Comments on Regulatory Modernization

Brendan Young
Director, Policy and Strategic Planning
Regulatory Affairs Sector, Treasury Board
RCD-DCMR@tbs-sct.gc.ca

September 5, 2019

Canada is in a national climate emergency
– Canada’s House of Commons, 2019

The perfect is the enemy of the good
– Voltaire, 1770 (from an Italian proverb)

Dear Mr. Young,

The Canadian Nuclear Association (CNA) appreciates this opportunity to provide comments on the Treasury Board Secretariat’s ongoing work on Regulatory modernization. The CNA strongly supports this initiative.

The CNA is a non-profit organization established in 1960 to represent the nuclear industry in Canada and promote the development and growth of nuclear technologies for peaceful purposes. Our national industry association represents the interests of clean energy generators, mining companies, the medical isotope community and others connected to the nuclear sector across Canada.

Introduction

The world’s climate problem is moving quickly. So are the technologies that might respond to it. So must the investments in infrastructure, capital goods, devices, services and knowledge that embody those technologies. The regulatory process might not always move with the same speed.

There is a need for regulatory regimes, but we cannot afford – particularly now – for them to impede the changes that will reduce emissions and slow climate change. We have many good rules intended to make Canadians and their environment safer and healthier. It would be tragic if, in an emergency, they impeded these same goals.

What was ancient wisdom to Voltaire is still true today:  The quest for the best tomorrow can conflict with what’s needed now. And in an emergency, the right balance tips toward what’s needed now.

What is needed now are reductions in emissions, which calls for the urgent innovation and deployment of more sustainable infrastructure, capital goods, devices, services and knowledge.

Regulatory regimes have traditionally viewed projects as sources of environmental and safety risks, and implicitly assumes that projects are often being built on greenfield sites.

But in an era of innovation and carbon constraints, new deployments are generally cleaner and safer that what they replace.

And in a slow-growing society, new projects are often “brownfield.”  That is, they are replacing late-in-life or end-of-life assets built decades ago. In these contexts, new projects become a major source – perhaps the major source – of emissions improvements.

Three General Themes on Regulation

Our industry appreciates having a world-leading, expert nuclear regulator, the Canadian Nuclear Safety Commission (CNSC). We also appreciate the efforts made by the government to invite, hear, and incorporate industry views.

CNA discusses regulatory issues with other industry sectors, including other highly innovative sectors (e.g. pharmaceuticals, medical devices, aviation). For example, CNA was active in the Canadian Chamber of Commerce’s 2018 study on this subject, and we also discuss regulatory affairs as part of the Canadian Manufacturers’ Coalition.

New Projects are at the Heart of Decarbonization

One point often made in these conversations is that: building and making new things is part of the health and safety solution, much more than it is part of the problem. The more urgently solutions and improvements are needed, the more costly it is to delay them with slow and burdensome review processes that ultimately do not lead to any better outcomes for the environment.

Regulation Needs Serious, Risk-Informed Cost-Benefit Analyses

Another common theme of such discussions is that regulations would benefit from greater application of cost-benefit analysis. Often, it is not clear whether increases in regulatory burden produce any material increase at all in health or safety – much less a net benefit – after the costs are fully accounted for. Regulatory Impact Analysis Statements (RIASs) as currently presented do not come close to providing the quality of information or even analysis needed. Better information would inter alia be risk-informed, that is, the probability or improbability of an event would be factored into the risk -and-cost calculation. Without much clearer cost-benefit tests – and in our view these should be conducted by government, not industry – regulatory changes are little more than an upward cost driver for Canada.

Governments Must be Clear that Nuclear is Clean Energy

A third theme, more specific to the nuclear industry, is that Canadian government programs and regulations can be very inconsistent (or at least unclear) about whether nuclear is considered “clean energy.”  Where there is silence or ambiguity, players can be implicitly discouraged from offering solutions because they do not want to invest time in applying. Given the weight of experience and evidence for the safety and reliability of nuclear technologies in Canada, and government statements to this effect, our industry believes that governments should be very consistent and clear that their “clean energy” programs and initiatives include nuclear. For consistency and completeness, this should be applied to activities across the whole nuclear fuel cycle (exploration, mining, fuel manufacturing, decommissioning, disposal and reprocessing).

Specific Comments in Reply to the Request Targeted Regulatory Reviews

Small modular reactors (SMRs) are increasingly expected, including by former advocates for a 100% renewable energy system, to be indispensable as part of a complete strategy for decarbonizing the economy and eventually replacing the burning of fossil fuels.

Several SMR designs are now being considered for demonstration at Canadian nuclear facilities, and commercial SMR deployment is expected to be feasible within the coming 8-12 years in Canada, notably for replacing coal-burning power plants and diesel-powered remote communities and mine sites.

However, the regulatory system in its current form will present various unnecessary or reducible barriers to SMRs, including their fuel supply and disposal/reprocessing, and (in some cases) to all new nuclear plants:

• Regulations are designed for large reactors constructed in sets of one to four. SMRs are likely to be deployed in fleets of identically manufactured small reactors distributed across many locations (such as remote communities or mine sites).
• While we were pleased that the Project List associated with Bill C-69 will not require greenfield reactor units up to 200 MWth to undergo a federal impact assessment, raising this threshold to 900 MWth would be more appropriate, to facilitate the replacement of coal-fired generating plants (e.g. in Saskatchewan).
• CNSC cost recovery fees should be rebated for first-of-a-kind units and scaled down for some number of units following the first one, so that cost recovery is more closely aligned with the economics of net revenue from a fleet.
• Regulations under the Nuclear Liability Act should be revised to reflect the smaller risks associated with much smaller reactors. Also, the market for nuclear insurance should be opened to competition, and incentives/assistance should be implemented to make insurance of first-of-a-kind units more feasible.

Red Tape Reduction Act

The nuclear regulator currently issues regulatory documents (RegDocs) that are not just guidance, but that contain requirements themselves. Rather than setting out only the path to regulatory implementation, RegDocs are themselves becoming the expression of what the regulatory standard is.

One consequence is that this has the effect of avoiding application of the Red Tape Reduction Act. Another consequence is that the drafting of substantial regulatory standards is less coordinated within the government. Some in our industry point to the regulations under Bills C-68 and C-69, as well as some regulations on radiation protection, as examples of this problem.

While the current regulatory system allows some digitalization, regulators generally require retention of the analog system as well. The end effect is that the industry must then obtain approval for two systems where there was previously only one.

Regulators are willing to move toward international standards, but only if the latter is more rigorous than the incumbent domestic standard. If international standards are desirable in these cases, consideration should be given to the possibility that they could reveal cases where the domestic standard is unnecessarily stringent.

Regulatory Mandates

As noted above, Regulatory Impact Analysis Statements (RIASs) as currently presented do not come close to providing the quality of information needed. Better information would inter alia be risk-informed, that is, the probability or improbability of an event would be factored into the risk and cost calculation.

Next Regulatory Modernization Bill

Generally our industry is concerned about the upward trend in cost recovery fees, which runs contrary to the apparent and expected trend toward smaller enterprises and smaller devices in the nuclear energy field. Efforts must be sustained to ensure that, at least, regulatory timelines and fees do not prohibit the success of technology start-ups and genuinely innovative products, and better yet, that the regulatory system allows them to thrive.

The CNA is troubled by the ongoing increase in the nuclear regulator’s overhead costs (notably staff) at a time when a number of licensees have reduced operations. The CNSC’s current cost recovery structure requires overhead costs to be spread proportionally over licensees. When a licensee shuts down a site or reduces operations, the total fees are not reduced they are just spread over other licensees thus driving up their fees. The CNA believes that this cost recovery structure needs to be re-evaluated and a better way be found to address overhead. Cost recovery needs to reflect services and while it is reasonable to cost recover some overhead, the government needs to restructure its cost recovery regime to better manage overhead costs which are currently placing an undue burden on industry and impacting competitiveness.

Finally, we continue to see a need for better, more consistent implementation plans for new regulations, which would provide much-needed clarity and certainty to industry players.

The CNA would like to thank the Treasury Board Secretariat for the opportunity to provide input into this critical initiative and we look forward to working further with the Secretariat as this process moves forward. For and questions or further information please contact Steve Coupland at couplands.cna.ca

Sincerely,

Steve Coupland
Director, Regulatory and Environmental Affairs
Canadian Nuclear Association