Prior to the enactment of the current Water Act, it was virtually impossible
to transfer provincially licenced water rights in Alberta. However, as the shortcomings of current water
management regimes have become more apparent, water rights transfers are being
promoted as one of the solutions.
The debate over water
rights trading is an important one for the Alberta public, but it begins with
understanding the current system.
The following article includes adapted sections from a report authored by Water Matters' Executive Director, Danielle Droitsch, and Ecojustice Canada's Randy Christensen. The 2008 report, Fight to the Last Drop: A Glimpse into Alberta's Water Future provides an overview of a number of water allocation challenges in Alberta with case studies on the controversial Balzac water rights transfer. Selected portions from the report include excerpts related to Alberta's emerging water rights transfer system.
A water right refers to the right of a user to divert water from a water source (e.g., a river, stream, lake or source of groundwater). In Alberta, a water right is articulated on paper as a water licence, which the government issues under the Water Act and its regulations. A water licence typically defines the amount of water that can be diverted, the timing of diversion, the rate of diversion, the source of water, and other terms and conditions, as well as the seniority of the water right. Seniority is determined by the date of licence application and determines who gets their water first in the case of a water shortage.
A water rights "transfer" occurs when a water license holder transfers all or a portion of their water licence to another party, which often involves a financial transaction. Generally a transferred water right maintains the same seniority and terms and conditions of diversion as stated in the original water licence. Because the water right is bought and sold between willing buyers and sellers, the term ‘water market' is often used.
According to supporters, the ability to transfer a water right gives licence holders an incentive to use water efficiently because they are permitted to sell or lease any water they do not use. Transfers also make possible the reallocation of water rights from economically low value uses to higher value uses. Theoretically, a water rights transfer may help avoid conflict as existing licence holders are not forced to give up or share water rights but could do so voluntarily if motivated by a sufficiently attractive financial offer. Water rights transfers can enable the ‘freeing up' of water to new users. New users could then gain access to water without incurring the cost to the environment by withdrawing new water from the river or other source. Other jurisdictions have been successful in ensuring environmental flows are maintained in the transfer of water rights.
Critics, however, point out that water serves social and environmental needs that are too important to be left to the whims of market forces. Some argue that the preservation of a commercially valuable fish population is more socially useful than the profligate watering of a golf course; however, market forces may favour the watering of fairways and greens. In other words, environmental interests are not able to compete in the market as it is now structured. The benefits of environmental integrity accrue to society (and non-human interests) collectively and it is naive to expect individuals in search of profits to volunteer to pay for public benefits at the level required for a healthy environment.
Transferring water from one use to another is potentially complex. The potential environmental impacts and management challenges of water rights transfers include:
- Reduced return flows (or an increase in consumption by the transferee leaves less water instream for other users)
- Transfers of seasonal rights (may change the timing of diversions to a high demand period and may also change the total amount diverted)
- Stream conveyance losses (a change in the point of diversion may increase channel losses)
- Changes in the point of diversion (a downstream transfer of a senior right may have an impact on a junior right located between the original diversion point and the new diversion point)
- Temporary storage problems (noting that, while most uses provide return flows, the timing of these flows may be an important asset since delays in returns may produce benefits by potentially providing storage and therefore deliveries in later, low-flow periods)
- Changes in water quality
- Harm to those not taking water from the river (social and economic impacts on communities)
One of the major concerns about Alberta's system is its willingness to allow the transfer of "sleeper rights" — water rights that were allocated in a licence but were not actually used. Many jurisdictions limit transfers to quantities of water actually used. For example, most US states with prior appropriation water allocation systems limit the maximum amount transferable to "historical use", an amount often defined as "an average of recent years' use." As Nigel Bankes has pointed out, specific problems arise with the transfer of water rights that have not been fully utilized before the transfer:
"Environmental concerns with water transfers frequently emphasize the problem of so-called sleeper and dozer rights. These are rights that are not used up to the full level of the licenced amount. The creation of a market provides an incentive for the licencee to transfer its entitlement with the transferee inevitably making more intensive use of the water right with the necessary implication that there will be less water left for the aquatic environment. But even where existing rights are fully utilized (i.e., the right is not a sleeper right), there will still be an incentive to conserve and intensify the use of water. While this may be socially desirable and lead to the adoption of more efficient irrigation systems, it may also lead to the loss of wetland and riparian habitat as water users seek to reduce canal losses, etc. Greater efficiency may also reduce return flows on which other users depend. Intensification of use and reduced return flows may also have a detrimental impact on water quality.
"The literature identifies various mitigative strategies that may be used to overcome some of the social, economic, and environmental concerns associated with transfers. These include prohibitions (or serious restrictions) on inter-basin transfers, requirements for prior approval of transfers, no-harm analyses prior to approval, prescribed limits on the proportion of water that may be transferred, restricting transfers to amounts actually used or consumed, the prescription of appropriate ground rules (such as instream flow and lake level requirements) to protect important public values, and allowing conservation organizations and others to use the transfer system to acquire instream flow rights to protect the aquatic environment."
With the passage of the Water Act in 1999, Alberta now allows transfers but recognizes that those transactions need to be carefully regulated. Under section 82(5) of the Act, the following factors may be considered by the Director with respect to any transfer:
- Effects on the aquatic environment and any applicable water conservation objective
- Hydraulic, hydrological and hydrogeological effects
- The amount of water that the licencee has historically diverted under the licence
- Any other matters applicable to the transfer of the allocation that the Director considers relevant
Under Section 83 of the Act, Alberta Environment may hold back up to 10 per cent of the water being transferred under licences so as to keep that 10 per cent in the river. The increasing number of transfers of rights from licenced water users to others is evidence of the emerging water market in Alberta. Since 1999, there have been 26 permanent water rights transfers. Moreover, there are now commercial operations and websites dedicated to brokering water rights transfers.
In the long term, how the Alberta government approaches the seemingly arcane issues of water rights transfers will likely determine in large part the future water security of Alberta's rivers and its citizens. There is no single path toward securing the future of the province's water supplies, but it is clear that the current one is pointed in the wrong direction. Change is necessary. A robust regulatory framework with a solid system of governance, accountability and assurance that the public interest and the environment are protected should guide future water allocation decisions in Alberta. The approaches chosen, however, must be consistent with Alberta's overall strategies for managing water and promote a range of long-term options, environmental sustainability, social equity, and economic prosperity.
Sources
Bankes, Nigel and Arlene Kwasniak. 2005. The St. Mary's Irrigation District licence amendment decision: irrigation districts as a law unto themselves. Journal of Environmental Law and Practice 1. 16:1.
Nigel Bankes. 2006. The legal framework for acquiring water entitlements from existing users. Alberta Law Review 44 (323). p. 27.
Joseph L. Sax et al. 1991. Legal Control of Water Resources, 2nd ed. West Publishing: St. Paul, Minnesota.
Government of Alberta. 2000. Water Act, supra note 9, s. 82(5)(c)(iii).
Alberta Water Transfers. 2007. Home page.
