ALBERTA WATER COUNCIL AUGUST 2009 Recommendations for Improving Alberta's Water Allocation Transfer System ALBERTA WATER COUNCIL Recommendations for Improving Alberta's Water Allocation Transfer System About the Alberta Water Council The Alberta Water Council is a multi-stakeholder partnership with Members from governments, industry, and non-government organizations. All Members have a vested interest in water. The Alberta Water Council is one of three types of partnerships established under the Water for Life strategy; the others are Watershed Planning and Advisory Councils and Watershed Stewardship Groups. The Alberta Water Council regularly reviews implementation progress of the Water for Life strategy and champions the achievement of the strategy's goals. The Council also advises the Alberta Government, stakeholders and the public on effective water management practices and solutions to water issues, as well as on priorities for water research. Where there is consensus, the Council may advise on government policy and legislation. However, the Government of Alberta remains accountable for the implementation of the Water for Life strategy and continues to administer water and watershed management activities throughout the province. Alberta Water Council #1400 Petroleum Plaza South Tower 9915- 108 Street Edmonton, AB T5K 2G8 Tel: 780.644.7380 Fax: 780.644.7382 Email: [email protected] Web: www.awchome.ca COVER/INSIDE BOTTOM PHOTO CREDIT: DAVID DODGE, CPAWS AUGUST 2009 Contents Executive Summary 2 Acknowledgements 4 1 . I ntroduction 5 2. Protected Water 1 1 3. A Market for Transferring Water Allocations 17 4. Moving Unused Water to the Market 25 5. Finding Water for the Market through Conservation 32 6. Transfer Application and Approval Process 36 7. Data and Information Platform 43 8. Implementation 47 9. Conclusion 49 Glossary 5 1 Appendix A — Project Team Members 54 Appendix B — Project Team Methodology 55 Appendix C — Alberta Water Council's Consensus Decision-Making Process 56 Appendix D — The South Saskatchewan River Basin 58 Appendix E — SSRB Matters and Factors for vDo No Significant Harm' 60 Appendix F — City of Calgary Water Scenarios 62 6 ALBERTA WATER COUNCIL Recommendations for Improving Alberta's Water Allocation Transfer System Executive Summary In support of achieving the three goals of Water for Life, the Alberta Water Council established the Water Allocation Transfer System Upgrade Project Team with the mandate to "recommend improvements to better utilize and enhance Alberta's water allocation transfer system." As per their Terms of Reference, the team kept their work within the confines of existing legislation, specifically the Water Act. Currently there are a n umber of projects focused on water allocation in Alberta and this work serves as one of several inputs to the Government of Alberta. After a year of examining Alberta's current water allocation transfer system, the Alberta Water Council is pleased to make a n umber of recommendations. If i mplemented, these improvements will greatly strengthen the water allocation transfer system. They will also ensure the system meets the social and economic needs of all Albertans, while still safeguarding the environment, now and in the future. The Council identified six areas for improvement and made a n umber of recommendations within each area that can be briefly summarized as follows: 1) Protected Water: Before a water allocation transfer system can function effectively an amount of water must be set aside for environmental and non-consumptive purposes as determined in the public interest by the process established for creating a water management plan. This Protected Water will not be traded in the water allocation transfer market. This step is the foundation of, and contributes to certainty in, the water allocation transfer system. Setting the amount of Protected Water as a Water Conservation Objective for each of Alberta's seven major basins; developing Approved Water Management Plans; and regularly reviewing and improving such plans are additional activities required to ensure our water sources remain healthy and sustainable for future generations. 2) A Water Allocation Transfer Market: A robust market must be established to incent the transfer of all or a portion of a water allocation between users. An active water allocation transfer market must be fair to all participants. It must be transparent and administratively efficient with clear objectives, principles and criteria. Once transfers are approved for use in a b asin, all existing water allocation licence-holders 'in good standing' can participate in a market subject to conditions or requirements around participation, specific to each basin. 3) Unused Water for the Market: Certainty about the amount of water available for transfer is also a foundational requirement of the water allocation transfer system. Unused water or water gains made through conservation and efficiency can be made available to meet the needs of new users. Although there are acceptable reasons to hold unused water in a licence, criteria need to be developed to clarify such situations. In addition, a decision tree is proposed for determining if a n existing licence is transferable. The principles of 'in good standing' and 'reasonable prospect of use' are used to guide decision-making. Every potential transfer must be assessed to ensure it s atisfies the 'does no significant harm' principle. 6 m AUGUST 2009 4) Conserving Water: Water conservation is a cornerstone of the Water for Life strategy. Improved conservation efforts will make more water available to meet ecosystem and economic goals of the province. Hence, an improved water allocation transfer system should promote water conservation, efficiency and productivity and should not be at cross- purposes to such initiatives. Additionally, to manage their risk, all water licence-holders should be prepared for, and develop, a Water Shortage Response Plan. 5) Applying for a Transfer: The water allocation transfer system requires an effective application and approval process. To facilitate this, three classes of applications are proposed based on the level of risk to society and the level of discretion to be exercised by the Director in the public interest. Simple transfers will be processed relatively quickly; transfers that are more complex will come under increasing scrutiny by the Director, by directly affected parties, and those who may achieve public interest standing. 6) Data and Information Platforms: An improved water allocation transfer system will require solid data and sound information to inform decision-making. An information platform must be accessible to all participants such that available volumes, prices and other pertinent information are known to both parties in a transaction. In general, the Alberta Water Council found that with the improvements recommended in this report, the water allocation transfer system can continue to serve the province well. For the most part, there was agreement regarding where improvements were needed and what actions were required. However, despite sincere commitment and extensive discussion in the available time, consensus was not reached on some items. Out of a total of 23 recommendations in this report, there are two recommendations that do not have unanimous support. Of the 15 member groups represented on the Councils Water Allocation Transfer System Upgrade Project Team, two member groups do not support Recommendation 16 and one member group does not support Recommendation 19. In addition, there are two recommendations that are supported by all team members, but are felt by some to not go far enough; specifically, two member groups believe that Recommendations 1 and 8 do not go far enough. Hence, for 21 of the 23 recommendations there is consensus support. It w ill take a c oncerted effort and time to implement an improved and robust water allocation transfer system in Alberta. This system must be adaptive and should have performance indicators and periodic review and assessment built into it. However, as the province begins closing its basins to new allocations, time is of the essence. Unless otherwise noted, all recommendations in this report are directed to the Government of Alberta. ALBERTA WATER COUNCIL Recommendations for Improving Alberta's Water Allocation Transfer System Acknowledgements The Water Allocation Transfer System Upgrade Project Team would like to thank the Alberta Water Council for providing the team the opportunity to contribute advice to a significant area of provincial water policy. Members acknowledge their own sponsoring organizations and contacts that provided support and input towards the project. Sector contributions of in-kind meeting space, communications and other logistical support are also much appreciated. The team's work was greatly informed by the March 2009 Water: How Alberta Can Do More with Less three- day symposium. The team thanks symposium organizers and sponsors including the Alberta Association of Municipal Districts and Counties, Alberta Urban Municipalities Association, Alberta Water Council, Alberta Water Research Institute, Canadian Association of Petroleum Producers, City of Calgary and Ducks Unlimited Canada. Last but not least, the team thanks project manager and facilitator Christine Macken, editor Petra Rowell, and the Alberta Water Council office staff for assisting them in completing their work. 1 , I ntroduction The Alberta Water Council is pleased to present this report to the Government of Alberta, other stakeholders and the public. Alter a solid year of reviewing and discussing Alberta's water allocation transfer system in detail, this report puts forward a number oi recommendations dial will greatly strengthen and improve Alberta's current system. Carrying out this work in a mulu- stakeholder, collaborative and consensus-based process ensures these improvements are to die benefit of all Albertans, now and in the future. Currently there are a number of projects focused on water allocation in Alberta and this work serves as one of several inputs for the Government of Alberta to consider in this matter. 1.1 The Task Water for Life: Alberta's Strategy for Sustainability (2003), is a c omprehensive long-term plan for the management of Alberta's water resources. The strategy is designed to achieve three interrelated goals: ■ Safe, secure drinking water supplies, ■ Healthy aquatic ecosystems, and ■ Reliable, quality water supplies for a sustainable economy. In order to achieve these goals, the strategy sets out a number of actions including the following: "Review the water allocation transfer system to ensure a viable market that moves water to support sustainable economic development." This report is one of several initiatives to address this action. To undertake this work, the Alberta Water Council created the Water Allocation Transfer System Upgrade Project (WATSUP) Team, with representatives from 15 sectors. The WATSUP Team followed an approved Terms of Reference, which is available online at www.awchome.ca. The mandate of the team was to "recommend improvements to better utilize and enhance Alberta's water allocation transfer system." A major part of the work of the WATSUP Team was to examine how water allocations and transfers are managed in other jurisdictions around the world. One of several initiatives undertaken was to organize the Water: How Alberta Can Do More with Less symposium, bringing together dozens of experts and practitioners from jurisdictions across Canada, North America, Europe, and Australia. The purpose of this event was to explore international examples, policies and practices for addressing water scarcity and to learn from the experience of jurisdictions around the world in establishing water markets. The WATSUP Team received additional information on water transfer systems in Australia and other jurisdictions, and concluded ALBERTA WATER COUNCIL Recommendations for Improving Alberta's Water Allocation Transfer System that its mandate was to stay within the first-in-time, first-in-right system. Consequently, a more substantive review of systems in other jurisdictions was not conducted. Further details on WATSUP Team membership, methodology and the Alberta Water Council's consensus decision- making process are included in Appendices A, B and C, respectively. This report is the culmination of the WATSUP Team's work. As such, it p rovides an overview of Alberta's current water allocation transfer system, discusses briefly the drivers for change, and makes recommendations in six key areas. These recommendations will improve the system such that Alberta has a robust, efficient process for facilitating water allocation transfers in a v iable water allocation transfer market. Recommendations in this report, unless otherwise noted: ■ Uphold the first-in-time, first-in-right principle, ■ Work within and enhance the existing water allocation transfer system under the Water Act, ■ Strive to reduce administrative burden, thus increasing efficiency of the system, ■ Are implementable, and ■ Contribute to the achievement of the Water for Life strategy and its goals. This report has been prepared by the Alberta Water Council as advice to the Government of Alberta, stakeholders and the public. Alberta Environment is currently undertaking its own broader review of water management and the water allocation system in Alberta and may consider input from several sources and processes, including this one. 1.2 Where We Have Been Prior to 1930, the Federal Government managed the province's water pursuant to the Northwest Irrigation Act. In 1930, the Government of Alberta was given this responsibility under the Natural Resources Transfer Act. In the past, water management focused on identifying that portion of annual volume required for conveyance and transboundary commitments. The remainder was then available to allocate to licence-holders for social and economic uses such as municipal drinking water or agricultural irrigation. In more recent years, water management has been expanded to address environmental instream flow needs (Figure 1). 4 Alberta Allocation Concept — Under the Water Act Protected by WCO Licence or Conditions on Licences (varies historically) Figure 1 — The theory of annual volume-based water distribution showing flow for environmental protection and an allocatea portion that may incluae water that is: (1) unused, (2) used but returned to the system, or (3) consumed with no return flow. ALBERTA WATER COUNCIL Recommendations for Improving Alberta's Water Allocation Transfer System 1.3 Drivers for Change Based on geography and climate, Alberta's water supply has always provided a v ariable volume. Yet the historical system of water allocations is based on fixed volumes contained in licences. This system does not necessarily respond well to seasonal and annual variation, and in particular, to years of low flows. It also may not address future risk from factors such as increased growth, development or climate change. First-in-time, first-in-right has been a k ey principle of granting and administering water allocations since 1894. During extensive public consultation for the Water for Life strategy, some stakeholders said "Alberta must preserve the 'first-in-time, first-in-right' (FITFIR) principle" (Figures 2 and 3) while others questioned whether it was the best system to allocate water (see http://environmentygov.ab.ca/info/library/7497.pdfat pages 10-12). Priority Based Allocation System in an Average Year STORED AND RELEASED Identified UNALLOCATE Allocation Limit Consumed 1991 1980 Protected by WCO Licence or Conditions on Licences 1950 (varies historically) Figure 2 — The priority-based allocation system in an average year. Both senior and junior licences are able to divert their full dllocdtions.