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File photo of Nestle logo on products in the company supermarket at the Nestle headquarters in Vevey February 16, 2012. Nestle, the world's biggest food group, missed first-half sales forecasts and trimmed its 2013 target August 8, 2013, after it cut prices in Europe in a bid to lure recession-hit shoppers.

Denis Balibouse/Reuters

Conservationists are celebrating after the Ontario Environmental Review Tribunal dismissed a motion to approve a proposed deal between Nestlé and the province that would have exempted the Swiss food giant from water restrictions during droughts at a well it owns in Wellington County.

The tribunal, which termed the deal "not consistent" with both Ontario law and the public interest, ordered the case be given a full environmental hearing.

It's a victory for the groups that brought the challenge: the Council of Canadians and local non-profit Wellington Water Watchers.

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"I'm not saying I'm optimistic, we don't know what to expect, but we're very pleased there will be a hearing," said Mike Nagy, chair of Wellington Water Watchers.

The saga started last year when the Ontario government attached new conditions to Nestlé's water source, a well about 80 kilometres north of Toronto. The conditions would have forced Nestlé to cut back on the volume of water it pumped during times of droughts, making it the only permit holder in the watershed to face mandatory reductions.

The company appealed the permit to the Ontario Environmental Review Tribunal. But, while the tribunal was deliberating, Nestlé and the ministry made a deal to remove the conditions. The company subsequently tried to withdraw its appeal which would have ended the public hearing process.

In an effort to scuttle the deal and force a hearing to take place, the Council of Canadians and Wellington Water Watchers launched their own appeal.

"Nestlé argued that it shouldn't be treated different but we say absolutely you should be," Mr. Nagy said. "The overall concern with these types of permits is they're 100-per-cent consumptive. Every drop of water removed from that watershed, that well, and trucked away, nothing is replenished."

The permit for the Nestlé well allows the company to pump 1.13 million litres of water per day. Under Ontario regulations, the company pays only $3.71 for every million litres of water it draws.

While Nestlé maintained that the restrictions were unfair since there is no evidence that the surface watersheds are connected to the underground aquifer, the non-profits argued the hydrology isn't understood well enough to say for sure.

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Bruce Pardy, who presided over the tribunal, sided with the conservationists.

"The water in the aquifer comes from somewhere and goes somewhere," wrote Mr. Pardy in his decision. "Even if taking from the aquifer does not directly affect surface waters in the immediate area, that does not mean that surface waters elsewhere would not be affected by taking from the aquifer during drought conditions."

No date has been set for the new hearing. "We're still reviewing the decision to understand what additional clarification the officer requires in a hearing," Nestlé spokesman John Challinor said.

Will Amos, director of the Ecojustice Environmental Law Clinic at the University of Ottawa who represented the non-profits in the hearing, said this ruling might make regional governments in Canada take a more holistic look at the way they issue permits in the future.

"This is a shot across the bow at provincial governments who are not issuing permits for water with precaution front and centre in their thinking," Mr. Amos said.

Editor's Note: An earlier version of this story said the Ontario Environmental Review Tribunal "struck down" a deal between Nestlé and the province regarding water restrictions. The Tribunal dismissed a motion to approve the proposed deal and ordered that a public hearing be held on the matter.

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