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

Issue 20 - Evidence

OTTAWA, Thursday, November 17, 2005

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:35 a.m. to examine and report on emerging issues related to its mandate.

Senator Tommy Banks (Chairman) in the chair.


The Chairman: This meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources has been called this morning to continue our consideration of matters arising from our previous reports having to do with the Nuclear Liability Act in general, nuclear generation in general, and, specifically, insurance with respect to the public liability, that is, a contingent liability that would apply to operators of nuclear facilities, both large and small.

Appearing before us this morning, and we are grateful that they are, are Mr. Wallace, Mr. Brown and Mr. McCauley from Natural Resources Canada. Gentlemen, thank you for being with us this morning. Mr. Brown, it is particularly nice to see you again. You have been with us many times before. Mr. Wallace, shall I assume that you will lead the discussion and tell us what you would like to tell us?

Tom Wallace, Director General, Electricity Resources Branch, Natural Resources Canada: I am prepared to make some opening remarks, and we also have a presentation deck in your package that goes through in more detail some of the policy issues associated with the review. Mr. McCauley is prepared to take you through that, if senators would like.

The Chairman: We would appreciate you telling us what you think we need to know, and we will then regale you with questions.

Mr. Wallace: Thank you for the invitation to appear before the committee. I should like to begin with a short summary of the purposes of the Nuclear Liability Act and its key principles. The NLA is federal legislation that came into force in 1976 to address operator liability and victim compensation in the unlikely event of a nuclear accident.

There are two key principles in the legislation. The first is that nuclear operators, for example, Ontario Power Generation or Hydro-Québec or New Brunswick Power, are absolutely and exclusively liable for nuclear damage up to the liability limit, which is currently set at $75 million. ``Absolute liability'' means that the operator has no defences as he would normally under common law. For instance, he cannot argue that he acted with all due diligence to prevent the accident. ``Exclusive liability'' means that all liability is channelled to the operator to the exclusion of other parties such as suppliers or contractors.

The second principle is that operators are required to carry financial security to address their $75-million liability limit. Currently, this financial security is in the form of insurance obtained from the approved insurer, which is the Nuclear Insurance Association of Canada. I understand you met with representatives of that organization previously.

As our deputy minister, Mr. Richard B. Fadden, indicated to Senator Banks in his letter of November 9, the review of the NLA is quite a complex undertaking. We have been consulting thoroughly with nuclear operators and the nuclear insurers to address our concerns with the existing regime and chart a way forward that satisfies their interests as well as those of the Government of Canada and the Canadian public. Our work on the NLA review is not complete, and the government has not yet decided if or when it will introduce legislation or what final elements that legislation should entail. Thus, today, while we are in a position to review with you some of the major policy issues that we are addressing, we cannot pronounce, as I am sure you will understand, on what the government's policy position will be at the end of the day.

One of the key considerations is the liability amount and the amount of financial security that will be required of the operators. Any new legislation in this area will likely need to seek a balance among what is appropriate in relation to the likely consequences of a nuclear incident, the availability of insurance to cover it, the financial burden on the operator and relevant international practice. As I think you are aware from your travels in Europe and elsewhere, the amount of the operators' liability under the current legislation is well below international norms. My colleague, Mr. McCauley, would be pleased to take you through some of the international comparisons if the committee would find this helpful.

In our discussions with the industry, nuclear operators have suggested that the new regime include provisions for alternative forms of financial security to insurance and, if there is to be an increase in operator liability, it be phased in. Our review is also examining what the appropriate role of the government should be in the financial regime.

Many argue that the government should be the insurer of last resort. We are considering the appropriateness of government insurance for certain risks where there is no available private insurance capacity. Examples include damage caused by terrorist acts and bodily injury claims beyond 10 years after the incident in question.

Claims administration is also an important policy consideration in the review. The existing legislation provides for an administrative tribunal to replace the courts where it is in the public interest to do so. This is based on the recognition that such a mechanism may be more efficient and equitable than the courts in handling potentially large numbers of claims. However, details of the functioning of this mechanism are lacking in the existing legislation and elaborating on how this would work would be useful.

These are just some of the policy issues we are dealing with as we formalize our recommendations to the minister. As indicated in Deputy Minister Fadden's letter, the department is committed to completing its work on updating the Nuclear Liability Act and replacing it with a statute that reflects modern-day legal and financial principles. To this end, we recognize and appreciate the good work and recommendations of the committee in its report on nuclear reactor safety. Like the committee, we have been well engaged in our review in international discussions with agencies such as the Nuclear Energy Agency of the OECD and the International Atomic Energy Agency.

In its September 2004 response to recommendations by the Commissioner of the Environment and Sustainable Development the department made it clear that we were committed to completing our work this year. In our response we said that:

Natural Resources Canada is undertaking significant policy work to ensure that the revisions required to the Nuclear Liability Act are addressed. Natural Resources Canada commits to completing its work on developing policy proposals for revisions to the act by the end of 2005. The time frame for bringing forward any revisions will be established by the government once the policy work is complete.

It is six weeks to the end of 2005. We are on target and we fully anticipate having completed our work by the end of this calendar year.

Again, thank you for the opportunity to appear before the committee. This is a complex area, as you will be aware from your previous discussions. We do have a presentation deck. My colleague, Mr. McCauley, is prepared to take you through a presentation outlining in detail some of these policy issues and the alternatives available to the government, international comparisons of liability regimes, et cetera, if the committee would find this helpful, or we can stop now and respond to any questions. We are in your hands.

The Chairman: It would be useful if Mr. McCauley took us briefly through this. There is a significant amount of this we know. Bearing that in mind, there are always wrinkles that we would like to hear about.

Mr. McCauley, please take us quickly through this and refer to the high points. We will then start our questions.

Dave McCauley, Senior Policy Advisor, Uranium and Radioactive Waste Division, Natural Resources Canada: Honourable senators, moving into the key issue of operator liability, we all recognize that the Canadian operator liability limit is quite low, at $75 million, relative to other countries. We are looking at a number of options such as an inflationary increase to the limit that would bring it up, essentially, to $250 million. Alternatively, we are looking at the current international levels, which would bring the limit up to around $600 million. That is in keeping with the committee's earlier recommendation in the report on nuclear reactor safety. Unlimited liability would essentially mean whatever insurance that the operators could get would put the operator's assets on the table, and we believe that could also involve government insurance at the end of the day.

Some considerations are the risk, the likelihood, of a nuclear incident, the potential impact of a nuclear incident, the available insurance capacity and how much can the insurers put on the table for the third-party liability risks.

We have looked closely at the international levels. I will turn to a slide that goes into more detail on the cost to operators. We could establish high liability limits, but then we would have to question what value there is in that for incidents that we believe are unlikely.

Turning to the second slide, we show a comparison of the Canadian nuclear liability limit on the left, which is extremely low, $75 million, with other countries that participate in what is known as the Paris convention. I believe the committee has met with the NEA on the matter of the Paris convention.

Honourable senators will see that all the Paris convention countries have a liability limit up to approximately $600 million. The non-nuclear countries, Italy, Norway and Denmark, which only operate research reactors, have quite low operator liability limits. That is supplemented by what is shown on the next slide, the amount of state funding. That is then topped up by a states' pool, whereby all the member countries of the Brussels convention, which supplements the Paris convention, would participate in providing funds in the event of a nuclear incident.

Senator Milne: Are these reinsurance agreements?

Mr. McCauley: It is somewhat like a reinsurance agreement. In the event of an incident, each of these countries commits to putting a certain amount of funding into a pool that is used by the state where the accident occurs to compensate victims.

France has a large nuclear fleet and quite a low operator liability limit. It is supplemented first by the state and then it relies on the pool.

The Netherlands, the U.S., Germany and Japan all have high liability limits. I will point to the American situation. The operator's liability is roughly Can. $400 million as a first tier in the event of an incident. That is supplemented by what are known as retrospective premiums. All reactor owners in the United States pay up to a maximum of roughly Can. $100 million per reactor into a fund. If you are operating five reactors, you would be liable for committing $500 million to this fund in the event of an incident in the United States.

Japan and Germany have unlimited liability. However, there is an actual limit on the operator's liability. That is supplemented by a state guarantee. In Germany, these are large corporations that operate the nuclear reactors and their assets are included in those schemes.

That is all I want to point out. I indicated that the maximum liability in the Paris convention and the Brussels convention countries is roughly Can. $600 million. These countries have agreed to increase the operator liability limit to 700 million euros, which equates to just over Can. $1 billion. That would be supplemented by a state fund of 500 million euros and a states' pool fund of 300 million euros. The equivalent of all those tiers would be roughly Can. $200 billion.

The European states are anticipating being able to implement that approach by 2007. The insurers are skeptical about having sufficient capacity to address that first tier of liability, but nonetheless that is the intent of those states. We move on to the next slide.

Another important issue is the form of financial security. In the current legislation the only form of acceptable security is insurance from an approved insurer. The operators have suggested that they would like alternative financial security options. Some of the items that we have considered are government guarantees — recognizing that some of these utilities are publicly owned — self-insurance or letters of credit. We are looking at the viability of all of the alternatives.

Of course, these alternative schemes must be robust. We want to ensure that the money is there in the event of a nuclear incident. We must recognize that these would be considered on a case-by-case basis. We could not issue a blanket authority for a particular type of alternative financial security. We would have to judge them based on the viability of the individual operator.

Any alternative financial scheme must address claims administration. That is something that insurance does well. When you buy insurance, you also buy claims administration. If we go with alternative financial security, we would have to find a way of dealing with the claims should there be an incident.

Finally, there is the administrative burden. If we were to assess alternative financial securities, it would in turn be a burden on the federal government to ensure that those financial securities were maintained. There is the issue of costs associated with that. These are some of the considerations in regard to the prospective alternative forms of financial security.

The third issue is the phase-in of the liability amount. The operators have indicated that they would like to see a phase-in of any revision to the liability amount. We have the option of not complying with what they would like and just having any increase take effect immediately on entry into force of new legislation.

Alternatively, we might phase it in over a fixed period. The real advantage of a phase-in is it eases the financial burden on the operators somewhat. It also enables the insurers to develop capacity.

The insurers have indicated that a certain amount of capacity is available but that varies from year to year, and a phase-in period would allow the insurers' capacity to develop with more certainty.

Another issue is the role of government in the entire financial scheme. Under the current regime, the government provides a certain amount of reinsurance. Crown corporations are not required to carry financial security. The financial security of small facilities is topped up by the government, and then there are certain risks that the insurers will not cover. The government is involved in that form of reinsurance.

The question is whether this approach is desirable. Do we want to maintain this approach should we move to new legislation?

The federal government's policy on risk management for the Crown corporations has changed. Crown corporations are expected to act like private sector entities in how they deal with their risks. We would expect that they would be required to obtain insurance. Small facilities pose minimal risk, so it may be reasonable for the government to be involved in some kind of reinsurance scheme there.

Many argue that the government is really the insurer of last resort in the case of catastrophic situations. It may be reasonable, where insurers are unwilling to provide insurance — such as in the area of terrorism, as Mr. Wallace referred to, or personal injury claims beyond 10 years — for the government to step in when it is morally responsible to do so.

The Chairman: If I may, Mr. McCauley, I will stop you there, because from here on we get into arcane matters of insurance, liability, administration and actuarial considerations, which we know have to be taken into account. Our concern is more overarching, and you may wish to refer to these in answer to some of the questions that you will receive. However, we will start with questions now.

Senator Cochrane: Thank you very much for appearing before us this morning.

I will start off with the Nuclear Liability Act itself. Prior to passage of that act in 1976, it was recommended during a parliamentary committee debate that the legislation be reviewed every five years. Of course, that never happened. We find ourselves, 30 years later, with seriously limited legislation.

I want to hear your views on this. Do you think there should be a review process built into this legislation? Is there any merit in such a process from the department's perspective?

Mr. Wallace: There has been quite a history, as you may be aware, with the Nuclear Liability Act. Initially, it was ready around 1971, and it took about five years to formally implement it because of a host of issues that we had to sort out with the insurance industry. That is an illustration of some of the complexity.

There was a legal challenge to the Nuclear Liability Act in the early 1980s in which the whole constitutionality of the act was challenged, and that took quite a few years to weave its way through the courts. In the end, the federal government's position was upheld by the courts. Those are some of the complicating factors in the history.

Senator Cochrane: However, 30 years.

Mr. Wallace: It is 30 years old. I think you can see from the policy work we are doing that from the department's perspective there is definitely a need for updating, which is why we are committed to completing this by the end of the year.

Your question about whether there should be a periodic review built into the legislation is an important issue. I am not sure what the government will decide. As Mr. McCauley has pointed out, the world does not stay constant. The current regime in Europe is now changing.

If we want a nuclear liability regime in keeping with the evolving international norms, then the argument would be that there are certain types of mechanisms for adjustments to be made over time. Whether that is through regulation or periodic legislative review is an important question.

Senator Cochrane: It is in the hands of the minister, then. It is his decision whether or not something should be put in place. As you just said — and that is my concern as well — things change over the years. We cannot wait 30 years before we can have something included in there. We have to do it as the situation changes.

Mr. Wallace: It is the government's decision whether or when to introduce legislation and what the elements of that should be. We are trying to complete our policy work so that we have not only good recommendations, but also all the legal work that must be done to position the government.

Senator Cochrane: I realize that, Mr. Wallace. However, we must have something in place. We cannot wait another 30 years before we review this legislation. That is my concern.

You said this will be ready by the end of 2005.

Mr. Wallace: That is right. Our policy work and all our legal work will be finished by that time. We are committed to that as a department.

Senator Cochrane: How much input have you received from the public?

Mr. Wallace: To date, we have been consulting with the operators and the insurers on the technical details. When the government decides to introduce legislation, it will become the vehicle for public input.

Senator Cochrane: Once the proposal is submitted to the minister, what is the next step? Where do we go from there?

Mr. Wallace: The government collectively, not just the minister, will have to decide whether to introduce legislation, the elements of that, and when. All those are cabinet decisions in the hands of the government. That gets into a domain that we cannot really comment on. We can do the policy work, but then it is up to the government to decide whether to go to Parliament, when, and what the elements will be.

Senator Cochrane: In the report The International Aspects of Nuclear Reactor Safety, this committee recommended that the federal government explore with the governments of the U.S. and Mexico the possibility of establishing a North American convention on nuclear liability.

Is that something the department is considering at this point as it works to move ahead with its commitment to revise this particular act?

Mr. McCauley: Our intent is to put forward proposals for the government's consideration for the revision of the existing act and then make decisions on what conventions we would enter into once the act was in a more modernized form.

We have had discussions with representatives from the United States on our bilateral relationship. That is an important consideration for us into the future. We have not had any discussions with the Mexican government on this matter. Our proximity to the United States is an obvious reason to want to ensure we have a good relationship with the Americans.

Senator Cochrane: Also with Mexico, because the Free Trade Agreement has opened things up. I am hoping we do not have to wait for another 30 years before we see something like this happen.

Mr. Peter Brown, Director, Uranium and Radioactive Waste Division, Natural Resources Canada: Our job here is to develop the policy considerations for the Canadian regime and give full consideration as to whether we want to join an international regime, specifically, with the United States. That will be an issue for Foreign Affairs, and they will be taking the lead on that.

Senator Cochrane: Does this department then have some kind of information sharing with Foreign Affairs? You have a lot of information that you can offer them.

Mr. Brown: At this point, our fundamental emphasis is to fully develop the regime in Canada and the policy issues surrounding that. It would be premature to discuss in detail with the United States a regime that we are still trying to work out ourselves. Once it is, then Foreign Affairs will be heavily involved, obviously. I imagine they will be the lead.

Mr. Wallace: My understanding is until we update our legislation, we cannot join some of the conventions that exist already. Is that right, Mr. McCauley?

Mr. McCauley: That is somewhat correct. We could, on the basis of the existing legislation, join the unrevised Vienna convention, but that has been eclipsed by a revised version. I do not think we would be entering into an old convention that is being left behind.

The Chairman: I want to remind us all, myself included, that when it comes to the question of the government implementing the recommendations from the department, that is a separate issue and we will have to question the government on that. What we are talking about here is what the department has done.

I will come to this later, but there is a certain frustration here about what the department has done. We are trying to find out why it has taken so long for the department to come forward with specific recommendations to the government. We can hold the government to account for not taking action when action is necessary with respect to introducing appropriate legislation. The government is saying they do not have the recommendations yet, and we have been looking at this for a long time now. Our report, to which the deputy chair referred, was in 2001, and undertakings were made to us then that ``The department is working on recommendations which we will take forward to the government.''

It is now nearly the end of 2005, and, Mr. Wallace, you have said to us again that that will happen. That is the context in which we are asking these questions, and they follow up on meetings that we have had, as you said, in Europe with the administrators and overseers and with the Nuclear Insurance Association of Canada, who have assured us they can do this without a problem.

I want to understand the context.

Senator Mitchell: I am sympathetic to what the chairman has just said. I am looking at the letter from the Deputy Minister of Natural Resources. I get the sense it is relatively vaguely written.

At the beginning it states:

You should be aware, however, that at this time our work is not complete and would benefit from greater consideration by the Minister and his colleagues.

It seems to me the department is putting it off on the political level to give some direction.

At the end it says:

These are just some of the issues we are dealing with as we formalize our policy recommendations to the Minister.

Specifically, why can the department not write a policy document with recommendations at this time and hand it to the minister? What is the impediment to doing that?

Mr. Wallace: I do not think there is a major impediment to doing that. We are doing the final touches on some of the legal issues to be in a position to have a bill ready. As I say, we are committed to completing it before the end of 2005, which is not far away. We are very advanced; I do not want to leave you with any other impression.

The difficulty we are in is that it is the government that finally has to decide, and it is not appropriate for us to indicate what those decisions are. We cannot. We have to leave it to the government to make the final decisions and make those public.

All I can say is that we have been working on it diligently. We are very advanced in our review. We met as recently as three weeks ago with the operators and the insurance industry to go through some of the fine details, so it is not that we have not been active on this.

I realize and I understand that the committee is frustrated. It has been a long time. All I can say is that we are pretty much ready, but we are entering a stage where, in some sense, it will be a transition from our review to the government making some decisions.

The Chairman: I will ask Senator Mitchell's question in a different way.

The then minister responded to a petition in 2003 by saying the standard government process for preparing legislative amendments is currently under way, and the departmental recommendations to cabinet would lead to a draft bill for introduction in Parliament. That was in 2003. Our recommendation was in 2001, and we can go back, as the deputy chair has said, into the 1970s.

Are we to assume on this basis that the standard government process for recommendations from the department to bring forward new legislation will take five years? Is that standard government process?

Mr. Wallace: It is probably not standard government process.

Senator Mitchell: If we were to ask you to appear here on January 1, could you say you will have completed your recommendations to the minister? Will that be delayed if there is an election? I suppose in some senses you might not have a minister to present it to. Will it be completed as of the end of December? Does the department do that?

Mr. Wallace: The department has already committed to completing its work by the end of 2005. I am not at liberty to get into questions of advice to the minister or discussions that the minister may have with his colleagues.

We can indicate our timetable and our determination to adhere to it. At this stage, I cannot get into a discussion of advice to the minister or decisions that the government may make on its parliamentary agenda. It is not because we are trying in any way to be difficult. There are rules respecting cabinet confidences, and we received legal advice prior to appearing before this committee. We must respect those rules regarding cabinet confidences.

The Chairman: Can you tell us what those rules are, please?

Senator Milne: You sought legal advice prior to coming before this committee?

Mr. Wallace: Yes, we did.

Senator Milne: That is appalling.

Mr. Wallace: It is important for us to know what we can and cannot reveal to the committee without betraying cabinet confidences.

Senator Milne: If it has not gone to cabinet, it is not a cabinet confidence yet.

Mr. Wallace: We have certain rules regarding advice to the minister; we have to respect confidentiality. I am not a legal expert.

To me it is analogous to the Freedom of Information Act. When we receive requests to divulge information under that act, advice to the minister is one of the criteria for exemption.

It was in that context that we reviewed with our legal counsel what we could and could not say vis-à-vis advice to the minister and cabinet deliberations.

Senator Kenny: The gentlemen here are not the ones we need before the committee on this particular topic because this is endemic throughout government. The Department of Transport is particularly bad. I feel Senator Milne's outrage daily when we have witnesses come before us.

The difficulty is that we are blaming the messenger and not the people who are creating these rules that, essentially, are in contempt of Parliament day after day. How one interprets what a cabinet confidence is becomes a hole big enough to drive a truck through. As a consequence, we as parliamentarians are continually poorly served.

It would be great sport to go after these three witnesses for the next hour or so on this subject, but none of them wrote these rules. We find continually in every committee on which we sit that the people who come have instructions and they have advice. There is a watcher taking notes and sending them back on everything they say to us. People are looking at them, and if they cross the line, they will hear about it tomorrow. It louses up the way the system is supposed to work. If people cannot tell Parliament how things are happening and what is going on, it means nobody knows.

We get a culture of leaks, of partial information and of Parliament going down the wrong track. Frankly, our job is to call the government to account, and that is why we have committee meetings like this. They do not work because of the instructions that you have just heard described.

This is a broader issue. I think these gentlemen have noted our outrage and frustrations, and I suggest that we pursue whatever questions we can and see where the line is. It would be very instructive to have a broader examination of the kind of cover-up and flim-flam that goes on, not because something has to be secret to protect the nation, but so politicians have their asses covered in question period. That is very aggravating.

Senator Mitchell: My question did not actually broach the issue of cabinet confidences. I am asking whether these recommendations will make it to the point where a minister would be aware of them and they therefore become a cabinet confidence by the end of this year. Unless the minister has explicitly said, ``I do not want you to make recommendations by the end of this year,'' there is no reason you cannot. There is no authority telling you not to. I think you are saying there is no question that it will be done by the end of the year.

I have a couple more questions following that. Because the consequences of a problem in this area would be international — the problem would be carried beyond our borders — is there international pressure from the U.S. or from any other country for us to address this?

Mr. Wallace: Yes, there is an international issue associated with U.S. suppliers providing material and services to nuclear reactors.

Mr. McCauley is in a better position to comment on that. It is one of the concerns underlying the existing legislation.

Mr. McCauley: As Mr. Wallace has indicated, there is pressure from American interests who supply to Canadian operators to ensure that our legislation is brought up to international standards. In the unlikely event of a Canadian incident with U.S. impacts, American victims would come to the Canadian courts to take advantage of the liability provisions in our regime.

Senator Mitchell: Page 3 illustrates what you have been describing and what we now know. Canada is the only country of the ones listed that has no second-tier liability of public funds, which is indicated in yellow on the graph. There is no third-tier states' pool — for example, an agreement with the U.S. and Mexico. There is also no second-tier industry pool. There is nothing indicated above the $75-million liability. In fact, there is something above that. There is no question that if there were a disaster, the Government of Canada would pick up the liability above the $75 million.

We can say what we want about no decision having been made on alternative financial security to existing insurance options. In fact, there is an alternative. A de facto decision has been made that that liability rests with the Government of Canada.

In the absence of a greater commitment from the industry through a pool or a greater commitment overall through, for example, a North American agreement, there has been a decision on who is the final bearer of that responsibility: It is the people of Canada. Therefore, it seems to me that that should increase the pressure to have this decision made so that the people of Canada are not necessarily left to bear that kind of financial liability.

Mr. Wallace: I agree that for all intents and purposes, the pressure would be overwhelmingly on the government to come in above whatever the liability limit is. I believe that is what would happen. Legally, that is not what the existing legislation says, and there are issues respecting committing a future Parliament to expenditures. The wording in the current legislation is negative in explicitly saying that nothing in this commits the government above $75 million, or words to that effect. We have been criticized for that and it has been suggested that at least there be a positive formulation of that sentiment. We do run into issues about committing future Parliaments. However, if you ask me whether, in the real world is it likely that the government would be required to come in after the liability limit is reached, the answer is yes.

Senator Milne: Coming back to the question of the legal advice that you received before you appeared before the committee, I agree with Senator Kenny that that actually puts you in a position of contempt of Parliament. Did that advice come from your own department's lawyers or from Justice?

Mr. Wallace: Our legal counsel works for the Department of Justice. That is how the system works.

Senator Milne: That is what I thought.

Mr. Wallace: I might say that we did not ask for a legal opinion; it was not that degree of formality. We wanted some guidance on what the conventions were and what we could and could not say. We were advised that we had to respect cabinet confidences.

Senator Milne: Of course, but this has not yet gone to cabinet. It has not even gone to the minister, let alone cabinet. This is still just a think-tank session within the department, is it not?

Mr. Wallace: I am not in a position to comment on what has gone to the minister or to cabinet.

Senator Milne: Carry on, Chair; I am getting very frustrated here.

The Chairman: Can you answer us in any degree as to what the officials of the department are thinking with respect to what you will take forward to the minister?

Senator Kenny: We should get a list of what they were told not to talk about, Chair.

The Chairman: So that we do not waste your time, or ours, can you tell us where we cannot go?

Senator Milne: I think they have a legal beagle speaking in their ears there.

Mr. Wallace: We have tried through the list of issues that we have been presenting before you to give you a good sense of what we were wrestling with. We stopped short of saying what our recommendations would be on each of those issues because of the concerns that I raised. I am not in a position to disclose our recommendations. We have tried to give you sufficient information so that you can see the issues that we are wrestling with and some of the considerations that are on the table. However, I am not in a position to tell you what our advice is. We have tried to go as far as we can in giving you a full briefing on the issues and the available options, but we are not in a position to say what the bottom lines are and we have to wait for the government to make its decisions and announce them.

Senator Milne: Mr. Wallace, it seems to me that you are dancing around the issue very neatly, very nicely, and very frustratingly.

Since you have said you will not answer some of my questions about this chart before me, let us go back to the 1976 legislation. Was the five-year review in that legislation mandated or recommended? I was not part of the original study by this committee.

Mr. McCauley: Yes, I understand that it was a recommendation when the legislation went through. I believe it went through second reading. When it went to committee, there was a recommendation that the legislation be reviewed every five years. I understand that in 1982 a review was actually begun by what is now known as the Canadian Nuclear Safety Commission.

Senator Milne: It was begun but never completed.

Mr. McCauley: That is right. It was begun, there was a report and the decision was made that the process would continue. The review had spanned a fairly long time and the situation had evolved, the litigation had begun, et cetera, and it was considered that the department should take over review of the legislation at that time.

Senator Milne: Did that review ever come to the attention of Parliament?

Mr. McCauley: I do not believe that it did. It went as far as a report issued by the Atomic Energy Control Board.

Senator Milne: It is a good thing you were not dealing with today's Senate.

I was planning to ask you about Charles Caccia's 2003 bill, in which he recommended a liability limit of Can. $1.1 billion, which seems to me very much in line with what will happen in Europe in 2007. I think it is 700 million euros, which is about Can. $1 billion.

Mr. McCauley: Yes, that is right.

Senator Milne: You are not allowed to answer the question as to whether or not that is in line with department thinking right now. I am not asking you what has gone to the minister or what might go to the minister.

Mr. Wallace: The question of what the ultimate liability limit will be will, in part, be based on what we think is the insurance capacity. We also have to take into account the impact on the operators, the premiums that they will face and what is reasonable.

Whether or not, in light of those two considerations, we could go as high as $1.1 billion, there are issues there. The current international norm is in the order of $600 million, albeit there are suggestions to change it. The committee's own recommendation was in the order of $600 million.

The issue of the capacity of the insurance market might arise when talking about numbers of the order that you are suggesting and Mr. Caccia has suggested.

Senator Milne: Then can I infer from your answer that you are, perhaps, thinking of a phase-in to help the industry?

Mr. Wallace: That is certainly — as Mr. McCauley's presentation indicated — one of the items very much on the table in the review of the act.

Certainly, the higher the multiple of the increase in liability that is ultimately decided on, the stronger the arguments to phase that in, both in terms of easing the impact on the operator and giving the insurance market time to develop so it has the capacity to absorb that.

Senator Milne: Mr. Chairman, we cannot get any definite answers. We cannot get any definite guidance on what the department is thinking. It is very nice to have this slide presentation, but if they cannot give answers, why on earth are they here?

The Chairman: Because we invited them.

Senator Milne: We did not realize we would be stonewalled.

Senator Kenny: It would be helpful if we heard from this group what the definition is in their minds or in the department's mind or in their counsel's mind of a cabinet confidence, because this is an ever-growing circle. Perhaps we could be brought up to date on precisely what constitutes a cabinet confidence.

Can this panel assure us that all of the issues that were under consideration and all of the pros and cons of each have been completely and fairly presented to us?

Mr. Wallace: If I understand your question —

Senator Kenny: I asked two questions, sir.

Mr. Wallace: The second question was whether or not our list of issues is a fair reflection.

Senator Kenny: No, not a fair reflection, but a complete reflection, and whether it also reflected all of the pros and cons related to the issues. I did not ask you what the government's position was. Does it have all of the pros and cons listed? Is it complete, and are all the issues that are up for consideration listed as part of the presentation?

Mr. McCauley: We have tried to identify here the key issues, recognizing that we had a limited amount of time. We wanted to identify the key issues that we thought would be important to the committee. We have tried to establish all the considerations that have gone into our thinking on these key issues. We could have a lengthy discussion on any individual issue.

Senator Kenny: Would it be reasonable to ask if they could provide the committee in writing with a list of all the issues and all of the pros and cons associated with them?

The Chairman: Could you undertake to do that, Mr. Wallace or Mr. McCauley?

Mr. McCauley: We could, yes.

Mr. Wallace: Yes.

Senator Kenny: The first question was on what constitutes a cabinet confidence and, therefore, would not be available to this committee. Precisely what does that include? At what point does a document move from being someone's note to file to being a cabinet confidence?

Mr. Wallace: I can certainly undertake to go back and discuss it with people who are in a position to advise me on that.

Senator Kenny: We would like it in writing.

Mr. Wallace: I will undertake to do that and share whatever advice I receive with the committee.

The Chairman: That would be very helpful.

None of us would claim to be fully informed, much less expert, on all of the questions that obtain on the matter of the liability of nuclear generators in Canada, but we seek to give Canadians some confidence that the question is being addressed in a timely and complete manner. With respect — remember that I said we are not expert — we do know to some degree what the issues are. We have discussed this with the agencies themselves. We have discussed it with the Nuclear Insurance Association of Canada. We have met with the responsible regulators in Europe. We are not entirely ignorant of what the questions are.

We are hoping to find some of the answers to the questions and the general nature of the direction that the department is taking in advising the government. We have been waiting. We are holding the government to account for not taking legislative action on these matters. That is another question entirely. Answers in writing to the two questions that Senator Kenny has asked, and anything else you would like to say so that we know where that glass ceiling is, would be helpful. I want to reinforce the importance of the answers you can give us to those questions.


Senator Tardif: In light of the very alarming statements that we have heard this morning, my questions seem rather unimportant. Nevertheless, I will go ahead and ask them, for clarification purposes.

How do nuclear operators feel about the possibility of amendments to the Nuclear Liability Act? How are they reacting to this news? Also, what type of feedback are you getting from the provinces? How do nuclear operators and the provinces feel about possible changes to and the renewal of the Nuclear Liability Act?


Mr. McCauley: I can advise you that both the operators and the provincial governments recognize the need to revise the legislation because they know that there may be some problems with it, as well as the fact that it is lagging behind international standards. I think there would be support for revising the legislation from both those groups.

Mr. Brown: It is worth noting that, over time, the industry and the provinces have changed their views on this. As it has become more obvious that we are out of step with everyone else and that the liability levels are incredibly low, there is now a real recognition from the industry and also the provinces of the need to make revisions at this juncture, whereas previously there was considerable resistance. Part of the issue is that the positions change with time. We have constant discussions with industry and with NIAC itself. For example, NIAC did not have the capacity a while ago. Now they are saying that they have greater capacity. You heard that a week ago when they appeared in front of you. If you had asked NIAC that question five years ago they would have said no, they did not have it. It is reasonable, as Mr. McCauley indicated, that they are much more accepting of change at this point.


Senator Tardif: Would you say that there are not only financial considerations at stake, but also social considerations that can affect the amount of time it takes to implement any recommendations?


Mr. Brown: It is not just the financial issue, although that was probably one of the major ones. However, we have identified a number of issues here and presented those to you this morning. All of those issues have been changing over time. That is one of the reasons it has taken so long.


Senator Tardif: You noted in the table on page 3 that Italy, Norway and Denmark only assist research reactor operators. We see that these countries invest substantial public funds in this area. Canada also has a number of research reactor operators. Correct? No public funds are allocated for research only. Are research reactor operators covered by the same insurance? Is the liability limit the same as in the case of operators of isotope-producing reactors? Who is liable and why are no public funds allocated to research in Canada unlike the situation in other countries? What is the liability limit for research reactor operators as compared to that for operators of isotope-producing reactors?


Mr. McCauley: The liability limit for research reactors in Canada is the same. The liability limit for all designated nuclear installations in Canada is $75 million. A research reactor would have to have $75 million of coverage, as would any of the other designated facilities; however, the federal government has a much greater role in terms of reinsuring the amount for the smaller facilities than for the larger facilities.

Senator Milne: Would Chalk River be an example?

Mr. McCauley: That is right. I do know that Chalk River is different because it is owned by Atomic Energy of Canada Ltd. and there is no requirement for them to carry insurance. It is self-insured by the Government of Canada. As an example, a slowpoke reactor at École Polytechnique or at the University of Alberta would require $500,000 in private insurance, and over and above that, up to $75 million in a public tier. The federal government provides them with $74.5 million of insurance in recognition that their facility will never result in an incident that would require a significant amount of coverage. Nonetheless, we top it up to $75 million.


Senator Tardif: If I understand correctly, the federal government is largely responsible for providing insurance coverage, for example, to universities that invest in nuclear research.

Mr. McCauley: That is correct.

Senator Tardif: The table does not indicate that as such.


Mr. McCauley: We do not provide it as a separate public tier. The operators obtain their insurance of $75 million from NIAC and then the government reinsures $74.5 million of that with federal monies. It is a contingent liability of the federal government. It is not an explicit public tier.

For example, in France, the operator must go to the insurance companies for roughly $200 million of private insurance. The Government of France provides the remainder of the $500 million. We backstop the insurers in the case of the small facilities. They will get an insurance policy of $75 million. The premium for the first $500,000 is paid to the insurers; a nominal premium is paid to the federal government for the remaining $74.5 million. That is the way it works.

Senator Kenny: Is the insurance written in such a way that the first $500,000 comes from the insurer, or, should there be claims, does it come equally from the insurer and the reinsurer?

Mr. McCauley: I do not have the answer to that question. We do not anticipate an incident ever taking place that would exceed the $500,000.

Senator Kenny: If you do not anticipate it, why have the reinsurance where the federal government is carrying 95 per cent of the burden?

Mr. McCauley: The legislation requires that every operator have $75 million of coverage.

Senator Kenny: You should, therefore, have some understanding of who pays out first.

Mr. McCauley: I can find out and provide you with the answer.

The Chairman: The question is whether it is proportionate or whether the first $500,000 is paid by the insurer.

I will quote from a letter from the then minister of November 1, 2003 addressed to Theresa McClenaghan, who was counsel for the Canadian Environmental Law Association. The letter said, in paragraph no. 6:

The Department has not considered it necessary to conduct any studies on the environmental and economic sustainability implications of the current $75 million limit imposed on nuclear operators by the Nuclear Liability Act.

In paragraph 8 it states:

...the Department has not conducted any studies on the sufficiency of the $75 million liability limit of the current Nuclear Liability Act to address the damages to person or property that could arise from an accident at a nuclear power generating plant...

Is that still true?

Mr. McCauley: Since the time of that letter, the Canadian Nuclear Safety Commission and Natural Resources Canada undertook a study with a private consultant — that company was Magellan — to estimate the potential damage of what might be considered a foreseeable worst-case nuclear incident. We have copies of that report if you would like to receive it.

The Chairman: What is the likely liability in that type of accident?

Mr. McCauley: It was roughly a million to $100 million. Those costs were largely associated with evacuation. It contemplated an incident where the emissions were contained in the containment building and then released in a planned fashion.

The Chairman: That would be called a ``design-based situation''?

Mr. McCauley: That is it exactly.

The Chairman: What happens if the problem were not contained within a building? Let us say, for example, a large amount of radioactive heavy water is released into Lake Ontario. It is almost impossible to contemplate what the liability would be in that circumstance, is it not?

Mr. McCauley: I think that has been part of the issue in putting a number on these incidents. You can contemplate any kind of nuclear incident. You can raise all kinds of factors, but when we look at a worst-case design-basis incident the anticipation is that the radiation would be contained. That is what we focused on in our scientific studies.

The Chairman: That would be very nice, if it were contained.

Mr. McCauley: Yes.

The Chairman: Let me ask you a hypothetical question. Has the department considered obviating the question of insurance being required by the act on the part of generators since, in the event of a large catastrophic event, the liability would be so astronomical — bearing in mind the cost of carrying $600 million or $1 billion worth of insurance must be considerable; we have heard what it is — what would be the point of having such a minimal amount of insurance in effect for first liability? When we insure our car windshields we have first limits that we can remove from the insurance company's liability. Since $75 million or even $600 million would be such an infinitesimal part of the liabilities of such an event, why bother insuring it? The government will be on the hook for that amount of money in that unlikely event, anyway. Has the department considered recommending to the government that we ought not to require generators to obtain private insurance?

Mr. Wallace: When we look at the international comparisons, every country requires the operator to carry some insurance. Most of the pressure has been in the other direction because people perceive the limitation on liability as a subsidy to the industry. Therefore, the pressure has been very much to raise that liability limit so that a greater portion of the costs are absorbed by the operators and, in turn, reflected in the price of nuclear-generated electricity. That is the policy context in which we have been operating. What you have suggested is a possibility, but our thinking had been not to reduce the $75 million downwards as much as to move the Canadian regime in a direction compatible with international regimes.

The Chairman: The people will pay these premiums. The generators will pass on these premiums, as you have said, to the consumers, who will be paying significant insurance premiums for an event that is extremely unlikely in everyone's view. That view underlies the entire approach to the question.

This policy is good for the insurance business because there has never been a claim of any kind in Canadian history against any such operation. How much sense does it make for the people to be paying those premiums, given the unlikelihood of such an event and that the government, and therefore the people, are on the hook anyway?

Mr. Wallace: We will probably all have different answers, but perhaps I will try to answer that first.

In the first instance, the first liability would be on the operators. If we have an event in the range that Mr. McCauley spoke about, that would not be a call on the government; it would be a call on the operators and, in turn, on the insurance. If we have a design-based accident, except at the upper ranges, the bulk of the costs would be on the operator and then on the insurance. I might try to keep the premium cost in perspective. Our calculations suggest the current premiums are in the order of 0.003 cents of the value of the nuclear-generated electricity. In comparison, the recent Bruce refurbishment deal was for 6.3 cents per kilowatt hour. That gives you an idea of the order of magnitude of the current insurance premiums. If the liability goes up, we would be talking a multiple of that. However, we are talking about a relatively small impact on the consumer of nuclear-generated electricity.

The argument for having the operator absorb a significant burden is that the risks of a nuclear accident are part of the costs of nuclear-generated electricity. It is important to ensure, as much as we can, that the externalities associated with various forms of electricity generation are accommodated in the marketplace.

Perhaps Mr. Brown would wish to add to that.

Mr. Brown: There are two end numbers in considering who should pay and how much should they pay. One part is the very question that you have put — and it is distinctly an end number — these are incredibly low probability events. Why bother with insurance because the government will come in; no matter what you charge, they will not be able to pay, et cetera. The other side of that argument is to say let's go for unlimited liability on the operators themselves. Although that is a tenuous proposition since the operators have only the assets that they hold and that is, therefore, the maximum. Nonetheless, those are the two end numbers. From a policy consideration, you need to take a look at both of them and then the mitigating factors that drive you in one direction or another to come up with a reasoned and reasonable view as to how to move forward. My answer is that we have looked at that. That is one of the end numbers. It is appropriate that we look at the end numbers in the same way that we look at the other end number.

Senator Kenny: We all understand that the call is on the operators in the first instance. It is well established that in the case of a governmental operation the government self-insures; the logic of that is irrefutable. The government has the ability to tax, and therefore it is subsidizing the insurance industry unnecessarily. You did not comment here on whether there should be a corrective mechanism to pierce the corporate veil and to provide for appropriate punishments for the operators of facilities if they are not managed in an appropriate way. Why did you not mention that?

Mr. McCauley: I do not believe that punitive-type damages have gone into our consideration of a nuclear accident. They are excluded from the types of damages at the international level as well. These operators are regulated by the Canadian Nuclear Safety Commission. They have many considerations in terms of operating a safe reactor. If their operations are not up to the appropriate standards, then the CNSC takes action against them.

Senator Kenny: Do they put them in jail?

Mr. McCauley: I do not know what their penalties are; they can shut down the reactors.

Senator Kenny: Yes, but I am talking about putting people in jail. We have other legislation in force whereby executives who pollute streams or who make a mess of the environment face criminal charges.

This has been established and I guarantee you that no one will look at the operators of a nuclear facility warmly if they cause the kind of damage that we have seen in meltdowns. Jail might be the safest place for these people.

The Chairman: You just mentioned in a partial answer to Senator Kenny's question things the insurers will not cover.

On page 6 of your presentation you talked about risks that insurers will not cover. Without going into it at the moment except in the most general way, I would appreciate it if you would talk briefly about the nature of those risks and provide in writing later to the clerk of the committee a list of exclusions, if that is the word, risks that are not covered, under the insurance about which we have all been talking. Can you give us a thumbnail overview of what they are?

Mr. McCauley: Certainly. The one that comes to mind first is damage relating to a terrorist incident. The insurers have not been willing to provide compensation in relation to such an incident. It is only in the last year that they have indicated that they would be willing to provide 20 per cent of the limit in the event of such a situation.

Of course, bodily injury that develops 10 years after the date of an incident would also not be covered by the insurers. It is not covered by the legislation now. However, if we were to extend the limitation period in new legislation, then the insurers have indicated that they would only be able to provide coverage for the first 10 years. It would be for the government to provide the remaining coverage.

Personal injury that is not bodily: stress, psychological trauma, et cetera. That is another area where the insurers have indicated there is no coverage, and in certain areas of environmental damage as well.

The Chairman: Is it the view of the department, in looking at the extreme unlikelihood of any catastrophic event, that the most likely of the unlikely causes would be terrorism?

Mr. McCauley: I do not think that we have contemplated what the occurrence would be that would create an incident. We have not drawn any conclusions on that.

The Chairman: I hate to revert to this, but since 9/11 has it not occurred to someone that there is an increased likelihood of the kind of events we are talking about?

Mr. Wallace: I think the Canadian Nuclear Safety Commission has been quite active since 9/11 in looking at procedures. I am not an expert in that area and so not really in a position today to comment on whatever studies they have done on that.

I know there have been issues and there has been an update of the CNSC regulations since 9/11; however, it has been more with the nuclear regulator as opposed to with the department.

Senator Kenny: That boggles my mind. I personally do not think that a terrorist attack is the highest risk that you face. However, I am astonished that you do not have available to you an evaluation and a ranking of existing risks so that there is a sense of in what order of priority you are addressing those risks.

I cannot believe that people will insure you without examining all of the risks and asking you for a self-assessment of those that your organization sees and their likelihood.

Senator Milne: And contingency plans.

Senator Kenny: The whole nine yards.

I am astonished, not that you do not have it in your pocket, but that you cannot say ``Yes, we all know about that and we can produce that file and have it to your clerk tomorrow at 9:15.''

Mr. Brown: The safe operation of the reactors is in the domain of the Canadian Nuclear Safety Commission. They are a stringent regulator. I am sure they have these probabilities of design-based accidents.

The Nuclear Liability Act, on the other hand, is to determine the consequences and what to do should such an event occur.

Senator Kenny: With respect, Mr. Brown, that is a handy way to say, ``It is not my problem.'' At the end of the day, the government will have to answer to Parliament and the Canadian people if something goes wrong and so it should have a good understanding of these issues.

It is fine to set up an agency to handle them on a day-to-day basis, but in no way does that alleviate the responsibility of the minister to ensure that this matter is handled in an appropriate fashion.

Mr. Brown: There is no intent to duck the issue, but I have to emphasize that that entire safety side of the operation does indeed lie with the CNSC. It is their responsibility to ensure that these events do not occur.

Senator Kenny: Whom do they report through to Parliament?

Mr. Brown: Our minister.

Senator Kenny: How does he take advice as to whether their reports are good?

Mr. Brown: He relies on the Canadian Nuclear Safety Commission.

Senator Kenny: How does he satisfy himself that the reports he receives from them are appropriate? He turns to his officials and his department.

Mr. Brown: On a general perspective, yes. However, any detailed view as to terrorism, et cetera, would lie with the CNSC.

Senator Kenny: As I said, I do not think terrorism is at the top of the list. Whether the ranking is right or the agency has it right, I am sure that there is somebody in the department who signs off on that and says to the minister, ``It looks good to me. Go ahead and table it. I see no problems coming forward.''

Mr. Brown: Mr. McCauley mentioned a study by the CNSC looking at design-based accidents. We participated in that; therefore, we have those views and so the information is shared.

Details with regard to specific safety issues in the operation of those reactors are clearly with the CNSC.

Senator Kenny: Are you saying that your deputy does not feel some responsibility if your minister is tabling something from an agency for which he is responsible? You are saying that the report is appropriate in every respect?

Mr. Wallace: No. We do not second-guess the CNSC's regulatory decisions or the expertise that underlies it. We have no expertise to do so. Parliament has set up the CNSC as an independent regulatory agency that reports to Parliament through our minister. We get involved in issues respecting their resource requests, but not in the details of how they regulate nuclear reactors. We defer to their expertise.

Senator Kenny: If something went wrong, the minister could wash his hands of it and walk away?

Mr. Wallace: The CNSC is responsible and reports to Parliament through the minister. Therefore, it is an independent regulatory agency.

With respect to the amendments to the act, the minister no longer has direct power over the agency. The act was amended in 2000. The principle underlying the legislation is that the CNSC is to function independently in exercising its regulatory responsibilities. In our view, it would be inconsistent with the intent of the legislation for the department to be in any way second-guessing its expertise or its regulatory decisions.

Senator Kenny: Does the department never give the minister views on how the agency is doing or on whether the reports are appropriate and comprehensive? He is just an empty vessel that carries this document forward to Parliament.

Mr. Wallace: We will brief the minister on various reports that the CNSC tables in Parliament, with a view to providing him with any independent advice, if we feel it is necessary, on the kinds of reports and the resource requests.

If issues arise regarding the adequacy of their resources, the history has been that we would work with the Canadian Nuclear Safety Commission because we have a good sense in the department of the demands on the agency as a result of nuclear activity in Canada and can be in a position to advise the minister on the reasonableness of resource requests, et cetera.

However, when we get into the question of individual decisions, we have historically deferred to the expertise that exists in the CNSC.

Senator Kenny: Correct me if I am wrong, Chair, but I thought the original question had to do with the risks and their ranking, which has nothing to do with individual decisions but with a broad sense of where one should be most concerned and what one should look at first.

The Chairman: That was the question, and I think we have asked for a response later to that effect.

We have to assume that the department has looked at all of these questions and that is part of an answer that you have undertaken to give us in writing later, if I remember correctly.

Mr. Wallace: I want to get some clarification on what you understand we have agreed to do because we have not done studies along the lines that you have indicated; I do not think we have the expertise to do them.

The CNSC has been responsible for follow-up subsequent to 9/11, and if the committee has issues related to that, the commission is probably in a much better position than we are to respond.

The Chairman: The department is responsible — and you are part of the department — for advising the minister with respect to the liability of nuclear generators in Canada, notwithstanding that other people are concerned with the security of those facilities, et cetera. Surely you have to take into account the order of magnitude and prioritization of the risks when you are making recommendations to the minister.

Perhaps I am recalling incorrectly, but I think we asked earlier whether that was the case. I think you had undertaken to tell us, from the viewpoint of the department, the nature of the advice that you will take to the minister specifically on public liability on the part of nuclear generators.

I may be recalling that wrongly. If that undertaking was not made or if that request was not made, I now make it and ask that you do it to the extent possible. It is part of the earlier question about where we bump into the glass ceiling, what questions we can ask, what questions you cannot answer for us and what answers you can give us with respect to the nature of the advice with which you will be going to the minister. That is what I was asking you, Mr. Wallace.

Does that answer your question?

Mr. Wallace: As I understand what we talked about previously, we are committed to giving the committee an outline of all the issues that are associated with our review, the considerations, the pros and cons, so that you have an exhaustive list. We can do that.

The second part was related to the nature of cabinet confidences and what our limits are. We can go back and get advice from the appropriate people, and so we could do that too.

We have not studied the question of catastrophic accidents over and above the design based. The Magellan report that you referred to looked at that 1-to-100 million scenario, and we can certainly provide that.

That is all we have available in the department that we could share related to the issues that we have been discussing.

The Chairman: In the middle there is the issue of the extent to which you can answer our question about the nature of the recommendations that you will be taking forward to the department as well as those areas that you cannot go into.

Have you just said that the department will not consider the question of catastrophic events in the context of the recommendations that you will be making to the minister?

Mr. McCauley: We would identify what the risk was of a catastrophic incident, and we are saying that the question is whether you would set a liability limit to address a catastrophic incident or to address what might be considered a worst-case design-based incident. Those are some of our considerations in setting the liability limit.

Some have suggested large numbers in terms of the impacts of a catastrophic incident. We question whether it would be worthwhile to set liability limits reflecting those numbers.

The Chairman: However, the Magellan report says that with respect to a contained design-based event, the upward end of the liability is about $100 million, and we all understand that we are now talking about a liability limit, wherever it is, that is considerably in excess of $100 million.

Mr. McCauley: That is correct.

The Chairman: There must be, in the department's mind, some consideration of an event beyond the kind of contained design-based one referred to and circumscribed by the Magellan report that is being addressed by increasing that liability. We are not just doing it to be nice guys, to be philanthropic. We are doing it because many people in the world think it needs to be higher than that. Therefore, those people are considering things other than contained design- based events, are they not?

Mr. McCauley: The risk is only one element of the considerations that go into establishing the liability limit. Other considerations in other countries that would fall into this logic are as follows: What is the insurance capacity? What are the international trends? What is the cost to the operator?

The Chairman: Let me put it in a different way. If we were to insure only against contained design-based events, such as those addressed in the Magellan report, we would be able to say there is an objective view that the upward limit of that is $100 million. Notwithstanding how unlikely such an event is, the outside cost to an operator would be $100 million, and we are going somewhere else. Insurance is a bet, plain and simple, based upon the likelihood or otherwise of an event, depending on which side of the fence you are on.

The event being contemplated when the department is thinking about a different magnitude of insurance to remain consistent with the rest of the world does not have to do with a contained design-based event, the limit of which is $100 million. It is considering something else. It is not just to be in with the crowd. It is considering some other kind of liability, is it not?

Mr. McCauley: It is addressing an event that could exceed the design-basis incident, but we have not established what the risk of that is.

Senator Cochrane: I have a question for Mr. Brown, who is the director of the uranium and radioactive waste division.

Can you bring us up to date on what is being done and what is being considered in regards to the disposal of nuclear waste?

Mr. Brown: Most recently, the utility-based Nuclear Waste Management Organization, required to be set up by the utilities under the Nuclear Fuel Waste Act, has come forward with a report that has been tabled in Parliament. In that report, they recommend an adaptive, phased-in management approach.

The work the NWMO has done involved a lot of social interaction, discussions and public outreach. Their view and their recommendation to government is to proceed cautiously. The first phase would basically involve managing waste on the surface of the reactors and then going to an interim storage, possibly below ground, and ultimately, to deep geologic disposal.

The next step involves the government making a decision. We must review the report in detail, and then we are required to make and announce a decision. Should the government agree with the recommendation being put forward by the NWMO, then under the Nuclear Fuel Waste Act, the NWMO is obligated to implement that decision.

Senator Cochrane: Has there been a lot of public input into this?

Mr. Brown: Yes, there has been a tremendous amount of public input. Elizabeth Dowdeswell, the chairperson of the NWMO, has had interactive discussions with everybody, nationally and internationally, who wants to discuss it.

Senator Milne: Gentlemen, this review that you are working on is not yet complete. Is that right?

Mr. Wallace: We are down to the final strokes.

Senator Milne: Yes, but it is not complete and it has not gone to the minister? It is still within the department?

Mr. Wallace: Yes. We have not sat down with the minister and reviewed the detailed recommendations.

Senator Milne: If I put in a formal request through the Access to Information Act, would I be able to get more information on the policy analysis you have been working on? Will your lawyer allow you to give that to us in response to these questions?

Mr. Wallace: I do not believe so. We certainly did not set out to tell the committee today anything less than we felt we were able to tell you.

We process Freedom of Information requests in the same way. There are certain criteria for what we are not permitted to divulge, and we would follow them in those circumstances. The kinds of constraints that I have talked about would arise in a Freedom of Information request as well.

Senator Milne: It might be worthwhile testing that out.

The Chairman: There are also other avenues we could pursue. As Senator Kenny has correctly pointed out, the gentlemen before us now do not set those rules; they observe them, and quite properly.

Thank you very much for being with us, Mr. Wallace, Mr. McCauley and Mr. Brown.

We are now joined by a sustainability specialist, whose name is Pierre Sadik. He is here with us again representing the David Suzuki Foundation. I give him the floor to tell us what he would like to tell us.

Pierre Sadik, Sustainability Specialist, David Suzuki Foundation: I had the distinct pleasure of appearing before this committee earlier this year, on behalf of the Green Budget Coalition. I have since changed jobs and, as you noted, moved to the David Suzuki Foundation. One of the perks of that move is being entitled to appear before this committee twice in one year.

The Chairman: There are people who would not regard that as a perk.

Mr. Sadik: I certainly do. I am happy to talk to anyone who expresses an interest in these matters, and so I consider it a real delight to be here.

I have an opening statement in connection with this report, The Maple Leaf in the OECD, which we released last month and which we intend to release every two years around this time of the year to coincide with the availability of data from the OECD in connection with Canada's environmental performance and that of the other member countries.

Some of you may have seen a document similar to this in 2001. David Boyd released a report with the University of Victoria entitled Canada vs. the OECD. This report very much picks up on that theme and methodology. The idea is to track Canada's progress on the path to sustainable development every two years with the latest data from the OECD.

The disappointing news in this report is that Canada finishes 28 out of 30 OECD countries in terms of environmental performance. The truly comparative countries are the other high-income competitive-economy countries of the OECD, such as Switzerland, Germany, Sweden, Italy, Japan, France and Spain. They all ranked ahead of Canada.

There is another set of countries with relatively low per-capita incomes. These are countries with emerging economies or, in some instances, post-Soviet-bloc collapsed economies. The reason that they finished ahead of Canada by and large on the environmental performance ranking is that the poor economies prevent the citizens of these countries from consuming at the same rate as people in Western Europe and parts of North America. That allows them on a per-capita basis to perform better than we do.

What is noteworthy is that it appears from countries such as Switzerland and the other Western European countries that you can have your cake and eat it too. You can have a booming economy, and at the same time, with responsible environmental policies, a decent environmental track record. Those are the countries we suggest Canada ought to try to emulate.

The study was prepared for the David Suzuki Foundation by a 14-member research team at the Simon Fraser University School of Resource and Environmental Management. It was peer-reviewed by a dozen-plus bodies and experts in North America, including Environment Canada and a number of universities.

The study looks at 29 environmental indicators across the spectrum of the 30 OECD countries. There is a comparison of Canada and the other OECD countries' performance in 1992 and in 2002. There is a time scale that allows us to look at how Canada and these other countries have performed over the course of a decade.

Upwards of 90 per cent of the data are obtained from the environmental data compendium that the OECD puts out every couple of years. The countries are ranked in terms of environmental performance. That is the rank you will see on the cover and on page 5 of the report. That is an aggregate of the rank that Canada received vis-à-vis the other countries on each indicator; for example, Canada's water consumption compared to that of the other countries of the OECD, Canada's greenhouse gas emissions, Canada's species at risk.

There is another comparison on page 6, the environmental performance grade. The column on the far right-hand side will show you how Canada ranks as a percentage of the top performer on each environmental indicator. We have taken the best country in each category, given it a score of 100 per cent, and then simply seen where Canada's performance falls in relation to that.

Conducting a study such as this is nothing new. Every year, a host of studies comes out ranking Canada on the basis of environmental performance, economic performance or education. Other studies have conducted a ranking or an assessment of Canada vis-à-vis other countries, OECD countries, or even a larger proportion of the world's nations. Some have been conducted by Yale University, the Conference Board of Canada and the World Economic Forum, for example.

There are some distinguishing factors among these studies in terms of the environmental component. The Yale University study, for example, has Canada ranking considerably higher than the study we released last week. Yale ranks Canada fifth out of over 100 countries around the world. Canada ranks 28 out of the OECD countries in our report.

The difference is that the Yale study looks largely at the state of Canada's environment; that is, what percentage of Canada's natural environment, resources, et cetera, are still intact. Our study and some others look by contrast at the pressures that Canadians are imposing on the environment in the forms of emissions of pollutants and consumption of our natural resources. We believe that it is far more accurate and credible to look at the pressures that Canadians and citizens of other nations are exerting on their countries as a means of assessing environmental performance. You will note that the report is called Comparing Progress Toward Sustainability. A stated objective of the Government of Canada is for Canada to achieve sustainable development in the years ahead. You cannot assess whether people are on a path to sustainability by simply looking at what condition the environment or nature in their country is in. You must look at how citizens are living, how they are consuming and what they are emitting on a per-capita basis. You do not have a sense of whether or not the lifestyle of a society is sustainable by simply looking at the end result. You must look at where we are moving and how quickly, whether we are regressing or have reached a point of stasis where we are living in balance with the resources available to us.

Our sense is that that is a fairly straightforward proposition. That type of methodology is used in the context of all of our environmental rules, regulations and legislation and those of most countries around the planet. For example, environmental regulations will place a restriction or a limit on the level of consumption of a given natural resource or emissions of a given pollutant. Environmental regulations do not work on the basis of assessing the state of the environment; in other words, providing leeway to emit, pollute or consume until the environment reaches a certain level of degradation. That is an ineffective way to deal with environmental controls or determine whether or not a society is living in a sustainable manner.

We have grouped each of the indicators that you will see on page 6 into a set of challenges or goals that we produced in another report entitled Sustainability within a Generation, which was released last year. On that basis, we are able to assess how Canada is performing within each of these discrete categories. There are nine. The first is generating genuine wealth. That has to do with measuring things in our society that the GDP or the employment rate do not necessarily measure; that is, the level of education of Canadians, the amount of time they have for their families, the length of vacations, the quality of life, the happiness of children, the health of Canadians and so on. The GNP or the consumer price index simply will not measure those.

At this point, though, there are no reliable measurements of those somewhat ethereal concepts. We are unable to determine where Canada is in relation to the other countries of the OECD in that regard.

The next category is improving efficiency, which is simply a matter of being able to obtain the same output with a lower level of inputs.

The third category is shifting to clean energy and has largely to do with using renewable energy.

The fourth category is reducing wastes and air pollution. This is largely tracking the types of emissions we are putting into our air, water and land.

The fifth category is self-evident: Conserving and protecting Canada's water. Incidentally, in relation to the OECD countries, Canada finishes second last in terms of per-capita water consumption.

Producing healthy food is another category, as is conserving and protecting Canadian nature. This includes keeping wild spaces wild and building sustainable cities. It is becoming more widely understood that cities are the engines of our economy, and in that regard the new deal for cities is certainly a step in the right direction in terms of building sustainable cities.

The final category is promoting global sustainability. In our report — and you will find these categories at page 6 — we have gone beyond a parochial view of sustainable development. We have gone beyond the domestic realm and are looking more stringently at what Canada is doing to promote sustainable development around the globe.

The key findings of our report are that Canada finished an unfortunate 28 out of 30 OECD countries. There is some good news. On 17 indicators, Canada is performing better now than in 1992, so there has been an improvement. Oddly enough, the rate of improvement has been slower than the OECD average rate. That is quite surprising because in 1992 Canada was at the back of the pack at twenty-eighth place. In 2002 we are in twenty-eighth place. One would think if one is at the back of the pack, over the course of a decade it would be easier to move up incrementally in relation to the other countries because of the amount of existing technology of which Canada can avail itself in improving our environmental performance. This is technology that the leading countries obviously have been able to use and which is readily available to Canadians.

Second, there is a large element of low-hanging fruit; easy steps for us to take to move up a few notches quickly against the other countries when we are performing so poorly. For reasons I would be happy to discuss later, Canada has not moved up over the course of a decade.

On the other 11 indicators, Canada's performance has actually deteriorated in relation to where we were a decade ago and that leaves us with no improvement in our ranking vis-à-vis the other OECD countries.

In terms of some of the indicators — highlights or lowlights — with regard to energy consumption, Canada finished third last; greenhouse gas emissions, we finished 26 out of 30; sulphur oxides, we finished second last; we put on a good show in terms of recycling and municipal waste, where we finished ninth; pesticide use, we also put on a good show, eighth out of the 30 countries of the OECD. This is in part because the measurement is kilograms of pesticide per acre of arable land. Canada has obviously, being a large country, a tremendous amount of land, and while in theory it is all arable, only a small part is being farmed. On water consumption, as I noted, we finished second last and on protected areas we finished sixteenth.

In conclusion, Canada's performance was much worse than similarly situated OECD countries. Canada's position is not improving and our prescription for this problem is the establishment of a national sustainability act. Such an act would be an overarching framework with some substantive components to pull together all of Canada's disparate policies and regulations under a coherent, centralized policy. It is the type of measure that many of the countries that outperformed Canada on the environment and performed equal to Canada in terms of economics have implemented or are in the process of implementing. Some of the leading countries are the United Kingdom, which finished 10 places ahead of Canada, Sweden and Germany, which also finished ahead of Canada. That is the direction in which we believe Canada ought to be moving to try to bump up our performance.

In that regard, the David Suzuki Foundation is working on a model national sustainability act that hopefully will set a benchmark for the Government of Canada and should be available in January of 2006.

The Chairman: Thank you, Mr. Sadik. I hope that when you are writing that proposed legislation you will look at some of the things that this committee addressed in its recommendations to the government with respect to sustainability.

Mr. Sadik: You are including the Kyoto report, the wonderful report you released.

The Chairman: Yes, all that.

Senator Cochrane: In this report — and I am looking at this comprehensive bulletin that goes with it — to be fair, I think you do highlight indicators that may not present a truly accurate picture. I am thinking here, for example, of the table entitled: ``Change in proportion of population with sewage treatment 1992 to 2002.'' While Canada's increase of 14 per cent seems humble compared to the OECD average of 119 per cent, you explain that Canada's increase is relatively low because a substantial portion of the population already had municipal sewage treatment.

I am by no means suggesting that we should be proud of Canada's performance on sewage treatment. In my own capital city, raw sewage is pumped directly into the harbour — I am not very proud of that, either. However, often when presented with rankings like this, critics warn us that our poor showing is not accurate and can be chalked up to comparing apples and oranges. Given the example that I cited — and I am sure you know the others better than I — what would you say to defend this report against that criticism?

Mr. Sadik: Canada's sewage ranking is 14 of 28 and receives a score of 73 per cent. We are 73 per cent of the way to where the leading country is at 100 per cent. In this report, Canada does not actually do too badly.

The larger issue, though, that you raise is that it looks in some instances as if we are comparing apples and oranges or that Canada is getting a raw deal in terms of an individual ranking here and there. That is a function of virtually any type of methodology when you try to aggregate a lot of different statistics, data or indicators to get one score.

There are, without a doubt, unique situations in each country. Frankly, some of the comparisons might be an apples-and-oranges situation for Canada. However, the same applies to every other country in the OECD ranking. Every country has its unique situation that makes comparing its performance to the other 29 countries of the OECD something of an apples-and-oranges comparison. Each country will have one, two, three or maybe four examples of that. All of those minor negativities equal out in the overall comparison. I cannot think of a country that does not have that type of bias against it in a circumstance or two, but we are confident that in the end, all of the small biases that each country is burdened with come out in the wash and leave, overall, a balanced and accurate view of where the countries stand vis-à-vis each other.

Senator Cochrane: If Canadians were to read this report — and some will, I am sure — what message do you think they would carry away?

Mr. Sadik: We hope the message that Canadians get is that we are not doing well. Looking at others, we see it is possible to do better. We hope this will spur Canadians to contact their MP or senator, the Government of Canada, and say, ``Canadians like to do well, be it in hockey or aerospace or music, you name it, and we should be doing better on our environment; it is possible.''

Senator Cochrane: Have you had any response from the public yet?

Mr. Sadik: As is usually the case nowadays, we put all our reports on the Web. The last time I checked, we had had over 40,000 downloads of this report in the English version and about 25,000 downloads of the French version.

Senator Cochrane: What are they saying?

Mr. Sadik: People are downloading, which means they are reading the report. This cannot all be MPs and bureaucrats because there are not — well.

The Chairman: Damn near.

Mr. Sadik: The high proportion of French-language downloads we believe has to do with Belgium, which finished twenty-ninth out of thirty. We got a lot of calls from the Belgian media. They were very upset to be slumming it with the North Americans. They are a hoity-toity European country. It made front-page, below-the-fold news that Belgium's environmental performance is down there with the U.S. and Canada's. It is getting the attention of some people, including a fair number in Canada.

Senator Cochrane: I would like to talk a little about water consumption. It never ceases to amaze me that in this country we use drinking water for everything, even flushing toilets and washing our cars. Your report says that Canadians consume more than double the amount of water that other OECD countries do. Do you know why that is?

Mr. Sadik: I think it is because we have so much of it, and therefore some jurisdictions give water away too cheaply. Many municipalities not only do not charge for water, they do not even meter it. When something is on tap, in that sense, people will not use it wisely. That gets us into difficulty. We have seen the water difficulties in Kashechewan, Walkerton and North Battleford. We have seen the cyclical droughts in certain farming regions due to overuse, in part, as well as climatic conditions. It is similar to the situation in Venezuela you may read have about in the paper recently, where gasoline costs three or four cents a litre. When something is under-priced like that so it is not reflective of the true value of the resource, people will squander it and waste it.

Our solution to that is to price water to accurately reflect the real value of this precious resource in Canada and around the world. That does not mean making water prohibitively expensive, particularly for low-income people, but even a nominal price, in those instances where there is no charge and it is not metered, will make people think twice. If something has a value attached to it, people will use it more carefully.

Senator Cochrane: We should be looking to the Danish. They are using new recycling technology.

Mr. Sadik: If you call smaller toilet tanks new technology, yes, they are using new technology. If you call extremely miserly heads on your taps in terms of how much water comes out new technology, then yes. They are using very simple technological measures such as that.

Senator Cochrane: You mentioned two ideas. Are there any others?

Mr. Sadik: Pricing. Water costs more there so people are more careful. There is less of a culture of washing your car in the summer every week, taking it through a car wash, that kind of thing. Countries like that are on the cutting edge of what is called ``grey water use,'' of which we are beginning to see a little in Canada. For example, why not use water to flush your toilet that had been through the shower once? If anything, the residual soap will clean your toilet bowl. There is no downside to it.

Senator Cochrane: We see Canada is significantly higher than the OECD average on energy intensity. We are more than twice as high as Ireland and Italy. I would like to hear your thoughts on how we can go about lowering this. What areas offer the greatest potential for improvement? Are there lessons we can learn from Ireland and Italy?

Mr. Sadik: In fairness to Canada, a component of our high energy consumption and level of energy intensity is the fact that we are a northern country, we are a large country in terms of geography, and we are also an incredible net producer of energy, fossil fuel in particular. That does a number of things. First, it keeps energy prices at the consumer level relatively low compared with places such as Japan, Ireland, South Korea and Europe. It also means we will use more to visit family and friends.

Norway is a decent example of a northern country that is as cold or colder than a good deal of Canada and has considerably lower energy consumption and energy intensity. Norway, by the same token, is an enormous net energy producer. It is one of the top five oil producers on the planet, yet somehow they have managed to use less and use it less intensely. That has to do with responsible government and the implementation of responsible environmental and economic policies. Norway has made the energy that they are producing more expensive than it is here in Canada. That has done two things. It has encouraged people to use less of it, and it has provided an enormous source of revenue for the government. Norway is something of a European version of Alberta, except they are collecting a lot more money per barrel of oil for the citizens of Norway. That has allowed Norway to enjoy an extremely high quality of life compared with most other countries of Europe or North America.

The more southern countries with lower energy consumption and intensity are doing that in part because they are smaller and warmer, though that means they need air conditioning, but also because they are using more pricing mechanisms and energy efficiency technology than we are in Canada.

Senator Milne: Mr. Sadik, this report is very interesting. It is in the nature of a wakeup call. On many of these indicators, if you made some adjustment in the analysis for climate and geography, Canada would be doing much better. You cannot tell me that size and climate are just minor factors. In Canada, they are major factors. If I wish to visit my daughter by car, I must drive 3,000 kilometres. This is not a minor factor that will average out between countries. Canada is larger than many of these countries put together and with a much smaller population.

You say that we are ranked twenty-sixth for species at risk, but eighth in the proportion of our species that are at risk. Some of these things do not add up. I congratulate you on the report, but I think it is biased against us.

Mr. Sadik: It is biased here and there in the way that it is biased against every other country that we report on. Every country has its unique characteristics. Australia, for example, has a hot climate for most of the year; they must have air conditioning and that takes energy, yet they perform better than we do. Norway does not have our distances, but it does have colder temperatures than the vast majority of Canada; yet they are able to heat their homes much more efficiently than we are.

Senator Milne: Not too many people live up in those northern stretches of Norway; most live down where it is warmer than Canada.

Mr. Sadik: Do they?

Senator Milne: Yes, and Oslo is a great deal warmer than Ottawa.

Mr. Sadik: I have not been there, and perhaps you have. That is fair enough.

Certainly the energy indicators will be conditioned to a large extent by our size, climate, and the fact that we are a net producer of fossil fuel.

Senator Milne: They are also influenced by the fact that we have probably one of the fastest expanding populations in the world, so the per-capita use of energy has gone up by 6 per cent, but the total usage has gone up by 17-some-odd per cent. That is also a factor of the increasing population of the country.

Mr. Sadik: Since we are always looking at these numbers on a per-capita basis, growth in population does not really matter.

We have also seen over the course of a decade that we have not improved. We may be high consumers and high emitters in part because of factors such as size and climate, but that does not mean we cannot improve faster, or at least on the basis of the OECD average, while we are consuming at a rate that our conditions, to a certain extent, compel us to.

The type of conditions you mentioned will be a factor in energy. Water consumption has nothing to do with our size or climate, nor does use of sulphur dioxides, VOCs, ozone-depleting substances, nuclear waste, sewage treatment or municipal waste.

Senator Milne: We are not that bad on municipal waste, are we?

Mr. Sadik: On recycling we are pretty fantastic for Canada; I think it is one of our highest scores, ninth of 30.

Senator Milne: Fertilizer use is way up there, too.

Mr. Sadik: We are doing well. Here is the flip side of that bias that Senator Cochrane was talking about. Korea and Japan farm almost all of their arable land and they use pesticides. They score relatively poorly because they are using every inch of land on which they can grow something.

On the other hand, in Canada we are using only a small percentage of our total land on which we could conceivably grow crops, yet we are measuring pesticide use on the basis of all the available land.

Senator Milne: That is true for pesticide use, but I was talking about fertilizer. This is all per capita, anyway.

Mr. Sadik: No, that is on the basis of arable land, pesticides and fertilizer. You will find them quickly on the chart on page 6. You will see under ``Produce Healthy Food,'' two-thirds of the way down, it is pesticide use, kilograms per kilometre, not actual farm land but arable land. The Japanese and Koreans could say they are getting a bad deal because they are so tiny they have to farm every inch of their land.

Senator Milne: Fertilizer use is so low because Canadian farmers are remarkably efficient in buying as little as possible.

Mr. Sadik: Why not, you save money that way, right? That is the kind of factor one would think would apply to most of these use-based indicators. It costs money for us to use this much oil and gas.


Senator Tardif: Mr. Sadik, you stated that one of the global objectives identified is sustainable development. I have to wonder how a society like ours can compete with rapid economic and industrial growth in countries such as India and China.

How do all of the policies that you would like to see in place in Canada play out on the world scene, in light of what is happening today in India and China? How can Canada move forward with an eye to sustainable development? What role can Canada play globally?


Mr. Sadik: There is a dearth of indicators to measure how Canada is doing in terms of sustainable development globally. We have been able to rely on the ODA, the amount of money transferred as a percentage of GNP to aid to other countries. However, we are looking to expand that set of indicators to include some that are more accurate barometers of what Canada is doing on the global stage in terms of sustainable development.

On the basis of information that we have all seen in the newspapers, we know that the economies you referred to, such as India and China, are expanding at an incredible rate. Unfortunately, that expansion is happening in an unsustainable way because of issues of local poverty, resources at their disposal and, to some extent, a lack of democracy, where those governments are able to contaminate the environment in which their citizens have to live without serious repercussions at the ballot box.

In connection with those countries, and there are a fair number of them around the globe, we can encourage technology transfer. The Government of Canada can encourage Canadian companies and enable the private sector to sell energy-efficient or renewable-energy technologies to those emerging-economy countries. That is a win-win situation. I do not know how many ``wins'' there are there.

It is good for the Canadian private sector in terms of sales. It is good for the recipient country in terms of their environment. It is good for Canada in terms of the environment as well, because some of these environmental problems, such as climate change, are global problems. The coal that is being burned in China is causing climate change that is impacting the Canadian North as we speak. That is one of the obvious examples.

Canada can also take a more aggressive stance on sustainable development domestically, the type of thing this committee in some of its reports has found is lacking. If we perform more aggressively on sustainable development, it allows us to speak with more authority at the international fora such as COP 11, the UN climate change conference that will begin in Montreal late next week and continue for the following two.

Given Canada's poor performance on reducing our greenhouse gas emissions below 1990 levels, it is not for Canada to lecture China or India, or even set an example to these and other developing countries. The emissions of such a prosperous country as ours, with a high standard of living, are runaway.


Senator Tardif: With Project Green, has the Canadian government set the country on the road to sustainable development?


Mr. Sadik: No. Right now there are a number of programs and one is called Project Green. It is billed as a comprehensive environmental policy, but at this point it is simply a climate change policy.

The David Suzuki Foundation, as well as a host of environmental and other organizations around the country, including even the business sector, has stated that the climate change plan for Canada released in April of this year is woefully inadequate to achieve the targets we will have to achieve under Kyoto.


Senator Tardif: What are the main reasons for this? Is only one particular component affected? Is that the plan's principal shortcoming?


Mr. Sadik: The main reason the climate plan is failing, and I think this committee properly addressed it in its report as well, is that there is a disconnection between those who are emitting greenhouse gases domestically and those charged with the responsibility for reducing emissions in this country.

Large final emitters, that is, industry, electricity generators, et cetera, are responsible for upwards of 50 per cent of our emissions, yet they are charged with a tiny proportion of that in terms of reduction.

A lot of the burden is placed on Canadian citizens, in disproportion to their emissions. There is also a lot of tricky and nebulous purchasing of emission credits around the globe that enables us to continue, in theory, emitting as we have been.

In terms of the larger environmental picture, the David Suzuki Foundation, many government committees, environmental organizations and others across this country who look at these issues think Canada is failing environmentally, is finishing 28 out of 30, because we lack a coherent environmental policy.

There are too many disjointed, silo-based type environmental policies at the various levels federally, let alone across the country. Too many people are running off in too many different directions. A lot of money, energy and intellectual capital is being expended, but not in a coherent, effective manner. That is fixable. The money is there. The people are there. The resources are there. However, the overall plan is simply not there now.


Senator Tardif: Since the environment and natural resources are largely areas under provincial jurisdiction, could that explain in part the problems encountered in setting up a national plan?


Mr. Sadik: Yes. There are many components to every problem, and besides the lack of leadership at the national level, there is the fact that there are so many jurisdictions with an element of control over environmental or resource matters.

The federal Government of Canada can set national standards in connection with toxic releases through legislation such as CEPA; or, for the protection of species, in many instances, through the Species at Risk Act; or on greenhouse gas emissions through the international signing and ratification of the Kyoto Protocol. There is a large element of control at the federal level.

The federal government needs to demonstrate leadership on this important issue for all Canadians in the way that it has on health care. The government regularly brings the provinces together and exercises leadership in connection with health care standards for all Canadians, and it is beginning to do so in connection with childcare.

The government is pulling together all of the provinces to create and fund a national child care policy. Health care and child care are no more important than taking care of and protecting our environment, and the government has sufficient levers and jurisdiction at its disposal to exercise national leadership in connection with the environment and achieving sustainable development.

Senator Kenny: I have a couple of points I would like to raise.

We have a comparative economic advantage with our abundance of energy. It seems only reasonable that we should exploit it. When you have a lot of water, it is how you can compete. We take advantage of it.

It is one reason we have an opportunity to do things in the world that would not otherwise happen. We do not have an abundance of bauxite in Canada, yet we make a lot of aluminum. It creates a lot of jobs and wealth, but it runs up our use of energy. What do you say to that?

Mr. Sadik: To that I say two things: We have to keep our eye on the ball, or the end game. Jobs and relative economic prosperity will ultimately be diminished and/or meaningless if we approach environmental collapse. As was revealed in a report commissioned by the Prime Minister — I think this was in the press last week — Canada will not only suffer worse effects of climate change than almost any other major industrialized country, but it is singularly ill- prepared to deal with them.

It is a balancing act, balancing jobs and economic prosperity in the short term with their long-term sustainability. That is a complex issue, but I think we can do it. I believe we can balance those two competing factors.

How do we do it? One of the ways is to work smarter and more efficiently in terms of our exploitation of resources, of the growing of our economy.

What this study has shown, as I have said, is we have not been working smarter or more efficiently over of the course of the decade 1992 to 2002. Leaving everything else aside, the poor performance of Canada, in and of itself, ought to be a wakeup call and a warning. Even if we continue on our present path, we should at least do it in a smart and efficient manner so that we are incrementally improving.

Senator Kenny: With respect, Mr. Sadik, you are not addressing my question. My question had to do with areas where we have a comparative economic advantage. I cited the aluminum industry as an example. The facilities are generally sited to take advantage of hydro, which is a renewable resource, and we have an incredibly efficient aluminum production system in Canada. I was expecting you to say, ``You hit it. That is one example of where we are doing it right.''

Mr. Sadik: I did not say that because large-scale hydro is not considered ``renewable'' in the sense that it engenders a considerable amount of environmental damage. Greenhouse gases, which are stored in the biomass, are ultimately released into the atmosphere in relatively short order when an area of land is flooded. It is certainly not low-impact renewable energy. There is a continuum there, and large-scale hydro electricity is maybe at the margins of renewable energy.

Senator Kenny: It is also open to debate and hard to evaluate, so no one can come up with a bottom-line figure on it. It is also up in that part of the world where you cannot grow anything.

Mr. Sadik: You cannot grow anything of economic value; that is right.

You are posing the difficult questions that we all have to grapple with, not only as Canadians but also around the planet, and we will hit a wall if we continue as we are. Regardless of how good our present system has been to us, we will hit a wall. What do we do? We are saying we should start scaling back. We are not saying we should do it overnight, but we should slowly start looking elsewhere. We should phase out the non-sustainable aspects of our society, of our economy, and replace them with sustainable ways of living. Start the process, take a long time, implement transition measures, but we have to take the blinders off and start looking in that direction.

Let me be clear: No one is talking about shutting down the oil sands tomorrow; no one is talking about shutting down the aluminum plants tomorrow. A long-term, multi-decade transition to a clean economy is all we are talking about.

Senator Kenny: Everything you are saying is fine until you get down to cases, and until you start arguing cases. For instance, it is hard to come to grips with what you are saying on the aluminum industry.

You are saying that motherhood is good. You get nine votes around the table in favour of that, but when you start talking through whether or not we should be exploiting areas where Canada has a clear advantage and the consequences of not doing that, I would be with you if you said we should worry about areas where we do not have an advantage. The ones where we do are the only way we will survive in this world.

Mr. Sadik: My point precisely is that we will not survive if we continue to indiscriminately exploit those advantages.

Senator Kenny: My point is, in the long run, we are all dead. In the meantime, we had better take advantage of what we are good at. If Canada does not do the things it is good at, we will not have the luxury of foundations like yours or of people who are thinking about these things because we will not be able to afford them.

Mr. Sadik: If we encounter environmental or climate collapse, we will not have the luxury of aluminum plants, tar sands, jobs or cars either. We are both painting an apocalyptic picture here, and we both are saying we need to look intelligently at our problems and start planning for a different future over the course of a long period. Yes, you and I will die in the coming decades, but my children, my grandchildren and their children will be here. I want to ensure a brighter future for them.

Senator Kenny: Right, but you have to start with the case that aluminum plants are causing the problem.

Mr. Sadik: They are causing the problem?

Senator Kenny: You have to make that case first.

Mr. Sadik: They are causing less of a problem than other forms of industry, but whether aluminum plants in their present configuration — that is all I am saying — are sustainable is another issue. Conceivably, in the future we could see aluminum plants powered through renewable sources of energy. Maybe that is the way to go.

Senator Kenny: We could also run them with nuclear power. That would be terrific.

Mr. Sadik: That would not be our preferred option, but that is an option.

Senator Kenny: It is clean, safe, and does not even need insurance, if you believe our previous witnesses.

Mr. Sadik: I caught a little of that.

Senator Kenny: When one talks about arable land, I immediately think about my second home, and when Senator Banks is listening, I say my first home, of Alberta, and I think of the places there with irrigation systems that, by many standards, are very expensive, but they turn land into arable land. That is important in parts of Alberta. Where are you on that?

Mr. Sadik: I consider that to be a relatively micro-level issue. I confess I am not an expert on sustainable agriculture.

Senator Kenny: It is not a marginal issue if you are farming around Lethbridge.

Mr. Sadik: I meant in terms of looking at it at the micro as opposed to the macro level. Of course that is an important issue to the farmers of Lethbridge. You did not hear me say that water ought not to be shipped to the farmers of Lethbridge, who are taking non-arable land and rendering it arable. I am not saying that. Are you saying that?

Senator Kenny: No, the way it works here is I ask the questions and you give the answers.

Mr. Sadik: I understand that.

Senator Kenny: There was a comment earlier about our using drinking water in toilets. I suppose it sounds funny, but somehow it seems to me to be a reasonable thing to do, and then treat it on a mass basis, which is much cheaper than trying to retrofit homes with systems that would try to go about it the other way. Once you get into a full cost accounting of it, does it not make more sense to have a large plant that can treat significant volumes of water rather than taking apart individual dwellings and having our grey water going down pipe A, our toilet water going down pipe B and our drinking water going down pipe C?

Mr. Sadik: Savings are realized over the long term. Of course, realty being an item that lasts 50 to 100-plus years, savings will be realized over the course of a building's existence. What is proposed in this instance is not so much retrofitting but building new homes with a grey water system. That takes the pressure off the large water treatment facilities that you are talking about. It means simply that less water is getting to those large water treatment facilities because it is being used twice in the new homes rather than once.

Senator Kenny: We totally subsidize the North. The North would not exist if it were not for people in the south shipping buckets of money up there. We do that because it is important to us as a country.

Almost everything that functions up North is inefficient. Almost everything that happens up North is not economic by standards elsewhere. You would not have a water system or a sewage system such as they have in Inuvik except for the fact that people are living in an inhospitable place. Yet collectively, we think it is important and we continue shipping money up there. We try to find ways to mitigate that and to preserve a lot of things important to Canadians.

How does that work when you get into a ranking and rating system? How do you take into account values, cultures and beliefs that are important to the fibre of a nation?

Mr. Sadik: I disagree with you on one point, although I do agree on the rest.

The North existed before we were here and before we were shipping buckets of money up there, and it will continue to exist whether or not we continue to do that.

Senator Kenny: Then we could stop sending the money now?

Mr. Sadik: That would be an anthropological experiment in whether people could return to their original native way of life.

Senator Kenny: We have a senator from the North who would address that. Where is she when we need her?

Mr. Sadik: I will not address the propriety of sending money to the North because that is not the issue in terms of environmental concerns. The issue you were getting at is ranking. You were talking about economic costs, and perhaps you were suggesting an environmental cost in terms of maintaining the peoples in the North.

The peoples of the North have an extremely marginal influence on Canada's poor ranking. It is the big consumers in the south, those living in the big cities, who are driving Canada's rank down. It is not the handful of people who live in Canada's North.

They live differently, and there is a potential, for example, for our northern peoples to use distributed energy. There is an enormous wind inventory up there. If instead of having diesel generators running around the clock to create power, it could be augmented or replaced with wind turbines in areas where the wind blows almost continuously, the marginal negative influence they have on our economic standing would be reduced even further.

Senator Kenny: We will come back to you on that question.

On the question of national leadership, why are you starting from the top down? This is a bottom-up issue. Moreover, the framers of the Constitution did not contemplate issues such as the environment when they wrote it.

The examples you provided, such as health care and childcare, are not the business of the federal government. The federal government is intruding. They are politicians who see votes. They think that the North will not say no to money. ``Even if it is not stated in the Constitution, we will give them money and maybe they will vote for us.''

If we were ranking, would we start with one community at a time and work upwards to get each community to take responsibility for its own?

Mr. Sadik: I am simply regarding the political reality of the situation. The federal government will choose to lead in areas that it considers to be politically advantageous. You can frame health care, childcare, et cetera, that way if you wish to do so.

Senator Kenny: The Constitution does that.

Mr. Sadik: It would probably be politically advantageous for the government to lead on the environment as well because poll after poll has shown that, along with education and health care, Canadians care tremendously about the environment.

Being the realistic and pragmatic folks that we are, we try to tap into some of that political imperative at the federal level. We are urging the government to pick up the ball on that one as well.

Senator Kenny: The Constitution is silent on the environment. What about the premise of my question: Is this something where one leads with one community at a time rather than saying, ``We will have a master plan in Ottawa and you will conform''?

Mr. Sadik: The master plan in Ottawa would be negotiated with the provinces in the way that health care, childcare and other federal-provincial matters are dealt with. Ottawa is not currently negotiating a meaningful national environmental sustainability plan with the provinces. That is our problem.

In terms of the communities, how can we measure bottom up versus top down? Certainly there is a lot of activity at the community level in terms of environmental improvement and rallying. Many municipalities and provinces are taking the lead; for example, Vancouver, Toronto and Alberta. Alberta is the leader in wind energy in this country. That is fantastic.

Nevertheless, the experience of other countries, including the United Kingdom that contains semi-independent areas such as Scotland, Ireland and Wales, has shown the federal jurisdiction can take the lead and make a difference. That is what we are asking this government to do. We are saying this government has the ability, right and obligation to do that.

Senator Kenny: Give us the pros and cons that your association assessed in wanting go to the federal government rather than to communities. That is where the real leadership, at least in my mind, takes place, where the problems exist and where there is the most creativity. Is it just because we are a one-stop shop?

Mr. Sadik: No. It deals with the greater effectiveness of a coordinated effort. With other activities, sometimes it makes sense to encourage individual creativity.

Experience with sustainable development has shown there is a need for a coordinated effort. That is a result of the economy of scale. It deals with national standards that make it the only commercially viable way for manufacturers and importers of efficient items to introduce those into a country. They will not bring in one item for the Alberta market, another one for Prince Edward Island and another for Ontario. We need national standards or we will not be in the game.

In another instance, we are often tied into international treaties, and only the federal government has the right to enter into those.

Those are some of the realities that impinge upon a series of individual, independent efforts across the country, in my opinion.

Senator Kenny: Therefore, individuals should not take the lead and should not worry about communities that appear to have remarkably good programs. One person cannot make a difference in this kind of effort.

Mr. Sadik: We can learn from those who are making remarkable progress on the individual level and then apply that on the national level.

The Chairman: I am surprised to find that, with respect to dealing with nuclear waste, we do so badly in this country. I would have thought that we would do rather better than that. I am surprised because we do not have very much of it; we seem to be storing it well. What is the standard of measurement by which we are thirtieth out of 30 in dealing with nuclear waste?

Mr. Sadik: It is kilograms per thousand people. That indicator is simply a function of a relatively large amount of waste in relation to a relatively small population.

The other thing to bear in mind is that the CANDU reactors generate more waste than the types of reactors that are being used in Europe and, in some instances, in the U.S. as well, such as the Westinghouse or the GE reactors.

The Chairman: There is also the fact that we use a lot more electricity.

Mr. Sadik: Probably, but other countries have a higher proportion of electricity generated from nuclear power, yet those reactors produce a smaller amount of waste by kilogram, and in fairness, not just looking at radioactivity, perhaps more radioactive but denser waste and a larger population.

The Chairman: With respect to credibility, everyone on this committee does agree with your end objects. One of the things we have to do in that respect is, as you have said, to change peoples' minds and the way we live, the way we think, and certainly the way we consume. Reports such as this can have a great effect on that, depending upon their credibility.

Do you think it is credible to the guy on the street to read that Turkey is number one out of 30 in terms of environmental performance and that Mexico is rated considerably above Canada? I do not know if you have ever been to Turkey or to Mexico, but that is a hard sell to Canadians, to say that there is some sense in which we are outperformed in the environmental sense, long or other term, by Turkey and Mexico. I do not question that by the standards you have used in this report that is true, but I want to ask about the marketing. Does it not cause the average Canadian to look at this report and say, ``That cannot possibly be true''?

Mr. Sadik: The optics are problematic. For the sake of consistency and maintaining a credible methodology, we had to include those members of the OECD who are performing better than us for entirely different reasons than the Western European countries. The optics are problematic, but methodological integrity was more important than being able to spin this in the optimal way, if I can put it like that.

The Chairman: Is methodological integrity getting in the way of effect? That is a crass question, but if you are trying to convince people to change their minds you have to be credible. I am suggesting that methodological integrity might be getting in the way of that in this case.

Mr. Sadik: Yes. There is a trade-off there and perhaps that is the price we have to pay to maintain the integrity of the reports we release.

Senator Kenny: Is the price not a footnote, Mr. Chairman?

The Chairman: Well it should be, exactly.

Mr. Sadik: One of the things we could consider is a comparison of Canada against other high-income countries, G8, G20 type countries, something like that.

The Chairman: It might have a greater effect.

Mr. Sadik: Yes.

Senator Milne: This is not really a question; this is the reverse of what Senator Kenny said. At this point, you just get to listen and I get to speak.

You spoke about the use of wind energy in the North. If Senator Willie Adams were here he would take you up on that, because in his hometown of Rankin they have tried it. As you know, the North is a frozen desert. There is so much wind there that it wears out the rotors in about two months. There is snow, sand, grit, everything, moving sideways all the time, and so far they have not found a way to combat that. It is just far too expensive to keep replacing the rotors. That is the expensive part of a wind generator.

Senator Kenny: We keep telling him to get smaller propellers.

Senator Milne: They just spin off faster.

The Chairman: Mr. Sadik, thank you very much for being with us today.

Mr. Sadik: It has been a pleasure again, and it was nice to have some hardball questions, too.

The Chairman: I do not know how hardball they were, but we are grateful for you being here.

The committee adjourned.