:
I call the meeting to order.
This is the 40th meeting of the Standing Committee on Natural Resources. Pursuant to the order of reference of Monday, June 1, 2009, we are discussing Bill .
Today we are continuing our deliberations. We welcome our guests and witnesses. In the first panel, from 3:30 to 4:30, we have Mr. Rex Loesby, president of Canadian Remote Power Corporation, and from Ontario Power Generation Inc. we have Mr. Albert Sweetnam, executive vice-president and director of nuclear new build, and Mr. Pierre Tremblay, senior site vice-president, Pickering. Welcome.
Through our videoconference technology, from Toronto we have Mr. Norman Rubin, director of nuclear research for Energy Probe. Mr. Rubin, welcome. Are you hearing us okay?
:
Thank you for giving me a few minutes to talk with you about Bill regarding liability caps for nuclear reactors in Canada.
The bill is of interest to our company as we are working to provide clean and safe electric power to remote communities and mines in Canada through the use of small nuclear power stations.
First, I want to give you a little background on Canadian Remote Power, and then I'll address a concern we have about the regulations that may accompany the bill.
The idea to pursue the use of small reactors grew out of my work for a mineral exploration and development company, Western Troy Capital Resources. We're developing a copper-molybdenum project in a remote area of Quebec, and we found our power costs were going to be very high with a long power line from Hydro-Québec or a diesel power plant. This led us to look at a small reactor as an alternative. We found that a number of countries are developing small reactor designs, but we were surprised to find that in a country where low-cost power is needed in remote areas, no one was pursuing the idea here. So we formed Canadian Remote Power Corporation to do just that.
Now, Canada has a national treasure in its nuclear industry. Its CANDU reactors, along with its nuclear scientists and engineers, have gained world recognition. Over the past 50 years, 45 CANDU reactors have been built around the world, and they have operated without a significant safety incident. Nuclear power is one of the most economical methods to generate electricity, and there are no carbon emissions. Canada can continue to be a world leader in the industry as long as it is willing to encourage the industry and keep its regulatory system consistent with recognized world standards. Canada has the opportunity to play a leading role in the world to reduce carbon emissions.
At Canadian Remote Power we recognized very early that we needed a very strong technical team, and we're very fortunate that good Canadians are available. Your handout lists these folks, along with a bit of their background. I'll highlight one member of the team, just to give you an idea of the calibre of the people we've been able to attract.
Dr. Gary Kugler is on our board of directors and is a member of our technical advisory team. Dr. Kugler is the chairman of the board of Canada's Nuclear Waste Management Organization and is a director of Ontario Power Generation. He was with Atomic Energy of Canada Limited for 34 years.
The question is this. Is there a real need for small nuclear plants in Canada? Currently, electric power for remote communities and mines is generated using diesel engines. These diesel plants generate approximately 17 million tonnes of carbon emissions per year and the electric power produced costs between 25 cents and $2 per kilowatt hour, as compared to what you might pay connected to the grid, about 4 to 10 cents per kilowatt hour. In Nunavut alone, the diesel fuel budget is more than $200 million a year. With small nuclear plants we can eliminate carbon emissions and substantially reduce the power costs for these communities and mines. While we don't believe nuclear plants are the only answer, we believe they can and should be a large part of the solution to the challenges of maintaining and developing sustainable communities in the north.
On the mining side, there are currently eight mines in the north using large diesel power plants. There are projected to be 18 by 2016. These mines are projected to need 400 megawatts of generating capacity. In the Northwest Territories, there are 11 world-class mineral deposits that could be mines if power costs could be reduced. Another application for small nuclear plants is to provide heat for oil sands recovery.
Can small reactors be safe? Well, we're looking at a number of reactor designs. One design is a TRIGA reactor designed by General Atomics in San Diego. In your handout is a picture of a TRIGA reactor. As with all the reactor designs we're considering, the whole installation might require only two acres of land. This design is attractive for two more reasons. First, if there's any unplanned rise in reactor core temperature, the chemistry of the fuel shuts the reaction down. Secondly, there are 67 TRIGA reactors installed around the world. Some have operated since the 1950s. They are installed in hospitals and universities. There has never been a problem.
We're also considering other designs, including Canada's CANDU reactor. There's a Toshiba 4S that we're looking at. Argentina has a CAREM design. We haven't decided which way we're going to go yet.
I will talk about nuclear safety.
You see in your handout a table showing the fatalities over the past 40 years in the United States and the United Kingdom for three major electric power sources: coal, natural gas, and nuclear. This table is from a June 2008 publication of the World Nuclear Association entitled, Safety of Nuclear Power Reactors. Chernobyl is not included in this as there was no containment structure at Chernobyl, and there was not an internationally recognized safety regimen in place like there is in Canada. You can see that nuclear energy is by far the safest of the three sources. It's misleading, though, because I haven't included hydro. There are actually 4,000 fatalities in hydro, but those are as a result of boating accidents on the reservoirs. Obviously, if you can do hydro, you want to do hydro.
Technological innovation in all areas of clean energy development will come from both public and private entities and ventures. Canada will be well served if its government can respond to the clean energy challenge by making the regulatory environment as conducive to innovation as possible without compromising public safety. One of those innovations may be small nuclear power reactors.
The regulatory process for permitting such small reactors will be difficult and there are substantial uncertainties in the permitting process. The more these uncertainties and timeframes can be reduced, the more likely it is we will be able to raise funds for our venture. We hope to work with Parliament and the regulatory agencies to reduce the uncertainties and timeframes in many areas, without compromising public safety.
The issue before you today is Bill , which would bring Canadian regulations more into line with international standards regarding liability caps for nuclear power plants. How might Bill impact our efforts?
Well, in the past the maximum insurance cap for all reactors, as you know, was $75 million, and existing regulations allowed lower insurance caps for small reactors. The amount of these caps for small reactors is determined by Natural Resources Canada and the Canadian Nuclear Safety Commission through the regulations developed by those agencies. Bill sets the maximum at $650 million, and the bill has a provision for setting lower caps for small reactors. Paragraph 66(c) reads:
66. The Governor in Council may make regulations
(c) fixing an amount of reinsurance for any nuclear installation or for any prescribed class of nuclear installation;
An outline of the regulations related to Bill has been drafted by Natural Resources Canada. There are provisions in the outline for reduced insurance caps for small reactors, but the caps are not well defined. We've discussed this with the staff at Natural Resources Canada and suggested the regulations should include consistent and better defined caps for all reactors. The staff there has been really responsive and has encouraged us to suggest modifications to the outline.
Our suggestion is to include the language you see in the handout in the regulations. It gets fairly technical, and to keep my presentation short, I won't read through it now. This addition to the regulations will provide a greater level of certainty for developers of nuclear power stations as well as preserve the right of the Governor in Council to modify the liability caps for special circumstances.
How does this affect us? If we do not have that certainty for the insurance caps for our small reactors, we would have to assume pretty much the worst case for our fundraising efforts. If we were required to carry the maximum of $650 million of liability coverage, our insurance underwriter has suggested our premium could be $1 million or more per year for each installation. If the liability is capped using the formula we've suggested, our annual premium would fall to an estimated $100,000, thus improving the overall economic forecast for our business and potentially lowering the power cost to the consumer.
Thank you for taking the time to hear our story and suggested language for the regulations to follow the bill. I would be happy to answer any questions when the time comes.
Thank you.
:
Good afternoon, everybody.
I'm here on behalf of Ontario Power Generation, and I'm joined by my colleague, Pierre Tremblay, who is the senior vice-president of programs and training at OPG. We are here today to support the early adoption and timely passage of Bill C-20. Thank you for inviting us to speak.
We'll leave you with a deck, which you should have in front of you. I'm not actually going to walk through the deck, which covers the background of OPG, our community support, safety and environmental performance, and a brief update on the new bill.
I'll just give you a quick background on OPG. It is Ontario's largest electricity generator. We produce two-thirds of Ontario's electricity and we own all of Ontario's nuclear reactors, including the ones at Bruce. We operate 10 of the nuclear units, we have a very strong safety and environmental record, and our 12,000 staff are an integral part of all our host communities. Four of the five top CANDU reactors in the world in 2008 were owned by OPG. Three of these reactors are at Darlington and one is at Pickering B. In addition, in the first quarter of 2009, Darlington operated at a capacity of 99.99%, as close to perfect as you can get with a nuclear reactor.
Now I'd like to direct your attention to slides 9 to 11 in the deck. I'd like to speak to the point in front of the committee, which is Bill C-20. OPG strongly supports the immediate passage of Bill C-20 because it modernizes the liability framework placing the liability clearly with the operator—where it belongs—it imposes a reasonable limit on the operator's liability, it provides more protection to the public, and it allows our local and international suppliers to support us on a reasonable insurance framework. We also look forward to being involved in the regulatory process. That should include the ability of the utilities to be involved in any changes to the liability limits, the ability to access insurance at competitive rates from Canadian and/or international providers, and a recognition that this is the first step towards Canadian ratification of the Convention on Supplementary Compensation for Nuclear Damage. In summary, OPG supports the early passage of Bill C-20 with the proposed liability limits.
I look forward to answering any questions the committee might have.
Thank you.
I'd like to make four points. I'll start not with my first, in logical order, but with what I think is the shortest; that is, as somebody who has spent more time in court while the Nuclear Liability Act's legality and constitutionality were debated than anybody in your room, I would suggest that neither the Nuclear Liability Act nor its draft successor, Bill , is likely to survive a charter challenge after an accident. That is, if, God forbid, the act is triggered, I believe it will be struck down and the protection it gives to the risk-maker will not actually be there when called upon. I will leave that there for discussion later and go on to my other points.
My first point, logically, can be summarized with the question: why in God's name? If you have an industry that is capable of creating a catastrophic accident, and job number one for a government is presumably to ensure that such a catastrophic accident never happens, and job number two of a government should be to ensure that the consequences of such an accident are mitigated and minimized to the extent possible, and job number three is to ensure that every potential victim of such an accident is taken care of to the extent that they deserve, why in God's name would you limit the liability of the entities that might cause such an accident?
I'd like to point out that one of the useful strains of research in this area is to look at past catastrophes. We can examine, for example, Three Mile Island and Chernobyl in the nuclear area; we can examine the Challenger crash; we can examine when two jumbo jets collided on a runway. And what we find when we look at these catastrophes is that virtually every one of them, when viewed in hindsight, seems to have been caused by a combination of negligence and incompetence. Then the question is how, in a proactive way, looking forward, would you extend the incentives to try to minimize incompetence and negligence going forward? I would suggest that the last thing you should ever consider on a list of what you might do is to tell a number of potentially responsible parties in advance that they will be held blameless and to tell the remaining party that they will be held responsible, but only up to a certain point, regardless of the total bill to clean up the accident and to mitigate the consequences and to give reparations to the victims. Yet that is exactly what the Nuclear Liability Act does at present and exactly what would be preserved in Bill if it is passed into law.
I'd like to just spend another minute or two on this. Obviously prevention is key, and telling somebody that they aren't responsible is counter to the incentives to prevention; I think this is simply logic. It will be extremely obvious after an accident, although it's now theoretical, thank heavens. In addition, we've done some studies. In fact, for our failed constitutional challenge of the existing Nuclear Liability Act, we commissioned a study on the consequences of a potential nuclear accident, a catastrophe, at a CANDU station. What that found is, obviously, first of all, the size of the release is a key variable in the consequences, but the impact of a given release can vary incredibly hugely, from effectively zero to enormous tens of billions of dollars of damage. The variables that drive that difference are two. One is the weather, over which we have no control, and the second is contingency planning, over which we have a great deal of control. We should have every incentive applied to the risk-makers to ensure that they ensure that contingency plans are as good as possible and as good as they would require if they felt they were going to have to pay the damages in full.
Let me be clear. Contingency plans, getting potential victims out of the way of the radioactive release, turns out to be right up there with the weather in determining whether you have thousands of victims, thousands of casualties, or whether you have perhaps none.
I'd now like to compare Canada with two other states—Germany and Japan, both of which, as I understand it, have imposed unlimited liability on their nuclear operators. I have several questions about this situation. Why do we have to be different? Are their reactors safer than ours, either by design or by operation? Is their emergency planning so much better than ours that their industry doesn't mind operating under unlimited liability? Are their operators simply gutsier? Do they have more nerve than ours? Or is their federal government more independent from the industry that creates the catastrophic risk? In other words, have they simply taken the needs of potential victims as paramount, rather than caving in to the requests of the risk creator?
I think you can tell from the way I framed the question that I have a guess about where the main difference is between Canada and these other countries. I think their governments played hardball and our government did not. Our government behaved, first and foremost, as the shareholder of AECL, as the creator of one of the world's prominent reactor designs, as an international salesman of nuclear reactors around the world. Their governments, in contrast, acted as elected officials, the representatives of the potential victims and the guardians of the environment that would be contaminated in this kind of accident.
I'd like to close with a brief reference to one growing development. We are gradually shifting from a regime in which nuclear reactors are built and operated by governments, or by creatures of governments, like crown corporations, to a regime in which reactors may be built by private entities. It is worth considering how the federal government would act on behalf of potential victims where you couldn't count on a provincial government, for example, to backstop the owner and operator of a reactor.
I believe the main area where the federal government must act is not in limiting liability—liability should be unlimited, limited only by the consequences of a catastrophe. Rather, the federal government can and must mandate a minimum depth of pocket.
There must be assurances that even after the entity that owns and operates a reactor loses the reactor and incurs a massive internal bill and a loss of equity from that, it still has, through a combination of insurance and other instruments, approximately enough money to meet the needs of a credible but worst-case, beyond-design-base accident. I think there's a shadow of that in Bill and in the Nuclear Liability Act, but I believe it's only a shadow. That is, I believe, an essential role of government.
We are entering a period of a couple of months now when Bruce Power is going to be actively negotiating with the Government of Saskatchewan toward building a new reactor, probably a CANDU. They've set themselves a deadline of December. I always predict failure for these efforts, but it's just conceivable that there actually will be something happening, and some of this will matter. Let's hope that victims will have more than $650 million of compensation available to them, and that the decisions about siting, about emergency planning, and about design will be informed by full liability extending to the private owners of that facility.
Thank you.
:
I ask members to take their seats, please, and witnesses to take your seats. Thank you.
Members of the committee, we're now going to reconvene and continue with the second part of our agenda. We're pleased to welcome Mr. Christopher Heysel, from McMaster University, who is the director of the nuclear operations and facilities at McMaster Nuclear Reactor. Welcome, Mr. Heysel.
Also, from the Nuclear Insurance Association of Canada, we welcome Mr. Dermot Murphy, who is the manager, Madam Colleen DeMerchant, who is the assistant manager, and Mr. John Walker, who is legal counsel, Walker Sorensen LLP.
On our video conference we have Mr. Simon Carroll, program officer for the Swedish Biodiversity Centre. Mr. Carroll, you're a long way away, but we welcome you and we're very pleased to have you as part of our panel discussion. I guess it's good evening, is it?
Good afternoon, ladies and gentlemen, committee members, and fellow witnesses.
My name is Chris Heysel and I am the director of nuclear operations and facilities at McMaster University in Hamilton, Ontario.
First, l would like to say how grateful and appreciative I am to be here to have this opportunity to address the committee today. I was invited to speak to the committee to give a university perspective of the proposed changes to Bill and how these changes will impact Canadian university research reactors.
In Canada today there are six remaining university research reactors: the five-megawatt pool reactor at McMaster University and the smaller, 20-kilowatt Slowpoke facilities at the University of Alberta, the Royal Military College, the University of Saskatchewan, École Polytechnique, and Dalhousie.
Every country whose energy mix includes nuclear generation uses university research reactors to help educate and train those highly qualified individuals needed to design, operate and license its nuclear fleet. Indeed, the first step in any nation's journey toward nuclear energy begins with a research reactor. These facilities provide the initial and ongoing education and training for the scientists and engineers that are needed to launch and sustain a nuclear industry.
The McMaster nuclear reactor--indeed all university reactors exist to support the education and research missions of their parent institutions. While it is common to refer to these research reactors as university facilities, they are truly part of our national infrastructure and should be viewed as Canadian assets.
The McMaster nuclear reactor serves our education mission at the university by giving undergraduate and graduate students studying physics, nuclear engineering, material sciences, medical physics, and health physics a hands-on educational experience. As part of their curriculum, these students attend laboratory courses using the reactor and associated facilities to enhance their theoretical studies through actual experiments and interactions. These students represent the future intellectual capital for Canada's wide and diverse nuclear industries, capital that today is in short supply and in extremely high demand.
McMaster University also tours approximately 1,500 high school students through our facility each year. The open pool design at McMaster is the only facility in the country where one can actually see an operating reactor. Prior to coming to McMaster, the closest most of these students will have come to nuclear technology is driving along Highway 401 and seeing the large concrete structures of our nuclear power plants standing behind the intimidating security fences that surround these sites. This is a somewhat daunting sight for these young Canadians, but by touring the McMaster nuclear reactor and seeing the signature blue glow of the core, the mystery shrouding nuclear technology is quickly lifted and students are left with a better sense of how the technology works, and hopefully with an interest to further their education at the university level in a science or engineering discipline.
Research is also one of the critical missions of Canada's nuclear university reactors. These truly unique and powerful research tools provide academia and students with the opportunity to further their investigations in a variety of areas of interest. These fields include nuclear engineering, material sciences, radio-chemistry, radio-biology, geosciences, environmental sciences, archeometry, medical and health physics and medical isotope research and development.
In addition to supporting the research and education missions for our respective institutions, university research reactors provide a wide variety of irradiation services supporting important Canadian industries such as mining, environmental monitoring, automotive, oil and gas, aeronautics, and radio-pharmaceuticals.
With over 20 years of experience in operation of research reactors, I am provided with a thorough understanding of the costs associated with operating these facilities. In order for university reactors to cover their operating costs, they provide services and products to various industries and users. While we do a good job at keeping our costs in check, we do have to compete with like facilities when selling our services.
Despite their increasing importance and relevance, with the exception of RMC, university research reactors receive no government funding to cover operating, maintenance, decommissioning, insurance, or the fuel costs necessary to keep these national facilities in service. This is why even small changes to Bill are directly very important to university research reactors.
In the absence of federal funding, in order to survive, university research reactors need to generate income by providing a wide range of services and products to markets that are also served by our two main competitors, namely, the AECL facilities at Chalk River and the U.S. research reactors south of the border.
AECL, as a crown corporation, receives a major portion of its operating funds from the federal government. Hence, fuel disposal costs, salaries, decommissioning costs, and liability insurance are all ultimately federally funded. South of the border, U.S. research reactors are loaned their fuel from the Department of Energy. Hence, fuel and fuel disposal costs are borne by the federal government. In addition, unlike Canadian facilities, decommissioning funds are not a requirement for operating facilities as long as university trust funds have adequate equity to cover these future liabilities. This is an opportunity not open to Canadian universities.
More relevant, nuclear liability is capped at $250,000 for these non-profit educational facilities, with the balance to a maximum of $500 million covered federally. This $250,000 figure was the original amount set by the Price-Anderson Act and has remained unchanged in subsequent revisions to the act in recognition of the fundamental national importance of university research reactors.
In reality, it is extremely difficult to compete with U.S. research reactors when their prices for services do not carry the costs associated with reactor fuel, fuel disposal, decommissioning, and the Canadian levels of liability coverage. Competing with AECL is even more unfair.
Despite the growing demands on Canadian universities' research reactors to provide highly qualified personnel to the nuclear power and medical isotope industries, the ability of these facilities to continue to generate the funds necessary to sustain operation continues to be eroded. The changes contemplated to Bill constitute one more example of how Canada is unwittingly allowing this erosion to continue. The proposed changes would require Canadian universities to carry liability insurance at a level 15 times that of our U.S. counterparts. We are currently carrying a liability six times that required south of the border. Such an increase places Canadian university research reactors on an unlevel playing field with AECL and our U.S. counterparts.
Despite the difficulties we face at our Canadian university research reactor facilities, I'm proud of the contributions we continue to make to our nation from a training and research perspective. These are important outcomes that must be maintained now and well into the future.
In conclusion, I would ask that the members consider the fact that we are already being asked to carry a liability limit in excess of that required of our counterparts to the south and urge the members to amend the bill to place our facilities on an equal footing with those in the U.S. In parting, I implore the committee members to reflect on the fact that research reactors at universities here in Canada are non-profit, non-government-funded entities whose sole purpose is to support the scientific and educational mandates of our nation.
Thank you.
:
Thank you, Mr. Chairman.
My name is Dermot Murphy. I manage the Nuclear Insurance Association of Canada, also known as NIAC.
As Chairman Tonks pointed out, I'm joined today by Colleen DeMerchant, the assistant manager, and John Walker, of Walker Sorensen, our legal counsel.
As advised when last we met with the committee, NIAC was established in 1958 in response to the need to provide adequate insurance coverage arising from the peaceful development of nuclear power in Canada. NIAC provides statutory coverage to nuclear power operators and others, as required by Canada's Nuclear Liability Act, of up to $75 million Canadian.
NIAC is a pool of property casualty insurers who operate in Canada. Each insurer who is a member of NIAC insures a percentage of the policy limit. It is important to note that insurers provide highly secure protection. Each member of NIAC is regulated by the Canadian office of the Office of the Superintendent of Financial Institutions, known as OSFI, which requires insurance to be very well capitalized indeed. NIAC insurers have a combined $10 billion in capital, approximately, which relates to a hundred times the current limit of the operators' nuclear liability policy.
A pool is a mechanism whereby a number of insurers agree to appoint a common agent to underwrite, jointly, a particular risk or class of business. It is commonly used when the risks needing insurance are few in number, require a spread of risk, or present some particularly hazardous exposure that would otherwise be impossible to insure.
Insurance is a true risk-transfer mechanism that has proven to be cost-effective, but more importantly, does not impact upon nuclear power operators' balance sheets at the time of loss.
We've observed that one of the main questions raised in the speeches during the second reading of Bill is whether $650 million Canadian is an appropriate limit on operator liability. The issue of the appropriateness of the limit of liability and the issue of how much the amount of insurance each operator should be required to purchase can be seen as independent issues. However, it would not seem appropriate to require operators to purchase more liability insurance than is available in the nuclear insurance market.
In our appearance before the committee last time, we advised the committee that the insurance market could provide $650 million Canadian in capacity. I am now pleased to report that it appears likely, barring any unforeseen events, that the nuclear insurance market will be able to provide $1 billion Canadian in capacity.
A question we are frequently asked is exactly how much nuclear liability insurance costs. Currently, for a $75 million limit, the approximate cost is $200,000 Canadian per nuclear reactor. This, by the way, is the equivalent of the cost of insuring approximately 130 automobiles in Ontario that have full coverage and limits of $1 million.
Previously we advised this committee that the cost of providing the $650 million limit, which is about nine times the existing level, would be approximately four to six times the cost of providing the $75 million limit. We estimate that the cost of providing the $1 billion limit, which is 13 times the current limit, may be approximately in the five to eight times range as compared to the cost of providing the existing $75 million limit.
We very much appreciate this opportunity to discuss nuclear insurance with this committee, and we welcome any questions in due course.
Thank you, Mr. Chair.
:
Thank you, and thank you very much for inviting me to appear before your committee today.
I've been working with nuclear liability and compensation issues for about 20 years, mainly in the context of the international conventions and the development of national legislation in Europe. It's from this international perspective that I've looked at the provisions of Bill .
In my presentation today I will argue that the proposed liability limit is too low and not in line with relevant international standards. However, having just listened to Mr. Murphy's intervention, I can see that the proposal from the insurance industry would bring it more in line with what exists internationally.
However, the bill as it stands today already appears insufficient and out of date. In my opinion, the bill as it stands today would not establish a modern comprehensive nuclear liability and compensation framework for Canada. There can be no doubt that the current Nuclear Liability Act needs updating. The bill aims to do this mainly by providing a new definition of damage and a significant increase in nuclear operator liability.
I agree that the bill would provide an improved definition of damage and an appropriate scope of damage to be compensated. These provisions are in line with those found in current international instruments and in contemporary national legislation in other countries with major nuclear power programs. These are clear improvements, and I will not discuss them further in this presentation.
The increase in the liability limit to $650 million Canadian is perhaps the most noticeable feature of the bill. At first glance, the proposed increase appears considerable. As was mentioned earlier, it's a nine-fold increase, although taking into account the inflation since 1976, I understand that this figure should now be around $350 million Canadian. However, the amount looks insufficient compared to what would be needed following a nuclear accident. There is no single internationally accepted methodology for assessing the economic damage that might result following a nuclear accident. Therefore, estimates of such damage vary widely, but whatever approaches are taken to calculate the possible damage, it is clear to me that $650 million Canadian would not be sufficient to compensate for damage from a moderately large nuclear accident. On that basis alone, I would argue that the proposed liability limit is inadequate.
This, I should note, is with respect to nuclear power reactors, and I take on board the comments about research reactors made earlier.
There are two other explanations that have been offered for the proposed liability limit, that they're in line with current practice internationally and that there is a need to settle them within the capacity of the insurance market. I do not consider this to be fully the case.
In claiming that the new liability limit is comparable to those found internationally, the basis for comparison is not clearly made. I would suggest that the only meaningful comparison should be with international instruments and national legislation that is applicable in countries with a similar standard of economic situation to Canada and with a similarly developed nuclear power program. On this basis, the relevant international instrument is the OECD's Paris Convention. The Paris Convention is open to any OECD member state and it has attracted membership from much of western Europe. In 2004 it was amended by a protocol intended to modernize this instrument. This protocol requires a minimum operator liability of about $1,100 million Canadian. This is the minimum standard that nuclear operators in western Europe are now expected to meet, and this minimum far exceeds the upper limit proposed in the bill. Indeed, a state that would apply the proposed Canadian liability limit would not be able to ratify the protocol to the Paris Convention. The proposed limit is simply too low.
It is also worth noting that the 2004 protocol to the Paris Convention removes any requirement for an upper limit on operator liability. A number of Paris Convention states already have in place, or are considering, unlimited liability for their reactor operators. This is already the case in Switzerland and Germany, and has been for some time. It is also the case in Finland, where a large reactor is presently under construction.
Earlier this month a Swedish government inquiry stated that there are “overriding reasons for introducing unlimited liability for the nuclear power industry in Sweden”, and it proposed amending legislation accordingly. Outside of the Paris Convention framework, Japan also imposes unlimited liability on nuclear reactor operators.
It is true that there is a finite capacity of the insurance market, in Canada and elsewhere. However, there is no inherent reason to bind operator liability to this limited insurance. There are other ways to provide additional credible, verifiable financial securities for compensation in the event of an accident. By failing to consider such possibilities, the bill unnecessarily limits operator liability to what can be provided by the insurance market.
One approach developed elsewhere to provide additional compensation funds is the pooling of operators' resources, not insurance pools. The principal advantage of an operator pooling system is that large sums of private money--not public funds--can readily be made available to compensate victims. Perhaps the most familiar example of this is the United States, where by combining third-party insurance with an operator pooling mechanism, the total compensation made available per incident is over $10 billion U.S.
Operator pooling was introduced in Germany in 2002. This was because the financial security required from nuclear reactor operators was raised to nearly $4,000 million Canadian per incident. That amount far exceeds the capacity of the German insurance market. The solution developed to meet this goal was to combine individual operator insurance with an additional mutual agreement between German reactor owners. Each partner agrees to contribute to the total financial security required, based on that share of ownership with the German reactor fleet. The partners must also demonstrate to regulators each year that the promised funds would be available if needed, and the ultimate liability of the operator remains unlimited. In the event that the damage caused exceeds the financing available, other assets of the operator are available to add to the compensation amounts, including recourse against the assets of reactor owners if necessary.
Earlier this month, a Swedish government inquiry proposed a similar approach to that being used in Germany; that is, a combination of individual third-party operator insurance combined with an additional mutual agreement. It proposed that the nuclear operators be required to ensure a fund of $1,900 million Canadian per accident. The reactor operators’ liability would also be unlimited. The Swedish inquiry favoured such an approach as it was economically efficient and also provided reassurance that the nuclear industry would be responsible for the major costs of a nuclear accident. I would note that the Swedish proposal is in the context of a planned new investment in Swedish nuclear power.
In conclusion, I would like to reiterate three points. Yes, I believe the bill would improve on current Canadian nuclear liability legislation in some respects. However, the proposed new operator liability limit of $650 million is not comparable to minimum liability obligations found in the most relevant international instrument and does not compare well with compensation funds in other western countries with major nuclear power programs. Taken together, key provisions of the bill appear insufficient and out-of-date already, when compared with those found in contemporary nuclear liability legislation elsewhere. Thus, in its present form, in my view, the bill would not establish a modern comprehensive nuclear liability and compensation framework for Canada.
Thank you very much once again for this opportunity to appear before your committee.