Natural Resources Committee on June 10th, 2008

[Steve West]

There are none that I'm aware of, other than the existing facilities. All of these reactors are of a similar vintage. NRU is probably the older one, but all the other reactors also have a limited licence lifespan. I'm not aware of any other facilities today that would be able to meet the world's requirements for medical isotope supply.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

We're facing a tough situation right now. I'm talking not just from a business perspective but as a Canadian, because we saw last December what the outcome could be. In fact, we had the minister here, and he told us that Canadian lives would be at risk if we ended the supply of isotopes.

I'm very disturbed by that possibility, which appears to be more of a reality in the future than just a possibility. Now, facing the difficulties at the MAPLE reactor--and I don't think we can deny that there are technical problems with the MAPLE reactor--I'm at a loss. I'm looking to you to give us some direction on what could be done.

[Steve West]

The MAPLE reactors were really the best solution. Honestly, they really were. This solution was designed way back in the 1990s around the awareness that NRU had a limited lifespan. We believe very clearly that the completion of the MAPLE reactors is still the most viable solution. This is the best solution for long-term isotope supply.

We are very concerned about the reliability of supply for patients in Canada and in the world at large, since NRU today supplies over 50% of the world's isotopes. The MAPLE was designed to be a facility that replaced NRU and had a redundant capacity as well, because it was two reactors. As far as we're aware, there are no other long-terms plans from the other major isotope producers.

That is the reality of the situation.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Alghabra.

We'll now go to Madame DeBellefeuille for up to seven minutes.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Thank you very much, Mr. Chairman.

Good morning, gentlemen.

My question is for you, Mr. West. Reading through the timeline of the MAPLE reactor affair, at first glance, one could label the financial partnership with AECL as something of a fiasco. In fact, over the course of this affair, there have been several court cases, you have reopened and renegotiated agreements, and there has been litigation. From the outset, quite frankly, it made no sense.

Mr. Waddington told us in his testimony that in 2003, independent experts in nuclear technology wrote a fairly comprehensive report on the MAPLE reactor and came to the conclusion that they could not find a solution to resolve the reactors' problems. I think we have to give a lot of credence to the study. Despite that, you continued to have confidence in AECL, and you signed a new agreement in 2006 that included the parameters we saw earlier on.

Last February I attended a Canadian Nuclear Association forum, and already, the backroom chatter was that the MAPLE would never see the light of day. I am not an expert, but the fact that this reactor would never see the light of day seemed to be common knowledge. I am amazed that you are surprised since you signed an agreement in 2006 with the full knowledge that it was very unlikely that the MAPLE would see the light of day.

Can you tell me what motivated you, what your economic interest would be in signing such an agreement, an agreement that would almost certainly be challenged at some point in time?

[Steve West]

When we mediated our solution with AECL in 2006, they were very confident that they would resolve the issue of the positive power coefficient of reactivity. They gave us a timeframe of just two years from the mediation.

A lot of money, time, and effort had been put into the project. AECL were committing more resources and expertise to the project. They were very clear with us--and we felt confident in them as reactor experts--that they would complete the product. That is why we signed the mediation agreement. We believed that the reactors would come on line in October and through 2010. We believed that NRU had a finite life. We believed that this was absolutely the right solution for medical isotope supply for patients around the world, and we could continue to be the pre-eminent Canadian success story in this area.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

I am tempted to say to you that in my opinion, you were misled by the people at Atomic Energy Canada. It is not possible that they were unaware that there was little chance the reactor would be built and would produce isotopes.

The project was withdrawn, but taxpayers and the private sector, you in this case, have invested a great deal of money in this affair. That is to say that everyone is losing a lot of money. Following the presentation you have just made, I suppose you will ask the government for compensation for breach of your contract and for your financial losses. Québécois and Canadian taxpayers will therefore have to pay millions of dollars more in order to settle this case. The story is not over just because the MAPLE project has been withdrawn. I think we will have to plan for years of litigation unless you can come to an agreement.

The NRU reactor is 55 years old and its permit expires in 2011. You have signed a contract under which you will be supplied with isotopes for a 40-year period.

Do you think it is possible to upgrade the NRU reactor so that it can produce isotopes for 40 more years?

[Steve West]

NRU has a licence to 2011. It's a very reliable reactor. We're very pleased with the commitment AECL has made to upgrade the reactor. I heard Mr. MacDiarmid's testimony on Thursday, where he articulated the approach that AECL were taking toward that.

Beyond 2011--we generally all agree that a five-year licence is normally given to the operator--we've heard from AECL and the government that they will support whatever is required to meet the regulatory requirements to re-license NRU. We at Nordion will do our bit as well, if we can help in any way to assure that.

As far as the medium term is concerned, there is a path forward. We've heard that there's a high degree of commitment to bring the NRU reactor up to 2016. We have not been privy to any specific plans of either AECL or the government around the NRU reactor beyond 2016.

I still believe there's a long-term issue that hasn't been resolved, which was of course part of the MAPLE project, beyond 2016.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Mr. West, you talked about being very concerned about the potential production of medical isotopes. The medical world is very concerned as well. The Minister of Natural Resources is the only person who is optimistic and who is speaking candidly about the future of medical isotope production. You're the first person who talked about a date beyond 2011. I have the impression that with the current situation, pressure could be brought to bear on the Canadian Nuclear Safety Commission to extend the permit, which could be dangerous in terms of safety. The situation is rather alarming. Building a reactor does not take two years. It takes several years and it is very expensive.

The minister told us that in the end, the withdrawal of the MAPLE project is not that traumatic because it will open the door to private sector businesses wanting to produce medical isotopes. You told my colleague Mr. Alghabra that you are not aware of any isotope producers in the private sector.

Could you repeat for me that to your knowledge, there are no new reactors or private sector businesses able to produce medical isotopes in Canada or elsewhere in the world at this time?

[Steve West]

On the scale that NRU and the MAPLE projects were envisaged in terms of medical isotope reactors, I'm not aware of any new initiatives.

If you look at this supply chain, all the major large-producing reactors in the world are actually owned by governments, and generally the supply chain is a combination of private-public partnerships, and governments and taxpayers have invested in infrastructure to build these reactors to supply large quantities. I am making a differentiation between large and much smaller quantities that perhaps would serve a very local requirement. Here we're talking about our particular situation, where we supply more than 50% of the isotopes around the world. Those reactors are owned by governments, not by private companies. Companies like Nordion have invested a lot of money in the supply chain, and we are the processors. That's the role we play: the reactors supply the isotopes, the processors are perhaps the customers of the reactors, then we purify and distribute the isotopes to our customers.

That is the framework. Just to reassert and answer your question, I am not aware of any private enterprise initiatives today on the scale we see in terms of a MAPLE or an NRU or any of the other larger reactors around the world.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. West.

Merci, madame DeBellefeuille.

Now we go to the New Democrat member for up to seven minutes.

Ms. Bell.

[Catherine Bell, NDP, Vancouver Island North, BC]

Thank you, Mr. Chair.

Thank you for attending today.

You are a private company and you have shareholders. Is that correct? You're accountable to shareholders?

[Steve West]

I think we're accountable to shareholders. I think we're accountable to our customers. And frankly, I think we are accountable to patients around the world too.

[Catherine Bell, NDP, Vancouver Island North, BC]

Okay. I am curious to know if this cancellation of the MAPLE project has affected your bottom line in any way.

[Steve West]

The day-to-day operations of isotope supply still continue from NRU. So there is no immediate impact on our company related to the supply of isotopes today. If the MAPLE project is not completed, that is a long-term issue for us and there will an impact on our company. In terms of how we respond to that, we haven't really had a chance to think about that; it is a longer-term issue. In the short term we still continue to receive isotopes from a very reliable NRU reactor.

[Catherine Bell, NDP, Vancouver Island North, BC]

And for a while, I hope.

Mr. Waddington, you said that when the April 2008 tests were done, the CNSC was not satisfied the tests would signify that the reactors would work properly.

[John Waddington]

To be precise, I said AECL wasn't satisfied. I suspect the CNSC wasn't satisfied either, but that's an assumption on my part. AECL themselves could clearly see from the tests that one of the factors they were assuming would be a cause of the problem has to do with the small amount of water around the outside of the core, between the fuel and the moderator. That was thought to have an effect on the way the reactivity was changing. A test was done with a slight design change that would have fixed the problem, and the problem stayed the same; it didn't have any effect. The point I was making was that AECL concluded that this particular factor was not causing the problem that they could see.

[Catherine Bell, NDP, Vancouver Island North, BC]

So in all these years of testing, it's never been resolved?

[John Waddington]

That's right. The tests that have been done have accounted for probably half the effect, but not the whole effect.

[Catherine Bell, NDP, Vancouver Island North, BC]

So there's no indication from all these tests that it will ever work?

[John Waddington]

The problem has been that until you find the causes of the positive coefficient of reactivity, you will have a problem convincing the CNSC to give you a licence.

[Catherine Bell, NDP, Vancouver Island North, BC]

I guess my question is, how long does taxpayers' and your shareholders' money keep being poured into a project that may never work? Is it feasible?

I suppose I'm asking Mr. West as well.

[John Waddington]

I don't speak for AECL, but just for myself. It would seem to me that this was exactly the problem AECL had: how much money do we keep pouring in when we're not sure at this point, having seen the latest set of results, that we know what all the causes are? I guess that is indeed the problem that was faced by AECL's board of directors.

[Steve West]

Large sums of money, both private and taxpayers' money, have gone into the project so far. We're not reactor experts, so it's very hard for me to make a commentary on what will work and what won't work. But in the absence of any other long-term supply plan, we still believe that AECL should meet its contractual commitments, that it should complete the reactors, and that we should have security of supply for 40 years.

[Catherine Bell, NDP, Vancouver Island North, BC]

I have one more question. I think AECL said at the last meeting that the 40-year contract was contingent on the MAPLE being online, and that if that's not going to happen, then the contract was null. That's my understanding of it. Is it your understanding?

Obviously it's not.