Special Report: Nuclear Law and Liability Developments in India (Part 3 of 3)

INTRODUCTION

In early May, we started this special series on the developments in nuclear law in India. In Part 1, we examined the key historical and legal developments in India’s nuclear law regime. In Part 2, we then turned to the recent India-US trade deal and asked whether the deal would finally resolve unanswered questions as to the extent of liability for foreign suppliers of nuclear technology and supplies.

This week, in the final post of this series, we explore the establishment of the India Nuclear Insurance Pool (INIP) by drawing on multiple sources, including the recent talk by Els Reynaers-Kini – a Partner at M.V. Kini law firm in Mumbai – at a Mindfirst seminar in Toronto. To conclude, we ask what may come next for nuclear law and nuclear development in India and suggest a number of issue areas in need of further exploration and discussion.

THE INSURANCE POOL

On May 27, Els Reynaers-Kini gave a talk at a Mindfirst seminar on developments in nuclear liability in India. One of the key aims of her talk was to discuss the practical implications for Canadian parties interested in establishing commercial exports of civil nuclear energy technology and uranium.

One of key roadblocks to increased foreign investment and trade in India’s nuclear sector has been the 2010 Civil Liability for Nuclear Damage Act (the Act). The Act uniquely expanded the scope of liability beyond the operator to the suppliers of the technology used in the civilian nuclear energy sector. Under s 17(b) of the Act, a specific right of recourse was granted to the operator, enabling them to pursue damages against suppliers where…

…the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services.

Earlier this year, US President Barack Obama travelled to India and, together with Indian Prime Minister Narendra Modi, announced that both countries had agreed on a new foreign investment framework for nuclear technologies. While the announcement was met with great fanfare, left unresolved was the specific insurance and liability regime that foreign suppliers would be subject to under the Act.

Under s 8 of the Act, it is mandatory for the operator to take out an insurance policy or other financial security. However, as Ms. Reynaers points out in her talk, up until recently, insurance policies only provided coverage for “cold zones,” areas where no nuclear reactions take place. Bank guarantees, as another form of financial security, were not enough to cover the liability risks and thus a new insurance structure was needed to accommodate the operators and the suppliers.

After months of newly invigorated negotiation, in June the Indian government formally announced a new insurance pool of Rs. 1,500 crore (US $234 Million) that will provide coverage to operators and suppliers. The pool will be managed by the state-owned reinsurer, GIC Re. The fund will cover the risks of the liability for the operator, pursuant to s 6(2) of the Act and suppliers under s 17 of the Act. As Ms. Reynaers also noted in her talk, premiums will be roughly 2% of the insurance amount and will vary depending on a number of facts considered under the the Department of Atomic Energy (DAE)’s Probabilistic Safety Assessment study.

The announcement of the INIP’s formation will, in the long-term, likely be seen as a major turning point in the story of India’s nuclear energy development. It is, in a sense, a compromise of public policy and business – allowing for the right of recourse under the Act while building in security and certainty for foreign suppliers and the operators of India’s current and future nuclear power plants.

NUCLEAR POWER AND INDIA: WHAT’S NEXT?

As of July 2015, there is a great deal of activity in India’s nuclear sector. Deals are being signed for new reactors, and GIC Re is already talking about ways in which they want to enable the INIP to be a “one-stop” facility for covering all nuclear risks. For perspective on growth in the Indian nuclear sector overall, see the graph below.

indias_nuclear_power_capacity_2016

 

Source: World Nuclear Association

In the long run, India hopes to supply 25% of its electricity from nuclear power by 2050. While the road up until this point has been rough, India is uniquely positioned to leverage it’s massive population and increasing industrialization to spearhead development. In addition, the country’s cutting edge research into fast reactors and the thorium fuel cycle will help it develop a stronger presence in the nuclear sector beyond it’s own borders (for a current snapshot of the industry, see the the “Heavy Engineering in India” report by the WNA here). In short, there are tremendous opportunities now not only for foreign suppliers working in India, but India’s own industry players abroad.

Returning back the INIP now, in the coming months and years, careful attention must be paid to the exact structure of the contractual arrangements between suppliers and operators in India. As Ms. Reynears pointed out in her concluding slides, it will be crucial that precise definitions are laid out and that parties remain cognizant that the INIP is only advisable for suppliers (while it is mandatory for operators). However, if a supplier chooses to not take part in the INIP coverage, the INIP/GIC Re can still try to establish fault in Indian courts against the supplier.

In summary, in the short term the establishment of the INIP has ameliorated many of the concerns of foreign suppliers and local communities alike. As we discussed earlier, it both allows for recourse against those who may be at fault, while also building in some security and certainty for those suppliers who may find themselves liable. It is, thus, a compromise. However, as we noted above, there are many details and angles to the INIP that will require careful navigation by all parties involved. Let’s hope that, in time, the experience will be a smooth one and that India can continue towards its nuclear goals.

 

News in Depth: Defering the Decision on Ontario’s Nuclear Waste Plans

Back in March, we examined Australia’s efforts to find a site for a new National Radioactive Waste Management Facility. In that report, we also highlighted efforts being made in Canada to find a suitable nuclear waste management site, known formally as the Deep Geologic Repository for Low and Intermediate Level Radioactive Waste (DGR). One of the favoured sites, as of May, was the Bruce nuclear plant in Kincardine, Ontario.

This week, we will explore the recent developments in the DGR project, the story of the Bruce site, and discuss what may come next in this country’s quest to solve our waste management problem.

The Study and Approval Process So Far

In May, a report by the Joint Review Panel of the Canadian Environmental Assessment Agency (CEAA) approved the Bruce site and recommended it to the federal environmental minister, Leona Aglukkaq, saying that the “project is not likely to cause significant adverse environmental effects.”

For background, the plan at the Bruce facility to build a repository deep beneath the site where “200,000 cubic metres of low and intermediate level waste from the Pickering, Darlington, and Bruce nuclear plants” could be stored indefinitely. The facility would be more than one kilometre from Lake Huron and over 680 metres underground. The Bruce site was selected after years of consultation and assessment undertaken by Ontario Power Generation (OPG). This project is part of a larger movement in Canada to find safe sites in which we can store used fuel.

In 2002, the Federal government established the Nuclear Waste Management Organization (NWMO) to help guide this processIn 2011, Ken Nash, the current President and CEO of the NWMO, spoke with the National Post about the ethical motivations to finding suitable long term storage facilities that doesn’t simply leave materials above ground,

We can’t just leave it where it is, it’s up to this generation to look for something better and not pass on the burden…

The Bruce facility planned by the OPG is just such a solution, one that is designed to safely store materials for years to come. However, as the Toronto Star noted, over 152 communities in the US and Canada oppose the site. Local residents that live near the Bruce plant have also voiced concerns. Beverly Fernandez, of the Stop the Great Lakes Nuclear Dump group, has been particularly vocal on the issue of potential contamination of drinking water. In a March report in the London Free Press, she is quoted saying that

There should be no deep geologic repository (DGR) for nuclear waste anywhere in the Great Lakes Basin… locating it beside the drinking water of 40 million people defies logic.

The CEAA report, however, found that the risk of drinking water contamination “would be extremely low relative to current radiation levels in Lake Huron and negligible relative to dose limits for the protection of the public.”

Site proponents and the CEAA report also argue that there are a number of key components to the Bruce site that make it a good choice, including the stability of the rock, the current safety and security infrastructure, and the presence of engineering and construction expertise at the facility.

When the report was released in May, the federal environmental minister was given till early September to make a final approval. However, with federal elections looming in the fall, the decision was recently made to extend that deadline into December.

The Future Challenges Facing the DGR Decision

Some critics argue that the delayed decision is a sign that the Bruce DGR’s future is in peril. Ms. Fernandez, cited earlier as a strong opponent to the plan, thinks that the deferral reflects the fact that “more and more Canadian are expressing deep concern and strong opposition.”

Meanwhile, another local citizen’s group, Save our Saugeen Shores, has filed an application to the Federal Courts for judicial review, asking that the CEAA’s decision to approve the site be set aside. They argue that the panel “failed to consider Canada’s international obligations, was biased and violated the Country’s environmental rules.” 

This recent court challenge, and the continuing public debate, suggests that in the run up to the federal environmental minister’s December decision, every effort must be made to exhaustively discuss both the practical and political, the global and local. This project, no matter where it is located, will have implications on people and the environment for centuries to come, it’s only right that we take our time over the coming months to discuss and dissect the plan piece by piece, so we can make the best decision we can. 

The deferment, as a result, should not be viewed as avoidance. If anything, it is a reflection of the noted complexity of the project. If anything, it gives parties more time to resolve open questions and to hopefully address concerns regarding transparency. These things take time, and more time we now have.


Update (June 29, 2015) – two corrections were made in the article relating to the management of the Bruce DGR project and the to the approval process by the Federal minister. I apologize for the errors and appreciate reader feedback.

News in Depth: Putting a Face on the Future of Nuclear in the UAE

Over the last few months, our News in Depth series has explored the development of nuclear energy around the world. However, what is admittedly missing in our stories and in many of the stories we link to is that human element: who are the people that are driving the future of nuclear?

In this week’s feature, we focus on the future of UAE’s renewable energy programmes and the story of Marwa Al Shehhi and Omar Al Hashmi, Emirati students who are studying abroad in the hope of bringing their new nuclear expertise back home to the UAE.

The Students’ Stories and the UAE’s Nuclear Future

In a recent article in UAE’s The National, Caline Malek tells the story of two Emirati students, Marwa Al Shehhi and Omar Al Hashmi, who have travelled to Korea to bolster their nuclear engineering and management skills. Ms. Al Shehhi describes her motivation in the piece by saying that

“nuclear energy is interesting all over the world, and hearing that my country was adopting safe nuclear energy really made me proud. So I wanted to take part in that initiative…”

Ms. Al Shehhi is studying in a two-year masters program at Kings Kepco International Nuclear Graduate School. Mr. Al Hashmi is studying nuclear engineering as part of a bachelors program at Korea Advanced Institute of Science and Technology. Just like Ms. Al Shehhi, he is also keen on being part of the UAE’s energy transformation,

“I want to make my country proud and try to advance nuclear studies in the UAE. We’re trying to reduce our carbon emissions and this is one of the best ways to do it.”

These two students, along with their peers, appear eager to leverage their foreign education to gain professional experience at home and abroad. For example, another student mentioned in the piece plans to intern with Korea Electric Power Corporation before joining the Emirates Nuclear Energy Corporation (ENEC).

ENEC was establisehd by the UAE government on recommendation by the IAEA, as the country embarked on the development of nuclear energy production in the last decade. According the World Nuclear Association’s country profile, 98% of of the UAE’s 101 billion kWh energy production was from oil in 2012. In response to this continued reliance on fossil fuels, the country has accepted a $20 billion bid from a South Korean consortium to build four commercial reactors that are expected to produce 5.6 GWe by 2020 at Barakah, a coastal site 300 km west of Abu Dhabi city.

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Image credit: The National

The Educational Story in a Broader Context

With construction at the Barakah site progressing on time and on budget it appears that these students have a bright future ahead of them. However, this story also illustrates the complex interaction between foreign suppliers and the countries involved in nuclear development. It is clear that Korea and Korean companies have a vested interest in building not only reactors abroad, but universities at home that train Korean and foreign students alike. At the same time, countries that have little existing commercial, engineering, or educational infrastructure must look abroad to train students in new technologies such as nuclear.

As a result, the flow of knowledge follows the flow of capital around the world. In the nuclear energy sector in particular, it is important that local people, who will help maintain and operate the facilities long after the initial construction managed by foreign suppliers, have the know-how and skills to safely operate the site.

It starts, then, with education and training, with people like Ms. Al Shehhi and Mr. Al Hashmi. They are the future of nuclear for the UAE.

News in Depth: Dave Toke’s Cost Comparison of Nuclear and Wind

On May 15, Dave Toke, a Reader in Energy Politics at the University of Aberdeen, shared his analysis of the cost between nuclear power and both onshore and offshore wind power. Toke concluded that nuclear is, on the whole, more expsensive than both wind sources.

In this week’s News in Depth, we take a look at Toke’s analysis and discuss whether his conclusions and assumptions can apply in different context.

Comparing Nuclear with Wind Cost: Understanding the Numbers

Toke compares energy costs by using two main sources. First, he cites the UK Government’s 2013 contract with the operators of the Hinkley C nuclear power station in Somerset, England. The Government agreed to pay the price of £92.50 per/MWh over 35 years with a £10 billion loan guaranteed by the Treasury. Adjusted for inflation, the price is now closer to £94 per/MWh.

Toke then contrasts that example with the Government’s February announcement of new onshore and offshore windfarm contracts at £80 per/MWh and £120 per/MHh respectively over a shorter 15 year term (with no loan guarantee by Treasury). He notes that that these installations are yet to be built and thus he has to assume that these prices will remain stable for years.

So how does Toke arrive at his headline cost comparison figures of £83 per/MWh for nuclear, £78 per/MWh for offshore wind, and £73 per/MWh for onshore wind? For the full breakdown, please take a moment to read Toke’s full post. However, for context, know that Toke is taking a longer term view, building in the cost of refurbishment of both nuclear facilities and wind turbines.

He assumes a lifespan of 45 years for nuclear – lower than what he calls the wrongfully “accepted average” – and a lifespan of 45 years for wind (with a refurbishment after 25 years). He argues that the refurbishment of the wind turbines is much less expensive than the initial construction costs, as the foundations and electrical infrastructure can remain in place. As a result, both offshore and onshore wind are, in his analysis, much cheaper than nuclear. Toke concludes:

Hence we can see that both onshore wind and offshore wind are cheaper over 45 years even before we take the considerable advantage given to nuclear power by the loan guarantee on offer and also that the prospect of cost reductions is much stronger in the case of wind power than nuclear power.

Cost Comparison

Image Source: Dave Toke’s Green Energy Blog

The Take-Away’s and Potential Criticisms of Toke’s Analysis

So what are the potential takeaways and criticisms of Toke’s comparison? It must be said that his comparison is of course site specific, but there is little use in criticizing or dismissing his numbers simply because of their limited scope. Rather, we have to think about both the wider repercussions of his conclusions and about what his analysis elides: what assumptions are at play and what figures are not addressed?

It’s clear that one missing element is any discussion of the nature of the power sources themselves. Namely, nuclear, on the whole, provides a steady source of energy production during operation. Wind and solar are susceptible to the elements. I am not claiming that Toke is ignoring such a basic idea, he is looking at the averages here and at the government contract values, but it is nevertheless useful to bear in mind the fundamental difference in how the energy is produced if we are too think about cost in a broader sense.

Toke also makes assumptions about the refurbishment costs and construction methods employed in the offshore wind installations. Notably, he hedges when discussing the scope of refurbishment,

if they are refurbished (say after 20 years) the costs may NOT include the foundations, towers and electrical connections since they will already exist.

While assumptions like these may be informed and necessary for the short analysis of a blog post, they potentially undermine the profundity of the final conclusion regarding the cost benefits of solar vs. nuclear. The costs may indeed be lower, but such conclusions will take time to be tested in the years to come.

Summary report for Future of Nuclear seminar – Nuclear Liability Developments in India, May 27

On May 27th attendees of the Future of Nuclear seminar series had the privilege to hear Els Reynaers discuss recent nuclear liability developments in India. Specifically, the discussion focused on the practical implications for Canadian parties interested in establishing commercial exports of civil nuclear energy technology and uranium.

A review of India’s current energy mix, as well as the country’s ambitious projected energy scenarios provided context for the discussion. By 2050, India wishes to meet 25% of its electricity needs through nuclear energy, a significant increase from the roughly 2% the industry currently represents. Thanks to key international developments, specifically a 2008 exception from Nuclear Supply Group (NSG) guidelines that previously restricted the transfer of technology, it seemed India was on-route to meeting their targets with the help of foreign participation.

Nevertheless, for this union to be successful, foreign nuclear vendors, regulators, and suppliers had to navigate India’s Civil Liability for Nuclear Damage Act (CLND). It is precisely here where the challenges lie. Chief among them were issues regarding the value and time frame of supplier liability, as well as what constitutes a supplier and the right to legal recourse in the event of a nuclear incident.

In response, the recent India-US agreement represents a commitment to address the stipulations of the CLND and so encourage foreign partnerships. The recently launched India Nuclear Insurance Pool (INIP) serves this purpose by providing funds to cover both operator and supplier liability risks and thus generate investor confidence.

Towards the end of the discussion, insightful questions were brought forth that spoke of support as well as the need to delve into the details of both the CLND and INIP. For partnerships to thrive, it is key that the aforementioned challenges be addressed. While we await the finalization of the India-US agreement and INIP policies, the lines of communication between interested parties will be kept open.

Written by Alejandra Tobar, B.Sc. Candidate, University of Toronto

 

Presentation from May 27 Seminar re. Developments in Nuclear Liability in India

Thank you to everyone who attended our seminar on May 27 regarding developments in nuclear trade and liability in India with Els Reynaers, Partner at M.V. Kini and Co., and President of the International Nuclear Law Association.  As requested by some of our guests, the presentation slides are now available to be viewed and downloaded from our site.

CLICK HERE to view Els’ presentation slides from the seminar.

 

 

News Brief: Nuclear Power Developments in Argentina

Dan Yurman’s recent article for the Energy Collective sheds new light on Argentina’s recent nuclear power developments. Yurman higlights deals for three new nuclear reactors and the the country’s new R&D program focused on the development of a 25 MWe SMR based on a PWR design.

Key facts of the three new reactors include:

  • China’s CNNC is financing two of the new reactors for a total of deal worth $13 billion USD.
  • Russia’s Rosatom is partnering for the third reactor, financing $6 billion USD.
  • Despite these financing deals, Argentina will need to seek further financing, likely from international markets
  • The Chinese reactors are a 800 MW PHWR Candu type reactor scheduled for 2016, and later a new CNNC 1100 MW Hualong One reactor. Rosatom’s reactor is a 1200 MW VVER design.

Yurman also highlights the developmend of a 25 MWe SMR by CNEA (the National Atomic Energy Commission) that is positioned “to be used to supply energy for areas with small populations or, potentially, for supplying power to desalination plants in costal areas.

Nuclear Energy in Argentina

According to World Nuclear Association’s country profile, Argentina currently has three nuclear reactors generating about one-tenth of its electricity. In 2007, per capita energy consumption was over 2600 kWh/yr. In 2012, gross electicity production included 73 TWh from gas, 30 TWh from hydroelectric, 20 TWh from oil, 3 TWh from coal, and 6.4 TWh from nuclear.

Argentina’s electicity production is largely privatised, and is regulated from ENRE (Ente Nacional Regulador de la Electricidad). Yurman, in his article on Argentina’s future nuclear energy plans, describes the three existing reactors:

the profile of installed units includes three PWHR Candu type reactors the oldest of which was built in 1974 (Atucha 1). Atucha 2, a 700 MW PHWR entered revenue service in 2014, and a third unit Embalse, a 600 MW Candu 6, was completed in 1983.

The deals with China and Russia enable a rapid shift in Argentina’s energy mix, with an increasing focus on cutting carbon emmissions. However, questions remain as to whether Argentina can afford major new nuclear infrastructure. As an April 2015 op-ed by Jason Marczak in the World Politics Review noted, Argentina is often an afterthought for investors looking to invest internationally, due to political instabilitity and the fallout from the sovereign debt default in the early 2000s.

However, with presidential elections later this year, there is renewed optimism in Argentina and, perhaps, a chance that international investors will begin to reconsider their skepticism. Renewed investment will make help to catapult the recent Chinese and Russian deals, and the local SMR development, from the early stages of today towards a brighter future.

Special Report: Nuclear Law and Liability Developments in India (Part 2 of 3)

Introduction

Last week, in Part 1 of this Special Report, we explored the history of India’s nuclear law liability regime and the passing of the 2010 Civil Liability for Nuclear Damage Act. We ended by highlighting how the 2010 Liability Act effectively drove a wedge between international suppliers and India’s nuclear industry by exposing suppliers to increased liability in the event of accidents.

Today, in Part 2, we will discuss and analyze the recent India-US agreement on nuclear trade and liability. In addition, we will canvas news reports and opinion pieces to get a sense of the reaction’s of industry experts and observers.

Part 2: The India-US Agreement

In January of this year, U.S. President Barack Obama visited India to meet with Prime Minister Narendra Modi. One of the key goals of the president’s trip was to formalize an agreement on nuclear development and liability issues.

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(Image Source: Reuters via the BBC)

As a report by Dan Roberts in The Guardian notes, the threat of tough Indian compensation laws – specifically the 2010 Liability Act – had “frustrated US hopes of an export boom in the energy sector.” As of May 2015, the details of the deal are still being finalized. However, certain baseline elements are set. As this Reuters report lays out, the deal sets a framework for the US nuclear industry to enter commercial talks with India’s nuclear operators by resolving two concerns, inspections and liability.

On the issue of liability specifically, the agreement upholds the strict liability regime and the supplier liability provisions of the 2010 Liability Act. However, to address supplier concerns, India will establish an insurance pool to cover liability up to a hard cap. The insurance pool, which would be backed by the state of India, would cover operator liability of up to 15 billion rupees (around $250 million US). Any recourse sought by the operator against a supplier could not be exceed this figure. In addition, insurance premiums for suppliers would be a fraction of the amount paid by the operator of the plants.

The Reuters report also highlights that in the event of a large scale incident, the Indian government would cover additional costs up to $420 Million (US) and, for additional funds, the report says that India would need to join the IAEA Convention on Supplementary Compensation for Nuclear Damage (CSC).

Following the India-US agreement, India has made it clear that the 2010 Liability Act will not be amended. A report from the India Express highlights the government’s position that

the foreign suppliers of the reactors cannot be sued for the damages by victims of a nuclear accident but can be held liable by the operator who has the right of recourse that could be operationalised through the contract between the operator and the supplier.

As a result, the agreement should not be viewed as a reform of India’s liability laws, but as an agreement to work within those laws by establishing an insurance pool for the operators and suppliers. In retrospect, it is clear that it was very important that India maintain its liability regime, as public and political opinion favoured increased liability for foreign suppliers following the Bhopal disaster in 1984. The agreement thus establishes a mechanism that keeps this regime in place while allowing for increased international nuclear trade.

Reactions to the Agreement and Concluding Thoughts

Reactions to the agreement have been mixed in the ensuing days and months. Partly, this is due to the fact that many of the details of the insurance pool have yet to be finalized. In an interview with Germany’s Deutsche Welle (DW), Mycle Schneider, an independent international consultant on energy and nuclear policy, shared concerns about the deal;

apparently, no specific document was signed. The Indian government reportedly announced its plan to set up a 122 million USD insurance fund to cover operators and suppliers from liabilities in case of an accident. Senior US nuclear industry officials stated they need to understand the “fine print” of the insurance. Equipment suppliers are keeping the champagne on ice, as one Indian business journal commented.

Mr. Scheinder, when asked if he expects the Indian market to become more appealing for US companies, says that “there is no real market for foreign companies in India, unless they bring their own funding. Under free market condition, it is not possible anymore to build a nuclear power plant anywhere in the world.”

A recent article on Monday by Ran Chakrabarti, an Indian lawyer, echoes similar skepticism.

It remains to be seen whether the Act and the Rules set out a balanced framework, encouraging suppliers to dip their toes into the Indian nuclear energy market, yet protecting the legitimate interests and concerns of the public in the event of a nuclear accident.

Given the complexity of nuclear development and the liability regime in India, it’s clear that this agreement will not be a panacea for all of the industry’s problems. As we’ve seen in these criticisms, and throughout India’s history, the role of foreign companies and governments in trade and development has been at times troublesome and, at other times, even disastrous.

However, India is growing at incredible rates and, as we explored in Part 1, lacks access to domestic energy resources such as coal and oil (which have driven China’s much faster economic growth). As a result, nuclear energy can help provide for a better base capacity for the country as it continues to also develop renewables such as wind and solar. In Part 3, to be published in the coming weeks, we will explore the future of nuclear in India and also focus on the ongoing finalization of the US-India agreement.

Special Report: Nuclear Law and Liability Developments in India (Part 1 of 3)

INTRODUCTION 

On May 27, 2015, Mindfirst will be hosting a Future of Nuclear Seminar on Nuclear Liability Developments in India. The speaker at the event will be Els Reynaers, a Partner at the law firm of M.V. Kini & Co. and President of the International Nuclear Law Association.

In her talk on the recent Indo-US political breakthrough on nuclear liability, Ms. Reynaers will explore the legal and insurance-related developments in India’s nuclear sector, and what those changes mean for Canadian nuclear vendors, regulators, and suppliers.

In the run up to this event, we bring you a three-part special report on India’s nuclear law regime. In Part 1, we explore the history of India’s nuclear law and liability regime. Next week, in Part 2, we discuss the recent negotiations and tentative agreement reached between the US and India in early 2015. In Part 3, to be published the week of Ms. Reynaers’ talk, we will explore the opportunities and challenges ahead for India’s nuclear energy sector.

We hope that this report will give you a clearer understanding not only of the recent Indo-US agreement, but the unique evolution of the nuclear law regime in India. We hope you can join us on May 27 to discuss these issues in person.

Part I: The History of India’s Nuclear Law and Liability Regime

As Gruendel and Reynaers pointed out in their 2012 article, India is not well endowed with natural energy resources. In response to this lack of reliable and local reserves, India plans to have 20,000 MW of nuclear capacity by 2020, with plans to derive 25% of its electricity (approximately 3000 GW) from nulcear by 2050.

Up until the passage of the Civil Liability for Nuclear Damage Act, 2010 (2010 Liability Act), to be discussed below, nuclear activity in India was governed by the Atomic Energy Act of 1948 and the Atomic Energy Act of 1962. Together, these Acts made the Central Government of India the sole legal operator of nuclear facilities in the country. The legislation did, however, leave room for private sector companies to hold a minority share in the ownership and operation of nuclear facilities under joint ventures.

Another key detail – highlighted by Yash Mannully in an important 2012 article on issues in Indian nulcear liability law – is that the Acts gave power to the Government to make rules that deliniate

the [operator’s] liability in respect of any hurt to any person or any damage to property caused by ionising radiations or any radioactive contamination either at the plant under license or in the surrounding area.

However, despite provisions that enable the Government to regulate liability, little was done in terms of legislating until the last decade. Additionally, up until the last decade, India’s 20 nulcear power plants operated at reduced capacity, given that India was excluded from international nuclear trade under the 1970 Nuclear Non-Proliferation Treaty. However, with a 2008 agreement by the Nuclear Supplier Group to grant a waiver to India, the country was able to import nuclear technology and sign bilateral agreements on civilian nuclear energy technology with countries such as Canada, France, the Republic of Korea, the United Kingdom, and the United States.1

As of 2008 then, India’s nuclear energy sector was primed to grow at an incredible rate. The country, then home to over 1.1 billion people, was given a new opportunity to fulfill it’s nulcear energy ambitions, in new partnerships with suppliers from around the world. As Gruendel and Reynaers note2, these partnerships were not for “turn-key”, full construction services, but rather for specific contracts for reactor technologies and related components. Given that these contracts are between the suppliers and India’s state nuclear operator (the Nuclear Power Corporation of India Limited (NPCIL)) the challenge of establishing a clear liability regime for the industry, and the scope of the liability itself, remained.

The 2010 Liability Act was the first concerted effort by the government to outline the scope of liability for the nuclear sector in India. In essence, the Act, in conjunction with subsequent ammendments, expanded the scope of liability beyond the operator – in this case, the NPCIL – to the suppliers of technology used in the civilian nuclear energy sector. By affirming strict and no-fault liability on the operator, the Liability Act was in keeping with the 1960 Paris Convention on Third Party Liability in the Field of Nuclear Energy and the 1963 Vienna Convention on Civil Liability for Nuclear Damage.3

However, where the 2010 Liability Act differed significantly was in its granting of special rights of legal recourse to the operators in the event of an incident. Under s 17(b), the operator of the nuclear installation “shall have the right of recourse where:

the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services.”

As Gruendel and Reynaers note in their 2012 article, linked above, the original language of 17(b) targeted situations where “the nuclear incident has resulted from the willful act or gross negligence on the part of the supplier,” but such language was dropped when experts agreed that establishing mens rea (or “guilty mind”) would be too difficult and would potentially weaken the government’s power, through their role as operator, to rely on legal recourse for damages against suppliers.

There are additional issues in the 2010 Liability Act that are important – including limitation periods and the complex interaction between international and domestic law – but they are beyond the scope of this brief review.

SUMMARY

The key point is that up until the early 2015 Indo-US agreement – which established an insurance pool and clearer liabilility limits for both operators and suppliers in India – suppliers were subject to special legal liability in the event of a nuclear incident. The establishment of this statutory tort – which coexists with common law tort liability – thus drove a wedge between suppliers and India’s nuclear industry. The 2008 agreement to allow bilateral trade was thus at a standstill – the country was open for business, but there was a massive catch. In addition, while the law was extensive, it did not necessarily clarify many of the issues it was designed to solve.

As a result, reform was crucial to any opening of trade between foreign suppliers and India’s NPCIL. Next week, in Part 2 of this series, we explore the efforts to reform and clarify the 2010 Liability Act and the recent Indo-US agreement on nuclear liability and technological development.


 

  1. See Gruendel and Reynaers 2012, page 46.  
  2. See their 2012 article, linked above, page 48. 
  3. See Gruendel and Reynaers, page 49, footnote 26. 

News in Depth: Deploying SMR Technology in Canada’s Northern Communities

In mid-April, 2015, Peter Lang, President of Dunedin Energy Systems Ltd, gave a presentation at the Nunavut Mining Symposium, arguing for a radical shift in the way we provide energy to remote communities and mining operations. Traditionally, northern communities have relied upon diesel generators that produce substantial pollution and require costly infrastructure for fuel transport to maintain energy production.

Lang suggests a new approach, one that utilizes new, small modular reactor (SMR) technology to produce energy from floating nuclear power ships. In this week’s News in Depth, we explore Lang’s idea and the potential opportunities and challenges that are ahead.

An Old Idea Given New Life

As Lang noted in his presentation, the idea of utilizing nuclear reactors in unique contexts is not new: small, self-contained nuclear reactors have been providing energy on military ships and submarines (103 in the US Navy alone), and ice-breakers for decades and have been deployed in northern Russian communities since the 1970s.

Lang’s Dunedin Energy believes that their SMART (Small Modular Adaptable Reactor Technology) system would provide a more sustainable and consistent energy source for remote communities in Canada. They describe the systems as a “nuclear battery”:

When the fuel in a nuclear battery is consumed, the entire reactor module (which contains the spent fuel) is removed and shipped to a processing facility for fuel recycling. A new, freshly fuelled reactor module is installed to replace it. The reactor module is a sealed unit and cannot be opened for any reason at the operating site.

In his presentation, Lang compares diesel and nuclear, using a 16MWe common production rate. Notably, the annual fuel logistics of diesel include moving and storing over 31 million litres of fuel and annual greenhouse gas emissions are estimated to be 85,000 tonnes. Compare those figures to the zero fuel logistics and greenhouse gas emissions of their nuclear SMART system. Lang also highlights the issue of carbon taxes, arguing that while diesel may cost up to $1.2 Million for a 16MWe plant, a nuclear SMART reactor would gain a credit of $1.2 Million.

The Challenges Ahead

The incredibly favourable comparison above belies some of the deeper challenges that SMR development may face in northern communities.

The first set of challenges relate to cost and public resistance. Dunedin presents two business cases – a full-ownership option and a “zero-capital cost” option wherein Dunedin handles the operation and logistics of deployment, operation, and decommissioning, and the customer pays approximately 29 cents/kW in return.

However, northern communities and mine operators may be tempted to continue to rely on diesel – owing to the current low price of oil and, in essence, because of the stickiness of the status quo. In addition, northern communities, including many Aboriginal groups, continue to be locked in debates over energy development, mining, and socio-economic development; introducing any new nuclear energy plan may provide more fodder for political debate. Dunedin appears to be aware of these challenges and addresses the regulatory and safety issues on their website. However, as we suggested in a piece on April 23, better public engagement and education would be required to quell any genuine fears or uncertainty that exist.

Lastly, northern communities may demand a clearer set of guidelines and regulations relating to decommissioning and remediation. Lang noted in his presentation that decommissioning funds would be held in escrow, effectively guaranteeing that even if a community or mine is bankrupt, that the money for cleanup and restoration is not subject to claims by creditors or other parties. Dunedin’s approach is unique – in that the whole reactor-in-a-ship concept allows for relatively easy site cleanup – but questions still remain. How much would be necessary for cleanup? What does full restoration look like?

In other words, this ambitious idea is not without issues. However, there appear to be tremendous economic and environmental arguments in favour of SMR development in northern and remote communities. These arguments carry over to other contexts – including Mexico, for example – and may one day translate to a new energy future for Canada’s North.