## Agricultural Economics Department



# Presentations, Working Papers, and Gray Literature: Agricultural Economics

University of Nebraska - Lincoln Year 



# Economic and State Budget Cost of Reducing the Consumptive Use of Irrigation Water in the Platte and Republican Basins

Ray Supalla ∗ 

### Thomas V. Buell †



### Brian McMullen ‡

∗ rsupalla1@unl.edu † Univeristy of Nebraska - Lincoln ‡ University of Nebraska-Lincoln, bmcmullen2@unl.edu This paper is posted at DigitalCommons@University of Nebraska - Lincoln. http://digitalcommons.unl.edu/ageconworkpap/42

# Economic and State Budget Cost of Reducing the Consumptive Use of Irrigation Water in the Pl atte and Republican Basins

Analysis Prepared by:

Ray Supalla, Tom Buell and Brian McMullen 1



## August 21, 2006

1 Ray Supalla is Professor of Agricultural Economics, Tom Buell is Graduate Research Assistant and Brian McMullen is Research Associate, Department of Agricultural Economics, UNL. Analysis was conducted as a public service for the Nebraska Department of Natural Resources.

## Summary

The potential costs to irrigators, the stat e economy and the state budget were estimated for different methods of reducing consumptive us e (CU) of irrigation water in the Platte and Republican Basins. The policy methods considered included: leased retire ment of irrigated land using a willing buyer-willing seller approach; requ ired land retirement with lease payments equal to actual producer losses; retirement of irriga ted land by purchasing water rights using a willing buyer-willing seller approach; forced retirement of irrigated land w ith the purchase price equal to actual market value; allocation with 100 percen t producer compensation; and allocation with 50 percent producer compensation. Both long and s hort-term programs were considered with the reduced consumptive use occurring at different locations within each basin. The analysis assumes that CU must be reduced by 75,000 acre-feet in the Platte Basin west of Elm Creek, and by 100,000 acre-feet in the Republican Basin. Findings and Conclusions Concerning Economic Costs

• The land rental and land sales markets provi de the best indicati on of the value of irrigation water at the farm level. A compar ison of irrigated and dryland market values suggests that irrigation water is worth an av erage of $74 per acre per year in the Platte Basin and $82 per acre per year in the Repub lican Basin, with an average sale value of $639 per acre in the Platte and $725 in the Republican.

• The on-farm cost of reducing consumptive use depends on the per acre value of irrigation water and on the level of consumptive use per acre. The on-farm costs were estimated to average $69 per acre-foot of CU in the Platte Basin and $98 in the Republican Basin. In both basins on-farm costs per acre-foot of consumptive use decreases as one moves from
east to west.

• The off-farm costs of reducing consumptive us e are initially quite hi gh, but diminish as the displaced resources move to alternative uses. Off-farm cost s for the first year of a CU reduction program were estimated at $180 per acre-foot for the Pl atte and $193 for the Republican when a land retirement approach was assumed, and at $131 for the Platte and $176 for the Republican if only allocation was us ed to reduce consumptive use. All first year costs were projected to diminish to about 15 percent of the first year values within10 years or less.

• Total statewide economic costs for both the on-farm and off-farm effects were estimated for the Platte Basin to range from $185 per ac re-foot change in CU for a 10 year program to $114 for a 50 year program, if a land retire ment approach was used and from $225 to $147 if allocation was used to achieve the same level of reduction. The corresponding estimates for the Republican Basin were from $160 to $143 for land retirement and from $230 to $207 for allocation.

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### • The total economic cost of reduc ing depletions to the river was found to be substantially cheaper if the irrigation reductio ns occurred on land located clos e to the river, especially if the need was for a short-term program. A 10 year program in the Platte Basin, for example, would cost over $20,000 per acre-foot if the reduced pumping occurred five miles from the river, which corresponded for this calculation to the 28/40 line, compared to $367 for land located one mile from the river. Location was found to be much less important for a 50 year program, but still va ried from $155 for land one mile from the river to $702 per acre-foot for land 5 miles away.

Findings and Conclusions Concerning Community Impacts

• The best indication of how community leve l employment, population and income will be affected by irrigation reductions is how such communities were affected when the irrigation development occurred.

• The available empirical evidence suggests that the effects from the expected level of change in irrigation will be too small to be problematic at the community level.

• In the late 1990’s irrigated acreage in the Republican Basin increased by about 15 percent, which is approximately the leve l of decrease that may be needed, yet employment, population and income was not noticeably effected.

• The community property tax revenue base is unlikely to be reduced by more than two percent in either basin by the expected level of irrigation reductions, unless the irrigation reductions are very concentrated in small parts of the basin.

Findings and Conclusions Concerning State Budget Costs

• The estimated total annual state budget cost of reducing CU in the Platte Basin by 75 kaf ranged from $3.2 million ($42/AF reduction in CU) for a land retirement, water right purchase program with compensation equal to market value, to 7.7 million ($103/AF reduction in CU) for a voluntary wa ter right leasin g program.

• Total up-front budget costs for a 75 kaf Pl atte Basin program depend on the planned program length. A very long-term 50 year program would have total up-front costs ranging from $45.5 million for a water right purc hase with market value compensation, to $168.1 million if an allocation approach with fu ll compensation is used. Total up-front costs for a short-term 10 year program were estimated to range from $31.7 million to $68.3 million.

• The estimated total annual state budget cost of reducing CU in the Republican Basin by 100 kaf ranged from $4.5 million ($45/AF reduc tion in CU) for a land retirement, water right purchase program with compensation equal to market value, to $15.5 million ($155/AF reduction in CU) for a voluntar y water right leasing program.

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### • Total up-front budget costs for a 100 kaf Re publican Basin program followed a pattern similar to the Platte and ranged from $64.8 million for a water right purchase with market value compensation, to $110.7 million using a voluntary water right leasing approach. The range for a 10 year program was $63.0 million to $120.7 million.

• The per acre-foot cost of reduc ing depletions to the river will be much higher than the cost of reducing depletions to the basin, espe cially if the reduced irrigation occurs at more than one or two miles from the river.

• The cost differences between water right leasing and purchas ing are very large for long term programs, because with leasing the co sts continue indefinitely, whereas with purchasing once the right is paid fo r there are no further costs.

Policy Implications

• Policy makers can minimize the cost of reducing consumptive use from irrigation and augmenting stream-flow by purchasing rather than leasing irrigation rights, by using regulatory instead of a willing buyer and willing seller approach, and by reducing irrigation at locations close to the river

• Allocation programs, with compensation, rather than irrigated land retirement should be seriously considered as administratively easier, although somewhat more expensive, approach to reducing CU from irrigation.

• Cost uncertainties are primarily due to unknow ns regarding what type of program(s) will be used to achieve the desired outcomes. If the political process finds required irrigated land retirement with market value compensation, or allocation with perhaps only partial compensation acceptable, then state budget cost s will be relatively low. On the other hand, if Nebraska chooses to use a willi ng buyer and willing seller land retirement program, or a land leasing program, then many may find the costs prohibitively high.

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## Introduction

Nebraska must reduce the consumptive use (C U) of irrigation water in the Republican Basin, as per a legally binding Compact with Kansas and Colorado; in the Plat te Basin, as per the requirements in a proposed plan developed unde r the terms of a Coope rative Agreement with Colorado, Wyoming and the U. S. Department of In terior; and in any over appropriated basin, as per the requirements of LB962. This analysis ad dresses the economic co sts and the potential state budget costs of meeting these objectives under alte rnative policy scenario s. Economic costs

are estimated for both the on-farm and off-farm c onsequences, including the statewide effects as the changes ripple through the Nebraska economy. Factors Affecting Costs Both the economic and the budgetary costs depend on the policy ch aracteristics which determine how and when consumptive use is re duced. First, these costs depend on whether the appropriate policy concern is depl etion to the basin or depletion to the river. When the policy concern is depletion to the river, depletion reduction costs will be much lower if the policies used result in irrigation reductions on lands which are close to the ri ver. Second, CU reduction costs depend on whether CU is reduced by decreasing i rrigated acres, or by reducing the amount of water pumped or diverted (allocations). It is us ually less costly to reduce CU by reducing acres, compared to reducing allocations, because there is more opportunity for simultaneously reducing production and irrigation costs. Third, CU reduction costs depend on factors affecting the profitability of irrigati on, including rainfall, crop prices, irrigation costs and other production costs. All factors affecting the profitability of irrigation, pe r unit of consumptive use, will proportionately change the cost of reducing depletions to both the basin and the river. Finally, average CU reduction costs depend on whether the need is for short or long-term reductions. This is especially true for off-farm costs wh ich are relatively high initially but diminish substantially over the long-term. Policy Options Evaluated The policy options considered in this analys is reflect current issues in the Platte and Republican Basins. For the Platte Basin the analys is focuses on the potential cost of off-setting the increased depletions to th e river which have occurred be tween 1997 and 2005, as determined under the terms of the Cooperative Agreement. The cost of off-setting these depletions is

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### estimated for both irrigated land retirement and for allocation programs implemented over 10, 25 and 50 years, respectively. The specific programs considered include: Land retirement via a voluntary annual lease;

Land retirement via regulations, with annual compensation payments equal to the actual average on-farm cost;

Land retirement via voluntary purchase of water rights;

Land retirement via regulation with one-tim e compensation payments equal to market value of the water right (difference in land value with and wi thout irrigation);

Allocation via regulation w ith no compensation; and

Allocation via regulation with compensati on equal to 100 percent of the calculated reduction in farm income.

Costs under these policy scenar ios were estimated for reducing depletions to the Platte Basin, as well as for reducing depletions to the Pl atte River. Off-setting de pletions to the basin represent what might be required over the l ong-term under the requirements of LB962, which
mandates a water balance at the basin level, but not necessarily a restoration of stream flow. The needs in the Republican Basin are slig htly different. Unde r the terms of the Republican River Compact any reduction in consumptive use helps Nebraska meet its obligations. However, actions which have a relatively quick impact on the river during an extended drought are especially us eful. Republican Basin costs we re accordingly estimated for reduced depletions to both the river and the basin, for the same array of policy choices as the

Platte Basin.

Procedures Used to Estimate On-farm and Off-farm Economic Costs Parties involved in the water policy proce ss have expressed an interest in several

economic effects associated with reducing consumptive use. This analysis addresses the four

effects which are most often mentioned: the eco nomic cost at the farm level, the economic consequences for local communities, the effect s on the state economy and the potential state budget costs.

On-farm Costs Farm-level economic costs were defined as the change in net economic returns. The change in net returns for irrigation land retirement was estimated as the difference between the

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### net returns per acre of land for irrigation and the returns from the same quality land under dryland conditions. The on-farm cost of allocatio n was assumed to equal the difference in net returns due to a reduced water supply, assuming no change in capital costs. 2 

### All on-farm values were estimated for three representative counties in the Platte Basin (Morrill, Lincoln and Phelps) and three counties in the Republican Basin (F ranklin, Red Willow and Chase). A weighted average of county results was us ed to represent each basin. 3 

### Water Optimizer , a management tool developed by Supalla and Ma rtin, UNL, was used to compute the differences in net returns using prices and costs whic h reflect current conditions. 4 

### Annual property taxes on agricultural land were assumed to be 1.72 percent in the Re publican Basin and 1.67 pe rcent in the Platte Basin, levied on 80 percent of the market va lue of the land, as estimated in Johnson, 2006. 5 

### The interest charge was 8.0 percent for operating capital and 6.0 percent for capital costs. General overhead was estimated at 10 pe rcent of operating costs.

Off-farm Costs

Total economic costs for the State of Nebraska include both on and off-farm costs. These costs could be measured as changes in econom ic output, value added or household income. Change in economic output is a good measure of how business activity is affected, but is a poor

measure of the effects on Nebraska households . Value added is a better measure because it adjusts for intermediate input costs and is theref ore an indication of the net contribution made by

Nebraska resources. It is still not a good measure of how the welf are of Nebraska citizens is
affected, however, because some of the returns to Nebraska re sources may accrue to citizens outside the state. The changes in primary paym ents to Nebraska households which result from changes in irrigation are the best measure of tota l economic cost to the state. Primary payments

2 This approach assumes that the allocation levels do not result in reduced investment in farm or irrigation equipment, either because it is uneconomic to do so or because allocation rules require sustaining the capacity to irrigate all acres to maintain the allocation.
3 The Republican Basin average was based on certified acr es, with Franklin representi ng the 330,000 certified acres in the LRNRD (30.3% of the Basin), Red Willow representing 312,000 acres in the MRNRD (28.6%) and Chase representing 448,700 acres in the URNRD (41.1%). The we ighted average for the Pla tte Basin was based on the 2005 estimates of irrigated acres within the 28/40 area in three reaches, with Morrill County representing 424,900 acres (53.4%), Lincoln County representing 262,037 acres (33%) and Phelps County representing 108,000 acres (13.6%).
4 The crop production costs incorporated in Water Optimizer are based on 2006 Crop Budgets developed by Roger Selley, Nebraska Cooperative Extension Service. Irrigation Costs, excluding a $7.00 per acre capital charge for the well, were assumed to be $5.00 per acre inch for all coun ties except Chase, which was assumed to be $5.50 because of greater pumping depth. The crop prices used were corn, $2.40/bu.; grain sorghum, $2.30/bu.; soybeans, $5.50/bu.; wheat, $3.50/bu. and hay, $70/T.

5 These basin averages are a simple average of the 200 5 County Average Rate for the three counties representing each basin.



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### to households, often called earned income, are equal to wages and salaries and proprietors income. They exclude dividends and most types of transfer income such as social security payments. These values were estimated for the various policy scenarios using multipliers developed by a recent study by Charles Lamphear (Lamphear, 2005). Lamphear found that primary payments to households per one dollar change in output from irrigated crops totaled $.796 of which $0.162 was direct payments to on-farm households and $0.634 was payments to off-farm households. He also found that household payments from dryland crops totaled $0.646 per one dollar change in dryland output, consisting of $0.14 in payments to on-farm households and $0.506 in payments to off-farm households. These

coefficients were used to estimate the off-farm payments to households for both changes in irrigated acres and changes in water allocation. For policy scenarios involving retirement of i rrigated land, the off-farm costs for the first year of the program were estimated by multiplying the change in the value of irrigated production times 0.634 and then subtracting the o ff-setting increase in dryland production, which was computed as the change in dryland cr op value times 0.506. When irrigation is reduced through allocation ra ther than land retiremen t, however, the off-farm effects per one dollar change in irrigated output are much different. In this case, as the value of irrigated crop production changes there is no off-setting increase in dryland production. The only production inputs which change are irrigation costs and some yield dependent costs such as fertilizer. The multiplier for this situation was estimated at $0.466 cents per one dollar ch ange in the value of irrigated crop production. It was estimated by modifying Lamphear’s direct and indirect requirements matrix to reflect the production inpu t mix when irrigation crop output changes as a

result of water allocation.

Duration of Off-farm Costs The off-farm costs, also called secondary co sts in the economics lite rature, are transitory

because most of the resources involved eventual ly find alternative employm ent. This is why the principles and guidelines used by federal agencies for evaluati ng water projects do not allow project applicants to count s econdary benefits or costs (U.S . Water Resource Council, 1983). The federal agencies assume that the labor and othe r resources which become unemployed as a result of some change in irrigation (which is called a secondary effect) will eventually move on to alternative employment and earn as much or mo re than they earned before the change in

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### irrigation. Statewide off-farm costs are indeed ze ro if the resources wh ich are displaced when irrigation is reduced could im mediately find comparably productive alternative employment within Nebraska. But unfortunately some resour ces are immobile, and in all cases it may take some time before alternative employment can be secured. In addition, some of the resources involved may shift to uses outside the community or to another state. When this happens there is a long-term economic cost at the community and/or state level. The multipliers described above can be used to estimate off-farm costs in the short-run, which in this case is probably at least one ye ar, but there is no widely accepted method of determining how long these costs are likely to be sustained. Extensive research by the Economic
Research Service, USDA (Sullivan, et al., 2004 ) found that retiring irrigated land under the Conservation Reserve Program (CRP) had little lasting eff ect. They found that: “In the years immediately after land was enrolled in the CRP, job growth in high-CRP counties was significantly lower than in comparable low-CRP counties. However, job growth was i ndistinguishable ove r the longer term
(1985-2000).” (Sullivan et al., 2004). Although not discussed in this st udy, sustained state level impacts from reductions in agriculture would be even less likely. Most economists contend that secondary benefits and costs should be ignored in economic analyses because they are both transi tory and difficult to estimate (Anderson and Settle, 1977). We disagree. In an agricultural state such as Nebraska there is likely to be some lasting effect, if only because some of the peopl e and resources involved may need to leave the state to find alternative employment . In this analysis we assume that off-farm costs at the state level decrease linearly during the first 10 year s from 100 percent of the multiplier effects described above in year one to 15 percent in year 10, and then remain at 15 percent for the indefinite future. The unknown actual costs may be lower than this because of faster resource adjustments, but they are very unlikely to be higher. Local Community Impacts Community leaders are understandably concerne d about the potential effect of irrigation reductions on their communities, especially effects on employment, population and tax revenues.
Like off-farm costs, this issue is hard to addr ess because of the dynamics of resource adjustment. Will people who lose irrigation related jobs fi nd others within the community, or move to

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### another community or another state? Will school enrollments decrease? W ill public service costs

increase relative to the tax base ? Empirical estimates of these potential consequences were not developed for this analysis, but much can be le arned from a cursory assessment of the downside

risk We begin our assessment by reviewing what has happened in the Nebraska communities which experienced rapid irrigation growth in the r ecent past. Our contention is that the effects of decreased irrigation should be a mirror image of the effects from irrigation growth, assuming no other significant changes to the economic base of the community. And fortunately we have a great laboratory in the Republican Basin wh ere the MRNRD and the LRNRD experienced irrigation growth of about 150,000 acres, or 15 percent, from 1995 to 2004, with little change in other factors affecting their economic base. A plot of employment and irrigation growth in the Republican Basin for the 1995 to 2004 time period shows no discernible relationship (F igure 1). The fact that employment did not noticeably increase as irrigation development o ccurred does not mean that irrigation had no effect, however, because without irrigation develo pment there may have been actual employment declines. To address this possi bility we compared the growth in Republican Basin employment relative to employment in all other rural Nebr aska counties for 1995 to 2005 (Table 1 and Figure 2). We found that the employme nt growth pattern in the Repub lican Basin during a period of rapid irrigation growth was nearly exactly the same as the pattern for all other rural counties. An analysis of the percentage changes in employment, population and sales tax revenues from 1995 to 2005, for all non-metropolitan Nebras ka counties leads to the same conclusion regarding community impacts from irrigation (Figures 3, 4 and 5) . No statistically significant relationships were found between changes in irri gated acres and employment, population or sales tax revenue, for the Republican Basin counties, th e Platte Basin counties, or the remainder of non-metropolitan Nebraska.

One should not conclude from this assessmen t that irrigation has had no impact on local employment, population or sales taxes, because sure ly it has. What we can conclude, however, is that the effects are so small, even during period s of rapid irrigation grow th, that they cannot be easily detected or observed. This also means that they are prob ably small enough to be ignored when contemplating reductions in irrigation that are equal to or less than the growth we have seen in the last 5 to10 years.

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### Property Tax Impacts Another potential community impact that is of concern to po licy makers is the potential for adversely affecting the property tax base. The property tax base would decline if land values

declined as a result of irrigation restrictions (all ocations), or if irrigate d land is retired and taxed as dryland. The potential allocation levels being disc ussed will decrease economic returns to land but over the long-term this effect will be small and le ss than general inflation, thus making it likely

that land values will continue to increase, rather than decrease , although the rate of increase is likely to be slower than would otherwise occur. This expectation is supported by 25 years of experience in the URNRD. Despite going from an initial allocation leve l of 22.5 inches in 1979
to 13.5 inches in 2005, land values have continued to increase, albeit more slowly than in other parts of the state (Figure 6). Over the short- term (2 to 3 years), however, market psychology may be more important than economics. If uncer tainty and fear leads to pessimism, then some decline in land values is certainly possible. This appears to have happened in Southwest Nebraska in 2006, with gravity irrigated land values dropping by 1.8 perc ent in the Southwest Crop Reporting District (CRD) and by 4.8 percent in the South CRD. Center pivot irrigated land was down by 6.3 percent in the South CRD, but up by 5.1 percent in the Southwest CRD
(Johnson, 2006). The impact of land retirement on the property tax base depends in part on how the retirement is implemented. If the right to irrigate is sold in perpetuit y, then the value of the remaining land asset decreases to a dryland value and taxes are likely to be adjusted accordingly. On the other hand, if the right to irrigate is leased as it has been under the EQUIP and CREP programs, then the asset value probably hasn ’t changed and land taxes will remain at the irrigated level. Let us assume for purposes of illu stration that enough land is retired to reduce CU by 75,000 acre-feet in the Platte Basin (65,800 ac res) and by 100,000 acre-feet in the Republican
Basin (117,600 acres), and that all of these acres are then taxed at dryland values. This would reduce assessed values by $46 million in the Platte Basin, which is 0.4 percent of total valuation in the Basin, and by $85 million in the Republican Basin, which is 2.0 percent of the total. 6

6 Tax data is for 2005 and was compiled from Nebraska Department of Property Assessment and Taxation, http://pat.nol.org/researchReports/valuation/ . The counties included in these calculations for the Platte Basin were Adams, Banner, Buffalo, Dawson, Garden, Gosper, Hall, Kear ney, Keith, Lincoln, Morrill, Phelps and Scotts Bluff. The Republican counties were Chase, Dundy, Franklin, Frontier, Furnas, Harlan, Hayes, Hitchcock, Nucholls,



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### These amounts may be significant in an absolute sense, but the percen tage decreases are too small to materially disrupt the delivery of public services as long as the retirement program is not concentrated in a small part of the basin.

Estimates of On-Farm Economic Costs The on-farm economic costs of reducing consumptive use for irrigation were estimated for two types of programs, land retirement and allocation. The on-farm cost of land retirement, when expressed on an annual basis is equal to th e difference in net income when using the land for dryland production instead of irrigation. Three methodologies were used for determining this
cost: the land rental market, the land sales ma rket and a computed value using Water Optimizer. The results from each methodology were averaged to determine a best estimate. The cost of retiring irrigated acres was f ound to average $74 per acre per year in the Platte Basin and $82 per acre per year in th e Republican Basin (Table 2). The corresponding costs when expressed on the basis of a one-time pu rchase were $639 per acre in the Platte Basin and $725 per acre in the Republican Basin. There ar e significant differences within each basin, however, with the Platte ranging from $810 in the eas tern part of the criti cal habitat area to $547 above Lake McConaughy. Cost for the Republican Basin varied by much less, but again they were lowest in the far west. The basin average wa s lower in the Platte than in the Republican primarily because the averages were weighted by the number of impacted acres in each reach, and a high proportion of the Platte acres are above McConaughy where retirement costs are relatively low. The estimated per acre costs of retiring irriga ted land were converted to a cost per acrefoot change in CU by dividing through by an estim ate of CU per acre (T able 2). Expressed on this basis the costs were $69 per acre-foot of reduced consumptiv e use in the Platte Basin and $98 per acre-foot in the Republi can Basin. Again, the Platte Ba sin average is relatively low because of the dominating effect of land above McConaughy where CU per acre is the higher than anywhere else in either basin. The on-farm economic cost of using allocation to reduce consumptive use is equal to the

difference in annual income that results from applying less water. These costs were estimated for

Perkins, Red Willow and Webster. Calculations assume retirement of 97,939 acres in the Platte Basin and 117,647 acres in the Republican Basin and that retired irrigated la nd will be taxed at dryland value. Land values taken from Johnson, B., Nebraska Farm Real Estate Market Developments, 2005-2006. http://agecon.unl.edu/realestate/re2006.pdf.



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### a representative county in each reach using Wate r Optimizer, which computes the difference in net returns when each water supply level is used optimally. In th is case the cost per acre-foot change in CU depends on how much the water su pply (allocation) has to change to produce the desired effect, which in turn depends upon how many acres are regulated and on how much reduction in CU is needed. For this analysis we assumed a 75,000 acre-foot reduction in the Platte Basin proportionate ly distributed across all acres with in the 28/40 zone and west of Elm
Creek, and a 100,000 acre-foot reduction in the Re publican Basin proportionately distributed

across the certified acres in each NRD (Table 3). Achieving these reductions would reduce net returns by an average of $104 per acre-foot of CU reduction in the Platte Basin and by $155 per acre-foot in the Republican Basi n. Reducing CU by allocation is more costly at the farm level than retiring acres, b ecause there is no change in taxes and less opportunity to reduce capital

costs. When the on-farm cost of reducing CU by allo cation is expressed on a per affected acre basis, instead of a per acre-foot of CU basis, the results look quite different. Costs per affected acre were estimated for this case to average only $9 in the Platte Basin and $14 in the Republican Basin (Table 3). Costs per affected acre are lo w because they are spr ead across the entire land area and because the last units of water applie d to an acre of land do not add much to net

economic returns. 7



### It should be noted that if th e required reductions in CU fr om irrigation were higher than
the values used for these calculations, or if th e same level of total reduction was achieved by regulating fewer acres, then the on-farm costs could be much different. For example, it was estimated that if only one-third as many acres were regulated to achieve the same level of total reduction, then the cost per acre-foot change in CU would be about the same, but the cost per affected acre would triple.

Estimates of Off-Farm Economic Costs

Off-farm economic costs were also estimated for both land retirement and allocation. To
consider off-farm costs, however, one must also consider the length of the program, because off-

7 As more and more water is applied to a crop, the in crease in grain yield per unit of water applied gradually diminishes to zero because at some point more water does not add to crop yields. As the increase in yield per unit of water applied decreases, the net economic gain from applyi ng the water also decreases. Hence, net economic returns do not change much as a result of applying less water under allocation programs that reduce the amount of water applied by about 20 percent or less. Very low allocations, howe ver, will have a cost per affected acre that is similar to the cost of land retirement.



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### farm impacts are transitory, as noted earlier . Although most CU reduc tion needs are probably long-term, there may be a need for policy official s to consider shorter term programs as well. Hence, off-farm costs were considered for programs of 10, 25 and 50 years.

The off-farm costs of land retirement were estimated at $203 per acre per year for the
Platte Basin in the short-run (f irst year), decreasing to an average of $132, $71 and $56 per acre per year for programs that continue for 10, 25 and 50 years, respectively (Table 4). The corresponding costs for the Republican Basin were somewhat lower at $164 for the first year, then averaging $107, $58 and $41 per acre per year for 10, 25 and 50 year programs. Average

off-farm statewide costs for land retirements, when expressed on a per acre basis, are lower in the Republican Basin, because there is less differe nce between irrigated and dryland agricultural output, compared to the average for the Platte Ba sin west of Elm Creek. Ho wever, when off-farm costs are expressed in terms of do llars per acre-foot change in CU they are very similar for both basins, because average CU per acre is lower in the Republican Basin. First year off-farm land

retirement costs were estimated for both basi ns at approximately $185 per acre-foot of CU reduction, decreasing to an aver age of $120, $65 and $46 per year, per acre-foot of CU, for programs of 10, 25 and 50 years, respectively (Table 4). The off-farm costs of reducing CU with allocation when compared to land retirement were 27 percent lower in the Platte Basin and 9 pe rcent lower in the Republi can Basin (Table 5).

Off-farm effects from allocation are lower than for land retirement, for the same total change in CU, because there is less reduction in irrigation in put costs. Off-farm costs from allocation in the Republican Basin are a little higher than in th e Platte because the amount of water applied is already regulated in the Republican Basin. Current allocation levels were used as the baseline for the Republican Basin, whereas an estimate of current uncontrolled pumping was the baseline

used for the Platte Basin. Off-fa rm costs from allocation, expresse d as a cost per unit change in
CU, increase as the allo cation level decreases.

Estimates of Total Economic Costs
The total economic cost, on-farm and off-fa rm, of a long-term program (50 years or more) that would reduce CU by 100 kaf in the Republican Basin and by 75 kaf in the Platte Basin was estimated at $23.2 million per year using land retirement and $31.4 million using
allocation (Table 7). Estimated total economic costs, per acre-foot change in CU, were about 20 percent higher in the Platte Basin than in the Republican Basi n under a land retirement approach,

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### and about 30 percent higher if allocation was used (Table 6). A long-term 50 year land retirement program for the Platte was estimated to cost $114 per acre-foot compared to $147 for the Republican. A comparable allo cation program was estimated to cost $143 in the Platte and $207 in the Republican.
Cost of Reducing Depletions to the Riv er Compared to Depletions to the Basin Our discussion of costs to this point ha s been entirely in terms of reduction in consumptive use, which is equivalent to reduced depletions to the basin. However, in the Platte Basin the central issue is depletions to the river rather than deplet ions to the basin, and to a lesser extent this is also the case in the Republican Basi n. It will cost more per unit to reduce depletions

to the river because not all of th e reduction in CU will show up as a reduced depletion at the river

in the relevant time frame. To examine the sensit ivity of the results to this issue we computed the cost of reducing depletions to the river when land that is locat ed from one to five miles from the river is retired. This was done using the well known Jenkins Equation, as described in Table 5 and on Figure 6.

The total economic cost of reducing depletions to the ri ver using land retirement was found to be substantially cheaper if the retired land was located clos e to the river, especially if the need was for a short-term program. A 10 year program in the Platte Basin, for example, would cost over $20,000 per acre-foo t if the reduced pumping occurred five miles from the river, which corresponded for this calculation to the 28 /40 line, compared to $367 for land located one
mile from the river (Table 8). Location was found to be much less important for a 50 year program, but still varied from $155 for land one m ile from river to $702 per acre-foot for land 5 miles away. Illustrative results for the Republican Basin were similar, assuming no difference in average transmissivity or the aquifer storage coefficient. These calculations illustrate that when the polic y concern is depletions to stream flow it is very important to consider where irrigation should be reduced to provide for reduced depletions at least cost. However, the actual significance of proximity to the river in both basins may be quite different than what was calculated he re using the Jenkins Equation with assumed parameters. Groundwater models are needed to more closely examine this issue. Estimated State Budget Costs und er Alternative Policy Approaches State budget costs were defined as the amount of money it would take to implement a variety of approaches to reducing consumptive use. All estimates are for programs which would

15

### reduce consumptive use for irrigation by 75,000 acre-feet in the Platte Basin and by 100,000 acre-feet in the Republican Basin. 8 

### Estimates are provided for the annual cost of the programs and for the full up-front costs. The up-front cost s represent what it woul d cost if all required funds were appropriated in the fi rst year of the program. Estimates are also provided for the unit cost of reducing depletions to th e basin and to the rive r. All CU is assumed to be a depletion to the basin, but how much of the change in CU actua lly shows up as a change in depletions to the river depends on where the reduced depletions occu r (proximity to the river and on the relevant time frame. For illustrative purposes costs were calculated for time frames of 10, 25 and 50 years, with corresponding depl etions to the river equal to 2.2, 9.8 and 36.0 percent of the changes in CU which occur during each time period. The estimated annualized state budget costs fo r reducing CU in the Platte Basin by 75 kaf ranged from $3.2 million ($103/AF reduction in CU) for a land retirement, water right purchase program, with compensation equal to market value, to 7.7 million ($42/AF reduction in CU) for a voluntary water right leasing pr ogram (Table 9). Total up-fr ont costs depend on the planned program length. A very long-term 50 year progra m would have total up-front costs ranging from $45.5 million for a water right purchase with market value compensation to $110.7 million using a voluntary water right leasing approach. Estimated costs for a Republican Basin progr am are slightly higher per unit change in consumptive use, but the cost differences by policy option follow a similar pattern. The only significant difference is that further use of allocation in the Republican Basin to achieve

additional reductions in CU woul d be relatively more expensive compared to land retirement. This is because one is starting from a baseli ne which already includes allocation limits. Although allocation would not be the least co st method of reducing consumptive use, it may still be an attractive policy option. Using al location to reduce CU by 75 kaf in the Platte Basin, for example, would have a budget cost of $7.8 million per year if producers are compensated in full and $ 3.9 million with 50 pe rcent compensation (compared to $3.2 million for a land retirement purchase approach with mark et value compensation). With allocation any uncompensated costs are spread across all irriga tors in the impact area, whereas with land

8 The 75 kaf for the Platte is based on the amount of irrigation development which occurred in the basin from 1997 to 2005 and is a rough approximation of the reduction which may be required under the terms of the Cooperative Agreement. The 100 kaf estimate is simply an illustrative value for the Republican and may be significantly more or less than what is ultimately required given uncertain weather and future groundwater modeling results.



### 16

### retirement uncompensated costs accrue only to th ose whose land is retire d. As a result, policy makers may find it acceptable to implement an al location approach with only partial producer compensation, in contrast to land retirement whic h may require compensation in excess of actual producer losses, especially if a willing buyer and willing seller approach is used. Another advantage of allocation is that it is administrativ ely simpler than land retirement, especially if land retirement is involuntary. The total state budget costs a ssociated with reducing cons umptive use by the required amounts in both the Platte and Republican Basi ns depends primarily on the type of program

which the state chooses to use to achieve the de sired results. If the state chooses to use a voluntary leasing approach, the combined costs for long-term 50 year programs could be as much as $486 million, $166 million for the Platte program and $320 million for the Republican program. On an amortized annual basis these co sts are equivalent to $22.6 million per year, $7.7
million for the Platte and $14.9 million for the Re publican. However, if a land retirement water right purchase approach with co mpensation equal to actual losses is used, then total costs for both basins for a long-term program could be as little as $110 million, consisting of $45 million for the Platte and $65 million for the Republican . The equivalent amortized annual costs are $7.7
million total, $3.2 million for the Platte and $4.5 million for the Republican. Of course, these estimates would change proportionately if it turns out that the re quired reductions in consumptive use are more or less than the estimates used in this analysis.

17

### Figures and Tables Figure 1. Annual Employment and Cumula tive Irrigated Acres, 1995 to 2005, Middle and Lower Republican NRD’s.

Figure 2. Employment in the Lower a nd Middle Republican NRD’s Compared To Employment in all other Rural Counties.

Figure 3. Relationship between Growth in Irrigated Acres and Employment, 1995-2005.

Figure 4. Relationship between Growth in Irrigated Acres and Sales Taxes, 1995-2005.

Figure 5. Relationship between Growth in Irrigated Acres and Population Growth, 1995-2005.

Figure 6. Irrigated Land Value Trends.

Figure 7. Cumulative Depletions to Rive r as a Function of Time and Distance.

Table 1. Changes in Irrigated Acres, Employment, Sales Taxes and Population,

1995-2005.

Table 2. On-Farm Economic Cost of Retiring Irrigated Acres

Table 3. On-farm Economic Cost of Usi ng Allocation to Reduce Consumptive Use

Table 4. Off-Farm Statewide Economic Cost of Retiring Irrigated Acres

Table 5. Off-farm Economic Cost of Usi ng Allocations to Reduce Consumptive Use

Table 6. Combined On and Off-Farm Econo mic Cost of Reducing Consumptive Use (Depletions to Basin)

Table 7. Total Economic Cost of Re ducing Consumptive Use: Acreage Retirement vs. Allocation

Tabl 8. Total Economic Cost of Retiring Irrigated Acres, per Acre-Foot of Depletion to River

Table 9. State Budget Costs Under Alternative Po licies, Excluding Administrative Costs

18Figure 1. Annual Employment and Cumulative Irrigated Acres, 1995-2004, Lower and Middle Republican NRDs

23,000 23,500 24,000 24,500 25,000 25,500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Employment

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000Additional Irrigated Acres

Republican Employment Irrigated acres cummulative total

Figure 2. Employment in the Lower and Middle Republican NRD and Employment Compared to All Other Rural Counties

23,000 23,500 24,000 24,500 25,000 25,500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004LRNRD and MRNRD Employment

255,000 260,000 265,000 270,000 275,000 280,000All Other Rural County Employment

Republican Employment Total Rural Employment*
*Excludes Douglas, Sarpy, Lancaster, Madison, Hall, Buffalo, Scotts Blu ff, Lincoln, Platte, Dodge, and Adams



### 19Figure 3. Relationship between Growth in Irrigated Acres And Employment, 1995 - 2005

- 15 -10

- 5 0 5 10 15 20 25 30

0 10 20 30 40 50 60 70Percent Change in Employment No Statistically significant correlation between irrigation development and employment change.

Percent Change in Irrigated Acres

Linear (Platte) Linear (Republican) Linear (Rest of NE) Platte Republican Rest of NE

Figure 4. Relationship between Growth in Irrigated Acres and Sales Taxes, 1995 - 2005

0 10 20 30 40 50 60 70 80 90 100

0 10 20 30 40 50 60 70 80 90 Percent Change in Irrigated AcresPercent Change in Sales Tax

Rest of NE Republican Platte Linear (Rest of NE) Linear (Republican ) Linear (Platte) No statistically significant correlation between irrigation development and sales tax.

Saunders County



### 20Figure 5. Relationship between Growth in Irrigated Acres and Population Growth, 1995 - 2005

-15 -10

-5 0 5 10 15

0 10 20 30 40 50 60 70 80 90

Percent Change in Irrigated AcresPercent Change in Population Growth

Rest of NE Republican Platte Linear (Rest of NE) Linear (Republican ) Linear (Platte ) No statistically significant correlation between irrigation development and population change.

Saunders County

0 500 1000 1500 2000 2500

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004$ per Acre

Southwest Nebraska State Average 

### Figure 6. Irrigated Land Value Trends



### 21

### Figure 7. Depletions to River as a Function of Depletion to Basin, Time and Distance

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

1 8 15 22 29 36 43 50 57 64 71 78 85 92 99

YearsDepletions, % of Pumped

1 Mile
2 Mile
3 Mile
4 Mile
5 Mile



### 22

### Table 1. Changes in Irrigated Acres, Employm ent, Sales Taxes and Population, 1995-2005

Percent Change 1995-2005 Irrigated Acres Employment Sales Tax Population Republican 17.6 1.9 24.7 -8.9 Platte 10.7 4.4 39.7 3.7 Rest of Nebraska* 15.3 1.9 35.2 -1.8

* Does not include urban counties (Douglas, Sarp y, Lancaster, Madison, Hall, Buffalo, Sc otts Bluff, Lincoln, Platte, Dodge and Adams) and counties in the Pl atte or Republican Basins.



### Table 2. On-Farm Economic Cost of Retiring Irrigated Acres

Representative Counties Calculated Cost $/Acre/Yr Cash Rent Market $/Acre/Yr Land Market $/Acre Best Estimate $/Acre/Yr Cu Inches/Acre $/AF of Depletion to Basin
Morrill $65 $76 $547 $70 15.4 $55 Lincoln $73 $80 $719 $76 12.8 $71 Phelps $98 $75 $810 $86 8.8 $118 Platte Wtd. Avg. $72 $77 $639 $74 13.7 $69

Chase $78 $80 $719 $79 10.4 $91 Red Willow $94 $80 $719 $87 11.8 $88 Franklin $80 $83 $739 $81 8.4 $116 Repub. Wtd. Avg. $83 $80 $725 $82 10.2 $98

Notes: 1. Cash rent and land market values are from the 2006 land market surv ey by Bruce Johnson, averaged for center pivot and gravity irrigated land. 2. Republican Basin calculations based on irrigation returns given current allocation levels. 3. Basin averages are weighted by the number of acres in each reach. For the Platte Basin, Morrill represents the reach above McConaughy, Lincoln represents the area fr om McConaughy to Lexington, and Phelps represents the area from Lexington to Elm Creek. For the Republican Basi n, Chase represents the URNRD, Red Willow the MRNRD and Franklin the LRNRD.



### 23

### 24 Table 3. On-farm Economic Cost of Using Allocation to Reduce Consumptive Use

Cost of CU Reduction

Sub-Basins Required CU Reduction Regulated Acres Base Allocation

(Inches) New Allocation

(Inches) $/AF of CU Total Cost $/Affected Acre Above Kingsley 40,085.724 42 4,906 25.1 22.4 $66 $2,645,658 $6 Kingsley to Lexington 24,720.627 26 2,037 18.6 15.7 $132 $3,263,123 $13 Lexington to HW 183 10,194 $ 108,052 15 13 $188 $1,916,406 $18 Platte Basin 75,000 $ 794,995 $104 $7,825,187 $9

URNRD 41,140 $ 448,717 14 12 $121 $4,977,896 $11 MRNRD 28,605 $ 312,000 13 11 $163 $4,662,621 $15 LRNRD 30,255 $ 330,000 11 9 $195 $5,899,789 $18 Republican Basin 100,000 $1 ,090,717 $155 $15, 540,306 $14
Notes: 1. If the allocation program focused on part of the acres, such as those nearest the ri ver, on-farm costs per AF of CU would change very little, but cost per regulated acre would increase nearly proportionate ly, e.g., if the same amount of CU was reduced by regulating 1/3 as many acres then cost per regulated acre would increase three-fold.Table 4. Off-Farm Statewide Economic Cost of Retiring Irrigated AcresOff-farm Costs Based on Estimated Changes in Crop RevenueRepresentativeCrop RevenueIn Short RunIn Long RunCountiesDrylandIrrigatedDifference10 Years25 Years50 Years$/Acre/Yr$/Acre/Yr$/Acre/Yr$/AFCU/Yr$/Acre/Yr$/AFDepletion$/Acre/Yr$/AFDepletion$/Acre/Yr$/AFDepletion$/Acre/Yr$/AFDepletionto Basinto Basinto Basinto BasinMorrill$106$437$331$257$223$174$145$113$78$61$56$43Lincoln$208$473$265$248$195$182$127$118$68$64$49$45Phelps$285$455$169$232$144$197$94$128$50$69$36$49Platte Avg.$164$451$287$251$203$180$132$117$71$63$51$45Chase$151$417$266$271$188$192$122$125$66$67$47$48Red Willow$219$427$208$298$160$229$104$149$56$80$40$57Franklin$278$438$160$188$137$161$89$105$48$56$34$40Repub. Avg.$209$426$217$254$164$193$107$125$58$68$41$48Notes:1. Short run values assume that all of the resources which are displaced because of reduced irrigation remain unemployed, which is probably true during the initial year of the program. Long-term valuesrepresent an annual average for next 25 years. This estimate assumes that 85 percent of the displaced resources find alternative employment in the state during the next 10 years (linear adjustment), butthat the lost productivity from the remaining 15 percent continues indefinitely.3. Basin averages are weighted by the number of acres in each reach.For the Platte Basin, Morrillrepresents the reach aboveMcConaughy, Lincoln represents the area from McConaughy to Lexingtonand Phelps represents the area from Lexington to Elm Creek. For the Republican Basin, Chase represents the URNRD, Red Willow the MRNRD and Franklin the LRNRD.25

### Table 5. Off-farm Economic Cost of Usin g Allocations to Reduce Consumptive Use

Long Run Costs

Required CU Reduction Regulated Acres Reduced Ag Output

$/Acre Short Run Cost 50 Year 10 Year $/AF CU 25 Year $/AF CU $/AF CU $/AF CU Above Kingsley 40,086 424,906 $26 $131 $56 $42 $38 Kingsley to Lexington 24,721 262,037 $28 $137 $58 $44 $40 Lexington to HW 183 10,194 108,052 $24 $117 $50 $38 $34 Platte Basin 75,000 794,995 $27 $131 $56 $42 $38

URNRD 41,140 448,717 $27 $139 $59 $45 $41 MRNRD 28,605 312,000 $41 $208 $88 $67 $61 LRNRD 30,255 330,000 $38 $196 $83 $63 $57 Republican Basin 100,000 1,090,717 $35 $176 $75 $56 $52

Note: 1. Off-farm costs for the short-run were calculated using a multip lier derived from Lamphear (2005 ), as follows: Lamphear’s est imate of Primary Payments to HH (on crop farm) was 0.162 per dollar change in irrigated output. This value was increased to 0.33 to repr esent impacts due to allocation. Subtracting 0.33 from .796 equals 0.466 which is an estimate of the off-farm costs under allocation.

2. Short-term values assume that all of the resources which are displaced because of reduced irrigation remain unemployed, whic h is probably true during the initial y ear of the program. Long-term va lues represent the expected a nnual average.. This estimate as sumes that 85 percent of the displaced resources find alternative employment in the state during the next 10 years (linear adjustment), but t hat the productivity from the remaining 15 percent is lost to the state indefinitely.



### 26

### 27 Table 6. Combined On and Off-Farm Econom ic Cost of Reducing Consumptive Use (Depletions to Basin)

Long Run Costs

Location and Method of Reduction Short Run Costs 10-Year Program 25-Year Program 50-Year Program ***** Average Cost, $ per AF Reduction in Consumptive Use ***** Land Retirement

Above Kingsley $228 $ 167 $115 $98 Kingsley to Lexington $253 $ 189 $135 $117 Lexington to HW 183 $315 $ 246 $187 $168 Platte Basin $248 $ 185 $132 $114

URNRD $280 $ 213 $155 $136 MRNRD $345 $ 265 $196 $174 LRNRD $259 $ 202 $154 $138 Republican Basin $292 $ 225 $167 $147

Allocation

Above Kingsley $197 $ 122 $108 $104 Kingsley to Lexington $269 $ 190 $176 $172 Lexington to HW 183 $305 $ 238 $226 $222 Platte Basin $235 $ 160 $146 $143

URNRD $260 $ 180 $166 $162 MRNRD $371 $ 251 $230 $224 LRNRD $391 $ 278 $258 $252 Republican Basin $331 $ 230 $212 $207

Notes:

1. Short-term values assume that all of the resources which are displaced because of reduced irrigation remain unemployed, whic h is probably true during the initial y ear of the program. Long-term valu es represent the expected annu al average. This estimate ass umes that 85 percent of the displaced resources find alternative employment in the state during the next years (linear adjustment), but that the productivity from the remaining 15 percent is lost to the state indefinitely.

2. Basin averages are weighted by the number of acres in each reach. For the Platte Basin, Mo rrill represents the reach above McConaughy, Lincoln represents the area from McConaughy to Lexington and Phelps re presents the area from Lexington to Elm Creek. For the Republican Basin, Chase represents the URNRD, Red Willow the MRNRD and Franklin the LRNRD.Table 7. Total Economic Cost of Reducing Consumptive Use: Acreage Retirement vs. AllocationCost / AF of ReductionTotal Cost, 50 Year ProgramAverage Annual CostPresent Value @ 4%BasinProposedCU ReductionAcre-FeetRetire AcresAllocationRetire AcresAllocationRetire AcresAllocationPlatte75,000$114$143$8,550,000$10,725,000$183,672,678$230,396,430Republican100,000$147$207$14,700,000$20,700,000$315,788,114$444,681,222Total Both Basins175,000$23,250,000$31,425,000$499,460,792$675,077,65228

### Table 8. Total Economic Cost of Retiring Irrigat ed Acres, per Acre-Foot of Depletion to River

Length of Program
10 Years 25 Years 50 Years Cost in $/AF of Reduced Depletion to River Platte Basin 1 Mile from River $ 367 $204 $155 2 Miles from River $ 853 $337 $218 3 Miles from River $ 2,236 $582 $315 4 Miles from River $ 6,671 $1,059 $464 5 Miles from River $2 2,842 $2,026 $702

Republican Basin 1 Mile from River $ 445 $258 $201 2 Miles from River $ 1,034 $427 $284 3 Miles from River $ 2,709 $738 $409 4 Miles from River $ 8,084 $1,342 $603 5 Miles from River $2 7,679 $2,569 $912

Cost in $/AF of Reduced Depletions to Basin

Platte Basin $ 185 $132 $114 Republican Basin $ 225 $167 $147

Note: These values were estimated using the Jenkins E quation (Jenkins, 1968) to determine how much of what is pumped shows up as reduce d stream flow after 10, 25 and 50 years, assuming the pumping occurs at a given distance from the stream. This simplified approach assumes th at Qs = Qw (erfc(U)) where U = (d^2S/4Tt)^.5, where: Values Qs = Stream flow depletions, AF Qw = pumping rate of well, AF/day 2 d= distance from stre am (feet) variable S = storage coefficient (decimal) 0.2 T = transmissivity, ft^2/day 4000 t= time in days variable



### 29Table 9. State Budget Costs Under Alternative Policies, Excluding Administrative CostsState Budget Cost10 Year Program10YearProgram25 Year Program50 Year ProgramReductionin CU(AcreFeet)$/AFReductionin CUTotalAnnualCost$/AFDepletionto River,2 MileTotal UpFrontCost$/AFDepletionto River,2 MileTotal UpFrontCost$/AFDepletionto River,2 MileTotal UpFrontCostPlatte BasinLand Retirement, AnnualLease, Voluntary75,000$103$7,733,113$474$62,722,476264$120,807,314198$166,124,168Land Retirement, Annual Lease, Requiredwith Compensation Equal toon-farm Cost75,000$69$5,155,409$316$41,814,984176$80,538,210132$110,749,445Land Retirement, Water Right Purchase,Voluntary75,000$64$4,778,924$293$68,270,344#163$68,270,344122$68,270,344Land Retirement, WaterRight Purchase, Required,with Compensation Equal to Market Value.75,000$42$3,185,949$195$45,513,562109$45,513,56282$45,513,562Allocation, Regulation with CompensationEqual to 100% of Reduced Farm Income75,000$104$7,825,187$480$63,469,273267$122,245,690201$168,102,103Allocation, Regulation with CompensationEqual to 50% of Reduced Farm Income75,000$52$3,912,593$240$31,734,636133$61,122,845100$84,051,051Republican BasinLand Retirement, AnnualLease, Voluntary100,000$149$14,887,563$685$120,751,468381$232,574,692286$319,817,367Land Retirement, Annual Lease, Requiredwith Compensation Equal to On-farm Cost100,000$99$9,925,042$457$80,500,979254$155,049,795191$213,211,578Land Retirement, Water Right Purchase,Voluntary100,000$68$6,803,345$313$97,190,648174$97,190,648131$97,190,648Land Retirement, WaterRight Purchase, Required,with Compensation Equal to Market Value.100,000$45$4,535,564$209$64,793,766116$64,793,76687$64,793,766Allocation, Regulation with CompensationEqual to 100% of Reduced Farm Income100,000$155$15,540,306$715$126,045,801398$242,771,899299$333,839,718Allocation, Regulation with CompensationEqual to 50% of Reduced Farm Income100,000$78$7,770,153$357$63,022,900199$121,385,950149$166,919,85930

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Johnson, Bruce. 2006. “Nebraska Farm Real Estate Market Developments 2005-2006.” University of Nebraska-Lincoln Extension EC 06-809-S.

Lamphear, Charles. 2005. “Economic Importance of Irrigated Agriculture, 2003.” Nebraska Policy Institute, Lincoln, NE.

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, http://info.neded.org/stathand/lsect8a.htm . Last accessed July 13, 2006.

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Sullivan, Patrick, D. Hellerstein, L. Hansen, R. Johansson, S. Koenig, R. Lubowski, W. McBride, D. McGranahan, M. Roberts, S. Vogel and S. Bucholtz. 2004. “The Conservation Reserve Program, Economic Implications for Rural America.” USDA, ERS, Report No. 834.

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. http://real.unl.edu/h20/ . Last accessed on Aug. 1, 2006.

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