Natural Resources Committee on Oct. 21st, 2009

[Serge Dupont]

It's not a government subsidy in that these reactors have been sold for less than their cost of production. On the way it has worked for AECL in the past, it has incurred costs and been reimbursed by the buyers--utilities or other purchasers. Sometimes export financing was involved, but my understanding is that the projects covered their costs overall.

So AECL's history of losses is not attributable to individual losses on these projects as much as contributions to overhead, the laboratories, and so forth.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I have a question on the notion of liability. Again, I'm trying to be somewhat objective and think of this as an asset that the Canadian government is trying to privatize.

Point Lepreau is a good example. They estimate that the cost to ratepayers in New Brunswick is $1 million a day. If I were selling this asset I would try to minimize my liabilities and promote the best parts of it. As a buyer I would not want to be picking up any potential liabilities.

There's a series of old reactors around this country that AECL has some liability toward. There are also waste and contamination issues that are extraordinarily expensive. You've put $500 million aside.

I assume that's included, Mr. Wallace, in the subsidies I asked about earlier. Some wouldn't call it a subsidy, but cleaning up the waste from the production of that power would seem to be part of the complement of public subsidy toward the technology.

The review is going on right now within government. The government is looking at different ways to privatize AECL. Is there not a risk that all or many of those liabilities will simply be taken off-book in the sale and eventually held by the Canadian government, the Canadian taxpayer, and the good parts that might actually make somebody some money will be all that's up for sale?

That's an extraordinary concern for me and many others around this table.

[Serge Dupont]

I understand the concern. Whatever liability has been accrued by Atomic Energy of Canada Limited, quite a bit of it is acknowledged on the books. Some may not yet be acknowledged on the books and may be related to potential further cost over-runs in some of the projects. But whatever those liabilities are, they are currently liabilities of the Government of Canada, the taxpayers of Canada. The restructuring cannot change that.

Nobody is going to offer to take that off our shoulders. If they do, it will lower what they would otherwise pay for the asset that is going to be purchased. It is the responsibility of the Government of Canada to ensure that those liabilities are met and honoured.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you.

If you don't mind, Mr. Cullen, can we just hold it there? We're well over the time. If you want to expand on that, perhaps you can bring it up in the next round of questioning.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thanks.

[The Vice-Chair, Liberal, Alan Tonks]

We'll go to Mr. Shory.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

I'd like to thank the witnesses also for coming out this afternoon. It is always good to have first-hand information from the people who have vast knowledge in this field, this department.

I understand that the nuclear industry is very important to Canada. The government is also committed to an aggressive renewable energy policy that will see 90% of the Canadian electricity needs generated through non-emitting sources by 2020.

What role do you see for the nuclear industry to help Canada meet that objective, Mr. Wallace?

[Tom Wallace]

If you're talking about 2020, we're not really talking about new builds in that, or only at the very end of the period, if possible. I think the contribution of the nuclear industry over that period will probably be through the refurbishment projects that are under way now that will enable Candu reactors to have another 25 years of life. That is an important contribution toward the denominator, that 90% target.

[Devinder Shory, Conservative, Calgary Northeast, AB]

AECL is actively undergoing a restructuring process. We all know that.

Mr. Dupont, you said in your presentation that the “restructuring of Atomic Energy of Canada is a key, necessary step toward strengthening Canada's nuclear industry and putting it in a better position to access opportunities at home and abroad”.

What does the government hope to achieve by restructuring AECL?

[Serge Dupont]

Again, one has to look at what different partners can bring to AECL. If one looks at the way the industry has reshaped globally over the past number of years, there have been alliances, mergers, and restructuring that have resulted in larger, more integrated, and more competitive companies, with one exception in the domain of nuclear vendors, and that is Atomic Energy of Canada. This is because its governance framework, its legislative framework, did not allow it. Under its current legislative arrangements, Atomic Energy of Canada cannot borrow money from a bank in order to have working capital. It cannot enter into arrangements whereby it could bring in a partner for an equity share that in return could bring particular skills, market reach, resources.

There are a number of Canadian players and global players that can bring some of these additional capacities to Atomic Energy of Canada. I think the government is looking to ensure that we bring the best capacities to Atomic Energy of Canada to develop its full potential.

[Devinder Shory, Conservative, Calgary Northeast, AB]

We are all hearing that the world is entering into a nuclear renaissance. The public has faith in the safety of nuclear technology again, and there is a serious need for many places, not only in Canada but around the world, to increase and replace those electricity generation needs.

With this in mind, what do you see as some of the biggest hurdles the nuclear industry will face over the next decade, and what are the opportunities the industry will have to take advantage of over the next decade?

[Serge Dupont]

Mr. Chair, I think I would point out two key challenges for a nuclear industry.

The first is to establish and maintain a sustained public confidence. That is an ongoing challenge and responsibility for this industry. Of paramount importance is a very strong regulatory framework to ensure it is modern and up-to-date, and that it ensures the safety and security of the public, the environment, and so forth. That is for an industry writ large. With that I would include the regulatory apparatus. That's fundamental.

The second one, frankly, is on the economics, the certainty of the projects. Some of the members are asking questions about Point Lepreau; other projects internationally have also incurred some difficulties. AREVA is building a new reactor in Finland, and that too has come under some stress financially. That is a key one for this industry: to show that it can actually deliver projects on time and on budget.

[The Vice-Chair, Liberal, Alan Tonks]

You have about a minute and a half, Mr. Shory.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mike, do you want to ask a question?

[The Vice-Chair, Liberal, Alan Tonks]

Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I have a quick question on the refurbishment and the contracts.

The liability for existing operating plants certainly rests with the existing utilities, because they're the ones that actually buy them, although AECL would have been involved in the development, which is the case for Point Lepreau and some of the others as well. AECL's liability would only extend, then, if it signed a contract, as it did in the case of Lepreau, for a refurbishment.

Would the liability of AECL on the CANDU technology that rests around the world now rest solely with a contract if they were doing a refurbishment, or would there be other liability?

[Serge Dupont]

That's an excellent question. Your best answer would be from AECL lawyers.

But my understanding would be that you're absolutely correct. When we talk about liability in respect of Point Lepreau, we mean what accrues from the latest contract that AECL has signed for the refurbishment of the reactor. It's not as though there's ongoing liability forever and ever with regard to all the reactors AECL has built around the world.

So I think you're absolutely correct on that. I would like to see that validated by AECL lawyers, but certainly that is my understanding.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you, Mr. Allen and Mr. Shory.

We'll now go to Mr. Bains. We're in the five-minute round.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Thank you very much, Mr. Chair.

It's good to see you, Mr. Dupont and Mr. Wallace.

I have a couple of quick questions. I hope you can comment on this.

First of all, what's the current situation with the proposed Darlington reactors? What's the state of negotiations with the province, if you're able to comment on that?

[Serge Dupont]

I have to pause a second, because understanding what is in the public domain and what's not in the public domain, I'm basically forbidden from saying anything about it under the rules of the Ontario process.

So I guess what you would have seen in the month of June, I believe, is that Ontario announced that of the three proposals that had been submitted, only the proposal submitted by Atomic Energy of Canada Limited met the conditions of the Government of Ontario, of Infrastructure Ontario, in the competitive process. But it indicated at the same time that there were two issues that precluded at that time Ontario from being fully satisfied with that proposal, one being the uncertainty around the future of AECL, and second being the price. They felt the price was too high. I imagine they felt it was too high; they said “the price”, so I imagine it was because it was too high.

There have been follow-on, obviously, discussions with AECL and perhaps with other vendors, but I'm not at liberty of indicating under the rules of the Ontario process, which are actually quite strict.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Are discussions still taking place, or have they been suspended completely?

[Serge Dupont]

I guess I would say that the window for discussion is still open, and therefore the rules of the process still apply.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Okay.

This is just a quick question with respect to this review of the Atomic Energy of Canada Limited report that we just received now as well. When was this report actually mandated to be prepared; when was this report requested?

[Serge Dupont]

The report was intended to be released with the announcement of the minister in May--

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

No, I mean the National Bank. When were they requested to actually conduct the review?