Special Report

WATER WARS

Should Canada sell its most precious resource?

John Geddes March 6 2000
Special Report

WATER WARS

Should Canada sell its most precious resource?

John Geddes March 6 2000
They are an unlikely class of political provocateurs: the water entrepreneurs. In Vancouver, fast-talkers with dreams of getting in on the ground floor of a 21st-century boom once touted their plans for taking pure British Columbia mountain water in tankers to California. Shut down by a B.C. government unwilling to allow bulk exports, some still dream of shipping Alaskan glacier meltwater by the tankerful to Asia. In Newfoundland, a construction company owner from Gander flew his plane over a pristine lake and pondered the money that might flow if that crystalline water could somehow be sold in, say, wealthy Middle Eastern oil kingdoms. After mulling it over, the province turned down his proposal last year. And in Sault Ste. Marie, Ont., a business consultant envisioned shipping Lake Superior water all the way out the St. Lawrence Seaway to the Atlantic Ocean and on to slake the thirsts of unspecified Asian markets.

This last visionary was John Febbraro, president of a little firm called the Nova Group Ltd. Like the would-be water salesmen on the Pacific and Atlantic coasts, he was also thwarted in the end by a provincial ban last year. But Febbraro's application to remove Lake Superior water, filed with the Ontario ministry of the environment back in early 1998, made him a significant footnote in the on-again, off-again debate about whether export schemes jeopardize Canada's long-term water supply. Experts in water economics were deeply skeptical about the money-making potential of his proposal to haul water in bulk from the heart of the continent to the high seas. Yet so powerful is the mythology of water for Canadians that Novas sketchy business plan raised howls of protest—and sent politicians and policy mandarins, in both Canada and the United States, scrambling for dry ground.

The main result of that anxious reaction is slated to be made public on March 15: a sweeping report from the International Joint Commission on protecting the Great Lakes. Febbraro still seems taken aback by what he set in motion, and by the notoriety he unexpectedly achieved. Still, with a bravura display of the positive thinking shared by many irrepressible entrepreneurs, he declares the whole experience well worth it. All the free publicity, he says, has left the desk of his office in the Sault littered with new joint-venture proposals. As for the environmentalists and economic nationalists who portrayed him as the advance man for an all-out corporate assault on Canada's most precious resource, well, Febbraro does not hold a grudge. “Maybe everybody made me out to be the bad guy,” he says. “But at least I was a catalyst for the governments taking this stuff seriously.”

Federal officials, too, are trying to look on the bright side. Sure, they would rather the whole emotion-packed issue of water exports would just evaporate. But since Novas proposal stirred things up, Ottawa is hoping the IJC—the venerable Canada-U.S. agency that manages boundary waters between the two countries—can settle them back down again with its report. Beyond the IJC s work, federal strategists hope attention will soon shift from the peculiarly Canadian preoccupation with exports to deeper thinking about solving the developing worlds shortages. Thousands of water mavens and politicians will converge on The Hague from March 17 to 22 for the World Water Forum, an ambitious conference partly spearheaded by veteran Canadian foreign aid official Aly Shady. He says the aim is no less than to forge a global consensus around averting a water crisis that could destabilize arid, underdeveloped swaths of the globe in this century.

‘Water Is no different than fish or forests. If we don’t want to sell, we can decide that.'

But for now, it is the water exports issue that has prominent Liberals squirming. Consider Foreign Affairs Minister Lloyd Axworthy s position. Back in his opposition days, he personally raised the spectre of a U.S. threat to Canada's water sovereignty as part of the Liberal campaign against free trade. These days, Axworthy heads a department whose own experts bluntly reject that view. So does the IJC: in an interim version of its upcoming report, released last August, it dismissed the idea that the North American Free Trade Agreement might someday force Canada to allow huge water exports. It said the experts it consulted were “not aware of any provisions of international trade law that would prevent Canada and the United States from taking measures to protect their water resources and preserve the integrity of the Great Lakes Basin ecosystem.”

ABUNDANCE Share of the world’s renewable fresh water carried by Canadian rivers: 9%

That may satisfy most trade lawyers, but never Maude Barlow, the anti-free-trade firebrand who chairs the left-leaning Council of Canadians. Barlow has made water her latest crusade. Last year, she published “Blue Gold,” a 46-page call to arms whose subtitle, “The Global Water Crisis and the Commodification of the World’s Water Supply,"signals Barlow’s underlying concern: that water is coming to be viewed as a trade commodity like any other. She says the IJC has timidly avoided a frank examination of the trade-law issue, out of deference to governments it answers to in Ottawa and Washington—both staunchly committed to free trade. “What the IJC is trying to do is take steps to limit the ability of water to be traded,” she told Macleans, “without addressing what they view as a political problem—maybe an insurmountable political problem.”

WASTE Canadian household use compared with European: Twice as much

The legal opinion Barlow relies on to make her case was written by Steven Shrybman, a lawyer who is executive director of the West Coast Environmental Law Association. Shrybman’s starting point is that water in its natural state is defined as a tradable good under NAFTA and World Trade Organization rules, both of which are based on the global General Agreement on Tariffs and Trade, which mentions water. He goes on to argue that the principle of “national treatment”—the backbone tenet of international trade law that prevents countries from favoring their own domestic companies over foreign corporations—then kicks in. His conclusion is that since Canadian governments already allow water to be used domestically in countless cases for industrial and commercial purposes, the same rights must be extended to foreign investors seeking access to Canada’s water for export. “Unfortunately, rather than recognize and confront these problems directly,” Shrybman writes, “the federal government seems to be hoping that if it ignores them, they’ll go away.”

None of the trade experts who appeared before IJC hearings last fall on the issue agreed with Shrybman. One of the most eminent, Donald McRae, a professor of international law at the University of Ottawa, says the easiest way to see that trade deals cannot force Canada to sacrifice control over water is to look at the way other natural resources are treated. “The trade agreements regulate trade—they don’t tell us that we have to allow people to catch our fish or cut down our trees,” he points out. “Water is no different than fish or forests. If we decide that we don’t want to extract or sell them, then we can decide that. The decision is for us to make. The WTO and NAFTA don’t decide resource policy for us.”

Barlow counters that the only reason Canada’s regulations of other natural resources are still intact—more than a decade after the original Canada-U.S. free trade agreement came into force—is because foreign companies have not yet got around to taking aim at them. “We say that there probably are challenges that haven't happened yet,” she asserts. “This is a whole burgeoning area that is only beginning to be explored by lawyers.” And once those challenges are launched by foreign corporations trying to get unencumbered access to Canadian resources, including water, she predicts trade-dispute resolution panels set up under NATTA or the WTO will prove unsympathetic to Canada's environmental restrictions. “The people who make the decisions are generally trade bureaucrats— true believers who think everything is a trade barrier,” Barlow says.

Such deep-seated suspicion of the global trade regimes—the same distrust that fueled last years anti-WTO riots in Seattle—is not going away anytime soon. A year ago, though, Ottawa announced a three-part strategy designed at least to take the edge off the anxiety when it came to water. The first step was to ask the IJC to report on the issue. The second was to introduce amendments to the International Boundary Waters Treaty Act prohibiting bulk water removals from the Great Lakes and other lakes and rivers along the U.S. border. The third, and trickiest, element was to try to coax the provinces—whose jurisdiction over resources gives them the lead role in regulating the use of water—into joining a Canada-wide accord prohibiting bulk transfers from Canadian watersheds, even if the water was to stay within Canada. As usual, reaching a federal-provincial entente was far from simple. In meeting last fall in Kananaskis, Alta., all four western provinces and Quebec refused to sign on to Ottawa’s proposal. Still, that does not mean they are eager to export. In fact, British Columbia, Alberta and Quebec already had bans in place, while Manitoba was in the process of adopting its own. Disagreement swirls around details of Ottawa’s strategy, not the main objective.

Why not simply impose a federal export ban and be done with it? Federal lawyers argue that would violate NAFTA and WTO rules—inviting a challenge. Both trade pacts prohibit any such blanket export bans. On the other hand, Ottawa’s lawyers are confident environmental policies that forbid the large-scale transfer of water from one system of rivers and lakes to another are clearly allowed. The only laws that would not survive a trade panel, they say, would be any that discriminated in favor of would-be Canadian water exporters over foreign competitors.

DEMAND People around the world lacking clean drinking water: 1.4 billion

For now, at least, all this argument seems academic in commercial terms. Researchers for the IJC have searched for examples of economically viable schemes for bulk-water exports from Canada—and come up dry. It is an old story. In 1959, private interests first proposed putting a massive dike across James Bay and diverting whole river systems into the Great Lakes. In 1985, federal environment department officials got around to studying the scheme, and concluded the multi-billion-dollar direct costs of dams, pumping stations and canals made the proposal ludicrously expensive. Similarly, a six-state U.S. study in the late 1970s and early 1980s into the feasibility of massive diversions to rescue farmland over the Ogallala Aquifer, which has been depleted by irrigation, concluded that the costs were far too high.

If grand canals and grandiose diversions have fallen out of fashion, the notion of shipping water by tanker is still actively considered. Yet here, too, the economics are at best unproven. The Quebec government studied the issue in 1997 and found that sea water made drinkable by desalination plants remains two to three times cheaper than fresh water transported by tanker.


Yet there is something so unsettling about the world’s water situation that speculation continues. Might prices soar high enough this century to finally justify long-distance shipments? Azurix Corp., an affiliate of Houston-based energy giant Enron Corp., already manages water supply systems around the world and is exploring the potential for greater private-sector involvement—and is eyeing Canada as part of its long-term plan.

The role of such corporations is expected to be a hot topic when the World Water Council, an international think-tank, holds its huge meeting in The Hague in mid-March, expected to attract 10,000 people, in a bid to launch a sweeping strategy to avert a water crisis in the coming decades. According to the forum, 1.4 billion people now lack sufficient clean drinking water, and seven million a year die from diseases linked to unsanitary water. The problem is getting worse: an estimated 20 per cent more water than is now available will be needed to supply the needs of the three billion additional human beings who will be alive by 2025. Drought and chronic short supply are not the only pressing water management issues—thousands died in the past decade in catastrophic floods, from Bangladesh to China to Venezuela.

Shady, the Canadian International Development Agency official who is a vice-president and driving force in the forum, has guided Canadian contributions to water projects from Africa to central Asia. Shady was born into Egypt’s supremely water-conscious culture, in a little town north of Cairo in the delta of the Nile River. “Where I grew up you would look around and think you have lots of water,” he recalls, “then drive for half an hour and be in the middle of the desert. Irrigation was life there; the extremes of water govern your life.”

TRENDY Year Canada passed France as top exporter of bottled water to the United States: 1998

Shady suggests that Canada’s unique experience brings its own profound understanding of those extremes. “We have the very, very wet Atlantic and Pacific coasts, and the very, very dry areas in Saskatchewan and Alberta,” he says. “We have floods, dust bowls, the frozen North.” That climatic variety has spurred solutions—from the inter-provincial apparatus that governs the rivers that thread through parched Prairie farmland, to the binational Canada-U.S. system that controls the prolific flow over Niagara Falls—that might be adapted to problems in, say, Central Asia or the Nile basin. Bulk exports are unlikely to matter much in such poor places, Shady says. So, in the end, if Canada is to play a part in solving the world’s water woes, tankers filled from Newfoundland lakes or B.C. rivers are unlikely to matter much. What the world might be thirsty for, though, is Canadian expertise and aid dollars to flow to some of its driest corners.

For more information and key links on water issues, log on to www.macleansca.