Columbia River Treaty

Design and Purposes

The Columbia River Treaty (full text) between the United States and Canada mandated the construction and operation of three water-storage dams in British Columbia (Canadian storage) for the purpose of providing flood control and optimum hydropower generation in the Columbia River Basin in Canada and/or the United States. The Treaty also authorized a fourth dam on the Kootenai River in Montana for flood control and other purposes in the United States. All four dams were built.

By utilizing water storage sites in the upper Columbia River Basin that allowed for manipulation of the natural flows, the Treaty brought more surety and increased hydropower generation at dams downriver and also provided flood control. The Treaty was signed in January 1961 and implemented on September 16, 1964. Importantly, the Treaty considered that the value of flood control and hydropower dwarfed the value of other costs and benefits, and so it made no explicit provision for other values such as water-flow benefits for salmon and steelhead. By the time the Treaty became law, salmon and steelhead had been extinct in the upper Columbia River for more than 20 years because of Grand Coulee Dam, which has no fish passage facilities for either juvenile or adult fish.

The Treaty has no expiration date. It will continue indefinitely unless one country requests termination, which is allowed anytime after 2024, 60 years after its ratification, given at least 10 years advance notice (no later than 2014).

In the Treaty preamble, the two countries state that construction of three dams in British Columbia -- Duncan on the Duncan River, a tributary to Kootenay Lake, and Keenleyside and Mica, both on the mainstem Columbia River -- would provide benefits to the two countries in the form of additional hydroelectricity and flood control “. . . in a manner that will make the largest contribution to the economic progress of both countries and to the welfare of their peoples of which those resources are capable.”  The preamble noted that the people of the United States and Canada “have, for many generations, lived together and cooperated with one another in many aspects of their national enterprises for the greater wealth and happiness of their respective nations.”  The Treaty was seen as a natural evolution of that cooperation.

In recognition of this long friendship and in order to take advantage of their shared river for economic gain, the countries agreed that Canada would provide 15.5 million acre-feet of water storage:  7 million acre-feet at Mica Dam, 7.1 million acre-feet at Keenleyside and 1.4 million acre-feet at Duncan. The Treaty also authorized the United States government to build Libby Dam, and Canada agreed that the reservoir, Lake Koocanusa, could back 42 miles into British Columbia.

To realize the downstream power benefit, the United States (Article III, Paragraph 1) . . . shall maintain and operate the hydro-electric facilities included in the base system and any additional hydro-electric facilities constructed on the main stem of the Columbia River in the United States of America in a manner that makes the most effective use of the improvement in stream flow resulting from operation of the Canadian storage for hydro-electric power generation in the United States of America power system. The United States can discharge the “most-effective-use” obligation by reflecting the requirement in the studies that determine the downstream benefit. Importantly, Canada has to operate in accordance with agreed operating plans. In the absence of specific agreement, these plans are designed for flood control and to produce optimum hydroelectricity and not directly for other purposes such as providing water for irrigation, navigation, or flows to assist salmon and steelhead migration in the lower Columbia River.

Under the Treaty, the estimated additional usable hydropower generated in the United States compared to the 1961 United States reservoir system -- the downstream benefit -- is shared equally by the two countries. Comparison to the 1961 system gives Canada a “first added” benefit. This, along with other limits, keeps the benefit calculation higher than the actual marginal benefit, which is significantly reduced due to the addition of reservoirs in the United States after 1961, such as those behind Libby and Dworshak dams (Dworshak is on the North Fork Clearwater River in Idaho).

Canada’s share of the downstream power benefit calculation is called the “Canadian Entitlement.”  The original Canadian Entitlement, following completion of the dams, was 1,377 megawatts of capacity (half of the total additional dependable generating capability at the United States dams) and 759 average-megawatts of electrical energy (this means 759 average megawatts delivered at rates up to a maximum of 1,377 megawatts for a period of a year). The countries anticipated these amounts would decline over time. This is because it was assumed that 1) increasing demand for power would be met with new thermal-fuel power plants -- coal and nuclear -- for baseload generation, and 2) the dams increasingly would be used to supply extra energy -- peaking power -- when needed.

In fact, new power plants were added, or planned for addition, to the Columbia River hydropower system through the Hydro-Thermal Power Program, but not as much new baseload thermal generation as the Treaty anticipated. Thus, today we rely more on the dams than the Treaty planners expected. During August 2007 through July 2008, the Canadian Entitlement was 1,241 megawatts of capacity and 482.8 average-megawatts of energy. This energy amount was enough for about 280,000 average electrically heated homes.

Whether the Entitlement is 759 or 482.8 average-megawatts, it is a lot of electricity then and now. In 1964, the Province of British Columbia didn’t need it and wasn’t anticipating needing it for 30 years because the province was constructing a large dam on the Peace River. So the province sold the Canadian Entitlement to a consortium of utilities in the United States, organized as the Columbia Storage Power Exchange (CSPE), for 30 years for a lump sum of $253.93 million in U.S. dollars (adjusted from $254.4 million for early payment). This was considered a “pre-sale” of the benefits for that purpose, as it was assumed the benefits would continue to flow as long as the Treaty was in force. This “pre-sale” plus payments for flood control paid for a large portion of the construction of Mica, Keenleyside, and Duncan dams.

Duncan Dam, at the northern end of Kootenay Lake, was completed in 1967; Keenleyside Dam, just north of Castlegar, was completed in 1968; and Mica Dam, about 80 miles north of Revelstoke, began storing water in 1973 and generating power in 1976. Libby Dam on the Kootenai River in Montana began operation in 1972 and was completed in 1975. The Canadian Entitlement benefits do not include the effect of Libby Dam operations, but the province expected to acquire more than 200 average-megawatts of power benefits downstream in Canada from Libby operations as the result of paying for all the land acquisition and clearing for the Libby reservoir (Lake Koocanusa) in Canada and allowing Libby to be constructed (consent was required because of the flooding by the reservoir). On the basis of the anticipated additional stream-flow regulation, and the expected increased power benefits, BC Hydro built its Kootenay Canal plant on the Kootenay River just downstream of Nelson at ratepayer expense.

The 1964 pre-sale of Canadian downstream benefits expired in phases 30 years after the scheduled completion of each Canadian dam. With the expiration of the pre-sale deal, Canada became entitled to receive actual power, as opposed to the “pre-sale” cash equivalent. In April 1998, the United States and Canada agreed on new terms for the continued return of the Canadian Entitlement. The 1998 agreement called for power to be returned to British Columbia in phases at locations other than the Treaty-stipulated location of Oliver, British Columbia, a small town on the Okanagan River at the border. That was originally a convenient point between the eastern and western extremes of the basin, but it was not where the province wanted the power, then or in 1998, and would have required the United States to build new transmission to deliver it. Also, the 1998 agreement allowed BC Hydro to market its share of the energy in the United States, if it chose to, rather than accepting delivery in British Columbia. Today the energy is delivered to British Columbia over two 500,000-volt lines at Blaine, Washington, south of Vancouver, and a 230,000-volt line at Nelway, Idaho, north of Sandpoint.

Treaty History and Politics

The idea for the Columbia River Treaty of 1964 dates to 20 years earlier when, in March 1944, the United States and Canada asked the International Joint Commission (IJC) to investigate “. . .whether a greater use than is now being made of the waters of the Columbia River System would be feasible and advantageous.”  The IJC took 15 years -- until April 1959 -- to complete its report.

The report discussed the potential benefits of hydropower development in the Canadian Columbia River Basin and how the benefits might be apportioned. Nine diplomatic negotiating sessions, the first one in February 1960, followed. The Treaty was completed and signed in January 1961 and ratified by the two countries three years later.

While the Treaty authorized an equal sharing of the additional hydropower generation that results from additional water storage and coordinated water releases, the impacts of the dams were not equally shared by the two countries. The dams flooded fertile river valleys in British Columbia where the population was concentrated. More than 2,000 people, hundreds of farms, and 13 communities were displaced. In addition, Libby Dam flooded productive agricultural land in both countries. Operation of the Treaty dams caused yo-yo water level fluctuations in the Kootenay(i) and Columbia rivers, which led to bank erosion problems.

The Treaty gave the United States large amounts of power and flood control benefits from the operation of Canadian dams and Libby, plus small amounts of recreation and fishery benefits, adverse impacts on other fish, and loss of land upstream of Libby. British Columbia got three dams, large power benefits at Canadian Treaty projects and at Canadian dams downstream of Libby; flood control downstream; beneficial and adverse impacts to recreation, navigation, and fish; major flooding and dislocation of whole communities; and one-half of the estimated power and flood control benefits created downstream in the United States. (The province took its share of the U.S. flood control benefits for the first 60 years in up-front cash payments, and took a one-time cash payment for the additional hydropower benefits for the first 30-years. These funds were used to build Duncan and Keenleyside dams and partially fund construction of Mica Dam.

Construction of the Treaty dams was the second major power development in the United States to impact the people and environment of southeastern British Columbia. First, the completion of Grand Coulee Dam in 1941 eliminated salmon runs from the mainstem Columbia River and its tributaries in British Columbia; 20 years later whole towns were relocated for the benefit of power generation and flood control in Canada and the United States. Unlike Grand Coulee Dam, however, which the Canadian federal government did not protest, this time Canada got something in return -- a 50-percent share of the additional power and flood control benefits that Canadian storage operations created in the United States (Canada’s share of the United States flood control benefit was calculated at $64.4 million; this was paid by the United States when the projects began operating, with small increments being paid later for early completion of Duncan and Keenleyside). This was an important concession by the Americans, whose official position in the initial Treaty negotiations had been that Canada deserved a monetary settlement for the inconvenience of storing water and displacing its people, but not an actual share of the downstream benefit. In fact, the downstream benefit was the quid-pro-quo to Canada for paying for the dams, according to Professor Nigel Bankes of the University of Calgary Law School, who has written extensively about the Treaty.

Tim Newton, an expert on the Treaty who retired from PowerEx, the power marketing subsidiary of B.C. Hydro, observes that while the governments of British Columbia and Canada shared a vision of increased water storage, more hydropower, and industrial development in British Columbia, it was a vision often clouded by shorter-term goals. Electric utilities and government agencies in both countries recognized the potential of the Columbia River to provide the desired storage and power, but the IJC was taking its time on its investigation, and cross-border water-storage discussions in the late 1940s and early 1950s seemed to be going slowly as well.

“With a change of government in British Columbia, Kaiser Aluminum proposed building a ‘low’ dam on the Arrow Lakes, at Kaiser’s expense, and Kaiser would provide the province with 20 percent to 30 percent of the downstream benefits. This was too tempting for the new government, and they signed a memorandum of understanding with Kaiser in September 1954,” Newton said. “The provincial opposition parties used this agreement as a political issue, and the Canadian federal government joined them in opposing this plan on the grounds that it would not allow full development of the Canadian watershed, although it was partly to strengthen the federal role in negotiating the anticipated Treaty.”

The “low” Arrow Lakes dam was expected to cost $30 million, but the deal lapsed when the Canadian Parliament approved Bill No. 3, the “International Rivers Improvement Act,” the same year. Bill No. 3 required a federal license for any project in Canada that altered the flow on a river that crosses the international border. The federal government made it clear it would not approve a license for the Arrow Lakes dam.

“At this point in time, the [Canadian and American] federal objective was to keep the IJC process on track,” Newton said. “A lot of the discussion related to the loss of the Canadian competitive position that would result if the ownership of major natural resources was given to ‘foreign’ entities. Another major federal objective was to convince the U.S. that returning 50 percent of the downstream benefits would be better for the U.S. than having Canada divert water out of the Columbia Basin.”

Nonetheless, both countries remained interested in building dams in the Canadian headwaters in order to boost power generation downstream -- and also in British Columbia. In 1955, the Puget Sound Utilities Council proposed Mica Dam to provide 1,400 megawatts of power for British Columbia and 1,800 for the United States. The same year, the Canadian Parliament conducted hearings on power developments in the upper Columbia Basin, including diverting the Kootenay and Columbia in ways that would increase power generation. As part of the federal strategy the Canadian Section of the International Joint Commission, for example, proposed to divert 15 million acre-feet at Revelstoke -- about 67 percent of the river’s flow at that point -- through a mountain tunnel into the Fraser River for exclusively Canadian hydropower purposes. It ultimately didn’t happen, but the political climate in both countries in the 1950s supported dam-building in the Columbia and Fraser basins. Partly to assist the IJC study, Canada ordered seven engineering studies of possible dam sites between 1956 and 1961. Meanwhile, in spite of very close cooperation at the technical level, political suspicions continued between the Canadian federal government and the British Columbia provincial government.

“During the negotiating period, the two levels of government managed to keep a unified approach, but even during this period there was a fundamental misunderstanding,” Newton said. “The province wanted to develop both the Peace and Columbia rivers at the same time and was very public about this ‘two-river policy.’  The federal government was sure that this was a negotiating position with respect to the U.S., and also was sure that the Peace River development would be abandoned once the Treaty was signed. So the federal government believed it was negotiating for benefits that would be used in Canada immediately. This misunderstanding contributed to the delay in Canadian ratification of the Treaty.”

Both countries supported a diplomatic process to decide on Columbia River power developments, and the result was the completion of the Columbia River Treaty, signed by President Dwight Eisenhower and Prime Minister John Diefenbaker in January 1961, and approved by the United States Senate in March. Once the Treaty was signed, British Columbia opened negotiations with the Canadian federal government so that it could implement its policy of power developments in both the Peace and Columbia rivers. To ratify the Treaty it had signed, the federal government had to set aside its differences with the province and help sell the downstream benefits of the additional Canadian storage to the United States. At the same time, the federal government changed in Canada.

Negotiating the sale of the downstream benefits, which required a Treaty protocol between the United States and Canada and agreements between Canada and British Columbia, took several years. A key issue was the question of who would pay to build the Canadian dams. Ultimately, the two countries accepted a proposal by the province’s pro-development premier, William Andrew Cecil Bennett. Bennett proposed that because the power was not needed in British Columbia, the downstream power benefits could be sold to an entity in the United States for 30 years in a lump sum, and that this one-time payment could be used to pay for building the dams. This was an acceptable offer to utilities in the Pacific Northwest, and the three mid-Columbia public utilities in Washington -- Grant, Chelan and Douglas -- led the effort to create the Columbia Storage Power Exchange (CSPE) in May 1964. The agreement among the CSPE utilities was that half of the Canadian Entitlement would go to four private utilities and the other half to 37 public utilities, all in the Pacific Northwest service territory of the federal Bonneville Power Administration.

Because the Canadian Entitlement power was not needed in the Pacific Northwest until the 1980s, Bonneville helped the CSPE owners sell the Canadian Entitlement power in the early years to California utilities. First, the power was to be delivered over new high-voltage transmission lines -- the Pacific Northwest/Pacific Southwest Intertie, whose construction depended on the successful completion of the Treaty (interestingly, the Treaty thus became dependent on completion of the Intertie). Second, Bonneville led the creation of a Pacific Northwest Coordination Agreement that assured owners of projects downstream of Canadian storage that major American reservoirs would be operated optimally with exchanges of power between utilities, as needed to create the expected Treaty power benefits. Third, the CSPE exchanged its rights to the Canadian Entitlement with Bonneville in return for a guaranteed amount of firm power to be delivered from Bonneville to the CSPE. This eliminated the uncertainty of selling an unknown amount from future Entitlement calculations and allowed the CSPE to obtain a lower interest rate for the sale of CSPE bonds. To raise cash to build the Canadian dams, the CSPE issued $314.1 million in revenue bonds and, after setting aside an amount to pay interest during the nine-year construction period for the dams, delivered $253.93 million, the negotiated amount of the Canadian Entitlement, to BC Hydro to build the dams.

It was the deal W.A.C. Bennett wanted, and it was a deal the U.S. could accept, but it wasn’t the deal many people in British Columbia wanted. For example, historian Geoffrey Molyneaux wrote that the “hardware merchant from Kelowna” (Bennett) outplayed Prime Minister John Diefenbaker and the ranking Tory, Justice Minister Davie Fulton. Molyneaux observes that the Canadian federal government mishandled the three-way Columbia power negotiations with the United States and the province. Bennett got what he wanted; his critics claimed that the Americans did, too.

There were Treaty critics in the United States, as well. Dr. John Krutilla, who wrote extensively about the Treaty economics in the 1960s, thought there were better alternatives for the United States and Canada. But the consensus of most U.S. government and utility officials at the time was that although the Treaty was not the best deal for the United States, it was good enough.

From Treaty to Trust

Professor Bankes says that at the time the Treaty was signed and the dams built, people living along the upper Kootenay River and along the Arrow Lakes saw themselves as people in the way. They knew they would suffer losses, they knew others would benefit, and they knew that all sectors of their local economies would suffer from the creation of reservoirs and their periodic fluctuations of elevation. Bankes says that in addition to the losses sustained by individuals, and the loss of historic community identities, the agricultural, mining, forestry, and fishery sectors of the economy all suffered serious and permanent setbacks. Some 231 square miles of valley bottom land was flooded. Despite the bright promise of the Treaty, for decades after ratification the benefits were realized far from the areas affected by dam construction. For some 2,300 residents of southeastern British Columbia, this was anything but greater wealth and happiness.

That began to change in 1995 as the province anticipated the end of the 30-year, one-time payment for the Canadian Entitlement. Soon power would begin flowing to British Columbia from the United States, and the province wanted to be ready with a plan for spending the new money that power would create. Appropriately, the province’s Legislative Assembly favored investing the downstream power benefit in the areas most affected by the Treaty dam construction. Following a year of public meetings to gather ideas on how to mitigate the impacts of the Treaty, in 1995 the Legislative Assembly approved the Columbia Basin Trust Act, which created the Columbia Basin Trust. The Trust, governed by a board of directors comprising residents of the affected areas, is empowered to spend a portion of British Columbia’s share of the additional hydropower income to mitigate the social, economic, and environmental impacts of the Treaty dam construction. The amount of funding available is made possible by the sale of the Canadian Entitlement but is not dependent on the magnitude of the Entitlement or the price for which it is sold. Since its inception, the Trust has invested in social and educational programs, fish and wildlife habitat improvements, development of small businesses, and tourism-related economic developments including major investments in golf and ski resorts.

The Trust also is involved in hydropower development. Columbia Power Corporation, which is owned by the province, has a primary mandate to undertake power project investments as the agent of the province on a joint-venture basis with the Trust. Columbia Power and the Trust formed the Power Project Joint Venture to assess and advance power projects. Each owns half of the joint venture, with Columbia Power as the manager. When a decision is made to build a new power plant or expand an existing one, a separate, jointly owned company is created for that purpose.

The first of these joint-venture projects was the 187-megawatt power plant at Keenleyside Dam, which began generating power in 2001. The facility, known as the Arrow Lakes Generating Station, is owned by Arrow Lakes Power Corporation, which is jointly owned by Columbia Power and CBT Arrow Lakes Power Development Corporation, a subsidiary of the Trust. The hydropower income is split between Columbia Power and the province.

Columbia Power completed a 120-megawatt expansion at Brilliant Dam on the Kootenay River at Castlegar in 2007. Brilliant Dam and its existing 145-megawtt power plant were purchased in 1996 by Brilliant Power Corporation, which is owned by Columbia Power and CBT Power Corporation, another subsidiary of the Trust. Up to 90 percent of the electricity generated at the new powerhouse is sold to BC Hydro under two long-term contracts.

Columbia Power also owns rights to build a second powerhouse at Waneta Dam at the mouth of the Pend Oreille River just north of the international border. The existing dam and powerhouse are owned by Teck Cominco Metals Ltd. Waneta Expansion Power Corporation, a company created jointly by the Trust and Columbia Power, is planning a powerhouse with a capacity up to 435 megawatts. Construction could begin in 2009.

Last updated: Oct 2, 2008