Assessing The Option Value Of The Ogallala Aquifer In Texas High Plains: A Contingent Valuation Approach

Abstract The decline of the groundwater in the Ogallala Aquifer may create an uncertainty for water availability in the associated states in the future. Effective policy reforms are essential to determine efficient present and future use of water resources. Therefore, this study explores the option value for reducing current groundwater use to ensure the water availability in the Ogallala aquifer for future use. A double- bounded referendum format contingent valuation survey was carried out to investigate households’ preferences and the mean willingness to pay (WTP) of households for conserving the groundwater is empirically examined using a censored regression model. The estimated mean WTP to conserve one million acre feet of water for future use is $17.66 and the total willingness to pay is $28.96 million. The results indicate education and prior knowledge about the aquifer are significant determinants that are positively related to WTP whereas age is a significant factor that is negatively related to WTP in conserving the groundwater in the Ogallala Aquifer. This study provides policy makers with valuable information for building effective and sustainable policies, and the value estimates provided by this study will help future studies of groundwater use on the Texas High Plains.