AECL review forces federal nuclear liability to increase by $2.4 billion

OTTAWA – The federal government’s anticipated cost for cleaning up its nuclear program has soared by $2.4 billion to a total of $5 billion.

The unexpected extra cost will go straight to Ottawa’s bottom line, fattening up the deficit at a time when the government is desperate to trim it down.

In a statement posted quietly late Tuesday, Atomic Energy of Canada Ltd. said it has just finished a review of the federal liability for nuclear decomissioning and waste management.

AECL said previous estimates of $3.6 billion were out of date, and the indirect costs of disposing of radioactive waste over the next 70 years have climbed.

“The main reason for the liability adjustment is an increase in the indirect costs attributed to the decommissioning and waste management over the period of up to 70 years of the program,” the AECL statement explains.

So now, the government needs to put a liability of $5 billion on its books, rather than the $3.6 billion it carried up till now.

The agency says the extra amount of $2.4 billion will have to be included in the federal government’s financial results of 2012-13.

“The increase will require a corresponding adjustment to the liability recorded in the Public Accounts of Canada, which was $3.6 billion as at March 31, 2012. The adjustment will be reflected in the Government’s financial results for 2012-13, ” the AECL statement reads.

Finance Minister Jim Flaherty had previously projected a deficit of $26 billion for this fiscal year, although many analysts believe he will come out ahead.

Details will be made public on Thursday when the government tables its budget, although it was not immediately clear if the new AECL liability would show up in the budget documents.

For years, the federal government did not carry any liability for the inevitable cost of cleaning up nuclear waste.

But in 2005, officials began the process of trying to put a price tag on decommissioning, managing and safely disposing of AECL’s radioactive waste. That led to the $3.6-billion liability that was on the books last year.

Since then, however, anticipated costs have been rising around the world because of higher safety standards, a better understanding of the decommissioning and low interest rates, said Natural Resources Minister Joe Oliver in a statement.

So Ottawa ordered a second review in mid 2012, AECL said.

“Our government has a long-standing commitment to clean up historic radioactive waste sites for which it is responsible,” Oliver said in a written statement, pointing out that many of the liabilities date back decades to the beginning of Canada’s nuclear program.

“We remain committed to cleaning up these historical waste sites,” he said.

Ottawa is in the midst of restructuring AECL, and will issue incentive-based contracts for safe, efficient clean-up of nuclear waste, Oliver added.

He said the hit to Ottawa’s books would have been even worse if AECL had not kept their liability analysis up to date.

“This has allowed the government of Canada to discover this increase in costs earlier, which in turn has allowed us to formulate plans earlier. We will continue to take the actions necessary to protect Canadian taxpayers while ensuring that Canada continues to benefit from a strong nuclear sector,” Oliver said.

AECL has long been a drain on Ottawa’s finances, requiring billions in subsidies over the years. But it’s certainly not the only clean-up that will cost the government dearly.

Last spring, the federal environment auditor took the government to task for not setting aside enough money to deal with contaminated sites.

Scott Vaughan found that Ottawa would be facing at least $7.7 billion in clean-up costs but had only set aside a fraction of that amount of money.

AECL said that confirmation of its most recent calculations still need to be verified by its board, external auditors and the Office of the Auditor General.

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