Alberta's Water Resource Allocation and Management System:

Alberta's Water Resource

Allocation and Management System:

A Review of the Current Water Resource Allocation System in Alberta

W.L. (Vic) Adamowicz

University of Alberta David Percy

University of Alberta Marian Weber

University of Alberta/ Alberta Innovates

June 2010

Prepared for the Alberta Water Research Institute’s project on

Financial Market-Based Instruments for Sustainable Water Management

Thanks to Stephanie Simpson and Marius Cutlac for research and editorial assistance

TAble of ConTenTS

IntRoducton 1

A RevIeW oF the cuRRent WAteR ReSouRce

AllocAtIon SySteM In AlBeRtA 2

the alberTa waTer aCT: A MARket-BASed APPRoAch 9 IS the cuRRent WAteR ReSouRce AllocAtIon

SySteM “SuStAInABle”? 15

cASe Study 1: The Lower aThabascan river basin 16 cASe Study 2: The souTh saskaTchewan river basin 21

concluSIonS 32

BIBlIogRAPhy 33

InTRoduCTIon

the water resource allocation system in Alberta is under increasing scrutiny.

Water scarcity concerns, particularly in the South Saskatchewan River Basin, and water quality concerns, have raised questions about the current mechanisms for water resource allocation in the province. this paper examines Alberta’s water resource allocation system and investigates the extent to which the framework is “sustainable” in the medium and long run. the report begins with a review of the current water management framework from a legal perspective. this review examines the evolution of Alberta’s framework as well as resource allocation mechanisms in the other prairie provinces in canada. Issues such as mechanisms for reallocation of water among users, initial allocations, and environmental safeguards are examined. A key point arising from this review is that there is a more market-based approach to water re-allocation taken in Alberta relative to the other prairie provinces.

the report then turns to the assessment of sustainability of the resource allocation system. the concept of sustainability, and the linkage between the water resource allocation and management framework and sustainable resource management, is discussed. the approach taken in this report is to examine the current framework and assess how it will perform if expected bio-physical (e.g., climate change), economic (e.g., economic growth) and social factors change in the future. here we define sustainability of the water allocation system as the ability to deliver on a range of social policy objectives related to water. A major section of the assessment examines the extent to which water markets are “sustainable” or resilient relative to these objectives. A related question is the degree to which water markets in Alberta actually are able to function well to allocate resources. to assess this question, criteria required for successful markets, as described in chicago climate exchange (2009), are used. the review of Alberta’s water allocation system is based on two case studies which examine specific regions of the province (the South Saskatchewan River Basin and the lower Athabasca River Basin).

the case studies highlight the fact that while market mechanisms provide several potential advantages for water resource allocation, there are several challenges associated with implementing such mechanisms. First, the basins in Alberta are quite different in physical and economic nature. this suggests that a “one size fits all” approach to using markets to aid in resource allocation will probably not be possible. the structure of market-based institutions will have to differ if they are to provide benefits in resource allocation and contribute to sustainability. Second, there are several barriers that prevent the successful adaptation to market-based mechanisms. Some are associated with the legal framework for water resource allocation and the need to address social concerns associated with environmental quality and equity. these legal and social issues are the main barriers associated with the water resource allocation framework and addressing these issues will lead to a more sustainable system that employs appropriate market-based mechanisms to guide resource allocation.

A RevIeW of The CuRRenT WATeR ReSouRCe AlloCATIon SySTeM In AlbeRTA

Introduction

the importance of water allocation in the southern Prairies is underlined by the fact that it has been governed by a detailed regulatory scheme since 1894.

After the enactment of the dominion lands Acts of 1872 and 1879, the North west Irrigation act of 1894 was the second comprehensive piece of legislation passed by Parliament in relation to the natural resources of the Prairies. the federal legislation was incorporated into provincial law in 1931 when the federal government transferred ownership of natural resources on the Prairies to the respective provinces. the fundamental principles of the 1894 legislation can still be seen in the water legislation of the three prairie provinces, and especially in Manitoba and Alberta. they will be described in the following sections of this paper.

Government Ownership

As a cornerstone of the legislation, in order to secure control over water use, the federal Irrigation act declared that the crown owned all the water within the jurisdiction. the present version of that principle in the alberta water act declares that “the property in and the right to the diversion and use of all water within the province is vested in” the crown (water act, s. 3(2)). It has been clear since 1962 that crown ownership of water includes groundwater and that rule is confirmed in the present Act (water act, s. 1(1)(fff)).

on the firm foundation of crown ownership, water legislation controls the allocation of the resource by prohibiting anyone from using or diverting water without first obtaining a licence from the government (water act, s. 49(1)) with

Allocation of Rights to Water

Exempted Uses A.

Western canadian legislation has always been silent on the vexed subject of aboriginal water rights. As a result, their existence and extent remains highly controversial. on a more mundane level, the legislation has consistently exempted the minor use of water for basic domestic and agricultural needs from the licensing requirement. originally, this exemption was established to limit interference with the historical water use rights of riparian landowners. the same privilege was extended to users of groundwater when the Act applied the licensing requirement to groundwater use in 1962. however, the approach of defining the exemption with reference to a type of use – domestic purposes – made it impossible to quantify with any precision the amount of water to which users were entitled. the alberta water act modified the approach to exempting minor users of water from the need to obtain a licence. It creates two categories of exemptions:

Household Users i.

this portion of the water act is based on an initial decision to

quantify the former right of riparians to the domestic use of water, so as to avoid excessive claims, and to re-name it, so as to minimize any confusion between the old common law right and the new statutory right to use water for household purposes.

Section 21 of the water act declares that a riparian has a right to divert water for household purposes, but only to a maximum of 1,250 m (approximately 1 acre-foot) of water per year (water act, s. 1(v)). this quantity is based on the average household use of a family of four and imposes a clear limit on the many claims to use larger amounts of water for domestic purposes that arose under the water resources act.

the Act also provides a protected right for the same quantity of water to household users of groundwater, who thus obtain a degree of legal protection for their use which they did not enjoy either at common law or under the water resources act (Percy, 1996). the use of both surface and ground water for household purposes is given a highly protected status, as it now has a first priority in times of shortage (water act, s. 27).

the Act also ties up some legal loose ends by emphasizing that household users may not obtain a licence for their limited use and that they cannot use any quantity of water in excess of 1 acre-foot per year without obtaining a licence (water act, ss. 21(1), 22(1)). however, the other aspects of riparian rights at common law are not touched by the legislation (water act, s. 22(2), (3)).

this portion of the water act illustrates a continuing geographical dilemma in Alberta water law. In some southern regions of Alberta, domestic use can consume the entire flow of some streams unless tightly regulated in the manner provided in the new Act. In contrast, in much of the northern half of the province and in the foothills, even generous domestic use poses no problems for water supply. As a result, the highly restricted right to household use is subject to “any exemptions specified in the Regulations” (water act, s. 21(1)). It is possible that future exemptions will be made in areas of the province where there is ample supply of water for all consumptive uses.

Traditional Agricultural Users ii.

the strict limits on domestic use imposed by the water act meant that some users, especially in the agricultural community, would be required to obtain a licence for water uses in excess of 1,250 m per year that they carried on under the domestic use exception in the former water resources act. this consequence created an outcry among many water users who thought that they had a valid right to use water without a licence when they realized that the legislation required them to obtain a licence (Report of the Water Management Review committee, 1995). this requirement created a potential inequity, because any new licence for the use of water beyond the new

limit of 1,250 m per year would take priority only from the date of application, even if legitimate use in excess of this amount had been carried on for decades.

the water act solved this perceived problem by creating a hybrid water right for traditional agricultural users who are either riparians or groundwater users. As long as they use water for raising animals or applying pesticides, they can continue to divert up to 6,250 m (5 acre-feet) of water per year without a licence (water act, s. 19(1)). this section also allows approved water management plans to increase the maximum of 5 acre-feet per year in the area covered by the plan.

uses for traditional agriculture are permitted but lack any guaranteed security of supply unless the use was registered before december 31, 2001. A registered use obtains a priority that is retroactive to the date that water was first diverted for the traditional agricultural use.

The Requirement of a Licence B.

Any person who uses water in excess of the amount exempted under the Act, or for non-exempt purposes, must first obtain a licence to divert and use water. the licence grants the right to divert and use the quantity of water stipulated in the licence and in accordance with any stipulated conditions.

early licences, particularly those issued by the federal government at the beginning of the 20th century, typically granted the right to divert large quantities of water for irrigation purposes. For example, one such licence authorized the total diversion of 627,178 acre-feet of water during the irrigation season (licence no. 111). licences were usually granted without a fixed term and were treated as permanent in nature by those who held them. licences were secure, because they could be cancelled only if the licensee committed one of a limited series of offences specified in the Act. As will be described in the following section, licences ordinarily pass to the successors in title of the original licensee.

The Prior Allocation Principle C.

Any system of water law that grants users secure rights to consume water and allows cancellation only in limited circumstances must deal with the problem that occurs as soon as there is insufficient supply to satisfy all recognized users. on the canadian Prairies, the law resolved that problem by borrowing from the American doctrine of prior appropriation.

the principle of priority enshrined in the water act entitles the senior licensee to receive the entire allotment of water stipulated in the licence before a junior licensee is entitled to receive any water. the canadian law is thus functionally similar to the original doctrine of prior appropriation, though it is properly described as a system of prior allocation because priority depends on the date of the application for a licence and the quantity of water allotted to the licensee has always been measured by an administrative decision rather than by the amount of water which an individual puts to beneficial use (water act, ss. 29, 30).

The Features of a Water Licence

Legal Characterisation A.

Most water licences in Alberta grant the licensee the right to divert and use a specified quantity of water at a specific location. those who hold licences, some of which were granted more than a century ago, have considered them permanent entitlements. however, the legal nature of the licence can only be determined by the wording of the governing legislation and of the nature of the rights granted by the terms of the licence.

An analysis of the status of licences under the governing legislation suggests that they convey neither property rights nor contractual rights to the licensee, but they are mere regulatory permissions that can be modified or even revoked if the necessary statutory powers exist (lucas, 1990). they are unlikely to be classified as interests in property, because neither the licence nor the governing legislation contains words that suggest the conveyance of an interest in property. licences are probably not contracts, because the documents themselves do not suggest a contractual relationship and the governing legislation gives no indication that the issuer of a licence has any statutory authority to conclude a contract with the licensee. It is difficult to disagree with the conclusion that licensees receive “bare statutory licences” in the form of a regulatory permission (lucas, 1990). the only shadow of doubt cast on this view is that licences appear to confer more than “a mere personal right of use”

on the licensee. they do have some characteristics of property rights, in that they are ordinarily attached to the land in respect of which they are issued and licences are transferred to the new owners of the land if it is sold and ordinarily pass with the land by inheritance to the successors of the licensee. they are probably best classified as regulatory permissions, but with a rather unique nature.

Transferability (The Original Approach) B.

As indicated in the previous section, the water act and its predecessors stated firmly that licences “are appurtenant to the land or the undertaking specified in the licence and are inseparable therefrom” (water act, s. 58).

As a consequence, under early versions of the legislation, allocations of water granted under a licence could not be transferred unless there was a disposition of the land or undertaking in respect of which the licence was issued.

By 1920, the Irrigation act had fulfilled its original objective of encouraging agricultural settlement by providing secure water rights as they were required. At that time, the inconvenience of a rule that prohibited the transfer of a water allocation was first noticed. the concern arose in southern Alberta that the existence of a number of large licences, especially for irrigation, meant that there might not be sufficient water available to meet the needs of new and expanding municipalities (house of commons debates, 1920). In the same year, the federal Irrigation act was amended to address the immediate concern of ensuring that municipalities would have access to adequate water supplies. the Act

created a safety valve, which allowed the transfer of water from a lower priority to a higher priority use (Irrigation act, s. 5). the safety valve was incorporated into the legislation of the prairie provinces when they passed their own water legislation in 1930 and 1931 and its essential elements still exist in Manitoba. Where water is fully allocated, the Manitoba water rights act allows a higher priority user to buy the water allocation of a lower priority user. the relative priority of different uses of water is determined by a table, which establishes the following order of priorities in Manitoba: domestic, municipal, agricultural, industrial, irrigation, and other purposes. A higher priority user can acquire the allocation of a lower priority user in a voluntary transaction. If voluntary negotiations fail, the applicant can essentially expropriate the water granted to the lower priority user by paying an amount of compensation that is fixed by arbitration if necessary (Manitoba water rights act, ss. 9, 14).

there is no evidence that any transfers under the table of priorities have ever occurred, possibly because it is difficult to justify the compulsory acquisition of water allocation from a licensee on the ground that another use is more important. the possibility of allowing the transfer of water allocations based on the table of priorities was abolished in Saskatchewan in 1984 and in Alberta in 1999.

Initially, long-term efforts to increase the available supply of water disguised the inability of the Irrigation act to allow new users to obtain water allocations without acquiring the land to which they were attached or without resorting to the table of statutory priorities. Beginning with storage projects instituted by the Prairie Farm Rehabilitation Administration, water shortages on the Prairies were addressed by the construction of dams, culminating in the oldman River dam, which was completed in 1992. As the era of dam building began to recede, other proposals suggested increasing the supply of water in the southern Prairies by diversions from the Mackenzie River Basin. Proposals of this nature were always highly controversial. In particular, they were viewed as the first step in allowing water exports to the united States. this source of opposition could conceivably have derailed the entire project of modernising Alberta’s water legislation. As a result, the Act expressly prevents water exports and contains a prohibition against interbasin transfers. the latter prohibition alone effectively prevents exports and in addition insulates the Act against most possible challenges under nAFtA.

the role played by water law in the existence of water shortages became the subject of examination only after the efforts at augmenting the natural supply of water had been exhausted. It became readily apparent that the model of water law based on the Irrigation act had never been designed to deal with water scarcity. the legislation had essentially granted secure water licences of indefinite duration that were free of charge, once a modest initial application fee had been paid, and not readily transferable, except with the land or undertaking to which they were attached. the system created no incentives for the efficient use of water and could allow water use to adapt in the face of changing societal needs only in the most cumbersome manner.

As a result, fundamental changes began to creep into western canadian water law. Manitoba undertook reforms in 1983 and Saskatchewan enacted radical changes in 1984. the Manitoba legislation has since undergone a further modernization. Alberta enacted a major reform of water law in 1996, and Saskatchewan reorganized its approach again in 2002. All the provincial reform initiatives recognized that the basic model of water law had frozen water use in a pattern that could not adapt to either economic or environmental changes. the reforms involved two different broad policy approaches, each of which will be considered in turn.

Reforming the Prohibition against Transfers (Compulsory Reallocation) C.

Manitoba and Saskatchewan addressed the defects in the basic model by adopting solutions which are legalistic and technocratic. the reforms recognize that the source of the problem is that the bulk of available water supplies are tied up in existing licences. they seek to cure the problem by creating a legal mechanism to take water away from existing licensees and make it available to new users. the approach is technocratic because it leaves administrators to decide which licensees have “excessive” water rights and how much water should be removed from them and made available either to new users or to increase the natural flow of a river system.

Manitoba takes a modest approach to dealing with existing rights. the province adopted the principle that all water licences should be issued for a fixed term (Manitoba Water Rights Regulation, s. 5, as amended). the Act emphasizes that the Minister has the power to decline an application to renew a licence on the grounds that the water is required for a higher priority use. In this event, the new user is required to pay compensation to the original licensee, and the amount of compensation can be determined by arbitration if necessary (Manitoba water rights act, s. 14(4), (5)).

however, the impact of the Manitoba changes is limited because the Act does not expressly impose a fixed term on licences that were in existence prior to 1987, so it is probable that that only licences issued after 1987 are subject to a fixed term. Accordingly, Manitoba has not significantly increased its ability to transfer water from early, high volume licensees, to new users.

Saskatchewan took a much more draconian approach when it established the ability to cancel or curtail all existing water licences. the original version of the legislation in 1984 created a remarkable power which enabled the Saskatchewan Water corporation, the body then charged with the administration of the Act, to cancel any existing water right. the holder of the cancelled right was entitled to compensation, based only on the actual value of any works that were rendered redundant by the cancellation (Saskatchewan water Corporation act, s. 42). the creation of this arbitrary power was without precedent in north American water law, but it existed for eighteen years until it was modified in the province’s most recent reform.

under Saskatchewan’s latest version of water law, the Saskatchewan Watershed Authority (the Authority), is now responsible for the

administration of the Act. the Authority has the express power to issue a

water licence for any term and subject to any conditions that it considers appropriate (Saskatchewan watershed authority act, s. 6), and it may cancel the licence to the use of any water that it has granted. If it cancels a licence, the measure of compensation remains the same as it was under the 1984 legislation. however, the 2002 legislation means that the Authority almost certainly no longer has the power to cancel water licences granted before 1984. the cancellation power under the new legislation applies only to water rights granted by the Authority or its immediate predecessor, the Saskatchewan Water corporation (Saskatchewan watershed authority act, s.

95(2)). Prior to 1984, water licences were granted by the crown, rather than the Authority or the Water corporation, and thus now appear to be exempt from the cancellation power.

the statutory changes in Saskatchewan and Manitoba provide a solution to the rigidity of the allocation of Prairie water rights that is legalistic rather than useful. It is true that water rights in these provinces are no longer completely inflexible and unable to accommodate changing patterns of water use. In Manitoba, the Minister can authorise the

transfer of an allocation from a post-1987 licence and can refuse to renew an existing licence. In Saskatchewan, the Authority may refuse to renew or cancel an existing licence. the Minister in Manitoba or the Authority in Saskatchewan can reallocate water that was formerly granted to certain categories of existing licensees to another user or for a social purpose, such as increasing instream flows.

Although the powers granted to administrators in Manitoba and

Saskatchewan are legally valid, it is extremely unusual in water law to find cases in which water licences (except those that were issued for temporary purposes) are not renewed or in which the powers to cancel water rights are actually exercised, except in cases of non-use by the existing licensee.

this is not surprising because, despite the fact that water licences do not convey property rights, licensees tend to view their water rights as entitlements. Any attempt by an administrator to remove or limit those rights is likely to be met with a degree of outrage that makes it politically difficult or impossible to exercise the statutory powers.

the Saskatchewan and Manitoba solutions are equally ineffective in policy because they tend to perpetuate the wasteful use of water.

Although the powers of non-renewal and cancellation would be effective in allocating water to new users if they were exercised, they create no incentive for water users to reduce the amount of their consumption.

Because the powers are likely to be brought to bear only in extreme cases, they also fail to allow for day to day adjustments to water use throughout both provinces. In addition, the effect of the entire scheme in both provinces depends on the ability of the administrator to make correct decisions as to which uses of water are “more important” than others.

Rapid urbanization suggests that one type of compulsory reallocation that is likely to occur in western canada (and which is expressly contemplated by the table of priorities in Manitoba) would be from an irrigation user to a city. An administrator might find it difficult to deny an application

when a city seeks more water to satisfy the needs of its inhabitants, but the city’s need may arise precisely because its existing use of water is inefficient (Roach et al., 2004). compulsory reallocation under the statutes in both provinces creates a safety valve which will enable cities and other potential users to obtain increased water rights if they can demonstrate a need, without necessarily exploring measures to reduce existing consumption.

the provisions for the compulsory reallocation of water in Saskatchewan and Manitoba thus create a heavy-handed and partial cure for the

inflexibility of water rights, while failing to address the real problems that underlie water shortages on the canadian Prairies.

The AlbertA WAter Act: A MARkeT-bASed AppRoACh

In contrast to its neighbours, Alberta showed no appetite for the compulsory reallocation of water from existing to new users during a seven-year examination of its water allocation law. the alberta water act, which was first passed in 1996, takes a more market-based approach to the twin problems of a rigid pattern of water rights and inefficient water use.

the water act allows the voluntary transfer of all or part of a licensed allocation from an existing licensee to a new user (water act, s. 82(1)). the idea of

transferable water allocations was controversial during the reform process, with the result that the Act inserts an important political safeguard. It allows the consideration of the transfer of an allocation of water only if the ability to do so has been authorized in a particular region of the province, either through an approved water management plan or by an order of the lieutenant governor in council. As a water management plan must be “approved” by the cabinet, the Act ensures that strong political oversight will occur before a decision is taken to allow transfers in any region (water act, ss. 81(7), 11(1)). once transfers have been authorized in a particular region, there is no further political control over the transfer process.

After the proclamation of the Act in 1999, the pressure to accommodate changes in water use quickly became irresistible. In 2002, the cabinet removed any potential obstacle to water transfers in the areas where they were most needed.

the South Saskatchewan River Basin Water Management Plan authorizes the director to consider applications to transfer water allocations within the entire basin (South Saskatchewan River Basin Water Management Plan Phase 1, 2002).

the philosophy of the Act was to subject applications for the transfer of a water allocation to the same scrutiny as applications for new licences. It essentially requires the director in a public review to apply the principle that a transfer must result in no net harm. the director must ensure that the amount of water to be transferred does not exceed the amount of water allocated under the original licence and that the transfer does not impair the rights of other water users. In addition the transfer must not cause a significant adverse effect on the aquatic environment (water act, s. 82(3)). the Act requires the director to examine at least seven factors before deciding whether to approve a transfer application.

In addition, the director must consider all matters and factors stipulated in the

relevant approved water management plan. the South Saskatchewan River Basin Water Management Plan sets out 14 factors which the director must address before approving a transfer.

In addition to permitting the permanent or temporary transfer of water allocations, the water act also allows the short-term assignment of water allocations without any of the major safeguards that apply to transfers.

licensees or traditional agricultural users may temporarily assign all or part of their entitlements to another licensee or traditional agricultural user simply by executing a written agreement. the assignment is effective without any regulatory approval, though the relevant director of Alberta environmental Protection may require the submission of a copy of the agreement. the rights of the assignor must be in good standing and the assignment must not affect adversely the rights of other water users or the aquatic environment. the director is empowered to intervene if adverse effects of this nature occur (water act, s. 33).

Although this portion of the water act was designed to increase short-term flexibility in the use of water, it is hampered by two defects. First, there is no definition of the extent of the period of time for which an assignment can operate. transfers rather than assignments should be used if the parties wish to alter the pattern of water use over a prolonged period. Second, a section of the Act appears to place an unnecessary limitation on the utility of the assignment, by stating that the assignee may not divert a total amount of water that exceeds the allocation in its own licence (water act s. 33(3)(c)). this limitation suggests that assignments can be used mainly to improve the position of junior licensees whose supply of water is threatened by the priority principle during times of drought. thus, in the Alberta drought of 2001, when water supply to a group of junior licensees was about to be cut off, the junior licensees were able to bargain in order to obtain a portion of the senior licensees’ entitlement through a series of assignments. the assignment mechanism as enacted thus cures a priority problem without allowing a short-term increase in the total amount of water required by a licensee.

If this conclusion is correct, it diminishes the capacity of the Act to respond to short-term water needs among licensees. If a junior licensee needs to acquire more water than the total allocation set out in its licence, and the assignment provisions do not permit this possibility, the junior licensee must try to obtain a temporary transfer of a water allocation from a senior licensee. however, temporary transfers are subject to presumptive requirement of a 10% holdback.

A potential transferor will be reluctant to engage in a temporary transfer if at the end of the transfer period, they receive back their original allocation minus the 10% hold back.

Alberta has thus introduced an element of flexibility in water use in the large region that is covered by the Saskatchewan Basin plan. It creates a method for accommodating new users, and it provides an incentive for all water users to reduce wasteful use by allowing the marginal value of their water to be recognized. the Act also encourages the many changes in water use that can occur without raising serious issues of water policy, although the apparent

restrictions placed on the use of assignments do place an unnecessary limit on flexibility. however, the Act places many safeguards on the transfer of water allocations and imposes high transaction costs on those who wish to use the transfer system. It must also be emphasised that for the moment transfers are restricted to the South Saskatchewan Basin. there can be very few justifications for this restriction.

Environmental Safeguards

traditionally, water legislation in western canada operated almost as an adjunct to agricultural development. the legislation was broad enough to permit environmental factors to be taken into account in allocation decisions, but in practice administrators were concerned with the impact of a licence application on the rights of other water users rather than the broader environmental implications of their decisions.

An examination of environmental safeguards in modern water law must focus on the role of environmental factors in allocation decisions, the protection of instream flows and unlicensed water uses and monitoring and enforcement mechanisms in the legislation. each of these issues will be considered in turn.

Allocation Decisions A.

the close relationship between water allocation and environmental priorities emerged with dramatic judicial decisions dealing with the authorization of the Alameda dam in Saskatchewan and the oldman River dam in Alberta. the increasing scarcity of water makes the inextricable connection between water allocation decisions and the environment even more important. however, most water legislation in the prairie provinces has failed to give explicit recognition to environmental factors in the water licensing process.

the alberta water act makes a break from traditional water allocation statutes by integrating the evaluation of applications for water licences with the provincial environmental protection and environmental assessment regimes (water act, ss. 5, 10). In ordinary circumstances, an applicant is required to provide public notice of the application and

“any person who is directly affected” is permitted to submit a statement of concern. A person who submits a statement of concern may bring an appeal to the environmental Appeal Board if the director decides to issue a licence (water act, ss. 108, 109, 115).

the procedural requirements of the water act increase the possibility that environmental concerns will be properly aired in water licensing decisions. once the concerns are raised, the legislation seeks to guide the director’s discretion in dealing with environmental factors. In making a decision on a licence application, the director is required to consider any matters and factors specified in any applicable approved water management plan for the region in question. the director is also authorized to consider the effect of the proposed licence on the aquatic environment and to consider its hydrological effects (water act, s. 51(4)).

the alberta water act provides a mechanism for integrating water licensing decisions with environmental objectives. It does not guarantee that the objectives will be fully addressed, unless they are contained in an approved water management plan. however, the Act brings water allocation issues out of their traditional isolation and provides a defensible basis for any decision by the director to deny an application for licence or to add protective conditions on environmental grounds.

Instream Flows and Unlicensed Uses B.

All jurisdictions that have adopted either the prior allocation or the prior appropriation model face problems with maintaining a level of minimum flows sufficient to ensure that river systems function at a level consistent with environmental objectives. this question arises at the time that initial licensing decisions are made, when it is important to ensure that water is not allocated in a way which threatens the environmental functioning of a water body or which ignores important, but unlicensed uses of water. In most of western north America, a much more intractable problem arises when the water in a river basin has been fully allocated, because any initiative to restore flows to an adequate level tends to threaten the vested rights of existing users.

Initial Allocation i.

the water act contains many provisions which can potentially guard against over-allocation. the Minister is required to establish a strategy for the protection of the aquatic environment and that strategy can contain guidelines for establishing water conservation objectives (water act, s. 8(2), (3)). however, in deciding whether to issue a licence, the only mandatory restriction on a director’s discretion occurs when there is an approved water management plan. At the moment, the only approved water management plan exists in the South Saskatchewan Basin. Although the director is empowered to consider the effect of a licence application on the aquatic environment, minimum levels of instream flow have not been established for the rest of the province either through an approved plan or water conservation objectives. It is difficult for the director to deny an application for a licence because of a threat to minimum flows when there has been no authoritative decision which establishes the required level of those flows.

the establishment of instream flow levels is typically complex and very time-consuming. While this process unfolds, there is no formal method to prevent the over-allocation of water in central and northern Alberta. It seems desirable to avoid the future difficulty of reclaiming water from existing licensed users by establishing interim levels of instream flow for all the major basins in the province as quickly as possible.

Most modern water allocation law deals successfully with issues surrounding those who hold water rights that are defined and registered within the system of a particular jurisdiction. Both the

issue of new licences and the intensification of water use that occurs when transfers are introduced can threaten uses of water that lack any recognition under provincial legislation. this risk means that great care must be exercised when actions under the water act are taken in areas where indigenous people rely on access to water supplies but hold no licence or permit for water use or where federal interests are affected.

Water law in Alberta and the other prairie provinces generally fails to address effectively the problem of unregistered water use by indigenous people. Alberta protects only unlicensed domestic or household use (water act, s. 21), but not unlicensed instream uses.

Saskatchewan declares that Indian bands have common law riparian rights on lands set aside for Indian reserves under modern land claims settlement agreements (Saskatchewan watershed authority act, s. 42(d)), but the legislation is otherwise silent on the question of unlicensed traditional uses. In contrast, canada’s three northern territories of nunavut, yukon, and the northwest territories all deal explicitly with the problem of those who are dependent on water but who lack legally recognized rights to water use (e.g., Northwest Territories waters act, 1992).

the water act does not mention aboriginal water rights and thus leaves them to be considered in the slow-moving process of establishing instream needs or in policy documents that do not relate directly to the words of the legislation.

Allocations under the water act can also affect waters in which there is a federal interest, particularly inter-jurisdictional waters and water that is subject to the exclusive federal powers to regulate fisheries and navigation. For decades, there was little if any federal involvement in water allocation decisions on the Prairies until the Supreme court of canada unequivocally established that the provincial licence for the oldman River dam was governed by the Federal navigation legislation, which in turn engaged the federal rules governing environmental assessment. the long-held assumption that the province held quasi-sovereign rights over water within its boundaries is impossible to defend in the case of potential conflict with established areas of federal responsibility.

It is also possible to protect the functioning of a body of water by issuing a licence to protect water in its natural state. the Alberta legislation on its face appeared to be in the vanguard by making provision for natural state licences in 1971 (water resources act, 1971).

however, in practice only one such licence was issued before the Act was replaced in 1999. the water act places a further limitation on the potential of this device by allowing only the government to apply for a natural state licence (water act, s. 51(2)). It is thus unlikely that their use will increase.

Restoration of Instream Flow Levels ii.

the introduction of transferable water entitlements in heavily allocated rivers can make the restoration of minimum flows even more difficult because they create incentives to put to use water that might previously have been available to the river system through return flows. the alberta water act addresses this problem by allowing the director to withhold water for environmental purposes when a transfer is approved. It provides that, where authorized in an approved water management plan or by order of the lieutenant governor in council, the director may withhold up to 10 percent of the water allocation that is subject to the transfer in order to protect the aquatic environment or to implement a water conservation objective (water act, s. 83(1)).

the South Saskatchewan River Basin Water Management Plan authorizes the use of water conservation holdbacks in transfers. the operation of the transfer system thus creates a rare win-win situation.

In exchange for granting the right to transfer water allocations that were previously tied to the land and for allowing new users to acquire water that was previously unavailable, the Act permits some progress towards important environmental objectives.

the explicit use of the transfer process to restore instream flows is unique in canada. Although the holdback provision is modest and unlikely to restore large quantities of water to a river system, it provides a key to unlocking an otherwise intractable problem.

Where the director withholds water from a transfer, the Act creates three options: the withheld water may remain in the natural water body for the purpose of providing or maintaining minimum flow requirements, the water may be reserved from the general allocation scheme, or it can be allocated to the government under a licence. If the director follows the third option, the government licence provides an important protection, as it must hold the same priority as the original licence from which the holdback was taken. this option creates the possibility of devoting water to instream flows with a senior licensed priority.

Monitoring and Enforcement C.

the water act also adopts the framework of monitoring and enforcement provisions that is found in the environmental Protection act. this is a significant advance on the previous water resources act and provides the necessary tools for effective enforcement. the water act probably deals with more individual actions than any other environmental or natural resource legislation. It requires an approval for virtually every activity that is conducted in water or that might affect water, unless there is a specific exemption established in the regulations, and a licence for every diversion of water and every water well that diverts more than 1,250 m of water per year. the scale of regulated activities makes monitoring a daunting task. there has been no empirical study of monitoring and enforcement activities under the Act, so it is impossible to draw any firm conclusions

IS The CuRRenT WATeR ReSouRCe AlloCATIon SySTeM “SuSTAInAble”?

the preceding sections have described the evolution of water allocation systems in the prairie provinces of canada. In contrast to the approaches implemented in Saskatchewan and Manitoba, Alberta has taken a more market-oriented approach to dealing with water scarcity and reallocation issues. the water act provides for water transfers and assignments and it includes mechanisms to address environ- mental objectives and instream flow needs. While many aspects of this frame- work appear to be improvements in the way water quantity and quality objectives are met, there remain concerns about the sustainability of the framework in light of changing bio-physical, economic and social conditions.

this section of the document examines the performance of Alberta’s water resource allocation and management system and assesses the degree to which the current framework is “sustainable.” It also examines changes that may improve the performance of the system. Performance is assessed using a set of commonly used criteria for policy evaluation in the context of two basin case studies: the lower Athabasca Basin and the South Saskatchewan River Basin. In part these case studies are chosen because of their differences in economic structure and hydrological conditions. the criteria used to evaluate the performance of the water allocation system include elements such as economic efficiency, incentives for conservation, the ability to achieve minimum human use and ecosystem requirements, and equity and fairness (e.g., olewiler, 2007).

Since Alberta’s water management framework enables a market-oriented approach, the case studies are also used to assess the extent to which the conditions for markets to effectively allocate resources are met in these regions.

the criteria set out in the document, “the Potential Benefits of an organized exchange for the Sustainable use of Water in Alberta” (chicago climate exchange, 2009) are used in this evaluation. the document focuses on five key conditions for the efficient operation of a market, namely:

1. there must be many buyers and sellers, with low entry and exit

barriers in the market, so that each market participant is not capable of individually influencing market prices. this is desirable as transparent and accessible markets foster competition.

2. there must be perfect information among participants. While perfect information may not be possible, transparency is required. this includes knowledge of the market-clearing price, accurate metering of water use, publically reporting the quantity of water being diverted and consumed, and establishing eligibility requirements that must be satisfied as a precondition for participating.

3. third-parties are not adversely impacted as a result of the transaction—

there are no “externalities.” environmental pollution or degradation is an example of such an externality.

4. Property rights are well-defined.

5. there are low costs and risks associated with executing transactions.

CASe Study 1:

the Athabasca River flows from the Rocky Mountains through Alberta to the north eastern border of the province. the river has a mean annual discharge of approximately 24,000,000 dam³ and the Athabasca River Basin has a human population of fewer than 200,000 people (Alberta environment, 2007).

About 70% of the annual allocation of approximately 850,000 dam³ is for energy sector activities. this region has a very different pattern of water use than other regions in the province. Within the Athabasca River Basin, the lower Athabasca River is very active in terms of allocation of water. Figure 1, based on Mannix et al. (2010), outlines the current and forecasted water allocations in the lower Athabasca, amounting to over 400,000 dam³ of approved allocations. note that this allocation is to a total of nine

“firms”, reflecting the concentration of water use among economic entities in the region. the lower Athabasca River provides water to the oilsands mining sector in Alberta. this sector is expected to expand its withdrawals and uses of water over the next three decades as energy development expands (Alberta environment, 2007). Alberta environment (2007) forecasts suggest that relative to use in 2005, water use will be as high as double 2005 rates in a fully developed oilsands sector. this level of use will decline somewhat over time as water use is highest at the establishment of oilsands mines and technical efficiencies are expected to arise over time. In the case of the oilsands mines and existing technology, the ratio of water use relative to withdrawals is high as water withdrawn for oilsands mine use cannot be readily returned to the river because of the impurities arising from the mining process. tailings ponds have been developed to store and treat water to the point that it can be returned to the river.

Water quantity and allocation in the oilsands was highlighted as a concern in environmental assessments in the late 1990s. An assessment in 2003 raised questions about instream flow needs (IFn) and water conservation objectives (Wco) in the lower Athabasca region. the result of these concerns was a joint program by the Federal department of Fisheries and oceans and Alberta environment to construct a supplemental water management framework for the lower Athabasca region. this framework, which defines temporal water withdrawal limits on oilsands companies in the region, has been implemented on top of the water resource allocation mechanism employed by the province (prior allocation, first in time first in right, and other associated principles.)¹.

the Water Management Framework (WMF) was developed via deliberations between Alberta

government organizations, federal agencies, and the local stakeholders. the result was the WMF Phase 1 in 2006 (Fisheries and oceans canada, 2007). the objectives of Phase 1 (completed) and Phase 2 (to be completed in 2010)² are:

1. to provide a high level of protection of the aquatic ecosystem over the long-term.

2. to provide incentive to develop cooperative management options for water in the Athabasca River.

1 To the best of our knowledge this basin does not yet have an approved water management plan and thus it does not have a specified set of water conservation objectives (WCOs). The second phase of the WMF is expected to help generate information that will lead to a water management plan and WCOs for the region. http://www.energy.alberta.ca/OilSands/pdfs/

FinalReport_2007_OS_MSC.pdf

these five criteria elaborate on the conditions required fo r markets, as one component of a water allocation framework, to be efficient. the following

sections provide two case studies: the lower Athabasca River Basin and the South Saskatchewan River Basin. In these case studies we assess the performance of the current water allocation system and the potential for the use of market mechanisms to improve the performance of the system.

3. to provide incentive for achieving more efficient water use.

4. to provide a reliable supply of good quality water.

5. to ensure water use restrictions are realistic and the framework is straightforward to administer.

Source: Fisheries and Oceans Canada, 2007.

the implications of the WMF for oilsands operations can be summarized as follows. Maximum

cumulative withdrawals are limited to 15% of flow in “green” conditions – the condition when flows are above an ecologically determined cautionary threshold. this allocation of flow is relatively small compared to existing allocations on other river systems in Alberta (Alberta environment, 2007). however, it is unlikely that this limit in the green condition will result in water use restrictions for existing or planned oilsands mines. In the “yellow” and “red” conditions (below the cautionary threshold) water levels may require users to implement water use restrictions. In the “red” condition the total diversion rate is 5.2% of the historic median weekly flow.

In the WMF, if water use restrictions are required they are not implemented by the first in time, first in right principle. the oilsands sector in the region was asked to develop a sharing agreement that would allocate water under yellow and red conditions. they have responded with “oil Sands Mining Water Management Agreements.”

(an example for 2008-2009 can be found at http://environment.alberta.ca/documents/Oil-Sands-water-Mgt- agreement-winter-2008-09.pdf.)

the four signatories to the agreement are oilsands companies operating during the winter period (Syncrude, Suncor, Shell Albian Sands, and canadian natural Resources limited). the agreement

illustrates the impact of Syncrude and Suncor having older, or higher priority, water licences as they agree to limit withdrawals during red and yellow conditions to their average annual allocation rate while the other companies must use storage to meet the withdrawal limits.

given the unique nature of the lower Athabasca region, and the likely increases in water use and scrutiny of water use in oilsands mining, it is instructive to evaluate the conditions for sustainability presented in the previous section for this case. In the oilsands case a few features become apparent. First, the implied water restrictions in terms of percentage withdrawals are quite stringent, relative to those found in other regions in Alberta and in other parts of the world. there has been an attempt to be very cautious in the allocation of water for energy sector development in the region. Second, there are very few firms operating in the area and there are clearly opportunities for negotiation and bargaining with low transactions costs, but there is also the potential for strategic behavior.

Evaluation of the Performance of the Current Water Allocation System in the Lower Athabasca River

As described above, the performance of the current water management framework can be evaluated by examining its ability to protect ecosystems, to allocate water efficiently (including providing incentives for conservation), and to be fair and equitable in water resource allocation. these may be viewed as environmental, economic and social performance objectives. the discussion below examines the water allocation system, including the WMF, in this regard. In addition, the conditions for markets to function to efficiently allocate water in this case are also assessed.

the current system, particularly with the addition of the WMF, goes a long way toward achieving

minimum human use and ecosystem requirements, at least in terms of instream flows or water quantity objectives. While some would argue that the WMF framework excludes the possibility that no water is withdrawn in very low flow years, the WMF is very stringent relative to other maximum withdrawal

conditions in the Province and elsewhere. In addition, an environmental base flow exemption is being discussed in the latest version of the WMF (ohlson et al., 2010). the basin does not yet have an established watershed conservation objective or management plan, but the WMF Phase 1 and 2 are likely to be important components of any such plans.

While the current framework provides significant protection for environmental protection it is unlikely to be economically efficient. Water will not be moving to the highest value uses as the water allocation framework, and to a certain degree the sharing arrangement under the WMF, are based on historical allocations. If higher valued uses, such as more efficient oilsands operations, enter the sector, they will have lower priority licenses and will be the first to have to reduce water use in times of shortage. the WMF illustrates this outcome as the newer and apparently more efficient users of water are the first to have to reduce their water use in times of shortage (see Mannix, 2009). It is possible that a water pricing scheme, if appropriate prices are determined, can move towards economic efficiency (see horbulyk, 2010; 2005). A water rights trading or transfer scheme may also result in efficient outcomes if the small number of players and the potential for strategic behavior do not hinder the market processes. Mannix (2009) examines the efficiency gains associated with moving to a pricing or trading scheme under the assumptions of an efficient market. She finds that a combination of storage and a market-based instrument approach would yield efficiency gains of

$270M per year at an assumed oil price of $70 per barrel (Mannix, 2009). note that as a fraction of expected revenue for the sector this is a relatively small amount (approximately 0.6%). note also that storage may play an increasingly significant role in water management in this region in the future, given the apparent interest in enhanced conservation and the potential inclusion of an environmental base flow condition (ohlson et al., 2010). the efficient operation of water storage may be a more important component of efficient allocation of water in this region in the future.

In addition, the current framework does not generate significant incentives for conservation. the WMF describes limits, but water use does not have a price per unit. Similarly, the incentives for technology include political and public pressure, but are not directly financial in nature. the new regulations concerning requirements for reductions in tailings ponds will provide some pressure to develop technologies to address water use, but it is not clear how effective these pressures will be relative to a market-based approach.

the introduction of the WMF is in part a response to questions about equitable allocation of water resources. In principle, the WMF addresses water allocation to environmental uses, Aboriginal People, and future generations by aiming to protect aquatic ecosystems. Phase 2 of the framework will include assessments of the socioeconomic aspects of water use and employ traditional knowledge as well as western scientific approaches to water management. other mechanisms, including market-based approaches, could follow similar strategies to ensure adequate water to a range of users and uses.

In summary, the current framework performs well in terms of providing protection for the environment with regard to some social or equity considerations. however, in terms of cost effectiveness, providing incentives for conservation, and resilience in economic terms, it could be improved. the extent to which a water market could improve on the allocation system defined under the WMF depends on the design of the system. In the next section we examine the criteria for a successful water market in the context of the lower Athabasca case.

Meeting the Conditions for an Efficient Market: The Case of the Lower Athabasca River

By way of review, the five conditions for an efficient market described in the chicago climate change Report (2009) can be summarized as:

Many buyers and sellers and low entry and exit barriers.

1.

Perfect information and transparency, metering, reporting, etc.

2.

third parties not adversely affected.

3.

Property rights are well defined.

4.

low costs and risks associated with transactions.

5.

clearly, the first condition does not hold in the case of the lower Athabasca River Basin, nor is it likely to hold in the Athabasca Basin as a whole. two issues arise in this situation. First, the fact that a small number of firms (four in the current water sharing agreement) account for a very large share of the total water allocation means that there will be few buyers and sellers of water. Furthermore, the overlay of the WMF in a sense precludes the development of a market as the mandated allocation mechanism is a negotiated agreement. there is the opportunity for buying and selling to emerge within the sharing agreement but that is not obvious from the arrangement. even if the extent of the potential market is expanded to consider areas beyond the lower Athabasca, the majority of the water allocations remain in the oilsands sectors with a relatively small number of large players.

An additional issue is that there may be little heterogeneity between firms in terms of water use and demand. Since the technologies are fairly similar between firms there may be little difference in the value of water or implied demand – once again limiting the potential for buying and selling. the chances of a successful trading water system are increased with heterogeneity in firms, technology, the demand for, and the value placed, on water. there will be heterogeneity between oilsands mining operations and in-situ operations as well as heterogeneity between energy sector users and other users of water, but the fact that the majority of the water allocated in the region is to energy activities limits the impact that such heterogeneity will have on a potential market.

A component of the first condition is the existence of few barriers to entry or exit. the WMF may impose a type of barrier to entry on the market because of uncertainties about water availability. Mannix et al.

(2010) examine the extent to which “red” and “yellow” conditions may arise in the lower Athabasca using scenarios of expected development of oilsands and various flow conditions arising from climate change projections. they show that when the industry is fully operational (at the current projected capacity) there will be an average of six weeks of water shortfall or about 3% of total water demand. While the frequency of water shortfalls is relatively low, there is a significant probability of such events that increases with water extractions (see Mannix et al. 2010, table 4). there is a potential barrier to entry in that the risk of being required to reduce water use, or use stored water, will increase with an increase in the number of firms. Since the new firms are likely to have less strategic advantage in the sharing agreement (should an agreement like the WMF continue), there is an increased enterprise risk and thus a potential barrier. What is unclear is whether this effect would be any different under other approaches to water management (e.g., a pricing or trading approach).

the second condition calls for perfect information and transparency in water use. While there have been concerns about water quantity and flow monitoring (Schindler et al., 2007), as well as water quality monitoring (kelly et al., 2009), there is evidence that the quality of data is increasing and that at the individual firm level, detailed information about water quantity and flow are available. the water sharing agreement indicates that water quantity data are available as the agreement requires reporting and monitoring on an average daily basis. levels of reporting and monitoring for other uses in the basin are likely to be reasonably high quality because of the relatively recent development of the area and the increasing scrutiny of water use in the region.

In terms of third party effects, transfers of water from one party to another in the lower Athabasca region may have effects on other users of water (e.g., other industrial or municipal users), but these effects will probably be quite modest. on the other hand, water withdrawals in general create externalities that affect Aboriginal People in the region, local communities, and other individuals through the impact on ecological systems. concern over these externalities is, to a certain degree, what resulted in the Water Management Agreement. however, transfers from one licensed user to another will not be as likely to generate externalities because of the proximity of the oilsands mine sites and the lack of other water users that will be affected by transfers between the mine sites.

(a depiction of the location of mine sites, and other oilsands areas can be found at: http://www.oilsandsdevelopers.

ca/wp-content/uploads/2009/03/02-location-of-oilsands.jpg.)

note that third party effects may be significant if transfers of water occur outside of the lower Athabasca Region. If a water transfer mechanism is developed for the Athabasca River region, then the impacts of trades from regions outside the lower Athabasca could have significant impacts on users.

the fourth and fifth conditions address property rights, transactions costs, and risks. usufructuary rights relating to water are well defined by the licensing system and the rights defined therein. the overlay of the WMF and sharing agreement can be viewed as creating some uncertainty in the original rights, but this framework was developed in the context of the basic rights system. It is unclear what the legal status of the WMF is under the water act, and it may only be enforceable as a contract between the parties.

Regarding transactions costs, it is difficult to assess the extent to which such factors as holdbacks, legal proceedings, and other issues would translate into high transactions costs. the development of the sharing arrangement under the WMF suggests that the costs of developing such a mechanism, which in some ways is not unlike a short term transfer agreement, are relatively modest.

Summary

overall, it would seem that the most challenging condition to meet in the lower Athabasca region is that of the low number of buyers and sellers. the other conditions for market effectiveness are not met perfectly but the fact that there are few players in the region raises questions about the potential for a viable market in terms of a short term water transfer market or a market exchange. given the current allocation framework, including the WMF, a negotiated agreement between the small number of players may be relatively effective in terms of quantity allocation, and may facilitate some economically efficient reallocations, but there remain no direct incentives for conservation. this situation does not preclude the potential use of other market-based instruments to provide incentives for water conservation (Adamowicz, 2007). A water pricing and refund scheme, for example, may generate effective incentives for conservation without disadvantaging the sector as a whole (Adamowicz, 2007; Mannix, 2009;

horbulyk, 2010). Future development in the region, including developments in the entire basin, may result in conditions that would benefit from short term water rights trading and/or a centralized exchange that would help promote conservation of water resources

fIGuRe 1: Approved licences for Water use Sourced from the Athabasca River for oil Sands Mining

Project / Company Status Annual licensed

water-use, GL Annual licensed

water-use, m³/s Max. instantaneous pumping rate, m³/s

Suncor Existing 62.825 1.99 3.790

Syncrude Existing 61.675 1.96 4.163

Athabasca Oil Sands Project

(AOSP), Albian Sands Existing 55.100 1.75 2.220

Fort Hills Demonstration Plant,

Petro-Canada Existing 0.271 0.01 0.030

Joslyn SAGD (Steam Assisted Gravity Drainage), Total E&P

Canada Ltd. Existing 0.177 0.01 0.020

Total existing 180.048 5.71 10.22

Jackpine Phase I, Shell Approved 63.500 2.01 1.950

Horizon, CNRL Approved 79.320 2.52 3.100

Fort Hills Project, Petro-Canada Approved 39.000 1.24 1.237

Kearl, Imperial Approved 80.000 2.54 4.600

Total approved 261.820 8.30 10.89

Total existing & approved 441.868 14.01 21.11

source:

Mannix et al. (2010). See Mannix et al. 2010 for details on table entries.

CASe Study 2:

the South Saskatchewan River Basin flows from the headwaters in the Rocky Mountains through the prairie provinces to hudson Bay. the Alberta portion of the South Saskatchewan River Basin, shown in Figure 2, includes the sub-basins of the Bow, Red deer, oldman, and South Saskatchewan rivers.

the combined watershed of the basins is 121,095 km², of which 41% is from the Red deer sub-basin, 22% from the oldman, 21% from the Bow, and 16% from the South Saskatchewan. the mean annual discharge from the basin into Saskatchewan is 9,280,000 dam³ (Alberta environment, 2010). the Master Agreement on Apportionment (Prairie Provinces Water Board, 1969) governs the quantity and quality of water which must pass from Alberta to Saskatchewan in any given year. under the agreement, Alberta must pass 50 percent of the annual natural flow from the South Saskatchewan River Basin to Saskatchewan.¹

Projections of future water use in the basin are increasing. over the last decade, stated objectives of decision makers on both the Alberta and Saskatchewan sides of the border have included the doubling of Saskatchewan’s population, expanding livestock operations, and increasing irrigation acreage. Water availability is a potential constraint to economic development, with all sub-basins except for the Red deer currently closed for further allocation. the South Saskatchewan River Basin is also vulnerable to

climate change. Potential impacts of climate change for the South Saskatchewan River Basin include changes in annual streamflow (possibly with large declines in the summer), and reduction of flows from glaciers. even though annual flows may increase in some climate scenarios, the timing of flows is expected to change, with more water available in spring when there is less demand for irrigation.

this has implications for agriculture and the role of storage, in particular due to increased likelihood of severe drought and increasing aridity in semi-arid zones at a time when water availability for meeting consumptive and instream flow needs, especially during summer months, is expected to decline (Prairie Adaptation Research collaborative, 2005; Sauchyn et al., 2008).

FiGure 2: South Saskatchwan river basin Planning area

source: Alberta environment, 2006.

Allocations in the South Saskatchewan River Basin

As described above, the crown owns all of the water, and licenses rights to divert and use water. Before licences for water can be allocated to new users, Alberta environment must ensure that new allocations do not impact existing water licences, the aquatic environment, or the ability to meet apportionment agreements. there are about 20,000 licences and registrations in the South Saskatchewan River Basin (Alberta environment, 2005). the licensed allocations specify both a fixed annual diversion volume as well as an instantaneous diversion rate. there are often other restrictions specified in individual licences such as instream objectives. during periods of shortage, water is allocated according to the seniority date