Water, Water Everywhere But Canada Won’t Sell It

Commentary, Environment, Frontier Centre, Uncategorized

With an average annual rainfall of 33 feet, Link Lake in British Columbia sends enough water into the Pacific Ocean to meet all of California’s water needs for the next 20 years, according to widely published estimates in the Canadian press.

This is but a small example of the comparative advantage Canada has in marketing water internationally. Yet, in July, when President Bush said he wanted to talk to Prime Minister Jean Chretien about a pipeline to ship fresh Canadian water into the parched American Southwest, he was brushed off. This is because selling water to the U.S. is considered politically incorrect by Mr. Chretien’s nationalist base. Nevertheless, it makes a lot of sense.

Canada has only a half percent of the world’s population but it holds one-fifth of the planet’s freshwater supply, half of which is renewable. It already sells an estimated 30 billion liters of water a year abroad, but only in containers no larger than 30 liters.

Bulk water sales could be a lucrative source of foreign exchange for Canadians, yet the government remains firmly opposed to it. Numerous ideas for bulk water marketing have been proposed in recent years, but almost all have been struck down either by the federal government, which forbids water sales from international boundary waters, or by provincial governments, which have jurisdiction over freshwater sales from their own provincial sources outside the Great Lakes.

This is a paradox for a country that hungrily seeks American markets for its comparatively finite petroleum resources. “Food, lumber and bulk water are all renewable resources, but we export only the first two, because water is sacred,” comments Lee Morrison, a retired member of parliament. “Meanwhile, we merrily dispose of precious, non-renewable natural gas and oil. When it’s gone, our lives will be much less comfortable, but we’ll still have 20 times the water we need.”

Even though most Canadians now approve of bulk water sales, nationalist groups like the Council of Canadians and their allies in the labor, environmental and aboriginal communities have mounted campaigns against every proposal. “They’re coming to take our water,” intoned a recent poster campaign by Water Watch, a group of lobbyists patched together to fight against bulk exports. They insist wrongly — by most accounts — that under the North American Free Trade Agreement, once water has become a salable good, its sale cannot be stopped. Even if that were true, it’s not clear why it would be a problem. Despite some ecologists’ warnings of unforeseen dangers from water transfers, there is little detailed science to support such concerns.

Fortunately, there is some hope that the wisdom of water sales may eventually triumph over emotionalism. Last spring the McCurdy Group, a Newfoundland company looking for permission to tanker 13 billion gallons a year from pristine Gisbourne Lake, received an unexpected endorsement from Newfoundland’s Liberal Premier Roger Grimes. Mr. Grimes has promised to use the money the government gets from the deal to underwrite university tuitions in Canada’s poorest province. A better plan would be to auction the rights and use the proceeds for much-needed tax cuts.

The McCurdy Group is still waiting for an official go-ahead but thanks to Canadian law, the federal government can’t stop the province from granting the permit. “We don’t want to sell water in bulk,” says Mr. Chretien, “But at the same time, we have to realize that we don’t have absolute control of the water. We have control of navigable waters, but we don’t have control of other types of water that are under the provincial jurisdiction.” Ontario and British Columbia have already said “no” to companies that want to sell water by tanker but if Newfoundland has success in water marketing that might change.

Still, it is the pipeline debate that really matters. Consider a 30-foot pipe running from the mouth of the Nelson River in Manitoba near Hudson Bay to the American Southwest. (Placing the pipeline at the mouth of the river would allow the water to run its course nearly to the sea and thereby minimize environmental impacts.) It could carry an annual flow of 1.3 trillion gallons, only three days’ worth of the fresh water now flowing into Hudson Bay annually. The cost would be about $34 billion to build, and if the water it carries was sold at only one-half to three-quarters of a cent per gallon, the province of Manitoba would garner $2.6 to $5.9 billion a year in profit.

The price of the pipelined water would be higher than what subsidized farmers in the U.S. now pay but lower than the desalinated water that is bound to become a staple in the thirsty Southwest. Pipelined water from Canada would be about $1,630 to $2,445 an acre-foot, far above the $50 to $100 rate now available to U.S. farmers who qualify for federal subsidies. But that bargain-basement rate has long been under attack by market economists, who dislike its concomitant resource distortions, and environmentalists, who decry the resulting waste. Moreover, if the Sun Belt continues to boom, current water sources will not be able to meet demand. The price of water from desalination plants then becomes the benchmark, and it is running at $2,000 per acre-foot. The pipeline option looks less whimsical when viewed from that perspective.

This economic potential makes for a compelling argument in a country with a standard of living 30% below the U.S., but logic has little power over religious fervor. “There is something about water that’s part of our history, part of our soul, if you will,” explains ultra-nationalist Maude Barlow. Western Canada’s dustbowl experience was vicious and memories die hard. Alberta wrote a new Water Act about 10 years ago that allowed the commercial sale of water rights, but hamstrung the public by forbidding the transfer of water from districts with abundance to those with chronic drought problems. If Canadians can’t sell to each other, it’s unlikely that they will be allowed to send water over the border, even for a good price.

Mr. Chretien’s position is that Canada’s water is not for sale. But this may change as more of his colleagues come to understand the opportunities presented by an intelligent and environment-friendly water export policy. Canada’s freshwater advantage could help fund its stressed public-healthcare system or, better yet, cut the country’s high taxes.