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(';> ."j N ....] N CHAPTER I INTRODUCTION Control of the salinity in large river basins in arid areas is an interesting and difficult challenge to policy makers. All rivers contain dissolved salts acquired by leaching from soils and substrata or from inflows of saline water from underground sources. Normal urban and industrial development in areas adjacent to river basins further contribute to the salinity eoncentration through evaporation in reservoirs and return flows from irrigation, urban, and industrial withdrawals. Increased concentrations of dissolved salts usually have a detrimental effect on production and eosts, Such detriments affect agriculture, industry, and households most noticeably in terms of increased costs of operation. There is also an indication of some adverse health affects, Nowhere in the United States are the problems of salinity management more sharply defined than in the Colorado River Basin, Further- more, the water of the Lower Colorado Basin, with constantly increasing levels of salt concentration, flows into Mexico. It is imperative that measures to correct this problem are well-founded and based on sound concepts and information. It is contended that economic tools be employed to mateh the problem to policy decision criteria. Economically, the problem is that the well-being of some users of the river conflicts witb the well.being of others. A perfectly competitive economy would yield allocation of resources such that no alt.ernative pattern of resource use would make anyone better off without making someone worse off. It is evident that this ideal market situation does not exist in the allocation of water or in managing water quality for at least two reasons. First, prices do not correctly reflect the social value of resources and commodities. The individual decision~maker has no incentive to take all the costs or benefits into account in making a resource allocation decision. This implies that a misallocation of resources may occur. Second, producers of upublic goods" such as improved water quality are unable to collect all the revenues from the beneficiaries, since users cannot be excluded for non~payment of price. Consequently, each user may expect to reap benefits from these public goods whether or not he pays the cost, The salinity problem in the Colorado River exhibits both of these aspects of market failure, It is estimated that at least 50 percent of the salinity concentration in the river is due to external causes. This level of salinity, due to man-made influenees, constitutes a negative externality imposed on down- stream users. A private market approach would not sueceed in attaining the most socially desired level of salinity because the producers of the improvements would be unable to collect the appropriate revenues from the downstream beneficiaries. In this research. the various aspects of an economically efficient program are identified and measured. Models involving river hydrology, agricul- tural responses, municipal and industrial water uses. and interrelationships among these sectors are used to develop a socially optimal program, Irrigation management practices to control salinity problems are not discussed individually in this study but include the following methods: Ditch linings, soil management, salt leaching, and special bedding. This researeh will serve as a basis for evaluating a plan which has been submitted by the basin states to maintain salinity standards within the hasin, In order to determine a socially optimal manage- ment program, it was first necessary to estimate the losses due to the increasing levels of salinity. OBJECTIVES This comprehensive report of the salinity man- agement options for the Colorado River was conducted with five specific objectives in mind. The first was to estimate the direct eeonomie damages to agrieultural users associated with specific alternative salinity levels in the basin water, The seeond was to estimate the direct economic damages associated with specific alternative levels of salt concentration for municipal water users in the basin, Objective three was to estimate the direct economic impact of possible salinity cont.rol measures on Upper Basin water users. The fourth objective was to estimate the indirect economic impacts associated with various salinity levels on agricultural, municipal, and industrial water users. Included in this objective was an estimate of indirect economic impacts associated with possible salinity control measures. The fifth objective was to express the results of the study in terms that would 1