Proceedings of the Standing Senate Committee on
National Finance
Issue 9 - Evidence - Meeting of May 26, 2009
OTTAWA, Tuesday, May 26, 2009
The Standing Senate Committee on National Finance met this day at 9:30 a.m. to examine the estimates laid before Parliament for the fiscal year ending March 31, 2010.
Senator Irving Gerstein (Deputy Chair) in the chair.
[English]
The Deputy Chair: Honourable senators, I call this meeting to order. Our meeting will have two parts. In the first hour, we will hear from Christiane Ouimet, Commissioner, Public Sector Integrity Canada, who recently tabled her annual report in Parliament. In the second hour, we will hear from the officials at Atomic Energy of Canada Limited, AECL, with reference to their estimates.
I now welcome Ms. Ouimet, who is joined by Henry Molot, Deputy Commissioner; and Joe Friday, General Counsel.
Since we have a second session this morning, senators, I know that you will ask your usual succinct questions.
Christiane Ouimet, Commissioner, Public Sector Integrity Canada: Thank you very much. I am pleased to appear before this committee.
This morning, we present the mandate and the complex work of my office, to situate it in a context of our second annual report, which was tabled April 29, and to discuss my budget plan, if it pleases the chair.
It is truly an honour to have been appointed in August 2007 Canada's first Public Sector Integrity Commissioner. My office is responsible for implementing the Public Servants Disclosure Protection Act. Our mandate is, first, to establish a safe, confidential mechanism enabling public servants and the general public to disclose wrongdoing committed in the public sector; and, secondly, to protect from reprisal public servants who have disclosed wrongdoing and those who have cooperated in investigations. In short it is one act and two regimes: disclosure of wrongdoing and protection against reprisal.
[Translation]
Our ultimate goal is to enhance public confidence in our public institutions and in the integrity of public servants. In fact, the preamble of our act expressly recognizes that the federal public administration is part of the essential framework of Canadian parliamentary democracy. It is in the public interest to maintain and enhance confidence in the integrity of public servants through a disclosure and reprisal protection regime.
I would also like to emphasize the key role that our public institutions play in the lives of all Canadians, and that this role is never more important than in times of economic uncertainty. Strengthening our federal public administration, in whatever way possible, is both an expectation and an obligation on the part of my office.
My second annual report is built around the theme of Building Trust Together: A Shared Responsibility. It has three guiding principles — inform, protect and prevent — which are the key pillars of our work, and I will use these principles to frame my submissions to you today.
[English]
My office has jurisdiction over the entire public sector, which goes beyond the core public service and includes Crowns. It excludes public security organizations, however. Our constituency is approximately 400,000 public servants, which truly means we cannot perform this work this alone. Our act specifies that members of the public can also come forward with information about possible wrongdoing.
Our constituency is significantly broadened as a result. Part of our duty is to ensure that stakeholders understand what we do, why we do it and how we do it.
[Translation]
It is a challenge to ensure that all public servants know about the legislation and the role of my office. We are very active in reaching out to people throughout our constituency, but much remains to be done. And we rely on the support of colleagues in the public sector, the media, and members of this committee to help us ensure that people are aware of our existence, informed about our mandate and confident in our ability to carry out that mandate.
Our annual report is a key means of reaching all public servants and informing them about our role and our approach.
I would now like to say a few words about the second pillar of my mandate: protect. Our act specifically deals with protection on a number of fronts. We have exclusive jurisdiction to handle reprisal complaints. We must protect public servants who come forward with a disclosure or who participate in an investigation. We must also protect all of the information that comes into our hands as a result of our work.
[English]
In the context of our work, many interests are at stake: the interests of someone coming forward with an allegation of wrongdoing, who has faith in the public sector and wants to uphold its long tradition of ethical behaviour; the interests of that same person, in being protected against reprisal and in not being punished for doing the right thing; the interests of a chief executive, on behalf of his or her organization, in wanting to manage effectively and honestly in knowing about problems as soon as they occur and being able to respond to them; the interests of those against whom an allegation is brought and whose reputations and careers are at stake; and the interests of an organization in being able to continue to operate.
When we are called in, our job is not to shut down organizations when we respond to an allegation.
The public's interest is paramount at all times. We are and will continue to be guided by the public interest in all cases. All the essential interests must be recognized and balanced, and they all are part of a broad protection mandate.
Let me briefly address the third pillar of the mandate: prevent. Early in my mandate — in fact, when I appeared before both committees — and, with the support of Parliament and eminent jurists, we collectively agreed to interpret my legislative mandate as something broader than mere enforcement. We truly believe a strong prevention-oriented approach is critical to our success, along with education and outreach.
My office will respond fully and seriously to every allegation of wrongdoing and to every complaint of reprisal. We will not hesitate to use the full investigative powers provided by the act. However, that is not to say that we confine ourselves to two options: investigate or close the file.
[Translation]
An enforcement model is simply not enough for us to achieve our goal. We have a responsibility to identify vulnerabilities and respond to them to prevent wrongdoing from occurring. And let me repeat this for the sake of clarity, we will respond as effectively and efficiently as possible within the framework of our legislation. It is our moral duty to ensure that good governance, common sense and instinct all point to the importance of prevention in serving the public interest.
[English]
Therefore, the three guiding principles — inform, protect and prevent — are the framework of my annual report, the contents of which I will touch upon briefly.
This year, you probably noticed that we raised concerns about small federal agencies and Crown corporations. Small agencies are particularly vulnerable to serious mistakes, which are essentially due to a lack of internal capacity. Urgent action is needed.
Based upon our general observations, the main source of risk for Crown corporations lies in governance. The report discusses five myths and misconceptions that have an impact on the degree of vulnerability of Crown corporations to wrongdoing. We also discuss four serious cases that we handled in the last year, and our Chapter 3 emphasizes that our options are not only to launch a formal investigation or do nothing. There are actions that can and must be taken so that the office carries out its obligation under the act. In one of the cases, we highlighted immediate action since the allegation dealt with a risk to life and safety of individuals. We acted quickly and informally to the satisfaction of the disclosure and the organizations. Our involvement in any case must result in a value added and a net gain, and we are confident that we bring such value.
We also devoted a chapter to the fear of coming forward, which is real and still present. It is complex, but we discovered that most employees only want the wrongdoing to stop. They want the problem to be fixed as quickly and informally as possible. They do not want a long, formal investigation. Disclosing wrongdoing is a difficult thing to do, even with all the protections offered by the act.
My office will continue to be sensitive to that challenge. This sensitivity will include insuring the perspectives of people who have come forward in the past are heard. We have extended an invitation to meet with those people and with others working in those organizations. We have begun a consultation process. We value their unique perspective.
[Translation]
The annual report describes the impact of organizational culture on the decision to come forward, and we will continue to address that theme in the next annual report. The chapter on small agencies, Crown corporations and two target communities: senior leaders and middle managers, who are the culture carriers of the public sector and key allies.
That summarizes the findings in our annual report, and I also want to let you know that we held a symposium in September 2008. The annual report contains a photo showing the participants who joined us, including the Auditor General, the former Auditor General, provincial representatives and distinguished guests from abroad. We will also continue benchmarking Canada's disclosure regime against that of other countries, namely, the United States, the United Kingdom, Australia and New Zealand.
[English]
We also provided you with a one-page document that gives an overview of the budget spent by my office in 2008-09. Our spending was $3.6 million. We believe this amount is adequate to meet our current demands and build capacity. We gave you a few details of our expenditures.
Our office is still in a set-up mode, which makes it difficult to predict how many cases we will receive and how many staff will be required.
[Translation]
I have put in place a core team of professional and dedicated staff, while recognizing that there will always be a need to have access to internal experts in specific areas from time to time, depending on the cases that are brought to our attention.
[English]
In 2009-10, we will focus on a communication strategy, extending our effort to Canadians across Canada as well.
[Translation]
We will continue to focus on the mandate of our office, as well as improving our case management system. As our work progresses, we will come forward to report on the resources required to continue to do our important work.
[English]
The act requires a five-year, independent review of the act to take place and to be presented to Parliament. We intend to continue to gather and analyze information necessary to support that review and to ensure that any recommendations that flow from it are fully informed and well supported.
It has been an honour to appear before you and we look forward to questions from the members.
The Deputy Chair: Do Mr. Friday or Mr. Molot wish to add anything to the opening comments?
Thank you for appearing before us. I commend the government for the concept of establishing a public sector integrity commission and I congratulate you, in particular, for occupying the first position as commissioner.
I want to focus on the concept of whistle-blowing. Usually, in the corporate world, information on whistle-blowing is received by the chair of the board or the chair of the audit committee, who normally are independent from management, independent directors, because one of the foundations of whistle-blowing is that it remain anonymous. In situations in which I have been involved, I have never known who it was that sent information to me.
Can you outline for us the process that you follow so that people will come forward and bring situations to your attention, recognizing that they will not be penalized by whoever they are associated with within the organization?
Ms. Ouimet: The experience of the private sector has informed us with respect to how to approach it. We had a senior vice-president from Petro-Canada at our symposium and we also have a quote in the annual report from Thomas d'Aquino, who is well known in the city and across Canada.
The protection offered to anybody coming forward is framed by the legislation. First, every chief executive has an obligation to set up his or her own disclosure regime. Under the act, there is an important role for the minister responsible for Treasury Board to inform and educate all public servants across the country about the existence of that disclosure regime.
Any individual has the choice to come forward to either their immediate supervisor, what is called the senior officer, who is designated to receive that confidential information, or come directly to our office.
The act is complex. It is more than 54 pages; it has exclusions and inclusions. Ultimately, we have been telling all public sectors that they must know about their rights and obligations.
I will close by quoting the Honourable Patrick Ryan from New Brunswick, my counterpart in New Brunswick. While the act offers protection, occasionally, it is qualified protection because we cannot protect confidentiality at the expense of natural justice. Those accused must be able to respond. Reputations are at stake.
The balance is a delicate one. However, I can assure the committee, based on the specific case where three whistle- blowers changed their minds — they did not want to pursue it any further — we protected their wish. Still, we provided the information to the chair of the board of directors, who was able to act accordingly and satisfy himself that the alleged wrongdoing was either taken care of or did not exist. The balance is delicate and we are conscious of the importance of protecting the interests of all those involved.
The Deputy Chair: I understand what you said but I want to clarify one item. You indicated that whistle-blowers can report to their supervisors. Are they able to do that on an anonymous basis or do they disclose that they are speaking to their supervisor because this disclosure might cause a problemÉ In some situations, there are phone numbers where people can leave voice mails. I know the balance is delicate because people can have interests other than only whistle- blowing, but I am interested in the process.
Ms. Ouimet: Essentially, while the process is confidential, and we keep the identity of the person confidential, the person must put his or her name forward because we have to verify good faith. We cannot investigate anonymous allegations.
In the end, even if he or she goes to the supervisor, that supervisor has the same obligation under the act to protect the confidentiality of the individual and the process itself. The allegation might relate to another sector of the public service. That is why Parliament has offered the option to go to the senior officer that is seen at arm's length and completely independent. The option for those who want to disclose information is to select what they see fit.
[Translation]
Senator Ringuette: It is a new office, and there is much work to be done. But since 2007, how many complaints or allegations have you received?
Ms. Ouimet: First of all, the act requires us to report to Parliament on disclosure and reprisal. The first year, we received approximately 200 general information requests. And that is important because it can include people who inquire about the system and who realize that perhaps they should go to the Canadian Human Rights Commission or the Public Service Commission, because our role is to avoid any overlap with other existing agencies specializing in the matter in question.
This year, we received around 150 general information requests. At 76, the number of disclosures is similar to or slightly higher than last year's.
Senator Ringuette: Seventy-six.
Ms. Ouimet: Seventy-six disclosure cases where it was necessary to go to the next step, that is, carrying out a slightly more thorough review of the case's admissibility and preparing a written report for the person who came forward.
As for the reprisal cases, which we are supposed to process within two weeks of receiving them, there were 23 requests in terms of admissibility.
Finally, we provide a breakdown of all of these cases in the annual report, which also contains information on the processing of each case. For instance, some of the disclosure cases were turned away because they did not satisfy the definition of ``wrongdoing.'' In some cases, the person was referred to the appropriate place.
However, four cases turned out to be serious enough to include in the annual report; two involved health and safety, and two involved reprisals.
I would like the committee to know that the 76 disclosure requests were reviewed carefully, a process that can take weeks or months. We try to find practical solutions. The legal analyses are also important; our team of investigators works with a team of lawyers because the cases we receive are often very complicated from a legal standpoint.
Senator Ringuette: Of the 76 cases in which allegations were made, you said that 23 had to do with reprisals against an employee, and then there were four with two involving health and two involving reprisals. Of all the 76 cases in which allegations were made, how many had to be dealt with through the legal system?
Ms. Ouimet: We do not have specific data on that. Generally speaking, we try to refer all cases when a solution can be found by other means. That is common practice. A number of cases have to do with labour relations, and many others have to do with an area you know very well, human resources. Many more involve private interests, which is very significant because people come to us as a last resort. And that does not mean that a case involving private interests cannot also concern public interests. Nor does it mean that private interests are not important.
Here again, perhaps we could benefit from a slightly more detailed analysis in three or four years, when the data will be available and each department will have had the opportunity to review the allegations. Every department receives requests and has to report them, formerly through the Canada Public Service Agency. In addition to that, 23 of the 76 allegation requests had to do strictly with reprisals. Again, they often involved labour disputes. There were a lot of those.
Senator Ringuette: Basically, the answer to my question is that none of the 76 investigations was referred to the Department of Justice.
Ms. Ouimet: The Department of Justice does not as such receive, is not one of the agencies —
Senator Ringuette: — for legal actions.
Ms. Ouimet: For legal actions. No case has necessarily been referred to the Department of Justice. It was more quasi-judicial and administrative bodies. Some cases were referred to the Office of the Auditor General. We more commonly refer our cases to agencies that handle public administration.
Senator Ringuette: In terms of the cases referred to the Office of the Auditor General, does the office follow up with you afterwards?
Ms. Ouimet: One of the cases mentioned in the annual report concerns a Crown corporation. It was officially referred to the Auditor General, who told us that she would review it in the coming year.
Senator Ringuette: In short, I take it that the 76 cases in which allegations were made involved labour disputes. Therefore, it would make sense to ask whether labour representation was sufficient or even existent, since these people come to you to file grievances.
Ms. Ouimet: That is a very good question, Mr. Chair. I gave a presentation to the National Joint Council where all of the labour organizations are represented. They asked me something along the lines of whether we had problems with our labour relations system. I said it in September 2008, and I will say it again: I have always worked closely with the unions. I used to co-chair labour management groups. Unions are part of the solution. In this case, I suggested that we host a consultation forum in the fall. I am going to ask a former union leader to head the consultation to find out what unions think about the disclosure system, whether they see it as a useful part of their responsibilities and whether they can help members when we cannot.
In the end, you know as well as I do that this does not mean that there are no problems in public administration; nor does it mean that we do not have a very good public administration that can stand up well internationally. But if there are problems, we want all of the parties involved to help us solve them quickly, and labour representatives are part of that solution.
[English]
Senator Callbeck: Thank you for your presentation, and congratulations on your appointment, Ms. Ouimet.
On the cases Senator Ringuette talked about, I will ask a more specific question. Out of 76 disclosures, 22 were closed on the basis that the subject matter could be dealt with better by another act of Parliament. In that case, do you refer the disclosure on or do you talk to the person who made the complaint and it is up to that person to take it somewhere else?
Ms. Ouimet: It is a combination of all of the above. In certain instances, the person disclosing readily accept that they were mistaken, and the general counsel can elaborate on practical examples as well, because he plays a pivotal role in ensuring that the subject matter is dealt with.
As you see in the explanatory notes laid out in the annual report, we took a lot of care in identifying specifically where the matters were closed. Sixty-one cases were closed; 23 were closed on the basis that there was a valid reason in not dealing with the subject matter; 13 did not meet the definition of wrongdoing; 4 had insufficient information; 3 were withdrawn by the person disclosing; two were closed because the subject matter was investigated internally by the organization; and one was closed because it was combined with another disclosure file.
Of the 22 further disclosures that were closed on the basis that the subject matter of the disclosure was adequately dealt with or could be more appropriately dealt with according to a procedure of another act of Parliament, in some cases the person disclosing was going through a separate process, for example, a grievance process, so we will not intervene in that situation.
I will give examples. Nine were closed on the basis that the commissioner did not have jurisdiction, and five were closed because another person or body acting on another act of Parliament was already dealing with the subject matter. I am giving you details, and it is laid out. I do not know if I answered your question properly. We document specifically the reason we do not intervene. That does not mean that we do not guide the disclosers in detail as to the best avenue for them.
Senator Callbeck: In other words, it is up to them to take the initiative, but you guide them?
Ms. Ouimet: Absolutely.
Senator Callbeck: You mentioned inform, protect and prevent. With respect to informing, you mentioned that this year you will have a communication process. I was interested in that process, because you said that members of the public can come forward as well. I am interested in your communication process. I come from Prince Edward Island. How are people on Prince Edward Island to know that they can come forward with a complaint?
Ms. Ouimet: That is a good question. Early in my mandate, I sent an email to all members of Parliament and all senators to seek their help in reaching out to their constituencies. I come from a small farming community, and I sat down with farmers and asked them: Do you understand what I am doing; do you understand the purpose; and does it appeal to you?
I quoted them in my first annual report. Their response was, maybe we have a disclosure regime at this point because we need it. Of course, they were aware of incidents in the public sector.
I have invested a lot of time in individual meetings and reaching out into and beyond the public sector. When I appeared before the Senate, I was guided by an eminent senator who told me; do not forget the regions. I made it a point to reach out to regions, to what is called the federal council, as well as middle managers. I addressed 700 to 800 public servants.
I am answering the deputy chair`s question now. It took me a while. For capacity reasons, we have not, reached out to Canadians because we did not have as much capacity. We use our website, we use the annual report, and we use the media when we can, but we want to invest more fully in reaching out to Canadians. We welcome your recommendations in that regard.
Senator Callbeck: The plan has not been laid out yet?
Ms. Ouimet: For regular Canadians, it is not yet laid out, but we have some ideas, including expanding the website, making it more user friendly, using the media and reaching out so that Canadians understand that we are part of the Federal Accountability Act. I have 22 employees presently, and our communications group is a group of two, but we intend to invest more fully in this communication. I take it that this is a recommendation, and we will follow through.
Senator Callbeck: I will go on the next round.
Senator Mitchell: I am interested in several things. With respect to numbers, on page 30, the numbers you spoke to are detailed, but to review, it says 61 closed disclosure files. After review, 59 were closed. Two were closed after an informal case resolution or corrective measures, and zero were closed after a formal investigation. Is this information driving the conclusion that in only two cases resolution or corrective measures were required, and those measures were only informal?
Ms. Ouimet: Thank you for raising this question. We spent an enormous amount of time trying to capture the information showing what was done. One case involved three disclosers working within a Crown corporation. This case was serious enough, but the whistle-blowers did not want to go forward. We respected their wish. We cannot force them to take it to the next level. We thought it was in the public interest nonetheless to pursue it with the board of directors and the chief executive officer to ensure that it did not stay in abeyance and was looked at by the Auditor General.
The second case was a health and safety issue. We reacted within 48 hours. We did not wait until the wrongdoing took place, because it could have affected potentially the lives of individuals. We acted quickly, informally, with the written consent of the individual. We contacted the senior officer, and we potentially avoided serious consequences within the workplace, which was a blue-collar environment.
All this is to say that I do not think the statistics mean we did not act or react in the other cases. We try to find a solution every time. In the vast majority of cases, as I have indicated, these matters are private. They are matters that concern one individual who occasionally has been involved in a number of processes. We are the last resort, and they are confused with respect to our mandate. We try to help in every case, but we do not want to duplicate the grievance system or the Public Service Staffing Tribunal procedures. That is why we need to clarify further what we are and what we are not. Each department has its own disclosure regimes. Perhaps next year we will be able to perform some analysis of all the allegations that have been dealt with already in departments. I think it would be normal that they would take action as a result of allegations.
Senator Mitchell: To clarify, if someone comes forward with a problem and it is a real problem but they decide they do not want to pursue it and they drop it, do you drop it as well, or do you find another way to ensure that the problem is addressed without implicating that person?
Ms. Ouimet: This is in the early days, but in the one case that was brought to our attention for a number of reasons, there were multiple whistle-blowers and it was a health and safety issue. There were also other corroborating facts and evidence, so in that case we did not think it was in the public interest to drop it. We have a legal analysis that gave us the authority to go forward.
The Deputy Chair: May I ask, Senator Mitchell, that you go on round two? We have a long list. Thank you for your questions.
Senator Neufeld: Thank you for appearing. A number of my questions have been answered. Have you received any complaints from the public? I assume that the complaints were only about something relating to the federal government or a federal crown. I think that assumption is correct, but it is not explained.
Ms. Ouimet: Usually, the registrar is with us and has the numbers, but I think we have received 12 complaints from the public, if I recall correctly. You are right. Some specific complaints related to Crown corporations.
Senator Neufeld: That would be 12 out of the total 76?
Ms. Ouimet: Yes, that is correct.
Senator Neufeld: I want to go a little further on what Senator Mitchell asked about. If a whistle-blower decides to drop out of the process and not be involved, and if you, the commission or whoever thinks the matter is serious enough, then you can take it forward to try to resolve the issues. Is that correct?
Ms. Ouimet: Early in my mandate, I asked this question of chief executive officers, chairs of boards of directors and deputy ministers: What do we do if we hear about a matter that is of importance or a serious allegation? We handled one case in our first annual report that was an anonymous complaint that we could not pursue because we could not verify good faith.
Everyone answered: Yes, absolutely, we want to know because there might be something we can do that falls under our responsibility. If a serious allegation were brought against them, they would want to discover the particulars as much as possible and do their own probe because it involves the reputation of their institution.
Looking at the specific case in the annual report, there were specific criteria that we looked at carefully to give us the authority to go forward. Public safety and the number of disclosers played in the balance.
Senator Neufeld: I see also on page 28, it says:
Complaints of reprisal are dealt with on a high-priority basis. The Commissioner is made aware of every reprisal complaint as soon as it is received. . . .
The organization is new. You talk about a small number of people so far, and I appreciate and understand that. Do you think it is realistic that, maybe 10 years from now, the commissioner will be able to deal with all the complaints once people know the process? Do you think the commissioner will have his or her hand in each complaint? Will that be part of the commissioner's job, and your job?
Ms. Ouimet: That is an excellent point. I have expert registrars, lawyers and investigators who do all the work. However, given the 15-day time frame for the admissibility review, I asked to be notified because I want to be involved at the earliest possible time. As well, from a general perspective, we needed to guide the evidence looking into the allegation, ensuring that the process is fair. That is why I asked to be notified.
The senator is right. I used to be at the Immigration and Refugee Board of Canada. I was the highest-ranking public servant. The backlog had grown to 55,000 cases, notwithstanding the fact that we had over 200 decision makers. Essential at that time — and we can do this with experience — is something called triage and the case management system that is devised based on the legal criteria, the quality of evidence and the qualified personnel to ensure that we give the appropriate attention to each case. However, there might be documentary evidence that we can give to disclosers to guide them into making some of the decisions.
We will embark on our case management system, as well as costing better in terms of how we deal with the case. In the meantime, I want to assure all the members of the committee that we dealt with each case with a lot of attention and with due diligence, looking at all areas of the complex legislation with top-notch personnel to reach out and obtain the facts of each case.
Senator Neufeld: I have one more quick question.
The Deputy Chair: May I ask you to go to round two? As I said earlier, we have a lengthy list.
Senator Eggleton: I am looking over these statistics and I have a question similar to Senator Mitchell. Out of the 61 disclosed cases, it looks like you delved into only two of them. The case resolutions were informal, as was pointed out; none were closed after formal investigation. All these others look like technical reasons for not dealing with them, although the cases may be valid.
Can you explain more about them: What is a valid reason for not dealing with the subject matter? There are 23 in that category. What is an example? What is an example of something dealt with under another act of Parliament?
Nine cases did not have jurisdiction. Two cases were closed because of the length of time that elapsed. Regarding another two, the subject matter was not sufficiently important.
It looks like a lot of technical detail in here and only two were looked into.
I wonder how satisfied people might feel with this service if you acquire a reputation that most of these cases will not be dealt with but passed off for technical reasons to some other entity. There may be a fair level of dissatisfaction and, therefore, that dissatisfaction would hurt the credibility of your operation.
A lot of these things are perception — I realize that. Can you comment? That situation stood out for me. Out of 61 cases, you seemed to delve into only two.
Ms. Ouimet: This concern is valid and I am happy to answer the question.
First, notwithstanding the closure of files, some of those files are incredibly complex and may deal, for instance, with pension issues that require a lot of information. Some information and areas where we do not have jurisdiction may relate to a private-sector organization that has nothing to do with our organization; it carries a different title. Also, we have to remember that disclosure regimes already exist in each department.
I was there not long ago, and I can assure you that every public administrator knows there is a potential for wrongdoing. There are unscrupulous people who join the public sector. They have made the news. Fraudulent activities are investigated as soon as they are found out. There are a series of actions. No one has an interest in ignoring a potential alleged wrongdoing.
In the meantime, the senator is right; people continue to be concerned with coming forward. That fear exists. Statistically speaking — and we have seen this situation in all the other jurisdictions — coming forward affects careers and family lives. That is why we had the vivid example of three people coming forward and changing their minds. This is also an indication that fear is part of the regime.
Our experience is similar to what exists in provinces. The year before, we proportionately compared our results with the province. Statistically, they were close. Do we need to invest in reassuring people: absolutely. Do we need to reach out to Canadians: absolutely.
In the meantime, wherever I appear when I am reaching out to Canadians in the public sector, I invite people to come forward if they have concerns. If any senator knows about a potential wrongdoing in or with any of their constituencies, we will deal with the concerns fairly, according to the act, with natural justice principles. The act talks about ``informal.'' This is one requirement of the act.
Therefore, we look forward to any further recommendations because we are new, we are not well known and we need to continue to invest.
The Deputy Chair: Senator Eggleton, can I ask that, if you have further questions, that you ask them and the commissioner can answer them in writing, so we can continue through our list?
Senator Eggleton: I would like a couple of examples of the 23 cases — not dealing with subject matter — so I can have a better understanding of that category.
Ms. Ouimet: Do you want this answer in writing or orally now?
The Deputy Chair: Orally now, but quickly.
Ms. Ouimet: One example is insufficient information. If we go back to the disclosers for weeks or months and we do not receive a response, this situation falls into that category. People are busy or they go to another avenue.
Another example is if the case does not meet the definition of ``wrongdoing.'' The definition is as follows: ``any contravention of any'' federal or provincial law or legislation; ``serious breach of a code of conduct'' — the word ``serious'' is important; ``gross mismanagement'' — which is also important; the fact of creating a security risk to the environment or a person; or counselling a person to commit a wrongdoing.
All this to say that the act is already broad. However, as I have indicated, a lot of the complaints we received deal with a private matter as opposed to a public matter, so we have to clarify this kind of complaint further. We commit to the senator and the members of this committee to do more intensive work in that area.
Senator Eggleton: The bar is high for meeting the test.
The Deputy Chair: If you have any further information, perhaps you could expand on it. Senator Eggleton's point is well taken and I am sure members of the committee would like to hear more about that subject. If you can forward that information to the clerk, he will distribute it to members of the committee.
Ms. Ouimet: I will do so.
[Translation]
Senator Rivard: Ms. Ouimet, I have a very brief question. I understand that your constituency includes employees from the public service and Crown corporations. Does it also include the staff who work for members and senators?
Ms. Ouimet: No, senator.
Senator Rivard: Do you wish you could intervene if you had complaints?
Ms. Ouimet: As you know, our mandate is already very broad.
Senator Rivard: I take that as a no.
[English]
The Deputy Chair: Thank you, Senator Rivard. You receive the award for the most succinct question.
Senator Di Nino: Let me start with a general question. The creation of your office and the expenditure of public funds leaves one with the impression that there is a serious problem with wrongdoing in the public service. Is that the case or not?
Ms. Ouimet: I put that very question to a union leader, and his response was that there is a perception of significant problems in the public sector. However, he went on to say that in his view, the public sector is one of the best in the world.
My responsibility is to bring back the confidence in our public institutions and those who work in them. I take this responsibility seriously, not only in the intervention, action and enforcement, but hopefully, I can satisfy Parliament that I invested as well in preventing the wrongdoing; in reaching out to the next generation of middle managers and giving them advice.
On our website, I set up mandate letters. How do they avoid wrongdoing? Similarly, we include 50 good questions on our website to guide small agencies, the questions we would ask Crown corporations if ever we have to conduct an investigation.
In the end, I truly believe — and I will be guided by Parliament — that our public sector is still one of the best in the world. Have there been incidents: absolutely. Have there been mistakes: absolutely. If there are situations of wrongdoing, I can absolutely commit that we will investigate them fully, informally or formally, as the case may be.
Senator Di Nino: Your comments talk about an independent review — or the information that I have does. Who does that review?
Ms. Ouimet: Are you talking about —
Senator Di Nino: The five-year review.
Ms. Ouimet: Under the act, it is the Treasury Board.
Senator Di Nino: Then the review is presented to Parliament?
Ms. Ouimet: Correct.
Senator Di Nino: My last question deals with the concern that you raised about the small federal agencies and Crown corporations. I understand that some, at least, are exempted from the requirement to establish disclosure procedures. Is that what your concern was? In a few words, can you describe what you mean by that concern?
Ms. Ouimet: Parent corporations only are covered under the act. One of our suggestions is that subsidiaries be brought under the act as well. Often this area is where the most activity takes place.
In the case of small or medium agencies, I think that the vast majority are covered under the act. I am not aware of any that are not, but the problem remains the same. The problem is one of capacity, the problem of having qualified personnel not only to ensure delivery of the mandate, but to meet corporate responsibilities as well.
Senator Di Nino: Do you want to see this exemption removed?
Ms. Ouimet: With respect to subsidiaries, yes.
[Translation]
Senator Chaput: My questions are fairly brief. Of the 76 disclosures you received, I assume we are talking about 76 individual people and not any groups.
Ms. Ouimet: Yes, in principle, they are individuals. We have confirmation of that.
Senator Chaput: Of those 76 complaints, did you notice a problem that was widespread, or were the problems varied? Of those 76 disclosures, what percentage was external, from agencies and offices in Ottawa, for example?
Ms. Ouimet: We have preliminary data on the geographic breakdown. We want to be cautious because we do not have any indicators. It will be very important to review the data of the public service agency, which is a new agency. We are going to study the breakdown more thoroughly.
It is more or less proportionate to the number of employees. We have some in the regions. We do not have any specific trends at this stage.
Senator Chaput: Are you able to measure the satisfaction level of the 76 people who came forward with disclosures? Are you able to measure whether the people who sought out your services were satisfied with the process?
Ms. Ouimet: That is a very good question. The feedback varies. There are those who are disappointed. We are their last resort, and they expect that we will solve their problem. Often, their request has already been considered by the courts or by other means, and the individuals were not successful. We do our best to lead them in the right direction. To my knowledge, there have not been any complaints about cases not being processed quickly through natural justice, but, of course, there are those who are disappointed.
We may want to survey Canadians, public servants and those who have come forward. We could work with Treasury Board on that.
[English]
Senator Nancy Ruth: My question follows Senator Chaput's in terms of data collection. I am interested in how many complaints over time, whether valid or not, came from a particular department or agency. If one tracked that data over three or five years, it would indicate something serious. Whether the complaint was legitimate or not, there is trouble. Are you collecting that data? If so, how do you anticipate handling that kind of situation?
Ms. Ouimet: That again is a good question. We will pursue this matter with the Treasury Board officials because they have part of the answer.
As well, I make the following presumption that the number of complaints does not necessarily indicate there is a problem, but perhaps that the organization has a good disclosure regime that people know about. If people do not know that the system exists, perhaps this is why we do not see many complaints. We have to be careful in how we interpret statistics or lack thereof. We will pursue this matter.
The Deputy Chair: I have three names on round two. If each of you could ask your questions, we will have the commissioner respond in writing, if that is satisfactory.
Senator Ringuette: Your office is able to receive complaints or allegations from 400,000 public servants. You have received 76 complaints, and your budget was $6.5 million. Since we are the finance committee, and we are charged with looking into the financial implications of tax dollars, if we look at the numbers, that is $86,000 per allegation. Do you think that is value for tax dollar money?
The Deputy Chair: Can I have the questions, please, so Ms. Ouimet can respond?
Ms. Ouimet: Do you want me to respond?
The Deputy Chair: In writing, please.
Senator Callbeck: My question has been answered.
Senator Mitchell: Of the disclosures that you receive, or the concerns and complaints, how many involve gender issues, such as harassment, discrimination or pay equity?
Second, this question is a broader philosophical one but you alluded to it, and that is the issue of building credibility of government. It always strikes me that we are hard on ourselves and we have a clean government. We have a successful parliamentary system. It is the most successful system of government on the earth today. It has lasted longer than any other system of government.
However, this success is a two-edged sword. We seek out all the problems, which I think is essential. However, seeking out problems can have the other implication of showing a disproportionate number in our system, and people tend to focus on them. I think real problems have emerged.
First, we have a public sector that, I think, is often paralyzed because they are afraid to do anything because there is no upside. They are not defended; they are criticized; and their 35-year successful career can be brought down to a single dispute or complaint. It can be ruined, and no one is there to defend them.
I am reading your report, and I would like to see greater emphasis on this idea that this system is great and we have great people; we have found so few problems, really, but we are vigilant and it is important that we seek out problems.
I throw out this philosophical question: How do we have the public servant feel that the situation is not all negative to the point that they are paralyzed? With auditors auditing auditors, auditing auditors, and so forth, how do you find that balance?
Senator Neufeld: The question was asked earlier. Some people may be unhappy with your report of their disclosure. Are you covered by freedom of information?
Ms. Ouimet: Under both access to information and privacy, we can protect the information.
The Deputy Chair: Commissioner, associates, on behalf of the Finance Committee, we greatly appreciate your participation today.
Honourable senators, I welcome Michael Robins, Senior Vice-President and Chief Financial Officer of Atomic Energy of Canada Limited, AECL.
Mr. Robins, the floor is yours.
Michael F. Robins, Senior Vice-President and Chief Financial Officer, Atomic Energy of Canada Limited (AECL): Mr. Chair and honourable senators, thank you for the opportunity to be here today to discuss AECL's Main Estimates appropriations and other funding provided to AECL via the budget in 2009. I will begin by providing a short overview of AECL's mandate.
AECL has a dual mandate from Parliament. The first is to build a global commercial enterprise that designs, constructs and services nuclear reactors. This commercial nuclear business, employing about 2,000 people, is headquartered in Mississauga, Ontario.
AECL's Canada Deuterium Uranium, CANDU, technology is a proven supplier of safe, clean and reliable energy to millions of people here in Canada and in six other countries around the world. In fact, Ontario generates about half its total electricity from CANDU reactors; New Brunswick and P.E.I. about 30 per cent; and Quebec, about 3 per cent. Several provinces are looking to expand or begin domestic nuclear energy programs, including Ontario, New Brunswick, Alberta, and Saskatchewan.
AECL is proud of the fact that we have built and delivered several CANDU reactors overseas on time and on budget over the past decade, in South Korea, China and Romania.
Our team CANDU partners — SNC Lavalin, GE Canada, Babcock & Wilcox and Hitachi Canada — have been instrumental to the success of the CANDU industry, which comprises 150 leading-edge Canadian companies employing about 30,000 highly skilled workers.
AECL's second mandate is to operate a national laboratory for applied nuclear science located at Chalk River, Ontario, about two hours west of Ottawa. This mandate has led to the development of a world-class research and development program supporting our CANDU power reactor fleet, the Canadian research and academic community, and medical isotope production and nuclear waste management.
On the topic of isotopes, five research reactors in the world produce most of the medical isotopes used in hospitals and clinics. Typically, the Chalk River reactor, called National Research Universal, NRU, which began operating in 1957, has delivered approximately one third of global isotope production. Last summer, the largest of the other four reactors, located in the Netherlands, was forced to shut down and has restarted only recently. To make up the supply shortfall, AECL increased its production and has supplied over half of global demand.
It bears mentioning that the average Canadian requirements are roughly 10 per cent of AECL's production levels, so the vast majority of our production is for non-Canadian consumption. At this time, as you know, the NRU at Chalk River labs is in extended outage to diagnose and repair a small, contained leak of heavy water, which poses no risk to workers, the public or the environment.
A national nuclear energy program, safety support to provincial and international reactors, isotope production and other essential research and development requires investment. Let me describe the public investment in AECL as a commercial Crown corporation.
AECL currently receives an annual parliamentary appropriation included in the Main Estimates of $103 million to support the ongoing operation of the large complex and aging Chalk River nuclear laboratories. Incremental funding for health, safety, security and environmental projects totalling $6 million is also included in the 2009 appropriation.
Canada's unique and successful CANDU nuclear energy program was born in the 1940s at Chalk River Laboratories, which employs about 3,000 of the country's best scientists, engineers and technical staff,. The primary public policy objective of Chalk River is to carry out nuclear safety research, nuclear R&D, new reactor development, isotope production and nuclear waste management.
Budget 2009 also provided a $351 million, one-time cash contribution to AECL for 2009-10 operations, including ongoing support for development of the Advanced CANDU Reactor and to maintain safe and reliable operations at Chalk River labs.
The cash contributions approved in Budget 2009 will be used as follows: $94 million for ``Project New Lease,'' which is capital projects and operations program to upgrade the Chalk River site; $50 million to support ongoing Chalk River operations; $47 million to implement a refurbishment program to prepare the NRU reactor for licence renewal so that it can operate safely beyond 2011; $25 million to wind up and safely achieve an extended shutdown state for the dedicated isotope facilities; and $135 million for continuing Advanced CANDU Reactor design, engineering and systems development in 2009-10.
These additional government appropriations will help to ensure regulatory compliance of Chalk River's operations and effective management of Canada's world competitive nuclear knowledge assets.
The successful completion of the 1,000 megawatt Advanced CANDU Reactor development program is integral to AECL's future as a financially self-sustaining entity. With its successful licensing and deployment, the ACR-1000 is poised to capture the entire Canadian nuclear energy market and help maintain Canada's 10-per-cent share of the global market.
Sales of the ACR-1000 and our existing CANDU 6 power plant in select international markets in the long term will ensure the sustainability of the Canadian nuclear industry, and add thousands of quality, knowledge jobs and billions of dollars to the Canadian gross domestic product. More CANDU nuclear energy also means cleaner air. Well over 1 billion tonnes of carbon alone have been avoided by deploying CANDU technology instead of burning fossil fuels.
I will also comment briefly on the provision in the 2008-09 Supplementary Estimates (C) for $100 million to support AECL's ongoing reactor life-extension projects. AECL's ability to provide reactor life extensions is fundamental to CANDU's competitiveness. There is the potential to undertake 20 such life extensions over the next 15 year. The two life extension projects currently underway at Bruce Power at Ontario and at Point Lepreau, New Brunswick, are different in nature from each other. Both of them are first-of-a-kind projects in their own right.
Unfortunately, the schedule has slipped and unbudgeted cost increases have occurred. These life extension projects are not simply tightening a few bolts and applying a fresh coat of paint. The task to deconstruct and then reconstruct a nuclear reactor is complex. In some respects, it is more complicated than building a new one. We have put in place intensive scrutiny and oversight procedures. We have made changes as necessary and are benefiting from lessons learned. We have assembled experienced, capable, committed teams of professionals at both locations to deliver on our undertakings. While undertaking this task, we will, of course, not compromise workplace safety.
To conclude, yes, there are challenges. As AECL has done for over 50 years, those challenges will be met and overcome. Beyond the challenge is a remarkable once-in-a-lifetime opportunity for this country. Global demand for electricity will double in the next 30 years. Demand for nuclear reactors is growing rapidly, and this challenge is a $2 trillion opportunity. AECL's history, products, its Canadian partners and, above all, its remarkable employees place Canada in a unique position to create an industry for the 21st century that will provide thousands of high paying jobs. Seizing this opportunity is foremost in our goals at AECL.
The Deputy Chair: Thank you, Mr. Robins. All of us have heard of the recent leak at Chalk River and the resulting shutdown. In your opening comment, you said that Chalk River labs are in an extended outage to diagnosis and repair a small, contained leak of heavy water, which poses no risk to workers, the public or the environment.
I submit to you that, in addition to that situation, there is a risk to the public in that the lack of isotopes for those who are awaiting immediate medical care is also a serious issue. I am interested to know, as I am sure other members of the committee are, how long it will be, in your view, until Chalk River is back in operation.
Mr. Robins: We are undertaking significant analysis of the reactor. We are conducting ultrasounds of the internal vessel that was installed in 1972, as well as a thorough review of the external pieces of the reactor to ensure that we have a good analysis before we make any conclusions. We know it will be at least one month and probably longer, but we do not know for sure how long the work will take. We undertook it about a week ago. We said it would take about two weeks to complete the thorough analysis. Sometime within the next week, we expect to become much clearer in terms of the full extent of the outage. I cannot comment any further from a technical perspective in terms of how long that outage will be. We have not concluded the information. I will defer to our chief nuclear officer to conclude as to how long that work will take. We do not expect the results for another couple of days in terms of the extent of the work that is necessary to resolve the leak.
The Deputy Chair: With utmost respect, are you indicating to the committee that, with the outage that took place last year at Chalk River, a thorough analysis was not undertaken at that time and that analysis is only now being conducted with the second outage?
Mr. Robins: The outage in December of 2006, I think it was, was not a full shutdown for a full review. That shutdown was for regulatory reasons because of pumps that were not connected to the site. We did not conduct a thorough analysis of the vessel at that time.
In fact, one issue that we have been dealing with as an operator is that we have not had the opportunity to conduct a planned shutdown for a thorough review of all the pieces in the last long time because of the fact that we have been operating full out. In excess of 50 per cent of the world's production of the isotopes has come out of the NRU for at least the last eight months, and we have not had the opportunity to perform a planned outage, which typically lasts a month. We have been working with the Canadian government and other producers of isotopes to work towards a scheduled sequence of outages with the other five reactors so we can have a long-term, planned outage to conduct only the reviews that you referred to.
The Deputy Chair: Mr. Robins, as chief financial officer, in your view, is this a funding or an operational issue?
Mr. Robins: It is an operational issue in terms of coordination with the other vendors of isotopes around the world. We work closely with MDS Nordion on these issues. I do not believe at this moment that the issue is a funding issue.
Senator Ringuette: Thank you for coming here. I have been asking for your presence for a long while. I am sorry to see that you have lost $49 million from your base operating budget. That money is gone forever. You tell us that you are pleased to see a $351 million one-time cash contribution. Of that money, $216 million is for Chalk River. Then you have ``$135 million for continuing Advanced CANDU Reactor design, engineering and systems.'' If memory serves me correctly, that funding was cancelled last summer, or two summers ago, in regards to your research on this Advance CANDU Reactor.
Mr. Robins: No —
Senator Ringuette: Which research project was cancelled?
Mr. Robins: Our MAPLE project was cancelled.
Senator Ringuette: How much money was that?
Mr. Robins: We were not receiving government appropriations for the dedicated isotope production.
We have funded about 50 per cent of the Advanced CANDU Reactor, ACR, out of profits from the commercial piece of our business, and the Government of Canada has contributed the other 50 per cent of the funds for the development of the ACR.
The $135 million in 2009-10 will go to furthering the development of the Advanced CANDU Reactor. We have had tremendous success with the regulator in terms of the licensing of the ACR in preparation for market readiness in 2010.
Senator Ringuette: From your base funding, where are the cuts in your operating cost — the $49 million? How will you exercise that loss of expenditure?
Mr. Robins: We have a commercial business and we have an appropriated research and development facility. For approximately 10 years, the funding for the research and development facility was frozen and we used the profits from the commercial business to help operate the site at Chalk River.
Over the last two years, the funding levels increased to levels where we were able to fund the activities at Chalk River without any losses.
In 2008-09, we also expensed the expenditures on the Advanced CANDU Reactors that were invested by AECL. Therefore, those expenditures contributed to the loss.
As noted in my remarks, we incurred losses on the major refurbishments of the first-of-a-kind projects that we have at Point Lepreau. As a result, those losses had a negative impact on our net income, on the commercial part of the business.
For 10 years, the commercial business returned good results, in the neighbourhood of 15 per cent on our sales. Unfortunately, in the last year, we incurred difficulties with these first-of-a-kind projects, which caused losses.
Senator Ringuette: I also see in your presentation that you have sold CANDU reactors overseas, specifically to South Korea and China.
Can you provide us with the financial agreements with these countries to buy the CANDU reactor?
Mr. Robins: These were commercial arrangements. In South Korea, we did it on a contractual basis where we earned very good commercial margin. We were able to receive positive cash flows and it was funded by the South Korean organization.
All those reactors, as well as the Chinese reactor, were developed and delivered on time and on budget. In fact, the Chinese reactors were delivered ahead of schedule, and our profits were even higher than we anticipated. There was a $1.5 billion loan from Export Development Canada, EDC, to the Chinese to facilitate the transaction, which has been beneficial to the Government of Canada. The money was lent at a good rate. Historically, in all EDC loans to our international customers, we have never received any defaults. They have all been paid off; the fees have been paid and the interest rates have been attractive.
Canada has benefited from these international sales. Not only has AECL benefited but the organization of CANDU industries — the 150 companies referred to here — all benefited greatly from the export sales to each of those countries.
Senator Ringuette: I have one last question regarding the isotope situation. Chalk River is not the only nuclear generator in this country. Why are you not looking at equipping another facility to provide isotopes? Isotope needs will increase; the nuclear medical equipment will demand more isotopes.
Why are we not looking at another Canadian facility, at least to stabilize the supply for the health community?
Mr. Robins: We are, and have been, working closely with the Government of Canada in looking at all options, both in Canada, using cyclotrons and other means of developing a similar kind of production, as well as other producers of isotopes, perhaps in Argentina. We are, and have been, working also, as I said before, in a network of the other producers of isotopes around the world to coordinate the supply of isotopes to benefit Canadians.
Senator Ringuette: Are you looking at a Canadian facility?
Mr. Robins: We are —
Senator Ringuette: A second Canadian facility?
Mr. Robins: In terms of a similar kind of isotope production, you mean?
Senator Ringuette: Yes.
Mr. Robins: We are not, to the best of my knowledge. However, we are looking at alternative forms of isotope production, yes.
Senator Mitchell: I want to say a bit on the isotope issue. I think it was two years ago that Linda Keen said something had to be done or there would be leaks and the Prime Minister said; do not worry, there will not be a leak. Linda Keen was right. She is gone. The Prime Minister was wrong and he is still here.
Were any specific steps taken to follow up on Linda Keen's concerns expressed two years ago so that we would not be confronting a situation now where there is a leak, however minimal officials say that leak is?
Mr. Robins: The Government of Canada has provided us with funds to improve the safety, observation and monitoring of the NRU. The government has also provided us with funds to begin the analysis and investment in the Isotope Supply Reliability Program, which is the $47 million we receive from the Government of Canada to do just that.
We have received funding from the government — $12 million last year and $47 million this year — to begin the process. We have investigated the situation and we are working towards the long-term solutions. Unfortunately, this leak was identified, in many respects, because of the safety procedures we put in place through inspection to enable us to identify the problem.
Senator Mitchell: The first $12 million came almost a year and a half after the December 2006 issue arose?
Mr. Robins: It came through the supplementary estimates, I believe, in the process where we identified the need. There was a response.
Senator Mitchell: Regarding CANDU reactors, so often it is said — and it does not seem to be grasped always in the current circumstances by this government — that there are huge opportunities with respect to climate change for those who will seize them. The CANDU reactor is one of those opportunities. I know this issue is controversial but the reactor does not emit carbon and carbon is a pressing issue.
One would think that there would be a huge marketing program on the CANDU reactor side. You point out that this technology is a huge opportunity — a $2 trillion world market's worth. It seems to me also that marketing is government to government. We need to have ministers and prime ministers going to these major markets and promoting this product. That is how these things are marketed internationally.
What are our major markets for this CANDU reactor — China, South Korea clearly, and India? What is the government doing specifically at the highest levels by way of a marketing campaign?
Mr. Robins: We have two major reactor products. The enhanced CANDU 6 reactor is a smaller reactor that has been our workhorse for the last 20 years. We have installed it in Romania, Argentina, China and Korea, as well as in New Brunswick and Quebec. It has been a successful reactor. In fact, the reactors in Korea are four of the top ten producing reactors historically in the world. Their capacity factors are the highest of any reactor in the world.
The Korean market is a good example of how good the CANDU reactor is because Korea also has the competing technology. In every case, the CANDU reactor has exceeded the performance of the light water reactors. We have a competitive and good reactor. It is towards the end of its life cycle, but it is a good niche product.
Because it is a natural uranium reactor, it does not require any enrichment. It has the ability to burn different kinds of fuel, like thorium. Its size is conducive to smaller nations that have a grid size that will fit the 700 megawatt reactor, rather than the larger reactors.
We are treating the enhanced CANDU reactor as one that has a number of opportunities around the world. Government officials have met heads of state in Lithuania, Jordan and Romania to further our marketing opportunities for that product.
The Advanced CANDU Reactor is our new technology. It is a third generation reactor and we have focused our attention on the Ontario marketplace. We believe that by demonstrating our ability to bring in the Advanced CANDU Reactor on time and on budget with the right kind of price point, we can take the Advanced CANDU Reactor elsewhere in Canada and then internationally.
I think it is important to note that we need to conclude work on the reactor in Canada as a foundation for our export sales. We have received support for the EC 6, which is our existing product, in the markets that we are targeting. One of the markets is China because the alternative fuel capability is key to our competitiveness in China. However, the new product, we believe, needs to be sold in Canada before taking it to the export markets.
Senator Nancy Ruth: First, let me correct the record. As I remember, it was not the Prime Minister that said it was safe; it was the minister responsible.
On the isotopes, if Canada needs 10 per cent of them — and I know you have contracts out there and you have to deliver on contracts — is there any provision that if something should happen, Canada will be served and other countries will not?
Mr. Robins: I can comment only that we have a commitment to deliver to our customers, so our distribution is only to our customers. We are working with them in terms of ensuring that we have a source of supply back into Canada. Right now, we do not have the ability to distribute anywhere else other than through our customer.
Senator Nancy Ruth: The answer is no? That is what I hear.
Mr. Robins: We are looking at other alternatives to serve the Canadian marketplace.
Senator Nancy Ruth: Thank you for your smile. I was interested in your paper with your desire to be a financially self-sustaining entity. This is a great idea and something the taxpayer will be most happy to see. The nuclear energy adventure that we have been on for 70 years in this country has never been self-sustaining, as far as I can remember.
I am looking at how this $351 million is being spent. I see that a relatively small portion is going toward advancing the design and engineering component of the Advanced CANDU Reactor. That small portion makes me wonder about how fast you will reach the point of being self-sustaining, and how much longer the Canadian taxpayer will pay and pay again when there are leakages here or something wrong there.
Senators sat long into the night to make a moral decision that they do not know enough about to make. That December was horrible when we had to make that decision. Anyhow, we made it.
I am asking a question about money and how it is spent. How much more do you think you will need from the treasury before nuclear energy can be sustainable? I also want to know more about the complexity of deconstructing and then constructing a reactor, and the fact that you say in some respects, that task is more complicated than building a new reactor. You have not included a financial figure, so I wonder what the financial component of that complexity is for deconstructing and rebuilding. I want to know more about those sorts of things.
Mr. Robins: Let me answer what I believe to be your first question, and that is about sustainability.
AECL is unique in the world in that we are the only vendor of nuclear reactors that is integrated with a research facility. Areva is segregated from its research facility and has a public float. General Electric is an independent private sector company that is reliant upon the U.S. labs for a lot of its access to the research. Westinghouse has recently merged with Toshiba and is independent of their lab structure in the United States, as well as in Japan, and operates fully as a commercial entity.
When we talk about the sustainability of the commercial operations, we are talking about the profitability of our commercial business and the ability to deliver profits on our commercial part, which we have carved out financially within our financial statements from the research and development organization.
The research and development organization in Chalk River, as well as the waste management decommissioning of both the Chalk River and the Whiteshell sites, will require ongoing government support in some fashion. The support is similar to that of other nuclear nations where they invest in their nuclear infrastructure from a research and development perspective.
Senator Nancy Ruth: Does that require $300 million or $400 million a year?
Mr. Robins: The track record is about $100 million to $150 million for the decommissioning of the waste management, much of which occurred in the 1940s before a sale existed. Ongoing research and development costs and maintaining the site will cost about $150 million to $200 million a year. The sustainable, profitable part of the business, we believe, has a great opportunity because of the growth of the reactor business.
On the complexity of the life extension business, one of our customers described it as a surgeon performing heart surgery in the next room over, and remotely working in the valves of the heart to perform the surgery.
Because of the nature of these reactors in that they have radioactivity at the site, a lot of work must be undertaken remotely, so we have invested heavily in major machinery. We call the machinery ``tools,'' but some of the tools would fill this room. The process involves a complex ability to take out these radioactive tubes, crush them, put them in containers, put the containers safely aside so they can be handled properly for the long term, and then put the tubes back in. The process is much like a home renovation in the sense that it is a lot easier to build from new than it is to renovate.
With the three reactors, we have come a long way and we have learned a lot. Our learning curve has been steep, and our performance on each one of these reactors has improved each time. We have two other reactors under contract and about 20 that we foresee as a great opportunity in the future. The economics of continuing are beneficial to both the customer and to AECL. However, we encountered challenges in the first couple of reactors as we moved up that learning curve.
Senator Nancy Ruth: The project sounds fascinating. Essentially, you are also telling me that you cannot leave a nuclear reactor there and close it down. It is not like leaving an empty house that will collapse eventually, because this material is radioactive, so there is no option to mothball it and build a new one.
Mr. Robins: There is that option, but it is uneconomic. It is much more economic to extend the life by 25 years to 30 years. The reactor is much less expensive than alternative forms of fuel and technology, because it will produce electricity for another 30 years. The economics for the life extension are compelling.
The option exists to shut down the reactor. This option is always something to contemplate. The New Brunswick Energy and Utilities Board studied the options at length before they elected to proceed with the life extension.
Senator Nancy Ruth: I have one quick comment. I would be grateful if the word ``safe'' was removed from all your materials. Everyone who is in the nuclear business in this country and everywhere else knows that we do not have adequate storage, yet we have never dealt with the storage issue. I know we are building more of these facilities, but I hate that situation. It is a compromise I do not like having to make.
Senator Neufeld: Further to Senator Nancy Ruth's comment, I think the fear regarding nuclear reactors, in most cases, is what to do with the waste. People around the world have attempted to deal with this issue, but no one has been successful yet.
I turn to the life-extension projects in your briefing on page 6. It says that currently two life-extension projects are ongoing in Ontario and New Brunswick and that there is funding of $100 million to support these projects. Is that $100 million from the federal government to rebuild or refurbish those two reactors?
Mr. Robins: Yes.
Senator Neufeld: You say there are 20 other life extensions over the next 15 years. Where are these projects?
Mr. Robins: The 20 life extensions are the reactors that are installed by AECL and its customers around the world, over the last 20 years. We are working on one in Korea today. As these reactors age, when they become about 25 years old, they reach the point where the reactor needs to be refurbished to extend its life. For example, Point Lepreau was constructed in 1981. Consequently, these reactors are now being life extended.
Senator Neufeld: Am I right in assuming that the $100 million, using simple arithmetic, is $50 million each for the one in New Brunswick and the one in Ontario? Let me ask the question this way: Is that $100 million for those two reactors?
Mr. Robins: Yes.
Senator Neufeld: If I multiply that by 20 life extensions, $1 billion could be spent worldwide, which the Canadian taxpayer will obviously fund. Is that correct?
Mr. Robins: No, that is not correct.
Senator Neufeld: Tell me what you mean, then.
Mr. Robins: With respect to the $50 million, we incurred first-of-a-kind challenges on these initial projects. This is the first time that AECL has undertaken to complete these projects. We have commercial arrangements with the customers. These contracts exceed $1.1 billion. Based on the analysis that was prepared before, we went into the projects. We believe that we will enjoy a good return commercially on those projects. We have discovered that, because of the learning curve and the cost of the tooling and the labour, which was higher than anticipated, the cost to deliver and the time to deliver has been more than we initially anticipated.
In subsequent projects, we will take that experience into consideration and manage the commercial nature of the agreements to reflect the cost of delivering these projects. We believe that the economics of the project to the customer will still be a good deal, and we will amend our commercial dealings in such a manner that the Government of Canada and the taxpayers of Canada will not have to invest further. That cost will be reflected in subsequent transactions.
Senator Neufeld: The short answer is, yes, the Canadian taxpayer probably will subsidize some of those projects around the world. You are all over the place on that response, and I appreciate that. Maybe you do not want to be direct about it.
I will tell you what bothers me, because I think the chair will cut me off. In British Columbia we have no nuclear reactors. So far, we do not allow them. However, we do our own repair to our own systems. The ratepayer in British Columbia pays that cost of refurbishment. We are refurbishing dams that are 100 years old, 80 years old and 50 years old — bringing them up to a standard to generate more electricity, with no help from the federal government.
When I see that the federal government supports two provinces to refurbish their regeneration projects, it brings to mind that I need to talk to the federal government about helping us refurbish our projects.
I worry when you talk about 20 such life extensions that are outside Canada, and the taxpayer of Canada having to pay for those life extensions. I prefer that the country, or whoever supports those systems around the world, paid their own costs. It is tough enough for me to accept that in Canada, two provinces are receiving support, while the other eight provinces and the territories are not, let alone that this support goes around the world. I think the chair will cut me off at this point, so I am finished, unless you provide information that is different.
Mr. Robins: I will be consistent with my previous response. These arrangements are commercial. Customers pay for the work they contract for. We will enter into contracts with our customers at a profitable level, based on what we have learned.
Senator Neufeld: That is from now forward. I appreciate that.
The Deputy Chair: Thank you, Senator Neufeld. Your point was well taken.
Senator Di Nino: Mr. Robins, let us deal with that issue for a moment. I am hearing that the money to upgrade to these life extensions that you are talking about is money that taxpayers will throw out the window. Surely there is a better explanation than that. Is this not, in effect, like any other business where you have to invest some money to be able to get some money back?
Mr. Robins: You make a good point. AECL does not have access to the financial markets to borrow money. Whenever there is a fluctuation in our cash flows, we need to anticipate that fluctuation in our annual appropriations, or find other ways to manage within those means.
From time to time, if there are delays in collections of our accounts receivable, or if there are challenges like the ones we encountered on these projects, we need to ask for money. I need to be clear that these projects are five- or six-year projects. In one case, the project will lose money. In the other case, the project will not lose money. The issue is a timing issue as opposed to a subsidy issue. The situation is complex. The issue is as much a timing of the cash flows as it is a loss, although on one of these projects, we are incurring a loss based on the learning curve.
Senator Di Nino: That situation is normal in a business. Businesses do not make money in every initiative.
Mr. Robins: That is correct.
Senator Di Nino: I want to put that comment on the record.
I want to deal with a different issue, because I have a different concern. Am I correct in stating that AECL in the past has been seen as a world leader in nuclear reactor technology?
Mr. Robins: That is correct.
Senator Di Nino: Do we still have that tag attached to the product that we now produce?
Mr. Robins: Our performance demonstrates that we have at least four of the top ten reactors worldwide, from a production perspective.
Senator Di Nino: When was the last sale of a CANDU reactor?
Mr. Robins: In 2003, we sold the second unit in Romania, and it was completed in 2007.
Senator Di Nino: How was the financing arrived at for that reactor?
Mr. Robins: EDC supported the sale.
Senator Di Nino: Has EDC received payments on that loan regularly?
Mr. Robins: Yes, that is correct.
Senator Di Nino: There is no loss that we know of in the EDC financing of these projects?
Mr. Robins: That is correct. In fact, the loan has been successful.
Senator Di Nino: Why have we not built any reactors in the last six or seven years?
Mr. Robins: Customers have not bought any.
Senator Di Nino: There have been sales of reactors by competitors in this period of time, as I understand. I may be wrong.
Mr. Robins: The sales were primarily in China and in the home countries of our competitors. To the best of my knowledge, Areva has projects underway in Finland and France and the beginnings of two projects in China. China is the market where our competitor has focused. Westinghouse has only two underway, and they are in China. The prospects are significant, but currently, our competitors do not have a lot of projects underway other than in their home markets and in China.
Senator Di Nino: There was discussion about the most recent breakdown at Chalk River. What is the CANDU reactor experience compared with other manufacturers? Are we average? Are we better? Are we worse?
Mr. Robins: We have been better. The CANDU 6, in particular, has been better than our competition. CANDU 6 allows for online fuelling and, therefore, it does not need to be shut down nearly as often as the reactors of our competitors.
Senator Di Nino: When do you expect the ACR-1000 to be ready for sale to the public?
Mr. Robins: It will be 2010-11.
Senator Di Nino: That technology will bring us back, as far as you are concerned, to being world leaders in this field?
Mr. Robins: Absolutely.
Senator Di Nino: Thank you.
Senator Callbeck: Thank you, Mr. Robins, for your presentation. What is the estimated cost of Point Lepreau?
Mr. Robins: Our piece of the contract is for $560 million. The customer also has costs that are not under our control.
Senator Callbeck: Is the $100 million coming from the government for the two projects?
Mr. Robins: Yes.
Senator Callbeck: You mentioned MAPLE reactors. They are for the production of isotopes, but they have been cancelled; is that right?
Mr. Robins: Correct.
Senator Callbeck: When were they cancelled?
Mr. Robins: They were cancelled in May 2007.
Senator Callbeck: Why were they cancelled?
Mr. Robins: That decision was a difficult one based on a lot of different factors, economic and technical, which all led towards shutting down that project as the best decision for the taxpayers of Canada.
Senator Callbeck: The decision was a financial one?
Mr. Robins: Yes.
Senator Callbeck: What was the cost to be?
Mr. Robins: All in, the cost was in excess of $1 billion.
Senator Callbeck: How much?
Mr. Robins: I do not recall off the top of my head how much it would have been, but it would have been a significant dollar value.
Senator Callbeck: Did you say $1 billion?
Mr. Robins: Yes.
Senator Callbeck: It was that high?
Mr. Robins: If not more.
Senator Callbeck: When Senator Ringuette asked you questions, you mentioned looking at alternative forms for making isotopes. Did I understand that answer correctly?
Mr. Robins: AECL is not. AECL is working with the Government of Canada to find alternative solutions of supply for the isotope production in Chalk River.
Senator Callbeck: Can you elaborate?
Mr. Robins: I have not been involved in that work directly. All I know is that we have been working on different options, either supply from other countries or different suppliers within Canada using different technologies and the coordinated effort that we have with the other isotope suppliers around the world.
Senator Chaput: You have 20 commercial agreements with countries outside Canada, approximately. If you deal with 20 other countries, do you have commercial agreements with all of them?
Mr. Robins: I am sorry; we do not have reactors in 20 different countries. We have about 20 different reactors. We have reactors in Romania, Argentina, South Korea and China.
Senator Chaput: That is four countries?
Mr. Robins: That is all.
Senator Chaput: You have four commercial agreements?
Mr. Robins: Yes.
Senator Chaput: Are those agreements the same for each country? For example, do you have a clause in those agreements relating to environmental issues; the risk to the public and the environment? Do you have something to that effect in those agreements?
Mr. Robins: We satisfy the Canadian standard for safety in all locations.
Senator Chaput: What is that standard?
Mr. Robins: It is based on the requirements of the Canadian Nuclear Safety Commission, CNSC.
Senator Chaput: Have the countries agreed to that standard?
Mr. Robins: Yes.
Senator Chaput: For example, if an agreement was finished and there was a problem with safety or an environmental issue in one of those countries, is Canada responsible for that issue?
Mr. Robins: No, it is the responsibility of the customer to manage the operations of the plant.
Senator Chaput: On a moral basis, are we responsible to ensure that the country does not suffer from whatever agreement we had with them?
Mr. Robins: We would certainly work with the customer on all these matters.
The Deputy Chair: If I may conclude with a final question and a comment: In your view, Mr. Robins, would you say that AECL would like to have borrowing authority, as the Export Development Corporation, the Business Development Bank of Canada and Canada Mortgage and Housing have?
Mr. Robins: I think it would make us a much more viable commercial entity and help us grow. I think it would be beneficial to Atomic Energy of Canada Limited, yes.
The Deputy Chair: I believe Senator Mitchell made reference to the fact that Chalk River was shut down in December of 2006. Am I not correct that it was shut down in December 2007 and that the government moved quickly to restore the reactor?
Mr. Robins: The years start to meld into each other, but yes, I think it was in 2007. I distinctly remember it being in December.
The Deputy Chair: On behalf of all the senators on the Standing Senate Committee on National Finance, I thank you for your appearance today. This meeting is adjourned.
(The committee adjourned.)