For community water providers, safeguarding source waters from contamination offers an additional barrier of protection and a potential means of avoiding in-plant treatment costs. Whether source water protection efforts are cost-effective relative to in-plant treatment requires hydrologic, geologic, and climatologic knowledge of source watersheds, as well as an understanding of how changes in source water quality affect treatment costs. Quantitative evidence on the latter relationship is limited. This study estimates separate hedonic cost functions for water systems that primarily use surface water sources and those that primarily use groundwater sources using a database of United States (US) Community Water Systems. Cost functions relate annual variable treatment cost to production, factor input prices, capital stock, and source water quality, as proxied by land use within various ex-ante defined contributing areas (i.e., surrounding land areas affecting source water quality). For surface water systems, a 1% increase in urban land relative to forestland is correlated with a 0.13% increase in annual variable treatment costs. In this analysis, the relationship between costs and agricultural land is not statistically significant. Conversely, for groundwater systems, a 1% increase in agricultural land relative to forestland is correlated with a 0.24% increase in costs, whereas in this analysis the relationship between costs and urban land is not statistically significant. The cost-effectiveness of forestland preservation, based on sample means, varies considerably with the size of the contributing area, with no clear indication as to whether preservation is more likely to be cost-effective for surface water or groundwater systems.
Keywords: Community water system; avoid treatment cost; land use; source water protection; water quality.