Valuing the Hidden Benefits of Reservoir Storage: A Stochastic Assessment of Flood Damage Reduction in an Irrigation-Dominated System

Multipurpose reservoirs provide both irrigation water and flood protection, yet flood risk reduction is rarely valued alongside market-priced water supply benefits. As a result, reservoir evaluations and storage allocation decisions may underestimate the economic contribution of flood mitigation. This study estimates the economic value of flood protection provided by Navajo Dam on the San Juan River, New Mexico, where irrigation and municipal water supply are the reservoir’s primary authorized purposes. Historical hydrologic records were used to compare regulated and unregulated flow conditions and quantify the reduction in expected agricultural flood damages attributable to reservoir operations. Results indicate that dam regulation reduces expected annual agricultural flood damages by approximately $366,000, equivalent to a marginal flood protection value of $1.34 per acre-foot of flood-control storage. Expressing flood protection in the same units as irrigation water values enables a direct comparison of competing reservoir services and highlights the extent to which conventional appraisal methods may undervalue risk-reduction benefits. The proposed framework provides a practical approach for incorporating flood mitigation into economic assessments of multipurpose reservoirs and supports more comprehensive and balanced water resources planning.