The federal government believes it could face lawsuits because of its failure to fund water systems relied on by tens of thousands of First Nations households.

An October 2025 briefing note from Indigenous Services Canada (ISC) warned a lack of federal funds for decentralized water systems on First Nations reserves could be a public health and infrastructure risk.

It also speculated this could be grounds for legal action, given the government committed, in a 2021 class action settlement, to making drinking water safe on First Nations reserves.

“Canada is at significant risk of further litigation and additional financial penalties should efforts not be made to address decentralized systems,” said the note, which the IJF obtained through its Open By Default database.

That note was prepared for ISC’s deputy minister in response to a Dalhousie University study on funding for decentralized water systems on First Nations reserves.

The report estimated more than 30,000 First Nations homes rely on those small, localized systems — like individual wells — for drinking water.

The report warned those systems “pose significant risks to public and environmental health” for First Nations, in part because of a lack of dedicated public funding.

The federal government has spent billions to improve water quality on First Nations reserves in the last decade, but the briefing note says most funds are earmarked for large, centralized water systems — not decentralized ones.

Much of that funding came after a 2021 landmark class action settlement wherein Canada agreed to spend billions to improve water quality on First Nations reserves.

The settlement also included a provision that Canada must make “all reasonable efforts” to ensure First Nations have regular access to safe drinking water in their homes — something the briefing note cautioned could be grounds for further legal action.

University of British Columbia engineering professor Madjid Mohseni said some First Nations centrally manage smaller water systems, which means they can be eligible for government funding. But many don’t.

“The reality is some First Nations don’t like individual systems because you put the onus on individual homeowners, and homeowners don’t have the resources,” Mohseni said.

The briefing note said new, dedicated funding for decentralized systems is needed to fix the problems outlined in the Dalhousie report, since First Nations may rely upon them in future litigation “should efforts not be made to address decentralized systems.”

The latest federal budget contained $2.3 billion over three years for improving clean water access and infrastructure on First Nations, but none of those funds are specifically earmarked for such systems.

ISC spokesperson Jennifer Cooper declined to comment on “potential legal actions.” Cooper said ISC funding “has historically been prioritized towards addressing centralized systems, reflecting their broader public health significance and the greater number of community members impacted by system improvements.”

Keyvan Maleki, CEO of the research group Community Circle, said the problem is magnified by incomplete data, the complicated geography of First Nations and the patchwork of federal and provincial funding.

“It’s not an easy fix. It’s a really deep problem,” Maleki said.

Maleki argues that the government could start by piloting an improvement strategy in a select number of First Nations communities to try and improve water system infrastructure and staffing.

“At least, you need 15 different regions … we need to do piloting with the communities to see what can be transferable and what can be scaled,” Maleki said.

More Briefs

Who asked for pesticide policy changes included in the Liberal fiscal update law?

SeatGeek lobbying Alberta on ticket reselling laws

Meta is hiring public policy managers in Toronto, Montreal and Ottawa

Major gas company may ask for break from B.C. environmental regulations