Economics of water allocation to instream uses in a fully appropriated river basin: Evidence from a New Mexico wild river

In fully appropriated multiple‐use river basins, a major potential competitor for a share of water may be publicly sponsored appropriations to supplement low streamflows for fish, wildlife, and recreation, which generates economic values not revealed in the marketplace. Based on a survey of instream recreationists on New Mexico's Rio Chama a travel cost model is developed to identify the potential recreation demand for instream flows. A discrete optimal control model is formulated that solves for the intraseasonal allocation of reservoir releases which maximizes the yearly value of instream recreation benefits, net of values of competing uses in the basin. Results indicate that in New Mexico, reservoir releases which augment low streamflows can return gross recreation benefits in the range of $900 to $1100 per acre‐foot (ac ft) of water consumed (1 ac ft = 1.233 × 10 3 m 3 ). This compares to a $40/ac ft cost of using the water. Consequently, results strongly support the hypothesis of potential economic payoff from public investments in and management of instream flow reservations.