The Value of Water to Oklahoma

Damian C. Adams Larry D. Sanders

Agricultural Economics DepartmentOklahoma State University

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Stillwater Newspress (Mar 21, 2007)

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By April 2007, another story…Heavy rainfall during March washed away drought from nearly the entire state. … The rainfall caused flooding problems in much of the state, … but it appears that it was sufficient to erase many of the lingering impacts of a 2-year-long drought cycle. (http://www.drought.unl.edu/dm/)

Across the entire state, topsoil moisture (down to 30 inches) appears replenished, …. Reservoirs … rose several feet in a matter of hours. Several reservoirs still face lingering impacts and need much more rainfall to fully recover, but they appear to be well on their way if normal rainfall continues. … streams appear to be flowing again and more runoff will make it to the lakes, adding to recharge. --Mark Shafer, Director of Climate Information, OK Climatological Survey(http://agweather.mesonet.org/soil/)

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Leading to new apparel trends in OK & TX…

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What is Water Worth?

“We never know the worth of water till the well is dry.”  ~Thomas Fuller, Gnomologia, 1732

“Water flows uphill towards money.”  ~Anonymous, saying in the American West, Cadillac Desert,

1986

“Depends on which specific water services are being valued, as well as where and why the valuation exercise is being conducted.”~R. Young, 2005

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What Determines Water Prices?

Supply and demand Cost of capture and transportation Water rights Non-market impacts & externalities?

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Water Demand: Competing Uses

Other Uses?

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Demand for Water Will Increase

Oklahoma Population (US Census)

2,200,000

2,400,000

2,600,000

2,800,000

3,000,000

3,200,000

3,400,000

3,600,000

3,800,000

4,000,000

1960 1970 1980 1990 2000 2010

Year

?What do you think will happen?

Source: http://www.populstat.info/Americas/usas-okp.htm

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Population growth

Industry

RecreationConservation

Demand Pressures

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Water Supply… Historically Speaking

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Water Supply Issues in OK

Plenty of water…

OklahomaWatersupply

1120 square milesof water area inlakes & ponds & over 78,000 milesof rivers & streams

23 major ground-water basins w/320 mil. acre-feet

Allocated streamwater use is

2.6 mil. ac-ft/yr

34 mil. ac-ft/yrflows out of

state viaArk. & Red River

basins

Problem is Allocation– getting it where, when, how much and at a price we want

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Oklahoma’s Water Use

Surface Water Ground Water Total

Irrigation 151 566 718

Municipal & Rural Water Systems

562 113 675

Livestock & Aquaculture

113 54 167

Power Generation 143 3 146

Domestic & Commercial

9 28 37

Industrial & Mining 19 9 28

Total 998 774 1772

Source: US Geological Survey, 2000

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Oklahoma water resources under pressure

Growingpopulation

Economicdevelopment Ethanol

production

Thirstyneighbors

Texasrule ofcapture

Tribalrights

Moreweathervolatility

OK WaterResources

Invasivespecies Wateruptake

Waterqualitydiminisheseffective water supply

Unknown/ unexpected event(s)

Changes inwater law/rightsLack of

Investment

20 years ago, how many of these were unexpected events?

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Oklahoma water under pressure, but… changes in demand and supply

Conservation

OK Water Resources

Investmentin waterinfrastructure

Developmentof newstructures

Drought/floodmanagement

Increasethe priceof water

Droughttolerantplants

More efficientIrrigationsystems

Re-usewater

Desalinatewater

Re-use petropumpingwater

Red cedareradication

Wetland use

AssigningProperty rights

Unknown/UnexpectedEvents?

What role should OCES play?

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How can we tell if there is intelligent life elsewhere in the universe?

"The surest sign that intelligent life exists elsewhere in the universe is that none of it has tried to contact us.“

Sources: various public websites and emails to instructor; anonymous authorship.

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What is my water worth?

It Depends… Alternative uses Location

Capture Transport (incl. right-of-way)

Quality Treatment Regulations

Quantity (storage) Supply/Demand

Within-season cyclicity Structural shortage & climate change

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Daily Water Prices Around the World…

$0.85$0.07$0.14

$0.47

$0.20-35

$0.24

$8.00

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Typical municipal water prices in US and other countries (per cubic yard)

Source: World Water Commission for the 21st Century, 1999

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Municipal Water Rates in OK

Arkansas River Basin

Red River Basin

$0.20 $0.32

$0.43

$0.25

What determines prices?

$0.27

$0.26, $0.49

$0.27, $0.53

$0.69

$0.27, $0.53

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Costs of irrigation water by source and category, 2003 (USDA-ERS)

Cost category Oklahoma cost range ($/ac)

National average cost ($/ac)

Energy for pumping (groundwater) 7 - 176 39.50

Energy for lift (surface water) 10 - 82 26.39

Off-farm water purchases 5 - 86 41.73

Maintenance/ repair expenses 4 - 80 12.29

Average variable cost Unknown 49.87

Capital investment expenses 6 - 187 42.18

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Wetlands as an economic tool: wetland functions, services & values (adapted from Bergstrom and Brazee, 1991, in USDA-ERS EIB-16)

Wetland Function Service Economic value

Forest Tree growth medium Commercial timber harvest

Private net economic value of

timber

Fisheries Fish habitat Commercial fish harvest

Private net economic value of

fish

Recreation Wildlife habitat Recreational, fishing, waterfowl

harvest

Mixed net economic value of

hunting/fishing/ recreating

Flood control Flood retention Reduced flood flows/peak (less

risk)

Public net economic value of reduced

damages

Water quality Water filtration Cleaner waters Public net economic value of reduced

damages

Endangered species

Endangered species habitat

biodiversity Public net option, existence values

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OSU Water Policy Projects

Valuation of Water for Recreation Water Conservation Programming &

Website Water Law Handbooks Survey of OK Residents’ Water

Conservation Behaviors & Attitudes Potential Water Quality Trading

Program

Non-Market Valuation of Recreation on the Illinois River System in Oklahoma

Total Willingness to Pay

= Use Value + Nonuse Value

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  WTP

Boat ramp* NS

Camp available $6.48

Camp with electric $13.28

Porta-Potties* NS

Flush toilet $23.47

Flush toilet with showers $27.02

Lodge* NS

Water clarity* NS

Willingness to pay for changes in water quality and other park attributes

* NS indicates that variables are not significantly different from zero.

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Using the Oklahoma Department of Wildlife Conservation’s estimate of 18,400 annual visits (Crews and Summers, 2002) this would imply the recreation value of the trout fishery alone was $2 million per year.

Lower Illinois study:Trout fishing

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Upper Illinois River:Upper Illinois River:BoatingBoating

June 05-Oct 06: $97,484 from a $1/person per trip fee

94,504 visitors outfitted by companies in the region at an average of $15-$20/per person per day for canoeing and rafting equipment

$1.4-$1.9 million in direct expenditures

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Water quality: pollution sources & solution of Water Quality Trading Permits

• Sewage treatment plants• Urban stormwater• Septic tanks—rural and urban• Agriculture• Mining/oil/gas fields• Emerging contaminants• An evolving solution: develop artificial markets to trade permits to pollute

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Trends for water use in agriculture Ag water use FALLS as economic

development RISES Less water for Agriculture in the future?

Increased non-Ag demand for water Urban development (economic & population) Water sales and transfer out of OK Recreation

Reduced Ag water access (?) Changes in water law Climate change

Improved irrigation technology (e.g., graywater)

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Opportunities for Extension

Framing the water-related issues to identify critical research, education needs

Provide feedback/oversight for research efforts

Proactive – planning to meet information, education, knowledge needs

Help stakeholders understand what is at stake

Indirectly support stakeholder policy involvement

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Question?

Thank you for your help!

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Value of Water in a A Stream With Reuse Four Users on a Stream Ac-Ft Water Worth $40; 40% Return Flow

1af.4af

$40

Withdraw ValueUser 1: 1.00 af $40.00 returns .4 af

.4af.16af

User 2: .40 af $16.00 returns .16 af

$16

User 3: .16 af $6.40 returns .064 af

.16af$6.40

.064 af

.064 af

User 4: .064 af $2.65 returns ---

$2.65

Tot Withdrawal 1.62af, Tot. $65.05

flow

Courtesy of A. Stoecker