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The Welfare Implications of Bankruptcy Allocation of the Colorado River Water: The Case of the Salton Sea Region

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Abstract

This paper focuses on assessing a policy for reallocation of Colorado River water for major stakeholders in the state of California, to set a standard for sustainable long-term public and environmental use. We address the policy of allocating scarce water resources to competing stakeholders of different sectors in the Salton Sea region under over-committed water rights agreement. We determine the value of water applied to the agricultural, urban and tourist sectors to estimate the regional welfare under different allocation frameworks. We use two models for allocation: one involving a social planner approach that maximizes regional welfare, the second focusing on the bankruptcy rules of proportional deficit (cutback), and constrained equal award. We find the proportional cutback framework to be less conducive to regional welfare, although it presents a more politically feasible and robust option.

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Data Availability

All data can be made available upon request from the corresponding author.

Notes

  1. We recognize that by referring only to recreational benefits from the Salton Sea we ignore several important aspects associated with water level in the Sea, such as health impacts.

  2. Based on BLS (2019) inflation between 1960 and 2017 was 724 percent, and between 2011 and 2017 it was 10 percent.

  3. It should be noted that the value of unit of water in the agricultural sector is very low for consumption above nearly 125,000, 300,000, and 60,000AF for IID, CVWD, and SDCWA, respectively.

  4. Note that the value of unit of water in the urban sector is very low for consumption above nearly 447,000, 147,000, and 303,000AF for MWD, CVWD, and SDCWA, respectively.

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Acknowledgements

This paper is based to a large extent on the capstone project submitted by Jacob Rightnar to the University of California, Riverside, School of Public Policy on June 7, 2019, under the supervision of Ariel Dinar. Support from the W4190 Multistate NIFA-USDA-funded project, Management and Policy Challenges in a Water-Scarce World is greatly appreciated.

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No funding from external sources was used for the work leading to this paper.

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  1. School of Public Policy, University of California, Riverside, CA, USA

    Jacob Rightnar & Ariel Dinar

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  1. Jacob Rightnar
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  2. Ariel Dinar
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Correspondence to Ariel Dinar.

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Rightnar, J., Dinar, A. The Welfare Implications of Bankruptcy Allocation of the Colorado River Water: The Case of the Salton Sea Region. Water Resour Manage 34, 2353–2370 (2020). https://doi.org/10.1007/s11269-020-02552-1

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