Water Markets and Good Watershed Governance: An

Inherent Conflict?

John JanmaatEconomics

UBC Okanagan

Critical Questions

• What is good watershed governance?• What is a water market?• How do people feel about a water market?• How can a water market be implemented in

the Okanagan?• Why should we bother?

Governance

• Governance relates to decisions that define expectations, grant power, or verify performance. It consists either of a separate process or of a specific part of management or leadership processes. Sometimes people set up a government to administer these processes and systems. (http://en.wikipedia.org/wiki/Governance)

Good Governance• Participation

– Everyone involved and affected has a voice.• Transparency

– Decision process and justifications available to all.• Effectiveness and efficiency:

– Resources used efficiently.• Responsiveness

– Listen to public concerns.• Accountability

– Responsible to public• Consensus oriented

– Seeks to include all of public• Equity and inclusiveness

– Concern for the less privileged• Rule of Law

– Clear rules in place and government follows them.

Good Watershed Governance

• Application of good governance to watershed issues.

• Can a water market be a part of good watershed governance?

BC Water Act

• 2 (1) The property in and the right to the use and flow of all the water at any time in a stream in British Columbia are for all purposes vested in the government, except only in so far as private rights have been established under licences issued or approvals given under this or a former Act (British Columbia, 2008).

Alberta Water Act

• (2) The property in and the right to the diversion and use of all water in the Province is vested in Her Majesty in right of Alberta except as provided for in the regulations (Alberta, 2008).

Ownership of Water

• Water is owned by the crown– Water users own a right to ‘use’ the water, a usufructary right.

• Water rights – licences can be granted, cancelled, or transferred.

• Water is ‘traded’ if two people arrange to transfer a licence between themselves, – In a ‘free’ market, what is ‘paid’ in exchange for

the water is determined by the traders.

BC Water Act

• 19 (1) On the application of the holder of a licence, approval or permit and on compliance by the holder and by the proposed transferee with the comptroller's or the regional water manager's directions as to giving notice, the comptroller or the regional water manager, on the terms he or she considers proper, may

• (a) transfer all or part of the rights and obligations granted and imposed under the licence, approval or permit from the holder to the proposed transferee, …

Alberta Water Act• 82(1) Subject to this section and sections 34, 81 and 83,

on application, the Director may• (a) approve the transfer of an allocation of water under

a licence and, subject to subsections (6) and (7)(b), issue a new licence for the transferred allocation of water subject to any terms and conditions that the Director considers appropriate, including specifying in the licence the land or undertaking to which the licence is appurtenant, or

• (b) refuse to approve the transfer of an allocation (Alberta, 2008).

Water Trading

• BC Water Act does not forbid trades– But it isn’t much talked about.

• Are water licences bought and sold in BC, separate from their appurtenant land?– Unknown, reasons for appurtenancy change not

consistently recorded.– Am investigating it right now.

• Alberta, trades are taking place.– Trades recorded, but not price.

Attitudes about Water

• Irrigator attitudes surveyed in 2008.

Environment Perceptionsa) There is currently plenty of water in theOkanagan to meet the needs of all users.

Cou

nt (n

=72)

No

Ans

wer

Stro

ng

Agr

ee

Wea

k

Neu

tral

Wea

k

Dis

agre

e

Stro

ng

0

5

10

15

20

25

0 39 4 29

b) There is plenty of water in the Okanaganto meet the needs of all users to at leastthe middle of the century (2050).

Cou

nt (n

=36)

No

Ans

wer

Stro

ng

Agr

ee

Wea

k

Neu

tral

Wea

k

Dis

agre

e

Stro

ng

0

2

4

6

8

10

12

14

1 4 5 27

c) Climate change is going to cause morewater problems in the Okanagan.

Cou

nt (n

=70)

No

Ans

wer

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ng

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ee

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k

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tral

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k

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agre

e

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ng

0

5

10

15

20

25

2 56 5 9

d) The growth of cities and towns in theOkanagan is the biggest threat to the supplyof water in the Okanagan.

Cou

nt (n

=72)

No

Ans

wer

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ng

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ee

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k

Neu

tral

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k

Dis

agre

e

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ng

0

5

10

15

20

25

30

35

0 66 0 6

Environment Priorities

x) Ensuring that there is enough water forthe environment (fish spawning, protectingwetlands, etc.) must take priority over otherwater uses.

Cou

nt (n

=67)

No

Ans

wer

Stro

ng

Agr

ee

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k

Neu

tral

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k

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agre

e

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ng

0

5

10

15

5 33 12 22

e) Household needs (drinking, bathing, etc.)are more important than supplying water forirrigation.

Cou

nt (n

=70)

No

Ans

wer

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ng

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ee

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k

Neu

tral

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k

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agre

e

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ng

0

5

10

15

2 24 14 32

f) Water that is saved by increasingirrigation efficiency must be retained foragricultural uses.

Cou

nt (n

=70)

No

Ans

wer

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ng

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ee

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k

Neu

tral

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k

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agre

e

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ng

0

5

10

15

20

25

2 52 9 9

g) When water is needed for the environment,it must come first from savings outside ofagriculture.

Cou

nt (n

=72)

No

Ans

wer

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ng

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ee

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k

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tral

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k

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agre

e

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ng

0

5

10

15

20

25

30

0 48 9 15

Market Benefitsh) If farmers are required to reduce theirwater use for the environment, they should becompensated for the impact on their business.

Cou

nt (n

=67)

No

Ans

wer

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ng

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ee

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k

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tral

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k

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agre

e

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ng

0

5

10

15

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25

30

5 62 2 3

m) People who waste water should pay more forit.

Cou

nt (n

=70)

No

Ans

wer

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ng

Agr

ee

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k

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tral

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k

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agre

e

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ng

0

5

10

15

20

25

30

35

2 65 0 5

o) The option to trade water would encouragemore water conservation, and thereby benefitthe environment.

Cou

nt (n

=67)

No

Ans

wer

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ng

Agr

ee

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k

Neu

tral

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k

Dis

agre

e

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ng

0

5

10

15

20

5 31 5 31

p) The option to trade water would provide mewith more options when there is a shortage.

Cou

nt (n

=64)

No

Ans

wer

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ng

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ee

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k

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tral

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k

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agre

e

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ng

0

5

10

15

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8 34 4 26

Market Concerns

v) Water trading will become a tool fordevelopers to secure their water needs, atthe expense of agriculture.

Cou

nt (n

=66)

No

Ans

wer

Stro

ng

Agr

ee

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k

Neu

tral

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k

Dis

agre

e

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ng

0

5

10

15

20

25

30

6 62 0 4

s) It will be very difficult to come up witha water trading mechanism that farmers willhave faith in.

Cou

nt (n

=67)

No

Ans

wer

Stro

ng

Agr

ee

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k

Neu

tral

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k

Dis

agre

e

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ng

0

5

10

15

20

25

5 46 6 15

t) People who agree to buy or sell water arelikely to back out of the deal later.

Cou

nt (n

=52)

No

Ans

wer

Stro

ng

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ee

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k

Neu

tral

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k

Dis

agre

e

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ng

0

5

10

15

20

20 24 10 18

u) The option to trade water will lead to ahigher price for water.

Cou

nt (n

=60)

No

Ans

wer

Stro

ng

Agr

ee

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k

Neu

tral

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k

Dis

agre

e

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ng

0

5

10

15

20

25

12 46 5 9

Further Concernsn) If I agree to use less water during oneseason, my future entitlements would be lesssecure.

Cou

nt (n

=68)

No

Ans

wer

Stro

ng

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ee

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k

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tral

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k

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agre

e

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ng

0

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25

4 41 4 23

q) Knowing that water I save would helpanother farmer who needed it (very sandysoil, well ran dry, etc.) would be animportant reason for me to conserve water.

Cou

nt (n

=67)

No

Ans

wer

Stro

ng

Agr

ee

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k

Neu

tral

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k

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agre

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ng

0

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5 48 5 14

r) I would consider trading water only withother farmers that I knew well.

Cou

nt (n

=59)

No

Ans

wer

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ng

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ee

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k

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tral

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k

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agre

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ng

0

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25

30

13 17 1 41

w) Management of the water used withinagriculture is best done by the irrigatorsthemselves.

Cou

nt (n

=71)

No

Ans

wer

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ng

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ee

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k

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tral

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k

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agre

e

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ng

0

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1 54 4 13

Final Opinionl) Water is so essential that it would bewrong to sell it.

Cou

nt (n

=65)

No

Ans

wer

Stro

ng

Agr

ee

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k

Neu

tral

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k

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agre

e

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ng

0

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20

7 52 1 12

Attitude Summary

• Recognition of pending scarcity and pressures.• Benefits of market incentives recognized.

– Strong support for some of these.• Concerns about implementation issues

– Protecting agricultural water.– Ensuring contracts honored.

• BUT: STRONGLY opposed to selling water.– Resolution: Australian model?

Ownership of Licences

SOUTH EAST KELOW

SUMMERLAND CORP

OSOYOOS INDIAN B

BLACK MOUNTAIN IOKANAGAN INDIAN OKANAGAN-SIMILKA

PENTICTON CITY O

SIMILKAMEEN IMPR

KEREMEOS IRRIGAT

LOWER SIMILKAMEE

WESTBANK IRRIGAT

GLENMORE-ELLISON

LAKE COUNTRY DIS

PENTICTON INDIAN1318052 ONTARIO

2763 OTHERS

Holders of Largest Total Licence Quantity

Ownership of Licences

ST. MARY RIVER IRRIGATIO

LETHBRIDGE NORTHERN IRRI

TABER IRRIGATION DISTRIC

ALBERTA ENVIRONMENT

RAYMOND IRRIGATION DISTR

UNITED IRRIGATION DISTRI

BLOOD INDIAN BAND COUNCIMAGRATH IRRIGATION DISTR

BOW RIVER IRRIGATION DISCITY OF LETHBRIDGE

1410 Others

Largest Licence Holders in the Oldman Watershed

Australian Model

• Water rights differ– Australia, proportional appropriation– Western NA, prior appropriation

• Most delivered by purveyors (like BC/Alta)– Based on availability, determine allocations.– Allocations are banked, and can be traded.– Purveyor a ‘bank’, managing water accounts.– Water ‘rented’ for season or ‘sold’ for good.

Australian Model

Reservoir “Bank”

Acct #1

Acct #2

Acct #3

DepositsM arket

Transfers

U ser #1 User #3User #2

Inflows

W ithdrawals

Application to Okanagan

• Infrastructure already or soon to be present.– Most water provided by purveyors.– Purveyors metering, can manage accounts.– Allocation model already practiced.

• Determination of total available, from purveyor licence.• Reduction in allocation if shortage.

• Farm level sophistication increasing– Precise water management tools.– Expertise available

Application to Okanagan

• Secures water for agriculture.– Allocation belongs to irrigators, not district.– To supply outside agriculture, district buy from

farmers.• Makes ‘seepage’ transparent.• Paid for conservation, not loosing water to others.

• Flexible in crisis– Minimum flow protection, buy needed when dry.– Most flexible make reduction.

Good Governance?

CriterionCurrent System

Purveyor Managed Market

Participation Transparency Effectiveness and efficiency Responsiveness Accountability Consensus Oriented Equity and Inclusiveness Rule of Law

Okanagan Water Purveyors

• Purveyors good at what they do– Determine available water– Deliver water (management and monitoring)– Educate water users

• Australian style reforms enhancements– Build on existing strengths– Provide greater flexibility.– Increase responsiveness to unknowns.

Conclusion

• From Alberta to Australia, water trading is spreading.– St. Mary’s and Taber irrigation district.

• Water purveyors in position to manage water market.– Same position in system as purveyors in Australia

and Alberta.• Markets and Good Governance: No Conflict!

Further Information

– Australian water governance:http://svc044.wic032p.server-web.com/nwi/water_governance/governance-at-a-glance/water-markets.cfm

– Murrumbidgee water exchangehttp://www.murrumbidgeewater.com.au/

– Murray irrigation limitedhttp://www.murrayirrigation.com.au/watexch/