The influence of lateral flows in an aquifer on the agricultural value of groundwater

AbstractValuation of water in an aquifer depends on reliable information about the hydrologic conditions of an aquifer. Regions of depression emerge in an aquifer because groundwater cannot seamlessly flow between shallow and deep aquifer locations, and our analysis shows that the degree of lateral flow influences the value of the water in the aquifer. The assumption that groundwater declines uniformly over a landscape, a bathtub aquifer, leads to an underestimate of the value of a unit of water in an aquifer but an overestimate of the wealth that the aquifer represents. For the alluvial aquifer in Arkansas, USA, the average accounting price of water in an aquifer is almost 40% higher if there is no lateral flow, but the groundwater wealth is 10% lower. The value of an aquifer with the limited lateral flow is less sensitive to changes in agricultural markets, the discount rate, or the natural recharge of the aquifer.Recommendations for Resource Managers
Average value of water in an aquifer with limited lateral flows is nearly 40% higher than the value of an aquifer with high lateral flows.
Groundwater wealth weights the accounting prices of water in the aquifer by the amount water underneath each site. As lateral flows decline, the wealth of the aquifer rises and then falls because the distribution of accounting prices change so most water is beneath sites with lower accounting prices.
The average value of water in an aquifer is less sensitive to changes in hydro‐economic model parameters such as the natural recharge or discount rate when the lateral flows are less.