The economic efficiency of water development in Utah, including transfer systems, has seldom been examined, not has the costs of public policies which result in deviations from efficient allocations. In order that public officials be better informed about water allocations, the present effort examines the efficient allocation of water in time frames up to 2020 under several alternative assumtions and calculates that cost of alternative policies. Using mathematical programming techniques, a computer model is developed to determine the supply (marginal cost) and demand (value or marginal product) relationships for agricultural water, given depletions for municipal and industrial (M&I) and wetland requirements. The model maximizes net profit per acre to an average agriculturalist in each of ten study areas in Utah. Proposed interbasin transfers and their costs are included in supply. The optimal solution generated is an efficient allocation, since maximization of net profits occurs only when value of marginal product equals marginal cost. The requirements for M&I water are projected into the future using trending and probable industrial development. An efficient allocation (optimal solution) is generated by the model for 1965, 1980, 1990, 2000, 2010, 2020. The timing of investments in water distribution systems can be determined from these solutions. Using alternative temporal distributions are determined. Additionally, the effect of restrictions on groundwater pumping (present levels of storage must be maintained) is examined. The costs to users in higher supply curves (marginal costs) are approximated by areas between supply curves. In addition, losses to agricultural users from diminished efficient new production can be approximated. The critical factor in large proposed water transfers in Utah appear to be the growth of M&I requirements along the Wasatch Front, particularly in the Jordan River Basin. Sufficient water is available in the Colorado River Basin to provide maximum transfers, full oil shale and power generation development, and efficient agricultural production. Restrictions on groundwater pumping and water salvage in the Jordan River Basin and maintenance of high inflows to Great Salt Lake make earlier transfer necessary. The costs of such restrictions approach 25 percent of the total investment by agriculture in transfer systems. If no restrictions are made, but investment in these systems occurs now, a loss of foregone returns to alternative investment equal to about 70 percent of the total agricultural investment is incurred by society.
Keith, John E.; Andersen, Jay C.; and Clyde, Calvin G., "The Economic Efficiency of Inter-Basin Agricultural Water Transfers in Utah: A Mathematical Programming Approach" (1973). Reports. Paper 280.