Many irrigation districts within the southern Murray Darling Basin have imposed external environmental impacts to adjoining landscapes, in particular, high watertables which cause salinity and increased waterlogging. These environmental impacts can cause losses in agricultural production and also degrade the natural ecosystem. Natural depressions are highly susceptible to these external impacts and are compounded by local flooding and ponding events. The level of investment in salinity and waterlogging mitigation works in excess of tangible benefits to protect or reclaim degraded depressions becomes a social choice between the community’s willingness to pay for the potential environmental benefits of the mitigation works and the level of degradation the community is willing to accept. The drainage options and level of economic tradeoff to improve the environmental conditions in the Green Gully area are described to provide an understanding of the economic impacts of environmental externalities.