Natural Resources Committee on Oct. 26th, 2009

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone.

We're here today to continue our review of the state of the nuclear industry in Canada and abroad. This review leads up to our study of Bill C-20.

We have six groups represented here today. We will allow them to give their presentations in the order laid out in the agenda.

However, first I want to mention that we have to pass a budget to cover the expenses of people who have expenses that qualify. We'll do that at the end of the meeting. It shouldn't take long, but we want to leave a few minutes in case there is any discussion. We have it scheduled at 5:15; if you think we can do it in less time, we can go a little bit later.

Go ahead, Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Chairman, are we going to ask them to speak before we tell them whether we're going to cover their costs?

[The Chair, Conservative, Leon Benoit]

Yes.

[Geoff Regan, Liberal, Halifax West, NS]

I'd move it right now, if you want.

[The Chair, Conservative, Leon Benoit]

I don't know how the Liberal vice-chair handled meetings last time, but that's not the way we're going to do it now. I don't want....

Okay, could we get down to business, then? We'll go directly to witnesses, because there are a lot of them. I hope you will keep to the time that was given to you.

We'll start with Shawn-Patrick Stensil, an energy and climate campaigner with Greenpeace Canada.

Go ahead, please. You have up to seven minutes.

[Shawn-Patrick Stensil, Energy and Climate Campaigner, Greenpeace Canada]

Thank you very much.

I will give my presentation in English, but I will be pleased to answer your questions and comments in French.

Thank you very much for the invitation to speak to you today. You're dealing with a very important topic. It's one that Greenpeace doesn't believe has had enough public scrutiny.

To start my presentation I'd like to begin with three reality checks that I think the committee and the government are struggling with right now in its debates around the privatization of AECL. From the point of view of Greenpeace, there are three things we need to keep in mind while we do this.

First, despite proclamations of a nuclear revival, there is little or no market for reactors internationally, in particular for CANDU reactors. This is mostly because international vendors such as AECL, but also AREVA, have failed to design a new generation of reactors that are low cost and competitive with other sources of energy. What's more, the industry hasn't learned its past lessons, which it originally promised in the early 2000s, that the cost overruns and delays of the past would be a thing of the past.

Secondly, based on this, we need to admit that CANDU technology is at a dead end. AECL has been unable to successfully innovate, design, and sell any new reactor designs since the CANDU 6 in the late 1960s, early 1970s. In regard to its next-generation reactor, the advanced CANDU, AECL has failed to meet its objectives for market readiness for the design as well as for price points. Members of the Canadian industry, in fact, have started to admit publicly that it is too late for the advanced CANDU.

Finally, while the federal government has stated its intent with AECL restructuring is “to maximize Canadian taxpayers’ return on their investment”, we must admit that such payback will be trivial. Total cumulative subsidies to AECL are well over $20 billion. Meanwhile, media reports indicate that the market value for selling AECL would be about $300 million. This is a bitter pill to swallow, but necessary medicine if we are going to stop the bleeding connected with ongoing AECL subsidies and support of the CANDU line.

In this way, Greenpeace believes that the privatization of AECL and the government's initiative could make a positive contribution to Canada meeting its international commitments to transitioning towards a more sustainable economy by shifting nuclear power's high cost from the taxpayer to the nuclear industry, where it belongs. We would support such a scenario if undertaken by the government. However, there has been an ongoing lack of transparency and scrutiny regarding the proposed restructuring and privatization of AECL. This is not the fault of the present government. Without increased public scrutiny and consultation, Greenpeace is concerned the restructuring and privatization will neglect public interest issues such as sustainability and taxpayer protection.

My written brief to you today, which you won't get because I didn't have time to have it translated--my apologies--is in fact a petition to the federal Environment Commissioner in which Greenpeace requests the federal government to make a number of commitments.

One, come clean on the liabilities taxpayers have been exposed to in order to prop up current CANDU life extensions, such as the one taking place at Point Lepreau, and Bruce, in Ontario.

Second, we make a request that the government raise the bar on transparency and accountability for all future AECL contracts. Before future contracts are signed, the federal taxpayer should have the right to know what liabilities AECL's contractual performance guarantees may expose them to.

Finally, the petition, I hope, will provide the committee with valuable background information on AECL's recent performance.

We don't make this request lightly. In 2009 the federal taxpayer was forced to pay $100 million to cover “off-balanced liabilities” for cost overruns at the Bruce A, Point Lepreau, and South Korean refurbishment projects. According to AECL's annual reports, it currently holds $500 million in these “off-balanced book liabilities”, due to contractual performance guarantees for reactor construction projects. It is unclear what accountability mechanisms or caps the federal government has placed on AECL for the accumulation of such liabilities under this government and former governments.

Greenpeace's petition requests clarity on the financial liabilities for the contracts that have already been signed. Greenpeace is deeply concerned that the federal government is increasingly exposing the federal taxpayer to these financial risks for life extension projects.

It has been said that AECL's ability--to change topics--to keep going, or its ability to sell the advanced CANDU reactor to Ontario, will be “a destiny issue” for the organization. It should be noted that the federal taxpayer has already subsidized the design of the advanced CANDU for $433 million, well above initial estimates. This is just for the design. We haven't sold one yet.

Ontario is now asking the federal government to subsidize the construction of the ACR by potentially billions of dollars while the federal government is also asked to assume significant risk transfer.

As you can see, this endeavour has already become, as you would say in English, “in for a penny, in for a pound”. That's what we're in for with AECL and the advanced CANDU. However, this does not make good public policy.

It should be noted that AECL has been unable to successfully innovate and design any new reactor since the CANDU 6 in the 1960s was first developed, despite billions in subsidies. Some in the Canadian nuclear industry have already given up on the ACR, despite the hundreds of millions we've spent, and are calling for a return to the antiquated CANDU 6. Such desperation should not motivate or cloud our thinking on moving forward and protecting the taxpayer and protecting the environment.

To conclude, I hope this committee will use our petition and pose some questions to both the government and AECL and members of the CANDU industry. And I hope we can raise the bar on public transparency for the liabilities the Canadian taxpayer has been forced to assume for propping up CANDU in the recent past and also over the past 50 years.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you for your presentation.

Apparently the clerk had notified you that you could have up to 10 minutes for your presentations. I appreciate you being well within that timeframe.

We will go now to our second presenter, from the Mouvement Vert Mauricie Inc., Michel Fugère, representative for energy matters. Go ahead, please, for up to 10 minutes.

[Michel Fugère, Representative, Energy matters, Mouvement Vert Mauricie Inc.]

Thank you for giving us this opportunity to appear for the first time before the Standing Committee on Natural Resources.

When I received the committee's invitation, the topic was indicated as the state of the nuclear industry in Canada and abroad, in the context of this particular bill that you are studying. For the committee's benefit, therefore, I decided that it might be useful, before going ahead and supporting the Canadian nuclear industry, to take the trouble to have a vision that is a little more comprehensive of the international situation, and to understand the origins of this nuclear industry that people have been keeping on artificial respiration for so many years.

Before getting into that, I thought it would be helpful to focus on countries that have the best track records in order to gain a better understanding of the industry's importance, weaknesses and aspirations. I picked France as my example, since it is, as you know, a major user of nuclear energy. Of course, I also thought about the United States, which has over 100 nuclear reactors. We know that France and the United States together produce nearly half of the total electricity from nuclear sources in the world. Canada is also a player.

Curiously, the history of how these industries developed shows that they have a great deal in common. I have provided some background documents to the committee. They include a research study carried out by Mariah Blake entitled Bad Reactors, Rethinking your opposition to nuclear power? Rethink again. This is an in-depth analysis of what is happening in the nuclear industry in the United States. What the study provides is really more or less the history of the nuclear industry around the world.

Where Canada is concerned, I provided the committee with the document that was prepared a few years ago by Ralph Torrie and Richard Parfett, who are Canadian energy experts. They carried out an assessment of the nuclear industry in Canada, including the history, the current situation, future prospects and possible alternatives that could move us in a harmonious way away from nuclear production in Canada. Those documents are available to everyone because I have provided them to the committee.

I have also submitted a document entitled Status and Trends of the World Nuclear Industries by Mycle Schneider from the Carnegie Endowment for International Peace. It contains well-documented and up-to-date charts that provide an accurate and multi-faceted picture of the nuclear industry around the world.

We often hear about a nuclear renaissance in the world. That notion implies that the nuclear industry has been stalled for decades and that its survival has been under threat as a result. Why has the nuclear industry been stalled and unable to move forward for decades?

Everyone knows the reasons. There are the risks associated with the technology not being fully controlled. There have been incidents such as Three Mile Island and many others here in Canada. We can come back to this during the question period after my presentation.

There is the poor management of construction projects that has compromised the reliability of nuclear sites. The Finnish Olkiluoto project is a very good example of that. There is the poor financial planning of projects, which has led to huge cost overruns. There again, the Olkiluoto project is a very good illustration. There are the delays in getting projects up and running. The same things happen time and again.

There is the lack of skilled workers, which is something we see in Canada. There is clear documented evidence that this is a major crisis in the United States. Leaders in the nuclear industry themselves acknowledge the problem. There is the reduction in the quality and quantity of services available and the dwindling number of service providers. These are recognized facts. Projects are often delayed because the required parts are not available and services cannot be readily provided.

There is also the fact that the financial burden associated with nuclear infrastructure is so heavy that the industry cannot bear it alone. So it must assumed by taxpayers. In the United States, proposed nuclear projects have been the subject of fierce opposition, just recently, by major financial agencies and other groups, especially on Wall Street, to the point that they are threatening to discount companies that get involved.

Given all this, what has prompted the nuclear renaissance? Is it that the control problems have been resolved, that construction projects are being better managed, that financial planning has been improved, that deadlines are being met, that there are more skilled workers and a better supply of services, and that the industry is assuming the financial burden of its operations? No. There are daily indications to the contrary. Anyone who can read can find out about them.

So why is it that we are being bombarded with this notion of a nuclear renaissance from every side, as if it were genuine? This nuclear renaissance is due not to technological advances but to a good public relations campaign and effective government lobbying.

In particular, those pushing the nuclear option took advantage of the fact that our societies were in shock owing to the serious climate change crisis. It was the need to reduce greenhouse gas emissions that mobilized those trying to sell this industry. That is the angle they used. They invested all their effort in promoting their cause and led us to believe that the nuclear industry was undergoing a renaissance.

The concept actually had its origins in France. The flagship project that breathed life into the idea was Olkiluoto in Finland. In 2005, France managed to find a place to build its new generation reactor, the pride and joy of the nuclear industry, which is the EPR. Finland was given guarantees that there would be no cost overruns, that the technology would work flawlessly, that construction would be completed without a hitch and that greenhouse gas emissions would be reduced within the required timeframes as a result.

Today everyone is disillusioned because the Olkiluoto project is a failure across the board. This includes Finland, whose economic position has been hard hit by the delays in the project.

So the French embodiment of this renaissance is the Olkiluoto project. In the United States, it was the adoption of the Energy Policy Act. Because of the international context, American nuclear leaders finally managed to mobilize political support and create the conditions necessary for the nuclear industry to rise from the ashes in the United States. Since France and the United States have been able to kickstart the nuclear industry once again, what is the situation right now?

We have seen the failure of the Kyoto Protocol. In the United States, the financial sector has clearly rejected the idea. The concept has not been validated from a technological, financial or environmental standpoint. If the industry is not able to deliver the goods, it cannot reduce greenhouse gas emissions as promised. Enormous costs have been incurred, meaning that this money cannot be invested in alternative energies. From a societal perspective, it is taxpayers who will have to pay the bills for this industry that was supposed to be so dynamic.

Thank you. I will be pleased to answer your questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Fugère.

We go now to our third presenter, from the Organization of CANDU Industries, Mr. Neil Alexander, president.

Go ahead, please, for up to 10 minutes.

[Dr. Neil Alexander, President, Organization of CANDU Industries]

Good afternoon. Thank you very much.

I'd like to paint a broader picture of the context of nuclear power around the world, particularly in Canada, and talk a little bit about the opportunities that it presents the nation.

OCI represents about 160 companies, all of which have an active involvement in the Canadian nuclear supply chain. Power producers, such as OPG and Bruce Power, are not members, nor are the reactor vendors, such as AECL, AREVA, and Westinghouse. That allows us to focus very clearly on issues surrounding the manufacturers and the other suppliers of goods and services that make up our supply chain.

The CANDU supply chain has benefited from the consistent, ongoing work that's been taking place within the industry, both in building new stations and maintaining and refurbishing the existing CANDU fleet. This has led to the creation in Canada of a modern, tight, well-organized, and highly qualified supply chain that is actually the envy of many of the other reactor vendors.

It's interesting to think that some of the problems that have previously been discussed arose as a result of new supply chains being formed, and compare and contrast those with the solid supply chain we have here in Canada.

With the renaissance in the industry, the other reactor supply chains are severely challenged, which creates a massive opportunity for Canada and its companies to benefit by supplying components both to the CANDU plants and other plants around the world. In fact, I'd say one of AECL's greatest strengths that's often forgotten is the supply chain that stands behind it, which really creates a formidable force within the industry.

However, the situation at the moment is quite challenging. Uncertainties surrounding AECL's future and the fact that we presently have no demonstration site for the advanced CANDU reactor are dragging our industry down at a time when we should be building it and creating jobs. The failed Ontario RFP process and the isotope crisis have added to these problems—and, again, by association, these have lowered some of our opportunities. As a result, we are talking about the need for urgent action within the nation.

In these comments, I hope to make a case for saving the industry and to re-emphasize the urgency of identifying some of the things that we need to do to put things right.

The nuclear industry is an anchor industry within Canada. It's one of the few remaining anchor industries in the nation. We've always been a leader in the production of civil nuclear power: we were the second country to sustain a nuclear reaction; one of the first to develop a civil power reactor design; and we were one of the earlier adopters of nuclear power as a form of producing electricity. Today, we are the seventh largest producer of nuclear power in the world. We also hold a large portion of the world's uranium reserves, and we are a leading provider of uranium processing, mining, and exploration, as well as of our iconic CANDU brand of reactors. In fact, 10% of the world's power reactors are of Canadian design, and we are now one of an elite group of countries that do actually have a design for a generation III-plus reactor.

From the creation of an anchor industry, there are more than the direct benefits you will hear about in terms of the statistics of the value of a sale of a CANDU. There are also benefits to our industries. As a result of being in the nuclear industry, we now have established companies that specialize in nuclear engineering, construction, component manufacture, equipment supply, and service provision. They work on the Canadian-designed plants. We are also a large supplier of equipment to the other reactor vendors. L-3 MAPPS, one of our companies, is now the world-leading supplier of simulators, not just for the CANDU designs but also for all other nuclear reactors around the world. Indeed, they are now the leading supplier of simulators for all other thermal electricity-producing plants. All of that was a result of our investment in the industry. Similar stories can be told of The Babcock & Wilcox Company, and of SNC-Lavalin, which have benefited from being associated with this successful industry.

It's also created spinoff opportunities, which we're becoming very aware of nowadays, such as medical isotope production. Other areas that people may not know so much about are Canada's role in the supply of other sealed sources and in food irradiation. In all of these things, Canada is now a world leader.

Finally, as a result of our involvement in this as an anchor industry, we've invested in research and development, thereby creating commercially important intellectual property that remains within the country and from which we continue to benefit. It's also substantially helped in our development of human capital that allows us to compete on the world stage.

CANDU has a strong reputation around the world. It's something that I think sometimes in Canada we forget. Our CANDU plants are routinely in the top 10 in terms of the world's best reactor performers. Our record for on-time and on-cost delivery in our foreign export projects is exemplary. Our standing as a nation and our standing in terms of our manufacturers have very much developed and improved as a result of our involvement in this industry. As trade relations with India begin to improve, it is nuclear that is at the top of their list that they want to discuss with us.

I'd like to talk a little bit about nuclear renaissance, which is undoubtedly taking place. In order to understand why it's a renaissance, it is important to understand a little bit about the history of the industry. Nuclear power developed very rapidly. We only developed a consciousness that it was possible in the 1940s, and by the 1960s we had mastered the technology and built and operated power-producing reactors. By the 1980s, we were connecting a new reactor to the grid every 17 days. There are now 430 reactors producing power around the world at this moment, and many more reactors in submarines, icebreakers, and other forms of shipping.

Ironically, if the anti-nuclear groups had been successful in their attempts to do good and had managed to hold that program up earlier, then the world would have many more coal-fired power stations than it does at the moment. The environmental challenges that we face from smog, acid rain, marine acidification, and mercury contamination would be far worse. But worse still, global warming would have hit earlier and with much greater force than it presently does. It would also have been at a time when we would not have been technologically capable of responding. So our nuclear fleet around the world has made a dramatic improvement to our current environmental situation.

The rapid development, though, did have its problems. We accept that. Combined with the fact that fossil fuels were much more prevalent than we thought they were, that did cause a slowdown in the industry. That, in many ways, has been good news for Canada because some of the less strong reactor designs have fallen away from the market. Designs like the Magnox and AGR out of the U.K. are now no longer available, leaving Canada as one of the very few nations that has a reactor design appropriate for the developing modern market.

The world nuclear renaissance is clearly taking place. It's not as fast as some of us would have hoped, but it is solid, it's robust, and it is essential to the national strategies of both developed and developing nations alike. The World Nuclear Association records that there are presently 49 reactors under construction, and each one of these reactors is a project worth billions of dollars. That's in 13 different countries. There are 136 presently in the planning stages and 283 more in the proposed stages. If we take global warming seriously, there is an expectation that 650 reactors will be built in the foreseeable future. We were hearing today that the IEA, the International Energy Agency, is saying that it could be something more like 1,200, if we are to take some of the coal-fired production out of production, in order, again, to bring down our CO₂ emissions. Countries that previously turned their backs on nuclear power, like Sweden and Italy, are returning to the fold, recognizing that there is no other way of producing the electricity they need to maintain their standards of living.

Every reactor, no matter what its design, is an opportunity for people in the Canadian nuclear supply chain, and this opportunity is dramatically increased when we sell the CANDUs because over 80% of the value of the fabricated components come from Canada. It's a tremendous economic benefit to the nation when we are successful in selling those plants.

What we are trying to get people to understand is that this renaissance is happening now and other countries are making their decisions about their reactor technologies at this present time. So if we want to be part of this renaissance, it is important that we sort out some of our own issues internally so that we can move forward, demonstrate our capabilities, and become an active part of that renaissance. We do have a relatively short period of time to do that, and these issues are urgent.

Quickly on the issues, the Canadian nuclear industry is presently very busy. Throughout the recession it has been one of the beacons of light and hope for people, particularly in the trades in Ontario. No one in the nuclear industry, so far as I am aware, has requested or received anything of the style of a bailout package. However, our future export success does depend on us demonstrating the readiness of our technology, and also in developing a successful approach to selling our existing technologies--the CANDU 6s.

Presently, we have no confirmed site for the ACR demonstration, and this is being interpreted by the rest of the world as a lack of confidence in our own technology. We have no reason to lack that confidence. If a site were to be available, it would appear we would need to make further investments in order to successfully commercialize the ACR. Investment is a good thing. Investment creates a return.

AECL is presently poorly equipped to compete on the world stage. It has neither the financial resources nor the marketing presence to be successful. As a result, the government has decided that there should be a restructuring. We fully support that concept, to bring the appropriate resources into AECL and to allow Canada to be successful.

In previous sales of reactor vendors, such as the sale of Westinghouse to Toshiba, considerable premium was paid--in the order of billions of dollars--for the promise of the reactor technology that they were developing. With no identified demonstration site for the ACR, it will be difficult for this nation to realize such a premium on the restructuring of AECL. We consider that to be a significant threat to the ACR program, and consequently to the ongoing position of Canada as a world leader in this technology. As other countries are making their reactor choices now, we think we need to move swiftly to deal with identifying a site for demonstrating the advanced CANDU reactor and also for promptly restructuring AECL.

In restructuring AECL, we think the focus should not necessarily only be on how much income we can bring in, but we have to keep an eye on what it's going to do for the supply chain in Canada and maintaining the development, engineering, construction, and planning staff here in Canada. We'd be looking for people who want to commercialize the ACR and are prepared to make the investments, and we'd separately be looking for people who want to promote the existing CANDU technology, which has some very distinct niche market benefits.

As AECL is restructured, it substantially changes the landscape for the supply chain in Canada. We'd like to draw attention to that because we then believe that as we move forward, the supply chain needs to be treated like many of the other industries in the nation, such as the automotive industry and, say, pharmaceuticals, so that we would separately set up capabilities to sell the capabilities of our supply chain, such as trade missions, diplomatic support, and developing marketing campaigns focused around our supply chain and not only around our reactors.

We do say that we've passed a fork in the road. Every day we are walking involuntarily down a path toward decline. With some immediate action we can turn that around. We can capitalize on the position of a strong supply chain and create jobs for Canadians in Canada.

Thank you very much. I apologize for going a bit over my time, but I do feel it's an important message.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Alexander, president of the Organization of CANDU Industries.

We'll hear now from Don MacKinnon, president of the Power Workers' Union. Go ahead, please, for up to 10 minutes.

[Don MacKinnon, President, Power Workers' Union]

Good afternoon, Chair Benoit and members of the committee. Thank you for inviting the Power Workers' Union to present our views on the state of the nuclear industry in Canada and abroad.

For over 63 years, the Power Workers' Union has been representing the interests of more than 15,000 women and men who help operate Ontario's generation, transmission, distribution, system control, and telecommunications facilities. Our goal is to ensure that Ontarians receive clean, affordable, reliable, environmentally responsible, and secure electricity. We believe that securing Canada's role as a nuclear technology leader is one of the best ways to achieve this goal for all Canadians.

My remarks are going to touch on three issues. First I'll talk about the significant economic and environmental benefits Canada's nuclear industry creates for all Canadians and about the incredible potential for additional benefits in the future. Second, I'll outline why building CANDU 6 reactor units in Ontario is critical right now and is a necessary first step to help secure these benefits for future generations. Finally, I'll outline other actions the power workers believe are necessary to ensure Canada's continued nuclear technology leadership and the move towards generation III and generation IV technology, such as the ACR-1000.

With regard to the benefits of Canada's nuclear industry, all Canadians should be proud of what Canada has accomplished. It's one of only five countries to have pioneered a reactor technology. Our technology has successfully secured about 10% of the global marketplace. The numerous and significant economic and environmental benefits achieved by this relatively small crown corporation are listed on a Natural Resources Canada website, so I won't repeat those. However, there are benefits not mentioned on the NRCan site that deserve the attention of this committee.

Most of the tens of thousands of jobs created by Canada's nuclear industry are high-skilled, high-paying jobs. According to the Canadian Nuclear Association, nuclear supplies and services in the aerospace sector are the only advanced technologies for which Canada is a net exporter. Keeping a manufacturing sector in which we have a competitive advantage is particularly important at a time when Canada is losing manufacturing jobs to low-wage jurisdictions. We need to build on our industrial and technological successes.

Global concerns about climate change and the United States' reliance on coal-fuelled generation present a concern that we all share. But it's an opportunity for Canada. Exporting clean, nuclear-generated electricity to the United States reduces its reliance on coal generation, which means that we can all breathe a little easier. These exports also mean additional revenues and a better bottom line for Canadian generators.

Energy security is another benefit arising from Canada's nuclear prowess. Both Canada's vast uranium supplies and made-at-home nuclear technology provide enhanced energy security. In a world that is becoming increasingly dependent on finite fossil fuel supplies from unstable political jurisdictions, Canada's nuclear independence is important to Canadians.

Industry leaders and the media talk about a nuclear renaissance, driven by the need for reliable baseload generation, to help tackle greenhouse gas emissions. The World Nuclear Association projects a fivefold increase in today's global nuclear capacity by 2100.

Currently, 53 reactor projects are under construction. Another 133 are planned, and another 282 are in the proposal stage, as you heard from the previous presenter. Even in Sweden, a world leader in the development of renewable energy, they're considering new nuclear capacity.

As you know, four provinces--Ontario, New Brunswick, Alberta, and Saskatchewan--are considering new nuclear reactors. Ontario's integrated power system plan projects $27 billion of investment in the province's nuclear fleet between 2008 and 2027. New nuclear build decisions by New Brunswick, Alberta, and Saskatchewan would be another $30 billion investment.

Canadian and global electricity needs for clean, reliable electricity present an extraordinary economic opportunity for Canada's CANDU technology. Building either enhanced CANDU 6 reactors or the new twin ACR-1000 means hundreds of thousands of jobs and billions of dollars in economic benefits. For example, recent economic modelling by the Conference Board of Canada estimates that building four new twin ACR-1000 reactors in Canada and eight twin reactors internationally would create 500,000 person-years of employment and add $80 billion to Canada's gross domestic product. It also means lots of affordable, reliable, greenhouse-gas-emission-free electricity to run Canada’s industries, businesses, and homes.

On building CANDU 6 reactors in Ontario now, earlier this year Ontario deferred its decision to build new reactors using the latest technology designs. Although Atomic Energy of Canada Limited’s ACR-1000 design was the preferred technology, Ontario cited concerns about costs and the uncertainty surrounding the future of AECL. While we understand Ontario's unwillingness to commit to the next generation of the ACR-1000, we think Ontario must move forward with AECL's enhanced CANDU 6 immediately.

The current recession and the related temporary decline in electricity consumption presents Ontario with an ideal opportunity to move forward with CANDU 6. The failure to act means exposing Ontario consumers to unnecessary reliability risks. Ontario's temporary generation surplus will quickly disappear as Canada's economy rebounds, the population of Ontario continues to grow, and the electrification of the economy expands with the introduction of new technologies like electric vehicles.

Without new nuclear units, Ontario will not have enough supply to meet future electricity needs. Wind and solar generation only provide electricity intermittently and not necessarily when needed. The people of Ontario are already facing higher electricity prices even though the province's temporary generation surplus should be driving prices down. These price increases are driven by the government's long-term contracts with high-price incentives for new wind and new solar installations. Ontario's new feed-in tariff will pay even more. The reliability problems and higher costs of renewables should come as no surprise to us.

As other jurisdictions are discovering, wind and solar power generate more media hype than electricity to meet baseload demand. This year, three reports from Spain, Denmark, and Germany demonstrate that wind and solar generation come with very high costs, compromise reliability, and do not deliver the anticipated environmental and job creation benefits.

On the other hand, nuclear power provides clean, low-cost, reliable electricity 24 hours a day, 7 days a week, year in, year out, while creating real economic benefits. CANDU 6s have an enhanced design and a proven track record. In the last decade, AECL has been a leader in the construction of new reactors, building more than any competitor in export markets and leading the industry in on-time and on-budget construction. Examples include reactors in Romania, South Korea, and China.

About 75% of Ontario's electricity comes from nuclear and hydroelectric generation, giving the province one of the lowest-cost and lowest-carbon power systems in the world. By building CANDU 6s now in Ontario, we'd be assured of clean electricity for the future. As well, in an era when Canada's manufacturing sector is in decline and the old Canadian stalwarts are being picked apart, Canada's manufacturing sector would get a much-needed boost.

A decision by Ontario to build CANDU 6s would provide additional time for AECL to finalize the ACR-1000 reactor and for the federal government to complete its restructuring of AECL. It would also support similar decisions in New Brunswick, Alberta, and Saskatchewan. The current review of AECL's corporate structure should not be used as an excuse for inaction.

A national vision for Canada's nuclear industry is needed. We should be building on our proven expertise and successes as global nuclear technology leaders. Don't let what happened to Nortel be the precedent for AECL. We need a Canadian approach that involves the governments of Canada, Ontario, New Brunswick, Quebec, Alberta, and Saskatchewan; the domestic utilities operating CANDU plants; the manufacturers and service providers; universities and research institutes; the regulators; and labour.

The substantial economic and environmental benefits provided by Canada’s nuclear industry are evident. However, securing these benefits for future generations means that Canada's nuclear vision must focus on developing innovative federal-provincial-private sector financing mechanisms to address project investment needs, including how to address cost overruns; determining how to put our nuclear industry on a more competitive footing in the international marketplace; creating programs that will ensure we have a skilled workforce in place to design, build, and operate new domestic nuclear reactors and support international sales; allocating appropriate resources to research and development to keep our industry on the leading edge; and communicating with Canadians to increase their awareness about our nuclear industry and the benefits it generates.

CANDU reactors produce clean, reliable, safe, low-cost baseload electricity without smog-causing or greenhouse gas emissions. Critics are quick to say that nuclear power plants are capital intensive, too complex, and subject to cost overruns. Some of this is due to long timelines for approvals in construction, necessary stringent regulations and standards, and the unwavering commitment to worker and public safety. However, CANDU's track record shows that the benefits, both economic and environmental, far outweigh such costs.

Canada's global reputation as an energy powerhouse is built on the willingness of both government and the private sector to make major investments in groundbreaking technology. Harnessing the Niagara River in Ontario, James Bay in Quebec, the oil sands in Alberta, and nuclear power in Ontario and New Brunswick are examples of these successes. “Made in Canada” nuclear technology should continue to be a part of that story.

We have a huge energy-hungry economic power south of our border and emerging economies around the world that are looking for clean and reliable electric power. CANDU technology offers the answer.

AECL's recent global success stories, while competing with stiff competition from global giants, demonstrates that our “made in Canada” technology can succeed. Now is the time for all players in Canada's nuclear industry to come together, row in the same direction, and make CANDU technology an even greater success story.

Those are my comments.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. MacKinnon.

From Université Laval we have Michel Duguay, professor, from the department of electrical and computer engineering.

Go ahead, please, for up to 10 minutes.

[Professor Michel Duguay, Professor, Department of Electrical and Computer Engineering, Université Laval]

Thank you.

I studied physics at the University of Montreal. Then I went to Yale University to get a Ph.D. in nuclear physics. Afterwards I joined AT&T Bell Labs in New Jersey, where I worked for a total of 21 years, including a three-year stay at Sandia National Laboratories in Albuquerque, New Mexico, where I worked on a solar tower project and a laser-driven nuclear fusion project. My boss there was a nuclear engineer.

For a very long time I was a promoter of nuclear energy, and I used to follow it on a weekly basis, especially when I was at Sandia labs. One day my boss said that if we could make the solar business work, it would be so much better than nuclear reactors.

Afterwards I spent about 10 years as a member of the IEEE-USA Energy Policy Committee, which met in Washington about three or four times a year, and also in New York City. We had several nuclear engineers on our committee. I said to one of them one day, “I hear that the CANDU reactor in Canada is supposed to be very good.” He said, “Well, the problem with the CANDU reactor is that it has hundreds of tubes that are constantly bombarded by neutrons. They become fragile and can burst out.” That's what this American engineer thought.

I'd like you to look at the second page of my handout. Does everybody have it? It's important.

[The Chair, Conservative, Leon Benoit]

Everyone has a copy. Go ahead, please, Mr. Duguay.

[Prof. Michel Duguay]

What is striking about the CANDU reactor design is that there are so many tubes. In the CANDU 6 reactor, you have 380 horizontal tubes that carry the fuel, the energy producer, and the problem with having tubes in a nuclear reactor is that neutrons are constantly bombarding every material. Neutrons can transmute elements, so the composition of the tubes is changing with time. All kinds of mechanisms occur on the atomic scale, leading to an unpredictable behaviour for these tubes, as is recognized by the nuclear industry and in particular is well-documented by the Canadian Nuclear Safety Commission, the CNSC.

These are two major weaknesses in the CANDU design. The fact that it has a positive void coefficient of nuclear reactivity—I assume that some of you have been reading Ontario newspapers where this has been discussed quite a bit over the last year—simply means that if a pipe breaks and water is missing, the reactor design is such that nuclear reactions are accelerated. So at the time when you're missing water to take away the heat produced by the nuclear reactions, the neutrons go dancing a little faster.

You can have a power pulse that goes up a factor of ten over its normal output in one second, and then the computer that's in control of the reactor will drive down these neutron-absorbing rods. But it will take another second for these rods to come down. So you have a power pulse that lasts for about two seconds. According to the CNSC--I highly recommend that those interested read this document, INFO-0790, published in June of this year by the CNSC, where everything I'm saying is detailed. In that two-second power pulse, enough energy can be deposited in the core to melt the uranium as well as the tubes holding it. The molten metal can enter the moderator, which is heavy water, and cause a steam explosion.

The CNSC advises us that physical containment, the one metre of reinforced concrete, will probably hold in the explosion. Good! I'm very willing to believe that. But as an investor, do I want a multi-billion dollar investment to depend on the bursting of a single tube out of 380 tubes? There are six kilometres of high-pressure tubing in CANDU reactors. The pressure is not small. It is 100 atmospheres, a pressure you find at a depth of one kilometre. Very few submarines can stand that depth of one kilometre in the ocean. Those tubes have to stand it every day, at a very high temperature besides.

This positive void coefficient of nuclear reactivity is not the only trouble, although it is the major trouble of the CANDU reactor, and it is well-recognized by the industry. I'll have you notice that my colleagues on my left promoting the nuclear power industry have failed to mention the problem of the positive void.

The top guy in the French nuclear establishment, Bernard Bigot, was interviewed recently in a French film that came out only about two weeks ago. He talked about public distrust of nuclear power, and he said that our whole business has to be based on trust. The top guy, Bernard Bigot, said that. I agree with him 100%. If you consult your dictionaries or history books, or any linguist, trust has to be based on transparency.

People who have the knowledge, like you people sitting on the left here, have to tell things the way they are. There was no mention on your part of this power pulse problem, a major problem, and it was published in a June 29 article in the Globe and Mail.

The second major weakness of these pressure tubes, as I mentioned before, is the constant neutron bombardment and the flow-assisted corrosion that thins out the tubes, making them weaker, and it can lead to bursting.

Have a look at my third slide. You have to have sympathy for the designers and operators of the CANDU nuclear reactors, because nuclear power is a very, very ticklish business. This whole thing is driven by a neutron cloud. There is nothing more complex in the world, as far as I know, than the neutron cloud in a nuclear reactor, and in particular in the CANDU reactor. It's still the object of much uncertainty, as is well-documented by the CNSC in this June 2009 document. These neutrons are moving around, and there are power excursions. The reactor is controlled by a computer program.

The Canadian nuclear industry only realized in 2000 that the old nuclear models were not accurate enough. New models were introduced, but not all companies are fully up-to-date with the new modelling of nuclear reactors, as is documented here. The point is that when you have something that complicated, it's very hard to control. The CNSC admits it's very hard to predict exactly what would happen if a pipe burst, except a lot of trouble.

The next slide shows some beautiful engineering, and I recognize it, but the trouble is with the thermal hydraulics--I happen to also work in the thermal sector; I work in several areas of physics and engineering. The trouble is that uranium generates a whole lot of power out of these 17 reactors in Ontario that power half the province. A hell of a lot of power is produced here, and it's carried away by water. If the temperature goes up and you start getting a fuel element meltdown, how is the water going to take away the heat, especially if there has been a pipe break? It's a very difficult problem. When you read the papers on that you realize the authors complain about the complexity of the problem.

A fundamentally vulnerable aspect of CANDU reactors stems from the possibility of a pressure tube rupture. It happened with the Pickering 2 reactor in August 1983. The tubes operate at high pressure, 100 atmospheres, 300 degrees Celsius, and, as I mentioned before, under intense neutron bombardment. The metals change and their behaviour becomes unpredictable.

The second point is the positive nuclear reactivity coefficient, about which Greenpeace has talked a lot. I talk here about the two-second power pulses I mentioned earlier. We'll skip to the next slide.

On significant events in Canada in 2008-09 regarding nuclear reactors designed by AECL, I find it interesting that I list about five significant events here and none of my colleagues on the left mentioned even one of them.

In April 2008, the CNSC did not approve the integrated safety review proposed by Ontario Power Generation, which has a lot of nuclear engineers who were found not to be up-to-date with the latest modelling of nuclear reactors. The weaknesses notably concerned the positive void coefficient.

In May 2008, AECL announced its abandonment of the MAPLE reactor development. What's even more serious is that it reveals to this very committee its inability to explain the unexpected behaviour of the coefficient of nuclear reactivity.

This positive coefficient of nuclear reactivity has been well known to AECL. They talked about it in their 2002 and 2003 annual reports. They proposed then that you could have a new uranium fuel with dysprosium that would take away this power pulse problem. Bruce Power of Kincardine believed that. They worked for years trying it out, but they announced to the CNSC in the spring of this year that they're discarding this avenue as non-functional. Instead they're going to have to try to lower the rods a little faster instead of taking a whole second.

In June 2009, the CNSC published this document that I highly recommend to you, especially appendix F. It's only four pages. In these four pages you will learn more about the core business of AECL reactors than if you heard a whole day of talks such as the ones you just gave. You give PR talks. You don't tell the truth.

[The Chair, Conservative, Leon Benoit]

Mr. Duguay, make your comments to the committee through the chair, please, and not directly to other witnesses.

Your time is up. You're at 12 minutes. If you could wrap up quickly, I'd appreciate it.

Thank you.

[Prof. Michel Duguay]

It turns out that many provinces—Ontario, Quebec, and the Maritimes—are surrounded by water, over which good winds flow. We have several times the power output of Saudi Arabia on all these water surfaces, and I highly recommend that you have a look into that.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Duguay.

We go now to our last presenter. From SNC-Lavalin Nuclear Incorporated, we have Patrick Lamarre, president and chief executive officer.

[Patrick Lamarre, President and Chief Executive Officer, SNC-Lavalin Nuclear Inc.]

Good afternoon.

Thank you for this opportunity to present SNC-Lavalin's views on the nuclear industry in Canada.

First, I will give a brief introduction of SNC-Lavalin; second, I will talk about the ongoing SNC-Lavalin involvement with AECL and the other nuclear projects; and third, I will outline the need for urgent and immediate action to determine the future of AECL and the whole Canadian nuclear industry.

SNC-Lavalin has its headquarters in Canada, with annual revenues of over $7 billion and a staff of over 22,000 full-time employees. Half our revenues come from our international operations; however, more than 65% of the employees are based here in Canada. We make high-value products and export them. In this way, we generate more revenues, which means more benefits for Canadian employees. This added value helps the growth of each of our offices in the different provinces of Canada.

We are one of the leading groups of engineering construction companies in the world. We are also a global leader in the ownership and management of infrastructure. Currently, we're managing about 10,000 projects, with a capital value of over $50 billion internationally. This makes us a clear leader in the management of megaprojects. SNC-Lavalin provides engineering, procurement, construction, project management, and project services in the four major sectors—power, oil and gas, mining, and infrastructure. We have projects in 100 countries and permanent offices in 35.

My second point is SNC-Lavalin's involvement with the nuclear industry and AECL. We have been involved in the nuclear industry for the past 42 years. During all of these years we have had a relationship with AECL. Together we have been involved in the entire span of CANDU projects in Canada and overseas. Working closely in support of AECL on 14 CANDU units, and more recently in support of Team CANDU, SNC-Lavalin has been responsible for the balance of nuclear steam plants, conventional turbine generators, and auxiliary plants. Together, over the past 13 years, we have delivered seven new nuclear plants on schedule and on budget. These are key numbers that you can compare with those of our biggest competitors, the biggest nuclear technology providers in the world. No other company has delivered seven new nuclear reactors in the past 13 years. All this has been done with AECL, Team CANDU, the OCI, and the Canadian industry.

Recently, we completed the balance of a nuclear steam plant in the successful Qinshan Project, which is one of the best-performing reactors in the world. You have a third party that reviews the up-time of a nuclear reactor and the percentage of it that's performing. Qinshan, with the CANDU technology, is the leading reactor in the world. It is rated higher than all other technologies, all other reactors. Various magazines compile the rankings. It is not a Canadian opinion; it is an international opinion based on actual performance. This was done with the OCI, together with the Canadian nuclear industry.

The ongoing involvement in the CANDU reactor system has led to a partnership with AECL in the design and development of reactors. We worked together on the CANDU-3, the CANDU-9, and on the advanced CANDU reactors. As I mentioned, the CANDU reactor designed by AECL in China is one of the best-performing reactors in the world.

SNC-Lavalin has over 30 offices in 35 countries, and we're actively marketing the CANDU technology throughout the world. It brings us our presence, and we provide support and alignment for Canadian technology internationally.

Third, I want to talk about the future of AECL and the Canadian nuclear industry. AECL, with Team CANDU, was the only conforming bid on the international competition for two new reactors at Darlington. OPG had an RFP. They were selected internationally. They were the biggest technology providers, and at the end of the day, Team CANDU, with AECL, was the only conforming bid for a generation III project.

The bidding process, however, has now been suspended by Infrastructure Ontario, pending clarification from the federal government regarding AECL's future. The federal government is the owner of AECL, and it must make a decision about the future of AECL. It has come out openly that they were supposed to review and decide on the future ownership, structure, and potential of it. This was done a few months ago.

Based on this new ownership, SNC-Lavalin--and I am only speaking for SNC-Lavalin, not for the rest of the OCI--needs to make a decision on how we are going to keep bidding jointly with AECL and other Team CANDUs internationally. Each bid we put forward to develop and support a new nuclear reactor involves an enormous amount of money. These are big bids. They are big packages. They involve a lot of time, effort, energy, and support internationally.

Depending on the future of AECL, we will need to make decisions on how best to support it and how best to go forward. The typical cell cycle for a nuclear plant can fluctuate from 5 to 15 years. We have been working with many clients, in many countries, over all those years, and we believe we're close to having an agreement with some of them.

To clarify, and so we all understand, CANDU is the technology and AECL is the owner of that technology. However, when a CANDU plant is built, AECL's actual scope of work, which is part of the design of the overall plant, is only one small component. The vast majority of the project is executed by other Canadian companies and partners. Therefore, when we make a decision on AECL, unfortunately--or fortunately--it has a direct effect on the full line of products and companies that will be supporting it, executing it, employing Canadian employees, and that will also be paying taxes and looking for growth and opportunity in world markets to support it.

I'll repeat that point: a decision on AECL is a decision on the CANDU. A CANDU plant has an array of groups executing the project, and AECL has only one small part.

With regard to the privatization of AECL, when we meet potential international clients we are asked why they would purchase CANDU nuclear technology if the owner of AECL plans to sell to unknown buyers. Another way to understand the question is through the client's perspective. When we propose the CANDU plant, they ask why they would choose CANDU technology over other technologies if after the change of ownership they end up with a technology provider that they had previously rejected.

I'll also make the point in French.

When we meet clients, they ask us why they would choose CANDU technology rather than that of some other suppliers, if that other supplier might end up owning AECL. Clients have no way of knowing what will happen. As I explained earlier, the sale cycle is very long, and if a client is ready to sign an agreement now, there must not be any delays. All the efforts by Team CANDU, SNC-Lavalin, AECL and the industry may be thwarted if the needed transparency is not ensured now.

International clients understand that the process to privatize a company like AECL can easily take two or more years. This is a big company. It has a lot of different projects, some liabilities, and it has processes. If you go to tender, first, one needs to find a group that will do the privatization; second, you need to prepare a big document; third, you need to go to the market to find out who will bid, and afterwards there is the due diligence on the final process.

We've been working on projects for many years, and there is an opportunity for new ownership, but we have to make sure the decision on ownership can be done in a short period of time to prevent a process that could drag out for a year or two. If not, our potential clients, who are ready now, could say they will wait to see who the new owner is.

In conclusion, because of global concern with greenhouse gases, a nuclear renaissance is happening worldwide. Canada must be part of it. We've seen it in Italy; we've seen it in Germany. All those countries that stopped it before want to be part of the new renaissance.

We are at a crossroads for the future of the nuclear industry for Canadian companies. The federal government must urgently take steps to convince the world that AECL is still in business. Only in this way can it ensure the development of a powerful nuclear economic sector in Canada, creating high-quality jobs for national and international projects. This will allow companies like SNC-Lavalin and other companies like the OCI to grow their Canadian base and export products internationally, just as we've been doing for the past 42 years.

We must all remember that a decision on AECL's future ownership will be a decision that will impact all of the Canadian companies, 30,000 people, and over 150 companies working jointly on the CANDU technology and exporting services from Canada internationally.

We need clear and decisive decisions as soon as possible, if not now.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Monsieur Lamarre, president and chief executive officer of SNC-Lavalin Nuclear Incorporated.

We'll go directly to questioning now, starting with the official opposition.

A point of order.

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

A point of order, Mr. Chair.

Excuse me, sorry to interrupt, Mr. Regan. I'll be quick.

In terms of the way the committee structures this, it is difficult with six witnesses and now 45 minutes of time. It's difficult for committee members, particularly on a topic that's this complex, with a diversity of opinions, to be able to accomplish this. I'd just offer that so that when we're organizing these meetings....

When I saw the list yesterday, I thought, this is going to be very difficult, and it turns out it will be difficult for committee members to be able to actually get the fulsome debate that we need on this issue. Traditionally we only have four witnesses to a maximum, sometimes five, but six really pushes the clock quite far. Some committee members won't be able to ask questions at all, I would suspect, given our normal course of things. I just point out that we should try to limit the number of witnesses we get on a given day.

[The Chair, Conservative, Leon Benoit]

Mr. Anderson, on the point of order.

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

Mr. Chair, we passed a motion at the committee here in terms of what we wanted to do and how many meetings we wanted to put into this. We are trying to accommodate all the witnesses who were put forward by the various parties. I think we're going to be able to do that in terms of everyone who's willing to come, and we're trying to take them when they can come. So the reality is we have a number of witnesses. The witness lists that were put forward were fairly large, and we're trying to accommodate that.

No one is being denied, but obviously we're getting more witnesses at the table than we'd typically have. We're trying to accommodate the witness lists.

[The Chair, Conservative, Leon Benoit]

I will just add that from the chair's point of view I believe the clerk approached all the witnesses who were recommended by committee members on both sides. Some could come on certain days, some on others. The witnesses who are here today could come today. So the choice would be to not have them come at all, and I don't think that would be an acceptable position for me as chair to take, certainly.

Mr. Regan, you will get to the questioning soon, I would think. Go ahead.