Canada: BC Government’s Proposed "Water Sustainability Act" May Provide Certainty For Hydro Power Projects

On Friday, October 18, 2013, the BC government released its legislative proposal for a new Water Sustainability Act. The proposed legislation is intended to update and replace the existing Water Act and comprehensively modernize provincial water laws. The current Water Act is commonly criticized for failing to regulate groundwater usage and provide adequate protections for water security, stream health and aquatic environments.

The BC government has been actively considering updating the province's water legislation since 2009. Since beginning its consultative process, the province has received over 2,250 written submissions and engaged directly with a number of interested parties. The proposed Water Sustainability Act was developed based on feedback received in recent years and will be revised as a result of input received during the current consultation period. The government intends to introduce the final version of the legislation in the legislature in 2014.

Among other things, the proposed Water Sustainability Act will address seven key areas:

  • protecting stream health and aquatic environments (e.g. environmental stream flows and dumping restrictions);
  • broadening considerations of water in land-use decisions to improve consistency and watershed health;
  • regulating and protecting groundwater (BC is currently the only province that does not regulate groundwater use);
  • regulating water use during times of scarcity to address impacts of droughts, climate change and other water shortages;
  • improving security, water use efficiency and conservation through increased regulatory review and enforcement and allowing for area-based regulations and agriculture water reserves;
  • enhancing and enforcing obligations on water users to measure and report on large scale water use; and
  • providing a range of governance approaches, such as delegation of some water management activities or decisions to people or agencies outside of the BC government.

The proposed Water Sustainability Act has a few key implications for the power sector. First, the government is contemplating changes to the water fee and rental structure and rates, but not with respect to water power. Second, the government has indicated that environmental flow conditions would not be applied retroactively to existing water licences, although the new statute would enable decision-makers to regulate existing licensees to protect the environment during times of drought and scarcity.

Third, the BC government intends to resolve a longstanding issue regarding the term of water licences for power projects. In BC, a mismatch commonly occurs between the term of an electricity purchase agreement (EPA) for a hydro power facility, which typically continues for a specified period after a project achieves commercial operations, and the term of the associated water licence, which typically runs for a specified period from the date of grant. As a result, the project development and construction period that elapses between the grant of the water licence and achieving commercial operations will commonly cause a water licence to expire before the term of the EPA concludes. To resolve this issue, the Water Sustainability Act proposal contemplates that new water licences would include a project development period of up to five years (with the potential to extend a further five years) to allow hydro projects to operate for the full period contemplated in its EPA The government also envisions that existing hydro project water licensees could apply for an extension of their water licences to allow existing projects to operate for the full term of their EPAs and that such extensions will not be considered licence renewals that are subject to regulatory reconsideration.

The province is accepting feedback on the proposed Water Sustainability Act until November 15, 2013 via the government's blog, or by email, fax or post. We will update our blog as the statute progresses through consultation and is tabled at the BC legislature.

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