Worse, the reactors upon which this enterprise rested weren’t exactly in mint condition. At the time of the privatization, there were just two aged machines, both in Chalk River, producing all of Canada’s isotopes. The NRX began operating in 1947, and the NRU, or National Research Universal, started up a decade later. Although they were still chugging along nicely, both were nearing the end of their working lives.
No one in their right mind would buy a business that hinged on two old reactors on their last legs. The sale would require some kind of guarantee. In the end, the government provided one by offering an exclusive twenty-two-year supply of isotopes — this despite the fact that both reactors could likely expire before the contract ended.
Within two years, the government would be out of power. It was AECL — and its owners, you and I — who were left holding the bag.
ordion international inc. was formally sold for $165 million on November 1, 1991. The buyers, MDS Health Group, a publicly traded (but mostly employee owned) company headquartered in Etobicoke, Ontario, took more than an 80 percent share; and Amersham International PLC, a British radiopharmaceutical company with a minority share, now had exclusive rights to the country’s isotope bounty. (MDS Health Group would eventually buy out Amersham.) MDS Health Group, founded in 1969, already operated clinical labs and distributed medical products internationally. The new entity was christened MDS Nordion.It would be interesting to see the details of the sale, but although tax dollars funded the expertise that brought Nordion into existence, ordinary Canadians do not have this right. An access to information request uncovers a lengthy file on the sale but only twelve pages available for scrutiny: two title pages; six pages from the contracts, heavily redacted apart from the names of the parties to the agreement; and four pages of contemporaneous press releases.
Still, even these meagre offerings are illuminating. For instance, although bidding opened on November 1, 1990, and the winner was announced on June 11, 1991, something weird happened in between. The Isotope Supply and Revenue Sharing Amending Agreement, dated April 1, 1991, suggests that whatever the parting arrangements were between AECL and its isotope division in 1988, those arrangements were changed during the bidding process.
The alterations almost certainly had to do with buttressing the security of the isotope supply with more explicit guarantees. For instance, the buyer may have insisted that if one of the old reactors went out of service AECL would be obliged to build a new one to replace it. And on April 8, 1993, not even a year and a half after MDS Health Group bought Nordion, that scenario came true: the NRX was shut down for good. That left the NRU to produce all of the company’s — and a significant quantity of the world’s — medical isotopes.
For MDS Nordion, this was a business crisis. For the Canadian government, interestingly, it was seen as an opportunity to get out of the deal. After the NRX closed, AECL tried to invoke force majeure — a clause that would free it from obligations under the contract because of an extraordinary event or a circumstance beyond its control. But MDS Nordion wouldn’t have it. The company accused the government of misrepresentation and fraud.
According to MDS Health Group Ltd. v. Canada, dated October 28, 1993, “A dispute has now arisen as to whether AECL is obligated under its agreement with MDS and Nordion to maintain both of its reactors at all times, or whether it can take one of them permanently out of service without building a new replacement reactor…AECL has denied that it is obligated to maintain both old reactors and that it must build a replacement.” AECL, MDS Health Group claimed, was not living up to its agreement.
Then, just seven months after the NRX was shut down, there was a changing of the guard in Ottawa, when on November 4, 1993, Jean Chrétien came to power. Despite Mulroney’s promises, during his tenure the debt had swelled to $514 billion. To help hack it down, he brought in the hated Goods and Services Tax. Kim Campbell, his successor, led the Tories to a crushing defeat, losing all but two federal seats.
The new Liberal government inherited the dispute between MDS Nordion and AECL. It didn’t take long to conclude that there was no way out of the deal. “[The Liberals] realized they were in an untenable position,” a former government official told me. “The agreement was sufficiently clear that the government owed MDS Nordion security of supply,” he said. In other words, AECL was obliged to maintain two reactors so that the flow of isotopes would not be interrupted.
The negotiations culminated in the Isotope Production Facilities Agreement, known as “the 1996 agreement.” The result was that two small, ten-megawatt AECL-designed reactors, dubbed MAPLE 1 and MAPLE 2, would be built at the Chalk River site. They would be dedicated exclusively to isotope production, and would provide MDS Nordion with an ironclad supply guarantee.
In the end, the 1996 agreement was yet another head scratcher of a deal. It was agreed that AECL would build the two MAPLE reactors, operate and secure them, and dispose of their waste — but MDS Nordion would own them. The price was $140 million, but the federal government gave MDS Nordion a $100-million interest-free loan, plus a $5-million “non-repayable contribution,” to help offset the purchase cost.
