Natural Resources Committee on Oct. 26th, 2009

[Geoff Regan, Liberal, Halifax West, NS]

Did you indicate--and I'm sorry if I missed it--what you felt should happen to AECL in terms of the government's proposals or what it's looking at?

[Prof. Michel Duguay]

I'd prefer to defer to my colleague, Shawn-Patrick Stensil, on that topic, and also to Michel Fugère. It's too complex for me to decide; I'm just a physicist, you know.

[Geoff Regan, Liberal, Halifax West, NS]

Oh, oh! Very complex for a physicist, obviously.

Mr. Lamarre, do you have an opinion regarding the restructuring of AECL?

[Patrick Lamarre]

Could you repeat the question?

[Geoff Regan, Liberal, Halifax West, NS]

Regarding the company's structure, what is your preference? What would you suggest the government do about restructuring?

[Patrick Lamarre]

Our recommendation, of course, is for every nuclear technology company in the world to receive government support in order to develop its international relations and continue to develop. That is what the federal government is doing at present through the Department of Foreign Affairs and its various agencies.

As far as commercialization goes, we believe that government support and a Canadian interest would enable AECL to maintain its cutting-edge technology jobs. An ongoing Canadian interest in the CANDU industry would also enable the CANDU technology to be developed in Canada and internationally, and guarantee the future by keeping the reactor rehabilitation and repair industry in the hands of Canadians and the organization of CANDU industries.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Regan. Your time is up.

We go now to Madame Brunelle, from the Bloc Québécois, for up to seven minutes.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Good afternoon, gentlemen. Thank you for being here. This is a particularly interesting meeting because your views are very much in opposition.

Mr. Stensil, I will begin with you.

You say that the government has provided $20 billion in subsidies to AECL and that the selling price would be $300 million. I wonder where you got those numbers. I questioned the deputy minister, and I did not get that information. On another point, the Greenpeace Canada representatives seem to be in favour of privatizing AECL and support that idea. Moreover, you did not say anything about the risks associated with nuclear technology.

Those are my questions.

[Shawn-Patrick Stensil]

Thank you very much.

Regarding the figures, I was here last week when the minister said that the subsidies amounted to $8 billion. For some reason, every time the federal government prepares estimates on AECL, it does so in dollars of the year. The standard practice is for accountants to calculate in inflation and state amounts in current dollars. So the $20 billion is the equivalent in today's dollars and not in dollars from the 1950s or 1960s. So that is my explanation of the figures.

The $300 million amount comes from various media reports. They appeared last week, but they have been around for three years, so since before the recession. There are rumours circulating as to AECL's market value.

On privatization, it is true that we did not talk about the risks of nuclear technology. I can do so, if you like. It would be an interesting debate. However, your committee study is on restructuring and privatization; our interest is in levelling the playing field.

Canada has sustainability commitments. That means that energy costs must be internalized. If coal is used, coal-fired plants have to internalize the costs. The same is true for the nuclear industry. Privatizing AECL is an opportunity to force the nuclear industry to assume all those risks. For example, when the Pointe Lepreau reactor in New Brunswick was rebuilt, the government took on the risk without setting up any mechanism to ensure accountability and reporting to taxpayers. That is seen as an opportunity.

However, we are concerned about privatizing one piece of AECL. We are afraid that it might lead the government to always take risks with major projects like other overhauls in Ontario, the Gentilly plant and the Pickering plant, or the construction of new reactors. Private companies like SNC-Lavalin Nuclear will make money with those projects, but taxpayers will always be the ones to take the risks.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

You are saying that AECL would be sold piecemeal—the profitable pieces—and the responsibilities would remain with us. At this table, we have not talked at all about the management of nuclear waste. This will no doubt remain a government responsibility.

If I remember correctly, Mr. Duguay had asked what investor would invest billions of dollars in AECL. It would cost that investor billions of dollars to purchase a reactor with apparently outdated technology. I think that AREVA might buy it to dismantle it and gain a competitive advantage. That is my opinion.

Mr. Alexander, you say that you are a leader. Yet, some people say that your technology dates back to the 1960s. What is your position with regard to the privatization of AECL? As far as I understand, you were opposed to that. Have I understood correctly?

[The Chair, Conservative, Leon Benoit]

Mr. Alexander, go head.

[Dr. Neil Alexander]

I think there were two questions in there.

In terms of the technology, there are two technologies that AECL, broadly speaking, is in command of at the moment. One is the advanced CANDU reactor. That's a generation III-plus reactor. It's a mass market product that would fit into sophisticated grids in the developed world, in markets like the U.K. and the U.S.—if we can get it in there.

Secondly, they have the existing CANDU design, what is now called the enhanced CANDU 6. That has some very substantial niche market benefits for certain countries, and it may also be very valuable, as we go into the future, for burning alternative fuels, and also for waste management issues.

So AECL has two very beneficial technologies that we should be looking to polish up and use for the future.

Our position on the restructuring is that the restructuring should take place, that we need to put more investment into AECL if we're going to be a world player. We think we have every opportunity to be a world player. We think the restructuring will bring that investment into AECL and that it will also create for them the magnitude of marketing capability and worldwide presence that we need to take on some of the other very major companies.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Do you not believe that the French recipe has made it a major world player? I am not telling you anything new. It is 95% a crown corporation, which allows President Sarkozy, among others, to promote its nuclear energy throughout the world.

Is this not a responsibility that our government should undertake? You believe the opposite.

[Dr. Neil Alexander]

I would love to see a country where we did make a full investment in AECL and geared it up as a crown corporation to go forth and compete with all of the other reactor vendors. It is a very expensive proposition. If you look at what has happened with other reactor vendors around the world, they have formed strategic partnerships to take themselves to a magnitude that allows them to compete. The classic example is an association that now exists between GE and Hitachi, giving the two of them the worldwide presence and magnitude to be successful. That's the kind of scale we're talking about.

So it's a matter of bringing in other partners—and I support Patrick's idea that we have to have a significant presence in this regard—possibly from Canada, but also possibly from other parts of the world, to allow us to have the very substantial presence that will be important to our ongoing success.

[The Chair, Conservative, Leon Benoit]

Thank you, Madame Brunelle. Your time is up.

Mr. Cullen, for up to seven minutes. Go ahead, please.

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

Thank you, Chair.

Thank you to the witnesses. It was a good discussion.

Mr. MacKinnon, I have a question for you. Do the folks you represent have an opinion one way or the other about the privatization of AECL? Are you for or against it? If you are for it, are there any major conditions you've requested the government place on the sale?

[Don MacKinnon]

We're certainly for the restructuring. I think for AECL to be successful on a go-forward basis, it has to be able to operate like a commercial entity. I think the partnership model is probably a good one.

One observation, though, would be that if you want to continue with a science industry, you need to ensure that it's protected as part of this. Having things like a research reactor is important to ensuring that we continue to have a science industry in this area as well.

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

I'm going to stop you there just for a second. We've been doing some consultations and have been led to understand that in places where this has been broken up—where the research side has been broken up from the commercial and electricity production sides—it has not gone well, and that the whole, or the strength of the “solid supply chain”, as Mr. Alexander mentioned, is what is important. The government has talked about breaking off pieces, breaking off the so-called toxic assets at Chalk River, and having just a sale of the component pieces.

Is that a viable option for the eventual success of a nuclear industry in Canada?

[Don MacKinnon]

I'm not promoting one method over the other. What I would say, though, is that power reactors are a totally different operation from research reactors; they're two completely different scenarios. There are probably scenarios where they could function independently. I'm not promoting that; I'm just saying that if we're going to do one thing or the other, we have to ensure that we don't throw the baby out with the bathwater, such that if we want to continue to have a science industry in this country, we need to ensure that we have that research capability.

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

Thank you.

I have a question, Mr. Alexander. Something I'm confused about is that in your earlier presentation to the committee you presented the CANDU and the AECL scenario as very healthy and positive. Yet with all of the so-called renaissance going on, AECL holds no contracts or bids right now.

You mentioned this chicken-and-egg problem for the government. They've floated the idea publicly of a sale, and Mr. Lamarre commented on this. If potential bidders know that the thing is up for sale but don't know who is going to buy it, it creates a very difficult scenario to actually go out and sell, thereby lowering the price that Canadians can expect to get for the asset into which we've poured some billions, whether it's $20 billion or $15 billion or whatnot.

Why has the government gone about it this way? It seems confusing to me to not have any contracts in hand, which lowers the price, and then announce that you're going to sell it, which then causes more uncertainty--I would assume lowering the price—and no demonstrated ACR, no demonstrated site, which you called for. Is the demonstration site so critical for Canada to get a proper price for what Canadians have invested into this industry?

[Dr. Neil Alexander]

Yes. I'd go back to...and there were comments previously about the valuations on AECL. First of all, I wouldn't necessarily trust a journalist to do my valuations for me, but you can see the basis for them. It being--

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

The government does it all the time.

[Dr. Neil Alexander]

I'm not sure what I should say to that.

I think what they're doing is a simple business valuation based on existing turnover. There's a credible figure that comes out from that, around the hundreds of millions. What I would draw people's attention to is the promise, because there's also a valuation in companies based on what they think they might achieve with the technology they have.

In the nuclear industry, that can be billions of dollars, and there are precedents for that. In order to liberate that value, we need to have confidence in the ACR and demonstrate it. There is still a lot of value in AECL for its other products, but it's much smaller. If we really want to liberate the value out of the investment we've made, we need to find a site for the ACR.

I think there was probably an expectation that Ontario would be moving forward with its process. The suspension of the Ontario process has been a very substantial problem for our industry.

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

This is what seems strange to me, then, because the Ontario bid is now requesting a subsidy from taxpayers in order for that to be accomplished. So the government, in trying to sell an asset, has to go out and subsidize a project to hopefully get a better value for return on the investment. Do you see what I mean? It is very circular.

[Dr. Neil Alexander]

That's why it's very substantially chicken and egg.