Economic Valuation for Groundwater resource in Southern Ogallala Aquifer

This research focuses on the southernmost portion of the Ogallala Aquifer, underlying the Texas High Plains and eastern New Mexico. Irrigated agriculture and industrial/municipal water demand are in competition for this essentially nonrenewable resource. The absence of a market mechanism has resulted in policy to restrict agricultural withdrawals in order to conserve water for future municipal needs. These policies are established in the absence of an estimated social value for the water resources. This paper investigates the possibility of the marketable option value for maintaining groundwater resources in the southern Ogallala Aquifer as compared to an estimated existence value. We utilize a referendum format contingent valuation (CV) survey of the western portion of Texas. Both the estimates of existence value and option value are reasonable, given current use values. Factors influencing both estimates include age, the existence of children, importance of the aquifer for household income, and pro-environmental attitudes. We conclude by comparing the two estimates. Given that property rights in Texas are governed by the rule of capture, we contend – contrary to arguments presented in Freeman (2003) – that option value is the appropriate social value measure.