Proceedings of the Standing Senate Committee on
National Finance
Issue 12 - Evidence - June 22, 2010 - Morning Meeting
OTTAWA, Tuesday, June 22, 2010
The Standing Senate Committee on National Finance, to which was referred Bill C-9, An Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures, met this day at 9 a.m. to give consideration to the bill (topic: Part 18 — Atomic Energy of Canada Limited).
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Honourable senators, I call to order this meeting of the Standing Senate Committee on National Finance. I wish to thank all honourable senators for being here.
[Translation]
This is the tenth meeting on Bill C-9, and Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures.
[English]
Over our previous nine meetings, this committee has heard from the Minister of Finance, as well as departmental officials, who explained the provisions of each of the 24 parts of this bill. We now turn our attention to hearing from non-government witnesses on various aspects of the bill. We will spend the next two weeks doing that, honourable senators. At the end, we hope to have various ministers present who honourable senators have suggested would be helpful. At that time, we will ask those various ministers and agency officials to come in and help us.
In the meantime, however, we will deal with those individuals who are able to explain to us the impact of various aspects of the bill from a non-government point of view.
One of the issues which resulted in a number of questions from members was that of the Atomic Energy of Canada Limited, AECL, which is dealt with in Part 18 of the bill. That is what we will be focusing on today and tomorrow.
In this first panel, we are pleased to welcome Mr. Howard Shearer, President and Chief Executive Officer at Hitachi Canada Ltd.; and Professor Harrie Vredenburg, Suncor Energy Chair in Competitive Strategy & Sustainable Development at the University of Calgary.
Colleagues, we have an hour and 15 minutes for this session. Our witnesses will give brief introductory remarks, and then, as usual, we will ask questions. I would ask that we try to keep our interventions as succinct as possible so that all honourable senators will have an opportunity to participate.
Mr. Vredenburg, would you like to start?
Harrie Vredenburg, Suncor Energy Chair in Competitive Strategy & Sustainable Development, University of Calgary, as an individual: That is fine with me. I would like to start with a bit of context. The population of the planet is still growing, most rapidly in the industrializing world, notably in Asia. "Industrializing" means moving from low energy, subsistence agriculture to high energy, consuming, manufacturing and higher GDP per capita; more energy-intensive, modern consumers demanding everything from household appliances to rapid transportation.
Where will the energy come from to power these newly developing economies? Oil and gas will have their place over the next few years, but coal is the most plentiful and cheapest primary source of energy. It is also the most CO2 emitting. As world policy-makers increasingly target CO2 emitters because of their assumed contribution to global climate change, nuclear energy is seen as a major part of the solution to the greenhouse gas emission problem alongside renewables.
Canada, through Atomic Energy of Canada Limited, has played a key role in the global nuclear industry. It is an industry that makes sense for Canada as it requires highly educated and highly skilled personnel who earn a good income from jobs that are not easily exported to low-labour-cost countries. It also uses a raw material, high-grade uranium that Canada has the largest supply of in the world.
In my opinion, as the global nuclear industry is on the cusp of serious growth, Canada cannot afford to lose AECL and its high-quality jobs and economic benefits to foreign acquirers. We have seen, in the oil and forestry sectors, that foreign buyers move the best jobs and professional services that they buy to foreign cities. At the same time, to compete effectively in the global market, AECL needs an infusion of enthusiastic capital and market-responsive management that can only happen with private investment in the company.
Government can probably not absolve itself of all responsibility for Canada's nuclear energy industry. This industry, despite its 50-year history, is still young. Sir John A. Macdonald backed the railroad, and Peter Lougheed in Alberta, where I now live, backed the oil sands. The government's role could be played as a controlling shareholder on the model of what I refer to as the "new national oil companies" that we see increasingly evolving around the world, or the government could play its role through the Foreign Investment Review Agency and other mechanisms.
AECL needs the capital and the management to compete in a global market. It also needs assurances that it will remain Canadian, with Canadian technology and Canadian technical, managerial and professional head-office jobs. The government can do this through management control or through regulation.
Howard Shearer, President and Chief Executive Officer, Hitachi Canada Ltd.: Good morning. I wish to thank the members of the committee for receiving this presentation, and I trust the input will, somehow, contribute to a vigorous and globally competitive nuclear industry, with a strong base in Canada.
As you may know, Hitachi Ltd.'s nuclear division merged with General Electric Company's nuclear division to form a joint venture. In this arrangement, the North American division of this joint venture is GE-Hitachi Nuclear Energy, GEH, while the joint venture division in Japan is Hitachi-GE Nuclear Energy, HGNE.
The flagship technology of this venture remains based on boiling water reactor, BWR, technology. It should be noted that BWR technology accounts for approximately 25 per cent of the installed nuclear reactor base worldwide. This base consists of multiple reactor vendors currently offering BWRs to market.
It is also of interest to note that, in Japan, BWRs make up the majority of the installed base, with 28 of the 54 reactors in Japan being BWRs. In addition, with the next plan going forward to 2020, approximately 11 BWR-based new reactors will be built, as will 4 pressurized water reactors, PWRs.
HGNE in Japan has already completed four advanced boiling water reactors, ABWR, and is working on another four units — two in Taiwan and two in Japan. All of have been built on time and on budget, while incorporating very advanced engineering and construction technologies, including extensive modularization.
The ABWR overcomes issues of first-of-a-kind risk in the 1990s and, as such, offers a tremendous advantage to customers that need to avoid or limit risks. Similarly, there is no need for HGNE to pursue projects where commercial terms do not ensure a profitable contract.
In Canada, Hitachi Ltd., working through Hitachi Canada Ltd., has supported AECL in its efforts to develop the ACR 1000, and it continues to do so.
Globally, Hitachi has worked with AECL in executing new-build projects on time and on budget utilizing the same advanced construction technology learned in Japan, which was transferred to the project in China. All of this effort has been focused in non-nuclear areas, primarily the balance of plant, BOP. However, the construction technology methodology can and have been applied to the total plant.
In view of Bill C-9, which moves the process to privatize AECL a step further, I have the following comments. First, the process must be executed as soon as possible, having addressed the concerns of the various stakeholders. The elimination of uncertainty on ownership impacts customer confidence, locally and globally. In addition, many new- build opportunities are already engaged with competitors to AECL who are not encumbered with uncertainty around ownership and are, therefore, able to be decisive in commitments to customers.
Second, preserving and building intellectual capital is critical. The talent which exists cannot be easily replaced and remains an attractive target for the global market, particularly where new build is concerned.
Third, nuclear energy's role in Canada calls for a vision that realizes its potential in supporting nuclear medicine, a reliable and competitive base-load electricity supply, a clean energy source and one of the solutions to reduce CO2 emissions through the eventual future electrification of transportation.
Fourth, the future role of government in supporting any new-build programs domestically or globally must have clarity.
Fifth, Canada is a respected voice in the global nuclear non-proliferation community, which is in danger of being silenced if we no longer have a vibrant nuclear industry to stand beside.
Sixth, while the future of AECL is being debated, deals are being struck, partnerships are being formed and new reactors are being built — the nuclear renaissance expands without Canada or AECL being part of it. Let us seize the opportunity the renaissance offers to re-invigorate our nuclear industry and secure the high-paying jobs for Canada's future.
The Chair: Thank you very much, Mr. Shearer. I appreciate your comments and yours, Mr. Vredenburg.
Senator Ringuette: The first question will be for Mr. Vredenburg. You indicated that Canada cannot lose AECL because of the jobs, the technology and the great market potential. Although the government talks about and spins the word "restructure," the legislation in front of us specifically indicates the authority of the minister to sell AECL in whole or in part. That would be the CANDU reactor, the intellectual property, the Chalk River isotope production, et cetera.
How do you see that Canada would keep its energy security, its energy stability and its energy sovereignty if we lose and sell, in part or in whole, AECL?
Mr. Vredenburg: Thank you, senator, for that question.
I share your concerns. I can deal with this question in different ways. I see the question of investment in AECL as one that is imperative. If AECL is to be successful, it needs capital. It needs probably a significant amount of private capital to make it responsive to world markets. My concern is, like yours, losing an asset that is valuable to this country and something that Canada has developed over the last 50 years.
There are different ways that that can be done. I do think it is important to keep control in Canada. As I indicated, that could be done through either retaining a controlling stake in the company or through legislation in terms of the Foreign Investment Review Agency or some mechanism of that type that ensures that we keep the critical jobs in Canada. That is the question. It is the jobs.
We have seen it in other industries. I have seen it in the oil industry; that is very close to much of the work that I do. When we have a foreign takeover, yes, the operating jobs stay in Canada because that resource happens to be in Western Canada. However, many of the good jobs, the technical jobs, the managerial jobs, move to Houston or The Hague or wherever it might be, as well as the spinoff jobs, namely, the good law firm positions, the management consultancies and the jobs for our Master of Business Administration, MBA, graduates from our business school. Those are the jobs that move away. That, to me, is the real concern. It is less who actually owns it and more who has control and whether the firm remains based in Canada and committed to Canada.
Senator Ringuette: By saying that, you highlight another concern; namely, if there is instability and we lose all these jobs and the technology, we also risk losing the university education in nuclear power generating.
Mr. Vredenburg: Yes, I agree with you. We would see a ripple effect through the economy. These jobs, as I pointed out in my remarks, are the high-quality jobs. They are not low-skilled jobs that Canada will probably lose anyway to developing economies where the cost of labour is cheaper. This is something that Canada does well. We have a good university system. We have a well-educated and well-skilled population. That is the key to keep these in Canada.
However, that does not necessarily mean that AECL must remain a Crown corporation. It means that we have to be careful to control and ensure that these jobs and this economic activity remain in Canada. We can do that in different ways, through controlling stake, legislation or something similar.
Senator Ringuette: I can understand the different options. The issue before us, however, is Bill C-9, and it removes any type of approval by Parliament and therefore the Canadian population for the restructuring or sale in whole or in part. We have in front of us a very "iffy" proposal, and we could lose.
Canadians have invested over $8 billion since 1952 in AECL, the research and the jobs. The production of isotopes is not only for Canadians but also for the entire world. I look at the value and the contribution to the GDP. Major research has been done by the Canadian nuclear industry on the contribution to the Canadian economy. When you look at the facts, you realize that the contribution to the Canadian economy is greater than the $8 billion over the last almost 60 years that Canadians have invested in this.
Have you looked into this scenario of the investment versus the revenue stream and the GDP contribution of the nuclear industry in Canada?
Mr. Vredenburg: I have personally not done research in that area, but the numbers that you cite do not surprise me. There are significant spinoff effects.
I want to emphasize another point; namely, if AECL is to be competitive globally, it must become stronger than it is right now. This is an industry that is on the cusp of a significant growth area if you look at the planet. We are looking at nuclear being a significant industry. If Canada and AECL are to be a player in that, AECL must be strengthened, and that probably means some infusion of private capital and market discipline. It could also be a major infusion of government money, but that has not occurred over the last number of years. It needs to be a serious player and needs to work with other organizations. As Mr. Shearer pointed out, we have had a great deal of structural change in the industry with mergers, and the current players are a fairly good size. If Canada is to compete in this industry, it needs to be a serious player and needs this infusion of capital.
Senator Ringuette: I agree. We are told that the market for the next decade is approximately 400 new nuclear plants that will be needed around the world. If I look at the contribution to the economy outlined in the research, every nuclear plant represents a major contribution to the Canadian economy.
Senator Banks: I will re-plough the ground, professor, and explain to you and ask for your comment on what we are doing here.
You said that there could be protections for Canada's interests in maintaining control and that perhaps there should be protections. However, this bill contains no protections. What we deal with here, unfortunately, sometimes is not policy; and it is not what should or could be, but what will be. We are making law here, and this proposed law permits the outright sale — lock, stock and barrel — of AECL.
Do you think that a bill addressing that ought to have protections in it to ensure that the controls to which you specifically referred remain in Canadian hands?
Mr. Vredenburg: I was with you all the way until "remain in Canadian hands." I am not sure what that means. However, I do believe that controls need to be in place.
Senator Banks: I will be specific. You were talking about situations where the functional control of a corporation, whether it is oil or other, leaves Canada along with the upper-end jobs. That is the point you were making.
Mr. Vredenburg: Yes, that is correct.
Senator Banks: We can extrapolate then that if AECL's proprietorship were to move lock, stock and barrel to Lithuania, Russia, Brazil or France, that same situation might occur. To protect against that, legislation is needed that says that that cannot be done. The easiest way to say that is to ensure that the proprietorship — a controlling interest, not necessarily a majority — should be built in as a protection against those losses. This bill does not do that.
Do you think that if this bill were to be passed into law, it ought to contain the means by which Canada can ensure that we do not have the escaping of those upper-level jobs?
Mr. Vredenburg: Yes, I agree with you.
Senator Marshall: I find this discussion interesting, in particular some of the comments that you made about AECL. You are saying that you do not necessarily support the status quo. You said something to that effect earlier.
Mr. Vredenburg: That is correct.
Senator Marshall: You also said that it must become stronger. Obviously, you are in agreement that something needs to be done with AECL and that we cannot continue on the current track.
Mr. Vredenburg: That is correct.
Senator Marshall: Can you elaborate on that? You also said that we cannot afford to lose the jobs. The financial statements of AECL — and Senator Ringuette indicated that $8 billion has been put into that corporation since 1952 — indicate a $4 billion deficit on the books. Someone has to pay that unless the government is lucky enough to hook up with someone who is willing to undertake that $4 billion obligation. The operating loss last year was $400 million, and the year before, it was $300 million or $400 million. Can the government afford to keep AECL?
I am encouraged to hear you say that we cannot maintain the status quo. Could you elaborate?
Mr. Vredenburg: Thank you for the question. There are a couple of things. It is complicated, and I spend a fair bit of time thinking about this not just for this committee but in general.
In part, the answer to your question is that this industry is going through change. It has been 50 years of a fairly rocky road, in particular in North America. Something to keep in mind as well is that the industry has been growing outside of North America over the last 50 years. Events such as those at Three Mile Island and Chernobyl had a big impact in North America. The rest of the world has been building nuclear plants at a high rate as per the graphs. It is only in North America where things flattened out. That is starting to change now, with the rest of the world and North America increasing the construction of nuclear plants because of — as I said in my comments at the outset — rapid growth, GDP increases and concerns about CO2 emissions from the alternative, which is basically coal.
Despite it being 50 years old, the industry is still relatively young. Other governments are investing in some of these industries. The French company is not private; it has significant government support. In Canada, we have done that in the past with the Canadian Pacific Railway. This country probably would not have existed if the government of the day had said that it needed to find private investors to build the railroad and that the railroad had to make its own way right from day one. In a sense, I see an analogy to that.
If Canada wants to be a player in this, I believe these companies will be profitable over time. We have seen with the oil sands in Alberta for the longest time that things were not looking that good until the price of oil rose so high that it began to make sense and the technologies became cheaper. Some people had a vision and invested in that industry when it did not make sense to others who said that it was crazy and that we should get out of it.
I see the nuclear industry in Canada, at this time, as being in a similar situation. It would be a mistake for the country to get out of this business at this time because it is one industry that Canada actually does quite well. It makes sense for Canada with its high level of skill and education, but it requires investment. In the long run, I see these industries being profitable.
There are other industries in other countries as well. I spend time in Europe every year. The Danes invested in the renewable energy industry 30 years ago with wind power. Today, Vestas is the world leader in the wind power industry. The Government of Denmark invested heavily in this and has seen the benefits in terms of a successful industry and good jobs for similar highly educated and highly skilled people in Denmark.
Senator Marshall: Would AECL be better off run by a Crown corporation or by the private sector? I look at AECL's situation today and realize that they never really took off and that they are not getting any better. We have heard testimony over the last couple of months about project management. The corporation historically has problems delivering on time and within budget. As well, they are having financial problems. It seems that keeping it as a Crown corporation is not feasible.
The Minister of Finance testified last week and spoke to the issue. He said that funding is provided to the corporation each year, but half way through the year, they are back looking for more money. That is a real concern. However, I am encouraged by your comments that you do not support the status quo.
Mr. Vredenburg: If I may comment, thank you for that. Private investment is necessary, but I separate that from the issue of keeping control and jobs in Canada. That is the difference.
Senator Marshall: The issue becomes one of who is interested in investing the money without taking control of it. It will be a real balancing act.
Mr. Vredenburg: Yes.
Senator Murray: When the government officials were here, I asked them how many proposals they had received in response to their call for proposals. They shut me down telling me that this was commercially confidential information and that they would not disclose it. I did not have the wit to ask if there was more than one.
I wonder whether you have an educated guess on that question. I ask you in view of your obvious preoccupation with what you regard as the danger of the company falling under the control of foreign interests. Is it your sense, looking at this bill, absent some specific controls or restrictions on shareholdings, that that is the track that we are on?
Mr. Vredenburg: In terms of the first question, I do not have an answer. My guess is as good as yours. Mr. Shearer might have a better idea of that, and he might want to comment.
As to the second question with respect to control, that is something that I am concerned about. As the senator from Newfoundland pointed out, there is a need for private money in the company, and that is quite a separate question from control. I think the control question is a serious one.
Senator Murray: We have privatized quite a few Crown corporations in the past. In all those instances, I think I am correct in saying that we imposed restrictions on individual shareholdings, resident and non-resident, and the total proportion of shareholdings that can be held by non-residents.
Mr. Vredenburg: I think you are right. As I mentioned in my comments at the outset, I see a trend worldwide. I spend a great deal of time in the oil industry, and you see many former national oil companies that are still national oil companies in name but have taken in private capital and are listed on stock exchanges and are behaving, for all intents and purposes, as multinational corporations.
Senator Murray: Petro-Canada was one.
Mr. Vredenburg: It is now Suncor Energy Inc.
Senator Murray: Am I correct in concluding that you support this bill, Mr. Shearer?
Mr. Shearer: I support the aspect of privatization of AECL. The bill is very wide, as you know. I support the idea of AECL being privatized. Obviously there are caveats to that, but fundamentally, I support the bill.
Senator Murray: I see your recommendation and comment that the process must be executed as soon as possible, having addressed concerns of the various stakeholders. I would pose the question, and it is more than rhetorical, to what extent this bill addresses the concerns of the various stakeholders. You want to be sure that we are not encumbered with uncertainty around ownership.
Mr. Shearer: Businesses like certainty.
Senator Murray: Of course they do, and passing this bill will not create any more certainty about ownership. It will simply turn the thing over to the Governor-in-Council.
Nuclear energy's role in Canada calls for a vision that realizes its potential, et cetera. I do not see any of that in this bill, nor do I see the future role of government must, in supporting any new-build programs, domestically or globally, have clarity. I do not want to argue with you, but I hope you do not think for a moment that this bill does what you want us to do.
Senator Neufeld: Thank you to both of you for your presentations. It is more obvious to me, perhaps, than to others. We have invested some $9.5 billion since 1952 in nominal funding, or if you want to have it in constant 2009 dollars, $21 billion. I think the taxpayers have been pretty generous over the years in actually getting this industry going. I do not dispute for a minute that nuclear energy will become a larger part of what we see today. It will be huge, and it presents some opportunities. However, when I look at what has taken place until now — some investments and not any recent sales — it begs the question of whether AECL can actually expand, as has been talked about, without another infusion of $20 billion or something to that effect. Additionally, questions remain about funding for a whole host of other things that government provides.
You talk about keeping the jobs in Canada and so on. I do not disagree with you about that either. If we possibly can do that, we should. However, others have stated that government will just plain sell everything, every nut and bolt and desk and chair. I do not think this bill says that. It says that if, in fact, they want to, they could. However, it also says that this can be restructured and gives it some pretty wide latitude to restructure. If you have to come back to Parliament every time you want to say that these rooms are for sale, but these are not, you can imagine the discussion we will have for the next 20 years around this process.
To me, clearly the government is saying that they understand; they want to keep the investment as best they can, want to shield the taxpayers from continuing to expend billions of dollars and invite the private sector in to restructure it, if it is to be a partner or an investor.
Bill C-9 provides the ability for the government to actually move forward with restructuring similar to what the professor and Mr. Shearer are talking about. The devil is in the details. However, that cannot be worked out until you actually go out to the private sector. If you went to the private sector with something that says, "We want to retain all these items, and we do not want you to have any influence on any of that," you probably will not have even one investor walk up to the plate. An investor must have some incentive.
You have dealt with the oil and gas industry. Would they say, "We will take over the whole debt, but we do not get anything else?"
Would you comment on those statements? I see this as enabling us to actually move toward having a nuclear industry in Canada that is beneficial to Canadian taxpayers, not a drain on their pocketbooks.
Mr. Vredenburg: I hear what you are saying about the cost to the public purse over the last 50 years, and I think you are right about that. I do think private investment is needed. Senator Murray mentioned that we do not know the number of bidders, but I suspect there are bidders, and there are people, companies or operators, who are interested in investing in this. There are also others. Lots of other money is interested in investing in utilities, such as pension funds and other types of organizations that would not necessarily want to control and run the organization. That makes total sense, and it gets it off the back of the Government of Canada.
I have seen in a real sense what happens to jobs when companies are taken over by another company, whether in Houston or Europe. We see it at the business school at the University of Calgary. We have less demand for MBAs because those jobs are in Houston or Europe. The law firms do less well in Calgary as a consequence when we see this happening.
That is my concern, and that is a different concern than the ownership one. Private investment is clearly needed here. However, what type of private investment? It is not whether you actually have a say over this or whether you take over all the debt and not have any say. Yes, you do need to have a say, but it is more the issue of keeping the good jobs and things in Canada.
Mr. Shearer: I would like to first touch on your recognition of the debt and the costs. It is certainly not a one-way street. Nuclear energy has given a strong, base-load electricity supply in Ontario. It has enabled, with hydro and a little coal, us to have a lower emissions footprint that would be significantly more if nuclear were not there. In addition, it has been the engine for manufacturing and development in Ontario. New Brunswick and Quebec have nuclear energy, but fundamentally, its contribution to Ontario has been significant, in addition to over 70,000 jobs. Not to debate the issue, but I personally believe that the nuclear contribution to the Canadian landscape has been significant over a period of 30 years. In addition to that, there is the aspect or the nexus of the collaboration between industry and the educational institution, and the ability to move us to the next phase, which is where we are now.
With respect to the concept of whether the bill prohibits, the devil lies in the details, as I have said before. However, it is also fair to say that, for those involved in the industry, it is our responsibility to give due diligence to every aspect and look at every possibility. Business looks at risk management in every way.
While we indeed look forward to bringing a certain level of efficiency in engagement with AECL through a privatization process, it is fair to air all the issues, as I mentioned, that concern the various stakeholders and try to figure out how they can be addressed. I agree with my colleague about the danger of losing these jobs, but they could go anyway.
I know the amount of $21 billion sounds large, but it is not on a global scale. From a performance point of view, if you have under-invested in an asset for years, miracles do occur but not always. The best way to start this leg of the relay race is to apply our collective will to have an effective nuclear operation under AECL with private-sector participation.
The point was made that global collaboration is needed based on size. AECL may have some deficits in terms of global reach, but private-sector partners have that reach, and they have experiences and lessons learned. They can collaborate as we did with AECL in China, for example.
Their strengths are in the complete fuel-cycle capability of the Enhanced CANDU 6, EC6, which is a strong element to take on a global basis. I hope I responded to your question.
Mr. Vredenburg: I agree with Mr. Shearer that the devil is in the details. I can understand some interest in the government wanting to move more quickly rather than tying this up for the next number of years in Parliament and the Senate because this industry is moving rapidly. That would be a reason I could understand saying that we have to find something that we can move quickly because the market is changing quickly.
Senator Callbeck: Welcome this morning. Mr. Vredenburg, you mentioned that France has a corporation similar to AECL. How expensive is AECL to the Canadian government compared to the French corporation for the French government?
Mr. Vredenburg: I do not have comparative numbers to present to you. However, I know the French invest in AREVA, and other governments do so as well.
Senator Callbeck: Mr. Shearer, your company is involved or partnering with AECL in the Point Lepreau Generating Station refurbishing project, is it not?
Mr. Shearer: No, senator. However, we have looked at doing a new build with AECL, the Point Lepreau 2.
Senator Callbeck: I am sorry. I did not hear that.
Mr. Shearer: We have looked at partnering to do a new build in New Brunswick, which would be Point Lepreau 2. It has not materialized, but we have looked and are looking at it.
Senator Callbeck: If AECL were to become privately owned, how would that affect the extent to which members of Team CANDU, of which your company is a member, could work with AECL?
Mr. Shearer: In business, your competitors are your partners and your partners are your competitors, depending on where you are in the business case that evolves. It would obviously depend on who acquires AECL. For example, if the acquirer of AECL is a technology not compatible with our technical expertise, we would not be able to work with them. We have supported AECL in Canada in the non-nuclear sector, such as the balance-of-plant sector, which are the turbines and digital control systems, DCS. This would not preclude us, but it may be more difficult. We are open to partnering with everyone.
Senator Callbeck: As you know, Bill C-9 would grant the minister the possibility of disposing of any part of AECL. I am wondering about the Chalk River laboratories, where most of our research and development is being done. Do you think they would ever become profitable enough that the private sector would be interested?
Mr. Vredenburg: First, based on my understanding, I do not think that is part of the bill.
The Chair: Yes. Everything is there.
Senator Neufeld: They have said that they are viewing that part differently.
The Chair: We are talking about the bill, not government promises or intentions.
Mr. Vredenburg: Let me answer your question directly, then. I look at the economics. When the Chalk River reactor shut down, there was a huge shortage worldwide. That suggests to me, from basic economics, that we have a pretty good market internationally. That is usually a very good thing. You want to ensure supply, and you work on that; but if the demand is there, you have a good thing going.
I do not know the intimate details of that operation, but when you have a market such as that worldwide, it should be an attractive economic proposition.
Mr. Shearer: I will respond with two points. The model in the United States has research labs managed by the private sector. In some instances, then, that is a model that could be applied here. There may be an interest in the management or bringing some discipline to how the labs are operated.
On the other hand, even within a university or a private-sector environment, there is pure research and there is commercial research. Certain aspects of pure research look at the vision, which might be fusion or the next generation of nuclear medicine. That type of research must be funded by government. It cannot be fully undertaken by the private sector because there is no end game.
In that sense, the private sector would be involved or would be interested in the aspect of the research lab that delivers commercial product to a market where profit can be made. Here is the paradox or the paradigm differential that must be addressed as you look at privatization of labs: They have different roles, they serve different masters, they require different resources and there may be conflicts.
There are many things to consider from that perspective.
Senator Finley: Thank you, and good morning. I have restructured a number of companies in my career. I have acquired companies and spun off companies. One thing I would never do is consult with every single shareholder before I started out to do it. Perhaps I would talk with the board of directors and get some guidelines. You cannot negotiate a business deal in public.
The bill basically addresses that particular issue. While my friends on the other side say, yes, it does give the Minister of Finance the right to sell AECL, lock, stock and barrel, as Senator Banks described, it also gives the minister many other options, such as partnerships and even acquisitions. However, it does not necessarily mean that the nuclear sky is falling in.
The nuclear industry at the scale that we are talking about worldwide is a pretty tight family. Tens of thousands of companies are not involved in this. How big is the universe of companies, corporations or other entities that could either acquire or partner or be merged with AECL to make this a commercial viability? How many companies, realistically, in the world could do this?
Mr. Shearer: I will take a crack at this, senator. I would say that maybe five or six could. You raise an important point. There are few large nuclear companies. It is also important to realize that those large nuclear companies have already established a supply chain, which is tooled to build their own technology. Therefore, when you look at the supply chain that sits around CANDU, it is not the same as building a car where you can change a tool. It requires specific tooling. Many of these businesses are small and have installed expensive tooling. To say that you can go out and immediately transfer to being a supplier to another technology I think is a myth. There are barriers.
While I think it is a market that the Organization of CANDU Industries, OCI, should not ignore, those supply chains exist in those countries supported by that infrastructure and paid for by those taxpayers, and they will want to optimize or maximize the benefit.
The question is not just a matter of transitioning a nuclear entity such as AECL to a foreign partner, but the entire supply chain is also part of that package. Many of those jobs lie within that package. I hope that helps.
Senator Finley: It does help. If I want to try to restructure a business, I will look for a partner or a business plan that somehow complements some of the weaknesses and builds on some of the strengths that I have. We know that AECL has a strong engineering and research capability. We know that AECL has a sound product; at least, we are told that it is a sound product. What we do know, however, is that it is badly under-financed and that certain elements of its management, particularly in the area of contract management, project management and perhaps facility management, are inadequate.
How many companies in the world can complete that? Money alone, private investment, will not do this. Who will invest in a company that so far, in 2009 dollars, has soaked up almost $22 billion, including any revenues that they have received? That is over and above the $22 billion.
You will have a real problem raising private capital to do this unless there is a sound business case. I am particularly asking Mr. Shearer because he is in the business — I am not saying that you are not, but obviously he is — of building sound business plans for a business. I will not invest money, nor would you, as a private individual, or even as a corporate individual, in something that has no payoff for perhaps 15, 20, 25 or 30 years.
Where will the pickup be on this?
Mr. Shearer: Without getting into history, senator, I will just answer your question directly. If you are looking at AECL's service business and the potential for future refurbishment contracts, it could be a very profitable business. If you look at the renaissance for nuclear and the future requirement for nuclear, and you also look at the history for projects outside of Canada, AECL has built them on time, on budget, and profitably, and most of that renaissance will take place outside of Canada. I think there is a business case to be made, with the right management and the right investment.
It comes down to the following questions: What are the restructuring plan and the arrangements? What is the public-private participation? How is the funding handled? Where is the focus? Where is the opportunity?
I go back to the complete fuel-cycle capability, the strength of the EC6, for example, and the ability to partner. One of the reasons AECL partnered with Hitachi is because of our lessons-learned experience and our modularization and construction technology, which levelled the playing field for them on a global basis. Even in the design of the ACR- 1000, we brought modularization technology input into it.
Let us look forward, not backward. I would like to re-emphasize that that $22 billion was accumulated over 30-plus years. I would like to emphasize that the return on that had been significant in terms of stability and manufacturing prowess for Ontario. I believe there is a case to be made that with the right partner and the right private-sector discipline, AECL can be a successful company.
Senator Finley: I agree with you entirely. However, I do not think we can write all of what you have just said and all of the options and the possible combinations into a bill.
Mr. Shearer: May I make a comment? The perfect bill does not exist. However, consultation is part of the Canadian tradition. It is part of the parliamentary system. It is not for me to comment on that issue. The experts are around the table here. I leave it at that.
Mr. Vredenburg: I am also on the board of directors of an oil company called Petrobank Energy and Resources Ltd. It is developing a new technology. I am looking at this from a Canadian-taxpayer perspective. We are shareholders in AECL. I would be looking for a partner as we are expanding into this new market that will, as Mr. Shearer said, be complementary to what we do and protect what we do. We have a technology in AECL, and we have a base of skills and capabilities in that company.
I see three different types of investors that could be investing here. One is hands-off financial investment — pension funds, organizations such as this — but one that would also have a say, induce some market discipline on management and provide financial capital. Another is the type of investor that knows something about the business but is supportive and complementary to its technology base and its capability base and is willing to invest in that and seize the economic prospect of it. I have no problem with that. The third type of investor is interested in the company possibly to take its technology off the market in favour of its own technology.
As a shareholder in AECL, I would be concerned about that investor. As a director of a private company, I would be concerned that someone would want to take out the company and take out its technology as a competitor. That comes back to the control question. Is that in this bill? No. I am not sure if it is my place to comment on that or for you to comment.
The Chair: Thank you for that. Has the figure of $22 billion been established by witnesses? Mr. Shearer, you accepted it as fact. Are you able to confirm that figure?
Mr. Shearer: No, I cannot confirm it. If it is $22 billion as an upper limit, the return in jobs and the other things I mentioned certainly justifies that.
The Chair: Would you not have to balance that against the shareholders' equity, the existing intellectual property, and how much of it went to research, commercial venture or isotopes? A figure in the air is not awfully helpful to us.
Mr. Shearer: I agree, but I am just responding to the question.
The Chair: I wondered whether your response was a confirmation.
Next, we have Senator Gerstein, the deputy chair of the committee, from Toronto.
Senator Gerstein: Thank you, Mr. Chair. I thank the witnesses for being before us today.
Professor, your comment today, which was recorded in the National Post in December 2009, was that Ottawa should, as soon as possible, privatize and restructure AECL. I do not think there is any question about that in our minds. Have you ever been involved in a restructuring?
Mr. Vredenburg: Well, it depends how you define "restructure."
Senator Gerstein: That is good point.
Mr. Vredenburg: I am on the board of directors of a company in Calgary that we restructured. We spun off two IPOs, acquired other private and public companies, and other things; so my answer is, yes.
Senator Gerstein: With that background, let us hypothesize for a moment. You represent a great academic institution in Canada, the University of Calgary, where, I suspect, there is a department of energy studies. Let us presume for the moment that the president of the University of Calgary came to you and said, "Professor, we have a very serious problem in this department. It is a drag on the university. I would like you to look at how we might restructure, whatever that means, this department to bring us to the forefront of academia in Canada or globally." If he were to ask that of you, with your background, and stipulated, "Keep in mind when you are looking at it, professor, that you cannot take a look at the staffing and other things." Would you take that job on?
Mr. Vredenburg: No.
Senator Gerstein: That is my point. This is a restructuring for which the minister will be responsible. He is basically saying that you cannot have a restructuring where everything is not on the table. That does not mean that you will not do it, obviously. Everyone around the table is talking about things of great importance, such as education, security, control and responsibility to the taxpayers, jobs, and our future position in the global world. Would you not agree that everything must be on the table before you can come up with an appropriate plan to move this great institution forward?
Mr. Vredenburg: I understand and see your point, but I also think that there is, in your example, a case for the university to say that these are the higher ideals that we stand for as a university; or, in this case, possibly a role for government to say that this is important to us as a country and must be preserved. With that proviso, then, yes.
Senator Gerstein: However, it is important to look at all the options available to us.
Mr. Vredenburg: Yes.
Senator Hervieux-Payette: After Senator Finley asked you questions, you talked about contract management, investment, et cetera. We should look at possible models that could protect the interests of Canadian shareholders, because we are all shareholders, while maintaining control for the future.
Perhaps, not today but after some reflection on the situation, you could provide a model for the committee to study. Perhaps Senator Murray will remember that the government privatized Canadian National Railway, CN. First, CN is an American company and is not controlled by Canada. Second, their safety record is not up to what we expect. They have had incidents all over the place but maximize the profits for the shareholders. Certainly, they are not taking care of Canadian interests.
If we have a partner in AECL, how do we ensure that safety and security, which concern many Canadians, are maintained, given that this is about nuclear energy? We are not talking about a standard business but about one where highly qualified people work.
In principle, I am not against any form of partnership. I like the idea of a possible investor being a pension fund or the high-tech industry. Perhaps they should invest in nuclear energy rather than in subprime mortgages.
My question is also for you, Mr. Shearer, because you might be a possible partner. Hitachi is not a small company and could accompany us. What was your role in China? What model could we look at for possible recommendation to the minister? It is wide open in the bill, and it is the job of this committee to look out for the best interests of our shareholders, who are Canadian taxpayers.
Mr. Shearer: I want to look at safety and security. Currently, there are, perhaps, 20 operational CANDUs in Ontario. The technology and technical expertise for that are in Chalk River. It is important that the investment in Chalk River and the intellectual property, IP, be maintained to be able to respond to future issues. Any operation or plant, nuclear or otherwise, that is built to last for 30 years and longer requires a strong technical presence. Certainly, it would be difficult for a private-sector organization to come in and assume that legacy and protect it into the future.
With respect to a model, the commercial part of AECL, which, quite rightly, the government is moving to privatize, needs a private-sector management team. That organization should be able to realize a global partnership with one of the major technologies. That model ultimately will give benefit to AECL, not only domestically but globally.
It is important to understand that, even though there are multiple technologies on a market, some are only suited to certain areas because of grid sizes, for example, or application or availability of natural uranium versus the need for enriched uranium, jobs for local industry or nationalism, et cetera. A participation that welds government, the private sector and the supply chain would be a global win.
The Koreans are a good example of this. There is a single focus of research and development, R&D, and government and manufacturing companies that compete globally.
Mr. Vredenburg: I would like to comment on your question.
A government's role in affecting public-policy goals of safety, environment and the like is not only through ownership. We were talking about privatization. That should probably go hand and hand with ensuring that the regulatory framework is strong. That is how you deal with those issues.
This is not just in Canada but anywhere in the world. As we put more and more of the running of organizations and businesses into private hands, we have to ensure that public-policy goals are ensured through regulation. It is the best of both worlds where you have business people running the entrepreneurial businesses and you have government regulating those. I certainly would not advocate that we do not have strong regulation of an industry such as nuclear. I think the regulatory regime in the nuclear industry is strict.
Senator Hervieux-Payette: You are with Suncor Energy Inc., and you talked about Petro-Canada. How much do you think the Canadian taxpayers have invested both in the tar sands, developing the platform off the coast of Newfoundland, and other types of investment to develop this industry that, today, was so good that you decided to acquire Petro-Canada? Do you have an order of magnitude? How many billions of dollars have taxpayers invested in that company?
Mr. Vredenburg: I do not have that number, I am sorry.
Senator Hervieux-Payette: I remember just off the coast that Petro-Canada put billions of dollars in the platform.
I do not want to correct you with Peter Lougheed being behind the tar sands development. However, I remember quite well, because I was with part of the Trudeau government, that, with the blended price, some money was going to develop the tar sands technology, and it has evolved with today's technology. At the beginning, however, the two prices for the production of a barrel of oil were so different between the light oil and the tar sands that we helped by creating the whole industry that is today the cornerstone of our industry.
Now we are on the verge of having a buoyant industry. We had a black hole; we had the incidents at Chernobyl and Three Mile Island. In both cases, safety and management problems existed. That is why I am saying, today, that I do not believe that a regulatory agency alone can do the work.
As a government, we must still be involved. However, if we need a partner to reinforce the marketing, then I am asking you if you believe that this model could fit to serve the best interests of our country and capitalize on what we have invested today.
Mr. Vredenburg: If you are asking about the model of privatization, my answer is yes.
Senator Hervieux-Payette: No, I mean a partnership.
Mr. Vredenburg: I think that is one possibility, yes.
The Chair: Thank you. We will go on to Senator Peterson from Saskatchewan. They want a reactor in Saskatchewan.
Senator Peterson: Thank you, gentlemen, for being here this morning. Over the past number of years, AECL has had a great deal of difficulty selling their reactors worldwide.
In your opinion, what is the problem? Is it the end product, or an inability to provide an end price or a package deal where the consumer knows what they are getting? Do you believe that the private sector could bring the discipline to change this?
Are you aware of the level of support that the French government gives to AREVA to sell their product worldwide?
Mr. Shearer: First, AECL has sold about nine reactors worldwide, which is a good deal more in recent years than many other major suppliers have sold. It is important to understand that. For example, no new builds have taken place in North America for the last 30 years. AECL kept building; they built in Argentina, Romania, China and Korea. During that period of drought, they certainly continued to build.
Recently, they have been working on activities to promote themselves worldwide. Worldwide nuclear sales are a government business; there is heavy government involvement. It is important to understand that. A government presence is necessary because the customers you are selling to tend to be government.
The Chair: Mr. Vredenburg, do you have a comment in that regard?
Mr. Vredenburg: No.
The Chair: Thank you. That concludes our first round. We have run out of time and will not be able to get to the second round. I apologize to our senators on the second round. Our witnesses were most engaging, and we will have senators going home unhappy because they did not get to ask you a question in the second round. However, we very much appreciate you both being here from Hitachi Canada Ltd and Suncor Energy Inc. to help us out. Thank you very much.
We are now proceeding with the second panel in relation to the Part 18, which is one part of 24 parts of Bill C-9. We are dealing with AECL and the proposed changes in relation to the legislation governing that Crown corporation.
We are pleased to have with us this morning Dr. Upper, Dr. Scharfstein, Dr. Driedger and Dr. Lamoureux.
We will have a short presentation from each of you and then go to a question and answer period. Dr. Driedger, you look like you are ready.
Dr. Al Driedger, Department of Nuclear Medicine, London Health Sciences Centre: Thank you, Mr. Chair and honourable senators.
To clarify some possibility for conflict of interest, I will tell you that I decided to be a physician scientist, so I did a combined MD and PhD. My PhD work was done at Chalk River in an area that we then called biochemistry, but which today would be radiation biology. I spent a total of about five years there before I went to London to practice nuclear medicine.
Over the years and when I was in mid-career, I was asked by Jake Epp's office to take on a role with others to audit the annual expenditures of AECL to determine the appropriateness of the scientific objectives of the company. I participated in that activity as member and sometimes chair for 13 years. I know a little more about what is over the other side of the garden fence and have played both sides of the street through my career.
The first thing I want to tell you is that the nuclear medicine community is anxious about the state of the isotope supply worldwide, and the experience of the last year has induced some scars because of the difficulty in dealing with the workloads at times.
Medicine today is molecular in nature. You only need to look at the award of Nobel Prizes to see that 43 of the last 50 Nobel Prizes in medicine were awarded for work done at the molecular level. Isotopes are key to the technologies that allow that type of work to be done. Today, we are in an exciting, tumultuous transition from the traditional nuclear medicine toward what we call molecular imaging, which allows us to take genetic and molecular information to design reagents, diagnostic drugs and therapies for specific individual considerations.
The second point I want to make in my preamble is that we are concerned about the security of the chain of supply. As a physician, I do not really care where the isotopes come from as long as they are there every day when we need them. This has been in question the past year. We have seen how fragile and limited the world supply is. We have five major suppliers and a couple of small players around the edges, but the five major reactors are aged between 47 and 53 years, so the writing is on the wall in some way for all of them. We need to be ensured that someone is taking a look at isotope supply. Canadians need to have reassurance that the supply will be there for them at need.
The Government of Canada commissioned an expert committee last year to look at the issue of the isotopes. The committee came back with a strong recommendation that the government consider the funding of the construction of a new multi-use research reactor. The silence that followed that recommendation suggests to me that it has been rejected, but we have not heard anything.
It is necessary to bring all the players in the country together who have an interest in the operation of a research reactor to make the case. We, standing alone in one corner counting up the pennies, cannot say that we can make the case on the isotope side.
I am interested also in the isotope pricing model. For me as a Canadian, when it is my turn to be a patient, I do not really care whether the isotopes that are used to treat or diagnose me were paid for through a subsidy at the reactor face or whether they are paid for at full price at the hospital door. In every case, the money came out of mine and the taxpayers' pockets and the price should be the same. Where there is possibly a concern about subsidies is when we export the excess of our production capacity. That is a different issue to talk about.
AECL as a Crown corporation has done some wonderful things for Canada. When I was first involved with it, it was a national laboratory that was one of the most exciting places to be because every chemist, physicist, mathematician and biologist who had an interest in something at the nuclear level was there. There were 5,000 of us chipping away at the edge of ignorance, and it was wonderful. That mandate drifted away in the 1980s, and the company was forced to become progressively more product-oriented. I want to remind you that AECL had some remarkable successes, of which the national laboratory was one. We actually had a Nobel Prize in physics out of that work.
Another success was the cobalt therapy unit, which was developed in Canada. I suspect that many of our parents and grandparents had their cancers treated with cobalt units that were developed at Chalk River. Today, we do not use those because we have more expensive and elaborate linear accelerators. However, I have been spending, for the last 10 years or more, a month a year in the Republic of Yemen. We have there a Canadian-built cobalt therapy unit to treat cancer because it is simple enough that you do not need a team of PhD engineers to keep it tuned up to do the dosimetry. It works. It relieves pain and it comforts people.
AECL has had many successes. That was sold off and forgotten about. The accelerator technology was sold off, and we have forgotten it. Food irradiation technology was not going anywhere in Canada; that was sold off. The isotopes were sold off. AECL, at all times, looks like a loser company with not much good in its portfolio, but all of that went into the private sector. AECL, as an incubator, served many uses.
I think I have used all of my time.
The Chair: Thank you. Dr. Driedger is from the Department of Nuclear Medicine at the London Health Sciences Centre.
Would anyone else like to participate?
Dr. Scharfstein, we appreciate you being here. Dr. Briane Scharfstein is from the Canadian Medical Association, CMA, and is Associate Secretary-General.
Dr. Briane Scharfstein, Associate Secretary-General, Canadian Medical Association: Thank you for the kind invitation to appear. It may seem a little odd to have someone from the medical association at the Finance Committee. Maybe it is not. I will be talking about isotopes.
Prior to 2007, in fact, the medical association was not particularly involved or engaged. As the result of two major shutdowns, we have become eminently involved.
We have left you with a package. Hopefully, you will find some additional material from that. I will not spend precious time going over that in any detail but will highlight a few points that I think might be helpful as you work through the question of AECL and potential privatization.
The first point is the issue of this being intimately linked to health and health care. That has been our perspective. We were invited with the first unanticipated shutdown in December of 2007, along with a number of nuclear medicine physicians and others, to an expert advisory group to assist with managing the initial crisis. We have continued to meet since that time, unfortunately. I say "unfortunately" because we had hoped that through the lessons learned from that we might have put in place strategies to avoid the current scenario.
Unfortunately, we are deep into the second series of events that resulted in another significant shortage of isotopes, which we have been managing for more than one year.
During that time, once we managed the initial crisis, the expert committee produced a series of recommendations, which you have in your package today, that basically draw the lessons learned and suggestions for how we might avoid a future similar scenario.
From that, I would highlight that we covered seven areas for recommendations, many of which have been acted upon. I want to make the point that much has been done, including investments in research and improvements in communication, to try to manage unanticipated shortages. Certainly, we continue to work closely with our colleagues in government and with the nuclear medicine community to try to do that.
In one area, we would say that we have not accomplished much yet, which is the reason to be here today. We emphasized the need to minimize future interruptions in the supply to guarantee a more secure supply of isotopes for the medical needs of Canadians. We had a number of recommendations then that we continue to hold and that we think have not received appropriate care and attention.
Subsequent to the lessons-learned recommendations, we ended up in another unanticipated shutdown that has lasted for more than a year. During that time, we have continued to try to manage the shortages as best we can. It has been a bit of a surprise to us how little attention this issue has garnered publicly, given the importance, and how much it has put Canadians at risk in terms of their health. Our sense is that that is probably because there has not been a severe, unanticipated, single event that might have focused attention.
The nuclear medicine community and the facilities across the country continue to manage effectively. A recent Canadian Institute for Health Information, CIHI, study shows that the number of studies has reduced and the cost of the studies continues to increase with no solution to mitigate those costs. Our sense is that the health care of Canadians is in jeopardy and is being compromised, but we are managing. Therefore, it has not had the attention it requires given that it has continued for this length of time.
Finally, because of the scenario that I have just described, the government appointed an independent expert panel, which we strongly endorsed and supported, to study the issue and to find reliable long-term and medium-term solutions. We anticipated that report with some degree of hope. When the report was released, we felt fairly positive about many of the recommendations and awaited the government's response to it. We are somewhat surprised and a little disappointed with part of that response. Certainly, we commend the investment in research to find alternative technologies to replace isotopes in health care.
When I speak to the major recommendation that we had made originally, I emphasize that I am not speaking as an expert, such as Dr. Driedger. I am speaking on behalf of the nuclear medicine colleagues on our advisory committee and from the Canadian physician perspective.
We continue to have great concern about government's rejection of the expert panel's recommendation that Canada should continue to invest in a reactor for research and for isotope production. Our concern with the idea of divesting AECL in one fashion or another without active government involvement is that the likelihood of ongoing investment and maintenance in a research reactor is seriously diminished. Although much hope is being placed in many of the alternative technologies and production facilities, such as cyclotrons, et cetera, none has proven to be reliable yet. They might prove to be so, and we are hopeful. Certainly, our view would be exactly the same as Dr. Driedger's, whereby we are not concerned much about who owns what or what the most efficient and effective way to produce the isotopes might be. However, we are very concerned about the safety and security of health and maintaining isotope production.
The bottom line is that we rely heavily on isotopes. We would think it inappropriate to evacuate that field without having a viable alternative in place. Essentially, when the government announced the decision to get out of this business, we were concerned that that will be the net effect.
Amongst the recommendations that we have most recently made, a number of them relate to managing this entire area of activity better. You will be able to see those recommendations for yourselves. I would leave you with the major concern that we need to do more to assure an adequate supply of isotopes, in particular for the short and medium term.
The final point we made was that we do not have many examples, at least that I am aware of, of where we can say that Canada is the undisputed world leader in terms of technology and research and development; but this is one of those areas and serves as the shining example. From the very beginning, it was a great concern of ours that essentially we would abdicate from perhaps the best example of leadership in innovation and technology, while at the same time abdicate a government responsibility, which is to continue to look after the health care needs of Canadians.
Those are our pre-eminent concerns. We are very happy when anyone asks questions about the future of the Chalk River reactor or the future of AECL because it is intimately linked to those decisions and those concerns.
Thank you for inviting me today. I look forward to your questions.
The Chair: We appreciate your comments. Dr. Lamoureux, please proceed.
[Translation]
Dr. François Lamoureux, President, Association des médecins spécialistes en médecine nucléaire du Québec: M. Chair, I greatly appreciate your invitation to appear before this committee. I am the President of the Association québécoise des médecins spécialistes en médecine nucléaire du Québec (Quebec association of nuclear medicine specialists). I also speak on behalf of the Canadian Association of Nuclear Medicine, which represents most of the nuclear medicine specialists in Canada.
The use of medical isotopes is an extremely important issue worldwide. Over 80 countries conduct some 20 million nuclear medical tests a year, with close to 15,000 tests done in Canada each and every week. Nuclear medicine is a crucial sector that many people rely on and which has far-reaching consequences for patients both in Canada and abroad.
For example, there are 5,000 new cases of thyroid cancer reported in Canada, most often affecting young people. When such types of cancer are properly treated, those people can be cured almost 100 per cent of the time and will still be alive 30 or 40 years later. But in order for them to be cured, they have to undergo proper surgery from the outset. Radioactive isotopes must then be used; isotopes that can only be produced in a nuclear reactor such as the one at Chalk River and are used to treat the development of distant metastases.
When the announcement was made two years ago that we were withdrawing from the sector, many of our patients panicked because they believed they would be deprived of that type of treatment. Unfortunately, one out of every nine women in Canada will suffer from breast cancer. Usually, once the pathology is detected, surgery has to be performed on the mammary gland, and lymph node curettage must also be done to remove the lymph nodes that might have been affected at an early stage, thus helping to save the person's life.
Nuclear medicine specialists now use isotopes produced in a nuclear reactor, that is, technetium, and inject them in the tissue adjoining a woman's tumour. This allows us to detect the first, nearest lymph node, and to send it to the pathology laboratory for assessment while the patient is on the anaesthesia table. If the lymph node is positive, the surgeon will do a simple operation, eliminating the tumour without having to mutilate the person's body.
If we did not have technetium, we would have to revert back 20 years, when all women who were diagnosed with breast cancer had their tumorous breast removed and underwent a lymph node curettage. That amounted to very significant mutilation. Technetium is also used to detect bleeding. In short, many nuclear medicine techniques are irreplaceable.
There are other techniques, including magnetic resonance, CT scans and ultrasound. Although very useful, those are anatomical techniques that focus on existing forms. By using tracers that are not identified as foreign substances in the human body, nuclear medicine allows specialists to detect pathologies extremely early on, sometimes as much as two years prior to the appearance of symptoms or anatomical differences. Nuclear medicine is a therapy that provides patients — and one out of every two persons will develop a form of cancer — with a chance to survive and heal in more than half of all cases.
As my colleagues were saying before me, this is a tremendous concern for us, but it is even more so for the people who are ill and who might be deprived of this technology.
We often travel outside the country, because nuclear medicine is a rather small group, and we are constantly being asked about the situation in Canada. We are considered to be leaders in this domain, those who have the most knowledge, those who developed the most expertise in the domain, and people are wondering why we are turning our backs on it. I am terribly sorry to say so, but I answer that it is our government, for the moment, that has received poor advice concerning medical isotopes.
I believe that Canada bears a social responsibility in this area. Some people wonder why other countries did not follow our lead. I would suggest the reason is that all the other countries, including the United States, were convinced that Canada was highly dominant in this sector. And that is the truth, we produced more than half of the isotopes in the entire world. Moreover, ten years ago, we promised the whole world that we would put two new reactors into operation, that is Maple 1 and Maple 2, and that it would be enough to cover 150 per cent of the world's potential need for molybdenum isotopes.
We are experiencing a tragic situation and it is important for us, this morning, to bring this to the attention of the senators who represent our country, in order to ensure that our country continues to assume its responsibilities and also to apply its expertise in this domain, not only for Canadians who are ill but for sick people in the rest of the world as well. We have invested 50 years in building this industry. I think that if a country wants to have a future, it has to invest in its knowledge.
In conclusion, I want to make sure you know that a nuclear reactor such as the one in Chalk River produces not only medical isotopes, but is also essential for medical and industrial research.
[English]
Dr. Boyd Upper, Former President, Associated Medical Services, as an individual: Thank you, Mr. Chair, for the opportunity to present to this committee. I should say at the outset that I was an executive with MDS Health Group Ltd. for 21 years before I retired. MDS is the company that operates MDS Nordion, which is the distributing company for radioisotopes. I am not here today to talk about radioisotopes or about the dilemma that AECL's failure to develop the MAPLE reactors — the Multipurpose Applied Physics Lattice Experiment reactors — has caused for that company. I want to talk generally about the business case for AECL.
I hope this committee will recommend to the government that it retains almost 100 per cent, if not 100 per cent, of AECL. I would like this committee to also instruct the government to advance AECL the capital necessary to move to the next phase of their CANDU development, which is the Advanced CANDU Reactor 1000, ACR 1000. I would also like you to recommend to the government that Canada's good name and reputation around the world be entered into the marketing program for nuclear to go to other governments around the world. You heard earlier that the nuclear industry, the production of nuclear materials, their distribution and their use, is largely a government business.
Prior to getting into AECL, I would like to give you an example of what happened some years ago to an initiative in the high-tech field largely financed by government. You will remember the Avro Arrow. Millions of dollars were spent developing the world's finest jet fighter and the first of the world's large major jet commercial airplanes. A team of scientists were assembled, as well as engineers and technicians, for what was an earth-shaking development at the time. It was Canadian-designed, Canadian-built and it was a success.
One day, the government announced the program was over, chop up the planes, and that was it. The team of scientists were gobbled up by NASA, jobs were lost, Canada's reputation in the scientific community went down and the technicians and scientists that went to Houston put an astronaut on the moon nine years later. When they cancelled the fighter plane, the jet commercial contract went down as well because there was no staff, no support and no science to back it.
Was stopping the Arrow a good thing for Canada? I do not think so. Did it do a lot for our scientific community to enhance it and to stimulate students to seek high careers in science and technology? No, it did not; it discouraged them. Did it strengthen our reputation around the world for following through on breakthrough projects? No, it did not.
I think we are at that place today with AECL.
In 1952, Atomic Energy of Canada Limited was established essentially as a research laboratory at Chalk River. It was a superstar in the world of science, and it still is. People came from all over the world to work, study and learn there. It enhanced Canada's reputation everywhere. In 1970, eight 500-megawatt reactors were built at Pickering, and most of them are still in operation. Ten years later, the 800-megawatt reactors at Bruce Nuclear Generating Station were put in operation, and 10 years after that, the 900-megawatt reactors at Darlington were put into operation. When you go from 500 megawatts to 800 megawatts to 900 megawatts in the nuclear field, you are really inventing a new device.
The next evolution of the ACR 1000 CANDU reactor has been stalled for 10 years because there is no government enthusiasm for it. Why not; why should we not have enthusiasm for the development that has been one of the hallmarks of Canadian success in the high-tech world?
You heard earlier from other speakers how valuable the contribution of AECL has been. You heard earlier this morning that AECL, one of the few companies in the world that can design, manufacture, build and service nuclear reactors around the world, is the only company that has successfully built nuclear reactors on time and on budget outside its own borders in the last 10 years. That is a track record worth supporting, not knocking down.
In the last three years, AECL has been stalled in any efforts it has been trying to make around the world to try to develop markets and new customers because the government is basically undecided as to what it wants AECL to do and where it wants it to go. That uncertainty has translated into reluctance on the part of customers to talk to them because there is no certainty as to where this project is headed.
This bill is designed to basically dispose of AECL, in whole or in part. You heard earlier this morning that to separate the Chalk River laboratory from the manufacturing and commercial enterprises is not a good, sound scientific thing to do because the maintenance and operation of nuclear reactors depends upon the scientific cadre at Chalk River for the maintenance, modification and development of new technologies.
If you sell it in part, which part will you sell? You heard that the Chalk River reactor is not commercially successful. It requires government support if it is to be maintained. It is the one that has been producing the radioisotopes. Canada's reputation around the world as a producer and supplier of radioisotopes is one of the bright stars in our crown, and we are letting it slip.
AECL is not perfect in my view. It needs a different management, a more commercially oriented management so that it can succeed on the electricity side. It needs better marketing. The government has to back the marketing. President Sarkozy is the number one sales manager for AREVA. Everywhere he goes, he takes AREVA with him and says, "Buy our reactors." When was the last time someone from the Government of Canada in a senior position went abroad and said, "Buy CANDU"? It has not happened since China.
Right now, the big issues in the world are energy development and the environment. Nuclear is one of the major solutions to the energy requirements of the emerging Asian markets and the Third World generally. In addition, it is clearly one of the major answers to climate change and global warming because it emits no CO2 and no toxic pollutants.
The educational impact that a company such as AECL has on the university community and on students is vast and important. If this company goes down, where will our students go? They will go to France, Japan or the United States. Why can they not be Canadians working in Canada for a Canadian-headquartered company with a Canadian mission? That is what we need.
As far as I am concerned, I would like this committee to instruct the government to retain 100 per cent of AECL; to advance the capital to proceed with the next evolution of ACR so that we have a demonstration model that the rest of the world can see and buy; and to use our good name as a country, respected as we are around the world, to go to customers to say, "You can buy a CANDU; it is a safe reactor; it is a robust reactor; it is efficient."
Last year, four of the top most efficient nuclear reactors of the 440 reactors in the world were CANDUs. We have a story to tell; it is a good story, and I hope we do not throw it away or lose it.
The Chair: Thank you, Dr. Upper.
Senator Finley: That was a very passionate speech. Earlier, people from within the industry talked about a variety of scenarios that hopefully would allow what you were suggesting to materialize. I hate to bring filthy lucre into this, but money is certainly a significant factor here. The problem for governments — both sides because it is not unique to the Conservative Party — is the question of knowing when enough is enough.
A variety of considerations, for example, nationalistic and educational considerations, come into play, but so far, in real dollars, we have spent around $22 billion. The company is still $4 billion in the hole. You are talking passionately about, in effect, a blank cheque — let us build more and invest more.
At what point in time — or perhaps there is not a point in time, in your view — in terms of the Canadian economy, do we stop? At what point do we say that we cannot sustain this. We have to do so many other things as a country: Our infrastructure deficit is huge; our medical services are through the roof; and we have to rebuild our Armed Forces. Canada has so many priorities, of which this is just one.
What would be the size of the cheque, do you think? Is there a limit to that?
Dr. Upper: I think it is predictable. The last figure I saw for the world market for new nuclear, to simply supply the world's energy in the next 15 or 20 years, will be a minimum of $400 billion. If Canada gets even a small fraction of that, then AECL, in my view, will be profitable. It has a record of building nuclear reactors successfully in Argentina, Romania, South Korea and China, on time and on budget. They can make money doing it.
We know that we have been shut out of the American market because only GE and Westinghouse can build in the United States. We are shut out of the French market because only AREVA can build in France. Other markets exist, for example, China, India and others, plus there are many places in the Third World where I think a market exists. If we are enthusiastic about it and prepared to work at it, it can be a commercial success.
Senator Finley: Is the $400 billion that you refer to the net of the American and French markets? Is that outside those markets?
Dr. Upper: No. The American market will be a new-build market in part, but the big part of the American market for the next little while will be the refit or refurbishment of about 80 per cent of the reactors that they built pre-Three Mile Island.
Senator Finley: You said that there will be a small percentage of the $400 billion in business over the next number of years; even a small percentage, say 10 or 20 per cent.
Dr. Upper: Ten per cent is $40 billion.
Senator Finley: Yes. The actual return on that — I do not know what the margins are in building nuclear reactors, I must confess — is still coming an awful long way short of what we have already invested and what we have yet to invest to realize a return. I am talking financial here, and I will be quite clear; I am not talking about all the other spinoff benefits. I am 100 per cent sympathetic to isotopes and to technology and to everything else. I, the same as everyone else — and I think everyone around this table — would be delighted to have a eureka moment that brings all this together and satisfies it. I think government and others would do this if they could see a rational or even semi-rational plan for the next 20 or 25 years to do this. Part of this bill is to seek a way to do that because the Canadian taxpayer at this point in time would be struggling to do this.
Dr. Driedger: I would like to try to get some of this $22 billion off the table. We have to remember that during the first couple of decades of the Chalk River facility's existence, a huge defence research component was part of that, which probably should be subtracted. I do not know how many billions of dollars went to that component, but I know it was a large amount of money and figured largely in the construction of building the National Research Universal reactor, the NRU.
Going forward, the issue is the question of what is for sale. I do not think we can sell the custody of the Chalk River site because, in those early years, we were not fussy about how we disposed of our waste. We used to burn our domestic garbage in barrels at the back of the lot each week, and the same ethic applied at Chalk River. The radioactive stuff was taken over the hill and a fence was built around it, to be dealt with when the war was won. We Canadian citizens have to own custody of a lot of the stuff there. Giving it to a management group that is not government and not, perhaps, Canadian, would concern me and all of us greatly. Many factors are involved. We will still be shelling out money to pay for that because we will either pay for a service or keep the wrong company there to look after it. At the same time, excellent research facilities are still on site.
Senator Ringuette: My first question is to the Canadian Medical Association, CMA. Dr. Scharfstein, you provided a copy of a letter dated February 10, 2010, that you wrote to Minister Paradis, who is responsible for AECL. You made many good suggestions and comments and expressed huge concerns with respect to the reduction of cancer testing because of the reduced supply of isotopes, which is down 20 per cent to 25 per cent. Did your association receive a response to this letter from the minister?
Dr. Scharfstein: No, we have not received a response. We are still waiting. We are contemplating writing again to Minister Paradis and to the Minister of Health as well to reaffirm those concerns and to add a few other concerns. As you said, we had a series of concerns and suggestions in February and subsequently with the government's decision about the potential sale of AECL and the declaration that they would not accept their own expert panel's recommendation to continue to invest in a research and isotope reactor. We will raise that specific concern again with the minister.
Senator Ringuette: You and your association have expressed great concern for the health of Canadians and cancer diagnoses, yet, you have been five months without a response from the minister. It is truly shameful. As a Canadian, I find that unacceptable. Instead of responding to your concerns, the government has proposed, in this omnibus budget bill, Bill C-9, the sale in whole or in part of AECL, which includes Chalk River and the production of isotopes.
I refer you to our committee's meeting last Friday when the Minister of Finance appeared. Minister Flaherty told us that the Chalk River facility is expensive. What is the medical cost of not providing medical isotopes to Canadians? As Senator Finley said, when is enough, enough in terms of not having the proper diagnostic tools to treat patients?
Dr. Scharfstein: Certainly, I share that view and the question.
We do not purport to have expertise on the financial, business or international agreement aspects of the nuclear industry or of the isotope business. However, we propose that this committee might want to get a stronger commitment from the government and recommend a greater commitment to assuring that we do not compromise some of the significant health effects, which might happen if they are not guaranteed. That could involve a series of recommendations, in particular, a commitment to the reactor and to other mitigating technologies.
Whether the nuclear power industry is private or public, health care and its associated costs will remain a public responsibility. Not only is the compromise in health care a factor but also the additional cost of alternative technologies that might prove to be more costly. Therefore, until there are guaranteed, tried-and-true alternatives to the current production of isotopes, we think that, at a minimum, the government should be required to commit to maintain the Chalk River facility, which currently only runs to 2016.
Again, that is predicated on the assumption that we will have alternatives in place by then with international agreements or with alternative production facilities in Canada. None of those are guaranteed. We strongly urge a requirement to maintain the commitment until those other technologies prove effective, as well as additional technologies such as positron emission tomography, PET, which we are seriously lacking.
Senator Ringuette: You recommend that Bill C-9 be amended to exclude the sale of Chalk River.
Dr. Scharfstein: Yes.
Senator Marshall: I wish to ask a question to whoever would like to respond. I am focusing on the isotope supply. Based on the testimony that we have heard today, including from officials of AECL, the impression is that while they had successes in the past, they are having trouble now delivering their projects on schedule and on budget.
When they had to cease the isotope supply, a lot of public debate took place. People probably lost some confidence in AECL. My understanding is that the Chalk River facility is supposed to be coming back on stream soon, and we are expecting the isotope production to kick in again. However, we still do not know if they will meet the next deadline. Could you speak about the lack of confidence, if that is what is happening, in AECL to deliver? Unless they can deliver, it will still be an issue. I would like to hear some comments on that.
Dr. Driedger: A series of disappointments occurred. When the reactor went down last year, we were told that it would be a few months, but it became more than a few months and then a year. I believe that at this stage, AECL has applied to the Canadian Nuclear Safety Commission, CNSC, for permission to restart the reactor. All in all, we anticipate a flow of isotopes again in July.
I personally think the international market is where there is a loss of confidence. I have certainly had that expressed to me. In particular, I have heard it from Bob Atcher, the former president of the Society of Nuclear Medicine, SNM, in the United States. At a public platform over this problem, he said that Canada has betrayed the world because we said that we would produce isotopes, and then we said, "Oops, I guess not." Therefore, we have lost a great deal of credibility, and whether we would get all our markets back assuming there were other sources, that is the issue. While NRU has been down, the Petten reactor, in the Netherlands, also went down with a leak; it is also suffering from problems of old age. We have had times when we have had 10 per cent of the requirement of isotopes.
You are absolutely right. Something will have to be done if we want to keep the customers — I think you have to keep the Canadian customers, regardless — and to satisfy them that AECL will deliver in future.
Senator Marshall: You speak about the lack of confidence. However, AECL could remain as a Crown corporation. It does not have to remain as one, though, to deliver and to gain back that confidence.
Dr. Driedger: Without being ideological about this — and I will try to be reasonable — I think there are some uses for a Crown corporation. Some people have recently resurfaced the concept of a national laboratory. I do not know if that concept will fly now or not. Whenever there is a situation where a public need cannot be met in a robust way by the market, the government has a role to consider. That has been the case with isotopes.
A role for vision and policy also exists. When the NRU was built, no one had ever asked to order isotopes. The channels that made radiation possible were put in with a vision that maybe someday someone will want it. It took a decade or more before people did, and today the demand is huge.
Therefore, there needs to be a vision around this. As I said in my opening statement, you need to bring together all the clients for that research reactor environment. I do not see that anyone in the country has pulled all the people together; I think I would have heard about it. We need to talk to the physics community, to the materials science people and to industry about this.
I am sure there are possibilities for doing it differently than has been done in the past. I am not arguing for maintenance of the status quo. However, we cannot walk away from some part of this just because it does not quite make business sense today.
Dr. Upper: As a matter of information, MDS entered into an agreement with AECL in 1995 to develop two 10- megawatt reactors that they call the MAPLE reactors. That was looking ahead to the aging of the research reactors and the fact that the market was developing worldwide for Canadian isotopes. The construction of these two reactors would protect the Canadian market and allow it to expand for the next 30 years. Either one of those 10-megawatt reactors would produce the world's supply at the time. The second one would be backup for maintenance or if a shutdown was required for whatever technical reason.
I do not know the ins and outs of why that failed. I know that MDS, as a private corporation, initially committed $140 million to the reactors, and, as it dragged beyond the deadline, it ended up at $340 million with no conclusion to the MAPLE reactors. The reactors were built. My understanding is that there was a difference of opinion between the physicists who built them and the Canadian Nuclear Safety Commission as to whether it had met the original specifications. My understanding is that those reactors could work today at 80 per cent capacity and could produce isotopes sufficient to meet the demand, but they have not been authorized to proceed.
Who do you believe, the scientists that design and build these reactors or people who read a document and say, "That is not what you wrote four years ago when you were starting the design of this reactor."?
I do not have the answer. I am just telling you for information that the vision was there to deal with an expanding radioisotope market. It succeeded brilliantly until we did not get the reactor.
Dr. Scharfstein: It is fair to say that there is a crisis in confidence for sure. Simply selling off, divesting or restructuring AECL is not the solution to the crisis in confidence. It needs more than that. It predates the current problems with the current shutdown; it goes back before 2007. It is about investing in aging technology. Most of the reactors in the world that produce isotopes are aging — 50-plus years — and it requires a longer-term vision and commitment.
Our concern is that the commitment required would not be sufficient if it is left to be a business decision only. It is much the same as health care; we would not trust the future of the health care system of Canada to be simply made without the involvement of government. That is our major concern. We would agree there is a serious confidence issue and it needs to be addressed.
I want to correct an earlier statement I made. You asked about a response to our letter. I had someone check. We did receive a letter of reply that simply referenced the work being done by the expert panel. Unfortunately, the recommendations of the expert panel have not been accepted, so our concerns are still unanswered. However, we did receive a letter of reply.
[Translation]
Dr. Lamoureux: To answer the senator concerning the current isotope shortage, consider that we are currently obliged to buy them from South Africa, and because they have a very short half-life, we must buy twice as much at five times the price. Regardless of what happens, this obliges us therefore to spend millions of dollars per year in order to obtain these isotopes.
Concerning the problem and the questions regarding the Maple 1 and Maple 2 reactors, even the American Academy of Sciences said last January that we could use the Maple reactors if certain modifications were made. The nuclear medicine medical community across Canada has unanimously been asking the government for two years now to set up a committee of international and independent experts to study the issue. If the government is right, that is fantastic and they can congratulate themselves for having made the right decision. But imagine if they are wrong.
Why refuse to set up an international independent committee of experts to study the issue, while we believe, as Dr. Upper mentioned, that the Maple reactors are functional?
[English]
Dr. Driedger: There is a MAPLE reactor that is functioning. It was not built to produce isotopes, though. It is in South Korea and is called the HANARO reactor — the High-flux Advanced Neutron Application reactor — and it has about a 20-year work history behind it how. The HANARO reactor was built by AECL.
Senator Banks: In order for you to know where I am coming from, Senator Neufeld is exactly right when he said that if we continue down the present road, we are heading for disaster; that is correct. For senators opposite who might not know, people have been arguing against the present path with the government before this one, the government before that one, and the government before that one. Everyone has been guilty, if that is the word, of starving an enterprise.
If you starve an enterprise to the point where it cannot do what it is supposed to do, you are able to say that it does not function properly, so we have to get rid of it. That is what has happened with this and other things. We have to fix it.
We have not spent $22 billion. We have spent $8 billion. That is what was actually spent, and there is a $4 billion outstanding liability. We are talking about $12 billion, which would average $207 million a year over the 58 years since the money has been spent.
I will ask Dr. Driedger this question. If we spent double that, if we spent $400 million a year, given the possible returns, costs, et cetera, to do what we have to do — and I am not suggesting that would be enough — to restore Canada to the position of pre-eminence, would that be money well spent?
Dr. Driedger: You need to put a vision down first before you commit any money. Having said that, I know these products. As was said earlier, the CANDU reactors are amongst the most efficiently functioning reactors in the world. They function with fuel that does not need to be enriched with enriched uranium, so there is simplification for safety and other issues. There would be an amount of money, which would be a large number, that would be well spent. However, you need to know where you are going with it and establish confidence with the market.
Before this blew up, I was aware of some seven or eight potential sales in the wind.
Senator Banks: Do you mean sales of reactors?
Dr. Driedger: Yes, but I think they are gone now.
Senator Banks: Dr. Scharfstein, you are right when you say that it is strange that you are here talking about this issue before the committee. It is because this is a function of a bill that is referred to as the "budget implementation act." You are right; it is inappropriate that that should be.
What would be the cost, give or take a nickel, of the reactor that was proposed by the expert panel?
Dr. Driedger: I expect that these days it would be somewhere in the range of $400 million to $500 million, depending on how many bells and whistles you hang on it with respect to all the other uses.
Senator Banks: What if it costs double that, a billion dollars?
Dr. Driedger: I think you need to price the reactor before you go into this. As was said earlier, AECL has built reactors on budget and on time. There is a different story, which is not appropriate to this table, as to why Ontario had some deficits. AECL knows how to do that, so you could ask them what the reactor should cost.
Senator Banks: We know about the stranded debt from Ontario Power Generation.
Dr. Scharfstein: First, I do not know what the cost was, but we put a good deal of faith in the expert panel chosen by the government to study the alternatives and the alternative production options for isotopes. They brought together — chaired by Richard Drouin — Thom Mason, Peter Goodhand, and Eric Turcotte. These people are internationally renowned experts. They spent a great deal of time and talked to many people in looking at solutions. In fact, many of the proposals they made are being acted upon, including the investments in research, looking at cyclotrons, and many others.
However, one of the key recommendations of this expert group, chosen by the government, was to invest in new mixed-use reactor research for isotope production. I have to assume these people had a whole lot more information and knowledge than we certainly have or, in fact, the government at the time had. We put a good deal of faith in a recommendation they made, which certainly made sense to us.
Prior to that, we also supported the call for an independent review of the decision to sunset the MAPLE project. We understand well the massive investment made and the lack of certainty about the outcome. However, again, because of that, we thought that any outstanding questions ought to be laid to rest by a panel of experts that we could trust so that we could say that we are now comfortable. If they said that, fair enough.
The situation is similar here. We now have an expert panel with a recommendation that is being ignored. Our sense is, given that this included people who understood the financial implications, as well as the medical and research implications, that it made a good deal of sense to us, and we still strongly endorse that suggestion.
Senator Banks: My final question is to Dr. Upper. An announcement was made today about a new accelerator at TRIUMF in Vancouver, British Columbia, and the government has said that it is committed to other means of making isotopes. Can that technology replace the production of isotopes that is now taking place or should be taking place at Chalk River?
The Chair: Can anyone answer that?
[Translation]
Dr. Lamoureux: No country in the world, whether it is the United States, France, England, Belgium or Africa subscribes to that theory. In our opinion, it is a media diversion. The only viable solution is a nuclear reactor. No country currently subscribes to that theory. We can produce technetium for research and local purposes, but not for commercial purposes to distribute across Canada or export.
[English]
The Chair: Is everyone in agreement with that?
Dr. Driedger: Just for clarification, the TRIUMF project is, at its core, a fundamental science project. One of the things they want to do as a science is look at photo-fission of elements. They think if they photo-fissioned uranium, they could make molybdenum. It will take them several years to know whether they can do that. If they could do it, they will have all the problems of extracting molybdenum from uranium and managing wastes that currently exist at the Chalk River site. Molybdenum is the product that technetium comes from. If they can make molybdenum, they will have to extract it from uranium. They will have radioactive waste in large amounts, and somewhere in the Vancouver environment they will have to manage high-level radioactive waste. That is the issue that I see as being impractical.
Senator Runciman: I read about the process with respect to the reactor getting into the hospital to serve the patients. It is fascinating and terribly complex; there is no question about it.
Dr. Upper, you referenced the foreign track record of AECL. That may well be the case, but I think the challenge is really the domestic track record. Senator Marshall struck on this, which has confirmed the whole confidence issue. One can look at the Ontario experience, and perhaps not all of that can be laid at the doorstep of AECL, but certainly the public perception is that that is where the responsibility lies. If there has been a modest success story in Ontario over the past number of years, it has been the refurbishment of the Bruce Nuclear Generating Station, which was done by the private sector coming in and handling that exercise.
One can look at what is happening with Point Lepreau Generating Station. We had officials here a couple of months ago talking about delay after delay, and millions upon millions of dollars. One can understand the frustration of taxpayers in this country, especially given the state of the nation's finances at the moment. That is certainly part of the concern here.
Dr. Driedger, you spoke about the United States and their reaction. I am not sure what term you mentioned that the official used to describe Canada not meeting their commitments, but it was a harsh description.
Dr. Driedger: It was "betrayed."
Senator Runciman: One could argue whether they were betrayed by Canada or by AECL as it is currently structured.
You made reference in the report that you circulated that because of their sense of betrayal, there is a real initiative in the United States to try to come up with a domestic production facility that can meet their needs going forward. I gather they take about 50 per cent of the production, or have in the past, from Chalk River.
What is happening in the United States with respect to this?
Dr. Driedger: I think it is going ahead. I am not up-to-the-minute on the most recent developments.
Dr. Lamoureux: They are supposed to build two new nuclear reactors to ensure the domestic furnishing of molybdenum.
Senator Runciman: Professor Vredenburg, from Calgary, was here earlier, and he spoke about the layperson's perspective of why this has not been more attractive than it apparently is when you look at the business case and the market for the product
Dr. Driedger: I have a concern about this as well. Canada controlled the market, with 40 per cent or more of the sales of reactor-produced isotopes. If, in fact, the price was inadequate to meet costs, then rather than complain about a subsidy, we should have raised the price. Everyone else would have followed our lead. The fact of the matter is that we did nothing, and that got us to this situation. I do not think it is legitimate to talk about having to stop the subsidy in some sort of pejorative way. The price is what it is. If you cannot justify the price, then there is the question of the human need. That is where the Crown corporation comes in, again, to buttress the issues that are not robust in the marketplace, or try to get them there so that they will be.
Senator Runciman: Essentially, you are saying that we have the lion's share of the market through underpricing the market.
Dr. Driedger: Everyone is producing to capacity. When the NRU reactor went down, it was the only reactor in the world that was not working at full capacity. It had room to increase its production. However, all the others were already at capacity, which is why the shutdown of the NRU was so catastrophic.
Senator Runciman: Maybe you cannot answer this, but, given the international import of this product, why has there not been an international effort to fund a facility or facilities to meet this worldwide need?
Dr. Driedger: Australia did it because they are in a remote corner. They built a small, multi-use research and isotope-production reactor, which came online last year. The rest of the world was comfortable with us. We were to have two MAPLEs and do it all.
Dr. Scharfstein: That is what is happening: Many other countries are now looking at filling the void, including the U.S. We are losing our place and our potential to be a leader and offset some of the costs with the sale opportunity. It is caught up in international agreements, supply and demand and private investment, et cetera, but certainly that is the concern.
When you are faced with the multiple challenges that exist with an aging facility that has multiple reasons to exist, not the least of which is research in which we led the world, you have a couple of solutions. One is to make it someone else's problem. We do not think that is the way to go. We need to find other solutions. They will not be simple for sure, but we have a responsibility, and our concern pre-eminently is for the area of research and isotopes in particular. That needs to be a priority concern.
Senator Dickson: Gentlemen, you have made excellent presentations and arguments on both sides. As Senator Banks said, you cannot point the finger at any one government; this has been occurring for decades.
I happen to be looking now at the evidence of the House of Commons Standing Committee on Finance of May 11. I want to concentrate on the isotope issue, if you do not mind. I refer to the evidence of Hugh MacDiarmid, President and CEO of AECL, who said that two different missions were occurring. First, the CANDU reactor division would be dealt with separately. Second, he said:
The Chalk River Laboratory will continue to be owned by the Government of Canada, and as you well know, the Prime Minister has clearly indicated, and my minister has given us the direction, that we are to re-licence the NRU to produce isotopes past its current licence expiry date of October 2011 and be prepared to produce isotopes through to 2016.
One of you gentlemen made reference to that commitment and also that it should go beyond 2016. Can anyone tell me what a reasonable time would be beyond 2016?
Dr. Scharfstein: The problem is that we do not know. A massive amount of investment is going into research for alternative sources of supply, which may work — of course, that is the unknown. Currently, there is no place that can efficiently meet our needs. Part of it is related to the way the isotope deteriorates. There are many unknowns.
We will have to wait to see what research determines. The commitment needs to be for as long as required. It may turn out that even prior to 2016 alternative production sources for isotopes or alternative technologies might well prove to be the solution to this problem. PET scanning is one of the alternative technologies; there is a plethora of new developments in imaging, probably more than any other area of activity. Generally, they tend to be more expensive, not less. Generally, Canada is underinvested in almost all of them. We are far behind most of the rest of the member countries of the Organisation for Economic Co-operation and Development, OECD, for example, in computed tomography — CT — and PET. There are uncertainties with respect to alternatives, either in new technologies completely in imaging or in new sources of isotopes.
We are suggesting that in the interim, since we do not know the outcome of this research, you must guarantee to maintain a production facility, whether it is the Chalk River facility or a new facility. We would then return to the expert panel, suggesting that it might be more advisable to invest in a new one than to continue to try to maintain Chalk River indefinitely. Either would be fine with us, as long as we have security and the comfort to know it would last.
Senator Dickson: At the same time, at the May 11 evidence before the house committee, statements were made about the CREATE committee — the Chalk River Employees Ad-hoc TaskforcE for a national laboratory — existing at Chalk River.
Do any of you gentlemen have any ideas as to where that may be leading? Would that be a solution?
Dr. Driedger: I know nothing about it.
Dr. Scharfstein: We know that there is a group of knowledgeable, well-known individuals involved who are firmly convinced that the Chalk River facility can be refurbished and maintained safely well beyond 2016. That is why, as the association representing physicians, we do not presume to know whether a new research isotope reactor or the existing one at Chalk River is most appropriate. One or the other would seem to be reasonable.
Senator Dickson: I come from Halifax. PET scanning is now available at either the Victoria General Hospital or the Queen Elizabeth II Health Sciences Centre in Halifax. That equipment is there on a public-private partnership basis with the medical community and Bell Alliant. I happened to notice the sign as I was passing by the unit.
Do you have any comment as to whether that partnership model may or may not work at Chalk River? That is, if there were sufficient tax breaks in the deal, would it work? That is probably not the case for the one in Halifax; some doctors formed a limited partnership and invested in that facility. Has the medical association, as a group, given consideration to what models might be acceptable?
Dr. Scharfstein: They have given a great deal of consideration, with minimal conclusions that are firm. We know about the many examples of private-public partnerships that have been very effective, particularly in areas that require heavy investment up front — for example, imaging. We would certainly see that as a potential option. There are other ways to divest PET. Philosophically, we do not have an objection to it. We see it working effectively as long as safeguards are provided.
The key there is that, in these partnerships, the government maintains a role and a point of regulation as well, to ensure that the public interest is looked after. We do not have any problem with that.
Dr. Driedger: We already have a model of that as concerns the AECL-MDS Nordion collaboration. That has been working, as far as I can tell. I do not believe we are in trouble on that account.
The Chair: On behalf of the Standing Senate Committee on National Finance, I would like to thank each of you doctors for being here and helping us to understand this complex issue. Dr. Scharfstein, Dr. Driedger, Dr. Lamoureux and Dr. Upper, thank you very much.
We will reconvene this afternoon. As honourable senators know, there is a vote at 5:30, so that will cut down the time that we have for our session this afternoon. I would like to start at 3 p.m. with your comments on the report for Supplementary Estimates (A), which we had hoped we would be able to adopt. If you can work on that over the lunch hour, that would be appreciated.
(The committee adjourned.)