Winnipeg has access to Lake Shoal water for its own consumption but diverting the water for sale to a nearby port violates Proposition 40 – according to the IJC’s investigation in the matter.
Read more from CBC News:

“The First Nation’s original land was expropriated about 100 years ago to build the intake that feeds water from Shoal Lake to Winnipeg. The community was moved to a peninsula sticking into the lake which was later cut off from the mainland when a diversion canal was built, leaving it on a man-made island.

The leadership of northwestern Ontario’s Shoal Lake 40 First Nation is welcoming a recent finding by the International Joint Commission.

The commission, which oversees lake and river issues in both the U.S. and Canada, says the City of Winnipeg would be violating an IJC order if it sent water from Shoal Lake to points outside the city limits.

The city is only allowed to draw from the lake for its own municipal water supply, according to the IJC.

The Shoal Lake community has repeatedly opposed Winnipeg’s plan to sell the water to nearby municipalities.

“Shoal Lake 40’s position is that they [the city] don’t have the legal authority, the mandate to carry out their plans of selling water beyond their boundaries, and this confirms it,” said Chief Erwin Redsky. “We want Canada, the City of Winnipeg, and the Province of Manitoba to sit down with us and work it out.

“They want to service the mega-project at CentrePort,” he added, referring to the $300 million inland shipping port which lies outside the city. “They need water, and our land was taken for a specific purpose, to service the city of Winnipeg, and not for profit.”

Winnipeg has not submitted an application to divert the lake’s water, and the IJC’s remarks are not an official ruling. The commission looked into the matter after Shoal Lake 40 raised concerns.”

http://www.cbc.ca/news/canada/thunder-bay/story/2013/05/01/tby-shoal-lake-ijc.html