Economic and Water Supply Effects of Ending Groundwater Overdraft in California's Central Valley

University of California, Davis (UC Davis) | March 1st, 2016

Surface water and groundwater management are often tightly linked, even when linkage is not intended or expected. This link is especially common in semi-arid regions, suc

Surface water and groundwater management are often tightly linked, even when linkage is not intended or expected. This link is especially common in semi-arid regions, such as California. This paper summarizes a modeling study on the effects of ending long-term overdraft in California’s Central Valley, the state’s largest aquifer system. The study focuses on economic and operational aspects, such as surface water pumping and diversions, groundwater recharge, water scarcity, and the associated operating and water scarcity costs. This analysis uses CALVIN, a hydro-economic optimization model for California’s water resource system that suggests operational changes to minimize net system costs for a given set of conditions, such as ending long-term overdraft. Based on model results, ending overdraft might induce some major statewide operational changes, including large increases to Delta exports, more intensive conjunctive-use operations with increasing artificial and in-lieu recharge, and greater water scarcity for Central Valley agriculture. The statewide costs of ending roughly 1.2 maf yr of groundwater overdraft are at least $50 million per year from additional direct water shortage and additional operating costs. At its worst, the costs of ending Central Valley overdraft could be much higher, perhaps comparable to the recent economic effects of drought. Driven by recent state legislation to improve groundwater sustainability, ending groundwater overdraft has important implications statewide for water use and management, particularly in the Sacramento–San Joaquin Delta. Ending Central Valley overdraft will amplify economic pressure to increase Delta water exports rather than reduce them, tying together two of California’s largest water management problems.

Economic consequence analysis of the ARkStorm scenario

American Society of Civil Engineers (ASCE) | November 1st, 2016

The business interruption (BI) impacts of ARkStorm, a severe winter storm scenario developed by the U.S. Geological Survey and partners, is estimated. BI stems from l

The business interruption (BI) impacts of ARkStorm, a severe winter storm scenario developed by the U.S. Geological Survey and partners, is estimated. BI stems from losses of building function, productivity of agricultural land, and lifeline services. A dynamic computable general equilibrium model of the California economy is developed to perform this economic consequence analysis. Economic resilience in the form of input and import substitution is inherent in the model’s equilibrium solution, and the model parameterization is adjusted to reflect other forms of resilience such as production recapture. Varying assumptions about the timing and source of funds for reconstruction results in a range of recovery paths. Five years after the storm, flood-induced building damage is the overwhelming source of gross domestic product (GDP) losses, timely and partially externally funded reconstruction mitigates impacts by approximately 50%, and the economy is not guaranteed to return to its baseline GDP trajectory. The methodology serves as a template for assessing the macroeconomic consequences of disasters and the influence of resilience in reducing BI losses.

Economic consequences of optimized water management for a prolonged, severe drought in California

American Geophysical Union (AGU) | May 21st, 2010

If abrupt climate change has occurred in the past and may be more likely under human forcing, it is relevant to look at the adaptability of current infrastructure system

If abrupt climate change has occurred in the past and may be more likely under human forcing, it is relevant to look at the adaptability of current infrastructure systems to severe conditions of the recent past. Geologic evidence suggests two extreme droughts in California during the last few thousand years, each 120–200 years long, with mean annual streamflows 40%–60% of the historical mean. This study synthesized a 72-year drought with half of mean historical inflows using random sampling of historical dry years. One synthetic hydrological record is used, and sensitivity to different interpretations of the paleo record is not evaluated. Economic effects and potential adaptation of California’s water supply system in 2020 to this drought is explored using a hydro-economic optimization model. The model considers how California could respond to such an extreme drought using water trading and provides best‐case estimates of economic costs and effects on water operations and demands. Results illustrate the ability of extensive, intertied, and flexible water systems with heterogeneous water demands to respond to severe stress. The study follows a different approach to climate change impact studies, focusing on past climate changes from the paleorecord rather than downscaled general circulation model results to provide plausible hydrologic scenarios. Adaptations suggested for the sustained drought are similar for dry forms of climate warming in California and are expensive but not catastrophic for the overall economy but would impose severe burdens on the agricultural sector and environmental water uses.

Economic Efficiency of Water Use and Allocation in California: A Scoping-Level Analysis

Delta Vision Blue Ribbon Task Force (Delta Vision) | July 1st, 2008

This report identifies key issues related to the economic efficiency of water development, allocation and use in California and discusses general policy changes that migh

This report identifies key issues related to the economic efficiency of water development, allocation and use in California and discusses general policy changes that might improve economic efficiency. Policy options focus on water pricing, water transfers, water use efficiency (i.e, conservation) and State development and enforcement policies. Analysis is provided at a scoping level of detail. Some important empirical issues that weigh on the relative merits of potential policy changes are not addressed. Efficiency of water use has never been more important in California. There is a need to save water and money. California has recently made progress in improved economic efficiency of water use, but major issues remain. Also, recent changes in the amount and location of supplies suggest a review of allocation efficiency. There are two important efficiency topics that this paper does not address in detail. First, economic efficiency of water use for ecosystem purposes is a viable concept, but it is difficult to apply given the state of Delta ecosystem science and the current range of possible futures. We can not quantify the relationship between water and ecosystem functions and values. Therefore, our ability to prescribe efficiency changes related to Delta water for ecosystem purposes is limited. Second, this paper also does not address the economic efficiency of major new storage or Delta conveyance facilities. The efficiency of specific water supply projects including regional or local conjunctive use and groundwater storage projects are also not considered. These are being addressed in different forums. This report focuses on other types of uses, allocations and development of water. A variety of potential actions and policies that might improve efficiency in the allocation, use and development of water resources are discussed. Some of the efficiency issues are • Are water allocations under California’s water rights systems efficient? • If there are inefficiencies, could an effective water transfer market increase efficiency? • Are there barriers or constraints to water transfer markets that should be removed? • How could water pricing be changed to increase efficiency? • How could California encourage efficiency in the use and development of water through incentives such as grants and loans, and through enforcement? In all cases, our findings represent potential improvements from the perspective of economic efficiency alone. There are usually other, non-economic considerations which would play into the larger question of the laws and policies that might be changed.

Economic Impacts of SGMA on San Joaquin Valley Dairies and Beef Cattle

Dairy Cares (California Cattle Council) | January 30th, 2023

Economic Impacts of the 2020–22 Drought on California Agriculture

University of California, Merced (UC Merced) | November 22nd, 2022

California just ended its third consecutive year of drought, resulting in the driest three-year period in the instrumental record. Multi-year deficits in precipitation in

California just ended its third consecutive year of drought, resulting in the driest three-year period in the instrumental record. Multi-year deficits in precipitation in the state’s usually wetter northern regions have been compounded by increased crop evaporative demands, leading to water scarcity impacts to agriculture across the state. Although 2020 was a dry year, water reserves stored during the wetter years of 2017 and 2019 greatly diminished drought impacts during that year. The water outlook changed rapidly in 2021—the third driest water year on record with the highest evaporative demand. The northern regions of the state—including the Sacramento Valley, the Scott and Shasta valleys, the Pit River valleys (northern intermountain valleys), and the Russian River—faced unusually dry conditions. Drought emergency conditions in 2021 were proclaimed first in the Russian River, Scott River and Shasta River basins, which faced subsequent curtailments. Water curtailments were extended to the Sacramento Valley later in the season. Water for local agriculture, ecosystems, exports, and water quality protection in the Sacramento-San Joaquin Delta were compromised by low water reserves. Atmospheric rivers in October and December 2021 provided temporary drought relief for a portion of the state, but record low precipitation from January-September allowed for extreme drought conditions to reign into the 2022 water year. To overcome persistent precipitation deficits and below-average storage in major reservoirs, the state again implemented water rights curtailments and low water deliveries from the State Water Project. The US Bureau of Reclamation announced reduced Central Valley Project deliveries—including unprecedented cutbacks to senior contractors in the Sacramento Valley—and local agencies implemented cutbacks as a first tier of drought response measures. Compared with the 2021 water year, however, 2022 brought less severe water cutbacks in the San Joaquin Valley. This report provides estimates of the economic impacts to agriculture for first three years of the current drought, which began in 2020. We use a combination of climate, hydrologic, agricultural and economic models, supplemented by informal surveys of irrigation districts and remote sensing data. The study includes nearly 88% of the 8.7 million acres of irrigated crop area in the state (LandIQ, 2019) excluding idle land. Our preliminary analysis for 2020–21 (Medellín-Azuara et al. 2022), focused on the Central Valley, and also examined the Russian River basin (North Coast), and northern intermountain valleys in Siskiyou, Shasta, and Modoc counties. Here, we expanded our spatial coverage to include the Central Coast, South Coast, and Colorado River.

Economic Productivity of California Water

Pacific Institute | October 22nd, 2004

This short summary presents information on total employment, total revenues/income, and total water use in California for various industrial and commercial sectors, using

This short summary presents information on total employment, total revenues/income, and total water use in California for various industrial and commercial sectors, using data through 2004. Far more detailed information, data, and analysis are available from the Pacific Institute and complete data sources are listed at the end of this memo. There are gross disparities in the “economic productivity” of water use. Even modest reallocations of water from one sector of our economy to another can produce significant changes in job availability and gross state product, but such reallocations must take account of regional economic priorities, job displacement and retraining issues, equity, and environmental side-effects. The data in this analysis suggest that carefully tailored water and business strategies, however, can lead to substantial benefits for California’s economy, job picture, and agricultural production.

Economic Sustainability Plan for the Sacramento-San Joaquin Delta

Delta Protection Commission (DPC) | July 19th, 2012

The Sacramento-San Joaquin River Delta is a unique place of economic, environmental, historic, and cultural significance. The land and water resources of the Delta suppor

The Sacramento-San Joaquin River Delta is a unique place of economic, environmental, historic, and cultural significance. The land and water resources of the Delta support significant agricultural and recreation economies, and the Delta also has an important role as an infrastructure hub for water, energy, and transportation. The region’s rich history boasts of bustling, river-based commerce before the automobile age, and its cultural uniqueness includes the only rural town in America build by early Chinese immigrants. As the largest estuary on the west coast of the Americas, the Delta also is a place of striking natural beauty and ecological significance that is struggling with serious environmental degradation problems. Although surrounded by growing cities, the Delta remains a highly-productive agricultural area with rural charms, landscapes, and waterscapes not found elsewhere in California. In recent years, there has been great concern over increasing environmental degradation in the Delta and over court decisions that reduced the quantity of water delivered to southern California through the state and federal water project intakes in the south Delta to protect endangered fish. Combined with additional concerns about the stability of the Delta’s levee system, these concerns led the California legislature to pass the Delta Reform Act of 2009. The Act created the Delta Stewardship Council and charged it with developing a Delta Plan to achieve the coequal goals of “providing a more reliable water supply for California and protecting, restoring, and enhancing the Delta ecosystem.” Recognizing the potential impact of the Delta Plan on the people and economy of the Delta, the Delta Reform Act stated that the coequal goals of water supply reliability and restoring the Delta ecosystem “shall be achieved in a manner that protects and enhances the unique cultural, recreational, natural resource, and agricultural values of the Delta as an evolving place.” Among the measures to address this goal, the Delta Protection Commission was tasked with developing this Economic Sustainability Plan to inform the Delta Stewardship Council’s development of the Delta Plan. The Legislature established the following guidelines for the Economic Sustainability Plan in the Delta Reform Act of 2009: "The economic sustainability plan shall include information and recommendations that inform the Delta Stewardship Council’s policies regarding the socioeconomic sustainability of the Delta region. (b) The economic sustainability plan shall include, but not be limited to, all of the following: 1) Public safety recommendations, such as flood protection recommendations. 2) The economic goals, policies, and objectives in local general plans and other local economic efforts, including recommendations on continued socioeconomic sustainability of agriculture and its infrastructure and legacy communities in the Delta. 3) Comments and recommendations to the Department of Water Resources concerning its periodic update of the flood management plan for the Delta. 4) Identification of ways to encourage recreational investment along the key river corridors, as appropriate. Since a key purpose of this Economic Sustainability Plan is to inform the Delta Plan under development by the Delta Stewardship Council, this report analyzes the impact of key policies being considered for the plan on the economic sustainability of the Delta. Many of the most significant proposals for the Delta are being developed in the Bay Delta Conservation Plan (BDCP). The policy proposals can be grouped into four categories: 1) water conveyance, 2) habitat creation, 3) levees, and 4) land use regulation. The report also considers many aspects of economic sustainability in the Delta that are unrelated to these water policy proposals including economic development recommendations in the 2008 Delta Vision Strategic Plan.

Economic-engineering optimization for California water management

American Society of Civil Engineers (ASCE) | May 15th, 2003

An economic-engineering optimization model of California’s major water supply system is presented. The model’s development, calibration, limitations, and resu

An economic-engineering optimization model of California’s major water supply system is presented. The model’s development, calibration, limitations, and results are reviewed. The major methodological conclusions are that large-scale water resources optimization models driven by economic objective functions are both possible and practical; deterministic models are useful despite their limitations; and data management, reconciliation, and documentation are important benefits of large-scale system modeling. Specific results for California indicate a great potential for water markets and conjunctive use to improve economic performance and significant economic value for expanding some conveyance facilities. Overall, economic-engineering optimization even if deterministic can suggest a variety of promising approaches for managing large systems. These approaches can then be refined and tested using more detailed simulation models. The process of developing large-scale models also motivates the systematic and integrated treatment of surface water, groundwater, facility, and water demand data, and identification of particularly important data problems, something of long-term value for all types of water resources analysis.

Economics of a State Water Resources Program

Legislative Analyst's Office (LAO) | July 9th, 1957