Proceedings of the Standing Senate Committee on
National Finance

Issue 10 - Evidence - June 16, 2010


OTTAWA, Wednesday, June 16, 2010

The Standing Senate Committee on National Finance, to which was referred Bill C-9, An Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures, met this day at 6:34 p.m. to give consideration to the bill (topic: Parts 18, 19 and 20).

Senator Joseph A. Day (Chair) in the chair.

[English]

The Chair: I call this meeting of the Standing Senate Committee on National Finance to order.

Senator Murray: If I may take one minute — I understand that the Minister of Finance will be with us for one hour tomorrow evening. One understands the demands on his time, and I am not complaining about that. I simply want to indicate first that there are a number of parts to this enormous bill that it will have been sufficient for us to have public servants as witnesses to give us the background and the detailed explanation of what is involved.

There are several parts, however, that raise policy questions that the committee should want to raise with ministers. For the consideration of yourself and the steering committee, and perhaps for later consideration by the committee as a whole, we should flag the need to perhaps call the minister who was in charge of AECL, Atomic Energy of Canada Limited, that would be the Minister of Natural Resources, I believe; the Minister of the Environment; the minister in charge of the Telecommunications Act, which I think is the Minister of Industry. Those are at least three, and there may be another one or two, the minister in charge of Canada Post, for example.

The areas where it will be obvious to us or to you that there are serious policy issues to be discussed, I think on those matters we would want to invite ministers to appear at some point. I think it would be good to give them a heads-up that they may be called.

The Chair: Thank you, Senator Murray, you are right. Steering has talked about other ministers other than the Minister of Finance on this particular bill, but it was our thought that we would probably try to get through an understanding of the bill and the outside witnesses, so we have a clear understanding of what the policy issues are. It would likely be in that final week of our hearings that we would ask the ministers to be here.

If there are any other senators who, from now, over the next week or so, feel that you would like to see certain ministers come before us — this is the minister in addition to the departmental people — let us know, and steering will try to work out a schedule on this. You make the other point of giving them a heads-up because they think everything is all done as of the end of this week. We should be giving the ministers some notice that we will be looking for them.

Senator Murray: We have until July 31, so I think we are quite flexible.

The Chair: We should give the ministers some notice that we will be looking for them.

On this issue, Senator Ringuette?

Senator Ringuette: Mr. Chair, I agree with Senator Murray because we are looking not only at the budget but also at policy issues. Is it necessary for an official motion in respect of Senator Murray's comment?

The Chair: No, I think the steering committee can deal with that.

Senator Ringuette: Thank you.

The Chair: Then we will go on with the business at hand.

[Translation]

Honourable senators, this is the fourth meeting of the Standing Senate Committee on National Finance dealing with Bill C-9, An Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures.

[English]

Over the course of our previous three meetings, departmental officials reviewed the provisions of 10 parts of the bill. The way we have been handling it — and we will continue to — is to try to focus as much as possible on the sections of the bill and what that section is trying to achieve, because sometimes it is difficult to understand a section without the actual bill that is being amended. There are often other bills being amended, in fact there are quite a few bills being amended in this particular piece of legislation.

This evening we will be focusing on Parts 18, 19 and 20. These parts deal with the Atomic Energy of Canada Ltd., participating funding programs and environmental assessment.

Colleagues, as we have been doing in our previous meetings, I ask you to try to keep your questions as succinct as possible, but we want to go over everything in one part before we proceed to the next.

To speak to Part 18, which deals with Atomic Energy of Canada, we welcome a number of officials from Natural Resources Canada.

[Translation]

Cécile Cléroux, Assistant Deputy Minister, AECL Restructuring; Jean-Frédéric Lafaille, Policy Director, AECL Review — CANDU.

[English]

Jenifer Aitken, Senior Counsel, Legal Services.

Welcome to each of you.

[Translation]

Ms. Cléroux, I would ask you to explain for us clauses 2137 to 2148, following which we will no doubt have questions for you.

Cécile Cléroux, Assistant Deputy Minister, AECL Restructuring, Natural Resources Canada: I would like to thank you for inviting us this evening to present Part 18 of the bill.

[English]

Part 18 of Bill C-9 deals with the restructuring of Atomic Energy of Canada Limited, or AECL. Let me first provide you with some brief background.

In May 2009, the government announced that, after review of the Crown corporation, it was moving forward with the restructuring of AECL. The review found that AECL's current mandate and structure limit the corporation's success and development, and that the restructuring would help to maximize benefits for Canada. In particular, the review concluded that the CANDU reactor division — that is, the commercial arm of the company — is too small to establish a strong presence in the high-growth markets that are key to its success. Strategic investment is needed to strengthen its global position, access opportunities around the world and reduce financial risk to the taxpayer.

[Translation]

In December 2009, following the approval of the restructuring plan submitted by its financial advisors, the government announced that it was calling on investors to submit proposals for the CANDU reactor divisions.

[English]

The policy framework for the ongoing restructuring process is based on three key policy objectives: to ensure safe, reliable and economic options to address Canada's energy and environmental needs; to control costs to the government while maximizing the return on its investment; and to position Canada's nuclear industry to seize domestic and global opportunities.

[Translation]

In Budget 2010, the government once again indicated that it had initiated a process to restructure AECL in order to attract new investment and expertise, favourably position the corporation in a rapidly evolving global market and seek new opportunities for Canada's nuclear industry.

[English]

AECL is an agent Crown corporation that is subject to a number of acts, including notably the Nuclear Energy Act and the Financial Administration Act.

[Translation]

Consequently, specific legislative authorities are required to complete AECL's restructuring, which is dealt with in Part 18 of Bill C-9.

[English]

The timely passage of this legislation will remove a potential source of uncertainty for investors interested in submitting proposals for AECL's CANDU reactor division, and will help secure the best outcome for Canadian taxpayers, AECL's employees and clients, and the Canadian nuclear industry as a whole.

The Chair: It may turn out we will do this as we go through the sections, but we will be required to vote on each of these sections. We understand the general policy, but we also want to understand how that is being achieved. Maybe Ms. Aitken can help us through that.

Before we ask you to focus on particular sections, could you clarify, with respect to the invitations that have gone out for interest in buying or doing something with AECL, is that for the entire AECL or is it for portions of AECL?

Ms. Cléroux: The current process that is under way is for a portion of AECL, meaning the commercial arm or what we call the CANDU reactor division. As we speak, that is the only part that is being considered by the investors for potential divestiture.

The Chair: Is that a public document, the document for expressions of interest?

Ms. Cléroux: The invitation was launched in December 2009 and a summary document has been posted on the website of NRCan, Natural Resources Canada. This is accessible to every Canadian in order to be able to have a sense of what is the proposal and what is put forward to investors.

The Chair: Who is managing that?

Ms. Cléroux: The AECL restructuring team is responsible for that.

The Chair: Do you have any outside entity helping you in managing those expressions of interest and in trying to find people who might be interested?

Ms. Cléroux: External consultants have been hired, meaning financial and legal advisers, in addition to the legal counsel that is provided to us by Justice Canada.

The Chair: Who is leading that?

Ms. Cléroux: We are responsible to lead that work.

The Chair: Of the outside companies, who is leading the search for interested parties?

Ms. Cléroux: I am not sure I understand your question.

The Chair: Could you name all the companies that are involved?

Jean-Frédéric Lafaille, Policy Director, AECL Review — CANDU, Natural Resources Canada: The financial advisers are managing the process. They were hired through a competitive process by Public Works and Government Services Canada, who is responsible for procurement. Rothschild Canada Inc. won that competition and they are managing the process.

Senator Murray: Who is the legal counsel?

Jenifer Aitken, Senior Counsel, Legal Services, Natural Resources Canada: The legal counsel is Davies Ward Phillips & Vineberg.

The Chair: The fact that the government has announced they are interested in selling all aspects of AECL — the medical isotope aspect, the research aspect and the commercial aspect — is that not part of the process you have just explained to us? They are only looking now for interested parties with respect to the commercial aspect, the CANDU reactor aspect? Do I understand you correctly?

Ms. Cléroux: I would provide a point of clarification. The government has not announced that it is going ahead with the divestiture of all of AECL. It has indicated that it is proceeding with the restructuring of AECL, which includes what we call the research and technology division, more commonly known as the Chalk River Laboratories. Currently, this part is not being considered to be divested in any shape or form. We will, however, examine its long-term mandate and look at different means of ensuring that the operations are governed in the best way possible.

This is work that will be done. It is just being undertaken. It is far from being advanced as we speak, but it is not intended to be divested. The part that is being considered as we speak, and the transaction process towards a potential interest of investors, what has been in place since December, is solely the commercial reactor division.

Senator Murray: This is a good example of a question that I think would probably have to be put to your minister. You have properly focused on the limited nature of the invitation for proposals for the restructuring. However, the bill would give you, would give the minister, vastly more authority than that, would it not? The bill, if passed, would give the minister the ability to do whatever he likes with the whole kit and caboodle of AECL, everything. Am I wrong in that legal interpretation?

Ms. Cléroux: The current bill has a broad coverage. It provides the latitude for government to be able to make the decisions.

Senator Murray: In addition to the particular restructuring that you have talked about — correct?

Ms. Cléroux: We are currently undergoing the potential divestiture of the commercial part. That would be covered by the current provisions in Bill C-9. As we go through the restructuring of the remaining parts of AECL, especially the research and technology division, there might be other elements that we will want to put forward to be able to proceed and to have the best possible structure as we go forward, and the bill provides for those flexibilities.

Senator Murray: The bill gives to the minister the authority to do whatever he and the Governor-in-Council want with the whole of AECL. That is the reality of the bill.

Ms. Cléroux: The bill provides to the minister and the Governor-in-Council — because it has to be a decision of the cabinet of the whole — wide potential flexibilities to be able to consider the different alternatives that could be envisaged.

Senator Murray: Madam, to do more than consider. The bill will authorize the minister to dispose of the whole thing — any security, shares, anything. AECL could disappear from the face of the earth if the minister used all the authority that is proposed to give him in this bill.

I do not need to have you debate the matter. It is not for you; I know that. We will perhaps have an opportunity to discuss it with the minister. It is simply that the authority proposed to give to the minister in this bill is far greater than the authority we talked about earlier to restructure the CANDU division.

The Chair: I refer you to clause 2138 on page 698. This is what Senator Murray is trying to get you to direct your attention to. We are not asking you to defend policy. That is not what this is about. We want to understand what is here; that is all we are trying to do.

Senator Murray: I have nothing more.

The Chair: Could we look at section 2138: ``The purpose of this Part is to authorize a number of measures for the reorganization and divestiture of all or any part of AECL's business.''

Does one follow from the other, or are they two separate aspects? Is business restricted to the commercial aspect or is it everything AECL does — research, isotopes and CANDU reactors?

Ms. Aitken: Regarding the word ``business,'' nothing restricts it. That section describes the purpose of this part of the bill. Then different sections provide for different things. When it says ``a number of measures,'' that is correct. A variety of measures are provided for in the bill that will not all necessarily be taken. It will depend on the structure of transactions and decisions still to be made. However, the bill allows for a wide variety of different things related to AECL. It is not limited to the CANDU division.

The Chair: You raise interesting points that I will let honourable senators pursue.

[Translation]

Senator Hervieux-Payette: My questions might be somewhat detailed, but I would like to know whether the financial and legal advisors were selected by way of a competitive tendering process?

Ms. Cléroux: Public Works and Government Services Canada conducted a tendering process for the selection of financial advisors and retained the services of N M Rothschild & Sons. As for the selection of legal counsel, the process was administered by Justice Canada.

[English]

Ms. Aitken: The process used by Justice Canada was their standard process for hiring outside legal agents.

Senator Hervieux-Payette: What is the standard process?

Ms. Aitken: I cannot tell you anything more today other than I know it is the standard process they use.

Senator Hervieux-Payette: My question was whether they were, for example, making a proposal with fixed fees? What is the scope of their mandate? Are you asking law firms to limit expenditures when this is the current practice both in Canada and other countries? It is not a running bill like lawyers used to have, but it is a firm price, and law firms provide that service for that price.

You will be supported by a good legal firm, but I want to know if they won the competition in terms of the proposal. Which entity of Rothschild Canada Inc. are we talking about? Is it the Rothschild that reports to England or to France? There are two branches in the financial sector.

Mr. Lafaille: This is a matter we will have to refer to Public Works Canada because they have the contractual relationship with Rothschild and hold that responsibility.

Senator Hervieux-Payette: Are you not working with them on a daily basis? What is the relationship between your team and the consultant? Normally the consultant has a broad mandate and works in close cooperation with you.

[Translation]

Ms. Cléroux: Public Works and Government Services Canada is the contractual agent that conducted the tendering process in an open and transparent manner.

PWGSC can answer questions about the procedural details. We are working on a daily basis with the firm that was chosen as a result of that process, namely Rothschild Canada. It is not for us to know which entity entered into the contract; our relations officer is Rothschild Canada.

You may want to refer that question to our colleagues from Public Works and Government Services Canada in order to get more clarification on the tendering process.

Senator Hervieux-Payette: My next question is even more pointed: Who drafted their mandate?

Normally, the client must provide them with a mandate. It is not up to the Department of Public Works to decide what your needs are and analyze the restructuring of a multi-billion dollar company. You sought out external expertise. I want to know who defined Rothschild's mandate. What your office responsible for that, or did someone else draft the mandate?

Mr. Lafaille: The collaboration between ourselves, Natural Resources Canada, i.e., the client, and Public Works and Government Services Canada is a joint effort. We define our needs, and they help meet them by applying Canada's procurement rules within a contract that they themselves manage with the bidders. We inform them of our needs, and they draft the contract.

Senator Hervieux-Payette: We asked earlier for a definition of the tendering mandate, which companies use to draft and submit their bids. There are a number of stages: an initial stage to select the players; a second, pre-selection stage for which you certainly had selection criteria: and finally the selection itself.

I would like to know whether we can see a description of those three stages in the tendering process, which Public Works Canada is simply administering. Clearly, it is not up to PWGSC to define your requirements in order to engage in what you have termed a restructuring, but which in no way corresponds to what I have read in the bill. I did not see any intent to restructure, but I did read about a divestiture of assets.

I heard your explanations, but normally, in a restructuring, thought is given to reassess the various components of a business in order to take a tailored approach to each corporate division. According to my reading, the bill basically gives the government all the powers to sell off the entity.

Once again, I would like to know where the term ``restructuring'' comes from, because I do not see it in the bill.

Ms. Cléroux: We will be able to provide the information by working with our colleagues from Public Works, because we do not have the contract details that you requested with us.

The same is true with regard to the contract given by Justice Canada to Davies. We will do the same with Justice Canada, because we do not have that information with us.

As for the term ``restructuring'', the mandate that we have with AECL is to work on restructuring the entire corporate entity, including all of its divisions. Part of the corporation is being considered for divestiture to the private sector through a process that was referred to previously, and as for the second part of the mandate, we have only begun to consider the long-term mandate as well as the best management practices in order to ensure the global competitiveness of the nuclear research laboratories.

Senator Hervieux-Payette: Lastly, I would like to get an approximate, comparative evaluation of the two entities, i.e., what would be the book value of the research division compared to that of the reactor operations. I think it is in the order of 5 per cent versus 95 per cent, but I would rather rely on your estimates. For example, if the federal government retains control of the research and development division and divests itself of the remainder of the corporation, how can you make an assessment of the restructuring?

Ms. Cléroux: We do not have that information.

The Chair: You can send that to our clerk, who will distribute it to all the members.

Senator Poulin: I would like to thank the witnesses for being here with us this evening.

Ms. Cléroux, did I hear you say that Bill C-9 is the act to facilitate the sale of AECL's commercial division?

Ms. Cléroux: Once adopted, Bill C-9 would give us the legal provisions to conclude the potential sale of the reactor division as well as carry out work on other stages that might be determined at a later date with regard to the restructuring of the remaining assets of AECL.

Bill C-9 is the vehicle chosen by the government — as announced in both May and December 2009 and restated in Budget 2010 — to proceed with the restructuring of AECL.

Senator Poulin: I am from Northern Ontario, and so you will understand my interest in this matter. You can well imagine the impact such a sale will have on a number of communities, in particular Chalk River.

You told us that the restructuring process, i.e., the sale of a substantial part of Atomic Energy, began in 2009, and that public funds — taxpayers' money — were spent in fiscal year 2009-2010. How could that have been, given that the legislation enabling such a restructuring has not yet been adopted?

Ms. Cléroux: The legal provisions contained in Bill C-9 were not needed to undertake the initial exploratory work with the private investors, but rather provide the legislative authorities required to complete a transaction.

The government has been very open from the outset. Public announcements were made and references to the undertaking were included in Budget 2009-10. The clauses that are currently in Bill C-9 are required to complete the transaction on the commercial division.

I must remind you that the Chalk River laboratories are not part of that division and will not be affected by the ongoing process to divest the commercial operations.

Senator Ringuette: It is covered by the clauses of the bill.

Ms. Cléroux: As indicated earlier, the bill does cover all parts of AECL.

Senator Poulin: But where are the legal provisions? In what piece of enabling legislation can we find the provisions that allowed the process to get started?

Allow me to ask you a comparative question. I sat on the board of directors of CBC for 22 years. You are saying that any crown corporation has the right, following approval by its board of directors, to spend public funds in order to plan its restructuring, including the sale of a substantial part of its assets. Therefore, where can we find the legal provisions that allowed for such a restructuring to take place?

Ms. Cléroux: The restructuring that is currently being examined was not initiated by AECL, but by the federal government, its sole shareholder. We do not represent Atomic Energy of Canada Limited, but rather the Department of Natural Resources Canada.

AECL's owner decided to review the entire crown corporation and determine the structure that would best allow it to be competitive on the international markets and meet both national and international challenges. The decision was made by the federal government, not the crown corporation.

Senator Poulin: You are saying that the decision was made by the government, which authorized the crown corporation to initiate the process in collaboration with the department.

Ms. Cléroux: It is the portfolio department that is piloting the restructuring with the crown corporation, not the other way around.

[English]

Senator Ringuette: I certainly understand the broad intent of the clauses in Part 18. Nevertheless, I would like to move on to specific clauses in the bill, if you do not mind, and request further clarification where possible.

On page 698, clause 2137 (5), on the operation of the Competition Act, states:

Nothing in, or done under the authority of, this Part affects the operation of the Competition Act in respect of the acquisition of any interest in an entity.

Could you explain what that means in respect of the sale, in part or in whole, of AECL?

Ms. Aitken: The word ``entity'' is used.

Senator Ringuette: No, the Competition Act.

Ms. Aitken: Yes. I understand that your question is about the subsection that refers to the Competition Act. In that subsection, the word ``entity'' is used and the word ``entity'' could be AECL or one of the other entities referred to in the bill. The bill refers to the potential formation of a corporation, for instance, or another type of entity. This clause is saying that just because these things are provided for in this bill, it does not change the application of the Competition Act.

Senator Ringuette: The Competition Act would apply, whether we are looking at the sale of AECL in part or in whole.

Ms. Aitken: It would apply but I cannot say in what way it would apply or how its terms apply.

Senator Ringuette: Why then are you stating this in the bill?

I am trying to understand why this clause is in the bill.

Ms. Aitken: It is to make it clear that this bill does not supersede the Competition Act; the Competition Act still applies.

Senator Ringuette: That is clear to me.

I want to move on to subclause 2139(2), which states:

The Minister may do anything or cause anything to be done that is necessary for, or incidental to, a measure approved under subsection (1).

That subsection is on divestiture — the sale, disposal, amalgamation, dissolution. What does this mean in terms of the power of the minister?

Ms. Aitken: The power of the minister is contained in subclause (1), as you pointed out. That sets out a number of things that can be done, and then subclause (2) gives the incidental power to take the steps that are necessary. For instance, there may be documents that need to be filed with the corporate registry under the Canada Business Corporations Act. There are steps involved in achieving those things so it is to apply to those steps.

Senator Ringuette: If you look at subclause (1), it states:

The Minister may, with the approval of the Governor-in-Council . . . .

And:

(a) despite section 11 of the Nuclear Energy Act . . . .

— which we will deal with later on —

. . . sell or otherwise dispose of some or all of the securities of AECL;

(b) procure an addition to, or other material change . . . .

Et cetera; then:

(c) procure the amalgamation of AECL; or

(d) procure the dissolution of AECL.

What other power can we give to a minister that requires that there, in subclause 2139(2), which states: ``The Minister may do anything or cause anything to be done''?

Ms. Aitken: I am not sure how much I can help, Mr. Chair. The powers are contained in proposed subclause (1), as the question points out, and proposed subclause (2) just applies to the incidental steps that are involved in carrying out that. For instance, if you change the objects or purposes, then you will amend the articles of incorporation and you will file those with the director of corporations. There are steps that are taken in carrying out those things.

Senator Ringuette: In your experience, Ms. Aitken — and I suspect that you are very experienced as you are from the Department of Justice — how many bills have passed in Parliament that give total power to a minister to dispose of a Crown corporation without parliamentary oversight?

Ms. Aitken: Mr. Chair, I do not have in front of me other bills. Obviously, there are other statutes when Crown corporations are privatized that apply. You could look at those to see the differences between those and this one, but I do not have them here but, obviously, that is the case.

Senator Ringuette: I understand your answer, Ms. Aitken, because I have not seen that happen either for I do not know how long.

I will move on so as not to be accused of filibustering.

Senator Neufeld: You would not do that.

Senator Ringuette: Some people who take their work seriously are accused of filibustering around here.

I will move on to page 700 and it is clause 2140 next. Here, again, proposed subpclause (2) states:

The Minister may do anything or cause anything to be done that is necessary for, or incidental to, a measure approved under subsection (1).

Proposed subclause (1) states:

The Minister may, with the approval of the Governor in Council . . . .

Not the approval of Parliament, but the approval of the Governor-in-Council, and it goes on:

. . . and on any terms that the Governor in Council . . . .

Not the Parliament —

. . . considers appropriate,

(a) procure the incorporation . . . .

(b) procure the formation . . . securities . . . .

Et cetera;

(c) acquire securities . . . and;

(d) acquire securities . . . .

Then it goes on and ``dispose of.'' That is found in proposed paragraph 2140(1)(d). It states: ``sell or otherwise dispose of some or all of the securities of the entity.''

Is this, again, another clause that provides a blank slate of power with regard to AECL to the minister — that is, no oversight for Parliament?

Ms. Aitken: Mr. Chair, this clause does provide a number of different measures that could be taken. As we have said, we do not have a specific transaction worked out in detail. These are different steps that could be taken, depending on exactly what the transaction was. They would not all necessarily occur because they provide for different ways of doing something, but there are a number of different things there.

Senator Ringuette: We move on now to proposed subclause (3) of the same paragraph:

The Governor in Council may, by order, declare that any of the provisions of Part X of the Financial Administration Act do not apply to a corporation referred to in subsection (1)(a).

Could you explain the meaning of that? What is the intent of that?

Ms. Aitken: Yes, I could. Subclause (3) refers to a corporation referred to in paragraph 1(a). Paragraph 1(a) refers to procuring the incorporation of a corporation, securities of which would be held by, on behalf of or in trust for Her Majesty. That paragraph speaks of creating a new corporation, which would be held by the Crown. Then subclause (3) refers to the rules that would apply to that corporation. If you go back to the purpose, it has to do with AECL so if the way of doing a transaction was to procure a new corporation, then this would allow for that corporation to be exempted from the provisions of Part 10 of the FAA.

Senator Ringuette: If you move on then to clause 2141, and it refers to clause 2140, the clause that we were just discussing. It says, with regard to whatever new Crown corporation may or may not be created:

AECL, a corporation referred to in paragraph 2140(1)(a), any other entity referred to in paragraph 2140(1)(b) . . . .

That we have just been talking about.

. . . or any one of their wholly-owned subsidiaries or wholly-owned entities may, with the approval of the Governor in Council and on any terms that the Governor in Council considers appropriate,

(a) sell or otherwise dispose. . . .

(b) sell or otherwise dispose. . . .

(c) issue securities. . . .

(d) reorganize its capital structure. . . .

(e) acquire assets. . . .

And the list goes on. I do not understand, first, why you would again come back to AECL and talk about a potential other Crown corporation and then state that the Governor-in-Council may also sell and dispose of some or a total of that new entity. Is that how it should read?

Ms. Aitken: Clause 2141, as the question correctly points out, refers to a number of different steps and refers back to a corporation or entity. Proposed subclause 2140(1) allows the incorporation of a corporation and it also allows the formation of a different type of entity.

As I said earlier, you would not necessarily do both of those things; it depends on what structure the transaction would take. Clause 2141 allows for certain steps to be taken. If the structure was to do one of the things listed in clause 2140, then clause 2141 allows for different steps to be taken with respect to that corporation or entity.

Senator Ringuette: Yes, but on the approval from the Governor-in-Council, not on the approval of the Parliament of Canada.

Ms. Aitken: Yes. The clauses say ``on the approval of the Governor in Council and on any terms that the Governor in Council considers appropriate.''

Senator Ringuette: If I move on to proposed subclause (4) of that same article, at the bottom of page 701 under ``Compliance with directive'':

(4) The directors of AECL or of the corporation, or persons acting in a similar capacity with respect to the entity, must comply with a directive issued by the Governor in Council. That compliance is in the best interests of AECL, the corporation or the entity, as the case may be, to whom the directive is issued.

Can you explain to me the extent of that clause?

Ms. Aitken: As Ms. Cléroux explained, the Minister of Natural Resources is the minister responsible for AECL and holds the shares in AECL, and AECL is a Crown corporation.

Essentially, this provides that the shareholder of the Crown corporation can direct the directors to do something and the directors would comply with that. It allows the shareholder to make the decision to do something with the corporation.

Senator Ringuette: With regard to the current AECL act and the current responsibility of the board, who is responsible with respect to AECL and its enactment to dispose of? Has a directive been issued to the board of directors?

Ms. Cléroux: No such directive has been issued at this time. We are collaborating with the corporation and we are proceeding with the restructuring, but we are not at the stage where decisions have been made on the fate and the future of AECL.

The Chair: May I ask a supplementary question on that?

Senator Ringuette: Yes.

The Chair: Ms. Aitken, I am having a difficult time understanding proposed subclause (4), the last sentence referred to by Senator Ringuette. The sentence reads:

That compliance is in the best interests of AECL. . . . to whom the directive is issued.

Are we statutorily saying that the compliance is in the best interests of the corporation? Is that to protect the directors when the directors have to do what they are told to do? They may feel it is not in the best interests of the corporation, but with these words, are we saying that compliance is in the best interests? Is that what we are doing here?

Ms. Aitken: I think you have basically summarized it correctly. Another way of wording it that is often seen is ``compliance is deemed to be in the best interests of the corporation.'' That is just —

The Chair: It is to protect the directors.

Ms. Aitken: — a point of drafting. The directors have the duty to consider the best interests of the corporation, but here the shareholder could make a decision.

The Chair: I would have felt a lot better if you said that ``compliance would be deemed to be in the best interests of the corporation.''

Ms. Aitken: I understand the point about the language, but that is a matter of legislative drafting that the word ``deemed'' is not used when it is deemed not necessary by the drafters.

The Chair: Yes. We would not want to use ``deemed'' too often, would we?

Senator Ringuette: We can disguise ``deemed.''

The Chair: Thank you. Maybe you can take that down to the draftspersons. It is difficult.

Senator Murray: She is a draftsperson.

The Chair: You are not a legislative draftsperson, are you?

Ms. Aitken: No, I am not.

The Chair: No, I thought not. Senator Ringuette, sorry for interrupting you; I just found that interesting.

Senator Ringuette: Yes, so did I. It continues under proposed subclause (5), the directive and the completion of any action that has been directed to the corporation.

I move on to clause 2142 now:

The Statutory Instruments Act does not apply to a directive.

Ms. Aitken: The Statutory Instruments Act is the act that applies to orders, regulations and so on. This provision says that it does not apply to a directive. One of the effects of that is that it would have to do with the publication of the directive, and there is another provision of the bill that addresses publication of a directive.

Senator Ringuette: Does this article say that anything with regard to a directive can be kept secretive and not public?

Ms. Aitken: No. Clause 2143 provides that the minister is to cause a copy of the directive to be laid before each house of Parliament and then provides for the provisions of that.

Senator Ringuette: Yes, 15 days after sitting. That is, on average, what we would see.

Senator Hervieux-Payette: May I ask a supplementary on that? To clarify, normally you have the bill, then the regulations and then the directive. The directive cannot come from the sky; it must apply to it. It is usually more specific about what the regulation authorizes the minister to do.

The regulations are subject to the scrutiny of regulations. That is what we do here on the Hill. That means we would get the regulations and see if they are in compliance with the law, and the directive comes after that. Of course, this is not reviewed by any parliamentarians.

I wanted to complete my colleague's idea. I see that in the insurance act, for instance, the directives are much larger than the regulations, but they must not extend the regulations. The regulations have to conform with the law, and they provide the framework to operate within the law; the directives are more specific, ensuring that you provide more detailed instructions to the entity. That is what I see in directives, at least when we refer to the insurance act. There are directives in that act, and they are extensive. Sometimes, they tend to go a bit further than the law in the regulations. They could be contested. The government issues many directives in many sectors, but they should be in compliance with the bill.

The Chair: Ms. Aitken, do you wish to reply to that?

Ms. Aitken: I am not quite sure if there is a question to reply to, and I am not familiar with the insurance act. However, in terms of a shareholder, the Crown giving a directive to a Crown corporation, there are certainly other statutes where that is done, for instance, the Financial Administration Act and other places.

Ms. Cléroux: There is no regulation associated with that act. When you are issuing a directive to a Crown corporation, there is no regulation that is lined up. It is not another step in providing instruction; it is a direct way to provide instruction to a Crown corporation.

The Chair: We are starting to see more and more of this process of directives and that it is not to be considered a statutory instrument. Just so that Parliament can stay involved, we will file it afterwards, unless it would be detrimental to the interests of the corporation. That is what this directive and this section says. It is interesting that this is a directive of the Governor-in-Council on the advice of the minister, which is different from what we saw previously, where they were directives of the minister. This is different from that. It is important to read all the sections to understand that.

Ms. Aitken: I do not think I could give you the section number right now, but I think there are other examples where it is a Governor-in-Council.

Senator Gerstein: Ms. Aitken, do you think the way this is worded is unusual or this is the first time the wording is being used?

Ms. Aitken: Mr. Chair, that is what I was trying to say, that there are other examples, and the Financial Administration Act provides for directives to Crown corporations, so that is part of the governance of Crown corporations in other statutes.

Senator Gerstein: My point being that I agree with you. I do not think this is the first time. I am looking at the Eldorado Nuclear Limited Reorganization and Divestiture Act of 1988, and as I look through it, the wording is almost identical in 1988 to this bill today, so I want to confirm that I totally agree with you.

Senator Ringuette: Part 18, clause 2146 reads:

On the requisition of the Minister and with the concurrence of the Minister of Finance, there may be paid out of the Consolidated Revenue Fund any amount that is required to carry out a measure referred to in sections 2139 to 2141.

Would that include paying an entity to take over AECL in portion or in part?

Ms. Aitken: Mr. Chair, it says any amount that is required, and I really do not have any further information about what those amounts might be. I could not really answer that.

Senator Ringuette: That is a blank cheque agreed upon by the Minister of Natural Resources and the Minister of Finance to take from the Consolidated Revenue Fund any amount of money that is necessary for them to achieve their purpose. The options are unlimited, and it could include money to pay an entity to acquire AECL, the funding to purchase AECL. It could include that.

The Chair: That is another question.

Senator Ringuette: It could include. It is so wide.

The Chair: We take your point. It is very wide.

Senator Ringuette: It is so wide, the disposition of funds from the Canadian taxpayers; this would provide a blank cheque.

The Chair: Ms. Aitken might not call it a blank cheque, but she agrees it is quite wide to cover all potential situations envisaged and not envisaged. Do you have another question, Senator Ringuette?

Senator Ringuette: Yes. Are clauses 2137 to 2146 subject to the foreign investment act?

Ms. Aitken: Mr. Chair, I think the reference is to the Investment Canada Act, and that act contains an exemption for the sale of a Crown corporation, so the sale of a Crown corporation is not subject to the Investment Canada Act by the terms of the existing Investment Canada Act.

The Chair: Where is that reference to the Investment Canada Act? Can you help us with that?

Ms. Aitken: The question was: Are these provisions in this bill subject to the foreign investment act, which I take to mean the Investment Canada Act.

The Chair: Okay. It is not referred to here but it is not excluded here; therefore, you say it applies. The Investment Canada Act, as it is worded, says that Crown corporations are not subject to review. Is that what you have told us?

Ms. Aitken: That is right.

Senator Ringuette: The sale in part or in whole of AECL, even to a foreign entity, is possible; we do not know. I think the call to tender is closing on June 30; am I right, Ms. Cléroux?

Ms. Cléroux: We have a process. There is a milestone at the end of June. It will not be completed by the end of June.

The Chair: It will not.

Ms. Cléroux: It will not.

Senator Ringuette: Exactly. Thank you, Mr. chair.

Senator Murray: Mr. Chair, unaccustomed as I am to entering a defence of the government, which this is really not because I do disapprove of the process, still, I think the clearest explanation they can give, if they would give it, is that AECL was created in the first place by order-in-council, and they are seeking to restructure or potentially dissolve it in the same way. It was the Atomic Energy Control Act of 1946, I think, that provided the authority to the Governor-in- Council to do what they did in creating AECL. There is a certain horrible logic to what they are doing. They are trying to get rid of it in the same way they created it.

Ms. Cléroux, the process of receiving submissions will not, you say, be completed by June 30. Do I understand you correctly?

Ms. Cléroux: This is correct.

Senator Murray: Since December 2009, how many proposals have you received?

Ms. Cléroux: This is not public information. This is a commercial entity that we are looking to be able to have potential investors. We are not in a position to be able to divulge that information.

Senator Murray: Even to say how many submissions?

Ms. Cléroux: I cannot discuss any of the specifics of the current process. This is a confidential process until it is completed.

The Chair: Please maintain any confidentiality obligations that you must. We are not here to cause you to breach any obligations.

Senator Murray: The answer is on the record and we will think about it more, perhaps. If it will not be completed by June 30, are you extending the process? Is there another deadline that you are fixing?

Ms. Cléroux: The government has publicly stated that we are aiming to complete the process by the end of this calendar year.

Senator Murray: So the new deadline is December 31, 2010?

Ms. Cléroux: It is not a new deadline. There was never any deadline that was specified at the end of June 2010.

Senator Murray: What was of the end of June then, if not a deadline?

Ms. Cléroux: It is simply a milestone in the process. It is not a deadline.

Senator Ringuette: No, but it is the completion of the tender process. June 30 is the completion of the invitation to tender that was issued in December.

Ms. Cléroux: I regret to say that it is not the completion of that. It is simply a milestone in a process that we take —

Senator Ringuette: We understand that —

The Chair: Senator Ringuette, let her finish her answer, please.

Senator Ringuette: I am sorry.

Ms. Cléroux: It is not the completion of the step that you are mentioning. The June 30 deadline is simply a milestone in the process.

Senator Ringuette: Could you tell us what milestone it is considered as?

Ms. Cléroux: As I have indicated, the transaction process is confidential. I cannot get into the specifics.

Senator Murray: Let us get the minister in here. Perhaps we can move on.

Senator Callbeck: You said that, in May 2009, the government announced the restructuring of AECL. Was there a study done before that to recommend it, and if so, is that study public? Can we get a copy of it?

Ms. Cléroux: There was a study done, and there was, in May 2009, a summary of the study published. That summary is available on the website of Natural Resources Canada, and if needed we can provide the web link to the clerk so that you will have access to that report.

The Chair: We will ask the clerk to get those documents for us and circulate them to everyone. I assume they are in both official languages so we will not need to have them translated?

Ms. Cléroux: They are.

The Chair: Senator Gerstein referred to legislation for the divestiture of Eldorado Nuclear. If you could give us that, it would be helpful.

Senator Callbeck: In 2005, there was a contract between MDS Nordion and AECL whereby AECL took over ownership of the isotope facility. AECL committed to supply the company with isotopes for 40 years. I understand that they are currently suing the Government of Canada for $1.6 billion.

What is the status of that lawsuit?

Ms. Cléroux: As there is litigation before the court, we cannot discuss the details of it.

Senator Callbeck: Are there any other lawsuits currently ongoing?

The Chair: Do you mean involving AECL?

Senator Callbeck: Yes, with regard to isotopes.

Ms. Cléroux: None of us are sure whether there are currently other lawsuits involving AECL and the isotope file.

Senator Callbeck: Will you provide that information to the clerk, please?

Ms. Cléroux: Certainly.

Senator Callbeck: In Supplementary Estimates (C) for the fiscal year 2008-09, AECL asked for an additional $410 million to support the CANDU refurbishment project.

How much money has been spent in total on these refurbishment projects?

Ms. Cléroux: Unfortunately, I do not have those numbers with me. They are available and we can provide them. Four refurbishment projects are currently ongoing, so the costs are not final.

Senator Hervieux-Payette: Can we have details on what is being done right now?

Ms. Cléroux: Would you like me to explain the four ongoing projects?

Senator Callbeck: Yes.

Ms. Cléroux: The Bruce Power refurbishment project in Ontario is about three-quarters of the way completed. There are still a few months to go in the refurbishment of the nuclear reactor at the Bruce Power station.

The refurbishment of Point Lepreau in New Brunswick has encountered technical and engineering challenges. The final solution has not been identified, although they are diligently working at it. New Brunswick Power, the province and Canada are working together to learn all the implications and impacts of that refurbishment project.

Wolsong in South Korea, which is similar to the New Brunswick Point Lepreau facility, is being refurbished. This job benefited from the lessons learned at Point Lepreau because it started a bit after the New Brunswick project. However, it has now caught up and the problems that were faced at Point Lepreau are being faced at Wolsong. The degree of advancement was different so they can address the technical solutions differently.

Gentilly-2 in Quebec is at the engineering phase. The outage has not started, meaning the shutdown of the reactor plant so that they can work in an environment that is not live. The other three sites are in an outage situation, meaning that they are not producing electricity.

Senator Hervieux-Payette: The only reactor that is actually owned by AECL is Bruce Power. Are Point Lepreau, Gentilly-2 and Wolsong the property of AECL, or are you simply refurbishing them in order that they can operate properly?

Ms. Cléroux: For clarification, Atomic Energy of Canada Limited owns only one nuclear reactor, and that is the research reactor that we commonly refer to as the NRU, the one that is producing isotopes and other research material for different purposes. All other reactors that I have referred to are owned by the utilities. Bruce Power owns the Bruce Power plant and the Point Lepreau reactor is owned by New Brunswick Power. We can provide the name of the Korean utility that owns Wolsong. Gentilly-2 is owned by Hydro-Québec.

Senator Hervieux-Payette: They all pay for the refurbishment?

Ms. Cléroux: Yes, they pay for the refurbishment. Contracts have been signed with AECL, and the type of work done by AECL varies depending on the contract. Commercial deals have been made.

Senator Callbeck: You will provide us with the total figure and a breakdown of what has been spent on each project?

Ms. Cléroux: We will provide you with the numbers that are in the public domain for the share that has been provided by the Government of Canada to AECL. Some of the funds for the refurbishment projects have been provided by the utilities based on the contracts that were signed.

Senator Callbeck: You mentioned Quebec. I did not think a decision had been made on that. I thought they were still studying it.

Senator Hervieux-Payette: It is done.

Senator Callbeck: They made a decision?

Senator Hervieux-Payette: Yes.

Senator Callbeck: That is not what the website says.

Senator Hervieux-Payette: I have the information from Hydro-Québec.

The Chair: We will take the evidence from the witnesses we have. If we wish to lead to other evidence, we will get that later.

Senator Callbeck: Is it correct that Korea was able to create a functioning reactor using the Maple design?

Ms. Cléroux: Are you talking about the production of isotopes? If I am not mistaken, the reactor to which you are referring is three times bigger than the version that was experimented with in Canada.

Senator Callbeck: Is size the only difference?

Ms. Cléroux: I would compare it to the Olympic Stadium. A mock-up of it was done in France and there were no problems. When the design was multiplied to a bigger size, it created all the issues that we have heard about repeatedly with the stadium in Montreal. It appears that the situation with the Maple could have the same implications, because this time the size was reduced.

The Maple reactor in Korea is much bigger, if I remember correctly. We could verify that. I believe that it is about three times the size of the reactors that were tested by AECL for the production of isotopes.

Senator Callbeck: What impact are all these delays and extra costs having on CANDU owners who were thinking of refurbishing? With costs and delays what they are, are they looking for other alternatives?

Ms. Cléroux: Across the world, we are in the first year of refurbishment projects. All refurbishment projects had struggles at their first inception. These are very delicate projects because components have to be changed in a radioactive environment, which is not the same thing as building new, and certainly not comparable to refurbishment of any other type of infrastructure.

These projects are very tricky. Everywhere in the world when a first-of-a-kind project has been done, there have been all kinds of technical, engineering and financial challenges, as there are in this case.

The Bruce Power Plant is not the same design; it is a less-evolved design than Point Lepreau. Point Lepreau is a younger design, which is the same in Wolsong and Gentilly-2. I am an engineer by trade, and it is typical in first-of-a- kind projects that the learning curve currently associated with the refurbishments of Point Lepreau, as well as Wolsong, will serve the Gentilly-2 and any other CANDU 6 reactor refurbishments that will happen across the world.

Senator Callbeck: Atomic Energy of Canada Limited appeared here a while ago and they indicated they were hoping to recover all these additional costs from future refurbishment projects. Is that still the intent?

Ms. Cléroux: When you are doing first-of-a-kind projects, you learn many elements, such as how best to evaluate the costs of the project, how best to contract those future refurbishment projects, as well as how to undertake the work on the engineering and technical parts, the way you train your staff and undergo the stages of the different phases. Those learning curves will be put to service for the next contracts that will be signed for refurbishment.

As we go through the transaction, the know-how that has been acquired is being considered by the potential investors as being something that will be useful in any future venture of refurbishment projects across the world.

Senator Callbeck: Is it still the intent to recover all these costs?

Ms. Cléroux: The recovery of costs is made by the fact that you will be submitting proposals to the other owners of CANDU reactors that will be more realistic. They will be informed by the learning from the first-of-the-kind that have been done. Normally, is it really fully recuperating the costs? This is something that only the future will be able to tell. However, the next time contracts will be signed, they will be informed by the learning from those three very live projects as well as the fourth that is not as advanced, which is the one with Hydro-Québec.

The Chair: Senator Finley has a supplementary.

Senator Finley: In terms of cost recovery and other elements, could you tell me, if you know, roughly how many taxpayer dollars have gone into AECL in the last decade in any form, be it operating budgets, equity loans, grants, marketing loans, et cetera?

Ms. Cléroux: I do not have those numbers but we can provide you with them. I did not bring the financial side of the AECL with me.

Senator Finley: It is obviously a critical component to this. Your organization must have some idea what the likely draw on taxpayers' dollars would be in the next decade.

Ms. Cléroux: It all depends on the type of business AECL would be doing and what will be under the responsibility of the Government of Canada. Right now, it would be a very speculative answer.

Senator Finley: It might be a speculative answer but right now most of the questions around the disposition of AECL are very speculative, as well. There is no hard and fast plan, am I right, for anything to do with AECL, other than the fact that the minister has been given a mandate to either restructure, dissolve, acquire, join, amalgamate, dispose of or something the asset or series of assets called the AECL, is that not right?

The Chair: Does that cover all the possibilities?

Ms. Cléroux: I did not do the check marks.

Senator Finley: I may have added one or missed one.

Ms. Cléroux: As we go through the different steps in the coming months, decisions will be made by the Governor-in- Council. In due time, government, through cabinet of the whole, will look at all of the alternatives that are before them before they make the final decisions.

Depending on those decisions, it will create all kinds of different needs of funding from the Government of Canada.

Senator Finley: Let us assume nothing changed. Would we know what the draw on public taxpayer funds would be in the next 10 years? We must have some idea.

Senator Murray: What would be the status quo situation going forward? I am sure that is a presentation to cabinet somewhere, when cabinet considered the alternatives. What it would cost to simply continue as we are? That is what Senator Finley is asking, I think.

Senator Finley: Pretty much.

Ms. Cléroux: This is a difficult question to answer. If AECL is not able to compete in the world at the time where there is a renaissance in nuclear energy, and AECL is not in a position and it has been determined by government as being too small or of not being versatile and flexible enough to be able to face the rules of the market, then you would have an entity that would have a group of people who would be working on a commercial side of an entity without contracts.

That would become a heavy demand on the taxpayers' money. This is part of the elements that will have to be taken into account by government to make the decisions in the coming months.

The part of the research and technology division that is responsible for research, production of isotopes, working with the CNRC on different projects — and we are not talking about only energy research but about all kinds of nuclear research — is partly dependent on the commercial part and the energy potential, but also independent because there are other needs in research. It is more related into a mandate of R&D in the nuclear field and it is something that government would make a decision on the long-term mandate.

That is why speculating on what would be the combination in 10 years if we were to stay status quo in the way that the AECL is formed, a lot would depend on whether they are able to get into new commercial contracts and also what the research field would be. It is very speculative and that is why we have not done such an estimate.

Senator Finley: I see. Thank you for the supplementary.

Senator Marshall: Could you speak about why the government decided to proceed with the restructuring? We did have some officials from the corporation testify before the committee a couple of months ago. We briefly spoke about the 2009 review a few moments ago. I know the Auditor General carried out a review of the corporation and had criticisms on certain areas of the corporation.

Did these things come into play when the government decided on the restructuring? My colleague here mentioned something when he was asking about the amount of funding that has gone into the corporation. I know from looking at recent financials that the corporation has an accumulated deficit of about $4 billion. I am second-guessing and thinking that was also a factor the government took into consideration when they decided restructuring was necessary.

Of course, we have also heard projects are not being met on deadlines and are not being completed within budget. Could you give us some idea as to what factors were considered when the government decided that there would be a restructuring of the corporation?

Ms. Cléroux: Studies were made to look at AECL to better understand what the strengths and weaknesses were, taking into account what is happening currently with nuclear energy across the world and the potential for Canada to have its share of the pie as these different projects are seeing the face of day.

I referred earlier to the summer report that was published in May 2009 that you will be provided with. That report indicates the different challenges being faced by AECL. For AECL to be a competitive organization, especially on the commercial side, the Government of Canada would have to put in substantial investment to be able to compete with the other organizations that are in that field across the world.

As the decision was being made, many elements had to be considered: The business of the government being supportive of a commercial entity that must compete with bigger corporations at a time when decisions are happening a lot faster than in the past; the fact that nuclear energy is being considered more and more as one of the clean sources of energy; and all the issues and challenges of climate change as a potential replacement for some of the base power currently supplied by fossil fuels.

Does the government want to augment the burden on the taxpayers so it can compete and seize those potential markets or are others better placed for that market competition? These elements, taking into account the question of project management, having to compete in a world where your reputation depends on timeliness and being on budget, being able to respond to the requests of other countries, having a large force across the world being able to market and look at the different possibilities, all of those elements were taken into account in making the decision that restructuring was in order, and that that restructuring would include seeking proposals to determine whether private investors would be interested in the commercial division of the entity. That is a broad answer.

Senator Marshall: Obviously, the independent studies led to the conclusion that the corporation, in its present form, would not be able to compete and meet the policy objectives of either the government or what should be the policy objectives of the corporation. Is that fair to say? The minister will testify and the question can be put forward then. Do you have any insight into that?

Ms. Cléroux: It is in the public domain. It is a fair question to ask. Definitely, it is one of the conclusions reached in the studies of early 2009. The corporation is currently too small to really compete with what is happening across the world. Different elements would have to be upgraded to put the corporation at par with its competitors around the world. These things all went into making the decision to proceed with proposals of potential investors.

Senator Poulin: I have a supplementary on that point. I find that to be an important point, senator.

Has the option been studied of possible partnerships with other similar corporations, either publicly funded as a Crown corporation or privately owned or publicly traded? Is that not public information?

Ms. Cléroux: The current transaction process does not limit the different types of partnerships. As the different investors are considering what is on the table, they could come back with offers or proposals that would mean a joint venture. That has not been excluded.

Senator Finley: I have a supplementary. Would the reason for the apparently complex set of clauses in this part of the bill be to allow the minister, at any time, to exercise or to pursue any range of options among the group that I mentioned, but partnership might be a constituent part of it? Are so many different options or alternatives laid out here to give the minister some flexibility and freedom?

Ms. Cléroux: That is exactly why the bill is written with so many options.

Senator Finley: Thank you.

Senator Marshall: May I have one more question?

The Chair: Absolutely.

Senator Marshall: I want to go back to the accumulated deficit of about $4 billion, which is a significant amount of money. Has there been any forward thought given to how that will be resolved or addressed? To your knowledge, has the government taken a position on that? Not only do we have to consider what has been put into the corporation by the government and what will be required in the future, depending on which way they go, but also we have to consider this amount of $4 billion on the books. How will that be resolved?

It looks like the corporation consumes quite a large amount of taxpayers' money. Are you able to speak to that? What will happen to this large accumulated deficit on the books of the corporation?

Ms. Cléroux: As we proceed through the restructuring, all of the positives and negatives of the corporation must be taken into account in the decision that will be made by the government. It definitely includes that element. I am sorry to say that I cannot speak to the $4-billion deficit because that figure is not in my mind. Any positive or negative has to be taken into account as we move forward because we are restructuring a corporation that has to be looked at as a whole. These figures will come out.

Senator Marshall: They will come out when you look at the various options.

Ms. Cléroux: Yes.

[Translation]

Senator Carignan: There has been some discussion of the financial impact of the reorganization. Canada has he second largest uranium reserves in the world, but will the reorganization that has been discussed have an impact other than financial, whether on uranium exports or nuclear safety? Could there be dangerous or negative effects as a result of your reorganization?

Ms. Cléroux: The restructuring of AECL only concerns the crown corporation, which is not involved in the exploitation, extraction or sale of uranium. The restructuring work that we are now doing in no way affects the safety and security of Canada's uranium extraction industry.

The restructuring falls within the legislative and regulatory frameworks in terms of safety and security. The options that are being considered for the restructuring of AECL do not change anything in that respect, and the framework governing our current operation remains in force.

Senator Carignan: Canadians can therefore rest assured that safety will be maintained and that Canada will continue to play a leadership role in terms of uranium extraction.

Ms. Cléroux: Absolutely.

Senator Carignan: I note that a funding program will be created to facilitate public participation in hearings that deal with government bodies, including the commission. It appears there will be legal aid funding for groups or members of the public who would like to have a say on decisions made by the commission pursuant to the Nuclear Safety and Control Act —

The Chair: Senator Carignan, are you on Part 19?

Senator Carignan: Yes.

The Chair: We are not there yet. We are working on Part 18. I would ask you to hold on, we are getting there.

Senator Carignan: My colleagues have asked so many questions, including those I had in mind; and the witnesses have been quite informative.

The Chair: Do you have any other questions concerning Part 18?

Senator Carignan: No, that will be all.

[English]

Senator Neufeld: Pardon me if I was outside and did not hear you relate to this, but a national bank review was done by the National Bank of Canada, I assume because it is the National Bank, in regard to the financial structure and impediments that would be faced by AECL. Could you briefly lay out the top points of that report and put on the record what they said about AECL?

Mr. Lafaille: The findings of the National Bank report were summarized in the report that was made public in May 2009. If we made this report available to you, you will have the highlights. Broadly speaking, they are consistent with what Ms. Cléroux said about the government's reasons for moving forward with the restructuring.

Senator Neufeld: I remember when AECL came here and testified before our committee. It surprised me, only because I never looked before, I guess, but, in the last two fiscal years, hundreds of millions of dollars were injected into AECL for the refurbishment of the four reactors that you talked about, three of them within Canada and one in Korea. As a person from one of those jurisdictions that gets to help pay to refurbish some of the electrical generation in the provinces, as I said, at numbers in the hundreds of millions of dollars, it struck me that this could grow quite a bit. I asked if there were any reactors outside of Canada. Canadians can perhaps accept that they have to pay to help redo a reactor in Quebec, New Brunswick or Ontario. However, when you start spending lots of Canadian taxpayers' subsidy dollars on reactors out of the country, I think that set off a few alarm bells. That would go along with what you talked about, namely, that AECL is kind of small to compete in the big, wide world of nuclear reactors compared to all the other companies that do it. That would face AECL and the Canadian government for many years to come. Would that be true?

Ms. Cléroux: Currently, the only contract that has been signed outside of Canada and is live is the Wolsong contract. At this stage, we are still within the provisions of the contract as it has been signed. In the coming months, we will see if we go outside the limits that have been set in the contractual arrangement between AECL and the Korean utility. As we look to the future, this is one of the elements that the government has taken into account. In the CANDU fleet, there are many reactors outside of Canada. There are a lot in Canada, but there are also many outside Canada. This is part of the elements taken into account in the decision. Every time there is a problem with a contract, as the shareholder, the Government of Canada — so, the Canadian taxpayers — have to bear the responsibilities of a contractual arrangement that is not going as it was first envisaged. This is definitely one element that was part of the government's decision to proceed with the restructuring.

The Chair: The Government of Canada is self-insured. It does not have any insurance to cover these contractual problems.

Ms. Cléroux: It does not have any insurance because it is the shareholder. Even if it was not self-insured, it would be difficult because, with the Crown corporation and its contractual arrangements, it is acting more like a banker. It is more in the role of shareholder banker. AECL has insurance that covers part of the challenges that are faced, but it is always within what has been put in the boundaries of the contracts. It is not an insurance that covers everything that can happen.

Senator Hervieux-Payette: A contract was signed for the refurbishment, and the taxpayers of Canada would pay if there were cost overruns. Normally, if the calculations were done properly and we get to master the technology because we refurbish the same model over and over again, the entity should make some profit. I do not see how they would have signed a contract knowing in advance that they would lose. However, I understand from what you said previously that we are now in the first year of refurbishing these reactors that are aged and need to be updated. This is done for quite some time, and people will pay back according to the contract. If there are cost overruns, they are on the shoulders of AECL. Do I understand that correctly?

Ms. Cléroux: You have understood correctly. The contracts that have been signed have been signed under certain commercial terms. Right now, the Government of Canada has to pay for some of the cost overruns because it is within the terms of the contracts, and we have to cover the cost overruns. If the future contracts were signed, taking into account the learnings of the current projects, having a better base or a more informed base for the contractual arrangement, then normally the Government of Canada would not be in a situation of having to support the cost overruns.

Senator Hervieux-Payette: There are others who are actually in the refurbishing process. Can you tell me where the manpower comes from and how many people are involved in terms of both on the technical side and on the execution of the trade side? You need manpower to work on the reactor. What is the scope or the size of manpower that we are talking about for these three in Canada? How is it done in Korea? Do we hire manpower from the country outside, or do we have Canadians executing the task of upgrading or modernizing these reactors?

Ms. Cléroux: I do not have the numbers of people. However, I have the approach that is taken. I can explain that, and we can complete the information with numbers.

When we are talking about Canadian projects, the majority of the manpower is Canadian. It is a combination of folks who are working full time for AECL and people who are hired for those contracts. Depending on the terms of the contract, there is also manpower from the utilities that services the contract. That is the case currently in the three Canadian projects. As I mentioned earlier in a previous answer, none of those contracts cover exactly the same scope. Some relate more to the engineering design, some look at the vessel and some contracts are a bit broader. It varies.

For the contract that is currently going into Korea, part of the staff is Canadian, because some of the engineering and physics knowledge is AECL proprietary, so it is AECL staff that is located in Korea for the project, and the rest of the staff is from the utility, as well as local manpower that has been hired.

Senator Hervieux-Payette: How would you define the work done on the reactor and all the supplies and equipment that are done by companies that will eventually supply those who will work at the plant site? There are certainly some companies that will produce technological equipment. Are they in Canada or abroad?

Ms. Cléroux: It is important, to be able to understand this question, to just have an image in mind. You have all seen photos of a CANDU reactor. It is a big dome. What happens within the dome is normally the job done by AECL. What happens outside the dome, including the structure of that dome, is normally done by local staff and firms that perform the engineering locally. That is not normally part of the contract signed with AECL. AECL takes care of the physics and engineering of the actual reactor. That is where they developed their expertise.

As for the proportion of the contracts, we could supply you with more precise numbers, but the basic proportion is about one-third linked to the reactor refurbishment and two-thirds is the rest of the systems that go around it. We could provide you with the exact numbers.

It varies depending on the reactor, the size of the plant and the type of site production that they have related to the plant.

Senator Hervieux-Payette: For example, in Korea, I know there is a lot of welding and pipes and so on, but do we buy local product if we need to replace it? I imagine the specifications for this equipment are highly technical and they must not have any flaws. I know errors are not permitted in this case. It is done by us. I suppose we control all phases, namely the work done on site and the work done by the suppliers. That is what I would like to know. Do we have control of both sides? Do we have people from Canada who would also prepare material to be shipped and installed in the reactors that we have built elsewhere in the world?

Ms. Cléroux: Unfortunately, I do not have the details for Wolsong. However, every time AECL negotiates a contract, you are absolutely right that some components within the dome demand a high precision. We are talking about nuclear reactors; it cannot happen with a lot of loosey-goosey material. The material needs to meet specific requirements. Across Canada there is a group of industries we call the CANDU industries that have developed the expertise and are specialized in the different components. All of those parts are very specialized.

Those people, depending on how the contract is signed with the other country, can also apply. That knowledge, know-how and capacity of production does not exist everywhere. However, Canada, in its philanthropic adventure across the world, has signed different types of agreements with different countries. There is also a transfer of knowledge that is part of that.

With Korea, this was part of the agreement that was signed at the time. This is the case with India and Argentina. There is a transfer of knowledge. Depending on where you are in the transfer of knowledge, it can also be for the trades and the industries so that these local industries, based on collaboration with Canadian firms, can develop locally. It varies per contract. We would have to go to the details of the contract at Wolsong to be able to specifically address the contract arrangements. Part of it will not be in the public domain because it is a commercial agreement.

Senator Hervieux-Payette: Are we able to at least evaluate the manpower needed and the number of jobs we are talking about both on and off site?

Ms. Cléroux: We will work with AECL and try to provide you with the best information possible that is available in the public domain. We will qualify the information so that it is as informative as possible.

Senator Finley: May I have a supplementary?

The Chair: We have two other people on supplementaries ahead of you. Is that okay?

Senator Finley: Yes.

Senator Murray: Quickly, Ms. Cléroux, is it you and your team — the people who report to you — who will be evaluating the submissions that come in?

Ms. Cléroux: The submissions, as we are going through the different steps of the process, are being evaluated by our team as well as our advisers.

Senator Murray: Of course.

Ms. Cléroux: It is the joint review that is put forward to the decision maker in cabinet as a whole.

Senator Murray: I will close on this point.

The Chair: I am sorry to be anxious. Please proceed.

Senator Murray: Senator Finley, Senator Neufeld and the witnesses have properly drawn our attention to the considerable sums of money that the taxpayer has advanced to this organization over the years — not that I begrudge any of it at all. However, the sums are such and the situation is such that one understands the desire and the need of the government to examine other options.

The sums are such that it reinforces my view that it is Parliament — not the minister and not the government — that should have the last word on the disposition of this organization, and the terms and conditions under which it is disposed of. That is the point of departure for our discussion with the minister when we get him.

The Chair: Thank you. We have made note of your interest in having the minister here. Thank you for that point.

Senator Ringuette: In your different reviews, what is the estimated nuclear plant requirement around the world for the future?

Ms. Cléroux: I am looking through the report that you will be provided with to see if I have a figure that is readily available.

Senator Ringuette: I think it is 400.

The Chair: Your ``readily available'' is not always the same for us. It is hard to try and find it here.

Senator Ringuette: I have a statement from an expert that states that two-thirds of Canada's production of cars — with regard to our GDP, gross domestic product, contribution — and light vehicles is like the contribution of building one nuclear reactor to our Canadian GDP. Has that been reviewed in your assessment of AECL?

Ms. Cléroux: I am sorry, we were both looking for the number of reactors, and we apologize. It is probably the time of day. We missed your question. Could you please repeat it?

The Chair: Comparing the auto industry to the nuclear industry.

Senator Ringuette: An expert has said publicly, a few weeks ago, to a highly economic audience that this compares the sale of one nuclear reactor to the contribution of Canada's GDP. There are two equivalents. One equivalent is the production of two-thirds of Canada's cars and vehicles in one year — that is a significant contribution to the GDP — or equivalent to exporting in the order of 180, 300,000-tonne supertankers. That is quite a significant contribution. That comes from an expert.

Based on this — and you started your statement tonight by saying that you did a review that ended in May 2009 — in the last four years, was that the only research that was done on the AECL situation?

Mr. Lafaille: There was a study done before it was announced. In 2003 that was done as well. It was an announcement by the minister at the time, Herb Dhaliwal, but that was in 2003.

Senator Ringuette: You are the officials from your department looking into this file for the minister, and you are saying there was no study done prior to this May review?

There was no public inquiry; there was nothing done.

Mr. Lafaille: I can answer quickly that, in November 2007, an announcement was made by the minister at the time launching a review of AECL, so a study was done. In May 2009, a report was published about the outcome of this study.

Senator Ringuette: For the benefit of my colleagues here, because a question was asked earlier in regard to the contribution, I have a note that was sent to me. The source is from the Treasury Board of Canada Secretariat. For the 57 years of operation of AECL, starting in 1952 with the research and development of a reactor, up until 2009, AECL, according to the Public Accounts of Canada, has used a nominal total of approximately $8.5 billion of its parliamentary appropriation. That is for the research and development, the isotopes of Chalk River, the installation, et cetera.

Senator Finley: Is that the $1.6 billion that we gave the Chinese when we they bought the two CANDU reactors?

Senator Ringuette: According to the Treasury Board of Canada, your $1.6 billion was not taken from parliamentary appropriation.

Senator Finley: I wonder where it came from, then.

Senator Ringuette: Probably the same source as Chrysler and Ford and so forth.

The Chair: We have to keep this together, folks.

Senator Ringuette: With respect to your review that you completed in 2009, you stated a few minutes ago that a Crown corporation like AECL could not compete in the world market. Is that the conclusion of the review?

Ms. Cléroux: That is one of the conclusions, namely, that its size, being small, does not position it well to compete because all of the other corporations in the world are a lot bigger. One of the conclusions of the report — this is part of the report you will have available — is that the size of AECL is not currently competitive, if we want to be able to look at the renaissance in nuclear energy, be present in the world and be one of the players.

Senator Ringuette: How does it compare with the other Crown corporation that is French-owned, called AREVA? It seems to be able to compete.

Ms. Cléroux: We are talking about a very different structure. There was a very different decision made by the French government. It is a complex structure when you look at AREVA: part of the AREVA holding is with the private sector; part of what they are doing is within a partnership with the private sector; part is owned by the government; and part is directed by the Government of France. We are talking about a different structure, a different decision that was made, and a lot of investment by the French government into that corporation.

The review that was done has indicated to the government that the size — and I answered that earlier — of AECL did not put it in a position to be able to compete. The government has looked at the implication, and has decided that it wanted to look at the potential of having investors being able to take it one step further, instead of having the taxpayer bear the brunt of that growth.

Senator Ringuette: That is exactly at the time, as you say, of the renaissance, where it is expected that 400 nuclear reactors will be built in the world.

Thank you, that is it for my questions.

The Chair: Senators, I have to tell you that we are over our 8:30 p.m. advertised time. We can finish this. I would hope that we would go on to Part 19. It is very short, but if we are going to use up our time now, we can stop now and continue Part 18 at our next opportunity, or do you want to continue Part 18 tonight, and pick up Parts 19 and 20 at our next opportunity? We are over our time and it is up to you.

Senator Gerstein: We should set a time.

The Chair: It will be unanimous consent. We will not go past nine o'clock, in any event. We will not proceed with another part. We will finish Part 18.

Senator Finley: My question is simple: You mentioned that there were four installations other than Korea. I know there is Pakistan and Romania, and there was at least one large CANDU reactor built in China. Was a second one built in China?

Mr. Lafaille: There are two units.

Senator Finley: At the time that the deal was cut with China, I think back in 1996, a $1.6 billion loan was extended to China through, I think, the Canada Account. I do not expect you would know, but could you find out the status of that? Has that been repaid, or is it repayable?

I am asking: Has it been repaid?

The Chair: Are you able to answer that, witnesses?

Ms. Cléroux: We do not have that kind of information with us. We will verify the information that is in the public domain.

Senator Finley: The next question is very technical. Is ``loosey-goosey'' part of some kind of high-tech nuclear terminology?

The Chair: I was wondering that myself. I figured I missed that course in engineering.

Ms. Cléroux: We always get caught by those expressions.

Senator Dickson: Could Senator Ringuette circulate that piece of paper via the clerk that showed the contribution to the GDP?

Senator Ringuette: That was from a public speech from an expert. His name is Dr. Neil Alexander and he is the president of the Organization of CANDU Industries.

The Chair: Senator Ringuette will be pleased to share that with the clerk for distribution to everyone.

Senator Ringuette: Absolutely.

The Chair: That will help people who are putting figures together.

Honourable senators, our time is up. On your behalf, I would like to thank our witnesses this evening. This was an interesting discussion. Ms. Cléroux, Mr. Lafaille and Ms. Aitken, thank you very much. We look forward to those considerable undertakings that you have given us. They will all be very helpful for us to draw this material together.

(The committee adjourned.)