modeling impacts of policy responses to prolonged and severe drought in the upper rio grande river...

Modeling Impacts of Policy Responses to Prolonged and Severe Drought in the

Upper Rio Grande River Basin

Dr. James F. Booker, Siena College

Douglas T. Hickey Professor of Business and Associate Professor of Economics

Ari M. Michelsen, Texas A&M University, El Paso

Frank A. Ward, New Mexico State University

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Drought is a human construct and may relate to hydrologic,

ecologic, or economic impacts

Policy Responses

• Endangered Species Protections

• Realistic incentives including pricing

• Regional water reallocations

• Interstate water reallocations

• Do nothing

Modeling impacts of policy responses

• Physical impacts on flows, stocks, and uses

• Distribution of economic impacts– by region and state– by use sector (agricultural, municipal)

• Efficiency impacts

Long term reforms

• Environmental protections

• Realistic incentives

• Reallocation from agriculture to other uses

Drought as catalyst for institutional change

Allocating the Colorado RiverOctober 17, 2002:

• “Southern California water officials agreed Wednesday to shift water from desert farms to San Diego.”

• “The farmers would be paid $258 to $400 an acre-foot for water that costs them $15.50 per acre-foot.”

Source: Los Angeles Times

Shores of Lake Mead:

Las Vegas Valley Water District

Lake Powell at Hite Marina:

Living Rivers

Introduction

• About the upper Rio Grande

• Modeling extended drought and policy responses

• Physical and economic impacts

• Extensions to other river basins

How much water is in this river?(annual mean flow in million acre-feet)

Mississippi 340

Colorado 16

Hudson 10

Rio Grande 2

Schoharie Creek 1

Rio Grande Headwaters, Colorado, USA

Rio Grande Headwaters, Colorado: Supply 660,000 Ac-Ft / Yr

Rio Grande Gorge: Northern New Mexico

MichelsenMichelsen

Rio Puerco, New Mexico: Supplies 32,000 Ac-Ft /Yr

Rio Grande, Southern New Mexico Ag Uses 495,000 Ac-Ft / Yr

MichelsenMichelsen

Rio Grande at El Paso, Texas: M&I Uses 140,000 Ac-Ft / Yr

Rio Grande at Juarez, Mexico: Ag Uses 60,000 Ac-Ft / Yr

Who gets what: existing policies

• Interstate compacts and treaties

• State water allocation institutions

• Allocations within federal irrigation projects

• Reservoir operating rules

Rio Grande Compact: Entitlement=f(inflows)

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300

600

900

0 500 1000 1500 2000

Upper Rio Grande Inflows (thousand af/yr)

Wa

ter

allo

ca

tio

n

(th

ou

sa

nd

af/

yr)

Colorado

NM

Texas

Mexico

Instream Flow (above Elephant Butte)

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Legally allowed diversions

lowest decile

median

highest decile

Colorado

New Mexico

TexasMexico

Basic Dynamic Model of a Rio Grande Type System

• Depletable reservoir/aquifer (and no pumping constraint)

• Variable surface flow

• Two users

If ground and surface water are perfect substitutes, and there are no annual pumping or diversion limits, then the problem of

dynamically allocating surface water flows tx between users 1 and 2, and a groundwater stock Z over time can be written as

ttttt t

xVzxV 2211 ()(1

max

subject to ttt xxx 21 ( t )

Zzt

t ( )

where t

1 is the discount factor, t is the rate of growth in rents

for user 1 (representing urban population growth and demand), and )(iV is the rent (gross benefit minus cost) for users i = 1 and 2.

T h is d e sc r ib e s p e r fec t co n ju n c tive u se , and the so lu t io n is to u se ava ila b le su p p lie s to g ene ra te co n sta n t d isco u n ted m a rg in a l ren ts a c ro s s tim e , so u rce , a n d sp a ce :

tttt

t

ss

s

tt

t

x

V

z

V

x

V

x

V

2

2

1

1

1

1

1

1 1

Background

• Ward et al. Institutional Adjustments for Coping With Prolonged and Severe Drought in the Rio Grande Basin, WRRI Technical Completion Report No. 317, Feb. 2001.

The Rio Grande Setting

• Highly variable river basin inflows• Extensive use and availability of renewable

and non-renewable groundwater• Reservoir storage equal to several years

average annual inflow• Rapidly growing (3+ %) urban population;

agriculture uses ~90% of surface water• Presence of an endangered species

Rio Grande at Del Norte

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400,000

600,000

800,000

1,000,000

1,200,000

1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

year

annu

al in

flow

(acr

e-fe

et)

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Albuquerque water demand growth

Source: City of Albuquerque, Public Works Dept., 1997

Endangered Species and the Rio Grande

• September 19, 2002: “A judge on Wednesday ordered federal water managers to release water earmarked for cities and irrigators to keep the Rio Grande flowing for the endangered silvery minnow.”

• October 18, 2002: “Water Release Halted. The decision by the 10th Circuit Court of Appeals means the endangered silvery minnow is on its own this autumn …. ‘That really means the end of the silvery minnow in the river.’ ”

Source: Albuquerque Journal

Endangered Species: the Rio Grande silvery minnow - distribution

Source: Desert Fishes Council

Rio Grande Basin Water Budget, Normal Year

Rio Grande Headwaters 660Conejos River (3 gages) 346 339 Colorado Ag Northern NM Mts 139Rio Chama 346 60 SeepageJemez River 45 60 EvaporationAlbuquerque M&I 60 100 Central NM Ag (MRG)Rio Puerco 32 135 Riparian VegetationRio Salado 41 180 Elephant Butte Evap

495 Southern NM Ag (EBID)140 El Paso M&I236 Texas Ag

60 Mexico Ag

Supply Demand (Depletion)

Rio Grande Model (RMA)

• Flows (instream, surface and groundwater inflows, diversions, pumping from groundwater, return flows, conveyance losses)

• Stocks (nonrenewable groundwater, reservoirs)

• Lags (shallow groundwater availability and surface recharge, riparian usage)

• Institutions

• Net economic benefits of water use by sector, region, and year (projected 40 years)

Flows at Otowi

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200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1942 1947 1952 1957 1962 1967 1972 1977 1982

Otow i-hist 8.20 - Otow i

MODEL VERIFICATION

8.22: EB Storage

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1942 1947 1952 1957 1962 1967 1972 1977 1982

EB-hist EB-stor

MODEL VERIFICATION

Drought Scenarios: 6 year future projection

• 100% of historic median flows

• 75% of median

• 50% of median

Policy scenarios

• Law of the River (do nothing)

• Intra compact water bank

• Interstate water bank

Law of the River Drought Damages

Change in Use with Intracompact Banking

Change in use between intracompact banking and interstate banking

Change in Benefits with Intracompact Banking

Change in benefits between intracompact banking and interstate banking

Specific conclusions

• Monetary drought damages are small in relation to regional economic activity

• Interstate compact results in concentrated impacts on users at the “end of the pipe.”

• Policy change can reduce 1/3 of drought damages: maybe drought will not be a catalyst for change here.

General conclusions I

• Regional (often intrastate) policy changes achieve most of the possible efficiency gains.

=> INCREASED FLEXIBILITY IN WATER ALLOCATION AT THE REGIONAL LEVEL CAN ACHIEVE MOST OF THE POSSIBLE EFFICIENCY GAINS.

General conclusions II

Interstate agricultural productivity differences lead to only modest gains from interstate water banks.

=> Interstate water banking will in many (most?) cases simply transfer agricultural activity. (Municipal demands can be met regionally.)

Interpreting aggregated models: Historic low flow days vs. annual flow

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- 500,000 1,000,000 1,500,000 2,000,000 2,500,000

Annual flow past San Acacia (acre-feet)

Nu

mb

er

of

da

ys b

elo

w 5

0 cf

s a

t S

an

Aca

cia

What is an “extreme” drought?

• Major crop/pasture losses;

• extreme fire danger; • widespread water

shortages or restrictions

• Palmer Drought Index : -4.0 to-4.9

• Soil moisture percentile: 3-5%

• Streamflow percentile: 3-5%

• Standardized Precipitation Index:-1.6 to-1.96

Source: National Drought Mitigation Center, University of Nebraska-Lincoln