Liability cap on Canada's nuclear plants 'outdated'

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Canadian nuclear plant operators would have to pay no more than $75-million in liability claims if a nuclear disaster like that unfolding in Japan were to occur in Canada.

Nuclear critics say that's a tiny fraction of the billions in health and damage claims that could result, and even Canada's nuclear industry thinks it is too low. But a 1970s-era law, still on the books, caps the operators' civil liability.

Such caps are common for the nuclear business around the world, but Canada's stands out as particularly inadequate. A government bill that would have increased the limit to $650-million died on the order paper last week with the defeat of the Conservative government.

Nuclear critics around the world have long attacked the caps as hidden subsidies designed to limit potentially crippling costs for nuclear operators. Now, with all eyes on Japan, those caps could be getting a second look.

Tokyo Electric Power Co., which operates the troubled Fukushima Daiichi nuclear plant, faces tens of billions of dollars in liability claims from those who lived inside the 20-kilometre exclusion zone.

The claims could ultimately be so large that the government may have to nationalize the company, Japanese politicians and analysts say.

Shares of TEPCO hit a 34-year low Monday as speculation grew about a possible government takeover of the company, which faces multibillion-dollar losses from its nuclear disaster.

For now, TEPCO hopes to raise around ¥2-trillion, or $25-billion (U.S.), in loans from major Japanese banks to deal with the crisis. Under Japanese law, the company's liability for a nuclear accident is technically unlimited. But Japanese law also only demands that nuclear power operators have insurance for about $1.4-billion per reactor. The Japanese government could be called upon to cover claims that exceed that amount.

In fact, under a clause in Japan's law, all of TEPCO's mounting bills would be covered by the government if the catastrophe was declared "a grave natural disaster of an exceptional character," but a government spokesman ruled out such a move last week.

In Canada, the bill to increase the civil liability cap was the fourth attempt to reform the legislation in recent years. (The previous attempt died when Stephen Harper had Parliament prorogued in 2009.) For now, both the industry and anti-nuclear activists agree Canada's $75-million limit is unacceptable.

"We just really felt it was outdated. If we're an industry that stands on our safety record, and is constantly improving our safety record, we felt it was important that the legislation reflect what was required," said Denise Carpenter, president and chief executive officer of the Canadian Nuclear Association.

While the proposed $650-million limit might also seem too little for a large-scale radioactive disaster, it's similar to caps in place in many other countries.

In the United States, a much bigger group of nuclear operators that can pool their insurance are required to cover $13-billion in claims.

Like other countries, Canada's law also prohibits lawsuits against equipment suppliers, saddling the nuclear plant operator with sole liability. Many assume the government would pay claims that exceed the liability limit.

But Theresa McClenaghan, executive director of the Canadian Environmental Law Association, who was counsel on a constitutional challenge of the law in the 1980s, said the legislation leaves this at Ottawa's discretion.

"It's entirely up to the cabinet how much money it decides to make available," Ms. McClenaghan said.

Florence Dagicour, a nuclear-law specialist with Fasken Martineau DuMoulin LLP in Montreal, said the Japanese crisis could prompt talk of hiking liability caps to be "more reflective of the damages that such an accident could trigger" - the very effect Chernobyl had in European nations in 1986.

Greenpeace anti-nuclear activist Shawn-Patrick Stensil, also attending the hearings last week on the Toronto-area Darlington plant, said the need for a liability cap undermines the industry's refrain about the safety of splitting atoms to make electricity.

"If you got rid of [the cap] a lot of [nuclear companies]would just pull out of the market because their own accountants would tell them it's not worth the risk," he said.

Dianne Saxe, a Toronto environmental lawyer, said the subsidy the liability cap gives the nuclear business is hard for most people to grasp. "The nuclear subsidy is invisible to people because it's a black swan - it's a very large, improbably event with very serious consequences. And we know ... that people are really bad at dealing with large-scale infrequent risks."