Increased use of irrigation water has imposed stresses on groundwater systems. Declining groundwater levels and spring discharges have heightened water users' concerns about the sustainability of regional economies. Recently there have been initiatives toward groundwater regulation and restrictions on water use have either been implemented or now being proposed. This study investigates the costs imposed on irrigators by restricting groundwater use and the potential for more flexible annual extraction rules that will take account of seasonal variations in rainfall to reduce these costs. The dynamics of the decision-making process on water use have also been accounted for when irrigators have some flexibility over annual extractions.