An optimal control model is used to determine the socially optimal spatial and temporal allocation of groundwater and surface water among agricultural and urban uses. The control model is described briefly and its advantages over other dynamic models are enumerated. Optimal rates of groundwater pumpage over the planning horizon were highly sensitive to increasing energy costs. Groundwater basins are shown to react differently to alternative economic and hydrological parameters. In a dynamic setting, a policy of pump taxes was shown empirically to be superior to pro-rata quotas and uncontrolled pumpage.