Natural Resources Committee on Dec. 4th, 2007

[Dave McCauley]

In our discussions, the insurers have not expressed that our $650 million proposal is out of line today and that they would be able to provide that capacity to us.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Sorry. The short version of it would be that because there's more capacity, theoretically they should be able to raise the minimum level to $1 billion without very much change in premium--in fact, a reduction in premium.

[Dave McCauley]

I don't know.... I think that's arguable. They indicated to us at the outset that roughly $850 million was available. I know a number of European countries now seeking to insure over $1 billion of private insurance are finding it very difficult to do so. In fact, they aren't able to bring their legislation into force because of this fact.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Again, that's why I asked you the question. I believe it would have been very difficult to get it 12 or 16 months ago, but now, with the rates being slashed all over North America, I'm wondering if this has changed to reflect that. When was the last time you examined this, in view of the change in market conditions for both reinsurance and the primary coverage?

[Dave McCauley]

I believe it would have been the last time we had discussions with the insurers, which would have been probably over the spring of this year.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Then I will go to this question. When you determine what a maximum catastrophe is, the most recent benchmark I can think of, notwithstanding the California fires, would be Katrina in New Orleans. There were some deaths, of course, but the majority of the $1 billion loss was defined by property loss. If we compare a nuclear catastrophe to flood or hurricane damage, I would think that in the case of a flood or a hurricane, one community or a smaller region would be affected. If you use $650 million as a benchmark for a nuclear catastrophe and more than $1 billion for a hurricane.... I would think that to some extent a nuclear catastrophe would cause far more widespread damage.

Can you tell me what you are using as a benchmark catastrophe? Was it those studies that have been done by...?

[Dave McCauley]

Yes, that's what we did. Basically we looked at the international comparisons, etc., the insurance capacity. Then we asked how this relates to a foreseeable incident that might take place at a Canadian reactor.

We discounted the fact of a Chernobyl-type incident, because our reactors are much different than those. We looked at what would be foreseeable. On that basis we looked at a worst-case, design-based incident, where there would be a controlled release of radionuclides and a precautionary evacuation.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you.

Mr. Chair, if subclause 21(1) is defeated, seeing as it can't be amended, would it defer automatically to subclause 21(2), where the Governor in Council increases the amount? And could this committee, by recommendation, suggest an increase to $850 million or $1 billion?

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

Is it subclause 21(1) or proposed subclause 21(1.1), which Mr. Bevington set forward?

[The Chair, Conservative, Leon Benoit]

There is no amendment on the floor. He's asking if subclause 21(1) were removed what the impact would be. There is reference in subclause 21(2) to subclause 21(1), and it's the same in subclause 21(3) as well.

Are there any comments on that, Ms. MacKenzie or Mr. McCauley? Do you have any help on that? If subclause 21(1) were removed by an amendment, subclauses 21(2) and (3) would obviously have to be amended. Could you explain what the impact of that would be?

[Brenda MacKenzie]

The bill is drafted so that subclause 21(1) is the linchpin; that is, there are numerous provisions that refer to the amount in 21(1).

Subclause 21(2) allows you to increase the amount by regulation. So in further references to subclause 21(1), which you see in subclauses 23(1), 24(3), 26(1), every time the reference is to subclause 24(1), it means $650 million, or such greater amount as is prescribed by regulation. I should clarify: the power to regulate is actually a power to increase the amount in the act. If you make the regulation the $650 million figure, you'll see in the electronic version of the bill that it actually increases.

Since there are references throughout the bill, and in calculations of reinsurance and so forth--for instance, if you go to the tribunal section, subclause 62(1), it is the linchpin there--it would require considerable redrafting if we simply remove subclause 21(1).

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

If we pass this at $650 million and the bill passes Parliament, then this committee could recommend that the Governor in Council seek additional limits based on changing market conditions in the insurance industry. Would that be a process that would ensure we could flow this through, and would it have the intention of this group to identify a higher limit should it become available? Is that a process that is reasonable and democratic?

[The Chair, Conservative, Leon Benoit]

Mr. Boshcoff, that may be a question more for me and the clerks.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Okay.

[The Chair, Conservative, Leon Benoit]

We've been discussing this. The $650 million limit seems to be the principle of the bill. It would be inadmissible to make an amendment that changes the fundamental principle of the bill, I would think. I'd certainly have to have a close look at that. The whole bill hinges on this. I'm not making any kind of a ruling; I'm making some hypothetical comments here. But that's the way it appears to me right now.

Now, we have a list, and whether it's on this or not.... I'll assume these are all actually on this because we're dealing with this clause.

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

I just want to question the witnesses a little bit about what I understood was the case here. There's a tribunal that's going to be established, and within that tribunal the liability can be expressed to the company up to $650 million. What happens to additional expenses over that $650 million in the unlikely case that they occur? Does that return to the crown?

[Dave McCauley]

The situation is that once the tribunal is established, the operator's liability is limited at $650 million, or whatever amount that $650 million is increased to in subsequent five-year reviews by the minister.

[Dennis Bevington, NDP, Western Arctic, NT]

Then over that amount...?

[Dave McCauley]

Should Parliament decide to appropriate additional funds over that amount, then they would be appropriated.

[Dennis Bevington, NDP, Western Arctic, NT]

So by increasing the amount in subsection 21(1), the liability to the crown then decreases. The likelihood of the crown and the taxpayers of this country being on the line actually decreases.

[Dave McCauley]

No. Certainly for an incident that was in excess of $650 million it would, but the government does bear some of the liability for whatever amount is set there. So even at $650 million, there is federal money involved in compensation.

[Dennis Bevington, NDP, Western Arctic, NT]

What federal money would that be? Could you clarify that for me?

[Dave McCauley]

The legislation provides that the minister may enter into a reinsurance agreement with the insurers, under which some of the risks would be borne by the federal government. So if you increase the liability amount, then you are also increasing that liability of the government.

[Dennis Bevington, NDP, Western Arctic, NT]

So under this act, if there is a nuclear accident of a sufficient degree that it requires large compensation, can the government rescue the operator in terms of insurance costs in the future? Is that what I'm hearing from you?

[Dave McCauley]

I'm not following your question.