Detroit has been taking water from the Canadian side of the river it shares with Windsor for the past four decades, without Ontario's knowledge.

The American city has avoided provincial regulations but an agreement is now in the works to start regulating the water grab. Critics, however, say the situation sets a dangerous precedent.

One of the city's water-drinking intake pipes extends 90 metres past the international boundary dividing the Detroit River and has been siphoning up to 212 billion litres of water a year since 1964, the Ontario Ministry of Environment recently revealed.

Ontario first learned of the cross-border pipe in 2006 when Detroit was making upgrades to the Southwest Water Treatment Plant's pipe, the ministry said. Since then, the two sides have been in talks, Ontario officials said.

"The City of Detroit was unfamiliar with Ontario requirements for water takings and has never had a permit to take water," the Ontario Ministry of the Environment website states.

Ontario environment ministry officials said the federal government has known about the water-taking since 1964, but didn't tell the province.

Under provincial regulations, anyone taking more than 50,000 litres a day is required to obtain a water-taking permit.

But now Ontario is proposing to exempt Detroit from that rule, citing the "historical nature and unique circumstances."

Water must be returned to basin: proposal

Instead, Ontario is seeking an agreement with Detroit that its continued use of the water meets certain conditions.

Under the proposal, Detroit would not pay fees for industrial and commercial users, "as administering the charge would be onerous and it would be difficult to enforce."

"It's basically taking water from one side of the river to another which basically doesn't have any environmental impact whatsoever," Sharon Bailey, the Ontario environment ministry's director of land and water policy, told CBC News.

Other proposed restrictions would include:

• Water must be returned to the Lake Erie Basin, minus that which has been consumed.
• Detroit must monitor and report to Ontario about how much water is taken.
• The amount of water Detroit can take is capped at 120.9 billion litres per year.

Bailey said that while the pipe could theoretically be moved to the U.S. side, it would likely be costly and would be the same water.

The intake pipe was placed farther out in the river because of water quality issues and to ensure it wouldn't interfere with navigation in the busy shipping channel, said Bailey.

Not surprised: activist

Canadian activist Maude Barlow told CBC News she wasn't surprised to hear of the water grab, but wondered how Ontario stayed in the dark for so long.

"This is another example of the federal government lapsing and if I was Ontario I'd be furious about it," said Barlow, who is national chair of Council of Canadians and a senior adviser on water issues for the United Nations.

She said it's indicative of poor communication between the federal and provincial governments and a "careless" attitude about our seemingly bountiful water resources. She's calling for a national water strategy.

Though the water is all from the same river, Barlow said there are international boundary agreements for a reason — to ensure each country takes responsibility for monitoring its own side.

Barlow said it sets a dangerous precedent for allowing use of Canada's water and questioned whether the allowable amount of water lost due to consumption could come to include water-bottling plants and other commercial facilities.

"I just think there are far too many loopholes and to find out that this one exists is a real concern," said Barlow.

Environment ministry officials defended the proposed exemption, saying it breaks no rules.

"It is not an export of water. There is no charge for the water. It has no NAFTA implications. It is simply municipal drinking water which is being returned to the same watershed," said Bailey.

The proposed exemption is open to public review until Jan. 31.