ECONOMIC-ASPECTS OF GROUNDWATER WITHDRAWAL PERMIT TRANSFERS

The economic properties of three different permitting options for regulating ground-water withdrawals are estimated by computer simulation of the economic return for irrigation of corn. The three regulatory options consist of withdrawal limitations in the form of ground-water pumping permits allocated in proportion to overlaying land area with: (1) No trading of permits; (2) trading of long-term (over years) permits; and (3) trading of both long- and short-term (within year) permits. Seven scenarios representing different combinations of regulations and weather and crop-yield predictability are simulated for farm plots in heavily irrigated areas of Kankakee and Mason counties, Illinois. Alternative assumptions regarding weather predictability are: (1) No knowledge at all; (2) complete knowledge of future weather and accurate crop-yield modeling (i.e., response to weather conditions and quantity of applied irrigation water); and (3) knowledge of past weather and accurate crop-yield modeling, but no knowledge of future weather. The results indicate that a considerable increase in economic efficiency may be realized from long-term permit trading and improving the accuracy of weather and crop-yield forecasting. The value of long-term permit trading is found to diminish in the presence of accurate crop-yield forecasting and is smaller yet if accurate weather prediction is available as well. © ASCE. © ASCE.