Thursday, 15 March 2012

Alberta's Water Markets: No Foreign-backed Eco-radicals Need Apply

By Tim Syer and Shi-Ling Hsu

Alberta is home to Canada’s only market for water licenses. Canada is generally abundant in fresh water, so perhaps it stands to reason that a lack of scarcity would obviate the need for water markets to serve an allocation role. In parts of Canada, however, water is scarce, as in the heavily populated (for Canada) and heavily agricultural South Saskatchewan River Basin (SSRB) of Alberta.

In 2006 the government of Alberta ceased issuing new water licenses and in accordance with the Approved Water Management Plan for the SSRB, it capped the amount of water allocated from SSRB rivers and allowed the trading of water licenses. Like other water markets, the government retains a number of controls over water trades, reserving the right to reject water transfers on environmental grounds, for example.

The puzzling part of the SSRB water market is, however, a limitation that water licenses purchased for "instream flow" purposes are limited to a cumulative maximum of 2% of all water allocated, provided that the minimum amount of "protected water" – the amount of flow that is deemed to be the minimally acceptable environmental amount -- has already been set aside. Why should there be such a limit? Is Alberta afraid of foreign-backed eco-radicals muscling in and buying up water rights?

The argument is that water is a resource that should be used to support economic growth. We see this bias towards consumptive uses in other resource laws – the use-it-or-lose-it nature of mineral licences, for example, reflect the assumption that resources are put to their highest and best use in consumptive uses, rather than passive environmental or ecological ones. But how do we know this without a truly free market to test that assumption? So what if Ted Turner bought up a huge block of water rights to thwart Alberta agriculture (Turner owns many ranches himself)? Is Alberta so afraid that its use of water is so unvaluable that it could not compete with the likes of Ted Turner's eco-radicalism? If so, that should tell us something. But even if we don't want to hear it, by retaining ultimate approval for all water allocations and transfers, the government can surely keep foreign interest at bay for the foreseeable future.

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