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Economic Impact Report


WY Demand Management of the UCRB




Economic Assessment of a Water Demand Management Program in Wyoming’s Portion of the Colorado River Basin



Wyoming CRB Economic Impact Report Abstract:

Given the persistently dry hydrology that the Colorado River Basin has experienced over the past 20 years, four states in the Upper Colorado River Basin (Colorado, New Mexico, Utah, and Wyoming) are considering proactive options to ensure they meet their obligations under the Colorado River Compact of 1922. One option under consideration is a Demand Management (DM) program, in which water users in these four states would be compensated for voluntarily reducing their consumptive use of water. These consumptive use reductions would be stored and then released, if needed, to meet downstream Compact obligations.


This study assesses the impacts of a potential DM program in the Wyoming portion of the Colorado River Basin on agricultural operations, households, and communities in the region, if consumptive use reductions came from the agricultural sector, through decreased production of irrigated grass hay. A DM program would be voluntary, so the payment participants receive for enrolling acres in such a program would need to be sufficiently high to compensate them for the costs of participating. Based on assumptions regarding producer participation, regional economic impacts are estimated using a modified IMPLAN regional impact model constructed for the regional functional economy of the Wyoming portion of the Colorado River Basin.


Net regional economic impacts of a one-year DM program with a target volume level of 25 thousand acre-feet are estimated to range from $2.17 to $4.77 million in lost income and 95 to 146 in lost jobs, depending on how producers change their hay and livestock operations in response to the program. This range represents 3.12% to 6.85% of income in the regional agricultural economy and 0.04% to 0.10% of income in the overall regional economy. Because a realistic baseline for an uncertain future has not yet been established, by default, this study evaluates the economic impacts of a DM program relative to “business as usual” baseline rather than to a baseline of heightened risk of curtailment (involuntary and uncompensated reductions in water use to ensure downstream Compact obligations are met). Results are sensitive to assumptions about how irrigation reductions would affect hay yields in both the enrollment year and the following year.




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