CHOICESThe magazine of food, farm and resource issues

A publication of theAmerican AgriculturalEconomics Association

First Quarter 2003

Figure 1. The Ogallala is the largest freshwater aquifer in the world. The maps above show the saturatedthickness (vertical distance between the water table and the aquifer floor) of the Ogallala in 1996-97 andthe water level changes between 1980 and 1997. The aquifer is depleted in parts of northern Texas and westcentral Kansas. A large share of Ogallala water lies beneath the Nebraska Sandhills, where the resourceremains largely untapped because crop irrigation is uneconomic (McGuire et al., 1999).

Conserving the Ogallala Aquifer: Efficiency, Equity, and Moral Motives By Jeffrey M. Peterson, Thomas L. Marsh, and Jeffery R. Williams

The Ogallala Aquifer is a vast geologic formationthat sprawls underneath parts of eight states fromSouth Dakota to Texas. Early settlers in the semi-arid High Plains were plagued by crop failures dueto cycles of drought, culminating in the disastrousDust Bowl of the 1930s. After World War II,affordable technology became available to irrigatefrom the Ogallala. The High Plains was then trans-formed into one of the most agriculturally produc-tive regions in the world.

To say that the High Plains economy now “runson water” is probably no exaggeration. Irrigatedcrops provide feed for livestock, which are in turn

the primary inputs for local meat processing plants.Water is also essential for the livestock productionand meat processing industries. The crop, livestock,and meat processing sectors form the core of theregional economy, accounting for a large share ofemployment and gross output. Because the Ogal-lala recharges very slowly, the High Plains economyis dependent on a finite resource.

The fate of the High Plains has been a policyissue since depletion of the Ogallala became appar-ent in the 1970s. Policy makers have wrestled withhow—and whether—to conserve the groundwaterresource. This debate has recently returned to the

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fore at both state and federal levels. In 2001, Kan-sas formed a special citizens’ committee to advisethe governor and legislature on potential ground-water conservation policies (Ogallala Aquifer Man-agement Advisory Committee, 2001). The renewedinterest within the High Plains states partly reflectsthe recent drought and exhaustion of the aquifer’susable economic life in many areas (see Figure 1).

The debate at the federal level has changed overtime. Debates in the 1970s focused on conservingthe Ogallala for national and international foodsecurity. During the 2002 farm bill debate, thefocus shifted to the regional impacts of federal poli-cies through their effects on water use. Becausewater is so fundamental to the region’s livelihood,policies affecting water use ultimately change thescope and distribution of economic activity as wellas the use of land and other natural resources. Fed-eral policies affecting water use in the High Plainsinclude commodity price programs, the Conserva-tion Reserve Program, and cost-share programs forinvestments in new technologies.

Central to policy debates is why water conserva-tion should (or should not) be a policy priority. Inthis article we discuss three policy motivations forconservation: economic efficiency, equity, andmoral duty. Policy debates are shaped by the rela-tive importance of these motivations to diversestakeholders. Reaching a consensus on these moti-vations is difficult. Nonetheless, policy tools flexi-ble enough to address different concerns may bestfoster consensus-building.

Conserve for Economic Efficiency?Economic efficiency means that resource useshould yield the greatest net benefit to society.Allowing individuals to base their resource use onprivate benefits and costs heightens economic effi-ciency for many resources. Unfortunately, ground-water is an exception to this rule. Because of itscommon property attributes, the rate of groundwa-

ter use will likely exceed its most economically effi-cient rate.

The inefficiency of unregulated groundwateruse is easy to demonstrate. Because each user holdsonly the property right for pumping water, ratherthan the entire bundle of property rights for thewater itself, withdrawals are governed by the “ruleof capture.” An individual pays only the pumpingcost and not for the value of the water removedfrom the common pool. The private costs of pump-ing are therefore less than the social costs of with-drawing water. Excessive pumping is the result.

Research has shown that common poolresources likely are overused if left unregulated. Themore difficult question is how such resourcesshould be governed for efficient use. In most HighPlains states, groundwater use is governed jointlyby state water laws and groundwater managementdistricts (GMDs) controlled by local irrigators.Controls differ by state and district.

In Kansas, New Mexico, and Colorado, theGMDs have adopted policies to deny new waterpermits if water availability in surrounding wellswould be significantly reduced. In Texas, no suchrestrictions are possible under the state water laws;the Texas Supreme Court ruled that “the owner ofthe land is the absolute owner of the soil and perco-lating water” (Houston & T. C. Ry. Co. v. East).

Whether the current combination of state andlocal rules has achieved efficiency for the Ogallala isan open question. The answer depends on the dif-ference between social and private costs, or theexternal costs, of groundwater pumping. These costsare made up of three parts (Provencher & Burt,1993; see box), all of which are hard to estimate.Because the horizontal flow of groundwater is veryslow in the Ogallala (a crude average is about onefoot per day), external costs are local in nature. Atthe same time, the flow rates of groundwaterdepend on different geologic factors. Many previ-ous studies found low depletion costs in large aqui-

The External Costs of Pumping from a Common Aquifer• The stock cost is the loss in water to future users for each unit pumped by a current irrigator. • The depletion cost is increase in irrigation costs, due to higher pumping lifts and lower well capacities,

as one irrigator lowers the water table by pumping. • The risk cost occurs because groundwater is used as a buffer against the large variability in rainfall,

allowing irrigators to limit their exposure to production risk. If pumping becomes more expensivebecause other users have lowered the water table, increases in the implicit premium for this insuranceexpose an irrigator to more risk.

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fers such as the Ogallala, suggesting that economicefficiency could be nearly attained with unregu-lated pumping (e.g., Beattie, 1981; Gisser, 1983).More recent studies found potentially large riskcosts and significant gains from groundwater man-agement policies in arid regions (e.g., Tsur, 1990).Little or no evidence is available for the stock cost.

Conserve for Equity?Although efficiency-centered policies would satisfythe interests of private irrigators, such policieswould not necessarily protect the public interest.An important part of the public interest is equity(or “fairness”) in the distribution of water withinand across generations of users. Equity within gen-erations depends on water conservation because,despite the flatness of the High Plains, the bedrockfloor of the aquifer is extremely uneven. Since mostwells are drilled to reach bedrock, landownersabove deep parts of the aquifer can reach water evenwhen nearby shallow wells have become inopera-tive. If conservation maintains a high water table,then access to water will be distributed more equi-tably.

Ensuring equity across generations, or sustain-ability, is defined as “meet[ing] the needs of thepresent without compromising the ability of futuregenerations to meet their own needs” (World Com-mission on Environment and Development, 1987,p. 43). Sustainability requires attention to actionsnow that may change the stock of physical and nat-ural capital in the future.

For groundwater, sustainability depends largelyon technological change. At one extreme, futuregenerations could sustain their standard of livingwith little water by relying on technologicalimprovements in crop varieties and irrigation sys-tems. In the absence of new technologies, however,future well-being depends heavily on water conser-vation.

Sustainability goals often conflict with privateincentives. Intergenerational equity suggests thatcurrent and future benefits should receive equalweight in allocating a natural resource over time.Individual users, however, discount future benefitsat their own costs of capital. Thus, sustainabilitypolicies must consider differences in social and pri-vate discount rates.

Research can address the equity issue by evalu-ating the substitutability between water and tech-nology. Improved irrigation systems may notreduce water use, particularly if irrigation runoff isrecaptured and reused (Huffaker & Whittlesey,1995). In some cases, the rapid adoption of newirrigation systems has enabled High Plains irriga-tors to grow more water-intensive crops or to irri-gate more land.

Water Conservation: A Moral Principle?Some environmental philosophers have argued thatefficiency and equity goals miss the fundamentalpoint. They believe that conservation of naturalresources should reflect moral duties. Such duty-based ethics reflect the writings of Immanuel Kant,who argued that all decisions should be based onmoral principles. For Kantians, natural resourceshave their own moral standing, independent ofhuman benefits or costs. These views suggest a pol-icy philosophy summarized in Aldo Leopold’s state-ment from his Sand County Almanac: “A thing isright when it tends to preserve the integrity, stabil-ity, and beauty of the biotic community. It is wrongwhen it tends otherwise.”

Such reasoning differs from mainstream eco-nomic thought because social decisions wouldreflect generic principles rather than the benefitsand costs of particular proposals. Nevertheless, sucharguments have influenced several policies; a nota-ble example is the federal Endangered Species Act.In the extreme, moral duties have also been calledupon to return the High Plains to a “buffalo com-mons.”

Policies and Motives in the High PlainsOf the three motives, economic efficiency haslargely driven the shaping of water policies in theHigh Plains. During the early years of develop-ment, groundwater was considered inexhaustibleand its hydrology a mystery. Water laws that fos-tered orderly and rapid development of theresource increased efficiency, but policies came toreflect the common pool nature of the aquifer asdevelopment grew. In the 1974 Groundwater Man-agement District Act, Kansas lawmakers concludedthat rules created by local districts were needed “forthe proper management of the groundwaterresources of the state; for the conservation of

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groundwater resources; [and] for the prevention ofeconomic deterioration.” These districts later setlimits on new water permits based on the externalcosts to nearby water users.

Sustainability motives have entered recent pol-icy debates. The “zero depletion” proposal in Kan-sas would limit an area’s withdrawals to the amountof natural recharge over a prescribed time period.Similarly, the “two pools” plan would restrict with-drawals only after an area’s “usable pool” of water isgone; the remaining “conservation pool” would bepreserved for future generations. Although theKansas Ogallala Management Advisory Committeedid not support these proposals, sustainabilityremained an important goal. The committee’sreport made several recommendations for “extend-ing the life of the aquifer and sustaining the vitalityof western Kansas” (2001, p. 7-8).

Flexible policy alternatives can address multipleconcerns and changes in policy needs over time.Flexibility characterizes the tradable water deedspolicy first proposed a quarter century ago (Smith,1977). In this policy, each water user would receivean initial allocation of water permits that are thenforfeited for each unit pumped less recharge. Forinstance, an irrigator initially may receive deeds forpumping 1,000 acre-feet of water from a givenwell. If 100 acre-feet are pumped the first year andrecharge is 25 acre-feet, then deeds for 925 acre-feetremain for the next year. Irrigators could also buyand sell deeds among themselves within prescribedareas. Limiting the number of returnable permits inindividual years could address efficiency goals. Sim-ilarly limiting the number of permits initially issuedcould address equity and moral concerns.

The water deeds policy is a potential base ofcomparison for other High Plains proposals. Oneexplanation for the opposition to the recent Kansasproposals is their narrow focus on sustainability.Many irrigators agree that restricting water use willenhance sustainability. Nonetheless, the two pro-posals did not clearly specify how the remainingwater would be allocated across space or time.Absence of this provision caused considerableuncertainty about future impacts on farmers andlocal economies. The water deeds policy has a clearmechanism for limiting and allocating water. Deedsare not issued for the water needed for future gener-ations, and market forces would allocate currentlyusable water. In effect, water deeds would create a

market for the groundwater stock in the same spiritas the markets for surface water that already func-tion in parts of the American west and other aridregions throughout the world.

For More InformationBeattie, B.R. (1981). Irrigated agriculture and the

Great Plains: Problems and policy alternatives. Western Journal of Agricultural Economics 6, 289-299.

Gisser, M. (1983). Groundwater: Focusing on the real issue. Journal of Political Economy, 91, 1001-1027.

Huffaker, R.G. and Whittlesey, N.K. (1995). Agri-cultural water conservation legislation: Will it save water? Choices, 1995(4), 24-28.

McGuire, V.L., Stanton, C.P., and Fischer, B.C. (1999). Water-level changes, 1980 to 1997, and saturated thickness, 1996-97, in the high plains aquifer (Fact Sheet FS-124-99). Washington, DC: US Geological Survey. Available on the World Wide Web: http://ne.water.usgs.gov/highplains/hp97_web_report/fs-124-99.htm.

Ogallala Aquifer Management Advisory Commit-tee. (2001). Discussion and recommendations for long-term management of the Ogallala Aquifer in Kansas. Available on the World Wide Web: http://www.kwo.org/Reports/ogallala_mac_rpt.pdf.

Provencher, B. and Burt, O. (1993). The Externali-ties associated with the common property exploitation of groundwater. Journal of Environ-mental Economics and Management, 24, 139-158.

Smith, V.L. (1977). Water deeds: A proposed solu-tion to the water valuation problem. Arizona Rev., 26, 7-10.

Tsur, Y. (1990). The stabilization role of groundwa-ter when surface water supplies are uncertain: The implications for groundwater develop-ment. Water Resources Research, 26, 811-818.

World Commission on Environment and Develop-ment. (1987). Our common future. New York: Oxford University Press.

Jeffrey M. Peterson (jpeters@ksu.edu) and ThomasL. Marsh are assistant professors and Jeffrey R. Wil-liams is a professor in the Department of Agricul-tural Economics at Kansas State University.

CHOICES First Quarter 2003