An Ex Post Evaluation of Ohio’s Great Miami Water Quality Trading Program1

Newburn, David A. and Richard T. Woodward, 2011. An Ex Post Evaluation of Ohio’s Great Miami Water Quality Trading Program. Journal of the American Water Resources Association (JAWRA) 48(1): 156‐169. DOI: 10.1111/j.1752‐1688.2011.00601.x Abstract: Market‐based approaches to address water quality problems have resulted in only limited success, especially in trading programs involving both point and nonpoint sources. We analyze one of the largest point‐nonpoint trading programs – the Great Miami Trading Program in Ohio, administered by the Miami Conservancy District (MCD). Our evaluation focuses on the economic and institutional aspects of the program, including cost effectiveness, efficiency of bidding, transaction costs, trading ratios, and innovation. We use a unique dataset consisting of all bids from agricultural nonpoint sources and interviews of soil and water conservation district (SWCD) agents in the watershed. We find that the MCD’s reliance on county‐level SWCD offices to recruit and advise farmers has been essential to achieve relatively high rates of farmer participation. Additionally, the MCD is able to partly free ride on the administrative costs that SWCD offices receive to assist federal conservation programs, which is helpful to lower costs for a fledgling trading program. However, the involvement of SWCD offices reduced the potential cost savings from the reverse auction structure because some agents were able to learn about the threshold price over the six rounds of bidding and help farmers bid strategically. Overall, the program structure serves as an effective model for future trading programs in other regions that seek to involve agricultural nonpoint sources.     

INSTITUTIONAL BARRIERS TO WATER MARKETING IN THE WEST1

ABSTRACT: Water marketing has been proposed as one means of reallocating water supplies in the western United States. While markets for western water currently exist and may be expected to expand, the institutional constraints within which the markets must operate will limit the ultimate size and efficiency of those markets. Lack of articulation of public interests in the water resource itself leads to incomplete definition of the private rights to use the water, and it is those private rights which are sold or leased in the market. The increase in size and efficiency of any market in water rights will be dependent on the willingness of legislatures to specifically define the nature and extent of public interests in water supplies, and detailed definition is unlikely.     

A Benefit‐Cost Analysis of Total Maximum Daily Load Implementation1

Abstract: Total Maximum Daily Load (TMDL) implementation generates benefits and costs from water quality improvements, which are rarely quantified. This analysis examines a TMDL written to address bacteria and aquatic‐life‐use impairments on Abrams and Opequon Creeks in Virginia. Benefits were estimated using a contingent valuation survey of local residents. Costs were based on the number and type of best management practices (BMPs) necessary to achieve TMDL pollution reduction goals. BMPs were quantified using watershed‐scale water quality simulation models (Generalized Watershed Loading Function and Hydrological Simulation Program‐FORTRAN). Based on our projections, the costs to achieve TMDL induced pollution reduction goals outweigh the estimated benefits. Benefit‐cost ratios ranged between 0.1 and 0.3.     

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.     

RESPONDING TO DROUGHT: COMMON THREADS FROM THE PAST,VISIONS FOR THE FUTURE1

ABSTRACT: A number of studies conducted since the late 1970s have evaluated state and federal responses to drought in the United States. Each of these studies identified a number of key issues and impediments that needed to be addressed to improve the nation's ability to cope with and prepare for future episodes of drought. A content analysis of these studies was performed to identify common threads in their recommendations. The premise of this analysis was that the series of drought years that occurred between 1986 and 1992 and recurred between 1994 and 1996 increased awareness of our nation's continuing and apparent growing vulnerability to drought. This awareness has led to greater consensus among principal constituents and stakeholders, and also a greater sense of urgency to implement actions now to lessen vulnerability. The results of this analysis revealed that several themes recur: create an integrated national drought policy and plan; develop an integrated national climate monitoring (drought watch) system; incorporate drought in FEMA's National Mitigation Strategy; conduct post-drought audits of response efforts; establish regional drought forums; and encourage development of state drought mitigation plans.     

Evidence Supporting Cap and Trade as a Groundwater Policy Option for Reducing Irrigation Consumptive Use1

Thompson, Christopher L., Raymond J. Supalla, Derrel L. Martin, and Brian P. McMullen, 2009. Evidence Supporting Cap and Trade as a Groundwater Policy Option for Reducing Irrigation Consumptive Use. Journal of the American Water Resources Association (JAWRA) 45(6):1508‐1518. Abstract: In the American West water is becoming an increasingly scarce resource. Obligations to bordering states, endangered species protection, and long‐term resource sustainability objectives have created a need for most western states to reduce the consumption of irrigation water. In Nebraska specifically, the Nebraska Department of Natural Resources (NDNR) and local Natural Resource Districts (NRDs) are meeting a large part of this need by using a regulatory approach, commonly called groundwater allocation. The cost of allocation, which occurs in the form of reduced economic returns to irrigation, could be greatly reduced by using an integrated cap and trade approach. Much like environmental cap and trade programs which are used to reduce the cost of limiting environmental pollution, the trading of capped groundwater allocations can reduce the cost of limiting water use. In an analysis of a typical case in the Nebraska Republican Basin, we found that the impact of a water market to trade groundwater allocations depended on the size of the allocation and on the characteristics of the land and irrigation systems involved in the trade. Potential economic benefits from trade ranged from US$0 to US$120 per 1,000 cubic meters traded, from US$25 to US$250 per 1,000 cubic meters of reduction in consumptive use, and from US$16 to US$50 per hectare of irrigated land in the region. The highest benefits occurred at relatively high allocations, which capped withdrawals at 65‐75% of the expected unrestricted pumping level. These gains from trade would be split between buyers and sellers based on the negotiated selling price.     

Demolish it and They Will Come: Estimating the Economic Impacts of Restoring a Recreational Fishery1

Abstract: This paper presents the results of an ex post survey of recreational anglers for the lower Kennebec River, post‐Edwards Dam removal. To the best of our knowledge, this study represents one of the first ex post analyses of fisheries restoration from dam removal. We find significant benefits have accrued to anglers using the restored fishery. Specifically, anglers are spending more to visit the fishery, a direct indication of the increased value anglers place on the improved fishery. Anglers are also willing to pay for increased angling opportunities on the river. These findings have policy implications for other privately owned dams that are currently undergoing relicensing and/or dam removal considerations. Our findings may also hold implications for fisheries that have deteriorated due to historic dam construction.     

Finding Water for Growth: New Sources,New Tools,New Challenges1

Abstract: Rapidly growing regions such as the western United States face difficult challenges in mobilizing new water supplies to meet new demands. Environmental concerns have curtailed the scope for large new surface storage projects, and widespread basin overdraft has limited ground water’s potential as a source of expansion. Drawing on the California experience, this article explores modern water planning approaches, which focus on a portfolio of options including nontraditional sources (recycling, desalination, underground storage) and more efficient use of existing supplies (conservation and water marketing). It reviews the advantages and drawbacks of the elements of the portfolio, provides examples of innovative planning approaches, and assesses the role for supportive government policies.     

CASE STUDIES OF AGRICULTURAL WATER CONSERVATION1

Farmers from four irrigation districts in Texas and California were questioned about water conservation practices they are now using, those they plan to adopt, and potential incentives that government might offer to induce still further water conservation on their part. While responses differed somewhat from place to place and among individual farmers, the general results were: a) farmers reported that “water conservation” is not new to them, it is something they practice regularly; b) recent innovations such as laser controlled land leveling devices have permitted some substantial water use reductions in recent years; and c) even greater incentive mechanisms that government could provide and that farmers would accept as useful incentives, such as long term low interest loans for water saving equipment, would probably not be able to reduce water use in agriculture much further than 15 percent below current levels. It is recommended nonetheless that Federal agencies and local water districts and individuals should nonetheless pursue water conservation training and education programs, demonstrations of conjunctive use and water banking opportunities for water saving, and increased loan programs for installation of water saving equipment.     

INTEGRATED RIVER BASIN OPTIMIZATION: MODELING ECONOMIC AND HYDROLOGIC INTERDEPENDENCE1

ABSTRACT: This paper presents an integrated optimal control model that optimizes economic performance of reservoir management in watersheds in which there are significant economic and hydrologic interdependencies. The model is solved using the General Algebraic Modeling System (GAMS). Results show that application of this model to New Mexico's Rio Chama basin can increase total system benefits over historical benefits by exploiting complementarities between hydroelectricity production, instream recreation, and downstream lake recreation.     

Barriers to Water Conservation in the Rio Grande Basin1

Abstract: The Rio Grande basin shares problems faced by many arid regions of the world: growing and competing demands for water and river flows and uses that are vulnerable to drought and climate change. In recent years legislation, administrative action, and other measures have emerged to encourage private investment in efficient agricultural water use. Nevertheless, several institutional barriers discourage irrigators from investing in water conservation measures. This article examines barriers to agricultural water conservation in the Rio Grande basin and identifies challenges and opportunities for promoting it. Several barriers to water conservation are identified: clouded titles, water transfer restrictions, illusory water savings, insecure rights to conserved water, shared carry‐over storage, interstate compacts, conservation attitudes, land tenure arrangements, and an uncertain duty of water. Based on data on water use and crop production costs, price is found to be a major factor influencing water conservation. A low water price discourages water conservation even if other institutions promote it. A high price of water encourages conservation even in the presence of other discouraging factors. In conclusion, water‐conserving policies can be more effectively implemented where water institutions and programs are designed to be compatible with water’s underlying economic scarcity.