:
I call the meeting to order. Good afternoon, everyone.
We are here today, pursuant to Standing Order 81(5), to deal with supplementary estimates (C) for 2010-11. We're dealing specifically with votes 1(c), 5(c), 15(c), and 25(c) under Natural Resources, which was referred to the committee on Tuesday, February 8, 2011.
Just before we go to our witnesses for today, I want to mention that, as you all probably know, the budget date was announced for March 22. We had a committee meeting scheduled for the afternoon of March 22.
Is it agreeable that we postpone that committee meeting until after the other meetings that are scheduled?
Some hon. members: Agreed.
The Chair: We have today as our witness the Honourable Christian Paradis, Minister of Natural Resources, and with him Serge Dupont, Deputy Minister.
Welcome, Minister. We're ready for your opening comments.
Go ahead, please, for up to ten minutes.
:
Thank you very much, Mr. Chair.
I would also like to thank the committee members for inviting us. With me today is my Deputy Minister, Serge Dupont.
I must say, it is remarkable how quickly time passes. It has been almost a full year since I have testified before this committee. Today, I have the honour of presenting the Supplementary Estimates 'C' to the Committee, and I am looking forward to responding to any questions hon. members may have regarding the Estimates.
If I may anticipate some of those questions, I am sure the Committee has noted the proposed additional funding for Atomic Energy of Canada Limited. The Committee will also be interested in the ongoing restructuring of AECL. With the Committee's permission, I will devote my opening statement to that subject, and to our Government's objectives and initiatives for AECL and the nuclear industry at large.
[English]
There is no question but that the nuclear renaissance that provided so much optimism in recent years has been slower to ramp up than expected. At the same time, there are opportunities for refurbishment and new-build projects, projects that will generate non-emitting baseload power for decades in Canada and around the world. As a government, we want to ensure that Canada's nuclear industry has the capacity to respond to these opportunities, but we are also cognizant of our responsibility to Canadian taxpayers.
Our decision to launch the restructuring of AECL in 2009 will achieve these goals. This decision was not taken lightly. It was made only after the completion of two separate and independent analyses and based on clear, sound policy objectives. The results of the analyses were clear: only market-driven investment in the commercial activities of AECL, that is, CANDU Inc., could create a stronger platform for growth while protecting taxpayers from the inherent risks of the nuclear market. Restructuring was and is the correct choice.
[Translation]
Our approach was endorsed last week by Luis Echavarri, the director general of the OECD Nuclear Energy Agency.
He told an audience at the Canadian Nuclear Association Annual Conference that when it comes to the nuclear industry, it's important to separate the public responsibility for establishing a framework from the responsibility of private investors, and that restructuring AECL will take us in the right direction.
[English]
This is a complex process and it has taken longer than expected. AECL has incurred setbacks along the way. The delays and cost overruns at Point Lepreau, Bruce, and Wolsong are well known. They have affected CANDU Inc. and drawn more money from taxpayers.
In supplementary estimates (C), the government is proposing additional funding for AECL. I will not mince words: I am not happy with this. But it is a matter of responsibility, not choice. The Government of Canada will honour these fixed-price contracts and other AECL responsibilities. We are working with AECL to ensure that it draws no more of the funding than necessary while meeting all its obligations, including maintaining the highest standards of safety, security, and environmental responsibility.
I understand that AECL officials are here to discuss their efforts in this regard. Nonetheless, this and previous requests for funds make clear that to maintain and create jobs AECL must be restructured and subjected to greater market discipline.
Looking forward, we cannot expose taxpayers to such risks. AECL has not and will not take on new contracts with material financial risk during the restructuring process.
[Translation]
Unfortunately, any restructuring leads to a period of uncertainty. The Government appreciates the impacts of this uncertainty on AECL, its workers and unions, its suppliers, and the nuclear industry in general. We are moving toward certainty, for taxpayers and for the industry. Today, the Bruce, Wolsong and Lepreau projects are performing well within their re- based timelines.
In particular, the independent advisors I appointed say we now have realistic timelines for Point Lepreau. We look forward to a constructive outcome for the Gentilly 2 refurbishment.
[English]
There are opportunities. Ontario has signalled a commitment for two new reactors at Darlington. Just last week, at the Canadian Nuclear Association Conference, Tom Mitchell, president and CEO of Ontario Power Generation, said that new nuclear is on the verge of becoming a reality in Ontario. He added that OPG sees the merit in continuing to use CANDU technology, in particular building enhanced CANDUs at the Darlington site.
AECL is assisting refurbishment opportunities in Ontario and in Argentina as well. The company has strong relationships with Romania, Jordan, China, and India.
In other words, the prospects for CANDU Inc. are encouraging, and I am pleased to say that our team is engaged in confidential negotiations with committed investors. While such negotiations are always difficult and success is never guaranteed, both sides are very mindful that time is of the essence.
I will conclude by assuring honourable members that our government remains committed to Canada's nuclear sector. Our government's record of support and engagement is clear.
Just a few weeks ago, I announced a key project for the removal of low-level radioactive waste, as part of our ongoing implementation of the Port Hope area initiative.
[Translation]
We made the investments needed to ensure the safe repair and return-to-service of the NRU. We support AECL's plan to re-license the reactor through 2016. In January, I announced funding of four major projects to develop the potential of cyclotrons and accelerators to produce medical isotopes.
Internationally, we have led an unprecedented effort to co-ordinate the global isotope supply chain; signed a nuclear cooperation agreement with India; and joined President Obama's non-proliferation efforts. We are actively studying options for the future mandate and management of the AECL's Nuclear Labs.
These are all major initiatives, and a clear demonstration of our confidence in the people and the future of Canada's nuclear industry.
Thank you and I look forward to your questions.
:
Thank you, Mr. Chair. Thank you, Minister.
This is a little unfortunate for you. The Department of Natural Resources is not one of the government's priorities. They prefer to invest in prisons rather than natural resources, since your funding has been cut by 20%. You may have good ideas, but ultimately, we look at the figures and we see reductions in this case of $928 million. You are having to deal with cuts of $235.9 million in operating costs. Grants of $457 million are being eliminated because they no longer believe in renovations, and $235.6 million in contributions. We are going to review this together. We are also going to talk about Atomic Energy Canada.
We get the feeling that the process is dragging on somewhat at present. The Ontario government is prepared to buy Atomic Energy Canada. You have one genuine buyer, the SNC-Lavalin Group and the Ontario Municipal Employees' Retirement System, which are bidding for the project jointly.
You are having problems with Argentina because your Department seems to have received a very clear message from its representatives, who are not very happy. Are you satisfied with the way the tendering process is working at present? Why can the Ontario government not buy it?
Also, why is this dragging on so long?
Good afternoon, Mr. Paradis, Mr. Dupont.
I would like to talk about Atomic Energy Canada Limited. There is something I find surprising in the initial votes. For 2010-2011, there was $102 million. We see that with supplementary estimates (A), (B) and (C), we get a total of $872 million for AECL. I am wondering why you are so far from the valuation.
Votes in the last four years were divided as follows: in 2007-2008, $212 million; in 2009-2010, $841 million. How can it be so far off? I think that may have a negative effect on the private sector that could want to buy it. It gives the impression that AECL is a bottomless pit. That is the impression we have too.
Also, I'm concerned about isotope production. As you know, this committee has given considerable attention to all the problems at the Chalk River reactor. I am wondering what is going to happen if it fails. The licence extension has been approved until 2016, but what will happen after that?
You have invested in other forms of isotope production with the cyclotrons, but these aren't projects that have reached maturity.
I have concerns about AECL and what will be left once you have finished the restructuring. You said you were keeping the isotope production, but doctors everywhere want some reassurance.
:
In terms of the Main Estimates, the supplementary amounts you see are distributed in instalments. We are in the process of restructuring. That means that what was in the Main Estimates corresponded to the normal votes for the usual operations.
There are two aspects to the costs. First, in the case of the CANDU, there have been cost overruns because of the refurbishments. Some $418 million has had to be spent to refurbish the various reactors. When we are operating in instalments, the faster the transaction is completed, the faster we will be able to have better forecasts.
But one thing is certain, and this relates to your other question concerning the private sector. Whatever happens, contracts have been signed by the government and we will honour our obligations. That is why I have asked two experts to consider the Point Lepreau case in particular. We want there to be financial valuations and project evaluations to get more conclusive estimates than in the past.
On the second aspect, there have been massive investments in recent years in the Chalk River laboratories. We know there was an audit done by the Auditor General in 2007. She said the laboratory was in poor condition. The government's role was to spend money to make up for lost time, because there were not enough investments in the past. We have therefore restored it to appropriate condition. That explains the cost of the additional money.
You also talked about isotopes. We share your concern about the fact that the NRU has stopped operating. We have seen how fragile the supply chain is. That is why we have asked other countries to have a coordinating group to discuss how to better plan the isotope supply. We know that it came from five reactors that are not recent, that are old.
As well, we said that we will spend the money needed to make sure that the reactors are in working order and there is another licence until 2016, in addition to looking for alternative methods. That explains why we have made $45 million in investments to study the feasibility of continuing and pushing for isotope production, whether in the form of cyclotrons or nuclear accelerators, which generate little or almost no waste. This is an alternative method that is very promising and we are continuing to invest in that.
:
Whoa, Chair, cutting off a minister; that doesn't look good.
Bonjour.
Hon. Christian Paradis: Bonjour.
Mr. Nathan Cullen: These numbers we have before us are staggering. For this year, it is 190% overbudget. Last year it was 140% overbudget. In 2008-09 it was 84% overbudget. It's almost another billion dollars into the nuclear industry, after last year's almost $1 billion.
To be honest, Minister, I'm a little surprised that you're not more angry as somebody who's in charge of this file, meant to be managing the money that's going into it. It's 190% overbudget, and after years of going overbudget....
I thought you'd come here with a different message for us today, and for Canadians, that you were going to rein this thing in. This is something that you're trying to sell. I guess what's confusing to Canadians is that, if you're trying to sell something, is there any chance that Canada is going to recoup even a fraction of what we're putting into AECL right now?
:
You know, angriness is.... I am angry, but being here and showing that I'm angry--I don't know how useful it is. I have to be in solution mode, and this is where I am now.
It shows that we have to restructure that thing; CANDU definitely needs to be restructured. A contract of refurbishment has been signed in the past. We have over-costs, over-delays.
I'm not a professional myself, so when I got into the office I made sure that I had professionals to monitor what was happening on the sites. Now we have revisited the timelines, and I'm quite confident that we have now...
[Translation]
We have more realistic timelines.
[English]
We will get through this now. We know better where we are going with this.
But in terms of being angry, yes, I am angry. This is why it shows that we have to get that thing restructured as soon as possible.
I mean, in saying that this is a fire sale...it's not a fire sale. We can achieve a good agreement that will be useful for everybody. But now, as we speak, the burden is definitely too heavy for taxpayers, and we have to get out of this situation as soon as possible.
:
I am going to use it well, Mr. Chair.
I'm going to start by thanking the committee members for having me here, because ordinarily I chair the Standing Committee on Official Languages. I am going to address that subject first, Minister. I simply want to mention that we have had the opportunity to hear from representatives of your Department at the committee, including your Deputy Minister Mr. Dupont. I want to congratulate you on the efforts your Department has made to implement the act in response to the last report by the Commissioner of Official Languages. What we were most pleased to learn was that the briefing notes for the Minister had to be translated into French. I have to tell you that this information made committee members smile.
That being said, I want to come back to your presentation. There are two points that struck me, Minister. The first relates to the restructuring of Atomic Energy of Canada. I am pleased to see that the direction you have taken, privatizing Atomic Energy of Canada, if we may put it that way, is approved by Luis Echávarri, the Director-General of the OECD Nuclear Energy Agency. That means that we are on the right track and that is the thing to do. He has clearly said that this will bring AECL business opportunities and that we will not end up, as you said just now, with contracts that are not profitable, for which taxpayers must ultimately pay the cost. I think Mr. Cullen and Ms. Brunelle compared this to a bottomless pit. In my opinion, you are really on the right track for sealing the cracks.
A second interesting subject in your presentation is nuclear reactors. Mr. Coderre mentioned that Ontario had expressed interest in buying advanced CANDU nuclear reactors. I even saw on the news that Argentina is considering that possibility. That is encouraging, in that regard. You also confirmed this afternoon that negotiations are underway. So that's a good omen. I think the subject has been covered well.
Minister, I would like to talk to you about sustainable development. Last Sunday you announced funding for various renewable energy projects. I would like to know the exact nature of the recent investments, and at the same time hear you on the subject of the principle of fiscal neutrality. We know that it is possible, in a program, to bill for expensive measures, for example in terms of energy, and distribute the revenue to those that save energy.
Would you talk about the measures you have announced in relation to renewable energy, please, and your plan to make Canada a clean energy superpower.
:
Thank you, Mr. Chair. Good afternoon, Ms. Brunelle and gentlemen.
On behalf of AECL, I am pleased to be hear to discuss the Supplementary Estimates (C). I would like to introduce Kent Harris, Chief Financial Officer of AECL.
[English]
With approximately 5,000 staff, AECL has two operating divisions: the CANDU reactor division, responsible for commercial operations; and the nuclear laboratories, responsible for R and D.
The CANDU reactor division designs and builds CANDU power stations. It offers a full range of products, services, and engineering support to nuclear utilities. The nuclear laboratories, located at Chalk River, Ontario, have three main missions: the production of medical isotopes, nuclear research and development, and the management of nuclear waste.
As the minister noted, the government is continuing with its process to divest the CANDU reactor division. For our part, we are moving ahead with internal preparations to separate AECL into two entities. AECL is focused on a number of priorities to implement government policy, sustain operations, and meet health, safety, and regulatory requirements.
At Chalk River, these priorities include extending the licence of the site until 2016, implementing the isotope supply reliability program, implementing “Project New Lease” to improve aging facilities, and implementing the nuclear legacy liability program to safely manage historic nuclear waste.
AECL is heavily engaged in preparing an application to the Canadian Nuclear Safety Commission this fall for a five-year renewal of the Chalk River site licence. Our relicensing plan is on schedule and within the agreed protocol with the CNSC. The isotope supply reliability program is mandatory if AECL is to continue to produce isotopes until 2016. This program will ensure reliable, safe, and effective operation in conformity with modern standards and licensing.
Project New Lease is a long-term infrastructure improvement program designed to ensure safety and security for all Chalk River missions. As many of you know as a result of your visit last year, Chalk River labs, established in the 1940s, requires significant ongoing investment to ensure safe and continued operation as Canada's largest nuclear research campus.
Site infrastructure at Chalk River comprises facilities to enable nuclear research and medical and industrial isotope production. It contains facilities necessary to carry out waste management and decommissioning activities. Infrastructure includes not only specialized facilities and labs to work with radioactive substances, but also a heating plant, an electrical switchyard, and waste and water treatment facilities.
Project New Lease expenditures are beyond what can be managed within AECL's reference level. They include construction of shielded modular above-ground storage facilities for low and intermediate radioactive waste, refurbishment of shielded facilities or hot cells, and upgrades to the switchyard and power system for safe operation and code compliance.
The Chalk River site safely manages wastes created during ongoing operations, as well as Canada's historic nuclear wastes. AECL is implementing the government's 70-year nuclear legacy liability program and we are now approaching completion of the fuel packaging and storage complex, which is a significant milestone.
I am proud to report that the World Association of Nuclear Operators, made up of operators for over 400 power reactors worldwide, last month granted the NRU reactor at Chalk River full membership. This is the first time that a research reactor has ever been granted membership in WANO, and this gives AECL access to a rigorous peer review process and important operating knowledge and experience. This will allow AECL to build a stronger safety culture, based on best global practices.
With respect to supplementary estimate (C), AECL has been allocated $175.4 million. This funding is lower than was expected earlier in the year, owing to our improved ability to forecast projects as technical uncertainty has declined. I would also point out that funding to AECL has not been awarded on a full-year basis during this fiscal year because of the ongoing restructuring. Therefore, the need for supplemental funding at this time is driven by this approach, not by any recent variations in our plan.
AECL funding requests receive detailed and careful oversight through AECL's board and interdepartmental committees. Supplementary (C) estimates include funding to ensure isotope production from NRU, which is operating at full power and is meeting all demands for health, safety, security, and environmental upgrades to meet new regulatory standards to continue CANDU reactor technology design and development, to support life extension projects, and to support restructuring and related costs.
AECL management is committed to taking measures to deal more effectively with risks inherent in our projects and programs.
We have been implementing recommendations from various independent reviews, as well as improving our internal management processes.
I would like to take just a few more moments to complete a high-level tour d'horizon of AECL activities. The life extension projects at Bruce Power in Ontario and Wolsong in Korea are tracking ahead of the latest estimates for schedule and cost. AECL will complete its scope for both projects before the middle of this year.
In New Brunswick, the Point Lepreau project is tracking to the latest schedule and cost forecast, which was developed in September 2010. We remain committed to completing our scope of work by May 2012. While there has been a schedule adjustment by Hydro-Québec on the G2 project, we are ready to proceed with the retubing and refurbishment of the Gentilly-2 reactor near Trois-Rivières.
As members of the committee know, I'm sure, life extension projects are highly complex. They involve development of massive new tooling systems and technology, as well as extensive training of skilled trades, and the procurement of highly specialized equipment and materials. As with most “first of a kind” projects and technology, there is risk of encountering unforeseen problems. However, we have overcome significant technical challenges in our projects and we are using this knowledge and experience as a springboard to a stronger future. Our aim is to become a true high-performance culture. We will complete our current life extension project safely with the highest attention to quality, and we will deliver those reactors back to customers so they can generate clean, reliable electricity for another 25 years or more.
In terms of CANDU marketing, we remain active in both new-build and life extension markets here in Canada and abroad. Our ongoing nuclear services business, which supports the CANDU fleet worldwide, is robust and performing valuable work for our reactor fleet customers. Our continued goal is to promote Canada's world-leading CANDU technology with its distinctive attributes of fuel cycle flexibility and natural uranium around the world.
Thank you, Mr. Chair. Merci beaucoup.
That concludes my brief overview of AECL. We would be pleased to respond to any questions.
:
Mr. MacDiarmid, it's a pleasure to meet you.
[Translation]
You know that this is an extremely complex and serious situation. When it comes to atomic energy, society makes a choice. One of the reasons we think this must not be done at fire sale speed, the previous Liberal governments invested in this sector, is precisely because it is an investment. It is a little unfortunate to see that the government wants to proceed quickly and we are not sure of how things are proceeding at present. I have some questions to ask you.
I am going to talk to you first about the situation of employees. You said, correctly, that we have to protect jobs, that you still have contracts to honour, that it is essential to have this expertise and we must not lose it. Now in your resources plan dated January 25, 2011, we can see that by 2013, the number of engineers will fall from 859 to 340. That means that ultimately, there is going to be collateral damage, that we, as Canadians, will suffer a loss that may have an impact on the expertise of Atomic Energy of Canada itself. Is it not a little hard not to believe that what we are doing is getting rid of an asset, of something important to Canadians? And jobs will be lost. The decision to cut more staff was a difficult one to make, I assume?
:
It is not a complete or accurate explanation of our manpower outlook.
That chart represented essentially the manpower profile associated with the backlog of our committed business. So essentially it's always going to go down that way, but it does not include any provision for new business that we expect to get in.
So it's an incomplete picture, if I don't mind saying. There was never any intention that this chart would be made public. It served a particular purpose, but it leaves a large part of the overall story unsaid.
Certainly, when we look at our plans for the future, they are to grow the business. They are to promote CANDU technology on a global basis, and they are to become a major supplier to the province of Ontario for both life extension and new-build reactors.
So it's certainly my hope that AECL, or the future CANDU Inc., and hopefully both, will be employing more people in the future.
:
Let's go to Argentina for a second, because this is an example of something I find very confusing, or perhaps problematic, with this long, painful sale process that's going on.
The Argentinians seem to want to sign a deal for this refurbishment. It's a $500 million contract, give or take. They have also said to us that they're willing to take on some of the liabilities if there are cost overruns. They're at the point, and we've heard this from them, where they are considering suing the Canadian government to do the contract.
I've never seen a situation like this, for someone who wants to hire you guys. I can't help but believe that you're under some sort of restriction; unable to sign a contract that would make you a lot of money, make you more profitable, and make you a better sale. Would it not? I mean, having this thing on the contracts, having those good folks working on the Argentina project, most of this $500 million would be spent on Canadians, a bunch of it in Canada.
Why not sign the contract? The minister says there's no restriction on you guys signing this thing. Argentina wants to sign; they're willing to take the liability. My goodness, do they have to actually sue us in order to get this contract off the ground?
:
We certainly expect to continue to produce isotopes reliably for the marketplace. We don't control our marketing efforts; it's through our distributor. We have made it very clear that we have to re-earn our reputation as a reliable supplier before the volumes will return to where they were before and/or grow beyond that. We are in the process of doing that. We've made good progress in the weekly and monthly volumes of isotope production and we hope that will continue.
Clearly isotopes are not the only business and the only mission at Chalk River. Continuing the Canadian Neutron Beam Centre and its support for the academic and scientific research communities is an important mission, as is support for the CANDU fleet worldwide. We do very important research and development activities through the CANDU owners group and with utilities.
Naturally enough, the management of the legacy waste is another very important program that we support. We're proud of the accomplishments of our team. We're appreciative of the continued funding of the Government of Canada to support that work, because a lot of it is inherently pre-commercial in nature and it's an appropriate use of government and taxpayer money. Clearly, we're building for the future.
For example, if I may say, I'm pleased that we were successful in recruiting a new executive to head up the laboratories, Dr. Bob Walker, who joined us from Defence Research and Development Canada, where he was the head of the defence research establishment. He is a very, very qualified individual with a tremendous wealth of experience in running a lab. We were successful in attracting Bob Walker because of the great potential at Chalk River. So we have a future there.