Agricultural water supplies are becoming increasingly uncertain in the western
United States due to elevated demands from competing water users, environmental
restrictions on surface water withdrawals as a result of the establishment of the
Endangered Species Act in 1973, and potential climatic changes. Since many rural
communities in the West are economically dependent on irrigated agriculture, reduced
water supplies may significantly impact the agricultural sector.
The objectives of this study were to: 1) estimate the impacts of reduced surface
water supplies and elevated instream flow requirements on commercial agriculture in
the Milton-Freewater area of northeastern Oregon and 2) estimate the value of
irrigation water and the cost to transfer water from commercial agriculture operations
to instream use assuming a water market existed (i.e. voluntary transfers to a
Two models written in the General Algebraic Modeling System (GAMS) were
developed to estimate economic impacts. Each model represented one irrigation
district in the area with its characteristics in terms of irrigated acreage, crops grown,
irrigation practices, and water usage. The models were then modified to reflect
changes in surface water supplies, increased minimum stream flow requirements, and
the existence of a water market, which allocates water to non-agricultural uses.
Results indicate that with reduced surface water supplies (10% reduction in river
levels) and higher stream flow requirements (additional 5 cfs left instream), both
districts (Walla Walla River Irrigation District and Hudson Bay District Improvement
Company) experience reductions in net revenues ranging from 0.9% to 4.2 % in Walla
Walla and between 11% and 15% in Hudson Bay. Moreover, the reduction in irrigated
acreage led to negative impacts on labor income with more significance in the senior
right holder district (declines vary between 0.7% to 4.1% in Walla Walla and from
0.7% to 2.5% in Hudson Bay). In the presence of a water market, while net revenues
decreased due to retiring irrigated acreage, income from water market activities
increased steadily to reach $2.4 million and $2.9 million in Walla Walla and Hudson
Bay respectively. At relatively low prices per acre-foot (about $19 in Hudson Bay and
$25 in Walla Walla) majority of irrigation water was transferred instream (80% to
90%) and row crop and apple acreage was retired. High-valued wine grapes were taken out of production when prices were in excess of $100 per acre-foot, while only
adding approximately 2 additional cfs instream. In addition to the long-term sale of the
water right, a market for land fallowing was established for the field and row crops.
Producers were offered per acre payment to fallow land and transfer water instream.
Prices per acre accepted to fallow land and leave irrigation water for instream flow
enhancement were on average about $63.
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