In 1980, the California Department of Water Resources defined 447 groundwater basins, sub-basins, and other water storage types, and highlighted the Pajaro Valley water basin to be one of 11 basins facing severe overdraft . Due to this classification, the Pajaro Valley Water Management Agency was established in 1984 to combat overdraft and salinity problems by bringing several different groups of stakeholders together. There is a seven member board of directors for the PVWMA. Four are elected every four years by the public , and the other three are appointed by Santa Cruz County, Monterey Bay County, and the City of Watsonville, respectively. The appointed individuals must receive a majority of their income through agriculture, and serve two year terms. There are no term limits. The PVWMA can manage groundwater resources, but it is not authorized to deliver potable water. The PVWMA completed its first basin management plan in 1994. In the early 1990s, the Pajaro Valley Water Management Agency started a water supply system that combines surface water, groundwater,blueberry grow pot and recycled water to provide water to farms as well as to recharge the aquifer to prevent seawater intrusion. Today, under the Sustainable Groundwater Management Act, PVWMA is tasked with bringing the water basin into “balance” by 2040, where the water entering the aquifer matches the annual quantity removed.
Total water use in the Pajaro Valley is approximately 55,000 acre-feet a year , with 52,000 AFY sourced from groundwater2 . Estimates from the PVHM suggest that overdraft in the groundwater basin is approximately 12,000 AFY . Through acombination of water conservation and alternative water resources , PVWMA is tasked to ensure that overdraft is reduced to zero. The Pajaro Valley Water Management Agency has embarked upon several strategies to fight the depletion of groundwater in the Pajaro Valley. Their primary objective is to reduce seawater intrusion in the valley, and this is partially accomplished by providing alternate water sources for farmers along the coast. There are three primary programs that have been carried out by the PVWMA, including the Watsonville Recycled Water Facility, the Harkins Slough Recharge and Recovery Facility, and the building of the Coastal Distribution System. The facility began operation in 2009, and has increased the volume of water deliveries from 2700 AFY in 2010 to 5500 AFY in 2020 . The recycled water is tertiary treated to meet California’s regulations required for the water to be applied to agricultural land. This involves the removal of all solids greater than 10 microns, and the removal of pathogens using UV filters. After the tertiary treatment process, the main differences between recycled water and potable water are the salinity, nitrate, and phosphate levels3 .
Nitrates and phosphates are useful for irrigated agriculture, as they are the main nutrients in fertilizers, and are therefore not removed during the recycling process. Salinity levels are carefully monitored to not exceed 590 mg/L before being delivered to growers. If salinity levels are too high, the recycled water is blended with water from inland wells, in order for it to fall below the threshold. The water storage at the Watsonville Recycled Water Facility has expanded over time, and additional storage tanks have been approved to be built . The Harkins Slough Recharge and Recovery Facility is another project by the PVWMA, where water is recharged and stored until needed for agricultural use. It has been in existence since 2002, and was the first groundwater recharge project constructed by the Agency. It stores winter surface water flow as well as irrigation water runoff in a 14 acre percolation basin to use for irrigation during the summer . While the PVWMA has a permit to pump 2000 AFY from the Harkins Slough, the reality has been closer to 1000 AFY , due to a lack of flow through the Slough and the limited capacity in the recharge pond . There are plans in place to improve the Harkins Slough Project, by installing new shallow extraction wells, upgrading the pump system and filters, and establishing a new recharge basin. The Coastal Distribution System is the delivery mechanism for the recycled water and recovered Harkins Slough water to the section of the Pajaro Valley that has the highest levels of salinity from groundwater intrusion, called the “Delivered Water Zone”. The CDSis a pipeline system that primarily serves farms in coastal southern Santa Cruz and northern Monterey counties.
The total length of the pipeline was approximately 20 miles long in 2020, and provided water to 5100 acres. There are plans to extend the CDS further, but all expansion plans are within the confines of the Delivered Water Zone . The location of the DWZ is depicted in Figure 3.2. There is a policy commitment to not deliver alternative water outside of the zone until groundwater pumping is no longer necessary within the DWZ. This is unlikely to happen in the near term: 2019 was the first year that growers in the DWZ used more alternative water than they pumped. Additional projects are on the docket for the PVWMA, mostly pertaining to expanding recycled water storage and increasing recharge. There are plans for additional recharge basins on the San Andreas Terrace and near Murphy Crossing . The College Lake Project is another plan, designed to add additional surface water from an existing lake to the CDS . In 2016, the Pajaro Valley Board of Directors approved ReNeM, a five year pilot project that develops multiple Managed Aquifer recharge projects using storm water . In addition, PVWMA does have rights to 19,900 AFY of Central Valley Project water, a pipeline was never built to the Pajaro Valley, and they currently lease the water rights to other sources. The length of pipeline required is financially unfeasible. In total, the PVWMA’s management strategy, combining the CDS, Watsonville Recycled Water Facility, and Harkins Slough, provided 5200 AF in 2020, which is more than ten percent of the annual groundwater used in the region . Targeting this water as a substitute for groundwater in coastal areas, as well as recharging the groundwater can lead to a mitigation of seawater intrusion. The Pajaro Valley Water Management Agency has the ability to regulate and limit pumping directly, but has opted for pricing policies and the supplemental water projects described above as an alternative to a command and control program.
The price of water varies in the Pajaro Valley depending on where the water is sourced , as well as if the well is metered or unmetered4 , and if the well is located within the delivered water zone . New rate structures have to be approved by residential, commercial,square plastic pot and agricultural water users. In addition, revenues for water pricing must not exceed the proportionate costs of the property-related service attributable to the parcel that is charged. Pajaro Valley Water Management Agency has found themselves in a few legal battles over the water pricing structure. PVWMA v. Amrhein was a lawsuit in 2007 that declared that all water prices were property-related, and therefore fell under the rules of Proposition 218. This means that prices charged for water need to be presented at a public hearing, and if a majority of affected owners file written protests at the hearing, the fees are not assessed. In response, the water pricing structure shifted into the tiered pricing structure that is still in use today. Griffith v. PVWMAfound that the revenue from water prices could pay for activities associated with implementing the groundwater program, including water conservation. Basically, the court found that the revised water augmentation charges did meet the requirements of Proposition 218, and that the charges benefited the entire basin. This led to upholding the revised augmentation charges in 2010. Dependence on groundwater as a freshwater source has increased significantly over time . It now accounts for over a third of irrigation water withdrawals worldwide and about half of the domestic needs of the world’s population . Meanwhile, climate change is bringing warmer temperatures, sea-level rise, and more frequent and extreme weather events . The increased variability of precipitation and the reduction in surface water supplies due to warming temperatures puts additional pressure on groundwater resources. Additionally, sea-level rise will flood agricultural lands, as well as degrade water quality through saltwater intrusion into coastal aquifers . Since both the quality and reliability of water supplies are crucial for agricultural productivity, this poses a threat to global food production. To date, the focus of the economics literature on groundwater resources has been on issues related to groundwater supply. Groundwater is a classic common-pool resource whereby, in the absence of well-defined property rights, individual pumpers’ actions cause direct, external effects to their neighbors. Recent work is advancing our understanding of the magnitude and nature of the stock and pumping cost externalities associated with extraction , and evaluating the potential for and impacts of different mechanisms to overcome this market failure . In addition, over pumping groundwater can also degrade water quality, particularly in coastal agricultural regions, because it moves seawater into freshwater zones as cones of depression are formed in areas around tube wells .
Largely absent from this recent and growing body of groundwater work are questions about water quality. This paper empirically estimates the marginal damages associated with increasing groundwater salinity. Our approach is based on the idea that the willingness of farmers to switch to more salt-tolerant crops reveals how much they value a change in groundwater salinity. Crop yields decline as salinity increases and switching to a more salt-tolerant crop is the primary mechanism to mitigate these costs . Thus, our understanding of the marginal damages of sea-level rise and the willingness to pay to avoid saltwater intrusion hinges on an unbiased estimate of the effect of changing water quality on crop choice. In this paper, we use a unique panel dataset on micro-level land use and groundwater quality from California’s central coast to provide a credible estimate of the likelihood that farmers switch crops in response to changes in groundwater salinity. Controlling for basin wide trends and relevant parcel-level characteristics, we estimate the impact of changes in salinity on crop choice with a panel mixed logit model. Then, we use our estimates to derive measures of the marginal WTP and simulate crop changes under salinity conditions likely to occur from continued groundwater overdraft and sea-level rise under climate change. Our empirical setting – the Pajaro Valley, California – provides a rare opportunity to estimate the WTP for changes in groundwater salinity using a revealed preference approach. Best known for its berries and vegetables, this productive agricultural area has experienced decades of seawater intrusion due to its dependence on groundwater for irrigation and its proximity to the coast. As a result, the water agency that services this region has been monitoring groundwater quality with an extensive network of monitoring wells for decades. The density of monitoring wells allows us to spatially interpolate water quality with minimal error, which is important to a research design that relies on these observable changes in quality over time and across space. Second, we are able to use high-quality geospatial land use data collected by the agency to pair water quality measurements with acres planted in a variety of crops that vary in their salt sensitivity.We take advantage of these observations over both space and time to apply panel discrete choice methods to this agricultural context. Our results show that an increase in groundwater salinity decreases the likelihood that a farmer will grow cash crops, relative to leaving the land idle, and that the impacts are greater among the more salt-sensitive crops. Our model indicates that strawberry and vegetable growers are willing to pay an average of $1,613 and $3,084 per acre, respectively, for a 10 mg/L reduction in total dissolved solids. Blackberry and raspberry producers are willing to pay $16,369 per acre on average. As a result, a simulation of changes in regional crop production due to a doubling in groundwater salinity projects that blackberry and raspberry production will experience the greatest decline in the region as sea-level rise exacerbates existing saltwater intrusion problems. We estimate that a change in salinity of this magnitude would cost $140 million, roughly 10% of annual agricultural revenues in the region.