Cost Recovery Advisory Group – 2020 meeting

May 15, 2020
Virtual meeting
10:30 a.m.–12:00 p.m.

Meeting Agenda

• Introductions and opening remarks
• Review of last year’s minutes and action items
• Looking back over the past year (roundtable discussion)
• Operational management / Gestion opérationnelle
  • Update on regulatory activity plans (RAPs)
• Financial management
  • Financial overview
  • Dispute resolution mechanism
• Other business
• Concluding comments and next meeting

Meeting Minutes

Licensee participants

Member	Sector represented	Work organization
Steve Coupland	Canadian Nuclear Association	Canadian Nuclear Association
Connie Leclair (via teleconference)	Nuclear reactors	Ontario Power Generation
Maury Burton	Nuclear reactors	Bruce Power
Jason Nouwens	Nuclear reactors	NB Power
Kevin Nagy	Uranium processing facilities and uranium mines	Cameco
Richard Wassenaar	Nuclear substance processing facilities	Nordion
Stephen J. Walker	Canadian Council of Independent Laboratories
Arliss McNaley	Nuclear Substances and Prescribed Equipment (Oil and Gas Exploration)	Schlumberger Canada Ltd.

Canadian Nuclear Safety Commission participants

Name	Position
Liane Sauer	Director General, Strategic Planning Directorate (CRAG Chair)
Benoit St. Jean	Director General, Finance and Administration Directorate (FAD)
Hugh Robertson	Director General, Directorate of Regulatory Improvement and Major Projects Management (DRIMPM)
Sylvain Faille	Director General (Acting), Directorate of Nuclear Substance Regulation (DNSR) / Director, Nuclear Substances and Radiation Devices Licensing Division, DNSR
Nancy Sigouin	Director, Financial Management and Internal Controls Division, FAD
André Bouchard	Director, Operations Inspection Division, DNSR
Dov Ben-Reuven	Director, Regulatory Operations Coordination Division (ROCD) DRIMPM
Mark Broeders	Director, Accelerators and Class II Facilities Division, DNSR
Tetyana Panichevska	Senior Project Officer, Director General’s Office, DRIMPM
Sonia Racine	Chief, Revenue Management
Lee Brunarski	Senior Policy Officer, Policy, Aboriginal and International Relations Division (CRAG Secretary)

10:30 – Meeting commenced.

Introductions and opening remarks

Liane Sauer, the Cost Recovery Advisory Group (CRAG) Chair, opened the meeting and welcomed the participants. She requested participants’ agreement that the meeting be recorded. This measure would make it available to CRAG members unable to participate and it would also assist with the meeting summary. There were no objections and the meeting was recorded via Zoom.

She noted the following changes to the CRAG membership since the last meeting:

• Arliss McNaley, of Schlumberger Canada Ltd., became the oil and gas representative under the nuclear substances and prescribed equipment sector.
• Jeffrey Fleming, of Golder, had been identified as the portable-gauges representative under the nuclear substances and prescribed equipment sector, replacing Dan Stunden of Stantec, who had been the representative for several years.
  • ADDENDUM: During the meeting, a CRAG member noted that Jeffrey was no longer with Golder due to the economic impacts of the COVID-19 pandemic.
• The Canadian Industrial Radiation Safety Association (CIRSA) decided to no longer participate in CRAG, as CIRSA’s main role is to advocate on behalf of industrial-radiography licensees for matters pertaining to radiation safety and associated regulatory compliance, and not cost recovery issues.
• The Canadian Nuclear Safety Commission (CNSC) will be looking to add additional portable-gauges and industrial-radiography representatives from smaller licensees and is exploring how to identify potentially interested candidates.

The CRAG Secretary then introduced the participants.

Review of minutes and action items

Liane noted that the minutes of the 2019 meeting had been provided to all CRAG members and, once finalized, would be available on the CNSC website. She added that the only action arising from the previous meeting – holding a special meeting open to all Regulatory Activity Plan (RAP) licensees to provide information on the level of effort and related estimated fees referenced in their RAPs – was completed in June 2019, when the special meeting was held. Stephen J. Walker noted that he had attended the March 25, 2019, CRAG meeting and asked that his name be included in the participants list in the final minutes to reflect that, which Liane agreed to and actioned. No other comments were made and it was agreed that the minutes be considered final.

The agenda was adopted without objection, amendment or comment.

Looking back over the past year

Liane recounted some of the notable developments for the CNSC since the last meeting including the following:

• The CNSC responded to the COVID-19 pandemic by having staff work from home effectively since March 16, 2020, and continuing to deliver on the CNSC’s safety mandate while ensuring that the CNSC remains responsive, agile and ready to emerge from the situation able to identify things that can be done differently, more efficiently, or better.
• President Velshi has led the CNSC for almost 2 years. During that time, she has regularly advocated for the importance of international collaboration to enable readiness for the next generation of nuclear technologies, including small modular reactors (SMRs). That advocacy has resulted in agreements with the United States’ and United Kingdom’s regulators to coordinate efforts as much as possible in reviewing SMRs. Twelve SMR vendors have submitted designs to the CNSC for review, which are at various phases of the CNSC’s pre-licensing vendor design review.
• President Velshi was appointed as Chair of the International Atomic Energy Agency’s (IAEA’s) Commission on Safety Standards (CSS) for the next 4 years, which signifies the high regard the IAEA has for Canada and the CNSC’s leadership and commitment to safety. The CSS establishes standards relevant to nuclear, radiation, transport and waste safety, and emergency preparedness and response.
• Canada hosted 2 IAEA peer reviews in 2019 – an emergency preparedness review in June and a regulatory review in September. Both found that Canada is well prepared to respond to nuclear emergencies and to regulate the industry safely, and made welcome recommendations that are now being responded to. Both reports, and the respective Management Action Plan, are available on the CNSC’s public website and will be presented to the CNSC Commission during a June 2020 meeting.
• Commission proceedings included 6 public hearings, after which licences were issued or renewed for Orano, Best Theratronics, Saskatchewan Research Council, Canadian Nuclear Laboratories (CNL), and Cameco, with a decision pending for BWXT. During Commission meetings, 5 regulatory oversight reports were presented: on nuclear substances, uranium and nuclear substance processing facilities, uranium mines and mills, nuclear power generating sites, and CNL.
• The CNSC published, updated or consolidated 12 regulatory documents on many subjects, such as personnel certification, SMR applications, conventional health and safety, security of nuclear substances, management systems, human factors and minimum shift complement. The CNSC also welcomed feedback, or feedback on comments or updates, for 8 draft regulatory documents on subjects such as drug and alcohol testing, fire protection, decommissioning, radiation protection, financial guarantees, waste management and dosimetry.
• The CNSC began environmental assessments for an SMR at the Chalk River Laboratories site and 2 mines in northern Saskatchewan, and continued environmental assessments for 3 CNL projects, of which 2 are in the Ottawa Valley and 1 in Manitoba.
• Independent Environmental Monitoring Program results for 10 facilities and sites were published.
• The CNSC formalized its commitment to long-term relationships with 2 Indigenous communities and held a collaborative forum with environmental non-governmental organizations to determine if there was interest in future such forums.
• Most importantly, the CNSC continued to work with licensees to ensure the safety of Canada’s nuclear sector.

Operational management

Update on Regulatory Activity Plans

Tetyana Panichevska gave an update on RAPs. RAPs apply to Class I nuclear facilities, mines, mills and waste nuclear substances activities. The estimates for the level of effort for planned regulatory activities are based on several factors, including anticipated licensing applications, the compliance baseline, past licensee performance, environmental scan information, development or improvement of the CNSC regulatory framework and processes, anticipated research and support projects, and internal support services. Regulatory activities are prioritized based on risks and documented in CNSC work plans, and they are costed for the RAP fee estimates and summarized in RAP packages. RAP packages include a cover letter, a RAP and a fee notification. RAPs include the estimated effort for technical regulatory activities and internal support services, the total estimated effort and fee, and the list of major activities. The 2019–20 RAPs and fee estimates were issued in March 2019.

The CNSC completed reports on the number of licensing and compliance activities in fiscal year 2018–19 and issued them in July 2019 to fee-paying licensees for Class I nuclear facilities and uranium mine and mill facilities. As applicable to a given facility, the reports include the number of licensing decisions for new licences, licence renewals and licence amendments, as well as the number of inspections conducted and the number of orders issued.

The 2020–21 RAPs and fee estimates were issued electronically on April 1, 2020. The format and level of detail of the 2020–21 RAPs were the same as in the 2019–20 RAPs, which had begun to include additional information on technical regulatory activities and internal support services, and a description of collective CNSC activities. The RAP cover letter was changed to clarify the basis for future years’ fee estimates, which have been included at the request of licensees. The emails containing RAPs clarified that the RAPs and fee estimates were subject to change during the fiscal year due to impacts from the COVID-19 pandemic. The report on the number of licensing and compliance activities was completed by the CNSC in 2019–20 and will be issued to Class I nuclear facilities and uranium mine and mill facilities around the time the final invoices are issued, which is expected to be in July 2020. RAP licensees were encouraged to contact CNSC Regulatory Program directors or project officers for detailed information related to licensing and compliance activities at their facilities, and to contact CNSC finance officers for fee-related questions.

Discussion

Kevin Nagy asked if the potential changes to the RAPs and fee estimates referenced in the cover letter due to COVID-19 were likely to result in more activities and higher costs, or fewer activities and lower costs. The CNSC responded that the CNSC is monitoring the COVID-19 situation closely but that it is difficult to anticipate the impacts at this time. The CNSC is noticing a shift in expenditure patterns; for example, travel expenditures will be lower, but investments have been required to enable CNSC staff to work remotely.

Steve Coupland noted that the industry had been contacted by the government about how the government could support industry during the COVID-19 pandemic and the recovery phase. He added that industry had suggested waiving cost recovery fees during the pandemic and recovery phase and asked what the CNSC position was on that issue. The CNSC responded that it recognizes and appreciates the hardship the pandemic could cause to licensees and is monitoring the situation closely. The CNSC noted that there were several government support initiatives that had been put in place in response to the pandemic and hoped that one or more of them would be able to provide support to licensees and their employees. The CNSC continued that the CNSC had followed up with the government about the potential for fee relief, but that there did not appear to be an intent to offer relief from fees at this time.

Steve Coupland noted that a letter had been sent to Natural Resources Canada on behalf of licensees requesting fee relief. He added that some of the internal support services, such as information technology investments, should not be covered by fee-paying licensees, but should be covered by the government through an increase to the CNSC’s appropriation. Fee-paying licensees believe that fees related to internal support services need to be reviewed. The CNSC responded that cost recovery fees collected by the CNSC and funds appropriated to the CNSC from the government have strict limitations on how each can be used. The CNSC noted that an analysis is underway of the Canadian Nuclear Safety Commission Cost Recovery Fees Regulations (CRFR) to determine if the CRFR needs to be reviewed and potentially amended, with many steps remaining before it could conceivably be made available for public consultation. The CNSC added that licensees always have the option to lobby ministers, members of Parliament, central agencies and other government departments to advocate for issues beyond the CNSC’s ability to address.

Financial management

Financial overview

Benoit St-Jean provided a financial overview. The CNSC’s expenses for 2019–20 were expected to total approximately $170 million, but that estimate was made prior to the COVID-19 pandemic. The average yearly increase in CNSC expenses between 2014–15 and 2019–20 was 2.1%, which is right around the 5-year average for the Consumer Price Index (CPI) of 1.7%. With respect to overall trends, the CNSC’s spending has increased by $16 million (10.4%), over the past 6 years, due principally to CNSC staff salary increases, which generally track the CPI. Investments have also been made in information technology infrastructure and in succession planning to ensure that the necessary skills and expertise remain available when CNSC staff retire. The CNSC continues to monitor the impacts from the COVID-19 pandemic and work closely with the Department of Finance Canada and the Treasury Board in case expenditures shift unexpectedly and the CNSC is not able to recover those costs from licensees. The CNSC has decided to not increase the hourly rate or formula fees for 2020–21.

Regulatory Activity Plans

RAP licensees represent 64% of the CNSC’s activities. Prior to the COVID-19 pandemic, RAP licensees were projected to receive a 3.1% refund for 2019–20, but that refund could increase slightly after the CNSC’s financial statements are audited in mid-July due to decreased efforts in the second half of March 2020. Between 2014–15 and 2019–20, final RAP fees increased by $11.4 million (11.7%), which represents an average yearly increase of $2.3 million (2.3%). (Initial RAP fees increased by $11 million (11%) between 2014–15 and 2019–20, an average yearly increase of $2 million (2%).) During that time, year-end refunds to RAP licensees varied between 0.6% and 6%. The initial RAP fee increase in 2020–21 from 2019–20 is approximately $1 million (0.9%).

Formula fees

Sylvain Faille noted that the CNSC’s regulatory oversight and deliverables for formula fees have changed since 2003 to meet new government policy, industry and regulatory requirements. These changes include:

• an enhanced regulatory framework, including licence application guides and new requirements and guidance
• increasing licence amendments and transfers
• increase in the oversight of event reports
• increased focus on the lower-performance sector of the industry, including more field compliance inspections
• security inspections and assessment of security plans
• improved outreach through working groups and meetings
• improved transparency through annual regulatory oversight reports and web content

Benoit St-Jean continued by noting that formula fees licensees have been subsidized from the CNSC’s funding appropriated by Parliament for many years to account for the shortfall in revenues compared to the regulatory effort required. The CNSC initiated a phased-in annual increase in formula fees in 2014–15 to reduce the subsidization. Between 2014–15 and 2019–20, formula fees increased by $2.9 million (51.5%), with an average yearly increase of $578,000 (10.3%). In recognition of the impacts of the COVID-19 pandemic, the yearly increase in formula fees for 2020–21 has been deferred. The hourly rate for 2020–21 will remain unchanged from 2019–20 at $270 per hour.

Projections for future years

The CNSC reviews budgets and costs every year and has a rigorous planning process in place. There are several layers of control over the CNSC’s budgeting process, including review, analysis, discussion and challenge by the CNSC’s Executive Management team, and a review and audit of the CNSC’s financial statements by the Office of the Auditor General. The CNSC also requires annual approval of its appropriations by the Treasury Board and Parliament. Projections for future years will be reassessed throughout the year in light of impacts from the COVID-19 pandemic, and industry will be informed of any changes.

Dispute resolution mechanism

CRAG members were reminded of where to find information on the CNSC website about the dispute resolution mechanisms for regulatory activity assignments and fee administration (from the “Acts and Regulations” tab, select “Cost recovery program”) and whom to contact about disputes.

Discussion

Stephen J. Walker noted that portable-gauges licensees have had significant increases in the CNSC’s fees over the last several years, totaling 63% between 2016–17 and 2019–20. A 10% increase in 2016–17 was followed by a 23% increase in 2017–18, and a 20% increase in 2018–19. He added that the Canadian Council of Independent Laboratories recently surveyed its 60 members that are also CNSC portable-gauges licensees, many of which are organizations with 10 to 20 people, and that the licensees are finding the increased costs unmanageable, particularly this year when most have let go of probably half of their staff due to the COVID-19 pandemic. He asked for confirmation that there would be no fee increases for formula fees licensees in 2020–21, which the CNSC confirmed. He wondered if other sectors have faced similar increases in recent years.

The CNSC responded that in 2003, when the CRFR came into force, the CRFR included formulas to be applied to the different use types for the licences held by formula fees licensees. For approximately 11 years after the introduction of the CRFR, there was no review of those formulas even though the effort required to regulate formula fees had changed and increased during the same time. The CNSC undertook an extensive analysis just prior to the 2014–15 fiscal year to look at the incongruity between the fees recovered from formula fees licensees and the costs of the CNSC’s related effort. That study identified a gap of between $8 million and $10 million annually, which was being subsidized from the CNSC’s Parliamentary appropriation. The fee increases to formula fees licensees in recent years are due to an increase in the values in the formulas used under the CRFR, as well as in the hourly rate. These increases are part of the CNSC’s strategy to gradually phase in fee increases beginning in 2014–15, so that formula fees licensees are paying for the CNSC’s full regulatory effort and are no longer being subsidized from the CNSC’s Parliamentary appropriation. Although the increases are being phased in gradually, they vary between use types, so some are affected differently. The CNSC explained that from an inspection and compliance standpoint, the portable-gauges sector in recent years has received more CNSC effort, including unannounced field inspections, due to a pattern of poor performance on the part of some portable-gauges licensees. The CNSC offered to respond to any specific questions from formula fees licensees.

Stephen J. Walker asked if the CNSC is nearing the end of the phase-in period for formula fees licensees. The CNSC responded that the phase-in period is not concluded yet, but that as part of the CNSC’s approach of continuously reviewing how to manage or reduce costs, the COVID-19 pandemic allows the CNSC to review how to do things differently, which might result in ways to find new, more efficient ways of working and managing costs for the future. Stephen J. Walker observed that COVID-19 is probably encouraging many to find ways to become more efficient. He noted that the Canadian Council of Independent Laboratories, which runs a number of certification programs such as laboratory audits and technician certifications, has begun to conduct virtual audits, which are working quite well and should bring down costs. The CNSC noted that the pandemic has only been a reality for 8 or 9 weeks and, while efficiencies and new ways of operating are being identified, the long-term impacts at the end of the COVID-19 pandemic will need to be considered before the CNSC rushes to adopt anything.

Steve Coupland asked what the timeline is for closing the gap between the fees recovered from formula fees licensees and the subsidy from the CNSC’s Parliamentary appropriation. The CNSC explained that the original target was to close the gap within 6 to 9 years. However, the CNSC regularly faces new costs each year, including staff salary increases and increases in the efforts required to regulate formula fees licensees, and that changes the original assumption. The goal remains to close the gap as quickly as possible, including by looking for efficiencies within the CNSC.

Maury Burton expressed support for the idea of RAP licensees lobbying the government to find ways to lengthen the amount of time to close the formula fees licensees fees gap, perhaps by providing bridge funding, in recognition of the hardships caused by the COVID-19 pandemic. He added that Bruce Power is likely to take a substantial financial hit in the Major Component Replacement Project in the years ahead, due to delays caused by the pandemic. The CNSC noted that it is looking for ways to control costs, but under the Government of Canada’s framework, the CNSC is required to recover its full costs.

Other business

Steve Coupland asked for clarification on the CNSC’s cost recovery program, specifically whether the CNSC’s CRFR is a separate, independent regulation or part of a broader suite of the Government of Canada’s cost recovery policy. The CNSC explained that the CNSC’s CRFR is its own separate, independent regulation that allows the CNSC to recover costs, and is separate from the government’s policy. The CNSC added that the ongoing CNSC analysis of the CRFR is holistic, and the process will likely be multiyear, since the CRFR includes many parts such as the RAPs, formula fees, fixed fees and special projects. The CRFR has been in place since 2003. Many things have happened in the nuclear industry since then, so any proposed changes to modernize the CRFR will need to reflect those developments while anticipating the future. The CRFR should also not impose any unnecessary administrative burden on licensees or on the CNSC, which could increase costs for the CNSC and thus fees for licensees. The goal will be to have an updated CRFR that is flexible, applies to today and is ready for the future.

The CNSC noted that there are a lot of new approaches being taken and lessons learned in response to the COVID-19 pandemic and, like the nuclear industry, the CNSC will take the opportunity to look for efficiencies and new ways of doing things.

Connie Leclair suggested that the CNSC hold a separate meeting to describe the CNSC’s fees. Ontario Power Generation (OPG) is required to provide an explanation to the Ontario Energy Board (OEB) of the cost recovery fees it pays, and wanted to ensure that OPG does not misrepresent anything to the OEB. In particular, OPG was looking for any additional information on the internal support services activities. The CNSC noted that the June 2019 special meeting provided much of that information. The CNSC and a CRAG member suggested that a one-on-one meeting between the CNSC and OPG might be more appropriate to explore the issue further, which both the CNSC and OPG agreed to.

Concluding comments and next meeting

Liane stated that the plan is to hold the next CRAG meeting in March 2021 unless another issue or issues arise that require a discussion before then.

Liane thanked CRAG members for their participation and adjourned the meeting at noon.

ACTIONS

• Add Stephen J. Walker to the attendees list of the March 25, 2019, CRAG meeting minutes.
• Arrange a meeting between the CNSC and OPG to provide information on the CNSC’s fees.