CAPITAL COSTS OF RURAL WATER SYSTEMS: AN EMPIRICAL APPROACH1

ABSTRACT: In the last two decades the federal government has provided substantial capital to construct rural water distribution systems. Loans at subsidized interest rates and front-end grants through the Farmers Home Administration have been the main source of this capital. Recent federal policy redirections have reduced substantially the availability of grants and subsidized loans. Because of design and material differences, capital cost estimates from urban systems are not uniformly applicable to rural water services. This study presents an econometric analysis of capital costs, using Illinois rural water system construction contract bids. Cost equations by systems components representing 90 percent of capital costs are estimated. The type of information developed here can be used in initial planning and optimization design models contributing to the efficient provision of rural water services.     

USING CONTINGENT VALUATION AND BENEFIT TRANSFER TO EVALUATE WATER SUPPLY IMPROVEMENT BENEFITS1

ABSTRACT: Many water systems in small cities and rural areas throughout the United States are facing water quality and supply problems. These problems are typically not the result of an unexpected event, but are the result of growth trends or decreasing water quality experienced over several years. This analysis uses the contingent valuation and benefit transfer methods to evaluate the willingness to pay for a rural water system in northcentral Montana. Both of the procedures resulted in similar values, ranging from about $4.05 to $7.50 per household per month for urban residents and $5.40 to $11.50 per household per month for rural residents, which is equal to 11 percent to 23 percent of current average water costs. The willingness to pay estimates do not include non-household water users. This analysis shows that useful planning information can be obtained from relatively inexpensive contingent valuation mail survey data and the benefit transfer method as long as the limitations of the data are understood. The willingness to pay for ensuring good quality rural water supplies in the future is likely to be low compared to the costs of extensive diversion and treatment systems. Willingness to pay estimates provide decision makers with information that can be used to avoid building a large water supply system that water users do not want to connect to because of high costs.     

MONITORING AND CONTROL OF CENTER PIVOT SYSTEMS WITH MICROCOMPUTERS1

A computerized water-energy-management system (WEMS) can be used by center pivot operators to reduce pumping fuel costs and monitoring expenses. Irrigation costs are lowered primarily because the system used climatic data and plant growth models to derive water schedules that considerably lowers the use of water compared with conventional irrigation practices. A capital budget analysis of a hypothetical, but representative farm growing corn, shows that cost savings are from three sources: 61 percent from pumping less water, 28 percent from labor savings, and 11 percent from savings on truck fuel, maintenance, and oiL The analysis illustrates that only a 4 percent water savings from irrigation scheduling over a 10-year period is required for the investment to be profitable for many central High Plains’ irrigators. The water savings required are relatively small compared with the potentials shown by irrigation scheduling research. WEMS is cost effective and can extend the life of the ground water source.     

ECONOMIC DESIGN OF CENTRAL WATER SUPPLY SYSTEMS FOR MEDIUM SIZED TOWNS1

ABSTRACT. Adequate and good-quality water supply for medium sized towns is costly when there are insufficient quantity and low quality of groundwater or surface water. In a central water supply system serving a number of towns, the economies of scale may permit a sufficient and good-quality supply at lesser rates. Such a system has the flexibility of supplying rural population through small service lines. The system may be an interbasin or intrabasin conveyance depending on the location of a suitable water source and the economics of the supply network. Seven cost elements are pertinent to the optimum or least-cost design of network consisting of pipelines and pumping stations. The relevant cost functions are based on the available data gathered from various sources. Water conveyance costs are calculated for various flow rates, pipeline diameters, flow variabilities, static heads, and interest rates, thus providing a measure of sensitivity of the conveyance cost to such variations. The economies of scale, the sensitivity of optimum unit conveyance costs, and variations in unit costs with change in cost functions are useful in making a feasibility study for a proposed conveyance system.     

Economies of scale in global iron-making

In this paper, we investigate the presence of economies of scale in the global iron-making industry for integrated steel plants, iron making being the first stage in the steel-making process. Iron making depends on basic commodities, such as iron ore, coke and various forms of energy, required in the operation of the blast furnace, which can be classified as essential inputs and used in fixed proportions to produce iron. A generalized Leontief cost function is estimated using panel data for 69 integrated plants, such a specification being appropriate for technologies with essential inputs that are used in fixed proportions in production. A significant scale effect is observed due to the existence of fixed costs and a linear dependence of the cost function on production. Under a simple linear cost function, a rough estimate of the breakeven scale of plant, where costs equal revenue, is 4.5 Mt per year. Competitiveness, as measured by the ratio of plant average cost per tonne to best practice cost per tonne, can be shown to be positively related to the scale of production as well as the cost of essential inputs. Therefore, low-cost producers are also often producers with low raw material costs and production levels below the estimated breakeven scale of operation. Labor costs, although significant, are comparatively less important as a driver towards low costs.     

THE IMPACT OF HIGH INTEREST RATES ON OPTIMUM MULTIPLE OBJECTIVE DESIGN OF SURFACE RUNOFF URBAN DRAINAGE SYSTEMS1

ABSTRACT. This research examines the impact of high rates of interest upon the least cost system design for urban drainage systems when water quality is a critical parameter. Results of examination of twelve alternative system designs in a case study watershed indicate the least cost study design is highly sensitive to the rate of interest, but not sensitive to the water quality parameters. When the high rates of interest currently prevalent are introduced into the model those systems which contain open channel collection components are selected as the least cost system. At low rates of interest pipeline collection components are selected as the least cost system. Holding pond components of system design are cost effective at several levels of water quality. They are neutral to the rate of interest so they are incorporated in least cost systems at all the levels of interest rates. The results of the study indicate that at the current high rates of interest open channel collection systems and holding ponds are cost effective system components to achieve selected levels of water quality in urban drainage system design.     

WATER SUPPLY COSTS FOR SMALL PRIVATE UTILITIES1

ABSTRACT: This paper examines the cost of water supply for small and mid-sized private water utilities. An econometric approach was employed in which data on utility costs and characteristics were used to estimate a total water supply cost function from which average and marginal costs were derived. The results suggest that although average and marginal costs decline with output, the rate of decline rapidly approaches zero, and unit costs therefore appear to remain relatively constant over a wide range of output. Implications of the results for pricing policy are examined.     

A MODEL FOR ACHIEVING CONSISTENCY FOR COST SHARING IN WATER RESOURCE PROGRAMS1

ABSTRACT: Three basic principles of responsibility have influenced the Federal/non-Federal cost sharing rates for water resources programs (1) full payment by beneficiaries (2) exclusive Federal assumption of costs and (3) joint Federal/non-Federal sharing. The efforts to determine appropriate cost sharing rates have resulted in several hundred complex arrangements involving contributions, user charges and direct sales based on many variations of payment terms. This basic present value model was developed to determine the non-Federal cost shares which are expected to be paid for 32 different functional purposes emanating from Federal water resources programs and projects for both implementation and OMR stages. The model introduces the concept of a composite (implementation plus OMR) cost share as a focus developing appropriate cost sharing rates for the private, public and mixed outputs produced through public water resources investments. The model can be used as a focus for policy decisions on cost sharing which seek to achieve consistent and equitable cost shares for purposes provided while maintaining an efficient allocation of resources within water programs.     

SOIL CONSERVATION PRACTICES AND WATER QUALITY: IS EROSION CONTROL THE ANSWER?1

ABSTRACT: This paper is a computer simulation analysis of an agricultural nonpoint pollution problem. Computer modeling is a universally applicable tool that can be used for establishing the linkages between and the quality of agricultural runoff in both surface and subsurface flow. The tradeoffs between the costs of soil conservation practices and water quality are reported, and the economic implications of such tradeoffs are discussed. Soil and nutrient losses resulting from crop production practices are analyzed using a field-scale computer simulation model (CREAMS). No-till planting, reduced tillage, and sod waterway systems are more cost effective than other practices for controlling soil and nutrient runoff losses. Nitrate leaching losses are increased slightly by most soil conservation practices. Terrace systems and permanent vegetative cover impose the greatest societal cost for water quality protection. Public cost sharing and tax incentives encourage farmers to adopt expensive structural practices, and policies are needed to get cost-effective practices implemented on critical acreage. Extensive treatment of land is necessary for agricultural best management practices (BMPs) to significantly improve water quality in areas that are intensively farmed.     

LINEAR PROGRAMMING USE FOR EVALUATING WATER RESOURCES AND COST AND BENEFIT ALLOCATION1

ABSTRACT A linear programming model for a river basin was developed to include almost all water-related economic activity both for consumers and producers. The model was so designated that the entire basin or basin sub-division could be analyzed. The model included seven sectors, nine objective function criteria, and three river-flow levels. Economic basis for conflicts among sectors over incidence of cost allocation and level of economic activity can be traced to some chosen objective. The disposal of untreated household waste water, particularly from the rural household, directly into the river was consistent with maximizing net benefits and minimizing costs. The optimum resource allocation, water-treatment plants, farms and industry activities would change with flow level. For each of the three industries analyzed separately, paper, wool and tanning, public treatment of industrial waste water was the optimal treatment process in one or more of the solutions. Lake shoreline was the dominant feature determining lake-resource valuation. Implied capital value varied from $126 per shoreline foot to over $250 depending on discount rate. Implied prices on lake surface ranged from $42 to $147 per acre. Strong economic forces encouraged small lot sizes for vacation cottages.     

WATER QUALITY ALLOCATED COST FOR MULTIPURPOSE RESERVOIRS1

ABSTRACT: Low flow augmentation from multipurpose reservoirs may yield significant water quality benefits. Cost allocation assigns a portion of reservoir expense to water quality consumers, waste water dischargers who benefit from increased receiving flow. Whereas such allocation currently is not authorized for Federal projects, the procedure is increasingly appropriate for efficient multiobjective management. Waste water treatment costs, multipurpose reservoir costs, and water quality are modeled for Oregon's Willamette River. Water quality is expressed as a function of treatment and augmentation levels. Treatment cost necessary to achieve a given water quality without augmentation less treatment cost with augmentation is an alternative cost of water quality maintenance. With a cost allocation procedure, this alternative cost is used to determine water quality's share of reservoir cost. Under current conditions, water quality beneficiaries could be charged approximately seven percent of annualized reservoir expense. This charge is one-fourth the expense of additional treatment facilities required were augmentation not provided.     

THE NATURE OF LONG RUN COST SAVINGS DUE TO WATER CONSERVATION1

Savings in capital, operation, and maintenance costs of new water supply facilities are referred to as “long run foregone costs.” Any conservation measure leads to reduction of water use or loss, however, significant long run foregone costs are realized only when reductions in size or delays in construction of facilities result. In order to accurately evaluate these costs it is necessary to know which facilities are affected and how they are affected (i.e., eliminated, downsized, or delayed). The effects of several levels of conservation on long run fore gone costs for an actual study are presented and some easy to use equations that may be used to calculate such savings are then derived. Some rules are presented to determine if it is more economical to delay construction or downsize facilities.     

COST FUNCTIONS FOR ADDITIONAL GROUND WATER DEVELOPMENT1

ABSTRACT Cost functions are determined which will allow compensation to existing users of ground water when new users require rights. These functions are dependent on the additional energy cost to existing users. The costs produced by these functions can be significant when large quantities of water are required.     

Economic evaluation of sewage treatment processes in India

This paper evaluates the total annual cost including capital and operation and maintenance (O&M) costs for the up-flow anaerobic sludge blanket (UASB) and waste stabilization pond (WSP) systems operated in India. It also compares UASB and WSP systems with the activated sludge process (ASP) and biological aerated filter (BAF) systems in terms of total annual cost and chemical oxygen demand (COD) removal cost by assuming various annual interest rates and land prices. It was found that the relationship between capital and O&M costs per unit size of a UASB or WSP system and its treatment capacity can be established by a first-order equation. The relation between the cost of organic removal and capital or O&M cost for various sewage treatment systems at various annual interest rates revealed that, for the Indian context, UASB could be the most suitable option in terms of expenses and treatment efficiency.     

Economic assessment of microbial biodiesel production using heterotrophic yeasts

The production of biodiesel using oleaginous microorganisms is investigated as promising alternative to produce a truly sustainable and renewable transportation fuel. While the feasibility of this approach has been shown on the laboratory scale, a commercial scale implementation is to date inhibited due to economic restraints. In order to evaluate the current cost situation and to develop suggestions to reduce production related costs, a simple cost analysis of the proposed microbial oil production process has been carried out. For closed fermentation in large-scale fermenters a break-even price of 2,350 US$ t^–1 for microbial oil was calculated. In the context of a sensitivity analysis it was shown that especially alterations in capital cost can lead to overall cost reductions. Accordingly, an open pond cultivation approach was designed, cutting the cost for equipment almost in half and decreasing the break-even price to 1,723 US$ t^–1. However, these reductions are only feasible when stable biomass and lipid yields can be ensured in open-pond systems, because the sensitivity analysis identified these yield parameters as leading factors influencing the break-even price. Even under very optimistic assumptions, it was not possible to reduce the break-even price below that of conventional plant oils as competitive products. Therefore, economic feasibility of the process will probably only occur if on one hand considerable technical development and efficiency improvements of the production process are made while on the other hand plant and crude oil prices are continuously increasing.     

ANALYZING THE IMPACT OF LAND USE ON SEWER SERVICE AREA PLANNING1

ABSTRACT: The density and distribution of land uses has important consequences for the planning of sewerage systems and for the costs of these systems. This paper examines these consequences using a simplified service area model. The model determines the area to be served by a central waste treatment plant, where alternative on-lot disposal systems are also available. The model is applied to various urban area configurations, which are summarized by their total populations and by their population density distributions. Both minimum regional cost and minimum local cost service area configurations are determined. In addition, the sensitivity of the model to the parameters of the cost and population density functions is assessed. It is found that the model is most sensitive to the parameters of the collection cost function.     

Biodiversity on Swedish pastures: estimating biodiversity production costs

This paper estimates the costs of producing biological diversity on Swedish permanent grasslands. A simple model is introduced where biodiversity on pastures is produced using grazing animals. On the pastures, the grazing animals create a sufficient grazing pressure to lead to an environment that suits many rare and red-listed species. Two types of pastures are investigated: semi-natural and cultivated. Biological diversity produced on a pasture is estimated by combining a biodiversity indicator, which measures the quality of the land, with the size of the pasture. Biodiversity is, in this context, a quantitative measure where a given quantity can be produced either by small area with high quality or a larger area with lower quality. Two areas in different parts of Sweden are investigated. Box-Cox transformations, which provide flexible functional forms, are used in the empirical analysis and the results indicate that the biodiversity production costs differ between the regions. The major contribution of this paper is that it develops and tests a method of estimating biodiversity production costs on permanent pastures when biodiversity quality differs between pastures. If the method were to be used with cost data, that were more thoroughly collected and covered additional production areas, biodiversity cost functions could be estimated and used in applied policy work.     

DISTRIBUTIONAL ISSUES IN WESTERN MUNICIPAL AND INDUSTRIAL WATER SUPPLY1

ABSTRACT Financing and repayment provisions of western water projects effect transfers of income among federal taxpayers, electric power users, local water users, and property owners. We use the Bonneville Unit of the Central Utah Project as a case study in the distribution of municipal and industrial water costs. We examine the distribution of costs among taxpayers and water users in different political/geographical jurisdictions, and how this distribution is affected by water law, cost allocation procedures, and the choice of revenue source for local repayment of reimbursable costs. In light of the magnitude of distributional effects of present water policy, we conclude that lack of open debate on water issues is unfortunate. We conclude with speculation on the relationship of western water policy to the motivation of western water leaders who are instrumental in its formulation     

A RATIONALE FOR THE REGIONALIZATION OF PUBLIC WATER SYSTEMS1

ABSTRACT. A rationale is set forth for requiring and/or encouraging the consolidation or regionalization of all systems beneath certain population size levels based on the small water systems’ capability to produce an adequate supply of safe drinking water at a reasonable cost to customers. Estimates for basic costs of water service including personnel, other operation and maintenance and capital are made and a range of water rates is suggested based on reasonableness and acceptability to customers. Guidelines are then drawn for a moderate rate of $10.00 per month and an upper limit rate of $15.00 per month to show the sizes at which public water systems might be expected to achieve fiscal viability. Finally, recommendations are made to State and Federal governmental agencies concerning possible legislation, plans and programs to achieve better public water service through the regionalization or consolidation of small public water systems.     

Using the multiple capitals framework to connect indicators of regional cumulative impacts of mining and pastoralism in the Murray Darling Basin,Australia

It is commonly recognized that there are constraints to successful regional-scale assessment and monitoring of cumulative impacts because of challenges in the selection of coherent and measurable indicators of the effects. It has also been sensibly declared that the connections between components in a region are as important as the state of the elements themselves. These have previously been termed “linked” cumulative impacts/effects. These connections can be difficult to discern because of a complicated set of interactions and unexpected linkages. In this paper we diagnose that a significant cause of these constraints is the selection of indicators without due regard for their inter-relationships in the formulation of the indicator set. The paper examines whether the common “forms of capital”, i.e., natural (renewable and non-renewable), manufactured, social, human and financial capitals, framework is a potential organizing structure. We examine a large region in western NSW Australia where the predominant production systems are mining and grazing for production of wool, beef and lamb. Production in both is driven by consumption of a non-renewable resource, i.e., ore for mining and topsoil for grazing, the latter on the basis that loss rate estimates far exceed soil formation rates. We propose that the challenge of identifying connections of components within and between capital stores can be approached by explicitly separating stores of capital and the flows of capital between stores and between elements within stores, so-called capital fluxes. We attempt to acquire data from public sources for both capital stores and fluxes. The question of whether these data are a sufficient base for regional assessment, with particular reference to connections, is discussed. The well-described challenge of a comparative common currency for stores and fluxes is also discussed. We conclude that the data acquisition is relatively successful for stores and fluxes. A number of linked impacts are identified and discussed. The potential use of money as the common currency for stores and fluxes of capital is considered. The basic proposition is that replacement or preservation costs be used for this. We conclude that the study is sufficiently positive to consider further research in fully-coupled models of capital stores and fluxes.