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Reducing Water for Agriculture Cultivation in the Walker Basin

walker_lake_sunset

Walker Basin Project – Economic Impacts and Economic Development Opportunities

By: Richard Bartholet, Elizabeth Fadali and Theodore E. Oleson
Contributing: Dr. Glen Atkinson, Dr. Richard Mason, E. John Snyder

This project was funded by a grant under Public law 109-103, Section 208(a), through the U.S. Bureau of Reclamation (Cooperative Agreement 06FC204044).

The Economic and Fiscal Impacts and Economic Development Strategies project is one of ten different projects examining various aspects associated with the acquisition of water and water rights in order to sustain Walker Lake, a terminal desert lake in western Nevada.  A general description of the Walker Basin Project from the Walker Basin website (http://www.nevada.edu/walker/about/index.html) is as follows:

The Walker Basin Project is a comprehensive, research-guided project to sustain the Basin’s economy, ecosystem and lake. This federally funded project involves collaborative environmental and economic research conducted by researchers with the Desert Research Institute (DRI) and the University of Nevada, Reno. It also involves the acquisition of water and water rights from willing sellers under the coordination of the Nevada System of Higher Education. The research is exploring the best means by which to get additional water to the lake while maintaining the Basin’s economy and ecosystem.

The Economic and Fiscal Impacts and Economic Development Strategies project also identifies a number of economic development opportunities that have the potential to improve the quality and/or quantity of water that will reach Walker Lake by influencing decisions made by agricultural producers, and/or by leveraging alternative crop choices made by some of the agricultural producers, or finally by utilizing the river and lake resources “improved” by the project.

Most of the citizens living in the Hawthorne/Walker Lake sub-region view the project with a positive expectation that Walker Lake can be “saved”, including preservation of the Lake as a fishery, migratory bird habitat, active recreational facility and scenic landmark.  Many of the citizens in the sub-regions where water and water rights may be acquired (Mason Valley and Smith Valley, Nevada) view the project with trepidation, concerned that their agricultural-based economies, communities, cultural heritage and lifestyles may be changed forever, and are primarily focused on potential negative outcomes.  The purpose of this study was to look at possible economic impacts in each of the sub-regions, and in particular to look at a several potential outcomes under various scenarios in areas targeted for acquisition of water and water rights, and then to identify potential economic development opportunities that might help mitigate any potential negative impacts.

With the acquisition of water and water rights one thing is certain: change.  Change often presents challenges and opportunities.  This study validates this general observation by showing how different decisions made by those conveying water and water rights (primarily agricultural producers) and by those acquiring water and water rights in terms of their policies about how much water is “left with the land” can substantially alter the economic impacts of the project.  In turn, the economic impacts will affect the fiscal impacts.

This study is relevant to many of the other high arid agricultural areas of Nevada, the western United States and the world.  While these other areas may not be dealing with preservation of a terminal lake, the competing interests for limited water resources, often pitting agricultural uses against municipal and/or industrial uses, will create pressure on agricultural producers to sell their water rights.  Decisions will be driven by the economic benefits to be derived from various uses of the water.  Understanding that there is not a single “predetermined” negative outcome for the agricultural producers and the communities that support and depend on agriculture is an important lesson.

IMPLAN (IMpact Analysis for PLANning) was the input/output model used as the primary economic impact assessment tool.  The fiscal impact analysis used the economic impact results and location-specific tax rates.  Economic development strategies were based upon suggestions by local residents in a number of community meetings and the project objective of improving the quality and/or increasing the quantity of water that might reach Walker Lake.

The potential economic impacts varied by region.  In the Hawthorne/Walker Lake sub-region, located within Mineral County, the impacts of a declining lake level and the increasing levels of salinity have caused a drop in fishing and other recreational use of the lake.  This has resulted in an estimated loss of around 41 jobs and a net annual economic loss to the community of around $1.3 million.  It is anticipated that this loss could be recovered with stabilization and some modest recovery of Walker Lake.

In the upstream areas of Mason Valley and Smith Valley, within Lyon County, the economic impact from the acquisition of water rights currently used for agricultural production could be negative or positive, depending upon whether the land is “returned” to desert or whether the amount of water acquired per acre leaves sufficient water for alternative crops. Which alternative crops are cultivated and the acreage involved in such production will substantially influence the economic impact.

The key question to be answered, simply put, was this: “What will be the economic impacts of acquiring water rights in Mason Valley and Smith Valley, destined for Walker Lake, in quantities sufficient for 50,000 acre feet annually to reach the Wabuska Gauge?”  (The Wabuska Gauge is located at a point along the Walker River below Mason Valley.)  The answer, unfortunately, is not as simple as the question.   The answer depends upon what economic activity is “displaced” by the water rights acquisitions, and what happens with the proceeds received by those conveying water rights.  In terms of current agricultural water consumption, the primary crops in the region are alfalfa hay and grass hay.

The research team examined four different scenarios as to how water might be obtained for Walker Lake, along with estimates of the economic impacts that might be associated with each of these scenarios: scenario 1) land goes from agriculture (alfalfa rotations) to desert; scenario 2) existing crop rotations and farming practices are altered to achieve water savings; scenario 3) alternative crops are planted that reduce water consumption; and, scenario 4) other (non-agricultural) sources of water rights are procured.  These scenarios were based, in part, upon information developed by other research teams working on the Walker Basin project.

Using data from the crop budgets developed by Kynda Curtis et al in their Economic Analysis of Water Conservation Practices for Agricultural Producers in the Walker River Basin[i] and utilizing the IMPLAN input/output model, economic impacts in Mason Valley and Smith Valley associated with a number of crops were estimated.  The alternative crops identified as being “viable” for cultivation in this sub-region (through other Walker Basin research projects) and having significant potential for water savings were teff (seed), baby leaf lettuce, two-row malt barley, great basin wild rye seed and wine grapes.

Teff seed:  Teff is an annual grass native to the northern Ethiopian Highlands of northeastern Africa, and currently commercially grown in the U.S. in Idaho.  Teff is one of the alternative crops being studied by Jay Davison, Elizabeth Leger and Erin K. Espeland[ii].  Teff seed production requires approximately 2-3 acre feet of water per year, which would result in a 25% water savings compared to alfalfa, while producing a net to the farmer slightly higher than alfalfa hay.

Baby leaf lettuce and spinach:  Also generally known as “spring mix”, a number of varieties of baby leaf lettuce and spinach are currently grown in Mason Valley.  By utilizing mechanical harvesting, the labor expenditures for this crop have been reduced to less than 25% of that needed to cultivate this crop using manual harvesting.  This increases the net profit to the farmer substantially, while decreasing the reliance upon migrant labor.  Spring mix requires one fourth of the irrigation water compared to alfalfa and grass hay, so holds great promise for water savings.

Two-row malt barley:  Barley is an annual cereal grain, ranked fourth in the world in terms of quantity produced and area of cultivation.  It is grown as a major source of animal feed with smaller amounts used for malting to be used in beer and ale production, or sold in health food stores.  Several varieties of two-row malt barley are grown in the western U.S. under dryland or irrigated conditions.  Often the irrigated two row malt barley is grown under contract with maltsters, who pay a premium for high quality malting barley.  Two-row malt barley should generate a net per acre to farmers approximately four times greater than the average net realized through rotations around alfalfa or grass hay and approximately twice that of the onion and alfalfa rotation, while utilizing only two acre feet of irrigation water.

Great Basin wild rye seed:  Great Basin wild rye is a grass native to the western U.S. and Canada.  In addition to its potential for livestock grazing, it is used extensively for range rehabilitation following wildfires.  Establishing wild rye helps to stabilize the ground against water and wind erosion while limiting the invasion of noxious weeds.   Growing Great Basin wild rye seed should generate a net value to farmers that is approximately half of the average value that would be realized from a typical alfalfa or grass hay rotation, while requiring only about one-third of the water.

Grapes:  Grapes grown for wine production present an interesting prospect from a quick glance at the numbers.  Grapes consume about one-third of an acre foot of water annually on drip irrigation, which is less than one-tenth of that typically required by alfalfa or grass hay, yet grapes also provide an estimated net profit to farmers approaching three times the net produced by typical alfalfa and grass hay rotations.  When the net profit from growing grapes is enhanced by the potential cash-flow benefit generated by the invested after-tax proceeds from the sale of excess water rights, the combined net benefit balloons to around eight times the average annual net generated by alfalfa and grass hay crop rotations.  The economic impact to the region from grapes is also very attractive, at over eight times that generated through alfalfa and grass hay production.

The research team then constructed three examples to show how decisions relative to the four scenarios described above might affect economic impact.  Assumptions were made about typical crop rotations, values that might be ascribed to water rights purchases and water leasing, tax rates on proceeds from the sale of water rights, rates of return on invested proceeds, and a number of other factors needed for the analysis.

In all three examples, it was assumed that 14 percent of the water to be acquired would be from non-agricultural sources.  This was based upon an option for geothermal water that has already been obtained.  An important aspect of understanding and utilizing economic impact analysis is appreciating that the methodology is quite good at estimating the direction and the order of magnitude of likely impacts, but the projected impacts are not similar to more exact measurements that can occur “after the fact.”  Because the input/output models generate precise numbers as estimates of outcomes, some people conclude that these figures convey much greater precision than they actually do.

In the first example, the assumptions were that the balance of the water would be obtained by a combination of scenarios, with 35 percent of the water resulting from some agricultural land taken out of production, 10 percent of the water resulting from modified crop rotations and agricultural practices, and 41 percent of the water obtained through changes to alternative crops  This example generated a projected net positive economic impact to the region of approximately $3 million annually (2006 dollars).

In the second example, the assumptions were that 58 percent of the water was obtained by taking some agricultural land out of production, 10 percent was obtained through changing crop rotations and agricultural practices, and only 18 percent was obtained through changes to alternative crops.  This example generated a projected net negative economic impact to the region of approximately $1.9 million annually (2006 dollars)

In the third example the assumptions were that all of the water obtained from agricultural sources (86% of the total water obtained) would be from taking some agricultural land out of production.  In this example, the projected annual economic impact was a negative $7.8 million (2006 dollars).

Net Annual Economic Impact

Clearly it makes more sense, from an economic impact perspective, to minimize the amount of agricultural land taken out of production and to maximize the amount of acreage that is switched from growing alfalfa to viable alternative crops.

Economic Development Recommendations

Specific economic development recommendations made by the research team are related to either a) economic impacts directly attributable to the historical decline of the water level of Walker Lake (those impacts that have already occurred in the Hawthorne area) or b) economic impacts that are likely to occur as a result of the acquisition of water rights in Mason Valley and Smith Valley, and that ideally will contribute to the quantity and quality of water flowing into Walker Lake.

These are preliminary recommendations that need to be vetted through community involvement.  It is the intention of the Nevada Small Business Development Center to manage this vetting process and to work with local citizens, public officials, existing economic development entities and any other stakeholders who can be identified to initiate implementation of economic development strategies in and for these sub-areas.

Mason Valley Economic Development Strategies:

Targets:  The suggested targets for economic development in Mason Valley include the following: a) value-added processing and market development related to the alternative crops of teff and two-row malt barley; b) agricultural research related to cultivation in arid high-elevation environments; c) alternative energy developments focused on geothermal and biodiesel production; and d) cleaning up the former Anaconda mine site.  Each of these is selected for its potential link to the Walker Basin project.

Value-added processing and market development for teff and two-row malt barley both seem worthwhile of further investigation.  Cultivation of both teff and two-row malt barley seem to have potential for reducing water consumption while generating positive economic impact within the region.  It fits well with the Walker Basin project and is consistent with the preferences expressed by local citizens.

One aspect of market potential for teff may be related to celiac disease, an autoimmune digestive disease that interferes with absorption of nutrients from food that is triggered by the consumption of glutten which is found in wheat, barley and rye.  It is estimated that roughly one in every 133 Americans has celiac disease but that 97% remain undiagnosed.  Flours without glutten can be made from teff, rice, corn, soy, buckwheat and a few other products.  Teff is purported to be an important health food for consumers to keep their bodies fit and to control weight.  It is also marketed as a natural sports food which is consumed by East African runners.

Two-row malt barley is primarily used for brewing beer.  Historically, breweries operated their own malting operations, but this has changed throughout most of the world because of the growth of a few larger commercial maltsters.  With the growth of the brewpubs and micro-brewery business in the U.S., there may be an opportunity for a boutique custom malting operator to cater to the requirements of the small brewery operations.  In addition to an end-market of home brewers, there are an increasing number of brewpubs and micro-breweries in the U.S. including at least 15 in Nevada.  An initial investigation could include contacting these entities to see if they would have any interest in custom malts that might help them to differentiate their products and/or add different beer styles to their current offerings.  If feasible, this would also fall in line with the trend to develop local supply relationships in order to reduce transportation costs and the carbon footprint associated with such products.

Agricultural research related to cultivation in arid high-elevation environments is another economic development target deserving further investigation.  This potential economic development target has the potential for both increasing available water for Walker Lake, and providing positive economic impact.  It is consistent with the desires expressed by local citizens. Several trends tend to support this concept: increasing world population, increasing food costs, declining farm land, and climate change which seems to cause reduction in precipitation and availability of fresh water in many parts of the world.

Cultivation in some of the arid environments has led to desertification as a result of using farming practices that are not sustainable.  Portions of rural Nevada provide ideal environments for testing alternative crops that can succeed under these arid conditions and also assess how modifications of farming practices can utilize irrigation water more efficiently.  The existing physical environment, combined with expertise found within the University of Nevada, Reno’s College of Agriculture, Biotechnology and Natural Resources and the Desert Research Institute, bring together factors ideally suited to help the United States develop the intellectual property needed to improve farming in these types of environments.

Alternative energy developments focused on geothermal and biodiesel production are two other potential targets for economic development that seem worthy of further investigation.  The option to acquire geothermal water rights for the restoration of Walker Lake already points to the linkage to this project.  If the geothermal water can provide some energy value, either in the form of generation of electricity or by providing a low-level heat source for some commercial or industrial use, there would be a double benefit.  One of the “negatives” of the geothermal water source is that geothermal water often contains large concentrations of dissolved minerals such as sodium, calcium, sulfate, chloride, or iron.  However, there has been extensive research on the recovery of minerals and metals from geothermal fluids.[iii] Depending upon the mineral content of the geothermal water in question, there might be some potential commercial benefit from extracting minerals and metals, and also improving the quality of this water source for Walker Lake.

Production of biodiesel from algae may present one more “dual purpose” economic development possibility.  Growing algae can be used to extract “contaminants” from water, thereby improving water quality and certain algae can also be a great feed stock for biodiesel.  This may be applicable to treated effluent from local municipal wastewater treatment facilities.  Depending upon the content of fertilizers in return flows into the Walker River from agricultural areas, there may be one additional source of water worthy of consideration for algae growth and biodiesel production.

Cleaning up the former Anaconda mine site has potential for positive economic impact, and might also have a relationship to the Walker Basin project.  A widely-held perception is that the water in the old pit is contaminated, even though Lyon County has a test result (Sierra Environmental Monitoring – 2006) that shows the water passing drinking water standards.  If, as part of any clean-up effort, minerals and metals could be removed from this water to improve its quality, and if any of this water could be made available for Walker Lake, it might provide one more source of non-agricultural water.

Smith Valley Economic Development Strategies:

Targets:  The suggested targets for economic development in Smith Valley include: a) value-added processing and market development related to the cultivation of wine grapes, and perhaps to teff and two-row malt barley, b) agriculture-based tourism, and 3) recreational tourism focused on the Walker River.

It appears that Smith Valley may be more conducive to the cultivation of wine grapes than Mason Valley.  If this proves to be true, as determined through monitoring of micro-climates within different parts of Smith Valley, and if substantial acreage of grape cultivation is attractive to farmers, then the opportunity for another winery could be a real possibility.  Smith Valley would provide an ideal setting for a winery.

Agriculture-tourism fits very well with a winery.  Agricultural tourism could include farm or ranch-based bed-and-breakfast operations or dude ranch operations.  Recreational tourism tied to the river could focus on recreational fishing or kayak/float activities, either within Smith Valley or perhaps in Wilson Canyon between Smith Valley and Mason Valley.

Hawthorne / Walker Lake Economic Development Strategies:

Targets:  The suggested targets for economic development in the Hawthorne/ Walker Lake area related to the Walker Basin project include the following:  a) lake-related developments such as boat ramps, improvements to camping and day-use areas, and renovation of or construction of new motel and restaurant facilities; and b) development of geothermal alternative energy resources.  The research team believes that Hawthorne’s economy is primarily a military-based economy.  Even if Walker Lake receives more water, the community should continue to pursue airport improvements, expansion of the ordnance and other explosives reprocessing, and contracting with federal agencies to support the military operations in the area, as well as developing home grown businesses.  However, while these projects are viable economic development opportunities, they are not directly related to the Walker Basin mission of restoring Walker Lake and therefore are not included among the suggested targets.

Citizens and public officials working to enhance economic development in their communities need to understand what “advantages” their area offers, and their role in encouraging individuals to make investments that can utilize these advantages.  Local citizens and officials can work to mitigate or eliminate different types of risks that would be perceived by potential investors and also create and/or promote their own competitive advantages.  For example, public processes that tend to ensure communities will be receptive to certain types of development reduce one of the risks that might concern investors.  Eliminating or reducing barriers to development might involve such things as land assemblage, expedited approval and permitting processes, development of key infrastructure related to transportation, communications, education, etc.  Business risks might be mitigated through access to targeted capital pools through low interest loans and/or grants that either lower the cost of capital or extend repayment terms to improve early cash flow.

For local economic development efforts to maximize their success, interested citizens and public officials should work to leverage existing available resources such as economic development entities, cooperative extension and business development entities that are part of state universities, and look for federal and state grant opportunities, particularly those targeted for rural communities.  Additionally, they need a sufficiently funded lead individual or entity to be responsible for organization, communication and most importantly, relentless expenditure of energy into the economic development effort.

With all this, each community needs to develop a process for moving their local economic development efforts forward, some initial resources to fund the process, and eventually access to a larger resource pool to use as the catalyst for “making things happen”.

To expedite successful economic development in each of the subareas of the Walker Basin, ideally some federal funding could be identified to assist economic development efforts in the basin.  A small portion could be targeted for technical assistance and another small portion might be dedicated to research, with most of the funds being dedicated to a resource pool available for investment in needed infrastructure and for grants/loans to help mitigate development risks and to serve as a catalyst for new projects.


[i] Curtis, Kynda, Carol Bishop, Staci Emm, Mimako Kobayashi, Man-Keun Kim and Thomas Harris.  (Draft 2008).  “Economic Analysis of Water Conservation Practices for Agricultural Producers in the Walker River Basin.”

[ii] Davison, Jay, Elizabeth Leger, and Erin K. Espeland.  (Draft 2008).  “Alternative Agriculture and Vegetation Management in the Walker Basin.”

[iii] Bourcier, W.L., M. Lin and G. Nix. 2005.  “Recovery of Minerals and Metals from Geothermal Fluids”, Lawrence Livermore National Laboratory, UCRL-CONF-215135 [2003 SME Annual Meeting, Cincinnati, OH, United States, February 24, 2003 –February 26, 2003]

About the authors:

Richard Bartholet is Director of Research for the Bureau of Business and Economic Research at the University of Nevada, Reno.  He has extensive experience as an entrepreneur prior to his current position.  Recent research has been in the areas of cost-effectiveness studies, economic impact analysis and economic development strategies.  Mr. Bartholet has a BS in Business Administration (Montana State University) and and MBA (UNR).

Elizabeth Fadali is a Research Associate at the University of Nevada, Reno Department of Resource Economics.  She started her career in economics in the area of non-market valuation and recreation demand.  Her recent work has focused on entrepreneurship and regional economics including input-output analysis.  Ms. Fadali has a BA in Math (University of Wyoming), an MS in Agricultural Economics (UNR) and she is currently enrolled in the doctoral program in the Resource Economics Department at UNR.

Ted Olsen is a Lecturer in the Department of Economics at the University of Nevada, Reno.  His areas of research include economic development, economic institutions, and economic history.  He has done extensive work in the State of Nevada for public and private entities examining fiscal consequences of economic growth.  Mr. Oleson has an M.S. in Economics (UNR) and is a Doctoral Candidate in Social Psychology (UNR).



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