Citation:

Price, J. AND Matthew Heberling. The Effects of Agricultural and Urban Land Use on Drinking Water Treatment Costs: An Analysis of United States Community Water Systems. Water Economics and Policy. World Scientific Publishing Co. Pte. Ltd., 5 Toh Tuck Link, Singapore, 6(4):2050008, (2020). https://doi.org/10.1142/S2382624X20500083

Impact/Purpose:

With growing interest in source water protection (SWP) as a means to avoiding expenditures at drinking water treatment plants, it is increasingly important to understand the costs and potential benefits of better watershed management. This paper describes a new study that estimates how land use (a proxy for source water quality) relates to annual treatment costs for both surface water and groundwater plants across the US. Decision-makers considering SWP often lack quantitative estimates of its benefits and the presentation will help explain the role economics has in estimating avoided treatment costs and determining whether SWP is cost-effective.

Description:

For community water providers, safeguarding source waters from contamination offers an additional barrier of protection and a potential means of avoiding in-plant treatment costs. Whether source water protection efforts are cost-effective relative to in-plant treatment requires hydrologic, geologic, and climatologic knowledge of source watersheds, as well as an understanding of how changes in source water quality affect treatment costs. Quantitative evidence on the latter relationship is limited. This study estimates separate hedonic cost functions for water systems that primarily use surface water sources and those that primarily use groundwater sources using a database of United States (US) Community Water Systems. Cost functions relate annual variable treatment cost to production, factor input prices, capital stock, and source water quality, as proxied by land use within various ex-ante defined contributing areas (i.e., surrounding land areas affecting source water quality). For surface water systems, a 1% increase in urban land relative to forestland is correlated with a 0.13% increase in annual variable treatment costs. In this analysis, the relationship between costs and agricultural land is not statistically significant. Conversely, for groundwater systems, a 1% increase in agricultural land relative to forestland is correlated with a 0.24% increase in costs, whereas in this analysis the relationship between costs and urban land is not statistically significant. The cost-effectiveness of forestland preservation, based on sample means, varies considerably with the size of the contributing area, with no clear indication as to whether preservation is more likely to be cost-effective for surface water or groundwater systems.

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