California’s Water Future: Keeping the Dream AliveJuly 10, 2006
Something to transition from the previous paper to this one.
*
5
10
15
20
25
30
35
40
45
50
1950
1960
1967
1972
1980
1985
1990
1995
2000
9.9 m
9.5 m
35.6 m
34.3 m
42.4 m
43.2 m
Market forces
Crop shifts
Irrigation efficiency
Acre-feet
(millions)
AW
Inland Empire
Other
*
*
Per capita urban use has only recently begun to fall; inland use is much higher
100
150
200
250
300
350
400
1960
1967
1972
1980
1985
1990
1995
2000
*
3.6
3.0
1.5
4.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Acre-feet
(millions)
5.0
*
Reduced Colorado River use (- 0.8 maf)
Reduced groundwater overdraft (1-2 maf?)
*
State recognizes that many options available for generating new supplies
0.5
1
1.5
2
2.5
3
3.5
(millions of acre-feet per year)
Source: California Water Plan Update, 2005
?
Cost/af
*
Irrigation water application has hovered in range of 3.5 – 3.6 acre-ft/acre since 1960s
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1950
1960
1967
1972
1980
1985
1990
1995
2000
Acre-feet/acre
*
Agricultural efficiency is not well understood from a policy perspective
Usual view is that ag efficiency improvements do not achieve much since they reduce return flows, which are usable
*
North-south and east-west differences
Productivity differences persist due to nature of water rights and lack of conveyance opportunities
Almost total lack of private investment in water infrastructure
*
($/unit-yr)
*
Groundwater banking and conjunctive use can enhance supply at reasonable cost
Historical overdraft has created lots of storage space
Simple banking can create opportunities for arbitrage
Development of wellfields can also allow for more aggressive management of surface storage facilities
A major problem with groundwater storage is flexibility
*
low-hanging fruit
Outdoor water use in rapidly growing inland regions often exceeds 50% of total use
Residential irrigation efficiencies very low
*
Urban recycling is promising
Urban conservation is desirable since it creates water in exactly the right place; no need for expensive conveyance
Recycled water can be used for landscape irrigation and industrial applications
Cost is relatively modest, ranging from $300 to $1,300/af
*
of reconciling supply-demand imbalances
Wide variety of deals; permanent vs. temporary; firm vs. interruptible; fallowing vs. efficiency conservation
Great interest in agriculture to sell water; also lots of trades within agriculture
*
Here is one western water market:
---------------------
Explore this further.
This is near Sparks.The City of Sparks mostly purchases surface water, though there is some gw too.
Developers have been purchasing water rights and donating them to Sparks EVERY year since 1993 at least.
How much water must be donated per new house in Nevada?
Call the number? Was this advertising enough to sell the water rights?
1.bin
Physical (transport, externalities)
Third party impacts
It is generally agreed that water markets improve allocation of water among competing uses. This is especially true in the western United States, where there is tremendous spatial and temporal variation in precipitation, leading to heterogeneity in water users and the potential for gains from trade.
Much work has been done exploring how different transaction costs impede their formation.
Broadly speaking, there are three types of transaction costs that impede market formation.
Physical, unavoidable costs intrinsic to the nature of the water resource, for example conveyance and physical externalities
2. Institutional, more avoidable transaction costs, such as legal barriers to trade,
3. Third party impacts, which are the damages to the economy of the exporting region.
[In many states, third parties must be compensated before a trade can be approved.]
If a water agency needs to buy water, does it buy water or lease it?
And a major theme throughout this study is the difference between a permanent sale and a lease of a water right, so let me make sure this is clear from the start:
We’re talking about purchasing a water right, which is the right to a flow of water forever,
Or leasing a water right, which is the use of water for a shorter period of time, usually but certaintly not always, one year or less.
---------------------------------------
Western water markets are now at a state where third party compensation that is perceived to be equitable and efficient are needed to move markets forward.
Schpiel on third party impacts. Why are third party impacts not considered an avoidable transaction cost?
A strict, neoclassical economic reading of third party impacts would place them in the avoidable category. Third party impacts increase the cost of a transaction, impeding the flow of a factor to its highest-value use.
But the reality is that legally and politically, third parties must be compensated before a trade can take place, in many states.
Q. Where do third parties have standing?
----------
Unavoidable/Legitimate
3. Firming up rights for transfer
4. Physical externalities (e.g., water quantity and quality issues with return flows)
(Somewhat) Avoidable: institutional/regulatory impediments
Legal: prevailing water rights
Legal: improving contract enforcement
Legal: streamlining regulatory approval
Political/Regulatory: Pecuniary third party impacts
Political/Regulatory: Blanket restrictions on exports
One local empirical example is:
*
Overview (II)
What factors drive water markets towards sales versus leases of water rights?
Leases seen as a second-best outcome due to legal restrictions on selling water between irrigation districts.
We examine additional factors:
Incorporation of environmental externalities and third party impacts into the approval process leads to leases.
-----------------------------------------------------------
*
OBJECTIVE
To test econometrically how different factors affect the decision to purchase or lease a water right:
Physical scarcity (hydrological conditions)
Environmental laws/third party protections
The goal of our paper is to econometrically test how different factors affect a water agencies’ decision whether to purchase a permanent water right or to lease the permanent water right for a short period of time.
Factors that might be affect the outcome are:
physical scarcity
financial scarcity,
and
Laws and regulations designed to correct for environmental externalities, or to compensate third parties in the exporting region for economic losses associated with the transfer.
-----------------------------
*
State
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
33421
35487
21823
22354
16309
14419
14308
10747
21690
1700
5160
8613
CA
11028
8121
25202
13260
81050
92535
14280
30671
27570
23941
25395
CO
6100
3495
3151
12322
17054
3459
221071
5961
5167
9092
12575
3539
ID
312
22395
6500
579
KS
510
240
165
MT
0
750
NE
0
31944
NM
231
102
11128
1497
9082
72
624
235
257
46
NV
1382
772
16169
1077
851
17422
32206
2262
3013
2795
5254
28595
OK
34
OR
452
159
867
907
7259
579622
16041
TX
6553
330
3473
5513
48903
102152
103273
26935
245210
127111
14097
25619
UT
291
29
2522
270
1681
6679
45
100
6025
1118
WA
202
0
11076
1033
78000
1419
WY
12000
2684
3000
Municipal/Industrial Purchases
Environmental Purchases
Agricultural Purchases
and
long-term leases
Total lease use, in af.
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
715000
601978
643996
699719
77295
14900
40821
1160000
81935
61420
1760
1638
AZ
715
602
654
710
87
25
79
101
122
103
43
44
CA
311775
248395
249703
123534
450232
166826
686719
342521
642600
741748
748815
415304
CA
367
303
318
212
1123
840
1467
1123
1543
1893
1963
1634
CO
39300
12558
23112
44360
52000
38857
36926
15674
23900
880
13180
15615
CO
43
41
52
73
92
79
77
56
65
42
55
58
ID
23039
351943
41373
268683
235828
40452
41757
44146
318398
11280
100000
ID
23
352
41
304
271
75
77
79
35
353
46
135
KS
80
MT
0
0
0
0
0
4
9
4
4
4
4
4
MT
0
5390
NM
65
25
5
5
49
95
44
6
323
66
53
48
NM
60790
20098
150
44760
90000
38110
316900
57013
13869
8460
NV
1
14
14
14
14
14
14
14
15
15
15
15
NV
850
OR
0
10
19
1
25
13
8
1
483
44
44
128
OK
31
TX
3
22
87
148
66
97
552
490
828
833
871
757
OR
0
10305
19273
155
23701
12131
7190
125
481577
39442
37951
117475
UT
10
15
16
12
9
0
6
0
0
0
12
21
TX
1410
20721
85512
145139
59680
67358
134069
49250
267127
110373
140662
26436
WA
1
0
0
11
0
5
6
5
23
35
1
2
UT
9950
14440
15924
11912
9038
6195
12000
21000
WY
0
3
14
0
0
0
2
0
0
0
44
10
WA
900
450
10614
4666
5725
4695
22969
34884
762
WY
3234
13673
0
0
1876
43575
10040
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
10000
28174
2271
1000
420
CA
55000
13750
20000
584500
107019
120250
251200
62940
4187
CO
3425
25000
200
11850
459
16
1277
117
ID
35000
KS
2911
1044
2580
1059
MT
0
400
0
3614
NM
4500
1700
3027
30000
NV
14000
1400
OK
5585
751
9640
OR
989
812
2698
1370
4840
TX
1500
1668
3000
23153
389011
22833
120116
161353
7644
424
UT
74
WA
137
416
920
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
715000
601978
653996
709719
87295
24900
78995
1198174
122380
102865
43205
43503
CA
366775
303395
318453
212284
1123482
840076
1466988
1122790
1543119
1893467
1963474
1634150
CO
42725
40983
51737
72985
92475
79332
77401
56149
64834
41830
55407
57959
ID
23039
351943
41373
303683
270828
75452
76757
79146
35000
353398
46280
135000
KS
0
0
0
0
80
0
2911
2911
2911
3955
6535
7594
MT
0
0
400
400
400
4014
9404
4014
4014
4014
4014
4014
NM
65290
24598
4650
4500
49260
94500
44310
6200
323100
66240
53096
47687
NV
850
14000
14000
14000
14000
14000
14000
14000
15400
15400
15400
15400
OK
0
0
0
0
5585
5585
6336
6336
15976
15976
16007
15976
OR
0
10305
19273
1144
24690
13120
8179
1114
483378
43941
43820
128184
TX
2910
22221
87012
148307
65848
96679
552401
490415
828408
833007
870940
757138
UT
9950
14514
15998
11986
9112
74
6269
74
74
74
12074
21074
WA
900
0
450
10614
0
4666
5725
4695
22969
35021
553
2235
WY
0
3234
13673
0
0
0
1876
0
0
0
43575
10040
715
366.775
42.725
23.039
0
65.29
0.85
0
2.91
9.95
0.9
0
601.978
303.395
40.983
351.943
0
24.598
14
10.305
22.221
14.514
0
3.234
653.996
318.453
51.737
41.373
0.4
4.65
14
19.273
87.012
15.998
0.45
13.673
709.719
212.284
72.985
303.683
0.4
4.5
14
1.144
148.307
11.986
10.614
0
87.295
1123.482
92.475
270.828
0.4
49.26
14
24.69
65.848
9.112
0
0
24.9
840.076
79.332
75.452
4.014
94.5
14
13.12
96.679
0.074
4.666
0
78.995
1466.988
77.401
76.757
9.404
44.31
14
8.179
552.401
6.269
5.725
1.876
101
1122.79
56.149
79.146
4.014
6.2
14
1.114
490.415
0.074
4.695
0
122.38
1543.119
64.834
35
4.014
323.1
15.4
483.378
828.408
0.074
22.969
0
102.865
1893.467
41.83
353.398
4.014
66.24
15.4
43.941
833.007
0.074
35.021
0
43.205
1963.474
55.407
46.28
4.014
53.096
15.4
43.82
870.94
12.074
0.553
43.575
43.503
1634.15
57.959
135
4.014
47.687
15.4
128.184
757.138
21.074
2.235
10.04
lease_use
Total lease data in taf.
year
year
year
year
6972.323
280.003
4887.159
204.379
2515.517
29.786
1534.559
709.169
813.887
605.307
356.95
302.986
304.377
23.274
218.436
17.684
87.197
91.528
16.25
111.798
100.533
18.76
10.904
0.75
Volume_new
State
12786
2019.075
4754
3443.2
3285
1692.606
733
1847.562
776
1800.794
1791
289.668
784
174.635
159
589.307
89
206.64
73
101
33
 State
Lease
Sale
na
Total
84
993
8
The next slide is volume-weighted prices by state. There is no water price information in the econometric analysis to follow, but I include this table as an aside because there are some really interesting things to note here.
First, the tremendous variation in lease and sale prices across states mirrors the variation we observed in lease and sale volumes across states.
Second, the capitalization rate implied by the ratio of lease price to sale price also varies quite a bit from state to state.
Do I explain, the primary reason for the variation is that these numbers include administratively set prices, of which there are a tremendous number. Oregon and Washington have high rates of return because there are tax breaks for agricultural producers who donate their unused water resources.
-----------
*
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
33421
35487
21823
22354
16309
14419
14308
10747
21690
1700
5160
8613
CA
11028
8121
25202
13260
81050
92535
14280
30671
27570
23941
25395
CO
6100
3495
3151
12322
17054
3459
221071
5961
5167
9092
12575
3539
ID
312
22395
6500
579
KS
510
240
165
MT
0
750
NE
0
31944
NM
231
102
11128
1497
9082
72
624
235
257
46
NV
1382
772
16169
1077
851
17422
32206
2262
3013
2795
5254
28595
OK
34
OR
452
159
867
907
7259
579622
16041
TX
6553
330
3473
5513
48903
102152
103273
26935
245210
127111
14097
25619
UT
291
29
2522
270
1681
6679
45
100
6025
1118
WA
202
0
11076
1033
78000
1419
WY
12000
2684
3000
Municipal/Industrial Purchases
Environmental Purchases
Agricultural Purchases
and
long-term leases
Total lease use, in af.
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
715000
601978
643996
699719
77295
14900
40821
1160000
81935
61420
1760
1638
AZ
715
602
654
710
87
25
79
101
122
103
43
44
CA
311775
248395
249703
123534
450232
166826
686719
342521
642600
741748
748815
415304
CA
367
303
318
212
1123
840
1467
1123
1543
1893
1963
1634
CO
39300
12558
23112
44360
52000
38857
36926
15674
23900
880
13180
15615
CO
43
41
52
73
92
79
77
56
65
42
55
58
ID
23039
351943
41373
268683
235828
40452
41757
44146
318398
11280
100000
ID
23
352
41
304
271
75
77
79
35
353
46
135
KS
80
MT
0
0
0
0
0
4
9
4
4
4
4
4
MT
0
5390
NM
65
25
5
5
49
95
44
6
323
66
53
48
NM
60790
20098
150
44760
90000
38110
316900
57013
13869
8460
NV
1
14
14
14
14
14
14
14
15
15
15
15
NV
850
OR
0
10
19
1
25
13
8
1
483
44
44
128
OK
31
TX
3
22
87
148
66
97
552
490
828
833
871
757
OR
0
10305
19273
155
23701
12131
7190
125
481577
39442
37951
117475
UT
10
15
16
12
9
0
6
0
0
0
12
21
TX
1410
20721
85512
145139
59680
67358
134069
49250
267127
110373
140662
26436
WA
1
0
0
11
0
5
6
5
23
35
1
2
UT
9950
14440
15924
11912
9038
6195
12000
21000
WY
0
3
14
0
0
0
2
0
0
0
44
10
WA
900
450
10614
4666
5725
4695
22969
34884
762
WY
3234
13673
0
0
1876
43575
10040
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
10000
28174
2271
1000
420
CA
55000
13750
20000
584500
107019
120250
251200
62940
4187
CO
3425
25000
200
11850
459
16
1277
117
ID
35000
KS
2911
1044
2580
1059
MT
0
400
0
3614
NM
4500
1700
3027
30000
NV
14000
1400
OK
5585
751
9640
OR
989
812
2698
1370
4840
TX
1500
1668
3000
23153
389011
22833
120116
161353
7644
424
UT
74
WA
137
416
920
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
715000
601978
653996
709719
87295
24900
78995
1198174
122380
102865
43205
43503
CA
366775
303395
318453
212284
1123482
840076
1466988
1122790
1543119
1893467
1963474
1634150
CO
42725
40983
51737
72985
92475
79332
77401
56149
64834
41830
55407
57959
ID
23039
351943
41373
303683
270828
75452
76757
79146
35000
353398
46280
135000
KS
0
0
0
0
80
0
2911
2911
2911
3955
6535
7594
MT
0
0
400
400
400
4014
9404
4014
4014
4014
4014
4014
NM
65290
24598
4650
4500
49260
94500
44310
6200
323100
66240
53096
47687
NV
850
14000
14000
14000
14000
14000
14000
14000
15400
15400
15400
15400
OK
0
0
0
0
5585
5585
6336
6336
15976
15976
16007
15976
OR
0
10305
19273
1144
24690
13120
8179
1114
483378
43941
43820
128184
TX
2910
22221
87012
148307
65848
96679
552401
490415
828408
833007
870940
757138
UT
9950
14514
15998
11986
9112
74
6269
74
74
74
12074
21074
WA
900
0
450
10614
0
4666
5725
4695
22969
35021
553
2235
WY
0
3234
13673
0
0
0
1876
0
0
0
43575
10040
715
366.775
42.725
23.039
0
65.29
0.85
0
2.91
9.95
0.9
0
601.978
303.395
40.983
351.943
0
24.598
14
10.305
22.221
14.514
0
3.234
653.996
318.453
51.737
41.373
0.4
4.65
14
19.273
87.012
15.998
0.45
13.673
709.719
212.284
72.985
303.683
0.4
4.5
14
1.144
148.307
11.986
10.614
0
87.295
1123.482
92.475
270.828
0.4
49.26
14
24.69
65.848
9.112
0
0
24.9
840.076
79.332
75.452
4.014
94.5
14
13.12
96.679
0.074
4.666
0
78.995
1466.988
77.401
76.757
9.404
44.31
14
8.179
552.401
6.269
5.725
1.876
100.6875
1122.79
56.149
79.146
4.014
6.2
14
1.114
490.415
0.074
4.695
0
122.38
1543.119
64.834
35
4.014
323.1
15.4
483.378
828.408
0.074
22.969
0
102.865
1893.467
41.83
353.398
4.014
66.24
15.4
43.941
833.007
0.074
35.021
0
43.205
1963.474
55.407
46.28
4.014
53.096
15.4
43.82
870.94
12.074
0.553
43.575
43.503
1634.15
57.959
135
4.014
47.687
15.4
128.184
757.138
21.074
2.235
10.04
lease_use
Total lease data in taf.
year
year
year
year
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
33421
35487
21823
22354
16309
14419
14308
10747
21690
1700
5160
8613
CA
11028
8121
25202
13260
81050
92535
14280
30671
27570
23941
25395
CO
6100
3495
3151
12322
17054
3459
221071
5961
5167
9092
12575
3539
ID
312
22395
6500
579
KS
510
240
165
MT
0
750
NE
0
31944
NM
231
102
11128
1497
9082
72
624
235
257
46
NV
1382
772
16169
1077
851
17422
32206
2262
3013
2795
5254
28595
OK
34
OR
452
159
867
907
7259
579622
16041
TX
6553
330
3473
5513
48903
102152
103273
26935
245210
127111
14097
25619
UT
291
29
2522
270
1681
6679
45
100
6025
1118
WA
202
0
11076
1033
78000
1419
WY
12000
2684
3000
Municipal/Industrial Purchases
Environmental Purchases
Agricultural Purchases
and
long-term leases
Total lease use, in af.
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
715000
601978
643996
699719
77295
14900
40821
1160000
81935
61420
1760
1638
AZ
715
602
654
710
87
25
79
101
122
103
43
44
CA
311775
248395
249703
123534
450232
166826
686719
342521
642600
741748
748815
415304
CA
367
303
318
212
1123
840
1467
1123
1543
1893
1963
1634
CO
39300
12558
23112
44360
52000
38857
36926
15674
23900
880
13180
15615
CO
43
41
52
73
92
79
77
56
65
42
55
58
ID
23039
351943
41373
268683
235828
40452
41757
44146
318398
11280
100000
ID
23
352
41
304
271
75
77
79
35
353
46
135
KS
80
MT
0
0
0
0
0
4
9
4
4
4
4
4
MT
0
5390
NM
65
25
5
5
49
95
44
6
323
66
53
48
NM
60790
20098
150
44760
90000
38110
316900
57013
13869
8460
NV
1
14
14
14
14
14
14
14
15
15
15
15
NV
850
OR
0
10
19
1
25
13
8
1
483
44
44
128
OK
31
TX
3
22
87
148
66
97
552
490
828
833
871
757
OR
0
10305
19273
155
23701
12131
7190
125
481577
39442
37951
117475
UT
10
15
16
12
9
0
6
0
0
0
12
21
TX
1410
20721
85512
145139
59680
67358
134069
49250
267127
110373
140662
26436
WA
1
0
0
11
0
5
6
5
23
35
1
2
UT
9950
14440
15924
11912
9038
6195
12000
21000
WY
0
3
14
0
0
0
2
0
0
0
44
10
WA
900
450
10614
4666
5725
4695
22969
34884
762
WY
3234
13673
0
0
1876
43575
10040
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
10000
28174
2271
1000
420
CA
55000
13750
20000
584500
107019
120250
251200
62940
4187
CO
3425
25000
200
11850
459
16
1277
117
ID
35000
KS
2911
1044
2580
1059
MT
0
400
0
3614
NM
4500
1700
3027
30000
NV
14000
1400
OK
5585
751
9640
OR
989
812
2698
1370
4840
TX
1500
1668
3000
23153
389011
22833
120116
161353
7644
424
UT
74
WA
137
416
920
state
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AZ
715000
601978
653996
709719
87295
24900
78995
1198174
122380
102865
43205
43503
CA
366775
303395
318453
212284
1123482
840076
1466988
1122790
1543119
1893467
1963474
1634150
CO
42725
40983
51737
72985
92475
79332
77401
56149
64834
41830
55407
57959
ID
23039
351943
41373
303683
270828
75452
76757
79146
35000
353398
46280
135000
KS
0
0
0
0
80
0
2911
2911
2911
3955
6535
7594
MT
0
0
400
400
400
4014
9404
4014
4014
4014
4014
4014
NM
65290
24598
4650
4500
49260
94500
44310
6200
323100
66240
53096
47687
NV
850
14000
14000
14000
14000
14000
14000
14000
15400
15400
15400
15400
OK
0
0
0
0
5585
5585
6336
6336
15976
15976
16007
15976
OR
0
10305
19273
1144
24690
13120
8179
1114
483378
43941
43820
128184
TX
2910
22221
87012
148307
65848
96679
552401
490415
828408
833007
870940
757138
UT
9950
14514
15998
11986
9112
74
6269
74
74
74
12074
21074
WA
900
0
450
10614
0
4666
5725
4695
22969
35021
553
2235
WY
0
3234
13673
0
0
0
1876
0
0
0
43575
10040
715
366.775
42.725
23.039
0
65.29
0.85
0
2.91
9.95
0.9
0
601.978
303.395
40.983
351.943
0
24.598
14
10.305
22.221
14.514
0
3.234
653.996
318.453
51.737
41.373
0.4
4.65
14
19.273
87.012
15.998
0.45
13.673
709.719
212.284
72.985
303.683
0.4
4.5
14
1.144
148.307
11.986
10.614
0
87.295
1123.482
92.475
270.828
0.4
49.26
14
24.69
65.848
9.112
0
0
24.9
840.076
79.332
75.452
4.014
94.5
14
13.12
96.679
0.074
4.666
0
78.995
1466.988
77.401
76.757
9.404
44.31
14
8.179
552.401
6.269
5.725
1.876
100.6875
1122.79
56.149
79.146
4.014
6.2
14
1.114
490.415
0.074
4.695
0
122.38
1543.119
64.834
35
4.014
323.1
15.4
483.378
828.408
0.074
22.969
0
102.865
1893.467
41.83
353.398
4.014
66.24
15.4
43.941
833.007
0.074
35.021
0
43.205
1963.474
55.407
46.28
4.014
53.096
15.4
43.82
870.94
12.074
0.553
43.575
43.503
1634.15
57.959
135
4.014
47.687
15.4
128.184
757.138
21.074
2.235
10.04
lease_use
Total lease data in taf.
year
year
year
year
The dependent variable is 1 if Sale, 0 if Lease.
Financial scarcity variables
BLD: Number of building permits issued annually
*
Physical scarcity variable
PDI: Annualized Palmer Drought Index.
Environmental /third party impacts variable
THIRD: =1 if third parties have standing in regulatory approval process (7.5 states). Getches, 1997.
*
Determinants of Water Trading Patterns in Western Water Markets (1993-2003)
Variable
Description
Coefficient
BLD
-1.76***
AGPRODN
** significant at 5%; *** significant at 1%.
The dependent variable is 1 when the transaction is a permanent sale, 0 if a lease.
Increased market volume appears to increase the probability of leasing. This likely reflects the fact that the 100,000th acre-foot removed from a basin is likely to have greater environmental and third party impacts than the first.
An increase in the value of agricultural production makes it more likely that a farmer will farm rather than lease out water (hence the increased probability of a sale), just as:
An increase in the value of underlying agricultural land makes it more likely that a farmer will farm rather than sell his land, so that his involvement in the market will be through leases.
An increase in urban growth, as representing by building permits, increases the probability of permanent sale, since urban agencies would prefer to purchase water to meet projected growth, rather than lease.
A higher Palmer Index value, indicating greater rainfall in a given year and location, increases the probability of a sale, since water agencies are less likely to be in the market
*
Urban growth, agricultural value, environmental demands and climate change will change water use in the West, particularly for agriculture.
Adjustment by conservation, new technologies and reallocation requires economic incentives- water in the west is gradually becoming a commodity.
Water Markets can stimulate adjustment, subject to
environmental laws
the clear designation of fish and wildlife as a beneficial use.
Leases may be the best outcome, if they are a response to temporary need or laws which protect externalities.
This page needs work. The primary conclusion that RH has been pounding is that volume and environmental laws interact. I need to include that variable in the analysis. If it is significant, then I feel more comfortable concluding it.
Hadjigeorgalis and Lillywhite found in Chile that lease activity is a response to restrictions on permanent transfers of water rights. In the West, we observe that leasing is not necessarily a second-best outcome. They are a response to:
First, variability in hydrological conditions, and
Secondly, strength of environmental and third party impact laws.
Surface Reservoir
Sale Volume
Lease Volume