ARTICLE
17 April 2024

Navigating Water Scarcity: Legal Implications And Impact On Alberta's Industries

BJ
Bennett Jones LLP

Contributor

Bennett Jones is one of Canada's premier business law firms and home to 500 lawyers and business advisors. With deep experience in complex transactions and litigation matters, the firm is well equipped to advise businesses and investors with Canadian ventures, and connect Canadian businesses and investors with opportunities around the world.
The Alberta government has identified, and is taking proactive steps to address, the looming threat of a severe drought this year.
Canada Energy and Natural Resources
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The Alberta government has identified, and is taking proactive steps to address, the looming threat of a severe drought this year. As negotiations unfold to secure water-sharing agreements, a cascade of legal and economic considerations emerges. In particular, the implications for various sectors, including agriculture and oil and gas, pose challenges and require well thought-out responses. In a recent letter, the Alberta government (Government) informed water licence holders that it will be bringing together major water licence holders to negotiate water sharing agreements.

The Government website indicates various industry sectors use significant amounts of water as part of their operations through-out the province, and the Government is encouraging them to develop water conservation plans and water-sharing agreements to efficiently use and share water resources. The proposed water-sharing negotiations, set to be the largest in Alberta's history, demonstrate the Government is taking the situation seriously and taking proactive steps to address water conservation going forward. With a focus on the Red Deer River, Bow River and Old Man River basins, the government aims to secure substantial reductions in water use in case a serious drought materializes. However, the ripple effect of such measures extends beyond municipal water supply considerations. Alberta Minister of Environment and Protected Areas, Rebecca Schulz, said negotiations would begin with major water licence holders to secure "significant and timely reductions in water use".

Local authorities, like the Mountainview Regional Water Services Commission, have already advised member communities to refrain from using water for oil and gas extraction, underscoring the interconnectedness of water usage across industries and the need for industry initiative and cooperation. This precautionary step in response to the threat of a potential drought raises questions about the legal landscape surrounding water rights, usage restrictions and commercial arrangements between various industries and participants now and in the future.

Approximately 25,000 organizations and businesses hold licenses for 9.5 billion cubic meters of water in Alberta. The unprecedented scale of the upcoming negotiations amplifies the importance of legal frameworks governing water rights and allocation. As the government seeks voluntary reductions, we anticipate potential disputes regarding the proper balance to be achieved between competing interests.

These negotiations will require a careful assessment of the rights and obligations of water licence holders under Alberta's current Water Act and its predecessor legislation. Although the Water Resources Act, which governed water rights starting in 1931, was replaced by the Water Act in 1999 after a thorough examination of Alberta's water policy and legislative framework, the rights granted under the Water Resources Act, which include the "first in time, first in right" principle, are in many cases grandfathered under the more recent Water Act. The differences between these two regimes are likely to be an issue in the upcoming negotiations.

The agricultural sector, a vital component of Alberta's economy, emerges as one of the most vulnerable industries. Media reports indicated that some farmers have expressed concerns about irrigation-dependent operations. The potential impact on cropping plans, fertilizer use, and overall production highlights the intricate relationship between water scarcity and agricultural viability. Legal measures to safeguard agricultural interests become crucial, necessitating a delicate balance between conservation efforts and sustaining livelihoods.

In addition to agriculture, the oil and gas industry, a cornerstone of Alberta's economy, faces uncertainty. The decision by local authorities to restrict water usage for extraction purposes prompts reflections on the legal obligations and responsibilities of these industries during water shortages. As negotiations progress, legal experts will likely scrutinize existing agreements and regulations governing water usage in resource extraction.

In conclusion, the potential drought and associated water scarcity triggers a complex web of legal considerations that extend far beyond immediate negotiations. The unprecedented scale of water-sharing agreements, coupled with the interdependence of industries, demands a cooperative solution that navigates the delicate balance between conservation, economic sustainability and stakeholder interests. As the province forges ahead with negotiations, legal clarity will be paramount in ensuring equitable and sustainable solutions for all parties involved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
17 April 2024

Navigating Water Scarcity: Legal Implications And Impact On Alberta's Industries

Canada Energy and Natural Resources

Contributor

Bennett Jones is one of Canada's premier business law firms and home to 500 lawyers and business advisors. With deep experience in complex transactions and litigation matters, the firm is well equipped to advise businesses and investors with Canadian ventures, and connect Canadian businesses and investors with opportunities around the world.
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