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.     

VALUE OF WATER IN IRRIGATED CROP PRODUCTION USING DERIVED DEMAND FUNCTIONS: A CASE STUDY OF SOUTH SASKATCHEWAN RIVER IRRIGATION DISTRICT1

ABSTRACT: Water abundance has led most North American societies to use water freely without priorizing its use. As water scarcity becomes reality in the southern part of Saskatchewan, planners and managers of water require information about the value of water in irrigation, as well as in alternative uses. In this study, the value of water to the producer in irrigation is developed both for the short and long run. The basis of this imputation is a derived demand function for water using linear programming. Water demand was bound to be inelastic at lower prices, and highly elastic at higher prices. The short-run value of water varied between $0.44 and $127.82 (1986 dollars) per acre-foot for different levels of product prices. However, the long-run value was estimated between zero and $1.59 per acre-foot of water.     

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.     

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.     

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.     

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.     

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.     

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.     

Valuing Water Rights in Douglas County,Oregon, Using the Hedonic Price Method1

Abstract: This paper uses the hedonic price method to estimate the value of an acre‐foot of irrigation water in Douglas County, Oregon. The analysis uses detailed information from 113 arms‐length transactions of farmland for 2000 and 2001. The estimated willingness‐to‐accept of $261 to sell an acre‐foot of irrigation water is consistent with other studies and recent transactions in the study area. Estimates for the value of leasing water are provided using a range of discount rates and leasing periods.     

FACTUAL INPUTS FOR ALLOCATION DECISIONS CONCERNING SCARCE WATER RESOURCES1

ABSTRACT: Factual inputs which may be useful for completing first-order assessments to aid decision-making on the allocation of scarce water resources are compiled. Water needs of major manufacturing industry groups and of minerals industries show wide variations in several measures of water use intensity. The chemicals and allied products and primary metals industries dominate the total water intake and consumptive water use by manufacturing industries. Consumptive use per employee for the petroleum and coal products industry group is nearly 2.5 times higher than that for any other industry group. Estimates of the water requirements per unit energy output for energy-processing systems vary by as much as an order of magnitude. Agricultural water use is larger than that of any other industry but water use for irrigation is not expected to increase significantly by the year 2020. In California, the production of crop calories and proteins per unit of irrigation water applied may vary by more than an order of magnitude. Crops which offer larger monetary returns per acre are irrigated most frequently.     

SOCIAL OVERHEAD CAPITAL COSTS OF IRRIGATION DEVELOPMENT IN WASHINGTON STATE1

ABSTRACT: Increased irrigation as a means of achieving economic development can impose significant social costs on the state or region of growth. The growth in population induced by additional irrigation will require new roads, water and sewage facilities, schools, fire and police protection, etc. Also the increased energy demands due to irrigation and growth in economic activity must be met. Capital investments required to service these needs of new development can become very large. This study attempts to measure such social overhead costs or irrigation development for some specific irrigation project areas of Eastern Washington. It is shown that investment costs in overhead items can reach $2,000 per acre irrigated or $70,000 per job created. Alternatively, the annual costs can equal $180 per acre or $6,700 per worker. These costs must be paid locally through increased taxes, utility rates, or costs for services.     

THE POTENTIAL IMPACT OF WATER REALLOCATIONS ON AGRICULTURE IN IDAHO1

ABSTRACT: Economics is concerned with the allocation of resources between alternative uses. Traditionally, in the western United States, water resources have been committed to agriculture and irrigation. Other competitive uses such as power, industry, and recreation are challenging this allocation. What are the impacts of shifting water out of agriculture into other uses, is a question that needs to be given consideration. Ilia paper attempts to evaluate the tradeoff between using farm land for either irrigated or dryland production and the resulting impacts on gross farm income and the average price of land. Baaed on historical data, reducing irrigated acreage and increasing dryland acreage could greatly reduce both farm income and the equity in farming. The model presented in this paper should be useful for evaluating the tradeoffs between dryland and irrigated land use, especially when there are gat differences in productivity such as those that exist in the inter-mountain region of the Western United States.     

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.     

MEASURING THE CONTRIBUTION OF LAND AND WATER TO AGRICULTURE1

ABSTRACT Irrigated land outproduces dryland agriculture, especially in the western United States. Many valuable crops could not be grown without irrigation. A paucity of yield data does not allow direct measurement of the contribution from irrigated crop agriculture, nor does it allow evaluation of the contributions from livestock which are dependent upon irrigated feed. Regression results indicate that 80 percent of Idaho farm income is associated with irrigation, and that 75 percent of the farm income in the 17 western states is associated with irrigation. For the United States as a whole, results indicate that 13.7 percent of the total cropland (irrigated land) produced 41.3 percent of all cash receipts from farming in 1978. If 14 percent of the land can produce 40 percent of the value of production, can 35 percent of our land produce all our food and fiber needs? Such an allegation has several implications in terms of the adequacy of our land and water resources. It also emphasizes the role of technology in future resource use and production.     

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.     

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.     

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 OPERATIONS PERFORMANCE IN LARGE-SCALE PUBLIC IRRIGATION SYSTEMS IN INDONESIA1

ABSTRACT: Different allocation and delivery performance ratios are used to assess operations performance in a large scale public irrigation system in Indonesia. Results from this analysis indicate that field management practices deviate substantially from the official operating procedures. The lack of application of a single, standardized procedure for planning water allocations represents a serious constraint to effective monitoring and evaluating system performance. Underestimated and unrealistic planned allocations becomes the justification for overdiversion of water, and has the effect of undermining the resolve of managers to see to it that actual flows meet planned flows. Miscalculating planned allocations, poor matches between planned flows and actual deliveries, overdiversion and misreporting have economic consequences as well. For example, strict adherence to the standard operating rule during the second dry season of 1987 would have resulted in 19,070,000 m³ less water diverted into the irrigation system from the Brantas River or, at a conservative estimate of $1.78 per 100 m³ water, a savings of $339,500. Scope exists for making improvements in management by closer adherence to the standard delivery rule, which will also facilitate proper monitoring and evaluation.     

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.     

WATER YIELD IMPROVEMENT POTENTIAL BY VEGETATION MANAGEMENT ON WESTERN RANGELANDS1

Increasing water for onsite and offsite uses can be a viable objective for management of certain western rangelands. One approach utilizes water harvesting techniques to increase surface runoff by preventing or slowing infiltration of rain. An attractive alternative, where applicable, is to replace vegetation that uses much water with plants that use less so that more water percolates through the soil to streams and ground water. Most sites are too dry to increase water yield in this way; probably less than 1 percent of the western rangelands can be managed for this purpose. However, where annual precipitation exceeds about 450 mm (18 inches) and deep-rooted shrubs can be replaced by shallow-rooted grasses, there is potential to increase streamflows and to improve forage for livestock. Little or no increase can be expected by eradication of low-density brush and pinyon-juniper woodlands. Potentials for improving water yield are reviewed and summarized by vegetation types.