Season 2, Episode 11: The Water Act and Licence Transfer System
with Dr. Arlene Kwasniak and Davin MacIntosh
In episode 11 of season 2, part of a water series, the discussion centers on the legal system and water market in Southern Alberta. The podcast features guests Arlene Kwasniak, a law professor, and Davin MacIntosh, a water rights facilitator, who explore the intricacies of water law and transfers. The conversation highlights the historical and current frameworks governing water rights, the challenges of the “first in time, first in right” principle, and the complexities of water transfers. The episode also addresses the need for reforms in water management to ensure sustainability, equity, and adaptation to climate change. Listeners are encouraged to engage with ongoing consultations on water availability and management in Alberta.
Introductions to Arlene Kwasniak and Davin MacIntosh
Jenny:
Welcome to The Gravity Well Podcast. I am your host, Jenny Yeremiy. Here you break down heavy ideas with me to understand their complexities and connections. Our mission is to work through dilemmas together in conversation and process. I acknowledge that I live on the traditional territory of Treaty 7 and Metis districts 5 and 6. The treaties and self-governance agreements established by indigenous peoples were created to honour the laws of the land, maintain balance with nature by giving back and uphold reciprocal relationships. This knowledge and intention are what guide The Gravity Well conversation. I ask for genuine dialogue, real hearts, and openness to different perspectives. This is your invitation to find common ground with me.
This podcast is dedicated to the natural world, our children, nieces, nephews, grandchildren, and all future generations. The gravity well is on YouTube and streaming wherever you get your podcasts. Join us@thegravitywall.net. Welcome everyone. Very glad to have, of course, Bob Morrison, my co-host in this water series that we’ve been doing. This is our third episode now, but we are in the midst of season two. This is episode 11 for anybody who follows the show. We are talking about the legal system and the water market today. We have two guests with us, Arlene Kwazniak, who’s a Professor Emeritus of Law with the University of Calgary law faculty and Davin MacIntosh, who practiced planning and municipal law for several years before facilitating water transfers. Really excited to dive into these two areas of water for us. Why are we talking about Water in Southern Alberta? This is a series of podcasts that is for the general public, for people involved in water. We want to empower those that are working in water and concerned citizens who wish to take positive action towards water security in the future. We’ve had two conversations so far. We did a history of irrigation with Shannon Stunden Bower and Jordan Christianson, and we’ve done one conversation in the environment, which is what this conversation sits within. And that one was on the impacts of resource extraction with David Mayhood, Jason Unger, and Younes Alila.
Both of those are available on my website, thegravitywell.net, and after these conversations, we’ll move into stewardship. That’s going to be in the next couple of weeks, reducing our impact. And then in the future conversations will happen in the fall. We might be looking to the two of you to return for some clarification questions then if this all goes accordingly. Thank you so much for being here. Let’s just do a quick round of proper introductions if you would. Bob, can we start with you please?
Bob:
My name’s Bob Morrison and I’m a retired planner. Originally we worked in water management and transportation planning. Since retirement, I’ve been involved in municipal issues and my main concern is getting people to understand water and how important it is in their lives. Thanks, Jenny.
Jenny:
Thank you, Bob. Arlene, you’re next, please.
Arlene:
Yeah, I am Arlene, Kwasniak, as you said, professor Emeritus of law, faculty of law. I’m also an adjunct with Environmental design and senior Research fellow of the Canadian Institute of Resources Law and I’ve been involved with water law for several years, I guess, since taking water law from David Percy back in 1979 or so. And I think he really got my interest going and it’s been kept on since then and I’ve been publishing and doing what I can to help sustainable water use and aquatic ecosystem protection.
Jenny:
Thank you so much for your work, Arlene. Really excited to hear more about it. Davin, please introduce yourself.
Davin:
Sure. Davin MacIntosh. I’m the owner of Water Transfer Alberta. I guess my interest in the space started when I was doing my undergrad law degree and people like Arlene and Nigel Bankes at University of Calgary inspired me to learn more about the area. I went on to have a career as a planning and municipal development lawyer with a couple of Alberta’s biggest firms where many of my clients were developers or municipalities and had questions about the evolving framework for water rights in the province. And seeing that as an opportunity, I went back to UFC and did it at a master’s and worked with Arlene. A pleasure to be here with Arlene today and started Water Transfer Alberta in 2007. Since then, I’ve been, I’d say it’s consultancy under brokerage for water rights, and I’ve been involved in a significant proportion of the water transfers that have happened in the Bow River Basin, then also many in southern Alberta.
Jenny:
Yeah, excited to hear more about this area, a space where people are not really clear on how this all goes down in our province. I’m very excited. Okay, we’re going to start with you Arlene. Arlene has prepared a presentation for us, so let’s get going on it. Please.
The Legal Framework for Water Management in Alberta
Arlene (00:05:20):
I was asked to talk about laws that affect and regulate water and water use in Alberta, and there are tons of them. I think we start with the constitution of Canada, which divides legislative powers, who can regulate what, and you’ll see that there are lots of federal powers that can deal with water issues such as fisheries, some pollution that can harm fisheries, migratory birds navigation, navigable rivers, water embed shores on federal lands as well as indigenous lands, interprovincial and international water species risk. Though we can’t discount that, there’s a lot of federal interest, but I won’t be talking about that today. And then provincial laws can regulate water as a provincial property, and I think that’s the main constitutional basis that I’ll be talking about. Water use rights, pollution, water bodies and bed shores, environmental matters, municipalities, things like fishing limits. And then the constitution of course recognizes and affirms existing aboriginal rights and treaty rights.
There’s a whole body of indigenous water law and we constantly are trying to determine the extent of indigenous water rights, but I have no doubt that they exist. And then there’s federal and provincial statutes that are made hoarding to these constitutional divisions of powers. There’s the indigenous law and the common law, which I’ll talk about a little bit, international law in there, policies which are something less than law, but governments make and can be very important with how we manage water and water rights. I’m going to mainly focus on water use management and water rights primarily under Alberta water legislation. But before I start, I just want to say, well, what if we could just invent a water law out of the blue without having anything else to worry about? What would we do? Well, I think what we’d have to do is we would invent a water management system where we wouldn’t let particular water rights holders inordinately impact private or public interests such as impairing in any significant way aquatic ecosystems.
You need mechanisms in the law to curb, cancel, and appropriate diversion rights in the public interest. You also need to secure sufficient instream flow to make sure that you have water systems that will even accommodate human diversions. You needed secure water for drinking, washing and other basic human needs. It regulates quantity and quality. That just makes sense because of course, pollution, assimilation, it depends upon the amount of water one is dealing with. You didn’t have something called conjunctive use where you’d regulate both groundwater and surface water together because they do form a system. You’d incorporate watershed governance and management. You would not just regulate the water in a watercourse or a water body, but also bring in the water uses on the land because they can affect what’s in the water body. You clarify rules regarding alternative sources because water that we can use doesn’t just come from rivers and lakes, it also comes from wastewater, reused rainwater, stormwater and Selene water, which I don’t have down here, but it’s also very important to the oil and gas industry.
And you would incorporate climate change mitigation and adaptation plans and actions because this is not only inevitable but happening and impacting our water resources. What is the background to our water law? And at the end, if I have time, I’ll go through those things I just mentioned to see how our water law measures up. Prior to water management and use legislation in Western Canada common law riparian rights apply. And this is a common law court made law and under it only occupants of riparian land land that is directly adjacent to a river or a watercourse for a water body had the right to divert and use water. And they also had the right to the continued flow. All riparian zones were subject to that limitation. There were two basic riparian rights, the household use, which was very limited to things like drinking water, washing clothes, just what really a household would need and an extraordinary use, which could include commercial uses, but all the uses much must be reasonable and leave the water source undiminished in quality and quantity.
There was built-in equity for riparian zones and sustainability limits because each riparian had the same. If someone was violating someone else’s riparian, right, they could go to court to try to enforce it. But riparian rights weren’t really working in Alberta and in the other what were back in the 19 hundreds called the late 18 hundreds called the Northwest Territories. The Dominion at that time passed a legislation that was called the Northwest Irrigation Act, meaning the dry prairies. There weren’t really that many riparian zones and this act extinguished all riparian rights except for the household, which was then quantified in the legislation and a couple other riparian rights which still exist such as the right to land that accretes to your property in a slow and perceptible way. And there are still some modified access rights to the water body or water course.
The Northwest Irrigation Act, and in subsequent legislation the way it works is that the crown claims ownership of all the water in the province and the right to divert use and generally disturb it. Since it claims it owns it, it can then give that right to people who apply for it to divert, use or disturb water through legislation. And the way that’s done is through statutory authorization. And I should mention that the Crown also claims ownership of the Bed shores of rivers and other water courses and lakes and permanent naturally occurring water bodies. But that’s under a different set of legislation. Most water rights beginning with the Northwest Irrigation Act are based on the principle of priority allocation, known as first in time, first in right or FITFIR. You don’t have to be a riparian owner to get a FITFIR, the priority or the right to divert is based on the date of the application for a water licence.
And what that means is that in times of shortage, the most senior gets all of their allocation before any less senior has the right to any water. And I like to use the following analogy, how this would work with water is like if you have Joe who got his water licence 100 acre feet, that’s how they were measured back then. Amount of water needed to fill an acre of land in 1900 and then Sally 50 in 1946 and Mary in 1988 and these licences run with the land. Even though Joe’s not with us, whoever who owns that land would have that right, could get all his 100 acre feet even though it might be downstream from Sally or Mary before Sally or Mary have the right to any of it. It’s sort of like if we had a family food supplement supply entitlement rules where the oldest person gets as much food as they need, as might’ve been determined sometime, and then the next oldest gets to fill their food needs and then follow the same pattern until the family runs out of food.
Grandpa Joe gets to eat everything he wants and then whatever is left, goes to Sister Sally, then to Dad Doug, then to mom Sue, and then to baby Bev. What could happen in a time of shortages, the most junior entitlement holder just gets nothing at all. We have to ask ourselves right now, is this really a reasonable way to allocate water? The Northwest Irrigation Act was law until the transfer of public lands and natural resources from the dominion to the Prairie provinces in 1930. As you might recall, the dominion held those public lands and natural resources back from the prairie provinces when they became provinces, and then Alberta then had to pass its own legislation, which it did with the Water Resources Act in 1931, and that only applied to surface water as in the Northwest Irrigation Act and then Water Resources Act added groundwater to the crown owned water.
All of a sudden it said we own groundwater as well in 1962 and before that the rule of capture applied at common law where the owner could just take as much as they wanted and the heck with any other groundwater users. But then it was now subject to the groundwater and was subject to prior allocation and FITFIR just like surface water. And then the Water Act replaced the Water Resources Act in 1999 when it was declared into effect and FITFIR was carried forward in the Water Resources Act and in the Water Act. And I can tell you there was discussion on whether it should be because I was a member of the Water Management Review committee that gave their recommendations to the province in enacting the Water Act and there was a lot of discussion, although the main water users certainly won the day and FITFIR stayed.
What the Act does that’s different from the Water Resources Act, I guess the first thing it does is it divides the province into what are called major river basins. This is just a map of it and I just want to mention that there is a, I guess I can call it a consultation, although the government calls it an engagement on water availability because the government is going to be amending the Water Act in various ways, and I have it here as Alberta Water Availability Engagement Survey (WAES), which anyone can fill out online until June 30th. One thing that wants to do is to merge the Peace Slave and Athabasca basins that certainly will have consequences for water transfers and maybe other things as well. Another major change is it brought in planning requirements and mechanisms and most significant are what are called approved water management plans because these must be considered in some important regulatory actions under the Water Act such as transfers, and there are only three, as far as I know right now, the South Saskatchewan River Basin approved Water Management Plan, battle River approved Water Management Plan and the Milk River approved Water Management Plan phase one.
There’s lots of other water management plans, but they aren’t approved by Cabinet, they don’t have the same regulatory impact in effect in the Water Act. How does one get a water right? Well, there are statutory authorizations. The first one is an exemption. I think it’s a regulatory right, but it means you don’t have to do anything more to acquire it. There are specific exemptions in the regulations for fire control and things like that, but the main ones are the household use exemption, which pretty much brings forward the household use riparian, right, quantifies it to 1,250 cubic meters a year, and it only applies to riparian but also groundwater users. Then there are agricultural use exemptions and for traditional agricultural uses up to 62 50 cubic meters a year. This is things like raising cattle and having dugouts, and again, here I have the water availability survey noted because the government is proposing to increase the number of exemptions and also the quantity of water that is exempted or you could acquire a regulatory right, such as a licence or an approval.
Yeah, licences are the main ones that we talk about today because they give the right to divert a quantity of water for an authorized purpose, typically for a 10 year renewable term under the Water Resources Act and predecessor legislation, there was no term, the existing licences, the ones that still exist don’t expire, but water licences are, I understand quite easily renewed. The purposes are set out in the regulations, the government has the right to change purposes without amending the statute, and I’m not going to go through them all, but as you can see there as one could expect municipal agriculture, irrigation, commercial and so on and so forth. But then some interesting ones like Habitat Enhancement recreation implementing a water conservation objective, which I’ll talk about a little bit. And then any other purpose specified by the director has seemed to have fallen off this, the director can just get an application for a water licence.
Then I guess just identify a purpose and it can be a purpose for a water licence. This is an old slide, but it does show you who the main water users are. We have agriculture being the largest commercial and then oil and gas and then other uses in the municipality. Some points on the Water Act licences compared with Pre Water Act licences, what are called the existing licences is they can have water conservation objectives or conditions. That means that the director under the Water Act who’s issuing the licence can require what are basically minimum flow conditions that if the water source does not meet certain minimum flows, then the director has the right to cut back on the amount of water that the licence holder can divert as determined by the water conservation objective. How much water does the government want left in the watercourse?
Now I just want to mention and compare these two in-stream objectives, which are, that’s the term that was used for minimum flows prior to the Water Act, on the existing licences you might have in-stream objectives which also give the directive the right to cut back on the allocation if the instream objective isn’t met, but it could be quantified in a different way from the water conservation objectives and is usually less as far as we can ascertain, but also compare both WCOs and IOs, to instream flow needs, because instream flow needs are scientifically determined quantity and quality of water that is needed to protect aquatic ecosystems, and this is a scientifically determined amount and as opposed to more of a politically determined amount with the WCO and the instream objectives, which are okay, the government may determine what the water course needs the instream flow needs, but then just take some number between that and nothing and make that as the WCO or the IO to enable as much allocation as it wants.
The Pre Water Act licences, the existing licences are really greatly protected under the Water Act and in that if the terms and conditions of existing water licences are inconsistent with anything in the Water Act, the terms and conditions apply, which is pretty amazing to me. And new water licences can be modified subject to certain limitations including because of ecological aquatic ecological conditions and some with compensation payable, but this does not apply to existing licences and new water licences can be transferred in regulated and limited situations and Davin will be talking about that. I have WAES written in a couple places here because the government proposes amendments, which will alter what I say here. Back to the obvious points. This was a really brief overview, how does the Water Act measure up with respect to not permitting water right holders to inordinately impact public and private interests in water?
Well, they curb in part, at least for new water licences, but existing water licences, there’s not much the government can do about them, but there’s no appropriation power, which I think is quite amazing since government can expropriate private land and water rights are not even property interests. Cancellation power is very limited water, right? Only if the water right has not been used for three years and there’s no reasonable possibility that it will be used securing sufficient instream flow where there are a few tools in the act, but they are really quite limited in recognizing indigenous water rights and securing water for them. The Act does not do that. Securing water for drinking, washing and other basic human needs household use, right, does have the highest priority. It does that, at least in part regulating water with quantity and quality. No, the Act doesn’t do that. Conjunctive use groundwater surface water. I think maybe the government tries to do that when it’s consistent with FITFIR, but there’s no requirement incorporating watershed governance and management, certainly not formally, although there are all kinds of things like watershed organizations that work towards this, clarifying rules regarding alternative sources, wastewater, so on rainwater and so on. No, but the government plans to add these into the Water Act, corporate climate change and mitigation adaptation. Sorry, it does not do that. That’s the end.
Davin:
Would you give it an A, B, C or D?
Jenny :
D or yeah, please. Would you pass this act? Is this something that you feel is sufficient?
Arlene:
No, absolutely not. No. I think it certainly did a few things over the Water Resources Act, which are good, but it could have done a lot more. It could have just done and FITFIR, it’s been done at other places in Saskatchewan, Australia, New Zealand, and have more equitable way of distributing water, and I think it probably could do it with respect to water management generally, but honestly, I know from being on the Water Management Review Committee that the really powerful sectors, oil and gas, municipalities and agriculture just wouldn’t have it FITFIR is pretty solidly in there. It’s not going anywhere.
Jenny:
Right. Yeah. I have so many questions, but I’m going to ask one out of the gates, which is I loved your diagram of showing Joe have his senior licence and that comes first. I don’t understand how that works in a geography sense. Meaning if you have somebody down in the irrigation district that has a senior licence, presuming that that’s true, how would somebody who has a junior licence in the headwaters know that there’s not enough allocation for them to receive their licence? I am just wondering in real time, how would that decision be made?
Arlene:
Well, I understand it’s done in conjunction with Alberta Environment and they will let you know when you can have your water. Is that how you understand it, Davin?
Davin:
Yeah. Well I think the long and short of it is it’s rarely if ever being done priority calls have rarely been, rarely happened on the basis despite that it’s the cornerstone of the act and Alberta has of course taken on lots of initiatives to avoid priority calls in anticipating shortages. We saw last year big multi-stakeholder negotiations to get voluntary reduction so that a priority call wouldn’t happen. And if you think about the risk of a priority call, many of the more junior licences, if you go back to Arlene’s slide, which showed how the relative proportion of uses municipal uses are growing and most of the rest are staying more stable, so many of those more junior licences are held by municipalities or for municipal purposes and you can’t cut off people’s drinking water.
Jenny:
Right. That’s the one thing I heard that is protected in the Act primarily is household use you were saying, is that right?
Davin:
Yes, household use generally, but licences issued to municipalities do come with a priority and are FAI subject to first in time, first in just like every other licence.
Arlene:
If you don’t live in a riparian and you get your water from the municipality, you’re getting the water is as good as the municipality’s priority though as Davin says, there really hasn’t been a call, so don’t have to worry about it very much.
Bob:
In terms of the groundwater, can they apply FITFIR to groundwater, but if an irrigation district wanted to make a call on their priority, would they be able to go after groundwater people as well?
Arlene:
I don’t see why not, especially if the groundwater is connected to the surface water and can impact it, but I don’t really know technically how that would work.
Bob:
It would have to be connected to the system. It wouldn’t be fossil water that is not connected to the river system anymore.
Davin:
Yeah, I mean generally speaking in the water regime there is a pretty big separation between surface water and groundwater and the Water Act focuses on surface water, and typically you don’t see groundwater serving larger users because the amount of water you can get out of a well is pretty limited unless you’re lucky enough to sit over a giant aquifer that isn’t connected to the river to surface water. Because if you have a well that’s near a river and it’s seen as connected, then technically you need a surface water licence even though you’re taking the water out of the ground.
Arlene:
Yeah, that’s right. And then it would just be subject to all the surface water priorities.
Bob:
Well, that leads to another question I have. TransAlta has on the Bow system, they’re hydroelectric plants, and those originally came in under, what was it, the Dominion Water Power Act, and then they somehow got into the Water Resources Act. Then back in the 1980s, I think, the provincial government said, okay, now part of the priority system, which apparently maybe they weren’t before that. Has anybody ever analyzed that to see if TransAlta had some sort of special rights in terms of FITFIR?
Davin:
I don’t know how much it would be worth considering because as you said, their rights are among the oldest in the province. If they did, they would have effectively first priority anyway. I think in the end it’s a moot point, but there have been negotiations between TransAlta and municipalities over the years about how to deal with water shortages and floods and all kinds of other things, and TransAlta does hold a lot of potential power in the system.
Bob:
Yeah, that’s the reason I was asking is because every time things start to get tight, whether it’s flood management or management during a drought, people tend to look at TransAlta and say, can you help us out? And I was wondering how they potentially may not fit into the system or maybe they’re completely in the system like everybody else.
Davin:
It’s my understanding that they are in the system like everybody else at times, they’ve explored opportunities to wield that power or monetize some of their interests, and at other times they’ve just wanted to help and collaborate with municipalities and other big users.
Bob:
Right. We’re hoping to have a conversation with TransAlta at some point in this series.
Jenny:
You mentioned Instream flow needs and how that can be scientifically quantified or substantiated, let’s say. I’m curious again, in terms of execution being a scientist and wondering about how would that be enforced? Again, thinking about a river and its needs and significant potential water shortages on the landscape, how would the rights of nature, let’s say, be enforced through the Water Act or would it be other, is it a federal question? I’m just curious how that would actually be enforced,
Arlene:
Whether it’s a federal thing. Curiously, I had another student who, Davin knows Maureen Bell who wrote a thesis on that, and she argued it could be though I don’t think the federal government has acknowledged it, and certainly the province hasn’t, but the way IFN–Instream flow needs could be enforced. Would it be only to the extent that the Water Act recognizes them and has some sort of law that requires that they be enforced and right now they’re not. There is WCO, which could be enforced in the water conservation objectives can be enforced with respect to particular licences and instream objectives. But as far as I have been able to ascertain and I rely on others to do the science here, that IO and WCO is not the same as is less than IFN. You can maybe protect some of the water, but not all.
Arlene:
And there’s also a possibility of government WCO licences, the government could give itself a licence to protect WCO, which I understand it has done, and then that water is presumably protected. But there are no, as I mentioned to earlier, just when we were just having a conversation that there are no instream flow private Instream flow licences, you can’t get a licence under the Act just to protect Instream flow, or at least we tried and Davin and I and Maureen Bell tried, but we’re not successful. That’s on the WAES, the water availability survey. If people are interested, they might want to ask the government to amend the Act to clarify that you can have instream flow licences. I think that would go a long way or at least part of the way to protect and stream flow.
Davin:
I think the big picture, and one of Arlene’s criticisms of the Act, is that it isn’t very adaptive when there’s less water in the province, there’s not necessarily less use. We see the tools that the government does have as pretty limited. I think generally there was a line of thinking that was that nowhere should more than approximately 50% of natural flows be allocated under licences. And that was the motivation, the impetus for the moratorium on issuing new licences in the South Saskatchewan River Basin and other parts of the province. The remainder is allocated under licences and then you see terms and conditions in licences. Every licence is different and you see these water conservation objective conditions that say thou shalt not divert if the water is below a certain level at a certain station. Unfortunately, that’s really difficult to police when you’ve got thousands of licences out there.
Davin:
It’s really self-regulated for the most part, and it takes some sophisticated analysis, which I think probably the big users, the irrigation districts, the larger municipalities are doing a pretty good job of making sure that their use corresponds to the terms and conditions of their licences. But for smaller users who would have to go and calculate the instream flows at a couple of stations over time and decide whether they can irrigate tonight or not, it might be much more difficult. And I expect that in practice, not many farmers are doing that. Not many private licence holders.
Bob:
Arlene, in terms of Instream flow needs, you mentioned the federal powers, the Navigable Waters Protection Act, in particular the Fisheries Act. How has that played into the management of water in Alberta?
Arlene:
It really hasn’t. I mean, there are, people need Fisheries Act authorizations that they’re going to be carrying out some project that will impact fish habitat. I mean, it has played out that way. But as far as focusing on Instream flow needs, I mean there was one case from, I don’t even remember when the seventies or so where I believe a…maybe Davin can remember this. I think it was an irrigation district or maybe it was a private irrigator who was cut off by the federal government because they were using too much water and fish habitat was being impacted. But then there was a big kerfuffle over that and the federal government just withdrew from that action, and I haven’t heard anything about that since. The federal legislation is mainly approvals to do things that will impair navigation or impair fisheries. And although as I said, Maureen Bell, who’s also a lawyer practicing in the water transfer area, I think to some degree argued that the federal government has power to enforce instream flow needs in so far as they might impact navigation or fish habitat hasn’t been enforcing those powers.
Bob:
I was looking at the Water Act last night, not that I’m a legislation junkie, but I remembered a clause that was in there from some other time, and it says very early on in the act, the Crown is bound by the Act. That seemed odd to me because again, I’m not a legislation junkie. I don’t recall ever seeing something like that in the traffic laws or anything like that. Is there some particular reason why that ended up in the Water Act?
Arlene:
I think it’s pretty common that maybe it’s because it had to be clearly said in natural resources type legislation. I think it’s fairly common that the Crown is bound by its own legislation.
Bob:
It would put in the legislation specifically the Crown is bound by the act because being an ordinary citizen, I would assume the Crown’s bound by anything else just like us, but maybe not.
Arlene:
Oh, you mean that it doesn’t have to be said,
Bob:
Right? Oh, well, not being a legal expert, I would assume the government can’t just make its own law and then say it doesn’t apply to us.
Arlene:
Well, sometimes it does. I mean, sometimes it’ll specifically say it’s not bound or it’s not bound by certain provisions of the Act. I think the standard is that the crown is bound by its own legislation.
Bob:
Okay, just take that as a dumb question from an illegal dummy.
Jenny/Arlene:
That is a good question. Yeah, exactly. I didn’t know that
Davin:
As an example. I mean, you see the crown holding water licences and being bound by their terms and conditions, and when they don’t have them, they go and get them. Alberta Environment has been a participant in the system and even a potential purchaser of water rights in some circumstances.
Jenny:
Wow. Okay. If that isn’t complicated enough, now let’s talk about water transfers. Can you please help us understand, Davin, the water transfer process, how that works in Alberta, please?
Explanation of the Prior Allocation (first in time, first in right) System for Water Licences in Alberta
Davin (00:39:49):
I guess just stepping back again, big picture, why do we have the transfer provisions? And it goes back to the fact that rights were issued for over a hundred years, most without any expiry date. And along the way, I guess it was in the eighties and nineties, there was a recognition that if all those rights were exercised at once, that many of Alberta’s rivers and streams would be below environmentally sustainable levels, could have disastrous consequences for wildlife, habitat, drought, all those sorts of things. Along came the new Water Act and included provisions that would allow for the transfer of water licences, and then slightly later along with the implementation of the South Saskatchewan, the approved water management plans generally, and then an order, we had a moratorium in 2007, which stopped the issuance of new water licences in many areas of the province. That was when the transfer provisions, which were in the act from earlier, actually came into effect.
The transfer system, it’s not as simple as it first appears. I’ve been facilitating transfers for more than 18 years now, and I still get surprised frequently. It looks pretty simple on paper. You can go online and find the process spelled out in four or five steps, but I’ve seen lots of consultants who try to work through it and not many have stuck with it over the years. Yeah, I guess I’d say there are basically eight steps to the transfer process. First is finding a suitable right. It’s not easy to find rights. People generally don’t generally put them for sale. There are provisions in the act that say if you don’t have a current use for your water, they’re subject to cancellation. As Arlene said, that’s rarely happened, but if rights haven’t been used for three years or more and there’s no reasonable prospect of use, licences can be cancelled.
Going and advertising that you got water rights for sale sometimes is seen as a red flag come, maybe I don’t need it anymore. Maybe I haven’t been using it. You don’t typically see that. It can be difficult to find a suitable one. And then transfers, I tell my clients it’s a bit like arranging a marriage in some ways because what the seller sells and what the buyer gets may be quite different and the engagement will end badly if the transfer is refused. Arranging a transfer, you really have to consider and anticipate the analysis that the director will make after an application is submitted. It’s like a mini environmental review process that happens between the application from the buyer and seller to the transfer being approved. Step one, finding a suitable right, and then you have to negotiate a purchase price because someone has to give their write up, and that doesn’t generally happen for free.
That’s where the legal aspect and the business aspect comes in when contracting for, as I said, you’re not buying and selling a physical thing that necessarily comes out the other end the same, and there’s no certainty that that transfer will be allowed. It can be a little bit mired coming up with reasonable contractual terms because if both participants, both the seller and the buyer, don’t cooperate through the process of the review, then it’ll never be approved. I remember a time back in 2009 or 10, and I spoke to the approvals manager and I said, how many transfer applications have been refused? And at the time he said, well, none. And I said, how many have you had? He said, well, 50 or some, but we’ve only had a handful that have been determined to be complete. That’s the thing, you submit an application and then that gets to step two, which is confirming it’s in good standing.
And step three, which is requests for further information, the director has a lot of discretion to ask for additional information before deeming an application complete. In many cases, you see applications submitted, but they’re never deemed complete, they’re never formally refused, but they’re never approved either. Yeah, step two, you got to confirm a licence is in good standing. That is a condition precedent to consideration of a transfer application. The approvals manager or the compliance group will look at a licence, say, have there been any identification of any non-compliance issues? Has it been used? Has it been reported on? Do the works match the plans on file, all that sort of stuff. And sometimes that can take a lot of time. I had a licence transfer a few years ago and it was a little private irrigation canal, and it had changed over the hundred years or so that the licence had been issued.
The check structures were in slightly different places or they didn’t look exactly as they did in the original plan. They’d still been using it and reporting it. It wasn’t really not in good standing, but it didn’t match the plan. And interestingly, Alberta environment said, well, go fix it all, go make it match the plan and then we’ll consider a transfer. All this money and time was spent rebuilding works so that they could be retired a few months later. And that happens quite frequently. Yeah, then there’s a paper application. The paper application looks pretty simple, buyer and seller sign that they’re in agreement and how much of the allocation’s going to be transferred and what rate of diversion is going to be transferred and then come the request for information from the director. Historically, there’s not much in the act that limits what the director can ask for a tremendous amount of discretion to ask for very specific detail or very general detail.
And this has been a challenge, especially in light of all kinds of, I could say policies. I mean the director’s consideration is supposed to focus around two basic heads of consideration, which is the effect on the aquatic environment and other water users. And that doesn’t give much guidance on what exactly the director should look at in deciding whether a transfer should be approved or denied and you get transfer applications to go from one side of the province to the other or from a big river to a little creek or vice versa. There’s all kinds of ways that you could look at the impact on the environment and other users of those proposed transfers. And there hasn’t been much bounding that. What we’ve seen is a host of policies, administrative policies, but unwritten generally not. You can’t find them anywhere a list of how these things are all considered.
I mean that’s really been a core of the value. I added a lot in a lot of cases to transfers is just understanding how different directors think sometimes, but also how those policies are evolving, how those considerations are evolving and being implemented. We’ve seen all kinds of policies that get discussed, and some of them do get documented at some point, like a few years ago, they stopped allowing transfers that went around a corner from one side of a tributary to another because of the lack of apparent connectivity between the flow of the water. Apportionment is another policy that has been discussed a lot. What that means is when you’re transferring a right from a bigger river to a smaller tributary, you can only move the percentage that tributary contributes to that bigger river upstream to the tributary. And that really changed the system and changed prices and changed what was being approved.
And that was phased in over time. Just ideas and considerations of a couple of different directors and others at Alberta Environment. See other things like good standing once or twice, I’ve seen a good licence be determined to be in good standing, but only part of it’s in good standing, not all of it. That was an interesting one. And then we’ve seen lots of back and forth on the issue of whether to impose the conservation holdback. The Water Act allows for a 10% conservation holdback, 10% of every licence transfer to be issued as a water conservation objective licence to the government. For a while it was imposed on public transfers, but not between municipalities or other groups. Then it was imposed on everybody. And now with the new consultation, it looks like it’s going to be scrapped. I think initially that was intended to help put more water back into instream flows, generally protecting instream flows and making system more adaptive at the end of the day, given that only about 400 transfers have been approved in Alberta since 2007, and many of those have not really been arm’s length, like probably half or actually arm’s length deals, the volume of water that’s transferred has not been significant enough to add up to significant WCO licences through the conservation holdback.
I think that was part of the consideration and allowing licence holders the luxury of not having to lose 10%. Okay. I was going through the steps. One is finding the licence. Two is confirming good standing. Three is the application, four is the request for information. Then there’s a mandatory public notice usually that is a required publication in a newspaper or other media source in the area. And then there’s a 30 day period during which anyone who thinks they might be affected can submit questions or concerns. After that 30 day period, the applicant would respond to those statements of concern. Not very clear how much Alberta Environment participates in that response process or the applicant or what the standard is. That’s an interesting sort of question in my head. I should know I’ve done this a million times, but it’s never clear how much of that burden falls to each.
But then the director has the discretion to also request a public meeting, which could mean an opportunity to dig a bit deeper into some of those issues that have been raised with statements of concern and then another additional period for submission. And then yeah, sometimes following all that there are additional requests for information. And then finally a decision. I do notice that in the water engagement study, it looks like they’ll be putting some cap on the number of requests for information, which I’m sure all licence transfers are interested in seeing, but a request for information could include 50 questions or two. I don’t know that having fewer requests for information opportunities will necessarily change the quantity of information required. That’s the short form of how the water transfer system works.
Terms and Conditions of Water Licences
Jenny (00:51:10):
Brilliant. I’m curious, and I guess this question goes to both of you. I haven’t heard any distinction between industrial water use and I’ll call it temporary water use. What I mean by that is as a geophysicist, as somebody who’s quite aware of how water is used in industry, a lot of fresh water is disposed of in the process of industrial use, let’s say for oil and gas fracking for example. Is there any provision in the Water Act or in any law that states if you were to transfer a water licence from somebody who is using it for irrigation versus somebody that’s using it to frack and dispose, is there any distinction there? Are there any limits to those types of transfers? I’m just curious. Thank you.
Davin:
Sort of. I can take that and then Arlene might have more to add. But yeah, every licence has terms and conditions and it’ll specify the amount that you can divert from the river, the rate of that diversion. And then a typical condition is how much you have to return to the river after use. Just for example, municipal uses that go through your house, you flush your toilets, flush down the sink, it goes to the water treatment plant, and typically in excess of 80% of the water that goes into your house ends up back in the river at the end of the day. Municipalities return high volumes and their licences will require that other uses, like the ones you’re talking about, may return zero. And interestingly too, agricultural irrigation is considered as returning zero or maybe it evaporates whatever, but it is not treated as going back into the river.
Licences do impact that. And at the beginning of the transfer system, those return flow requirements weren’t really considered in the mix. And we saw transfers approved from uses that returned 90 or even a hundred percent of the water to the river to uses that were a hundred percent consumptive and return none to the river. But that was considered early. And then policy changed on that and we suck quickly, I’d say about 2010 or that was reconsidered. And the return flow requirement is a big, big piece of the value of a licence and the fit between a buyer and a seller. I guess the other thing I didn’t mention is that the Water Act and nothing in the legislation really does prioritize between uses. It’s been relatively simple to change uses from, for instance, irrigation to municipal use, and that can be done by an amendment. It doesn’t necessarily require any public notice or consultation. The director has the discretion to require that in an amendment, but those uses have and do change frequently.
Arlene:
Interestingly, the Water Act doesn’t specifically allow changes of use in that informal way, but no one would ever challenge that. I don’t think the water availability survey does have a section on return flow and what we should be doing about that because there hasn’t been consistency through the years as Davin mentioned as to how we treat refer return flow. I mean, what is the true quantity in the allocation? I mean, do you always subtract the return flow or can you keep using your return flow until you’ve used your whole allocation as some municipal licensees? Treat it with what they call net licences. I think that’s something that is I guess as good as going to be dealing with. But I’m interested in ensuring that where there is a return flow requirement that will assist the aquatic environment, that we don’t just make all return flow, not a real requirement, and that people can just keep using their licences over and over until they’ve used the whole gross allocation.
Davin:
This has come up in some interesting ways too. For instance, there was an application for a transfer, I think it was to the town of Okotoks, and they found a licence that was a hundred percent consumption. It was probably an irrigation licence, they didn’t have to return any water. And they said, well, if it goes through our system, we’re returning 90% of the water from this licence. In fact, why don’t you give us a licence that’s 10 times as big because we’re going to return the same amount. And that I was given serious consideration. And I mean if you think about it in terms of the actual effect on the river, there’s an argument to be made. We make all kinds of these arguments.
Bob:
This is fascinating, all of it, but the transfer one in particular and very different from the way we manage land. If I want to sell my house, there are certain legal requirements, but it’s basically between me and the buyer and in particular, I can go onto a website with the real estate board and I can see how much money has been paid for one house or another. Do we have a similar public database that we can consult on water transfers?
Arlene:
My understanding is no. But that’s another thing that the Alberta Engagement Survey is addressing is getting the amount of consideration given for the water transfers made public.
Davin:
There’ve been some initiatives to start bulletin boards over the years, and none of them have really succeeded. There are examples of that in the US and other jurisdictions that have tradable water rights and maybe someday we will. I think there are a few things that make it look like a good solution, but it may not be. And it comes down to just finding a right that is the right volume in terms and conditions. It doesn’t mean that it can be transferred to where you need it. There are a lot of other issues to consider. And then on top of that, there are the use it or lose it provisions in the act, which I think scare a lot of people from advertising that they’re ready to give up their rights. It might help with transparency,
Bob:
It would help with transparency, but the transparency. But the interesting thing is in some way, we are creating a price on water that we didn’t have before because people are willing to pay a certain amount for a certain amount of water. And that leads to the whole question of, well, does the government charge for water or should they charge for water?
Davin:
And I mean, as Arlene started off with, the government owns all the water, there’s a price on licences, and that is an important distinction and one that we always keep in mind. It’s a subordinate, right? It’s not a property, right? You can’t register it on title, but it’s a right to use water and it does trade at a price. And that’s another big challenge with the market. The government doesn’t get involved in any aspect of the commercial purchase and sale agreement for water, with almost no price information available. And typically the contracts that are negotiated include confidentiality provisions. Neither the buyer nor the seller are really allowed to share the price they paid. That’s another place where people like me who’ve seen hundreds of transfers have valuable information. I know the prices that all of those are traded, and I have shared that in certain six circumstances with any private information stripped out, I have been asked over the years to do appraisals, valuations of water rights. It’s a bit of a rough art because there aren’t that many transfers and every licence is a little bit different depending on where it is in terms and conditions, et cetera, et cetera. But I get a lot of questions about price.
Jenny:
You mentioned that Alberta Environment is responsible for the water licence transfers, water diversion licences, though they are run by the Alberta Energy Regulator? I’m just curious what’s the distinction between a water diversion licence and a water transfer? And also is the water accounted for in both spots? Like what I’m saying, I’m an industry person, I’m used to looking at the Alberta Energy Regulator’s public notice of application and seeing those water diversion licences listed there. Is that the total of water diversion licences occurring or are there others that are with Alberta Environment that we might not see?
Arlene:
Well, you won’t see the household use, for example, but those are not recorded or don’t have to be, I don’t think. And maybe they’re somewhere he won’t see those, and it’s not just Alberta. The way I understand who takes care of the diversions and regulates them is that for any energy project, it’ll be the Alberta Energy regulator. For most other things, it’ll be Alberta Environment and Protected Areas. But then now we have the Minister of All Seasons resorts as well in there who will be dealing with land that’s designated under that new legislation will be dealing with them. I think it can be a pretty confusing mix.
Davin:
AER and AEP, they deal with the same basket of licences. If you’re applying for a transfer, I’ve had transfers where I’m making an application to AEP and they say, oh no, we’re going to hand this one to AER and vice versa. It depends who asks for what. Sometimes it’s when an energy company is a buyer, sometimes when it’s a seller, there seems to be very little rhyme or reason over who is going to handle the transfer process. The process is more or less the same, but different people and different timeframes even find that between different offices of Alberta environment transfers in Southern Alberta on the old man for example, happen typically two or three times as fast as those on the bow. I’m not really sure why. It’s just the timelines they’re used to and the process they follow.
Bob:
Yeah. You gave that example of the small irrigator with the works that weren’t quite in compliance and they asked them to fix that up at some point, maybe in your experience, or do you expect someplace down the road that somebody’s going to have a project like that and it could potentially affect their priority rights because they didn’t go through the right steps to maintain that priority because of the good standing issue? Have you run across that or do you think that’s potentially an issue?
Davin:
I don’t know. I mean, the priority has never been in question in any licence I’ve ever dealt with. The question is whether the licence is in good standing and sometimes whether the licence actually exists anymore because it may not have been used for 20 or 30 years. I mean, that typically is why I think these questions come up. And I know that Arlene taught me that one of the big concerns when the New Water Act was passed and we talked about transfers and putting a price on water rights, was that it would have a tendency to wake up all these old rights that hadn’t been used. Everybody would say, oh, I have a licence, or My grandfather has a licence on this land, and I’m going to wake it up and use it a bit and then sell it. We do see that frequently, but it hasn’t affected the priority. It has, as I said, affected in some cases the quantity of a licence allowed to transfer. I’d always thought of good standing as binary, either it is or it isn’t in good standing. But I did have a couple along the way where they said, well, you’ve only actually used a portion of the right that you had originally. Your works are only built to divert half of what your licences, we’re only going to consider a portion of it to be in good standing.
Arlene:
And that’s another thing that’s going to be considered in this survey is the government wants to amend the Water Act to clarify what good standing means.
Jenny:
Yeah, I understand The Environmental Law Centre is doing an engagement or helping inform folks on that.
Jenny:
We’ll do our best here to help get people engaged in that and offer some feedback as well. One thing I might want to leave as a question is that in my case, there’s so much to take in here is, as you mentioned, Davin, last year we had some really touch and go concerns about water and how we were going to address, let’s say a catastrophic situation. I guess if I’ll leave my question to you guys, my final question is what would action look like to you if we were in a situation, let’s say in Southern Alberta where I understand we’re an over allocated basin potentially, what does a bad situation look like for us and what would be the way to use these tools to help engage the public in a way that could help, let’s say, get the Water Act to a better than a pass fail situation or a fail situation? What would you do if you had the opportunity to help change or amend the way we’re currently operating in water and licencing?
Key Takeaways
Arlene (01:05:18):
There’s, I think, a lot of issues in that. One thing I was going to mention is there are recent changes to the Water Act to give the government more power in emergency situations and indeed to in a declaring an emergency, they have a lot more discretion and then can do things like require interbasin transfers in an emergency situation where before the amendments you would need a new act, act of legislature. And now I think you just need a cabin aurora order if there’s an emergency and that should be fairly easy to get if you have a government like we have now. I think that’s something to be concerned about because I think one thing that we would like to see prevail is the rule of law and that the legislation should be clear as to what occurs in an emergency, how long an emergency can exist, especially if the government has a right to declare that provisions of the Water Act don’t apply, then I think they should be really clear what that means and for how long that is and what an emergency is. And all those powers should be quite curtailed. As far as changing the Water Act, I think those questions are too big for me right now. I’d certainly want to have provisions to protect instream flow needs. Also recognition of indigenous water rights and ways to meet those water rights would be a couple of things. Climate change provisions, climate change is not just an emergency anymore, it’s a reality that we have to deal with. I think that I’ll just leave it at that and hand it over to my learned colleague here.
Davin:
I think it comes down to what we said earlier, the Water Act isn’t very adaptive. It doesn’t really, it can’t quickly address issues related to shortage. I think that’s the rationale for the emergency powers trying to find shortcuts to deal with issues. Practically speaking, we’ve seen years where it’s been pretty easy to anticipate problems back. One of the earlier events was a threatened priority call that would’ve affected, I think it was a meat packing plant on the St. Mary and all of the ranchers in the area said, “Oh, well if that meat packing plant gets shut down, we don’t have anything to do with all of our beef.” You saw the community come together and negotiate an agreement and preempt that potential issue. Again, these are problems that FITFIR doesn’t really help with, and I think we’ll see that again and again. As Arlene said, climate change is likely to result in less water in the system, the water not being adaptive, we’re going to have to use other measures. The best we’ve had so far is negotiated agreements. They’ve all been voluntary, with very little force of law. Maybe with these emergency powers there will be more, but things need to happen really fast when you’ve got a water shortage and we’re not very good at making these deals and arrangements and imposing laws quickly and legislative change takes forever.
Jenny:
Yeah. Thank you. I think that I’m hearing, it’s going to come down to the proponents on the landscape and how to have adult conversations around water should that emergency emerge. Well, and it is here, as you said, Arlene. Bob, did you have any last questions?
Bob:
No, just to say thank you very much. This has been very informative and an excellent conversation, the kind of thing that Jenny likes to do on The Gravity Well.
Jenny:
Thank you. Any final thoughts from the two of you? Anything we missed that you wish we would’ve asked?
Davin:
Oh, there’s so many interesting things we could have dug into and maybe for a subsequent podcast, but I think this will be great and I think this might be a useful tool for many people entering the space. I feel like often in the water area, people are really focused on their lane irrigation districts on all the subordinate rights they issue and their issues. Me in the transfer space, and then Arlene very much focused on the legal framework and there aren’t that many forums that bring all the different voices together. And I think if I were taking a job at Alberta Environment or something, I might think this would be a good podcast to listen to.
Jenny:
That’s great. And yeah, you’re absolutely right. That’s certainly something I experienced in the fossil fuel industry as well. Just how little a geophysicist understands the impact that we have in terms of liability, creating emissions, use of water, or harms to the landscape. All of this stuff is very compartmentalized in our work and we don’t see a lot of that. This has been a tremendous learning for me since my eyes have been open to it. You’re right. I think the more that we do this in collaborative spaces, the more that people will understand how much we’re interrelated and interdependent. Thank you. I really appreciate your time, especially going over. This has been amazing and yes, I’m imagining we’re going to have another conversation, so thank you so much. Well take care. Thanks.