The Economic Value of an Aquifer With Beneficial Outflows

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Unpublished Paper

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Economic models of optimal groundwatr management explore how the water table elevation should change through time in order to maximize an aquifer's value to society. However, economic aquifer modeling studies have typically used a closed single-cell, or bathtub, model with no outflows. In many groundwater systems, the elevation include groundwater baseflow to river systems, groundwater flow to wetland systems, and flow to springs. We modify the traditional single-cell aquifer model by allowing for ouflows when the water table is above certain threshold elevations. These outflows are modeled as being beneficial to society, providing economic, social and environmental benefits. We explore the tradeoff between maintaining outflows and maximizing the benefits of groundwater extraction. The value of services provided by outflows may warrant maintaining the water table at a higher elevation than if only the benefits and costs of groundwater extraction were considered. To illustrate the usefulness of the modified models in a joint economic-hydrologic context, we provide a short case study of the Ofos de San Pedro area in northern Chile. Evidence indicates that a wetland and lacustrine extraction for industrial use. We demonstrate how the key features of the model provide important insight in understanding the tradeoffs underlying the decisions made in this case.

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