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HomeMy WebLinkAboutCOM 0212.129 1996-1998 Apri124, 1997 Dear Council Members: . As the current Vice President of Hawaii Organic ~~~~s~s9ciafi~n 1~iO~), I must tell you that our organization, which has f200 members state e, oes not endorse either the expenditure of county funds or the passage of any resolutions pro~n~g';or ~a~~ the construction and operations of an irradiation facility. The use of irradigjtp~l(al~'d ISa~t- treatment is expressly forbidden under the federal Organic Food Production Act (OFPA~originally passed in the ]990 Farm Bill and which will be signed into law during this calendar year. The law mandates that any product sold as "organic", or using any adjective implying organic, must be certified by an accredited certifying agency. There are currently between 70-75 certified organic farming operations throughout the state, grossing approximately $7 million in gross sales this past year with over 1,000 acres certified for organic agriculture production. This estimate does not capture the value contributed by uncertified organic farms which may be considerable. In contrast, the sale of exotic tropical fruits contributed $1.1 million in 1995. There are two Hawaii-based organizations offering certifications which comply with the federal standards devised by the NOSB (National Organic Standards Board): HOFA which is anon-profit (SO1C6), and our affiliate KOLA (Kauai Organic Farmers Association). The establishment of this vital and growing sector of local agriculture has been done almost entirely on private investment with little assistance from local government, the University of Hawaii, Cooperative Extension, or the state Department of Agriculture. At the national level, the high-growth organic foods industry has been increasing sales by greater than 20% for each of the last six years with total sales of $2.8 billion in 1995. Direct and export sales accounted for $718.8 million of that amount (New Hope Communications, "Market Analysis" 1996). Instead of being a "flash in the pan" as was predicted in 1990, organic foods have emerged from a niche market status to the mainstream marketing sector. Furthermore, I am along-term resident on the Big Island with undergraduate degrees in Horticulture (San Francisco College) and Agbusiness (UHH), a Masters in Economics (1JI1M) and I am a PhD candidate in Agricultural and Resource Economics (UHM). I farm organically grown produce for local markets and cut-flower orchids for both local and export markets. I am a certified organic inspector and do consulting work in alternative energy issues. Aside from my volunteer work for HOFA, I am active in many agricultural and community organizations such as the Big Island Sustainable Communities Association (BISCA) which I serve as President of the Board, the Low- Input Sustainable Agriculture for Hawaii project (LISA) which [serve as a Board member, and Pakaka Road Association which I serve as the Secretary/Treasurer. As an applied economist and taxpayer of this county, l presented County Council members Aaron Chung and John Santangelo with a list of questions which need to be answered before an informed decision can be made on this matter (See attachment A). I am concerned about the following matters in the context of the appropriation of $2 million dollars for use on an irradiation facility. 1 Ww~r au. 212' ~ 1 ru. x. FNb~,Ct'f' Rei. Hate 'APR 2 4 tnm _ ¦ The papaya industry, which is the only tropical fruit industry capable of significant year- round production, and necessary to establishing the minimum quantity of throughput to support an irradiation facility, is using anon-nuclear method which is cost effective, preserves freshness while controlling pests, and is acceptable under organic certification requirements. Aside from the vapor heat method being used on papaya, there are other technologies which have proven successful experimentally and may be superior to the vapor heat method such as a dry heat technology. We have not fully explored the commercial possibilities of alternative, non-nuclear methods ofpost-harvest treatment for papaya and other fruits. Trials conducted on the new ringspot resistant variety indicate that this variety responds well to the vapor heat process currently in use. What tests have been done on the new genetically-engineered papaya variety to see if it performs well under irradiation? According to a Cooperative Extension agent who has performed extensive tests at the commercial food irradiation facility in Florida, the results of irradiation are variety specific meaning you can not extrapolate from data describing tests on other varieties. All but a few of the large papaya producers in the state are under contract to the existing treatment plants which currently support excess capacity. Dole which recently planted 600 acres of papaya on Oahu (more than''/4 of the state's current acreage in papaya) intends to build and operate a vapor heat plant Currently there are less than 500 acres in exotic tropical fruits, producing barely a million pounds of fruit. There are only six members of the Hawaii Tropical Fruit Growers Cooperative. Therefore I question the fairness of appropriating county funds to support a facility which will only benefit a minimal number of producers across the state. ¦ Since an irradiation plant is seen by the County Office of Research and Development as a means to develop export markets only (Reference Lois Datta'a Interview with Margarita Hopkins), consumers of the state will not benefit at all. Why should the County subsidize upscale niche market consumption on the mainland? ¦ It is also clear that no serious economic analysis has been conducted which would quantify the direct and indirect benefits of such an investment in export markets for tropical fruits (Lois Datta/Nlargarita Hopkins). A serious look has not been given to the size of potential markets for tropical fruits on the mainland. A two-year research project recently completed at the University of Florida does identify markets for exotic tropical fruits and their potential, yet no one has mentioned an awareness of this reseazch. Neither has consideration been given to the magnitude of competition in fresh exotic tropical fruits which will result from increased plantings in Florida after Hurricane Andrew hit in ]992. According to Jonathan Crane (Cooperative Extension agent in Homestead Florida), producers in Florida are successfully using cold treatment on star fruit and hot dip on mangos to ship into California, Arizona, and Texas. Also, Florida growers have decreased their acreage in Mango in response to increased competition from Mexico. Florida is not under quarantine to other states for these fruits. Florida is not under quarantine to any state for the in shipment of Longans, Lychees, and other exotic tropical fruits. With 530 acres planted in star fruit and nearly 900 acres in Longans and Lychees, Florida is increasing its plantings of exotic tropical fruits. 2 ¦ A federally funded program already exists for certifying almost all tropical flowers and foliage as pest-free. The program operates at no direct cost to the grower and allows producers and wholesalers to ship product to all 49 states. L-radiation serves no practical purpose for the cut-flower and foliage industries. ¦ A state funded program already exists for certifying the media of potted plants as nematode- free. The program operates at a minimal direct cost to producers and allows producers to ship potted plants to all 49 states. The cost of building benches to maintain plants nematode-free cannot be avoided even with the use of irradiation. There are low-cost hot technologies (steam sterilization of media), which are already operational and available to Hawaiian producers, therefore, irradiation offers no perceived benefits to the potted plant industry. ¦ Trends in consumption, as evidenced by the growth in the sales of organically grown products, indicate that consumers aze becoming increasingly conscious of the health hazards inherent in conventional farming and are willing to pay a premium for foods which are organically grown. To assume that irradiated fresh foods will be readily accepted goes against this observable trend. No bonafide market research studies exist to support the claim that consumer acceptance of irradiated fresh foods is excellent. Product demonstration, when conducted by a reputable marketing firm which would provide tracking sheets for all inventory sold, prices, locations, dates, time of day, and customer comments, is a valid market tool used to introduce new products and move surplus product out of inventory. It can not be substituted for a statistically significant survey of consumer preferences. ¦ To build an irradiation plant to pursue export niche markets for exotic tropical fresh fruits is not a sustainable marketing practice. Niche marketing requires extensive marketing expenditures in order to continually identify new markets and to stimulate demand. Flooding of niche markets can easily occur when other tropical fruit producing countries, who are lower cost producers, compete with Hawaiian products for our domestic market. Once irradiation has been trialed successfully on exotic tropical fruits, there is no international agreement to prevent transfer of this technology to other tropical countries which already have a comparative advantage in the production of exotic tropical fruits. ¦ [f irradiation of fresh food products in Hawaii could be done in a profitable manner, private enterprise would be willing to make the investment without financial supports from local government. Appropriation of public funds to support either plant construction or market promotion of irradiated product will not necessarily generate new, long-term employment possibilities on the E3ig Island. 1t may benefit only a few producers while increasing safety risks for County inhabitants. The risk to inhabitants will have to be mitigated with the introduction of emergency response measures which comes at a cost to the County. If the County is vested in the irradiation project and unanticipated events cause damage to private property or human health, the County could be held liable for damages. The inadequacies of the Geothermal Asset Fund should not be forgotten. 3 ¦ The international trend is away from the use of agricultural policy instruments, such as price support and import quotas, and towards a competitive market system. It is important to understand that agricultural support programs were introduced to bring about an equitable distribution of income between the sectors of our economy. Since the disparity of incomes is no longer significant between the agricultural sector and other sectors of the economy, these types of subsidies are being abandoned in favor of direct income transfers. The reduction and phasing-out of agriculture subsidies and the removal oftax-funded "safety nets" in the 1996 Farm Bill is evidence of this trend. The conditions of the most recent international trade agreements are also in keeping with this international trend toward a globally competitive market. ¦ The supply of Cobalt 60 is not guaranteed. The taxpayers of Canada, out main supplier, are calling for an early retirement of the nuclear industry since its existence has depended heavily on tax subsidies (See Attachment b). According to personnel from Food Technology Services in Florida, the other two producers of Cobalt 60, Chile and Eastern Europe, are currently not producing since there is no demand for the product. Instead of focusing on export, niche markets for fresh product, we recommend that the County focus on sustainable marketing practices by encouraging investment in processing facilities to create value-added products. Promotion of sustainable, diversified agriculture through provision of grants and interest-free loans for prototype processing businesses would result in the overall volume of production and value-added goods necessary to attract lower cost transportation options. Such investment would create more new jobs for which our local work force would be qualified and provide far higher GDP multipliers than spending of County funds to promote or support a post- harvest irradiation facility. Before making a decision to expend $2 million of taxpayers' monies on food irradiation, a serious economic analysis should be done on the opportunity costs of such a subsidy (the value of alternative uses of the funds). We need a coordinated effort by the state, the university, and the counties to develop an infrastructure for sustainable and organic agriculture so that producers can provide high-quality fresh produce to local markets for import substitution. Our farmers still have many basic and unfulfilled needs such as water, energy sources, roads, marketing networks, and grower cooperatives. Investments and adoption of policies which would encourage development of the infrastructure needed to assist in the transition from plantation agriculture to sustainable, diversified agriculture would stimulate the local economy in a more equitable manner than construction of an irradiation plant. Lastly, I was asked by the Hana district of the NRCS to tell you that they voted at their last meeting to not support an irradiation facility anywhere in the state. If you need documentation of that, they will be happy to provide the minutes of the meeting. Sincerely, M. Eileen O'Hora-Weir, Vice President and East Hawaii Coordinator Hawaii Organic Farmers Association 4 S~~m, ~-I-~(~( - ~1~1~f b~ ~~I~f~ The following questions need to be addressed and adequate answers furnished before the CJ'f{cGl - Council makes a decision concerning the appropriateness of spending $2 million of Hawaii %i~t' ~ County taxpayers' monies in support of apost-harvest irradiation treatment facility project. 1) What is the $2 million to be used for? Rumors abound, but nothing in writing has been offered to the public. Under Hawaii's sunshine law, the express purpose of this appropriation must be released in writing six working days in advance of the Council's vote on this matter. 2) What size irradiation facility is being constructed and where will it be sited? These factors must be known in order to anticipate pre-construction costs such as an EIS. What is the minimum annual throughput required (in pounds of fruit) to achieve the economies of scale necessary for minimizing average total costs? 3) What analyses do the County Council members have in their hands which gives abenefit/cost ratio for this project? How many years will the County have to subsidize this facility? When (in terms of years) will the County receive additional revenues as a result of the indirect multiplier effects of this expenditure of public funds? if the County Council possesses such analyses, were they done independently of the County? Did Isomedix perform the analyses? 4) Hasn't the County Council, as a body, received briefings from individuals and agencies whose interest it is to promote and support irradiation? In all fairness, shouldn't the Council, as a body, also receive briefings from a group of qualified agriculturalists and economists who do not support the passage of a $2 million appropriation to be used to prop-up an irradiation facility? 5) What hard data exists concerning the test trials conducted at the Isomedix facility in Morton Grove, IL, on the 34 shipments of fruit from Hawaii? Which fruits were tested? According to cooperative extension agents working in conjunction with the Food Technology Services plant in Florida, results of testing have repeatedly shown that the effects of irradiation are specific to, not only the type of fruit, but to the variety as well. Experiences with the Florida food irradiation facility were nel,~tive (items dried-up and/or fumed brown) with leafy vegetables and some flowers when attempts were made to use irradiation to delay maturation. The Florida facility never used irradiation on legumes (peas and beans). The Florida facility never attempted to inhibit sprouting on edible ginger using irradiation, but tests done by CTAHR have shown that irradiation does not inhibit sprouting of ginger. 6) What data does the County have which allows the County Public Information Officer, Marcia Reynolds, to claim that "consumer acceptance has been excellent" (Hawaii Tribune Herald, 4/15/9'7)? If this claim is based on the product demos conducted in the context of the 34 test shipments of fruit sent to Morton Grove, what methodology was followed in procuring the results of this marketing promotion effort. In order to generalize results from demonstrations conducted at specific locations to the greater public, certain methodology must be followed in order to assure statistically significant conclusions. Are these assurances of consumer acceptance based on sound and professionally conducted market research studies? Were efforts made not to introduce bias? 7) According to a spokesperson for the Food Technology Services plant in Florida, the biggest component of operating costs for an irradiation facility is the Cobalt 60. Has the Council considered the long-term supply security for this component and whether there is any cost security built into the agreements between Isomedix and Nordion, the supplier of Cobalt 60? 8) Does Isomedix have the intention of recycling physical plant components from another one of their facilities for use in Hawaii? 1f this is being done, does this relieve Isomedix of certain de- commissioning costs, thus allowing them to construct a plant in Hawaii more cheaply? 9) Is the cap on the insurance liability that Isomedix is required to have to construct an irradiation facility in Hawaii less than, the same, or greater than the insurance required at their Morton Grove site? Will the NRC require Isomedix to post (1) bonds covering costs to workers and communities in case of accidents and (2) bonds covering the costs of environmental clean-up, decommissioning the plants, and radioactive waste disposal? 10) Under economic theory, government intervention in the market is justified only in the case of market failure or provision of public goods. What is the market failure this appropriation is attempting to relieve? What data does the County have on the economic loss to Hawaii because of the costs or unacceptableness of vapor heat treatments for papaya? Hot dip methods for mango? Cold treatments for star fruit, lychee, and longans? These methods are being used by Florida and other tropical fruit producing countries (Mexico, Thailand and Taiwan etc.) which are under USDA quarantine for importing fruits to the states of Texas, Arizona and California. 11) Assuming that an irradiation plant is established in Hawaii as a test site and assuming the technology works on all of our exotic tropical fruits and assuming consumers willingly accept irradiated fruits, what prevents irradiation from being used by other tropical fruit producing countries? Virtually all areas where there is tropical fruit production have cheaper costs of production (land and labor) than Hawaii and many have nationally subsidized transportation. According to cooperative extension tropical fruit experts in Florida, there is no significant variation in seasons between Florida, Hawaii and Asian exotic tropical fruit production. In light of current changes in international trade agreements which are intended to level the playing ground, how can Hawaii expect to stay competitive in the exotic tropical fruit industry? 12) Has the Council attempted to quantify the cost to other state industries if there is a well- publicized boycott of Hawaiian products? What would be the impact on tourism? Eco-tourism? What would be the impact on non-irradiated product being shipped out of Hawaii? What would be the impact on organic agricultural exports (primarily ginger, coffee as well as avocados sent to Canada)? Certified organic agriculture is contributing approximately $7-8 million to the state's gross product. Hawaii's marketing advantage stems from its ability to promote "Hawaii" as an integral part of the product. Expenditures to overcome a negative image will outweigh expenditures directed at promoting a single product. 13) Has the Council any data on the projected supply of tropical fruits from other tropical fruit producing areas in the world? Even before hurricane Andrew devastated acres of citrus and fruit trees in 1992, large plantings of Tongan, lychees, star fruit and other tropicals had commenced. The hurricane took its toll, but there are currently 2,000 acres in mango production, 530 acres in star fruit with an expected increase in plantings, 20 acres in atemoya, and 20 acres in cherimoya. Florida 2 is also increasing its plantings of avocados (currently 6,100 acres) and its limes (currently 3,300 acres). In addition, Florida has planted sizeable acreage in jack fruit, keylime, mamey sapote, sapadillo, passion fruit, guava and most of the other exotic tropical fruits being planted in Hawaii. There are between 850 and 900 acres of longans and lychees of which approximately 80% aze less than 4 years (not yet mature) and lychee plantings are expected to increase. Florida currently uses a cold treatment on star fruit, but are not under quarantine for shipping lychee and longans into California, Texas and Arizona. In comparison, Hawaii had a total of 415 acres in exotic tropical fruit production (atemoya, star fruit, lychee, mango, rambutan, cherimoya, specialty pineapple) in 1995. How do we expect to compete with Florida with its lower labor and transportation costs as its production capacity increases? How do we expect to compete with foreign production as trade barriers protecting domestic production are dropped? 14) Who will benefit from this facility besides the six farmers that comprise the Hawaii Tropical Fruit Growers Cooperative and a couple large independent papaya growers? How will Hawaiian consumers benefit? If benefits are to accrue to both consumers and producers simultaneously, this can only be done at the expense of taxpayers. Why should the County of Hawaii taxpayers direct resources towards a project which will benefit a handful of growers statewide, ultimately benefit producers worldwide through market development, will not create any significant additional employment opportunities, and provide consumers in Hawaii zero benefits since all product is directed at export markets? 15) The fanners of this county are operating without an infrastructure for diversified agriculture. Farms need basic provisions such as water, energy sources, and roads. We have an inadequate intra- state marketing network for expanding the state's ability to provide import substitution of fresh foods. Has the County looked at all the direct and indirect economic impacts which could be realized if this $2 million were spent on establishing better domestic markets? (See attached). 16) Many possibilities exist for processing (such as juicing), dehydrating (through the use of solar technology) and creating value-added products from our fresh fruits. Has an analysis been done to calculate the benefits to our local economy from allocating a $2 million appropriation toward low- interest/no-interest loans for prototype processing businesses? A standard economic analysis would always calculate the opportunity costs (the value derived from alternative uses of funds) of this proposed appropriation. Has this type of analysis been performed? Government funds directed at establishing a much needed infrastructure for diversified agriculture will provide greater multiplier effects (indirect effects) for our economy. Expenditures directed at promoting import substitution and producing value-added products will create jobs, provide more spending of dollars in the state (income multiplier effect), and provide some buffer for our weak economy. We need to make self-sufficiency more of a reality, especially in regards to the $2 billion Aawaii spends annually to import fossil fuels to supply our energy needs (energy crops). A strong agricultural base, directed at both domestic and export markets can provide that economic self-sufficiency. Increased production would result from public policy directed at improving local agriculture's ability to provide import substitution and value-added products. Developing sustainable markets for value-added products will attract lower-cost transportation options and a greater quantity of agricultural support services. 3 _ A~t~~~~~, ~~;u~ (3 ~"~~~t C~~f~eA_u,,l NUCLEAR SUNSET: THE ECONOMIC COSTS OF THE CANADIAN NUCLEAR INDUSTRY by David H. Martin Nuclear Awareness Project and David Argue David Argue Consulting EXECUTIVE SUMMARY The Canadian nuclear industry was created through government intervention, and from the beginning relied on public funding. Now, fifty years later, the nuclear industry continues to depend on significant subsidies from taxpayers. Despite its failure to become financially self-supporting, the Canadian nuclear industry promotes itself by stressing its supposed contributions to the Canadian economy. The most recent major public relations exercise of this nature was sponsored by Atomic Energy of Canada Ltd. (AECL) and conducted by the consulting firm of Ernst & Young. The resulting report, entitled The Economic Effects of the Canadian Nuclear Industry, released in October 1993, has been uncritically accepted by many federal decision-makers. The present report, called Nucleaz Sunset: The Economic Costs of the Canadian Nuclear Industry is a response to the Ernst & Young report, in the area of "economic benefits" and AECL subsidies (section 2), and also in the area of direct employment (section 3). Nuclear Sunset also identifies three other areas of concern, where AECL continues to drain the public purse and put the taxpayer in even greater risk of future liability. These areas are AECL's Isotope Business (section 4); AECL's Decommissioning Liability (section 5); and Federal Heavy Water Investments (section 6). The nuclear industry in Canada is truly a "sunset industry". Activity and employment both peaked around 1980, and have declined steadily since. Foreign sales have largely failed to materialize, and nuclear construction proposals in Canada have been cancelled. The federal government faces a decision on nuclear subsidies not only for the 1996 budget, but also in connection with the imminent expiry of a seven-year Memorandum of Understanding between the federal government, Ontario, Quebec and New Brunswick on funding for AECL (see section 3.4). The MOU was initiated in 1990 by Jake Epp, former Tory Minister of Energy Mines and Resources, and it expires on April 1, 1997. The Province of Ontario has recently cut back its funding of AECL through this program. The federal government and the provinces (mainly Ontario) must soon decide whether to renew their subsidies for the Canadian nuclear industry. 1 s An internal, federal government review of the Canadian nuclear industry and AECL subsidies took place in late 1995. No public participation in this review was permitted, and the proceedings and results have remained secret. With nuclear industry supporters firmly entrenched in the government bureaucracy, there is little doubt that this review will support ongoing (if somewhat reduced) government subsidies for the Canadian nuclear industry. Many Canadians find it unacceptable that discussion about the disbursement of public funds for the nuclear industry should be conducted behind closed doors in Ottawa. Making this situation worse, is the fact that this secret review is based on the advice of nucleaz advocates whose industry colleagues receive the financial benefits. Particulazly at a time when social programs are no longer seen as affordable, funding for Atomic Energy of Canada Ltd. (AECL) should be at the top of the "cutting" list. Government subsidies for the nuclear industry should be ended. Ernst & Young arrived at their $23 billion estimate of the nucleaz industry's contribution to Canada's Gross Domestic Product using fundamentally flawed assumptions and faulty methodology. They assumed that nuclear power was the most cost-effective electrical generating option available. This is simply untrue. Cogeneration plants and many energy efficiency technologies are far cheaper to construct and operate, and offer far higher GDP multipliers than nuclear energy. Among other methodological errors, Ernst & Young counted the cost over- runs of nuclear stations as "economic benefits". For example, the 1978 "release estimate" for Ontario Hydro's Darlington Nuclear Generating Station was $3.95 billion, whereas the final cost of the station was over $14 billion. AECL Subsidies When calculated in real, 1995 dollars, total federal funding to Atomic Energy of Canada Ltd. (AECL) since its creation in 1952 until Mazch 3 t 1.995, has been about $13 billion. Ernst & Young claim that AECL's total funding to fiscal 1993 was $4.8 billion. This figure, however, is deceptive, since it makes no allowance for inflation, and includes several significant errors. The figure of $13 billion funding to AECL represents a real, cash subsidy, by taxpayers to AECL, and does not include any "opportunity cost", i.e. what the subsidies would be worth if the government bad instead invested them in break- even ventures. The opportunity cost for the accumulated subsidies to AECL up to the end of fiscal year 1995 is $120.4 billion. Canada's economy would have been much better off, if the government had simply used the AECL subsidies to reduce the national debt. Direct Employment in the Nuclear Industry Ernst & Young overestimated the number of jobs in the Canadian nuclear industry by about 40%. 2 They claim that there were about 30,000 jobs in the nuclear industry at year-end 1992. A more realistic estimate is about 18,000. There are several possible reasons for AECL's overestimation of employment, including: double counting (for example, several references indicate that uranium industry employees were counted twice); counting total employment levels at companies whose business is only partly nuclear, instead of just counting the nuclear-related jobs; overestimating the number of companies in the nuclear manufacturing private sector, and using biased assumptions for extrapolating employment levels at those companies that were not actually polled. The most significant overestimate is for employment among "private sector suppliers". Ernst & Young estimate employment in that sector for 1992-93 at 8,500, whereas this study estimates that the actual 1992 figure was about 2,000. Nuclear Prospects Ontario Hydro has decided to shut down, rather than rebuild part of the Bruce "A" Nuclear Generating Station. It is possible that Ontario Hydro's other nuclear stations will also be phased out early in order to avoid costly retubing or other major rehabilitation work. Staffing levels can be expected to decline proportionally. It is widely expected that Ontario Hydro's virtual monopoly on electricity generation in Ontario will be broken, making any new nuclear construction virtually unthinkable. A competitive market will inevitably lean towazds more efLicient supply alternatives with shorter construction lead-times such as natural gas-fired cogeneration and combined cycle plants. The prospects for new nuclear construction in any province outside of Ontario are almost as slim. Canada is the world's lazgest producer and exporter of uranium, and Cameco (the privatized former crown corporation in uranium mining and refining) has seen a recent increase in stock price. However, even this sector of the industry is facing a serious challenge over the medium- to long- term. Huge military stockpiles of uranium in the USA and Russia, as well as fuel recovered from nuclear weapons will likely make serious inroads on the market share of the Canadian uranium mining and refining industry. The AECL Isotope Business Long thought to be the one "profitable" division of AECL, the former Radiochemical Company of AECL was privatized in 1991 as "Nordion International Inc.", when it was sold to MDS Health Group. To secure the sale, AECL was obligated under a 23 yeaz contract to provide radioisotopes at a fixed price. Several factors have turned this commercialization into a fiasco. First, AECL's NRX reactor was forced to shut down in 1993. This has made radioisotope production solely dependent on the NRU reactor, which itself is experiencing technical problems and higher-than-expected operating costs 3 as it approaches the end of its operating life in the year 2000. Second, the estimated construction costs of a new production reactor, the MAPLE-X10, have escalated from $23 million in 1989 to an extraordinary $100 million by 1994. Nordion has refused to help cover the cost over-runs for the MAPLE-X10. Moreover, in 1993, MDS/Nordion launched a lawsuit to have the 1991 contract rescinded, and to have AECL return the $165 million purchase price of Nordion, along with $300 million in damages. This dispute remains unsettled. In addition to the $100 million MAPLE-X10, a second reactor will be needed once the NRU reactor is shut down. AECL is also considering construction of the IRF (Irradiation Research Facility) reactor at an estimated cost of $500 million. Investment of public funds in any new radioisotope production reactors is ill- advised, because AECL and Nordion will soon be facing new competition for the sale of their most profitable radioisotope (Molybdenum-99) from radioisotope producers in the US and Europe. AECL's Decommissioning Liability For four years, AECL has defied the Auditor General of Canada by not financially accounting for its decommissioning costs. Decommissioning activities include dismantling radioactive structures such as old reactors; cleaning up radioactively contaminated sites; managing the associated radioactive wastes; disposing of radioactively wntaminated equipment; and returning sites to "green field" condition. According to AECL's current practice for the financing of decommissioning activities, the company will simply send the bill to the taxpayers each year for expenses as they are incurred. This is not an acceptable procedure for proper financial planning or accounting. AECL has made a preliminary and partial estimate of decommissioning costs at about $300 million. However, the Auditor General's office has estimated federal decommissioning costs at $850 million, including AECL's portion. AECL should fully account for those decommissioning liabilities and should create a fund to cover those costs. This study's calculation of total funding to AECL (Table 1) does not include any amount for decommissioning liability. Federal Heavy Water Investments Heavy water, needed for CANDU reactors, is difficult, expensive, and dangerous to manufacture. Considering the grossly inflated historic expectations for CANDU sales at home and abroad, it is perhaps not surprising that heavy water manufacture represents the single greatest financial and technological fiasco experienced by the Canadian nuclear industry. Two heavy water plants in Nova Scotia, and one in Quebec, as well as most of the Bruce Heavy Water Plant in Ontario have been built and then shut down in the absence of any market for the heavy water. In 1981, the Canadian parliament forgave AECL heavy water plant loans and interest 4 totalling $816.9 million. In effect, federal taxpayers provided a one billion dollar subsidy for the production of a surplus federal heavy water inventory. Nevertheless, AECL and the federal government have recently agreed to forego a large part of heavy water sales to South Korea and Romania, giving over $300 million worth of business to Ontario Hydro instead. At the same time, the federal government has supplied about $300 million worth of heavy water, free of charge, for a scientific experiment. This failure to obtain a return on the federal heavy water inventory in effect adds dollar for dollar to the federal government budget deficit. Conclusion Key decision points on public subsidies for the nuclear industry include the federal budget in 1996, and the expiry of the federaUprovincial Memorandum of Understanding (also known as the CANDU Owners Group agreement) on nuclear funding on April I, 1997. The federal parliament's Standing Committee on Environment and Sustainable Development has already recommended that the government should "terminate its involvement in the CANDU Owners Group". Cabinet should heed that advice. The secret government review of the nuclear industry conducted in 1995 should be made public. A public consultation process should be launched to consider the phaseout of public support for the nuclear industry, in advance of the expiry of the federaUprovincial Memorandum of Understanding. In keeping with current spirit of fiscal restraint, the federal government should simply end its subsidies to AECL. If the nuclear industry is as promising as it claims, it should be able to provide its own financing and demonstrate that it can survive independently. Otherwise the sun should be allowed to set on the Canadian nuclear industry. Taxpayers have already paid too much. 5