Areas where the ground water aquifer is created or sustained by surface water irrigation are global. While hydrologists have a thorough understanding of the surface and groundwater connection, laws and property rights, and water policy have lagged in recognizing that connection. Following the legacy of prior appropriation doctrine, current water policy approaches are largely regulatory. We are all aware of the horror stories, where the legal and regulatory enforcement or litigation costs exceed the value of the water. In the forthcoming seismic shifts in water use, continued reliance upon regulation of hydrologic externalities will only increase the potential for catastrophic market failures or inefficient water use that a water scare society can no longer afford. Having framed the surface to groundwater hydrologic connections as economic externalities, we offer the power of economics as remedies: (1) Pigouvian taxes on pumping or subsidies for canal conveyance, (2) internalization by pricing or markets, or (3) negotiated payments between pumpers and surface diverters. At the very least, we must identify and explicitly consider all the producers and recipients of hydrologic externalities.

For more information:

Alley, W.M., Healy, R.W., LaBaugh, J.W., and Reilly, T. E. . (2002). Flow and storage in groundwater systems. Science 296, 1985-1190.

Bator, F. (1958). The anatomy of market failure. Quarterly Journal of Economics, 782(3), 351-379. 

Family Farm Alliance. (2010, August). Irrigators seek supreme court review in reclamation contract law case. Water Review. No. 83. 

Meade, J. E. (1952). External economies and diseconomies in a competitive situation. Econ. Journal 62(9) 54-67. 

Oregon Water Resources Department. (2010). Oregon Administrative Rule filed through May 14, 2010 for the Willamette Basin Program. Oregon Water Resources Department, Salem, Ore. http://arcweb.sos.state.or.us/
rules/OARS_690/690_502.html
.

Strauch, D. (2009). Pathfinder irrigation district general manager. Mitchell, Neb. personal communication.