Browsing by Author "McCarl, Bruce A."

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The 1997 Irrigation Suspension Program for the Edwards Aquifer: Evaluation and Alternatives
(Texas Water Resources Institute, 1998-02) Ward, Ruby; Chen, Chi Chung; McCarl, Bruce A.; Keplinger, Keith O.
The EAA implemented a pilot irrigation suspension program in 1997 on 9,669 acres mainly in Medina and Uvalde counties with the objective of increasing springflow at Comal Springs, and providing relief to municipalities in meeting Critical Period (drought) Management Rules. The Aquifer region, however, experienced a wet Spring in 1997, so that even irrigators not enrolled in the program applied little or no irrigation water. If conditions were dry in Spring 1997, aquifer simulation results indicate that suspending irrigation on enrolled acreage would have reduced pumping by 23,206 acre-feet and would have augmented Comal springflow by 6,498 acre-feet during the program year and by 17.7 cfs in August. The level of the eastern portion of the Aquifer would have been expect to rise by about 3.8 feet, and the cost per acre-foot of suspended irrigation would have been about $99. Payments to irrigators totaled $2,350,000. The ISP Program did cause farmer adjustments. Participants in the ISP program planted less corn, cotton, vegetables, and peanuts in favor of more sorghum and wheat. Irrigators who converted to dryland purchased somewhat less fertilizer, seed, and labor, but secondary effects on the local economy appeared to be small. The price paid per suspended acre was much higher than regional lease rates and average cropping profit margins in many instances. Factors which may have accounted for the high bids include: 1) lack of experience with an ISP, 2) its late start up, 3) the belief that bids might affect future water prices or offers, 4) tendencies to bid high enough to cover costs under a worst case scenario of a total loss of dryland crops, 5) collusion and need to bid high enough to compensate all under current land lease arrangements. Bids in future ISP solicitations might be lower, or might not. Given the substantial difference between local irrigated land rental rates and ISP bids, it seems unlikely that the EAA could attract sufficient acreage by capping bids at rental rates. There may be, however, some latitude for the EAA to set a maximum per acre rate somewhere between local rental rates and the ISP bids. This, combined with announcing the program and executing contracts in October or November, has the possibility of substantially reducing program cost. The EAA may also want to consider offering an option contract which when implemented would suspend irrigation in April or May. Waiting until April or May would provide the EAA more information on current year weather allowing better information on whether irrigation suspension is really necessary since: 1) more time would have elapsed allowing administrators to know Aquifer elevation at a later date, and 2) information of weather, irrigation use to date and projected irrigation for the remainder of the cropping year is increased this point. The cost of a single implementation of such a program may be substantially higher than a January 1 contract, since irrigators may sustain greater loss. Expected program cost, however, could be lower, since this option would be exercised less frequently, offsetting over higher cost of implementation. Good alternatives to an ISP are limited. We evaluated the potential of 1) implementing more efficient irrigation technology and 2) buying land and leasing it back during wet or average years. The ISP is a more cost effective source of critical water than is the use of subsidized irrigation efficiency largely because the ISP can put in place only when water is needed. Also, while not considered here, evidence in areas such as the High Plains suggests that irrigator pumping is not reduced by the amount an increase in irrigation efficiency would imply. This is because irrigators may choose to irrigate more water intensive crops and/or irrigate more acreage when efficiency is increased. The high bids experienced in the 1997 program compared to price of land in the Aquifer region suggests that a buy-leaseback arrangement could substantially reduce the cost to the EAA of suspending irrigation. This, of course, would require an alternate set of administrative costs by the EAA and may be less expensive than the ISP. Also the picture may be altered by the adjudication of water rights in the Aquifer which will likely be finished within three to five years. After water rights adjudication, however, buying and leasing back water rights may be a very appropriate and cost effective strategy for the EAA. In sum, we conclude that the 1997 pilot ISP was a reasonable response to the drought condition experienced in 1996. Fine-tuning the selection criteria, bid arrangement, allowing greater lead time, and/or implementing an ISP or option contract later in the year, holds the potential for reducing the cost of program implementation. A land-based ISP is an interim arrangement that can be implemented in the absence of a fully functioning permit system. After water rights are adjudicated in the region, ISP and option contracts will take on more conventional forms involving buy, lease, and option contracts for water rights. It is expected that water-based versus land-based arrangements would likely facilitate the transfer of water at lower rates.
Economic and Hydrologic Implications of Proposed Edwards Aquifer Management Plans
(Texas Water Resources Institute, 1993-03) Dillon, Carl R.; Jones, Lonnie L.; Williams, R. Lynn; Jordan, Wayne R.; McCarl, Bruce A.
The Edwards Aquifer underlies a large region in south central Texas extending from west of Uvalde to Austin. The karstic aquifer supports irrigated agriculture in the western part of the region, provides the sole source of water supply for San Antonio in the central portion and provides for spring flow-based recreation and municipal water supply in the eastern part of the region. In addition, spring flows and return flows from cities provide water supplies for downstream users and freshwater inflows to maintain productivity of bays and estuaries. The spring flows also support several threatened and endangered species unique to that ecosystem. Despite the varied and growing demand on Edwards Aquifer water, pumpage is unregulated since, according to Texas water law, ground water is a property right vested with the land owner. Throughout at least the past two decades, attempts to negotiate voluntary management plans to restrict pumpage have been unsuccessful, even though demand is projected to exceed average recharge near the turn of the century. A recent court ruling has increased the pressure for adoption of an Aquifer management plan. Acting on a suit brought to ensure spring flow and aquatic habitat protection under the Endangered Species Act, the court ruled that a management plan be developed and approved by the Texas Legislature by May 31, 1993. Should the Legislature fail, the court would implement its own plan. In 1992, two management plans were drafted by the Texas Water Commission (TWC) but were not adopted. Since Texas Legislature is considering plans similar to the TWC plans, a study was undertaken to evaluate the hydrologic and economic implications of these TWC plans. Both plans propose imposition of pumping limits based on water elevation in a reference well located in San Antonio. Four variants of the plans were analyzed using an annual economic/hydrologic simulation model of the aquifer. The model simulates water use by the agricultural, industrial and municipal sectors while simultaneously forecasting annual spring flow and year-end water elevations. Model solutions depict optimum water allocations among sectors based on economic welfare maximization. The model also accounts for uncertainty in the incidence of elevation-triggered pumping limits and recharge amounts. When the value of water is optimized in an economic sense, the model predicts an annual loss in regional economic activity of between $6.26 and $19.58 per acre foot that pumpage is reduced. Under a 1988 demand scenario, annual welfare is reduced between $0.73 and $1.57 million across the plans. The annual loss rises to between $2.38 and $6.60 million under estimated year 2000 demand conditions. Agricultural water use is the most pivotal: under year 2000 demands, irrigated acres decline by 32% to 84% while net agricultural income falls annually by $1 million (13%) to $2.5 million (36%). Simultaneously, the municipal and industrial sector welfare is reduced annually by between $0.8 million (2%) and $5.7 million (8%). The benefits from all management plans are increased spring flows at Comal and San Marcos springs and higher ending aquifer levels. However, none of the proposed plans is forecast to guarantee flows at Comal springs given a repeat of the 1950's drought. The model assumes that low valued users would allow higher valued users to displace their water use, a result that is unlikely in the absence of compensation. Thus, a rights structure was also examined where the irrigated agriculture sector (generally a low valued user) is guaranteed water usage at the 1988 level. The results demonstrate that while agricultural welfare is raised, municipal, industrial and total welfare is reduced by more than the agricultural gain. In other words, agricultural gains are achieved at the expense of municipal and industrial welfare. Equivalently, without an agricultural guarantee, the municipal and industrial gains are achieved at agriculture's expense. One set of results reveals a year 2000 agricultural use value equals about $19 per acre foot while non- agricultural values are about $109 per acre foot. The results suggest the desirability of simultaneously implementing water market mechanisms to allow water use reallocation along with plan-induced pumpage restrictions. An unchanging allocation of pumping use causes growing disparity in sectoral water values as demand grows ($90 per acre foot in the above example). The simultaneous imposition of pumpage limits, water rights and water markets appears necessary to maintain economic efficiency. The results show that allowing water sales through a market mechanism could return as much as $11 million annually, while allowing both water sales and leasing is worth an additional $1 million. Markets would allow economic agents to seek out the highest valued uses of scarce aquifer water resources and provide compensation to those users reducing their usage.
Economic, Hydrologic and Environmental Appraisal of Texas Inter-basin Water Transfers: Model Development and Initial Appraisal
(Texas Water Resources Institute, 2007-04) McCarl, Bruce A.; Cai, Yongxia
Water scarcity is becoming a pervasive and persistent problem in Texas particularly in the drier regions containing cities like San Antonio, Austin, and Corpus Christi while growth causes emerging problems in Dallas, Fort Worth and Houston. A number of options are being considered including Inter-basin water transfers (IBTs) shifting water from surplus to deficit regions. Potential water transfers can have unforeseen or negative impacts on basin of origin, regional economies, and or on the environment including water quality. The Texas water Code mandates that water transfers should consider economic, environmental and water quality impacts (in section 11.085, (K), (F)) demanding projections of impacts on water quality, aquatic and riparian habitat in all affected basins. While there are 51 proposed Texas Inter-basin water transfers in 2006 Texas Water Plan, there is no comprehensive evaluation of or even evaluation methodology proposed for these transfers. The water models available in Texas have various limitations that affect their usefulness in evaluating IBT induced economic impacts and water quality changes. Water-related models that deal with hydrologic and environmental issues commonly focus on the quantity issues such as water supply and water flow but do not have economic or water quality dimensions (Wurbs, 2003). Models with economic considerations tend to cover only restricted areas, for example, the Edwards aquifer and Nueces, Frio and Guadalupe-Blanco basin regions (Gillig et al, 2001; Watkins Jr & McKinney, 2000). Much of the research has been localized looking at only single or a couple of basins without looking at broader statewide issues. This research is designed to build a statewide model integrating economic, hydrologic, and environment components. Such a model will be used to examine Texas water scarcity issues and socially optimal water allocation along with the effects of inter-basin water transfers. We developed an integrated economic, hydrologic, and environment model covering 21 Texas riverbasins: Colorado, Brazos-Colorado, Brazos, Brazos-San Jacinto, Canadian, Red, Sabine, Guadalupe, San Antonio, Sulphur, Cypress, Neches, Neches-Trinity, Trinity, Trinity-San Jacinto, San Jacinto, Colorado-Lavaca, Lavaca, Lavaca-Guadalupe, San Antonio-Nueces, and Nueces. The model is designed to yield information to support effective public water policy making for state agencies, water management authorities and regional water planning groups. The surface water aspects of this project are summarized in this report. Future research work will be focused on combining surface and ground water by integrating the Edwards Aquifer Groundwater and River System Simulation Model (EDSIMR).
The Edwards Aquifer: An Economic Perspective
(Texas Water Resources Institute, 1993-03) Merrifield, John D.; McCarl, Bruce A.; Griffin, Ronald C.; Emerson, Peter M.; Collinge, Robert A.
Business as usual has ceased to be an acceptable system for the Edwards because of the burden it imposes upon regional competitiveness and welfare. Nonrevisionist strategies such as surface water development and spring flow augmentation address symptoms of the problem without curing the cause. Available evidence regarding water development also indicates that these strategies are not cost-effective. Needed are new policy constructs in tune with heightened water scarcity and the variety of demands now served by the Edwards Aquifer. A system of transferable groundwater rights is commendable for several reasons. It is flexible because it accomodates unforeseeable future shifts in demand. Transferable rights allow voluntary action on behalf of water users as opposed to requiring compliance with offensive regulations. The marketing of water complements regional competitiveness because water is not bound to inefficient uses, and overly expensive methods of water supply enhancement are avoided.
Evaluation of "Dry Year Option" Water Transfers from Agricultural to Urban Use
(Texas Water Resources Institute, 1997-04) Yu, Kang; Chowdhury, Manzoor; Keplinger, Keith; Jones, Lonnie L.; Lacewell, Ronald D.; McCarl, Bruce A.
This study investigated the economics of an Edwards Aquifer region "dry-year option" buyout directed toward decreasing agricultural water use in an effort to augment springflow. The research involved several phases. First, we applied crop growth simulation models to quantify the expected yield of major crops by weather year for alternative irrigation strategies. Second, crop enterprise budgets were developed for these strategies for entry into a farm level simulation model. Third, equations were developed which predicted the monthly springflow implications of changes in agricultural water use. Fourth, a "dry-year" agricultural model which predicted the agricultural consequences of exercise of various forms of the dry-year option was developed. Fifth, a model and literature-based evaluation was undertaken to arrive at a definition of the term "dry-year option". Sixth, the agricultural model was used to determine willingness to sell water at alternative prices. Seventh, a regional input-output model was developed to allow estimates of regional impacts of the dry-year option. Eighth, the input-output model was used to estimate the effect of water transfers on local communities, by sector. Ninth, the proposal that there should be compensation to third parties was examined. Tenth, the LP model was put in a form for delivery to the sponsor and a training workshop was scheduled. Eleventh, data on the nonagricultural demand for water were developed.
A Farm-Level Evaluation of Agricultural Profit and Ground Water Quality: Texas Seymour Aquifer
(Texas Water Resources Institute, 1994-12) Dyke, Paul T.; Harris, Billy L.; Benson, Verel W.; Ozuna, Teofilo Jr.; McCarl, Bruce A.; Lacewell, Ronald D.; Chowdhury, Manzoor
The Seymour Aquifer of north-central Texas is known to have elevated levels of nitrates. The design of economically sound policies for reducing agriculture's nitrate contribution to the aquifer suggests a need to evaluate alternative management practices and implications of different policies on nitrate percolation and associated loss of net returns. In the absence of field and experimental data, a validated process model (EPICWQ) was used to simulate crop yield and nitrate percolation by using stochastic weather and by varying the quantity and timing of nitrogen and irrigation applications across two soil types and tillage practices. Using these simulated data, a set of response functions was estimated and incorporated inside a risk-sensitive farm-level optimization model. Various policy instruments such as a performance standard, design standard, performance tax, performance subsidy, nitrogen tax, and nitrogen subsidy were evaluated to determine the economic and environmental tradeoffs for the region. A performance standard or a design standard (obtained from the model solution of performance standard) will decrease farm net income (over variable cost) by $6,220 or $5,225 for risk neutral and risk averse case, respectively. Arbitrarily selected design standards such as split use of fertilizer and minimum tillage reduced percolation but not down to 10 ppm. The net income loss for a performance tax was $ 17,340 and $ 15,233 for the two risk behavior scenarios, respectively. A performance subsidy would increase net income (subsidy received minus abatement cost) by $452 and $784 for risk neutral and risk averse case, respectively. A nitrogen tax of 200% of the purchase price of nitrogen caused a $29,680 and $36,910 reduction in net income while a nitrogen subsidy increased net income (subsidy received minus abatement cost) by $4,474 and $8,285, respectively. For the whole region, the least costly policy alternative would cost approximately $1 million either as farm net income loss or as government subsidy. Comparing this cost with the cost of bottled water (used as a proxy for the loss of consumer surplus) shows that this cost is about three times the cost of bottled water.