Economic valuation of groundwater in Texas

Abstract

Groundwater is a strategic economic asset, and recent Texas Supreme Court decisions have strengthened private ownership rights in groundwater. Despite the economic and political stakes, debate on how to actually value groundwater has been sparse. In response, this article sets forth seven methods of economically valuing groundwater in Texas and uses case studies and hypotheticals informed by real data to assess the valuation techniques' strengths and weaknesses under a range of conditions. In addition, the analysis shows how in practice, multiple valuation methods can be combined to render the most credible valuation range for a particular groundwater asset. Readers will also see how to marshal a wide range of publicly available data resources-including actual water sale and lease contracts-and analytically mesh them to arrive at a defensible valuation range for water assets under various conditions. These methods can help value water more accurately, create opportunities for unlocking additional economic value, and help manage groundwater resources more effectively for the benefit of future generations.