Chapter 3:Competition for water

Chapter 3-
Competition for Water

by Kenneth D. Frederick and Allen V. Kneese

Abstract

The growing scarcity of water in the West already has curbed the expansion of irrigated agriculture and promises to impose further constraints in the coming decades. Nevertheless, declines in irrigated acreage will be limited to the most water-scarce areas and will tend to be modest in scale. Since irrigation now accounts for about nine out of every ten gallons of water consumed in the West, large percentage increases in consumption for other uses can be accommodated with small relative reductions in agricultural uses. Opportunities for conserving water and increasing output per unit of water will further limit the negative impacts on irrigated agriculture. There are areas where water supplies are sufficient to support an expansion of irrigation. For the West as a whole, the Second National Water Assessment projects increases of 10 percent in irrigated acreage and 6 percent in water consumed for irrigation from 1975-2000.

Some of the adjustments which have only marginal impacts on overall western water use and development may have major impacts within specific locations. The point is illustrated by examining the potential impacts of energy development on the character and beauty of the Yampa River.

Full appropriation of water supplies presents a major challenge to the institutions allocating western water. If these institutions permit flexibility of use in response to changing demand and supply conditions, water will not be a barrier to either agricultural or nonagricultural development in the West.

The West is undergoing a major transformation with respect to water. In the past, increasing water demands stemming from the rapid growth of population and economic and recreational activities within the region have been met largely through development of new supplies. This strategy is becoming increasingly costly. Projects under consideration in California, for

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example, suggest it will cost several hundred dollars per acre-foot to increase water supplies for offstream use, and implementation of these projects would require diverting water from valuable instream uses. Groundwater also has become increasingly expensive due to rising pumping distances and energy prices. Furthermore, the opportunities for expanding groundwater use are limited, especially in the areas with the best agricultural potential; current use already results in the mining of more than 22 million acre-feet per year from western aquifers.^[1]

The transition to conditions of water scarcity has been under way for several decades in some areas of the West. In the 1950s western water supplies were sufficient to support a rapid growth of use. Total water withdrawals for all but hydroelectric generation rose 56 percent or 4.6 percent per annum from 1950-60. In contrast, withdrawals rose only 15 percent or 1.4 percent per annum from 1970-80. Much of this recent growth occurred in the northern plains states of Kansas, Nebraska, and North and South Dakota, where withdrawals nearly doubled over the last decade. In the rest of the West water withdrawals rose only 0.9 percent per annum in this period.^[2]

Irrigation spurred by the availability of inexpensive water and energy was the dominant factor in the expansion of western water use. Currently about five of every six gallons withdrawn and nine of every ten gallons consumed go for the irrigation of nearly 50 million acres in the seventeen western states.^[3] But as both the largest and a relative low-value user, irrigation is the sector most directly affected by the changing water situation. Some of the impacts of the transition already are becoming evident. Nonagricultural water consumption in the West grew twice as fast as irrigation use from 1960-80. In areas where water has become particularly scarce and expensive, water for irrigation has started to level off or even decline. In Arizona, for example, total water consumption declined by about 6 percent from 1970-80, even though consumption for nonagricultural uses rose by 67 percent. Only in the northern plains did the growth of water consumption for irrigation exceed the growth for other uses during the last decade.^[4]

The early expansion of irrigation relied almost exclusively on diverting surface waters. Since the mid-1950s, however, groundwater has accounted for virtually all of the net increase in irrigation water withdrawals. Total surface water withdrawals for irrigation have not increased significantly from the level of 88 million acre-feet (maf) reached in 1955. Groundwater

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withdrawals, on the other hand, rose from 11 maf in 1945, to 31 in 1955, and to 56 in 1975.^[5] Nearly 40 percent of total irrigation withdrawals now come from groundwater. As a result the aquifers in some of the principal irrigated areas are being depleted, and millions of acres now depend on a diminishing supply of water. The overall growth of groundwater use already has slowed markedly, and in some areas has become negative.

Future Changes in Water Use

Demand for western water continues to grow as new investment and people are attracted by the region's mineral, energy and amenity resources. But as supplies fail to grow apace, the competition for water intensifies. In areas of scarcity, irrigated agriculture will increasingly be the sector that others look to for water to meet their growing demands. Water is transportable, but the costs are high in relation to its value in agriculture. Consequently, irrigators in a given area must rely largely on water currently available either naturally or through water importation structures already in place. And as water demands in other sectors grow, irrigators will be confronted with increasingly attractive opportunities for transferring their water to other uses.

Assumptions and Projections of the Second National Water Assessment

The Second National Water Assessment provides a useful starting point for examining the implications of future development forces on the allocation of western waters. The Assessment provides water use estimates under average and dry year conditions for a base year 1975 and projections for 1985 and 2000 based on a consistent set of assumptions regarding national growth and change. Principal assumptions underlying the Assessment's National Future projections include:^[6]

· National population will grow at slightly less than 1 percent per year and will reach zero growth early in the next century. There will be 268 million people by the year 2000.

· Gross National Product will increase at about 4 percent per year.

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· Attainment of water quality goals and higher water costs will improve water use efficiency.

· Agricultural production and marketing will reflect 1971-73 trends in per capita consumption and export levels.

· Fish and wildlife and recreation needs will continue as they have in the past 10 years.

Table 3.1 indicates projected changes in population, employment, cropland harvested, and irrigated farmland from 1975-2000 for each of the seventeen western states.^[7] These numbers, which have been converted from subregional data in the Assessment to state boundaries, contain some real surprises. In contrast to recent experience, western population and employment are projected to lag behind national growth. Higher than average population growth is projected for the southwestern states of Arizona, California, and Nevada, but population is projected to actually decline over the rest of the century in five northern states. In Wyoming, one of the fastest growing states in the 1970s, both population and employment are projected to decline by more than 10 percent. It is hard to imagine what might cause such a drastic change in regional growth trends (perhaps a complete collapse of energy markets); as noted below, some of these assumptions raise questions about the usefulness of the Assessment's water use projections.

The projected changes in western irrigation are more in line with past trends and expectations even though, as discussed later, the Assessment likely understates the level of irrigated acreage. The 10 percent increase in irrigated acreage from 1975-2000 suggests a continuation of the decline in the rate of growth of western irrigation that has been under way for several decades. Irrigated acreage is projected to decline in Arizona, Nevada, New Mexico, and Texas, all of which are faced with major problems of groundwater depletion.

Table 3.2 presents the projections (derived by converting the Assessment data to a state basis) of water consumption for irrigation and other uses. Western water consumption from 1975-2000 is projected to increase only 6 percent for irrigation, compared to 88 percent growth for all other uses. In view of irrigation's dominance as a user of western water, total consumption increases only 13 percent in the West, less than half of the national average.

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The relations between water scarcity and growth implied in the data and projections of the Second National Water Assessment can be examined for water resource regions and subregions, the geographical areas for which water supply data are provided. These regions and subregions are defined according to drainage basins which do not conform to political boundaries. Regions 9 to 18 and their 53 subregions are used as a proxy for the seventeen western states in the subsequent analysis.

Water scarcity (measured as the ratio of total water use in the 1975 base year to average year streamflow) is negatively correlated (at a 95 percent confidence level) with the Assessment's projections of the growth of irrigated acreage by water resource subregion. Nevertheless, the Assessment's projections of population, employment, and total earnings by subregion are positively correlated (at a 90 percent confidence level or better) with this water scarcity measure. These results suggest that the features that attracted people in the past and contributed to the pressures on water supplies will continue to give these areas faster than average overall growth in spite of the pressures on their water supplies. The water to support the fast overall growth of these subregions, however, will come at least in part from a slower than average or in some cases negative growth of irrigated agriculture.

In examining the implications of water scarcity on water use by function, it is nearly as instructive, and conceptually much simpler, to differentiate between just two areas-a water-scarce area and the rest of the West-rather than to consider 53 different subregions. A water-scarce area of twenty subregions (identified in Figure 3.1 and in the note to Table 3.3) has been selected for this purpose. In all twenty of these subregions, 1975 water use exceeded average year streamflows. Most of these subregions also have relatively high ratios of groundwater mining to consumption; mining is 10 percent or more of consumption in sixteen of the subregions, and 25 percent or more in twelve of them.

Estimates of instream use have an important impact on the perception of water scarcity. In thirty-three of the western subregions, the instream flows needed to maintain fish and wildlife populations are more than half of the Assessment's estimates of total water use in 1975. The benefits that accrue from instream flows are difficult to measure, and there is no consensus as to how much water should be allocated to these uses. This does not mean, however, that instream benefits are insignificant.

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Figure 3.1
Twenty Water Resource Subregions with Serious Water Supply Problems
(cross-hatched area)

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On the other hand, provision of many instream benefits need not be competitive with offstream uses. For example, the better recreational areas in the West often are in the upper reaches of the streams. Streamflows can be maintained in these areas for withdrawal downstream where the better agricultural lands are often located. Thus, adding instream uses measured at the outflow point of a subregion and offstream consumption may overstate a region's water use. Nevertheless, even when instream uses are ignored-which few people would advocate-water problems remain. Offstream consumption alone is equal to, or greater than, average streamflow in seven of the water-scarce subregions. And 1975 water consumption exceeded dry year streamflow (the natural flow that will be equaled or exceeded 80 percent of the time) in all the water-scarce subregions identified in Figure 3.1.

Projections from the Second National Water Assessment suggest that while total water consumption will be essentially constant within the water-scarce region over the last quarter of the century, the allocation of water among types of users will shift. According to the projections, a decline of nearly 6 percent in consumption for irrigation is expected to slightly more than offset the 56 percent increase in consumption for all other uses (see Table 3.3). But even after this reallocation of supplies, irrigation will remain the dominant water user, accounting for 87 percent of consumption in the year 2000.

In contrast to the outlook in the twenty water-scarce subregions, there are opportunities for expanding both total and irrigation water consumption in the rest of the West for at least another decade. Indeed, the Second National Water Assessment projects that water consumption in the remaining thirty-three subregions will increase 22 percent for irrigation and 36 percent for other purposes between 1975 and 1985. Only a very minor further expansion of water consumption for irrigation is projected for after 1985, but consumption for all other uses is projected to increase 50 percent over the last fifteen years of the century. The twenty-five year projections for these thirty-three subregions suggest total water consumption will rise by one-third and consumption for purposes other than irrigation will more than double.

Limitations of the Projections in the Assessment

The Second National Water Assessment is the only recent attempt to systematically examine the nation's water use and supplies. But, as alluded to above and as considered in some

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detail below, there are good reasons for questioning some aspects of these projections.

Water for Energy

Although nonagricultural demands on western waters have been relatively minor in the past, development of the West's vast energy resources, especially coal and oil shale, may alter that. While water consumption projections of the Second National Water Assessment include an allowance for steam electric production, petroleum refining, and fuels mining, there was concern that the Assessment had not taken adequate account of all likely energy developments and associated water requirements. This concern led to a supplementary study by Aerospace Corporation, which accepts all the Assessment's water supply data and all the demand projections except those relating to energy.^[8] From four federally generated energy development scenarios, the maximum feasible limits for energy development are determined along with associated water requirements, assuming standard size plants and no special provisions to adopt water-conserving technologies. Although these estimates are higher than any likely levels, they provide an upper bound to the demands energy development is likely to place on western waters.

In comparison to the Assessment projections presented in Table 3.3, the high projections of water for energy development in the Aerospace report increase nonirrigation water consumption levels by 7 percent as of 1985 and 39 percent as of 2000. These estimates represent a 1 percent increase in total western water use by 1985 and a 6 percent increase by 2000. Although the percentage changes for the West are modest, the impacts would be localized, and within the affected regions major new demands on water supplies are implied. Where demand already exceeds renewable supplies, any increase requires either compensating reductions among other users or additional groundwater mining.

The twenty water-scarce subregions account for about 47 percent of the consumption of water for energy projected for the turn of the century in the Aerospace report. In the absence of compensating adjustments by other users, this would increase energy uses to about 8 percent of this area's total water consumption. Water for energy would become particularly important in seven of these subregions, where energy uses would account for an average of 19 percent of total projected water consumption.^[9] If these energy projections are realized, irrigation

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certainly would be adversely affected. The Second Assessment had already projected that irrigated acreage in these seven subregions would decline from 16 percent of the West's total as of 1975 to 10 percent in 2000.^[10] The percentage might drop further if the higher energy water use levels are realized.

The Aerospace projections suggest that energy uses could become an even more important component of water consumption in some of the subregions where water currently does not pose such constraints to development. In nine of the other thirty-three western subregions, the combined energy uses of water account for an average of 35 percent of total projected offstream water use in 2000.^[11] In general, however, these nine subregions do not rank among the more important irrigated areas; they are projected to account for only 6 percent of the water consumption and 4 percent of the land for irrigation in the West by 2000.

Alternative Population and Water Use Projections

The data and projections presented above as the Assessment view are the product of the federal attempt to develop nationally consistent information on current and projected water use. They are known as the National Future (NF) estimates. But for some of the regions and some of the socioeconomic and water use variables, an alternate set of information is also presented in the Assessment. A study team representing state and regional perspectives was formed for each of the 21 water resources regions, and these teams developed State-Regional Future (SRF) estimates for their respective regions. The SRF projections are not comprehensive, nor are they based on a consistent set of assumptions as to the national growth. Yet, as the Assessment points out, they do reflect a more localized and perhaps more accurate view of regional and subregional conditions.^[12]

There are some striking differences between some of the NF and SRF projections of population growth and water use that raise questions about the accuracy of the National Future estimates. The SRF projections suggest a national population (including the Caribbean area) of nearly 284 million by 2000, nearly 6 percent more than the NF projection. While the NF figure is closer to and actually slightly above the Census Bureau's mean estimates of total population in 2000, the regional distribution of the NF projection is questionable. Virtually the entire difference between the alternative population projections in the Assessment is attributable to the lower NF projections for the western water resource regions. Despite the fact that

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population in the seventeen western states grew at more than twice the national average from 1974-79,^[13] the NF data project lower than average population growth for the West as a whole from 1975-2000 (see Table 3.1). This inexplicable result suggests that the NF data may understate the future demands for western water.

The NF estimates of irrigated acreage in the West are also much lower than the SRF estimates in both the 1975 base year (40.6 versus 46.2 million acres) and in 2000 (44.9 versus 61.3 million acres). While there is considerable uncertainty as to the amount of land under irrigation, it is likely that the NF data grossly understate irrigated acreage in the base as well as in future years.^[14] For instance, the National Resources Inventory estimate of 50.2 million acres irrigated in the West in 1977 is 24 percent above the 1975 NF estimate and 9 percent above the 2000 NF estimate.^[15] The impact on water use estimates of understating irrigation levels is unknown. But again there is a possibility that the NF projections understate the competition for western water resources.

In view of the differences noted above between the base year levels of irrigation and the projected changes in western population and irrigation, it is not surprising that the NF and SRF estimates of water use also differ. The SRF estimates of total water consumption in water resource regions 9-18 are lower in the base year (84.7 versus 88.5 billion gallons per day) but considerably higher by the year 2000 (120.7 versus 100.7 billion gallons per day) than the NF projections. In both years, water consumed in irrigation accounts for more than 90 percent of the differences between the two sets of data.

A Case Study:
The Yampa River

Despite the reservations about the projections of the Second National Water Assessment, these data do indicate the broad changes in water scarcity likely to emerge from the increasing competition for western water and the implications of these changes on major categories of water users. These data, however, are not sufficiently detailed to provide much insight into local water problems or the nature of the competition for water. Indeed, there may be serious conflicts over the use of a region's or subregion's waters not revealed by the Assessment's aggregate supply and consumption data. Changes which have only

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marginal impacts on the overall level of western irrigation may have dramatic impacts on local areas, even within regions and subregions where water does not appear in the Assessment as being particularly scarce. These points are illustrated in the following discussion of the Yampa River, a tributary of the Green River which in turn is a tributary of the Colorado River.^[16]

The Yampa River is celebrated for its beauty and is a prime sports fishery. It also contains abundant resources of coal and is being considered for possible energy development.

To assess the effect of energy and fuel production on the Yampa River flows at Maybell, Colorado (USGS gauging station 2510), scenarios were assumed for 1990.

A. 2,000 Mw thermal electric power plant using 6.7 million tons of coal per year; the remainder of the 24 million tons per year of coal mined shipped out of the basin by unit train.

B. 2,000 Mw thermal electric power plant; 250 million standard cubic feet per day coal (SCFD) gasification plant using 6.94 million tons of coal per year; the remainder of the 24 million tons per year of coal mined is shipped out of the basin by unit train.

Details of these two energy development scenarios are presented in Table 3.4. For assessing the water consumed in these two scenarios, a "base case" plant and a "complete" plant are considered for both the power plant and the coal gasification plant. The "base case" represents a situation in which no restrictions are placed on waste discharges to the environment; the "complete" plant, a situation where zero wastewater discharges are allowed. As shown in Table 3.4, the two energy development scenarios, plus the "base" and "complete" plant options for both the thermal power plant and the gasification plant, result in six possible combinations of water consumption. For these six combinations, the water consumption rates for the year 1990 range from a low of 59.4 cubic feet per second (cfs) (43 thousand acre-feet per year) to a high of 101.3 cfs (73.3 thousand acre-feet per year).

The effect of this consumptive use of water on the flow of the Yampa River at Maybell is depicted in Table 3.5. For comparison, energy scenario B with "complete" plants for both the thermal power and coal gasification facilities was assumed (scenario B4 in Table 3.4). This consumptive use of water is compared with the mean annual flow, the mean monthly flows, and various measures of the low flow in the Yampa River at Maybell, Colorado. It is clear from Table 3.5 that energy development

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could not occur in the Yampa River Basin without surface or groundwater storage, or supplemental supplies from another subbasin. There simply is not enough water for energy and fuel production purposes during the low flow periods. Moreover, tradeoffs with other uses of river waters might have to be made during parts of the year, especially the seven-month period from August through February. Apparently, from this rough analysis of streamflows in the Yampa, the fisheries might be in serious jeopardy if energy development occurs, or hydraulic works might have to be undertaken that many think would adversely alter the character of the basin.

The only way to understand the full implications of energy development is to look at the details of specific situations. Unfortunately, such analyses are seldom part of studies assessing the energy potential of a region. Such studies should have high priority.

Conclusions and Implications for Water Management[en17]Conclusions and Implications for Water Management^[17]

While the West is not running out of water, it is running out of readily available, inexpensive water. Although some additions to the usable water supplies of the region may be developed either through streamflow augmentation or exploration and development of groundwater, the end may be coming of any large-scale schemes for further diversions of water into the region, or even any sizable shifts of water from one basin to another within the region. Thus, for practical purposes it would seem that the region must accept the limited nature of its water supplies and should move strongly to adapt itself to that condition.

The limited nature of water supplies, however, does not absolutely preclude development within the region. Barriers to urban residential or other development are more a matter of social than of physical limitations. Such barriers may be the institutions that prevent the transfer of water from agricultural uses into other, more highly valued, uses; or they may be social insistence on artificially low prices for municipal water. Instead of promoting rigid constraints on water use patterns, political effort within the region should be directed toward increasing the flexibility of current water use practices among all users. Generally speaking, there is considerable opportunity for modification if regional institutions permit and encourage it.

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For example, in planning new electrical generation facilities in the San Juan portion of the Colorado River that lies in New Mexico, utilities have available several options regarding the use of cooling water, even though the New Mexico State Engineer has projected a fully appropriated condition for the San Juan Basin without the addition of any new generating facilities. First, technological adjustments could be made in the cooling water required. Second, existing privately held water rights in the basin could be purchased, and with approval of existing authorities this water could be transferred into industrial use from its current predominant use in agriculture. Third, cooling water might be drawn from deep groundwater stocks rather than from currently used surface water supplies. These and other options illustrate the range of possibilities for flexible water use within the region.

One general institution that contributes to flexibility is the existence, where permitted, of an economic market for water rights. Such a market, if it works properly, signals all water users, in the form of the price that a water right may command, that (a) water is available, and (b) that competing demands for its use can be measured. With the information provided by the price signal, current and prospective water users can make informed decisions on water use options. In addition, as the price of water rights increases, there is a strong incentive to conserve water.

The economic returns to water used in irrigation tend to be lower than in most other uses. Accordingly, where demand exceeds supply, and institutions permit water to be transferred among sectors, water tends to be bid away from irrigation. Nonetheless, these forces will not necessarily result in large transfers of water out of irrigation. Since irrigation is the dominant offstream use of western water, large percentage increases in other water consumption can be accommodated with relatively small percentage reductions in irrigation use. Furthermore, many new demands can be met without transferring water away from agriculture. Deep or brackish groundwaters generally considered unsuitable for irrigation are available in some areas, and some primary sites for energy development still have untapped surface waters. Thus, even if the Assessment has understated nonirrigation water demands, water transfers among sectors will have only marginal effects on the total quantity of water consumed for irrigation.

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Regional irrigation trends initiated several decades ago in response to competition for water will continue. Some decline in irrigated acreage within the area from the southern High Plains to Arizona and Nevada is likely, as nonagricultural users bid water away from irrigation and farmers reduce pumping in response to declining groundwater tables and high energy costs. These declines will be more than offset by continued expansion of irrigation in areas where relatively low cost water is still available. The Nebraska Sandhills area will be one of the few areas in the West that will experience a significant further expansion of irrigated acreage.

The overall rate of growth of irrigated acreage in the West will continue to fall over the next several decades, but is not likely to turn negative during this century. Net expansion will depend in large part on agricultural prices. A modest 5 to 6 percent expansion (roughly 3 million acres) of irrigated acreage seems likely if real crop prices remain at roughly their 1975-80 average. A 25 percent increase in real crop prices might stimulate a net expansion of about 15 percent (nearly 8 million acres). In either case, however, the competition for increasingly scarce water supplies should bring the expansion of irrigated land to a halt early in the next century.

Principal changes in irrigation will be qualitative rather than quantitative in the coming decades. The quantity of water consumed for agriculture is likely to peak before irrigated acreage peaks. No peak in irrigated production is likely for the foreseeable future, however. As water costs rise, technologies and management practices that conserve water become more profitable. Since much of the irrigation in the West developed under and continues to be based on very low-cost water, the opportunities for substituting capital, labor, and management skills for water are great, and will be utilized with increasing frequency as water becomes scarce. The potential for such substitutions is illustrated in the High Plains Development Study which concluded that high energy costs would encourage a rapid improvement in irrigation efficiency. Average water use in the Texas High Plains is projected to decline from 1.38 acre-feet per acre in 1977 to 0.68 in 1990. Crop yields, however, are expected to continue to rise throughout the period and beyond.^[18]

Major constraints on western development over the rest of this century are likely to stem from institutional factors affecting water supply. As noted above, nonirrigation demands for water can be accommodated with only marginal effects on the overall

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level of irrigation. But it is by no means certain that water will be transferred to higher value uses on a timely basis, or that farmers will have incentives to make the investments and management changes required for more efficient water use. The institutions, including the legal system, affecting water use were developed when water was plentiful in relation to demand. Often these institutions, which vary widely among states, restrict transfers to alternative uses and discourage conservation measures. To the extent that the competition for water is relegated to the courts and state regulatory agencies rather than the market place, overall western development is likely to suffer. Although such restrictions tend to favor agriculture since irrigators commonly own the most senior water rights, continued development of western irrigation depends on incentives for improving water use efficiency, not on locking water into low-value uses.

Discussion:
A.N. Halter

The views expressed in this paper reflect the opinions of the author and not the opinions of the Electric Power Research Institute or its members.

In this discussion, my comments are divided into two sections. The first follows the outline of the Frederick-Kneese paper from the perspective of the adequacy of the methodologies used, with particular emphasis on water and energy. The second section discusses some of the implications of how pricing structures of electricity affect water use.

Review of Frederick-Kneese Paper

In their "Overview" and "Past Changes in Water Use", past trends in water use are shown to be the history of the expansion of irrigation. Growth in irrigation relied on surface water until the mid-1950s, when groundwater took over as the major source of supply. The authors should have pointed out that it was low-cost energy that made it possible to lift groundwater inexpensively.

In the authors' description of the projections of the Second National Water Assessment study, the following points should be noted:

1) Although assumptions of population growth are questioned and superficially related to the collapse of energy markets, other than referring to higher water costs and improved efficiency of uses, there apparently is no underlying pricing structure used to make the projections.

2) Frederick and Kneese relate water scarcity to the Assessment's projections of water availability, and projections of population, employment, and total earnings. Negative and positive correlations respectively suggest a methodology was used to make Assessment projections that is naive and devoid of economic dynamics and price structures.

3) Limitations of the Assessment are reviewed by the authors, and the supplemental study by Aerospace Corporation to cover the energy use of water is recounted. Though the authors point out that no special provision is made for including the possible effects of adopting water-conserving technologies,

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they do little to convince the reader that a better methodology was used by the Aerospace Corporation than by the Assessment study. They also point out that National Future estimates likely understate the competition for water resources, and are different from those made by the State-Regional Future study.

Under the heading of "Conclusions", the authors say that expansion in irrigated acreage in the West will depend in large part on agricultural prices, but do not relate it to energy prices in any general way. Institutional factors are given the major credit for limiting the use of water. This is the usual conclusion from resource studies in which the dynamics of supply-demand interaction are ignored. The current situation in energy speaks loudly for further demand constraint as pricing structures change.

The remainder of the Frederick-Kneese paper presents a case study of the Upper Colorado River Basin and its tributaries, a case that has been over-studied with little variation in the conclusions drawn. The Southwest Region Under Stress Project conducted by the authors' employer, Resources for the Future (RFF), justifies the use of the Colorado River as a case study as the authors are knowledgeable about the region. The RFF study uses a scenario approach to project energy development. The "speculative nature" of this approach is emphasized in that it ignores the price of electricity. The only factors said to affect water consumption in generating stations are the technology, quality of coal, and utilization rate; these in turn are said to be dependent on cost of water and other inputs. Pricing structures on the output or demand side are assumed away by the usual implicit assumption of the fundamental right to electricity and food.

Again, institutional changes are emphasized as necessary in the concluding section of the paper. One such change recommended by the authors is an "economic market" for water rights. Supply and demand for water rights would set their price and exchange among users. But the authors do not indicate how such a market would adjust for the inevitable uncertainty in streamflows and consequent shortages of electricity. The cost of electricity outages to the society and the economy are not considered in a water rights market. The lack of a holistic approach to institutional development can be just as detrimental to water

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allocation as the partial analyses used for making forecasts of water consumption.

One must question the methodologies being used for planning water resource use. In most cases the methods are so unclear that one must ask: what is the methodology for long-range forecasting for water and/or energy  Do forecasts reflect only conventional wisdom and the subjective preferences of the experts and institutions doing the planning, rather than the dynamics of interactive components in society and the economy  Does longrange planning for water, rooted in long-range forecasting of energy demand, rest on shaky ground? Under foreseeable conditions, especially changing costs, associated prices, and rate structures, demands are very likely to depart from patterns of the past.

Impacts of Electricity Price Structures on Water Use

Since I have emphasized that resource studies and long-range planning studies for water must be necessarily rooted in some expected schedule of prices for outputs and inputs, it is only appropriate that I also point out the impacts on water use of different pricing structures for electricity.

Prices for electricity are influenced not only by prices of petroleum, but also by utility regulation and rate structures. The unfortunate aspect of average-cost pricing, imposed by a 100-year-old regulatory environment, is that consumers do not experience the full cost of new sources of energy and hence of electricity. At a later time when prices must inevitably rise, many users of electricity are stuck with equipment and facilities required on the basis of former conditions. This can only lead to even more inefficient use of water. The water resource planner can no longer ignore the consequences of faulty regulation of the electric utility business.

Clearly, electricity conservation and peak-load pricing affect the amount of water and its pattern of use in irrigation. Declining block-pricing structures for electricity formerly created an incentive for groundwater overdrafting, because it was cheaper per unit to lift larger quantities of water. New inverted blockrate structures will remove that incentive, and should help to reduce the problem of overdraft.

Another innovative pricing structure being studied by energy economists and likely to be adopted by the electric utility industry is "responsive" pricing. As the term implies, electricity is priced essentially instantaneously as it is produced at its marginal cost. The communication and computer technology is already

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available to implement this for large users such as water districts, industrial firms, and municipal institutions. This time-of-use pricing structure would have a profound impact on water use in agriculture, as well as in industry and public institutions. The proper pricing of electricity for the major share of users would allow the simplest of rates to be used for residential customers. The confusion being caused by the proliferation of rates for residential customers is unfortunate and unnecessary, leading to further mistrust of electric utilities and the misallocation of energy and water.

The uncertainties of supply of electricity, given any pricing structure, must still be dealt with. The institution of a simple buy-back scheme could eliminate the consequences of shortage in an economic manner. The buy-back scheme could be similar to the one used by airlines to buy back seating when there is overbooking of a flight. A similar institution in the water area would complement the Frederick-Kneese suggestion of a water rights market.

Discussion:
Robert R. Curry

This paper does a good job of assessing the inadequacies of the U.S. Water Resources Council's report, The Nation's Water Resources 1975-2000: The Second National Water Assessment. However, many factors of supply and competition are not considered in either this paper or the Second National Assessment. Some of these are reviewed briefly here.

Groundwater availability is a serious problem, and groundwater quality is fast becoming equally serious. Technologic solutions are adequate for the short run, but when considered in a 25-50 year time frame, are probably worse than no solutions. As Frederick and Kneese point out, about 40 percent of western irrigation water is presently derived from groundwater, and five out of every six gallons withdrawn from the ground is used for irrigation. Further, of 56 million acre-feet withdrawn (estimated) in 1975, 22 million are overdrafted in excess of safe yield (mined). The authors further point out that, in half of the western watershed subregions, fully 50 percent or more of the consumption is derived from overdrafted groundwater.

Groundwater law and the public institutional framework are archaic throughout the West, and in many cases are based upon wholly faulty assumptions and models of groundwater dynamics.

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Thus, even in the most progressive states, water developers are encouraged to recover water with high energy costs from deep aquifers with poor water quality that will ultimately damage both surface soils and aquifers. In most cases the damage is irreparable. Particularly damaging is saline seep, which is an agricultural artifact of dryland farming techniques used in northern plains states. It renders unproductive tens of thousands of acres of agricultural land annually, at a rate far exceeding strip-mining, highway construction, and urban sprawl combined in those areas.

Salt loading and destruction of soil structure and ultimate productivity is a concomitant of use of sodic saline water for agriculture. We are often told of the great advantages to be gained by development of salt-tolerant food crops and forage. While it is certainly possible to increase productivity even while utilizing water of declining quality, such technology has a very discrete and finite limit, beyond which sodic loading will render the site essentially nonproductive. The progressive character of such actions means that we must ultimately pay the cost for myopia.

Groundwater pollution is another area of grave concern. Many of our assumptions about future groundwater supplies for all uses assume that known high-quality groundwater reservoirs will remain usable. We are learning, however, that the publicized horrors of Love Canal are but a small localized example of a much more pervasive nationwide problem.^[1] As cataloged by the Environmental Protection Agency, landfill and other sources of contamination have set serious limits on the period of time for which we may reasonably expect to recover groundwater from many significant and important local aquifers. Thus, even though we may not exceed safe yield pumping, we may have a limited lifetime for aquifers before we begin recycling our own wastes into domestic supplies or agricultural soils. Our projections of water supplies assume that supplies presently potable will remain so, despite saline intrusion, aquifer mixing, contamination through mineral extraction, industrial surface and groundwater pollution, and leachate contamination. The non-reversibility of such contamination seems to have escaped most analysts.

Groundwater overdraft is also a serious problem not clearly addressed. While we may estimate safe yield and overdraft rather precisely, in fact we know very little about site details. It is actually very difficult to estimate overdraft. Since agriculture itself, particularly salt-tolerant agriculture, and other land uses

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all tend to impede surface water infiltration through the root zone into the groundwater reservoirs, most observed overdraft is not a linear function of rate of withdrawal. Other things being constant, overdraft tends to increase with a fixed withdrawal rate, particularly where new lands are being brought into production and being urbanized. Thus, linear projections probably underestimate the true situation for the year 2000.

Energy costs are an increasingly important factor in water costs. Analysis of competition for western water requires careful attention to the economic pricing and institutional factors governing costs of water and electricity. As more and more water is delivered at costs of several hundred dollars per acre-foot, as in the California Water Project, many forms of agriculture are unable to afford additional water. What this has meant in California is that only large-scale corporate farms occupying large acreages of previously marginal land of questionable long-term productivity, and growing specialized high cash-yield crops, can afford to compete with urban and industrial water needs in a quasi-open market. As Frederick and Kneese point out rather inadequately, the cost of electricity is an increasingly important factor in groundwater costs. But several other energy cost factors are equally important. The cost of energy is increasingly important in all water supply systems, particularly those utilizing offstream storage, large storage reservoirs of any sort, or extensive conveyance structures. There is also feedback between the rising cost of electricity and cost of water for irrigation. As irrigation costs increase and food costs follow, it becomes economically feasible and desirable to store and transport higher cost food commodities. This means that an increasing fuel resource is utilized in food production and distribution, thus increasing competition for fuels for electricity production. Finally, there is critical social disruption caused by increasing supplies of high-cost agricultural water. This is well illustrated in the San Joaquin Valley of California, where high-cost federal and state projects deliver water to new sites for large, highly capitalized and mechanized farms. These large-scale operations, using expensive water on sites with drainage problems, salt loading, or poor soils, can temporarily compete with small family farms that have long-established food production systems often using gravity-feed streamflow irrigation sources or other low-cost riparian rights. The economic competition damages a diverse, efficient, long-productive food growing system in favor of a short-lived, high energy-dependent, unstable system. Thus pricing and delivery

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institutions destroy a long-term resource base for short-term production gains. Regional autonomy also declines as large-scale water delivery systems increase. Ultimately, rising energy costs will preclude continued production on the energy-dependent sites, but the low-energy-demand sites will meanwhile have been lost to urbanization, or their gravity water rights sold for other purposes.

Long term climatic change is a final factor that must be considered in a thorough evaluation of water resource demands. As pointed out by Harold Fritts in Chapter 1, the "historic" record of climate, including runoff and precipitation, leads to considerable overestimation of future resources. Study of tree-ring or other paleoclimatic records suggests that our concepts of drought used in present planning are rather naive. The unusual 20th century moderate climate cannot be expected to persist.