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ARS Home » Plains Area » Bushland, Texas » Conservation and Production Research Laboratory » Soil and Water Management Research » Research » Publications at this Location » Publication #343591

Research Project: Precipitation and Irrigation Management to Optimize Profits from Crop Production

Location: Soil and Water Management Research

Title: The impact of discount rate and price on intertemporal groundwater models in southwest Kansas

Author
item Vestal, Mallory - West Texas A & M University
item Guerrero, Bridget - West Texas A & M University
item Golden, Bill - Kansas State University
item Harkey, Logan - West Texas A & M University

Submitted to: Journal of Water Resource and Protection
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: 6/10/2017
Publication Date: 6/13/2017
Citation: Vestal, M., Guerrero, B., Golden, B., Harkey, L. 2017. The impact of discount rate and price on intertemporal groundwater models in southwest Kansas. Journal of Water Resource and Protection. 9:745-759.

Interpretive Summary: Agriculture plays a vital role in the growth and development of the High Plains Region of the United States. With the development and adoption of irrigation technology, this region was transformed into one of the most agriculturally productive regions in the world. The primary source of irrigation in this region is the Ogallala Aquifer. Currently, water from the aquifer is being used at a much faster rate than natural recharge can occur, resulting in a high rate of depletion from this finite resource. However, depletion of scarce water resources will have a significant economic impact on the long-term sustainability of the region. Therefore, scientists in the ARS led Ogallala Aquifer Program from West Texas A&M University and Kansas State University evaluated the impact alternative prices and discount rates have on groundwater policy recommendations. As indicated by results of this study, alternative prices, costs, and discount rates utilized in the study have an effect on policy effectiveness. These results are of interest to water policy makers and demonstrate the importance of economic assumptions in the outcome.

Technical Abstract: Agriculture plays a vital role in the growth and development of the High Plains Region of the United States. With the development and adoption of irrigation technology, this region was transformed into one of the most agriculturally productive regions in the world [1]. The primary source of irrigation in this region is the Ogallala Aquifer. Currently, water from the aquifer is being used at a much faster rate than natural recharge can occur, resulting in a high rate of depletion from this finite resource. Depletion of scarce water resources will have a significant economic impact on the long-term sustainability of the region. The objective of this study is to evaluate the impact alternative prices and discount rates have on groundwater policy recommendations. Deterministic models of groundwater withdrawals were developed and used in order to analyze and evaluate the impact of high, average, and low crop prices in a status quo scenario as well as a policy scenario reducing irrigated acreage allocation. Furthermore, this study analyzes the effects and associated consequences of alternative discount rates on net and total revenue. As indicated by results of this study, alternative prices, costs, and discount rates utilized in a model have an effect on policy effectiveness.