Natural Resources Committee on March 3rd, 2011

[The Chair, Conservative, Leon Benoit]

I call the meeting to order. Good afternoon, everyone.

We are here today, pursuant to Standing Order 81(5), to deal with supplementary estimates (C) for 2010-11. We're dealing specifically with votes 1(c), 5(c), 15(c), and 25(c) under Natural Resources, which was referred to the committee on Tuesday, February 8, 2011.

Just before we go to our witnesses for today, I want to mention that, as you all probably know, the budget date was announced for March 22. We had a committee meeting scheduled for the afternoon of March 22.

Is it agreeable that we postpone that committee meeting until after the other meetings that are scheduled?

[Some hon. members]

Agreed.

[The Chair, Conservative, Leon Benoit]

We have today as our witness the Honourable Christian Paradis, Minister of Natural Resources, and with him Serge Dupont, Deputy Minister.

Welcome, Minister. We're ready for your opening comments.

Go ahead, please, for up to ten minutes.

[Christian Paradis, Conservative, Minister of Natural Resources]

Thank you very much, Mr. Chair.

I would also like to thank the committee members for inviting us. With me today is my Deputy Minister, Serge Dupont.

I must say, it is remarkable how quickly time passes. It has been almost a full year since I have testified before this committee. Today, I have the honour of presenting the Supplementary Estimates 'C' to the Committee, and I am looking forward to responding to any questions hon. members may have regarding the Estimates.

If I may anticipate some of those questions, I am sure the Committee has noted the proposed additional funding for Atomic Energy of Canada Limited. The Committee will also be interested in the ongoing restructuring of AECL. With the Committee's permission, I will devote my opening statement to that subject, and to our Government's objectives and initiatives for AECL and the nuclear industry at large.

There is no question but that the nuclear renaissance that provided so much optimism in recent years has been slower to ramp up than expected. At the same time, there are opportunities for refurbishment and new-build projects, projects that will generate non-emitting baseload power for decades in Canada and around the world. As a government, we want to ensure that Canada's nuclear industry has the capacity to respond to these opportunities, but we are also cognizant of our responsibility to Canadian taxpayers.

Our decision to launch the restructuring of AECL in 2009 will achieve these goals. This decision was not taken lightly. It was made only after the completion of two separate and independent analyses and based on clear, sound policy objectives. The results of the analyses were clear: only market-driven investment in the commercial activities of AECL, that is, CANDU Inc., could create a stronger platform for growth while protecting taxpayers from the inherent risks of the nuclear market. Restructuring was and is the correct choice.

Our approach was endorsed last week by Luis Echavarri, the director general of the OECD Nuclear Energy Agency.

He told an audience at the Canadian Nuclear Association Annual Conference that when it comes to the nuclear industry, it's important to separate the public responsibility for establishing a framework from the responsibility of private investors, and that restructuring AECL will take us in the right direction.

This is a complex process and it has taken longer than expected. AECL has incurred setbacks along the way. The delays and cost overruns at Point Lepreau, Bruce, and Wolsong are well known. They have affected CANDU Inc. and drawn more money from taxpayers.

In supplementary estimates (C), the government is proposing additional funding for AECL. I will not mince words: I am not happy with this. But it is a matter of responsibility, not choice. The Government of Canada will honour these fixed-price contracts and other AECL responsibilities. We are working with AECL to ensure that it draws no more of the funding than necessary while meeting all its obligations, including maintaining the highest standards of safety, security, and environmental responsibility.

I understand that AECL officials are here to discuss their efforts in this regard. Nonetheless, this and previous requests for funds make clear that to maintain and create jobs AECL must be restructured and subjected to greater market discipline.

Looking forward, we cannot expose taxpayers to such risks. AECL has not and will not take on new contracts with material financial risk during the restructuring process.

Unfortunately, any restructuring leads to a period of uncertainty. The Government appreciates the impacts of this uncertainty on AECL, its workers and unions, its suppliers, and the nuclear industry in general. We are moving toward certainty, for taxpayers and for the industry. Today, the Bruce, Wolsong and Lepreau projects are performing well within their re- based timelines.

In particular, the independent advisors I appointed say we now have realistic timelines for Point Lepreau. We look forward to a constructive outcome for the Gentilly 2 refurbishment.

There are opportunities. Ontario has signalled a commitment for two new reactors at Darlington. Just last week, at the Canadian Nuclear Association Conference, Tom Mitchell, president and CEO of Ontario Power Generation, said that new nuclear is on the verge of becoming a reality in Ontario. He added that OPG sees the merit in continuing to use CANDU technology, in particular building enhanced CANDUs at the Darlington site.

AECL is assisting refurbishment opportunities in Ontario and in Argentina as well. The company has strong relationships with Romania, Jordan, China, and India.

In other words, the prospects for CANDU Inc. are encouraging, and I am pleased to say that our team is engaged in confidential negotiations with committed investors. While such negotiations are always difficult and success is never guaranteed, both sides are very mindful that time is of the essence.

I will conclude by assuring honourable members that our government remains committed to Canada's nuclear sector. Our government's record of support and engagement is clear.

Just a few weeks ago, I announced a key project for the removal of low-level radioactive waste, as part of our ongoing implementation of the Port Hope area initiative.

We made the investments needed to ensure the safe repair and return-to-service of the NRU. We support AECL's plan to re-license the reactor through 2016. In January, I announced funding of four major projects to develop the potential of cyclotrons and accelerators to produce medical isotopes.

Internationally, we have led an unprecedented effort to co-ordinate the global isotope supply chain; signed a nuclear cooperation agreement with India; and joined President Obama's non-proliferation efforts. We are actively studying options for the future mandate and management of the AECL's Nuclear Labs.

These are all major initiatives, and a clear demonstration of our confidence in the people and the future of Canada's nuclear industry.

Thank you and I look forward to your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Minister, for your opening comments.

Thank you both for being here today.

We will go directly to questions and comments, starting with the official opposition.

Mr. Coderre, you have up to seven minutes.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chair. Thank you, Minister.

This is a little unfortunate for you. The Department of Natural Resources is not one of the government's priorities. They prefer to invest in prisons rather than natural resources, since your funding has been cut by 20%. You may have good ideas, but ultimately, we look at the figures and we see reductions in this case of $928 million. You are having to deal with cuts of $235.9 million in operating costs. Grants of $457 million are being eliminated because they no longer believe in renovations, and $235.6 million in contributions. We are going to review this together. We are also going to talk about Atomic Energy Canada.

We get the feeling that the process is dragging on somewhat at present. The Ontario government is prepared to buy Atomic Energy Canada. You have one genuine buyer, the SNC-Lavalin Group and the Ontario Municipal Employees' Retirement System, which are bidding for the project jointly.

You are having problems with Argentina because your Department seems to have received a very clear message from its representatives, who are not very happy. Are you satisfied with the way the tendering process is working at present? Why can the Ontario government not buy it?

Also, why is this dragging on so long?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

To start with, I would like to talk about the aspect you raised first, the Supplementary Estimates. Let's look at the 20% you're talking about. There was the Economic Action Plan, under which massive economic stimulus investments were made throughout the government. There was a home renovation program that ends on March 31 for which $745 million was allocated. Your party voted for or against those measures, depending on the budgets. But the total is still $745 million.

[Denis Coderre, Liberal, Bourassa, QC]

We support the ecoENERGY Initiative.

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

In the Speech from the Throne, we said we were reviewing all programs. That is what we are currently doing, to make sure that return on future clean energy investments is acceptable to taxpayers.

In terms of the tendering process, as I said, there were two independent valuations indicating that the commercial side of AECL had to be restructured. We undertook a negotiation process with potential investors. Given the sensitive commercial nature of the process, I can't give any more detail. One thing is certain, and that is that we agree that the restructuring must be completed because costs and spending are currently too high. The financial burden is too high for taxpayers.

We also want to make sure that in future, we can keep high-level jobs, while taking opportunities that arise in future. This is a complex negotiation. We are not selling it as if it were a box of Cracker Jacks, but I can tell you that every effort is being made to achieve this.

[Denis Coderre, Liberal, Bourassa, QC]

When the one buying the Cracker Jacks might be the Ontario government, it seems to me to be fairly solid. The problem is that it's going too fast.

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

I told you there is a tendering process.

[Denis Coderre, Liberal, Bourassa, QC]

Minister, it seems to be a fire sale. I have in hand a document that deals with the human resources in the plan. The problem is that the number of engineers is going to fall from 870 to 340. You talk about protecting high-level jobs. By 2013, the number of engineers will fall from 870 to 340.

Do you not think that it is precisely your role to protect the interests of Canadians and make sure that these high-level jobs are protected?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

First...

[Denis Coderre, Liberal, Bourassa, QC]

Why is it going too fast?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

We want to do the restructuring properly. As I told you, it's complex. Some refurbishment projects will soon be completed. We're talking about Bruce and Wolsong. There are in fact a possible impact on employees. There are discussions going on about that. That is why we are taking the time to do things right, to optimize internal resources and make coherent and intelligent decisions, while being sure to take the opportunities that arise.

You also mentioned Argentina. We can't take tangible financial risks and make sure there are no more investors that want to participate in the process. We have to balance it. We have to make sure, within certain limits, that we take every opportunity that arises so that we do not scare off potential investors, who will want to manage things their own way, or when the process starts.

[Denis Coderre, Liberal, Bourassa, QC]

Minister, does it not seem that your decisions are having the opposite effect? At present, the Argentinian nuclear commission is prepared to do things. They have the expertise, but they are holding back. They are even threatening us with legal action. Taxpayers may have to pay hundreds of millions of dollars because of legal actions.

Do you not think that things are being done any which way?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

No, it's a question of balance. "Any which way" is what we saw in the past in the case of Point Lepreau, where things were pushed too fast. We have seen cost overruns and delays. It was done in political circumstances that you are probably more familiar with than I am because I wasn't there. We don't want to repeat that and sign contracts that are too onerous that we will not be able to justify to Canadian taxpayers. It is always a question of balance.

[Denis Coderre, Liberal, Bourassa, QC]

Minister, you say you are in favour of renewable energies. You have made a few pre-election announcements about that.

But when I look at the estimates, I see that spending is being cut by the most in the ecoENERGY programs. You may have raised budgets in the electrical area, but for the rest... We are talking about modernization projects, projects to make pulp and paper more ecological, energy and development projects, sustainable development technology projects, ecoTRANSPORT Strategy projects, renovation projects, because we know that it calls for prevention measures. How can a minister claim to be promoting clean energy when we see cuts to the ecoENERGY project in the budget?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

If you look at all spending since we came to power, it comes to $10 billion on clean energy. I think that record speaks for itself. We used the Economic Action Plan to accelerate that spending, in fact, and this enabled us to progress faster in that area while creating and consolidating existing jobs.

As I said, all programs are under review, as announced in the Speech from the Throne, so make sure that the investments to be made in future can be justified to Canadian taxpayers. We have to get something for our money, if I may put it that way.

Announcements have been made in recent weeks and we are very proud of them. You talk about investments, but I have to say that these are not pre-election investments, they are investments that were budgeted over the last five years. This is the logical culmination of that entire vision. I would also remind you that there will be incentives that will continue to be invested over the next 10 years.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Coderre.

We go now to the Bloc Québécois.

Madame Brunelle, you have up to seven minutes.

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

Thank you, Mr. Chair.

Good afternoon, Mr. Paradis, Mr. Dupont.

I would like to talk about Atomic Energy Canada Limited. There is something I find surprising in the initial votes. For 2010-2011, there was $102 million. We see that with supplementary estimates (A), (B) and (C), we get a total of $872 million for AECL. I am wondering why you are so far from the valuation.

Votes in the last four years were divided as follows: in 2007-2008, $212 million; in 2009-2010, $841 million. How can it be so far off? I think that may have a negative effect on the private sector that could want to buy it. It gives the impression that AECL is a bottomless pit. That is the impression we have too.

Also, I'm concerned about isotope production. As you know, this committee has given considerable attention to all the problems at the Chalk River reactor. I am wondering what is going to happen if it fails. The licence extension has been approved until 2016, but what will happen after that?

You have invested in other forms of isotope production with the cyclotrons, but these aren't projects that have reached maturity.

I have concerns about AECL and what will be left once you have finished the restructuring. You said you were keeping the isotope production, but doctors everywhere want some reassurance.

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

In terms of the Main Estimates, the supplementary amounts you see are distributed in instalments. We are in the process of restructuring. That means that what was in the Main Estimates corresponded to the normal votes for the usual operations.

There are two aspects to the costs. First, in the case of the CANDU, there have been cost overruns because of the refurbishments. Some $418 million has had to be spent to refurbish the various reactors. When we are operating in instalments, the faster the transaction is completed, the faster we will be able to have better forecasts.

But one thing is certain, and this relates to your other question concerning the private sector. Whatever happens, contracts have been signed by the government and we will honour our obligations. That is why I have asked two experts to consider the Point Lepreau case in particular. We want there to be financial valuations and project evaluations to get more conclusive estimates than in the past.

On the second aspect, there have been massive investments in recent years in the Chalk River laboratories. We know there was an audit done by the Auditor General in 2007. She said the laboratory was in poor condition. The government's role was to spend money to make up for lost time, because there were not enough investments in the past. We have therefore restored it to appropriate condition. That explains the cost of the additional money.

You also talked about isotopes. We share your concern about the fact that the NRU has stopped operating. We have seen how fragile the supply chain is. That is why we have asked other countries to have a coordinating group to discuss how to better plan the isotope supply. We know that it came from five reactors that are not recent, that are old.

As well, we said that we will spend the money needed to make sure that the reactors are in working order and there is another licence until 2016, in addition to looking for alternative methods. That explains why we have made $45 million in investments to study the feasibility of continuing and pushing for isotope production, whether in the form of cyclotrons or nuclear accelerators, which generate little or almost no waste. This is an alternative method that is very promising and we are continuing to invest in that.

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

I think you had confirmed to us that you were going to continue isotope production, at least for Canadian needs. Is that a commitment?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

At present, the NRU production represents more or less 40% of global supply. I think we are doing more than our part.

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

But we know that the NRU will stop at some point.