Federal nuclear liability to surge
AECL review forces long-term cleanup costs to increase by $2.4B
OTTAWA— A sudden $2.4-billion revision to Canada’s nuclear liabilities has crept up on Finance Minister Jim Flaherty and substantially deepened the deficit for the current fiscal year at a time when he is trying desperately to whittle it down.
But analysts say there is probably enough wiggle room in the government numbers this year to absorb the $2.4 billion without throwing Flaherty’s longer-term deficit reduction plans too far off course.
Atomic Energy of Canada Ltd. quietly announced Tuesday night that the anticipated long-term cost for cleaning up its nuclear program has surged to a total of $6 billion, up 67 per cent from the $3.6 billion that is currently on the books.
AECL said the increased liability will go straight to Ottawa’s bottom line, adding to the deficit of the 2012-2013 fiscal year.
AECL said previous estimates were out of date and the indirect costs of disposing radioactive waste over the next 70 years have climbed.
“The main reason for the liability adjustment is an increase in the indirect costs attributed to the decommissioning and waste management over the period of up to 70 years of the program,” the AECL statement explains.
It’s no coincidence that word of the large increase in liability is coming out just before Flaherty tables the spring budget, says Peter DeVries, an Ottawa-based consultant and former senior official at the Department of Finance.
“They want to book it now, in 2012-13, because the year is nearly over. They want to get it out of the way,” DeVries said in an interview.
The 2012-13 fiscal year ends on March 31 and the $2.4 billion will show up as a one-time hit on the government’s books for that year only — even though the money won’t actually be spent for years. Indeed, before the AECL news, the federal government was prob- ably on track to come in a couple of billion dollars ahead of where they had projected last fall, added Toronto-Dominion Bank economist Derek Burleton.
“Based on this year’s fiscal monitor results, they may have some wiggle room.”
So even though the revised AECL liability will set them back $2.4 billion, Ottawa is better off booking it this year than next year, he said.
That’s because economic growth is projected to slow more than Ottawa had expected next year, eating into federal revenues and making it difficult for Flaherty to get ahead, Burleton said.
Flaherty had previously projected a deficit of $26 billion for this fiscal year and many had expected him to beat that projection by a couple of billion dollars. Now that the increased AECL liability has been thrown into the mix, he will probably be close to his initial $26 billion when he tables the budget on Thursday, Burleton added.
Details will be made public on Thursday when the government tables its budget, although it was not immediately clear if the new AECL liability would show up in the budget documents.