Proceedings of the Standing Senate Committee on
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.
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
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
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.
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
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
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.
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.
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.
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.
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.
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.
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.
Consequently, specific legislative authorities are required to complete
AECL's restructuring, which is dealt with in Part 18 of Bill C-9.
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
The Chair: Is that a public document, the document for expressions of
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
Ms. Cléroux: External consultants have been hired, meaning financial
and legal advisers, in addition to the legal counsel that is provided to us by
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
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
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
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
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
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.
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
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
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.
Ms. Cléroux: Public Works and Government Services Canada is the
contractual agent that conducted the tendering process in an open and
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
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
Senator Ringuette: It is covered by the clauses of the bill.
Ms. Cléroux: As indicated earlier, the bill does cover all parts of
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
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.
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,
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 . . . .
(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
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 . . . .
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
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
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
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
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
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
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
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
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
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
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
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
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,
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
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
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
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
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
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
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
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
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
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
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
Ms. Cléroux: Yes.
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.
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.