Canada wants more money from U.S. under Columbia River Treaty

Canada appears to be positioning itself to ask for more money from the United States for the value it provides from its operation of the Columbia River hydro system.

The indication is contained in the 14 draft recommendations issued by the Canadian Entity, or BC Hydro, on Oct. 16. Entities on both sides of the border have independently drafted recommendations for updating the 49-year-old Columbia River Treaty when the notice period for treaty modification opens toward the end of next year. The U.S. Entity, which comprises the Bonneville Power Administration (BPA) and the U.S. Army Corps of Engineers, has drafted eight major recommendations in the revised document it released Sept. 20.

The treaty, signed in 1961 and ratified in 1964, was crafted after disastrous flooding along the Columbia River in the spring of 1948 and had two primary purposes: hydropower generation and flood control. Under provisions of the treaty, Canada built the Duncan, Keenleyside and Mica dams to create 15.5 million acre-feet of storage capacity that would be used to help smooth out the river’s seasonal flow for both flood control and managing power generation needs. In exchange, Canada receives one-half of the downstream power benefits, known as the Canadian Entitlement. As defined in the treaty, the benefits amount to the difference between the amounts of electricity capable of being generated with and without the Canadian storage.

Differences

In its draft recommendations, the Canadian Entity signaled that Canada will be seeking greater compensation from the United States for the benefits it provides. While its first stated principle is to “maximize benefits to both countries,” its second recommended revision says, “The level of benefits to the province, which is currently in the form of the Canadian Entitlement, does not account for the full range of benefits in the United States (U.S.) or the impacts in British Columbia.”

BPA estimates the power, which is transmitted to BC Hydro over BPA lines, to be worth between $250m and $350m per year. By contrast, the Canadian Entity’s website places the value at between C$100m and C$300m annually. While the two sides agree that the current method of calculating the Canadian Entitlement is outdated and no longer equitable, the U.S. Entity’s draft revisions state that the inequity results in an unnecessarily excessive cost to utility ratepayers in the Pacific Northwest, and call for the creation of “the least-cost transmission strategy for both countries to return the Canadian Entitlement to Canada.” 

Canada’s third draft recommendation also suggests Canada may ultimately seek greater compensation. “All downstream U.S. benefits … including associated risk reduction arising from coordinated operations compared to alternatives available to each country, should be accounted for and such value created should be shared equitably between the two countries.” While not directly at odds with the Canadian recommendation, one U.S. recommendation states that, “Unites States’ interests should ensure that costs associated with any treaty operations are aligned with the appropriate party.”

Similarities

The disagreement over compensation aside, there are several proposed revisions where the two countries agree, or appear close to agreement.

Consistent with the original treaty, the Canadian Entity’s draft recommendations state that the primary objective of the treaty “should be to maximize benefits to both countries through the coordination of planning and operations,” while the U.S. Entity’s recommendations refer to “the greatest possible shared benefits … from the coordinated operation of treaty reservoirs.”

The modernized treaty envisioned in both sets of draft recommendations would include a greater focus on the ecosystem. The U.S. recommends that “The inclusion of ecosystem-based function [should be] a third primary purpose of this treaty,” and that “The health of the Columbia River ecosystem should be a shared benefit of the United States and Canada.” The U.S. revisions note, “Inclusion of ecosystem-based functions in the treaty, and the implementation of these functions, should not prevent the region from achieving its objective of reducing U.S. power costs.”

Canada’s proposed revisions state, “Ecosystem values are currently, and will continue to be, an important consideration in the planning and implementation of the treaty,” and speak of the need to “balance ecosystem needs with those of flood protection and power generation.”

Entities on both sides of the border recommend amending the treaty to address adaptations to climate change. Canada notes that such adaptation “should be incorporated in treaty planning and implementation,” while the U.S. version states that, “The strategy for adapting the treaty to future changes in climate should be resilient, adaptable, flexible and timely as conditions warrant.”

Both sets of proposed revisions refer to a minimum duration of the revised treaty that is “sufficient to allow long-range planning and operational certainty” for both countries.

Under its terms, either country may terminate the treaty after it has been in force for 60 years, provided that it delivers written notice of its intent to terminate the treaty 10 years in advance. The earliest that notice could be given is Sept. 16, 2014. As an outgrowth of that timeline, the two nations have embarked on a treaty review process and are studying options in the context of modern concerns.

The U.S. Entity is accepting public comments on the draft regional recommendation through Oct. 25, and will forward its final regional recommendation to the U.S. Department of State before the end of December.

The Canadian Entity is following a similar schedule, with the province conducting public consultations on the draft recommendation and principles in four communities during the first week of November, and the documents will remain open for comment until Nov 20. Following that process, a recommendation will be finalized and presented to the Province of British Columbia’s Cabinet in December, a spokesperson for the B.C. Ministry of Energy and Mines told TransmissionHub Oct. 21.