Optimal Regional Conjunctive Water Management

The severe drought in the western United States in 1976-78 brought the problems of allocating extremely limited water resources to the attention of agriculturalists and urbanites alike. Greatly reduced surface water supplies exacerbated the already critical pressure on remaining groundwater stocks in the same areas. The chronic overdraft of many western states groundwater basins can be attributed directly to their common pool nature. The lack of explicit property rights to groundwater stocks results in individual users of the resource evaluating only their own private pumping costs in their decision framework and implicitly assigning a zero opportunity cost to the stock portion of the resource. Thus, the private decision does not take into account any user cost and results in a divergence in the private and the social optimal rate of pumping. 1 The objective of this paper is to describe briefly an optimal control model which can be used to determine the socially optimal spatial and temporal allocation of groundwater and surface water among agricultural and urban uses. The control model is then applied to a representative region of California under several sets of energy costs. Two policies, prorata allocation and taxation, are evaluated empirically as alternatives for accounting for externalities due to the common pool problem.