Is “run of the river” running away with the river?

Posted in BC Votes 2009 Reality Check Posted by CBC News on April 30, 2009 11:18 AM |

Half trueBoth the Liberals' and the NDP's claims about “run of the river” IPPs are Half True.British Columbians are hungry for power. Take a moment and think about how much electricity you use from the moment your (likely) digital alarm clock wakes you up until you switch off your bedside lamp at night.

If you’ve tuned in to this provincial election campaign, you’ve probably heard of Independent Power Projects (IPPs) or “run of the river.” That’s when the province grants a private company access to a river to build small-scale hydro project under contract.

Both parties have taken to releasing their own version of “Reality Check,” and the NDP version on this issue says, “the BC Liberals have sold the water rights to 120 B.C. rivers and waterways.”

The Liberal version says, “the public maintains ownership of the water and the river at all times.”

In this case, both might be true, but neither party’s release talk about the North American Free Trade Agreement, and how it applies to IPPs.

While no one can predict what the electricity industry will look like 40 years from now (who knew 40 years ago solar and wind would be so big today?) most of the experts we talked to said they couldn’t be positive of what would happen if, at the end of the lease, the company running the IPP wanted to keep the lease and the government of the day wanted something else.

If the company with the lease for the IPP is an American or Mexican company, it has investors rights under Chapter 11 of NAFTA. That’s the section dealing with investment, and those rules may mean if the B.C. government decides in 40 years not to renew the IPP lease, the company can sue. The grounds for the lawsuit could include the political decision to take the IPP back; thus, unfairly affects the investors.

Steven Shrybman, a lawyer who specializes in trade told us, “the run of the river projects and the leases the province is entering into with private developers in British Columbia are problematic…once private investors acquire a right to water resources pursuant to a lease or other arrangement, they have rights under NAFTA. Including the right to sue Canada if either the province of British Columbia, or BC Hydro or the government of Canada does something that they consider interferes with their investor rights."

In other words, when a company has been investing in Canada in good faith, it’s unfair under NAFTA to make a political decision to kick them out. Trying to ease public fears, the Liberals put up Barry Penner, the environment minister under the Campbell government, to make this YouTube video where he says “under the law in British Columbia, the government retains ownership of all water rights, and all crown land.”

Then there’s the argument that as long as the contracts are iron-clad and very clear, the rights of B.C. will be protected. Here’s what Shrybman says about that: “the thing to understand about investor rights under NAFTA is that they trump Canadian law and Canadian contractual arrangements. So the province can't legislate or contract its way out of the rights that foreign investors enjoy under NAFTA, even if they enter into a lease with that investor.”

The IPP investors could try to argue even if their lease has expired, if a lease given to BC Hydro hasn’t expired, the government can't discriminate between the two.

So while no one can predict what the energy industry will look like in 40 years, or how NAFTA plays into this, it would seem the only sure thing is the energy demands of British Columbians will continue to grow.

So the Reality Check team decided both the Liberals and the NDP are only telling a half-truth when it comes to the “run of the river” IPPs. Since no one knows exactly how it will end up, it might be hard to tell the whole truth.