The tradable permit system may be an improvement over the province's decades-old water policy that resulted in the overallocation of water in much of Southern Alberta, and it may result in short-term economic prosperity. But it is part of a policy overhaul premised on questionable forecasting that fails to set the economic and ecological management principles necessary for securing the future of Alberta's communities and ecosystems.

Southern Alberta's semi-arid climate placed water at the fore of early policy decisions. Not long after the railroad crossed the province, an unusually dry summer left little forage for livestock. When this drought was followed by a winter so cold that thousands of cattle died by literally freezing in the snow, ranchers turned to irrigation so they could grow enough forage to meet wintertime demands. As settlers poured onto the Prairies, they put more pressure on limited water supplies. Canadian water policies soon followed.

In 1894, Canada's Northwest Irrigation Act created a "first-in-time, first-in-right" system of water allotment, whereby senior licence holders received their full entitlement before junior licencees receive their share. The act also made all water the property of the Crown, which allowed the government to approve water licences for uses it considered legitimate. Hoping to attract settlers, the government tied water licences directly to land claims and put few, if any, expiry terms on these agreements. As settlement continued, water grew increasingly scarce, so dams and reservoirs were built to meet demand. The greater supply encouraged further expansion of agriculture and industry, which in turn increased water needs. This cycle continued until 1986 when construction began on the controversial Oldman River Dam.

Environmentalists, residents and First Nations people, including Milton Born With A Tooth, who spearheaded efforts to bulldoze a new channel diverting water around the proposed dam site, opposed its construction. But by massaging a federal court ruling and barefaced political gymnastics, the Alberta government completed the barrier. Although this finagling, according to Jack Glenn, author of Once Upon an Oldman, yielded "precious little" in terms of positive lessons learned, there is one thing it did do; it ended the practice of meeting water demands by increasing supply.

In 1996, Alberta revamped its water policies by passing the Water Act. Shortly thereafter, water policy reforms began to take shape in the form of management plans for the South Saskatchewan River Basin (SSRB), an area that includes virtually all of Alberta from the City of Red Deer to Montana. But effective planning has been complicated by unprecedented population growth; a highly variable, semi-arid climate; and the effects of early policies that resulted in a province with only two per cent of Canada's freshwater supporting 60 per cent of the country's irrigation.

The problems are severe. As James Byrne points out in his essay in The Return of the Trojan Horse, manure and pesticide runoff from industrial farms affect drinking water and increase the presence of E. coli during summer, a time when recreational water use is highest. Furthermore, a severe drought in 2001 catalyzed large water shortages when, for the first time ever, total water licences exceeded available supply.

Prompted by the drought, Alberta Environment studied the situation across the province, only to report that they found no trend towards decreased streamflow in the SSRB between 1912 and 2001. But these findings contrast with the research carried out by University of Lethbridge's Stewart Rood, that was reported in the Journal of Hydrology in 2005. Rood found there were sharp declines in streamflow in Alberta's southern rivers over the same period. Furthermore, Rood predicted the declines would continue.

Roslyn Case reported in the Journal of the American Water Resources Association in 2003 that tree ring records indicate that, contrary to popular belief, the 20th century in Southern Alberta was abnormally damp. In fact, 20th century stream-flow models in the SSRB were higher during this period than during any of the last five centuries. Similarly, Kathleen Laird at Queen's University found that lake sediments reveal that the western Prairies experienced prolonged periods of intense drought over the past several centuries. Unfortunately, the fact that 20th century streamflows provide something of a best-case scenario went unnoticed when Alberta Environment approved the new SSRB management plan.

Casting more doubt on Alberta Environment's modelling are the results of studies carried out by Dave Sauchyn, a research co-ordinator for the Prairie Adaptation Research Collaborative. He reports that models that use relatively short-term records, like those of the 20th century, inadequately reflect long-term trends such as the decades-long droughts that occurred on the Prairies prior to Western settlement and that are likely to return.

Moreover, even though most climate models predict temperature increases in Alberta, the SSRB management plan doesn't consider climate warming because government studies failed to find "'high confidence' research conclusions on future water supply and demand that may result from climate change." This caveat is not innocuous. Suzan Lapp's work at the University of Lethbridge suggests increased temperatures could considerably reduce stream-flow in the Oldman River, a major waterway in the SSRB. And Zhangxin (John) Chen at the Geological Survey of Canada predicts that a 50-per-cent reduction in per capita water use over the next 60 years will be required as temperatures increase and Calgary's burgeoning population demands more water.

Despite the management plan's shortcomings, the province recognizes it needs to conserve. To improve water efficiency and to allow water licences to be obtained at a level of risk acceptable to users, Alberta created a market in tradable permits. Water licences can now be leased or sold separately from the land to which they are historically tied. The market also includes a "conservation holdback," whereby, upon a sale or lease, up to 10 per cent of the water licence is returned to provincial control. As a result, the more trading there is, the greater the quantity of water that is conserved.

But two obstacles hinder the market's ability to achieve its goal of promoting a balance between human consumption and environmental conservation. The first is that 13 co-operatively owned irrigation districts hold licences to 75 per cent of Southern Alberta's water. They seem unwilling to part with their allotment given the risks associated with not having enough water for irrigation. Therefore, it is unlikely that trade volume will amount to much.

Secondly, water is currently so overallocated that even if every licence changed hands twice--allowing for conservation holdbacks of up to 20 per cent of allocated water--there would be only a moderate increase in flows left for the environment since, under the provisions of the system, recovered water would first go to junior licence-holders who do not receive their full allocations when there isn't enough water to go around.

One of the reasons the situation in Southern Alberta is so acute is that the effects of early allocation limits, called instream objectives, are not well-known on portions of the SSRB. Experts, according to Alberta Environment, estimate that 31 of 33 river reaches in the SSRB are in declining ecological health, and a study found that 85 per cent of the natural flow in Southern Alberta rivers is needed to simply maintain aquatic ecosystems. Despite these findings, the new SSRB management plan sets new water conservation objectives at only 45 per cent, or the old instream objective plus 10 per cent, whichever is greater.

The rationale for such modest conservation objectives is that given current levels of overallocation, it will take some time to reach these targets. But allocation limits--even for the Red Deer River, the only river with relatively few licences--significantly surpass the amount experts say is required for environmental health. Yet the government approved the water conservation objectives for the Red Deer River even though it did not receive majority support during the public consultation phase. And despite the moratorium it places on new water licences elsewhere in Southern Alberta, the plan ultimately gives away what skeptics believe to be the real driver behind allocation limits. The plan suggests that new allocations on the Red Deer will support economic growth for the next 40 years.

The Alberta government has undertaken an active conservation effort. Its provincial Water for Life strategy lays out a plan that attempts to marry a safe and secure supply of drinking water, and a healthy aquatic ecosystem with a sustainable economy. TV spots promote a partnership between citizens, communities, industries and government that is built on trust. But as a group of researchers from the University of Waterloo point out in Karen Bakker's new book Eau Canada, Alberta has yet to consecrate its vows. Despite its lofty goals, they contend that the Water for Life strategy falls short since it doesn't prioritize management principles in decisions between human use and ecological integrity.

In February 2007, the Rosenberg International Forum on Water Policy, arguably one of the world's premier water policy institutes, recommended that Alberta Environment refurbish the Water for Life strategy with clear, measurable environmental objectives and more transparent decision making. They suggested that "all efforts" be put into protecting Alberta's water from unabated population growth and demands from its energy sector. The recommendations also call for a less ambiguous treatment of issues relating to equity, fairness and environmental value. These recommendations highlight what is left out of Alberta's economic equations. They provide a path towards softer water management approaches which, if ignored, will leave Alberta's water reforms adrift in the interstices between ambition and application.

Jeremy Schmidt is a PhD student at the University of Western Ontario, researching fairness in water allocation.