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Market News

 April 16, 2007
Canada's water in high demand

 Ottawa, Canada -- Canada has water - lots of it - and this valuable resource will be in high demand from the United States and Mexico in the near future, particularly as climate change exacerbates drought conditions and agricultural usage depletes already overtaxed aquifers. This could result in serious challenges to Canada's ability to maintain control over the export of water from its rivers and lakes.

According to reports from CanWest News Service, water will be on the agenda when politicians, businessmen and academics from Canada, the U.S. and Mexico gather in Calgary on April 27th for a three day conference on the "North American Future 2025 Project", an effort to draft a blueprint" on economic integration for the continent.

The Project was launched in March 2006 to guide the ongoing Security and Prosperity Partnership, a comprehensive strategy which includes everything from combating terrorism to striking down trade barriers. Seen as an increasingly valuable commodity, press reports indicated that water diversion is among the issues to be tackled.

Canada's Environment Minister John Baird, responding to press speculation declared Canada had no intention to enter into any negotiations on bulk water exports or diversions. "Canada has restrictions in place to prohibit bulk removal of water, including diversion, backed by serious fines and/or imprisonment. Canada is committed to protecting water in its natural state and to preserving the integrity of ecosystems, and will continue to do so," said Baird.

Still, continental water shortages and management strategies may be discussed, and Canada will face increasing pressure in the upcoming decade to provide relief for drought-stricken areas in our neighbour to the South..

On a world scale, Canadians enjoy an overabundance of freshwater that is out of proportion to the national population, when compared with other countries. Canada possesses around twenty percent of the world's freshwater resources, most of which is locked up in the country's lakes and rivers.

But distribution of that water remains an issue, and it must be measured in regional terms related to local river basins and water tables. Certain areas, such as the Athabasca River in Alberta, which is subject to increasing withdrawals for the oil sands industry, do not have water to spare.

With the impacts of climate change a present reality as well as a future certainty, Canada will be increasingly pressured to bolster North America's freshwater supplies. The policy, business, and social responses to this issue will be vital to ensuring the prosperity and environmental integrity of the entire continent. Canadians would do well to pay attention to this highly sensitive issue.

It is now evident that large areas of the United States will require more water to sustain agriculture. Irrigation in the Southern Great Plans is heavily dependent on water from the huge Ogallala aquifer, which is being depleted by drought and increased withdrawals.

A similar situation is occurring in Mexico. The water table in the agricultural State of Guanajuato is falling by 1.8--3.3 meters per year, reports Lester Brown of the Earth Policy Institute.

Stress on fresh water resources is only expected to get worse, particularly as climate change leads to an increase in drought conditions. The Intergovernmental Panel on Climate Change (IPCC) recently released its report on expected impacts of warming temperatures, projecting decreases in water availability by 10-40%, and the United Nations predicts that by 2025, two-thirds of the earth's population will be living in areas suffering from scarcity of water.

For North America, the IPCC predicts a decreased snowpack that will lead to reduced summer flows, exacerbating competition for over-allocated water resources. Drier areas are likely to receive even less precipitation, as water distribution will become more sharply divided. The Ogallala aquifer and the Edwards aquifer in Texas could become severely depleted, it warns.

The upcoming discussions in Calgary will no doubt include such points, and the conference outline notes that "fresh water is running out in many regions of the world," reports CanWest. The U.S. and Mexico need to discuss solutions such as bilateral agreements on "water transfers" and the diversion of water, it adds, identifying an "overriding future goal of North America to achieve joint optimum utilization of the available water."

The issue of diverting or selling large amounts of Canada's fresh water south of the border has always been controversial. In 1999, Ontario permitted a Canadian company to divert and sell up to 600 million litres from Lake Superior. A public outcry forced the permit to be rescinded, and Ottawa legislated against the sale or diversion of Great Lakes water.

There are currently several large diversion projects underway, the largest of which is permitted to take over 3000 litres per minute for Chicago's municipal water supply.

Quebec and Ontario have voiced opposition to further diversion, but the Midwestern US states and others in the Mississippi basin are demonstrating a growing agricultural thirst that they claim can only be slackened by siphoning off Great lakes water.

Transfers out of the basin are banned in Canada, and all eight Great Lakes states in the US must agree to any water removal. However, there are opportunities within current legislation for bulk water exports to occur. Maude Barlow, National chair of the Council of Canadians points out in a statement that provincial accords to prevent exports are voluntary, and that the only existing prohibition on bulk water exports contained in the 1909 International Boundary Waters Treaty Act (IBWTA) only applies to waters that are shared with the U.S., and not on water from Canada's North.

There are many legal and international trade issues involved, and the North American Free Trade Agreement (NAFTA) and the World Trade Organization's General Agreement on Tariffs and Trade (GATT) could possibly be used as the basis for a challenge to Canada's right to control water exports. That challenge rests largely on the definition of water as either a 'vital resource' or a commodity. Canada could also make use of existing clauses in both agreements and assert that water exports would cause environmental damage.

So far, these grounds have not been extensively tested, and as it stands there are no plans to use NAFTA to enforce U.S. rights to import Canadian water. In fact, a 1993 Joint Statement by the Governments of Canada, Mexico and the United States stated: "The NAFTA creates no rights to the natural water resources of any Party to the Agreement ... nothing in the NAFTA would oblige any NAFTA Party to either exploit its water for commercial use or to begin exporting its water in any form. Water in its natural state in lakes, rivers, reservoirs, aquifers, water basins and the like is not a good or product, it is not traded, and therefore is not and never has been subject to the terms of any trade agreement."

However, as drought, climate change, and intensified agriculture put increasing pressure on dwindling water resources in the U.S. South, those states may bring the fight for Canada's water to the courts. Many legal experts believe that Canada would be able to successfully withstand such a challenge; but the increasing commoditization of water around the world is changing traditional views of this natural resource.



For More Information: Canada.com