professor designs auction to reduce irrigation
loud, rapid-fire patter of an auctioneer is a familiar sound to
farmers who buy calves, sell tobacco or replace worn-out tractors
at auction. However, bidding to pull acreage out of irrigation
in Georgias Flint River basin was silent in the electronic
auction in March held by the State Environmental Protection Division
to cope with a fourth year of drought.
challenge was to design an auction to pull enough land out of
irrigation to significantly cut surface water demand at a reasonable
price, said Charles Holt, a U.Va. professor of economics
who designed the auction with two collaborators at Georgia State
University and other officials from the Flint River Water Planning
and Policy Center in Albany, Ga., and the state environmental
EPD wanted to know how much money each farmer would accept, per
acre, not to irrigate his land this year. The farmers bids
were secret to avoid price-fixing, which would have raised the
states cost of the program.
pleased with how it went, Holt said. The EPD had very
few revisions in the bids after the last two rounds, so they stopped
after the fifth round. Besides, the coffee and doughnuts we brought
in that morning were all gone, it was after lunch time and everyone
a year ago, two Georgia State economists contacted Holt, an expert
in experimental economics and game theory, to brainstorm a solution
to South Georgias problem: How to pull enough land out of
irrigation for less than $10 million to ease the pressure on the
Flint River basins water supply. Could they do this voluntarily?
Or would the state have to force farmers to stop irrigating their
soybean, cotton and peanut crops until surface-water levels could
recover whenever that might be?
researchers didnt have much to go on since, to the best
of everyones knowledge, no such auction had ever been conducted.
Their goal was to allocate limited water resources efficiently,
using free-market principles, an understanding of bidding behavior
and Web-based communications technology to allow bidding from
researchers conducted several trial auctions, using students as
farmers holding irrigation permits and paying cash for their bids
as the trials unfolded. Officials from Georgias EPD observed
the trial auctions and chose the design they thought would work
best. In January, the researchers ran a full-scale trial run in
South Georgia using students at eight different sites.
result of the experts joint efforts was the electronic auction,
conducted March 17 throughout the Flint River basin after the
EPD director had formally declared a severe drought
on March 1. Nearly 200 farmers gathered at eight sites to submit
bids via computers to state EPD officials in Atlanta.
the auction, EPD officials watched the bids pop up on their computer
screen in real time as software crunched the numbers on individual
bids, total acreage involved and estimated total cost. State officials
conducted five rounds of bidding in which farmers dropped their
bids in successive rounds until the officials had the results
they wanted: enough acres were being offered at a price the state
the end, the EPD accepted offers from 194 farmers to hold 33,000
acres out of irrigation through the end of 2001. Accepted bids
ranged from $30 per acre to $200 per acre, with an average of
$135.70 per acre. The states total cost will be $4.5 million
and farmers are expected to receive payments this month, the EPD
result of the auction will be reduced demand on surface water
in the Flint River and its perennial tributaries, streams flowing
year round, by about 130 million gallons of water per day, according
to the EPD.
EPD did not include farmers using groundwater wells for irrigation
in the auction because the agency has not determined the impact
of groundwater use on the Flint River basin.
more than three years of lower-than-average rainfall, water levels
in southwest Georgias lakes, rivers and streams are dangerously
low. These low water levels threaten the viability of more than
85 species of fish in the regions lakes and rivers and have
damaged the habitat of other animals that depend on the same water
sources. The drought also has led to restrictions on watering
lawns and washing cars and has hurt Georgias tourist and
Floridas Panhandle, which lies downstream from Georgia,
depends on water flowing from the Apalachicola, Chattahoochee
and Flint rivers for its own water needs, including drinking water,
wildlife habitat and crop irrigation.
irrigation-permit auction came about through the Flint River Drought
Protection Act passed by the Georgia General Assembly in 2000,
which directed the states EPD to conduct an electronic auction
to temporarily pull land out of irrigation and preserve dwindling
supplies of surface water.
Legislature appropriated $10 million to cover the costs of the
program. The $5.5 million left after this years auction
will stay in a state account to cover any future drought declared
in the Flint River basin, according to the EPD.