Natural Resources Committee on June 12th, 2008

[Sheila Fraser]

Quite frankly, I expect the corporation to carry out its own analysis of those events and the government to look at the matter. As far as we are concerned, I would tell you quite frankly that we do not have the required expertise for a proper assessment of the technical issues and of the seriousness of the problems encountered. There are many highly technical issues at play here. So, we rely on experts in this field as well as on the Commission. I believe it would be useful for the corporation and the government to do this analysis and to learn some lessons for the future.

[The Chair, Conservative, Leon Benoit]

Merci, madame.

Mr. Trost, you have up to seven minutes.

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

Thank you, Mr. Chair.

I'll start off by saying that a lot of the questions I've been asking other witnesses keep going back to the question of risk. Now, I can very much understand what you were saying to Madame DeBellefeuille about not having the engineering and so forth. That's not your department. But we had witnesses last week who were telling us that, no, no, this was a low-risk project, which it turned out not to be. We had witnesses the other week who said it was high-risk.

Looking back, there was, I believe, even before the MAPLE 2, the MAPLE X, which they decided not to go ahead with because it wasn't going to work. It was too risky, I guess, from the perspective of the late eighties and early nineties.

That said, I'd like to go to the Auditor General's report from 1998, dated April 2. On page 12 there's a section on capital construction. I'll give you a second to get there.

This is what it says here: “We audited AECL's management of two projects in early construction stages: the MMIR project in Chalk River to build two MAPLE reactors and a processing facility.... Both of these projects involve significant risk to AECL. MMIR has tight timelines and budgets and an unexpected regulatory event.” So in your 1998 report you noted that there was significant risk.

In your opinion, did AECL have the appropriate risk management tools in their corporation, in the culture, for this project, etc.? If they did, why? And if they didn't, why not? What should they have done at that point?

Now, this is just reference to one element of it.

[Sheila Fraser]

Mr. Chair, I'll quote from that report of 1998, to continue on. In that particular section on page 12, in the next paragraph--this is for the China CANDU project as well as the MAPLE reactors--we said both projects “are in very early stages. In this context, we found appropriate management of each project compared to accepted project management standards.” We were looking at it as really the construction phase of that, and we found at that very early stage of defining the project and determining roles and responsibilities that they were doing that appropriately.

When we come to the special examination that was done in 2002, the project, of course, was much further advanced. There we raised a number of issues around the quality assurance and the management of that within the corporation. There were concerns raised then.

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

I can give you the page. It's page six at the bottom.

[Sheila Fraser]

We talked about weaknesses in quality assurance that can lead to additional costs and timing. There were several weaknesses in the quality assurance program, the main problem being inconsistent application. We've quoted in here that there were a number of audits done from 1999 to 2001 on the MAPLE reactor project, known as MMIR at the time.

There were a number of issues there, and there was mention of delays. We also mentioned in 2001 that there were a number of actions taken to correct the weaknesses that had been identified, but there were still concerns expressed by the regulator. That obviously became the major problem--the technical problems, that were not able to be resolved.

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

You're following my line of questioning here pretty well.

Between the 1998 report and the second 2001-02 report, some action was taken, but evidently not enough. Was it a problem only to this particular project, or in your opinion was it systemic? Were they having risk management problems throughout the culture? This is not specifically dealt with in the time from 1998 to 2001. Is there an overall problem here, or is this merely a project-specific problem with risk management?

[Sheila Fraser]

There were a number of problems. As we said in here regarding the quality assurance program, we actually felt it was significant enough that we qualified it as a significant deficiency. Significant deficiency means that there is a weakness that's serious enough to affect the operations and success of the corporation.

That was one of the three significant deficiencies that were raised in 2002. It wasn't related only to the MAPLE. From what I read, the MAPLE was the most significant project, but it was the case more generally throughout the corporation.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Trost, you still have some time left, but there was a change made to the Standing Orders about a month or two ago that now requires that there be unanimous consent given to continue with committee once the bells start. We used to just continue until there was maybe 10 minutes left.

I will need unanimous consent. I'm asking to continue with the Auditor General for about 20 minutes, to leave us 10 minutes to go back to the House. Is there unanimous consent for that?

Mr. Anderson.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Is it a 30-minute bell?

[The Chair, Conservative, Leon Benoit]

It is a 30-minute bell.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

We'll go 20 minutes, leave, and then probably not come back afterwards.

[The Chair, Conservative, Leon Benoit]

Then we'll just have the Auditor General. We don't want to keep her. I know she can't stay, since she has other commitments.

We'll go until about 12:20. That'll give us time to get to the votes.

[Some hon. members]

Agreed.

[The Chair, Conservative, Leon Benoit]

Mr. Trost, you have about two minutes left.

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

Thank you, Mr. Chair.

In your opinion, between the 2002 and the 2005 reports, were there continued improvements in the risk management tools and procedures at AECL?

[Sheila Fraser]

Yes, we noted in the report that the management practices in that regard had improved, and the major issue that we raised in our special examination in 2007 was the need to address certain strategic challenges, including the MAPLEs, but largely related to the funding that would be required. There were significant sums of money, and it was not obvious where that funding would be coming from. We also expressed some concern in the report about the delays, but it was largely related to funding.

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

I don't know if you can answer this one, but as has been noted repeatedly, in September 2005 AECL and its customers agreed to terminate their original agreement and replace it with a 40-year supply agreement dated February 22, 2006. Other testimony we've had here before the committee says there had been other technical problems, but they were beginning to realize about that time that they were having major problems with the positive power coefficient.

In your opinion—again, not from the engineering but from the Auditor General financial perspective—if you know you're having major technological problems with your core technology and you don't have a backup plan, is it good risk management policy to sign a 40-year agreement in that place at that time and that sort of situation?

[Sheila Fraser]

It's very difficult to talk about this specific case, because one has to assess how serious those risks were considered to be. When we did our audits, both the financial audit as at March 2007 and the special examination, which was largely at the same time, the corporation certainly indicated to us that it felt these technical difficulties would be resolved and that they would meet the commitments of that agreement.

Anyway, I would think, just in general business terms, you don't go in and sign a 40-year agreement if you think you're not going to be able to respect it. That doesn't make sense.

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

There is the possibility—and this is where I'm going with my thinking—that maybe they were a little bit too optimistic in the engineering, and the management wasn't quite fully communicated.

That's not a question for you to answer. That's just a statement a member is making in the committee, wondering out loud what the heck was going on.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost. We'll leave it with the wondering out loud.

Ms. Bell, do you want to have seven minutes? You weren't here when your turn came up, but if you'd like to, go ahead, please.

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

I'm sorry I'm late. I got stuck in the House with changes.

I'm sorry I missed your presentation and haven't heard what questions have already been asked, so I may be a little bit redundant.

We're obviously here to talk about the review, the reports that the Auditor General did on AECL, but with regard to the isotopes. I seem to recall that in the report you had pointed to a lack of funding or insufficient funding on a number of fronts. Did that lack of funding or insufficient funding hamper in any way the development or the work done to make sure that the MAPLEs were going to be operable?

[Sheila Fraser]

To my knowledge, that was not the case. It was not a question of lack of funding, but rather, a technical issue that could not be resolved.

When we referred to funding related to the MAPLE, the company had estimated at the time of the special examination that it would take significantly more sums of money to continue the research and the development, although they certainly indicated to us at the time that they were quite confident they could resolve this but they would need that additional funding, given the delays that were being incurred. It was not obvious where that funding, combined with other funding that was required either for the development of the advanced CANDUs or for the installations at Chalk River, was going to be coming from. That's the issue we were pointing out, that they did have these strategic challenges and that they had to resolve the question of funding, because that was obviously going to hamper their ability to move forward in those three areas.

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

Did you have any comments on that, Mr. Plouffe? No?

With the next generation of CANDU, was there more money going into the research, development, and production of that technology at the time, which maybe took away from the MAPLE? I'm just curious to know. If more money had been made available at the time, would we have seen more technicians working on the problems on the MAPLEs or discovering ways to overcome the problems that were hampering it from coming online?

[Sheila Fraser]

I really don't know that, Mr. Chair. That is really a question the corporation would have to address.