Implications of current and alternative water allocation policies in the Bow River Sub Basin of Southern Alberta

• Current policy favors senior license holding irrigators, People First policy favors cities.
• Proportional allocation policy affects all but affords most irrigation expansion opportunity.
• High value crop areas expand and low value crop areas shrink as the severity of shortage increase.
• With trading, non-irrigation users buy, some irrigators find selling water more profitable.
• Basin-wide aggregate surplus is the lowest with current policy, highest with trading policy.

In this study, economic implications of allocating surface water with the existing policy (seniority rule) and three other alternative (People First, proportional reduction, and trading) policies are investigated to address potential water scarcities in the Bow River Sub Basin (BRSB) of Southern Alberta using a mathematical programming model. The model used an improved calibration technique and 2008 data for three irrigation and three non-irrigation sector users in the BRSB. Results indicate that while the seniority rule favors senior license holding irrigation users and the People First policy favors municipal sector users, irrigation users are better off with the proportional allocation policy even though it affects all users across-the-board. Moreover, if the users can participate in costless trades, then non-irrigation users tend to buy water as they place high value on water at the margin. Some irrigation users find selling water more profitable than utilizing their allocations for crop production.