Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 7 - Evidence, February 6, 2003
OTTAWA, Thursday, February 6, 2003
The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C-4 to amend the Nuclear Safety and Control Act, met this day at 8:35 a.m.
Senator Tommy Banks (Chairman) in the Chair.
[English]
The Chairman: Good morning everyone. This morning we are continuing to deal with Bill C-4, an act to amend the Nuclear Safety and Control Act. As the first of three sets of witnesses this morning, we have Rita Mirwald and Al Shpyth from Cameco Corporation.
I assume that you have some things to tell us about your views on this proposed amendment. Please proceed.
Ms. Rita Mirwald, Senior Vice-President, Human Resources and Corporate Relations, Cameco Corporation: Thank you for the invitation to speak to the committee. We are grateful for this opportunity because Cameco and others in the industry have been working on this issue for almost two years. We are very pleased that it has come to this point in the discussion.
I have been in the uranium mining and processing industry for about 22 years. During my career, I have worked for a provincial Crown corporation that later merged with a federal Crown corporation. That company was subsequently privatized and eventually publicly listed. I have been through the gamut of financing options available to companies such as Cameco.
Cameco Corporation is the world's largest producer and supplier of uranium. Our largest customer is the United States, to which we export about 65 per cent of our product. Fuel produced by Cameco accounts for about 10 per cent of the electricity generated in the United States; a substantial figure for a company such as Cameco.
We are also the world's leading explorer for uranium, principally in Australia and central Asia. Our vision is to become one of the world's dominant nuclear companies. To that end, we have taken several steps beyond our core business. For example, the company is involved in the landmark Megatons to Megawatts program between Russia and the United States to recycle Russian weapons-grade material to fuel U.S. electrical generating plants.
Today, one out of every 10 light bubs in the United States is illuminated by fuel from Soviet warheads and more than 7,000 have been recycled. Our company is very proud to have been part of that initiative.
We have also recently become involved directly in electricity generation as an equity owner. Currently, Bruce Power is our only venture in that field. The company also has a small stake in a nuclear medicine company and in a hydrogen company looking at use of hydrogen for transportation.
We are headquartered in Saskatoon, Saskatchewan. We are traded on the New York on Toronto stock exchanges. Cameco is particularly proud of being a socially responsible company and is recognized internationally as a leading employer of northern and Aboriginal Canadians. Residents of Saskatchewan's north comprise 50 per cent of our mine site workforce. This is a very impressive number considering that many of the other companies that are working to increase Aboriginal employment are happy with numbers between 10 per cent and 20 per cent. We are very proud of our 50 per cent and have a target of 67 per cent by 2010.
For Cameco, safety is the number one priority. Cameco has a lower frequency of lost-time accidents than both the Saskatchewan and Ontario mining industries for the past four years.
We are also working toward ISO 1401 certification for all of our operations. This is an internationally recognized standard for environmental performance. It is hard to achieve, and our employees are particularly proud of their efforts toward obtaining those certifications over the past two years.
Our core business has always been and remains uranium mining and processing, and our principal sites are in Saskatchewan and Ontario. In Saskatchewan, Cameco operates three uranium mines and mills and has a fourth under development. They are the world's largest and highest grade mines and mills. Our operations here in Ontario include a refinery at Blind River, which is the world's largest refinery of uranium, and a conversion facility at Port Hope, one of only four in the western world.
While not yet a core business, Cameco is interested in expanding into nuclear power generation, as I mentioned earlier. To date, the realization of that goal is our partnership in Bruce Power. As you no doubt know, Bruce Power is one of the world's largest nuclear generating stations with a total of eight reactors on a very large site. The station is capable of supplying as much as 20 per cent of Ontario's electricity and currently supplies about 15 per cent.
When the new partnership is officially in place, Cameco will own about one-third of Bruce and we will remain responsible for fuel procurement for the full term of the lease. The new partnership is expected to be in place about the end of this month. When that happens, the partners will be Cameco; the Ontario Municipal Employees Retirement System, OMERS, through a subsidiary of its own called "Borealis,'' and TransCanada Pipelines Limited.
The importance of the two newer partners into Bruce, Borealis and TransCanada, is significant in that we have two large Canadian companies, which have never before invested in nuclear, deciding to invest in nuclear electricity in Canada. That is a fundamental endorsement of the promising future of the nuclear industry in this country.
The partners have also retained a very competent and experienced team of nuclear operators, headed by Duncan Hawthorne, the CEO of Bruce, who is here today and will speak to you later this morning.
At that site, too, more reactors are scheduled to come back on in April and June. That will bring a total of six operating reactors to the site. Their electricity production will contribute greatly to meeting Ontario's supply demands and should reduce the need for the province to buy high-cost U.S. production, with which I am sure you are familiar.
The new partnership needs Bill C-4 passed and proclaimed as quickly as possible in order to make it possible for the partners and, indeed, for Bruce itself to access project financing or secured debt of any kind. The current wording in subsection 46(3) of the act represents a serious financial constraint and our bankers have advised us that unless modifications are made, no project financing will be available to us. Therefore, Cameco is fully sportive of Bill C-4.
The new language substitutes "management and control'' in place of "right to or interest in'' to keep the regulations in line with common law and Canadian government policy. Bill C-4 will allow investors in nuclear projects to use the option of secured debt, for example, a mortgage, which is a normal business approach to the development of large initiatives. Our shareholders and employees expect that Cameco as a Canadian company, operating in Canada and investing in Canada, will have ready access to normal commercial financing to support ongoing investments and to support new developments. They know we use credit to grow our company, to create jobs, to provide a reasonable return to shareholders, and to contribute to social and economic expectations.
Therefore, we believe firmly that the impact of the bill will be substantive and positive.
As a publicly traded company, Cameco, as I mentioned, was created by the merger of a federal and a provincial Crown corporation. That perhaps puts us in a unique position to comment on the significance of this bill. When we were a Crown corporation, the governments of Canada and/or Saskatchewan were responsible for meeting the financial needs of the company. However, the investment policy of Crown corporations is often very limited, either to within Canada, or, certainly during my time with the provincial Crown, to investment in Saskatchewan. When we had the opportunity to access private sector capital, Cameco built on those very same assets we had as a Crown corporation and expanded rapidly into other countries. Consequently, Cameco has become, as I have told you, the world's largest producer of uranium, with operations not only in Canada but in the United States, central Asia, and, of course, a growing interest in other sectors.
Once we had access to private capital, using the same assets, we were able to make significantly better returns for our investors, for Saskatchewan and for Canada as a taxpaying unit. It is our observation as we move around the world that unusual restraints on borrowing, specific to nuclear, as created by subsection 46(3) do not exist in these other countries. Indeed, worldwide, nearly half of the world's nuclear plants — and there are about 430 operating nuclear plants around the world — are owned by private industry. In other countries, as well, the private sector is evident in all sectors of the nuclear business.
We believe that constraints on borrowing are really constraints on growth of companies and industries.
Such constraints, if they were intended as a public policy, should not be implemented by regulation through an agency devoted to public safety such as the Canadian Nuclear Safety Commission.
In conclusion, I would like to note that Canada is a leader in the nuclear industry. Canada produces one-third of the world's uranium from facilities in Saskatchewan and Ontario. We produce a majority of the world's medical isotopes from power and research reactors here in Ontario. We have invented and operate successfully the CANDU nuclear reactor, and it is supported by engineers and suppliers across Canada.
Nuclear power has a bright future. Worldwide, nuclear accounts for about 16 per cent of all electricity, about the same as gas, just a little less than hydro, and of course significantly less — about a half less — than coal. However, if you think of the Kyoto commitments, you will perhaps agree that if emissions become a factor in influencing energy decisions, those percentages are likely to change.
There is, of course, also a strong business case for well-run plants. There are many U.S. examples of efficiently run, successful plants. We believe Bruce Power is a leading Canadian model.
The record of these best plants proves that best operators have the best safety records, the highest capacity factors and the lowest costs. Good nuclear operators provide price stability and price predictability for consumers.
There is also a strong environmental case for nuclear power. One tonne of uranium fuel can produce as much electricity as 150,000 tonnes of coal. That is an amazing ratio. Nuclear power is the second largest source of greenhouse-gas-free electricity generation in the world, second only to hydro; but, unlike hydro, not constrained by geography.
In the U.S., which has 103 nuclear plants, CO2 emissions are reduced by about 30 per cent annually as compared to emissions that would exist if the nuclear share were replaced by fossil fuels.
Canada and Cameco can share in a bright future. We need Bill C-4 to make it happen.
Senator Lynch-Staunton: Thank you for the presentation. I will stay away from any debate on the pros and cons of nuclear energy; otherwise, we will be here too long. I want to focus on the impact of the amendment being requested.
I have found no problem with the intent of limiting a lender's liability to the possibility of losing its loan and not being involved in problems with the facility with which he or she is bound by a loan.
I have been asking this question for some time and have yet to get a satisfactory, or even a reassuring, answer. Let us take the case of Bruce Power. Right now the reactors are being leased by an agency of the Government of Ontario or the government itself — it does not really matter — to a company called Bruce Power. Ontario remains the owner of the facilities.
Ms. Mirwald: Correct.
Senator Lynch-Staunton: Its liability continues as an owner, based on the wording of the amendment. Its status as a liable party does not change. Is that correct?
Ms. Mirwald: I am not a lawyer. Perhaps I could defer your question to Duncan Hawthorne, the CEO of Bruce Power. He probably has the substantive answer.
Senator Lynch-Staunton: Are you aware of anything in the lease that would exonerate the owner of the facilities from any liability?
Ms. Mirwald: The owner in the case that you are referring to is Ontario.
Senator Lynch-Staunton: These are questions. I can wait, but I do hope to get answers before the end of the morning.
Can there be a clause in the lease that would, in effect, supersede this amendment?
Ms. Mirwald: No, I do not believe so.
Senator Lynch-Staunton: Nor do I, but I would like to have a definite answer. Can there be a clause saying, "Notwithstanding section 46(3) as amended, the owner of the plant is absolved of any liability?''
Ms. Mirwald: I do not believe so. Again, I am not a lawyer, but I am sure we could find the appropriate witnesses for you. Mr. Hawthorne is indicating that he is prepared to answer those questions.
Senator Lynch-Staunton: Thank you.
There was one troubling statement by the representative of the Canadian Nuclear Safety Commission, CNSC, at our meeting on Tuesday — and I am not taking this out of context. We were asking about the financial guarantees that the Safety Commission is entitled to ask from licensees. He said that the commission was not absolutely certain that the Bruce Power licence is being fully honoured at the moment. I hope that this was drawn to your attention; and, if so, can you comment on that?
Ms. Mirwald: That was with respect to the financial assurances for operation. The reason they would state that is that in this particular window of time the new partnership arrangement has not been closed. However, it is still being honoured by British Energy. The current owners of the project are still providing the backup. However, the CNSC is aware that the transition will occur to the three new partners at the closing of the deal, which is imminent. It is scheduled for February 14.
The Chairman: Honourable senators, is it agreeable that we ask Mr. Hawthorne to leapfrog the agenda and join us now?
Hon. Senators: Agreed.
Mr. Duncan Hawthorne, Chief Executive Officer, Bruce Power: Mr. Chairman, the best thing to do is both introduce Bruce Power and address the questions as part of my remarks. That might be more comprehensive.
I am the President and Chief Executive Officer of Bruce Power. I am also the President of AmerGen Energy, which owns three facilities in the U.S. I am British Energy's director here in North America.
There has been a lot of discussion about Bruce Power, which owns and operates the largest facility in North America. It leases the facility. The facility has an installed capacity of 6,800 megawatts. Currently, half of the facility is operational and half is in a shutdown state.
Since Bruce Power was formed on May 11, it has been working toward the restart of two of those laid-up units. This is 1,500 megawatts of capacity. We are on target as we sit here to return those two laid-up units to service before this summer. In fact, our target is April and June to return those two reactors to service.
Since we acquired the facility on May 11, we have recruited something in the order of 400 young people to the site. We are in the process of recruiting another 200 over the course of this year. That will raise our over employee population to around 3,300 employees.
Obviously, the restart of a nuclear facility from a laid-up condition is a significant capital investment program. As such, we have spent over the course of the period since May 2001 almost $600 million Canadian in refurbishing the operational units and toward the restart of the laid-up units.
In all those cases we have had to rely heavily on our investors to finance all of that spent. Clearly, we have used a lot of the operational revenue from the running reactors to meet much of that commitment. However, the gap has been filled by further equity injection from our owners.
Since Bruce Power is the largest independent operator of an industry that is clearly capital intensive, this particular bill and the language in the existing subsection 46(3) prevents us accessing normal capital markets. Because of banks' and lenders' concerns about being caught by the current language, it is clear to the banking facilities that we are being restricted.
Clearly, the nuclear industry is a heavily regulated industry in its own right. We comply with legislation as it exists. As well as our normal operational challenges, British Energy, which at this point in time is the majority owner of Bruce Power with 82.4 per cent, got into financial difficulties around September.
A condition of our operating licence is that the owners of Bruce Power must post financial guarantees. Those guarantees are designed to provide for costs that the business may incur in the very unlikely event that a shutdown of operational units were to occur, leaving Bruce Power with no source of revenue. In that event, our regulator, the CNSC, established the importance of having available to us sufficient funds to meet six months of our operational costs. The total sum of that was $264 million Canadian. The way that was actually provided to the CNSC was in the form of letters of financial guarantee from Cameco with respect to their 15 per cent ownership, and from British Energy with respect to their 85 per cent ownership. In actual fact, this guarantee is against what we would refer to as a contingent liability — i.e. the funds are not required to be posted; they are required to be available in the low probability event that they would be required.
When British Energy got into financial distress our regulator, quite appropriately asked for confirmation that the guarantees were still in full force and effect. For a period of time, whilst legally British Energy were able to say that the obligation remained theirs, they could not officially point to a bank account that had such funds available to them. Over the period of several months, we worked with the CNSC to demonstrate that the liability could be met through financial support that British Energy was receiving from the U.K. government. Effectively, licence condition 11.3, which is the clause that raised the senator's questions, is indeed in compliance as we sit here today. It is in compliance because British Energy continue to provide a letter of financial guarantee supported by funding made available by the U.K. government for their 85 per cent. During that entire period, the Cameco portion remained intact.
As part of the transition to change in ownership, we have already provided to the CNSC draft letters that demonstrate that each of the new acquiring partners will step up for their appropriate pro rata portion of the guarantee. In a seamless transition, the U.K. government's support for 85 per cent of the guarantee will fall away, simultaneous with the positioning of three new guarantees, each for 31.6, which represent the three new ownership interests. Thus, there is never a period of non-compliance. Nor is there ever a period without the guarantee.
Obviously, that is intended to be against the low probability event of a shutdown. It was mentioned earlier in the questioning the position of Bruce Power. Clearly, we lease this facility. As the tenant of the facility, we are libel for all the operational expenses of it. For example, there is a requirement for nuclear operational insurance in the amount of $75 million. That is Bruce Power's liability; that is our obligation as the operator of the facility. We have to meet all the regulatory requirements as the operator of the facility.
However, as the tenant, the landlord is not absolved from ownership responsibility. That remains with the owner. We have clear operational responsibility for meeting all legislation as it applies to the operator of the facility. The initial term of the lease runs until 2018, with an option to extend for a further 25 years. The owner retains responsibility for all decommissioning of the facility and for all spent fuel of the facility. Bruce Power's obligation is to operate this plant in compliance with all legislation, and to maintain the facility in a condition appropriate to performance measures related to CNSC regulations and what is termed to be good utility practice.
There is no break in responsibility. There is no ability for the owner to relieve himself of ownership responsibility. The lease itself is actually furnished to the CNSC and it must be in full compliance with all regulation. CNSC has oversight of the lease. It would not be possible for a change to the lease to occur that breaches or undermines any legislation in place, since the lease is part of the overall licensability of Bruce Power.
I have not gone into great detail about Bruce Power and I have not followed my script of information. There is clearly an understanding of the restrictive nature of the current language. I am pleased to hear there is general support for the language of change. It is not in any way an attempt by Bruce Power or, indeed, the nuclear industry to absolve itself of responsibility as an operator. We seek uniformity, if you like, with other jurisdictions. I have worked for five years in the U.S. plant. I worked for over 20 years as part of our AmerGen plant in the U.S. The legislation currently in place here is not symmetrical at all with anywhere else. In the U.S, those people in operational charge and control — owner-operators — are fully liable. Similarly, in U.K. and Europe the same legislation applies. There is no other jurisdiction that I am aware of that reaches beyond owners and operators of facilities to capture nuclear liability risk.
The Chairman: Just to further clarify the question asked by Senator Lynch-Staunton, clearly a lease cannot obviate or override a law. However, are there words in your lease with Ontario, such as "indemnify'' and "save harmless,'' that have to do with operational aspects and the liabilities that might arise therefrom?
Mr. Hawthorne: No, the language in the lease that refers to regulatory compliances is very clear. The issue is that the lease language talks about how the liabilities are split between operational control and ownership. There is very clear demarcation between how we as the operator must comply with all legislation, meet all operational regulations, and assume all risk for any further changes in legislation. For example, as the Senate recommended previously in the reports that I have read that the insurance coverage should be increased to some other number — that is entirely the responsibility of Bruce Power.
In a similar vein, if the commissioning rules should change requiring further support for decommissioning, then that is the responsibility of the owner and as such, that obligation would fall to them. This is, frankly, why the CNSC in matters of decommissions have always referred to the provincial government; they are ultimately the shareholder of Ontario Power Generation and have the responsibility for ownership matters such as decommissioning and clean-up costs.
The Chairman: Will the mandated contributions to the WMO be made by you or by Ontario?
Mr. Hawthorne: They are made by Ontario.
Senator Lynch-Staunton: In simple terms, can we say that it is a landlord-tenant relationship, with each carrying on certain responsibilities, which are well expressed in the lease?
Mr. Hawthorne: That is correct.
Senator Lynch-Staunton: This is getting beyond the amendment before us. We now, hopefully, will have strong shareholders in Bruce Power, whereas in the last few months it was found that the majority shareholder was unable to carry on.
If there had been contamination during that company's ownership, with its financial problems, who would have stepped in to make up for whatever financial requirements were necessary?
Mr. Hawthorne: There are two separate aspects to that, senator. The first issue is that even though British Energy, our major shareholder, may have been in financial distress, Bruce Power had the operational obligation. There was never any period where Bruce Power did not have its insurance coverage and all the things you would expect it to have as part of this particular piece of legislation. That was never in question. The day-to-day operation of Bruce Power was totally unaffected by British Energy's position.
The issue with British Energy was much more to do with contingent liabilities and access to funds to pay salaries, et cetera. It was never a safety issue. That is why the regulator was never particularly concerned about the operational safety of the site. All of the regulatory requirements in terms of maintaining adequate insurance and all the things that truly would have been judged to be default under our regulatory regime remained in place through the entire period.
In the postulated event, Bruce Power would have responded to that in the same way as it will under the new ownership. As the operator, Bruce Power is really the part of the operation that is regulated and under rules, and that never really changed during British Energy's financial position.
Frankly, the issue of British Energy's financial position merely heightened the anxiety about Bruce Power's inability to access normal capital markets. The reality is that Bruce Power has had a very good operational run. We have improved the operational safety of the site. We in our own right had a very strong balance sheet.
Given those scenarios, without this legislation, when our major shareholder had gotten into difficulty, I am very confident that without this language being in place we could have, in fact, have secured Bruce Power's position by accessing capital markets and funding that were closed to us because of this particular piece of legislation. What this did was to limit our ability to achieve a solution that our balance sheet would have allowed us to achieve.
Senator Lynch-Staunton: Bruce Power is a viable operation. I see the last report was very encouraging. Is it correct that its shareholders' financial obligations are limited to putting up their pro rata share of their operational guarantees?
Mr. Hawthorne: There are two elements that must be addressed. First, Bruce Power as we sit today has to trade off the credit rating of its shareholders. That is in two areas. We sell long-term power contracts. In doing so, you want to see creditworthy counter-parties on both sides of that transaction. The Enron situation is a good example of how, if you do not have creditworthy counter-parties on both sides of it, there is a risk of default.
Because one of our major owners, British Energy, effectively lost its investment-grade credit rating as a result of their financial distress, it has been necessary for us to post capital to allow us to continue our trading activities. As of today, the U.K. government has posted more than Can. $300 million to allow us to continue to sell our power. Again, that is an anomalous situation created by British Energy's financial situation. It would fall away immediately on financial close of this transaction because our three new owners are clearly strongly credit-rated companies and the need to post credit would fall away.
Currently, Bruce Power's financial support is in the form of capital posted to meet trading needs and a sum of money being made available to meet contingent liabilities.
Senator Lynch-Staunton: The borrowing that you would be able to have now from the banks once the amendment is approved will be secured loans, backed up by something?
Mr. Hawthorne: There are many options, senator.
Senator Lynch-Staunton: I do not want to pry into your internal affairs.
If the loans are secured by leases or mortgages or property, it means that in the bank, in case there is a problem, will have an interest in the operation, will it not?
Mr. Hawthorne: Obviously, project financing and the way it is structured always has the risk of intervention in the decision-making.
Perhaps, I can provide the committee with an example that might give you a view of how things are impacted by this.
At this point in time, we are in the process of placing a contract to replace all of the turbine rotors on all of the Bruce "B'' reactors. These reactors are 20 years old. At this point in time, you expect a significant capital investment to maintain and prove the operational life. We are in the process of getting that contract with GE. I am not giving away confidential information because we have been through a competitive process. GE told us in writing that if this language were to change, then they would be prepared to lease these items for us. It is a $151 million capital investment. Because of this language, we have to buy them outright from the cash in the business.
It is not that we cannot proceed, senator. It is simply that normal, commercial activity would allow us to lease these facilities, amortize the cost over the operational life and create a better balance sheet for Bruce Power, allowing us to free up funds to do other things. The vendor is prepared to do it, but is concerned about the risk of nuclear liability. GE has a very good example of how this works.
Following GE's example as to why they are concerned. Here is a major U.S.-based company concerned about the prospect, in a litigious environment in the U.S., that there is a catchall clause here that they can lend us cash and leave themselves exposed to potentially an enormous nuclear liability — far and away beyond the cost and value of the contract that they have. GE is the major supplier to all nuclear plants in the world, and they cannot do the normal business here in Canada because of this language.
Senator Lynch-Staunton: What is so magical about the fourteenth of February, if anything?
Mr. Hawthorne: The reality is that British Energy is receiving cash support from the U.K. government. The U.K.'s government intervention is based on a principle of security and safety of supply in the U.K. It is a reasonable position for the government to take.
British Energy continues to own overseas assets. One of the things that has come under close scrutiny in the U.K. and the European Parliament, is what would be considered to be state aid, because it would be unfair competitive behaviour in the U.K. market.
To protect themselves from such a criticism, the U.K. government said they were prepared to offer financial support to British Energy, including to its North American operations, as a means of facilitating an exit for all North America in a timely fashion and in a way that would actually recover value to the U.K. business. It would help to repay them for the credit they have extended. They set a deadline to say that by February 14, if the deal is not concluded to complete the Bruce transaction, then they will remove their financial support.
As I stated there is more than $300 million supporting trading activity right now posted here. Obviously, we do have parties interested. We have a transaction that is proceeding well towards close, but February 14 is the deadline set by the U.K. government.
Senator Lynch-Staunton: Thank you.
The Chairman: Is the February 14 also the day of the close of the share transfer that is contemplated?
Mr. Hawthorne: It certainly is around that date. There are a number of things that are required to achieve financial close. British Energy requires shareholder approval at an extraordinary general meeting, which is set for February 10. There are federal tax rulings that all parties require, and there are also provincial tax rulings that all parties require. We expect to receive the federal ruling, perhaps, this Friday, or the latest, Monday. Following that, we believe the provincial rulings would come in four or five days thereafter.
An optimistic view would be at the general meeting on February 10 for British Energy, and financially close within 40 hours of that. However, the more likely is that because of the tax rulings, it would be at February 14 before we can close.
The Chairman: Thank you.
Senator Spivak: I have no difficulty, as Senator Lynch-Staunton has said, as to who is exempt from liability. I am not clear about who is responsible for the liability. It seems to me that you said that decommissioning is spent fuel, anything to do with that is the responsibility of the owner, who is the Ontario government. Is that correct?
Mr. Hawthorne: That is correct, yes.
Senator Spivak: I know that all facilities have to put away monies for all these tremendous costs. Those monies are coming from the Ontario taxpayer.
Mr. Hawthorne: Perhaps it would be helpful if I explain how the lease is structured because it might provide some comfort. Because of my experience in the U.S. where we acquired three facilities, I can compare and contrast them. It may help the committee to understand things.
In the U.S. when we acquired facilities there, the nuclear regulatory commission was interested to know how decommissioning liabilities were actually made. In the U.S, nuclear regulators are controlled by what is called a "ruled- based regime.'' There is a particular rule 10CFR50, which says every year there will be an assessment of the decommissioning liability. There is a formula that says how much each utility must have in a fund to meet that perceived liability, based on the remaining life of the asset. However, in the case of a transaction and a change in ownership, the regulator requires that there be a cash top-up of the decommissioning fund to ensure that at financial close there were sufficient funds to meet the decommissioning liability.
When we acquired plants in the U.S, the owner had to put the funds in place so the decommissioning liability was always met. Regardless if we had closed the plant the day after, then funds were available to decommission it, because we were buying from one private sector company and transferring to another.
In Ontario, that was an issue. If you think about it, the very first day you power-up a nuclear reactor, you have incurred decommissioning liability because from that day, then you have clean-up costs.
We acquired the Bruce facility 20 years into its operational life. One of the issues then was that because it was a Crown corporation, you could not point to the cash that would meet that decommissioning liability. In structuring the transaction for the lease, we made an up-front payment, and we paid base rental payment on an annual basis from now until 2018. Those funds are calculated to be sufficient to meet the decommissioning liability when it falls due. We are, through our operational lease, funding the decommissioning liability where it was never previously cash. We pay that to Ontario Power Generation to build up the fund. That is inclusive of the 20 years of liability that was incurred before we arrived. Nonetheless, the fund is met through our operation.
The responsibility for decommissioning, however, resides with the owner. Therefore, in a simple way, we provide the cash to do it; we hand the facility back to them, having completed our tenancy, defueled the reactors, put the fuel in the fuel pool, hand the keys back, and, using money that we have provided, the owner then decommissions the facility.
Senator Spivak: What about the insurance? That is $75 million for third party. Who is the third party?
Mr. Hawthorne: As the operator, we are required to have valid insurance in place in full compliance with legislation. In the U.S, the quantum is significantly different from Canada. In our U.S. facilities, we have the same issue: As the operator, we must maintain insurance. In the U.S, we pay into a nuclear pool. The entire industry in the U.S. pays into a cooperative pool. Each operator pays around $88 million, and that pool currently has $9 billion in it.
Senator Spivak: What is the insurance?
Mr. Hawthorne: The insurance for each facility is $200 million U.S. As an operator in the U.S, we retain insurance for $200 million U.S, and also pay $88 million into the central nuclear fuel. It is called Nuclear Energy Insurance League, NEIL. That group manages a $9 billion fund to meet any nuclear event beyond the $200 million that any facility should incur. Above that ceiling, then the federal government has the responsibility.
In Canada, regardless of the lease, all operators are required to have insurance to the $75 million limit, which is set in legislation. We have that obligation. We maintain that obligation as the operator.
Senator Spivak: Past that $75 million limit, it is the federal government that has responsibility.
Mr. Hawthorne: Correct.
Senator Spivak: Thank you.
Senator Milne: Mr. Hawthorne, how many people are employed right now at the Bruce?
Mr. Hawthorne: Today there are 3,263 employees.
Senator Milne: I should tell you that probably Senator Eyton and I are the closest two senators to Bruce Power. I have farming relations in the area. I know that much of the rural farm income in those two counties comes from Bruce Power.
Mr. Hawthorne: That is correct.
Senator Milne: It is a major employer. Is it the major employer in the area?
Mr. Hawthorne: Yes, senator. As a rural community, yes.
Senator Milne: If the bill does not go through, what happens to the jobs after February 14?
Mr. Hawthorne: Obviously, we are in a growth strategy. I would be misleading the Senate if I said that immediately everyone is under a threat. The issue is not about threat; it is about loss of opportunity.
I mentioned that there are four laid-up reactors. We are in the process of restarting two of those. It is clear that the province of Ontario is chronically short of generation. We have, perhaps, sitting in our other two laid-up units the cheapest new generation available to the province. I believe that having successfully restarted units 3 and 4 — which we will do by this summer — the potential to do the same with the other two is very strong. That is a more capital- intensive project.
I actually see Bruce Power as being the jewel in the Canadian Crown in terms of nuclear plants. I am somewhat disappointed to find out that more people are not aware of its existence. I have been in Ottawa and spoken to many people, and it is surprising how few people know where it is. In that community when we acquired the facility, four units were operational. The other four units were laid up. Over 600 employees on the site had letters that they carried with them informing them they were about to be force-transferred from that location to other locations in downtown Toronto, in Pickering and Darlington because Ontario Power Generation were running down the facility.
In a community that is so heavily invested, you can see what a devastating effect it had — not only on the economy, but on the people who had grown up in that community and were forced to leave it in order to make a living because there was no credible alternative. We tore up all of those letters on the day of financial close. We have recruited 400 people since then. It is much more about growth and development. I am very proud of the impact we have had in the community. Anyone who visits the location could not fail to see the growth. Regardless of political stripe or affiliation, you cannot come to the community and not see new houses, new medical centres, schools that have been prevented from closing, and 400 young people who have not had to leave their place of birth to find a job. I see that only as good news as the result of the introduction of private sector financing and operational into a declining industry.
Senator Milne: I should point out to the senators who do not know that particular area, this is a farming area, but it is not a good farming area. This is an area of trees and rocks and swamps with a few fields in between. When off-farm income is lost, it quite often means that the home is lost. I would not call Pickering or Darlington anywhere near downtown Toronto, but having to move in an area like that where you probably would not be able to sell your farm is devastating to the local community.
Senator Eyton: Thank you for your presentation, Mr. Hawthorne.
I had a variety of questions about structure and you answered almost all of them very, very well. I can tell you I support the bill and its general purpose.
I recognize that Bruce Power is only an example of a beneficiary under the proposed amendment. On the original structure, which goes back now 20 years, was there any conventional financing in place then, or was there no need for financing at all?
Mr. Hawthorne: At that time, all of the build was either federal or provincial. There was no need for access to markets in order to fund the job.
Senator Eyton: There is a new need and the amendment at this time is responding to that new need?
Mr. Hawthorne: That is correct.
Senator Eyton: There have been references to owners and shareholders. What is the present structure? Is it a partnership or is it a corporation with shares?
Mr. Hawthorne: I know I sort of skimmed over everything in an effort to get to the heart of the issue.
I believe Bruce Power is a partnership in every sense. There are five owners of Bruce Power. This is a unique situation. Under the new arrangement, Cameco, TransCanada and OMERS Pension Fund together will own 31.6 per cent. You see that does not add up to 100. Our unions will hold 5.2 per cent of the equity; the Power Workers Union, who represents 2,300 of our employees, will own 4 per cent, and the Society of Energy Professionals, who represents 700 employees on the site, will own 1.2 per cent. We have sought to create a partnership with our employee groups.
It is not a publicly traded company. We have three investors who have put cash in, and two unions who have been given equity to create the partnership that is Bruce Power.
Senator Eyton: Looking at the new amendment, the key words are "owner,'' and you are telling the committee the owner includes the Ontario Crown Corporation, plus Bruce Power and the significant partners or all the partners in Bruce Power?
Mr. Hawthorne: In the purest sense, the owner of the facility is Ontario Power Generation, and their shareholder is the province. The owner of Bruce Power are the five groups I have mentioned, and Bruce Power is the tenant of the facility.
Senator Eyton: Perhaps, they are not owner, but they would certainly be occupants.
Mr. Hawthorne: Yes, we are obviously the licensed operator of the facility, Bruce Power. Everything, if you like, in terms of operational liability resides with Bruce Power as the intended operator.
Senator Eyton: And its partners?
Mr. Hawthorne: Correct.
Senator Eyton: Are you happy to assume that liability?
Ms. Mirwald: Yes, we are.
Mr. Al Shpyth, Director of Government Relations, Cameco Corporation: Senator, the bill does not change that part. The owner, occupant, operator responsibility was there before, and it is still there. It changes the words again "with an interest in'' to "management control.''
Mr. Hawthorne: I like to talk plainly about these things. The way it is explained to me by the banks when I speak to them. This particular language is similar to I go to the bank to ask for money to buy a car. I go out in the car, and I have an accident, and then I actually expect the bank to pay for that, because that is what this language effectively does. That is why the banks have problems. They have no problem lending you cash to buy a car, but if you go out and smash into something, why would you believe they have some liability for that? That is, in a simple terms, where this issue is. If I am the operator and I assume full, responsibility — it is my driving licence, I have to have insurance, I have to keep the car road-worthy, and I have to do all of those things because I am the operator. Until I pay the loan, the bank, in theory, is still the owner. Is it reasonable, though, to expect them to meet the costs of my accident and to absolve me of the responsibility? That is what the language currently looks like to a lending facility such as a bank.
Senator Eyton: On the dating itself, it seems there is an almost manufactured urgency because this bill came so late to the Senate. Is there any flexibility in the February 14 date? It is not too far away.
Mr. Hawthorne: That is an interesting question. Since I am a political spirit, it is kind of hard to say how much I can influence the U.K. government. The reality is that there has been a lot of opposition to the financial support for British Energy. There have been a number of appeals to the European Commission by various companies and indeed by nuclear activists suggesting that it is entirely inappropriate for the U.K. government to use U.K. taxpayers' money to subsidize a North American operation.
In that backdrop, there has been a sense of urgency for a long time to take this transaction where it is. A "line in the sand'' was drawn around those dates. There is also another date for exit from the U.S. of June 30. These dates have been through the European Commission.
Could we change them? Perhaps. However, in the time we have left, it could be very difficult.
It would be wrong for me to say that, having got the deal very close, that someone would prevent realizing it. It would be wrong to say that. However, I have to say the dates are very well publicized and they have certainly been portrayed to me as a very hard line.
Ms. Mirwald: On behalf of this group of owners, we have been working on this since May of 2001 when the issue became clear to us. We did have it taken forward in Bill C-57 in the last session, and we were caught in the proroguing of Parliament. Hence we find ourselves caught in a rather short time frame which we regret as well.
Senator Christensen: Obviously the need for financing by Bruce Power has brought to light this obvious defect in the legislation. Has Cameco, as a player in the nuclear industry, had need to go to the public sector for funds and, if so, have you had problems in the past?
Ms. Mirwald: In the time since this regulation has been the law, we have not had the need to go for project financing. The last big project we did before the increased investment in Bruce was the McArthur River mine in Saskatchewan. We were able to fund that with internal cash flows and the credit facilities that we had at the time.
No, we have not yet faced it. However, we are advised when we visit our banks, as Mr. Hawthorne mentioned, that were we to come with a project-financing request — perhaps for our Cigar Lake mine which is under development — that we would get the same answer that Bruce has.
The Chairman: Would the bank make a distinction between a loan for the purpose of operating a mine on the one hand and operating a nuclear generating facility on the other?
Ms. Mirwald: It would appear not. They would give us the same answer. They are concerned about the nuclear liability there as well.
Senator Lynch-Staunton: Other than requiring financial guarantees, what does the CNSC do? Do they have a person on site keeping an eye on things?
Mr. Hawthorne: Yes. As part of the normal operation of Bruce, there are seven CNSC inspectors on site who oversee our operation. They provide regular reports to the commission on the operational safety on the site. They are permanently based on our facility.
Senator Lynch-Staunton: What are their qualifications?
Mr. Hawthorne: The CNSC monitors in various areas. They put experts in safety analysis, security, health and hygiene, and environmental. They tend to cover the entire sphere and they try very hard to mirror the expertise within our own departmental functions. The way the CNSC is structured, there is a director responsible for Bruce Power; he is a senior member of CNSC staff. He is permanently based on our facility.
Senator Lynch-Staunton: The Americans have a similar nuclear regulatory commission making inspections. What is your experience with them and how does theirs compare with ours?
Mr. Hawthorne: As I said earlier, the U.S. regime has what is called a rules-based regulatory framework. That means, effectively, that every licensee has a standard licence. You can go to any nuclear plant in the U.S. and "Condition 7'' will be the same on every one, and all utilities have to behave to the same rule.
Here in Canada, the regime is very similar to the U.K.; it is less compliance-based and more judgmental. There are regulations that have to be met, but the licensee is able to advance technical arguments, which are assessed on their merits. Each operator may have variations on its licence. For example, on our facility, we have Bruce "B'' and Bruce "A'' and the licences are not the same because they are crafted to be unique to the conditions you find on that site.
That creates perhaps more of a regulatory burden for the regulator here, but it also creates a more focused licensing environment. That is supported by the fact that the people from the regulator who are on the site are very expert in the licence as it applies to that facility.
In the U.K., it is perhaps somewhere in between. The U.K. has what is called a "self-regulating environment.'' In that case, the regulator approves your arrangements and then just samples your performance against those. There are three slightly different ways of doing it. All of them have the same basic principle but the obligation to comply is on the licensee, and the regulator's oversight is to ensure compliance.
Senator Lynch-Staunton: Senator Spivak brought up the $75 million liability insurance requirement. In the U.S., it is substantially higher. Would you have an objection if an amendment were made to that act and the minimum amount were increased to something more realistic?
Mr. Hawthorne: At Bruce Power, our job as an operator is to comply with legislation. I personally have no objection because, if it provides comfort, that is fine. Frankly, in the U.K., it is £140 million, which is about $350 million. There is also a central, independent panel fund.
Senator Lynch-Staunton: They have a pool as they do in the States?
Mr. Hawthorne: Yes, there is a European pool under the Brussels Convention. The U.S. model has the NEIL insurance pool with $9 billion in it. The Brussels Convention is again a pool concept. I understand that there is an intent to review it here. As an operator I can understand your logic in that and, of course, we would not object to that.
The Chairman: Just for clarification: Beyond the $75 million minimum requirement, there is the additional, ongoing contribution which operators all make to the WMO which would account for the decommissioning of spent fuels.
Mr. Hawthorne: Yes, that is correct. That is different.
The Chairman: I wanted to make sure that we all knew that. Thank you very much.
Welcome to our next two witnesses, who wish to appear as a panel.
[Translation]
Mr. Shawn-Patrick Stensil, National Coordinator, Campaign for Nuclear Phaseout: My name is Shawn-Patrick Stensil and I am the coordinator of the Campaign for Nuclear Phaseout.
[English]
I may be unknown to you and that is probably because this is my first Senate presentation. Being an avid CPAC fan, I know that the hard questions on Parliament Hill tend to come in the Senate meetings, so please be nice.
The Campaign for Nuclear Phaseout is a pan-Canadian campaign supported by a coalition of organizations, including to my right, Ms. Elizabeth May of the Sierra Club of Canada, Greenpeace, Energy Probe, and a number of regional groups such as the Interchurch Committee on Uranium Mines and New Brunswick's Green Energy Coalition. Throughout our 13 years, we have advocated for Canada to phase out its nuclear reactors. I am sure that you can imagine what side of this bill we are on. Our position is based on a number of experiences in Europe, for example. I mention this in my brief.
Most of the world is phasing out its nuclear reactors. They are looking at the environmental and financial risks. As we can see today, the risks are quite high and countries are choosing to shut down their reactors as an encompassing way of looking at their nuclear energy policy. Belgium is one example. They passed legislation last December to close down all of their reactors by 2025. This is not a small thing. Belgium is a Kyoto signatory. They derive 57 per cent of their energy from nuclear power. This is the path that the world is taking. I would encourage the committee to think of it in that way.
In our current campaigns, we are working against the re-tubings in New Brunswick regarding Point Lepreau, which has been mentioned in these hearings, as well as Gentilly 2, which may need to be shut down in 2008.
I would like to contextualize this legislation a little bit. It has been argued that this bill puts the nuclear industry on equal footing with other industries. Unfortunately, though, the nuclear industry already receives a great deal of favourable treatment. Therefore, that is a fallacious argument.
It has also been argued that it is a small anomaly. In doing this, how do we make an industry that is already somewhat inoculated from responsibility, more responsible? Is this in the public interest and does it expand or enhance public welfare? Our argument would be no.
I will turn to the bill. I am not a lawyer. My colleague Ms. May is. However, I will give you a plain reading of this.
The proposed legislation states:
Where, after conducting a hearing, the Commission is satisfied that there is contamination referred to in subsection (1), the Commission may, in addition to filing a notice, under subsection (2) "order that the owner or occupant of, or any other person who has the management and control of, the affected land or place take the prescribed measures to reduce the level of contamination.
It has been argued that this is it unlimited liability, and the investors are being somewhat skittish. This does not read as a liability. This reads as discretionary responsibility that a regulatory body could choose.
Arguing that this is unlimited liability does not seem too cogent. It is not that a lending organization would be liable by fact. It would be done after public hearing where the public would have their say and be able to talk about what is in the public interest. It also assumes that we would have a very aggressive CNSC and that we would go logically from the occupant or the owner straight for a lending organization. This does not seem logical to me. The proponents of the bill are misrepresenting it.
The Nuclear Safety and Control Act deals with things off-site, but the requirement for $75 million insurance is the lowest level in the world. We are talking about an industry that is already well-protected. Investors are already aware of the massive risks in a nuclear station. Perhaps that is telling us something. Perhaps that is telling us that this industry could not stand on its own feet if it were to play fair like everybody else.
I would encourage you to abandon this bill. I would recommend that instead of making these small ad hoc changes, there be a review of Canada's nuclear energy policy. The industry has existed for 50 years. We have put $70.5 billion in subsidies to the industry. Meanwhile, we keep making small cosmetic changes without looking at whether it is worth the risk. I would say no.
Ms. Elizabeth May, Executive Director, Sierra Club of Canada: I appreciate the work of various clerks for coordinating efforts and that Senator Oliver released me from the Agriculture Committee to be with you here this morning.
The bill before you is unique in my experience. I do not know how you will handle clause-by-clause. You are done before you finish the sentence.
I gather from my colleague, Mr. Stensil, that a particular company that is in great financial difficulty needs this clause. I read the British papers, so I know that their difficulties are not confined to Canada. That company is a poor credit risk and is known to be relying on ongoing government bailouts by the British governments to stay afloat. They now have interest in the Bruce Nuclear Power Plant and are claiming that the mere fact that the Nuclear Safety and Control Act includes the words in subsection 46(3) "any other person with a right to or interest in,'' is a bar to their commercial success.
We have only their word for that. It seems unlikely, and I would again reaffirm the points made by Mr. Stensil.
When you review the scheme of the legislation, there is nothing here that suggests automatic liability. There is nothing here that suggests that it would be routine to look towards a lender. Any lender could, ultimately, become an owner.
However, there must have been some reason that the legislation was drafted in the way it was. Certainly, the house committee, in their transcripts, and also, I imagine, your committee, has explored the reasoning behind the language that was accepted in 1997, why it was put there and what Justice Department advice was taken. It appears to have, within five years, vanished, and become unavailable to us to understand why the specific words "any other person with a right to or interest in'' were used five years ago.
It is not a good idea to pass a particular bill to deal with one particular case. It is an odd way for a Parliament to legislate. This is clearly something that has come up in regard to a particular financial problem that has alleged to occur for Bruce Power.
As it stands, the Nuclear Safety and Control Act does not give us much confidence in the safety of the nuclear industry. I say this knowing I am on the record: The nuclear regulators in this country have always been quite close to the nuclear industry that they regulate.
The public interest has not been served. We need to have a full review of this industry. When I read the words of the Honourable Herb Dhaliwal that "Bill C-4 will put the nuclear industry on an equal footing with other industrial and power generation sectors,'' I wonder if we are about to take away the subsidies to the nuclear industry so this industry can be placed on an equal footing. We still have before the federal court in this country the lawsuit that we filed over the fact that the largest external loan in the history of Canada, $1.5 billion, was made available so that a nuclear reactor could be sold to China and they could pay for it with the money that we lent them. This is not an industry that has ever been on an equal footing. This is yet another concession. It is also a concession that is designed to increase the likelihood of other private sector owners moving into the nuclear industry.
I am not a fan of monopolistic enterprise running any operation. One could safely say that the Sydney Tar Ponds are where they are and are as bad as they are — with all due respect, Senator Buchanan — because we did not have a private sector owner. Everyone was concerned about keeping people afloat so the mill went on even when it lost money. I think the market and its ability to root out the things that do not make sense has a benefit.
In this case, there is a concern about privatizing nuclear because of its very high level of risk. It is not your average industry. That is why it has all the bills surrounding it such as the Nuclear Liability Act to hold damages for which the company would be liable up to $75 million but not more. The damages from a severe nuclear accident can be in the order of thousands of lives and billions of dollars. We have been very fortunate not to have an accident like that and I hope we never will.
However, to create legislation with the sole purpose to increase the livelihood of private lending to private owners of nuclear power plants should not happen through the back door with one clause. It should be debated as a policy change. It should be brought before the people of Canada and the Parliament of Canada as a discussion that is long overdue not only about the role of nuclear energy in Canada and the extent to which it receives subsidies but also whether the appropriate course is trying to keep aging reactors afloat by bringing in private sector investors. That question deserves to be debated, not whether it is appropriate to change "any other person with a right to or interest in'' and substitute "any other person who has the management and control of.'' That is not the level of debate that an issue of this importance merits.
Senator Lynch-Staunton: I am sorry that your strong feelings about nuclear energy have clouded your appreciation of the intent of this clause — namely, that all we heard earlier and on Tuesday is completely wrong. Unless you want to try to convince me, I do not understand what you mean when you say that Bill C-4 is an initiative of Bruce Power that would further insulate the nuclear industry from the true cost of nuclear energy. What does that mean with reference to the amendment before us? How did this amendment insulate the industry from true cost of the nuclear energy?
Mr. Stensil: The industry is already protected in a number of ways.
Senator Lynch-Staunton: We are talking Bruce Power. This amendment to a government bill is being done at the request of the Bruce Power and others may benefit from it. What are the advantages you see that Bruce Power will get out of this by being insulated from the true cost of nuclear energy?
Mr. Stensil: This bill takes the power of a regulator that would seemingly work in the public interest to ask a licencee or someone else to clean up a contaminated site. Those costs can be very high. We may need deep pockets for that.
Senator Lynch-Staunton: Who is removing the responsibility of cleaning up the contaminated site?
Mr. Stensil: It is asking supporters of the industry.
Senator Lynch-Staunton: Who?
Mr. Stensil: The "right to'' or "interest in'' — whoever is worried about that. I have been thinking about the scenario where people would be scared.
Senator Lynch-Staunton: You had better be more specific; otherwise, I can only consider these general platitudes.
Ms. May: You must look at the reality in the context in which this bill comes before you. You are aware of that. If a lender is dubious about put being money into a enterprise because they see there would be the requirement potentially — and it is very much potential and not automatic — for the commissioner to have the discretionary ability to order the costs of clean up to be borne by somebody who potentially was the lender. That is the section of the bill that is now found to be offensive only five years after it was passed. The actual application of the clause may not insulate Bruce in particular. However, the creation of the bill to allow them to get lending at a time when they are in financial trouble and at a time when banks are apparently not willing to lend them money if they feel that Bruce will not have the resources and they may find themselves on the hook, that is what it is telling us.
Senator Lynch-Staunton: If you had been here, Bruce Power would have told you and you would have heard them say that they are not in financial difficulty.
Ms. May: Well, the British papers are all wrong.
Senator Lynch-Staunton: A major shareholder of their parent is, but that will be taken care of, according to their testimony, by new shareholders coming in who are in a stronger financial condition. Do not say Bruce Power is in financial difficulty. It is not.
Second, paragraph 4 states that "The nuclear industry has claimed that committing investors and others with an interest in nuclear operations to clean up is an `anomaly.''' What does that mean, "committing investors and others with interest in nuclear operations to clean up is an anomaly.''? What investors are being committed to clean up today other than governments who have built the plants that are operating?
Ms. May: It is a reference to their claim that that this language was an anomaly. That is what we were told before the house committee — the use of the words "any other person with a right to or an interest in'' was an anomaly in law.
Senator Lynch-Staunton: Yes, but you had the words "to clean up.''
The Chairman: In the context, Ms. May, of Senator Lynch-Staunton's question, the question of anomaly, can you think of any other instance, power generation or otherwise, in which lenders to a business are exposed in any way to a contingent liability which would derive from the operation of that business?
Ms. May: In the operation of contaminated sites, banks are very concerned about their potential liability. There is not an act that deals with contaminated toxic sites of this order.
The Chairman: Except for the present one.
Ms. May: Yes. In the normal course of business, and a lot of work has been done on this by the national round table on brown field sites and other contaminated sites. In the normal course of things, lenders are concerned because they may become responsible as the people left holding the bag after bankruptcy or foreclosure with contaminated sites.
The Chairman: As they would in this bill, because they would then become owners or operators.
Ms. May: That is why we wonder why the bill was drafted the way it was in the first place. This makes some sense in the nature of nuclear contamination as a particular type and a particular concern. This is only on-site; it is not off-site. The damages there are still held under the Nuclear Liability Act at an artificially low level. There is a lot about the nuclear industry where you will not find parallels elsewhere. The uranium mining industry is the only mining operation regulated by the federal government and not the provinces. The nuclear industry has been treated as extremely different from any other industry for a very long time and there are many examples. This is just one of a difference. In terms of day-to-day practical dealing with contaminated sites in Canada, banks are very much players in trying to figure out how to deal with the problem of getting these sites rehabilitated.
Senator Lynch-Staunton: I will end, because I am not getting very far. I think you should find some assurance in the fact that if you believe that the nuclear industry is a dying, decrepit and dangerous industry, you will find that no private lender would be involved with. I do not know what you are worried about.
Ms. May: We are worried about the dinosaur thrashing its tail about as it goes.
Senator Milne: Ms. May, I have to tell you that I agree entirely with you when you ask why the government would be approaching changing the nuclear industry through the back door with one policy change. You then went on to say it deserves the issue deserves to be debated and I entirely agree with that.
According to Mr. Stensil, they are phasing out nuclear industry in Belgium but they are giving 22 years for it to happen. Presumably, that has already started.
Why would you want to begin this nuclear phase-out by attacking the bill that has to do only with financing, rather than suggesting stand-alone legislation?
Ms. May: We have supported a number of private member's bills over the years that would address things like revisiting the Nuclear Liability Act to level the playing field in the nuclear industry. We have addressed the issue in the context of National Energy Board hearings and through other pieces of legislation. If you ask us what our highest priority is in relation to the nuclear industry, we would not find it was the potential lending of British Energy and Bruce Power in this particular instance.
Having known the machinery of government, putting bills forward is not something government enters into frivolously or for a particular case. I find it offensive that this bill comes before the House committee, where it passed, and now the Senate. When I appeared before the House committee, I had the sense that many members thought it was offensive and wondered why it was before them. You can read the transcripts. There are many good questions asked by members of the House that were not properly answered. The only answer — which seems to be practically an ultimatum — is you have to pass the bill because the banks need it. It seems to be an abuse of the process of government.
Senator Milne: I have to say that I find it rather offensive that you would try to change the entire nuclear power structure or policy of the government by attacking this one particular bill. I think if you are going to do that sort of thing, it should be through stand-alone legislation in a timely matter, by which everyone could be educated on the whole issue. It should not be done by attacking one clause in one particular bill.
Look at the situation in Ontario last year, where Ontario was really short of power. Given the fact that we are in a situation of climate change — we will be faced with hotter summers and colder winters — if we did not pass this bill, what would you propose in the short term as a cheap, fast way for Ontario to get the power that it needs quickly?
Mr. Stensil: There are a number of things. Even in Canada, we do not have interprovincial lines between Ontario and Quebec. There is a lot of good power to be supplied very quickly.
Senator Milne: Do not go there.
Ms. May: I am not letting Mr. Stensil off the hook, but what we looked at is a power plant for Ontario. One of the reasons we are vulnerable and have shortages is that nuclear power is unreliable. Seven reactors are out of service right now. In the context of climate change, we need to invest our dollars where they do the most good. Capital investment in nuclear energy is not that option. What makes most sense is to ensure that we get maximum energy productivity from the energy we are using.
We have a study on our Web site that was produced by the Campaign for Nuclear Phaseout called Kyoto and Beyond, which points out that through energy efficiency measures, we can reduce the amount of energy we use by about 50 per cent by 2030. We meet Kyoto targets and keep going. We would also be able shut down the existing nuclear reactors and remaining coal plants. That scenario means thinking about using energy smarter. We do need long-term to bring more renewables on board, but in terms of what we do in the short term and what we do that provides the best bang for the dollars invested, the best thing to do is to improve energy efficiency.
Mr. Stensil: I lived in Toronto between 1995 and 2000 and I saw the difference in smog. That was the same period where nuclear reactors were shut down. What did we do when the reactors were shut down? We started burning lots of coal. The problem of getting out of that cul-de-sac was to get the reactors back online, so billions were thrown into that plan. In the interim, we are creating a disincentive for new, reliable and safe power sources to come online. In terms of the marketplace, Pickering takes up so much breadth that who will want to invest in Ontario or develop new technologies when they do not know if the new energy source is going to come back online.
Senator Milne: When it comes to sources of clean power, nuclear versus whatever else, this is an issue I would debate hotly with you. It is also a long-term situation. What I am concerned about right now is how we could possibly meet the power needs of the people of southern Ontario next summer. It seems to me that the only possible way is by getting some of these plants working again. Let us not have any more coal power plants set up.
Ms. May: With all due respect, I do not think the nuclear reactors are going to be back online next summer. The re- tubing process is going to take a long time.
Senator Milne: Did we not hear June for Bruce? This is what we are talking about today.
Mr. Stensil: In other provinces, such as New Brunswick for instance they are currently debating Point Lepreau. It must closed or rebuilt, at unknown costs. The Public Utilities Board of New Brunswick ruled that the proposal for retubing was financially risky. Again, it is a case of putting this huge nuclear plant online, on the chance it will work for another 20 years, when they have not had a very good track record. Or do they make the commitment to develop new energy sources? In Europe, people sat down and asked "does this work?'' and come to the conclusion that it did not. They then decided to make a plan that is logical, good for workers and ensures stable and safe power.
Senator Milne: Mr. Chairman, I agree with Ms. May. This is a subject that needs to be debated. It should not be debated or opposed through the back door. It is something that should be faced head-on, and I intend to support this bill.
The Chairman: We must be careful that we deal with the substance of the bill today.
Senator Buchanan: I want to thank the witnesses for appearing before the committee.
We do not have nuclear power in Nova Scotia and successive premiers have made it clear that we never would have nuclear power because we have coal. Twisting that around, we do not have coal any more. It is interesting that we still burn coal. It is not our own indigenous coal, unfortunately, it is coming from United States or South America, but 80 per cent of our energy needs is still coal and the balance is oil and some natural gas. There is the future.
What will we do in the future? We only have a few small open pit coalmines and the rest are all closed down. Where are we going in the future in Nova Scotia with energy? First, there will be no nuclear plants. Second, there will be no new coal generating plants. Third, some of our existing coal plants will be converted to natural gas. That has started already with the plant over in Dartmouth where they have one unit running on natural gas from time to time.
I know Ms. May is pleased to know that something she has been pushing for many years is now starting slowly but surely, and we do have wind generators in Cape Breton and Western Nova Scotia. That is something I did not think we would ever have but we have that now. We are progressive in that way. The future will be natural gas and wind power and possibly solar power.
Ms. May: The tidal plant you have going is working.
Senator Buchanan: I opened the very first tidal power plant anywhere in Canada and only the second in North America.
The Chairman: I have to ask that we try to get to the bill.
Senator Buchanan: I will support this bill because I believe it is just administrative in nature and opening up something for the nuclear plants in Ontario to get some financing that they could not get before. The safety factors will be strengthened and we will not have nuclear plants in Nova Scotia. Do you agree with that, Ms. May?
Ms. May: Which part?
Senator Buchanan: I know you do not agree with the first part but do you agree with the second part?
Ms. May: Absolutely.
Senator Spivak: I am still concerned with what the liability will be and for whom. It seems to me that in looking at this — and I wonder what you think — in the event of a major disaster it will be the taxpayers and the Government of Canada that will look after it. We already know that over a certain sum the Government of Ontario is liable.
I have no difficulty with excluding the lenders at this point, but I am wondering what your opinion is, given your experience of how and when and what the people of Canada are really responsible for in this particular deal?
Ms. May: In some ways the fact that this has come before you as a change to a bill of one fragment of a sentence clouds the reality of the larger context. I know I am focussing on the bill but I think to answer your question we need to recognize that the Nuclear Liability Act is primarily what restricts the liability for any owner or operator of a nuclear reactor in Canada to $75 million even in the case of a large-scale disaster. This is such a limited provision. That is why I find is so strange that it needs to be changed. This only contemplates the kind of contamination that occurs on a site and where the contamination has occurred in a way that the commissioner is engaged in a public hearing. This suggests that we are not dealing with an emergency. You have a public hearing and then the commissioner may make a decision on a discretionary basis that, in addition to filing a notice of contamination in the land registry office, they would also have the owner or occupant, or they would name a lender to take the prescribed measures to reduce the level of contamination.
It is a small, confined, discreet set of facts that do not speak the larger risks of the operation of the plant. Those risks are mostly covered by the Nuclear Liability Act. In reviewing the evidence, I do not think the government has put forward an adequate reason for the bill to be changed. You can say it is housekeeping, but nothing has changed in the circumstances of the legal system in the last five years that would require changing this. This is something that gives a commissioner the discretionary ability — not always but sometimes — and where they believe in their discretion it is appropriate to seek financial help in the clean-up of a contaminated site from a lender. That is all.
Senator Spivak: I did not pose the question properly. Does this wording here legally give unlimited liability to the people named here — that is, the owner or occupant or any other person? Is that liability unlimited? In other words, is there is no ceiling on it? We understand, of course, if it is a huge catastrophe, no government could stand by if everyone was unable to fulfil its obligations. Is this unlimited liability here to the people named?
Ms. May: Their liability is limited by another act.
Senator Spivak: That is a third party. This is what I do not have clear. That says a third party, the $75 million. Do you know what I mean?
Ms. May: There certainly is not any cap on liability in section 46, but the scope of the clean-up is more restricted.
The Chairman: No, the scope of who may be asked to pay for the clean-up.
Ms. May: Also the scope of the clean-up, because this is looking at a place or vehicle, an event that is likely to occur. The commissioner then holds a hearing, and this is very much not the larger accident scenario.
The Chairman: You are talking, however, about this whole bill, not the amendment of the bill.
Ms. May: I am talking about the whole bill.
The Chairman: The amendment of the bill has no effect with respect to what or who is caught by the bill.
Ms. May: No, I am plugging the proposed amendment of the bill into the section in which is would be found and looking at what it would mean.
Senator Spivak: We are dealing here with liability. This is what we are talking about, and we know who is excluded. My question is how then is the liability in terms of the private ownership. If it is unlimited, it gives me more comfort than to think that, as usual, the government and the taxpayers of Canada will potentially be liable in the event that this does encourage more private industry. I agree with Senator Milne, we have to look at that in general, but in the event it does, that is what I am referring to.
Senator Milne: They always have been in the long run.
Senator Spivak: I know.
Ms. May: There is nothing in either the proposed amendment or section 46 itself that limits the amount of cost related to following through on a commissioner's order.
The Chairman: Any further questions of the witnesses?
Thank you for your presentation.
Ms. May: May I say that what you might consider to be obiter comments in the committee's report to the extent that it would be helpful if a government that wants to see nuclear reactors and continues to subsidize them to the extent they are subsidized that it should not come forward in the context of one little amendment now and then. There should be public debate on this issue. We would appreciate any sidebar comments to that effect.
The Chairman: Thank you.
Honourable senators, is it agreeable that we proceed to "clause'' consideration?
Hon. Senators: Agreed.
The Chairman: We are talking about Bill C-4, an act to amend the Nuclear Safety and Control Act. Is it the intention of any honourable senator to propose an amendment to the bill?
Shall the title of the bill stand postponed?
Hon. Senators: Agreed.
The Chairman: Shall clause 1 carry?
Hon. Senators: Agreed.
The Chairman: Shall the title carry?
Hon. Senators: Agreed.
The Chairman: Shall the bill carry?
Hon. Senators: Agreed.
The Chairman: Shall I report the bill?
Hon. Senators: Agreed.
The Chairman: Thank you very much.
Thank you to our witnesses. We will take your admonition very much to heart.
The committee adjourned.