Our understanding of the facts of this matter are as follows.
The GVRD is proposing a partnership with the private sector to design, build and operate a water filtration plant at the Seymour reservoir (the DBO contract). The projected costs and operating revenues associated with the project are $150 million and $120 million respectively over the 20-year life of the DBO contract. The project would be the largest of its kind in North America.
The shortlist of companies now being considered as potential partners includes four corporations:
- U.S. Filter Operating Services Inc., which is owned by French-based Vivendi;
- Earthtech Canada Inc., a subsidiary of Tyco International;
- Aquavan Water Group, Joint Venture of Bechtel Canada Inc. and Thames Water Group; and,
- Atlantic to Pacific Water Group, joint venture of BC Gas and CH2M Waterworks Canada, owned by its U.S. Parent, CH2M Hill.
The only entirely Canadian consortium to have been in the running - a partnership between Alberta based Epcor and the Ontario Clean Water Agency - was recently eliminated from competition. The GVRD is now in the process of allocating a payment of $100,000 for the final bidders to defray their costs in developing stage 2 proposals for the project.
It is not uncommon for BC municipalities to contract out the design and construction of significant infrastructure projects. The innovative feature of the Seymour project is that it would also assign the operation of a major drinking water supply facility to the private sector for a period of as long as 20 years. This is a difference in kind as well as degree. Not only would such an arrangement substantially increase private sector involvement with the project, but it would also significantly increase the risks associated with such a relationship. These would be qualitatively different from those associated with a more limited role for the private sector in supplying one of Canada’s most important public services, safe drinking water.
We also understand that concerns have already been voiced about the impact of NAFTA and WTO disciplines on the project, including specific allegations that the GVRD tendering process fails to comply with the procurement rules of NAFTA . Concerns have also been raised by Burnaby City Council about the proposed Seymour project and the risks associated with NAFTA, GATS and other international trade agreements, and about the virtual impossibility of regaining local control of water distribution after the asset has been contracted to foreign companies.
In response, the Chair of the Board of Directors of the GVRD has stated that:
The GVRD’s solicitors have assessed the impact of NAFTA, GATS and other international trade agreements on the Seymour DBO contract. It has [sic] determined that no issues of significance are expected to arise. GVRD will not lose control of the operations of the plant. The proposed contract agreement will provide GVRD with complete control to terminate the operating contract at its sole discretion for whatever reason.
However, requests for access to the legal opinion upon which the GVRD appears to be relying have been declined.
It is relevant to recognize that among the remaining bidders are corporations that dominate world water markets. It is also apparent that their interest in the Seymour project is very much a part of efforts to expand their global positions in a market that is estimated to be worth $U.S. 300 billion.
These same corporations are often key players in business associations and trade advisory groups that have played a fundamental role in promoting trade liberalization goals founded on principles of privatization and de-regulation. They may fairly be considered to have some authorship of the trade rules that may come to bear on this GVRD initiative. They may also be familiar with the enforcement mechanisms these agreements provide. In fact, International investment disciplines have been invoked on more than one occasion when disputes have arisen between international water service corporations and governments.
In our view this context is important because for the GVRD’s potential private sector partners, the Seymour project may represent an important strategic precedent. On the other hand, for most municipalities international trade law is still an arcane subject remote from the day to day matters of local government. In our view, this mismatch in resources and expertise among the potential partners to the Seymour project needs to be acknowledged and addressed.