Natural Resources Committee on Nov. 18th, 2009

[The Vice-Chair, Liberal, Alan Tonks]

I call the meeting to order.

This is the 40th meeting of the Standing Committee on Natural Resources. Pursuant to the order of reference of Monday, June 1, 2009, we are discussing Bill C-20, An Act respecting civil liability and compensation for damage in case of a nuclear incident.

Today we are continuing our deliberations. We welcome our guests and witnesses. In the first panel, from 3:30 to 4:30, we have Mr. Rex Loesby, president of Canadian Remote Power Corporation, and from Ontario Power Generation Inc. we have Mr. Albert Sweetnam, executive vice-president and director of nuclear new build, and Mr. Pierre Tremblay, senior site vice-president, Pickering. Welcome.

Through our videoconference technology, from Toronto we have Mr. Norman Rubin, director of nuclear research for Energy Probe. Mr. Rubin, welcome. Are you hearing us okay?

[Norman Rubin, Director, Nuclear Research, Energy Probe]

I hear you fine, thank you.

[The Vice-Chair, Liberal, Alan Tonks]

Our second panel will be from 4:30 to 5:30, so we'll just keep an eye on the time, and I'll introduce those guests at that time.

Without any further ado, members, we have a quorum. Again, thank you to our witnesses for being here. Perhaps we can begin with Mr. Rex Loesby, who is the president of the Canadian Remote Power Corporation.

For those who haven't been here before, we have about ten minutes for each of your presentations. We go through our witnesses, and then we have a round of seven minutes for questions and answers; if we have time, we then go to a five-minute round.

[Rex Loesby, President, Canadian Remote Power Corporation]

Can you hear me okay?

[The Vice-Chair, Liberal, Alan Tonks]

We sure can. Thank you very much.

[Rex Loesby]

Thank you for giving me a few minutes to talk with you about Bill C-20 regarding liability caps for nuclear reactors in Canada.

The bill is of interest to our company as we are working to provide clean and safe electric power to remote communities and mines in Canada through the use of small nuclear power stations.

First, I want to give you a little background on Canadian Remote Power, and then I'll address a concern we have about the regulations that may accompany the bill.

The idea to pursue the use of small reactors grew out of my work for a mineral exploration and development company, Western Troy Capital Resources. We're developing a copper-molybdenum project in a remote area of Quebec, and we found our power costs were going to be very high with a long power line from Hydro-Québec or a diesel power plant. This led us to look at a small reactor as an alternative. We found that a number of countries are developing small reactor designs, but we were surprised to find that in a country where low-cost power is needed in remote areas, no one was pursuing the idea here. So we formed Canadian Remote Power Corporation to do just that.

Now, Canada has a national treasure in its nuclear industry. Its CANDU reactors, along with its nuclear scientists and engineers, have gained world recognition. Over the past 50 years, 45 CANDU reactors have been built around the world, and they have operated without a significant safety incident. Nuclear power is one of the most economical methods to generate electricity, and there are no carbon emissions. Canada can continue to be a world leader in the industry as long as it is willing to encourage the industry and keep its regulatory system consistent with recognized world standards. Canada has the opportunity to play a leading role in the world to reduce carbon emissions.

At Canadian Remote Power we recognized very early that we needed a very strong technical team, and we're very fortunate that good Canadians are available. Your handout lists these folks, along with a bit of their background. I'll highlight one member of the team, just to give you an idea of the calibre of the people we've been able to attract.

Dr. Gary Kugler is on our board of directors and is a member of our technical advisory team. Dr. Kugler is the chairman of the board of Canada's Nuclear Waste Management Organization and is a director of Ontario Power Generation. He was with Atomic Energy of Canada Limited for 34 years.

The question is this. Is there a real need for small nuclear plants in Canada? Currently, electric power for remote communities and mines is generated using diesel engines. These diesel plants generate approximately 17 million tonnes of carbon emissions per year and the electric power produced costs between 25 cents and $2 per kilowatt hour, as compared to what you might pay connected to the grid, about 4 to 10 cents per kilowatt hour. In Nunavut alone, the diesel fuel budget is more than $200 million a year. With small nuclear plants we can eliminate carbon emissions and substantially reduce the power costs for these communities and mines. While we don't believe nuclear plants are the only answer, we believe they can and should be a large part of the solution to the challenges of maintaining and developing sustainable communities in the north.

On the mining side, there are currently eight mines in the north using large diesel power plants. There are projected to be 18 by 2016. These mines are projected to need 400 megawatts of generating capacity. In the Northwest Territories, there are 11 world-class mineral deposits that could be mines if power costs could be reduced. Another application for small nuclear plants is to provide heat for oil sands recovery.

Can small reactors be safe? Well, we're looking at a number of reactor designs. One design is a TRIGA reactor designed by General Atomics in San Diego. In your handout is a picture of a TRIGA reactor. As with all the reactor designs we're considering, the whole installation might require only two acres of land. This design is attractive for two more reasons. First, if there's any unplanned rise in reactor core temperature, the chemistry of the fuel shuts the reaction down. Secondly, there are 67 TRIGA reactors installed around the world. Some have operated since the 1950s. They are installed in hospitals and universities. There has never been a problem.

We're also considering other designs, including Canada's CANDU reactor. There's a Toshiba 4S that we're looking at. Argentina has a CAREM design. We haven't decided which way we're going to go yet.

I will talk about nuclear safety.

You see in your handout a table showing the fatalities over the past 40 years in the United States and the United Kingdom for three major electric power sources: coal, natural gas, and nuclear. This table is from a June 2008 publication of the World Nuclear Association entitled, Safety of Nuclear Power Reactors. Chernobyl is not included in this as there was no containment structure at Chernobyl, and there was not an internationally recognized safety regimen in place like there is in Canada. You can see that nuclear energy is by far the safest of the three sources. It's misleading, though, because I haven't included hydro. There are actually 4,000 fatalities in hydro, but those are as a result of boating accidents on the reservoirs. Obviously, if you can do hydro, you want to do hydro.

Technological innovation in all areas of clean energy development will come from both public and private entities and ventures. Canada will be well served if its government can respond to the clean energy challenge by making the regulatory environment as conducive to innovation as possible without compromising public safety. One of those innovations may be small nuclear power reactors.

The regulatory process for permitting such small reactors will be difficult and there are substantial uncertainties in the permitting process. The more these uncertainties and timeframes can be reduced, the more likely it is we will be able to raise funds for our venture. We hope to work with Parliament and the regulatory agencies to reduce the uncertainties and timeframes in many areas, without compromising public safety.

The issue before you today is Bill C-20 , which would bring Canadian regulations more into line with international standards regarding liability caps for nuclear power plants. How might Bill C-20 impact our efforts?

Well, in the past the maximum insurance cap for all reactors, as you know, was $75 million, and existing regulations allowed lower insurance caps for small reactors. The amount of these caps for small reactors is determined by Natural Resources Canada and the Canadian Nuclear Safety Commission through the regulations developed by those agencies. Bill C-20 sets the maximum at $650 million, and the bill has a provision for setting lower caps for small reactors. Paragraph 66(c) reads:

66. The Governor in Council may make regulations

(c) fixing an amount of reinsurance for any nuclear installation or for any prescribed class of nuclear installation;

An outline of the regulations related to Bill C-20 has been drafted by Natural Resources Canada. There are provisions in the outline for reduced insurance caps for small reactors, but the caps are not well defined. We've discussed this with the staff at Natural Resources Canada and suggested the regulations should include consistent and better defined caps for all reactors. The staff there has been really responsive and has encouraged us to suggest modifications to the outline.

Our suggestion is to include the language you see in the handout in the regulations. It gets fairly technical, and to keep my presentation short, I won't read through it now. This addition to the regulations will provide a greater level of certainty for developers of nuclear power stations as well as preserve the right of the Governor in Council to modify the liability caps for special circumstances.

How does this affect us? If we do not have that certainty for the insurance caps for our small reactors, we would have to assume pretty much the worst case for our fundraising efforts. If we were required to carry the maximum of $650 million of liability coverage, our insurance underwriter has suggested our premium could be $1 million or more per year for each installation. If the liability is capped using the formula we've suggested, our annual premium would fall to an estimated $100,000, thus improving the overall economic forecast for our business and potentially lowering the power cost to the consumer.

Thank you for taking the time to hear our story and suggested language for the regulations to follow the bill. I would be happy to answer any questions when the time comes.

Thank you.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you very much, Mr. Loesby, for that presentation.

We'll move along to Mr. Albert Sweetnam, the executive vice-president for Nuclear New Build, Ontario Power Generation Inc.

Welcome, Albert.

[Albert Sweetnam, Executive Vice-President, Nuclear New Build, Ontario Power Generation Inc.]

Good afternoon, everybody.

I'm here on behalf of Ontario Power Generation, and I'm joined by my colleague, Pierre Tremblay, who is the senior vice-president of programs and training at OPG. We are here today to support the early adoption and timely passage of Bill C-20. Thank you for inviting us to speak.

We'll leave you with a deck, which you should have in front of you. I'm not actually going to walk through the deck, which covers the background of OPG, our community support, safety and environmental performance, and a brief update on the new bill.

I'll just give you a quick background on OPG. It is Ontario's largest electricity generator. We produce two-thirds of Ontario's electricity and we own all of Ontario's nuclear reactors, including the ones at Bruce. We operate 10 of the nuclear units, we have a very strong safety and environmental record, and our 12,000 staff are an integral part of all our host communities. Four of the five top CANDU reactors in the world in 2008 were owned by OPG. Three of these reactors are at Darlington and one is at Pickering B. In addition, in the first quarter of 2009, Darlington operated at a capacity of 99.99%, as close to perfect as you can get with a nuclear reactor.

Now I'd like to direct your attention to slides 9 to 11 in the deck. I'd like to speak to the point in front of the committee, which is Bill C-20. OPG strongly supports the immediate passage of Bill C-20 because it modernizes the liability framework placing the liability clearly with the operator—where it belongs—it imposes a reasonable limit on the operator's liability, it provides more protection to the public, and it allows our local and international suppliers to support us on a reasonable insurance framework. We also look forward to being involved in the regulatory process. That should include the ability of the utilities to be involved in any changes to the liability limits, the ability to access insurance at competitive rates from Canadian and/or international providers, and a recognition that this is the first step towards Canadian ratification of the Convention on Supplementary Compensation for Nuclear Damage. In summary, OPG supports the early passage of Bill C-20 with the proposed liability limits.

I look forward to answering any questions the committee might have.

Thank you.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you, Mr. Sweetnam.

Do you wish to add anything, Mr. Tremblay?

[Pierre Tremblay, Senior Vice-President, Nuclear Programs and Training, Ontario Power Generation Inc.]

No.

[The Vice-Chair, Liberal, Alan Tonks]

Okay, not at this time. Thank you.

Now we'll go to our video conference connection and Mr. Norman Rubin, who is the director of nuclear research with Energy Probe.

Mr. Rubin, welcome.

[Norman Rubin]

Thank you, sir.

I'd like to make four points. I'll start not with my first, in logical order, but with what I think is the shortest; that is, as somebody who has spent more time in court while the Nuclear Liability Act's legality and constitutionality were debated than anybody in your room, I would suggest that neither the Nuclear Liability Act nor its draft successor, Bill C-20, is likely to survive a charter challenge after an accident. That is, if, God forbid, the act is triggered, I believe it will be struck down and the protection it gives to the risk-maker will not actually be there when called upon. I will leave that there for discussion later and go on to my other points.

My first point, logically, can be summarized with the question: why in God's name? If you have an industry that is capable of creating a catastrophic accident, and job number one for a government is presumably to ensure that such a catastrophic accident never happens, and job number two of a government should be to ensure that the consequences of such an accident are mitigated and minimized to the extent possible, and job number three is to ensure that every potential victim of such an accident is taken care of to the extent that they deserve, why in God's name would you limit the liability of the entities that might cause such an accident?

I'd like to point out that one of the useful strains of research in this area is to look at past catastrophes. We can examine, for example, Three Mile Island and Chernobyl in the nuclear area; we can examine the Challenger crash; we can examine when two jumbo jets collided on a runway. And what we find when we look at these catastrophes is that virtually every one of them, when viewed in hindsight, seems to have been caused by a combination of negligence and incompetence. Then the question is how, in a proactive way, looking forward, would you extend the incentives to try to minimize incompetence and negligence going forward? I would suggest that the last thing you should ever consider on a list of what you might do is to tell a number of potentially responsible parties in advance that they will be held blameless and to tell the remaining party that they will be held responsible, but only up to a certain point, regardless of the total bill to clean up the accident and to mitigate the consequences and to give reparations to the victims. Yet that is exactly what the Nuclear Liability Act does at present and exactly what would be preserved in Bill C-20 if it is passed into law.

I'd like to just spend another minute or two on this. Obviously prevention is key, and telling somebody that they aren't responsible is counter to the incentives to prevention; I think this is simply logic. It will be extremely obvious after an accident, although it's now theoretical, thank heavens. In addition, we've done some studies. In fact, for our failed constitutional challenge of the existing Nuclear Liability Act, we commissioned a study on the consequences of a potential nuclear accident, a catastrophe, at a CANDU station. What that found is, obviously, first of all, the size of the release is a key variable in the consequences, but the impact of a given release can vary incredibly hugely, from effectively zero to enormous tens of billions of dollars of damage. The variables that drive that difference are two. One is the weather, over which we have no control, and the second is contingency planning, over which we have a great deal of control. We should have every incentive applied to the risk-makers to ensure that they ensure that contingency plans are as good as possible and as good as they would require if they felt they were going to have to pay the damages in full.

Let me be clear. Contingency plans, getting potential victims out of the way of the radioactive release, turns out to be right up there with the weather in determining whether you have thousands of victims, thousands of casualties, or whether you have perhaps none.

I'd now like to compare Canada with two other states—Germany and Japan, both of which, as I understand it, have imposed unlimited liability on their nuclear operators. I have several questions about this situation. Why do we have to be different? Are their reactors safer than ours, either by design or by operation? Is their emergency planning so much better than ours that their industry doesn't mind operating under unlimited liability? Are their operators simply gutsier? Do they have more nerve than ours? Or is their federal government more independent from the industry that creates the catastrophic risk? In other words, have they simply taken the needs of potential victims as paramount, rather than caving in to the requests of the risk creator?

I think you can tell from the way I framed the question that I have a guess about where the main difference is between Canada and these other countries. I think their governments played hardball and our government did not. Our government behaved, first and foremost, as the shareholder of AECL, as the creator of one of the world's prominent reactor designs, as an international salesman of nuclear reactors around the world. Their governments, in contrast, acted as elected officials, the representatives of the potential victims and the guardians of the environment that would be contaminated in this kind of accident.

I'd like to close with a brief reference to one growing development. We are gradually shifting from a regime in which nuclear reactors are built and operated by governments, or by creatures of governments, like crown corporations, to a regime in which reactors may be built by private entities. It is worth considering how the federal government would act on behalf of potential victims where you couldn't count on a provincial government, for example, to backstop the owner and operator of a reactor.

I believe the main area where the federal government must act is not in limiting liability—liability should be unlimited, limited only by the consequences of a catastrophe. Rather, the federal government can and must mandate a minimum depth of pocket.

There must be assurances that even after the entity that owns and operates a reactor loses the reactor and incurs a massive internal bill and a loss of equity from that, it still has, through a combination of insurance and other instruments, approximately enough money to meet the needs of a credible but worst-case, beyond-design-base accident. I think there's a shadow of that in Bill C-20 and in the Nuclear Liability Act, but I believe it's only a shadow. That is, I believe, an essential role of government.

We are entering a period of a couple of months now when Bruce Power is going to be actively negotiating with the Government of Saskatchewan toward building a new reactor, probably a CANDU. They've set themselves a deadline of December. I always predict failure for these efforts, but it's just conceivable that there actually will be something happening, and some of this will matter. Let's hope that victims will have more than $650 million of compensation available to them, and that the decisions about siting, about emergency planning, and about design will be informed by full liability extending to the private owners of that facility.

Thank you.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you very much, Mr. Rubin.

We'll now go to the members. We'll start with Mr. Regan's questions. You have seven minutes.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chairman, and thank you to the witnesses for coming today.

I'm going to start with you, Mr. Loesby. Am I correct in understanding that you're actually not suggesting any amendments to this bill in terms of what you're concerned about?

[Rex Loesby]

That's correct. In discussions with Natural Resources Canada and the Canadian Nuclear Safety Commission, they said that basically they didn't want to see a change to the bill. They wanted discretion to set the regulations, as they have done in the past, so all we want to do here today is put into the record of the deliberations on the bill that it is our request that the standards for small reactors be better defined in those regulations that they set.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

Mr. Sweetnam, we've heard from a number of witnesses that we should amend this bill to create unlimited liability, as is the case in some countries. We know there are higher levels of liability elsewhere, and you heard Mr. Rubin ask why we have to be different. Would you like to answer that question? Perhaps you may have other comments as well.

[Albert Sweetnam]

I don't know if I can answer the question, but I'll try to address the issue.

The problem is that the capacities of the utilities and operators and insurance companies are not unlimited. Therefore, at some level, all countries provide backstops for third-party liability in some way. This is certainly the case in the European nuclear liability conventions, as well as in the U.S. There's no such thing as no liability. The backstops are provided because you couldn't get an insurance that had no liability limit on it.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

We've heard some concern that this bill gives vast regulatory power to the minister and that changes can be made to the regulations without consultation. We've heard that concern, I think, from Hydro-Québec, and we may hear it from others. The concern would be not just in relation to Hydro-Québec or to companies; it could perhaps be in relation to others not being consulted or not having any input before regulations are changed.

Does that raise a concern for any of the witnesses? Would you suggest amendments in that regard? We'll start with Mr. Sweetnam, and then Mr. Loesby, and then Mr. Rubin if we have time.

[Albert Sweetnam]

As Mr. Loesby said, we've had discussions with the ministry and we feel quite comfortable that we would be able to address our concerns through the regulatory process. One of the issues is that we would like to be consulted if the minister decides to change the liabilities in the act. Our understanding is that we would be able to address these concerns during the regulatory process, so no amendments to the bill would be required.

[Geoff Regan, Liberal, Halifax West, NS]

Would you like to comment, Mr. Loesby?

[Rex Loesby]

I have no comment.

[Geoff Regan, Liberal, Halifax West, NS]

Would you comment, Mr. Rubin?

[Norman Rubin]

I have no comment.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Rubin, if this bill were to be defeated--in fact, if it were to be amended--it would probably mean that the government would not proceed with it when it went back to the House. If that happens, or if this bill is defeated, we will be left with the status quo, which is a limit of $75 million. Is that situation better than passing a bill that raises the limit to $650 million?

[Norman Rubin]

There are two branches to my answer. One is that if I'm right, if there were an accident, the act would not survive a charter challenge, in which case it doesn't matter. And the other is that if I'm wrong, the act would survive. And obviously if it would survive, the $650 million is more than $75 million and closer to what a catastrophe might cost. So sure, all things being equal, I suppose if the good were not the worst enemy of the best, or vice versa, if the best were not--you know what I mean--it'd be nice to get an instant amendment to $650 million and then talk about what should really happen. But I don't think that's how it works in the real world.