The passage of Senate Bill 1 I 1997 established a regional process for water planning in Texas. An important aspect is understanding the economic and social impacts caused by drought on local communities. This study surveyed industrial and municipal water rights holders in the Guadalupe River Basin to elicit possible responses to water shortage and the effects on revenue. Computer simulations of water deliveries to the users in the same basin were run to gain knowledge about the possible extent of water shortages to those surveyed in order to produce a basis for evaluating economic impacts. This study then sought to develop a methodology based on knowing the responses of individual water users to quantify the potential direct impacts in a three county area within the basin.