Canada Sells Controversial Nukes Abroad

On a trade tour last month, Canadian Prime Minister Jean Chretien gave Thai, Korean, and Filipino officials a familiar pitch: Buy Canadian nuclear power plants - the world's safest and most efficient.

For decades CANDU (Canadian Deuterium Uranium), the world's only commercial heavy-water nuclear reactor, has been the pride of Canada's nuclear industry.

And for nearly as long, critics have questioned the selling of technology to nations like China that violate Canada's promises to uphold nuclear-weapons nonproliferation and human rights.

But what recently has surprised many Canadians is their government's willingness to set aside environmental laws and use a billion-dollar government loan to sell CANDU reactors abroad that Canadian banks will not finance and Canada's utility companies themselves will not buy.

"These reactors we're [selling] to Asia, they're so expensive and defective that the market for them has dried up [here]," says Tom Adams, a senior associate at Energy Probe, a Toronto public-policy group.

For instance, even as Mr. Chrtien was touting the CANDU in Asia last month, serious CANDU problems were bursting out in Point Lepreau, New Brunswick. The CANDU reactor there had sprung a leak, causing a shutdown. After nearly two years and millions of dollars spent fixing the CANDU at Point Lepreau - one of Canada's best - came the new leak and a big new problem: corroding "feeder tubes" that carry reactor coolant. For a 14-year-old plant with a design life of 40 years, this was yet another disheartening sign of "premature aging."

Are prospective buyers like the Thais, Koreans, or Filipinos told about the premature aging when they sign up? Perhaps.

There are 21 operating CANDU reactors in Canada. Yet no new CANDUs have been built in Canada since construction began on the last one in 1982. So Atomic Energy Canada Ltd. (AECL), the government-owned corporation that designs and markets the CANDU reactors, has turned to overseas markets - Argentina, Romania, South Korea, Thailand, and the Philippines - mainly focusing on Asia.

Costly downtime, few sales

But selling Canadian reactors overseas has not been easy. Prior to the China sale in November, only nine commercial CANDU reactors had been sold outside Canada in more than three decades. Partly this is because CANDUs have proven costly to maintain. Despite claims of greater efficiency than other reactor designs, CANDU reactors seem to be experiencing much more downtime as they age.

AECL officials point out that there are six CANDU reactors among the 25 most efficient in the world. But a 1995 global tally in Nuclear Engineering International magazine shows CANDU reactors operating at only a 61.4 percent load factor, lowest of all reactor types.

"Nobody in their right mind would want to build one of these things here [in Canada]," Mr. Adams says. "That raises the question of why the Chinese and other governments are buying?"

Aside from high maintenance costs, a global trend toward light-water technology has also made CANDUs a hard sell. Increasingly, AECL has come to rely on large-scale government financing to help sell CANDUS.

On Nov. 26, 1996, Chinese officials signed a contract for two CANDU reactors worth $3 billion - a reactor design similar to the one at Point Lepreau. AECL had been working for years to get the sale, but hit a snag when Chinese negotiators wanted major concessions. Faced with a financing deadline, the Canadian government last summer made the Chinese an offer they could not refuse: the largest loan on any single project - $1.1 billion - ever made to a foreign government.

"Clearly, the main reason the Chinese bought CANDUs is that Canada was willing to put up the financing at very cheap rates," says David Martin of the Nuclear Awareness Project, a nuclear watchdog group in Uxbridge, Ontario.

Defending the loan before Parliament, Trade Minister Art Eggleton said the deal was not a sweetheart, but "a regular commercial operation." Details cannot be made public, the government says. But far from being "commercial," such a loan would be considered far too risky for any Canadian bank, most observers agree.

One reason no bank would touch the deal, for instance, is that financial liability in the event of a nuclear accident has not been determined. Since China is not a signatory to the Vienna Convention on third-party liability, Canadian taxpayers could owe billions if an accident occurred at a CANDU in China, says the Ottawa-based Campaign for Nuclear Phaseout.

For AECL officials, all this amounts to sniping at a deal they say will create 27,000 "person years" of work in Canada. Selling reactors to China will help China's air quality and the global environment by lowering greenhouse-gas emissions.

Robert Morrison, director general of the Uranium and Nuclear Energy branch of Natural Resources Canada, says, "Having a big project like this in China is a bit of a flagship" for selling to all of Asia.

Critics, however, doubt such exports will ever recover the $9.5 billion in direct taxpayer subsidies pumped into AECL since the 1950s. That same amount adjusted for inflation would have lowered Canada's national debt by $24 billion, the Sierra Club says.

"The federal expenditure on CANDU has been a financial disaster," wrote George Lermer of the University of Lethbridge, Alberta, in an April 1996 critique of the CANDU program.

Setting aside environmental law

Such criticism has had an impact. AECL funding has been cut in recent years. But it retains key support in Ottawa. Mr. Chretien, a former energy minister, says selling CANDU remains a priority. "Some people don't like nuclear energy," he said at an Asia-Pacific Economic Cooperation meeting last November. "For me, I like it."

But what many Canadians don't like is the government brushing aside Canada's own environmental laws - which require an environmental review on federal overseas projects - in order to smooth the way for the China sale.

On Nov. 6, 1996, the federal Cabinet met in a quickly arranged session to change the Canadian Environmental Assessment Act. Those changes were published Nov. 27, the day after the contract signing in Shanghai, exempting the government from environmental assessments on federally funded overseas projects.

In response, the Sierra Club of Canada filed suit last month to force Ottawa to conduct an environmental assessment of the CANDU reactors sold to China.

Canada's sale to China is rippling south of the border, too. Before any US reactors can be sold to China, the White House must certify to Congress that China is not selling nuclear-weapons technology to rogue nations. "There's no question the US nuclear industry is pointing to the CANDU sales and increasing pressure to get China certified," says Steven Dolley, of the Washington-based Nuclear Control Institute.

"The US [nuclear] industry is saying: How can things be so bad [with human rights and nuclear proliferation] when Canada is willing to sell?" says Leonard Spector, a senior associate at the Carnegie Endowment for International Peace.

But beyond such moral questions there is the question of the CANDU's cost to taxpayers. And despite strong support in Ottawa, Canada's deficit cutters have gotten through. The AECL subsidy was slashed from C$174 million last year to C$100 million this year "Public and political patience is running out. They're running out of largess," says Adams of Energy Probe.