Natural Resources Committee on June 5th, 2014

[Jeff Labonté]

From a policy perspective, the department would certainly feel that it was a stronger bill. The previous version of the bill limited the liability to $650 million, whereas this bill puts it at $1 billion, so there's a fairly sizeable change. This bill has that liability phased in over time, which is responsive to what some of the stakeholders felt was the need over time to be able to get into the insurance market, to get the insurance required, and to put the fiscal elements in place they would want. That's moving from $75 million to $1 billion over a three-year horizon, starting at $650 million, moving to $750 million, $850 million, and then to $1 billion.

Bill C-22 also more clearly defines psychological trauma, one of the damages that is compensable under the bill, and how that would work over time and how it's associated with bodily injury. It was less clear in the previous versions of the bill. So the longer we officials have had to look at a bill, the longer we have had to try to optimize and refine it to provide as much clarity as possible. As you're parliamentarians, I'm sure you're trying to do the same thing, but time always limits the ability for you to look at everything as much as you can.

Bill C-22 makes explicit that the costs incurred by authorities in responding to an incident are not compensable by the operator. For example, if emergency services of fire, police, or whatnot responded to a potential incident, those costs are not reimbursable to the municipality or the province responsible. They're covered via the emergency services of that particular part of the country.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Whenever we're placing an additional burden on industry, we always want to know what the impact is going to be on the consumer, so I'm wondering if you can tell us what the impact will be. Are you expecting premium increases on electricity for homeowners?

[Jeff Labonté]

We expect that the change of the liability amount to $1 billion will substantially change the premiums in the insurance market for the operators. There are only three operators of nuclear facilities in the country that'll be seeking insurance, so the number of operators is small and the community of insurers is small and has to be approved. Under the bill the Minister of Natural Resources has to approve an insurance policy to make sure it's consistent with the act.

So there is going to be a premium increase. We expect it to be about five to eight times what is paid today. In Ontario, where there are the most number of reactors, that is expected to translate to about $2 per year for the average ratepayer.

[Joan Crockatt, Conservative, Calgary Centre, AB]

That's not five to eight times the electricity cost. The premium would be five to eight times what it is, basically.

[Jeff Labonté]

The insurance premium would be five to eight times what it is today.

[Joan Crockatt, Conservative, Calgary Centre, AB]

That's $2 per year?

[Jeff Labonté]

It's $2 per year per household, based on an average consumption. We don't have specifics on every household, but we kind of modelled the average over time.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Crockatt.

We go now to the official opposition, to Ms. Moore, for up to seven minutes.

Go ahead, please.

[Christine Moore, NDP, Abitibi—Témiscamingue, QC]

Thank you very much, Mr. Chair.

Mr. Labonté, as you know, disasters like those we saw in Fukushima, Three Mile Island and Chernobyl happen from time to time, despite the fact that these are very unexpected and unfortunate events. That is an undeniable fact. Such situations place the environment and public health at risk. In short, the repercussions are huge. Taxpayers may be liable for these repercussions for decades to come. Here in Canada, we have been very lucky so far.

I would like to hear about the worst case scenario you have imagined that could take place in Canada. What are the potential costs of such an accident in the worst case scenario? Do you know how much the three greatest global catastrophes cost, those being Fukushima, Three Mile Island and Chernobyl? Could you also provide us with information as to whether we have had accidents or near misses here in Canada?

[Jeff Labonté]

Thank you for your question.

I think your comment contains a few sub-questions. I would like to answer by making several points.

There certainly is a risk of accidents happening in the nuclear sector. The risks are there and it's always a possibility. However, we think the probability is very low. At the same time, we need a compensation system and legislation to protect citizens as well as every aspect of our economic activity, the environment and public health.

In developing Bill C-22, we have had many discussions with various stakeholders and with the population. We have imagined scenarios that could lead to an accident in Canada, taking into account our nuclear reactor's model, system and context.

With your permission, I will carry on in English.

We modelled the context—and certainly it was done a number of years ago—such that the design of the reactor and the situation provide for an incident contained within the design parameters and within the structures of the reactor. Procedures are built into the engineering to provide for things to shut down or to happen, and there are backup procedures and backups to backups that limit the potential for an incident to escalate into a more substantial incident.

The modelling looked at a scenario in which an incident would be contained within a nuclear facility. It also looked at a number of different contexts, one in

Gentilly, in Quebec, and another one here in Ontario, where there are reactors. In such cases, I believe the scenario would amount to $100 million, which includes costs and expenditures from an accident that would take place in the context of developing or installing a reactor.

In that context, it was believed to be in the order of about $100 million. The modelling did not model the scenario of a Fukushima or a Chernobyl, being that these are a very, very low probability and, if you will, very unique circumstances. In each of those, it hasn't been something that we've looked at in terms of trying to design a system to protect against those types of incidents.

In the case of Fukushima, I believe the cost of the Fukushima accident is in the order of $30 billion at this point and is expected to be much more as it goes on. It's a running total, if you will. In the Chernobyl case, I'm not sure of the figures for that one. It is not one in which the countries involved have been as transparent about the cost structures.

I think you had a third reference. Three Mile Island? For Three Mile Island in the United States, I'll have to get back to you on the exact numbers of that particular incident, although it's not considered a severe incident, if I could use language of that sort. There was one in the United Kingdom in the 1950s that was a bit more substantial in terms of an incident in which there was a release of radiation.

For the three examples that you have posed, certainly we can get back to you with the numbers, if you wish. On the design scenarios around the Canadian context, our colleagues at the Canadian Nuclear Safety Commission would have done and have done some modelling work also, and some work in terms of incidents, and may be able to provide further evidence and further information to you in response to your question.

[Christine Moore, NDP, Abitibi—Témiscamingue, QC]

Thank you.

I am indeed interested in seeing their modelling.

In Bill C-22, absolute liability is set at $1 billion. You mentioned scenarios that you had analysed, but those are not the worst case scenarios that could take place.

I know nuclear safety is very, very important in Canada and that it appears very unlikely for an accident to happen. However, the fact remains that such an accident would be quite costly. How can we ensure that taxpayers do not end up footing the bill?

[Jeff Labonté]

I think that's an important question, in the sense that the majority of the system begins with the design, implementation, build, and operation of the system, and the regulatory approach to ensuring the system is regularly developed, tested, and mitigated. On the work that goes in, there's a fairly substantial amount of work that goes in to protect taxpayers, to ensure that the system is designed well. There are prevention measures. There are exercises that are tested. There are a number of procedures in place that would prevent the worst case from ever even being possible. That's the most important point of all of the dollars invested in the investment of prevention and preparing for the possibility.

On the next step, you're right. The bill proposes $1 billion in absolute liability. That is a cap. It's a limit; there is a limit to $1 billion for the operators. The bill provides that should an incident ever appear to approach the $1 billion, or exceed the $1 billion, the Minister of Natural Resources would be obligated to bring to Parliament a report that outlines what said costs would be or what they're proposed to be, so that Parliament would be in a position to discuss and debate what response, if any, the government would choose to consider and invoke.

That said, I think it's important to point out that there are only three nuclear operators in Canada. Two of those operators are crown agencies. In other words, they're agencies for provincial governments. In fact, there are three, if we count Gentilly and Hydro-Québec in Quebec, although that particular facility is not operating right now. Also, there's one private operator, but in all instances, the reactors are owned by crown agencies.

There's an element of—how would I put it?—interaction between ownership of the reactors themselves, the operations of those reactors, and then the federal and provincial governments, in which you see an interaction between the law and the regulatory environment that's federal, and yet they're owned, operated, developed, and produced in provincial jurisdictions. There's an element of relationship between governments and between certainly how one would hold and deal with an incident should it ever exceed—which we don't expect it ever would, heaven forbid—the billion-dollar absolute liability amount.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Moore.

Mr. Regan, you have up to seven minutes, please.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you, Mr. Chairman.

Mr. Labonté, I don't recall if it was you before the committee when the previous iteration of the bill came here a couple of years ago, but as I recall, the officials told the committee that the $650 million in the bill, which was the absolute liability limit set at that point, was going to be more than adequate, and that a move to $1 billion would cause problems.

What changed?

[Jeff Labonté]

Time: I think the bill was here before committee four years ago, it might have been.

[Geoff Regan, Liberal, Halifax West, NS]

I don't recall exactly either.

[Jeff Labonté]

I wasn't the official, but I do believe it was four years ago.

In that time, we have had the chance to conduct further consultations and discussions with the insurance community, the operator community, and the global community. The movement has emerged globally, I think, in the insurance markets. I'm not an insurance market specialist, but our discussions have certainly provided us with confidence that the insurance market's ability and capacity to insure these activities is broadening, and is bigger than it was.

[Geoff Regan, Liberal, Halifax West, NS]

If there are already countries where the absolute liability limit is $1 billion, and obviously there are insurers providing that kind of coverage, why is there a need to have a three-year staged process at that level here?

[Jeff Labonté]

Actually, I don't want to mislead the committee. It's probably worth pointing out that there are only three or four countries that have over $1 billion. In fact, the European Union is in the process of moving to $1 billion overall; so it's a staged period of time.

The trend is that all of the global community is moving. Much of that, I think, is partly in response to better understanding and partly in response to growing and healthy insurance markets, which kind of move with economic cycles. It's also to be certain that their community is, if you will, changing the dynamic, and that's a factor of markets.

So there are a couple, for sure. There is an insurance community right now under the current act. That's the Canadian nuclear insurance association, the United States, the U.K., and another in Europe; so there are only four pools of insurance that we would accept as reasoned within the context of our act. There is a limited number, but those pools are made up of larger insurance companies that are globally based and have the assets and the segregation and the appropriate financial instruments to support the policies they have.

[Geoff Regan, Liberal, Halifax West, NS]

I think you're aware that in our second hour at committee on Tuesday, one of the witnesses was William Amos of Ecojustice.

[Jeff Labonté]

Indeed.

[Geoff Regan, Liberal, Halifax West, NS]

He recommended a number of amendments to Bill C-22. One of them called for the bill to give cabinet the ability to make regulations for the calculation of non-use environmental damages.

[Jeff Labonté]

Correct.

[Geoff Regan, Liberal, Halifax West, NS]

If the bill were to be amended to address this shortcoming, what specific clause or clauses would have to be amended?