Transcript The Economics of Water Resources

The Value of Water to Oklahoma
Damian C. Adams
Larry D. Sanders
Agricultural Economics Department
Oklahoma State University
Stillwater Newspress (Mar 21, 2007)
2
By April 2007, another story…
Heavy rainfall during March washed away drought from
nearly the entire state. … The rainfall caused flooding
problems in much of the state, … but it appears that it
was sufficient to erase many of the lingering impacts
of a 2-year-long drought cycle.
(http://www.drought.unl.edu/dm/)
Across the entire state, topsoil moisture (down to 30 inches)
appears replenished, …. Reservoirs … rose several feet in a
matter of hours. Several reservoirs still face lingering
impacts and need much more rainfall to fully recover,
but they appear to be well on their way if normal
rainfall continues. … streams appear to be flowing again
and more runoff will make it to the lakes, adding to
recharge.
--Mark Shafer, Director of Climate Information, OK Climatological Survey
(http://agweather.mesonet.org/soil/)
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Leading to new apparel trends in OK &
TX…
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What is Water Worth?
“We never know the worth of water till the
well is dry.”
~Thomas Fuller, Gnomologia, 1732
“Water flows uphill towards money.”
~Anonymous, saying in the American West, Cadillac Desert,
1986
“Depends on which specific water services are
being valued, as well as where and why the
valuation exercise is being conducted.”
~R. Young, 2005
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What Determines Water Prices?




Supply and demand
Cost of capture and transportation
Water rights
Non-market impacts &
externalities?
6
Water Demand: Competing Uses
Other Uses?
7
Demand for Water Will Increase
Oklahoma Population (US Census)
4,000,000
3,800,000
3,600,000
?
What do you think will happen?
3,400,000
3,200,000
3,000,000
2,800,000
2,600,000
2,400,000
2,200,000
1960
1970
1980
1990
2000
2010
Year
Source: http://www.populstat.info/Americas/usas-okp.htm
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Demand Pressures
Population growth
Industry
Recreation
Conservation
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Water Supply… Historically Speaking
10
Water Supply Issues in OK
Plenty of water…
23 major groundwater basins w/
320 mil. acre-feet
1120 square miles
of water area in
lakes & ponds &
over 78,000 miles
of rivers & streams
Oklahoma
Water
supply
34 mil. ac-ft/yr
flows out of
state via
Ark. & Red River
basins
Allocated stream
water use is
2.6 mil. ac-ft/yr
Problem is Allocation– getting it where,
when, how much and at a price we want
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Oklahoma’s Water Use
Surface Water Ground Water
Irrigation
___________
Total
151
566
718
562
113
675
113
54
167
143
3
146
Domestic
&
___________
Commercial
9
28
37
Industrial & Mining
___________
19
9
28
Total
998
774
1772
Municipal & Rural
___________
Water Systems
___________
Livestock &
Aquaculture
___________
Power Generation
Source: US Geological Survey, 2000
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Oklahoma water resources under
pressure
More
weather
volatility
OK Water
Resources
Lack of
Investment
Changes in
water law/
rights
Texas
rule of
capture
Growing
population
Invasive
species
Water
uptake
Tribal
rights
Economic
development
Ethanol
production
Thirsty
neighbors
Water
Unknown/
quality
unexpected event(s)
diminishes
effective
20 years
ago, how many of these were
water
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unexpected
supplyevents?
Oklahoma water under pressure, but…
changes in demand and supply
Re-use petro
pumping
water
Red cedar
eradication
OK Water
Resources
Desalinate
water
Wetland use
Assigning
Property rights
Re-use
water
Conservation
Development
of new
structures
Investment
in water
infrastructure
Increase
the price
of water
Drought/
flood
management
Unknown/
Unexpected
Events?
More efficient
Irrigation
systems
Drought
tolerant
plants
What role should OCES
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play?
How can we tell if there is intelligent life
elsewhere in the universe?
"The surest sign that
intelligent life exists elsewhere
in the universe is that none of
it has tried to contact us.“
Sources: various public websites and emails to instructor; anonymous authorship.
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What is my water worth?

It Depends…


Alternative uses
Location



Quality




Capture
Transport (incl. right-of-way)
Treatment
Regulations
Quantity (storage)
Supply/Demand


Within-season cyclicity
Structural shortage & climate change
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Daily Water Prices Around the World…
$0.14
$0.07
$0.85
$0.47
$0.24
$0.20-35
$8.00
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Typical municipal water prices in US and
other countries (per cubic yard)
Source: World Water Commission for the 21st Century, 1999
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Municipal Water Rates in OK
$0.69
$0.26, $0.49
$0.20
$0.25
$0.32
Arkansas River Basin
Red River Basin
$0.27, $0.53
$0.27, $0.53
What determines
prices?
$0.27
$0.43
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Costs of irrigation water by source and
category, 2003 (USDA-ERS)
Cost category
Oklahoma cost
range ($/ac)
National average
cost ($/ac)
Energy for pumping
(groundwater)
7 - 176
39.50
Energy for lift
(surface water)
10 - 82
26.39
Off-farm water
purchases
5 - 86
41.73
Maintenance/ repair
expenses
4 - 80
12.29
Unknown
49.87
6 - 187
42.18
Average variable cost
Capital investment
expenses
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Wetlands as an economic tool:
wetland functions, services & values
(adapted from Bergstrom and Brazee, 1991, in USDA-ERS EIB-16)
Wetland
Function
Service
Economic value
Tree growth medium
Commercial timber
harvest
Private net
economic value of
timber
Fish habitat
Commercial fish
harvest
Private net
economic value of
fish
Recreation
Wildlife habitat
Recreational,
fishing, waterfowl
harvest
Mixed net economic
value of
hunting/fishing/
recreating
Flood control
Flood retention
Reduced flood
flows/peak (less
risk)
Public net economic
value of reduced
damages
Water quality
Water filtration
Cleaner waters
Public net economic
value of reduced
damages
Endangered species
habitat
biodiversity
Public net option,
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existence values
Forest
Fisheries
Endangered
OSU Water Policy Projects





Valuation of Water for Recreation
Water Conservation Programming &
Website
Water Law Handbooks
Survey of OK Residents’ Water
Conservation Behaviors & Attitudes
Potential Water Quality Trading
Program
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Non-Market Valuation of
Recreation on the Illinois River
System in Oklahoma
Total Willingness to Pay
= Use Value + Nonuse
Value
Willingness to pay for changes in water quality
and other park attributes
WTP
Boat ramp*
NS
Camp available
$6.48
Camp with electric
$13.28
Porta-Potties*
NS
Flush toilet
$23.47
Flush toilet with showers
$27.02
Lodge*
NS
Water clarity*
NS
* NS indicates that variables are not significantly different from zero.
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Lower Illinois study:
Trout fishing

Using the Oklahoma Department of
Wildlife Conservation’s estimate of 18,400
annual visits (Crews and Summers, 2002)
this would imply the recreation value of
the trout fishery alone was $2 million per
year.
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Upper Illinois River:
Boating



June 05-Oct 06: $97,484 from a $1/person
per trip fee
94,504 visitors outfitted by companies in the
region at an average of $15-$20/per person
per day for canoeing and rafting equipment
$1.4-$1.9 million in direct expenditures 26
Water quality: pollution sources & solution
of Water Quality Trading Permits
• Sewage treatment
plants
• Urban stormwater
• Septic tanks—rural
and urban
• Agriculture
• Mining/oil/gas fields
• Emerging
contaminants
• An evolving solution:
develop artificial
markets to trade permits
to pollute
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Trends for water use in agriculture


Ag water use FALLS as economic
development RISES
Less water for Agriculture in the future?



Increased non-Ag demand for water
 Urban development (economic & population)
 Water sales and transfer out of OK
 Recreation
Reduced Ag water access (?)
 Changes in water law
 Climate change
Improved irrigation technology (e.g., graywater)
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Opportunities for Extension


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
Framing the water-related issues to
identify critical research, education needs
Provide feedback/oversight for research
efforts
Proactive – planning to meet information,
education, knowledge needs
Help stakeholders understand what is at
stake
Indirectly support stakeholder policy
involvement
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Question?

Thank you for your help!
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Value of Water in a A Stream With Reuse
 Four Users on a Stream
 Ac-Ft Water Worth $40; 40% Return Flow
Withdraw
Value
User 1: 1.00
af
$40.00
User 2: .40
af
$16.00
User 3: .16
af
$6.40
User 4: .064 af
$2.65
Tot Withdrawal 1.62af, Tot. $65.05
$40
1af
flow
.4af
returns
returns
returns
returns
.4
af
.16 af
.064 af
---
$6.40
.16af
.064 af
.064 af
.4af
Courtesy of
A. Stoecker
$16
$2.65
.16af
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