Intervenor: Vol 23. No 2 April - June 1998

Selling Our Water - Water Taking in Lake Superior

We have a regular ritual at CELA we affectionately call "reading the paper with Martin McPherson". Martin is from Sault Ste. Marie, Ontario and his environmental antennae are always on full alert. His instincts and concerns about environmental issues are exceptionally good. His phone bill must be enormous. Our relationship with Martin served us well in early May when Martin heard about the permit to export Lake Superior water to Asia in a local news report. The next day the story was picked up by the Kitchener-Waterloo Record. Martin called Sarah.

Sarah got on the phone to her 20 years worth of contacts in the Great Lakes basin on both sides of the border. Over a month later, the story has not quit yet. This feature article contains much of the materials recently loaded to our website on this issue and looks ahead to the continued interest and activity around this story.

On March 31, 1998 the Environment Ministry issued a five year "water-taking" permit to a private company, the Nova Group of Sault Ste. Marie, allowing withdrawal by tanker of up to 600 billion litres a year of Lake Superior water. After the issue mushroomed into an international incident, Ontario consulted the public about cancelling the permit, see related information below. 

The stakes in this issue are high. Will governments enact laws to protect this ecological treasure and ensure its long term sustainability? The governments of Ontario, all the Great Lakes States, Canada and the US are now involved and actions they have taken so far are inadequate.

In a 1997 report entitled The Fate of the Great Lakes: Sustaining or Draining the Sweetwater Seas?, CELA and Great Lakes United documented the many stresses on Great Lakes water quantity and the sorry history of inaction. Issued on February 10th, 1997, to mark the 12th anniversary of the Great Lakes Charter, the report included an urgent call to action for a comprehensive management strategy based on environmental and sustainability grounds. That call remains unheeded and the Pandora's box opened by this ill-advised permit is one consequence of the prevailing crisis management approach.

Water taking permits in Ontario are issued under the Ontario Water Resources Act for any water-taking above 50,000 litres per day. This law was not written for anything like the Nova Group permit. Environment Ministry officials did not evaluate the long term environmental, social or trade policy impacts of issuing this permit. Public consultation was limited to posting notice on a computer bulletin board, the Environmental Registry. It's one of the few remaining ways the government notifies the public about significant environmental matters. Then, on the basis of an extremely limited amount of information, the permit was issued and would have allowed a private company to take, for free, Great Lakes water and put it on the international export market.

After a month of negative reaction, the Ontario government sought public comment on a proposal to cancel the permit. Ontario has also adopted a policy on Surface Water Transfers which contains some important features including language about Ontario being "generally opposed to proposals to divert water" and the need to preserve water quantity to sustain ecosystem integrity. It also requires broad consultation and that reviews of permit applications must consider cumulative effects of existing and proposed water takings. However, unenforceable policy is no substitute for law.

Public comment was sought on both the proposal to cancel the permit and on the Surface Water Transfers Policy, even though the policy is already in effect. Since the Nova Group water taking had not begun, the new policy applies and is used to justify cancelling the permit.

Caught off guard by the Nova Group permit, the federal government looked up its unenforceable 1987 policy "discouraging" water exports. In this legal vacuum Canada has made a request to the United States that the two countries jointly refer the matter to the International Joint Commission (IJC). Negotiations are currently underway on the possible mandate for this referral. If the referral goes ahead, public consultation by the IJC could occur in late summer or early fall (watch CELA's website for further details).

While the IJC should be involved in discussions on this matter, it has no authority to resolve problems. More important, the IJC has already undertaken references, and written reports on this issue. In 1985, the IJC issued an excellent report, Great Lakes Diversions and Consumptive Uses, that recommended stronger measures to prevent diversions, large withdrawals and exports of Great Lakes waters. If those recommendations had been followed, governments might have prevented their continuing crisis management of this significant resource.

This summer, the federal government also intends to review, with the provinces, all of its freshwater policies. The work will be overseen by Environment Minister Christine Stewart under the recently signed Harmonization Agreement between the federal government and the provinces. This task is potentially huge and like many federal-provincial negotiations could be controversial, acrimonious and lengthy. Nevertheless, on a parallel and likely swifter track, Christine Stewart has said that Canada hopes to pass a law in the fall of this year banning bulk water exports (stay tuned to the Intervenor for more on the trade implications of selling off our water).

Despite the much-delayed move to cancel the permit, the public should view this controversy in a much larger context. The Ontario government has systematically made its water resources vulnerable to private takeover and control (Intervenor v.22 no.1 & Intervenor v.22 no.5&6, dereg issue, print only).

For three years, the Ontario government has been paving the way for privatizing Ontario's water and sewage utilities. Numerous legal changes (Bill 26 and especially Bill 107) have served to both establish the rules for, and exclude the public from, future decisions about privatization of water and sewage plants by Ontario municipalities. (See "Is Public Control of Water on the Chopping Block?". Intervenor v.22 no.1, Jan/Feb 1997, print only, for a fuller discussion of this issue, including the privatization experience in England and Wales).

Water pollution rules have been weakened and Provincial monitoring and enforcement staff laid off (36.2% at the MoE and 40% at the MNR as of April 1998, Intervenor v.22 no.5&6). All of this, combined with crippling funding and program cuts and downloading of responsibilities, puts the financial squeeze, and the political heat, on municipalities. Previously public services, including water, could well be privatized and become available only to those who can afford to pay.

Despite public opinion surveys showing over 75% support for continued non-profit, public control of water in Ontario, the Province has forged ahead with this coordinated strategy.

Equally apparent is the strategy and agenda of the international water industry. With over 10 years experience in taking control of publicly-owned water around the world, the international water industry is now made up of multinational operations often structured as conglomerates. These corporations include water, electrical and gas (including pipeline) utility companies, large consulting, engineering and construction firms, and large financial institutions including banks and investment firms.

The Canadian brand of privatization is sizing up to be a two step process. Through "public-private partnerships", private companies are tendering bids on the operation of water and sewage plants while municipalities maintain ownership. Across Canada, especially in Ontario, municipalities are being courted by water companies. Also in Ontario, the Office of Privatization wants to sell the Ontario Clean Water Agency (OCWA) — a body that manages about one quarter of the water and sewage treatment plants across Ontario. These 230 plants were transferred by the province to municipal ownership. If the OCWA sale goes to a single company, it will be in a public-private partnership arrangement with 230 municipalities.

As yet, only a handful of municipalities have set up public-private partnership arrangements. One barrier to these partnerships is the preferential tax and borrowing status of municipalities. At a recent summit of the water industry held in Toronto, tactics to overcome these barriers were identified. Several private companies have applied to Revenue Canada for "municipal status" to gain GST and HST exemptions. The outcome of those applications will have profound impacts significantly blurring the lines between private companies and democratically-elected municipalities.

The push for full privatization will continue because the international water industry agenda is clear. The private sector sees water as the oil of the next century and seeks control of Canada's most precious and vital natural asset. When the same companies that are setting up shop in Canada are also acquiring water contracts in the US, can water pipelines to the US be far behind? Under Ontario's weakened laws, this activity will be largely unregulated; and, under NAFTA, Canada's water, once diverted, would become a commodity, perpetually supplied even during times of shortage in Canada.

The Nova Group permit is not governed by the Canada-US Free Trade Agreement or NAFTA, since the company intended to ship the water to Asia, not to the US or Mexico (Canada's trading partners under NAFTA). However, GATT applies, and the FTA/NAFTA do affect what response Canada can make to this challenge. Since the permit was granted under Ontario provincial law, the province can effectively revoke it, or put sufficient conditions on it, so that no exports can occur. However, for the federal government to now contemplate banning water exports is very difficult given the FTA and NAFTA.

The Nova Group permit drew strong opposition from members of the US Congress, the Great Lakes Commission, various Great Lakes Governors and others. Despite the relatively small amount of water involved, the broader policy issues and precedent-setting nature of the decision was recognized. As well, the lack of consultation was widely criticized. Canadians were reminded once again that the US has a law, the Water Resources Development Act, 1986, which provides federal veto power over any export, diversion or withdrawal from the Great Lakes. The Act also requires consensus among all Great Lakes states prior to any export, diversion or withdrawals. Canada and Ontario have no such legislation.

Michigan Congressman Burt Stupak has introduced a resolution to the US House of Representatives calling upon the President and Secretary of State to "act to prohibit the sale or diversion of Great Lakes waters to foreign countries, businesses, corporations, and individuals." Note that the resolution does not prevent such sales or diversion within the US.

It is essential that any federal government action not be based solely on economic and export issues but also include the environmental, social and cultural importance of sustaining our water resources. And the uniqueness of the Great Lakes Ecosystem requires special protection in the form of a joint US-Canada treaty. A legislatively-based National Water Policy for all of Canada is long overdue and will be more complicated. Work should begin on both immediately.

The International Joint Commission could hold public consultations on a new treaty as early as this summer or fall. Watch CELA's website for more information.

Kathleen Cooper is a researcher, and Sarah Miller is the coordinator, both at CELA