Potential Implications of Groundwater Trading and Reformed ...

Case Study

Potential Implications of Groundwater Trading andReformed Water Rights in Diamond Valley, Nevada

Harrison Zeff1; David Kaczan2; Gregory W. Characklis, M.ASCE3;Marc Jeuland4; Brian Murray5; and Katie Locklier6

Abstract: This paper presents an ex ante analysis of a novel groundwater management reform being considered by irrigators in the DiamondValley, Nevada. Groundwater extraction for irrigation in the valley has considerably exceeded the natural recharge rate since the 1960s.The area was recently declared a critical management area (CMA) by the State Engineer of Nevada, which will trigger curtailment of waterrights unless other action halts unsustainable abstraction. We examined the likely impacts of a number of potential institutional structures thatcould be implemented as part of groundwater reform in the Diamond Valley. The major reform is a conversion from a priority-based curtail-ment of existing water rights to a shares-based system of gradually decreasing basinwide pumping allocations, an approach that offers someeconomic benefits to the region. The beneficial reforms, namely creation of a common market in which to trade rights and an ability togradually, rather than suddenly, curtail rights, can be built into the existing priority-based rights structure. However, the conversion of rights toshares offers limited additional basinwide benefits, and mainly affects farmer profits through the redistribution of some profit from seniorrights holders to junior rights holders. The redistributional nature of the institutional reform, paired with limited broader gains, may make itdifficult to reach legal agreement regarding changes to established priority-based water rights institutions. DOI: 10.1061/(ASCE)WR.1943-5452.0001032. © 2019 American Society of Civil Engineers.

Author keywords: Water markets; Groundwater; Hydroeconomic model; Depletion; Efficiency; Western United States.

Introduction

The establishment of water markets that allow trading of alloca-tions among rights holders is an increasingly common policy formanaging water. Worldwide, markets are now prevalent in a num-ber of surface water systems, both between agricultural users andbetween users in different sectors, particularly during times ofdrought. Prominent examples include Australia’s Murray–DarlingBasin (Grafton et al. 2011; Wheeler et al. 2014), and numerousbasins in Chile (Bauer 2004; Hearne and Easter 1997) and thewestern United States (Brookshire et al. 2004; Howitt and Hansen2005). The impetus for establishing these systems often comesfrom scarcity arising due to biophysical limits or government-or community-specified caps on total extractions. Markets allow

individuals to buy and sell well-defined water rights up to thelevel of the specified cap (Debaere et al. 2014). Although systemsdiffer in the type of rights—permanent water rights or temporaryallocations of water, for example—that may be traded, marketinstitutions assist in the reallocation of water toward higher-marginal-value uses and sectors (Lund and Israel 1995; Rosegrantand Binswanger 1994; Vaux and Howitt 1984) or regions(Hadjigeorgalis 2009), and the water price created provides a dy-namic incentive for efficiency improvements (Chong and Sunding2006; Thobanl 1997). Even where formal water markets do notexist, water users sometimes engage in informal trading in orderto capture efficiency gains (Easter et al. 1999).

Trading systems for groundwater offer similar potential forimproving economic efficiency (Knapp et al. 2003; Shah 1993;Palazzo and Brozovic 2014). However, despite theorized benefits,formal groundwater markets remain less common than surfacewater markets. This is due to most systems’ lack of secure and volu-metrically defined water rights, a prerequisite to trade (Gao et al.2013). In addition, groundwater rights are almost always correla-tive, meaning that they are linked to specific land parcels and there-fore difficult for private users to move over space. The efficiencybenefits of markets may further be constrained by transaction costs,third-party costs, and reductions in employment in areas that exportwater rights for use elsewhere (Easter et al. 1999; Lund and Israel1995). These effects must be balanced against the potential gainsfrom trades.

Particularly relevant for groundwater, however, is the factthat trading can minimize the economic cost of transitioning fromuncapped management (or lack of management) to capped manage-ment following severance of existing rights. This transition isimportant given both the economic importance of groundwater(Maupin et al. 2014; Zektser et al. 2005; WWAP 2015; Shahet al. 2007) and the rapid rate of depletion facing many aquiferstoday, which will likely induce greater policy action in the near

1Postdoctoral Researcher, Institute for the Environment, Dept. ofEnvironmental Sciences and Engineering, Univ. of North Carolina atChapel Hill, Kernville, CA 93238 (corresponding author). Email:[email protected]

2Senior Research Fellow, School of Commerce, Univ. of SouthAustralia, Washington, DC 20433.

3Professor, Institute for the Environment, Dept. of EnvironmentalSciences and Engineering, Univ. of North Carolina at Chapel Hill, ChapelHill, NC 27599.

4Associate Professor, Sanford School of Public Policy, Duke Univ.,Durham, NC 27708; Adjunct Senior Research Fellow, Institute of WaterPolicy, National Univ. of Singapore, Singapore.

5Director, Nicholas School of the Environment, EnvironmentalEconomics Program, Duke Univ., Durham, NC 27708.

6Researcher, Nicholas School of the Environment, Duke Univ.,Durham, NC 27708.

Note. This manuscript was submitted on December 27, 2017; approvedon August 7, 2018; published online on March 26, 2019. Discussion periodopen until August 26, 2019; separate discussions must be submitted forindividual papers. This paper is part of the Journal of Water ResourcesPlanning and Management, © ASCE, ISSN 0733-9496.

© ASCE 05019009-1 J. Water Resour. Plann. Manage.

J. Water Resour. Plann. Manage., 2019, 145(6): 05019009

Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

https://doi.org/10.1061/(ASCE)WR.1943-5452.0001032

https://doi.org/10.1061/(ASCE)WR.1943-5452.0001032

mailto:[email protected]

future (Wada et al. 2010). Failure to properly manage groundwaterresources can result in high extraction (Bruggink 1992; Famigliettiet al. 2011), reduce the sustainability of supply for human purposes,increase pumping costs, and cause environmental degradation ofgroundwater-fed surface streams and wetlands (Hornbeck andKeskin 2014; Wada et al. 2010; Zektser and Everett 2000). Thesechallenges have led to widespread calls for reduced total use andmore-efficient management (Gleeson et al. 2010; McCarl et al.1999). In California, groundwater markets have emerged as onepotential tool to help agricultural users meet the objectives laid outin the state’s Sustainable Groundwater Management Act, passed intolaw in 2014 (Babbitt et al. 2017; Green-Nylen et al. 2017).

As more aquifers face these problems, research that quantita-tively assesses the potential benefits (and costs) of groundwatertrading is required. We undertook an ex ante analysis of a novelgroundwater management reform being considered by irrigatorsin the Diamond Valley, Nevada. Groundwater extraction for irriga-tion in the valley has considerably exceeded the natural rechargerate since the 1960s. This has caused large and ongoing decreasesin the aquifer level of up to 3 ft=year. The area was recently de-clared a critical management area (CMA) by the State Engineerof Nevada (NDWR 2015), which will trigger curtailment of rightsunless other action halts unsustainable abstraction. Consistent withthe doctrine of prior appropriation (Bryner and Purcell 2003;Harrison 2001), which ranks the legitimacy of rights in order ofseniority, curtailment will target water rights in reverse order ofseniority.

As is allowed by Nevada state law, the irrigator communityplans to propose an alternative schedule of graduated water-rightscuts, alongside new provisions for groundwater trading and bank-ing to avoid the default cut. One suggested management regimewould redefine existing groundwater rights as shares of an overallextraction total, rather than as fixed quantities, that would alsobe tradable between farmers within the valley (ECD 2015; Young2015). This is similar to the rights structure that is used formanagement of surface water and some groundwater resources inAustralia’s Murray–Darling Basin (O’Keefe 2011; Connor andKaczan 2013; Young 2014).

Our analysis used a hydroeconomic model to integrate essentialfeatures of the spatially distributed resource, the dynamics of abstrac-tion, and the profit-maximizing behavior of farmers; Harou et al.(2009) provided an overview of hydroeconomic models. Water trad-ing is driven by the marginal economic value of water, as determinedby crop production functions and the cost of pumping, which varieswith groundwater depth. The aquifer level varies spatially across thestudy area, and temporally due to both localized seasonal drawdown,and basinwide annual drawdown. The aquifer sensitivity to extrac-tions was calibrated using Diamond Valley well abstraction datafrom 1960 to 2013. The behavior of actors was described by a profitfunction optimized subject to institutional and biophysical con-straints. Along with the quantity of water applied, agricultural pro-duction was allowed to vary due to cropping and fallowing optionscommonly used by farmers in the Diamond Valley. Individual irri-gators are well-described as profit-maximizing agents subject to con-straint, but this framework does not account for the externalitiesassociated with pumping, in particular the increased pumping costsin the future associated with lower overall groundwater tables. Sec-tion “Depth to Groundwater” discusses (and presents calculationsfor) this externality cost and the associated socially optimal ground-water level to put the various management plans under considerationin the Diamond Valley into context.

The Diamond Valley offers important advantages as a case studysite for the analysis of groundwater trading. It is a relatively simpleand isolated system, allowing for high confidence in model results

and the opportunity to clearly understand the implications of insti-tutional changes. Furthermore, the policy changes are relativelynovel, and if successful, could be extended to other locations inthe United States with declining water tables. The changes re-present a departure from two longstanding principles of western USwater law, prior appropriation (honoring water rights by seniority)and beneficial use (an obligation to apply water to specified pur-poses within a set timeframe, albeit often unenforced), by allowinglow-cost farmer-to-farmer trading and water banking (wherebyunutilized rights can be used at a later date). Our study also pro-vides insight into the factors that influence the potential benefits ofgroundwater trading.

Existing Markets for Groundwater Allocation

A number of markets and trading institutions for groundwaterexist globally, despite the governance challenges that often facesuch systems. Functioning formal markets exist in parts of theMurray–Darling Basin in Australia (O’Keefe 2011), and in manyparts of the southwestern United States (e.g., Arizona and theEdwards Aquifer in Texas) (Debaere et al. 2014; Votteler 2011).The Australian markets see trade in both annual leases and perma-nent extraction rights, i.e., rights are unbundled (Young 2014).In 2012–2013, 126 GL [102,150 acre-ft (AF)] of groundwater(both entitlements and allocations), or approximately 6% of totalgroundwater rights, were traded in New South Wales (NWC2014). The Edwards Aquifer of Texas is managed with extractionrestrictions to protect spring-dependent ecosystems (Howe 2002).These restrictions were initially specified by a cap on permanentwater rights, and since 2007 have taken the form of a cap on waterallocations during drought periods (Debaere et al. 2014). Trading ofallocations is permitted below these limits. In 2011, over 500 tradestransferred more than 52.5 GL (42,500 AF) of water between irri-gators or from irrigators to municipal users (Sugg 2013). Althoughit was suggested that greater trading is hampered by a lack of pricetransparency (Debaere et al. 2014), there is anecdotal evidence thattrade from agricultural to municipal users (in particular, the city ofSan Antonio) has spurred investment in irrigation efficiency andlowered the cost of water supply augmentation (Richter 2014).

Informal groundwater markets are more common. In irrigatedareas of Pakistan, groundwater is leased on a temporary basis—in exchange for cash or crop shares—by bore well owners to nearbyproperties without access to groundwater (Khair et al. 2012). Theseinformal trades have occurred in response to rapid depletion ofgroundwater resources and are reportedly helping to drive effi-ciency investments. In China, informal groundwater markets arosewith the spread of private wells following agricultural reforms. By2004, 44% of villages in the North China Plain were reported tohave active groundwater markets, and there is evidence that thesemarkets improve water use efficiency (Zhang et al. 2010). In India,groundwater irrigation accounts for over two-thirds of the country’stotal irrigated area, and informal markets for pumping services sup-ply groundwater to approximately half of that area (Banerji et al.2012; Mukherji 2008).

Although there is considerable literature investigating theseinformal institutions, mainly using econometric (ex post) or quali-tative approaches, few studies explicitly modeled formal ground-water trading in either existing or proposed forms. Exceptionsinclude Knapp et al. (2003), who used a hydroeconomic modelto predict the welfare impact of trade from Central Valley irrigatorsto municipal users in southern California with and without a market.Blanco-Gutierrez et al. (2011) modeled the cost reductions achievedby implementing a market, among other policies, to limit extraction



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

from Spain’s Mancha aquifer. Social cost savings were limited;however, their model showed that trading reduces private costs.Similarly, Gao et al. (2013) modeled cost reductions from imple-menting a cap on extractions from Western Australia’s Gnangarasystem. They found considerable benefits to trade, but the policydesign was complicated by a need for spatially differentiated restric-tions, given heterogeneous environmental impacts of extractionacross the area served by the aquifer.

Study Setting

The Diamond Valley is a relatively remote irrigation district inEureka County in central Nevada with a county population ofapproximately 2,000. It lies at the hydrological terminus of an in-terconnected regional hydrographic flow system. Water flow occursalong ephemeral surface streams and contributes to subsurfacegroundwater flow (Knochenmus et al. 2011). The system is iso-lated, both hydrologically and administratively, and neither feedsinto further catchments nor crosses state borders. The valley’sclimate can be characterized as semiarid midlatitude steppe in thebasin lowlands, and as subhumid continental in the mountainswhich rise on either side of the valley. Annual precipitation aver-ages 10 in. but is highly variable (WRCC 2005).

The primary economic activity in the Diamond Valley is thecropping of high-quality timothy hay and alfalfa, irrigated usingcenter-pivot technology with groundwater extracted from the val-ley’s underlying aquifer. The economic value of these two cropsalone is approximately $22.4 million annually (HEC 2014). A min-imal amount of water (∼5%) is additionally used for winter grainproduction, for ranching, and for urban uses (Tumbusch and Plume2006). Irrigation in the region commenced in the 1950s, expandedto approximately 29,000 acres in the mid-1980s, and has remainedroughly at that level in the years since, although current circle-pivotirrigation methods limit the wet irrigation area (total area under cul-tivation) to about 24,310 acres. Groundwater extractions rose instep with irrigated area, and are today estimated to be between72,000 and 93,300 acre-ft=year (NDWR 2014), based on crop areastatistics and water levels.

Current Groundwater Situation and Institutions inDiamond Valley

The USGS estimates the basin’s perennial yield at approximately35,000 acre-ft=year (Harrill and Lamke 1968; NDWR 2015). Thedifference between the perennial yield and the current high rate ofextraction has led to a large and ongoing decrease in groundwaterlevels, progressing at a rate of about 2–3 ft=year, and totaling about100 ft since the 1960s (Tumbusch and Plume 2006). Fig. 1 showsthis decline over the historical record (1961–2012) in data obtainedfrom four USGS long-term monitoring wells (USGS 2016). Thisdecline prompted a critical management area designation in August2015 (NDWR 2015).

As described in Nevada state legislation, the declaration sets inmotion a process to reduce overextraction. Given the rate of extrac-tion, this could involve a large (as much as 64%) curtailment ofexisting water rights to bring extraction into line with perennialyield. Curtailment would occur by 2025—10 years after theCMA declaration—in the absence of other actions to reduce with-drawals (NDWR 2015; Nev. Rev. Stat. § 534.037). As is typicalin many western US states, revocation would proceed by seniority(i.e., starting with rights most recently granted) (NDWR 2014;Nev. Rev. Stat. § 534.110). In the absence of any action, the aquiferlevel would continue to decrease, leading to increased ground-water pumping costs, an eventual reduction in irrigation, and a

reduction in the flow of several springs and wetlands (NDWR2014; Tumbusch and Plume 2006).

There are currently 401 Diamond Valley groundwater rights thatare held by 110 legal interests (Young 2015). Most farms inthe Diamond Valley thus draw on multiple rights that vary in theirseniority. The principle of prior appropriation requires that more-senior rights are granted a higher priority of water allocation intimes of shortage; pre-existing rights are protected as new water-use permits are granted (Bryner and Purcell 2003; Harrison 2001).Rights are specified as an entitlement to take an annually specifiedquantity of water rather than a share of what is available in agiven period (DCNR 2015). Beneficial use requires that extractedgroundwater be applied to purposes deemed beneficial by the stategovernment or by the courts (Toll 2011). In Nevada, such beneficialuses include irrigation, mining, stock watering, recreation, com-mercial, industrial, and municipal uses. Failure to “use beneficiallyall or any part of the underground water for the purpose for whichthe right is acquired or claimed” for 5 consecutive years can, at leastin principle, result in forfeiture of part or all of that right to theextent of the nonuse (Nev. Rev. Stat. § 534.090). This treatmentstands in contrast to the use of surface waters in Nevada, whichare no longer subject to forfeiture (Harrison 2001; Nev. Rev. Stats.§ 533.060). Both surface water and groundwater rights are reclaimedby the state in cases of abandonment (which applies in cases in whichthere is clear intent not to use water) (Harrison 2001).

The principle of beneficial use, in particular forfeiture, appearsto be weakly enforced, if at all, in the Diamond Valley. For exam-ple, rights in the region were originally granted based on anassumption of flood irrigation technology, through which farmerswould apply 4 AF/acre on a typical square-shaped 160-acre plot(or 640 AF/land parcel). Today, nearly all farmers use center-pivottechnology and thus typically irrigate only 125 acres, but pumpingrights that are not being used have not been curtailed. Groundwatermay be traded independently of land in Nevada (i.e., groundwaterrights are severable), via the Office of the State Engineer (NDWR2015). This right applies to both complete and partial water rights(i.e., water rights may be divided); however, partial rights sales arevery rare in the Diamond Valley due to limits on available landimposed by the Bureau of Land Management.

A number of mechanisms exist by which local commun-ities may participate in, and influence, groundwater management

Fig. 1. (Color) Water table levels between 1961 and 2012 for fourUSGS monitoring stations in the Diamond Valley. (Data from USGS2016.)



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

decisions [Fig. 2(a)]. A petition by a majority of local groundwaterrights holders can compel the State Engineer to designate a basinas a CMA (which the State Engineer can also designate on thebasis of the groundwater situation without petition). Following aCMA declaration, the State Engineer must cut water rights toachieve sustainable abstraction (after a waiting period of 10 years),or the community must propose alternative means—set out in agroundwater management plan (GWMP)—to return groundwateruse to sustainable levels. The GWMP must be adopted by the StateEngineer if it meets established criteria. The GWMP mechanismmay thus provide sufficient legal power to introduce institutional

reforms such as changes in the curtailment approach, or new trad-ing institutions that deviate from the principle of prior appropria-tion. We describe these possibilities in the following sections.

Alternative Rights Regimes

Diamond Valley irrigators have proposed alternatives (ECD 2015)which call for gradual rights reductions and/or a transition toshares-based allocations (Young 2015). Rather than curtailingthe most junior rights in their entirety, these alternatives wouldsee some or all rights converted to water shares. Water shares would

Fig. 2. (Color) Schematic representation of the stakeholders involved in groundwater management in Nevada under the (a) status quo; and(b) proposed new institutions for the Diamond Valley.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

represent an entitlement to a fraction of the basin’s total availablewater, rather than a fixed quantity of water. The basin’s extractiontotal would be chosen by the community and approved by the StateEngineer at the start of the program, and would decrease each year.The long-term goal is to reduce total net use to the perennial yieldamount (i.e., to 35,000 acre-ft=year, but which could be revisedunder conditions of changing water availability). The cost ofthe total extraction reduction could thus be more evenly distributedacross rights holders relative to a one-time rights curtailment, and itcould be imposed over a longer period. Introducing a more gradualcurtailment period also begins to affect the eventual groundwaterlevel at which the groundwater table will ultimately stabilize. More-gradual curtailment will cause the groundwater table to stabilize ata lower level, increasing potential agricultural revenue in the near-term but increasing the pumping costs for remaining irrigators inthe long term. This shares-based proposal has similarities withthe water management system used in Australia’s Murray–DarlingBasin (Young 2014).

There are several key negotiation points around the design ofthe shares-based system. The first is the length of time over whichthe reduction of abstraction to meet the perennial yield wouldbe achieved, because a longer time horizon would result in greatercumulative extraction and a lower water table. A second is the spe-cific size of the cut to each water right, and how that cut varies as afunction of the priority of the right. In contrast to the status quo,more-junior rights holders might not lose their right entirely, butwould lose a greater proportion of that right. Such a change wouldrun counter to the principle of prior appropriation and wouldrequire majority community agreement as well as the approval ofthe State Engineer. The community would also have to agree tocover all administrative costs, and would likely need to establisha local groundwater board that would allocate groundwater quan-tities to each share in each season according to the GWMP, andmonitor and enforce water use. To make it possible to implementany version of the plans under consideration, all use would have tobe metered, a formal water accounting system established, andpenalties for overuse of ground water enforced. Fig. 2(b) showsa possible institutional setup for this policy. A benefit of such ashares-based unbundled system is the potential for increased tradevia the introduction of opportunities to trade shares and tradeor bank allocations. Agreement on such a GWMP would putthe CMA-mandated water rights curtailment (planned for 2025)on hold.

Methods

This report presents a partial-equilibrium benefit–cost analysis ofdifferent scenarios that are aimed at clarifying the value of differentcombinations of changes in the water rights institutions in theDiamond Valley. The baseline against which we assessed thechanges is the default curtailment policy, although we also com-pared this baseline and the alternatives with a no-action regimeof continued overextraction. In addition to assessing the overall im-pacts of the potential policy changes, we considered the distributionof costs and benefits among stakeholders according to the seniorityof the affected water rights. This section describes the modelformulation, followed by the specific institutional scenarios thatwere analyzed, and finally the data that were used to parameterizethe model.

Model Formulation

Costs and benefits were calculated using a hydroeconomic optimi-zation model which mathematically integrates essential features

of the spatially distributed groundwater resource and profit-maximizing decisions by farmers, as constrained by the water rightsinstitutions specified in different scenarios. Within the model, waterallocations among farmers are driven by the marginal economicvalue of water, determined on the basis of the revenues from cropsproduction, net of pumping and other costs. Decisions in the modelare made at the scale of the individual well: each well is linkedto a specific Diamond Valley landholder and corresponds to anirrigated plot (i.e., an individual 160-acre parcel of land, whichis typically irrigated using center-pivot irrigation that covers125 acres). Landholders may own more than one well in the basinand hold multiple water rights of varying priority for their multipleassociated plots; these are aggregated into a landholder-specificfarm. Agricultural production and quantity of extracted ground-water is allowed to vary on the basis of irrigator decisions, withlinkages between aquifer level and pumping activity maintainedthroughout. The aquifer level, which dictates water availabilityand cost, varies spatially across the study area and varies temporallydue to both seasonal drawdown from local use and annual draw-down from basinwide use.

In order to facilitate analysis of the effects of alternative waterrights institutions, the model is structured to allow the purchaseand sale of water rights by farmers to achieve optimal pumping,subject to varying constraints on total pumping. Specifically,the model solves for maximum farm-level operating profits, whichinclude the aggregated plot-specific irrigation profits from agricul-tural production over all of a landowner’s plots, plus the revenuesfrom the sale of water allocations (or minus their purchase). In thisformulation, irrigation profits correspond to the revenue associatedwith the sale of crops grown at an individual plot, minus theoperating costs at that plot. The net benefits calculation does notaccount for metering/transaction costs associated with a specificpolicy.

We assumed that each agricultural plot, w, has a productionfunction such that

yc ¼ fc

�Qw;

Xf

Hf;m;c

�ð1Þ

where yc = yield (t) for crop c; Qw = total applied water on plot w(AF); and Hf;m;c = other farm input f (fertilizer, pesticide, labor,and so on) for crop c using management practice m.

We also assumed that each agricultural plot is a profit-maximizing agent, subject to

OPw ¼ Pcyc − aw;yQw −Xf

bfHf;m;c ð2Þ

where OPw = total operating profit at plot w; Pc = price of crop c($=t); aw;y = cost of water at plot w in year y ($=AF); andbf = cost of other farm input f.

The cost of water from irrigation well w in year y (aw;y) can beexpressed as a function of the initial depth to the groundwater table,as well as the total pumping at well w, by year, such that

aw;y ¼ L ��GWw;y þ

kQw

2

�ð3Þ

where GWw;y = depth to groundwater table (ft) at well w in year y;L = pumping lift cost ($=AF-ft); and k = intra-annual drawdownconstant (ft=AF).

If we assume that both yield from crop c and the costs of otherfarm inputs are a linear function of the total irrigated area on plot w,Eq. (1) can be expressed as a function of crop type, management



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

practice, and pumping costs, which vary according to the depth ofthe water table

OPw ¼ Qw ×

�Aw

�zcPc −OCm;c

FYm

�− L ×

�GWw;y þ

kQw

2

��

þ AwzcPcRy

FYmð4Þ

where zc = maximum crop yield for crop c (t=acre); FYm =irrigation volume required for full yield under management methodm (AF); OCm;c = acreage-based farm input costs ($=acre);Ry = total irrigation season precipitation in year y (ft); and Aw =plot area (acre). The bracketed term in Eq. (4) accounts forthe operating profit generated from crop yield that is supportedby pumped irrigation water, whereas the final term correspondsto the precipitation-induced crop yield. Precipitation during theirrigation season (April–October) is responsible, on average, for12.5%, or 0.5 in., of total water requirements. The effect of croprotation patterns, management practices, and variable operatingcosts on total farm operating profits are subject to sensitivity analy-sis in section “Sensitivity to Heterogeneity.”

The well-specific water table depth GWw;y is estimated as

GWw;y ¼ GWw;y−1 þ dw ×½Pnw

w¼1ðQw − IwÞ − SY�nw × Aw × ET − SY

ð5Þ

where dw = annual drawdown constant (ft=AF); Iw = rateof infiltration (AF); SY = sustainable yield of the aquifer (AF);and ET = consumptive use of irrigated crops (AF=acre). The draw-down constant d at each well is calibrated based on historicaldrawdown rates at four monitoring wells with long (>50 years)historical records. Specifically, at each well w, the drawdown ratedw is a proximity-weighted function of the drawdown rates at thenearest two long-term monitoring wells

dw ¼ d1 þ�Xw − X1

X2 − X1

�× ðd2 − d1Þ ð6Þ

where d1 = drawdown rate at the nearest monitoring well with alatitude greater than the latitude of well w; d2 = drawdown rateat nearest monitoring well with a latitude less than the latitudeof well w; and Xw = well latitude.

In each year, pumping volumes are allocated across all wells tomaximize basinwide profits from irrigation

fðQÞ ¼ max

�Xnww¼1

OPw

�ð7Þ

This optimization problem is solved using the interior-pointalgorithm in MATLAB, an iterative maximization algorithm thathandles constrained nonlinear systems of equations (Mathworks2016).

Total pumping in the basin is constrained by the annual limits onextraction cy under a specific institution

Xnww¼1

Qw;y ≤ cy ð8Þ

Furthermore, the maximum annual pumping at each well isbounded between zero (nonnegativity constraint) and the irrigationvolume required for full yield at a plot, minus the total irrigation-season precipitation

0 ≤ Qw;y ≤ FYm − Ry ð9Þ

In institutional scenarios that include water rights trading, thevolumetric price of the groundwater right is equal to the in situmarginal net benefit (MNB) (i.e., the value of water in the ground)of the least productive activity receiving an allocation of ground-water. This price is equal to the marginal net benefit value becauseit is the price that the last irrigator in the market would bid for theright to pump. This marginal net benefit of a given use of water at awell is also equal to the first derivative of operating profit, withrespect to Qw

MNBw ¼�Aw

�zcPcRy

FYm−OCm;c

�− L × ðGWw;y þ kQwÞ

�

ð10Þ

Water rights confer a pumping allocation on the basis of thevolume of the water right, the priority of the right, and two institu-tional reform parameters: the rights-to-shares conversion factor(RS; 0 ≤ RS ≤ 1), and the shares-to-allocation conversion factor(SA). Each separate right rt is assigned a priority rank prn onthe basis of the date on which the right was granted; the most seniorright is given a rank of 1, and the most junior right is given a rank ofnR, which is the total number of separate right parcels granted in thebasin. The rights-to-shares conversion factor is a policy parameterthat is used to represent how each water allocation is scaled as afunction of the right’s priority. The shares-to-allocation conversionfactor is used to scale the total basin-wide allocation to the pumpinglimit in a given year, such that

PArt ¼ VrtRSprnSAy ð11Þ

where PA = pumping allocation; and V = water right volume.The number of shares in the basin remains constant throughout

the course of the simulation. Each year, shares can be converted topumping allocation on the basis of the annual pumping limit

SAy ¼cyPnrt

rt¼1 VrtRSrtð12Þ

Allocations for each well are then aggregated by individualrights holders, f, to determine a rights holder’s total pumping al-locations in a given year, and these are compared with the optimalpumping levels calculated in Eqs. (4)–(9). The difference betweenallocated pumping and actual pumping is restricted to zero in sce-narios without trading. When trading is allowed, this difference,RSPf, can be positive or negative, indicating water rights salesor purchases, respectively, such that

RSPf ¼ PAf −Qf ð13Þ

The sum of RSP across all parties, f, equals zero, indicating thatthe market for pumping allocations clears.

Total profit is aggregated at the rights-holder level and is equalto the irrigation operating profit across all rights-holder wells plusrights sales (or minus rights purchases)

NBf ¼ wp × RSPf þXfwnfw

w¼fw1

Rw ð14Þ

where fw = index of wells owned by right holder f; NB = netbenefit; and wp = water price as calculated in Eq. (10), i.e., themarginal net benefit.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

Two additional constraints are applied to pumping at each well.If, in any year, the depth to the water table at an individual welldrops below the depth of that well, no pumping can occur unlessa new well is drilled. New wells are drilled only if the additionaldiscounted value from irrigation at that well is greater than the coststo drill a new well to 300 ft, plus the costs to relocate the pumpstation, over an investment horizon of 20 years. The expected addi-tional value of irrigation at that well is equal to the operating profitthat could be generated through irrigation of the entire plot minusthe value of the water rights needed to achieve irrigation of theentire plot

VNWw

¼Xyþ20

EVY¼y

AwðzcPc −OCm;cÞ− FYmðL× ðGWw;y þ kQw2Þ þ wpyÞ

ð1þ drÞEVY−y

ð15Þwhere VNW = expected additional value of irrigation; EVY =evaluation year; and dr = discount rate.

Wells must also be financially viable (i.e., profitable) for pump-ing to occur, and this consideration reflects both the marginal andfixed costs associated with irrigation. Optimal pumping at eachwell is determined on the basis of the marginal net benefits of irri-gation, but the total profit from a given well must at least cover thefixed costs of operating the associated plot of land. The total profitat a well differs from the operating profit in that it must account forthe cost of purchasing additional pumping rights, and this fixedcost. Individual rights holders maximize their profit by applyingtheir own pumping allocations to their highest marginal net benefitplots. Once all of a rights holder’s pumping allocations have beenassigned to these high-value plots, the rights holder may purchaseadditional water rights/shares, and the total profit at the remainingwells is then

PRw ¼ Qw ×

�Aw

�zcPc −OCm;c

FYm

�− L ×

�GWw;y þ

kQw

2

��

þ AwzcPcRNy

FYm− wpyðQw − PAw;fÞ − Fw ð16Þ

where PAw;f = remaining pumping allocation available at well w;and Fw = fixed cost for farming the associated plot. For farming andpumping to occur, PRw must be greater than or equal to zero.

Institutional Scenarios

Initial pumping in all scenarios is based on estimates of fullirrigation of 227 plots (∼3.5 AF=acre under average precipitation),or 99,300 AF=year basinwide. However, there are currently135,000 AF of groundwater rights in the Diamond Valley, becausethe rights were originally issued with the intention of providing4 AF=acre of irrigation. The current center-pivot irrigation tech-niques use closer to 3.5 AF=acre of irrigation and only reach 125of the 160 acres on each plot. Water rights curtailments made in thisanalysis assume that irrigators retain the full volume of their waterright, not the estimated amounts of pumping.

The Diamond Valley hydroeconomic model was run under fiveinstitutional scenarios that represented different potential manage-ment strategies aimed at reducing extractions to the perennial yieldof 35,000 AF=year1. Scenario A: immediate curtailment based on prior appropria-

tion, as mandated by law, 10 years after the CMA declaration(i.e., only the 85 most-senior rights representing 35,000 AF ofpumping are preserved);

2. Scenario B: Scenario A, but allowing for trading of full or partialwater rights;

3. Scenario C: immediate curtailment to 99,300 AF according toprior appropriation, followed by gradual additional curtailmentat a rate of 3%=year, continued under prior appropriation, untilnet extraction is equal to the perennial recharge, and allowingfor trading;

4. Scenario D: immediate conversion of all junior rights (i.e., allbut the most senior 35,000 AF of rights), to shares that translateto a total pumping allocation of 64,300 AF (leaving the35,000 AF of senior rights intact), followed by a gradualcurtailment of the junior shares at a rate of 3%=year, untilnet extraction is equal to the perennial recharge, and allowingfor trading; and

5. Scenario E: Scenario D, but applying a rights-to-shares conver-sion for all rights.Finally, for comparison purposes only, we simulated outcomes

for a no-action policy, although this is not the appropriate baselinegiven the legal mandate imposed by the CMA declaration to reducepumping to the perennial yield, and thus was not considered aninstitutional option scenario in our analysis.

As such, the key institutional variables evaluated were theeffects of trading (Scenarios B–E), gradual (rather than one-time)curtailment of water rights (Scenarios C–E), and the specific rights-to-shares conversion formulas that ascribe greater or lower primacyto more-senior rights (Scenarios D and E). For the latter, inScenario D, at the beginning of the management period, the mostjunior 100,000 AF of rights are converted to shares on the basis of alinear function of their priority rank, such that the most junior rightis converted into a share equal to 70% of its total value (in AF), andthe most senior of those 100,000 AF of junior rights is convertedinto a share equal to 100% of its total value (Table 1). This 70%rights-to-shares conversion rate is an arbitrary benchmark set dur-ing discussions with Diamond Valley irrigators. We examine theimpact of different conversion rates in section “Rights-to-SharesRatio” and Table 6. These shares are then converted to pumpingallocations such that the conversion initially yields a total of64,300 AF of pumping for the junior rights holders (in additionto the 35,000 AF that remain unchanged for the senior rights hold-ers), which declines to zero by the end of the curtailment period,leaving only the senior rights holders holding pumping rights at theend of curtailment. In Scenario E, the conversion is similar, exceptthat all existing 135,000 AF of water rights are converted to sharesat the start of the management period, again on the basis of a linearfunction of their priority date. Thus, the most junior right is con-verted into a share equal to 70% of its total value, and the mostsenior right is converted into a 100% share. These shares are thenconverted to allocations such that the total initial pumping alloca-tion is 99,300 AF. Gradual curtailment proceeds at the same3%=year rate for 30 years, until total pumping is reduced to theperennial yield. In a sense, Scenarios D and E bound the range

Table 1. Illustrative example schedule of rights-to-shares conversion basedon priority date of the right

Right priority dateRights

volume (AF)Rights-to-shares

ratioTotalshares

January 1, 1955 400 1 400May 4, 1960 250 0.925 231.25June 2, 1968 1,280 0.85 1,088October 3, 1988 440 0.775 341February 3, 2013 550 0.7 385



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

of likely potential rights-to-shares scenarios for a gradualcurtailment. Scenario D is perhaps most consistent with prior ap-propriation in protecting the senior rights that correspond to theperennial yield of the aquifer, whereas Scenario E is most equitablein sharing rights reductions while still weighting seniority to somedegree.

We further assumed that no changes in management practicesoccur without incentives to reduce pumping. In other words, inScenario A, senior rights holders have no incentive to reduce waterpumping, and thus do not engage in improved management. In allother scenarios, however, trading gives rights holders an incentiveto improve management because this allows them to increaserevenue from trading unneeded rights [as in Eqs. (7)–(10)]. In ad-dition, for Scenarios C–E with immediate and gradually increasingcurtailment, we assumed that the initial cutback in rights is tothe initial pumping level of 99,300 AF and is based on prior ap-propriation (i.e., only the 284 most-senior rights representing99,300 AF of pumping are preserved), followed by further curtail-ment at a rate of 3% per year, until net extraction is reduced to35,000 AF. This curtailment rate is consistent with early discus-sions about potential alternative reduction schedules in theDiamond Valley (Young 2015). In all cases, rights holders drilla new well at a plot when the benefits from additional irrigationat that plot are greater than the cost of drilling plus any revenuefrom selling the rights.

Data

To calculate the net benefits under each management institution, theDiamond Valley hydroeconomic model requires detailed data onwater rights ownership, along with the location of and depth togroundwater at each irrigation well, historical measures of aquiferdepth, crop budgets, management practices, and crop prices. Thesedata were obtained from a variety of sources in the Diamond Valleyand Nevada, as summarized subsequently.

Groundwater DepthThe depth to the water table in the Diamond Valley aquifer is mod-eled to vary across space (with a clear north-to-south gradient) andtime (gradual drawdown based on pumping levels), as a function ofthe water extraction rate. Drawdown in the model was calibrated bycombining a 50-year historical record of aquifer depth data at fourlocations across the Diamond Valley with 179 USGS wells thatprovide a more detailed spatial representation of recent aquiferdepths (Fig. 3). Lack of metering in the basin precludes detailedunderstanding of pumping over time, but the historical water-leveldata revealed a roughly constant decline throughout much ofthe record (Fig. 1). As such, the longer time-series data from thefour wells were used to estimate a linear relationship betweentotal consumptive pumping in the basin—assumed to besteady at 99,300 AF=yr over this period, based on experimentsconducted by the Diamond Valley Producer’s Cooperative (DVPC)

Fig. 3. (Color) (a) Location of USGS monitoring wells in the Diamond Valley; and (b) irrigation wells and depth to well bottom in the DiamondValley.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

(Jim Gallagher, President of Diamond Valley Producer’s Co-operative, personal communication, 2016) —and aquifer drawdownmeasured at those wells, to allow approximation of spatially explicitwater table declines under reduced pumping and using Eq. (3). Inaddition, water table depths at each well are allowed to vary intra-annually in the model, because seasonal irrigation pumping in-creases the cone of depression around each well. Data loggers ata select number of irrigation wells in the Diamond Valley showedwater tables dropping by about 20 ft over the course of the irrigationseason (April–October), followed by rebound in the nonirrigationseason. In lieu of detailed data relating pumping rates to well-specific drawdown, the model assumes a constant rate of 20 ft undertypical pumping levels, and does not include neighbor effects.

This simplified water budget model of groundwater rechargeand discharge may not be appropriate for many groundwatersystems (Bredehoeft et al. 1982). However, it is appropriate for theDiamond Valley because its aquifer is a terminal basin. As such,changes to the aquifer level over the ranges considered by this studyare not likely to significantly affect natural recharge.

Water Rights and Irrigation Well DataAll groundwater rights held by Diamond Valley irrigators wereincluded in the analysis, including those recently granted to sur-face water irrigators and ranchers to compensate them for deple-tion of groundwater-fed springs. Each water right has a uniquepriority date, duty (volume), and owner (Fig. 4). Furthermore, localrecords identified 227 irrigation wells as being operational (welldepth > 150 ft) and linked to water rights. Each such well is asso-ciated with a 160-acre plot of land, and the records indicate itslatitude and longitude, maximum depth, and owner. Maximum welldepth is used in the model to determine whether the well remainsviable as the water table declines. The drilling of a new well is as-sumed to cost $275=ft, including the cost of lowering the pumpstation. The model also assumes that any new well is drilled to adepth of 300 ft, which is the County Engineer’s estimate of theaquifer’s floor.

Farm Management DataTwo crops, alfalfa and timothy hay, are grown in the DiamondValley. For reasons related to soil conservation and nutrient content,all farmers appear to follow a strict rotation of timothy hay for4 years followed by 7 years of alfalfa production. Because the yearof this rotation cycle at each farm is unknown, the model is initial-ized by randomly assigning to each plot of land a starting point onthis cycle (one of 11 possible years). The relationship betweenyield and irrigation is then dependent on plot-specific managementskill. Given the lack of widespread metering in the Diamond Valley,estimation of the precise irrigation volume needed to reach full

yield (5.5 t=acre for both alfalfa and timothy hay) is not possible.Most Diamond Valley irrigators currently operate under the as-sumption that approximately 4 AF=acre of irrigated land (includingan average of 0.5 ft annual precipitation) is used to reach full yield,but DVPC data suggest that much of this water is lost to deepinfiltration, and that irrigation can be reduced by up to 25%(3 AF=acre) with no effect on yield. Reducing water lost to deepinfiltration will have no effect on overall aquifer levels, but mayhave an impact on the distribution of farm-level profits in aconstrained groundwater market.

Although the DVPC did not explicitly track the costs of im-proved management practices, it is likely that the primary reasonfor the lack of widespread adoption of similar water-saving prac-tices, which should reduce pumping costs, is the cost of increasedvigilance or irrigator effort. Improved management practices couldbecome profitable if total water rights in the basin were reduced andthe value of groundwater increased. To represent this situation, im-proved management methods were assumed to increase total laborcosts by 50%, a value that exceeds current potential savings fromreduced pumping and that is consistent with conversations heldwith local farmers. Learning costs were not included, althoughit is unlikely that new labor-intensive methods would be adoptedthe instant they become profitable. Thus, the main analysis as-sumed a gradual transition to improved management, at a rateof 2% of plots per year. Once a plot adopts more-efficient manage-ment, it continues to use that method until the end of the modelsimulation.

Crop Production and Price DataData on crop yields, production costs, and crop prices were ob-tained from the DVPC. Alfalfa can be deficit-irrigated; specifically,this crop is estimated to generate 80% of total yield with 70% of itsirrigation requirement (Doorenbos and Kassam 1979). However,irrigators in the Diamond Valley also have the option to fully irri-gate a reduced area using the center-pivot irrigation technology.Although reduced irrigation acreage would linearly reduce yields(70% of yield for 70% of the irrigation requirements), simple cal-culations indicate that reduced variable costs for fertilizer, seed, in-secticide, and so on make irrigating a smaller area more profitablethan deficit irrigation over an entire plot. Therefore, total pumpingat each well is assumed to be directly proportional to total irrigatedacreage and yield at that plot. Each plot incurs both fixed and var-iable costs (Tables 2 and 3). Revenues are then obtained from multi-ple cuttings of alfalfa and timothy hay, each of which have differentprices that vary according to the cutting (Table 4). Each cutting isassumed to have the same irrigation need, and the total generatedrevenue is thus equal to a weighted average of the different prices.Given traditional management methods, timothy hay generates anoperating profit of $926/irrigated acre and alfalfa generates an op-erating profit of $847/irrigated acre, before the cost of electricityused to run irrigation pumps is included.

Base-Case and Sensitivity AnalysesIn the base-case analysis, the net profits from irrigation, includingthe purchase and sale of groundwater rights (or shares-based allo-cations, when applicable), are calculated at each irrigation well inthe model over a period of 30 years. Net profits are presented as anet present value (NPV) over these 30 years, calculated at a 3%discount rate. The “Results” section presents the overall net bene-fits as well as the net benefits for three different groups of rightsholders1. Senior only—these 9 farmers (owning 15 wells) hold only rights

that predate May 1960. Thus, under the default policy of suddencurtailment according to prior appropriation, these rights wouldremain.

Fig. 4. (Color) Cumulative water rights issued in the Diamond Valleyby priority date.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

2. Mixed—these 17 farmers (owning 115 wells) own some seniorrights, but also own rights granted after May 1960. They wouldthus lose some, but not all, of their water rights under the defaultpolicy.

3. Junior only—these 40 farmers (owning 97 wells) hold onlyrights granted after May 1960, and would thus lose all pumpingrights under the default policy.We also conducted a sensitivity analysis in order to better

understand the key assumptions that could impact the magnitudeof gains from reforms to water management institutions. Both localand global sensitivity tests were run to examine the impact ofincreased heterogeneity in farm-level variable costs, more flexibil-ity in crop rotation patterns, and changing the rate at which indi-vidual farms adopt better management practices. In addition, weevaluated the water management institutions under three specialscenarios: one in which gradual curtailment occurs more quickly,at 6%=year; one in which rights are taken away to reflect beneficial

use (i.e., before any curtailment occurs, rights are reduced by 32%to reflect more efficient irrigation and a smaller irrigation area perplot); and one in which the priority weight applied to the rights-to-shares conversion can be changed.

Results

Depth to Groundwater

We began by considering the varying effects of the various modeledinstitutions on the water table depth in the aquifer underlying theDiamond Valley, compared with a no-action policy. Under the de-fault CMA policy (Scenarios A and B), the water table declinesrapidly (as in the no-action case) for 10 years until rights are cur-tailed, at which point the water table immediately stabilizes (Fig. 5).

Table 3. Farm fixed costs

ExpenseOverhead

costs ($=plot)

Liability 1,750Office and travel 750Buildings, insurance, and equipment 2,500Land 9,500Machinery and vehicles 4,500Total 19,000

Source: Data from Diamond Valley Producer’s Cooperative (unpublisheddata 2016).

Table 4. Crop prices

CropRevenue($=t)

Yield(t=acre)

Timothy hay, first cutting 300 3.5Timothy hay, second cutting 250 2Alfalfa, first cutting 230 1.7Alfalfa, second cutting 210 2.2Alfalfa, third cutting 230 1.6

Source: Data from Diamond Valley Producer’s Cooperative (unpublisheddata 2016).

Table 2. Farm operating costs

Expense

Alfalfa, traditionalmanagement($=acre)

Alfalfa improvedmanagement($=acre)

Timothy haytraditional management

($=acre)

Timothy hayimproved management

($=acre)

Rodent control 5 5 5 5Insecticide 10 10 10 10Herbicide 20 20 20 20Fertilizer 100 100 350 350Seed 12 12 12 12Hired labor 83 124 83 124Operator labor 48 72 48 72Accounting and legal 4 4 4 4Fuel and lube 35 35 35 35Maintenance 50 50 50 50Utilities 2 2 2 2Miscellaneous 5 5 5 5Total 374 439 624 689

Source: Data from Diamond Valley Producer’s Cooperative (unpublished data 2016).

Fig. 5. (Color) Observed and estimated changes in the average depthto groundwater at historical wells under no-action, default suddencurtailment, and two alternative gradual-curtailment-rate policies.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

In the gradual curtailment scenarios (Scenarios C–E), slight reduc-tions in pumping begin immediately, reducing the decline of thewater table for the first 10 years relative to the default CMA policyof sudden curtailment after 10 years. At a curtailment rate of 3% peryear, however, it takes significantly more than 10 years for pump-ing to reach a sustainable level, leading the water table to stabilizeat a slightly lower level than under the default CMA policy, whichindicates somewhat greater cumulative extraction of water underthis institution. When pumping reductions are implemented at afaster rate (e.g., 6% per year), the water table instead stabilizesat a higher level than under the default CMA policy.

Importantly, without any policy action, the water table wouldcontinue to drop rapidly over time, and eventually lead to exhaus-tion of water storage in the aquifer. Predicting when the bottom ofthe aquifer would be reached—estimated to be at 300 ft belowground level—is difficult due to lack of data about the specificshape and behavior of this underground storage reservoir. However,assuming that the historic relationship between extraction anddepth remained stable, most wells (even if they reached the aquiferfloor) in the southern part of the valley would no longer be viableby 2090, and only a small number would remain by the beginningof the next century, which would effectively end the decline. Amanagement policy that is able to stabilize the groundwater tablebefore these depths are reached will provide benefit to the DiamondValley in the form of lower capital costs due to stranded wells,avoiding issues related to land subsidence, and the return of flowto the springs in the northern portion of the valley. Quantifying thebenefits of avoiding complete aquifer depletion was beyond thescope of this work, but all Scenarios (A–E) discussed here helpto achieve these groundwater management goals by stabilizingthe aquifer through policies of curtailment.

One important question for groundwater policy in the DiamondValley is the optimal rate (and amount) at which rights curtailmentshould proceed. This will determine the level at which the ground-water table ultimately stabilizes, and thus the long-term pumping(lift) costs for the remaining Diamond Valley irrigators. Ourmethodology incorporates the marginal cost of pumping into thedecision-making process for irrigators, but it does not includethe externality costs associated with the marginal increase in futurepumping lifts from the reduced groundwater table. Using observedlevels of drawdown at the four long-term observation wells, as-sumed constant levels of total Diamond Valley groundwater pump-ing, and Eq. (3), we can calculate the groundwater table drawdownat each well per AF of pumping in excess of the 35,000 AF=yearsustainable yield of the basin. Most wells observed drawdownsranging between 3.0 and 3.5 × 10−5 ft=AF excess pumping, withan average drawdown across all active wells of 3.1 × 10−5 ft=AF.Under typical pumping conditions in the Diamond Valley describedin Table 5 (electric pumps and low-pressure irrigation systems),lift costs for one AF of water are $0.125=ft, in line with irrigatorfinancial records provided by the Diamond Valley Producer’sCooperative. For every AF of excess pumping, on average,$3.875 × 10−6 is added to the cost of pumping one AF of water

in the future (due to increased lift costs). If this value is appliedto 3.5 AF=acre of pumping at every well, a 3% discount ratetranslates into $12.77 of NPV externality cost per AF of excesspumping (assuming 100 years of continuous irrigation). This valueis significant, but not enough to suggest that groundwater levelsare anywhere near the socially optimum level. Before includingpumping costs, operating profits are $847=acre for alfalfa and$926=acre for timothy hay. Assuming the status quo applicationof 3.5 AF=acre and a pumping cost of $0.125=ft, the groundwatertable would have to be over 1,900 ft below surface before alfalfaproduction becomes unprofitable (over 2,100 ft for timothy hay). Ifthe marginal externality cost is added to this pumping cost, thisdepth is reduced to only 1,824 and 2,000 ft for alfalfa and timothyhay, respectively. This is significantly deeper than what is believedto be the bottom of the Diamond Valley groundwater aquifer(∼300 ft).

There is also, however, a distributional aspect to this ground-water externality cost. All of the excess pumping is, by definition,done by irrigators with junior rights. However, the costs of the re-duced groundwater table are felt by all irrigators, junior and senioralike. Rights holders with only senior rights see no benefit frombasinwide pumping beyond the 35,000 AF sustainable yield ofthe aquifer, but they do experience higher lift costs from the addi-tional pumping. If we consider only the externality cost to thesesenior-only rights holders, it translates into $1.69 of lost NPV/AFof excess pumping. At current rates of overextraction, thistranslates into $108,910 of additional pumping costs per yearfor senior-only rights holders, or about 7.5% of the current annualoperating profit for the group. The benefits from pumping to juniorand mixed rights holders are much higher than these costs, but thedistributional effects suggest that some form of groundwater man-agement is needed, even though current groundwater levels are sig-nificantly higher than what would be considered socially optimal.

Economic Benefits to Irrigators

The analysis next considered the economic implications of eachgroundwater management policy, first for Diamond Valley irriga-tors as a whole, and then for the three classes of rights holders(senior only, mixed, and junior only). The relative impact of eachmanagement policy (Scenarios A–E) is illustrated in Fig. 6. Eachsuccessive policy results in some level of overall NPV gains forDiamond Valley irrigators, although the overall gains from intro-ducing markets for rights trading (Scenario B) and imposing agradual (3%=year) curtailment of rights (Scenario C) are muchlarger than the gains from the rights-to-shares conversion intro-duced in Scenarios D and E. The overall gains accrue to all usergroups, except in Scenario E, in which large gains to junior-onlyrights holders come at the expense of large losses to senior-onlyrights holders.

For the default CMA policy without trading (Scenario A), irri-gation generates a NPVof $273 million in operating profits. Seniorrights holders accounts for $33 million of this amount, farmers withmixed rights receive $162 million, and farmers with only juniorrights generate operating profits of $78 million (Fig. 6). Trading(Scenario B) allows for an increase in total NPV of 11% (to$302 million), with gains being distributed equitably among seniorrights holders (12% gain, to $37 million), mixed rights holders (9%gain, to $177 million), and junior rights holders (15% gain, to$90 million). The ability to purchase water rights allows a smallnumber of junior rights holders to continue farming beyond the dateof curtailment. This reallocation of rights through trade distributeswater to more-valuable uses within the Diamond Valley, as seniorrights holders sell some of their rights to junior rights holders with

Table 5. Pumping lift cost estimates

Factor Value

Pump efficiency 0.725Electric motor efficiency 0.9Water weight 2.72 × 106 lb=AFLift energy 3.77 × 10−7 kWh=ft-lbEnergy cost $0.08=kWhTotal lift cost $0.1257=AF-ft



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

lower pumping costs and/or improved management practices,increasing the value of a given volume of water. The fact that gainsfrom trade are relatively modest (an increase of 11% comparedwith the no-trade scenario) is largely a consequence of relative eco-nomic homogeneity throughout the region. The effects of increas-ing regional heterogeneity are examined in section “Sensitivity toHeterogeneity.”

In the gradual-curtailment scenarios (C–E), NPV increases aswould be expected given the higher cumulative pumping (at a rightscurtailment rate of 3% per year) noted in section “Depth to Ground-water.” In Scenario C, NPV increases 9% relative to Scenario Band 21% relative to Scenario A (to $329 million) (Fig. 6); the onlydifference between Scenarios B and C is the gradual curtailment ofrights, starting in Year 1, under Scenario C, in contrast to the sud-den curtailment after 10 years in Scenario B. Fig. 6 also showsbenefits to all three rights holder groups, including a 10% gain(to $40 million) relative to Scenario B for senior rights holders,who take advantage of the increased opportunities for trade. By start-ing a market in Year 1 (as opposed to Year 10 as in Scenario B) andincreasing the number of junior rights holders that are able to pumpwhile their groundwater rights are being withdrawn gradually,the price and volume of rights sold by senior rights holders increase,raising their overall operating profits. Mixed rights holders generateNPV of $189 million, due to increased pumping under their juniorrights and a better market for their senior rights, an increase of 7%over Scenario B. Finally, junior rights holders, who benefit fromincreased opportunities to pump, see an increase in NPV of 11%,to $100 million.

Over the course of the entire 30-year simulation, an increase inthe rate of curtailment reduces overall pumping and farmer revenue.An alternate Scenario C (not shown in Fig. 6) using a gradual cur-tailment rate of 6% per year reduces the total NPVoperating profit

to $235 million, or 24% less than Scenario B (and 31% lower thanScenario C using a gradual curtailment of 3% per year). Theselosses are primarily felt by farmers with only junior rights, whoproduce an NPVof $43 million in operating profit (a 59% reductioncompared with sudden curtailment in Scenario B, and a 64%reduction from the Scenario C baseline). Those with mixed rightssee their net present value operating profits reduced to $152 million,a 14% reduction from Scenario B and a 21% reduction fromthe baseline gradual curtailment case. Senior rights holders areunaffected by changes to the curtailment rates.

In Scenarios D and E, priority-based water rights are convertedto shares. The impact of this conversion, relative to the gainsfrom trade (Scenario B) and gradual curtailment (Scenario C) isillustrated in Fig. 6. This institutional change allows the mostefficient holders of junior rights (who are in both the junior andmixed groups) to offset their fixed costs and stay in productionfor a slightly longer period, resulting in overall gains of about1% (Scenario D) and 1.6% (Scenario E) relative to Scenario C.However, Fig. 6 also illustrates substantial distributional differen-ces between Scenarios D and E. In Scenario D, senior rights areprotected from any curtailment, whereas in Scenario E, all rightsare subject to curtailment (albeit with a preferential weight appliedto seniority). Holders of only junior rights generate $137 million inNPV, an increase of 37% compared with Scenario D. In contrast,mixed and senior only rights holders generate $174 million and$24 million in NPV, respectively, a 10% and 41% decrease for thesetwo groups relative to Scenario D. Nearly all the distributionaleffects observed in Scenario E are captured by the market valueof the water rights transferred from senior-only and mixed rightsholders to junior rights holders during the rights-to-shares conver-sion. Using the market price of water in Scenario D, junior-onlyrights holders gain NPV $32.2 million of water shares under the

Fig. 6. (Color) Total NPVoperating profits accruing to junior, senior, and mixed rights holders under different GMPs and groundwater levels over30 years (2016–2045) at 3% discount rate.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

rights-to-shares conversion described in Scenario E, or a directpolicy-based transfer equal to 32% of the total NPV in Scenario D.This zero-sum transfer of water shares comes at the expense ofsenior-only rights holders, who lose $15.1 million, which is equiv-alent to a transfer of 37% of their total NPV, and mixed rights hold-ers, who lose $17.1M NPV, a transfer of 8.8% of their total NPV.This net transfer of value in the form of water shares makes upnearly all of the distributional change in NPV observed betweenScenarios D and E. From a legal perspective, this redistribution,which runs counter to the doctrine of prior appropriation, couldface substantial hurdles.

One of the ancillary benefits of this redistribution, however, isthat many more farmers produce profits exceeding the fixed costs ata plot under Scenario E (Fig. 7). Scenarios D and E grant juniorrights holders more pumping allocations than under the priorappropriation-based systems in Scenarios A–C, reducing the totalcost of purchasing allocations necessary to exceed fixed costs attheir farms. Maintaining more-equitable production could havepositive effects in maintaining the long-term vibrancy of theDiamond Valley community, although quantifying this benefitwas beyond the scope of this analysis. However, the increase inthe total number of farms under production also means that totalfixed costs increase in moving from Scenario C to Scenarios Dand E. When fixed costs are taken into account, Scenarios Dand E actually generate less net (rather than operating) profitthan Scenario C. Maximum basinwide net profits are achievedunder Scenario C, with a 30-year NPV of $262 million. This totalNPV decreases to $261 million (<1% reduction) under Scenario D,and decreases by 1.5%, to $259 million, under Scenario E.

Simply for the purposes of comparison, we calculated thatirrigators would be able to generate a total NPV of $453 millionin operating profits (and $366 million in total profits, includingfixed costs) over the 30-year model period if no action to curtailgroundwater extraction were taken. In this case, senior rights

holders would generate $30 million (lower than in scenarios B–D,because of lower overall groundwater levels and no market forrights sales), mixed rights holders $229 million, and junior rightsholders $194 million in operating profit. Current legislation doesnot allow for this no-action scenario which would effectively ex-haust the aquifer and lead to long-term economic losses beyond the30-year period evaluated here.

Rights-to-Shares Ratio

The redistribution of rights into shares that occurs in Scenarios Dand E depends on the priority-based weight applied to each right.In the baseline case, the most senior right is granted a weight of100% (meaning 1 AF of rights translates into one share), and themost junior right is granted a weight of 70% (1 AF of rights equals0.7 shares). The remaining rights are assigned a weight between70% and 100%, varying linearly based on the priority rank ofthe right. Changes to these priority-based weights can have a slightimpact on the distributional changes in NPV, particularly inScenario E in which senior rights are not protected. Table 6 liststhe NPV operating profits accruing to each right holder classunder different weighting structures. The weighting values listed inTable 6 are applied to the junior-most right, with the remainingrights increasing linearly by priority rank until the senior-mostright, which is assigned a weight of 100%. Adjusting these weightsmay be one way in which disagreements over distributional effectsof the rights-to-shares conversion could be solved.

Beneficial-Use Adjustment

As noted previously, the vast majority of Diamond Valley irrigatorstoday use center-pivot technology to irrigate their fields. As a con-sequence, they are likely using less water than the 4 AF=acre theywere originally granted, because of greater watering efficiency(needs are 3.5 AF=acre) and the smaller area of cultivated land

Fig. 7. (Color) Total plots producing enough operating profit to meet fixed costs, by irrigator type under each groundwater management scenarioover the 30-year simulation period (2016–2045): (a) Scenario A; (b) Scenario B; (c) Scenario C; (d) Scenario D; and (e) Scenario E.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

(125 rather than 160 acres). It has therefore been argued that theState Engineer could invoke the beneficial-use clause of the priorappropriation doctrine as a justification for making across-the-board cuts to the baseline level of existing rights, reducing the totalamount of rights by 25% to roughly 99,300 AF, in line with theestimate of current pumping. In effect, the State Engineer wouldrecognize only water rights that are currently being applied inthe Diamond Valley, allowing more-junior rights holders to main-tain their water rights after curtailment. Invoking the beneficial-usemechanism as a means of justifying expropriation is uncommon inthe western United States, and it is likely that senior rights holders,in particular, would view this action as a violation of their rights.The State Engineer’s argument would be made even more difficultby the lack of monitoring records that could be used to establishexactly how much water the valley’s rights holders have beenpumping.

Nonetheless, a beneficial-use adjustment (BUA) would affectthe distribution of benefits under Scenarios A–D (across-the-boardcuts to rights would leave Scenario E unchanged). Table 7 indicatessmall gains overall, but significant distributional changes. Juniorrights holders generate gains, at the expense of mixed and seniorrights holders. By reducing the volume of water rights across theboard, the group of senior rights holders (those owning a share ofthe most-senior 35,000 AF of rights) is broadened. This gives someof the farmers previously referred to as junior rights holders accessto rights that are protected from curtailment in Scenarios A–D.Likewise, farmers who previously owned senior rights see thevolume of those rights diminished, reducing the amount thosefarmers can use and/or sell. In Scenario E, the BUA has no effecton NPVoperating profits for any of the farmers because all sharesare distributed based on a conversion from the initial rights basedon the priority rank of those rights. Across-the-board cuts to waterrights do not affect the priority rank of any individual right, so theshares would be distributed to farmers in exactly the same propor-tion, with or without a BUA.

Sensitivity to Heterogeneity

Under base-case assumptions, as shown previously, introducingtradeable rights and alternative rights structures generate moderate

NPV gains. One might expect these benefits to be greater withgreater heterogeneity across farms, because alternative rights struc-tures would allow larger gains from trade. To test this hypothesis,three different forms of heterogeneity were introduced into themodel framework: variable farm operating costs, changes to therate of adopting better management practices, and increased flex-ibility in the crop rotation schedule. Figs. 8(a–c) shows the changesto net present operating profit under local changes to each variable(i.e., with the values of the remaining two heterogeneous variablesset to their base-case values).

In the base case, it is assumed that each farm has a uniform var-iable cost (dollars/acre) for producing alfalfa and timothy hay.Although the region is geographically small and subject to similarclimatic conditions, differences in soil, topography, operator expe-rience, and access to farm equipment may lead to differences in thecosts facing individual farmers, and therefore the use of averagecosts provided by the Diamond Valley Producer’s Cooperativefor all farmers would understate the potential benefits of trading.We allowed for variability in costs by perturbing the variable costs(dollars/acre) at each farm. Three separate ranges of perturbationswere applied randomly to each farm, to contrast with the base case(no perturbations): a small range (individual farms randomly as-signed a perturbation cost of−$100 to $100=acre), a medium range(random perturbation of −$200 to $200=acre), and a high range(random perturbation of −$300 to $300=acre). The average changein farm variable cost is zero, but a larger range increases the hetero-geneity experienced across Diamond Valley farms. Increased var-iable cost heterogeneity increases the gains in overall NPVoperating profits introduced by trading (moving from ScenarioA to Scenario B) [Fig. 8(a)]. This agrees with the basic intuitionthat trading facilitates maximization of the marginal value of waterwhen producers face different costs. In the base-case scenario,higher-value farms with junior rights often fail to offset their fixedcosts when they need to purchase more pumping allocations,because the difference in marginal benefits between the low-and high-value farms is relatively small. These higher-value farmstherefore do not participate in the market, but rather exit from farm-ing. With increased heterogeneity in variable operating costs, farmswith lower operating costs can purchase larger quantities of waterrights and still generate sufficient operating profit to meet these

Table 7. Change in NPV operating profit after a BUA within Scenarios A–E, for each right holder group

Right holdertype

Operating profitchange after BUA,

Scenario A ($ million)


Scenario B ($ million)


Scenario C ($ million)


Scenario D ($ million)


Scenario E ($ million)

Senior-only −2 (−6%) −5 (−14%) −7 (−18%) −7 (−18%) 0 (0%)Mixed −8 (−5%) −7 (−4%) −7 (−4%) −9 (−5%) 0 (0%)Junior-only þ16 (þ21%) þ15 (þ17%) þ18 (þ18%) þ19 (þ19%) 0 (0%)Total þ6 (þ2%) þ3 (þ1%) þ4 (þ1%) þ3 (þ1%) 0 (0%)

Table 6. Scenario E operating profits (30-year NPV) for senior, mixed, and junior rights holders under various rights-to-shares conversion weights

Prioirty weight,junior-most right

NPV operating profit,senior-only right holders

($ million)

NPV operating profit,mixed right holders

($ million)

NPV operating profit,junior-only right holders

($ million)

0.0 33 180 1190.5 26 176 1330.7 (Baseline) 24 174 1371.0 23 169 143

Note: Values range from the junior-most right being worth an equal quantity of shares as the senior-most right (priority weight = 1.0) to the junior-mostright being worth 0 shares. Weights increase linearly with right priority, and the senior-most right is worth 1.0 shares (per AF of right) under all weightingoptions.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

fixed costs. In Scenarios D, and E, this effect is slightly enhancedbecause the farms with the most-junior rights are granted more ini-tial pumping rights as a result of conversion of rights to priority-weighted shares, allowing even more of the high-value farms withjunior rights to continue production.

Heterogeneity between farmers can also emerge from differ-ences in the rate at which they adopt improved managementtechniques, which increases marginal benefits by increasing irriga-tion efficiency. If better management practices are adopted by somefarmers at a faster rate, those farmers’ new excess water rights canbe sold on the market to junior rights holders. Fig. 8(b) shows theeffects of farmers adopting the practices at rates ranging from 0% ofthe total population per year to 10%. Increased rates of adoptiongenerally result in higher operating profits for Diamond Valleyfarmers. When the adoption rate of improved management tech-niques falls to 0% (i.e., the market for groundwater rights/pumpingallocations does not incentivize any farmers to improve manage-ment practices), NPVoperating profits for the Diamond Valley fallrelative to the base case, under all institutions.

A third type of heterogeneity can emerge from allowing flexi-bility in the crop rotation utilized by farmers. In the base case, everyplot grew timothy hay for 4 years, followed by 7 years of alfalfa.Timothy hay is the more profitable crop, and alfalfa is used to pro-mote soil health. However, economic pressures could lead somefarmers to attempt to lengthen the period over which they growtimothy hay, shortening the amount of time that alfalfa is planted.Here, we explore the effect of changing crop rotations from a uni-form length of 4 years of timothy hay production to one in whichsome farmers can grow timothy hay for up to 6, 8, or 10 years(all scenarios maintain an 11-year crop rotation cycle). In the 6-yearcase, each farmer is randomly assigned a timothy hay period of4, 5, or 6 years; in the 8-year case each farmer is randomly assigneda period of between 4 and 8 years; in the 10-year case, eachfarmer is randomly assigned a period of between 4 and 10 years.

Lengthening the timothy hay growing period increases NPV oper-ating profits in all Scenarios (A–E) [Fig. 8(c)]. However, the effectof allowing heterogeneity in the crop rotation schedule is signifi-cantly smaller than the effect of operating cost variability or an in-crease in adoption of better management practices. Furthermore,this analysis does not include potential negative effects of degradedsoil quality (lower yield, lower quality crops) from changing therotation schedule.

When these three sensitivities are considered together, increasedheterogeneity generally leads to increases in NPVoperating profitsunder all Scenarios A–E, and for all rights holders [Figs. 9(a–d)].The only scenarios which cause a reduction in NPV operatingprofits are those in which the better-management-practice adoptionrate is reduced to 0% (dark blue lines), from a base case rate of2%=year. Under heterogeneous conditions, valleywide NPV oper-ating profit increases by up to 18% when rights become tradeablein Scenario B (compared with an 11% increase from tradingunder baseline conditions). Gradual curtailment under hetero-geneous conditions in Scenario C generates gains of up to 14% overScenario B (compared with 9% increases under baseline condi-tions). More heterogeneity increases the value of policies that allowtrading and more-gradual curtailment of pumping rights. However,even under the most heterogeneous assumptions, the introductionof shares-based systems in Scenarios D and E generates small gainscompared with Scenario C (0.5%–2%), which are comparable tothe gains made under base-case conditions. Distributional effectsare also present across all sensitivity scenarios, driven by the reallo-cation of water shares from senior rights holders to junior rightsholders. Senior-only rights holders on average lose water sharesequivalent in value to 37% of their operating profit, mixed rightsholders lose shares equivalent to 8.8% of their profit, and junior-only rights holders gain 33% relative to Scenario D. This transferfrom senior rights holders to junior rights holders is significantlyhigher than the externality costs to senior rights holders discussed

Fig. 8. (Color) NPVoperating profits, over 30 years at a 3% discount rate, accruing to all Diamond Valley farmers across management scenarios givenchanges in variables related to farm heterogeneity: (a) change in costs; (b) change in management; and (c) change in crop rotation period. Localsensitivity to changes in each variable is shown in color.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

in section “Depth to Groundwater,” and would likely serve as thebasis for legal objections to the management plan described inScenario E. This suggests that a switch to a shares-based systemwould not generate significant systemwide benefit gains comparedwith a rights-based trading system with gradual rights curtailment,even if farmers in the Diamond Valley are or become more hetero-geneous than the base case assumes.

Rights Banking

Although not included in this analysis, institutions that allow forgroundwater trading can also allow rights banking, in which rightsor pumping allocations from 1 year can be banked in order to beused or sold in subsequent years. Banking increases profits for afamer who would otherwise use his rights (i.e., either sell or irri-gate) only if the unit price for water rights increases faster than thatfarmer’s discount rate. Water distribution systems that incorporate asignificant amount of groundwater banking typically include theconjunctive use of surface and groundwater, with banks providingstability when surface water deliveries have large interannual vari-ability. The Diamond Valley does not rely on variable surface watersupplies in any significant way. Precipitation in the valley is sparse,and most of the annual groundwater recharge occurs via subsurfaceflow into the terminal groundwater basin. However, we examinedthe potential role banking could play during the curtailment periodas irrigators buy and sell varying quantities of water allocationsbased on the market price. The year-over-year increase in the pricefor a water right/allocation calculated in this simulation can providean estimate of the potential for groundwater banking in theDiamond Valley. Fig. 10 shows the annual change in price forgroundwater rights in Scenario E under different assumptions aboutthe rate of curtailment and the level of heterogeneity. More juniorrights holders remain in production in Scenario E, producing a

groundwater market that is more responsive to contraction in over-all pumping allocations than one with fewer potential buyers. Theutility of groundwater banking in the Diamond Valley is bestdemonstrated under these conditions.

The change in the per unit price for pumping allocations is largerin cases with increased heterogeneity. Under more-heterogeneousconditions, there is a larger change in the marginal net benefit ofthe least-valued user from a given reduction in the total supply ofpumping allocations. In essence, water demand in the DiamondValley becomes more inelastic. Similarly, there is a larger increasein price (at least initially) in cases in which pumping curtailment isimplemented at a higher rate, causing a greater reduction in supplyfrom year-to-year. In both the base case and the cases with greaterheterogeneity, there is significantly higher growth in the value ofwater for the first two or three years of 9%=year curtailment. Thisgrowth is short-lived, and is then followed by a reduction. Pricereductions occur when high-value junior rights holders can no lon-ger meet the fixed costs at their farms and accordingly exit the mar-ket. At a 9%=year curtailment rate, junior rights holders are forcedinto this insolvency more quickly, and their rapid exit from therights market has a more pronounced effect on the value of water.

Under base-case conditions, the annual price growth is generallyless than 5%=year on average, and below 2%=year in most years ofthe simulation, regardless of the curtailment rate. This analysis useda 3% discount rate to calculate the profits from irrigation andgroundwater management. Most of the farmers in the DiamondValley, some of whom use farm loans to pay planting costs, likelyhave considerably higher private discount rates. Even under themore conservative 3% discount rate, the growth in price for pump-ing allocations observed under base-case conditions is thereforeunlikely to incentivize groundwater banking in the Diamond Valley.When there is more heterogeneity, in contrast, the annual growthin the unit price of a pumping allocation regularly exceeds 5%.

Fig. 9. (Color) NPVoperating profits, over 30 years at a 3% discount rate, accruing to (a) senior rights holders; (b) mixed rights holders; (c) juniorrights holders; and (d) all Diamond Valley farmers. Lines show the global sensitivity range to changes in all three variables; color shows the changein value of the dominating driver of these sensitivities (i.e., rate of adoption of better management practice).



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

At a curtailment rate of 3% per year (dotted blue line), for example,the unit price of pumping allocations initially grows at just over10% per year (although the high price growth is relatively short-lived). Higher curtailment rates (e.g., 6% and 9%=year) producehigher levels of price growth over a more sustained period. Thus,it may be possible for rights banking to increase NPV profits forindividual farmers and the Diamond Valley if heterogeneity and cur-tailment rates are sufficiently high.

Discussion and Conclusions

The Diamond Valley of Nevada was recently declared a ground-water critical management area due to severe overpumping of waterfrom its aquifer; this declaration requires a reduction of extractionto sustainable levels in 10 years. In order to evaluate the economicimplications of different institutions designed to reduce pumping tosustainable levels in the region, this study developed and analyzedthe effects of different management reforms using a spatiallyexplicit hydroeconomic model. The model simulated changes inthe groundwater level and the implications for optimal crop produc-tion and economic benefits over time. The institutions consideredincluded a default curtailment plan (based on prior appropriation)induced by the State Engineer’s recent CMA declaration, optionsallowing for trading of water rights, sudden versus gradual curtail-ment of rights in excess to sustainable yield, and conversion to anew shares-based approach modeled on management methods usedin water markets in Australia. This represents the first study to ourknowledge that compares the economic impact of such widelyvarying rights and trading institutions in the United States. Themodel did not estimate the costs of bankruptcies, monitoring costs,or any legal challenges associated with specific policies, nor did itestimate the benefits of increased organization and liquidity in thelocal water rights market.

The analysis revealed that there are material economic benefitsto the Diamond Valley as a whole under institutions that allowwater rights trading (11% increase in NPV) and a gradual (ratherthan sudden) curtailment of pumping allocations (9%). Smaller ad-ditional benefits (0.5%–2%) emerge as a result of a conversion to ashares-based approach, but these benefits are only seen in terms of

operating profits, and are slightly negative when fixed costs aretaken into account. Estimates of the distributional effects of theshares-based conversion described in Scenario E are large, how-ever, because senior water rights are converted to shares and cur-tailed, reducing the total curtailment of junior water rights. Largeshifts in income from senior rights holders to junior rights holdersare primarily explained by the transfer of value in the form of in-creased water shares assigned to junior rights holders in Scenario E.This effect can be ameliorated somewhat if the weight given to jun-ior rights is reduced during the rights-to-shares conversion process.If the priority-based rights system is left in place (no conversion toshares), a beneficial-use adjustment, applied to water rights beforecurtailment, will also increase the profit generated by the junior-rights holders at the expense of the senior and mixed rights holders.Rights banking also appears unlikely under base case assumptionsabout the heterogeneity in the Diamond Valley.

Consistent with intuition and prior literature, the gains fromtrade increase with heterogeneity across farms. Evidence suggeststhat cropping patterns in the Diamond Valley are fairly homo-geneous, but it is possible that the base-case analysis understatesheterogeneity in costs of production and in responses to dynamicefficiency incentives. If Diamond Valley farms are more hetero-geneous than described in the baseline conditions, the benefits fromtrading increase, and there is some potential to increase profitsthrough banking, particularly when the gradual curtailment rateis high.

Holders of more-junior rights see the largest decline in profitsdue to curtailment, but using a shares-based approach or applying abeneficial use adjustment before curtailment can increase the prof-its to that group, at the expense of senior rights holders. The netincrease to valleywide profits from these changes would be small,and their distributional consequences raise the possibility that thisconversion could be challenged in court. Converting water rightsinto shares would almost certainly be opposed by most senior rightsholders, who could view the action as an expropriation of theirrights by junior holders. It may also be difficult to set a baselinefor a beneficial use adjustment because the Diamond Valley doesnot possess official records of pumping and water use. Thesechanges could be perceived to fall outside the principle of priorappropriation as it is practiced in the western United States, and

Fig. 10. (Color) Annual change in price in management Scenario E under different rates of gradual curtailment and heterogeneity.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

could lead to the courts finding that they violate existing ground-water rights.

Nonetheless, there are circumstances that could still help juniorrights holders in this case. More heterogeneity between farmerscould increase junior rights holders’ profits during and after curtail-ment. Although it is uncertain whether there is any meaningful vari-ability in operating costs in the Diamond Valley, it is relatively easyto imagine that some farmers, and particularly junior rights holders,could more rapidly adopt better management practices. Farmerscould be incentivized to adopt these practices through institutionsthat encourage trading (e.g., because any saved water could be soldon the market for profit), increasing the value of a well-functioningrights market. Gradual curtailment of water rights also results inincreased profits across the Diamond Valley, and among juniorrights holders in particular. Because pumping costs are only a smallpercentage of farm operating costs, reducing the rate of curtailmentincreases the profits obtained by junior rights holders, even whenthe groundwater table drops (inducing higher pumping costs).

The Diamond Valley offers important advantages as a case studysite for the analysis of groundwater trading. It is a relatively simpleand isolated system, allowing for high confidence in model resultsand the opportunity to clearly understand the implications of insti-tutional changes. Our analysis of the novel change under consid-eration in the Diamond Valley, a conversion from a priority-basedcurtailment of existing water rights to a shares-based system withgradually decreasing basinwide pumping allocations, demonstratespotential economic benefits. Even so, it appears that the beneficialaspects of this policy, namely the creation of a common market inwhich to trade rights and the ability to gradually, rather than sud-denly, curtail rights, could be built into the existing priority-basedrights structure. The conversion of rights to shares itself, as a policytool, offers only minor efficiency improvements (in terms of eitheroperating or total profits), and mainly alters the number of farmerswho continue to irrigate in the valley. A greater total number ofirrigators could provide broader vitality benefits to the region thatare not estimated within this study. Meanwhile, the redistributionalnature of the conversion to shares component of the institutionalchange, paired with the lack of broader, population-wide gains,may make it difficult for this element to survive legal concernsabout moving away from the prevailing priority-based water rightsinstitution.

References

Babbitt, C., M. Hall, A. Hayden, A. Garcia Briones, R. Young, andN. Brozovic. 2017. “Groundwater trading as a tool for implementingCalifornia’s Sustainable Groundwater Management Act.” AccessedSeptember 25, 2017. https://www.edf.org/sites/default/files/documents/water-markets.pdf.

Banerji, A., J. Meenakshi, and G. Khanna. 2012. “Social contracts, marketsand efficiency: Groundwater irrigation in North India.” J. Dev. Econ.98 (2): 228–237. https://doi.org/10.1016/j.jdeveco.2011.07.005.

Bauer, C. J. 2004. “Results of Chilean water markets: Empiricalresearch since 1990.” Water Resour. Res. 40 (9): 1–11. https://doi.org/10.1029/2003WR002838.

Blanco-Gutiérrez, I., C. Varela-Ortega, and G. Flichman. 2011. “Cost-effectiveness of groundwater conservation measures: A multi-levelanalysis with policy implications.” Agric. Water Manage. 98 (4):639–652. https://doi.org/10.1016/j.agwat.2010.10.013.

Bredehoeft, J. D., S. S. Papadopulos, and H. Cooper. 1982. “Groundwater:The water budget myth.” In National research council (US) geophysicscommittee scientific basis of water resource management. Studies ingeophysics, 51–57. Washington, DC: National Academy Press.

Brookshire, D. S., B. Colby, M. Ewers, and P. T. Ganderton. 2004. “Marketprices for water in the semiarid West of the United States.” WaterResour. Res. 40 (9): 1–8. https://doi.org/10.1029/2003WR002846.

Bruggink, T. H. 1992. “Third party effects of groundwater law in the UnitedStates: private versus common property.” Am. J. Econ. Sociol. 51 (1):1–17. https://doi.org/10.1111/j.1536-7150.1992.tb02501.x.

Bryner, G. C., and E. Purcell. 2003. Groundwater law sourcebook ofthe western United States. Boulder, CO: Natural Resources Law Center,Univ. of Colorado School of Law.

Chong, H., and D. Sunding. 2006. “Water markets and trading.” Annu. Rev.Environ. Resour. 31 (1): 239–264. https://doi.org/10.1146/annurev.energy.31.020105.100323.

Connor, J. D., and D. Kaczan. 2013. “Principles for economically efficientand environmentally sustainable water markets: The Australian experi-ence.” In Drought in arid and semi-arid regions, 357–374. New York:Springer.

DCNR (Nevada Department of Conservation and Natural Resources).2015. “Nevada water law 101.”Accessed March 24, 2016. https://perma.cc/95LN-A8UB.

Debaere, P., B. D. Richter, K. F. Davis, M. S. Duvall, J. A. Gephart,C. E. O’Bannon, C. Pelnik, E. M. Powell, and T. W. Smith. 2014.“Water markets as a response to scarcity.” Water Policy 16 (4):625–649. https://doi.org/10.2166/wp.2014.165.

Doorenbos, J., and A. Kassam. 1979. Yield response to water. 257. Rome:Food and Agriculture Organization.

Easter, K. W., M. W. Rosegrant, and A. Dinar. 1999. “Formal and informalmarkets for water: Institutions, performance, and constraints.” WorldBank Res. Obs. 14 (1): 99–116. https://doi.org/10.1093/wbro/14.1.99.

ECD (Eureka Conservation District). 2015. Diamond Valley groundwatermanagement plan outline/working model. Eureka, NV: ECD.

Famiglietti, J., M. Lo, S. Ho, J. Bethune, K. Anderson, T. Syed, S. Swenson,C. De Linage, and M. Rodell. 2011. “Satellites measure recent rates ofgroundwater depletion in California’s Central Valley.” Geophys. Res.Lett. 38 (3): 1–4. https://doi.org/10.1029/2010GL046442.

Gao, L., J. Connor, R. Doble, R. Ali, and D. McFarlane. 2013. “Opportu-nity for peri-urban Perth groundwater trade.” J. Hydrol. 496: 89–99.https://doi.org/10.1016/j.jhydrol.2013.05.009.

Gleeson, T., J. VanderSteen, M. A. Sophocleous, M. Taniguchi, W. M. Alley,D. M. Allen, and Y. Zhou. 2010. “Groundwater sustainability strategies.”Nat. Geosci. 3 (6): 378–379. https://doi.org/10.1038/ngeo881.

Grafton, R. Q., G. Libecap, S. McGlennon, C. Landry, and B. O’Brien.2011. “An integrated assessment of water markets: A cross-countrycomparison.” Rev. Environ. Econ. Policy 5 (2): 219–239. https://doi.org/10.1093/reep/rer002.

Green Nylen, N., M. Kiparsky, K. Archer, K. Schnier, and H. Doremus.2017. “Trading sustainably: Critical considerations for local ground-water markets under the Sustainable Groundwater ManagementAct.” Accessed September 25, 2017. https://www.law.berkeley.edu/wp-content/uploads/2017/06/CLEE_Trading-Sustainably_2017-06-21.pdf.

Hadjigeorgalis, E. 2009. “A place for water markets: Performance andchallenges.” Appl. Econ. Perspect. Policy 31 (1): 50–67. https://doi.org/10.1111/j.1467-9353.2008.01425.x.

Harou, J. J., M. Pulido-Velazquez, D. E. Rosenberg, J. Medellín-Azuara,J. R. Lund, and R. E. Howitt. 2009. “Hydro-economic models: Con-cepts, design, applications, and future prospects.” J. Hydrol. 375 (3):627–643. https://doi.org/10.1016/j.jhydrol.2009.06.037.

Harrill, J., and R. Lamke. 1968. Hydrologic response to irrigation pumpingin Diamond Valley, Eureka and Elko Counties, Nevada, 1950-65, witha Section on Surface Water. Resources Bulletin No. 35. Carson City,NV: Nevada Dept. of Conservation of Natural Resources Water.

Harrison, S. 2001. “Historical development of Nevada water law.” Univ.Denver Water Law Rev. 5: 148.

Hearne, R. R., and K. W. Easter. 1997. “The economic and financial gainsfrom water markets in Chile.” Agric. Econ. 15 (3): 187–199. https://doi.org/10.1016/S0169-5150(96)01205-4.

HEC (Hansford Economic Consulting). 2014. Potential DiamondValley set-aside program. Draft technical memorandum. Truckee, CA:Hansford Economic Consulting.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

https://www.edf.org/sites/default/files/documents/water-markets.pdf

https://www.edf.org/sites/default/files/documents/water-markets.pdf

https://doi.org/10.1016/j.jdeveco.2011.07.005

https://doi.org/10.1029/2003WR002838

https://doi.org/10.1029/2003WR002838

https://doi.org/10.1016/j.agwat.2010.10.013

https://doi.org/10.1029/2003WR002846

https://doi.org/10.1111/j.1536-7150.1992.tb02501.x

https://doi.org/10.1146/annurev.energy.31.020105.100323

https://doi.org/10.1146/annurev.energy.31.020105.100323

https://perma.cc/95LN-A8UB

https://perma.cc/95LN-A8UB

https://doi.org/10.2166/wp.2014.165

https://doi.org/10.1093/wbro/14.1.99

https://doi.org/10.1029/2010GL046442

https://doi.org/10.1016/j.jhydrol.2013.05.009

https://doi.org/10.1038/ngeo881

https://doi.org/10.1093/reep/rer002

https://doi.org/10.1093/reep/rer002

https://www.law.berkeley.edu/wp-content/uploads/2017/06/CLEE_Trading-Sustainably_2017-06-21.pdf

https://www.law.berkeley.edu/wp-content/uploads/2017/06/CLEE_Trading-Sustainably_2017-06-21.pdf

https://doi.org/10.1111/j.1467-9353.2008.01425.x

https://doi.org/10.1111/j.1467-9353.2008.01425.x


https://doi.org/10.1016/S0169-5150(96)01205-4

https://doi.org/10.1016/S0169-5150(96)01205-4

Hornbeck, R., and P. Keskin. 2014. “The historically evolving impact of theOgallala Aquifer: Agricultural adaptation to groundwater and drought.”Am. Econ. J.: Appl. Econ. 6 (1): 190–219.

Howe, C. W. 2002. “Policy issues and institutional impediments in the man-agement of groundwater: Lessons from case studies.” Environ. Dev. Stud.7 (4): 625–641. https://doi.org/10.1017/S1355770X02000384.

Howitt, R. E., and K. Hansen. 2005. “The evolving western water markets.”Choices: Mag. Food Farm Resour. Issues 20 (1): 1–5.

Khair, S. M., S. Mushtaq, R. J. Culas, and M. Hafeez. 2012. “Groundwatermarkets under the water scarcity and declining watertable conditions:The upland Balochistan Region of Pakistan.” Agric. Syst. 107: 21–32.https://doi.org/10.1016/j.agsy.2011.11.007.

Knapp, K. C., M. Weinberg, R. Howitt, and J. F. Posnikoff. 2003. “Watertransfers, agriculture, and groundwater management: A dynamic eco-nomic analysis.” J. Environ. Manage. 67 (4): 291–301. https://doi.org/10.1016/S0301-4797(02)00162-7.

Knochenmus, L. A., D. L. Berger, M. T. Moreo, and J. L. Smith. 2011.Data network, collection, and analysis in the Diamond Valley flowsystem, central Nevada. Rep. No. 2331-1258. Carson City, NV: USGeological Survey.

Lund, J. R., and M. Israel. 1995. “Water transfers in water resource sys-tems.” J. Water Resour. Plann. Manage. 121 (2): 193–204. https://doi.org/10.1061/(ASCE)0733-9496(1995)121:2(193).

Mathworks. 2016. “Constrained nonlinear optimization algorithms(r2018b).” Accessed February 1, 2017. http://www.mathworks.com/help/optim/ug/constrained-nonlinear-optimization-algorithms.html#brh9swj.

Maupin, M. A., J. F. Kenny, S. S. Hutson, J. K. Lovelace, N. L. Barber, andK. S. Linsey. 2014. Estimated use of water in the United States in 2010.Rep. No. 2330-5703. Reston, VA: US Geological Survey.

McCarl, B. A., C. R. Dillon, K. O. Keplinger, and R. L. Williams. 1999.“Limiting pumping from the Edwards Aquifer: An economic investiga-tion of proposals, water markets, and spring flow guarantees.”Water Resour. Res. 35 (4): 1257–1268. https://doi.org/10.1029/1998WR900116.

Mukherji, A. 2008. “Spatio-temporal analysis of markets for groundwaterirrigation services in India: 1976–1977 to 1997–1998.” Hydrogeol. J.16 (6): 1077–1087. https://doi.org/10.1007/s10040-008-0287-0.

NDWR (Nevada Division of Water Resources). 2014. Diamond Valleygroundwater management plan workshop. Presentation by the StateEngineer. Eureka, NV: Dept. of Conservation and Natural Resources.

NDWR (Nevada Division of Water Resources). 2015. “Order #1264.” Ac-cessed September 25, 2017. http://water.nv.gov/documents/1264o.pdf.

NWC (National Water Commission). 2014. “Water markets report–NewSouth Wales.” Accessed January 6, 2019. http://webarchive.nla.gov.au/gov/20160105040606/http://www.nwc.gov.au/publications/topic/water-industry/australian-water-markets-report-2012-13/4.4-new-south-wales.

O’Keefe, V. 2011. A framework for managing and developing groundwatertrading. Canberra, Australia: National Water Commission.

Palazzo, A., and N. Brozovic. 2014. “The role of groundwater trading inspatial water management.” Agric. Water Manage. 145: 50–60. https://doi.org/10.1016/j.agwat.2014.03.004.

Richter, B. 2014. “Water markets: A new tool for securing urban watersupplies?” J. Am. Water Works Assoc. 106 (3): 26–28. https://doi.org/10.5942/jawwa.2014.106.0047.

Rosegrant, M. W., and H. P. Binswanger. 1994. “Markets in tradable waterrights: Potential for efficiency gains in developing country water

resource allocation.”World Dev. 22 (11): 1613–1625. https://doi.org/10.1016/0305-750X(94)00075-1.

Shah, T. 1993. Groundwater markets and irrigation development. Oxford:Oxford University Press.

Shah, T., J. Burke, and K. Villholth. 2007. “Groundwater: A global assess-ment of scale and significance.” InWater for food, water for life, editedby D. Molden. London: Earthscan.

Sugg, Z. P. 2013. Market-based groundwater allocation: Considerationsfor Arizona from the Texas Edwards Aquifer cap and trade system.Tucson, AZ: Univ. of Arizona.

Thobanl, M. 1997. “Formal water markets: Why, when, and how to intro-duce tradable water rights.” World Bank Res. Obs. 12 (2): 161–179.https://doi.org/10.1093/wbro/12.2.161.

Toll, M. 2011. “Reimagining western water law: Time-limited waterright permits based on a comprehensive beneficial use doctrine.” Univ.Colorado Law Rev. 82: 595.

Tumbusch, M. L., and R. W. Plume. 2006. Hydrogeologic framework andground water in basin-fill deposits of the diamond Valley flow system,Central Nevada. Carson City, NV: US Geological Survey.

USGS. 2016. “USGS groundwater data for the nation.” Accessed February1, 2017. https://waterdata.usgs.gov/nwis/gw.

Vaux, H. J., and R. E. Howitt. 1984. “Managing water scarcity: An evalu-ation of interregional transfers.” Water Resour. Res. 20 (7): 785–792.https://doi.org/10.1029/WR020i007p00785.

Votteler, T. 2011. “The Edwards Aquifer: Hydrology, ecology, historyand law.” In Water policy in Texas: Responding to the rise of scarcity.Washington, DC: Earthscan.

Wada, Y., L. P. van Beek, C. M. van Kempen, J. W. Reckman, S. Vasak, andM. F. Bierkens. 2010. “Global depletion of groundwater resources.”Geophys. Res. Lett. 37 (20): 1–5.

Wheeler, S., A. Loch, A. Zuo, and H. Bjornlund. 2014. “Reviewing theadoption and impact of water markets in the Murray–Darling Basin,Australia.” J. Hydrol. 518: 28–41. https://doi.org/10.1016/j.jhydrol.2013.09.019.

WRCC (Western Region Climate Center). 2005. “Diamond Valley, USDA,Nevada (262296).” Accessed March 24, 2016. http://www.wrcc.dri.edu/cgi-bin/cliMAIN.pl?nvdiam.

WWAP (United Nations World Water Assessment Programme). 2015.The United Nations world water development report 2015. Waterfor a sustainable world. Paris: UNESCO.

Young, M. 2015. “Unbundling water rights: A blueprint for development ofrobust water allocation systems in the western United States.” AccessedJanuary 6, 2019. https://nicholasinstitute.duke.edu/water/publications/unbundling-water-rights-blueprint-development-robust-water-allocation-systems-western.

Young, M. D. 2014. “Designing water abstraction regimes for anever-changing and ever-varying future.” Agric. Water Manage.145 (Nov): 32–38. https://doi.org/10.1016/j.agwat.2013.12.002.

Zektser, I. S., and L. G. Everett. 2000. Groundwater and the environment:Applications for the global community. Boca Raton, FL: CRC Press.

Zektser, S., H. A. Loaiciga, and J. T. Wolf. 2005. “Environmental impactsof groundwater overdraft: Selected case studies in the southwesternUnited States.” Environ. Geol. 47 (3): 396–404. https://doi.org/10.1007/s00254-004-1164-3.

Zhang, X., S. Chen, H. Sun, Y. Wang, and L. Shao. 2010. “Water use ef-ficiency and associated traits in winter wheat cultivars in the NorthChina Plain.” Agric. Water Manage. 97 (8): 1117–1125. https://doi.org/10.1016/j.agwat.2009.06.003.



Dow

nloa

ded

from

asc

elib

rary

.org

by

Nor

th C

arol

ina

Stat

e U

nive

rsity

on

03/2

6/19

. Cop

yrig

ht A

SCE

. For

per

sona

l use

onl

y; a

ll ri

ghts

res

erve

d.

https://doi.org/10.1017/S1355770X02000384

https://doi.org/10.1016/j.agsy.2011.11.007

https://doi.org/10.1016/S0301-4797(02)00162-7

https://doi.org/10.1016/S0301-4797(02)00162-7

https://doi.org/10.1061/(ASCE)0733-9496(1995)121:2(193)

https://doi.org/10.1061/(ASCE)0733-9496(1995)121:2(193)

http://www.mathworks.com/help/optim/ug/constrained-nonlinear-optimization-algorithms.html#brh9swj

http://www.mathworks.com/help/optim/ug/constrained-nonlinear-optimization-algorithms.html#brh9swj

https://doi.org/10.1029/1998WR900116

https://doi.org/10.1029/1998WR900116

https://doi.org/10.1007/s10040-008-0287-0

http://water.nv.gov/documents/1264o.pdf

http://webarchive.nla.gov.au/gov/20160105040606/http://www.nwc.gov.au/publications/topic/water-industry/australian-water-markets-report-2012-13/4.4-new-south-wales






https://doi.org/10.5942/jawwa.2014.106.0047

https://doi.org/10.5942/jawwa.2014.106.0047

https://doi.org/10.1016/0305-750X(94)00075-1

https://doi.org/10.1016/0305-750X(94)00075-1

https://doi.org/10.1093/wbro/12.2.161

https://waterdata.usgs.gov/nwis/gw

https://doi.org/10.1029/WR020i007p00785



http://www.wrcc.dri.edu/cgi-bin/cliMAIN.pl?nvdiam

http://www.wrcc.dri.edu/cgi-bin/cliMAIN.pl?nvdiam

https://nicholasinstitute.duke.edu/water/publications/unbundling-water-rights-blueprint-development-robust-water-allocation-systems-western




https://doi.org/10.1007/s00254-004-1164-3

https://doi.org/10.1007/s00254-004-1164-3



Potential Implications of Groundwater Trading and Reformed ...

Documents

Transcript of Potential Implications of Groundwater Trading and Reformed ...