Last call for AECL subsidies

Tom Adams
National Post
March 20, 2002

Should Canada continue to bankroll that perennial money loser, Atomic Energy of Canada Limited’s nuclear reactor sales program? Herb Dhaliwal, the new federal Minister of Natural Resources, will soon be putting that question before the federal Cabinet, along with two reviews designed to inform their opinion.

Such reviews are not new. Mr. Dhaliwal’s predecessors have been churning them out for 50 years, most recently in 1995 and 1998. One of the current crop of expert reviewers brought in to help the government decide, Nesbitt Burns, was an advisor back in 1995. The other reviewer, KPMG, employs Reid Morden, until three years ago AECL’s chairman and CEO.

What is new is skepticism from a prominent Cabinet member. Whether the government should continue the $100-million a year subsidy is “what the review’s all about,” Mr. Dhaliwal said hours after taking over his new portfolio earlier this year. “What is the future of our Candu reactor and atomic energy? Because if we’re not making any sales and there’s no potential, should we continue to invest in those areas or not?”

Mr. Dhaliwal has good reason to ask hard questions. In 1995, and with help from Nesbitt Burns, AECL committed to sell 10 reactors in 10 years. Since then, only two were sold, both to China. The last hot prospect, Turkey, declined the nuclear option in July 2000. As Turkish Prime Minister Bülent Ecevit then observed: “The world is abandoning nuclear power.”

In the 1998 review, AECL committed to snag business in Southeast Asia by setting up offices in Thailand, Vietnam, and Indonesia. So far, no bites there, despite billions of dollars in bait that AECL has dangled before potential purchasers.

The only pending “sale” is to complete a Candu in Romania called Cernavoda 2 that was actually sold in 1977 yet remains only 40% complete. The process of completing it has been complicated by a series of misadventures, including shoddy work by slave labourers and the execution of the project’s sponsor, former dictator Nicolae Ceausescu. Like so many nuclear projects before it, the project awaits yet another subsidy from the Canadian government in the form of a Canada Account loan from Export Development Corporation, this time for $390-million.

AECL’s drive to find foreign customers gained new urgency in 1993, when Ontario Hydro decided it could no longer afford to buy Candu reactors. To stave off its own bankruptcy, Ontario Hydro began to phase out its existing nuclear plants by closing one reactor less than halfway through its planned service life and tearing up its plans to build, jointly with AECL, 10 more reactors. In 1997, Ontario Hydro pulled the plug on another seven operating reactors, admitting to an Ontario legislative committee that it would be unable to meet its financial obligations due to its nuclear problems.

Once the nuclear industry promised electricity too cheap to meter. Now the industry cares little what its power costs to consumers, an attitude that goes some way to explain its failure. AECL scientist Jeremy Whitlock, the industry’s unofficial voice through his online nuclear presence and comments in the press, minces no words in presenting his industry’s perspective. When asked whether he and his nuclear colleagues thought nuclear-generated power was cheap, he replied: “I submit to you that this is an irrelevant question, and if you think that any of us suppose otherwise, you have simply not done your homework.” Instead of cost, Mr. Whitlock prefers to measure value through complicated desk studies that attempt to value the “life cycle factors of the technology.”

AECL has lived off an uninterrupted stream of federal government subsidies for 50 years. In 1996, George Lermer, then dean of the faculty of management at the University of Lethbridge, reported that between 1947 and 1994, the federal government had invested $19-billion (in 2001 dollars) in AECL and its Candu program, over and above any offsetting gain to the federal government or federal taxpayers. Prior to Ontario Hydro’s forced closure of one-third of its remaining reactor fleet in 1997, Mr. Lermer concluded: “The Candu project should have been declared a commercial failure and wound up at least two decades ago.” Instead, the federal government has since provided the nuclear industry with billions more in financing.

Always a wily follower of Ottawa fads, AECL adapts its message to suit. Sometimes it casts itself as a cure to regional disparity to pick up regional development dollars. That is how Cape Breton obtained an unneeded heavy water plant costing hundreds of millions. Sometimes it is a champion for the Third World poor – all the better to tap the Canadian International Development Agency for foreign aid dollars. School children in Thailand received some of AECL’s nuclear “education,” paid out of funds earmarked for aid. In recent years, AECL has thrown a green cloak over its shoulders and tried to get paid for not emitting greenhouse gases. From its beginnings, AECL has excelled at tapping into government export credit subsidies.

AECL has succeeded in gulling so many, in part, because AECL has been allowed to conceal itself from scrutiny. Despite a legislative obligation to report annually, its corporate plans have not been filed with Parliament since 1995. In 1998, AECL stopped reporting its overseas “agent fees,” used indirectly in the past to bribe foreign officials. The public and the press have been kept in the dark along with government agencies and the federal Cabinet. Whether Canadians continue to be kept in the dark, and whether we continue to be forced to support what has become the longest-lived failure in industrial history, is now up to Mr. Dhaliwal.

Author’s note: This article incorrectly states AECL’s annual subsidy is $100 million. That figure was promised by the federal government as the limit of AECL’s subsidization, but the figures ever since that promise was made have been substantially higher

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