Water Rental Fees

A “tax grab”?

One objection that many business and land owners seem to have about groundwater licensing is that they have to pay an annual water rental fee to the provincial government. Many groundwater users see this as a “tax grab”, and therefore may be one of the reasons that many businesses and land owners are not applying for a water licence.

 “I’m not giving government another dime! They will never know that I’m pumping groundwater anyway!”

That may be a common sentiment, but is it over-reacting? The main goal of my posts is to raise the level of water rights literacy amongst water users. In particular, I target groundwater users who, prior to 2016 (when the Water Sustainability Act (WSA) came into effect), had never really been regulated before. So, in this post, I’d like to shed some light on the topic of water rentals to increase understanding of this controversial issue.

Water rental as a fundamental principle

A water rental fee is a fundamental principle in water licensing in BC. Recall in my August 19, 2019 post that the province “owns”, or is the guardian of, the water resource. Water does not belong to the business or land owner. As far as I can find out, water licences dating all the way back to the 1920s pay water rental fees, so this principle has been there a long time.

The province of BC sets a nominal rental rate for water so as to be able to derive a revenue from its use to help offset the cost of operating the water management program. Water rentals have always applied to those using water from streams; however, with the coming into effect of the WSA, water rentals now apply to groundwater use. The concept of charging a nominal fee for taking other natural resources, like timber, oil, gas, and minerals, is commonly accepted. The ability to charge is strategic because that revenue can be used to fund other public services like health care, education and building of infrastructure. Interestingly, only BC, SK, MB, NS and the three Canadian territories charge for the diversion and use of water; the concept of charging for water use does not exist in Alberta or the neighbouring states in the USA.

Revenue from water rental fees

Annually, the province receives about $380 million from water rentals from roughly 50,000 water licensees. 97% ($368 M) come from hydro-power producers (e.g., BC Hydro), 0.5% ($2 M) from municipalities and private water utilities, and 2.5% ($10 M) from all other water licensees. This water rental breakdown shows that:

·       the bulk of water rental fees comes from a few hydro-power producers and very little comes from the vast majority of licensed water users, and

·       it likely costs the government more to license and bill the vast majority of licensed water users than the revenue generated from those users.

So why does the government continue to charge water rentals to the vast majority of water users? My sense is that (as long as the cost to administer is not staggeringly large) charging for water use is and always has been, on principle, the right thing to do. The fact that domestic groundwater users are not licensed (and therefore do not have to pay a water rental fee) indicates the government does not believe licensing and charging for domestic groundwater use (up to 2 m3/day per household) is cost-effective to administer.

How much are water rental fees?

So, how much are the water rental fees in BC? Rental fees depend on the:

1.       quantity of licensed (or actual[1]) use and

2.       type of water use.

For irrigation, the cost for 1000 cubic metres of water (that’s a volume of water that is 10 m long × 10 m wide × 10 m high) costs the farmer $0.85! For municipal use, the same volume (1000 m3) costs $2.25.

If, for example, a farmer pumps 75 L/s over 120 days to irrigate hay, the cost would be $660/year. 75 L/s is a large enough pumping rate to trigger a project review under the Environmental Assessment Act. That pumping rate is enough water to irrigate about 80 hectares for average conditions in the dry southern interior of BC (at least a quarter section of land), depending on the efficiency of the irrigation system. The minimum cost to any farmer is $50.00 annually for smaller systems.  The table below shows how much the annual water rentals would be for two example scenarios pumping at 75 L/s: irrigation (120 days) and municipal drinking water (year round).

For most commercial businesses using quantities of 240 m3/day or less, the water rental rate is a flat fee of $200/year. The province of BC has a Water Rental Calculator on-line so anyone can calculate what the water rental fee would be for any water use: (http://www.env.gov.bc.ca/wsd/water_rights/water_rental_rates/calculator/index.html).

Changes in water rental rates

While groundwater users may object because they have never had to pay for the use of groundwater before, that’s only because (unlike surface water use) groundwater use in BC was never regulated. The WSA brings groundwater use on par with the use of surface water.

Historically, water rental rates have not tended to change frequently over time (prior to 2016 fees remained stable for a decade or more). Water rental rates, unlike electricity rates, are set by government, not approved by the utilities commission. Therefore, raising water rental rates has politically been controversial (anger is directed right back at government, not at a government appointed board). Those that use water (and pay water rentals) understandably do not want rates to increase. Those that want to curb excessive water use (especially in water stressed areas) want to see rates increased to better reflect the “value” of water.

Fees but also benefits

Like it or not, licensed water users in BC must pay water rental fees. However, I hope this post helps the water user understand the principle and actual cost of water rental fees. The benefits of protection under a licence, particularly for existing groundwater users who can have their historic water use recognized back to their date of first use is a huge competitive advantage.

So, is having to pay a water rental fee still a reason to not apply for a water licence? The alternative is grim – using water without it being authorized by government and hoping no one will notice, complain or report.

Finally, as stated above, the purpose of my posts is to raise literacy about water rights in BC. If you want that too, please help me by sharing this and past posts with others. My hope is that in time, everyone will have a clearer understanding of the WSA, its role in protecting BC’s water resources and our individual and collective responsibility to keep the water supply safe and available for all who depend on it.

[1] Hydro-power and waterworks use are invoiced based on reported actual use (not exceeding the licensed quantity); other uses are based on the quantity in the licence.

Thanks to M. Curtis, T. van der Gulik, and  C. Pinches for their input on the draft post.