BC Business
Is it possible for water, a substance that eschews arbitrary political borders and respects only those prescribed by topography and the forces of nature, to be owned and commodified? If you mention water and privatization in the same sentence in this province, you may as well wear a mink coat to an animal rights convention.
The sun evaporates a molecule of water from the ocean and a thermal updraft carries it high into the sky. Propelled by a slow-moving southwesterly, this molecule passes above Puget Sound and then onto the turbulent air mass hovering over rugged Vancouver Island. There, as it collides with the Arctic outflows of Bute Inlet, it attaches to a microscopic dust particle, condenses into a liquid and then freezes. Heavier than the surrounding air, it falls as a snowflake upon the Beaufort Mountains, a distinctive, clearcut-scarred ridge of rounded summits that runs down the east side of Vancouver Island above the town of Union Bay. For the remainder of the winter and well into spring this flake nestles deep in the snowpack – nature’s deep-freeze water storage. When the day starts stretching toward summer solstice the sun will intensify, melting the snow and this molecule of water will surrender to gravity, tumbling down the mountainside in freshets of spring melt. So goes the wondrously dynamic hydrological cycle, a process of evaporation, condensation, sublimation and precipitation that is to the earth what the circulatory system is to the human body. Is it possible for water, a substance that eschews arbitrary political borders and respects only those prescribed by topography and the forces of nature, to be owned and commodified? After all, by definition it’s a raw natural resource, like gold and oil, except it’s renewable. But unlike these other resources, water is essential for life. That makes it profoundly different. Historians say oil shaped the 20th century. The geopolitics of the 21st century will be mapped out by the struggle to secure access to the world’s dwindling supplies of fresh water. In a thirsty world, it’s estimated that Canada holds 20 per cent of the planet’s known fresh water and of that amount, 30 per cent of it is stored within the borders of B.C. This province is so blessed with water that most of us simply take it for granted. We tend not to expend energy thinking about where water comes from, but the manner in which it arrives at our household taps is quietly undergoing a change. Municipal and regional governments are looking for solutions beyond the traditional model of publicly owned and operated utilities supplying fresh water and removing waste water, and private companies are eyeing this juicy province for watery opportunities. But if you mention water and business in the same sentence in this province, you may as well wear a mink coat to an animal rights convention.
On a moonless March night, around 100 people gather beneath the big wooden beams of the Union Bay Community Hall. Out there in the darkness, a winter’s worth of snow is accumulating in the Beaufort Mountains, lying in wait for spring melt. Citizens have forgone an episode of Survivor to hear Regional District of Comox-Strathcona chief administrative officer Bob Long present a wink, wink – nudge, nudge sales pitch for Kensington Island Properties (KIP). If approved, the development promises to transform this sleepy seaside community, founded 100 years ago as a coal port, into a bustling retirement and recreation hub. However, it’s not the ¬obvious impact of an additional 1,100 homes and 27 holes of golf in a town where two cars equals a traffic jam that has garnered a bucketful of local media attention; it’s water – where it will come from and who’s going to provide it. A small but vocal minority is questioning KIP’s association with Terasen Utility Services Inc. (a subsidiary of Texas-based Kinder Morgan now owned by majority shareholder B.C. Investment Management Corp. and CAI Capital Partners), which put together a water management proposal for the development. As people line up to speak at the microphone, a youthful Leslie Dickout sits quietly at the back of the hall with a folder in her hand, watching and listening while the few critics of the development’s water plans are unceremoniously shouted down by their neigh-bours. Clearly the debate over the town’s future has been ¬divisive and acrimonious, especially for such a tight-knit community. For Dickout, dots on the map like Union Bay are the front lines in the battle to determine just how water in B.C. will be managed in the future. “I’m impressed with CUPE because they saw this as an issue early on,” Dickout says. “Water is essential to life and when you put water testing and management in private hands their motivation is profit, and that’s not necessarily in the public interest.” A year ago the Canadian Union of Public Employees hired Dickout to spearhead its Island Water Watch campaign. The self-interest of her employer, whose half-million members across Canada include people who work for municipal water and sewer utilities, is not lost on her. However, she says it goes beyond protecting jobs – there are serious philosophical, ethical and social issues at stake: If water utilities are run on a profit motive, they will inevitably suffer from cost-cutting measures that could compromise water quality and reliability and send water rates into the stratosphere. [pagebreak] On one end are those captains of commerce who believe that water should be treated like any other privatized commodity; like trees above ground or a body of ore below the ground, it should be bought, sold and traded on the open market. At the other end you might find CUPE or the Council of Canadians, so-called aqua-nationalists who say that water is an inalienable public good – full stop. A simple human right that should remain above the base considerations of capitalism, never to be exported, sold or treated as a commodity. Most likely the ¬answer, whether by accident or design, will lie somewhere between these two solitudes, a mix of public ownership of water and private delivery. Waves of business Like it or not, private companies are filling an undeniable need, awakening to emerging business opportunities. Cash-strapped communities around the province without the expertise to meet new, more stringent water quality regulations are saddled with aging water and sewer infrastructures that will cost in the hundreds of millions of dollars to replace, according to the B.C. Ministry of Community Services. In 2005, a mere 20 per cent of our population was served by water systems that meet these new regulations. And though both the feds and Victoria have committed funds to the cause through a Canada-B.C. Infrastructure Program grant and the B.C. Community Water Improvement Program respectively, the temptation to outsource management of these systems will grow. Beyond its partnership with KIP in Union Bay, Terasen has water deals with the Nuu-chah-nulth and Cowichan First Nations, does contract water metering for the City of Surrey, has purchased 50 per cent of Fairbanks’s water system, recently signed a 21-year P3 deal under its subsidiary West Shore Environmental Services to operate the City of Langford’s sewer system, and is eyeing the Victoria suburb’s waterworks as well. Edmonton-based EPCOR, with water assets from Canmore to Port Hardy, is also an increasingly active player in the water market. In May 2005, EPCOR bought the private White Rock Utilities Ltd. and now operates water assets on behalf of 20,000 White Rock residents. EPCOR also has a long-term contract with the Vancouver Island community of Port Hardy worth roughly $1.2 million ¬annually to manage water and wastewater. On February 6 of this year, the Office of the Water Comptroller of B.C. approved EPCOR’s purchase of a small, locally owned private ¬utility near Parksville for $1.1 million, which serves 3,500 Vancouver Island residents. A fundamental fact often gets lost in the emotional debate over water – that the Crown owns water and grants licences to use it through the Office of the Water Comptroller of B.C. Still, the reaction to private sector involvement ranges from energetic to downright hostile. In March, on the eve of World Water Day, Courtenay city council narrowly passed a resolution introduced by the local Council of Canadians chapter ensuring that delivery, management and regulation of water services will remain a public responsibility. Councillor Greg Phelps, manager of a local FM station, supported the resolution, saying he was wary of the “commodification” of water and feared the day his kids would have to monitor the stock market for water prices. Farther down ¬¬ island the story is similar. “There was some discussion during the last election,” says Colwood city councillor Gordie Logan over the phone from Victoria, “but none of the candidates were in favour of privatization. You take the profit factor out of the equation when you keep water and sewerage public.” Brett Hodson, the upbeat president of Terasen Utilities, has heard plenty of business bashing as head of a firm that makes water and waste water its business, but he makes no apologies. In fact, he says the time has never been better for investing in this testy market. According to Hodson, worries about an evil future where access to potable water is at the cold mercy of the stock market is fed by fear-mongers and misinformation, and he relishes the opportunity to address those fears head on. “Water always makes a good news story. People get motional over water but they’re emotionally misinformed,” Hodson says. “In reality we’re not talking about water, we’re talking about infrastructure.” Hodson says his firm can bring much-needed expertise, economy of scale and capital to small communities with neither adequate expertise nor the deep pockets of a metro-polis like Vancouver. The city can spread among hundreds of thousands of property owners its share of a major capital undertaking, such as the GVRD’s massive $600-million state-of-the-art, ultraviolet Seymour-Capilano Water Utility Treatment Projects. As evidence that the current model isn’t working as well as it could, he points to the frequent boil-water advisories in B.C., now as common as forest-fire alerts in the summer. Not to mention B.C.’s big embarrassment – the fact that our glorious capital is still shamefully pumping what amounts to raw sewage into the Strait of Juan de Fuca. That’s why the company is keenly trolling these waters for opportunities. After analyzing the Capital Regional District’s water utility, Terasen claimed it could deliver a 20-per-cent saving to rate-payers. However, Hodson’s careful not to make blanket promises of savings. For example, in places where water is subsidized, consumers would likely experience price increases under a full-cost-recovery model. Even conservationists might agree with full-cost recovery for the simple fact that people tend to value and conserve that which they must pay for. Conversely, social activists such as the Council of Canadians counter that if you apply full-cost recovery to water, price- sensitive, low-income Canadians will feel the pinch. These are regulatory and business decisions – neither of which, Hodson says, has anything to do with water ownership. He bristles at the way he says the foes of private enterprise have exploited confusion over who owns water to manipulate public opinion. <-!–pagebreak–> “Look, today it’s not about water ownership; it’s about pipes, valves and meters. Water ownership is a Crown asset and it should stay that way,” Hodson says. Still, when pressed he is reluctant to put limits on private-sector involvement in water. “In 20 or 30 years the market might change. Maybe there will be a market for it and would I change my mind about water ownership? Maybe.” Another sizeable player, EPCOR, has been into water and sewers for the better part of a century and is banking on this experience to grow its business in B.C. The firm debuted here in 1999 when it signed a 21-year P3 deal with Port Hardy to manage and operate the city’s water. “Treating water and waste water is our area of business and we can do it better than most municipalities. Whereas a town may build one or two treatment facilities in its lifetime, we’ve built dozens over the years,” says Karim Kassan, VP of development for EPCOR B.C./Pacific Northwest, from his Vancouver office. Six years into the deal, Port Hardy mayor Hank Bood, reached by phone at Bood’s Bootery in the remote Vancouver Island community, has nothing but good things to say about his town’s working relationship with EPCOR. “Lots of material comes across my desk saying how horrible public-private partnerships are, but frankly we’re very pleased with how it’s turned out. I’m not going to pretend that there wasn’t some concern at first about the profit question, but EPCOR’s operating standards are stringent and first class. They’re just way better at managing water and sewers than we ever were,” Bood says, adding that under the EPCOR agreement Port Hardy retains control over water rates. Like Hodson, EPCOR’s Kassan says discussions about private water are moot. “The current legislation doesn’t allow it but I’m sure it will be debated in the future,” Kassan says. Wary about water Needless to say, it doesn’t take much to make public water defenders nervous, especially when they hear private corporations speculate about the future of water. There’s a feeling that we’re treading on a slippery, rather ¬unproven slope. At the bottom of this slope is the bottomless pool of outright private ownership and the export of water to our thirsty neighbour to the south. Indeed, foreigners seem baffled by our provincial attitudes. Take the comments made by former U.S. ambassador to Canada, Paul Cellucci, in a 2005 radio interview: “Water is going to be – already is – a very valuable commodity and I’ve always found it odd where Canada is so willing to sell oil and natural gas and uranium and gas, which are by their very nature finite. But talking about water is off the table, and water is renewable. It doesn’t make any sense to me.” During the last federal election campaign, Nanaimo-Alberni Conservative candidate James Lunney suddenly found himself treading controversial waters when news reports had him declaring support for bulk exports at an all-candidates meeting. It was later revealed that he had been misquoted out of context. NDP candidate Manjeet Uppal, whose election team first leaked this tantalizing but erroneous sound bite to the media, was forced to make a public apology. Even though the statement had been quickly debunked, the response it garnered showed once again that water is always a hot-button topic. It’s not only unions and activists raising alarms. Academics are also singing a cautionary tune lest we go rushing to the altar of water privatization. First of all, says Hans Schreier, a professor at UBC’s Institute for Resources, Environment and Sustainability, private companies are profit-motivated and therefore intuitively not that interested in conservation. As anyone who has had a well run dry on Vancouver Island or been faced with watering restrictions in the Okanagan knows, even in this verdant province, seasonal scarcity is a serious issue. “They’ll basically be in the business of selling water,” Schreier says. Secondly, he says, water monitoring and maintenance of infrastructure also costs money and subsequently affects the bottom line. That’s why we need robust, clear and concise regulations to ensure private companies are held to the highest standards of water quality and maintenance, and Schreier believes we’re not there yet. “In many ways B.C. is a banana republic when it comes to water. Today we still don’t even have good regulations for groundwater. A company could pump water from the ground and nobody would know how much is being taken.” Could the slope we’re stepping on slide toward bulk water exports to the U.S.? Schreier believes it’s a very real threat. In the late 1980s, B.C. toyed with the idea of selling water to California-based Sun Belt Water Inc., which had secured contracts to transport water in retrofitted oil tankers to a city in the golden state. However, the then-NDP government took a cold shower and ¬declared a temporary ban on bulk water ¬exports in 1991, later codified within the 1996 Water Protection Act. The legislation restricts water export to containers of up to 20 litres – bottled water, in other words – and prohibits the drilling for, transport and selling of water for removal from B.C., as well as the diversion of water to an area outside B.C. or construction of any mega-project capable of moving water from one major watershed to another. In 1999, in a now infamous lawsuit, Sun Belt sought damages from Canada to the tune of several hundred million dollars, claiming that B.C.’s law violated NAFTA-based investor rights, enshrined in Chapter 11 of the trade agreement. At the time, CEO Jack Lindsay boldly stated that thanks to NAFTA, Sun Belt was a stakeholder “in the national water policy of Canada.” Chilling as the comment was for Canadians, the suit has more or less ¬languished in court. “We’re at a very sensitive time right now. I don’t think we can be confident that there won’t be major transfers of bulk water. There are so many loopholes in trade law and once you commodify water you set a precedent and you can’t go back,” Schreier says. Back in Union Bay, Leslie Dickout watches people file out of the community hall into a dark, rainy night. Tomorrow, the warm sun of a long, spring day will melt snow in the Beaufort Mountains and fresh water will at first trickle, then tumble down through second-growth forests towards this little community. Over the next 20 years or so, more than 1,000 houses will likely be added to Union Bay and like all of us, the new residents will expect a clean, safe and reliable flow of tap water day after day. They likely won’t care much about pipes, valves, water mains and sewers – let’s face it, it’s just not the sexiest of topics. However it’s in places like this – microcosmic boiling points of the water wars that lie ahead – where the future of this simple molecule of two hydrogen atoms and one oxygen atom – who owns it, who controls it, who delivers it, and who pays for it – will be hammered out. And it’s clear the private sector is ready to jump into the pool with both feet. “I’ve been told that there’s not a city councillor who hasn’t been taken out for lunch by someone from Terasen or EPCOR,” Dickout says.