This report looks at groundwater extraction and the water balance. Groundwater extraction and net use are related to groundwater depletion and the water balance. Potential evapotranspiration, actual crop or vegetative evapotranspiration, dependability of precipitation, moisture deficits and moisture availability index are defined. A method is presented for estimating potential evapotranspiration and crop evapotranspiration from a minimum of climatic data. For arid areas the only weather measurement required is temperature. Crop factors are presented for a wide variety of crops. A water balance study for an essentially closed basin in Nicaragua is described and used to illustrate the relationships proposed. The economics of using groundwater extraction to prevent or alleviate drainage problems is discussed. Irrigation requirements are related to the economics of pumping water for irrigation.