Sask. ‘moving forward’ with $1.15B Lake Diefenbaker Irrigation Project despite incomplete feasibility study

The government of Saskatchewan says it is “moving forward with constructing” a $1.15-billion irrigation project, despite having never completed or publicly released a feasibility study that was supposed to examine whether it is a good use of public money.

Earlier this year, Premier Scott Moe announced “we will begin construction of the early works” of the project in 2025. 

That has critics worried that the government may be launching an ill-thought-out mega-project — spending more than a billion dollars to benefit just a handful of farmers.

Robert Halliday, a leading water resource engineer who has extensively studied the Saskatchewan river basin, says the lack of transparency has him worried.

“Faith in government is plummeting,” he said. “This kind of stuff just gives government a bad name.” 

In April 2021, the province asked the accounting firm KPMG to do a feasibility study on the Lake Diefenbaker Irrigation Project, which is aimed at providing expanded irrigation to mitigate the effects of climate change. The study was to examine, among other things, what the project might contribute to the economy and whether that would justify the cost.

That review was supposed to be completed by March 2022, according to the government’s RFP requirements. However, the province says the document is still “not finalized,” so it can’t be publicly released.

Halliday wonders why the province is moving forward without completing its due diligence. 

“It seems like the cart is before the horse here,” he said. “It’s almost beyond belief that after doing almost four years of study … they’ve got no product that’s available for public release.”

He said there are many crucial questions that remain unanswered. How many farmers will take part in the project? What will they have to pay to participate? What’s the likelihood that increased financial benefit from irrigation will cover the cost to taxpayers? Could this project attract secondary processing and what would the impact of that be? And much more. 

He’s also concerned that the government has, so far, failed to do any detailed work examining potential environmental impacts.

He wonders if, with a provincial election looming in the fall, the government doesn’t like what the KPMG report concluded.

“Maybe the report found that the economics don’t add up very well and that’s why the province is refusing to release the report,” he said.

‘How do you justify that expenditure?’

Dave Marzolf, a farmer from the Lake Diefenbaker area who has been paying a lot of attention to this project, said that while it obviously would benefit the few hundred farmers who will get guaranteed water to their fields, it’s unclear how this project is good for the rest of Saskatchewan people.

He pointed out that spending $1.15 billion to irrigate 90,000 acres means a per acre cost of $12,778, or more than $2 million per quarter section.

“The investment in those farms doesn’t come back to the taxpayer,” said Marzolf. “It goes into the pockets of those … farmers.” 

The Saskatchewan government says it held public forums in rural areas near the project, and was met with significant interest and support.

Marzolf, who attended some of those forums, said that’s unsurprising.

“That would be like being a Catholic and going to the Vatican. You’re not going to get any resistance there,” he said. “Go and talk to the average Joe Blow in Regina and say ‘Hey, how do you like your taxes funding guys that are going to come out of this fairly well-to-do?'”

Marzolof wants the province to answer a simple question.

“How do you justify that expenditure?”

Province ‘moving forward with constructing’ project

Back in 2020, the province announced the three-phase $4-billion Lake Diefenbaker Irrigation Project, which it said would irrigate 500,000 acres (200,000 hectares) of farmland. 

The first phase, targeting about 90,000 acres (35,000 hectares) in the RM of Fertile Valley, involves rehabilitating and completing more than 40 kilometres of canals that were built in the 1970s and then mothballed by the NDP government of the day.

At the time of the announcement, the government said Phase 1 would cost $500 million. That has now more than doubled to $1.15 billion because of inflation and some changes to the project.

In a news release this past March, Premier Moe announced that the province was “moving forward with constructing the early works of the first 90,000 acres.” Late last month, the provincial government awarded a $12-million contract to engineering firms Stantec and MPE to design and cost-out Phase 1.

“Our government is committed to this project, and this is the next step in moving ahead the Lake Diefenbaker irrigation projects to the construction phase,” a July 25 news release quotes Water Security Agency Minister Dave Marit as saying.

CBC asked Marit for an interview, but he declined. 

The Saskatchewan government has already spent or signed contracts for tens of millions of dollars on the project, but when asked precisely how much, it refused to answer.

A cost-shared project

The province says it will cost-share the $1.15 billion with the farmers who tap into the irrigation. But it says it doesn’t know how many farmers are in the area of the proposed project, how many might participate, or what portion of the cost they will have to pay.

“That’s something yet to be determined in discussion with the producers,” said Patrick Boyle, the executive director of communications with the Water Security Agency, the provincial government body leading the project.

Halliday, the water resource engineer, told CBC that participants will have to be quite well-off because irrigation is pricey. An irrigation pivot for a quarter section of land costs about $200,000. That’s in addition to the yet undisclosed cost for farmers to hook up to the system.

“I suspect that the ones that would benefit tend to be larger farms and more prosperous farms,” he said.  

Aaron Gray, a farmer and board member of Irrigation Saskatchewan, said his organization will insist that anyone tapping into this new system pay a “significant” fee.

“The increase in value of the land at a bare minimum would [have to] be the hookup fee to hook up to the water,” he said. “So then your tax dollar and my tax dollar doesn’t pay for one farmer to essentially increase his net worth.”

Gray, who doesn’t have land near the Phase 1 project, said he feels it’s fair to require participating farmers to pay one-third of the $1.15 billion.

He said irrigation is beneficial for farmers, though the value varies wildly from year to year based on his own experience.

He said during one drought, his irrigated crop was 10 times better than the rest. But other years there was enough rainfall that “we didn’t even turn the irrigation on.” 

In an email, the Ministry of Agriculture said that in 2023 in the Lake Diefenbaker area, dryland crops like wheat contributed about $200 per acre to the GDP, while irrigated acres contributed more than $1,000.

No ‘federal funding partner’

Boyle said the KPMG feasibility study was conducted on the assumption that Ottawa would provide grant funding for the project — money that would not have to be paid back.

But in the end, Boyle said, Ottawa only offered up federally backed loans. That meant the feasibility study had to be reworked to just focus on Phase 1. He said that explains the delay. 

He said because Ottawa isn’t providing grant funding, the province “might stop at the 90,000 acre project,” and abandon Phases 2 and 3.

Boyle said Ottawa expressed its support for this project in the past. In 2020, Western Economic Diversification Canada completed a feasibility study on the Lake Diefenbaker project and concluded “the governments of Canada and Saskatchewan should advance the [500,000 acre/200,000 hectare project] through a multi-pronged approach.”

That high-level analysis estimated it would return $20 billion in tax revenue to provincial and federal coffers over its 50-year lifespan.

However, much of that value was based on the assumption that water flows generated by the project would spur the construction of two new potash mines in the area. The mines would, hypothetically, contribute about $14 billion of the total $20 billion in new tax revenue.

Without the new potash mines, the 2020 federal report estimated the $4-billion irrigation project would generate about $6.9 billion over the 50 years, adjusted to 2020 dollars.

Alberta envy

While Saskatchewan is not thrilled by the offer of federally backed loans, the Alberta government recently embraced Ottawa’s offer of financial assistance. In 2021, it accepted $466 million in repayable loans from the Canada Infrastructure Bank to help with a major irrigation infrastructure project.

In an email, a Saskatchewan government spokesperson said this province is expecting grant money, not loans, from Ottawa because from the late 1800s until the 1970s, Alberta’s irrigation infrastructure was funded by federal grants.

“Saskatchewan is looking for a similar agreement.”

Alberta has four times more land dedicated to irrigation than Saskatchewan. 

A recent study by the Alberta Irrigation District Association says that while irrigated land represents just 4.4 per cent of the provincial land base, it generates 27 per cent of Alberta’s agricultural sales.

The Alberta government says irrigation contributes $3.6 billion to the provincial GDP.  The Saskatchewan government says it doesn’t know how much this province’s irrigation industry currently contributes.

“In terms of irrigation, we are 100 years behind Alberta,” Jillian Brown. from the Saskatchewan Irrigation Producers Association, said in a 2023 Canadian Agri-food Policy Institute report.

Potato power 

Boyle said more irrigation will lead to better yields and more specialty crops, which will mean higher GDP for Saskatchewan and presumably more tax revenue.

He said dryland wheat contributes $400 an acre to the provincial GDP, compared to $5,500 for an acre of irrigated potatoes and $20,000 for an acre of processed potatoes.

“So the return back on irrigation and then the food processing and the other value-added benefits that come with it is significant,” he said.

Dave Marzolf said this seems overly optimistic, given that so little of the currently irrigated land in Saskatchewan is being planted with potatoes or other specialty crops.

According to a Saskatchewan government report, only 4,800 of the 112,000 irrigated acres in the Lake Diefenbaker Development Area — 4.3 per cent — were planted with potatoes in 2023. Other specialty crops like vegetables and hemp account for an additional two per cent, or about 2,000 acres. 

“The statistics don’t prove out that they’re making headway on these specialty crops or these high-value crops that are bringing supposedly economic advantages to the province,” said Marzolf.

Right now, 76 per cent of Lake Diefenbaker’s irrigated land is being seeded with lower value cereal and oilseed crops. The remainder is made up of pulses, like lentils and forage like alfalfa.

Marzolf said he wonders if this project is just a pricey way of subsidizing a handful of farmers to improve their wheat or canola crop.

“One of the questions I asked at those open houses is, ‘How much of that special crop has to be grown to make that billion-dollar investment makes sense?'” he said. 

“Nobody answers that question.” 

Spudco revisited?

Aaron Gray said a lot of farmers getting into irrigation, and growing new types of crops, would attract processors for those crops and spur spinoff effects in the industry.

“You’re going to have specialized equipment that needs to be purchased. There’s going to be more dealers that move into the area. There’s going to be more jobs created with the service industry to service this equipment,” he said.

“It takes time. You’re not going to turn a dryland farmer into a table-food growing irrigated farmer overnight.”

Marzolof, a Saskatchewan Party supporter, said he’s surprised that the party appears to be making the same sort of mistakes it mocked the NDP for in the early 2000s — investing public dollars to essentially subsidize potato production.

“What happens if [this project] turns out like a Spudco?” Marzolof asked.

The Spudco scandal of the late 1990s and early 2000s involved a public-private partnership aimed at developing the potato industry.

The deal got caught up in lawsuits and a police investigation. Eventually  the provincial government lost millions of dollars it invested in potato infrastructure and the Saskatchewan Party accused the NDP of a cover-up.

Unexamined environmental impacts

Halliday pointed out the province still hasn’t commissioned a study on the potential environmental impacts of this project. 

The province says it has “established an environmental baseline for the project” by analyzing available data, which it says will help it to monitor the effects of the project. 

Halliday said it’s good the province has done that work, but it needs go further by examining the potential harm of this project, like how it would affect soil salinity and water quality downstream.

Under the Saskatchewan Environmental Assessment Act, only official “projects” require an environmental impact review. Boyle told CBC the government hasn’t yet determined if the Lake Diefenbaker Irrigation Project should be deemed a “project” under the act.

“To me that sounds an awful lot like a project,” Halliday said. “But I don’t think you’ll find anybody in the Saskatchewan government that will say it’s a project.”