[Recorded by Electronic Apparatus]
Thursday, May 11, 1995
.1110 
[English]
The Chairman: Colleagues, I would like to call this meeting to order and continue with our order of the day, which is the main estimates. This morning we'll be hearing from Atomic Energy of Canada Limited. Mr. Morden will carry on without the overhead projectors and we will just hand out the presentation. You can follow it as we go, which we've done on numerous occasions anyway, so it won't be that inconvenient.
I want to welcome Mr. Morden, the president and chief executive officer, and ask him to indicate who he has with him. Then we will go right into the presentation. From there, of course, we will have questions from the members.
Mr. Morden, the floor is yours.
Mr. Reid Morden (President and Chief Executive Officer, Atomic Energy of Canada Limited): Thank you very much, Mr. Chairman. With me this morning is Dr. William Hancox, the vice-president for strategic planning in the company; and Mr. David Thomas, the chief financial officer of the company.
I had hoped to do this by way of the overheads because it adds a little more colour to the presentation, but you have the slides there, so I'll just give the colour commentary.
The intent is to provide a context for the annual appropriations we're here to discuss. In doing so, I'm going to put particular emphasis on AECL's position in the global market.
I think the company's major achievement in collaboration with Canadian utilities and private sector companies has been the development of the CANDU nuclear power system. The CANDU itself is the result of the federal government's investment in knowledge. It has been an important investment, and some of the results can be summed up by saying that in 1994 CANDU power plants provided close to 20% of Canada's electricity and 65% of the electricity in the province in which we are now sitting.
.1115
CANDU technology is the basis of a very strong and growing export business, which is generating substantial economic benefit for Canada. We expect to continue to win orders against very strong international competition. I think this will ensure that Canada will continue to have a competitive indigenous technology to meet its own electricity generating needs in the future.
AECL's first main activity involves growing the CANDU business by securing new CANDU power plant projects and expanding our commercial research and development and engineering services to the plants that are already operating. This means keeping CANDU competitive in the global market by continuing to invest in research and development and product engineering.
Our second activity involves developing technology for the disposal of nuclear waste, which is mainly the used nuclear fuel that is stored at each of the nuclear generating stations.
In that context, over the past 15 years AECL, in partnership with Ontario Hydro, has developed the technology and underlying science for disposal of nuclear fuel waste deep in the granite of the Canadian Shield. The Canadian Environmental Assessment Agency is currently reviewing a comprehensive environmental impact statement that describes the disposal concept and the supporting science and engineering.
Our third main activity involves fundamental research in nuclear sciences, which contributes to Canada's science and technology objectives. AECL continues to be Canada's national nuclear laboratory, making its unique research facilities open to Canadian universities and interacting very closely with the nuclear research organizations of other countries.
[Translation]
Since March of 1990, the federal government has invested 172 million dollars annually in AECL's research and development activities: $80 million to push back the frontiers of knowledge and develop new technologies that will allow CANDU plants to remain competitive internationally; $20 million to develop technology for permanent disposal of Canadian nuclear fuel waste; $52 million to push back the boundaries of knowledge in basic nuclear science, thus contributing to Canada's science and technology objectives; $20 million for de-commissioning of plants that have reached the end of their useful lifespan and for major capital equipment.
Ontario Hydro, Hydro-Quebec and New Brunswick Power together provide a further $89 million annually, $20 million of which is spent on nuclear waste disposal research and development programs, bringing the total to some $40 million. Sixty-nine million dollars are earmarked annually for research and development programs needed to ensure that Canada's 22 CANDU plants continue to operate safely and effectively.
What has been the return on this investment since 1990? The $80 million invested in CANDU technology can be assessed in terms of their direct financial or economic benefits.
.1120
That can be determined based on the commercial returns from CANDU business and revenues from both CANDU plant projects and the provision of R and D and technical services to operating nuclear plants.
In the five year period since 1990, the federal government has invested $420 million in new CANDU technology and the underlying science. For its part, AECL has recorded revenues in the order of $500 million for the provision of technical and R and D services to hydro companies in both Canada and abroad.
In addition, this investment has yielded $800 million in revenues from CANDU power plant projects in Korea and Romania; 80% of these revenues have benefited the private sector in Canada, and especially Canadian equipment manufacturers. The data provided here is limited to a five-year period, but each project generally produces revenues over a six year period. Thus, projects currently under way are still producing benefits.
[English]
Just to give you an example of the benefits that come from reactor sales, I'd like to take just a few moments to talk about our activities at the Wolsong site in Korea.
Our project in Korea is a $5 billion investment by Korea in Canadian technology. Our contracts total about $1.2 billion and cover work that is to be done or sourced here in Canada. That breaks down into $300 million for engineering services, $540 million for equipment and $330 million for heavy water. Only about $100 million of this is for work done by AECL. As I've mentioned previously, the rest in this case goes to Canadian engineering companies and equipment suppliers.
Work on the project began in 1991 and the three units under construction will enter service in 1997, 1998 and 1999. I regret not having the overheads to show you the next slide, which is a photograph of the three CANDU units under construction. It was put in to simply give you a sense of the scale of this construction project, which is truly immense.
If you can see it even in what you have there, the first unit, which is Wolsong 1, is in the background. It has been operating since 1983 and consistently outperforms Korea's other electricity generators, which are comprised of light-water reactors of American design, and coal- and natural gas-fired plants.
In 1994 Wolsong 1 was the world's number one performer. This ranking has been shared from time to time with other CANDU units, notably those at Point Lepreau and indeed with one of our other customers in Embalse, Argentina. The performance of Wolsong 1 and Korea's commitment to CANDU give us a very strong position in the international marketplace for further sales.
In the presentation I'm focusing on CANDU power plants, but I should note that we also see a market for our research reactor technology. This spring the Korea Atomic Energy Research Institute began operating its HANARO research reactor, which is based on AECL technology and the combined efforts we've made with the Koreans over the past seven years of its construction. I think this success opens the door further to other sales in Asia Pacific and beyond.
.1125
Looking to the future, I think there's a potential for contracts for five new units over the next couple of years. I think people know that following the visit of the Prime Minister to China in November, we undertook negotiations with China for two units. These will replicate the Wolsong design. The scope of the work to be sourced in Canada would be a minimum of $1.5 billion.
We are also in discussions with Turkey for the first of two CANDU units. Again, this unit would be a replication of the Wolsong design. The Canadian scope of work there would be in the neighbourhood of $700 million.
In very much looking not just in terms of future sales but also in terms of future product, we are discussing with Korea an additional two units for the Wolsong site. But these units would be of the 900-megawatt design rather than the 600-megawatt designs, which is the capacity of the four now on the site. Here again, the Canadian scope would be about $1.5 billion.
The 900-megawatt unit is a new product, but it's based on a proven design that is now operating at Ontario Hydro's Darlington generating station. We're currently reinvesting a portion of our commercial margins on the design of this new unit. Our market studies show that this is a product that will be highly competitive in a number of emerging markets. We're confident that we will secure the vast majority of these sales out of these prospects.
However, we cannot succeed without continued research and development funding. CANDU business is viable only if the product is kept competitive with other types of nuclear power plants and other electrical-generating technologies, notably coal-fired power plants and combined-cycle gas turbine plants. This is so only if there is a very strong base of underlying knowledge.
CANDU is differentiated from other nuclear power plant technologies by several unique technical attributes. These attributes secure CANDU's place in the market and must be continuously developed and demonstrated.
The expertise and knowledge in place today - this is the result of past investment - and the direction of future development give a potential buyer confidence such that investing $2 billion to $3 billion is a good investment in a power plant of our design.
About $165 million is required annually to advance the CANDU product and the underlying technology. The company's commercial margins provide somewhere between $25 million and $35 million of that. The CANDU owners group utilities, Ontario Hydro, Hydro-Québec and N.B. Power, somewhere between $35 million and $40 million. Some $100 million will therefore be required from the federal government.
I'd like to just open a parenthesis and try to put that in context. AECL's main competitors are FRAMATOME of France, Siemens of Germany, and Westinghouse and .AA Combustion Engineering of the United States. All these vendors sell plants that they've developed for their domestic use. All depend on funding from their governments for product development. All depend on access to government-funded research and development.
We have the numbers of the funds that flow to the competition from their national governments. I wouldn't take up the time of the committee by going through it all, but I'll take one example, which is France.
FRAMATOME, in terms of its relations and ties to the French government, is not dissimilar from the structure of AECL. FRAMATOME looks to the French government-owned entity called the Commissariat à l'énergie atomique to advance the technology and the knowledge associated with its pressurized-water reactor designs.
.1130
In 1995 the Commissariat à l'énergie atomique has a total budget of about 10 billion francs, which I think at today's exchange rate translates into roughly $2.8 billion Canadian. About 2 billion francs or $530 million Canadian goes on reactor technology, 1.6 billion francs or roughly $450 billion Canadian on reactor fuel cycles, and 1.2 billion francs or $330 million Canadian on nuclear safety. In other words, there is a total of $1.3 billion directly related to power plant technology.
Our other competitors receive from their national governments much the same in different ways.
I'm not opening this parenthesis to say to you that we need more to keep up with the competition. I think we have some pretty good people who, over the years, have carried out the research and development and the product development that have kept the CANDU system competitive. We are not coming to you for more than we are currently in receipt of. Mentioning these numbers in comparison to what some of our competition has is simply meant to put our own appropriations here in the context of what is received by the competition.
In terms of what that $100 million annually over the next five years, for example, might yield, we would say that it would yield about $1.7 billion in CANDU project revenues on the completion of the projects under way in Korea and Romania and four new projects. Again I have to stress that a large portion of the project revenues will flow through AECL to Canadian engineering and equipment manufacturers.
I think, without too big a stretch in optimism, that the Korean commitment to CANDU technology ought to be able to yield us at least two more 900-megawatt units in Korea for a total of four 900-megawatt units. This of course brings with it increased servicing business as the new units go on line.
If we are successful in coming to agreement on a contract with China, and once we construct the machine there and prove its worth, I think we can expect that China would adopt CANDU as part of their formally designated electricity supply system.
In sum, I think AECL's track record over the past five years and the strong prospects for new projects in the short term demonstrate the important role the company plays in contributing to the Canadian economy.
With that statement, sir, I will cease and I will try to answer any questions that the committee might have.
The Chairman: Thank you Mr. Morden.
We'll go right to Mr. Canuel.
[Translation]
Mr. Canuel (Matapédia - Matane): The 1995-96 Estimates report an expected drop of approximately 10% over last year in research and development operating expenditures. On the one hand, we are told there will be a 50% increase in capital expenditures and at the same time, a 14% drop in external revenues and contributions.
Could you explain to the committee the reasons for this increase? Shouldn't revenues be increased to fund AECL's growing share of internal development and engineering work?
.1135
Atomic Energy of Canada Ltd also receives an important contribution from Ontario Hydro, Hydro-Quebec and NB Power. You also mentioned that these agreements will expire in March of 1997. What will AECL management do to ensure that these seven-year funding agreements are renewed?
I would also ask that you repeat your explanation of the nature of Ontario Hydro, Hydro-Quebec and NB Power's participation.
I realize there are a tremendous number of CANDU plants out there, and I certainly want to commend you for that. In a sense, we pretty well cover the entire world. You also gave us quite a few very interesting figures.
You've probably already answered this question, but I would like to know whether the sale of a nuclear plant in Korea actually creates jobs here in Canada. What in fact are the economic spin-off in terms of jobs and revenues by province, and particularly in Quebec?
[English]
Mr. Morden: I will answer those questions, although perhaps not quite in order.
To take the second question first, the funding agreements, of course, run out in 1997. This morning in my opening comments I said the receipt of a government contribution to the continued research and development of the technology is essential and is not out of line with other countries wishing to have a nuclear industry within their borders.
I guess we are anticipating that over the next little while we will be sitting down with the federal government and, of course, with our utility partners. We'll try to come to a conclusion on what might be expected in terms of continued support for the research and development activities of the company, so when the funding does run out in 1997 there will be a strategic sense of where we go from there.
As to your third question, I've commented throughout the piece on the Canadian scope of work that would come back to Canada. And that, of course, translates into jobs of one kind or another.
For example, if we were to bring home the project in Turkey, which translates roughly into $700 million in work either done in Canada or sourced in Canada in terms of equipment, we think the translation of that would be roughly 25,000 person-years of work. Mr. Chairman, I don't have with me this morning a breakdown by province of where the work goes, but we can provide that. I will provide that as soon as possible.
There is no question that the two provinces of Ontario and Quebec have the lion's share of the work. But the 150 companies depending to a greater or lesser extent on the nuclear businesses as a part of their business stretch right across the country, all the way from the eastern seaboard to the Pacific.
.1140
I'd like to ask Mr. Thomas to answer the first question, but I'm not sure he has the details of it.
Mr. David Thomas (Vice-President, Finance and Administration, Atomic Energy of Canada Limited): No.
Mr. Morden: He was having some trouble with his monitor. Would you mind, sir, just repeating your comments?
[Translation]
Mr. Canuel: Yes, of course. The 1995-96 budget estimates report a drop of approximately 10% over 1994-95 in R and D operating expenditures. They also refer to a 50% increase in capital spending and a 14% drop in external revenues and contributions. My question was this: Could you explain to the committee the reasons for this increase? I won't bother with my sub-question. I'll just let you wangle your way out of this on your own. What I do find surprising is the 50% increase in capital spending. It's especially on that point that I would appreciate some clarification.
[English]
Mr. Thomas: Thank you.
In the footnote on the estimates, there is a note that covers the fact that we have changed the reporting format between the 1994-95 fiscal year and the 1995-96 fiscal year related to the isotope and the accelerator business units. In the 1994-95 estimates, those units were organizationally an integrated part of the research organization.
For the 1995-96 fiscal year, we have established those two units as separate business units to deal with some isotope contractual matters and to address a separate accelerator business unit. Therefore, the numbers are not comparable in the operating expense line and consequently in the revenue and external contribution line. The reality of the change is reflected in the subtotal line of $163,618,000 in the 1994-95 span down to $162,211,000 in the 1995-96 span.
If we exclude that difference due to a different organization, the numbers line up quite closely. But it is significant, as you say, to see an increase in capital and the investment in capital primarily rates to an increase $6 million for a program to refurbish the infrastructure at the Chalk River laboratories.
Many of the buildings at Chalk River date back to the 1950s and are effectively past their useful lives. The organization needs to effectively invest in infrastructure to provide the facilities researchers need and to achieve some operating economies that don't exist in the older establishments that are there. That increase of $6 million is a first step in that program.
The Chairman: Mr. Canuel.
[Translation]
Mr. Canuel: How many research laboratories are there in Quebec and Ontario?
[English]
Mr. Morden: The company is represented by offices with various tasks in five different provinces. There is an office in Fredericton. There is an office of close to 150 people in Montreal that is basically doing engineering and design work and some services work related to the CANDU business. The two main research facilities are located at Chalk River in Ontario and at Whiteshell in Pinawa, Manitoba.
We also have an engineering design -
[Translation]
Mr. Canuel: How many staff do you have there?
[English]
Mr. Morden: That is where we have the bulk of the staff. I think there is upward of 2,000 people at Chalk River. We've been downsizing at Pinawa in Manitoba and we have roughly 750 people there. We have roughly 100 people at the office in Satiation.
.1145
The Chairman: Mr. Morrison, please.
Mr. Morrison (Swift Current - Maple Creek - Assiniboia): Mr. Morden, I have a series of one-line questions. For simplicity and to avoid communications problems, I'd like to ask them one at a time. We can talk back and forth.
You mentioned the CANDU units that have been discussed as being sales to China. Have any contracts been signed for these units as yet, or is this still just conversations, memorandums of understanding, and that sort of thing?
Mr. Morden: It's probably closer to the latter than it is to the former, because following the Prime Minister's visit and initial discussions on the parameters of the project, which included a trip by me to China at the end of January, we have been spending most of the time putting together the anchor piece or the cornerstone of the financing package, which is very important, in terms of the participation that the Export Development Corporation wishes to have in the piece. Things always move more slowly than you would like to see them move. It is only fairly recently that we've been able to get a decision on that and been able to begin discussions with a little sense of greater detail with the Chinese. We expect a Chinese delegation to be here over the next few days to begin to put additional meat on the skeleton and move things forward toward actual negotiations on a commercial contract.
Mr. Morrison: That led very well into my next question. If this deal does go ahead, how will the sales be financed, particularly concerning the Export Development Corporation's involvement?
Mr. Morden: This is of course a very large project, and only a minority percentage of it will be financed through the EDC. We have selected a financial adviser and arranger, a financial institution that is now performing work in talking to other export credit agencies of other offshore suppliers to put in place the other parts of the financing package, which we anticipate will also require some borrowings from the capital market and some other lending from private sources. Anything of this magnitude will have a mixed financial package which gets put together block by block.
About the EDC's contribution, it is going to be lent at the non-concessional rates that have been established within the OECD agreements. Indeed, the company will carry any additional load the original borrowing to provide the lending will require.
About the taxpayer, I can say without hesitation and qualification, this is indeed a non-concessional arrangement with EDC.
Mr. Morrison: What percentage of the financing would actually be under the aegis of the EDC? Or are you not at liberty to tell me that?
Mr. Morden: I think I would have to fall back on the comments I made in my opening presentation. We would anticipate there would be a minimum Canadian scope of work of $1.5 billion. We would hope to increase that, but that's the bottom.
Mr. Morrison: The entire $1.5 billion would be financed through the Export Development Corporation.
.1150
I have another financial question. On the last page of your presentation, you list $2.6 billion in anticipated revenues over the next five years. How much of that would be net before the $500 million R and D expense? In other words, if we spend $500 million on R and D, how much are we going to net back out of that projected revenue?
Mr. Morden: I think the figures I gave you are indeed the net-backs.
Mr. Morrison: They are the net-backs.
Mr. Morden: They are the net-backs. Those are the revenues, not the margins. I mean, they are the revenues that will flow back to Canada.
Mr. Morrison: Yes, but that doesn't answer my question. The suppliers obviously are only interested in the profit they're making; we as a country are only interested in the profit they will make and the taxes they will pay. So how much of that $2.6 billion would be net either to AECL or to the suppliers?
Mr. Thomas: There's both nets in terms of profit and in terms of value-added. I just want to pause on this before I try to think about how to answer the question.
The value-added to Canada is going to obviously be a large percentage of the $2.6 billion. As for the bottom-line profits, each organization obviously has some different rates of return. What traditionally falls to the bottom line after wages, taxes and all of the other costs incurred obviously tends to be a minor portion of that amount. If we think of the value-added then, it would be a significant proportion of the $2.6 billion.
Mr. Morrison: Okay. I don't want to belabor this because of our time constraints, but I must say I'm not entirely satisfied with the answer. Could you get some numbers, please, and send them to the clerk of the committee so that I can have a closer study of this particular question?
Mr. Morden: Sure.
Let me go back to a bit earlier in the presentation when I was discussing Wolsong. As what you might call the lead Canadian entity in Wolsong, we had contracts that totalled $1.2 billion - somewhat less than 10% of that is done by us as a company. Therefore, of the numbers I'm using, 90% flows through to Canadian suppliers -
Mr. Morrison: I'm aware of that.
I have another sales-related question on AECL's accelerator unit, which you didn't mention in your presentation. It's my understanding that as with the reactors to China, there are some ongoing discussions for the sale of electron beam accelerators to India and Japan. How are they going? What's the status of these sales? Are we going to make this one or is it questionable?
Mr. Thomas: In the case of Japan, we have a refundable deposit from a customer there. We therefore hope to be able to conclude a negotiation for the sale of a unit to Japan. And within India, we have one customer with whom we're at a reasonably advanced stage of discussion. He also has some timetables, however, in terms of when he would be using a unit for medical sterilization. The timesframe to conclude those negotiations, if we are successful, would be a number of months in the future.
Mr. Morrison: I see, and by that you mean it will be a number of months in the future before you really know if there is indeed a sale or not.
Mr. Thomas: Yes, we will know whether or not we will conclude a sale.
Mr. Morrison: That applies to both India and Japan.
Mr. Thomas: Yes.
Mr. Morrison: You're pursuing this sale vigorously, are you?
Mr. Thomas: Yes, those are both significant potential sales.
.1155
Mr. Morrison: I want to ask a few more questions about sales and economics, but because I have another question or two here, I had better defer those for a second round.
I'd like to know when we are going to have a high-level waste disposal facility in this country. When we do have it, who's going to own it and how is its construction and operation going to be financed? This is a pretty big question, but we basically have the technology. When is this going to be an accomplished fact?
Mr. Morden: It is a big question, and I'm glad you asked it. At the beginning of my presentation, I described very briefly the work we had done on its background and in research. As you know, we're satisfied that we have done enough underlying science and engineering to prepare the environmental impact statement that is now before the Federal Environment Assessment Review Office. I think it's quite important that the concept, which is really fairly revolutionary, be thoroughly examined in terms of its environmental impact and the impact it would have on any given site.
At the same time, since you asked about when all of this might happen, I'd just like to give you a little bit of chronology. Depending on where you want to place the starting line, we've been working on this research for somewhere between ten and fifteen years.
In 1988, which is now quite a number of years ago, the then Minister of Energy, Mines and Resources requested a review of the disposal concept under the federal environment assessment review process. In October 1989, a panel was appointed to do just that. In May of the next year, the panel held some open houses in various communities across the country. Late in the summer of 1990, it established a scientific review group to make a scientific evaluation of it. In the late fall, the panel held scoping meetings in fourteen communities in the five provinces where it was being reviewed in order to identify issues to be included in the guidelines for the preparation of the environmental impact statement. In mid-1991, seven months later, the panel issued draft guidelines for a review. And in March 1992, the panel issued final guidelines to us, the company. Two years later, we submitted the EIS to the panel.
I have to say, frankly, that the company is quite happy to get on with this as fast as possible. I do think the process of environmental assessment is important, but just from that chronology, it has become a very cumbersome piece of machinery.
In looking to the future, my understanding is that the hearings might therefore begin in the assessment agency late this year, although somebody told me the other day that they may not commence until next year. They will then go on for some considerable period of time, so I can't give you a precise answer on when it would happen.
In terms of assuming that the concept is approved without too much of a requirement for additional work, I must say that within the company we don't have a corporate position on how we would move to the stage of turning it into a reality in terms of selecting a site and putting it up. This, of course, is something else that is not entirely within our purview.
.1200
The disposal of the wastes of spent nuclear fuel is the responsibility of the utilities that burn it. This of course accounts for the vast majority of used nuclear fuel that would be the subject of the current concept. So in a way, the timing and the means by which it will be done is something in which Canadian utilities - Ontario Hydro above all, I suppose - will have a very considerable, if not determinant, say. They are the people who are putting in quite a lot of money, and it is largely their waste that will be used once the thing is established and gets going.
That's a long answer to your question, but it is a big question.
Mr. Morrison: It is not an answer to my question, because you didn't give me even a vague idea of when this may happen.
As for it being the responsibility of the utilities, I'm aware of that. AECL, however, certainly has some fiduciary liability in there. If I'm not mistaken, AECL has spent federal money - to the tune of about $350 million or $400 million - developing the concept for this high-level waste storage facility. We must therefore have some direct involvement, and that was the reason for the second half of my question about how this thing will be financed when it is built. Who's going to pay for it and who is going to charge the storage fees, if any?
Mr. Morden: Those latter questions are questions that have not been addressed. I think they also have to be the subject of what attitude and approach the federal government wishes to take once the concept is approved and is seemingly viable for implementation.
There is no direct-line relationship between moving from the development of a research concept to its commercial marketing as far as AECL is concerned. Indeed, over time we have spun off a number of companies based on the smaller concepts that we've developed and put out into the private sector once they reached a certain point. In terms of the policy options that the government may wish to pursue, I don't think this can be ignored.
The money has been deliberately devoted and it has, of course, been matched by the utilities. There has been a very considerable amount of utility money involved in the $400-odd million that we have spent on this.
Ontario Hydro, which is at the moment the possessor of most of the spent fuel, anticipates that it would not require this kind of storage or the implementation of the concept until, at the earliest, 2025.
Mr. Morrison: So we're just going to keep it around the reactors until 2025, in the swimming pools or in dry storage?
Mr. Morden: That is what Ontario Hydro's current plans are.
The Chairman: Thank you, Mr. Morrison. We'll come back to you at round two.
Mr. Hopkins, please.
Mr. Hopkins (Renfrew - Nipissing - Pembroke): During the presentation this morning, we heard about the amount of money that has been put into Atomic Energy of Canada Limited, and about some of the money that has been put out. At this time in our research history, Mr. Chairman, when everything is being very deeply scrutinized, I think it's important to put on the record once again that since 1952, Canadian taxpayers have invested $4.7 billion in AECL. The return on that, as taken from the Ernst & Young report, says that at least $23 billion was contributed to Canada's gross domestic product by the nuclear industry from 1962 to 1992. That's a period of 30 years, but that is in return for the $4.7 billion put in over a period of 40 years, from 1952 to 1992.
.1205
Every time we start talking in this country about putting money into research, some start thinking that we're putting it into a big sinkhole. It's important to underline the returns here.
Ontario Hydro, for example, says that between 1965 and 1989 the Canadian economy has saved approximately $17 billion in foreign exchange alone. I don't think that figure includes New Brunswick Hydro, which has also had a saving in that regard.
For obvious reasons, our witness this morning, Mr. Morden, did not get into the Maple-X reactor. I presume it's because that subject is still under legal discussion. But I wonder if he could give us a report on that in any way. If he can't, then we'll understand. It's important to understand why the Maple-X reactor is important, because approximately in the year 2000 the NRU reactor, which is the only one we have left in Canada that produces radioisotopes, will virtually reach the end of its life line, and the Maple-X reactor would be dedicated towards producing radioisotopes only. It would not be a research reactor.
To show you of what national importance this is - and this is why I raise it - in Canada today the Atomic Energy Control Board has issued 2,253 commercial and industrial licences to companies or organizations in Canada: 690 medical institutions across this country are licensed to receive radioisotopes; 514 government agencies are so licensed; and in educational institutions, universities, 286 licences have been issued in that field - for a total of 3,743 licences across the nation.
If you want a breakdown on these, Ontario has 1,541 licences; Quebec has 887; Alberta has 447; British Columbia has 373; Manitoba has 110; Saskatchewan has 107; Nova Scotia has 105; New Brunswick has 95; Newfoundland has 47; Prince Edward Island has 12; the Northwest Territories has 11; and Yukon has 8. So it's very much a national picture.
It's very important that we should continue this production, to say nothing of the fact that we produce 88% to 90% of the world's supply outside Canada as well.
I wonder if Mr. Morden could comment on what he sees as the future of this major export trade we have, and indeed what he sees as the guarantee to these medical institutions and others across this country that will be in need of this product in the years to come.
Mr. Morden: My first comment would be that, of course, as Mr. Hopkins said at the outset of his remarks, we continue to be in what are called facilitated discussions among the parties that at the moment are not in agreement on how the business should be conducted, so I will be a little bit circumspect. But I would like to tell the committee as much as I can about where we are at the moment. To do that, I think I have to say a couple of sentences about the history of it.
.1210
AECL has a very long and very proud history and tradition of operating on things that have to do with nuclear medicine and the other research issues Mr. Hopkins outlined just a few moments ago. Nevertheless, toward the end of the last decade there was the decision that what had become an entity within AECL called the Radiochemical Company, which dealt with isotopes and various other things, should be privatized. There was a great desire to privatize it, and to privatize it as quickly as possible.
As somebody coming to the play in the middle of the second act, so to speak, I have to say that in terms of AECL's interest, the arrangement at the time of privatization was anything but positive. It was contributing to very substantial losses.
Even with the privatization of the company, we continued to have responsibility for providing the molybdenum 99 isotope to the newly privatized company, now called Nordion, for its work in supplying its network of customers. We did incur very substantial losses in order to meet that commitment.
Various events took place, including the shut-down of the oldest research reactor at Chalk River, the NRX reactor, which made it clear to the company a year of so ago that they really could not continue to operate and be part of this business and take these risks in the way the business was structured. That led to arbitrations and lawsuits, which have brought us to the facilitated table.
In the meantime, legal proceedings have been stayed while these discussions are going on. They have been proceeding, in my view, quite well and in a very constructive atmosphere.
On the main themes and with some details still to be tied up...on the main principles, we have been able to come to a very large measure of agreement with Nordion's new owners, MDS Health. What remains is to have an agreement that will involve the money that is required and the means by which the Maple-X10 reactor, which, Mr. Hopkins, since we're all optimists here, we're now calling the Maple-1 in anticipation - who knows? - of maybe Maple-2....
Those discussions are proceeding, again in a facilitated way, between the government and Nordion's owner, MDS Health, in which the company is not directly involved. I think it's the hope of everybody that we are coming to a conclusion which will report success or otherwise. In the meantime, we continue to do everything possible to ensure a continuous, steady, and secure supply of isotopes is made available to Nordion for their purposes.
We continue to do it at considerable expense, because as you point out, Mr. Hopkins, the NRU reactor is quite old, and old things tend to require more maintenance and other things, all of which cost money to keep going. However, we continue to do it, and we make a very substantial effort to make sure Canada's position, which is largely an export position, and one, as you say, where we have a very large majority of the world supply, is maintained.
.1215
That's about all I can tell you about where we are today. That's where we are.
Mr. Hopkins: Infrastructure and leading technology have been mentioned this morning, as being needed if we are to maintain and promote our stable global name and our stable position in the world economy. Infrastructure of course is the big term today. That covers a host of things. But leading technology in itself is the most expensive one of all, and that's the one we need if we are going to maintain our high profile in this particular technical development in the world market.
What about the replacement of the NRU reactor at the moment? I know a lot of discussions have been going on for the replacement of NRU. That is only a short possible - we're talking just about possible time here - five years away. We're arriving at a stage at which there might be a gap in time between the phasing out of NRU and the beginning of a new reactor age. Where does the new IRF facility stand at the moment? Are there still ongoing discussions? Have you settled the design of it, the type of facility you want to put in place? If so, from there on, where does the financial reality hit the ground?
Mr. Morden: Over the past few weeks and months we have been in discussions with a very wide number of people: the federal government, various provincial governments, the academic community. So the discussions, in essence, are ongoing.
As to the design, the technology and other issues, the technology will be the so-called Maple technology, which is in the Maple-X or the Maple-1. It is the same technology as is now in actual operation at the HANARO research reactor in Korea, which I spoke about earlier. That's the technology that would be used.
In terms of the design, we have not settled on what would be the ultimate design because that involves knowing what the user community would want to have in the way of facilities to carry out research and do experiments and so on. If we were doing this as a simple AECL machine, then we might well have settled on that by now; but we have advanced the concept of a replacement for the NRU and a new research reactor very much in terms of a national instrument. That means that we have been consulting very strongly and very extensively with the universities and other interested research organizations throughout the country to try to get the best fix on, if you will, what everybody would like to have, as opposed to what constitutes a kind of reasonable machine that we could build for money that would seem to be achievable, and also to see whether people would be prepared to make a contribution to those funds.
In return for such contributions and interest, we are equally prepared to have the management of the reactors time managed jointly with people who would then become our partners in a national science project, if you will.
.1220
We certainly share the concerns that I think you bring forward by simply noting the age of the NRU. We have notionally taken the year 2000, beyond which we can't have as much assurance as we have now of the continued functioning of the reactor. Therefore we are bending our efforts to give form and shape to the proposal. Also, we have been working on the budget side to try to accommodate the parts of the design that the research community would like to have, and to put it into a form that can be constructed as efficiently and as cost-effectively as possible. That's really where we are.
The Chairman: Okay. One more?
Mr. Hopkins: I don't know which one to pick here, Mr. Chairman.
Mr. Thalheimer (Timmins - Chapleau): Take that one.
Mr. Hopkins: The sale of the two reactors to China - I believe Mr. Morrison questioned you on that one - are there any problems there? Are things proceeding reasonably well? Do you see any immediate or long-term difficulties in that sale? Do you think it will be completed? There have been some negative comments in the media, as you know.
Mr. Morden: Well, I guess from the comments in the media on various aspects of it, I've spoken to this issue publicly. We have in place the overarching instruments that have permitted us to go into the China marketplace in terms of the nuclear cooperation agreement that Canada always requires, and the government has assured itself that that contains the additional requirements of Canadian policy over and above China's participation in the nuclear non-proliferation treaty. So we have that umbrella, which of course is to answer one of the criticisms that has come along.
On the purely financial front I must say, after being involved for more than 20 years in international trade, in Canada's export performance, that China, once it has undertaken to do something and has contractually agreed to do something, is a country that has paid its debts. Frankly, we don't have a concern about that.
In terms of our discussions, which I was describing a few moments ago, I don't see any unusual difficulties. At the end of the day, as in any commercial contract, whether or not the deal gets done will depend on whether the price and the cost that are acceptable to China contain the margins for us and the other Canadian suppliers that are reasonable. But at the moment I have no reason to think we won't be successful in doing it.
Many people who have done business in China are very quick to say, ``If you're going into the Chinese market I hope you have patience, because this can go on for quite a long time. This has been our experience.'' I've always noted, though, that the people who say this also say it's really hard to make a buck in China, but no one who's ever said this to me has closed their office in Beijing. It may take patience and it may be hard to make a buck, but they're still there trying to do it.
In terms of the speed with which it will be done, certainly in some instances projects have taken a very long time to negotiate with the Chinese. I think matched against that, in this particular case, is the fact that China's requirements for power over the next 20 years are truly enormous. I think I used the statistic when this was a topical item last autumn, that every year, for the next 10 years anyway, just to catch up on their backlog, they would almost have to install as new capacity the total installed capacity of the province of Ontario - which, as you know, is quite considerable.
.1225
They want the power and they need the power. When I visited China at the end of January, my concluding meeting was with one of the vice-premiers. I must say, after he had spoken to me about their need to get as cost-conscious a deal as possible, the bulk of his conversation was directed at, if they were successful in concluding this, how quickly we could get this thing going, because their need for power was really very great.
As I've said, we will have a Chinese group here this week to take it to the next stage of detail, and we're pursuing it as quickly as possible. I think, because of their need for power, there are reasonable chances of doing it over the next few months.
The Chairman: Mr. Morrison, please.
Mr. Morrison: Mr. Morden, since we are running out of time, I'm going to shift gears and go on to a totally different subject. Could you tell me, just off the cuff, how much we are spending annually on fusion research in Canada?
Mr. Morden: I think on fusion the federal government's contribution is just over $8 million, if I'm not mistaken.
Mr. Morrison: I see. Are any other entities other than universities spending any money, or is that basically it?
Mr. Morden: I think there are some minor amounts that come from other sources, sir, and I don't exactly know what the sources are. Perhaps Dr. Hancox does. But the bulk is the federal contribution.
Mr. William Hancox (Vice-President, Strategic Development, Atomic Energy of Canada Limited): The federal contribution is matched by both the Ontario government, through Ontario Hydro; and the Quebec government, through the research arm of Hydro-Québec.
Mr. Morrison: I see. So basically we're talking about $16 million a year total, more or less.
Mr. Hancox: Well, three times....
Mr. Morrison: Oh, they're each matching the whole?
Mr. Morden: Yes, I'm sorry.
Mr. Hancox: Of the order of $26 million.
Mr. Morrison: Okay. My next question also deals with fusion. What's the status of Canada's bid to be the host country for the international thermonuclear experimental reactor? Where are we going on that?
Mr. Morden: That's a question, I have to say to you, Mr. Morrison, which would be better directed toward Ontario Hydro, which is leading the charge on this. I think you will know that we act as managers, if you will, because of the federal contribution, of the program, and the money simply flows through us to the two research entities in Quebec and in Ontario.
Fusion research for us, of course, is a very much a long-term scientific goal. In terms of the company itself, I think I've tried to describe where our priorities lie in terms of our own research efforts. So frankly, we are on the sidelines in this particular thing and I can't tell you exactly where it's at; it's not something in which we're directly involved.
Mr. Morrison: Okay. If they are successful, what will be AECL's exposure in the financial side? Do you know - although I understand you can't speak for the people who are trying to get this thing in here - what would be the overall cost to Canada if indeed we do end up with the facility located at Darlington or wherever? How much will it cost AECL annually, and for how long? How much will it cost all Canadian entities or participants in Canada, and for how long? Do you have any feel for those figures?
.1230
Mr. Morden: Frankly, if it were to happen, I suppose we would be in a new situation. Then if somebody came to me with a proposition that would involve exposing the company's balance-sheet, obviously I'd take a look at it at the time it was presented. Currently it's not in my anticipation of exposing the company's balance-sheets on this project.
Mr. Morrison: So you're not actively backing this proposal and it is not a priority of AECL to get the ITER here in Canada? This is not something you're interested in?
Mr. Morden: Could I perhaps reword that? I would be delighted if we were to capture what is a very interesting and forward-looking scientific project of some magnitude, if it were to come to Canada. I say that generally, and I would make supporting noises if I were asked to do so anywhere at any time. But the priorities of the company at the moment, in very constrained financial circumstances, are such that we are pursuing the priorities that I've described, and for the moment I don't intend to divert any of our revenues to this project.
Mr. Morrison: I'm asking now just for an opinion. Do you think it is in the cards that the thing may end up in Canada, or is this just a lot of talk?
Mr. Morden: I think in courts at some point you get somebody to say, ``Objection. That calls for a conclusion on the part of the witness''.
Actually, I don't really think one thing or the other, in quite those terms. This is a very big project and the amounts of money that are being talked about are very substantial, which would suggest that the people who are currently in the program and who have been providing the major share of it probably have a bit of an advantage out of the starting-gate when it comes to finding a site for it.
Nevertheless, as I was saying in my own presentation, in terms of the amounts of research money that flow to our competitors from their national governments compared to what we receive here in Canada, we've been pretty good at doing some fairly substantial things with a lot less than a lot of other people have.
So I don't know that it's all talk. We certainly have the scientific infrastructure. We have the research capabilities. Ontario Hydro I think is advocating that it would use part of its site at Darlington, so we have the right kind of infrastructure to support such a project. So we're not without real credentials in bidding for the project.
I guess all I'd have to say is that, like so many things for us, because we're a lot smaller than our competition in so many ways, in so many things, you've got to run harder and it's going to be a tough fight for the people leading this project.
Mr. Morrison: I'm going to go back again to the questions Mr. Hopkins asked about the radioisotope production. To your knowledge, is Nordion International Inc. still actively pursuing an alternate source of isotopes in the United States? If it is successful, what is this going to do not only to the Maple-X project but also to the Chalk River operations in general? Would it be a severe blow if they were able to replace our isotope capacity with something in which they might have more confidence in the States?
.1235
Mr. Morden: I don't know precisely what Nordion is doing. They would be pursuing what they see as their best business interests. I would assume - and it's nothing more than an assumption - if I were the head of Nordion and had an uncertain situation such as we have currently in Canada, I would be looking around for how best to protect my business in the future.
As I say, in describing where we are in the discussions, I think it's the hope of all the parties to them to come to a conclusion so we will have some certainty on whether this is going to be a major new initiative in Canada for the continuation of our position in the marketplace or whether, unfortunately, it's not possible to come to an agreement, in which case Nordion will have to make its own decisions.
Mr. Morrison: But the second half of my question, Mr. Morden, is what is that going to do to us? I gather an awful lot of the operating expenses of NRU are now met by isotope production. Correct me if I'm wrong on that.
Mr. Morden: About one-third.
Mr. Morrison: Then there is the further question of what the status of Maple-X10 actually is. The last time I looked the project was totally shut down. Is it still a go? Is it mothballed? What's happening there?
Mr. Morden: About a third of the operating costs of NRU come through the isotope revenue stream. The Maple-X10 project is indeed shut down, but most of the equipment is there and of course the shell is ready for the installation of the critical equipment. We would anticipate that if the project were to go forward, we would be talking about a three-year schedule to complete the project.
Mr. Thalheimer: Just to get you back on that waste problem, I'd like some idea...and we could relate it to just how massive a problem this is in relation to our garbage problem.
The other thing I was surprised to hear you say to Mr. Morrison was that the problem was one of the producer. It seems to me AECL, which is the developer of this technology, should be responsible, as part of the development, for disposing of the spent rods. Did I hear you say this was the responsibility of the producers? So you're out selling these things and you don't give a damn where these rods are going to land up. Is that a fair assessment?
Mr. Morden: No.
Mr. Thalheimer: I hope not. That's what you said was the responsibility of the producer. If you sell me a plant, you say, well, you find your disposal means.
Mr. Morden: Let me try to answer your last two questions. The first question is how big is the problem. That also falls in the category of I'm glad you asked that question, because it seems to me a lot of fairly inflammatory discussion goes on around the magnitude of the problem and it's perhaps just as well to try to get it in perspective.
A little over 1.5 million used fuel rods, fuel bundles, have been generated by the burning of CANDU fuel in reactors in Canada. Now, what does that mean? That means, if I can relate it directly to something that occupies a lot of the TV screen in the evening, the Stanley Cup play-offs. We are talking about a total mass and volume that is a little bit larger than a hockey rink, filled from the ice level to roughly the top of the boards. So I may say it is not a problem that suggests that we have bits of spent nuclear fuel all over the countryside. This is, in fact, a quantifiable and a fairly limited volume of material.
.1240
Your second question, sir, is also a very interesting one. I think that over time competitive nuclear vendors such as ourselves will, partly as responsible citizens and partly as a marketing tool, want to be able to say to a possible purchaser that if they buy one of our machines we'll come there, we'll build it, we'll train their people. When problems arise, as they inevitably will over the 30- to 40-year life of the machine, we'll be on their doorstep to help them fix it, and at the end of the day we will find a disposition for the fuel.
There have not been, other than the storage technologies we have developed and indeed have sold in various places to store the fuel in dry storage after it comes out of the swimming pools.... When we have sold the machines, it has been with the purchaser knowing full well that as part of the contract they take responsibility for the storage of their spent fuel. Until now, that has been part of contractual arrangements.
At the same time, we have spent some time this morning talking about the amount of research we have put into developing a concept for more permanent storage in the Canadian Shield, which is certainly designed to look after our used spent fuel here in Canada. Other countries, some with the same kind of geological formations we have, like Russia and Sweden, have been doing similar research.
What is in the future is in the future. We have certainly brought our concept of trying to look at a permanent disposal concept to fruition through the process we're in at the moment. If that's approved, we've had a discussion that over some time in the first quarter of the next century it might well come into use, certainly here in Canada.
Mr. Thalheimer: That's like saying the manufacturer of motor vehicles is not responsible for emissions, but governments have made them responsible. It becomes a very public concern, because if these things are just stored all over the place or if they can leak because of lack of proper storage, it's going to affect me and all the neighbours. Surely there's a responsibility in AECL to make sure this stuff is eventually properly stored.
Mr. Morden: I'd have to say that I think the utilities that have used the CANDU technology in Canada have, through their own pricing of their product, found various ways of funding what has proven to be quite safe storage above ground for the spent fuel they've had. I don't think I've heard anybody saying that Ontario Hydro or New Brunswick Power or Hydro-Québec have acted irresponsibly in this fashion, so I think people have taken a good deal of care in doing this. Subject to many of the same kinds of pressures, I equally don't think any of our customers overseas are going to go on an irresponsible path in terms of storing the spent fuel that comes out of the reactors we sell them.
.1245
Just to give you some additional background, I talked about the fact that in all probability the next units we hope to sell to Korea will be larger CANDUs than the ones currently under construction. This is very much a result of the fact that the Korean government is listening to public opinion that says because it is a small country without a lot of land, it would like to see these generation sites maximized so reactors aren't dotted all over the countryside. I don't know whether that's based on perception as opposed to fact, but the Korean government and the Korean utility are telling us they want to maximize the amount of power generation on the existing sites. Hence they are encouraging us very much to talk to them about a bigger CANDU that will give them more electricity per unit.
It's the same sort of thing. I think countries like that are responsive to their public opinions and that is also reflected in the approach they take to their spent fuel.
Mr. Thalheimer: I read some horror stories about Romania three or four years ago during the revolution. It seems the CANDU was being built there and the stories I read were just frightening. Has that problem been rectified and who's paying for all that? I read stories that they had unqualified engineers and everything was going in the opposite direction.
Mr. Morden: The short answer to your question is that those things have been rectified. This is a very long-standing, ongoing project that started in 1979 and proceeded in fits and starts over the intervening period. I'm telling you this morning that these things have been rectified, because about the time of the revolution and shortly thereafter we had not been involved in the project at all for some years, for reasons best known to Mr. Ceausescu. But the Romanians came to us at the end of the 1980s saying maybe we should try to restructure and resuscitate this relationship.
Since the beginning of the 1990s we have been in Romania with a very sizeable Italian partner to do the civil engineering and oversee the civil construction. The costs for whatever remedial work had to be done before we could get on with the actual completion of the reactor are included in the commercial contract we concluded with the Romanians at that point.
It's a nuclear island of potentially five units, of which we are now completing the first. The reactor is 96% to 97% complete, and if we get the proper licensing approvals from Romanian regulatory authority, we hope to begin to commission and bring the reactor to criticality some time in the course of the summer so it can go on the Romanian grid at the beginning of 1996 in a safe and fully operable condition.
[Translation]
Mr. Canuel: On the eve of the year 2000, it seems to me that in the nuclear research sector not enough attention has been paid to the medical aspect even if in the last 10 years or so, things have started to move a bit. Shouldn't that be one of your priorities?
.1250
We talked a lot about the CANDU program. It's all very well and good but, as far as I am concerned, in the medical sector, there is still quite a number of things that could be done. If it's not one of your priorities, I'll understand. If it's not the case, is it because you don't have the money? Why is it that we don't do enough in this sector? If you tell me you have done quite a number of things, I would like you to tell me what they are.
[English]
Mr. Morden: In the main your comments are quite correct. Some research that is done is medically related. We do have a biosciences unit and activity at Chalk River in particular. But those activities are indeed oriented, at least indirectly, toward the safety of the reactor itself. In terms of the current thrust of the company, the medical research is not a priority.
Part of the mandate that AECL has, of course.... When I was talking about the three main areas when making my initial presentation, one is to do underlying and basic research in a number of areas that have a nuclear connection. That, of course, could and might include the medical dimension.
Our major contribution has been through the cobalt technology, through the isotopes and so on. We have a continuing connection in that way.
Then you get down to the question of funding. If there were funding, because of the role that has been consigned to AECL as the national nuclear laboratory, if someone were to say, ``Here's so much money. We want to see medical research done'', then of course we would use the expertise we have and engage others to do it. But in today's world you do the things you can afford to do.
At the moment, our priority is to use the bulk of our research money to things related to the evolution and competitiveness of our reactor so that it will remain at the cutting edge of nuclear power generation technology. In the short term, as I've described, it is basically aimed at an export market, but as an interim stage so that we will have very good technology to use here in Canada for power generation once the demand picks up in the country, which probably will be seven or eight to ten years from now.
[Translation]
Mr. Canuel: What percentage of your budget is earmarked for medical research?
[English]
Mr. Hancox: In the numbers quoted earlier, $52 million was quoted for work in the nuclear sciences. Of the order of $3 million of that would go towards research mainly directed at the biological effects of radiation. So it is perhaps not medical research in the way you're thinking of it, but more looking at the impact of radiation.
AECL in fact has not, at least in my recollection, done any medical research of the kind you're thinking about. Of course, we've looked at the application of isotopes to medical diagnostic procedures, and those sorts of things, but we've never done medical research per se. That's always been somebody else's area of work.
.1255
[Translation]
Mr. Canuel: Thank you for the information. However, I deeply regret that, on the whole, only 3 million dollars are earmarked for this. It's next to nothing. I hope it will become a priority. I also hope that the government will be in a position to provide the necessary funding. As far as I am concerned, this is essential.
Is there a document which would mention, in terms of percentage, how much money is set aside for this in the province of Quebec, in Ontario and in all the other provinces?
I would like to have this information as quickly as possible. Thank you.
[English]
Mr. Morden: I think we can say that this research takes place at Chalk River exclusively.
Mr. Reed (Halton - Peel): I would like to make a few comments on the issue of high-level waste, and ask some questions.
One comment I have to make is that probably one of the bases for concern is about the way it's being handled at the present time. I understand it's quite safe and I understand the magnitude of the volume, but sometimes we tend to miss the point that being able to continue the present type of storage of nuclear waste we have depends very much on a stable society.
We can say that in Canada it's not going to happen that somebody is going to toss a grenade into a swimming pool or 100 grenades or whatever it takes to blow the side out of it, although we were more than a little shocked at what happened in Oklahoma City in the United States by an extremist group.
The fact is that the purchasers of these reactors around the world obviously, as you said, are responsible for their own storage and disposal. It would appear that there is a dependence on their societies remaining as stable and peaceful as ours over a fairly long period of time.
It has been a continuing concern of mine since my days on the hydro select committee in Ontario that we have this stuff on the surface and it's vulnerable. You also made a comment about who pays for the high-level, long-term storage, and you had said quite candidly that the subject of who pays has not been addressed.
Electrical utilities today are moving into whole costing; even environmental impacts are being monetized at the present time. In British Columbia that is certainly happening, and the United Nations has done some extensive work on energy utilization around the world. Some values are being put in, whether it's carbon dioxide going into the atmosphere and the burning of coal or sulphur or whether it's the warming of cooling water and so on.
Sooner or later the subject of who pays has to be addressed, because if you're looking forward you're saying that once domestic demand picks up, we might look forward to having more nuclear units in Canada itself.
.1300
The problem with nuclear power in Canada has been that it's essentially not competitive now. If we add in the costs of high-level storage - and obviously the taxpayer or the buyer of electricity is going to end up being the payer somewhere - how can we even imagine that there would be any possibility of building nuclear plants on a competitive basis? Darlington is not competitive. In spite of all the creative financing that Ontario Hydro does, it's far from it. It's built on the margin, whereas private generators of power using other technologies are building plants that will produce power profitably at half the price.
So I wonder whether we're engaged here in a kind of pipedream about how we might look at the future. Unless we solve the waste problem once and for all and can incorporate it into the whole cost of generating electric power, how can we justify moving on?
Mr. Morden: In fact, you would indeed get an argument from Ontario Hydro as to whether or not their station at Darlington is producing power at competitive prices. I won't get into a debate with you on that, but I think they would say that.
But certainly all three utilities in Canada that have CANDUs have included the price of storage and ultimate disposal as part of the electricity cost, which is kept, in Ontario's case, in a trust fund for ultimate use. So it's already included in the cost of the electricity that is given to the consumer.
In many of the countries that we're.... Korea, for example, is not a country blessed with the same kind of natural attributes as we have here in terms of what constitute the economics of electricity generation or distribution in North America. They have few resources indigenous in terms of coal or gas, and certainly very little hydro power; therefore the economics, quite frankly, in a country like that, and for that matter in large stretches of China, make the generation of power by nuclear means quite competitive in competition with the costs of other means of generating electricity.
If I may respectfully disagree, I think it's not a pipedream. It makes sense to people. If it didn't make sense to people, they would be loading up their countries with gas-fired plants or coal-fired plants, fossil plants. People don't buy these things, because of the big front-end cost of them, certainly without an awful lot of reflection that they have the thing.
For example, you might say that just as everybody has to have an airline, everybody has to have a reactor. I don't think that's the case. I wouldn't want to rely solely on the Korean example, but it's certainly one where the government, in conjunction with their national utility, have thought through where they want to be and how they want to generate the electricity they think Korea needs for its economic development. And their reliance on nuclear power is extremely heavy.
For a small country, they have also taken what I think is a far-sighted, but nevertheless very brave, decision to operate a two-technology nuclear system, where they have as the standard the American light-water reactors and, in a subsidiary role, ours. I think they're looking ahead, for example, to the days when there will be a fuel synergy between the light-water reactors, where the spent fuel from that can be, with some refurbishment, re-burnt in CANDUs and you get a double bang for the buck.
.1305
So I think people look at this very seriously; they have to because of the front-end costs. The people who have bought our machines, certainly most recently, have taken a very hard look at what it means before they've taken that decision.
Mr. Reed: I can fully appreciate that some countries would choose nuclear power as part of their mix. China is one of those. As you pointed out quite rightly, China's annual incremental demand for electricity is going up at a rate of about 30,000 megawatts a year at the present time, which is something that boggles the mind, it's so great. They have installed over 100,000 water turbines in their country already. Naturally there are places geographically where that can't happen and so on, so cost is probably less of a factor than necessity in some of those situations.
In Canada we have another story. There's 100,000 megawatts of undeveloped hydraulic power in Canada, or close to it; after La Grande it's a little bit less. It was 125,000 before the big Quebec project. The nuclear industry will have to compete with many of those sites in the future. That's from the Canadian society of engineers, if you want some bibliography on it.
As a matter of fact, Ontario Hydro is probably looking forward to the time when they are not generators of electricity any more but distributors, and therefore their reliance, because of the cost of building - maybe the way they do it now, I don't know. But it's going to be cheaper for them to purchase privately produced power.
Of course, the debate has raised the question of whether the production of nuclear power should be in private hands too, and there's been a great reluctance to even consider that by Hydro and by political committees such as this that have looked at that possibility. I don't want to rain on your parade, but I just point out reality.
I've followed Darlington right from the time the first dollar was committed. I watched the overruns slop in one on top of the other and I watched the money being poured out to pay interest on the stuff because wheels weren't turning at Darlington. Those megaprojects are finished. They're done in Canada. Anybody who would contemplate doing another one now is not looking at the rational expenditure of money.
The Chairman: I'm going to cut you off there because we're a little over time and I want to take an opportunity to thank Mr. Morden and his colleagues for coming this afternoon.
I just want to remind Mr. Reed that those of us in northern Ontario and northern Quebec might have a different discussion about hydro power and the kinds of effects it has on our environment and our landscape.
Mr. Reed: It's good for you.
The Chairman: That's another discussion for some other time. We won't get into that, but there are many of us who have a different opinion of nuclear power versus hydro power.
I want to take the opportunity to thank you very much for a very good presentation and a good couple of hours of discussion. I'll take this opportunity to suggest that we may be revisiting you and the atomic energy field down the line as we get into the outreach document the minister has sent to all the offices and the department. We will be looking at that, so I just want to remind you we might be asking for some more information. Of course, some of the members have asked for some and we hope to see that come to the office soon.
.1310
On behalf of the committee, thank you very much for your presentation.
Colleagues, this meeting will be adjourned until next Tuesday, when the Minister of Natural Resources will be here to talk about the estimates and of course the outlook document as well.
This meeting is adjourned.