Keywords

1 Introduction

Recent decades have witnessed the expansion of irrigated agriculture in some of the most productive semi-arid economies in the world, such as the Texas High Plains. This in turn has led to an increasing interest in groundwater management, and has attracted much attention from producers, policy makers, and groundwater management bodies. Groundwater provides for the majority of fresh water supply in these economies that critically depend on irrigated agriculture for their sustenance in the absence of other reliable sources of water. However, continued dependence has led to a decline of this limited resource due to heavy withdrawals and low recharge in several semi-arid agricultural and livestock production areas globally, as well as in the U.S. (Scanlon et al. 2006). In addition, the uncertainties posed through climatic events such as drought exacerbate the challenge of managing this scarce yet vital resource. This chapter describes the problem of declining groundwater resources in a semi-arid economy exemplified by the Texas High Plains, discusses the management approach of water use restriction to handle the ever increasing demand for agricultural production with a limited supply in hand, and outlines the role of policy planning in groundwater management.

2 Groundwater Resources and Agriculture

Among nature’s valuable and partially renewable resources, groundwater is considered a vital resource globally because of its importance in food production by way of irrigation and for potable use by humans. The importance of groundwater in agriculture is manifested in several critical areas, such as irrigation that directly impact agricultural productivity. In agricultural production areas facing surface water deficit and low precipitation rates, groundwater provides for a reliable and continuous water supply thereby influencing the type of cropping systems and associated profitability in these high demand regions.

2.1 Importance of Groundwater in a Semi-Arid Agricultural Economy

Semi-arid regions comprise approximately 30 % of global terrestrial surface area, and have been expanding (Dregne 1991; Scanlon et al. 2006). With increase in population growth , water scarcity con tinues to remain a critical issue in these regions as compared to the more humid regions (Scanlon et al. 2006). Between 1960 and 2000, about 40 % of the population growth in the United States occurred in the semi-arid states in the south western region (US Census Bureau 2004). The most productive semi-arid regions in the world are agricultural economies that heavily rely on irrigated production for their sustenance. Irrigation consumed 90 % of global freshwater resources during the past century (Shiklomanov 2000; Jury and Vaux 2005), and represents 20 % of cropland and approximately 40 % of food production (Jury and Vaux 2005; Molden 2007).

Over the past few decades, groundwater has emerged as the primary irrigation source for 40 % of global irrigated acreage, and 60 % within the United States (Siebert et al. 2010). Besides irrigation, groundwater is the major source of about half of the United States’ domestic and municipal water supply (Alley et al. 1999), and forms the backbone of several industrial economies in a majority of the states, besides contributing flow to rivers and wetland areas (Alley et al. 1999). Major reasons for the expansion of groundwater based irrigation are availability and ease of access to this resource, few infrastructure requirements for extraction, and consideration of groundwater as an alternate supply source to manage production in case of adverse climatic events such as drought (Giordano 2009).

The High Plains region in the United States is one of the most productive semi-arid regions in the country, and is often called the “grain basket” of the United States (Scanlon et al. 2012). This is enunciated by the fact that the market value of agricultural products was $35 billion in the High Plains relative to the United States total of $300 billion in 2007 (National Agricultural Statistics Services 2011). Groundwater has been the major source of irrigation particularly in the Texas High Plains region of the High Plains, and has largely supported the growth and expansion of irrigated agriculture as well as the livestock production in the area (Tewari et al. 2014). The Texas High Plains witnessed the expansion of irrigated agriculture as early as the 1950s (Colaizzi et al. 2009). Both irrigated area and volume pumped recorded their highest levels in mid 1970s and saw a steady decline in the next decade. In the early 2000s irrigated acreage was approximately the same as it was in the late 1950s, however volume pumped had shown a slight increase (Fig. 13.1).

Fig. 13.1
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Irrigated area in the Texas High Plains (Colaizzi et al. 2009)

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In the present situation, with water demand far exceeding supply (Colaizzi et al. 2009), a semi-arid production economy such as the Texas High Plains faces increasing dependence on groundwater for irrigation resulting in high depletion rates for the region’s groundwater resources.

2.2 Withdrawals from a Partially Renewable Resource: The Ogallala Aquifer

The Ogallala aquifer i s the prime source of groundwater for irrigation purposes in the U.S. High Plains, and underlies parts of eight states: Texas, New Mexico, Oklahoma, Colorado, Kansas, Nebraska, South Dakota, and Wyoming (Alley et al. 1999). Figure 13.2 outlines the location of the aquifer underlying the above mentioned states.

Fig. 13.2
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Map depicting the location of Ogallala aquifer (USGS 2014)

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Water table levels in the aquifer have been declining in certain locations over the years more specifically in the southern and central region of the aquifer (Tewari et al. 2014). This rate of decline for water levels in the aquifer is accelerated by the fact that recharge when compared to the rate of depletion is much lower in certain areas, and varies greatly from one region of the aquifer to the other (Birkenfeld 2003).

A study by Scanlon et al. (2012) for the High Plains region indicates that high recharge in the northern High Plains results in sustainable levels of groundwater being pumped, whereas in the central and southern High Plains higher depletion has occurred on account of lower recharge. In addition, depletion is highly localized with 4 % of the High Plains land area accounting for a third of total groundwater depletion in the area (Scanlon et al. 2012). Based on future predictions for recharge rates, this study indicates that more than one third of the southern High Plains will be unable to support irrigation within the next three decades (Scanlon et al. 2012). In 1990, the Ogallala aquifer in the eight-state area of the Great Plains contained approximately three and half billion acre-feet of water, of which Texas had about 12 % in storage or approximately 417 million acre-feet of water (Tewari et al. 2014). A recent estimate of the volume of water in the eight-state Great Plains area was less than three billion acre-feet (Tuholske 2008). These changes in the groundwater resource supply will most likely have a significantly negative impact on the agricultural production areas that depend on the aquifer for their sustenance (Tewari et al. 2014).

In a study conducted by the Center for Geospatial Technology at Texas Tech University, changes in saturated thickness were observed over an 18 year interface for selected counties in the Texas High Plains, and estimates of the saturated thickness in the year 2030 were developed. The counties of study showed substantial change in the amount of water storage underlying the county over a study period of 18 years from 1990 to 2008 (Texas Tech Center for Geospatial Technology 2010). Figure 13.3 shows the saturated thickness of the aquifer underlying the counties of study as an estimate for the year 2030.

Fig. 13.3
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Texas High Plains’ counties with saturated thickness of 30 ft or less in 2030 (Texas Tech University Center for Geospatial Technology 2010)

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A saturated thickness level of 30 ft or less indicates a reduction in availability of water in the aquifer in the region for further use (Schloss and Buddemeier 2000). It is clearly observable that a majority of the counties in the study region will experience a steady decline in saturated thickness, and are anticipated to have a saturated thickness less than 30 ft in certain parts. As a result of this anticipated decline in the volume of water storage in the aquifer, continued availability of irrigation water will be interrupted. Irrigated production of economically important crops in the region such as cotton and corn may therefore experience reduction in terms of both productivity and profitability.

3 Management of Groundwater

Several studies such as Caswell and Zilberman (1986), Buller and Williams (1990), and Negri and Brooks (1990), have evaluated how irrigators make management decision choices with regard to the use of technology, and the use of available water. The outcome of these studies indicates that several factors such as commodity prices, energy prices, pump lift, and well capacity determine the use of technology, which in turn could affect the amount of water use. In addition, the amount of water use in agricultural production is also influenced by the water rights in the area, crop water requirement, and management policies. Above all, since irrigators operate with an objective of profit maximization, a long-run investment in irrigation technology influences the selection and planning of future crop-mix and the amount of water used for irrigation. Several past studies suggest that government intervention through policy measures is required to ensure that adequate groundwater stock is maintained in the aquifer for future use, and these will be discussed in the following section.

3.1 The Role of Policy Planning and Groundwater Conservation Districts: The Case of Texas High Plains

It is imperative to first understand t he water rights system in the state of Texas to understand policy implications for groundwater management. The Texas law of water rights has a complex structural framework which can be accounted for by inclusion of elements of the Hispanic water law, in combination with traditional English common law (Handbook of Texas Online 2009; Tewari et al. 2014). The existence of water-rights law paves the way for determining the entitlement of available water supply usage in respective quantities.

The Texas Judicial system divides water into different classes, which are governed by different set of rules regarding usage and ownership of each class. Broadly, there are three major legal classes of water (atmospheric moisture, surface water, and percolating groundwater) with several sub-classes for each class (Templer 1992). The basic assumption followed by the Texas courts is that all groundwater may be classified as percolating unless there is a distinct evidence of proof, about the source. With these defined laws in existence, the ownership of percolating groundwater in Texas is clearly articulated. For percolating water (percolating below the surface of the earth (Tex. Water Code §36.001(5) (Texas Constitution and Statues 2011))), the rule of capture also referred to as the “law of the biggest pump”, is considered as the regulatory or guiding principle in the state of Texas (Tewari et al. 2014). This has been derived out of the English common law which was adopted in the year 1904 by the Texas Supreme Court in a historical ruling which is considered as a landmark in legal doctrines on groundwater. This specific ruling has been recorded as Houston and Central Texas Railway vs. East (Texas Water Development Board 2004). Following the rule of capture, the owner of the overlying land can pump and use the water with few restrictions, irrespective of the impact on adjacent landowners or more distant users of water (Tewari et al. 2014).

The rule of capture has been maintained as the case law for groundwater in the State of Texas, ever since the East ruling and has been modified with regard to groundwater management in different regions of the state (Tewari et al. 2014). A law passed in 1949 in the Texas Legislature provided for the voluntary establishment of local conservation districts for underground water. These are specifically called the underground water conservation districts (UWCD). Such local districts hold a strategic position in the regulation and management of groundwater in Texas. In the above context, a “district” is defined as an authority formulated to regulate the spacing of water wells, the production from water wells, or both, as defined in the Texas Water Code §36.001(1) (Texas Constitution and Statues 2011; Tewari et al. 2014).

By the late 1980s only 11 districts had been established under general law or by special legislation, and several areas with rapidly depleting groundwater levels still were devoid of any district and subsequent supervision. Currently there are 94 underground water conservation districts in Texas which have been confirmed by voters through local elections (Texas Water Development Board 2010). The Senate Bill 1 passed in 1997 recognized the importance of managing groundwater resources by suggesting a “grassroots” approach to be implemented through local UWCDs. Under the same bill, the Texas Water Development Board designated 16 regional water planning groups (Texas Water Development Board 2010). The primary objective followed by these planning groups was to formulate and submit regional water management plans addressing important ground and surface water management issues like regulation of water use under drought or severe water stress, maintenance of existing water rights and specific groundwater conservation district plans.

The second 5 year planning period began in 2001 with the approval of Senate Bill 2. The primary focus still was on UWCDs. Under the Senate Bill 2, UWCDs were awarded a provision for charging a fee on water use not to exceed an upper limit of $1 per acre foot and $10 per acre foot for agricultural and non-agricultural uses, respectively. The main purpose behind this was to apply charges on production and give the underground water conservation districts, authority to regulate water use. In the State of Texas, the rule of capture is still held as the foundational law governing water, however Senate Bills 1 and 2 provide authorization to regulate underground water pumping by the UWCDs (Johnson et al. 2004). The 80th Regular Session of the Texas Legislature in the year 2007, acknowledged the crucial role that water conservation plays in meeting the future demand via the passage of Senate Bill 3 and House Bill 4 in the year 2008. These proceedings were also the platform for creation of the Water Conservation Advisory Council, responsibilities of which include: monitoring trends in water conservation implementation and new technologies for possible inclusion as best management practices (Water Conservation Advisory Council 2008).

The on-going debate concerning groundwater conservation in Texas has resulted in studies that examine alternative policy options for groundwater management. Johnson et al. (2004) and Johnson et al. (2009) used a dynamic optimization model along with an input–output model and studied the impacts of different policy alternatives on the saturated thickness of the Ogallala Aquifer and economy of Texas High Plains. The study compared a baseline scenario with three policy alternatives for response to aquifer depletion using a planning horizon of 50 years. These policy alternatives were: introducing a fee on water extracted per acre-foot, an annual restriction of water use to 75 % of a 10 year average water use, and a restriction on the drawdown of the aquifer over a 50-year planning horizon to 50 % of the initial saturated thickness at the beginning of the period. The results showed that the baseline scenario resulted in the most rapid exhaustion of the water supply and caused the most dramatic decrease in net income for the economy over time. The production fee alternative showed little change from the baseline and the drawdown restriction resulted in slightly lower net income than the quota restriction. They further concluded that the aquifer drawdown restriction could be considered the most effective alternative because it projected the best equivalence between producer profit, water conservation, and subsequent effects on the regional economy.

Wheeler et al. (2008) evaluated the effectiveness and efficiency of temporary water rights buyout policies for 10 and 20 years. This study used county level optimization models to maximize net present value of net returns to land, management, groundwater, and irrigation systems over a 60 year planning horizon for a given county as a whole. They evaluated two voluntary incentive based policies which could feasibly be implemented under current Texas water law and concluded that the longer term 20-year water rights buyout is a more efficient and effective water conservation tool than the 10 year water rights buyout for the Southern High Plains of Texas.

Recently, Tewari et al. (2014) evaluated the policy option of multi-year water allocation coupled with water-use restriction in the Regional Water Planning Area-Region A of Texas (Fig. 13.4), over a planning time frame of 60 years using an economic optimization model.

Fig. 13.4
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Regional water planning area—Region A of Texas (Texas Water Development Board 2010)

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A water allocation system over multiple years will potentially reduce inefficient use of water during the allocated period by allowing for water stock (allocation) to accumulate for the judicious users, which could be rolled over into the next allocation period at an appropriate rate of the unused stock. An unconstrained baseline scenario with no restrictions was compared with water use restriction scenarios at successively increasing rates. Under the unconstrained baseline scenario with no policy implementation over 60 years, the counties of study showed a decline in saturated thickness that recommends the incorporation of water-use restriction alternatives at different rates. Increasing restrictions rates led to decline in water use per acre as well as total annual water use. The study suggested that such restrictions, if mandated by the water conservation districts, will result in individual irrigators bearing the cost of water savings in the form of reduction in net present value per acre. In addition, the decline in net present value will impact the regional economy, and therefore analyzing the socio-economic effects of implementing such a policy alternative is critical, and the feasibility of policy implementation should also be evaluated with regard to the existing legislative and political scenarios (Tewari et al. 2014).

3.2 Hydro-economic Models for Evaluating Net Benefits from the Use of Groundwater for Irrigation

Hydro-economic models are widely used to e valuate economic impacts from the use of groundwater in agriculture. These models can be adjusted for incorporation of water policies and subsequent impacts during the implementation time frames can be evaluated. Initial hydro-economic modeling studies such as Burt (1964) studied optimal allocation of nonrenewable or partially renewable resources such as water. The models estimate an optimal usage rate and the expected present value of groundwater operating under a socially optimal policy. The marginal social value of water at a point in time is equated to the marginal social value of water as a stock resource in the subsequent period. Extensions of this model made use of sequential decision theory, and formulated policies concentrating on optimal groundwater usage (Burt 1966). These models evaluated the net social benefit of water use and the issue of common property, and formulated the optimal groundwater extraction rate on the net present value of water in a specific area. Subsequently, these models were further expanded to incorporate institutional restrictions and their subsequent effect on storage of groundwater (Burt 1970).

In recent decades, a combination approach of utilizing diverse kinds of models to optimize the use of the remaining groundwater stock in the Ogallala aquifer has been used (Feng 1992; Johnson et al. 2004; Wheeler et al. 2008; Johnson et al. 2009; Tewari et al. 2014). This includes combining non-linear dynamic optimization models with bio-simulation models of crop growth, and including hydrological parameters of the groundwater source which directly impact costs of production from the perspective of irrigation.

The objective function of an economic model used in studies such as the above maximizes the Net Present Value of net returns over the study period. Because farm profitability is linked with parameters of crop production, the economic model provides a representation for quantifying the crop responses to water application in the form of net returns from irrigation. An objective function that maximizes net revenue over n years is expressed in Eq. 13.1.

$$ Max\;NPV={\displaystyle {\sum}_{t=1}^{\mathrm{n}}N{R}_t}{\left(1+r\right)}^{-t} $$
(13.1)

where NPV is the net present value of net returns; r is the discount rate; and NR t is net revenue at time t. The bounds of summation for the net revenue are from one to n years.

The simplest form of evaluating these changes will be in the form of changes in net revenue, net present value of net returns over the study period, changes in irrigated acreages, and movement in crop-mix. NR t is defined in Eq. 13.2 as:

$$ N{R}_t={\displaystyle {\sum}_i{\displaystyle {\sum}_k{\varOmega}_{ikt}\left\{{P}_i\;{Y}_{ikt}\left[W{A}_{ikt},\left(W{P}_{ikt}\right)\right]-{C}_{ikt}\left(W{P}_{ikt},{X}_t,S{T}_t\right)\right\}}} $$
(13.2)

where i represents crops grown; k represents irrigation systems used; Ω ikt is the percentage of crop i produced using irrigation system k in time t, P i is the output price of crop i, WA ikt and WP ikt are irrigation water application per acre and water pumped per acre respectively. Y ikt is the per acre yield production function, C ikt represents the costs per acre, X t is pump lift at time t, ST t represents the saturated thickness of the aquifer at time t. The model can be subjected to various constraints specific to the location, and the policy option evaluated, and further compared with an unrestricted status quo scenario to evaluate the impacts of policy implementation. The results of these models can be analyzed for the parameters of saturated thickness, annual net revenue per acre, pump lift, water applied per cropland acre, cost of pumping, net present value of net returns per acre (NPV), and for shifts in crop-mix over the planning time frames (Feng 1992; Johnson et al. 2004, 2009; Wheeler et al. 2008; Tewari et al. 2014).

Costs of production, crop prices, and energy prices are held constant thorough the time horizon. Costs of pumping irrigation water change as the pump lift increases with declining levels of saturated thickness in the aquifer. The location specific optimization model incorporates the initial values of crop acres, irrigated acres, average saturated thickness, and depth to water for a specific acreage unit such as a county, or a region. With these initial values, the model estimates the level of crop production and water use that optimizes farm net income for the location over the planning time frame.

4 Economic Value of Groundwater Management: Understanding Water Use Restriction Policies

The economic value o f groundwater management in Texas can be studied using the case of optimal allocation of a common natural resource. In the state of Texas, the freedom extended by absolute ownership to landowners in making pumping decisions infers that groundwater is managed more as an open access resource than a common-property resource (Easter et al. 1998). Open access resembles a first- come, first-take, free for all that is barren of restrictions, whereas common property arrangements employ social expectations and rules of conduct governing resource use (Ciriacy-Wantrup and Bishop 1975). Given the above, groundwater remains a contentious issue for producers across Texas, particularly in high water use areas.

Among several suggested policy options for groundwater management, the water use restriction policy is a mandatory annual or multi-year limit that reduces the amount of water pumped from a common groundwater resource such as the Ogallala aquifer, for the purpose of agricultural irrigation. For the Texas High Plains region, the water use restriction policy along with various other water management alternatives was suggested in a study by Amosson et al. (2009) that compared the effectiveness of six different water management strategies in the Texas High Plains, including the policy of water use restriction. In order to implement this policy, a mandatory annual percentage reduction will be applied on the total water pumped for irrigation throughout the planning horizon (Amosson et al. 2009). Results suggest that while an annual water use restriction policy can lead to increasing saturated thickness levels in the aquifer, producer income will be negatively impacted. It is therefore implied that the underlying objective of a restriction policy on groundwater use in a region such as the Texas High Plains is to sustain the existing groundwater supply for use by future generations, and presents a trade-off that will have to be borne by existing producers in the form of reduction in net revenue.

The importance of this policy to the Texas High Plains is further emphasized by a few strategic modifications in the Texas Water Law in the recent decades. These modifications allow the regional groundwater conservation districts to set goals known as desired future conditions (DFC) for the district (Cook and Hope 2005), which are represented by an amount of groundwater remaining in the aquifer after a set period of time. Several conservation districts in the region have implemented pumping restrictions in order to ascertain a DFC of 50 % for the current water supply being available in 50 years, and these have been commonly addressed as the 50/50 management goal (Johnson et al. 2011). For example, the North Plains Groundwater Conservation District, in its Groundwater Management Plan for the years 2008–2018, set a maximum allowable production limit of 2 acre-feet per acre per-annum on water rights tracts not to exceed 1600 acres (North Plains Ground Water Conservation District 2008).

The economic impact of a water use restriction policy is depicted in Fig. 13.5.

Fig. 13.5
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Impact of a water use restriction policy on the marginal cost of irrigation water

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The irrigation demand is depicted by AE, which is the derived demand for irrigation water from commodity prices. The policy places a certain percentage of annual restriction on the water pumped from the aquifer per acre. The quantity of water available per acre declines from Q1 to Q2, and because of decline in the average water application rate, production declines. This increases the marginal cost of water from C1 to C2, which also implies that use of irrigation water becomes more expensive for production.

Figure 13.6 shows the impact of a water use restriction policy on a single irrigated commodity. The point on the production curve corresponding to point W1 represents the level of output Y1 for current baseline water use. The water use restriction decreases the water use to point W2. This shift causes output on the panel above to decrease from Y1 to Y2, decreasing returns to producers. A water use restriction will encourage producers to adopt more efficient technology systems so they can continue to remain at a profitable level of output.

Fig. 13.6
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Impact of a water use restriction policy on irrigated agricultural production

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An evaluation of the costs and benefits associated with the implementation of the policy is critical to evaluate the feasibility of the policy in actual field conditions. The costs of implementation are primarily calculated as the net social cost of each policy and comprise of private and social costs related to each policy measure. Private costs are calculated as the income loss borne by the producers on account of reduction in irrigation water per unit area as a result of policy implementation, as well as any other implementation costs incurred by the producer, for example technological advancements, and monitoring tools. Public costs refer to the administrative and operational costs of implementing the policy as incurred by the state, and management bodies such as the water districts.

5 Impacts of Climate Change

The future availability a nd sustainability of groundwater in several principal aquifers in the world is under threat on account of depletion by overuse and climatic stresses (Brekke et al. 2009; Alley et al. 2002). An in-depth understanding of climate change and variability is crucial for agricultural economies and ecosystems, especially in the context of complex changes in climatic variables that reduce chances of replenishment and pose questions regarding the sustainability of groundwater reserves in overused areas (Dragoni and Sukhija 2008). It is also crucial to incorporate how spatial changes in the available water supply and their temporal variability affect adaptation strategies to mitigate adverse impacts of climate change on irrigated production, as suggested in a study by Quiggin et al. (2010). This study evaluated the effects of climate change adaptation and mitigation in the Murray-Darling Basin in Australia, using a state-contingent simulation approach. This approach represents risk management by producers in the form of variations in land allocation between production activities. The results from the study suggested that in the absence of mitigation, climate change will adversely impact irrigated agriculture in the Murray-Darling Basin . The study also pointed out that these adverse impacts of climate change can be mitigated by land and water use changes in agricultural production.

Recently for the U.S. High Plains, Crosbie et al. (2013) used 16 global climate models (GCMs) and three global warming scenarios to investigate changes in groundwater recharge rates for a 2050 climate relative to a 1990 climate. Under a 2050 climate, median projections suggested increased recharge in the Northern High Plains, slight decrease in the Central High Plains, and a larger decrease in the Southern High Plains. There is however, considerable uncertainty in the magnitude and direction of these changes in recharge projections from the above study. In addition, the U.S. Global Change Research Program ’s report for the year 2009, predicts a temperature increase in the range of 2.5–13 °F from the 1960 to 1979 baseline for the Texas High Plains by the end of this century (Karl et al. 2009). The report also indicated that summer changes are projected to be larger than those in winter and precipitation will particularly change in winter and spring. Overall, the conditions are anticipated to become drier and hotter in the Texas High plains, as well as frequencies of extreme events such as heat waves and droughts are projected to increase. These changes in long-term climate could further increase the stress on the regions’ already depleting water resources, as well as agricultural and ranching activities that form the backbone of the regional economy (Karl et al. 2009).

6 Conclusions

The demand for groundwater in semi-arid regions will continue to increase in the future, particularly under a changing climate that projects higher temperatures and lower precipitation rates. The uncertainty posed by climatic factors, as well as by continued expansion of irrigated agriculture in groundwater dependent semi-arid agricultural economies such as the Texas High Plains creates an impending need for incorporating water policy measures in the groundwater management plans. These measures will prove critical in managing the exhaustible supply of groundwater provided for by finite sources such as the Ogallala aquifer. However, the feasibility of implementing such policy measures is greatly influenced by the existing groundwater laws, as well as the agricultural production systems followed in the region.