Chapter 11

The Nova Group and Annex 2001 (excerpt)

ONE EVENING BACK IN 1997, John Febbraro was lounging at home in Sault Ste. Marie, Ontario, when a narrator popped up on the television and began pleading for donations on behalf of the world’s poor. As dolorous photos of impoverished faces flashed across the screen, the narrator talked about how—with just one dollar a day—viewers could change a person’s life in the developing world. As Mr. Febbraro, a Canadian entrepreneur, listened to the sales pitch he realized that these people didn’t just need food— drinking water was a problem for them as well. That’s when he came up with a bold and daring idea of his own: to ship Great Lakes water to thirsty people halfway around the world. “They need water,” he remembers thinking, “and literally we look in our backyard and we have tons of it!” In the days that followed, Mr. Febbraro huddled with a partner at his diminutive consulting firm, the Nova Group, and they began fleshing out a plan to use bulk oceangoing freighters to ship cool, clean Lake Superior drinking water to Asia.

Mr. Febbraro, a former consultant to the Canadian space agency, spent the next several weeks contacting shipping companies, crunching numbers, and developing a business model. The more modeling he did, the more he became convinced of the project’s viability. From a business school perspective, however, the model was somewhat unusual—a humanitarian effort on behalf of the world’s poor that was also designed to make money. “It was a for-profit,” he says unapologetically. “I mean, I’m an entrepreneur, right?”

The plan called for sending an empty bulk freighter out into Lake Superior a few miles northwest of Sault Ste. Marie, where the vessel would pump water into a large disposable liner inside the ship’s hold. The water would be purified at a Great Lakes port before the ship continued on to the Far East. The plan was to start with a few shipping runs per year to see how it went and expand the operation from there. With his strategy mapped out, in early 1998, Mr. Febbraro went down to a government office and was surprised at how easy it was to find a permit application. “There was an application that says ‘for the withdrawal of bulk water,’” he remembers. “So that is what we filled out, and what we sent in.” He attached a brief business plan, and on March 31, 1998 (after a quiet thirty-day comment period that elicited no response from the public), he obtained the permit. The document gave the Nova Group permission to export 158 million gallons of water to Asia per year—one tanker at a time.

When news of Mr. Febbraro’s water export scheme hit the papers, it spread rapidly through the Great Lakes Basin, prompting an extraordinary and heated anti-diversion debate. Ever since the Chicago River was reversed nearly a hundred years before, people had worried about additional diversions of Great Lakes water. But never before had someone stepped forward with a plan quite like this one. Although most people on both sides of the border agreed the Nova proposal was a bad idea, it created a time of heightened international water tension in the Great Lakes region. People were particularly alarmed that the proposal had managed to gain government approval without the public, the press, or politicians even knowing about it. “Nova identified a series of gaps,” says Jeff Edstrom, who worked at the Council of Great Lakes Governors at the time. “It was something that wasn’t really planned for. Today we think about water exports all the time, but before Nova, people’s primary concerns were about pipes.”

Mr. Febbraro found himself caught up in controversy and besieged by the media, politicians, and average citizens on both sides of the border. “I was on the news almost every day,” Mr. Febbraro exclaims. “Time magazine, CNN, CTV, ABC, it didn’t matter.” The controversial nature of his proposal caught him completely off guard. “I was absolutely surprised by the media attention,” he says. The most ferocious criticism came from environmentalists. “A lot of environmental groups really got on our case,” Mr. Febbraro remembers. “[They were] saying, ‘What the hell are you trying to do here? You’re going to set a precedent ...