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December 01, 2011

Planning for Asset Management: The Reports on Water Quality, The Wait for Regulation

Asset management and financial viability are concerns at some water and wastewater treatment plants across the province. Municipalities both large and small, as well as First Nations struggle to find adequate financial resources to treat water and wastewater. The issue of asset management, however, is much more pronounced for small municipalities and First Nations. Two recent reports found that these communities do not have the tax or knowledge base to invest in water and wastewater treatment.

The Challenges for Small Municipalities: A Report in the Canadian Medical Association Journal

It cannot be ignored that the Walkerton tragedy occurred in a small municipality. Studies have shown that Canadians in smaller remote communities are far less likely to have access to clean drinking water.1

Small municipalities face numerous challenges in ensuring safe drinking water for their citizens. Smaller municipalities often do not have the resources required to adequately fund drinking water systems or hire and train qualified and knowledgeable system operators. Additionally, many smaller municipalities with their own drinking water systems do not benefit from the economies of scale enjoyed by larger municipalities.

A report by Steve Hrudey of the C.D. Howe Institute suggests that an effective mechanism to overcome the difficulties experienced by smaller communities is to consolidate smaller systems into ‘larger more viable operations.’ 2 A similar conclusion was reached in the Watertight Panel Report. The Report found that the only way for smaller communities to keep the costs of providing safe drinking water to a manageable level while avoiding risks, is to increase the scale and capacity of water systems through consolidation.3

This suggestion of consolidation has met with opposition from municipalities. As the Watertight Panel Report observed, there are concerns from smaller municipalities that local accountability and autonomy over water will be lost.

To date the province has not addressed the particular difficulties faced by small communities.

First Nations Must Deal With High Risk Systems: National Assessment of First Nation Water and Wastewater Systems Report

The recent National Assessment of the First Nation Water and Wastewater Systems Report focuses on water and wastewater systems for First Nation communities.4 The Report finds that 45% of Ontario First Nations have high risk systems. Similar to municipalities, the majority of high risk systems are found in areas with a small population. Researchers observed that smaller facilities do not meet current design protocols. Perhaps more importantly, small water systems appear to have fewer resources available for operation compared to larger systems.

In May 2010, the federal government attempted to take steps to address access to clean water on First Nations by introducing Bill S-11, the Safe Drinking Water for First Nations Act. The Bill would have allowed the federal government to draft legally enforceable drinking water standards for First Nations communities.

However, the Bill triggered immediate opposition from First Nations. According to Assembly of First Nations National Chief Shawn A-in-chut Atleo, “First Nations [would] need infrastructure, training and support to meet the requirements of the new regulations. Regulations without the capacity and financial resources to support them will only set up First Nations to fail and to be punished for this. In my view, we must address the ‘capacity gap’ as well as the ‘regulatory gap’.”

Even at the federal level, the proposed approach is to set legally enforceable limits and allow for prosecutions, without identifying and dealing with the need for adequate financial resources and asset management plans.

The bill has stalled and it is unlikely that the Safe Drinking Water for First Nations Act will ever come into force in its current form. However, the exercise may have opened the door for the recent announcement of a pilot project on water quality in First Nations Communities.

On July 6, 2011, the federal and Ontario governments announced a joint three year program to improve drinking water quality in First Nation communities in Ontario. The program will be known as “The Canada-Ontario First Nations Pilot to Improve Drinking Water Quality”. The federal government will contribute $5 million in funding, while the Ontario government will provide technical support and training, assisted by the Ontario First Nations Technical Services Corporation.5

The joint program is expected to select three First Nations in Ontario and propose innovative approaches to ensure safe drinking water. The purpose of the program is to determine if there are economically viable options that will improve access to clean drinking water in First Nations Communities.

The Regulatory Framework to Address Asset Management

The issue of asset management and funding for water and wastewater infrastructure was a focus of the Walkerton Inquiry a decade ago. In his report for the Walkerton Inquiry, Justice O’Connor devoted a number of pages to ‘full-cost accounting and recovery’ and its importance for ensuring safe drinking water in Ontario. Justice O’Connor recognized the linkage between full-cost accounting and recovery and safe drinking water, and the importance of financial sustainability to the health of all Ontarians.

Coincident with the Inquiry, the province passed the Sustainable Water and Sewage Systems Act, which would require municipalities to institute full-cost accounting and recovery for water and wastewater services.6 Aware of this legislation, Justice O’Connor had expected implementing regulations would follow. Notwithstanding that the SWSA was passed back in 2002, the province has not passed the implementing regulations.

The Safe Drinking Water Act has filled some of the gap by requiring municipalities to prepare financial plans when they apply for a municipal drinking water licence.7 For new systems, the financial plans must indicate that the drinking water system is financially viable, include a statement that the financial impacts of the drinking water system have been considered, and include details of the proposed or projected financial operations of the drinking water system.8 Applications for amendments to licences require more detailed information.9 Currently, all municipal drinking water systems are required to have a financial plan.10

The new Water Opportunities Act11 may further address the need for proper accounting and asset management. The WOA will require municipalities and utilities to prepare and submit water sustainability plans. These will provide for performance indicators, targets and asset management plans for physical infrastructure. These tools should assist the province and municipalities to implement full-cost accounting and recovery with less provincial prescription. They allow for consideration of issues faced by small, remote and rural municipalities.

The WOA contemplates that a water sustainability plan may contain

  • an asset management plan for the physical infrastructure
  • a financial plan
  • a risk assessment and plan to deal with any risks that may interfere with the future delivery of the municipal service (including the risks posed by climate change)
  • strategies for maintaining and improving the municipal service, including meeting future demand, the more efficient use of water, and cooperation with other municipal service providers
  • such other information as may be prescribed in the regulation.12

The Minister may establish performance indicators and targets for water and sewer services, and such indicators and targets may vary for different municipal service providers and areas of the province. If a regulated entity does not achieve an applicable performance target, the Minister may invite the regulated entity to provide information on the strategies and steps to be taken by the regulated entity to achieve the target and may direct the regulated entity to amend its municipal water sustainability plan. 13

Consistent with recent provincial practice, we will have to wait for regulations to see the details that must be included in municipal sustainability plans, and how they are to be reviewed and amended. However on the municipal side, we are inching closer to the water system financial sustainability recommended by Justice O’Connor. While we now have a better picture of the scale of the infrastructure and capacity gap on First Nations, it does not appear that the federal government has a plan to address it.

End notes 
1 Hrudey, S.E. 2008. “Safe water? Depends on Where You Live!” Canadian Medical Association Journal 178(8): 975. 
2 Steve Hrudey, “Safe Drinking Water Policy for Canada” (February 2011). 
3 “Watertight: The case for change in Ontario’s water and wastewater sector” (2005) Report of the Water Strategy Expert Panel. 
4 Neegan Burnside, “National Assessment of First Nations Water and Wastewater Systems” (April 2011). 
5 Aboriginal Affairs and Northern Development Canada, News Release “Pilot Project Marks Important Partnership to Improve on Reserve Water Quality in Ontario” (July 6, 2011). 
6 See our article in the Spring 2010 issue of this publication. 
7 O. Reg. 453/07, ss. 1(1), (2). See also Safe Drinking Water Act, 2002, s. 32(5) para. 2(ii). 
8 O. Reg. 453/07, s. 1(2) paras. 1, 2(i) and 4. 
9 O. Reg. 453/07, s. 3(1). 
10 O. Reg. 453/07, ss. 1(3) and 3(1). See also O. Reg. 188/07, s. 3. 
11 S.O. 2010, c. 19, Sched. 1 [WOA]. 
12 WOA section 26(2). 
13 WOA sections 28-31.

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