water in the west: current use and future challenges christopher goemans, ph.d. agricultural and...

Water in the West: Current Use and Future Challenges

Christopher Goemans, Ph.D.

Agricultural and Resource Economics

13th Annual Farmers Cooperatives ConferenceCooperatives, Agriculture & Water Resource Policies

Broomfield, CO

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Overview

• How is water currently “used”?• How is water currently allocated?• Future challenges• Options for dealing with future challenges

A story of change…

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Total Withdrawals

Figure 2, “Estimated Use of Water in the United States in 2005”, Circular 1344, USGS

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Total Irrigation Withdrawals

Figure 2, “Estimated Use of Water in the United States in 2005”, Circular 1344, USGS

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Colorado: Percent of Total Diversions by Activity

Public Supply; 6%

Irrigation; 90%

SS Industrial; 1%Other; 3%

Calculated based on 2005 USGS Water Use Estimates, water.usgs.gov/watuse/data/2005/

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Water Allocation Law in the U.S.

• Three “layers” of laws…

– Laws governing the allocation/use of water within states

– Laws governing the allocation/use of water across states

– Federal laws

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Within State Water Allocation

Two primary systems:

1. Riparian Law

2. Doctrine of Prior Appropriation

– Primarily in the Western U.S.

– Priority system of water rights based on: “first in time, first in right”

– Water Rights transferable as long as other water rights holders not “injured”

• Designed to protect existing uses/users

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Projected M&I and Self-supplied Industrial Gross Demand, 2000 - 2030

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2000 2010 2020 2030

M&

I De

ma

nd

AF

/Yr

Year

West Slope

East Slope

Approximate Projected Increase in Demand:

•West Slope: >100,000 AF/Yr

•East Slope: >650,000 AF/Yr

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10

South Platte River Basin: Projected Population Growth by Region

7000000

6000000

5000000

4000000

3000000

2000000

1000000

0

1980 1990 2000 2010 2020 2030 2040 2050

Population Growth by Region

Northern Region

Central Region

Southern Region

%U %U

%U

%U

%U

%U

%U

%U

%U%U#

Denver

#

Boulder

The Basic Problem…

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tSupply tDemand

•In simple terms: Water managers goal is to make sure that there is enough supply to meet demand

•Questions: How much supply and where? How much demand will there be? Can we increase supply? Can we decrease demand?...

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Options for achieving this goal…

• Development of additional storage?• Reuse?• Conservation?• Reallocating water???

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A “Slice” of the Hydrologic Cycle

Consumptive Use: that part of water withdrawn that is evaporated, transpired by plants, incorporated into products or crops, consumed by humans or livestock, or otherwise removed from the immediate environment. (USGS)

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The Importance of Return Flows

The South Platte River Basin

• Annual total “native” flows: 1,400,000 acre feet

• Annual “trans-basin” inflows: 400,000 acre feet

• Annual surface water diversions: 4,000,000 acre feet

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Alternatives for Reallocating Water

Institutional Alternatives for Reallocating Water:• Water Rights Markets

Alternatives for freeing up the water:

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Why Water Transfers?

“It is commonly argued that reallocating just 10 percent of agricultural water to municipal uses

could boost municipal supplies by 50 percent West-wide.”

Water and Growth in Colorado- Nichols et al. (2001)

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Why Water Transfers?• “It is thus of increasing importance that existing water

supplies be allocated more efficiently than in the past. It is ludicrous that Southern California should incur a cost in excess of $450 per acre-foot for additional water while irrigators in the Central Valley continue to irrigate thousands of acres of crops which are in surplus nationally.” (Howe et al. 1986)

• “…the economic value of water is often several times that of agricultural use. For example, native irrigation water is worth $500 to $1,000 per acre-foot in the Northern District, while the asking price for municipal water from Windy Gap is 10 to 24 times more…” (Nichols et al. 2001)

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Alternatives for Reallocating Water

Institutional Alternatives for Reallocating Water:• Water Rights Markets

– “Buy and Dry”

Alternatives for freeing up the water:

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39,000 acres

2,600 acresor

2,400 acres

1,300 acresor

23,000 to 72,000 acres

7,900 to 16,000 acres

2,500 to 10,000 acres

No change

60,000 to 100,000 acres

133,000 to 226,000 acres

Potential Changes in Irrigated Acres

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Alternatives for Reallocating Water

Institutional Alternatives for Reallocating Water:• Water Rights Markets

– “Buy and Dry”

• Water Markets– Water Banks– Multi-year Leasing Agreements– Interruptible Water Supply Agreements

Alternatives for freeing up the water:• Rotational Fallowing• Limited Irrigation

Questions? Comments?

Christopher Goemans

Department of Agricultural and Resource Economics

cgoemans@colostate.edu

Using Experimental Markets to Evaluate and Design Institutions

Example: Experiment Overview