April 23, 2005

From the Tap to the Bottle and Back Again

A look at bottled water and privatization

by Leah Orr

The Dominion - http://www.dominionpaper.ca

Many of us have purchased a bottle of water thinking that we were paying for a pure product taken from an abundant source and packaged in a clean container. Maybe not, according to Tony Clarke, director of the Polaris Institute and author of Inside the Bottle: An Exposé of the Bottled Water Industry. Clarke says we may not only be supporting dubious social and environmental practices, but also contributing to the privatization of our public water systems.

In February 2005, the Polaris Institute brought together more than twenty "water warriors" on the banks of Lake Michigan to discuss regional issues and cross-border strategies concerning the bottled water industry. In a talk he delivered at that meeting, Clarke outlined what he sees as some of the key problems with privatized water management and distribution in Canada.

The Birth of the Bottled Water Industry

According to the Canadian Food Bureau, consumption of bottled water in Canada currently outpaces that of coffee, tea, apple juice, and milk. However, this wasn't always the case. As little as two decades ago, the industry was made up of a few local bottlers serving niche markets. Some estimate the bottled water industry's revenue growth at nearly 800 percent in the past 20 years.

In the 1980s, Clarke says, European food giants Nestlé and Danone had expanded as far as they could in Europe and set their sights on North America, "so they came in and bought up a whole series of the more productive and expanding bottled water operations."

In the late 1980s and early 1990s, as bottled water sales skyrocketed and soft drinks were linked to health problems such as obesity, Pepsi and Coca-Cola realized that there was a foreseeable end to the soft drink boom. They looked to juices and bottled water as the way of the future. Their entry into the bottled water market, however, was easier than their European counterparts'.

"They didn't have to buy up bottled water companies. They already had their own bottling operations and their big bottling plants. It was a question of taking advantage of that infrastructure, moving on that and getting some kind of a toehold into the market," says Clarke.

That "toehold" was based on access to publicly built, maintained, and funded water systems, and the result is two of the best-selling brands of single-serve bottled water in North America: Aquafina and Dasani.

Public Water For Private Gain

In the cases of Aquafina and Dasani, bottled water is no more than tap water taken from municipal supplies that is reprocessed and marked up for resale. To get an idea of how much this water is marked up, compare 1.5 litres of New York City tap water (often flaunted as some of the cleanest water in North America) and the same quantity of Dasani. New York tap rings in at about 1/100th of a penny. A bottle of Dasani, however, costs around $1.20. A 1999 Natural Resource Defence Council (NRDC) study titled Bottled Water: Pure Drink or Pure Hype? estimates that it costs "from 240 to over 10,000 times more per gallon to purchase bottled water than it does to purchase a gallon of average tap water."

Companies that use groundwater (or "spring water") have it a little harder than those who use municipal water, as they have to pay for drilling and infrastructure. However, they are not required to pay a fee or tax for extraction as they would for oil and gas.

Speaking on condition of anonymity, one Ontario water activist says, "They do pay for drilling and their own infrastructure, but notice that they are still accessing the water for free. A company takes a standard amount of one million litres per day. Each litre sells for $1.25, so gross revenues are half a billion dollars per year."

"I don't thing water should be priced," she continues. "Rather, private companies should pay hefty taxes for the privilege of temporary use, if they're to get it at all."

One of the reasons for a 2003 moratorium on new water permits in Ontario is that the province does not have a system to determine how much water is being extracted and whether permitted extractions are damaging the system.

The situation in Alberta is similar, says Diana Gibson, Research Coordinator at the Parkland Institute. "Alberta does not have an accurate inventory of ground water aquifers, nor do we know the rate at which those are being tapped or replaced." A current Natural Resources Canada initiative to map 20% of key regional aquifers by 2006 indicates a shortage of information in all regions.

Would bottlers be concerned if they did have that information? The Ontario activist is doubtful. "Our experience locally is that [water bottlers] use up aquifers and move on to new ones when those have run dry."

But isn't it worth paying for a better product? Though the CBWA claims that "bottled water is held to stringent standards for quality, identity and labelling," Clarke and other water activists are quick to point to the NRDC report. This four-year study tested more than 1,000 bottles of 103 brands of bottled water and concluded that "about one-third of the waters tested contained levels of contamination – including synthetic organic chemicals, bacteria, and arsenic," and that bottled water "is not necessarily cleaner or safer than most tap water."

Add to this the environmental costs of manufacturing the components of plastic bottles, the bottles themselves, and what Clarke views as "the toxic chemicals and fossil fuel runoff of the biggest throwaway item there is," (plastic water bottles) and it seems water bottlers are getting away with more than price gouging.

All of this to transform water into... water.

The new consumer culture

The more we hear it, the more we come to believe that bottled water is a superior product. The more we accept that clean water is a luxury, rather than a right, the more we are willing to pay for it.

"By creating a consumer culture through bottled water you set the stage for people to accept and promote the privatization of water services," says Clarke. "It helps to have those water privateers directly engaged in the bottled water portion of things to start to facilitate that kind of development."

What Clarke is referring to is that some companies have their fingers in both pies, including one of the largest proponents of public-private partnerships in North America: Veolia (formerly Vivendi).

According to the Veolia Company Profile released in February 2005 by Public Citizen, Veolia is "concentrating on…contracts where the company can lease assets and collect revenue without being required to make any major capital investments in maintaining, expanding or rehabilitating the water system infrastructure. In other words, the public must pay for pipes, treatment plants and other infrastructure, and the company gets to make the money."

In May 1998, the city of Moncton, New Brunswick partnered with US Filter Canada and The Hardman Group Ltd. to build and maintain a new water treatment facility for the city. One year later, Veolia bought US Filter and its subsidiaries (including Culligan). Apparently Veolia's 85% share of the 20 year, $85 million contract was not enough.

Between 1999 and 2004 (when Veolia sold US Filter) the company not only treated municipal water, but also sold filtration systems and bottled water to residents of Moncton as Culligan. Like Dasani and Aquafina, Culligan fills its bottles and jugs with reprocessed tap water – in this case, tap water its parent company had already treated.

The Dangers of Privatization

When Chrysler moved out, so did the tax base of Highland Park, Michigan, dropping the population from 60,000 to 16,000, and leaving behind astronomical debts incurred by Chrysler and former residents. The state took the city into receivership, and through a series of business dealings, the city's water department was contracted out to CPI Engineering.

Highland Park is one of the poorest cities in the United States. Residents are also subject to one of the highest water rates in the nation. In 2003, over half of Highland Park's residents – many of them families with children and seniors – had been placed on shutoff status due to unpaid bills. Unpaid bills are added to property tax, and in many cases result in foreclosure on residents' homes. According to a June 2003 Earth First! media release, CPI employees were seen carrying firearms while shutting off people's water.

Public Citizen reports that in June 2004, while families were still being denied access to water, Highland Park City Council considered a proposed 10-year water management contract with Rothchild-Wright Group Inc. When it was revealed that the contract included an allowance for the company to bottle and sell water from the public reservoir, the proposal was hotly debated and ultimately rejected.

In Canada, privatization has not been an overwhelming success, either.

Hamilton, Ontario, privatized its system in the mid-1990s. Since then, the city has had numerous raw sewage backups and floods. According to a CBC report, in 2003 even city councillors were confused as to who, exactly, was running their water service due to numerous shifts in ownership, including a stint with Enron-owned Azurix in 1999.

In Halifax, Suez subsidiary United Water insisted that taxpayers pay for future failures (such as chemical spills). As a result, the city cancelled a $465 million contract in June 2003.

The Way of the Water Warrior

Water activists agree that there is a time and a place for bottled water. In times of crisis, such as drought or contamination, bottled water is crucial to sustain life. If, however, we come to rely upon bottled water as our sole source of hydration – as many people have – we risk losing a basic human right to life: clean water for all.

"While publicly operated water systems are managed to deliver clean, safe and affordable water to you and your family, privately operated systems are managed to get as much money as possible from you and your family," says Public Citizen. Clarke and the rest of the "water warriors" would likely extend that to the bottled water industry.

The Michigan meeting brought together many perspectives and presented many strategies for continued action on water issues. Many commonalities came to light, but the one resounding belief shared by all participants is perhaps best stated by the Sweetwater Alliance, a grassroots movement based in Michigan. "Fundamentally, we believe that life and the things that support it are sacred, and that it is vicious and wrong to exploit the needs of living things for private gain."