Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 22 - Evidence - January 29, 2015
OTTAWA, Thursday, January 29, 2015
The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C- 22, An Act respecting Canada's offshore oil and gas operations, enacting the Nuclear Liability and Compensation Act, repealing the Nuclear Liability Act and making consequential amendments to other acts, met this day at 8:02 a.m. to give consideration to the bill.
Senator Richard Neufeld (Chair) in the chair.
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The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
My name is Richard Neufeld. I represent British Columbia in the Senate and I am chair of this committee. I would like to welcome senators, any members of the public with us in the room and viewers all across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website under "Senate Committees.''
I would now like to ask senators around the table to introduce themselves, and I'll start with the deputy chair, Senator Paul Massicotte, from Quebec.
Senator Massicotte: Good morning.
Senator Mitchell: Grant Mitchell, Alberta.
Senator White: Vern White, Ontario, replacing Senator Wallace from New Brunswick.
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Senator Ringuette: Good morning, I am Senator Pierrette Ringuette from New Brunswick.
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Senator Patterson: The late Dennis Patterson, from Nunavut.
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Senator Verner: Good morning. I am Senator Josée Verner from Quebec. I am replacing Senator Black.
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Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator MacDonald: Michael MacDonald from Nova Scotia.
The Chair: I would also like to introduce our staff. On my left is the clerk, Lynn Gordon; and on the right, our Library of Parliament analyst, Sam Banks.
In addition, I would like to thank Ceri Au for her work with the committee. Ceri has provided communications services to our committee since 2009. During this time she has been instrumental in helping us chart new territory in digital parliamentary communications, most notably establishing the committee's Twitter feeds, which, as you will recall, were the first Twitter feeds for any parliamentary committee and the precursor to the Senate's current successful Twitter presence. Ceri has helped our committee find new ways to share our work with Canadians and I'd like to acknowledge Ceri for her assistance on these valuable initiatives.
At this time I would like to welcome Ceri's replacement, Ms. Alida Rubwindi, who is new to the Senate but brings an extensive communications background in the public service. We welcome her and look forward to working with her.
Today we continue our hearings on Bill C-22, the energy safety and security act, which was read a first time in the Senate on November 18, 2014.
Today I am pleased to welcome, in the first portion of our meeting, John Barrett, President and Chief Executive Officer of the Canadian Nuclear Association.
Dr. Barrett, welcome. I understand you have some opening remarks, after which we will proceed to questions. The floor is yours, sir.
John Barrett, President and Chief Executive Officer, Canadian Nuclear Association: Thank you, Mr. Chair and honourable senators, for inviting me to appear on behalf of the Canadian Nuclear Association and the industry on this important bill.
The Canadian Nuclear Association is a non-profit organization established in 1960 to represent the nuclear industry in Canada. We promote the development and growth of nuclear technologies for peaceful purposes.
We represent the full spectrum of nuclear technologies that mean a quality of life for Canadians, from medical imaging to faster diagnosis for more efficient and less invasive therapies, from sterilizing pharmaceuticals and food and medical supplies, to testing the sophisticated materials that underlie all advanced manufacturing.
The nuclear industry generates clean, affordable electricity with zero greenhouse gas emissions, a significant contribution to our country in combatting climate change. Moreover, ours is the only energy industry that accounts fully for all of its waste, which we hold in safe and secure storage today and do not release it in the air, and for which we are advancing plans to contain and isolate in repositories for the long term.
Nuclear power plants stand at the centre of this industry, providing about 15 per cent of Canada's electricity. In New Brunswick, for example, a single reactor provides about 30 per cent of all the electricity generated in that province. Eighteen reactors in Ontario provided enough electricity last year to meet 62 per cent of the province's demand. To put it in concrete form, in this room your lights, recording system and electrical devices are mostly nuclear-powered. We do that day in and day out, in all types of weather.
Nuclear technology is also an integral part of Canadian engineering, manufacturing and innovation. From it come commercial applications that improve the lives of Canadians.
Some types of energy are extracted in quantity from natural resources but with little science and engineering. Nuclear energy works the other way around: considerable science and engineering applied to a very small quantity of natural resources. A single 20-gram uranium pellet destined for a reactor will yield as much energy as 350 cubic metres of natural gas, or 410 litres of oil, or 400 kilograms of coal. Eight uranium pellets of that size will power the average- sized house for a full year.
Being carbon-free, this clean electricity is therefore a national strategic asset that mitigates our country's overall greenhouse gas emissions. Clean nuclear electricity in Ontario and New Brunswick therefore creates flexibility for the Canadian government in regulating greenhouse gases.
Nuclear technology is also a net contribution to our economy. According to Canadian Manufacturers & Exporters, the nuclear industry directly employs some 30,000 Canadians and another 30,000 Canadians indirectly through suppliers across the country.
Many Canadians do not know that our industry is also an important Aboriginal employer. In northern Saskatchewan, two uranium mining companies there employ more than 5,000 people, many of whom are First Nations or Metis. Cameco Corporation is this country's largest industrial Aboriginal employer.
Again, citing Canadian Manufacturers & Exporters, the nuclear industry generates nearly $7 billion of economic activity, exports $1.2 billion in goods and services, and pays $1.5 billion in federal and provincial taxes.
In all of our activities our hallmark is safety. It inextricably permeates our corporate culture. Nuclear power stations have never exposed any member of the public to harm from radiation, nor have nuclear transporters. Our industry moves thousands of packages a year through the Canadian transport system without incident. In Saskatchewan, according to that province's Workers' Compensation Board, uranium mining has a lower time-loss injury rate than farms, construction and even the province government.
We are proud of the fact that there has never been a claim under the Canadian Nuclear Liability Act and we are determined to see that none will ever occur under the new nuclear liability and compensation act.
Our industry supports the passage of Bill C-22. This legislation would protect Canadians and improve the industry's ability to manage risks responsibly. With the 1976 Nuclear Liability Act, our industry accepted the principles of absolute operator liability, mandatory financial security, and liability limitations in time and amount. These principles are standard features of nuclear legislation in the United States, Europe and elsewhere.
With Bill C-22, Parliament would bring Canada in line with modern international standards. Moreover, our members appreciate the government's flexibility in proposing financial instruments as insurance alternatives.
The nuclear industry also strongly supports Canada's ratification of the international Convention on Supplementary Compensation for Nuclear Damage. This multilateral treaty, already ratified by the United States, will provide further protection in the case of an international incident. It will also improve the industry's ability to export Canada's significant nuclear expertise.
On January 15, Japan signed the Convention on Supplementary Compensation for Nuclear Damage. Japan will be entering the CSC on April 15. With Japan's entry, the international agreement comes into force. This will go a long way in establishing a global nuclear liability regime and creating a more favourable international environment for Canadian nuclear suppliers.
There are significant global opportunities presented by the current construction of 71 nuclear reactors worldwide, including 5 in the United States and 26 in China. Canada enjoys an enviable international reputation as a nuclear pioneer and global leader in technological innovation, robust safety parameters and regulatory effectiveness. We are wanted as a partner because Canadian nuclear means quality, integrity, security and safety.
China has recognized this fact and last month Canada and China agreed to deepen our nuclear cooperation. The China National Nuclear Corporation signed a joint venture with CANDU Energy to develop markets worldwide, based on the Advanced Fuel CANDU Reactor. This global commercial partnership creates significant opportunity for Canadian technology.
With that said, there is one point that deserves the government's attention. We would urge the minister to use his authority to increase the number of eligible insurers. Our members face a substantial increase in premiums and would appreciate the benefits of open and fair competition in the insurance market. Greater competition will be needed when this bill is proclaimed.
In summary, Mr. Chair and honourable senators, the Canadian nuclear industry supports this bill and urges the Senate to pass it into law. These amendments, long overdue, would bring Canada's nuclear liability regime in line with international standards.
The Chair: Thank you very much. We will now go to questions and we will begin with Senator Massicotte.
Senator Massicotte: Thank you, Mr. Barrett, for being with us this morning. Obviously this is an important modernization of responsibility and the whole concept of the bill, typical and common government practice today, is "polluter pays'' for the damages. In your case, relative to nuclear, the government is proposing to fix a cap of $1 billion. Why the special treatment? Why not associate the same responsibility as we do with petroleum producers and other energy producers?
Mr. Barrett: Thank you for the question. On the principle of "polluter pays'' that, in my understanding, has been long accepted in the nuclear industry because all the operators are accepted as being the key responsibility source for any incident, accident or release that could occur. We have embedded that principle well into the nuclear industry from the start.
On the question of the cap, the important thing here is to obtain and reach a level of the liability in amounts that are significant, pertinent and useful in being able to compensate, should there be any kind of incident. If the result of an incident could incur liabilities and costs of such a magnitude that it effectively would shut down the generating possibilities and the generating entities themselves, then you would have this phenomenon of having at the same stroke damaged the capacity to produce electricity that's needed, in the case of Ontario 62 per cent or 65 per cent of the electricity generated.
You could have compensation that, without the cap, in a very severe situation — which we forecast as extremely low in possibility, but that's why you have insurance — you would run the risk of actually shutting down the whole industry because you would be putting it out of business because it couldn't afford to pay such amounts. That's my understanding of the logic behind it.
Senator Massicotte: In Ontario, there are a couple of producers of nuclear and there are some private players. I am having difficulty understanding, not from an accident in Canada, because we've been very lucky and have good practices, but if you look at what happened in Japan, it's easy to conceive of a nuclear accident exceeding $1 billion in damages given the consequences. Why would Canadian taxpayers, or somebody else, pay for a private operator or in some cases provincial operators, pay for their accidents? Why should we treat them differently than say an oil and gas company working offshore?
Mr. Barrett: The way to look at that would be, first of all, with all respect, I'm a little concerned when one uses the Fukushima accident as any type of example that is pertinent in Canada. It is so different in its nature. The character, the quality and the style of the nuclear reactor are completely different from the CANDU reactors. The seismic situation and tsunami situation is completely different.
My point here is the safety record of the Canadian nuclear industry, as I mentioned in my remarks. There has been no fatality whatsoever over 60 years and we intend to keep it that way. There is a very deep safety culture, defence in- depth and, as you have probably already heard from the Canadian Nuclear Safety Commission, how they impose the regulatory exactitude, if you will, and strength on the industry to make sure that no accidents or incidents can occur. With that, I'm trying to position the industry as very safe with the possibility of accidents as extremely low.
In that, the compensation one might envisage I don't think necessarily would range way above the $1-billion amount, because I just don't think that the risk is there.
Senator Massicotte: Why would you disagree with it? If it's inconceivable that it could exceed $1 billion, then you have no objection to it being unlimited.
Mr. Barrett: I would go back to the point I made and it's just natural to be able to situate the industry in a way that here is the sort of risk scenario, if you will, the risk environment, and here is the kind of compensation going from 75 to $1 billion, that the industry will pay and is quite happy to do so. There comes a point at which should there be — and we have to say "should there be such an incident'' — then we have to balance that with the risk of shutting down the whole industry and having a further impact not only in the immediate environment in which an incident would occur, but also it would affect the whole province in its electricity generation. I come back to that balance point.
Senator Ringuette: Thank you, Mr. Barrett, for being here. Being from New Brunswick, I know that the need for nuclear energy generated by Lepreau is certainly an important component of our needed resources. I'm sure that you did your research, and you know my line of questioning with regard to the cost of this insurance. I see that, in your statement, you urge the minister to use his authority to increase the number of eligible insurers.
I gather that it's not a very competitive market, and the minister has something to do in qualifying insurers that you will have to adhere to. What is the cost going to be? Just look at Lepreau in one perspective. What is the cost going to be for these probably sole-source insurers, as I can see from your statement, going from a liability of $75 million to $1 billion? What is that going to cost Lepreau?
Mr. Barrett: Thank you, senator, for the question. On specific costs for Lepreau, I would have to say that I do not have the figures at hand and would have to go to Lepreau generating and New Brunswick Power to see if they have forecasts, which I would be happy to try to ascertain. I don't have the numbers myself.
I think the main point that you're driving at is that, first of all, there has been increase in insurance premiums for the nuclear industry. Without this bill, it's been happening anyway and it's been above the Consumer Price Index and inflation. There has been a steady rise in the premiums, even back at $75 million, which was the previous limit. So the industry is saying, "We're happy and prepared to see the liability limit go up to $1 billion and, of course, to obtain the insurance that's required for that.'' But, at the moment, there is a kind of monopoly in the insurance. They can only turn to one association, which is the Nuclear Insurance Association, and, as I say, those premiums have been rising. The industry feels that, if there were a wider pool of potential insurers, you would have better competition and perhaps then not such a dramatic rise in the price of the premiums that have to be paid, which then would have a beneficial effect for all concerned.
That was one of the important messages from the industry on the bill. We're very pleased to see that, in that, the minister has some flexibility. In terms of whether the minister would exercise that, we would encourage the minister to look at that possibility.
In the bill, there's also the possibility of other types of financial security to be put in addition to premiums to make sure that the insurance protection is there and paid for. That is helpful, but it's the element of a lack of competition. If you're going to go up so high in the premiums and the liability cap, we would like to see some more.
But to your point about the specific costs, I would have to go to the generating utilities themselves and see what they're forecasting on it.
Senator Ringuette: This issue has been hovering and certainly the department has been in discussion with you and your membership. Your membership around the board table has certainly discussed the cost of this.
In the Canadian industry, there is only one private operator in the nuclear industry, and that is SNC-Lavalin. With regard to providing assets to mitigate liability, it is not in the same position as provincial governments or the federal government and so forth. How much of this is to reduce the premiums for SNC-Lavalin, a private operator, by increasing the number of operators that will have to use this?
I'm also very concerned because we have quite a number of university nuclear research facilities. How will that affect them? A university, with regard to their budget, is already under a lot of constraint. They are a prime source of research and innovation for the industry.
As to the cost factor, first of all, Mr. Barrett, I'll be very honest; I am very surprised that you cannot indicate to us what the additional cost of this insurance increase that is required by the bill will be.
The Chair: Senator, we're pushing the time here.
Senator Ringuette: I'm pushing the time, chair, because —
The Chair: We need to be fair to the other senators.
Senator Ringuette: — this is a major issue with regard to this bill. I have asked for the Ontario nuclear power group and the New Brunswick Lepreau group to come before us, and they all defer to the current witness whom we have before us who cannot give us answers with regard to the additional cost to the industry and to taxpayers for the electricity generated by the nuclear power plants.
At the end of the day, Chair, the only thing I want is an answer to my question with regard to what the increase in cost is going to be.
Mr. Barrett: Thank you, senator. Just at the outset, you mentioned SNC-Lavalin. That company is indeed the owner of the CANDU Energy company, which is also the primary constructor of CANDU reactors in Canada. But I think you're referring to Bruce Power. Bruce Power is the utility and the operator to which this insurance premium — the insurance cap — would be applied. In Ontario we have Ontario Power Generation and Bruce Power as the operators.
That takes me to the second point. On the research reactors, being much smaller in power by orders of magnitude, the risk factor is completely different because it is related to the megawattage and the size of the reactors. So, with the research reactors being much more limited, the insurance costs are much lower. They're different. I can't specify what they are, because there are different types of research reactors, whether Royal Military College or McMaster, et cetera, but they will be quite a bit smaller and, therefore, still able to conduct their research without being unfairly penalized.
Then, on the cost — I am wary of the time — I would say that I could certainly, and I will, undertake to provide that information. I'll have to go to the utilities, each one of them being in a different situation, to see if they have forecasts that we can provide to this committee.
Senator Mitchell: Thank you, Mr. Barrett. I'm interested in a couple of things. One is your commitment to safety and the record that you have underlined. "Safety culture'' were the words that I think you used. More and more, in industrial circles, the idea of auditing for safety culture is being considered. I know that the NEB has given a great deal of thought to that. Is there a process of auditing for safety culture in the general auditing processes in the nuclear industry?
Mr. Barrett: In response to that, senator, I would say that the Canadian Nuclear Safety Commission, which is the regulator, has a very strong presence in the industry. They effectively lead the charge, if you will, almost as an auditor. Whether there are strict auditing procedures they use, I'm not familiar with that sort of detail. But what I would like to underline is that the CNSC is holding the industry to account on safety right across the board, from the uranium mining, to the transport of radioactive sources for medical purposes, and right to, of course, the big power generators. They are there all the time, watching all the time and holding to account.
That's the backbone, if you will, of the safety culture. It's a strong presence, with tough regulations and absolute commitments to live up to. The compliance issues are very strong, and they're made public. If anyone deviates slightly, they're told, "Back in line and we'll publish this on the website.'' It's kind of like a transparency to enforce that safety culture.
That safety culture is so strong. I saw it in a different way when I was the ambassador for Canada to the International Atomic Energy Agency. I was there during the Fukushima accident. Afterward, a group of countries — Canada included — worked very strongly behind the scenes to push the whole agency at this moment to develop an enhanced action plan on safety across the board. I can tell from the experience that the Canadian Nuclear Association senior leaders were there, either in person or helping to give me the instructions to push the whole Atomic Energy Agency into a stronger, tougher position worldwide.
The result was a 12-point action plan. I think I earned the irritation of some of the agency's top brass, because I was there at their door right until the action plan was adopted by all of the countries, to say, "We can go further on this. We can push the safety so that everyone is moving up and up the bar, the standard of safety.''
I just use that as an illustration that not only are we leaders domestically in the safety culture but, as I mentioned in my remarks, we have the expertise and influence to export that and make the world safer, so to speak, in that regard.
Senator Mitchell: Thank you.
I may have misunderstood your discussion on the cost of insurance and who's paying it. First, are you saying that Bruce Power is the only corporation that is actually having to buy insurance because everything else is government- owned? Second, whether or not that is the case, what criteria does the government use now to determine what companies could insure this kind of risk, and why does the government have to determine that in any event?
Mr. Barrett: All the utilities and power generators, the operators are involved in obtaining the insurance. I just mentioned Bruce to clarify something there, but I didn't mean to suggest that they were the only ones. No; all the generators, the government-associated ones like OPG and NB Power, will also have to do that.
To the second part of your question, I will say I'm not an expert on the insurance industry. But because of the risk nature, it's my understanding that there has been a Nuclear Insurance Association of Canada over the years of different companies that have come together as part of that association to say, "We will provide the insurance that's necessary for the nuclear industry,'' bearing in mind that it is the big power generators that have probably a different type of risk entirely, as I mentioned earlier, than, say, very much smaller research reactors. That has gone along to a point where the industry has seen the premiums rise and rise, and this was before the passage of this bill. Presumably, then, the premiums will continue to reflect this higher liability.
The legislation from 1976 — and I would double-check this myself just to make sure I'm accurate on it — involves the federal authority in qualifying, if you will, the insurance protection, the companies protecting it, the association. So we're asking the government to qualify other potential insurance companies, if you will, or entities, so that there can be some competition and perhaps lower rates, as we do in our daily business when we're trying to get insurance for our cars or houses; we're looking around at others. We look at the risk, weigh it according to the safety culture, et cetera, and come with a lower premium, to say, "We're confident that we're not going to have to pay this out, so we can give you a better deal.''
The Chair: I've got a full clock here, so I'll ask that the questions be more compressed, and the same with the answers, so that each senator has an opportunity to ask questions. Next to Senator Patterson, please.
Senator Patterson: I wonder if the witness could kindly elaborate a bit on how the Fukushima situation is not at all relevant to Canada. I suppose part of it might be that we don't have nuclear reactors right on the ocean. Is that true? Could you elaborate, please?
Mr. Barrett: There are a couple of things that we would identify right away as being pertinent. I will be mindful of the time, chair. You have already identified one.
The accident, as you may have read, had to do with a seismic event and then a tsunami. Certainly, like the Canadian reactors, the Fukushima reactors shut down because of the seismic activity. But then in came the big tidal wave, and it swept in and took out the power-generating sources, the secondary ones, that were needed to provide the cooling, et cetera.
It's a boiling water reactor, which has a different configuration. My point here is that the Canadian CANDU technology is a different design than these boiling water reactors that were in Fukushima. That was one thing that's very different. The shutdown, the defence, and the protective and passive measures are important, because if you have an accident and you lose the secondary power that helps you deal with the accident, then you've got a double problem there. If you have passive sources of protection and defence, then it doesn't matter. These are built into the Canadian reactors.
The seismic situation is completely different, where the Canadian reactors are located and the geology.
I mentioned the safety culture. Just recently, the head of the Japanese parliamentary commission that investigated the Fukushima accident — the TEPCO utility did its own investigation. The government did its own investigation. But the Diet in Japan said, "We're not so sure that they're independent and sufficiently distant. We'll do our own.'' You can read that report online. They did it in English as well. But the opening lines were that there was not a safety culture; there was too much collusion between the operator and the regulatory body, et cetera. So there had been situations pointed out in 2007 to TEPCO about some of their facilities, and they never did it. This would not happen in Canada at all.
Senator Patterson: With regard to your recommendation urging the minister to use powers to increase the number of eligible insurers, that could be done outside the act; is that correct? You're not suggesting any changes to the act?
Mr. Barrett: No. You're absolutely right, yes.
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Senator Bellemare: My question is about radioactive waste. Do the responsibilities cover the provisions relating to radioactive waste? What do you do with this radioactive waste?
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Mr. Barrett: My understanding is, yes, that the insurance is covering the whole cycle, if you will, excluding uranium mining. That is under a different type of insurance and liability. But this act covers the operators and therefore it is covering the operators from the transport of the fuel to the utility, the use of the fuel in the utility, and then the ultimate disposition and the waste management. That's also combined with a separate fund that is to pay for the treatment and management of the waste. So those funds are already paid by the utilities up front.
[Translation]
Senator Bellemare: I would like to ask a complementary question. Does radioactive waste stay in Canada or is it sent abroad? If it is sent abroad, are we also responsible for it?
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Mr. Barrett: No, it's not sent abroad at the moment. The waste products — the spent fuel, being one of the main parts of the radioactive waste — stay on the site where it's produced. So there are seven sites in Canada — New Brunswick Power, just to use an example; Chalk River, now the Canadian Nuclear Laboratories, formerly AECL. It stays there.
The government, by its act of 2002, created the Nuclear Waste Management Organization, and that organization is going through a process. It is long term, but it's done with very good management and an approach with communities to say that we have, in Canada, a responsibility, ultimately, to deal with these waste products. One of the ways of dealing with it is to put it into a secure, isolated repository. In Canada, as in some other countries that are looking at these situations, that would be a geological repository in the earth. This organization is conducting its technological, scientific treatment of it but, at the same time, is consulting very closely with possible communities. If that comes into being, there may be a move, then, of some of this waste to one central repository, but that will take some time to develop.
Senator Seidman: Thank you very much. Mr. Barrett, you expressed strong support for both Bill C-22 and the international Convention on Supplementary Compensation for Nuclear Damage. My question is: Is there a relationship between these two things, the bill and the international convention? If there is, specifically how does this affect the operators?
Just now, you mentioned the impact of the liability on the operators. It applies to the operators, but I don't think it applies to the contractors. So, could you just please try to help me understand some of this?
Mr. Barrett: There's not a specific connection between the two. You have the convention that stands to one side, and you have this Bill C-22. It happens that both can be done at the same time, but they're not inextricably linked in that sense.
Where they are connected is that it facilitates, then, the possibility of export and supply of technology, of parts, or whatever from, in our case, Canada to potential markets because it alleviates the risks carried entirely by a supplier.
I'll give you an example. This will help us with the United States because we both agree that, if there is any sort of incident, if it happens in Canada, it's governed by Canadian legislation and Canadian jurisdiction. If it happens in the U.S., it's U.S. jurisdiction and U.S. operators. So it's very clear where any type of proceeding would occur and in what jurisdictions. This, again, clarifies the arrangement so that the trade and the market in such materials between Canada and the U.S. can occur.
You may have read recently that, with President Obama in India, they're trying to sort out a problem that affects all countries that have technologies that could be sold to an Indian market. The Indian government passed, in 2010, a law that said, "No, the suppliers play.'' As a result, the big companies like Westinghouse and GE Hitachi and our own CANDU Energy can't go into the Indian market because they can't take that kind of risk. The operator may use the product wrongly. You supply a product. The operator uses it in a faulty way, and there's a problem with it. The supplier would have to pay. This is why you can see an example of how, unless the operator takes it, this can completely curtail any possibilities of interaction.
Senator Seidman: So you're saying that the convention alleviates that particular problem?
Mr. Barrett: It reinforces the solution, if you will, the alternative. On top of the liability that we're talking about here, it's starting to expand an international pool that can be drawn upon, too. It is, as the name suggests, supplementary compensation were there to be any type of incident.
In the case of Fukushima, it happened in Japan. I remember the Philippine ambassador and other countries in the region being concerned that there might have been some impact. If there were claims in some of those countries, who would pay? The CSC is a way of trying to establish a better understanding, a better possibility, that there is an international compensation pool that could be utilized to cover any of these incidents.
Senator Seidman: Does it change anything for any of the suppliers, for example, or the contractors?
Mr. Barrett: No.
Senator Seidman: Or does that still leave the operators in the lurch if there's a mistake made?
Mr. Barrett: The operators, yes.
Senator White: Thank you very much for being here today. I have two questions. The first one will be quick.
If there was an accident at a facility and decommissioning was required, it would cost $500 million to $800 million, as I understand. Does that $500 million to $800 million come off of the $1 billion, or do you have $500 million to $800 million that will be set aside from a company that is separate from the $1 billion? Or is it part of the decommissioning?
Mr. Barrett: If I understand that correctly, you're saying, if there's decommissioning under way and then there's an accident —
Senator White: There's an accident at Darlington. Decommissioning is not underway, but, as a result of the accident, it is going to be decommissioned. Would decommissioning costs come out of the $1 billion?
Mr. Barrett: My understanding is no. My understanding is that this comes out of the decommissioning funds that have been put up all along. This fund is growing all the time.
Senator White: That's good. We're running out of time I've been told.
The second question I have is: In the United States, they have what's called secondary insurance. A number of companies are linked, and, if it exceeds the $1 billion, or whatever the number happens to be in the U.S., it then goes to a pool of money that is attached by the individual that had the issue. Would you see that as a possible solution to our problem in Canada or to the question as to whether or not the $1 billion is enough? You could attach yourself to the remaining four or five facilities. If there were an accident at Bruce, you could attach yourself to Darlington, AECL, Point Lepreau.
Mr. Barrett: As to the U.S. pool, because they have over 100 reactors, they are able to handle that differently. In the Canadian situation, we don't have quite the numbers, so that kind of secondary pool isn't going to work.
I don't know whether there could be a connection in the future between the Canadian situation and the U.S. one — to become part of their pool or not — but I'm not sure that we have the size to have that kind of pool in Canada.
Senator White: The total would be $5 billion. That's a dramatic difference from $1 billion. There are five facilities? Darlington, Bruce, AECL, Point Lepreau and Quebec.
Mr. Barrett: I'm just trying to do the math in my head, because I understand that the U.S. pool is about $12 billion.
Senator White: It is, but it's not $1 billion each.
Mr. Barrett: No, it isn't. It's brought down by the numbers, of course, because it's in a sort of pro-rated sense.
Senator White: But it would deal with some of the concerns others have raised as to whether the $1 billion is enough.
Mr. Barrett: Yes, but then that would be saying that, for some reason, now, we need to say that $5 billion is the limit. It's sliding that number up.
Senator White: Absolutely.
Mr. Barrett: I guess the question we have to ask is: At what point do you say, "That's the coverage necessary for the industry to function well, pay the premiums and have sufficient coverage to deal with the likely compensation that one could see?''
Senator White: So you don't think it's a good idea.
Mr. Barrett: Were there a risk scenario way beyond that, do we have to try to cover it to infinity?
Senator MacDonald: Thank you, Mr. Barrett, for being here today. I'm not going to speak to you about insurance, but I want to take advantage of the fact that the head of nuclear power for the country is here in the room. I'd like to get feedback from you on the CANDU reactors.
The CANDU reactors are proven Canadian technology, and the safety record of the CANDU is flawless in Canada, but it seems in the past few decades there has been no growth in the industry. When you think about all the discussion today about global warming, carbon footprints and greenhouse gases, nuclear power deals with all these problems. Why isn't there more growth in nuclear power in this country? Is it a problem of government, or has the nuclear association dropped the ball on this in terms of promoting its technology and its solutions?
Mr. Barrett: Thank you very much for the question. That is a big one. In the time remaining, let me just give you a couple of points that I think are pertinent in answering your question.
The technology in the CANDU, as you say, is proven. It's a heavy water type of technology. In the years of the 1970s and 1980s, when there was a great expansion of nuclear technology and reactors worldwide, the light water reactor, which was the preferred reactor of the United States and the companies there — it's a different type of design, et cetera — really caught hold for various reasons. So, many countries utilized this type of reactor and did not go the heavy-water route. Some did, such as Argentina and Romania. China has a mix. As a result, the market was really taken over by the light water reactors. The heavy water technology, which is well understood by the technical people, just moved to a lower category in predominance and prevalence.
There are up-front costs with building a reactor and the construction. Therefore, you need a host government who is thinking in terms of having this for 60 to 80 years. It will be refurbished. The costs will be amortized over time. If they have that perspective, they see very clearly the advantage of that type of reactor. But if they're looking short term, then those initial capital costs become problematic.
There is increasing recognition now that nuclear technology is one of the instruments we in the world have at hand to deal with climate change because, as you mentioned, it's zero emissions. So you have very important leading environmentalists who are saying they used to not like nuclear because they didn't know much about it and pushed it to one side. Now they see it as something that can be done to mitigate climate change.
We're in a period of a bit of stagnation, but we are starting to see it opening up more from the Canadian perspective. One thing is, as I mentioned, more people are saying we have to do something about the carbon emissions. If you look at the charts of where India and China are going, you think we have to use different technologies, and this is one.
The other area is to produce smaller reactors that are not so costly. There are some Canadian companies that are working in this area. It needs a customer, though, to say let's try these small, modular reactors that can power communities in a different way than the big ones in Darlington.
Senator MacDonald: Are they variations of the CANDU?
Mr. Barrett: In some cases, yes, but in other cases, no. One is an integrated molten salt reactor. It is using a different type of fuel. It's going to produce very little in the way of radioactive waste. These are advanced technologies over the horizon.
The last one I'll mention is encouraging. The Candu Energy folks who built the CANDUs, they are looking at advanced fuels. I mentioned it. What they mean by that is that the CANDU reactor can burn different types of fuels. The Chinese are looking at this, as well as the Indians. They look at an element called thorium. It's a different kind of fuel than uranium. The CANDU reactor can burn that. It's adaptable and flexible. It can also use the radioactive spent fuel, used fuel, because there is still energy in the fuel. It has gone through a light-water reactor. What the Chinese are thinking of doing is for every three or four light-water reactors, they will buy and build a CANDU reactor, so they can take the fuel from the light-water reactor, run it through there, and now you're getting a free generating source, every fourth reactor. These are the areas where there's quite a bit of encouragement and opportunity.
Senator Ringuette: You've indicated that in Canada, for 60 years, there have been no accidents in our nuclear industry.
Mr. Barrett: No fatalities.
Senator Ringuette: No fatalities. There have been accidents. Has the insurer been asked to provide funds from insurance?
Mr. Barrett: My understanding is no. Where there have been incidents, they have been quickly detected and quickly dealt with by the safety systems already in place. They get recorded. We are so well scrutinized and everything is documented.
Senator Ringuette: I understand that. As of yet, in Canada, after 60 years of operation of nuclear, no funds have been required from insurance liability premiums?
Mr. Barrett: To my understanding, no.
Senator Ringuette: Correct. You indicated that the current agreement with regard to the three countries that are signing this right now is to facilitate exports of nuclear operators and generating equipment. Who in Canada exports?
Mr. Barrett: In Canada, one could start with Candu Energy and SNC-Lavalin is the parent. That used to be the AECL reactor division. They have the intellectual property of the CANDU technology.
Senator Ringuette: Who else?
Mr. Barrett: There's a whole supply chain.
Senator Ringuette: No, but they're not operators, so they would not be required to have this billion dollars in liability insurance and the premium that goes along with that.
Mr. Barrett: That's right.
Senator Ringuette: So the only entity in Canada right now that would benefit from this three-country agreement is SNC-Lavalin, and the additional premium for the billion dollars for every nuclear operation in Canada will probably reduce considerably, if you look at the risk factors, the number of players in the industry and so forth, the required billion dollars in insurance in order to export for SNC-Lavalin.
The Chair: Is there a short answer to this question?
Mr. Barrett: There is. I think the important thing is that although Candu Energy and SNC-Lavalin are constructors, builders and owners of the technology, it is the operators of the utilities that receive this from them. They are suppliers. SNC and CANDU are the suppliers. They supply that technology, so they're not affected by it. It will all be the operators. Whether it's OPG, NB Power or Bruce Power, they're the ones who are operating. Therefore, if there's an incident, the question will come up: Who is liable? They are going to be liable, and therefore all the insurance things we're talking about today start to kick in.
Senator MacDonald: To follow up on what we discussed before, you mentioned the evolution and the development of light-water reactors in the States, but that doesn't really explain to me why that would have a dampening effect on the expansion and development of CANDU reactors in Canada. We had two Deuterium of Canada heavy-water plants in Cape Breton in the 1970s. They were a big thing at the time, and they were both mothballed and torn apart because the industry fell apart in the country in terms of expansion. Why didn't the industry expand to Canada the way we expected it to?
Mr. Barrett: My own personal view, because I can't speak on behalf of all of our members on such a matter, is that I think there was an initial enthusiasm for nuclear power back in the 1960s and 1970s, and it was going to be an answer for many things. It did become an answer for a lot of things, and I mentioned some at the outset.
There is a great lack of knowledge or understanding, I think, more generally in the Canadian public of the extent to which the nuclear technologies and industries are actually in other areas, like materials testing. They test the well. You can use these non-destructive testing methods by using neutron beams, et cetera, to look into a material without cutting it open. You can test the wells in oil and gas pipelines, for example, to see if they are sound and the rotor blades in jet engines. They are used for these types of technologies.
I have heard from a company that they are looking into using heavy water in pharmaceuticals — I can't explain exactly how — because there are some properties about it. So it goes on in this direction.
People have not well understood that, and maybe the industry has not explained. You always think about power, and that's important. The lights are on, but then you take it for granted. So everyone thinks, "Okay, the lights are on. We don't have to worry too much about electricity. It comes out of that thing in the wall.''
Then comes the time when these reactors need to be refurbished, so there is another cost for the refurbishment. They're down for a couple of years and then they come back on for another 30. At those moments they may say, "This is costing us a lot of money,'' but they've forgotten that they've been benefiting from the steady electricity rates, production, that has come year after year after year, in all weather, as I mentioned. Polar vortex or whatever, the nuclear plants just keep going. There is a kind of complacency that sets in. You say, "Let's have renewable electricity everywhere.'' Then you think, "Well, that's kind of complicated to do.'' But meanwhile you've got this going, so why don't you support it? I think we lost sight of that.
With climate change, it's not a happy way to have the attention brought back, but I think more people are saying, "Yes, there is this zero-emissions thing.'' You have a very small footprint. You go to Bruce and you see this site on a very small parcel of land and it's the biggest nuclear power plant in the world.
Senator MacDonald: I'm a big believer in nuclear power.
The Chair: Thank you very much, Mr. Barrett, for your responses, and to the senators for their very good questions.
I am pleased to welcome, during the second portion of our meeting, from the Canadian Association of Petroleum Producers, Paul Barnes, Manager, Atlantic Canada and Arctic.
Welcome, Mr. Barnes. I understand you have some opening remarks, after which we will proceed to questions. The floor is yours, sir.
Paul Barnes, Manager, Atlantic Canada and Arctic, Canadian Association of Petroleum Producers: Good morning. Thank you, chairman. My name is Paul Barnes, and I am the manager of Atlantic Canada and the Arctic for the Canadian Association of Petroleum Producers, or what's sometimes referred to as CAPP. CAPP's head office is located in Calgary, and we have regional offices in Vancouver, Ottawa and St. John's, Newfoundland and Labrador, where I am based.
CAPP represents Canada's upstream oil and gas sector, specifically those companies involved in the exploration, development and production of oil and gas in Canada. We appreciate the opportunity to offer CAPP's perspective regarding Bill C-22 and specifically those sections of the act related to the offshore oil and gas industry.
CAPP is supportive of Bill C-22, as its overall intent to enhance accountability for safe and responsible operations is in line with industry's commitment of developing offshore oil and gas resources safely and responsibly. Safety comes first in Canada's offshore oil and gas industry. Offshore operators assess every activity, before beginning that activity, with safety in mind. Similarly, protecting the environment is a key consideration in everything we do. Operations in the offshore are designed to mitigate potential risks to both people and the environment.
The bill will also modernize aspects of the offshore oil and gas regulatory regime so that Canada's offshore can maintain its world-class safety and environmental regulations.
Bill C-22 is also founded on the "polluter-pays'' principle. This principle is supported by CAPP and is consistent with other federal legislation that applies to the oil and gas industry. If you pollute, you should therefore clean it up.
One of the more significant changes resulting from this bill is an increase in offshore liability limits. These are limits that a company is liable to pay as a result of an incident. It is important to differentiate between absolute or "no fault'' liability versus liability for incidents where fault or negligence by industry is proven. In any case where fault or negligence is proven, the company at fault has unlimited liability, meaning that we are fully responsible for the costs of cleaning up the incident. This has always been the case in Canada, and this bill does not suggest any change to the at- fault liability provision.
The increase in liability, therefore, that we are referring to is what's called "absolute liability,'' meaning the amount companies will be required to pay, even if they are not at fault, for an incident. This amount is $1 billion. The amount companies must provide to government in various financial instruments so government can get unfettered access to use it in the event of an incident, if needed, has also increased.
It should be noted that the industry works diligently to prevent incidents from occurring, so it is our hope that we never find ourselves in a position where liability for an incident comes into play. But at the same time, we understand and accept the rationale for increasing absolute liability limits.
Likewise, we understand that the bill also brings new requirements for companies to demonstrate they have $1 billion in financial capacity to undertake work in the offshore. Again, we accept the rationale for these changes.
We do wish, however, to have further dialogue with governments and regulators as the regulations and guidelines related to financial responsibility are developed, as industry would like to see some flexibility to use various financial instruments that are available in the financial market today, such as letters of credit, guarantee or indemnity bonds, for example, accepted in order to demonstrate the financial capability requirement. We understand these regulations and guidelines are currently being drafted and we look forward to providing input to government as they are further developed.
In the area of dispersants, as I mentioned, offshore operations are designed with a "prevention first'' philosophy. While our primary focus is on preventing incidents, like spills, from occurring, it is important that we are prepared to respond effectively in the unlikely event of a spill.
We are encouraged that the federal government, through this bill, is taking the steps necessary to enable the use of spill-treating agents in Canadian waters in the event of a spill. Industry has been advocating for several years for the acceptance of one such agent, dispersants, as a viable spill countermeasure in Canada. Several recent reports and reviews have also recommended that Canada facilitate dispersant use where there is a net environmental benefit, including the 2012 report of the Commissioner of the Environment and Sustainable Development, Office of the Auditor General.
Dispersants are a common spill countermeasure in other offshore jurisdictions. In fact, over 75 countries around the world identify dispersants as a first or second spill-response option. These proposed changes bring Canada in line with current global best practices.
The key to effective spill response is having access to a variety of tools that can be used in a particular spill scenario. Dispersants and other spill-treating agents provide another tool in the tool box to spill responders, thereby improving our capacity to respond effectively to a spill and managing environmental impacts. We also look forward to engaging with governments as regulations related to use of spill-treating agents are developed.
I also wish to point out that this bill supports the concept that the offshore petroleum boards in Newfoundland and Labrador and in Nova Scotia are the best-placed regulators for the offshore industry in Atlantic Canada. Industry has always advocated for a single-window regulatory approach for the offshore, meaning a regulatory structure that has industry engaged with one primary regulator. This approach ensures cohesiveness and clarity in the regulatory model and is in line with the original intent of the Atlantic accord acts.
Bill C-22 provides additional authority to the boards in the areas of environmental health and safety and makes the offshore petroleum boards lead regulatory authorities under the Canadian Environmental Assessment Act. In our view, the offshore petroleum boards are the best-placed regulators for conducting offshore environmental assessments, so we are pleased to see this authority being granted to the boards in this bill. This change also brings the offshore petroleum boards in line with the National Energy Board, which has already been named the lead regulatory authority under the Canadian Environmental Assessment Act for the Northern Canada offshore area.
The bill also provides additional authority to the boards to release environmental reports and other documents to the public. CAPP is generally supportive of efforts to improve transparency. In fact, in CAPP's own Responsible Canadian Energy report, the industry voluntarily publishes performance data related to environment and safety. However, further dialogue is required, as the bill does not define specifically what documents may be released and some information may be commercially sensitive. We look forward to this dialogue with governments and the offshore petroleum boards to get more information on the release of environmental reports and other documents.
Bill C-22 also enshrines cost-recovery practices by the offshore petroleum boards in the legislation. Although it has been the practice of the offshore boards to recover their costs through industry funding in the past, this was informal through an agreement largely between the operators and the boards themselves. Enshrining these principles in legislation paves the way for regulations to be written specifying cost-recovery rates, thereby giving industry more clarity and certainty around this aspect of the costs of doing business in the Atlantic Canadian offshore.
To conclude, I want to reiterate CAPP's support for Bill C-22. This bill demonstrates government's commitment to ensure public safety and environmental protection and it is in line with industry's own commitment to develop resources safely and responsibility. We look forward to working with government as the regulations related to the bill are developed in the areas around spill-treating agents, cost recovery and financial responsibility.
I'd like to thank you for the opportunity to present today, and I look forward to any questions you may have.
The Chair: Thank you very much, sir.
Senator Massicotte: Thank you for being with us this morning. Let me talk to you about the cap, because that's one of the principal issues of this bill. In fact, there is unlimited liability for the members of CAPP. The regulation will define that in more detail, but a portion of the $1 billion can be done by your own balance sheet or acceptable security, and a portion can be done by insurance. One billion dollars is not a lot of money for offshore, but for many players it can be.
Most of your members are very significant international players; that is not an issue. Could the $1 billion cap be too much for maybe some local Canadian players and will therefore inhibit competition and provide fewer economic benefits to Canada?
Mr. Barnes: Most of the Canadian companies that are involved in the offshore generally are large companies anyway, like Husky Energy or Suncor. They are the principal Canadian companies and they have the financial wherewithal to live within the limits defined in this legislation.
Where it may have some impact, you're right, is maybe some smaller companies that wish to get into the offshore; they may not have the financial capability to do so. But they still play a role within the Canadian industry because they can become partners with larger companies to develop jointly some type of offshore structure or play, or they can just simply enter the offshore and do some analysis of the geophysical data and market that data to the larger players that can actually drill wells or other activities in the offshore, with the financial wherewithal to protect the environment and safety.
Senator Massicotte: Would that be the case because of the $1 billion requirement of insurance, or is that already the case given the risks of offshore and the technology required?
Mr. Barnes: Well, with respect to the $1 billion you're referring to, now those small companies could certainly attempt to do some drilling off shore, but the way the legislation is structured, current legislation would probably prevent them from doing that activity largely because they would not be able to produce the financial responsibility documents required. This legislation makes it even more stringent.
Senator Ringuette: Mr. Barnes, you were here at our earlier panel, and they indicated in regard to the nuclear industry that there was a sole provider of insurance for the $1 billion liability and that was controlled by the minister. How does that compare with CAPP members?
Mr. Barnes: There are many, certainly, members of our organization that are so large that they can actually self- insure. They're larger than some of the insurance companies that exist around the world. But there are a number of large insurance companies that insure many of our businesses and the activities of offshore oil and gas activities around the world. They tend to be large, global insurance companies and our members have easy access to them and use them frequently.
Senator Ringuette: This week, at an earlier committee meeting, we were looking into the possibility of offshore drilling in the Arctic and the requirement of this $1 billion in insurance.
My question was: how does that compare with regard to a possible Arctic drilling insurance issue? How would that compare to the offshore drilling that is being done in Newfoundland and Nova Scotia in regard to this $1 billion in insurance premium?
Mr. Barnes: Again, drilling in the Arctic does bring some additional challenges because you have obviously more ice to contend with and other factors such as more darkness during the winter months. There are certainly added challenges working in the Arctic versus offshore Newfoundland or Nova Scotia. But the liability regime is largely the same, because again our industry accepts unlimited liability. So, if there is any incident, whether in the Arctic or the offshore of other areas of Canada, we're fully liable for the clean-up of it.
The $1 billion comes in when the regulator, the government, assesses whether the company has the $1 billion capacity to undertake any work in the offshore. Whether it's in the Arctic or on the east coast shouldn't make any difference.
[Translation]
Senator Bellemare: Good morning. Thank you for being here. I would like to ask two quick questions. First, could you please provide us with some clarification on the effectiveness of dispersants, in other words this new technology that can be used in the event of a spill? Is it very effective? What is the effectiveness rate?
I would also like to know whether Bill C-22 deals with aspects relating to potential breakage or damage caused by pipelines. Are there grey areas, for example, between the Atlantic Provinces and Quebec? We know that the pipelines will pass through everywhere. Do you have any comments on that?
[English]
Mr. Barnes: Sure, let me tackle the dispersant question first.
Dispersants are a highly effective tool when it comes to oil spill response and clean-up. The way they work is they basically get applied to an oil spill and they break up the spill into smaller oil droplets, which makes it easier for their own biodegradation. They kind of evaporate and get dispersed more easily than if they were all in one oil-spill clump. Basically, that's how dispersants work.
They have been highly effective in major spills around the world to not only aid in the clean-up but also to prevent environmental damage to sea birds and other life that may exist on top of the water. Dispersants basically disperse the oil and put it down further into the water.
They were extremely effective with the major spill in the Gulf of Mexico because subsea dispersants were used at the source of the spill and allowed the oil to break up more quickly before it came to surface. As a result, it quickly biodegraded.
They're highly effective and are used in 75 countries around the world effectively in our industry, and Canada is the only country really in the offshore that has been restrictive in their use. However, this bill will allow effective use of them. That's why we're positive.
This bill does not cover pipelines. Pipelines are covered by their own act, and they have liability regimes within those acts.
[Translation]
Senator Bellemare: Are there any secondary effects to the use of dispersants?
[English]
Mr. Barnes: Secondary effects?
[Translation]
Senator Bellemare: I am talking about negative effects. Dispersants can be effective and, like medication, sometimes it is good for fighting illness, but there can be side effects. Are there any known secondary effects?
[English]
Mr. Barnes: For example, for the spill in the Gulf of Mexico, where dispersants were heavily used, a lot of dispersants were used in that incident and it appears from the science that there were no effects on sea life as a result of their usage. But there is some potential for that. There is a risk to fish if they're exposed to oil, of course, and dispersants do bring the oil down into the water column as opposed to leaving it on the surface. So you could expose oil to certain sea life that wouldn't be exposed to it if you left the oil on the surface.
The Chair: Senator Bellemare, we're going to be debating a bill later on, Bill C-46, which will cover onshore liability issues much the same as we are doing with offshore now; they're just separate.
Senator Patterson: It's impressive to me that so many countries do allow dispersants. You said most of the coastal countries.
Mr. Barnes: Yes.
Senator Patterson: Would that include France, the U.K. and the Baltic countries?
Mr. Barnes: Yes. I don't know about France, but of the 75 countries, all the ones that have offshore oil and gas activity allow the use of dispersants.
Senator Patterson: In that connection — and I'm not sure if it's relevant to this act, Mr. Chair — when we were studying hydrocarbon transportation by water, we learned that Canada doesn't allow controlled, I think it's called in situ burning. Does CAPP have any position on burning as a response to water spill of hydrocarbons?
Mr. Barnes: Yes. In situ burning is another tool in the toolkit for oil spill response and clean-up. Basically what it involves is, if you have an oil spill and the oil is on the surface of the water, you basically light it afire and it burns off. That tool is used quite effectively, especially in environments where you might be impeded in the water by such things as ice, for example. It's very effective in those environments. But I'm not aware that it's restricted in Canada. I believe that you can do in situ burning in this country.
Senator Patterson: That's a bit of a surprise to me, from what I recall hearing during our committee fact-finding visits and we'll look into that. But do I take it CAPP endorses that approach?
Mr. Barnes: Yes. I would say yes, for sure. Again, it's another tool that the industry would use in case of a spill.
Senator Seidman: Thank you very much, Mr. Barnes. There was a recent survey that was reported this month about Canadians' confidence in our ability to handle spills, particularly spills on water, so this is really pertinent.
I'd like to ask you a few more questions about the dispersants, if I might. You say in your presentation, and the Office of the Auditor General also said in 2012, that Canada facilitates dispersant use where there is a "net environmental benefit.''
I'd appreciate it if you could elaborate on that a bit, because I'm not sure what the science is and I would hope that any decisions made about the use of dispersants would take into account the science as well as the fact that we could be using these in the North in very frigid waters, so I would hope that we have some information on particularly the use of dispersants in that kind of water.
Mr. Barnes: That's right. The way it will work, once this bill becomes law, is that the operator of the oil and gas company will have to do an analysis on the type of oil that they are exploring for or producing and the effectiveness of the chemical dispersant that will be used on the oil. They will submit that information to the government or to the regulator to determine whether its usage will be of benefit in the environment or in the situation that it's going to be used in.
For example, offshore Newfoundland on the Grand Banks, there are a lot of offshore sea bird colonies that are on the surface of the water. If there is a spill, there would be a lot of loss of sea bird life. But if you can use a dispersant on that spill, again, you will disperse the oil more quickly, bring it down from the surface and protect the sea bird life. In that instance, the regulator will probably determine that is probably a better benefit for the environment than not using dispersants.
In some circumstances, there might not be a benefit; for example, if there are no sea birds there but there are a lot of some type of fish that may be close to the surface. By using a dispersant, you may be affecting the fish. In that case, there would not be an environmental benefit and the regulator would likely not approve the use of dispersant.
Senator Seidman: You use the word "benefit'' a lot, but I would like to be assured that the risks — in other words, the potential harms — are also going to be taken into account, and then how you balance the risks and the benefits.
Mr. Barnes: That's right.
Senator Seidman: You say you would have to submit some kind of research. Does that mean scientific, evidence- based research?
Mr. Barnes: Yes. It would be science-based research on the type of dispersant and how it's used; the type of water it's used in; the various factors of the water, such as the salinity and the temperature of the water — basically how effective the dispersant would be in the environment it's going to be used in and also a scientific analysis of the environmental conditions that may exist at the time; again, what type of sea life may be there and what type of birds may be in the vicinity. All that information and the scientific facts associated with it is compiled by the operator and submitted to the government for verification and there may be some further research on their own.
The Chair: A bit further on that, that work would take place during the environmental assessment process prior to any other work being done. Is that correct?
Mr. Barnes: Yes. It doesn't necessarily have to be an environmental assessment process, but it will certainly have to be done at any time prior to an incident. An operator would begin to undertake all of this work obviously before an incident occurs, submit it to the government and get what we would refer to as prior approval. So all that analysis would be done. Approvals would be in place such that if there was an incident, you could use dispersants immediately, because the most effective use of dispersants is in the immediate first few hours of a spill.
The Chair: Yes, that's what I was thinking. I just wanted to clarify that so people understand that this is done beforehand wherever you are going to work and you will have a good idea of what those dispersants will do.
Senator Mitchell: Thanks very much for being here. On the question of dispersants, they're being used in 75 countries. We have experience with them in Canada to some extent, I think. It's not a big job to figure out which dispersants would be acceptable and which wouldn't. Is there science and processes in place so that we can get a list pretty quickly?
Mr. Barnes: Yes, that's correct. There are only about a dozen types of dispersants available in the world. Environment Canada at the moment is preparing a regulation that will list the types that will be acceptable in Canada.
Senator Mitchell: The question of safety and safety culture is extremely important and relevant to all of this, as it was to our previous witness as well, of course, in terms of the nuclear industry. We hear a lot about it in the oil industry. The NEB is looking seriously at auditing a safety culture. What's CAPP's position on audits and safety culture?
Mr. Barnes: Yes, we are aware that the National Energy Board is looking at some type of tool to audit safety culture, and they are working with the two offshore petroleum boards on that as well. We look forward to having further discussions about that, because we're not aware of any tool that currently exists that can measure safety culture.
We take safety culture very seriously. Before any offshore shift occurs in the offshore environment, there are safety briefings that take place. Safety discussions take place throughout the day in the offshore workforce. As an industry, globally, we share incidents among the oil and gas industry from different countries and obviously with our members here in Canada. So there's always that learning aspect associated with understanding incidents and how safety can be improved.
Senator MacDonald: Mr. Barnes, thank you for being here this morning. I want to go back to the dispersants again.
I'm assuming — please feel free to correct me — that the type of dispersant used is related to the viscosity of the product that goes in the water; correct?
Mr. Barnes: Correct, yes.
Senator MacDonald: Whether it's light crude, sweet crude or Bunker C that we bring in, and we export refined products. What has the experience been in Canada dealing with bitumen? We're discussing the TransCanada Energy East Pipeline, a pipeline which I support; I'll put that on the record. I have some concern, though, about bitumen in the Bay of Fundy, with the highest, lowest and strongest tides in the world. If the Bay of Fundy goes out, the entire bottom of the bay is exposed. It's all sand and clay.
What would be done in the case of a major spill of bitumen in the Bay of Fundy when the tide goes out and there's no water to put the dispersant in?
Mr. Barnes: That's a good question. I don't know. The offshore industry obviously is not working in the Bay of Fundy at the moment, but that would be a question for the pipeline industry.
Senator MacDonald: But the pipeline industry doesn't really care about the bitumen once it gets in the water. It's away from them. Then it's in ships' bottoms. There's a big difference between bitumen in a pipeline and bitumen in a ship's bottom. The buzzwords we hear continually — and our own government says it enough — is getting bitumen to tidewater. But there's a big difference between the tidewater in the Bay of Fundy and the tidewater at Point Tupper, which is deep water, ice-free, on the ocean, with immediate access to the ocean, to all the shipping lanes.
I find that the pipeline industry, although I support the pipeline, doesn't have a lot of skin in the game when it comes to this stuff. It's the ones that produce the petroleum, that pay the money to get the bitumen out of the ground and refine it, or prepare it to ship it. All the pipeline industry has to do is put it into the pipeline and get it to a port.
Mr. Barnes: True.
Senator MacDonald: I'm not convinced that the pipeline industry will take the lead in determining the proper management of bitumen if there was a spill in the Bay of Fundy.
Mr. Barnes: I'm not well-versed or able to provide you an appropriate answer to that question, but it's a good question.
Senator MacDonald: I guess when it gets to environmental hearings, we'll deal with it.
Mr. Barnes: Yes.
Senator MacDonald: Thank you.
The Chair: Just quickly, a little bit more about dispersants. You might have said this already. You say they are used in 75 countries around the world. How many decades or years have dispersants been around? Has the makeup of dispersants changed dramatically over that time period?
Mr. Barnes: I don't know when dispersants first came into use in our industry. I don't have any facts at the moment to provide you. But it's like any tool in our business; there's always constant improvement and testing of dispersants — their makeup and their effectiveness on different crude types. That continues. All the companies around the world that make dispersants are into continuous improvement and doing further research on refining their products. That type of activity continues.
The Chair: You can confirm, then, that scientifically those dispersants, however long they've been used, have been adapting to new technology and those kinds of things; it's not that something that was used 30 years ago is used today?
Mr. Barnes: That's right. They're much more improved today. There's obviously a lot more knowledge with respect to their use. There's a lot more information that our industry can provide to those who make them about the types of water that we may be undertaking oil and gas activity in — for example, the salinity or the cold temperatures. A lot of scientific rigour goes into testing different dispersant types in different environmental conditions.
The Chair: Could you send us by letter a response as to how long dispersants have been used around the world in these 75 different countries, if you wouldn't mind?
Mr. Barnes: I can do that, sure.
The Chair: I don't know if you have to do all 75 countries, but at least a good portion of them, to give us a sense of how long it's been around, so that people won't try to say that this is brand new and we don't know what we're doing.
With that, I appreciate your time. It has been a good presentation. We had good questions and good answers. Mr. Barnes, thank you for being here.
We will now adjourn.
(The committee adjourned.)