The Impact of IRS Ruling on Groundwater Conservation Efforts in the Texas High Plains

Groundwater resources in the Texas High Plains (THP) are common resources. They are managed by dispersed, autonomous and local groundwater districts that use nonregulatory strategies to promote conservation and groundwater quality. Growing water needs, due to advancements in the agricultural and industrial sectors and to growing population in the region, have caused a significant drawdown in the water table of the Ogallala Aquifer. Groundwater resources in the THP are privately owned by owners of the land overlie the aquifer. As a result of this arrangement, any depletion in the water table entitles landowners a tax deduction from their business income. This paper evaluates the different tools used by groundwater districts to conserve the resource, and argues that the tax allowance, which is unique to the region, promotes inefficient uses of groundwater resources in the region. Furthermore, the paper shows that the termination of such depletion allowances will provide farmers st