Natural Resources Committee on Nov. 16th, 2009

[Dr. Michael Binder]

In my opinion, the dirty bomb scenario—

This is again in Canada. A lot of people come here with this junk science, to be blunt, about a dirty bomb.

First of all, in Canada, to try to create a dirty bomb, you would have to have access. It's very difficult to actually get your hands on our facilities. They are very secure and guarded. There is a very low probability, a low risk, that someone could get in and try to actually get a hold of some of the material to create a dirty bomb.

Again, I have said that I'm not an expert in insurance, but it seems to me that in the airline industry or the car industry you count the number of incidents and you actually come up with some sort of assessment of risk.

To put Chernobyl in the same situation as Canada is outrageous. TMI never, ever released, so the system worked. In Canada, in the last 63 years, we have never had such a system. In fact we are managing to make sure that no such system occurs. So I don't understand how the probability here would lead you to another kind of conclusion.

[The Vice-Chair, Liberal, Alan Tonks]

I'm going to have to interrupt, Madame Brunelle.

We will go now to Mr. Cullen for the next round of questions.

Mr. Cullen.

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

Thank you.

I have a question for Mr. Mason. You said the current liability regime limits your company's access to the Canadian market. You gave the scenario in which GE was operating a reactor here and the reactor had an accident and someone wanted to seek damages. You said they might seek damages in a U.S. court because the liability is so low in Canada. Am I following your logic?

[Peter Mason]

No, I should clarify. It's not GE operating a reactor; it's if we designed or made a piece of equipment. Let's say we designed and built a piece of equipment in the U.S. and it was installed in a reactor in Canada. If it could be proved that the equipment was part of the causal chain of a nuclear incident in Canada, then a claimant could take a claim back to GE in the U.S.

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

As your lawyers try to understand what risk your company is exposed to by selling nuclear reactors or parts to other countries, do you folks ever make public the assessment of the risk of a nuclear accident in Canada or in the U.S.? Do you go through and say, “We need to carry this much insurance as a company for the material that we've sold”?

[Peter Mason]

We do have a risk analysis process within the company. For example, the company would not accept being exposed to a nuclear risk in a jurisdiction that did not have an appropriate nuclear regime in place.

The only reason we are able to serve Canada from our Canadian operations is because it is a completely separate legal entity and we employ only Canadians within that organization.

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

It seems, then, that with regard to the upcoming sale of AECL and its potential commercial operations, the factor of insurance would be a component to anyone looking to buy AECL. Is that fair to say?

[Peter Mason]

Yes.

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

So again, this issue is interwoven into the things that are going on with the nuclear industry right now--the potential sale; the issue of isotopes; and clearly, the issue of insurance, what insurance exposure folks are going to have.

What I'm confused by is that private industry seems so comfortable with the idea that taxpayers have to be on the hook for anything above $650 million in claims. I don't know why we can't call that a subsidy. You, as a company, also generate power from other sources. I assume the U.S. and Canadian governments don't provide a cap and a limit on the insurance claims that might happen if a wind tower were to be knocked over. Why would they do it for nuclear?

[Peter Mason]

I think there are two answers to that. First of all, we carry conventional insurance for things that we're involved in, for example, a wind turbine. In nuclear it's very different. I think if there were not a cap and if there were not suitable legislation insurance in place, then we wouldn't be in the nuclear industry.

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

Maybe that's my point. This industry can't survive without the backstop of the public taxpayer in order to cover any extension of damages. If just left on its own, around the world--we're dealing with Canadian legislation--the nuclear industry could not operate as a normal energy-producing operator, because the liability, the risks, would be so high if there were an accident.

I don't want to exaggerate this. I'm just trying to understand the state of the--

[Peter Mason]

You're right. In fact, if you look at the majority of nuclear companies today around the world--and we can name some of them--you'll see they're backstopped by government.

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

It's interesting.

This is a question for Mr. Thompson. Trying to understand the value of that backstopping is curious to me. In your report that you've outlined here, you suggest that the subsidy adds up to a certain amount of money per kilowatt hour produced by the nuclear industry per year because of that public backstop, because the public is picking up the tab for extra liability.

Am I reading your report correctly?

[Dr. Gordon Thompson]

That is correct. I attribute a cost in cents per kilowatt hour to the implied subsidy to nuclear-generated electricity in Canada. That calculation is complex and involves a number of assumptions, as I state in the report. However, my assumptions are in alignment with those of nuclear insurers, insofar as that information is public. Indeed, it is less conservative than assumptions insurers have evidently made in the three countries I have data for.

[The Vice-Chair, Liberal, Alan Tonks]

Mr. Cullen, I'm going to have to interrupt.

Mr. Thompson, I think the committee would like to pursue the availability of that report; it may be helpful with respect to the committee's continuing deliberations on this. We'll make a note of it.

We'll now go to Mr. Allen, please.

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

Thank you, Chair, and my thanks to you gentlemen for being here.

Mr. Binder, I want to pick up on some of the comments you made in your testimony. What I found interesting was that we've been regulating the facilities for 63 years and no claims have been made under this act. That's an impressive record, and it says a lot about the regulatory regime we have.

I'm interested in clause 6. You comment about your support for the act. You would no longer designate the facilities and would no longer be the administrative authority for the legislation. That would go to the Governor in Council, who under clause 6 would have the designation responsibility. If you're supporting the legislation, I assume this does not increase the regulatory risk and the risk of an accident. There would still be oversight. Could you comment on that? I'm intrigued by it. What difference does it make to us now that the Governor in Council will be designating these facilities? To whom would the Governor in Council be delegating?

[Dr. Michael Binder]

I wasn't there when that policy decision was made, but I think their idea was to separate the regulation from whoever established the appropriateness of the insurance. The Ministry of Natural Resources has been designated.

We will provide technical advice on which facility has the fissile material and on risk analysis. We do risk analysis in this business, contrary to what we heard. The industry does extensive risk analysis, and we provide technical advice to the ministry.

[Peter Elder, Director General, Directorate of Nuclear Cycle and Facilities Regulation, Canadian Nuclear Safety Commission]

Mr. Thompson mentioned probabilistic risk assessments. We require them. We have a CSA standard based on IAEA guidance, so we have international guidance on this one. We also require the licensees to look at design-basis accidents. We require them to look beyond design basis or severe accidents. We want to make sure that those are dealt with, so that they understand what they could do to prevent releases even on low-probability accidents.

How we would manage the risk would not change whether we are administering this act or not. We put a lot of effort into making sure that the risks of a major accident are kept small. We don't keep within the design basis; we go well beyond it and make sure they are controlling the risks and trying to improve the performance of the plants.

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

I think Mr. Hiebert had a question.

[The Vice-Chair, Liberal, Alan Tonks]

Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

We've been referring to the need for insurance off site. My question has to do with insurance on site. It's my understanding that operators carry property insurance for cleanup and repair costs. To get a licence to operate a facility, you have to have sufficient funds for decommissioning. It's my understanding that the bill does not require on-site insurance. Is this something that we need to address, or is it sufficient to allow the operators to set their own levels for on-site insurance and repair costs?

[Dr. Michael Binder]

There are two kinds of financial guarantees that we ask from an operator. First of all, we ask for a financial guarantee for operations. If something goes wrong in the operation, there has to be enough money to repair whatever needs repairing. Similarly for decommissioning, there has to be money accumulating in a separate pot that would provide sufficient funds to decommission the site.

As for regular insurance for workers, I think they get commercial rates. Somebody might be able to help me on this.

[The Vice-Chair, Liberal, Alan Tonks]

Mr. Hiebert, Mr. Thompson would like to come in there, and then we'll have to bring this to an end.

Mr. Thompson.

[Dr. Gordon Thompson]

Thank you.

Studies by the Canadian nuclear industry show that there is a substantial risk of on-site damage, which may or may not be accompanied by off-site damage. I have not been able to determine any mechanism for insurance coverage for the risk of on-site damage in Canada. In the United States, that coverage is required by the Nuclear Regulatory Commission, and a mechanism is in place to provide it. That's a significant issue that is neglected entirely by Bill C-20.

[The Vice-Chair, Liberal, Alan Tonks]

Okay. Mr. Thompson, we're—