New podcast episode: Water availability and economic development in southern Alberta

Economic Development and water availability are two major priorities of Southern Albertan districts. How is economic development in these areas being impacted by factors like fully allocated basins and potential drought? Learn more about the findings from this recently published ALI funded study with Lorraine Nicol.

For more information check out these resources:

• Closing a river basin to water allocations: Is economic development affected?

Transcript

Host: You’re listening to the Land Use Podcast brought to you by the Alberta Land Institute.

Lorraine: Within the municipalities within the St. Mary River Irrigation District, how is water being allocated and is the allocation working towards economic development?

Community leaders are telling us over and over again that water and wastewater treatment capacity is limited.

The situation that we face is in decisions made about 25 years ago, and now it's estimated local governments in Alberta face about a $30 billion infrastructure deficit.

Host: Hello and welcome back to another episode of the Land Use Podcast. My name is Aysha Wu with the Alberta Land Institute. Today's episode will discuss findings from a newly published study supported with funds from the Alberta Land Institute.

Today’s episode will discuss findings from a newly published study supported with funds from the Alberta Land Institute. Before we start, I would like to acknowledge that the University of Alberta, its buildings, labs and research stations are primarily located on the territory of the Néhiyaw (Cree), Niitsitapi (Blackfoot), Métis, Nakoda (Stoney), Dene, Haudenosaunee (Iroquois) and Anishinaabe (Ojibway/Saulteaux), lands that are now known as part of Treaties 6, 7 and 8 and homeland of the Métis. The University of Alberta respects the sovereignty, lands, histories, languages, knowledge systems and cultures of all First Nations, Métis and Inuit nations.

According to the Alberta government, over 80 per cent of Canada's irrigated land is in southern Alberta. Under the water licensing system, many river basins in the region are closed to new water allocations, which can complicate the availability of water for non-irrigation uses, especially in times of drought.
Lorraine Nicol, a senior research associate at the University of Lethbridge, is joining me today to discuss her research into the impact of water availability on economic development in southern Alberta. Thank you for joining me, Lorraine. This isn't your first time on the podcast, but for people who do not know you, could you please introduce yourself?

Lorraine: My name is Dr. Lorraine Nicol. I'm a senior research associate in the economics department at the University of Lethbridge and for about 20 years, I have worked in water management as relates most specifically, not entirely, but most specifically to agriculture and irrigation agriculture. Mainly because irrigation districts hold the majority of the water licences in southern Alberta, and there's ways to reallocate water amongst users beyond irrigation districts.

And I have had a keen interest in studying how reallocation frameworks work and mechanisms work, how well they work, what ways in which they work and how easy it is to reallocate water. So this study relates to that and just relates to a lot of work that I have done in the past, but in a slightly different avenue this time.

Host: So this really is a field that you have a ton of background knowledge in.

Lorraine: Yeah, that's right.

Host: So as background for this study, there was a previous study that informed this one. Could you just give me a really high level overview of the previous study?

Lorraine: Yeah, casting my mind back two and a half years. The gist of that study was, again, looking at irrigation agriculture. And we were going to try to evaluate amongst irrigators themselves what kind of licensing and allocation water frameworks they like to work under. There's different ways to allocate water, and we were going to do a survey, but allocating water and licensing systems are sensitive subjects in this area. So I had thought not long after the study's approval that this wasn't going to be a topic that we would get irrigators interested in participating because of their reticence to talk about water.

And this was at a time when the Water Act was being reviewed by the provincial government. And so there were questions in the air and people did not know changes that might be coming because of conversations that the provincial government was having with the population. Since then, those conversations are done and there has been some changes to the Water Act, but they're not changing the water licence framework itself. And in working with water allocation for a really long time in agriculture, the licensing framework for agriculture is very, very critical, if not the most critical component of working in agriculture in this region.

So with the reticence that I felt that irrigators would have towards opening up to us the conversation about water licensing and different frameworks, we moved in another direction. And so the direction that we moved in was to look at water reallocation under existing licensing systems. And one paper looked at that. And the second paper, which we're talking more specifically about today, is whether the economic agents on the ground in this region, that is, economic development agency directors, as well as the elected representatives from municipalities, be their mayors, councillors, and reeves within the St. Mary River Irrigation District, how they perceive reallocation of water and how it's working on the ground in terms of fostering economic development.

Host: Okay, so then can you tell me what findings from the first paper specifically informed the second one?

Lorraine: In the first study, I did some of the research for it, but it was written by Dr. Christopher Nicol, which is my husband and research partner. So actually it's coming out in the Canadian Water Resources Journal in July. So we looked two things and the first thing was during periods of drought, what mechanisms are there in place for sharing water amongst major water licence holders?

And so we went back to what happened in the drought of 2001. There's been pockets of drought here and there in the province, but no drought as widespread as 2001 and another big drought that might have been coming down the pipe in 2024. So we looked at what mechanisms were in place to share water amongst licence holders. And we find that in both situations, major licence holders come together to share water and reduce water consumption. So in 2001, what the major licence holders did in southern Alberta was that they came together and they produced a written agreement that those licenced water holders would reduce their water consumption by 60 per cent, and that's what they did. And irrigation districts were major in that. Big municipalities participated in that as well. And it was an award-winning agreement that came out of that. So that was amazing.

Then in 2024, it was kind of the same thing. Early in the year in April, May and June, it looked as if there was going to be another catastrophic drought. Those major players came together again and they signed a memorandum of agreement to cut back their water allocations. Because I wasn't the major author on that paper I can't remember if it was 60 per cent, but they all had agreed their water allocations were going to be reduced. The irrigation districts all cut back their water that year. Every single year, they look at water availability and each irrigation district announces to their users how much water they're going to use. If it's a good year, it's 18 acre inches within the St. Mary Irrigation District that I study most, but some years, I think that in 2001 it might have been 8 acre inches. It can be between 12, 14, 17. This year I think the allocation started at 11 acre inches and an increase to 14 based on rain that we received.

And then going back to 2024, rains did come. We had significant rain in June and a catastrophic drought was avoided. But irrigation districts still, with the reservoirs being low, they stuck to lower levels of irrigation allocation compared to a good year. So these allocations are adjusted every single year and they're adjusted sometimes over the course of the growing season. So they start out conservatively and then they may increase later in the growing season. So that's a common practice. I don't know if people are aware of that, but that's what they do. So monitor it all the time and adjust their allocations accordingly.

The second piece of it was we looked at irrigation districts, one major way in which they share their water licence is through water designated for other purpose uses. So I'll call it OPU, other purpose uses, and it's a licence amendment that's permitted by the provincial government. where they can amend water licences up to 1,000 acre feet and 2 per cent of the remaining licence volume. So an irrigation district may hold three or four or five different water licences and those licences can be amended accordingly for water set aside for other purpose uses other than irrigation. So other purpose uses can be for municipal water supply, residential water, industrial uses, commercial uses, stock watering, management of fish and wildlife habitat, habitat enhancement, as well as recreational uses.

And so for every irrigation district, we actually spoke to the irrigation districts and acquired the numbers from them as to the volume of water that's been set aside for other purpose uses. And then we also looked at their water licences and according to the formula that I just mentioned, what would be the maximum that they could allocate for other purpose uses if they were to maximize the licence amendments. So they haven't maximized their licence amendments, but all of them has set aside water for other purpose uses. So for the St. Mary River Irrigation District, it's 20,000 acre feet, which in terms of their water licence capacity is a fairly small percentage, but 20,000 acre feet goes a long way when we're talking about municipal feedlot operations, wetlands, industrial use, etc. So our first paper went into that practice in great detail.

Then the second paper that we're talking about more specifically today is the paper that just went out last week. And that is that we wanted to talk to these community leaders about within the municipalities within the St. Mary River Irrigation District, that was the area that we focused on, how is water being allocated and is the allocation working towards economic development at its best?

Host: Right, okay. So you said interviews with community leaders, but did you want to talk a little bit more about the research process for the second paper?

Lorraine: Yeah, sure. So we have to go through an extensive ethics approval application through the University of Alberta. And the people that we were targeting, I think in the beginning I had about 30 people on my list. And of course, you have to find their e-mail addresses and that was the way that I contacted them initially, inviting them to participate in the study.

As it turned out 15 people participated in the study and the interviews themselves took place between July, August and September of 2025. And the interviews consisted of quite a few open-ended questions when they could talk about water and issues and opportunities and the interviews were recorded and then they were transcribed. And I had about 100 pages of transcriptions that you then have to go through and try to whittle down all of that into the major findings. And so out of that came the paper.

Host: Was there anything you expected to hear going into the interviews?

Lorraine: No, didn't. I have never conducted a study of this sort before in this region. And I must say I probably kept a fairly open mind because it also did cover a very large area because between the St. Mary River itself runs between 170 kilometers in length from Lethbridge to Medicine Hat.

Host: That is a large area.

Lorraine: Yeah. And then there's two big cities in there, there's two large towns, Tabor and Coaldale, over 10,000 people, and then there's all of these municipalities in between. So I didn't really know what to expect because the area is extremely diverse. And on the western side of the district near Lethbridge and in the Tabor and Coaldale area, you've got significant food processing activity taking place. But as you move further east, there is a lot less food processing taking place. And the concentration of specialty crops is more concentrated within the SMD in the western area of the region as opposed to the east.
So it's a very large irrigation district and actually it just amalgamated or took up the Tabor irrigation district. So Tabor used to be its own district and the SMRID has now amalgamated. So it's in one big district and the largest irrigation district in Alberta for sure.

Host: Okay. So what were the key findings from the interviews then?

Lorraine: So a couple of things. First of all is that water availability in itself is not a constraining factor. So the reallocation mechanism of especially water set aside for other purpose uses is very effectively being used. Saying first of all that water in this region is certainly not taken for granted. We manage water within a water allocation system where water is licenced for users, be that municipalities, industries and irrigation districts. And in this region, the water basin has been closed to new water licence allocation for fully 20 years, going back to maybe a little bit more detail about the allocation framework.

Current water allocations were set in time a long time ago and we live and work within what is called a closed basin. So say a new potato processing plant were wanting to locate in this area, they would need considerable amounts of water because food processing takes a lot of water. Perhaps that water can be supplied by a municipality that has sufficient water licence capacity, but not all municipalities do. Under these circumstances, they could turn to the St. Mary River Irrigation District, which as noted, has set aside a certain quantity of water licence for other purpose uses.

What this study found was that the community leaders we spoke to are aware of the availability of that water. They have a good working relationship with the irrigation district. Hence, a critical finding in the study was that water availability is not a constraining factor. Now having said that, this is not to say water is not an issue during a drought situation. And we know from past experience, as recently as 2024, that major water licence holders, be that municipalities, industries and irrigation districts, come together to cut back water consumption when drought situations are imminent. And that has been a proven practice more than once. So that was the first major finding.

The second major finding is that there is not enough water treatment and wastewater treatment capacity to accommodate further food processing in the region. So the situation that we face in regards to this issue is that it's rooted in decisions made about 25 years ago when governments cut infrastructure spending as fiscal constraint was practiced. Federal and provincial governments downloaded those responsibilities onto the municipal level, and now it's estimated local governments in Alberta face about a $30 billion infrastructure deficit.

As relates to this study, we now see that municipalities in this intensive agriculture production region are really behind the eight ball to no fault of their own. Community leaders are telling us over and over again that water and wastewater treatment capacity is limited. And this is preventing them from actively recruiting food processors to locate in this region. So this is a real unfortunate situation to be in.

As relates to food processing in this region, a new initiative announced in about 2020 was that federal and provincial governments want to make the St. Mary River District a premier agri-food corridor all the way from Lethbridge to Medicine Hat, which is a big visionary element of the region as to what it could be like in about 20 years. But the water treatment capacity that we do not have is really holding everything back.
So the individuals that we spoke to, they're very ambitious and they're very anxious and excited about the premier agri-food corridor, a little bit less so in the east, but certainly in the west and they're all on board. But this agri-food corridor isn't going to happen until the deficit in water treatment capacity is addressed. And this is going to take time and it's going to take a lot of money.

So some steps are being taken though. Coaldale and Tabor are studying water needs in the area and there is a Highway 3 portable water, wastewater technical working group that's working together to come up with some answers. There was a $4.5 million grant provided to Coaldale for a new reservoir and pumping station. The city of Lethbridge, they're well aware of their water and wastewater treatment capacity limitations as well. So in 2024, the City of Lethbridge received $2.8 million for treatment plant upgrades to increase the volume of water treated. And the city is now moving ahead with plans for wastewater treatment plant upgrades and expansions. And about a month ago, Ottawa announced $510 million for water and wastewater infrastructure in Alberta municipalities, a partnership with the provincial government, and this was announced in Calgary.

So what I find interesting is that the city of Calgary is very different from our region because the city of Calgary had that catastrophic main water break about two years ago and they're still dealing with it. So that really turned the public eye and scrutiny to the lack of infrastructure funding that we're now paying for in big ways because these systems are breaking down. But for cities like Calgary, infrastructure needs have consistently been deemed a barrier to housing at a time when population has been growing rapidly. So housing development suffers because of that in Calgary.

But for our region involving Lethbridge to Medicine Hat corridor, the infrastructure deficits have implications for housing indeed, but I think more so it's for economic development as relates to attracting food processors. So it's a little bit different. Our region is the central food processing area in the province. Two different scenarios, I believe.

Host: But both stemming from a lack of infrastructure and funding. So then is that the major roadblock at this point?

Lorraine: Absolutely. I mean, it always comes down to money. So yeah, I mean, even $510,000 announced by the federal and provincial government, that's a drop in the bucket, when in fact the deficit in water treatment and wastewater treatment capacity is 30 billion.

Host: Ooh that's a lot.

Lorraine: Yeah.

Host: So there is some funding coming to alleviate the issue and municipalities are working on solutions but how else can these findings be implemented?

Lorraine: I think that's a very good question. There's two scenarios. An industry could, another McCain's could come from somewhere and say, we want to locate in a community in southern Alberta. They could go to a municipality and the municipality would try to work with that processor and may go to the St. Mary River Irrigation District and say, could we acquire water through other purpose uses for this industry? And the St. Mary Irrigation District would then work with them accordingly. And the water for other purpose uses is not free. So the St. Mary River Irrigation charges per acre foot of that water. So the industry itself and the municipality can be working together and they do.

The municipalities as an aside, what they're telling me is that they're not going out and recruiting food processors. Because of the infrastructure deficit, they're not going out and actively recruiting food processors. But another way aside from the other purpose use mechanism is that there's water licence trading. So there's a water market where you can actually sell part of a water licence. So an irrigation district can sell a portion of their licence to a food processor. Or as they've done the Bow River Irrigation District, they have arrangements with very large feed lot operators.

And so that's the second mechanism is that water licence holder can carve off part of that water licence and sell it. That would be a whole other procedure where you would go through Alberta environment. There would be a legal process in which for that process to unfold and occur. And those processes can take considerable amount of time and can include a public hearing as well as a great deal of paperwork. So to this date, there's been about 400 water licence transfers through a water market for money. But the St. Mary Irrigation District itself has never sold any of its water licences and most irrigation districts don't. I think the Bow River Irrigation District has sold a small amount and the Western Irrigation sold part of its water licence when the Cross Iron Mills was being built and the County of Rocky View was involved in a major, major commercial enterprise and they bought part of a water licence from the Western Irrigation District. But as I say, involving irrigation districts, that practice is very limited.

So a food processor, working with municipalities, there's a couple different ways in which water can be accessed. The easiest route absolutely is using water for other purpose uses because the processes are already developed and the administrative steps that you would have to go through are pretty minimal compared to if we're talking about a water licence transfer.

Host: Yeah, and I think it's a really positive finding that there are a few ways to make water available. It's just unfortunately that we're running up against the lack of infrastructure.

Lorraine: Yes, that's right. There hasn't been a figure put on how much money is going to be required to get water treatment in this region that we need. I guess that the studies that are being undertaken will determine that. It will still take years to find that money and to build those water treatment plants. In the meantime, you know, there are some good things that are happening with respect to the Premier Water Food corridor. Work is progressing on the twinning of a highway between Lethbridge and Medicine Hats so that goods can move by transport more easily. There's only a two lane highway right now in some many areas of that region. So that progress is taking place.

As well, there is already a $600 million expansion of the McCain potato processing plant in Coaldale. And also there was, it's really cool, a $222 million cold food storage facility built in Coaldale called New Coal. And so there may be minimal water requirements for that particular facility, but it is a major undertaking in that community. And these communities, Lethbridge, Coaldale, Tabor, you know, they're a going concern, like they do want economic growth. It's just not going to be growth involving those that need water treatment at the moment, but it doesn't mean that growth isn't occurring.

Host: People are just finding different avenues from the sounds of it.

Lorraine: Yeah, that's right.

Host: So obviously municipalities are doing some of this, but how can future research build off of this study.

Lorraine: I think that that's the main one. An undercurrent issue as we spoke to people that live in a more dry easterly area of the region was that they're worried about water supply itself from a climate change perspective. Various individuals brought this up. We can say that we've got water licences on paper, but the South Saskatchewan River Basin, some of the sub basins within it, like the Old Man River Basin, they are in fact overly allocated because in a dry year, if water licence holders took all of the water that they legally can, there would be no water left. So That's why the water basin was closed in 2006. No additional licences. But even of those existing licences, there's so many of them that many believe that the water basin is over allocated.

So when we move to areas closer to Medicine Hat and those drier areas of the region, they're saying, yeah, great, you have water licence on paper, but is water in the river? So climate change came up. And as well, they're a little bit reticent about the premier food corridor ever reaching their region because it's a long corridor through which these food processors are to be located, but they're not coming to their region first. And so they're less enthusiastic about the premier food corridor. And they receive less of the benefits from irrigation agriculture than irrigators in the West because there isn't that food processing element. There are greenhouses. Medicine Hat is very, very prominent and well known for their greenhouse capacity. And foods that you buy in grocery stores come from there. It's absolutely fantastic. But greenhouses aren't food processors, they're a whole different thing.

And they also say, not only are we not beneficiaries as much of the irrigation agriculture in that region, but as well, irrigation agriculture has really driven up the price of land. And so a piece of land that has irrigation water rights, those land prices are, well, they said that they are astronomical to them. and that it's kind of squeezing out smaller farmers that may want to start out fresh. It's not easy when land prices are so high. So irrigation agriculture is very, very positively viewed in this region, there's no question, but there are caveats to the positivity under some circumstances.

Host: Yeah, that's a pretty different perspective.

Lorraine: And as relates to your first question about your related question is whether there's any resolution to some of these issues is that when we go further to the east and towards Medicine Hat, there is a lot of study going on about increasing water storage in Alberta and in southern Alberta especially. And so then maybe increasing water storage in the easterly region could be more of an option, especially because there may be more irrigation capacity then, more availability of water for food processing to take off more and to put their roots down in that area equally as much as in the west. But they all are involved in meetings about the agri-food corridor and they all are working as a team. There's no question about that. It's just their circumstances are different.

And the other thing I wanted to mention that one individual said to me, which is quite interesting, is that she said, on the Bow River and on the South Saskatchewan River, we live downstream from a big city like Calgary. And what happens in Calgary has implications for us, but they have no control over what's upstream. So they're not sure what water they're necessarily going to get. So they're aware of that factor as well.

Host: That's definitely something to consider too. So we are going to have to wrap up right away here, but do you have any concluding thoughts?

Lorraine: I think if I had any concluding thoughts, I do want to say to people listening to this is that I think that irrigation is sometimes misunderstood. The perception of irrigators may be that, they're irrigating their crops during the heat of day and that's not very efficient and they're using so much water, but, it's a complicated system. Within the St. Mary River Irrigation District, there's fully 1500 irrigators and when irrigators call for water, they get water to their farm for a specific day or days, and those are the days in which they have to irrigate. So, irrigation systems are ongoing during day and night.

In addition I want to emphasize that irrigation districts are cognizant of the water that they use. As I mentioned earlier, the administration of the water from their head office works such that they look at what water is available. They don't provide to their irrigators any more than what is available and it's very, very limited number of years when they use the water to the maximum. They're cognizant of the value of water and they work with the wider community. They share water, they conserve water. I would think that, if anything, that the public educate themselves on the way that water works in this region and also the benefits to it involve all of us.

I think that I am as objective as I can be, but having worked in this area for 20 years, to me, and indeed I am an economist as well, trained that way, I see the significant benefits that occur and hope that people take time to understand that.

Host: Perfect, thank you, Lorraine. You can find out more about Lorraine's research from the links in the description. If you enjoyed today's episode, you can like, comment, and subscribe. You can also follow us on Facebook, X, Instagram, and LinkedIn, and sign up for our newsletter from our website, uab.ca/ali, to stay up to date with all of our latest podcasts, research, webinars, and more. Thank you for listening to the Land Use Podcast.