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Prospects for Managed Underground Storage of Recoverable Water (2008)

Chapter: 5 Legal, Economic, and Other Institutional Considerations

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Suggested Citation:"5 Legal, Economic, and Other Institutional Considerations." National Research Council. 2008. Prospects for Managed Underground Storage of Recoverable Water. Washington, DC: The National Academies Press. doi: 10.17226/12057.
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5 Legal, Economic, and Other Institutional Considerations Is managed underground storage of recoverable water (MUS) being utilized in circumstances where it is appropriate, given costs and environmental con- cerns, or do institutional barriers impede its use? How are regulatory agencies, courts, and other institutions involved with the development and oversight of MUS facilities? Does this involvement support the safe, efficient, and cost- effective use of MUS technologies, with maximum benefits and minimum costs, balancing the interests of the project proponents, society, and the environment? These questions are critical ones, because MUS has been studied for dec- ades in the water resource management literature and has been successfully im- plemented by multiple jurisdictions. Although the previous chapters have de- scribed the physical challenges associated with MUS, those challenges are not the only impediments to its more widespread implementation. An equal or greater challenge, and the topic of this chapter, is the array of institutional issues associated with MUS. MUS technologies have been applied in a wide range of physical systems (e.g., different aquifer types, different hydrogeological and geochemical condi- tions, and different depths) and for a wide range of purposes (municipal water supply, agricultural and industrial water supply, and even supplies for aquatic habitat) and operational goals (peak and seasonal demands, drought and other emergency supply). As the applications and understanding of MUS to meet different water management goals and water supply needs increase, and the abil- ity to meet technical challenges associated with these technologies improves, MUS is increasingly being considered and applied throughout the United States. The decision to utilize MUS will reflect both technical and institutional considerations. As the technical challenges associated with MUS become more tractable, the institutional issues associated with its implementation rise to equal or even greater prominence. “Institutional issues” refer to topics associated with governance, informed decision making, legal rights and liabilities, economic trade-offs under uncertainty, and so on. As others have recognized, institutions are key elements of water resource management (Blomquist et al., 2004; Ingram et al., 1984; Livingston, 1993; Lord, 1984). At the outset, it should be noted that MUS is likely to be utilized only when it is less costly than alternative means of meeting water demand. As discussed in this chapter, although economic studies have been performed on various as- pects of MUS (e.g., the economics of groundwater use or of artificial recharge), little has been published in terms of formal studies of the economics of MUS versus other forms of water storage and water management. Consequently, ref- erences to MUS as “costly” or “inexpensive” are usually generalities. Whether 181

182 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER MUS is economically feasible depends on the circumstances of particular loca- tions—not only the technical requirements of a particular MUS project, but the alternatives that are available for water supply and storage and the financial re- sources that can be marshaled. Municipal and industrial suppliers in water-short regions, for example, are able to pay almost any price to meet water demands that are increasing in the face of growing populations or to respond to the mining of groundwater aqui- fers, increasing regulatory constraints on surface water storage, and regional water competition. Furthermore, communities in almost any location have al- ternative means of addressing these water demands, such as conservation meas- ures, pricing practices, or transfers of water from other uses (e.g., retiring of agricultural water rights is occurring across the western United States). Institutional arrangements also determine whether MUS comes within the set of feasible policy options. Institutional constraints affect whether recovered water can be stored underground, that is, whether a legal regime exists that would prohibit or permit this activity. The coordinated actions necessary for implementation of an MUS program are unlikely to occur if rules and organiza- tional arrangements (1) impede or prohibit coordination of actions necessary to divert, impound, treat, recharge, store, protect, and extract water; (2) do not pro- tect those who invest in facilities or who store water now for later recovery; or (3) do not provide or recognize workable and fair methods for distributing the costs of an MUS program among those who benefit from it (Blomquist et al., 2004). Those who would invest in MUS projects need to capture and internalize benefits from their investments. Those who incur costs by participating in an MUS program (e.g., accepting recovered water supplies in lieu of other supply sources to which they also have access) must be able to capture some of the benefits they have provided for others. The assurance of the protection of public health and the environment is also critical in MUS development and operation. Other major institutional considerations in MUS involve the nature of the organizations (public or private) and the allocation of their authority and respon- sibility to capture, convey, manage, store, or sell water; to monitor water re- source conditions and respond to perceived problems; to communicate with the public and other policy makers; and to protect public interests. Like any ap- proach to water management, MUS emerges through the interaction of multiple organizations with diverse interests and responsibilities. The practices of those organizations and the relationships between them shape the implementation and performance of MUS. This chapter provides an overview of the regulatory in- volvement in the development and oversight of these technologies; a discussion of other issues facing institutions in their approach to MUS; and an evaluation of the economic aspects of MUS.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 183 LAW, REGULATIONS, AND THE MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER At each step in the development and implementation of a water storage and delivery project there are institutional issues to address. One of the reasons for the complexity of the development of MUS systems is that the action of taking water, placing it in storage through a well or recharge basin, storing it under- ground in an aquifer, and removing it from the aquifer (typically through a well) for later use—particularly if that use is for drinking water—involves a range of regulatory programs at the federal, state, and sometimes, local levels. MUS projects are among the most complex to implement, unless a state has addressed these issues in a statutory scheme that was created specifically for the regulation of these projects. Box 5-1 delineates the aspects of MUS activities that may be subject to regulatory oversight. Recharge and recovery projects involve an array of legal issues. Depending on a state’s laws and regulations, MUS projects will be easier or more difficult to develop and implement. States’ legal regimes governing water are infamous for separating water allocation or rights issues from those of water quality. The fundamental concerns of water quantity and water quality laws are usually quite distinct, as are the agencies that administer these laws. Statutory schemes that are specifically directed at MUS projects contain a welcome recognition that these different aspects of water are interrelated and appropriately considered in tandem. While some states have comprehensive regulatory schemes, others have schemes developed for different types of quality concerns or very minimal sys- tems. Any discussion of water quality protection is further complicated because both the federal and the state governments play roles in regulation. Laws allo- cating water quantities among uses and users are discussed in the following sub- section, followed by a discussion of water quality concerns.1 MUS and the Regulation of Water Use Well-understood and characterized rights of water use are essential for MUS projects to be considered feasible options for water management. Most states' water rights systems were developed long before groundwater storage was contemplated. Additionally, competing rights holders will be vigilant to prevent infringement of their rights and will be involved in any proposals that are perceived to affect their water. 1 A very useful review of laws and regulations concerning the aquifer storage and recovery method of MUS was provided by Seerley (2003).

184 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER BOX 5-1 Aspects of MUS Activities That May Be Overseen by a Regulatory Agency, Depend- ing on laws or regulations applicable at the site Water Quantity-Related Activities • The right or permission to store water within an aquifer, the volume of water that can be stored, and the protection of the stored water from recovery by others) • The timing and rate at which stored water can be recharged to the aquifer to pre- vent impacts to subsurface structures from mounding of water levels or stream accretions resulting from recharge • The right or permission to withdraw the water from storage (this can be particu- larly important in regions where groundwater management or groundwater re- covery activities are restricted due to water quantity-related concerns such as fal- ling groundwater levels, land subsidence, or saltwater intrusion) • The timing and rate at which stored water can be recovered to prevent water quantity-related aquifer management concerns, such as well interference or other impacts of neighboring well users, and stream depletions or other surface water impacts for tributary aquifers • The type of use to which the recovered water can be put Water Quality-Related Activities • Protection of the quality of the native water in the aquifer from impacts by or deg- radation from interactions with the water to be recharged; if recharge is by well injection, this is typically regulated under the federal Underground Injection Con- trol program • Protection of the quality of the water being stored from impacts by or degradation from interactions with the surrounding native water in the storage aquifer, particu- larly if the intended post-recovery use of the stored water is for potable purposes • Protection of the aquifer matrix from physical impacts resulting from chemical in- teractions between the stored and native waters, such as precipitation of metals and resultant clogging of aquifer pore spaces (this can also be viewed as a water quantity-related issue, and regulated by a water resources agency because these impacts can reduce aquifer productivity for other well users) • The construction and maintenance of wells, including well casing and wellhead, to prevent movement of water between aquifers and water and to prevent con- taminants from entering the aquifer unintentionally • The construction and maintenance of surface recharge facilities Land Use • Ownership of and/or access to land for surface recharge • Ownership of and/or access to land for well installation, operation. and mainte- nance, for directionally drilled recharge or dual-purpose recharge and recovery wells, this may also include ownership of land over the entire length of the well • Ownership of and/or access to and permission to use the storage aquifer; In addition, special laws or regulatory programs may address the water quantity and/or water quality aspects of activities involving recycled wastewater, stormwater, desalinized water, or other forms of water reuse.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 185 Surface Water and Groundwater Rights One set of water rights issues arises out of the presence of dual or multiple water rights systems, which separate the management of surface and groundwa- ter. Separate rules governing surface water and groundwater are common throughout the United States, although the rules in use differ noticeably between the eastern and western states. In the United States, most states east of the Mississippi River pro- vide riparian rights for the use of surface water; that is, they link the use of water to the ownership of land adjacent to that body of water. Another set of rules governs groundwater use rights—by virtue of their land ownership, overlying owners have correlative rights to withdraw water from beneath the land for beneficial uses on the land. Water shortages (relatively rare in the East through most of the nineteenth and twentieth centuries) occasionally caused one land- owner's water use to encroach upon the needs or customary use of another, and these were generally approached through common law remedies. During the latter half of the twentieth century and into the early twenty-first century, eastern states have modified their water rights regimes by requiring state-issued permits limiting water withdrawals to a maximum quantity or rate (e.g., gallons per minute or per day). Furthermore, all eastern states overlying the aquifers of the Coastal Plain—from New Jersey south to Florida—have enacted special regula- tory programs for use in designated locations (which may be called “Capacity Use Areas,” “Critical Areas,” or “Groundwater Management Areas”) where groundwater resources have been overdrafted or where negative impacts such as well interference, seawater intrusion, or land subsidence have necessitated a more active regulatory and regional approach. The legal context for MUS pro- jects in the eastern states is thus comprised of the overlaying of permit systems and critical area designations on the existing riparian rights rules for surface water and correlative rights rules for groundwater. This is of special significance because most MUS projects that have been planned or undertaken along the eastern seaboard of the United States are in the Coastal Plain, where these state-by-state regulatory programs apply. Some of these regulatory regimes include strict limitations on groundwater use in state- designated critical areas and may require consideration of drawdown impacts of one pumper on others within the same area. Often, these regulatory programs restrict withdrawals from designated aquifers, but allow the use of MUS to pro- vide “credits” that project proponents can draw against. Most western states in the United States developed rights to the use of sur- face waters by means of the prior appropriation doctrine. The prior appropria- tion doctrine allocates water on the basis of seniority, or “first in time, first in right,” rather than on the basis of land ownership Through agency-issued per- mits or a process of adjudication, individuals are granted rights to divert from the stream channel and use up to a specific amount of water, usually on an an- nual basis. When shortages occur, those who hold the most senior rights have those rights satisfied first, while those who hold junior rights may not receive

186 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER any water. States were slower to develop statutory schemes to address the exploitation of groundwater, because it was only with the widespread utilization of pumping that conflicts began to arise. Some states regulated groundwater through the prior appropriation doctrine, requiring permits for withdrawal and protecting other users from excessive withdrawals. Other states permitted landowners unlimited access to the resource. States have also regulated groundwater on a regional scale, through critical area designations or similar means, with more stringent controls in some regions than others. As groundwater is better under- stood and the competition for water increases, there is increasing regulation by states. MUS projects typically involve the movement of surface water into groundwater and thus there is a need to reconcile legal systems that typically do not integrate these differing concerns. In states where rights for use of surface water differ from rights for use of groundwater, some adjustment of water rights rules may be necessary for the holder of a surface water right to be able to le- gally store some of that water underground and pump it out later. By the same token, the rights of a groundwater user to put water into an aquifer, as well as take it out later, may require modification of governing rules. For instance, if an individual or organization already possessing rights to the use of groundwater also participates in an MUS project, the project propo- nent will have to establish how the stored water relates to the rights holder’s other groundwater extractions—that is whether stored water is counted as the “first” water extracted (after which the rights holder can continue to extract whatever other amount of groundwater it has a right to use) or as the “last” wa- ter extracted (in which case a rights holder does not tap its stored water in a given time period unless and until it has already extracted whatever other groundwater it had a right to use) (Shrier, 2004). The implications of the differ- ence are considerable. The former option provides little incentive for the holder of an existing groundwater right to engage in long-term water storage since the stored-water “account” is exhausted first. The latter option provides a consider- able incentive to store water for the long term, but may not account for the bene- fits to other aquifer users that accrue when a rights holder places water into the aquifer and leaves it there for a long period (discussed later in this chapter). Storage and Recovery of Project Water Another set of legal concerns is raised because many MUS projects involve the storage of water imported from another location or produced through purifi- cation processes (e.g., reclaimed wastewater, desalinated ocean or brackish wa- ter). In most states this “project water” is produced and delivered by public or private project operators and does not fall clearly within the riparian, appropriat- ive, or other rights systems that apply to surface water diversions or groundwa- ter extractions. Contracts between project operators and the recipients of the

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 187 project water express rights in the water. These contracts come in such variety that it is difficult to characterize a typical arrangement. Legal Status of Aquifer Storage Space A third major legal issue is unique to underground storage projects and presents novel questions. While ownership of groundwater rights has been developed in western states, there is no readily available reference for ownership or control of aquifer storage rights. Thus, in the absence of a statutory provision, it is often unclear whether aquifer space is owned or controlled by overlying property owners, by owners of water use rights in the aquifer, or by no one at all. In some states, this issue has been addressed by statutory and regulatory schemes providing for MUS, or by court decisions resolving other issues.2 In 1995, the State of Oregon adopted a statute authorizing the state’s Water Re- sources Commission to issue permits for aquifer injection and storage projects, and providing for the state’s departments of Environmental Quality and Human Services to offer comments during the permit review process.3 The statute im- poses water quality standards on the stored water and acknowledges that the water will be retrieved sometime in the future. The Oregon statute does not re- quire that aquifer storage and recovery projects have discharge permits,4 and declares that water stored in ASR projects will not be considered a waste, con- taminant, or pollutant.5 Idaho established through legislative action that the storage of water is a beneficial use, and that permits can be issued for the capture and storage of un- appropriated water, in effect creating a secondary water right.6 Idaho’s approach recognizes that such projects may simply recharge groundwater supplies, whereas Oregon’s approach mandates that water would be retrieved from the aquifer.7 In 2005 the Kansas Division of Water Resources promulgated regulations to establish a permitting process for ASR projects.8 Project applicants must seek and obtain two types of appropriation permits. The first permit is for appropriat- ing the surface water that will be stored underground. The second permit is for 2 California, for example, does not have a statewide approach to groundwater storage, but rights to store water underground and recover it later have been established through adju- dications of pumping rights in several groundwater basins (Bachman et al. 1997; Blomquist, 1992; Blomquist et., 2004; Littleworth and Garner ). 3 Or. Rev. Stat. § 537.534 (2003). 4 Or. Rev. Stat. § 537.532(b) (2003). 5 Or. Rev. Stat. § 537.532(a) (2003). 6 Idaho Code Ann. § 42-234(2) (2006). 7 Idaho Code Ann. § 42-234(1) (2006). 8 Kan. Admin. Regs. § § 5-12-1 et seq.

188 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER appropriating the stored groundwater—extracting it for use. The Kansas Divi- sion of Water Resources was prompted to enact these new regulations by a demonstration project in the Equus Beds groundwater area of the Little Arkan- sas River in south-central Kansas. Wichita and the Equus Beds Groundwater Management District No. 2 are undertaking the ASR project, with the city as the designated lead local agency (Peck and Rolfs, 2005). Arizona has enacted a comprehensive statute addressing the storage of wa- ter. Arizona Revised Statutes § § 45-801.01 et seq. has a twofold purpose: 1. Protect the general economy and welfare of this state by encouraging the use of renewable water supplies, particularly the state's entitlement to Colorado River water, instead of groundwater through a flexible and effective regulatory program for the underground storage, savings and replenishment of water. 2. Allow for the efficient and cost-effective management of water supplies by allowing the use of storage facilities for filtration and distribution of surface water instead of constructing surface water treatment plants and pipeline distribution systems.9 The storage facilities cannot impair vested water rights, and the applicant for a water storage permit must have a right to the proposed source of water.10 Unlike Oregon, Idaho, and Arizona, California does not have a comprehen- sive act for the underground storage of water. This is in part due to California’s common law treatment of water rights in which a property owner has the right to the surface and everything above or below it. Therefore, storage could be detri- mental to an overlying property owner’s right.11 However, California does rec- ognize the underground storage of water as beneficial use, as depicted in Cali- fornia Water Code, Section 1242: The storing of water underground, including the diversion of streams and the flowing of water on lands necessary to the accomplishment of such storage, constitutes a beneficial use of water if the water so stored is thereafter applied to 12 the beneficial purposes for which the appropriation for storage was made. Texas also uses a common law approach, molded after the Rule of Capture and its treatment of oil and natural gas.13 However, the Texas Water Code con- tains a preliminary regulatory scheme that proposes the investigation of aquifer storage through the issuance of temporary permits for pilot projects: “(a) The commission shall investigate the feasibility of storing appropriated water in 9 Ariz. Rev. Stat. § 45-801.01 (2005). 10 Ariz. Rev. Stat. § 45-803-01(A) (2005); Ariz. Rev. Stat. § 45-831-01(B) (2005). 11 Kiel and Thomas,2003. 12 Cal. Water Code § 1242 (2006). 13 Drummond et al., 2004.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 189 various types of aquifers around the state by encouraging the issuance of tempo- rary or term permits for demonstration projects for the storage of appropriated water for subsequent retrieval and beneficial use.”14 As these examples and the discussion in the preceding subsections indicate, MUS projects are likely to be governed and affected by a combination of laws in each state, since MUS can involve the use of surface water or other project wa- ters for recharge, the extraction and use of groundwater upon recovery, and the storage of water in the aquifer. A particular project can therefore require per- mits or other regulatory approval from multiple state agencies enforcing differ- ent provisions of state law (not to mention federal approval for injection pro- jects, discussed in greater detail later in this chapter). It may not be necessary to rewrite state water codes in order to facilitate underground water storage, but state policy makers considering the promotion of underground storage are well advised to review current state regulatory requirements and processes in order to assess the extent to which they inhibit the planning, economic feasibility, and practical execution of MUS projects. Several states (Arizona, Colorado, Kansas, Nevada, New Mexico, Oregon, Utah, and Washington) have already modified statutes or regulations to provide for alternative permitting processes for MUS projects or to clarify the water rights aspects of underground storage and recov- ery of water (Shrier, 2004). Additional Considerations Thus, a variety of water rights issues may be triggered by an MUS proposal, with important implications for the prospects of implementing such a plan. When water rights are unquantified or otherwise incompletely specified, or aqui- fer storage rights are unclear, users are less likely to undertake investments in storing water or to exercise restraint in leaving stored water underground. In addition, when water rights are unclear or when differing and contestable claims arise in relation to the same water resource, users bear the additional costs of resolving conflicts and negotiating and/or enforcing solutions about who may do what in relation to which aspects of the resource. Rights to manage stored water, to exclude others from capturing it, or to transfer stored water to others help assure participants that they will maintain control of the water supplies they commit to an MUS project and, thus, be able to recover benefits from the pro- ject. Here too, however, the details of these legal arrangements matter. For ex- ample, in an appropriative rights system, the priority date of stored water may be later than (or “junior” to) that of other water rights holders in the aquifer. If jun- ior users’ rights are subordinated during periods of shortage, such an arrange- ment would provide no incentive to store water for water-short years. 14 Tex. Water Code Ann. § 11.153 (2005).

190 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER Rules governing water use can have yet another effect on MUS projects. An important advantage of MUS is flexibility in the use of water. Traditional approaches to the allocation of water rights may undermine the flexibility of an MUS project, which treats as interchangeable water derived from alternative sources and withdrawn at times that cannot be specified in advance. The latter point is critically important: even in states where water use rights are quantified and limited, they may be fixed by time period (e.g., a right to use x amount of water per year). The recovery aspect of an MUS project cannot always be so readily fixed—stored water might be drawn on every year at a predictable rate (more likely in the event of an MUS project that is intended to augment supplies using purified wastewater) or might be drawn on only occasionally in response to drought or other interruptions of usual water supply. In the latter type of case, how much groundwater will be extracted and when are necessarily uncertain. Thus, in the same aquifer, some entities may have quantified annual rights of withdrawal while others possess a recognized yet unspecifiable right of with- drawal. The emergence and development of MUS in the United States depends therefore not only on whether states define rights that are secure enough to in- duce individuals to invest in MUS, but also on the ability of institutions to pro- vide some flexibility in using water from different sources and at uneven and not entirely predictable times. Regulation of Public Health and Environmental Concerns MUS systems involve public health and environmental concerns on two levels: impacts to the water being stored and impacts to the water in the storage aquifer. If water is being stored for recovery for potable uses, upon recovery the water will be regulated under various federal or state drinking water protection programs. Notably, there may be little difference between the regulatory ap- proaches to water recovered from underground storage and water recovered from aboveground storage. A greater regulatory emphasis has been placed on the second category of concerns: the impact of the stored water on the aquifer. This is the case if the aquifer being used for storage is defined as a current or future underground source of drinking water (USDW)—generally, groundwater with a total dis- solved solids (TDS) content of less than 10,000 mg/L—and if the water is being stored in the aquifer by means of injection.15 Injection systems are regulated under the federal Safe Drinking Water Act’s (SDWA’s) Underground Injection Control (UIC) Program or similar state programs. 15 There is no federal regulation of aquifer recharge using surface infiltration, although state regulations and/or federal source water protection regulations may apply.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 191 Federal and State Underground Injection Control Regulations Federal regulation of MUS projects covers those projects that fall under the UIC program. In accordance with the mandate of the Safe Drinking Water Act (SDWA), UIC regulations provide that “no injection shall be authorized by per- mit or rule if it results in the movement of fluid containing any contaminant into Underground Sources of Drinking Water, if the presence of that contaminant may cause a violation of any primary drinking water regulation under 40 CFR part 141 or may adversely affect the health of persons.”16 The U.S. Environmental Protection Agency’s (EPA’s) UIC regulations classify injection wells into five categories. Injection wells that are used for MUS systems are classified as “Class V” wells because they do not fit into Classes I-IV. Examples of Class V wells cited in a 1999 EPA study included agricultural drainage wells, stormwater drainage wells, large-capacity septic systems, sewage treatment effluent wells, aquifer remediation wells, car wash and laundromat effluent wells, saltwater intrusion barrier wells, aquifer recharge and ASR wells, subsidence control wells, and industrial wells (USEPA, 1999). Thus, although most UIC-regulated wells are intended for waste disposal,17 UIC regulations also apply to wells that are used to replenish water in an aquifer (in- cluding ASR wells). The UIC program was developed to prevent endangerment of drinking wa- ter supplies, as explained in Section 1421 (d)(2) of the Safe Drinking Water Act: “Underground injection endangers drinking water sources if such injection may result in the presence in underground water which supplies or can reasonably be expected to supply any public water system of any contaminant, and if the pres- ence of such contaminant may result in such system's not complying with any national primary drinking water regulation or may otherwise adversely affect the health of persons.” The implementing regulations put the burden of proof on the applicant to demonstrate compliance: 40 CFR 144.12(a): No owner or operator shall construct, operate, maintain, con- vert, plug, abandon, or conduct any other injection activity in a manner that al- lows the movement of fluid containing any contaminant into underground sources of drinking water, if the presence of that contaminant may cause a violation of any primary drinking water regulation under 40 CFR part 142 or may otherwise 16 Aquifers that are not underground sources of drinking water are not exempted aquifers. They simply are not subject to the special protection afforded USDWs. 17 Waste disposal appears to have been the principal regulatory concern of the federal UIC program. In its explanation of the purpose for the UIC program, the EPA web site states that “when wells are properly sited, constructed, and operated, underground injection is an effective and environmentally safe method to dispose of wastes” (http://www.epa.gov/ safewater/uic/whatis.html; accessed March 30, 2007). Furthermore, the agencies that administer UIC regulations typically regulate many times more wells intended for waste disposal than MUS wells.

192 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER adversely affect the health of persons. The applicant for a permit shall have the burden of showing that the requirements of this paragraph are met. Underground injection control regulations may be implemented directly by the federal government through EPA regional offices or by a state agency in states that have been granted “primacy” status for this program. In states with primacy, state regulations must be at least as restrictive as federal UIC regula- tions (and may be more restrictive); states must have the enforcement capacity to implement the regulations; and state regulations must be submitted to the EPA.). Florida’s UIC regulations are listed in Box 5-2 as an example. Differences of approach among EPA regions can have impacts on state- level efforts to implement MUS programs, because EPA regions have taken different positions on the issue of the proper “point of compliance” for assessing aquifer water quality. (The point-of-compliance question is discussed further below18.) Consistency among EPA regional offices on SDWA-UIC interpreta- tion would reduce uncertainty for decision makers in assessing the costs and benefits of an MUS project compared to alternatives such as surface storage. Florida’s regulators have interpreted SDWA language to mean that “the in- jection practice cannot require a public water system to have to provide a greater degree of treatment because of an injection activity than it would if the injection activity were not present. This provides some leeway from the strict interpreta- tion that there can be no violation of a primary drinking water standard.” (Flor- ida Department of Environmental Protection, 2006) Although the UIC program and the Safe Drinking Water Act provide a na- tional framework for regulating the quality of water introduced directly to drink- ing water source aquifers, UIC and other groundwater protection programs can and do vary from state to state in their structure and in their application to re- charge projects. EPA regional offices may vary in their approach to application of UIC regulations to MUS projects, and the potential risks are evaluated under differing site-specific scenarios. In some states, the state groundwater protection program may have larger budgets and staffs or more direct experience with MUS than does the EPA regional office. Nationally, the EPA has more funds available for research and the development of science-based guidelines. How- ever, perhaps recognizing the variety of circumstances in which MUS systems have been used, the EPA has not yet developed national guidelines for MUS systems. (It is studying ASR through a national workgroup to determine whether further national direction or guidance is needed.) Despite being authorized by the SDWA, EPA’s involvement in well re- charge projects raises federalism concerns that are familiar to many areas of environmental regulation. These concerns are highlighted in the MUS field 18 With particular regard to ASR systems, Pyne (2006, pp. 393-395) has offered a list of recommendations for state regulatory programs.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 193 BOX 5-2 Florida UIC Rules 62-528.605 Well Construction Standards for Class V Wells: (3) Class V wells shall be constructed so that their intended use does not violate the water quality standards of Chapter 62-520, F.A.C., at the point of discharge, ex- cept where specifically allowed in Rule 62-522.300(2), F.A.C., provided that the drinking water standards of 40 C.F.R. pt. 142 (1994) are met at the point of dis- charge for projects and facilities described in Rule 62-522.300(2)(a) and (b), F.A.C. Migration or mixing of fluids from aquifers of substantively different water quality (through the construction or use of a Class V well) shall be prevented by preserving the integrity of confining beds between these aquifers through ce- menting or other equally protective method acceptable to the Department. 62-528.610 Operation Requirements for Class V Wells: (1) All Class V wells shall be used or operated in such a manner that they do not present a hazard to an underground source of drinking water. 62-528.630 General Permitting Requirements for Class V Wells: (4) If at any time the Department learns that an existing Class V well may cause a violation of primary drinking water standards under Chapter 62-550, F.A.C., the Department shall, as determined by following the process in Rule 62-528.100(2), F.A.C.: (a) Require a permit for such Class V well; (b) Order the injector to take such actions needed to prevent the violation, including, when necessary, closure of the injection well; (c) Require monitoring to demonstrate that the water quality criteria in Rule 62- 520.420, F.A.C., are not violated; or (d) Take enforcement action. (5) Whenever the Department learns that a Class V well may be otherwise adversely affecting the health of persons, the Department shall prescribe action necessary to prevent the adverse effect, including any action authorized under subsection (4). The process for determining these actions is described in Rule 62-528.100(2), F.A.C. (6) Notwithstanding any other provision of this Chapter, the Department shall take immediate action upon receipt of information that a contaminant which is present or is likely to enter a public water system may present an imminent and substan- tial endangerment to the health of persons.

194 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER because federal regulation exists for injection projects but not for some other recharge methods that also may pose environmental or public health risks— notably, basin recharge by surface spreading and percolation.19 If EPA were to regulate basin recharge through a program other than the UIC program, some would object to the expansion of the agency’s role. Several conflicting perspectives have been expressed on the issue of the proper federal regulatory role. On the one hand, federal regulation can provide a floor for state programs and may help to prevent pollution that may become a national responsibility (e.g., future Superfund sites). Also, federal resources for research and the development of water quality standards are greater than those of nearly all states. On the other hand, the negative effects of a poorly designed or implemented project are relatively local, there is little competition among states for commercial operators of these projects since they are in response to water demands, and there are other means of funding and disseminating re- search. Furthermore, in some parts of the country there are states that have more experience and expertise with MUS projects than the EPA does. EPA regulation of MUS remains a relatively small component of a UIC regulatory system deal- ing with much more significant projects of a different type.20 Several additional policy questions arise out of state groundwater protection programs and the application of UIC regulations at the federal and state level, with various regulatory approaches and site-specific issues, particularly where secondary drinking water standards are concerned. Two examples are point-of- compliance and antidegradation policies. The question of point of compliance arises because regulated constituents may be absent from the injected water at the point of injection, but the water 19 As discussed in Chapter 4, infiltration through the vadose zone provides a degree of soil treatment, so recharge basins and vadose zone wells do not present exactly the same risks to aquifer water quality as direct injection. Nevertheless, some contaminants may survive the infiltration process, so it is not the case that injection presents risks while infiltration methods are risk-free. 20 Efforts at federal and state levels to regulate underground water storage projects encoun- ter the challenge of reconciling the highly variable, site-specific nature of such projects with the need to develop fairly uniform statewide or nationwide rules. To some extent this ten- sion is inherent in the making of laws and regulations, and cannot be relieved completely. As an alternative approach, Seerley (2003, p. 70) recommends building a regulatory regime around the need for extensive site-specific studies: “Conclusive data are needed to show how injection/withdrawal schemes, includ- ing the consequences of mixing waters of different chemical makeup, may impact hydrogeologic structures as well as the natural systems that depend on ground- water to maintain their long-term biological integrity…. Many states have no regu- lations in place to require site-specific hydrogeologic studies prior to project im- plementation, and even fewer address concerns of long-term geologic integrity. Although some of these issues may be addressed in the permitting processes, the statutory language leaves a great deal of room for trial and error rather than creating the structure for a systematic approach that ensures long-term success.”

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 195 quality can change during aquifer storage. At one location in Florida, for exam- ple, injection of water into an underground formation bearing arsenopyrite re- sulted in arsenic mobilization in the vicinity of the well. To prevent human con- sumption of water exceeding arsenic maximum contaminant loads (MCLs), and meet the non-endangerment21 requirements of both the UIC regulations and the Safe Drinking Water Act, the Florida UIC program has requested the EPA to review their proposed arsenic regulations for MUS systems using well recharge (referred to as ASR in Florida’s regulations).22 Some states prohibit any degradation in water quality in an aquifer, even when both the source water and the water in the aquifer meet all drinking water standards. Such a stringent rule can impede an MUS project by imposing costly pretreatment requirements, or even prohibit MUS altogether. The net benefit to the environment or public health may be very low in comparison to the cost. The California State Water Resources Control Board (SWRCB) proposed a resolution to address the application of antidegradation regulations. SWRCB Resolution No. 68-16 provides for the maintenance of the highest quality of am- bient waters and states that any changes to this quality should be consistent with maximum benefit to the people. Box 5-3 presents some questions to consider in balancing antidegradation goals with other benefits, according to SWRCB Reso- lution No. 68-16. Strict application of antidegradation policies can raise other risks. Chlorine may be added to water being stored in an MUS project, for example, to ensure compliance with state disinfection requirements for recycled water that may be used for drinking water. The resulting chlorine disinfection by-products (DBPs) may degrade groundwater quality and present a health risk. As the search for additional water supplies becomes more intense, states will be asked to balance the risks posed by their antidegradation policies against the risks posed by alter- native water supplies. 21 Non-endangerment means that injection operations must not allow fluid containing any contaminants to move into U.S. drinking waters where the presence of the contaminants may cause violations of primary drinking water regulations or adversely affect public health (40 CFR 144.12, as cited in EPA’s State Implementation Guidance—Revisions to the UIC Regulations for Class V Injection Wells, p. 8) 22 “Arsenic levels may exceed 10 µg/L within the ASR storage zone under the following conditions: 1. A concentration of 10 µg/L is not exceeded at the property boundary; or 2. The ASR storage zone over the entire area of review contains a TDS concentration of 10,000 mg/L or more; or 3. The ASR storage zone over the entire area of review contains a TDS concentration of 3,000 mg/L or more and a Professional Engineer certifies that the treatment necessary to render the natural water potable will also reduce the arsenic level to 10 µg/L or less; or 4. Institutional controls are in place that prohibit the construction of new drinking water wells used to withdraw water from the ASR storage zone, and there are no existing wells used to withdraw drinking water from the ASR storage zone within the area of review; and 5. Any recovered water is retreated or blended as necessary to meet the water quality standards applicable to the intended use of the recovered water.”

196 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER BOX 5-3 Balancing Antidegradation and Maximizing Benefits In California, one criterion is that the lowering of water quality must be to the “maxi- mum benefit of the people of the State.” The demonstration of maximum benefit to the people of the state should be considered a balancing test—the greater the decline in water quality, the greater is the required demonstration of benefit to the people of the state. In general, the negative effects of lower water quality must be weighed against the project benefits to assess the net impact on public interests. This is not, however, a formal cost- benefit analysis. When evaluating the maximum benefit to the people of the state, the benefit should be compared to the alternative of not approving the project. For example, if a water recycling project is not approved, the alternative may be to discharge the treated water to the ocean. Consequently, freshwater supply would have to be used for irrigation instead of recycled water. There would be a monetary cost for using freshwater instead of recycled water. In addition, there would be an environmental cost to develop the freshwater supply, such as the construction of storage facilities or increasing diversion of freshwater supplies from the Sacramento-San Joaquin Delta and other surface waters where beneficial uses are im- paired due to diversion-related reduced flows. In some cases, the additional water supply provided by a water recycling project will outweigh the degradation of the groundwater supply. However, this might not be the case if the degradation would impair beneficial uses or had significant impacts on downstream users. In general, a finding of maximum benefit should be difficult when a project shifts significant impacts from one area to another, such as from one portion of a watershed to another. The analysis of water quality impacts can be complex and should be addressed in en- vironmental impact reports and other environmental analyses. For example, a proposed subdivision that would use recycled water because fresh water is not available may have impacts on groundwater associated with the recycled water use and may have other water quality impacts on surface water associated with urbanization. Questions to consider when evaluating whether a project provides a maximum benefit to the people of the state include the following: 1. Does the project provide a net environmental benefit? Although the project may cause some lowering of groundwater quality, it may provide offsetting environmental bene- fits. These may include providing habitat restoration, creating new environmental habitat, avoiding diversion of potable water, preventing seawater intrusion, or augmenting ground- water supplies. 2. Does the project increase the freshwater supply? Projects that replace freshwater use with recycled water use, such as the replacement of freshwater with recycled water for the irrigation of a golf course, augment the freshwater supply, which is a benefit. 3. Does the project prevent the depletion of freshwater supply? Recycled water may be used to supply new water demands, such as irrigation at new parks or residential com- munities, which would otherwise use freshwater. 4. Would water be used if no recycled water were available? Sometimes water recy- cling projects are proposed to irrigate sites that would not otherwise be developed. For example, the project may irrigate a new agricultural site to grow an unprofitable crop. These projects should be considered disposal projects and evaluated as such with other disposal alternatives. 5. Is water recycling being proposed as an alternative to providing best practical treatment and control? Sometimes water recycling is proposed as an alternative to provid- ing advanced treatment and discharging to a stream, where the water could also be used beneficially. SOURCE: California State Water Resources Control Board Resolution No. 68-16 and later supporting documents.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 197 Indirect Potable Reuse via Recharge Additional or separate regulation programs often are involved for MUS sys- tems that involve reuse of water. There are no federal regulations directly gov- erning water reuse, although state approaches to reuse were summarized in EPA’s Guidelines for Water Reuse (EPA, 2004). As stated in this document, “As of November 2002, 25 states had adopted regulations regarding the reuse of reclaimed water, 16 states had guidelines or design standards, and 9 states had no regulations or guidelines. In states with no specific regulations or guidelines on water reclamation and reuse, programs may still be permitted on a case-by- case basis” (p.148). In some states (California and Florida), specific programs govern reuse of reclaimed water in MUS systems. Where MUS systems use surface infiltration, the systems are typically treated as indirect potable reuse. Examples of state approaches to indirect potable reuse, particularly for MUS systems, are provided below. In some states, regulations addressing indirect potable reuse via groundwater recharge are independent from the state’s water reuse regulations. For example, in Arizona, the use of reclaimed water for groundwater recharge is regulated under statutes and administrative rules administered by the Arizona Department of Envi- ronmental Quality (ADEQ) and the Arizona Department of Water Resources (ADWR). Several different permits are required by these agencies prior to imple- mentation of a groundwater recharge project. In general, ADEQ regulates ground- water quality and ADWR manages groundwater supply. All aquifers in Arizona currently are classified for drinking water protected use, and the state has adopted National Primary Drinking Water Maximum Contaminant Levels (MCLs) as aqui- fer water quality standards. These standards apply to all groundwater in saturated formations that yield more than 20 L/d (5 gallons per day) of water. Any ground- water recharge project involving injection of reclaimed water into an aquifer is re- quired to demonstrate compliance with aquifer water quality standards at the point of injection. Sample Water Recycling Criteria Number 1: The State of California The existing California Water Recycling Criteria (California Department of Health Service, 2000) include general requirements for groundwater recharge of domestic water supply aquifers by surface spreading. The regulations state that reclaimed water used for groundwater recharge of domestic water supply aquifers by surface spreading “shall be at all times of a quality that fully protects public health” and that DHS decisions “will be based on all relevant aspects of each pro- ject, including the following factors: treatment provided; effluent quality and quan- tity; spreading area operations; soil characteristics; hydrogeology; residence time; and distance to withdrawal.” Until more definitive criteria are adopted, proposals to recharge groundwater using either surface spreading or wells will be evaluated on a case-by-case basis, although draft groundwater recharge criteria described

198 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER below will guide DHS decisions. California has prepared draft criteria for groundwater recharge (most recently in 2004). The information presented below is based on the most recent draft of the proposed groundwater recharge regulations (California Department of Health Services, 2004); it is likely that substantial changes will be made prior to adoption of the criteria. While aspects of its regulatory development process have been protracted, California has developed a comprehensive approach to groundwater recharge with reclaimed wastewater. Currently proposed regulations have gone through several iterations and, when finalized and subsequently adopted, will be included in the Water Recycling Criteria. The proposed regulations address both surface spreading and injection projects and are focused on potable reuse of the recovered water. The draft regulations, portions of which are summarized in Table 5-1, include require- ments for—among other things—source control, water quality, treatment proc- esses, recharge methods, dilution, operational controls, distance to withdrawal, time underground, monitoring wells, and preparation of an engineering report. The criteria are intended to apply only to planned groundwater recharge projects using recycled water (i.e., any water reclamation project planned and operated for the purpose of recharging a groundwater basin designated for use as a do- mestic drinking water source). They do not apply to wastewater disposal pro- jects. Constituent Monitoring. The reclaimed water must comply with the fol- lowing state drinking water regulations: primary maximum contaminant levels, inorganic chemicals (except nitrogen), MCLs for disinfection by-products, and action levels for lead and copper. Quarterly monitoring is required, with com- pliance determined from a running average of the last four samples. The re- claimed water also must be monitored annually for several secondary MCLs. In addition, the reclaimed water must be sampled quarterly for unregulated chemi- cals, priority toxic pollutants, and chemicals with state notification levels that DHS specifies based on a review of the project. Each year, the reclaimed water must be monitored for endocrine disruptors and pharmaceuticals specified by DHS after reviewing the project. Total Organic Carbon. The proposed regulations specify total organic carbon (TOC) as a surrogate for determining organics removal efficiency. Al- though TOC is not a measure of specific organic compounds, it is considered a suitable measure of the gross organic content of reclaimed water for the purpose of determining organics removal efficiency. The proposed TOC limit is based on increasing concern over unregulated chemical contaminants and the realization that current technology using membranes can readily reduce TOC to 0.2 mg/L or less. The TOC limit applies to TOC of wastewater origin in recharged water. Weekly sampling is required for TOC, with compliance determined monthly from the average of the most recent 20 TOC samples.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 199 Table 5-1 California Draft Groundwater Recharge Regulations Type of Recharge Contaminant Type Surface Spreading Subsurface Injection Pathogenic Microorganisms Filtration ≤ 2 NTU a Disinfection 5-log virus inactivation, ≤2.2 total coliforms per 100 mL Retention time 6 months 12 months underground Horizontal 150 m (500 ft) 600 m (2000 ft) b separation Regulated Contaminants Drinking water Meet all drinking water MCLs (except nitrogen) and new federal and standards state regulations as they are adopted Total nitrogen ƒ Level specified by DHS for existing project with no RWC increase ƒ ≤5 mg/L for new project or increased RWC at existing project ƒ Or NO2 and NO3 consistently met in mound (blending allowed) Unregulated Contaminants TOC in filtered TOC ≤ 16 mg/L in any portion of the filtered wastewater not sub- wastewater jected to RO treatment TOC in recycled RO treatment as needed to 100% RO treatment to water achieve: achieve: ƒ TOC level specified by DHS ƒ TOC level specified by for existing project with no RWC DHS for existing project increase with no RWC increase ƒ TOC ≤ (0.5 mg/L)/RWC (new ƒ TOC ≤ (0.5 mg/L)/RWC project or increased RWC at ex- (new project or increased isting project) RWC at existing project) ƒ Compliance point is in recy- c cled water or mound (no blend- ing) Recycled water ≤ 50% subject to above requirements contribution 50-100% subject to additional requirements (RWC) NOTE: RO = reverse osmosis; RCW = recycled water contribution. a The virus log reduction requirement may be met by a combination of removal and inactiva- tion. b May be reduced upon demonstration via tracer testing that the required detention time will be met at the proposed alternative distance. c If mound monitoring approved. SOURCE: Adapted from California Department of Health Services (2004).

200 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER Dilution Requirements. The draft criteria require a minimum of 50 per- cent dilution with water of nonsewage origin, although recharge greater than 50 percent reclaimed water may be considered by DHS if certain conditions are met, such as annual testing for tentatively identified compounds (TICs); inclu- sion of an advanced oxidation process (i.e., hydrogen peroxide addition and ul- traviolet radiation); and submission of a proposal and report that includes docu- mentation of compliance with all pertinent criteria, the results of any additional studies requested by DHS, and peer review by an independent advisory panel. The reclaimed water contribution must be determined monthly with compliance based on a running five-year average. Groundwater Monitoring. Groundwater monitoring wells must be located within one and three months’ hydraulic travel time from the recharge area to the nearest downgradient domestic public or private water supply well and at addi- tional points. The monitoring wells must be capable of obtaining independent samples from each aquifer that potentially conveys the recharged water. Moni- toring wells must be sampled quarterly for TOC, total nitrogen, total coliforms, secondary MCLs, and other constituents specified by DHS that are identified through reclaimed water monitoring. Required Permits. Any intentional augmentation of drinking water sources with reclaimed water in California requires two state permits. A waste discharge or water recycling permit is required from a Regional Water Quality Control Board (RWQCB), which has the authority to impose more restrictive requirements than those recommended by DHS, and a public drinking water system using an affected source is required to obtain an amended water supply permit from DHS to address changes to the source water. The State of Florida Florida’s water reuse rules pertaining to groundwater recharge are summarized in Table 5-2. The rules address rapid-rate infiltration basin systems and absorption field systems, both of which may result in groundwater recharge. Although not specifically designated as indirect potable reuse systems, groundwater recharge projects located over potable aquifers could function as indirect potable reuse sys- tems. If more than 50 percent of the wastewater applied to the systems is collected after percolation, the systems are considered to be effluent disposal systems, not beneficial reuse. Loading to these systems is limited to 230 mm d−(9 inches per day). For systems having higher loading rates or a more direct connection to an aquifer than normally encountered, reclaimed water must receive secondary treat- ment, filtration, and disinfection and must meet primary and secondary drinking water standards.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 201 TABLE 5-2 Florida Water Reuse Rules for Groundwater Recharge Type of Use Water Quality Limits Treatment Required ƒ 200 fecal coliforms/100 mL Groundwater recharge via ƒ 20 mg/L CBOD5 ƒ Secondary rapid infiltration basins ƒ 20 mg/L TSS ƒ Disinfection (RIBs) ƒ 12 mg/L NO3 (as N) ƒ No detectable fecal coli- forms/100 mL Groundwater recharge via ƒ 20 mg/LCBOD5 ƒ Secondary RIBs in unfavorable condi- ƒ 5.0 mg/L TSS ƒ Filtration a tions ƒ Primary and secondary ƒ Disinfection drinking water standards ƒ 10 mg/L total N ƒ No detectable total coli- forms/100 mL ƒ Secondary ƒ 20 mg/LCBOD5 ƒ Filtration Groundwater recharge or ƒ 5.0 mg/L TSS ƒ Disinfection injection to groundwaters ƒ 3.0 mg/L TOC ƒ Multiple barriers for con- having TDS < 3,000 mg/L ƒ 0.2 mg/L TOX trol of pathogens and or- ƒ 10 mg/L total N ganics a ƒ Primary and secondary ƒ Pilot testing required drinking water standards ƒ No detectable total coli- forms/100 mL Groundwater recharge or ƒ 20 mg/L CBOD5 ƒ Secondary injection to groundwaters ƒ 5.0 mg/L TSS ƒ Filtration having TDS 3,000-10,000 ƒ 10 mg/L total N ƒ Disinfection mg/L ƒ Primary drinking water a standards NOTE: CBOD5 = carbonaceous biochemical oxygen demand ; TOX = total organic halogen; TSS = total suspended solids. a Except for asbestos. SOURCE: Adapted from Florida Department of Environmental Protection (1999). Florida regulations include requirements for planned indirect potable reuse by injection into water supply aquifers. A minimum horizontal separation distance of 150 m (500 feet) is required between reclaimed water injection wells and potable water supply wells. The injection regulations pertain to G-I, G-II, and F-I ground- waters, all of which are classified as potable aquifers. Reclaimed water must meet G-II groundwater standards prior to injection. G-II groundwater standards are, for the most part, primary and secondary drinking water standards. Pilot testing is required prior to implementation of injection projects. Groundwater recharge projects in Florida that involve injection also must comply with the state’s Un- derground Injection Control regulations (Florida Department of Environmental Regulation, 2002), which include criteria pertaining to ASR wells.

202 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER Travel Time or Residence Time Criteria Bank filtration systems in Europe have a precedent for regulation that in- cludes travel time criteria to control pathogens. For example, a “rule of thumb” used in many European countries is that 50 days are typically sufficient to attain water free of pathogens (Grischek et al., 2002). If bank filtration systems ex- ceed these criteria, no disinfection is required of the product water that will be used for potable purposes. Following similar logic, residence time criteria are being developed at the state level for MUS with reclaimed water. For example, California's proposed groundwater recharge regulations (Table 5-1) specify a minimum residence time that water must be stored underground. The criterion determined for injected water (one year) is longer than that for surface spreading (six months), presuma- bly to address uncertainties in water movement. The required residences times specified in the draft California recharge criteria are based strictly on a review of typical pathogen (specifically virus) inactivation rates and do not consider either site-specific conditions or chemical constituent behavior. A residence time re- quirement (two years) has also been imposed on an MUS system in Texas with the goal of ensuring virus inactivation in recovered water. A required residence time prior to withdrawal has the operational benefit of providing a time window for corrective action to be taken in the event monitor- ing indicates that the reclaimed water does not meet appropriate standards for its proposed use (e.g., potable reuse). Residence times of months have also been shown to be sufficient to attenuate many organic contaminants in groundwater, so such requirements may also be beneficial in this regard, even if this was not the original intent of the regulation. A limitation of the required residence time approach is its relative arbitrari- ness with respect to the known important variables among aquifers. Site vari- ables, such as type of aquifer geology and geochemical conditions, significantly impact chemical and microbial contaminant persistence (as described in Chapter 4). Furthermore, in aquifers with flow patterns that are more complex than a relatively homogeneous sand (such as highly heterogeneous or dual-porosity media, for two extreme examples), the high variance of travel times between locations (or residence times in an ASR scenario) may not provide a level of protection comparable to that afforded by flow through a more homogeneous sand system. It is, therefore, not sound science to propose a fixed residence time independent from consideration of site conditions. Currently this is an area of considerable research activity and need. While rigorous site-specific testing of virus attenuation is not feasible at the field scale at all sites, characterization and consideration of the primary geo- chemical and microbial characteristics that affect contaminant attenuation are achievable. An alternative model to the required residence time is an “attenua- tion zone,” described in the South Australia Environment Protection Authority’s 2004 ASR Code of Practice. Water quality objectives do not need to be met within the defined attenuation zone but would apply outside the attenuation

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 203 zone. This approach requires that the attenuation be sustainable and, thus, re- quires a monitoring strategy that demonstrates consistent attainment of treatment objectives. Interorganizational Coordination Typically, MUS projects and their regulation require coordination among several organizations, public and private. Projects often involve facilities (treatment plants, recharge and recovery facilities, distribution systems) that are owned, operated, regulated, or otherwise affected by separate public or private organizations, each of which is governed by rules (laws, regulations, charter provisions) specifying what it may, may not, and must do.23 Extensive monitor- ing is required—of water conditions above and below ground, consumptive use requirements, species and habitat conditions, and so forth—and those monitor- ing responsibilities are unlikely to be performed by only one entity (at least in the United States). Furthermore, an MUS project’s possible impacts—on over- lying lands, hydrologically interconnected surface water bodies, related habitat, water quality, and water use—stretch across the agendas of multiple state and federal agencies. Involvement of multiple public and private organizations in an MUS project necessitates interorganizational coordination, which includes intergovernmental coordination. “To the extent that policies of one jurisdiction have spillovers (i.e., negative or positive externalities) for other jurisdictions, so coordination is necessary to avoid socially perverse outcomes”(Hooghe and Marks, 2003, p. 239) Interorganizational coordination entails transaction costs—the time, effort, and other expenditures of resources involved in reaching and implementing agreed courses of action.24 Transaction costs include negotiation and bargaining costs, communication and monitoring costs, and the costs of maintaining and enforcing an agreement. In an MUS project, because of the involvement of multiple organizations with differing interests and responsibilities, these transaction costs can be con- siderable. All other things being equal, transaction costs will rise with the num- ber of organizations (public or private) whose actions must be coordinated (Scharpf, 1997, p. 70). Even where the number of organizations is small, dis- putes over political leadership and authority, the sharing of financial costs asso- ciated with a project, and the interpretation of laws and regulations governing 23 Even if a single organization were responsible for implementing an MUS project, it would likely have to arrange to use the distribution facilities of a surface water project to deliver water to or from the project site, acquire or perhaps lease land from another organization for the site of the project, and sell the stored water to other clients. 24 For en overview of transaction costs and their role in institutional analysis, see Eggerts- son (1990) and Williamson (1985). For an application of transaction costs in a water man- agement context, see Challen (2000).

204 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER different organizations can stall progress toward coordination.25 Transaction costs do not exist in a vacuum. Like any cost considerations, they must be viewed in context. There may be offsetting benefits from the in- volvement of multiple organizations in an MUS project.26 Public agencies or private organizations that focus on water project operation, water quality moni- toring, or administering pumping rights and managing the storage space in an aquifer may exhibit returns to scale or from functional specialization that offset or even exceed the transaction costs of coordination. Organizations such as wa- ter associations or special districts at the basin or watershed scale can even ease or overcome coordination problems and enhance the opportunities for MUS. The existence of transaction costs alone does not argue conclusively for re- ducing the number of public and private organizations involved in an MUS pro- ject; bringing everything under one roof, so to speak, will not necessarily yield overall efficiency gains. What matters is whether the configuration of organiza- tions engaged with an MUS project makes sense in light of the tasks being per- formed by those organizations, the scale on which they operate, and the con- stituencies they represent, as well as the transaction costs of coordinating their activities.27 This is an empirical question that will differ from one location to the next and may change over time in the same location. Accordingly, individu- als and organizations contemplating or undertaking an MUS project should be cognizant of the transaction cost implications of interorganizational coordination and be willing to adjust the number, authority, and responsibilities of public and private entities as needed. In light of transaction costs, a variety of organizational arrangements may support or hinder the practice of MUS. There will not be a single best organiza- tional model for executing an MUS project, and experience within the United States to date indicates that multiple organizational forms are viable: private companies, state agencies, municipal and other public utilities, joint-powers agencies, et cetera. Organizations with overlapping and conflicting interests may or may not overcome their differences in order to move forward with MUS. One consideration specifically relevant to this issue is the matter of single- 25 In Monterey County, California, an MUS project to divert and store surplus Carmel River winter flows in the overdrafted Seaside groundwater basin for summer use was delayed for years by a disagreement between the California American Water Company and the Mon- terey Peninsula Water Management District over control of the project. A demonstration project begun in 1998 had established the feasibility of the operation, but the California Department of Health Services refused to issue a permanent permit for the project until the company and the district arrived at a long-term agreement governing the operation of the project and the disposition of the water (Hennessey, 2005). Such an agreement had not been reached at the end of 2005. 26 For an application of this idea in the context of metropolitan government in the United States, see Oakerson (1999). 27 Hooghe and Marks (2003, p. 239) imply the existence of such a trade-off: “The chief benefit of multi-level governance lies in its scale flexibility. Its chief cost lies in the transac- tion costs of coordinating multiple jurisdictions.”

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 205 purpose agencies whose legislative mandates may require them to focus solely on one mission. In some jurisdictions, flood control agencies have such man- dates, yet integration of the facilities managed by flood control agencies into an MUS project can be extremely beneficial—even crucial—to its success. The impoundment and controlled release of floodwaters provide some of the greatest opportunities in the United States for moving water to underground storage for later recovery. As the Rosedale-Rio Bravo case described in Box 5-4 illustrates, extreme hydrologic events often provide opportunities for groundwater re- charge. Legal or other institutional barriers that inhibit coordination among flood control agencies and other public or private organizations involved in wa- ter resource management impose substantial transaction costs with no certain offsetting benefits. In most locations, flood control facilities, surface water stor- age reservoirs, and underground storage projects can operate in complementary ways or satisfy multiple goals. This is an important matter that warrants further research and institutional reform as needed, in order to exploit the potential complementarities and minimize conflicting operations. Most communities in the United States are also trying to reduce and control stormwater runoff. As one would expect, a wide variety of agencies and legal instruments are associated with these efforts, from land use regulations promul- gated by county or municipal governments to the operation of facilities by spe- cial districts. Therefore, integrating stormwater into an MUS program would entail another level of interorganizational coordination.28 Stormwater quality is extremely variable and often ill-suited for recharging into aquifers: the National Research Council (NRC, 1994) recommended against the use of stormwater from agricultural and industrial areas for groundwater recharge. There may be some possibilities for use of residential stormwater runoff however, and pursu- ing this potential presents another coordination challenge where the trade-off of transaction costs and potential water management benefits will be faced. When multiple organizations are involved in an MUS project, as will usu- ally be the case, coordination problems are especially likely to arise over the allocation of benefits and costs among participants. These are not only matters of legal rights to the use or storage of water, which have been discussed above. The allocation of benefits and costs in an MUS project can include which individuals and communities will receive water higher quality or of higher price and for what uses; how the financial costs of constructing, operating, and main- taining facilities associated with an MUS project will be borne; and who shoul- ders the responsibility for monitoring project operations. In some cases, municipalities are motivated to develop MUS systems to re- duce their dependence on other municipalities for storage and delivery of water. This is particularly true of newer suburban communities that are dependant on large metropolitan centers that have surface water storage facilities and water 28 For example, stormwater is an important element of groundwater recharge in Southern California cases described in Blomquist (1992).

206 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER BOX 5-4 Rosedale-Rio Bravo Water Storage District The Rosedale-Rio Bravo Water Storage District is located in the southwestern Central Valley of California. When the district was formed in 1959 it contained 43,000 acres. The developed acreage was entirely in irrigated agriculture. The mission of the district was to build and operate a groundwater recharge project to attenuate overdraft, which resulted in water table drawdowns of 8 to 10 feet annually. Historically, recharge was accomplished through the natural percolation of flood flows on the lower Kern River, adjacent to the dis- trict. With the completion of flood control projects upstream in the early 1950s, the fre- quency and magnitude of flood flows diminished, thereby diminishing recharge. Growing agricultural water use also contributed to the overdraft. Project facilities include approximately 550 acres of spreading grounds along the his- toric overflow slough of the Kern River. The district succeeded in acquiring supplemental surface water supplies from the federal Central Valley Project, the State Water Project, and the Kern River. The quantities supplied vary significantly from year to year and from season to season depending on runoff conditions. These variable supplies are managed by perco- lation to the underlying aquifer, which serves as both a reservoir and a distribution system. Surface water deliveries are made to landowners adjacent to project facilities in lieu of groundwater pumping and therefore constitute a form of recharge. To date, approximately 2.5 million acre-feet (3 billion m3) has been recharged since the beginning of the project. Managed underground storage has reduced water table decline to 2.0 feet annually. Modeling studies show that the water table is 240 feet higher than it might have been with- out the project. This occurred in spite of a 30 percent increase in water use during the life of the project. Although salts, nitrates, and pesticide residues are present in some areas, the recharging of good quality water has helped to maintain, and in some instances improve, water quality. In recent decades, the district service area has begun to urbanize, and today about 20 percent of the land is devoted to urban and industrial uses. The underlying groundwater is of good enough quality to serve as the basic source of supply for the grow- ing urban uses. The costs of recharge are estimated to be $79.20 per acre-foot in constant 2004 dol- lars. The benefits of the project are $1.60 for every dollar of cost. Benefits are attributable to both energy savings and avoided capital costs of additional or deeper wells. It appears that alternative sources of supply are either enormously costly or altogether unavailable. This case study illustrates the importance of groundwater-surface water interactions, and the potential importance of flood flows in recharging groundwater, and it illustrates how MUS can be used to manage highly variable sources of supply and attenuate groundwater overdraft (Roberts and Crossley, 1997). treatment plants, such as Denver, Albuquerque, Phoenix, Los Angeles, Portland, and Seattle. During periods of drought, these older metropolitan centers may restrict the quantity of water supplied outside their primary service area or may increase their rates. MUS systems can provide smaller communities, particu- larly those without direct access to surface water supplies, with a means of stor- ing their water locally and obtaining water during wet years, wet seasons, or other non-peak demand periods. Large municipalities may encourage surround- ing communities to develop underground storage for conjunctive use of surface and groundwater resources (Hydrosphere Resource Consultants, Inc. et al., 1999).

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 207 Nowhere are coordination problems more likely to emerge than around fi- nancial issues. Even where MUS appears to be a less expensive alternative wa- ter supply development or water storage—that is, even where a “win-win” op- portunity appears to exist—the distribution of gains and costs is unlikely to be uniform across participants. Overall benefit-cost calculations may not take ade- quately into account the difficulties that can arise over questions of who receives the benefits and who pays the costs. This is only one of the institutional issues that touches upon the economic considerations involved with water resource management. ECONOMIC ISSUES The Economics of Groundwater Management The economics of groundwater management and use has been well devel- oped. There is a substantial and varied literature on the economics of groundwa- ter use that develops and characterizes a set of common principles upon which economically efficient management and use can be based (see, for example, Burt, 1970; Cummings, 1970; Gisser, 1983; Burness and Martin, 1988; Provencher and Burt, 1993). Fortunately, the economics of managed under- ground storage can easily be integrated into the framework that these principles provide. The general economic prescription for efficient groundwater use re- quires that water be extracted at rates where the net benefits (total benefits net of total costs) are maximized over time. Benefits are determined by the uses to which the water is put. In the short run, costs include the cost of extracting the groundwater and the opportunity cost, which is frequently called a user cost. Extraction costs depend on the cost of energy, the depth from which the wa- ter must be pumped, and the efficiency of the pump. Opportunity costs reflect the cost related to extracting and utilizing the water now compared to conserving it for later use—for example, water pumped in the current period results in a lowered water table for all future periods. If extractions are to be efficient, pumpers must account, through the user cost, for the consequences of extrac- tions on future water table levels. Economically efficient extraction leads to an optimal water table depth when the steady state is reached. An optimal steady- state depth is reached when all pumpers account fully for all of the costs of ex- traction, including the user cost. Much of the economic literature on groundwater focuses on the case where the resource is treated as a common pool and extractions tend to occur at rates that are inefficient, with the result that too much is pumped too soon and steady- state water table levels are lower than optimal. When groundwater is treated as a common pool resource, pumpers have an incentive to ignore the user costs; this

208 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER results in a steady-state depth to the water table that is deeper than optimal.29 In an overdrafted aquifer there may be costs in addition to the increased costs of pumping from a lowered water table. These can include the costs of land subsidence and an increased risk of saltwater intrusion in coastal aquifers. There can, however, be circumstances in which overdrafting is economically efficient. This occurs when the benefits of use are quite high in relation to the costs of extraction, which is often the case during severe droughts. In most in- stances, overdrafting will be economically efficient only on an intermittent ba- sis. On the other hand, persistent overdraft is always self-terminating. As water tables decline, eventually a point is reached where the costs of additional extrac- tions are greater than the benefits associated with any of the uses to which the water may be put, at which point the aquifer is said to be “exhausted economi- cally” even though it still contains some water. When it is no longer economical to extract water, pumpers either stop extracting it or reduce the quantity ex- tracted. This process continues until extractions equal recharge and thus the quantities extracted are exactly equivalent to the safe or the sustainable yield. In this circumstance, the overdrafted aquifer reaches a steady-state equilibrium. When groundwater is not recharged, as is the case with fossil groundwater, f over time should occur in a pattern that maximizes the present value of the net benefits. Ultimately, a point will be reached where the benefits from extraction are less than the costs of extraction. At this point, the aquifer is said to be, “eco- nomically exhausted.” Economic exhaustion is quite different from physical exhaustion or complete dewatering. Aquifers are rarely completely dewatered. When groundwater is exploited in an individualistically competitive fash- ion, the rates of extraction and the resulting steady-state depth will usually not be optimal. The user costs are typically ignored, because pumpers believe that their own extractions have a very small impact on other pumpers and because they perceive that voluntary restraints on extraction serve only to make the water available to competing pumpers. The problem of optimal regulation in situations where groundwater is exploited competitively is to provide incentives that will cause pumpers to behave in the aggregate in a way that takes user costs into ac- count. Corrective measures that can be employed to help achieve this result include the formal vesting of property rights to groundwater in situ, pumping quotas, and pump taxes that are set equal to the marginal user cost. There are some instances in which the transmissive properties of the aquifer are such that extractions by one pumper will have no impact on adjacent pumpers. In such 29 It should be noted, however, that the common pool characteristics of aquifers—and the impacts pumpers have on one another—follow primarily from simplifying assumptions that the modeled aquifer is relatively transmissive and nonsegmented. The effects that pum- pers’ withdrawals actually have on one another will depend on specific characteristics of an aquifer, and these considerations have been taken into account only occasionally in past economic analyses.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 209 cases, corrective measures are unnecessary. It is important to note that the formal economics of groundwater manage- ment should account for groundwater-surface water interactions. Groundwater extractions can diminish or eliminate discharges to the surface. Thus, for exam- ple, Glennon (2002) documents a number of cases in which the failure to con- sider groundwater-surface water interactions led to serious adverse outcomes. Moreover, Alley and Leake (2004) note that the failure to account for these in- teractions may lead to erroneous estimates of steady-state or sustainable with- drawals. Strictly speaking, equilibrium is achieved when recharge equals with- drawals, where withdrawals include extractions plus discharges. Inasmuch as MUS entails groundwater storage and is not intended to affect groundwater- surface water interactions, the discussion that follows focuses on the economics of MUS and abstracts from groundwater-surface water interactions. The formal economics of groundwater management and use reveals an im- portant conclusion for MUS. When groundwater is treated as a common pool resource, the incentive to invest in MUS facilities and operations is eroded. Wa- ter recharged and stored is freely available to competing pumpers who need not pay to capture it. Thus, an important lesson for the development of successful underground storage schemes is that the aquifer in question must be managed in ways that prevent it from being treated as a common pool resource. The economic implications of groundwater quality should not be neglected. In general, aquifers possess significantly less capacity to process waste and self- cleanse than surface waters. This means that once groundwater is contaminated, it remains contaminated for very long periods. There are methods to accomplish groundwater remediation or cleanup. Although in situ methods show some promise, the conventional remediation technique entails pumping and treating. The costs of pumping and treating or any groundwater cleanup regime are very high. They are so high, in fact, that the economics of groundwater quality can be resolved into the simple proposition that it is almost always cheaper to prevent the contamination of groundwater in the first place than it is to clean up once it has occurred. This principle will almost always hold for MUS projects given that the project requires investment that may be considerable. Preventing con- tamination of the aquifer that is utilized for storage is a matter of protecting that investment as well as avoiding the high costs of cleanup. The Economics of Managed Underground Storage The operation of underground storage schemes will usually require the use of artificial recharge operations. The economics of artificial recharge for direct use has been analyzed in detail by Brown and Deacon (1972), Cummings (1971), and Vaux (1985). Briefly, artificial recharge augments the rate of re- charge and thereby increases the quantities of water that can optimally be ex- tracted in a given period. Artificial recharge can also reduce uncertainty about supplies, arising from variability in surface water flows. The economic justifica-

210 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER tion for artificial recharge is that its costs may be less than the benefits that ac- crue from the various uses to which the recharged water can be put. Artificial recharge also may reduce the vulnerability of an aquifer to saltwater intrusion or to subsidence, and the economics of these considerations have also been ad- dressed in a number of case studies (Cummings, 1971; Warren et al., 1975). Traditional means of coping with water scarcity and hydrologic variability have been to construct surface water reservoirs that allow water to be captured and stored in wet times and places so that it can be made available for use in dry places during dry times. Today, our ability to construct additional surface stor- age capacity is sharply constrained by reduced land availability, rising construc- tion costs, and ecological impacts (see Chapter 1). Yet population and economic growth have led to intensifying water scarcity, and additional storage would help to alleviate that. There are a number of pioneering examples of the use of MUS in lieu of surface water storage or to help manage highly variable flows from surface water sources, including storage. Two of these in California, the Arvin- Edison Water Storage District and the Rosedale-Rio Bravo Water Storage Dis- trict, are described in Boxes 5-4 and 5-5, respectively. Historically, storage space in aquifers has not been treated as if it were a scarce commodity. Rather, in the face of the very large capital costs of surface water impoundment facilities, both public and private operators have sought long-term water supply contracts that significantly reduce the probabilities of a financial default. Typically, markets for storage capacity are thin or nonexistent. One result is that there is a dearth of empirical data on the scarcity value and economics of storage capacity. In regions where water is scarce and the scarcity is intensifying, it is rea- sonable to assume that the value of storage capacity is significant. It is esti- mated, for example, that at the margin, storage capacity in California has a value of about $600-$800 per acre-foot per year (Richard E. Howitt and Jay R. Lund, University of California, personal communication with H. Vaux, 2006). It seems likely that values that high would be found throughout the arid and semi- arid West and in other regions where water is locally constrained and quite scarce. Finally, it is important to draw the distinction between the economics of groundwater management and the financing of groundwater management. The economics of groundwater management is about the full range of costs and benefits and the values that attach to those costs and benefits. Finance is about the monetary or pecuniary aspects of groundwater management— such issues as (1) where investment capital is to be obtained and at what cost, and (2) how capital is to be retired and the cost of capital repaid. Economics focuses more broadly and transcends financial issues. It is possible for a project or program to be financially justified but not economically justified. This might be true if there were large external costs, such as environmental damages, that did not have to be compensated monetarily. Conversely, it is possible for a project to be eco- nomically justified but not financially justified as, for example, when problems of risk and cash flow in the early stages of the project make it impossible to

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 211 BOX 5-5 The Arvin-Edison Water Storage District: Managed Underground Storage for Agriculture The Arvin-Edison Water Storage District occupies approximately 132,000 acres (53,000 hectares) in the extreme southeasterly portion of California’s Central Valley. While soils are rich and the growing season is favorable, average annual precipitation is just 8 inches (200 mm) and inadequate to support rain-fed agriculture. Thus, successful agricul- ture depends almost wholly on the availability of water for irrigation. Early growers in the region irrigated exclusively with groundwater. With favorable growing conditions, irrigated acreage expanded and overdraft became severe and persistent. By the 1930s, overdraft amounted to 113,000 acre-feet (140 million 3 m ) annually. It became clear that supplemental sources of surface water would have to be found if agriculture was to continue on its existing scale. The Arvin-Edison Water Storage District subsequently contracted with the federal government to supply water imported from the north via the Central Valley Project. The contract entitled the district to 40,000 acre feet 3 3 (49 million m ) of annual firm supply and 311,675 acre-feet (384 million m ) of interruptible supply. Thus, only 11percent of the supplemental supply was reasonably reliable, with the remaining 89 percent delivered on an “as available” basis that depended on higher than average levels of precipitation. At this point, the district’s need was not so much for addi- tional water as it was for more reliable water. Arvin-Edison was able to acquire some additional firm water through a series of sur- face water exchanges, but these were insufficient to resolve the problem completely. The district then developed a conjunctive use program, which allowed it to store underground excess (non-firm) supplies in wet years and utilize them in dry years. Between 1966 and 3 1999 the district stored a total of 4.2 million acre-feet (5.2 billion m ) in the underlying aqui- fers. This storage had a number of benefits. First, groundwater levels have been stabilized through a combination of reduced extractions and a formal program of recharge. This means that the costs to those who continue to extract groundwater are less than they would have been in the absence of the formal recharge program. Second, the surface wa- ter service area accounts for only about 40 percent of district lands. Growers on the re- maining 60 percent do not have access to surface water and continue to extract groundwa- ter. In effect, the stabilization of groundwater levels permitted the district to continue to serve a significant proportion of its users with groundwater and thereby avoid the consider- able expense of a surface water delivery system for the groundwater service area. Third, in the area that is served with surface water, groundwater is available to growers in drought years when surface water deliveries are reduced. The groundwater is pumped from wells maintained by the district and introduced into the surface water delivery system. A simple cost analysis shows that stabilization of groundwater levels has resulted in substantial cost savings. By assuming that (1) groundwater pumps in the District have an average efficiency and (2) the marginal cost of energy per kilowatt-hour is between $0.12 and $0.20, the savings to pumpers from not having to lift water the additional 235 feet (80 m), which would be the case had there been no recharge program, range between $47 and $80 per acre-foot. Total water costs to Arvin-Edison users in 2000 amounted to $79.90 per acre-foot. Water costs, then, are between one-half and two-thirds of what they would have been had groundwater levels not been stabilized, and all growers continued to extract the same quantities that they had extracted historically in spite of the increased costs. This example illustrates how agricultural water users can benefit from sustainable un- derground storage. The fact that the aquifer in question is hydrologically isolated proved to be an important pre-condition. Because of the hydrologic isolation, there were no compet- ing pumpers who would have been in a position to reap the benefits of the recharge project as free riders. The hydrologic circumstances of the aquifer effectively restricted those who could benefit from the recharge to those who paid for it. Thus, it was not necessary to adju- dicate groundwater rights prior to undertaking the recharge project. This saved significant time and much money.

212 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER attract the funds needed for completion and the transition to full operating status. The next section focuses on the economics of groundwater management. The financing of groundwater management and managed underground storage is discussed fully in Chapter 6. That discussion identifies the critical variables af- fecting financial feasibility and generally characterizes the importance of finan- cial drivers in determining the feasibility of specific managed underground stor- age projects The Economics of Multiple Objectives There are several possible objectives for any project or process of artificial groundwater recharge. First, such recharge is frequently done for the purpose of augmenting the quantity of water in storage. This objective has become increas- ingly attractive as the opportunities for surface water storage have diminished and the environmental and other costs of surface water storage projects have risen. Second, artificial recharge may also be undertaken in an effort to stabilize groundwater levels. Thus, for example, where water tables decline continuously because an aquifer is overdrafted, artificial recharge is one means of augmenting total recharge and either bringing extractions into balance with recharge or nar- rowing the difference between the two. Third, artificial recharge may be used to mitigate or avert some of the costs of persistent overdraft (e.g., land subsidence, seawater intrusion). Fourth, artificial recharge can be used to control the migra- tion of contaminant plumes, thereby protecting the quality of the groundwater. These objectives tend to be interrelated: that is, measures focused on the achievement of one of the objectives often result in the achievement of one or more of the others. This does not mean that all effects of artificial recharge are beneficial. For example, artificial recharge for the purpose of augmenting storage could lead to flooding of basements and other subterranean structures in very wet years or raise water tables to a level where contaminants are mobilized from soil layers near the land surface. In planning for artificial recharge it is important to ac- knowledge explicitly the possibilities for achieving multiple objectives, as well as to account for potential adverse impacts. Ideally, an artificial recharge pro- gram should be planned so that total net benefits, those related to all objectives, are maximized.30 30 There is a substantial literature on the methods of multiobjective planning (e.g., Loucks and van Beek, 2005). It is customary to employ methods that either optimize the mix of emphases on the different objectives or entail achieving a set of targets. Target planning entails the identification of plans that best meet a predetermined mix of objectives or tar- gets. Optimization planning also requires prior knowledge of the decision maker or policy maker’s preferences but requires that these preferences be expressed in terms of objec- tives rather than targets. The goal of optimization planning is to identify the optimal mix of objectives that can be achieved subject to a set of financial and other feasibility constraints.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 213 As a general rule, MUS will require explicit identification and consideration of all objectives and costs, both actual and potential. Underground storage pro- jects are more likely to be sustainable if they are conceived and operated in fash- ion in which future circumstances have been foreseen and flexibility is main- tained to permit adaptation to circumstances that cannot be foreseen. The quality of water in a given aquifer may not be threatened currently by the proximity of a contaminant plume, for example, but such an eventuality could arise in the fu- ture and the costs of addressing it may be significantly reduced if the recharge system is adaptable and flexible. It is also true that the presence of multiple ob- jectives may make an underground storage project more economically attractive than if there were only a single objective. The conclusion is that for economic reasons and to promote sustainability, underground storage plans should account for all objectives and their costs and benefits. Spillovers and Unmarketed Benefits In modern, highly complex market systems with millions of interrelated ac- tions, market imperfections are common. Such imperfections may introduce significant distortions into observed economic behavior and need to be ac- counted for in designing water supply or water delivery projects, in the eco- nomic analysis of the costs and benefits, and in financing. Two common market imperfections are spillovers—often called “externalities”—and the presence of unmarketed or misvalued benefits. These imperfections are likely to be present with some frequency in MUS projects. Spillovers or externalities are said to occur when an economic transaction results in impacts on a person or persons who are not party to the transaction. There are both negative externalities, which inflict costs on those not party to the transaction, and positive externalities, which confer benefits. The general con- clusions about externalities are quite straightforward. Where external costs are present, the good or service tends to be overproduced or overconsumed relative to what would be economically optimal (e.g., extraction of groundwater by one producer lowers the water table for all others). Where external benefits are pre- sent, the good or service tends to be underproduced relative to what would be economically optimal because of the inability of the private investor to capture all of the returns from the investment (e.g., one producer recharging an aquifer when stored water can be extracted by anyone). Usually, therefore, restraint of pumping or provision of recharge will have to be produced through a public In the case of target planning the goal is to attain the target values without reference to constraints. Optimization planning acknowledges the existence of constraints of all sorts. In general, formal mathematical methods of multiobjective planning require that objectives and constraints be quantified.

214 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER entity or an institution such as a user cooperative that has the authority to regu- late users’ behavior and/or to tax or otherwise secure payment for the recharge service from all those who benefit. The general remedies for externalities include taxes (and subsidies) and regulations. In general, taxes are the most straightforward and are set at the mar- ginal value (cost) of the external cost. When the tax is added to the unadjusted price, the externality is appropriately reflected in the price and economically efficient levels of production and consumption occur, other things being equal. In some circumstances, appropriate subsidies can accomplish the same thing, encouraging or compensating one who produces a beneficial externality. Regulations can be used to accomplish the same outcomes, but in general they are harder to design, may entail significant enforcement costs if they are to be effective, and are difficult to fashion so that they both are effective and ac- commodate differences in the circumstances of different producers and consum- ers. In principle, regulations are thought to be superior to pricing incentives only in circumstances where it is not possible to measure the magnitude of the spill- over or externality or where the magnitude is so large that catastrophic impacts are a possibility (Baumol and Oates, 1979). In practice, however, regulations are employed more frequently than taxes or price incentives. When markets function reasonably well and imperfections are absent or mi- nor, prices provide an accurate guide to the value of goods and services that are traded in those markets. For goods and services that are not traded in markets, prices are absent and the value of such goods and services is not immediately obvious. Water itself is rarely priced in markets. The prices paid by most water users reflect the costs of capturing, storing, and conveying the water and of treatment in the case of domestic supplies. In other words, since water is not often traded in markets, it tends to be assigned a scarcity value of zero and is treated as if it were a free good. This signals consumers that water is much more freely available than it is in fact. Consumers do not face prices that reflect the true scarcity value of water. This means that water is used in quantities that ex- ceed the economically efficient quantity. Other relevant nonmarketed products include environmental services and environmental amenities. Glennon (2002) documents in detail the connection between groundwater and environmental amenities and services, showing that groundwater depletion has significant adverse impacts on the values of these amenities and services. Glennon also notes that the unmarketed nature of envi- ronmental amenities and services means that there is a tendency to undervalue them or ignore them altogether. Inasmuch as artificial recharge and augmenta- tion of storage may have positive impacts on environmental amenities and ser- vices, it is important to recognize the need to value these and other benefits that may not be traded in markets. The fact that water itself rarely has a market-determined scarcity value means that comprehensive economic valuation of artificial recharge schemes will require the use of alternative valuation methods. Acceptable valuation methodologies exist and are used to value an entire range of unmarketed goods

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 215 and services (NRC, 1997, 2005). These methods include inferential techniques in which the value of a good or service can be inferred indirectly from the be- havior of consumers and survey techniques that query consumers about their valuation of certain nonmarketed amenities. Economic analyses of MUS pro- posals will frequently require the use of such methods to value benefits and costs. Comparative Values and Costs The costs and values of MUS are necessarily relative. The cost competi- tiveness of a given project cannot be determined in any absolute sense. The problem is compounded by the fact that storage capacity is rarely priced accord- ing to its scarcity value. The financial realities of water project construction and operation mean that storage tends to be allocated through long- term contracts that are executed at the outset and rarely renegotiated when they expire (Bain et al., 1966). This financial practice ensures that the project costs or a portion of them are repaid over the life of the project. While there is financial justification for such practices, they have the effect of shielding storage capacity from the economic forces of competition. This means that storage is underpriced or not priced at all and that the financial costs of storage projects understate the eco- nomic costs by a least the scarcity value of the storage. Scarcity costs aside, the relative attractiveness of any storage project will depend on the costs of other alternatives as well as the value of the use to which the water is to be put. Thus, for example, the costs of MUS at the Orange County Water District are in the range of $400-$600 per acre-foot which in any absolute sense appears relatively high. Yet the cost of the cheapest alternative source of water—imported water purchased from the Metropolitan Water Dis- trict of Southern California—is on the order of $650 per acre-foot and the costs of other alternatives, such as seawater desalting, are even higher. In the circum- stances faced by the Orange County Water District, MUS is attractive from a cost standpoint even though the costs of treating the water to be stored are rela- tively high. The relative value of the uses to which the water is put is also important. In the Orange County case, the project is attractive not just because the relative costs are low but because the water is put to domestic, industrial, and commer- cial uses, all of which are relatively high-valued. As a general rule, these uses are valued higher than agricultural uses and many environmental uses, although some environmental uses appear to have sizable values. The Orange County Project would not look so attractive, for example, if the water was to be used to irrigate fodder crops, a relatively low-valued use. In that circumstance the costs would likely be significantly higher than the value of the use and would raise compelling questions about the economic justification of the project. The result is that the attractiveness of any MUS project depends on the costs of alternative sources of supply as well as the value of the product water in its final uses. Fi-

216 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER nancial considerations are discussed more fully in Chapter 6. For these reasons, it is difficult to make generalizations about the attractive- ness of MUS, since it will depend almost exclusively on local or regional water supply and water use conditions. Nevertheless a few generalizations can be made. Managed underground storage is more likely to be an attractive option when the value of the final use is high. It is likely to be a competitive option where alternative sources of water supply are either unavailable or very costly. It is also likely to be attractive when the costs of treating the original source water to appropriate levels of quality are low. Managed underground storage is likely to be far more attractive in the future because low-cost water supply options are no longer available in many regions and locales and, because high-valued uses are growing in many expanding urban areas and in those regions where source water can be obtained relatively inexpensively and costly treatment can be avoided. Subsidies Frequently, the high costs of providing water supplies or remediating and enhancing water quality result in calls for public subsidy in order to make the project or program “affordable.” Often, advanced techniques of augmenting water supplies such as desalination, wastewater reuse, or groundwater recharge appear very costly in comparison with the costs of established alternative water sources. The relatively higher cost of “new” water invariably leads to demands for public subsidization in order to keep the costs of all water supplies roughly equivalent. From an economic perspective it is important to understand the cir- cumstances in which subsidies are warranted and those in which they are not. The general rule is that where the value of goods and services is totally re- flected in the price, there is no economic justification for subsidization. Never- theless subsidies are used for a variety of purposes. Some subsidies are designed to restrain production, keeping the subsidy-adjusted price higher than would be the case if prices were determined by market forces alone. Other types of subsi- dies lead to prices that are lower than those that would result if market forces were left untouched. In these circumstances, a subsidy simply represents a gift in the form of an artificially low price. Also, there are mechanisms such as average cost31 pricing that keep the price of utility services—electricity, gas and water— lower than they might be otherwise. When subsidies are used to depress artifi- cially the price of some good, that good will be produced and consumed in quantities that are greater than the economically efficient quantity. The justifica- tion for these subsidies invariably rests on social and political, not economic, 31 Average cost is total cost divided by the number of units of output. It is the average cost of producing each unit of output. The marginal cost is the cost of producing one additional unit of output

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 217 grounds. Frequently, for example, subsidies may be required to ensure that a project is financially feasible. As a consequence, where financial feasibility is an overriding concern, subsidies may be common. Subsidies in the context of fi- nancial feasibility are discussed further in Chapter 6. There are certain instances in which subsidies may be justified economi- cally. These are cases where the market-generated price of the good or service does not fully reflect its value. The earlier conclusion that investment in groundwater recharge facilities and operations would be less than optimal if left to the private sector is a case in point. Where groundwater is extracted competi- tively, all extractors benefit from the recharge in the form of reduced levels to the water table and consequent reduced pumping costs. Yet, a purely private entrepreneur cannot capture all the returns from these benefits and thus invests less in the recharge operation than is optimal. In the absence of some other col- lective arrangement that would allow all of the returns to be captured by the investor, subsidizing investment in recharge facilities would be one method of securing more nearly optimal levels of investment. Another pertinent example is the case where an artificial recharge operation augments storage and repels the advance of a contaminant plume thereby protecting the quality of the groundwa- ter for all pumpers. In this instance, protecting its quality for one protects the water quality for all, and the gain in water quality protection cannot be withheld from an extractor who refuses to pay for it. In such instances a subsidy to the recharger that reflects the total benefits from recharge would be economically justified. Alternatively all extractors could be taxed for the amount of the bene- fit. The choice between a public subsidy and an alternative institution would depend in part on which alternative entails the smallest transactions and admin- istrative costs. The conclusion is that subsidies are justifiable on economic grounds in cir- cumstances where market prices do not capture all of the values—both positive and negative—of some good or service. Where subsidies lack an economic justi- fication, they will distort prices and affect the allocation of goods or services in ways that are less than economically optimal. Such subsidies should be estab- lished carefully since in some cases subsidization encourages water use and this may not always be desirable where water is scarce. CONCLUSIONS AND RECOMMENDATIONS Conclusion: Some states have created statutory schemes that are tailored to MUS projects; this approach is desirable because of the novel questions posed. For example, a state may find it desirable that withdrawals from an MUS project be done over a longer time period than a traditional water right might provide or that MUS be allowed despite the junior status of the right’s holder. States can anticipate these adjustments to traditional water rights as appropriate. Recommendation: While a comprehensive approach has advantages, at a minimum states should define property rights in water used for recharge, aquifer

218 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER storage, and withdrawn water, to provide clarity and assurance to MUS projects. Conclusion: The federal regulatory requirements for MUS are inconsistent with respect to treatment of similar projects. Federal UIC regulation addresses only projects that recharge or dispose of water directly to the subsurface through injection wells, while infiltration projects are regulated by state governments whose regulatory standards may vary. The appropriateness of regulation through the UIC program has been questioned by states with active ASR regula- tory programs. Also, there are inconsistencies between the Clean Water Act and the Safe Drinking Water Act that impact MUS systems. For example, some jurisdictions try to control surface water contamination problems by diverting polluted water from aboveground to groundwater systems. This approach may undermine MUS programs by putting contaminants underground without appro- priate controls. Recommendation: The federal and state regulatory programs should be examined with respect to the need for continued federal involvement in regula- tion, the necessity of a federal baseline for regulation, and the risks presented by inadequate state regulation. A model state code should be drafted that would assist states in developing comprehensive regulatory programs that reflect a sci- entific approach to risk. Conclusion: Regulations are, quite properly, being developed at the state level that will require a certain residence time, travel time, or travel distance for recharge water prior to withdrawal for subsequent use. However, regulations based on attenuation of a single constituent or aquifer type, such as pathogen attenuation in a homogeneous sand aquifer, may not be appropriate for a system concerned with trace organics and metals in a fractured limestone, and vice versa. Such regulations are particularly pertinent for MUS with reclaimed water. Recommendation: Science-based criteria for residence time, travel time, or travel distance regulations for recharge water recovery should be developed. These criteria should consider biological, chemical, and physical characteristics of an MUS system and should incorporate criteria for adequate monitoring. The regulations should allow for the effects of site-specific conditions (e.g., tempera- ture, dissolved oxygen, pH, organic matter, mineralogy) on microbial survival time or inactivation rates and on contaminant attenuation. They should also con- sider the time needed to detect and respond to any water quality problems that may arise. Conclusion: MUS projects can exhibit numerous and complementary eco- nomic benefits, but they also entail costs. Some of those benefits and costs are unlikely to be incorporated in the calculations of individual water users—that is, there may be spillover costs to third parties or spillover benefits that are not given market valuations. Failure to account for all benefits and costs, including ones that may not be reflected in market prices for water, can lead to underin- vestment in groundwater recharge, overconsumption of water supplies, or both.

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 219 Recommendation: An economic analysis of an MUS project should cap- ture the multiple benefits and costs of the project. MUS projects invariably en- tail the achievement of multiple objectives. Third-party impacts, such as the environmental consequences of utilizing source water, should be included. Conclusion: Water resources development has been characterized by sub- stantial federal and state subsidies. As water shortages intensify, the political pressure for investment in new technologies will increase. Recommendation: Water managers should avoid the introduction of fur- ther distortions in prevailing choices of water technologies. To ensure optimal investment in MUS and other technologies, subsidies should be provided only when there are values that cannot be reflected fully in the price of recovered waters. An example of such a value would be an environmental benefit that accrues to the public at large. In particular, simply lowering costs should not be the justification for providing subsidies for MUS projects. Conclusion: Antidegradation is often the stated goal of water quality poli- cies, including policies that apply to underground storage of water. For any MUS project – including storage of potable water, stormwater, and recycled water – it is important to understand how water quality differences between na- tive groundwater and the stored water will be viewed by regulators who are charged with satisfying those regulatory mandates. In addition to water quality factors, a broader consideration of benefits, costs, and risks would provide a more desirable regulatory approach. Therefore, weighing water quality consid- erations together with water supply concerns, conservation, and public health and safety needs is an essential plan of action. Rigid antidegradation policies can impede MUS projects by imposing costly pretreatment requirements and may have the practical effect of prohibiting MUS even in circumstances where the prospects of endangering human or environmental health are remote and the benefits of water supply augmentation are considerable. Recommendation: State laws and regulations should provide regulatory agencies with discretion to consider weighing the overall benefits of MUS while resolutely protecting groundwater quality. REFERENCES Alley, W. M., and S. A. Leake. 2004. The journey from safe yield to sustainabil- ity. Ground Water 42(1):12-16. Bachman, S., C. Hauge, K. Neese, and A. Saracino. 1997. California Groundwa- ter Management. Sacramento, CA: Groundwater Resources Association of California. Bain, J., R. E. Caves, and J. Margolis. 1966. The Northern California Water Industry. Baltimore, MD.: The Johns Hopkins University Press. Baumol, W. J., and W. E. Oates. 1979. Economics, Environmental Policy, and

220 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER the Quality of Life. Englewood Cliffs, NJ: Prentice Hall. Blomquist, W. 1992. Dividing the Waters: Governing Groundwater in Southern California. San Francisco, CA: ICS Press. Blomquist, W., W. Schlager, and T. Heikkila. 2004. Common Waters, Diverg- ing Streams: Linking Institutions and Water Management in Arizona, Cali- fornia, and Colorado. Washington, DC: Resources for the Future. Brown, G. M., Jr., and R. Deacon. 1972. Economic optimization of a single cell aquifer. Water Resources Research 8(3):557-564. Burness, H. S., and W. E. Martin. 1988. Management of a tributary aquifer. Wa- ter Resources Research 24(5):1339-1344. Burt, O. R. 1970. Groundwater storage control under institutional restrictions. Water Resources Research 6(5):1540-1548. California Department of Health Services. 2000. Water Recycling Criteria. California Code of Regulations, Title 22, Division 4, Chapter 3. Sacra- mento, CA: California Department of Health Services. California Department of Health Services. 2004. Draft Groundwater Recharge Regulations: 12-1-04. Sacramento, CA: California Department of Health Ser- vices, Drinking Water Technical Program Branch. Challen, R. 2000. Institutions, Transaction Costs and Environmental Policy: Institutional Reform for Water Resources. Cheltenham, UK: Edward Elgar. Cummings, R. G. 1970. Some extensions of the economic theory of exhaustible resources. Western Journal of Economics 7(3):201-210. Cummings, R. G. 1971. Optimum exploitation of groundwater reserves with saltwater intrusion. Water Resources Research 7(6):1415-1424. Drummond, D. O., L. R Sherman, and E. R. McCarthy, Jr. 2004. The rule of capture in Texas: Still so misunderstood after all these years. 37 Tex. Tech L. R. 1.) Eggertsson, T. 1990. Economic Behavior and Institutions. New York: Cam- bridge University Press. EPA (U.S. Environmental Protection Agency). 2005. Guidelines for Water Re- use. EPA 625/R-04/108. Washington, DC: EPA. Florida Department of Environmental Protection. 1996. Ground water classes, standards, and exemptions. Chapter 62-520 In Florida Administrative Code. Tallahassee, FL: Florida Department of Environmental Protection. Florida Department of Environmental Protection. 1999. Reuse of Reclaimed Wa- ter and Land Application. Chapter 62-610, Florida Administrative Code. Tal- lahassee, FL: Florida Department of Environmental Protection Florida Department of Environmental Protection. 2001. Ground Water Permitting and Monitoring Requirements. Chapter 62-522, Florida Administrative Code. Tallahassee, FL: Florida Department of Environmental Protection. Florida Department of Environmental Protection. 2002. Underground Injection Control. Chapter 62-528 in Florida Administrative Code. Tallahassee, FL: Florida Department of Environmental Protection. Florida Department of Environmental Protection. 2006. Position paper: permitting increased arsenic levels at aquifer storage and recovery facilities. Unpub-

LEGAL, ECONOMIC, AND OTHER INSTITUTIONAL CONSIDERATIONS 221 lished. Gisser, M. 1983. Groundwater: Focusing on the real issue. Journal of Political Economy 91(4):1001-1027. Glennon, R. 2002. Water Follies: Groundwater Pumping and the Fate of Amer- ica’s Fresh Waters. Washington, DC: Island Press. Grischek T., D. Schoenheinz, and E. Worch. 2002. Bank filtration in Europe— An overview of aquifer conditions and hydraulic controls. In P. Dillon (ed.) Management of Aquifer Recharge for Sustainability. Proceedings of ISAR- 4, Adelaide, South Australia. Lisse, The Netherlands: Balkema. Hennessey, V. 2005. Cal Am, District in accord. Monterey Herald, November 22. Hooghe, L., and G. Marks. 2003. Unraveling the central state, but how? Types of multi-level governance. American Political Science Review 97(2):233- 243. Hydrosphere Resource Consultants, Inc., HRS Water Consultants, Inc., Mulhern MRE, Inc., and Spronk Water Engineers, Inc. 1999. Metropolitan Water Supply Investigation Final Report. Consultants Report to the Colorado Wa- ter Conservation Board. Available online at http://www.climatedata.com/ publications/metro_water/MWSI_report.pdf. Accessed December 20, 2007. Ingram, H. M., D. E. Mann, G. D. Weatherford, and H. J. Cortner. 1984. Guide- lines for improved institutional analysis in water resources planning. Water Resources Research 20(3): 323-334. Kiel, P. J. and G. A. Thomas. 2003. Banking Groundwater in California: Who Owns the Aquifer Storage Space? Nat. Resources and Environment 18:25- 30. Littleworth, A. L., and E. L. Garner. 1995. California Water. Point Arena, CA: Solano Press Books. Livingston, M. 1993. Designing Water Institutions: Market Failures and Institu- tional Response. Policy Research Working Paper No. 1227. Washington, DC: The World Bank Lord, W. B. 1984. Institutions and technology: Keys to better water manage- ment. Water Resources Bulletin 20(5):651-656. Loucks, D. P., and E. van Beek. 2005. Water Resources Systems Planning and Management: An Introduction to Methods, Models and Applications. Paris: UNESCO Publishing. NRC (National Research Council). 1994. Ground Water Recharge Using Waters of Impaired Quality. Washington, DC: National Academies Press NRC. 1997. Valuing Groundwater: Economic Concepts and Approaches. Wash- ington, DC: National Academy Press. NRC. 2002. Privatization of Water Services in the United States: An Assess- ment of Issues and Experience. Washington, DC: National Academies Press. NRC. 2005. Valuing Ecosystem Services: Toward Better Environmental Deci- sion-Making. Washington, DC: National Academies Press. Oakerson, R. M. 1999. Governing Local Public Economies. Oakland, CA: ICS

222 PROSPECTS FOR MANAGED UNDERGROUND STORAGE OF RECOVERABLE WATER Press Peck, J. C., and L. Rolfs. 2005. Wichita Aquifer Storage and Recovery Project moves forward. Water Law Newsletter 38(3):6. Provencher, B., and O. R. Burt. 1993. The externalities associated with common property exploitation of ground water. Journal of Environmental Economics and Management 24(2)139-158. Pyne, R. D. G. 2006. Aquifer Storage Recovery. Second Edition. Boca Raton, FL: Lewis Publishers. Roberts, M., and H. Crossly. 1997. Managed conjunctive use of groundwater storage. Water Resources Bulletin October :147-153. Scharpf, F. W. 1997. Games Real Actors Play: Actor-Centered Institutionalism in Policy Research. Boulder, CO: Westview Press. Shrier, C. 2004. Aquifer storage recovery. Water Report 8:1-10 (October 15). South Australia Environment Protection Authority. 2004. Code of Practice for Aquifer Storage and Recovery. Adelaide: South Australia EPA. USEPA. 1999. The Class V Underground Injection Study, Volume 1: Study Approach and General Findings. EPA/816-R-99-014A. Washington DC: U.S. Environmental Protection Agency, Office of Ground Water and Drink- ing Water. Vaux, H.J., Jr. 1985. Economic aspects of groundwater recharge. Pp. 703-718 in T. Asano (ed.) Artificial Recharge of Groundwater. Boston, MA: Butter- worth. Warren, J. P., L. L. Jones, R. D. Lacewell, and W. L. Griffin. 1975. External Costs of Land Subsidence in the Houston-Baytown Area. American Journal of Agricultural Economics. 57(4):45–455. Williamson, O. 1985. The Economic Institutions of Capitalism. New York, NY: Free Press.

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Growing demands for water in many parts of the nation are fueling the search for new approaches to sustainable water management, including how best to store water. Society has historically relied on dams and reservoirs, but problems such as high evaporation rates and a lack of suitable land for dam construction are driving interest in the prospect of storing water underground. Managed underground storage should be considered a valuable tool in a water manager's portfolio, although it poses its own unique challenges that need to be addressed through research and regulatory measures.

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