Analyses of water markets and allocation mechanisms in Texas

The purpose of this study is, given water scarcity in the State of Texas, to examine the efforts to improve the efficient use of water through marketing and transfers. There has been quite a bit of work conducted in the area ofthe efficiency of water marketing in general, including Howe et al. [1986], Saliba [1987], and Simpson [1992]. But only a relatively small number of empirical studies have been conducted and out of these very few have any statistical analysis of water marketing.

The specific objective is to develop three essays that examine the differing mechanisms of water marketing or water reallocation among users. Essay 1 will examine the surface water spot water transactions along the Rio Grande. Statistical analysis along with on site interviews will be used to reveal what determines spot market prices and why price differentials between users exists. Essay 2, using a modified case study approach, will examine underground water transactions made by West Texas municipalities. The purchase of irrigated farmland by municipalities to increase supply is becoming a common practice as limited surface water is already committed. Essay 3 will examine critically the purpose, structure, and operation ofthe Texas Water Bank (TWB) which was created to facilitate water marketing on a statewide basis.