State Water Resources Research Institute Program

Project ID: 2008CO167B
Title: Water Reallocation and Bioenergy in the South Platte: A Regional Economic Evaluation
Project Type: Research
Start Date: 3/01/2008
End Date: 7/31/2009
Congressional District: 4th
Focus Categories: Economics, Models, Water Supply
Keywords: Regional economic analysis, bioenergy, water transfers
Principal Investigators: Waskom, Reagan M. (Colorado State University); Pritchett, James
Federal Funds: $ 15,000
Non-Federal Matching Funds: $ 7,976
Abstract: Bioenergy crop production and refining are key opportunities for revitalizing rural communities in Colorado. This optimism stems, in part, from growing urban areas in Colorado that demand clean burning and relatively inexpensive biofuels. Yet, the same urban areas are rivals for two important inputs in biocrop farming: water and agricultural land. Increased municipal demands heighten the competition for water in Colorado's over-appropriated river basins increasing the value of each acre foot. Thus, the potential gains from bioenergy cropping must be attractive enough to retain water in irrigated agriculture else water will flow to municipal consumption. If profits for bioenergy crop production are limited, then outside investment in bioenergy refining and infrastructure is likely to suffer. The rural economic impacts of bioenergy cropping and increasing water resource demands stretch beyond the farm gate. Agribusinesses that rely on the sale of crop inputs (e.g., seed, chemical and fertilizer sales) and the use of farm products (e.g., ethanol plants, dairies, feedlots, sugar processors and meatpackers) will find their activities are substantially altered by bioenergy cropping and/or water transfers. If irrigated acres are permanently fallowed, input suppliers and agribusiness processors will face significant reductions in economic activity. As biocropping gains popularity, agribusinesses that compete with biorefining for farm products (diaries, feedlots, and sugar processing) will certainly need to adapt and perhaps relocate. The economic outcome is uncertain. Farming and agribusiness represent an important base industry for rural communities, and with few alternatives to agricultural production, these communities will suffer as economic activity is reduced. For the leaders of these communities, it is important to gain information about how resources, including tax revenues, may be altered by the competing incentives of water resources and bioenergy cropping. Likewise, water stakeholders, agribusiness leaders and farm organizations seek to understand the tradeoffs in policy initiatives. Can Colorado's agricultural producers meet the challenges of a burgeoning bioenergy industry while still supplying water to growing municipalities? What impacts will be felt by local agribusiness, both suppliers of inputs (e.g., local supply cooperatives) and those who rely on irrigated crops for their livelihood (e.g., sugar processors, dairies and feedlots)?

This proposal's overall objective is to provide insights into these important questions. The research involves developing a computable general equilibrium model for the South Platte Basin. This economic model extends previous research regarding irrigated agriculture's contribution to rural economic activity. Yet, rather than a snapshot of the economy, the proposed model will trace flow of water resources in and out of the basin with water transfers, while suggesting how cropping patterns are altered with bioenergy adoption. Further, the proposed model focuses on the impact to agribusinesses that utilize and process farm products, an analysis that has been neglected. Proposal objectives also include plans for analyzing potential policy scenarios, dissemination of results and presentations to stakeholders.

Progress/Completion Report, 2008, PDF

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