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California’s Central Valley region has been called the “bread-basket” of the United States. The region is home to one of the most productive agricultural systems on the planet. Such high levels of agricultural productivity require large amounts of fresh water for irrigation. However, the long-term availability of water required to sustain high levels of agricultural production is being called into question following the latest drought in California. In this paper, we use Bayesian multilevel spatiotemporal modeling techniques to examine the influence of the structure of surface water rights in the Central Valley on agricultural production during the recent drought. California is an important place to study these dynamics as it is the only state to recognize the two dominant approaches to surface water management in the United States: riparian and appropriative rights. In this study, Bayesian spatiotemporal modeling is employed to account for spatial processes that have the potential to influence the effects of water right structures on agricultural production. Results suggest that, after accounting for spatiotemporal dependencies in the data, seniority in surface water access significantly improves crop health and productivity on cultivated lands, but does not independently affect the ability to maintain cultivated extent. In addition, agricultural productivity in watersheds with more junior surface water rights show less sensitivity to cumulative drought exposure than other watersheds, however the extent of cultivation in these same watersheds is relatively more sensitive to cumulative drought exposure.

[1] A spatiotemporal model is developed to examine prior appropriations–based water curtailment in Idaho's Snake River Plain Aquifer. Using a 100 year horizon, prior appropriations–based curtailment supplemented with optimized water use reductions is shown to produce a spatial distribution of water use reductions that differs from that produced by regulatory curtailment based strictly on initial water right assignments. Discounted profits over 100 years of crop production are up to 7% higher when allocation is optimized. Total pumping over 100 years is 0.3%, 3%, and 40% higher under 1, 10, and 100 year prior appropriations–based regulatory curtailment, respectively.

[1] Over 2000 water market transactions that occurred in the western United States from 1990 to 2003 were examined to learn who sold to whom and for what purpose, how much water was involved, and how much it sold for. The transactions show that much more water changes hands via leases than via sales of water rights. Public agencies and irrigators are the most common lessors, with lessees being fairly evenly distributed across types of buyers. However, with water rights sales, irrigators are by far the most common sellers and municipalities the most common buyers. Across the West in general, the number of leases has been rising in recent years, as have their prices. The prices of water right sales have also been rising, but the number of sales has not. The price of water is highly variable both within and between western states, reflecting the localized nature of the factors that affect water prices.

The contingent valuation method (CVM) is used to quantify the Public Trust values of Mono Lake at alternative lake levels. The dichotomous choice approach to contingent valuation is employed using a logit model. The economic benefit to California residents of preserving Mono Lake is estimated to be $1.5 billion. Purchase of replacement water and power would cost $26.2 million annually. On efficiency grounds, reallocation of water for maintenance of Public Trust values at Mono Lake is warranted. The CVM appears to be a useful methodology to evaluate the balancing and feasibility tests of the expanded Public Trust doctrine suggested by the California Supreme Court.

The Supreme Court has ruled that water is a commodity in commerce the same as coal and oil and gas. It has held further that automatic state ownership of the resource because the water is within a state's boundaries is a legal fiction. This ruling will require substantial readjustment by the states including possible acquisition of water by the states in the water market the same as any private water right holder. If the state becomes the owner of water resources, it may lease those water resources for use within the state and at the same time preserve sufficient control over the resource to continue to function as a viable political entity in the federal system. The proper role of the Supreme Court in evaluating state attempts at ownership of their water resources should be to support the states in this effort and to protect the states from efforts by Congress to preclude such state ownership.

This paper explores the impacts of a water right's allocative priority-as an indicator of farmers' risk-bearing ability-on land irrigation under water supply uncertainty. We develop and use an economic model to simulate farmers' land irrigation decision and associated economic returns in eastern Idaho. Results indicate that the optimal acreage of land irrigated increases with water right priority when hydroclimate risk exhibits a negatively skewed or right-truncated distribution. Simulation results suggest that prior appropriation enables senior water rights holders to allocate a higher proportion of their land to irrigation, 6 times as much as junior rights holders do, creating a gap in the annual expected net revenue reaching up to $141.4 acre-1 or $55,800 per farm between the two groups. The optimal irrigated acreage, expected net revenue, and shadow value of a water right's priority are subject to substantial changes under a changing climate in the future, where temporal variation in water supply risks significantly affects the profitability of agricultural land use under the priority-based water sharing mechanism.