ESSAYS ON THE ECONOMIC EFFECTS OF PRODUCER RESPONSES TO DECLINING WATER AVAILABILITY FROM THE OGALLALA AQUIFER

With withdrawals from the Ogallala Aquifer continuing to exceed the recharge rate, water conservation is of great importance in the Texas High Plains. In this area, producers must continuously reexamine their production decisions as groundwater availability diminishes. Two studies were conducted which evaluate the economic effects of producer responses to declining water availability from the Ogallala Aquifer.

Study one provides the dynamically iterative results from a MATLAB-based economic intertemporal allocation model that combines the economic decisions faced by producers, influenced by groundwater availability, and the changes in the available resources which affect future decision-making regarding groundwater use in the Palo Duro and Double Mountain Fork Watersheds. The temporal allocation results reflect how the conditions that producers face will change over the planning horizon under six scenarios including the status quo, a 10 and 25 percent acreage reduction, an increase of energy prices, and an increase and decrease in precipitation.

In both watersheds, an increase in precipitation results in an increase in both producer profit and value added. In Hartley County within the Palo Duro Watershed, a 10 percent acreage reduction results in the lowest decline in the sum of projected producer profit ($1,812 million) with a 3.3 percent decrease from the status quo. As the availability of water declines, so does the yield, revenue, and overall profitability for each crop. However, the policies that conserve the greatest amount of water may not be the most ideal situation for producers. Focusing on value added, a 25 percent reduction in irrigated acres provides the second highest increase in value added for the rural economy. This scenario also projects a 6.4 percent decrease in total water use and a 25.9 increase in ending saturated thickness. In Lynn County and the Double Mountain Fork Watershed, the considerably lower starting well capacity and saturated thickness result in the acreage reduction scenarios being the only scenarios in which there is any change in total water use or ending saturated thickness.

As groundwater levels continue to decline in the Ogallala Aquifer, stakeholders, policymakers, and producers encourage the adoption of new irrigation technology in an effort to conserve groundwater, extend the economic life of the aquifer, and enhance profitability. Study two evaluates the economic feasibility of one such technology currently receiving attention in the Central Ogallala region, the mobile drip irrigation (MDI) application system. This study compares MDI to low elevation spray application irrigation by evaluating the changes in variable cost per hectare to calculate the payback period for a MDI system under three levels of investment cost for grain and fiber crops representing three levels of water use while holding yield constant. Using a 3% discount rate, under the medium level of investment cost ($371 per hectare), a discounted payback period of 4.9, 9.0, and 6.3 years is required for corn, cotton, and sorghum/wheat, respectively. As the cost per hectare to convert an existing center pivot drops to $185 per hectare, the payback period also drops to 2.3, 4.2, and 3.0 years, respectively. Thus, producers growing higher water use crops are able to recover the costs of the conversion to MDI through increased water use efficiency quicker than producers growing medium and lower water use crops.