The Columbia River Treaty is a complex agreement that has managed water across the Canada-U.S. border in the Columbia Basin over six decades. Now that Canada and the U.S. have reached an agreement in principle (AIP) that creates a road map to move toward a modernized, 21st-century version of the treaty, it’s important to be clear on the benefits and how they are shared between the two countries.
The treaty was designed to reduce flood risk and enhance power generation on both sides of the border. Under the treaty, Canada receives a half-share of the increased power the U.S. could potentially generate as a result of how B.C. operates its treaty dams. This half-share is called the Canadian entitlement. It could just as easily be called “the British Columbia entitlement” since, under the 1963 Canada-British Columbia Agreement, most Columbia River Treaty rights, benefits and obligations are allocated to the province.
The entitlement has long been a source of disagreement and confusion.
In recent years, U.S. stakeholders have claimed the treaty gives too much power to Canada. After the AIP was reached this summer, commentators north of the border have said the AIP will mean that Canada won’t get its fair share of power from the deal.
In fact, the Canadian entitlement volume was established through formulas included in the 1964 treaty. It is a 50-50 split, with Canada and B.C. receiving 50 per cent of the increased amount of power potential that the U.S. could generate as a result of the water that Canada manages under the treaty.
Confusion arises because that simple 50-50 split is subject to several key variables.
First, Canada and B.C. don’t receive the entitlement as money. It comes to B.C. in the form of power: Electricity sent to the border, sold to either BC Hydro or utilities in Alberta or the United States. The revenue from the sale of that electricity goes to the provincial government’s general-revenue fund. Even though the 50-50 split remains in place, the amount of power it represents has always been forecast to decline over time, as the U.S. was expected to add new generation to meet increasing demand for power in the Pacific Northwest, thereby reducing the proportional contribution from the treaty.
Some forecasts suggest the increased power potential from the treaty will drop to zero at the end of the 2020s, while others expect the entitlement to continue over a longer term. If the former comes true, the Canadian entitlement would be 50 per cent of nothing.
The other variable is market price. The revenue B.C. receives from selling the entitlement can increase or decrease, depending on prices in the Pacific Northwest power market, which vary seasonally and from year to year.
The bottom line is that, without the AIP, there would have been uncertainty on the size of the Canadian entitlement and, hence, the revenue to B.C., with a risk of it declining to zero in the near future.
The good news is that, under the AIP, Canadian negotiators secured the Canadian entitlement until 2044, ensuring predictable revenue to B.C. over the next two decades. In the short term, the entitlement volume will be lower than in recent years; but, toward the end of the 20-year term, it will be at a higher level than we would have received had an AIP not been reached.
The AIP also includes new annual cash payments to Canada of US$37.6 million from the U.S. for flood-risk management and US$16.6 million for additional benefits the U.S. receives from the operation of the Canadian reservoirs, both payments indexed to inflation. Canada and B.C. also gain access to U.S. transmission to support power trading that generates profits and helps keep rates lower for all British Columbians.
It should be emphasized that the benefits under the AIP go beyond dollars and electricity. The AIP includes significant non-financial benefits, such as support for ecosystem health and salmon restoration, respect for Indigenous knowledge and cultural values, and consideration of socio-economic needs, such as recreation and tourism. The AIP provides additional domestic flexibility to meet our regional objectives and will create scope to adapt to the effects of climate change and other future unknowns. These added provisions reflect the interests voiced by B.C. Columbia Basin Indigenous nations, local governments and residents over more than a decade of engagement with the province.
The AIP must be considered in its entirety, as opposed to separate components. As with any international agreement, there is give and take, with countries seeking consensus on a package that benefits their own respective interests. Our Canadian negotiating team has spent six years working to reach an agreement that better serves B.C. and Canadian interests. We believe the AIP does just that, bringing a host of long-sought benefits to the B.C. basin.
More information available about the AIP and Columbia River Treaty can be found here.
My team and I encourage you to attend a virtual information session on Sept. 17, from 6-7:30 p.m. PT. I, and other members of Canadian negotiation delegation, will be on hand to provide details about the AIP and answer questions. To register for the session, visit: https://ca01web.zoom.us/webinar/register/WN_za0aiYO-TMeeRBAWdQuACQ.
Kathy Eichenberger is the executive director of the Columbia River Treaty and B.C. lead for the Canadian negotiation delegation.
