Market water transfers as a water quality policy : a case study of the Malheur River Basin, Oregon Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/j098zd78s

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  • Agronomic research documents a strong correlation between the level of irrigation water applied and the level of farm chemicals leached into water bodies. Consequently, policies that cause farmers to alter irrigation water management practices are likely to influence water quality. Water markets are a potentially attractive method of addressing agriculturally induced water quality concerns because they provide an economic incentive to reduce agricultural effluent which is less costly to farmers and society than command and control or tax policies. This research focuses on quantifying key economic and environmental implications of changes in institutional rules defining terms of water trade. At the heart of this dissertation is an empirical hydrologic-economic simulation model of the Treasure Valley area of eastern Oregon. The economic component of the model consists of 8 subregional mathematical programming models. The models vary across subregions with differences in soil productivity, production technology and irrigation cost specification. The hydrologic component of the model consist of two parts. A nitrate leaching model describes how changes in crop choice, irrigation and nitrogen input influence the level of nitrate leaving the root zone. A finite difference model describes the process of nitrate dilution in the aquifer. Five impacts of water trade are predicted: 1) water supplied to water markets, 2) profits from water market participation, 3) local groundwater quality effects, 4) local economic effects of water markets, and 5) effects of water markets on third party water rights holders. Significant conclusions drawn from the study include: 1) in large portions of the study area, the annual returns to selling water rights exceeds returns to continued irrigated crop production, even at very moderate water prices ($20 an acre foot); 2) at current water prices, the parts of the study area most likely to supply water to markets are areas used for extensive cultivation of hay, pasture and grain which contribute little to the loading of the underlying aquifer with nitrates; 3) a well developed water market in the area would not likely lead to full compliance with EPA groundwater quality standards; 4) the Oregon Statute allowing sale of conserved water is unlikely to induce much trade in conserved water in the Treasure Valley.
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