recreation demand model and Contingent Valuation Method (CVM), a type of Contingent Behavior Method (CBM). Data were obtained from a visitor survey administered along the Poudre River in Colorado. In the dichotomous choice CVM willingness to pay (WTP) question, visitors were asked if they would still visit the river if the cost of their trip was $Y higher, and the level of $Y was varied across the sample. The CVM yielded an estimate of WTP that was sensitive to flows ranging from $55 per person per day at 300 Cubic Feet per Second (CFS) to a maximum $97 per person per day at flows of 1900 CFS. The recreation demand model estimated a boater’s number of trips per season. We found the number of trips taken was also sensitive to flow, ranging from as little as 1.63 trips at 300 CFS to a maximum number of 14 trips over the season at 1900 CFS. Thus, there is consistency between peak benefits per trip and number of trips, respectively. With an average of about 100 non-commercial boaters per day, the maximum marginal values per acre foot averages about $220. This value exceeds irrigation water values in this area of Colorado.     

DEVELOPING COMPETITION FOR WATER IN THE URBANIZING AREAS OF COLORADO1

ABSTRACT: Rapid population growth in the metropolitan area of Denver, Colorado, is causing conflicts over water use. Two cities, Thomton and Westminster, have begun condemnation proceedings against three irrigation companies to secure agricultural water rights for municipal use. This is the first condemnation proceeding against irrigation water rights for municipal use. Should the suit succeed, over 30,000 acres of presently irrigated land will lose its water supply. There are about four hundred landowners in the area; two hundred of these are commercial farmers, including truck, dairy and specialty farms. Total agricultural production amounts to about $8 million per year. About 561 jobs related to agriculture will disappear along with about $4 million in not income. Only 6.4 percent of the farmland along the Front Range is irrigated. Continued urban growth will put pressure on the water supply of much of this land. The interested parties of the region should cooperate to lessen the impact of urban growth on agricultural lands and water by forming a metropolitan water district. Such a district could share costs of development of additional municipal water and develop systems where municipalities would recycle waste water back to the irrigated lands.     

DESALTING SALINE WATER FOR IRRIGATION A CASE STUDY,COACHELLA AREA,CALIFORNIA1

ABSTRACT .A case study was performed to evaluate potential applications of desalted saline water for agriculture using 2 distillation type processes and 2 membrane type processes. The investigation determined the costs and benefits associated with desalting saline water at concentrations of 1,500, 900, 400, 200, and 50 ppm. Benefits from desalting are generated by shifts to more profitable crops, reduced costs for drainage, and reduction in fertilizer and labor requirements with better quality water. Costs are based on the project features such as desalting plants, raw water diversion facilities, storage reservoirs, conveyance and distribution systems, brine disposal, blending facilities, and gypsum addition systems. Hydrologic studies determined the crop irrigation requirements, water demand schedules, desalted water storage requirements, brine disposal requirements, and size of facilities required. Reconnaissance design layouts were made for producing desalted water using a combination of 14 schemes. The study also included a review of irrigation practices. The benefit-cost ratios range from 0.4 to 1.0 for 1,500 ppm irrigation water to 0.8 to 1.0 for 50 and 200 ppm water. Investment costs per acre are high, ranging from $12,900 to $20,900. Irrigation benefits are based on the increase in production from a desert condition with no water supply to the irrigation conditions studied.     

WATER AUCTIONS AS AN ALLOCATION MECHANISM IN VICTORIA,AUSTRALIA1

ABSTRACT: During recent years many countries have moved to rationalize the management of state owned or state controlled resources. In Victoria, Australia, water, in particular, has received a great deal of attention. Subsidies to construct, operate, and rehabilitate irrigation facilities have been reduced, and there have been numerous consolidations of small water supply authorities to achieve economies of scale. In addition, Victoria has taken the unusual step of using auctions to allocate new irrigation water entitlements. The six water auctions that took place during 1988 and early 1989 were perceived as an efficient and equitable mechanism to allocate limited water supplies to their highest value use. While the agricultural areas where the different auctions occurred were similar, there was substantial variation in the prices paid, which reflects varying demands for additional irrigation water. This paper will discuss the following topics: the auction process used and the results of the auctions, the efficiency of the auction procedures, and the factors influencing the demand for additional irrigation water in the different auctions. In addition, the implications of using auctions to allocate water supplies for future water management in Victoria will be discussed.     

MUNICIPAL WATER USE AND WATER RATES DRIVEN BY SEVERE DROUGHT: A CASE STUDY1

ABSTRACT: This paper synthesizes and interprets data pertaining to the evolution of average water revenue, water use, and the average cost of water supply in the City of Santa Barbara, California, from 1986 to 1996, a period which included one of the most devastating droughts in California this century. The 1987–1992 drought hit the study area particularly hard. The City of Santa Barbara was dependent exclusively on local sources for its water supply. That made it vulnerable as the regional climate is prone to extreme variability and recurrent droughts. The 1986–1992 drought provided a rare opportunity to assess the sensitivity of municipal water use to pricing, conservation, and other water management measures under extreme drought conditions. Our analysis indicates that the average cost of water rose more than three-fold in real terms from 1986 to 1996, while the gap between the average cost of supply and the average revenue per unit of water (= 100 cubic feet) rose in real terms from $0.14 in 1986 to $ 0.75 in 1996. The rise of $3.08 in the average cost of supplying one unit of water between 1986 and 1996 measures the cost of hedging drought risk in the study area. Water use dropped 46 percent at the height of the drought relative to pro-drought water use, and remains at 61 percent of the pre-drought level. The data derived from the 1987–1992 California drought are unique and valuable insofar as shedding light on drought/water demand adaptive interactions. The experience garnered on drought management during that unique period points to the possibilities available for future water management in the Arid West where dwindling water supplies and burgeoning populations are facts that we must deal with.     

AN EVALUATION OF THE 1997 EDWARDS AQUIFER IRRIGATION SUSPENSION1

ABSTRACT: In early 1997, the Texas Edwards Aquifer Authority implemented a pilot Irrigation Suspension Program with the objectives of increasing springflow and providing relief to municipalities during drought. Irrigators were paid an average of $234 per acre to suspend water use, a price higher than regional land rental rates. Auction theory and program implementation details suggest that the program implementation partially caused inflated bids. The Irrigation Suspension Program is also compared to two alternative programs: (1) subsidizing more efficient irrigation technology and (2) buying land. The irrigation suspension is found to be more cost‐effective relative to subsidizing improved irrigation efficiency because it can be put in place only when aquifer levels are low. Land purchase is a cheaper alternative if the bid levels remain at the levels observed.     

Tradeoffs between soil, water, and carbon -- a national scale analysis from New Zealand

The tradeoffs between the regulation of soil erosion, provision of fresh water, and climate regulation associated with new Pinus radiata forests in New Zealand are explored using national models. These three ecosystem services for which there is strong demand are monetised as commodities (avoided soil erosion is NZ $1 per tonne; water is NZ $1 per cubic metre; and sequestered carbon is assumed to be NZ?$73 per tonne). This permits their summation on a spatial basis to produce a national map of the net benefit of these ecosystem services. Net benefit is spatially variable depending primarily on the relative mix of forest growth rates and demand for irrigation water. New P.?radiata forests (once mature) generally reduce mass-movement erosion by an order of magnitude. This provides significant benefits for erosion control where there are high natural rates of erosion. Benefits are especially large in catchments where high sedimentation is increasing flood risk and degrading aquatic ecosystems. The generally high growth rates of P.?radiata in New Zealand (8.5 tonnesCha(-1)yr(-1) on average for existing forest) add significant environmental benefits of carbon sinks to climate regulation. However, the reduction of water yield associated with new forests (between 30% and 50%) can neutralise these benefits in catchments where there is demand for irrigation water, such as the eastern foothills of the Southern Alps and the tussock grasslands in the South Island.     

RUNOFF IMPOUNDMENT FOR SUPPLEMENTAL IRRIGATION IN TEXAS1

ABSTRACT: The current increase in the demand for water by municipal, industrial, and other users is likely to result in approximately one-third less water being available for agricultural use in Texas by the year 2000. As water supplies diminish, the rainfall excess needs to be used more efficiently. Large amounts of runoff occur in the eastern part of Texas that could be collected in small impoundments and utilized for crop production. Farmers in water-surplus basins or subbasins can apply for a permit to divert surface water into small on-farm impoundments to be used for supplemental irrigation. The costs for runoff collection and two supplemental irrigations, which amount to a total of 4 in./yr., are estimated to be approximately $60/acre/year. Depending upon the crop produced, the estimated increase in gross income from supplemental irrigation ranges from about $80 to more than $100 per acre annually.