EVALUATING DIRECT BENEFIT ESTIMATION PROCEDURES FOR IRRIGATION PROJECTS: A SIMPLIFIED APPROACH1

ABSTRACT: An integral part of evaluating the net benefits generated by an existing or proposed irrigation project is the assessment of the associated impacts in commodity markets. Traditionally, these impacts have been measured by either assuming no change in commodity prices and calculating net returns to project farmers, or by allowing commodity prices to fall in accordance with a given elasticity of demand and subtracting commodity production costs from the associated area under the commodity demand curve. In either case, it is implicitly assumed that supply is perfectly inelastic. This article establishes that traditional approaches to measuring direct benefits are biased. Formulae are presented for calculating the maximum absolute and relative error which may result from using these techniques as a function of project size. Direct benefit estimates are then evaluated for three irrigation projects in Nebraska, illustrating how these results can be used to improve project evaluation procedures.     

SUPPLEMENTAL IRRIGATION OF HORTICULTURAL CROPS IN THE HUMID REGION1

ABSTRACT: A computer model was developed in order to establish a yield predictive relationship and to estimate the water requirements for supplemental irrigation of horticultural crops in the humid region. Alternative distribution systems were developed and designed using the results from the computer model and Wood's (1980) pipe network algorithm. The capital, operational, and maintenance costs of the distribution and recommended on-farm irrigation systems were determined and used to evaluate the economic feasibility of the alternative designs. Results show that the concentration of irrigated area along the distribution system, the length of the distribution system, and cropping system all have an important effect on the economic feasibility of supplemental irrigation in Wayne County, Kentucky.     

THE ENHANCED ROLE OF WATER CONSERVATION IN THE COST-BENEFIT ANALYSIS OF WATER PROJECTS1

The concept of water conservation has increased in importance because of revisions in the rules and procedures for performing cost-benefit analyses of federal water projects. These revisions include a requirement that nonstructural and water conservation measures be incorporated into economic assessments of projects. Project analyses will now proceed as if water supplies were allocated “most effectively,” that is, to their highest valued uses. A related requirement provides that the net benefits of any project should now be valued using willingness to pay measures. A specific cost-benefit methodology accommodating the revisions is constructed and discussed. Informational requirements for applying this methodology are identified. In addition to being consistent with federal mandates, this technique offers important advantages over the traditional “requirements” approach to water supply planning.     

MEASURING INTANGIBLE BENEFITS -SOME NEEDED RESEARCH1

ABSTRACT. Society has long sought to maximize the welfare of its members by allocating its limited resources so as to provide maximum satisfaction. As long as all of the values that society gains or loses are measured in the market place in terms of price, the process of maximizing through economic models is relatively straightforward. In fact, however, the total value that society receives from the use of its resources is not completely measured through the private market transactions. There are some values created which are external to the market system. The resulting underinvestment in natural resources by the private sector necessitates the entry of the public sector. The presence of intangible benefits and intangible costs has long been recognized, but completely satisfactory methods for including these in the quantitative analysis of benefit-cost have not been developed. Some progress has been made in including recreational values in project analysis via the expenditures method, the Gross National Product method, consumer surplus method, cost method, market value method, and monopoly and discriminating monopoly methods, but little has been done in the area of aesthetic values. Techniques for including such values in project evaluation need to be further researched. Tradeoff models developed by market researchers, the advertising industry, social psychologists and sociologists may have some applicability. Methodology for including proposed multiple objective functions in project analysis is also a critical need.     

A LOW COST DRIP IRRIGATION SYSTEM FOR SMALL FARMERS IN DEVELOPING COUNTRIES1

ABSTRACT: In areas where water is scarce, drip irrigation provides the most efficient way to conserve irrigation water, but its cost of £1000 an acre is prohibitive for most small farmers in developing countries. The cost was reduced by 90 percent by (1) making dripper lines moveable, so that each line reaches ten rows instead of one; (2) replacing 25-cent emitters with simple 0.70 mm holes punched by a heated needle; and (3) using £3.00 off-the-shelf 20 liter containers with cloth filters in place of expensive filter systems. This reduced the cost of a half-acre system to £50. The low cost system was field tested in the hill areas of Nepal, and in mulberry cultivation in Andhra Pradesh, India. Uniformity of flow from emitters was 73–84 percent. Small farmers reported that the low cost trickle irrigation system cut labor requirements in half, and doubled the area irrigated by the same amount of water. The low cost drip system is likely to be widely adopted by small farmers in semi-arid and hilly regions.     

ECONOMIC APPRAISAL OF A GROUND WATER DEVELOPMENT PROJECT1

A ground water development project in the northern part of Thailand was appraised by means of benefit-cost analysis. This is the first project in Thailand to develop ground water for irrigation purposes and it is also the first project which made use of an underground PVC pipe water distribution system. Results indicate that the project is economically feasible. In comparing different water distribution systems, it is also found that distribution by means of underground PVC pipes is more economical compared to an open ditch system if the life of the latter is relatively short and the rates of inflation are high.     

VALUING IRRIGATION WATER: A SIMULATION/MATHEMATICAL PROGRAMMING APPROACH1

ABSTRACT: A two-stage simulation/mathematical programming model was developed to derive irrigation water values that reflect efficient response to reduced water supplies. The failure of many previous water valuation studies to represent the dynamic dimension of irrigation was shown to result in overestimation of derived water values. Water values are also shown to be dramatically influenced by both application system characteristics, as well as the relative costs of irrigation inputs. Finally, the marginal value of irrigation water was shown to vary considerably over the irrigation season, reaching its maximum when atmospheric demand is highest and crops are most susceptible to water stress. Results presented should be of interest to policymakers investigating the viability of alternative water reallocation mechanisms.     

THE DEVELOPMENT OF A COMBINED WATER QUALITY INDEX1

ABSTRACT: Use-oriented benefits and treatment costs analysis has been incorporated into a water quality index to show an economically optimized concentration for the treatment of the pollutants and the resulting water quality. This combined water quality index can be used in decisionmaking at the federal and local government levels. Five major pollutants, i.e., coliforms, nitrogen, phosphorus, suspended solids, and detergent, have been considered for the municipal waste water. With each higher level of improvement the treatment costs increase accordingly and the benefits associated with the reuse of this treated waste water will increase too but not for the nutrient removal in agricultural use. The optimal concentration is determined when the marginal costs equal the marginal benefits. The combined water quality index is the combination of the maximum net benefits and the water quality index of the optimized residual concentrations. This water quality index is zero dollars for the Tucson region in this study. The possible reclaimed use of municipal waste water is for agricultural irrigation and recreational lakes for the Tucson region.     

COST SHARING IN TRANSITION: THE CASE OF PLAN 6, CENTRAL ARIZONA PROJECT1

ABSTRACT: In the past, development of Federal water resource projects depended heavily or exclusively on Federal financing of construction costs. However, pressures on the Federal budget, environmental issues, and the notion that there are economic efficiency gains when beneficiaries of Federal water resource projects increase their cost share are causing changes. The case of the Central Arizona Project Plan 6 is a noteworthy example of the transition to more non-Federal participation in water resource development. This is because the non-Federal financing is to be provided for a project already under construction. The negotiation and terms of the Plan 6 financing agreement between the Department of the Interior and multiple interests in Arizona are used as an example of how Federal water project cost sharing is in a state of transition. The negotiation process is described, a financial analysis is provided, and the terms of the agreement and policy issues that were deliberated in the Executive Branch of the Federal Government are discussed.     

AUBURN DAM: A CASE STUDY OF WATER POLICY AND ECONOMICS1

ABSTRACT: This paper provides a critical analysis of the Bureau of Reclamation's Auburn-Folsom South project in California. While this massive $1.5 billion project is temporarily halted for redesign for earthquake hazard, it is timely to examine its justification on economic grounds. The key finding is that several major benefit categories, irrigation and recreation, have been grossly overstated. In addition, the Bureau failed entirely to estimate the cost of use on the free-flowing American River, or a probability-weighted estimate of catastrophic loss. Revised estimates indicate that the project is not economically justified. In addition, the project has unattractive distributive effects. The implications of this case study for current revisions in U.S. water policy are explored. The Auburn study basically provides support for the U.S. Water Resource Council's draft manual of procedures for evaluating federal water resource projects.     

OPTIMIZATION OF WATER RESOURCES FOR IRRIGATION IN EAST JORDAN1

The paper describes an approach towards optimal allocation of surface and ground water resources to three agricultural areas in the Jordan Valley under conditions of scarce water supply. The optimizing model allocates water from three main rivers, each with reservoir storage, and from two ground water sources to three irrigation regions. Productivity of irrigation water, expressed as the net present value of the regional agricultural output, but allowing for crop water deficits, is first maximized using nonlinear programming. The allocation process then adopts techniques of linear programming to determine the least cost alternative based on the unit cost of water from each resource at each destination, as it varies with time.     

AN EX POST ANALYSIS OF THE UNCOMPAHGRE PROJECT1

ABSTRACT: The national and regional economic impact of the Bureau of Reclamation's Uncompahgre Project which was authorized in 1903 is assessed. Benefit-cost ratios for the project are calculated for a range of production cost estimates and discount rates. An economic base approach is used to estimate the project's regional economic impact. Although the project has been marginal in terms of an economic efficiency rationale it has been an important impetus to regional economic growth in the Uncompahgre Region over time.     

ENGINEERING ECONOMIC ANALYSES OF ARTIFICIAL RECHARGE IN THE COLUMBIA BASIN PROJECT,WASHINGTON1

ABSTRACT: Appraisal-level, engineering economic analyses for two types of irrigation systems are compared: (1) a surface-water irrigation system, and (2) a ground-water recharge irrigation system. An artificial recharge irrigation system is an economically viable alternative to surface-distributed irrigation in a conjunctive irrigation plan if electric power rates remain sufficiently low. As electric rates increase, this viability generally decreases until it becomes completely unattractive at rates of about 0.012 dollars per kilowatt hour.     

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.     

MEASURING THE SITE-SPECIFIC RECREATION BENEFITS RESULTING FROM IMPROVED WATER QUALITY: AN UPPER BOUND APPROACH1

The estimation of the value of recreation benefits resulting from improved water quality is required for many purposes. In particular, the Water Pollution Control Act of 1980 requires the consideration of the reasonableness of costs of reducing water pollution in relation to benefits to be derived from establishing effluent standards (Clean Water Act of 1977). Recreation is often the most important benefit resulting from water quality improvement. Current methods used to calculate recreation benefits are either not site-specific or are expensive and controversial. This paper presents a relatively simple, inexpensive, and less controversial method of calculating site-specific recreation benefits resulting from improved water quality. It does this by producing an upper bound estimate which often is adequate for the relevant decision. The upper bound estimates is based on two assumptions: 1) there are alternative equivalent substitute sites for the newly augmented water quality site, and 2) the new augmented recreation opportunities at the site will be used to their maximum supply capacity. Clearly, if an upper bound benefit estimate in a cost-benefit ratio does not produce a favorable ratio, no other benefit estimate will. In cases where this estimate produces an ambiguous result resort must be had to other more precise methods of estimation.     

OPTIMIZING THE RETURN FROM A JOJOBA PLANTATION UNDER SCARCE DATA CONDITIONS1

ABSTRACT: There is a serious shortage of yield data for Jojoba (SIMMONDSIA CHINENSIS) from mature and cultivated plantations of ten years or older. Thus, the optimal quantities of water and fertilizers that are needed annually by a Jojoba plantation to achieve maximum profits were estimated from existing plantations. A computer model (IMSL subroutine ZXMWD) was used to determine a Mitscherlich yield function. An economic profit model that incorporates the yield function was then designed to maximize the profits. According to the net present value (NPV) criterion, the maximum yearly net profit is about $7800 per ha, which is achieved during the 11th growth year. The computed cumulative NPV is approximately $21,000 per ha for the entire 15-year period. Similar profits were calculated when the model was tested to examine the NPV using different assumptions with respect to varying costs.     

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.