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WATER RESOURSES DEVELOPMENT AND MANAGEMENT
Technology, Economics, and Institutions
CVEN 5393/ ECON 6555
Fall 1998
Professors Chuck Howe (Economics) and Ken Strzepek (Civil Engineering)
DESCRIPTION OF THE COURSE
This course covers the economics and engineering dimensions of water resources and water systems. It is intended to prepare the participants for practice as water resources engineers or economic consultants. For those pursuing the MA/MS or Ph.D. degrees, it is prerequisite for writing a thesis/dissertation in the field.
The need for combining economic analysis with engineering and hydrology lies in two historical facts:
1. Water engineering approaches to project design and system management (river basin, urban, etc.) have typically been based on physical criteria, such as "delivery efficiency," irrigation "needs," urban "requirements," the "maximum historical flood event," reliability under the greatest drought of record, etc.; and ·
2. Economists have frequently made erroneous analyses and naive policy recommendations because they haven't understood basic hydrology, groundwater-surface water interactions, flood frequencies, or factors affecting urban system reliability.
Interdisciplinary courses always pose the problem of finding the right level for each discipline without losing or boring people from other disciplines. For this reason, you may have to have or to pick up on your own certain basics from economics and water engineering. These topics should include:
1. Economics: scarcity, broad functioning of a market economy, supply and demand, production functions, cost functions, demand analysis, welfare measures, correcting for price level changes, discounting of future values (compounding of past values), present value of a series of benefits or costs over time. Anyone not having a working knowledge of these topics should consult an introductory or intermediate level microeconomics, such as
Hal R. Varian , Intermediate Microeconomics
Jack Hirshleifer, Price Theory and Applications
Gwartney and Stroup, Microeconomics: Private and Public Choice
Byrns and Stone, Microeconomics
2. Water Resources Engineering: precipitation, evapotranspiration, runoff, aquifers, hydrographs, reservoirs, basic probability, basic statistics, point and nonpoint source pollution, BOD, DO, and waste water treatment. Anyone lacking a working knowledge of these topics should consult one of the following texts:
Linsley et al., Water-Resources Engineering; will be on reserve at the Engineering Library.
Mays, Handbook of Water Resources; will be on reserve at the Engineering Library.
3. The course presumes a knowledge of PC operation for word processing and spreadsheets , as well as the use of software packages that will be provided in class.
The basic texts for the course will be an extensive set of readings and Linsley et al. , Water-Resources Engineering. The set of readings will be placed on reserve in the Engineering Library and somewhere else that will be convenient to those on the other side of campus.
The class is scheduled to meet Tuesdays and Thursdays in Economics, Room 16, from 9:30 to I 0:45.If a more felicitous time and place can be agreed upon, we may shift. Grading will be based on Homework: 20%; Mid-
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terms (2): 20% each; Final: 20%; and Team project: 20%. The team project is always an enjoyable part of the course and an important vehicle for becoming an interdisciplinary team worker. We will decide on the topic or topics later in the semester.
COURSE OUTLINE AND ASSIGNMENTS
Introduction
Subject 1: Global Overview
Engineering Aspects:
The hydrologic cycle and global water balance
River basins of the world and the USA
Water problems of world regions
Water problems of regions of the USA
Readings:
#1. Gleick, Chapter I bk Linsley et al., Chapter 2
Economic Aspects:
Water development in U.S. history
The role of water in economic development
Readings:
#2. Howe, Chapter I #3. Howe, "Effects of Water Resource Development ... "
Problem Sets: none
Subject 2: Overview of River Basin Planning
Engineering Aspects:
River systems and interdependencies
River basin modelling
lnterbasin transfers of water
Surface water - groundwater relationships
Readings:
bk. Linsley et al., Chapter 21
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Economic Aspects:
Steps in river basin planning
Defining a "project''
The "accounting stance"
Readings:
#4. Howe, Chapter 3 #5. Booker and Young, "Economic Impacts ... "
Problem Sets: No. I
Subject 3: Economic Analysis I
Topics:
Water "institutions"
Outlines of water law
The role of prices in an economy
Market supply and demand
Economic efficiency and the concept of equity
The "arithmetic" of benefit - cost analysis: PVNB, B/C, IRR
Choosing the discount rate
Estimating benefits and costs
Readings:
#6. from Colorado Water News #7. Howe, "Institutional and Administrative Issues ... " #8. Howe, Chapter 5 #9_ Howe, Chapter 6 # JO. Howe, "The Social Discount Rate"
Problem Sets: Nos. 2 and 3.
Subject 4: Economic Analysis II
Topics:
Uses of demand function
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Nonmarket benefits and costs
The analytics of project design
Project evaluation
Project output pricing
Multiple-objective planning and evaluation (MOPE)
Readings:
#JJ. Howe, "Frontiers ... " #12. Howe, Chapter 4 #13. Howe, Chapter 2
Problem Sets: No. 4
Subject 5: Development of Surface Water Supplies
Engineering Aspects:
Basic hydrology
Rain fall - runoff relationships
Reservoir models
Hydraulic Structures
Deriving storage - yield curves
Readings:
The "Supply Side"
bk Linsley et al., Chapters 3, 7, and 8
Economic Aspects:
Costs of surface water development
The analytics of project design: application
Readings:
#14 Lof and Hardison
Problem Sets: No. 6
Subject 6: Groundwater Supplies and Conjunctive Management of Surface Water and Groundwater
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Engineering Aspects:
Groundwater hydrology
Tributary and nontributary systems
Groundwater models
Artificial recharge
Readings:
bk Linsley et al., Chapter 4
Economic Aspects:
Economics of renewable and nonrenewable groundwater
Colorado regulations for tributary and nontributary water
The case of the Ogallala formation
The case of the South Platte
Readings:
#15. "Digital Computer Simulation" #16. " .. . High Plains Region" #17_ "Colorado's Law of Underground Water ... "
Problem Sets: ? ?
The "Demand Side"
Subject 7: Irrigated Agriculture
Engineering Aspects:
Soil types and plant physiology
Soil water chemistry
Water application methods
Return flows
Water pollution
Readings:
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bk Linsley, Chapter 4
Economic Aspects:
Crop yieldfunctions
Optimizing water application
Farm management models: linear programming
Effects of Agricultural policies
Readings:
#18. "Technical Elements ... " #19. "Irrigation-Induced Water Quality Problems" #20. " ... Federal Irrigation Policy" #21. "Paying the Farm Bill" #22. "Rural Development"
Problem Sets: Nos. 7 and 8
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Subject 8: Municipal Supply Systems, Wastewater Treatment, and Water Demands
Engineering Aspects:
Supply system components
Hydraulic design
Sizing components
Wastewater collection and treatment
Urban runoff and drainage
Readings:
bk Linsley et al., Chapters 15 and 19 #23. "Urban Wastewater Management Planning" #24. "Metropolitan ... Development"
Economics Aspects:
The peak period problem
Residential demands
Rate structures
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Economics of system reliability
Economics of nonprice conservation
Economics of metering
Readings:
#25. "The Peak Period Problem" # 11l1l p ' ' II 26. rrater ricing ... #27 "I t o.FP · " . mpac 'J nee ... #28. "Price and Rate Structures" #29. "Value of Reliability"
Problem Sets: 9 and 10
Subject 9: Industrial, Commercial, and Public Water Uses
Engineering Aspects:
Major water-using industries
Technologies of industrial water use: general characteristics, sources, intake treatment, discharge treatment, recirculation
Case studies: manufacturing, mining, thermal power, etc.
Readings: ??
Economic Aspects:
Industrial demand functions
Industrial water pricing
Readings:
#30. "Estimating Industrial Water Demands"
Problem Sets: None
Subject 10: Instream Uses: Hydropower, Navigation, Recreation, and Ecosystem Values
Engineering Aspects:
Basic hydraulics of hydropower
Pump-storage projects
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Mini-projects
Operating rules
U.S. waterway structure
Factors in flotilla pe,formance
Restoration of rivers and riparian ecosystems: the case of Glen Canyon
Readings:
bk Linsley et .al., Chapter 17 Corps of Engineers Reports (not in packet) #31_ "Operation of Glen Canyon Dam"
Economic Aspects:
The wholesale peak problem
Economics of wholesale pricing
Power and dilution foregone through consumption uses: the case of the Upper Basin of the Colorado River
Costfunctionsfor waterway transportation
Nonmarket valuation: TC and CVM
Readings:
#32. "Frameworkfor Inland Waterways " #33_ ''Keeping the Waters Flowing" #34_ "Economic Value of Instream Flow" #35_ ""Mono Lake"
Problem Sets: No. 11
Subject 11: Water Quality
Engineering Aspects:
Current U.S. situation
Point and nonpoint sources
Control at sources
Wastewater treatment methods
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Modeling water quality
Current regulatory scheme: SIPS, permits, TMDL, etc.
Readings: ??
Economic Aspects:
Economic efficiency model
Cost-effectiveness model
Readings:
#36. "Static Systems Model" #37, "Economic Analysis of Clean Water Act Issues"
Problem Set: No. 12
Subject 12: Flood Control
Engineering Aspects:
Flood hydrology
Structural measures
Nonstructural measures
Readings:
bk Linsley et al. , Chapters 5 and 20
Economic Aspects:
Measuring flood control benefits
U.S. flood insurance program
Readings:
#38. "Floodplain Management in the United States" #39. " .. . Economics of Flood Protection"
Problem Sets: Flood control case study
Subject 13: Regional Impacts of Water Projects and Water Transfers.
Topics:
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direct benefits and costs
indirect or secondary benefits and costs
''pecuniary" benefits and costs and the real costs of change
input-output models
case study of the Arkansas River Valley of Colorado
Readings:
#40 " ... Input-Output Models #41 "Economic Impacts of Agric.to-Urban Transfers:the Arkansas River Valley
Problem Set: review the calculations of set# 12
Subject 14: Macro-Institutional and Financing Issues.
Topics:
Jurisdictional issues: case of the Colorado River
interstate compacts
cost allocation methods
cost sharing practices (i.e.repayment practices)
Readings:
#42, "Interstate River Compacts #43, " .. . Cost Allocation #44, "Evaluating the Financial Plan of the Project #45, " ... Colorado-Big Thompson Project #46, "Public Intervention .. . "
Problem Sets: None.
Subject 15: Water Markets.
Topics:
interregional transfers and efficiency gains
agriculture-to-urban water transfers
water banking
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option and spot markets
protecting public values under tradable permit (water right) systems
effects of land ownership on water marketing
Readings:
#47, " .. .Interregional Transfers .. . " #48, "Moving Ag. Water to Cities ... " #49, "Option and Spot Price Water Markets ... " #50, "Protecting Public Values ... " #51, "Irrigation Districts and Water Markets"
Subject 16: A Summing Up and Final Case Study.
Topics:
ex-post analysis
general equilibrium models
Readings:
# 52, "A Summing Up ... "
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