NARRATIVE SUMMARY

This research estimates the economic benefit of a water market within the Rio Grande Project. Currently, water is released from Elephant Butte Dam for agricultural production. Cities, including Ciudad Juárez, obtain municipal water from groundwater sources. However, Ciudad Juárez and El Paso are significantly depleting the underlying Hueco Bolson aquifer and will need to find more expensive external sources of water if the project water remains unavailable. This research constructed a large optimization model of water users in the Rio Grande Project. For agriculture, multiple water irrigation activities, including deficit and trickle irrigation, were defined. For municipalities, desalination, groundwater recharge and import of distant groundwater activities were also defined. The model incorporates concepts of consumptive and priority water rights. The net income from water use in agriculture (net income remaining after payment to other factors) and willingness to pay based on urban demand formed the objective function. The model simulates allocation and net benefits of water use that would occur with exchange of consumptive use water rights assumin