Natural Resources Committee on June 5th, 2008

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

First of all, let me respond to a couple of things. Regarding the 1997 report, the ministers and the government absolutely receive an advance copy. The timeline for when that report was released--and it wasn't tugged out of us; our government releases absolutely every single Auditor General's report without question. And let me just mention--

[Lloyd St. Amand, Liberal, Brant, ON]

You do that four months later?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

Absolutely. In fact, if you go to the record of the previous Liberal government, they took a year to release the 2002 Auditor General's report.

[Lloyd St. Amand, Liberal, Brant, ON]

But you're the transparency guys.

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

That's why we released it in four months. We released it well within the normal timeframes to do the review and release that report.

I will also say that the period covered under that Auditor General's report largely was during the previous government. Her report covered a period, the majority of which was actually reporting on the record of the previous Liberal government. This report was completed about a year after we took office, and there was about six months, I believe, if my memory serves me correctly, of time covered by our government. But prior to that it was the previous government.

Instead of getting into a discussion of whether I released it within three months or four months or two months...we absolutely released it. But more important is what's in the report, which is that the major deficiencies were never corrected. She identified the same problems in her 2002 report, which the previous government ignored.

I think our performance with respect to the MAPLE decision indicates we did the right thing. We did it in the right timeframe. We did our due diligence. We did the tests to ensure that we adequately protected the investment by the taxpayer. And once we had done all of that work, we made the correct decision.

I think the Auditor General, in a subsequent report, will applaud our decision and the steps we took to do our due diligence.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. St. Amand and Mr. Minister.

Madame DeBellefeuille, you have five minutes.

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

Thank you, Mr. Chairman.

Minister, Atomic Energy of Canada Ltd. decided to withdraw from the assessment of ACR reactors in the United Kingdom. Ontario decided to open up its call for tenders to firms other than Atomic Energy of Canada. There was also the failure of the MAPLE research reactor project. Nonetheless, Canada is an expert in nuclear technology—you said so. All this raises doubts regarding AECL's ability to deliver the goods. If we were to look at these events from the outside, we might perceive AECL as lacking credibility.

Minister, how can we guarantee that ACR reactors won't have the same design problems as MAPLE reactors? Earlier, you said that we could not compare CANDU reactors to MAPLE reactors, because we cannot compare apples and oranges. However, can we compare the MAPLE design with the ACR design? In the eyes of the world, we seem to have come up short in quite a few areas.

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

First of all, I think that's a legitimate question. It's a concern for me and it's a concern for AECL. Even though they identified the MAPLE as a high-risk project and advised against it, they are concerned about that. But I will say emphatically that the MAPLE technology is completely separate. It's completely different from the ACR technology, which they're doing. And to their credit, the ACR technology, the advanced CANDU reactor, is built on the CANDU 6 platform. About 80% of the parts, or even more, in the CANDU 6 are interchangeable with the ACR. So that's the platform.

Look at their record. That's what I say. Look at the record. I was in Argentina, and I went inside the reactor. They have awards for the most efficient reactor in the world.

In China there is Qinshan 1 and 2. I was there a few weeks ago. Again, if you listen to the engineers there, of all the Chinese reactors in the entire Chinese fleet, the two CANDUs have the shortest construction time, are the most efficient reactors, were on time and under budget, are the least expensive per unit of energy, and use the least amount of uranium per unit of energy produced. They're marvellous pieces of technology.

It's the same thing in Korea. They have 20 reactors. Ours are four of the top five, and soon, I'm told, will be four of the top four.

Let me just finish.

The record is very strong.

As far as the England bid in the U.K is concerned--you raised this, so I just want to touch on this if I can--the cost of just doing the bid is $25 million to $30 million. They have opportunities here at home. They want to do what they do, and they want to do it well. So they had to make a strategic decision.

We have a lot of work here in Canada. We have New Brunswick talking to us. We have Ontario. And we're hearing interest in Alberta. Let's focus our priorities on Canada right now to get the ARC platform and get it producing electricity. I actually think it's going to be award winning, from everything I read.

So I think they made the right decision, a strategic decision, to not continue the U.K. bid process. That's not to mention the cost.

[The Chair, Conservative, Leon Benoit]

Madame DeBellefeuille, make it a very brief question, please.

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

Thank you.

Minister, are there any problems associated with the ACR-700 and ACR-1000?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

There's a CANDU 6 or 6E, the enhanced CANDU 6, which produces 740 megawatts. That's probably around 726 or 740. The ACR-1000 actually produces 1,140 megawatts of electricity. I'm not even sure how they came up with these numbers.

As for its problems, the CANDU 6 is a tried and proven technology that's operating well. It's operating in Canada and operating around the world.

The ACR has never been built, so it is a new technology. It's built on the CANDU 6 platform. It's about 80%.... You know, the parts are interchangeable, but it's the next generation. It's called Generation III technology. There are no Generation III reactors operational anywhere in the world. There are a few under construction, and they are not without their challenges.

Listen, we have some of the best people at AECL. I have been out to meet the nuclear scientists and engineers at Chalk River and at Sheridan Park. I absolutely believe that our greatest asset is our people at AECL, and I have a lot of confidence in them. I do. And I think we have an ability to create a Canadian champion.

That's why our government has put the resources into it. In the budget of this year we put $300 million into AECL. The reality is that I think nuclear is going to play a much increased role in electricity production. It's greenhouse-gas-emission-free. It's pollution-free. It's not without its challenges, but it will be part of our energy mix in the future. We're seeing that Ontario has launched a bid process for two new reactors, something we haven't built for decades in Canada.

[The Chair, Conservative, Leon Benoit]

Thank you, Minister.

We have to go. We'll give the government member, Mr. Trost, just a couple of minutes. I know your time is very limited here.

Go ahead, please, Mr. Trost.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I think I know the answer, but just for greater certainty on this point, in terms of continuing the project, even if there had been hundreds and hundreds of millions of dollars more poured into this, was there any certainty that this project, the MAPLE reactors, would ever work?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

There was absolutely none. No technological solution has been found, as we speak.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I understand.

My other question relates back even further on the timeline. The Auditor General's report from 1998 says that both of these projects--referring to the MAPLE reactors--involved significant risk to AECL. It talks about tight timelines and budgets and unexpected regulatory events.

I think the term you used when you were talking earlier in your testimony was high technological risk. At what point was this known to be a high technological risk? Was this from day one known to be a very risky project, which is what it turned out to be? Or was it thought to be new technology but with high probability and only later was it understood that it was a high-risk problem, as it turned out to be?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

First of all, I actually meant to address Madame DeBellefeuille. That just flagged my memory. She actually raised the question. She hadn't received responses from the department from my last appearance. I will follow that up. I don't agree. That's not acceptable. I'll get you the answers.

I don't have the specifics. I'm not sure if Tom does. That's something you may want to ask AECL. I'll ask Tom to answer that in a minute.

What I do know is that the government of the day was advised that it was an extremely high-risk project, and AECL had significant concerns about it. I don't know if the risks were technological, the timeframe, or what. And I don't know what the Auditor General meant in her 1998 report when she talked about a regulatory event. But maybe Mr. Wallace can answer.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Wallace.

[Tom Wallace]

The only thing I can say about the technical risk is that the predecessor project to the MAPLE was a MAPLE X reactor. AECL terminated that program in the early nineties, and indeed, that sort of precipitated a bit the actions leading to the MAPLE.

Now with respect to the regulatory reference in the Auditor General's 1998 report, I wasn't engaged in the file at that time. I understand there were regulatory decisions taken to the effect that the operators for the MAPLE reactor had to have the same type of training as the operators for power reactors. That required a certain amount of expenditure to get the people trained to operate the reactors and to get the more qualified people engaged. That's my understanding of the history.

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

The MAPLE X was never constructed. It was terminated before any construction ever happened.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Minister, and Ms. Kirby and Mr. Wallace. I appreciate very much the information you've given us. It will be very helpful in finishing this study. Thanks again.

We look forward to seeing you in the future, Minister.

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

I just wanted to comment on your statement in the House yesterday. I was quite moved by that. It was one of the nicest statements I've heard, Leon. It was very good. Thank you for that.

[The Chair, Conservative, Leon Benoit]

The meeting will be suspended for two minutes. We'll just change the witnesses as quickly as we can and reconvene in two minutes.

[The Chair, Conservative, Leon Benoit]

We will reconvene the meeting now with witnesses from Atomic Energy of Canada Limited.

We have Hugh MacDiarmid as a witness, president and chief executive officer. With Mr. MacDiarmid today is Allan Hawryluk, legal counsel. The committee, of course, knows that as legal counsel, Mr. Hawryluk is not allowed to answer questions. He will just give advice to the witness, if the witness seeks advice from him. So we will proceed in that way.

Mr. MacDiarmid, do you have a statement to make?

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

Yes, I do, Mr. Chairman. Thank you very much.

Thank you, Mr. Chairman and members of the Standing Committee on Natural Resources.

I am here with our vice-president and general counsel, Allan Hawryluk.

Ladies and gentlemen, I joined AECL in January, on the same day that Glenna Carr was appointed chair of our board. We joined a company with a proud 56-year history of being the stewards of Canada's nuclear platform. We joined a company with a tremendous future as we stand on the cusp of a global nuclear renaissance. I joined the company from outside the nuclear industry, but with experience in both the transportation and technology sectors. In fact, as a former officer of the Canadian Pacific Railway, I feel rather comfortable in the railway committee room today.

AECL has a dual mandate. The first is to be a successful architect and developer of commercial nuclear power reactors around the world, something we do very well and in which we have a tremendous future. The committee is well aware of the strong business and environmental case that exists for nuclear power, and we are determined to be a major player in the global market with our CANDU brand.

The second part of our mandate is to be the platform for Canada's nuclear science and technology. AECL's major research and development efforts take place at the Chalk River laboratories. Our scientists and engineers perform research and product development to support and advance CANDU's nuclear reactor technology. The facility has world-class expertise in physics, metallurgy, chemistry, biology, and engineering. AECL's research and development infrastructure there enables the production of medical isotopes, and we supply those through an exclusive business arrangement with MDS Nordion.

The special examination report of the Auditor General, released in January, highlighted three deficiencies, as they termed it, in the company that needed to be addressed, one being the resolution of issues surrounding the dedicated isotope facility. That report succinctly summarized some of the challenges this project faced. So, as would any incoming business executive, I wanted to undertake a broad-gauge review of the business and the issues.

The first and largest is the technical challenge. The physics of the MAPLE reactors were presenting certain mysteries, most particularly in regard to the PCR coefficient, the power coefficient of reactivity. We made every effort to solve these mysteries, but the answers were eluding the best minds in nuclear science. Furthermore, the costs and timeframes for commissioning and licensing the MAPLEs were increasing in the absence of a technical solution.

A second issue related to the uncertainty of the marketplace. The market for isotopes produced by AECL was changing, and it was clear that new sources of supply were coming onstream around the world. It was also clear that the worldwide movement towards producing isotopes from low-enriched uranium targets, a movement born out of concern for nuclear proliferation, could leave a facility designed on the basis of highly enriched uranium targets—the MAPLEs—obsolete in a matter of a few years, even prior to completion.

Thirdly, we looked at our obligations and options with regard to our contract with MDS Nordion, in particular a deadline to bring MAPLE 1 into production by October of this year. We were very aware of the concerns of the health care community for their patients. It was clear that swift resolution was key and that if the MAPLEs couldn't be the solution, we needed to be mobilizing quickly with another workable plan.

Another consideration, of course, in all of this was for the hundreds of dedicated AECL employees who have devoted the past 12 years to this project. Taken together, it became clear to AECL management and was confirmed with our board that meeting the October 2008 deadline for commissioning MAPLE 1 was improbable.

Throughout the process, we continued our work on solving the technical challenges leading up to a milestone test, as the minister mentioned, on the reactor in mid-April. Once that test was conducted and failed to resolve the PCR issue, there was a tipping point for our decision. The factors we considered—the significant cost, the technical risk, the timeframe, as well as our contractual obligations—were placed in the context of a broad look at the marketplace, and we came to the conclusion that the case for continuing the MAPLE project could not be supported.

This is what got us to where we are today.

Discontinuing the dedicated isotope facility project does not affect the short- or medium-term supply of isotopes. We will continue to supply and continue to produce from the NRU, and our focus now is on making sure this reactor is as reliable as it can possibly be until the end of its current licence period, and taking the steps necessary to extend that licence beyond 2011.

It was a difficult, but necessary, decision.

It was made based on facts and the best available evidence and advice. It was made by looking forward, not back, and made in good faith and with the best interests of the taxpayers of Canada in mind.

Mr. Chairman, that concludes my remarks.

I would be pleased to answer questions from committee members.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. MacDiarmid, for your very concise remarks.

We will now go to the official opposition for seven minutes.

Please go ahead, Mr. Tonks.