\begin{abstract}
	Previous studies of groundwater management through fallowing have focused on isolated effects and single fallowing contract types. We identify fallow spillover effects that adjust expected property right surety along with policy interactions at the local and federal level. We focus on the application of federal fallowing incentives (CREP) for farmers in San Luis Valley, Colorado. Farmers in this environmentally sensitive region had previously self-organized to impose pumping fees that curb pumping and reduce externalities. These pumping fees are found to be highly effective in groundwater consumption but also dampen the effect of CREP. Farmers with the largest response to the subdistrict policies are found to self-select into the CREP program. Consequently, CREP conserves 33.4\% less water while program costs rise by 46.7\%. Changes to spillover effects for neighboring wells due to long-run expectations are estimated by leveraging variations in fallow contract length.  Neighbors are found to reduce pumping rates the most if wells are permanently retired, with only one-fourth the reductions for wells with a 15-year contract, and insignificant increases in pumping when fallowing a four-year term.
\end{abstract}