Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 7 - Evidence, February 4, 2003


OTTAWA, Tuesday, February 4, 2003

The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C-4, to amend the Nuclear Safety and Control Act, met this day at 5:05 p.m.

Senator Mira Spivak (Deputy Chairman) in the Chair.

[English]

The Deputy Chairman: Honourable senators, I want to welcome Mr. Dhaliwal and his officials.

The Honourable Herb Dhaliwal, Minister of Natural Resources: Honourable senators, it is a pleasure for me to be here. With me is David McLellan, Acting Director General, Energy Resource Branch, and Duncan Cameron, who is general counsel in the NRCan legal services.

I regret that I can only stay until six o'clock, but I assure you that if the committee does want me to come back for further questions, I would be happy to return. Unfortunately, I do have another commitment for this evening.

Once again, thank you for the opportunity to appear today. Bill C-4, as you all know, is a one-clause bill that clarifies the wording in subsection 46(3) of the Nuclear Safety and Control Act, or NSCA.

That act enables the Canadian Nuclear Safety Commission, or CNSC, to protect health, safety, security and the environment, and to respect Canada's international commitments on the peaceful use of nuclear energy.

Under section 9 of the act, part of the CNSC's mandate is to "prevent unreasonable risk, to the environment and to the health and safety of persons, associated with that development, production, possession or use'' of nuclear energy.

Sections 24 to 26 allow the CNSC to license nuclear facilities. There are over 3,500 licences. Section 24 of the act gives to the CNSC broad powers to request financial guarantees in granting a licence and to ensure there are sufficient funds to cover known future clean-up costs and costs of decommissioning facilities. Sections 29 to 36 provide for inspections to verify compliance. Section 44 provides for the CNSC to make regulations. Sections 45 to 47 provide "exceptional powers'' dealing with radioactive contamination.

Turning to the section touched by this bill, under subsection 46(1) of the act, the CNSC may conduct a public hearing to determine whether there is nuclear contamination at any place where it has reasonable grounds to believe there may be such contamination.

Under subsection 46(2), the CNSC may, after conducting the hearing and determining there is contamination, file a notice of contamination where the title to the land is recorded.

Subsection 46(3) of the act, which is the subject of the amendment in Bill C-4, currently reads:

Where, after conducting a hearing, the Commission is satisfied that there is contamination referred to in subsection(1), the Commission may, in addition to filing a notice under subsection (2), order that the owner or occupant of, or any other person with a right to or interest in, the affected land or place take the prescribed measures to reduce the level of contamination.

Hence, under subsection 46(3), the Canadian Nuclear Safety Commission could order the owner, occupant or any other person with a right to or interest in the land to clean up contamination. "Person with a right to or interest in'' could include a lender who has a mortgage interest in a nuclear site but is not involved in the management of the facility.

As currently written, section 46(3) places potentially unlimited liability on lenders, a situation that does not exist in federal environmental law pertaining to other industries. Governments are encouraging more private sector participation in the ownership and management of facilities in all energy sectors. Companies with nuclear operations need access to the same financial instruments available to other companies. This means that companies need the participation of banks and other financial organizations to attract market capital in order to finance ongoing and future operations.

Accordingly, Bill C-4 clarifies subsection 46(3) by deleting the mention of "any other person with a right to or interest in,'' and substituting "any other person who has the management and control of...'' That is the fundamental amendment that this bill incorporates.

Under the amended section 46(3), private sector owners, operators or managers will still be liable for clean-up. As regards lenders, the amendment quantifies their risk. If Bill C-4 is enacted, a lender stands to lose, at most, no more than the monies advanced. The lender would not face a potential unlimited liability. However, a lender who goes into management and control of a nuclear facility would be within the reach of this subsection.

Canadian law generally restricts lender liability to those with charge, management or control of secured assets. The current wording is an anomaly to be dealt with because it is preventing private sector lending to nuclear facilities by banking institutions. In the near term, these loans are needed to refurbish, modernize and extend the life of nuclear power plants.

Bill C-4 is not a measure to provide favourable treatment to the nuclear industry. As already mentioned, no other industrial sector or power generation sector is encumbered by such a federal provision that discourages access to lending from financial institutions.

In addition, the proposed amendment does not represent a transfer of risk from the private to the public sector. Canada has in place a modern, stringent nuclear regulatory regime under the CNSC, which is designed to deal with the spectrum of risks posed by nuclear activities in Canada. There are tough sanctions for offences under the Nuclear Safety and Control Act, and it is an offence to fail to comply with any conditions of a licence. The CNSC can also suspend, revoke or amend a licence if conditions are not met.

I would like to take this opportunity to respond to some questions that arose during second reading debate of this bill in the Senate.

The first question pertains to whether the original legislation, which was passed in 1997, was written with the knowledge that nuclear facilities would be privately owned. Officials have consulted the record of parliamentary discussion of the bill and can find no answer, as subsection 46(3) was not raised as an issue.

Extensive consultations were conducted in the development of the act. Subsection 46(3) did not emerge as an issue in those consultations either. For example, industry did not raise it. This is relevant to a related question that was also raised during second reading, namely, why the question of liability was not a problem when nuclear facilities were not privately owned.

The fact is, many large CNSC licensees are privately owned and were privately owned when the original bill was passed. These include companies that mine uranium, fabricate nuclear fuel, and produce and ship medical isotopes around the world.

Both questions can therefore be summarized by the following: Given that major private sector companies, as well as provincially owned nuclear utilities, had the opportunity to express their views on the original bill, why did they not raise subsection 46(3) as an issue? As an answer, my officials suggest that the licensed nuclear operators at that time focused more on the sections of the bill directed specifically to them and less on this section, which applies to any property in Canada and which appears under the heading "Exceptional Powers.'' That would explain why the issue only came to light when new players looked at the act in the year 2000 and when a new entity, Bruce Power, sought financing.

The next question was: Whom are we protecting by removing this liability of financial institutions?

Well, we are here today because financial institutions have refused to take on this potential liability. They have refused to lend under the existing act. This amendment will remove an impediment that prevents nuclear owners and operators from borrowing. The amendment accomplishes this not by removing a liability, but by clarifying that the liability rests with the owner or occupant or any other person who has management and control, which, for the sake of clarity, could be a financial institution.

Another question relates to the government's plan for the management of nuclear waste. As senators will know, this matter is being dealt with by a separate piece of comprehensive legislation, the new Nuclear Fuel Waste Act, which entered into force in November 2002. Through this legislation, the Government of Canada has already shown its commitment and leadership in having the nuclear industry deal responsibly with its waste. The Nuclear Fuel Waste Act ensures that waste owners fully meet their financial responsibilities and carry out long-term waste-management activities in a comprehensive, integrated and economically sound manner.

Since the Nuclear Waste Act entered into force, waste owners have deposited $550 million securely segregated in trust funds. Thus the Government of Canada has established a legal framework to move effectively towards implementing a long-term management approach for nuclear fuel waste in the best interests of Canadians. For more information, an annual report will be tabled with MPs and senators in the coming months, or senators may consult the government's Web site on the Nuclear Fuel Waste Act.

In conclusion, Madam Chair, the nuclear industry is an important part of the Canadian economy. Nuclear power has been in commercial operation for over 30 years in Canada and presently supplies 13 per cent of our electricity. In addition, nuclear technology is an integral part of our industrial, medical and scientific applications. Canada is a world leader in producing medical isotopes, which are used every day to diagnose and treat disease.

Bill C-4 will put the nuclear industry on an equal footing with other industrial and power generation sectors in obtaining lending. At the same time, it will not weaken Canada's stringent licensing and regulatory system.

Thank you, Madam Chair.

The Deputy Chairman: Thank you very much, Mr. Minister.

Senator Lynch-Staunton: I do not think on the surface I have any problems with the intent of the bill. I have a little problem with how it has come about, and why there are 3,500 licensees under the CNSC, including a number of large, privately owned ones such as uranium mines, fabricators of fuel, et cetera.

You say "they,'' meaning financial institutions, have refused to lend under the existing act. Does that mean that all nuclear facilities or licensees who have needed financing have obtained it internally, or through banks that, while aware of this clause, have been willing to lend under it?

Mr. Dhaliwal: First, let me say, when I was talking about 3,500 licensees, this includes everyone who handles any type of uranium. Whether they are hospitals, research facilities or companies that provide isotopes for medical services, they are all licensed by the CNSC and are required to meet fully the commission's safety requirements.

I think we were talking about major nuclear facilities that, as you know, were basically government owned. The private sector in Canada was not involved in it. It was not until recently, with the Bruce nuclear plant, where the Ontario government arranged a long-term lease with a private sector company, that you had private sector involvement.

They found, when they needed major financial resources to do a retrofit to modernize the facilities, that they were unable to get funding. That is a result of the clause, which would make the lender fully responsible for any liability if there were contamination.

I do not think the same would be true for MDS Nordion and some of the other companies, because they are not involved in a nuclear plant. They are more involved in providing goods.

Senator Lynch-Staunton: However, it would be true for uranium mines and fabricated nuclear fuel companies, where contamination risks are very high also. Were some of those financed by private institutions?

Mr. Dhaliwal: I do not think it is the same risk.

Senator Lynch-Staunton: My point is that this clause has not caused a problem so far. If lending has taken place, with full knowledge of it and without causing concern to the lender in the past, why is it a problem now? Is it the magnitude of the lending rather than the fact that it is a nuclear facility?

Mr. Dhaliwal: I think we are talking about two different types of business, as well as different lending situations. In one case, the company would require major mortgage funding, which would be quite different from normal business funding. Also, operating a nuclear reactor would be much different from just handling isotopes.

Senator Lynch-Staunton: True, but there is a risk in any event.

Mr. Dhaliwal: Yes, but the financial institutions were not willing to provide long-term, fixed funding like mortgages.

Senator Lynch-Staunton: Why would a bank take a mortgage on a nuclear plant? If the owner of the mortgage defaults, the bank is stuck with the property and would take on the liability as an owner.

Mr. Dhaliwal: If the bank managed and controlled the asset, it would have a liability under the legislation.

That is one of the risks they would have to look at in terms of what sort of financial strength the players have. I am sure they would not fund it if they felt there was a problem with the people involved.

Senator Lynch-Staunton: Do you know why this particular clause did not exist anywhere else and does not apply to any other industry?

Mr. Dhaliwal: I think my statement was that I am not aware of other industries where someone who is a lender would have unlimited liability.

Senator Lynch-Staunton: That is the question then. I know that the library, your department and others have done background research, and they have not found a reason why this particular clause was included. Apparently it was never debated, nor was it ever part of the briefing notes. Someone put it in for a reason — it is not a boilerplate clause.

Mr. Dhaliwal: When the question was asked, our staff went back and looked for the purpose. At that time, it was not an issue because the private sector was not involved in running nuclear plants. Therefore, the clause was there because it was the government of the day that owned the asset. At that time, I believe it would have been the provincial governments of Ontario and New Brunswick. Perhaps my officials can give you a better answer than that.

Mr. David McLellan, Acting Director General, Energy Resources Branch, Natural Resources Canada: We have tried to find out why this clause was put in, but we cannot find anything on the record that would allow us to cite any fact. As a result, we are left only with speculation.

Senator Tkachuk: Would there not be someone in the department who would know? It is not that long ago.

Mr. McLellan: The legislation was passed in 1997, over five years ago. Those people have gone on to other things.

Senator Lynch-Staunton: Is Bruce Power the only company you are aware of that would benefit from this clause? Without their concern, would this amendment be before us?

Mr. Dhaliwal: At this time, I am only aware of Bruce Power's difficulties, but I believe the industry in general has said that this is a concern for them. People see that because of climate change and other things, there will be a greater involvement from the private sector.

Senator Lynch-Staunton: The Ontario government — whatever the agency is named — has leased the Bruce nuclear plants to Bruce Power, so they maintain an interest, obviously, and maintain ownership.

Is it fair to say that in case there is a contamination problem, the Ontario entity would carry part of the liability to clean up this site?

Mr. Dhaliwal: I honestly am not familiar with the agreement between Bruce and the Ontario government, the OPG. I am not aware of what their agreement is and how long their lease is. I am aware there is a lease, but I am not sure of the details, so I could not answer that. Perhaps Bruce could give you a better answer.

Senator Lynch-Staunton: Could one of your officials help?

Mr. McLellan: I also do not have access to the agreement between Bruce and the Ontario government, but Bruce Power, when they appear on Thursday, could answer that.

Senator Morin: Thank you, minister, for this presentation. I have two questions dealing with private ownership and protection of the environment. Would this new bill indicate that there is a shift in policy as far as the federal government is concerned in regards to the private ownership of nuclear power plants? Does this bill also indicate there would be changes to protection for the environment, and in what way would this bill affect protection of the environment?

Mr. Dhaliwal: This does not reflect in any way a change of government policy. As a federal government, we have neither encouraged nor discouraged private sector investment. It does not say anything about our policy. It is not a change of policy.

In terms of the environment, the Canadian Nuclear Safety Commission will still be doing everything they do now to ensure that they protect the safety and health of Canadians, and that does not change at all. It does not in any way diminish the role of safety or in any way reduce the requirements for a safe and healthy environment. None of that changes as a result of this bill. It strictly makes it easier to obtain financing.

Senator Milne: Mr. Minister, I live sort of in the middle between Bruce and Pickering and Darlington. Do you see the same sort of problems down the road, given the present Ontario government, with Pickering and Darlington?

Mr. Dhaliwal: You are asking me a question about which I really do not have enough knowledge to respond. That can be better addressed by OPG or others. I am not aware of other problems that may occur.

Senator Milne: You gave the precise difference in wording, changing it from "any other person with a right to or interest in'' to "any other person who has the management and control of.'' Does this replacement wording appear anywhere else in legislation? I think I have seen it somewhere before. Is this in the Environmental Protection Act?

Mr. Dhaliwal: I do not know what other acts may include the same wording. Perhaps the staff can answer that. Basically, the wording will confirm that a lender would not have an unlimited liability, as they would now. Under the present legislation, if I were a lender, I would have an unlimited liability. This restricts it to those who manage and control.

Senator Milne: I realize that. I see the problem. They cannot get the banks to lend them any money, obviously. However, it seems to me that this wording may be in line with the wording used in other acts.

Mr. Duncan Cameron, General Counsel, Legal Services, Natural Resources Canada: Yes, the concept of management and control is fairly well established in federal legislation. It appears in quite a few other statutes, including, for example, the Aeronautics Act. It exists in a fair amount of environmental protection legislation, both at the federal and provincial level. The phrasing "management and control'' is a well-known concept legally. I would not say it is boilerplate, but it is language that is well known in other federal statutes.

Senator Kinsella: I am trying to understand the policy of the Government of Canada. What was your policy in 1997, and what is your policy today with reference to this change? If I have understood so far the discussion, you are not sure what the policy was, and you are not sure why that clause was written the way it was. Is that what you are telling us?

Mr. Dhaliwal: Looking back to when this legislation came forward, there was no debate on this specific clause, and industry did not make any representation on it. We were asked why that specific clause existed. When our staff went back and looked for any evidence as to the reason for it, they could not find it. We have no policy change as a government on private ownership.

Senator Kinsella: When that bill was brought in, it had a Royal Recommendation. It was brought in by a minister. The government wrote the bill that it brought before Parliament and that was adopted by Parliament. Are you telling us that the government has no idea as to why they wrote that line in the bill?

Mr. Dhaliwal: Lawyers put all sorts of phrases in to protect every area. When they come forward, if people have concerns, I am sure they bring them up. However, because there was no private sector involvement in the management of nuclear plants, it was not an issue brought forward at that time. I cannot tell you why lawyers decided to put that in. I am not a lawyer.

Senator Kinsella: It is not the lawyer who brings a bill before Parliament; it is the minister. It is the Government of Canada. We are faced with a case here where we do not know, and the government is telling us they do not know, why they did what they did. Now they are asking to us do something different with this clause. My question is the same. What are your policy principles upon which you are making this request to Parliament?

Mr. Dhaliwal: We are saying that a change occurred in this industry, in that the private sector was not previously involved in running nuclear plants. Therefore, this was not an issue in the past. The Ontario government or other provincial governments were involved in running them, so therefore this clause did not have any effect, or did not cause any problems. The private sector involvement in nuclear plants has created a situation where they cannot get funding. This is a change that has occurred. If there were no private sector involvement, we probably would not be here before you requesting a change because it would not be necessary.

Senator Kinsella: What is the public interest principle upon which you are arguing?

Mr. Dhaliwal: The public interest is that there is a change. The change is that there is more private sector involvement now. We as a government are recognizing that this was a situation where they were not able to get funding as a result of that clause, which is quite different from those governing all the other industries, and therefore we are trying to correct that because of the change in the marketplace. There is a change in the marketplace. We recognize that. As a government, we must respond to changes in the marketplace. That is why we are here requesting these changes.

Senator Kinsella: I am from New Brunswick, where we have Point Lepreau, and they have their challenges, as all operators do. If this bill were to pass, how would you see it benefiting my province and that particular facility?

Mr. Dhaliwal: I think it will create opportunities for the private sector that may not have existed in the past, so there will be not only government management of nuclear plants. With this unamended clause, you will not get the private sector coming in, because of course they would not be able to get any financing. It does create opportunity that would not have existed in the past in your province, and other provinces, for the private sector. If you look at the U.S. and other countries, the private sector is very much involved in the nuclear industry. In Canada, they have not been in the past, but they are very prominent in other parts of the world.

Senator Kinsella: Finally, in the United States, is there a similar provision in either state or federal law that absolves lenders of liability?

Mr. Dhaliwal: It is my understanding there is, but I want to make sure that they indeed have a similar clause to avoid a situation whereby funding could not be provided by financial institutions. Perhaps Mr. Cameron could give a clearer answer.

Mr. Cameron: I would refer you to section 170 of the United States Atomic Energy Act, which places a limitation of liability on lessors with respect to nuclear facilities.

Senator Lynch-Staunton: Is that on lessors but not on lenders?

Mr. Cameron: Yes, a certain kind of interest. "Lessors'' is correct.

Senator Lynch-Staunton: What about lenders?

Mr. Cameron: The act is silent on lenders.

Senator Lynch-Staunton: There is no equivalent.

Mr. Cameron: It is not identical, which is why I pointed out that it is on lessors.

Senator Lynch-Staunton: That is a completely different party.

Senator Tkachuk: Is there any urgency to the passage of the bill, minister?

Mr. Dhaliwal: The only urgency is that there is private sector involvement in Bruce Power. A number of Canadian companies have recently taken over from British Energy and they have an interest in moving forward to complete the deal and ensure that they can carry out the changes. That is the only situation of which I am aware.

Senator Tkachuk: Has the Canadian Nuclear Safety Commission set a deadline date for the resolution of the issues at Bruce Power? Is that part of the problem?

Mr. Dhaliwal: There may be a set date, but perhaps Mr. McLellan could better answer that. I understand that CNSC will appear before your committee to provide you with a more comprehensive answer.

Senator Tkachuk: Correct me if I am wrong, but has this problem not been around for quite some time? The bill came before the senate in mid-December and we are dealing with it now, and yet it was hanging around the House for quite some time before that. When was the problem originally brought to the attention of the government and when did the government introduce proposed legislation to resolve it?

Mr. Dhaliwal: I have been minister for a little over one year. I met with nuclear industry officials when I first became minister because they had brought this to my attention. They voiced their concern and wanted the government to deal with the problem. It has been some time since they talked to me. Of course, these things take time to look at and review, but we have been working for some time on this — not just the past month or two. Work done on this file goes back a couple of years, I am told, but I know that when I came into this job, it was raised with me as the minister.

Senator Tkachuk: The whole year has been taken up with those three or four words that were changed in the bill?

Mr. Dhaliwal: There has been some consultation with the industry and with others, but I do not know how long the department has been working on it. I do know that the issue was raised with me when I became minister some time last year.

Senator Lynch-Staunton: You originally introduced the bill in May last year and reintroduced it in October. The actual wording of the bill has been known for about one year. Senator Tkachuk asked why it stayed in the House for so many months and then it suddenly came before us and we have to rush it through by a magic date.

Mr. Dhaliwal: I will leave that to the whip of the House.

Senator Lynch-Staunton: The government did not set the date of February 14 and you are not pushing for passage of this bill without careful study. You would appreciate careful study of the bill and, if we go beyond February 14, it would not concern the Government of Canada. Is that correct?

Mr. Dhaliwal: Your committee and your chair will decide what time you require. You will decide whether you have had the appropriate consultations to determine that. I cannot tell you what your agenda should be.

Senator Tkachuk: I would like to follow up on this Saskatchewan chemical corporation. This particular problem has been around for one year, I understand. We will ask the companies when they come forward about how long this thing has been brewing and the end-date problem. Were you and your department alerted to this? Why was it not acted on much sooner so that we would have the necessary time to study the bill? As it stands, we are under the gun to pass the bill by a certain date or it may greatly affect the operation of Bruce Power?

Mr. Dhaliwal: There have been many changes to Bruce Power recently. We have been working on making the changes, but the department did its due diligence and then brought it in. It was not dealt with earlier in the House of Commons because our government leader determines when proposed legislation can be brought forward based on the priorities. I do not have any say on that point. We have proposed legislation to be brought forward, but the Government House Leader would have to determine the priorities and how quickly the bills should be passed. Of course, every minister deems his bill the most important and should take priority over other bills, but we do not decide that. The Government House Leader decides that.

Senator Eyton: Thank you, minister. I will declare that I considered at length the short amendment. I find it reasonable and practical and therefore I am prepared to support it. I say that partly because of the background I have in the power business. I was, and still am, associated with Great Lakes Power, which, as it happens, is not in the nuclear business but does generate both hydroelectric power and co-generation power. It readily arranges financing; that constitutes no problem. I can see, given the Nuclear Safety and Control Act, that the Bruce facility does have a problem that should be resolved.

In terms of the timing, we will hear from other witnesses, but I understand the urgency. It is not the fault of the parties to the transaction, because they are doing the best they can in what was a challenging and difficult circumstance with the financial problems encountered by British Energy. It is my understanding that there is a fixed date of February 14 to complete an extremely important transaction involving big facilities and a great deal of money. Many people have put much effort into it.

Looking at the short phrase, it is difficult to generate questions out of five or six words. However, do you know what constitutes an "owner''? I say that in the context of Bruce Power, in particular, which I presume is a consortium — in effect, a partnership — and not a share-ownership entity. Who is an owner? Is it a shareholder with 15 per cent or an owner with 100 per cent? Is it a bank that is proceeding to realize on the security it holds on the facility? I am curious about what constitutes an owner for the purposes of this act.

Mr. Dhaliwal: Senator, only a lawyer could answer that question, and even then, he may not because it depends on the circumstances and context in which the question is asked. Our courts often spend months or years determining who is the exact owner of an entity, depending on the situation. It would be difficult for me to give you a direct answer.

Senator Eyton: We are trying to clarify responsibility under the act. It seems important to me. The word "occupant'' is understandable. It could be a corporation or individuals who are physically on the premises. However, the word "owner,'' if a broad definition or meaning is used, could sweep up all kinds of people who may resist in exactly the same way that the financial institutions are resisting inclusion for the purposes of the act.

Mr. Dhaliwal: This bill tries to clarify that "owner'' refers to the people who manage and control the asset. It depends on the corporate make-up. If a certain company owns 15 per cent, is it the owner? Or is the owner the entity that actually runs and manages and controls the asset? Those are legal questions that I cannot answer. Maybe Mr. Cameron can give you a better answer. I am not a lawyer.

Mr. Cameron: That is an interesting question. At times it is a complex question to determine what nature of the right constitutes ownership. The minister is absolutely right when he says courts have been faced with this kind of issue in the past.

I would like to point out to the senator and the committee that the bill does not change the word "owner.'' It was in the 1997 act and it is not one of the words that we are changing.

Senator Eyton: We are looking for clarity. There is an opportunity to clean something up.

Mr. Cameron: I appreciate that. I would think that "owner'' would not include — by virtue of this amendment, if adopted — someone who holds a security interest. I say that because courts, in interpreting the legislation, would look at its legislative history and at the change that is before the Senate today. They would see that we have intentionally taken out the concept of right or interest and replaced it with a much more specific phrase, "management and control.'' Therefore, in its wisdom, Parliament must have intended that "owner'' mean something other than a right or interest of a security nature, for example.

It comes down to the question of nexus between the individual and the property in question. I concede that the term "owner'' would have to be resolved on a fact-specific basis.

Senator Watt: How many private companies are out there? That may also help to clarify this.

Mr. Dhaliwal: How many private companies are involved in running a major nuclear plant in Canada? There is one right now. That is Bruce Nuclear.

Senator Watt: Would that also include the private ownership of waste storage or waste facilities?

Mr. Dhaliwal: Yes, there was a separate bill passed in November 2002 dealing with nuclear waste.

The Deputy Chairman: Under the Nuclear Liability Act, a third party has liability up to $75 million. Above that, the government has the liability. If there were a catastrophic incident involving billions of dollars, the companies would probably go bankrupt. Is there any legal requirement — not moral requirement — for the government to assume the liability?

Mr. Dhaliwal: Your first question is whether the $75 million is sufficient. I presume the Canadian Nuclear Safety Commission would evaluate that on an ongoing basis.

The Deputy Chairman: Oh, it is not sufficient.

Mr. Dhaliwal: They would evaluate that and report to the government as to the reasonableness of that amount, based on, I presume, past risks and any future risk.

I am not aware of the government's legal liabilities. Maybe Mr. Cameron can better answer that.

The Deputy Chairman: The policy has changed in a major way, because now private industry will be running nuclear facilities, whether it is one or ten. That question is important because most private operations, no matter how large, would not have the resources to deal with a major catastrophe such as Three Mile Island. What is the legal responsibility of the taxpayers of Canada?

Mr. Dhaliwal: There is nothing to prevent the private sector now from managing large nuclear facilities. They would not be able to get financing because lending institutions refuse to provide it with this liability level. Bruce Nuclear is already being managed by the private sector, by British Energy. So that did exist and it exists now. We are saying now they will be able to get funding where they could not in the past.

The Deputy Chairman: I understand that. Senator Eyton raised the question, who is the owner? Who will actually be liable? My question is this: If the owner or manager and controller cannot assume the liability, who will?

Mr. Dhaliwal: The question assumes that the liability goes beyond the capability of the company that is there now. That is a hypothetical question. I do not know if I can give you an answer. We have had an excellent record. We have not had a situation like that in Canada. Second, it is like predicting problems and costs and degrees or types of contamination. It is very difficult to speculate on that. In the end, with a major incident where a company goes bankrupt in mining or other areas, people turn to government, but the government does not always take on the problem as their responsibility. It depends on the political situation and a variety of other issues at the time.

The Deputy Chairman: Minister, thank you for spending this time with us on short notice. I thank your officials for coming.

Mr. Dhaliwal: Thank you to the senators for their excellent questions. I hope we have responded adequately to some of them.

Senator Lynch-Staunton: Will you promise to come back?

Mr. Dhaliwal: I would be happy to come back if you feel you need to ask me more questions and to try to ensure that we deal with every one of your concerns.

The Deputy Chairman: We will hear now from Mr. Mike Taylor.

Mr. Mike Taylor, Executive Director, Office of Regulatory Affairs, Canadian Nuclear Safety Commission: Thank you for inviting the Canadian Nuclear Safety Commission to appear before you. With me today is Ms. Irene Gendron, Senior Legal Counsel. I appreciate this opportunity to present our views on Bill C-4, which remain those presented to the House Standing Committee on Aboriginal Affairs, Northern Development and Natural Resources in November 2002, and to respond to your questions.

First, I would like to say a word about the mandate of the Canadian Nuclear Safety Commission. The CNSC is an independent federal agency and a quasi-judicial tribunal that reports to Parliament through the Minister of Natural Resources. It consists of a seven-member commission tribunal, of which the president is currently the only full-time member. The members are appointed by Governor in Council. The commission employs about 400 staff who provide licensing recommendations to the commission tribunal and conduct ongoing compliance activities and other regulatory activities.

The commission's role is to regulate the nuclear industry in Canada in such a manner that the development and use of nuclear energy do not pose an unreasonable risk to health, safety, the environment and national security. This industry has wide scope, from uranium mining to power reactors and waste disposal. It also includes the use of radioisotopes for industrial and medical purposes and the transport of nuclear material.

We also have responsibility for the implementation of certain international obligations relating to the safeguarding and non-proliferation of nuclear materials. The commission has comprehensive and detailed licensing assessment and compliance processes to implement this mandate.

I should like to comment on the impact of Bill C-4 on the commission's effectiveness.

It is the view of the commission that the changes to the Nuclear Safety and Control Act proposed by Bill C-4 are of a financial rather than a safety or environmental nature. Financial considerations are only of concern to the commission to the extent necessary for it to conduct its mandate. The commission is satisfied that the proposed revised wording of section 46(3) provides it with sufficient capability to order the owner, occupier or person in control of the land in question to obtain the necessary remediation of contamination in excess of the prescribed limits.

Accordingly, the commission has no objection to the proposed legislation before you.

Senator Lynch-Staunton: When the commission is faced with an application for a licence, does it look into the financial condition of the applicant?

Mr. Taylor: To the extent that it needs to be satisfied that the applicant will make, as it says in section 24 of our act, due provision for public safety of persons, for the environment, for the security and for Canada's international obligations. To do that, it requires, among other things, certain financial assurances. In particular, it requires financial assurance that the taxpayer does not have to pay for decommissioning.

Senator Lynch-Staunton: What kind of financial assurances?

Mr. Taylor: This is money that is set aside.

Senator Lynch-Staunton: Do you mean you have monies in escrow that you keep in trust?

Ms. Irene V. Gendron, Senior Counsel, Canadian Nuclear Safety Commission: The commission has a wide range of financial instruments that it could look to or order a licence applicant to put in place. I am aware that the commission has some licensees with letters of credit in place and others with a guarantee of sorts from a provincial government or a federal government. Not all of the guarantees are in place yet, but the commission has a policy on financial guarantees.

Senator Lynch-Staunton: What guarantee do you have from Bruce Power presently?

Mr. Taylor: There are two types of guarantee. You are aware that the act is relatively new; therefore, part of this issue of actually getting the final guarantee in place is still outstanding, particularly with the decommissioning.

There is also, in the case of Bruce, something called an "operational financial guarantee,'' which is where the commission seeks to be assured that a company is capable of maintaining a plant in a safe state should it, for any reason, become financially not viable. That is the second type.

The act says that the commission "may'' require financial guarantees, and it does require these two types of financial guarantee in the case of Bruce Power.

Senator Lynch-Staunton: Have these guarantees been honoured? Do you have them on hand?

Mr. Taylor: There is an issue with respect to the operational guarantee, which has to do with the uncertainties surrounding the British Energy financial situation. I must be careful what I say because this issue is still before the commission for a decision, but the commission has made a public statement to the effect that it recognizes that Bruce power stations are being operated safely, but it is urging all parties concerned to come to a resolution of the issue, because the commission is not absolutely certain that the Bruce Power licence conditions are being fully honoured at the moment.

Senator Lynch-Staunton: Does the licence remain in the hands, in this case, of Ontario, or has the licence been transferred to Bruce Power?

Mr. Taylor: The licence is always given to the operator.

Senator Lynch-Staunton: To the operator?

Mr. Taylor: To the operator, and the operator is Bruce Power in this case.

Senator Lynch-Staunton: However, the ownership remains with the agency in Ontario.

Mr. Taylor: Yes, because this is a lease arrangement.

Senator Lynch-Staunton: You have issued the licence, but you are not satisfied that the financial guarantees that you are seeking have been met.

Mr. Taylor: We were satisfied, and they were being met. However, as you are aware, there were and are problems with the main shareholder. We believe that action is in hand to resolve those problems, so the issue is with the commission. I think it is fair to say that the commission is satisfied, and its statement shows, that there is no question as to the safety of the plant.

Senator Lynch-Staunton: We will not get into that safety until something happens. I have no doubt they are operating it professionally and adequately and all that. What concerns me is that certain financial guarantees that should be in place in case the unexpected occurs, such that they would be able to take corrective measures with the resources on hand, are not. If there is nothing there and there is a quarrel as to the interpretation of the proposed amendment, the thing will be in the courts forever. Meanwhile, whatever disaster has taken place will not be corrected as quickly as one would like.

Mr. Taylor: We understand that the U.K. government is backing this issue, but it is difficult for me to discuss it.

Senator Lynch-Staunton: I appreciate your position. Perhaps we should direct these questions to the particular interested party.

The amendment would read or will read that the owner and occupant or any other person is "one who has management and control.'' That seems to be a narrow definition of who is responsible. It does not say much more than that. You could have an owner who does not have management and control, as is the case with Ontario. As I understand it, under the Bruce Power agreement, it has certainly given up the management portion and, I assume, has also given up the control portion through the lease agreement. If my interpretation is correct, does that mean Ontario, in this case, is no longer liable for any contamination that might take place?

Mr. Taylor: As I understand it, and I am sure Ms. Gendron will correct me if I am wrong, the wording of the amendment is such that the commission has the capability to order the owner, occupier or a person —

Senator Lynch-Staunton: — who has the management and control?

Mr. Taylor: Yes.

Mr. Taylor: They can order the owner —

Senator Lynch-Staunton: There are two, plus one, who happens to be something. That clears that one up and I will continue another time. Thank you.

The Deputy Chairman: Are there any further questions?

Senator Lynch-Staunton: That means that Ontario would have liability, being the owner. Could you say, "yes'' for the transcript because this is important?

Mr. Taylor: I believe so, yes, because the owner is one of the people that the commission could find liable.

Senator Lynch-Staunton: That is fine: the owner or the occupant or any other person.

The Deputy Chairman: Thank you for appearing before the committee.

Mr. Taylor: Thank you, Madam Chair.

The Deputy Chairman: I am pleased to welcome, from the Canadian Nuclear Association, Al Shpyth.

Mr. Al Shpyth, Director of Regulatory and Environmental Affairs, Canadian Nuclear Association: Thank you for the opportunity to address you today. The timely consideration of Bill C-4 is important to the nuclear industry and we appreciate the committee placing it among its first order of business for the new year.

I also wish to thank those senators who welcomed my daughter here. She is studying the Government of Canada and has just studied the Senate. She will be making a report to her class tomorrow, so I hope I do well, for her sake.

Senator Lynch-Staunton: Tell us her name, for the record.

Mr. Shpyth: Her name is Megan Shpyth and she is in grade 5 at Robert Bateman Public School in Ottawa.

Senator Lynch-Staunton: We are delighted to have her here.

Senator Kenny: At the end of presentations, we grade for style and content.

Mr. Shpyth: The Canadian Nuclear Association is seeking the support of the Standing Senate Committee on Energy, the Environment and Natural Resources and, through the committee, the Senate of Canada, for Bill C-4, to amend subsection 46(3) of the Nuclear Safety and Control Act. We are doing so for three reasons.

First, the current wording blocks investment, and the bill corrects this situation. Second, the current wording is an anomaly in Canadian law, and the bill brings it in line with common law and regulation. Third, regulatory control is maintained.

As noted by the CNSC, Canada's nuclear regulator, in their submission to the House of Commons committee, and I trust here, this matter is not a safety issue, so we believe that the bill can proceed without impacting regulatory control.

In my statements tonight I would like to elaborate briefly on each of these three points. For additional information I will refer you to our brief, which has been circulated in English and French and contains an executive summary.

The current wording of subsection 46(3) has had the unforeseen effect of denying private sector companies in the nuclear sector access to debt financing, as banks and financial institutions are refusing to accept the extraordinary liability created under the Nuclear Safety Control Act and the wording in this particular section. As such, it represents a significant barrier to private sector investment in the nuclear industry and puts nuclear power at an unfair disadvantage compared with other forms of electricity production.

The current wording of subsection 46(3) of the NSCA imposes extraordinary liability on "any other person with a right to or interest in'' any place that is contaminated with nuclear substances in excess of prescribed limits.

In doing so, it imposes unlimited liability for the remediation of environmental contamination on anyone with a legal right to or interest in the contaminated land, including secured lenders. The practical and unforeseen consequence of this language is that lenders have refused to provide financing on the security of nuclear assets.

The current wording in subsection 46(3) is not contained in any other Canadian law and is an anomaly. Lenders understand and accept the long-established principle that liability for the cost of environmental remediation attaches to those who own, manage or control contaminated property. The proposed amendment would re-establish this principle, which we think is tough but fair, with respect to the property of licensed nuclear operators and make the wording of the Nuclear Safety and Control Act consistent not only with the common law, but also with all other federal and provincial environmental statutes that we have reviewed. By returning the wording of the legislation to that which is generally accepted in Canada, the nuclear industry would continue to be subject to the same tough but fair and progressive standards as all other industries face.

The CNA does not believe that Parliament intended, through the Nuclear Safety and Control Act, to either place the nuclear power industry at a distinct disadvantage with respect to its ability to raise project financing or to preclude private sector participation in this industry.

One of the key reasons we believe that the bill can go ahead is that amending the wording in subsection 46(3) as proposed would not reduce the power or authority of the Canadian Nuclear Safety Commission to ensure the safe operation of nuclear facilities through licensing or through the exercise of regulatory control over the owners and operators of such facilities. Such powers, which are already realized, include those to require financial guarantees, to ensure adequate provision for decommissioning and to ensure that licensed operators have the capability to provide a full and appropriate response to any environmental threat.

We further believe the amendment to be consistent with other sections of the Nuclear Safety and Control Act that assign responsibility to those who are the responsible licensees, be they owners or operators. Specifically, we believe the proposed amendment to subsection 46(3) does not exempt the owners and operators of nuclear power plants from the responsibility for remediation should there be contamination of land or facilities. In fact, we believe the bill and the amendment it puts forward clarify their responsibility in line with subsection 42(1) of the Nuclear Safety and Control Act.

In conclusion, we are seeking the support of the Senate for the bill, as we believe the proposed change in wording will bring the Nuclear Safety and Control Act into line with all other Canadian legislation. We believe it will permit the Canadian nuclear industry to have access to capital markets for the purpose of obtaining project financing without in any way taking away from the CNSC's power to ensure adequate protection of the environment. The amendment imposes no additional costs on the federal government, involves no new risk being assumed by either governments or the public, and yet has significant implications for the economic viability of the Canadian nuclear industry.

As a consequence, our industry supports this bill. We believe it effectively addresses an anomaly in the current act that is having a significant impact on the financing of private sector participation in the nuclear power sector of our industry.

Senator Lynch-Staunton: Who are the main members of your association?

Mr. Shpyth: The Canadian Nuclear Association represents all of the major licensees in Canada's nuclear industry throughout the full nuclear cycle. We have the uranium mining and milling companies, the people involved in fuel processing and fabrication, and the utilities.

Senator Lynch-Staunton: Are all the public utilities and hydro utilities involved?

Mr. Shpyth: Yes. We have Hydro Québec, Ontario Power Generation, Bruce Power, New Brunswick Power and beyond. We also include MDS Nordion, which is involved in the production of radioisotopes for nuclear medicine.

Senator Lynch-Staunton: Is there any limitation in Canada on foreign ownership of power-producing facilities, whether hydro or nuclear or coal-fired? I refer to anything that is defined as a "public utility'' in that field.

Mr. Shpyth: I do not know. In my part of the industry, foreign ownership restrictions exist on Cameco, which is a uranium mining and milling company and a former Crown corporation.

Senator Lynch-Staunton: Is that a Saskatchewan restriction?

Mr. Shpyth: It is a Saskatchewan-based company, but there is a federal restriction on ownership. I am sorry; I do not know if there are current restrictions on the utility sector. I can certainly endeavour to find out for you.

Senator Lynch-Staunton: I am sure someone will tell us before we are through with this bill. I am not pleading one way or the other, but I am sure that there would be some concern if we saw a lot of our generating plants being licensed or sold to non-Canadians.

You are satisfied, obviously, that the removal of these words does not change the liability feature presently in existence, except to exempt lenders?

Mr. Shpyth: We believe this bill puts the liability where it most properly belongs — on the owners, the operators, those who have responsibility and are in the best position to deal with instances of contaminated land, should they arise. This certainly does not take away any of the responsibility on the owners and operators of nuclear facilities to take care of the environment and to take action if there is any contamination.

Senator Lynch-Staunton: I asked this question earlier because the only case that is preoccupying us in light of this bill is that of Bruce Power. Assuming that Ontario had sold the Bruce nuclear systems to Bruce Power, and so was no longer the owner nor had an interest in it, would that remove any liability they have for contamination? Would there be a continuity of that liability, no matter what change of ownership occurred?

Mr. Shpyth: Bruce Power is a lease arrangement. I have been in contact with New Brunswick Power. Senators may be aware that, last Friday, the Government of New Brunswick tabled in their legislature a bill to reorganize or restructure or re-regulate — if I remember the news release — their utility. They are proposing to separate New Brunswick Power into four parts, two of which would have generating interests, one non-nuclear and one nuclear. It is the stated intention of the Government of New Brunswick to seek private sector partners in their electrical industry.

This bill is not only of interest to parties involved in Bruce Power, but also to New Brunswick Power.

Senator Lynch-Staunton: The reason I asked the question is that Mr. Mike Taylor was obviously in an awkward position when I asked him to be precise about financial guarantees from Bruce Power. It was obvious that he did not have what he thinks he should have. If that continues to be the case, and if Bruce Power were to become the ultimate owner rather than just a lessee, that would cause quite a problem when it came to exercising that responsibility.

That is why I am asking if ownership by a private group, as a result of a sale by a government or a public utility, with strong financial guarantees, would not lead to some difficulty in exercising the commission's right to order decontamination of a site because the new owner would not have the financial wherewithal in place to do so. This is what worries me most about this bill. I am looking for an assurance that responsibility for contamination will continue in strong financial hands.

Mr. Shpyth: Certainly we believe it will. We believe the commission has quite broad powers to require financial assurances for decommissioning and reclamation. They have done so in the case of Bruce Power. I am aware that Bruce Power will be appearing on Thursday. They also have requirements for financial assurances in operations, so to speak.

Financial assurances are not new to the nuclear industry. They have been in effect in the uranium mining and milling side of the industry for a number of years. Those assurances are generally in the form of letters of credit, which can be called upon by whichever government holds them for purposes of decommissioning and reclamation. Those letters are for very significant amounts and are based on current decommissioning plans. Those decommissioning plans are renewed on a regular basis as the licences are renewed. That process allows them to be kept current with not only advancements in knowledge of environmental concerns and consequences, but also with respect to advances in technology for decommissioning and reclamation.

We think it is a fairly robust system. Letters of credit, from my experience in one of the member companies of the Canadian Nuclear Association, are not simple bookkeeping entries. There is a direct financial assurance for tens or hundreds of millions of dollars. A letter of credit takes up a very significant part of one's credit facility so that it is available to government if and when it is ever needed.

Senator Lynch-Staunton: Are you aware of any financing request being refused because of this particular clause?

Mr. Shpyth: We are aware that it has been an issue for Bruce Power and its partners. From our discussions with New Brunswick Power, we know that this bill would also solve a problem for them. If they were to seek private sector equity or participation in their nuclear generation company, the current act would be very much a barrier to that. Therefore New Brunswick Power and the government there are very interested in this bill as well.

Senator Lynch-Staunton: Have there been any instances of private financing being turned down for any major project affected by this existing clause?

Mr. Shpyth: Outside of Bruce Power, there has not. This is the first time the barrier-to-financing issue has been raised. The Bruce Power case is also the first time in Canada that a public utility brought in private sector participation. That brought the matter to the fore.

If you look around the world, there are some 430 operating nuclear reactors, approximately half of which are privately owned and operated. This type of barrier to financing is not in existence in the United States, Sweden, Switzerland, Germany, or other major industrial countries where there are private sector owners and operators of nuclear plants. We do not believe it should exist in Canada either.

Senator Lynch-Staunton: They are all actual builders and owners? They did not lease or buy an existing plant in most cases?

Mr. Shpyth: To the best of my knowledge, they are owners.

Senator Lynch-Staunton: That is different from the situation we are looking at now.

The Deputy Chairman: You mentioned insurance. What is the size of the insurance policy for, say, Bruce Power?

Mr. Shpyth: Bruce Power will be here and could answer that.

The Deputy Chairman: Generally speaking then, what kinds of insurance policies do private operators have in other countries? We have only one at the moment.

Mr. Shpyth: That varies from country to country. If that is of interest to the committee, we could probably, on short notice, get a sense of the situation in the major industrial countries.

The Deputy Chairman: The United States would be a good example. That would be good. Thank you for coming.

Mr. Shpyth: Thank you again for the opportunity.

The committee adjourned.