Evidence of meeting #18 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was aecl.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Arlene Kwasniak  Representative, Alberta Wilderness Association
Richard Lindgren  Counsel, Canadian Environmental Law Association
Andrew Van Iterson  Manager, Green Budget Coalition
Jamie Kneen  Co-Manager, MiningWatch Canada
Denis Lemelin  National President, Canadian Union of Postal Workers
Stephen Hazell  Associate, Ecojustice Canada
William Amos  Staff Lawyer, Ecojustice Canada
Hubert Thibault  Advisory Vice-President, Corporate Affairs and Desjardins Group Management, Desjardins Group
David Phillips  President and Chief Executive Officer, Credit Union Central of Canada
Tracy Redies  President and Chief Executive Officer, Coast Capital Savings Credit Union, Credit Union Central of Canada
Peter White  President, Society of Professional Engineers and Associates
Michael Ivanco  Vice-President, Society of Professional Engineers and Associates
Neil Alexander  President, Organization of CANDU Industries
Hugh MacDiarmid  President and Chief Executive Officer, Atomic Energy of Canada Limited
Christopher Hughes  As an Individual

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Okay.

5:05 p.m.

President and Chief Executive Officer, Coast Capital Savings Credit Union, Credit Union Central of Canada

Tracy Redies

Therefore, the Case for Progress committee would like to propose that it would be better if clause 1958 were amended and clauses 2009, 2010, and 2011 of Bill C-9 were deleted to ensure the protection of membership lists.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you.

5:05 p.m.

President and Chief Executive Officer, Coast Capital Savings Credit Union, Credit Union Central of Canada

Tracy Redies

We believe these amendments would strengthen the proposed legislation and help ensure take-up of the federal credit union option.

I'd like to close by reiterating the Case for Progress committee's support for enactment of this legislation, which will allow credit unions to expand beyond their provincial boundaries. We believe this is a positive development for consumers, the financial sector, and the Canadian economy.

I'd like to thank the House of Commons finance committee for the opportunity to comment.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much.

We'll now go to the Society of Professional Engineers and Associates, please.

5:05 p.m.

Peter White President, Society of Professional Engineers and Associates

I believe Mike Ivanco is going to make a statement.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Okay.

5:05 p.m.

Dr. Michael Ivanco Vice-President, Society of Professional Engineers and Associates

My name is Dr. Michael Ivanco. I'm vice-president of the Society of Professional Engineers and Associates, or SPEA, as we're called. I'm also a scientist who works for Atomic Energy of Canada Limited. With me is Peter White, president of SPEA and a nuclear engineer.

We represent engineers, scientists, technicians, and technologists who work for the CANDU reactor division of AECL. Our members work in Ontario, Quebec, New Brunswick, and internationally. Collectively we represent most of Canada's nuclear design expertise. Indeed, the intellectual property associated with CANDU technology is resident primarily within our members. To design and maintain nuclear reactors, you need experience in all fields of engineering and natural science. It took decades for AECL to acquire this unique capability through our members.

Part 18 of Bill C-9 contains proposed legislation that allows for the sale of AECL—but, essentially, it's our members who are for sale. As a company, the CANDU reactor division of AECL does not hold a large number of patents. It holds few physical assets such as buildings or property. The sale consists primarily of the transfer of the knowledge, skills, and experience of the employees who work there, namely, our members. Hence, we have a keen interest in this bill.

Given the size of the industry and the fact that AECL is its cornerstone, we were somewhat shocked to see that the sale was buried in a few pages of a 950-page budget implementation bill. We do not believe that a crown asset with the distinguished history of AECL, and created through an act of Parliament, should be dismantled through an “act” of cabinet. We think that Canadians deserve better.

Seventy percent of Canadians polled by the government last year actually opposed the privatization of AECL. It's difficult to imagine how a 100% sale would lead to a positive outcome for the Canadian industry. No private sector Canadian company can be of sufficient size to give potential buyers the assurance that they will still be around to support the CANDU product for decades to come. A 100% privately owned Canadian company would have little chance of selling reactors abroad. It would likely be relegated to the refurbishment of existing units—the nuclear equivalent of a VCR repair company.

A foreign company with its own technology would likely only be interested in our members, not our technology. If this were to be the outcome, our members would rather leave AECL on their own terms and not wait for any sale. Indeed, a critical mass of our senior members is on the verge of doing so. This subset consists of those who can retire early but have chosen not to, or those who could get jobs next week with a competitor—and likely earning more money in doing so. They're understandably frustrated by the secrecy of the privatization process, the inappropriate inclusion of AECL in an omnibus bill, and the lack of consultation with SPEA, which represents their interests. If they choose to leave, the asset value of AECL would drop like a stone.

SPEA has grave concerns about the nature of part 18 of Bill C-9. It allows for cabinet to make deals with potential buyers behind closed doors, without scrutiny by Parliament. The interests of Canadians can only be assured when they know all the facts. A national debate in Parliament on the sale of AECL would at least be one step in the right direction. Canadians have made an investment in AECL that has created an industry and given us a stature and place among the world's scientific elite. Nuclear science, research, and production are an important policy objective worthy of continued support.

This committee hearing should not be the last chapter of that story. There's still much that Canada can contribute, and there are thousands who would be proud to make that contribution. Do not allow us to lose an industry and our leadership position internationally without a proper national debate on the future of AECL.

That's all.

5:10 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation.

We'll now go to Mr. Alexander, please.

May 11th, 2010 / 5:10 p.m.

Dr. Neil Alexander President, Organization of CANDU Industries

Good evening. My name is Neil Alexander. I'm the president of the Organization of CANDU Industries.

OCI is an association of about 165 companies, with bases here in Canada, that have an interest in the ongoing health of the nuclear industry here. One of those companies, Laker Energy Products, is represented by its president and owner, Chris Hughes, who's sitting in the audience.

OCI's private sector member companies employ more than 30,000 people directly on nuclear work. They represent a significant proportion of the 70,000 people who owe their livelihoods to the investment by Canada in its nuclear industry.

OCI is an independent organization, and while it works closely with stakeholders and the plant operators, it does not represent their views.

We see a great opportunity for Canada. Canada is one of the few nations that can benefit significantly from the worldwide renaissance in nuclear power. This renaissance will likely lead to a market opportunity of $2 trillion to $3 trillion as between 400 and 600 new reactors are built around the world. The benefit to Canada will arise from sales of CANDU plants into which Canadian companies supply many of the components, as well as the sales of components to the other reactor designs that are built around the world. These components will be built by companies like Laker Energy Products and our other members, and they will create high-quality jobs for skilled workers throughout Ontario and the rest of Canada.

As an example, we see what the Koreans are doing. They have spotted this tremendous opportunity in the nuclear business, and they recently signed their first export order for four units from the United Arab Emirates. Their newspaper celebrated this success by announcing that this single project was worth the same as the export of a million cars, or one hundred and eighty 300,000-tonne supertankers.

I leave you to imagine how beneficial such an announcement would be in Canada in the present economic circumstances. To gain these benefits, Canada needs to remain at the forefront of the technology. We need to continue developing and innovating, and CANDU Inc. has a very important role in ensuring that happens. It is also essential that the existing fleet of CANDUs is properly supported by a team of sufficient size and competence to deal with any arising operational issues.

OCI has been a long-time and consistent supporter of the restructuring of AECL to achieve the objectives that are very clearly defined in Rothschild's investment summary. We agree that CANDU technology has to be properly capitalized to be successful, that the management team of AECL does need a significant injection of commercial capability, and that the sales team at AECL does need a much greater international outreach.

We believe that all of these things can be achieved through seeking an appropriate business partner for the organization, again as specified in the investment summary. We also believe that to gain access to the wave of opportunity that's currently developing, the restructuring needs to be completed promptly. Further delay will likely cripple the opportunities for CANDU sales, as other reactor designs find footholds in new markets and then become entrenched. And of course we're concerned about the issues that Michael Ivanco raised concerning the retention of the high-quality staff at AECL.

Additionally, continuing uncertainty increases the risk of the loss of our talent. We need to maintain them, and we need to retain that talent in companies like Laker Energy Products, which have very highly skilled craftsmen working within their organization.

As a result, we support the language in Bill C-9 and encourage all parties to ensure that AECL is restructured as quickly as possible.

As well as the need to make the decisions promptly, achieving the stated policy objectives is also important. In the investment summary we remind people that there are three policy objectives, five evaluative criteria, and eight desired outcomes. We believe these policy objectives are effectively a contract with the people of Canada and that the government is obligated to deliver on them.

Two of these policy objectives, three of the evaluation criteria, and three desired outcomes are focused entirely on the prospects of the industry, including expanding access to markets and growing jobs in design and engineering.

One policy objective, one of the evaluation criteria, and two desired outcomes are focused entirely on safety and performance.

The issues are complex and we believe that the restructuring team should demonstrate how it is ensuring that these objectives will be met. But we do conclude that the restructuring of AECL has to proceed promptly and that the process should ensure that the policy objectives are met in an optimum way.

Thank you very much.

5:15 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation.

I do have consent from the committee, I believe, to finish the presentations, so we will let AECL do their five-minute presentation.

5:15 p.m.

Hugh MacDiarmid President and Chief Executive Officer, Atomic Energy of Canada Limited

Thank you, Mr. Chairman. I appreciate the opportunity to be here today.

First of all, let me provide the committee with an update on our most urgent priority at AECL, namely the repair and return to service of the NRU reactor at AECL's Chalk River Laboratories.

Intense repair operations continue around the clock. They involve over 300 highly qualified AECL staff and industry partners. As of today we are working to repair the last of ten sites that required repair on the reactor vessel. The process has been painstaking. Our rate of progress has been dictated by the need to inspect, analyze, and understand irradiated metal behaviour and to measure and evaluate stress on the vessel structure. What we are doing, simply put, has never been done before in the history of the nuclear industry. It is probably the most complex and sophisticated welding operation ever undertaken in a radioactive environment.

As we stated last March, the NRU will resume isotope production by the end of July 2010. That schedule does include prudent contingency to reflect the difficulty inherent in these final repair sequences. AECL is making every effort to return the NRU to service as quickly and as safely as possible. At AECL we do understand the importance of critical projects that we must execute successfully. We understand the need to control our costs and the imperative that we prepare for the upcoming restructuring of the company, which is a process being managed by the federal shareholder.

In terms of our first-of-a-kind CANDU reactor refurbishments in New Brunswick and Ontario, we have experienced cost overruns and scheduled delays due to the highly complex nature of deconstructing and rebuilding reactors that were built in the 1970s. However, we have instituted corrective measures to improve project management and financial reporting systems in order to enhance performance.

As for AECL's ongoing market development, there is strong interest in many countries in CANDU technology, both in our proven 700-megawatt reactors and our larger 1,200-megawatt advanced CANDU reactor. In terms of supporting and preparing for the restructuring process being led by the federal government, we have divided AECL into two internal divisions. One is the commercial part of AECL, the CANDU reactor division, which is the part of the AECL being divested by the federal shareholder. The other division is the research and technology division, which comprises Chalk River Laboratories in Ontario and Whiteshell Laboratories in Manitoba. As has been stated, the nuclear laboratories will continue to be owned by the federal government.

To conclude, Mr. Chairman, there is a bright future for the nuclear power industry in Canada and an important role for nuclear laboratories to support world-class Canadian nuclear technology.

Thank you.

5:20 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation.

As I mentioned, we will suspend. We will go down to the House for the vote, and we will come immediately thereafter and start with questions from members.

Thank you for your patience. We will be back as soon as possible.

5:45 p.m.

Conservative

The Chair Conservative James Rajotte

We will come back to order, please.

I want to thank all the witnesses for their patience.

We will start with Mr. McCallum, for a seven-minute round, please.

5:45 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Thank you, Mr. Chair.

Thank you to all the witnesses for waiting for us to vote and for being here today.

I'd like to start with Mr. Alexander. I would think that a number of the members of your organization might be potential buyers. Does that not put you in a slight conflict of interest position?

5:45 p.m.

President, Organization of CANDU Industries

Dr. Neil Alexander

No one that I'm aware of that is a potential buyer had an involvement in the preparation of our statement.

5:45 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Okay. The next question is also about AECL. I've noticed that two witnesses seem to be saying quite different things. So I'd like to ask both Mr. Ivanco and Mr. MacDiarmid a couple of questions.

First of all, I've heard the fear expressed that if AECL is sold to a foreign company 100%, or even a Canadian company, it would be much more difficult to sell CANDU reactors overseas, because they have a lifespan of perhaps 50 years, and without some government backing it would be difficult to sell. How would you react to that, Mr. MacDiarmid?

5:45 p.m.

President and Chief Executive Officer, Atomic Energy of Canada Limited

Hugh MacDiarmid

The first thing I would say is that clearly the goals of the Government of Canada are to strengthen us, to make us more successful internationally, and to ensure that we do sustain the CANDU brand and sustain AECL's competitive position.

So my belief is that all of the actions that we're taking are designed with that in mind. I believe we can compete internationally with the best of them. We have excellent products, outstanding people, and strong market opportunities for our CANDU brand and CANDU design. It fits very well. So with respect to the impact of the future structure on the specifics of any negotiation, I think it's simply impossible for me to speculate on that.

5:50 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

I guess that doesn't quite answer my question. I'm not really talking about the government's intent. I'm saying if your company is acquired by a purely private owner and no longer has any government backing, will countries like China, Korea, or whatever want to buy an asset that no longer has any guarantee or backing from a government?

5:50 p.m.

President and Chief Executive Officer, Atomic Energy of Canada Limited

Hugh MacDiarmid

I certainly believe it is possible that will happen. Yes, I think it can happen.

5:50 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

What would you say, Mr. Ivanco?

5:50 p.m.

Vice-President, Society of Professional Engineers and Associates

Dr. Michael Ivanco

We've been on record as stating the opposite. I'm not a businessman, but I know who our competition are. Our competition are large companies generally owned by governments, or private multinationals with many lines of business, like General Electric, Westinghouse, and Toshiba, which were founded in the 19th century. When people buy from those companies they know they're going to be around for 40 or 50 years because they've been around for over a century.

Our concern is that when you have competition that is this big and you are a 100% Canadian-owned company, because the products cost so much money it is hard to imagine that we would have credibility. The example I mention to people is that 12 years ago the biggest company in Canada was Nortel, and if they sold reactors instead of telecommunications equipment the people that bought those reactors would be in big trouble today.

5:50 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Thank you.

I'll start the second question with Mr. Ivanco. Another concern I've heard is in terms of the existing nuclear reactors in Canada, which will need refurbishing in coming years, and if AECL is acquired by some competitor company that might want to end the existing technology, those Canadian reactors would not be able to be refurbished and the cost would be much higher and they'd have to buy new ones. In your view, is that a legitimate concern?

5:50 p.m.

Vice-President, Society of Professional Engineers and Associates

Dr. Michael Ivanco

It might be. There are a couple of issues. One is, we have an international obligation to maintain in Canada a nuclear safety capability. For that you need a large organization, as Neil mentioned, of critical size that has the capability to demonstrate this. Right now AECL is that organization. I believe we are the only one. At one time it might have been Ontario Hydro, but when they were broken up they lost that capability. So when it comes to Canada, we're kind of it.

If we were bought by a foreign company it's possible they may see all kinds of ways to make money that won't include refurbishment. I guess the point is, it will be out of our control.

5:50 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Mr. MacDiarmid, how would you respond to those owners of CANDU reactors?