Natural Resources Committee on Dec. 6th, 2007

[The Chair, Conservative, Leon Benoit]

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

I would like some clarification on clause 26. We had a discussion about this a little earlier in the last session.

In terms of the reinsurance agreement, could you characterize the types of risks you would anticipate whereby you would put this clause in the agreement?

[Dave McCauley]

Yes, there are a number of risks.

First of all, there are the risks associated with small facilities--for example, Slowpoke reactors, etc.—where you would not anticipate that they could possibly create an incident amounting to $650 million just because of the size and the amount of radioactive material that's contained in them. So whereas they would be covered by the $650 million of funds and insurance, the federal government would be reinsuring the majority of that amount. These reactors usually are located in universities, etc., but by far the majority of that risk would be covered by the federal government.

Another area of risk would be risks that the insurers simply are not willing to cover, such as I had indicated previously—latent illnesses associated with release, for example. The insurers are only willing to cover damages for a period of 10 years after the incident, so in order for us to be able to ensure that victims who might be exposed to an incident would have coverage for a period longer, the 30 years that we're proposing, it would be necessary for the federal government to carry that risk.

For example, another area would be in the area of terrorism. In the event of a terrorist incident that would cause damage, the insurers have indicated that they would not be willing to cover the entire amount, and so it would be necessary for the federal government to provide.

I think those are the two main categories: the supplementary insurance associated with small facilities and the substantive risks that the insurers are unwilling to cover.

[Dennis Bevington, NDP, Western Arctic, NT]

Was there an analysis done of the potential likelihood of claims after 10 years? My experience is with the situation that occurred on Great Bear Lake with uranium contamination, which played out over many, many years.

Did you have documents that laid out the potential liability of the federal government under this?

[Dave McCauley]

No, we didn't. Basically all countries that provide a 30-year liability limit recognize that the insurers are unwilling to provide the compensation beyond 10 years and that public funds would have to be used to address the remaining period.

[Dennis Bevington, NDP, Western Arctic, NT]

Is there a mechanism for recovery of those funds?

[Dave McCauley]

No, there isn't.

[Dennis Bevington, NDP, Western Arctic, NT]

Okay. Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Bevington.

Mr. Ouellet.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Thank you, Mr. Chairman.

If I've understood correctly, Mr. McCauley, you just said, in response to Mr. Bevington, that coverage of a terrorist act could vary over time. So it could be 20% now, 5% in five years or 90% in 20 years, and that could be set down in the act.

Is that what you're suggesting?

[Dave McCauley]

Following the events of September 11, 2001, insurers decided to withdraw their coverage of terrorist acts at all nuclear power stations. But they've gradually come back into that market and are starting to offer that coverage.

Currently, Canadian insurers, NIAC, only cover 20% of the terrorism risk. We're trying to increase that percentage to 100%. From now on, 80% of the risks associated with nuclear damage caused by a terrorist act will be covered by the government.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. McCauley.

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

Further on that terrorism provision or the responsibility for acts of terrorism to be passed on to the federal government, is there anything in the act that would ensure that there's no negligence on the part of the company when it comes to security and that the proper system is in place to eliminate the risk of this sort of activity going on, or is this simply open-ended, that there's an act of terrorism and the federal government is responsible?

[Dave McCauley]

The situation is that we explicitly indicated that damage relating to acts of terrorism would be covered under the legislation, because it was our view that these were things that the operator could take measures to preclude, whereas acts of war, and so on, were outside that scope, and therefore they should not be liable for damages that were caused by acts of war. That was the rationale as to why we included terrorism coverage, because we felt that the operators should have mechanisms in place to deter terrorists from taking advantage of nuclear facilities.

Have I answered the question?

[Brenda MacKenzie, Senior Counsel, Environment Canada, Department of Justice Canada]

I just want to clarify that the security of the installation is dealt with under another piece of legislation, not this one—that is, the Nuclear Safety and Control Act. It is the responsibility of the Canadian Nuclear Safety Commission to ensure that nuclear installations are safe. This act is only concerned with insurance, with establishing a proper insurance scheme. So that is out of the purview of this act.

[Dennis Bevington, NDP, Western Arctic, NT]

I want to clarify that, though. My understanding is that with this clause you're covering acts of terrorism. The federal government is the insurer for acts of terrorism in the system. My question is how the two acts then relate. How do you ensure that in the event that under one act a company is negligent, that follows through on any claims they make on that?

[Dave McCauley]

In terms of terrorism, there is no test of negligence. What the legislation puts in place is that the operator is absolutely liable, so if there is an act of terrorism that causes nuclear damage, there is no question. The operator is liable and there is no need to suggest that he was negligent in his operations. He is absolutely liable for all damages.

The issue, however, is that the insurers are unwilling at this time to provide 100% of the coverage. Their coverage is limited to 20%, and we are seeking to increase the coverage that they provide.

[The Chair, Conservative, Leon Benoit]

Thank you.

Monsieur Ouellet.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Mr. McCauley, does that mean that, if the terrorism protection by an insurance company increases from 20% to 40%, the premium will increase by the same amount for the company that is protecting itself?

[Dave McCauley]

Probably, but I'm not sure. I'm not an expert on the premiums that insurers charge operators.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Are we opening the door to a possible coalition between the minister and nuclear power station operators? There's so much talk about brown envelopes. If I give you a nice gift, the premium isn't being increased because that will be too costly. We only hear about that. You won't always be in power; the Liberals will be back.

[The Chair, Conservative, Leon Benoit]

Mr. Alghabra, go ahead, please.

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

Just to clarify and follow up on Mr. Bevington's point, I want to make it clear that if, God forbid, a terrorist incident occurred, the crown is not responsible for the coverage. It's the insurance company. It would still fall as if an incident occurred, so it would still be covered under the insurance policies, and it would still be covered under the act. Is that correct?

[Dave McCauley]

That is correct.

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

Thank you.