Complaint to EDC Compliance Officer - July 28, 2003

July 28, 2003

Ms. Alison Lawford
Compliance Officer
Export Development Canada
151 O’Connor Street,
Ottawa ON K1A 1K3

Dear Ms. Lawford:

I am writing you on behalf of the NGO Working Group on EDC (WG), a working group of the Halifax Initiative, to file a complaint with regard to the Cernavoda 2 nuclear reactor in Romania. Last January, Export Development Canada (EDC) confirmed that it would provide a $328 million loan guarantee to the Romanian government to help complete the construction of the reactor.

In accordance with the guidelines for filing complaints, I have divided this letter into three sections that outline the WG’s opinion of the problem, our opinion on the desired result of an investigation, and what has been done to solve the problem.

Opinion of the problem. It is our opinion that EDC has violated the spirit of its disclosure policy, environmental review directive and Code of Business Ethics. We say ‘spirit’, because we believe it is extremely difficult to violate the letter of any of these policies as they are written to be as flexible as possible. We see your role, therefore, as interpreting these policies in ways that ensure that they are implemented to their best intent.

It is our opinion that:

1) no effort was made to release the full EIA by AECL and by the Romanian Authorities,

2) the EIA conducted by AECL failed to include data essential to EDC conducting an informed and appropriate review,

3) all three EIAs conducted for Cernavoda 2 breached host country environmental requirements, and that

4) the Cernavoda 2 project violates the international standards appropriate to this project.

EDC has consequently contravened numerous policies outlined in its Environmental Review Directive (ERD) and its Code of Business Ethics. It is our opinion, therefore, that these breaches necessitate a full review of the environmental process by which EDC made its assessment of Cernavoda 2, and its decision to finance, rather than reject, the project.

1) Violation of Section D3 of EDC’ s Disclosure Policy and Code of Business Ethics

“EDC will encourage all project sponsors to whom it is providing support to publicly release available environmental impact information”

“EDC's individual transaction disclosure pursuant to D2, in respect of support to projects that would be classified as Category A projects under its Environmental Review Directive, will be expanded to include reference to the international standards which are met or exceeded by the project's design.”


“It is also corporate policy that communication and relationships with stakeholders be truthful and transparent in a way that will withstand the highest degree of public scrutiny. Working relationships will be based on candour and openness, treating each other fairly and with respect, while acting with integrity, and weighing responsibilities to all stakeholders.”

AECL only ever made available a summary of its EIA in December 2001. As EDC endeavours to act according to high international standards and the best prevailing practices, this would require the full release of the EIA. This is especially true since EDC’s client in this case is a government agency, and financing for this project is through the Canada Account.

Furthermore, the review that the Sierra Club conducted of the AECL summary was endorsed by over sixty international NGOs, representing a large constituency of stakeholders whose opinions EDC has apparently made no effort to weigh. There is little evidence that EDC, for example, took these comments into consideration in its review, despite its commitment to being fair and “respectful to all stakeholders”.

2) Violation of Environmental Review Directive, paragraph 16

“Where EDC determines that it is unable to obtain sufficient environmental assessment information to conduct its environmental review of a project, EDC will decline to enter into a transaction related to such a project”.

Key omissions in all three EIAs

We believe that significant details were omitted in all three EIAs, and consequently EDC’s assessment could not have been made on the basis of sufficient environmental assessment information. For example, in “Annex III – Illustrative Environmental Impact Assessment Report” of EDC’s ERD, the crown corporation lists elements appropriate to an EIA. Many of these elements, however, are omitted in the various EIAs. Without this key information, EDC’s ERD may have skewed the crown corporation’s final decision in terms of determining whether or not to fund or reject the project.

1.  The EIA indicates that the Cernavoda 1 and 2 reactors are to share the Emergency Water Supply System, yet it fails to establish how the supply can accommodate the two reactors, and also fails to outline the risks and mitigation measures to be taken in the event of an accident simultaneously affecting both reactors and the water supply.

2.  Section 2.5 of the AECL EIA Summary, “Effects of the Environment on the Projects”, outlines potential events that may impact upon the Cernavoda 2 site.  “Human-Induced” events are listed broadly as “land, sea, and air accidents.”   There has been no apparent assessment or mitigation measures with respect to the potential for CANDU reactors to be used to produce material for Weapons of Mass Destruction (WMD).  In light of the post-Sept.11 reality, it is prudent to include the proliferation of WMDs and terrorism vis-à-vis CANDU technology as constitutive of a “human-induced event”.

3.  The AECL summary contains little site-specific information, and no discussion of the performance legacy of CANDU reactors.  Since CANDU technology has not changed fundamentally over the past decade, we can make a sound assessment of the reactor’s impact on the region from its operational history elsewhere. Principle safety problems and malfunctions characteristic of CANDU reactors are as follows:


          o “Flux Tilts”, or fuel melting and instability of heat production due to varied flow of neutrons in the reactor core.
          o Drastic increases in the rate of power when coolant does not circulate properly in the core, leading to loss of reactor control known as the “positive void effect”.
          o Retention of radioactive material in the containment relies on active systems, a major deficiency in design
          o Hydrogen, steam and reactor explosions
          o Large amounts of radioactive Tritium emissions
          o Specific to this case, the Cernavoda reactor represents a serious seismic and fire hazard, as Romania is one of the most active earthquake zones in Europe.

The PHARE study does go some way towards addressing some of these omissions, but is itself not immune to certain flaws in its analysis.


1.  Specifically, the PHARE assessment includes the following omissions in its analysis:

          o Does not demonstrate proof of demand for a new power station with 700MW capacity
          o Does not discuss alternative options to provide 700Mw, such as co-generation, gas turbine, use of biogas or biomass, despite the fact that the site is located near an agrarian region
          o Plant safety and risk management is not sufficiently described or verified, including seismic qualifications, fire resistance, hydrogen explosions in the containment, emergency core cooling, and potential severe accident or external impacts[i]

2.  Missing or absent information in the PHARE EIA includes:

          o Meteorological data
          o Earthquake history ends abruptly at 1992, although there have been 10 earthquakes with a magnitude greater than 3 over the past three years
          o Earthquake data only reports magnitude, but no acceleration data
          o Discharge rate for the Danube Black Sea (DBS) canal
          o Temperature rise due to outlet of hot water in the Danube Canal and its impact
          o Flooding frequency data
          o DBS Canal water levels are not given, thus the extent impact of discharge rate on the water body is not assessable
          o Impact of radioactive effluent with the CCW outlet on the drinking water of villages and town
          o Impact on the population in the event of accident due to airborne radioactive release due to precipitation
          o Flight corridor details
          o Distance of gas and oil pipe lines to the plant
          o Discussion of potential for accidents beyond design base accidents and their impact. [ii]


In the ICIM EIA as well as the two others, the amount of radioactive effluents to air and water are greatly underestimated as the calculations do not account for precipitation.  Additionally, because the seismic risk of Cernavoda 2 is grossly underestimated, so too are the calculations of overall risk for accidents with large radioactive releases.  Because greater disclosure of information pertaining to these calculations have not been made available, it is impossible ascertain in more concrete terms the true costs and risks of the project.

Given the omissions in all three EIAs, regardless of which EDC used to conduct its review, it is our opinion that the crown corporation could not have had sufficient environmental assessment information on which to conduct its review, and should have hence declined to enter into this transaction.

3) Violation of Environmental Review Directive, paragraph 22 and EDC Code of Business Ethics

“[…] the project in respect of which EDC is conducting a review has been designed to comply with host country environmental requirements”.

Illegal EIA

Atomic Energy Canada Limited (AECL) conducted the EIA for the Cernavoda 2 reactor. According to EDC’s ERD, Cernavoda 2 would be deemed a Category A project (Article 7) and would hence require a copy of the EIA Report in order to assist EDC identify and assess potential adverse environmental affects associated with the project (Article 17).

It is our understanding that EDC based its review on the EIA conducted by AECL, a summary of which was made available to the public in December 2001. However, according to the Romanian Ministry of Waters and Environmental protection, AECL was not certified to carry out such a study, and furthermore, the Environmental Impact Summary (EIS) issued by AECL did not meet the national requirements in this matter (according to Ministry Order 278/1996 and 125/1996 respectively).


This consequently lead to a second EIA, conducted by the National Institute of Research and Development for Environmental Protection (ICIM). The ICIM EIA was completed in January 2002 and a summary in English published in August 2002.

If EDC based its review on the AECL study, it was therefore basing its review on a document that had breached Romanian law.

The public consultations, held from August 15th to September 21st 2001 on the AECL EIA, were based on a Romanian translation of an initial draft of the AECL EIA, rather than the complete EIA. This would explain why the Romanian translation is quite different from the English AECL study. For example, the two summaries do not share the same structure, include different assessments of estimated future energy needs in Romania, and the Romanian version fails to make references to the economic justification of the nuclear project and non-nuclear alternatives. Making such information available to the public, however, is an explicit requirement of the ‘Permitting Procedure for economic and social activities having an environmental impact’ of Romanian Environmental Protection Law No. 137/1995 ( Article 4.3.2). Furthermore, the English EIA summary by AECL was not made public until the end of 2001, after the period for public consultation.[iv]

Public consultations conducted in Romania by AECL did not meet with the national environmental legal requirements.

Ironically, the EIA conducted by Romania’s own national Institute, ICIM, also violated the same national law. Since only a summary was made publicly available in August 2002, ICIM violated the same Romanian Environmental Protection Law that AECL did, which states that an EIA must be subject to public consultations with locally-affected communities and Romanian NGOs before the Environment Ministry can grant an environmental license. Even though Romanian authorities claim that they held new consultations, no NGOs critical of the nuclear project were appropriately informed about the meeting. Consequently, the meeting in September 2002 was attended only by technical experts and pro-nuclear NGOs, and was chaired by officials working for SNN itself.[v]

Public consultations conducted in Romania by ICIM did not meet with the national environmental legal requirements
Furthermore, based on the summary, the Romanian EIA appears to be unsystematic, incomplete, and widely incoherent due to the absence of any appropriate maps and figures.[vi]
Both the AECL study and the ICIM study therefore both breach Romanian environmental law requirements.

A more comprehensive study was also conducted through the PHARE program of the European Commission, documenting four studies concerning environmental, safety, economic, and financial aspects of the Modernization project for Cernavoda NPP-2. However, according to experts at the Austrian Institute for Applied Ecology, all three EIAs conducted for Cernavoda 2 were flawed and incomplete, violating EU Directive 97/11/EC which states that all problems, current or potential, must be considered in the assessment.[vii]

Regardless, therefore, of which EIA EDC used to review the Cernavoda 2 case, all three failed to abide by specific national laws. This therefore contravenes Article 22, by which EDC is obliged to “comply with host country environmental requirements”.

4) Violation of Environmental Review Directive, paragraph 21

“In conducting its environmental review, EDC will use as benchmarks, the international standards which are most appropriate to the particular project[…]”

Despite the existence of three separate EIAs, none discuss the impact of waste water from Cernavoda NPP-2, or the impact of radioactive emissions into the local aquifers, groundwater, and drinking water supply.  This is a clear violation of the Helsinki Convention’s Protocols on Water and Health under Council Decision 95/308/EC, a breach of water policy Directive 2000/60/EC of the European Parliament, and a departure from the Environmental Cooperation in the Danube-Black Sea Region agreement under COM(2001) 615 final.[viii]
Cernavoda NPP-2 is also in breach of Article 3 of the Espoo Convention on the Environmental Impact Assessment in a Transboundary Context, which states:

“For a proposed activity listed in Appendix I that is likely to cause a significant adverse transboundary impact, the Party of origin shall, for the purposes of ensuring adequate and effective consultations under Article 5, notify any Party which it considers may be an affected Party as early as possible and no later than when informing its own public about that proposed activity.”

Cernavoda 2 is located 35km from the Romanian border with Bulgaria.  However, the Bulgarian government was not notified by the Romanian government about its intention to go ahead with the project until the end of 2002, when the EIA study was already finalised.  A response, dated August 14, 2002, from EDC relating to our inquiry regarding EDC’s possible financing of Cernavoda-2, dismisses this breach of international law stating,
“The [ESPOO] Convention contains mechanisms for neighbouring states to request an exchange of sufficient information for the purposes of holding discussions on whether there is likely to be a significant adverse transboundary impact.  The government of Bulgaria has not, as afar as we are aware, registered such a request to date.”[ix]
This is perhaps because the Bulgarian government had not yet been made aware of the plans to complete Cernavoda 2.

This issue was not in fact addressed until June 2003 when the DG for Environment of the European Commission requested the Romanian Authorities to provide the Bulgarian government with more detailed environmental information about the project. This would seem to substantiate NGO complaints that the Romanian government was in breach of Article 3 of the Espoo Convention at the time when EDC approved the loan guarantee for the project.[x]

Finally, given the omissions in the EIAs and breaches to host country law highlighted above, it appears impossible that EDC could have reviewed the EIA using the highest international standards. Yet EDC’s Code of Business Ethics asks the crown corporation to encourage best practices among those with whom it does business, with the aim of raising international environmental standards. This has not been achieved.

Regardless, therefore, of which EIA EDC used to review the Cernavoda 2 case, all three failed to abide by international standards set by European law, the Helsinki Convention and the Espoo Convention, some of “the international standards which are most appropriate to the particular project”.

Opinion of the desired result of the investigation

This complaint has attempted to demonstrate that the EIAs on which EDC based its review failed to comply with various national and international laws and standards, and omitted information essential to making a proper review of the EIAs for Cernavoda 2 with the involvement of all stakeholders, including local and international civil society organisations.

General requests

It is our belief that EDC has not pursued the due diligence of its environmental review process, and that both the violation of national and international laws in this case should be corroborated, and the omissions in the various EIAs should be substantiated. Based on these findings, EDC should reassess its decision to approve this project, and make the results of this inquiry available to the public. The Compliance Officer should further review the policies contained in the ERD, and make recommendations as to how the crown corporation can ensure that this breach of its policies does not happen again.

Specific requests

Relative to EDC support for Cernavoda 2, we request the following:

    * Release of correspondence requesting EIA release and client rationale for refusal
    * Demonstration of significant harm caused to client if EDC had required release of EIA
    * Release of AECL full EIA
    * Disclosure of international standards used to assess AECL EIA
    * Release of Environmental Covenants
    * Commitment to Review Romanian EIA
Correspondence or material relating to EDC’s determination that, despite significant adverse environmental effects and mitigation measures, it would approve Cernavoda 2.

What has been done to solve the problem   

In March 1999, 164 Members of Parliament and 42 Senators came out publicly against a Canada Account loan for Cernavoda 2.

In January 2002, Sierra Club of Canada conducted a review of AECL’s summary of its environment assessment study (EAS), critiquing both the inadequacy of the study and the lack of a complete EAS.

In February 2002, Campagna per la riforma della Banca mondiale and CEE Bankwatch conducted the first fact-finding mission, conducting interviews with Romanian authorities and investigating the economic, environmental, safety and social implications of the reactor. The report included specific recommendations to project financiers, including EDC.

In March 2002, the Halifax Initiative, along with the Sierra Club of Canada and Campagna per la riform della Banca mondiale, wrote Prime Minister Chretien recommending that EDC review the host country environmental study, rather than the study carried out by a project sponsor (AECL) without any independence in its evaluation. At that time, we also asked the Prime Minister to make public the full AECL EIA, the Romanian EIA, to commission a new independent and update alternatives study, and to make EDC financing conditional upon consultation with Romanian groups. EDC was copied on the letter.

In May 2002, Gar Knutson, Secretary of State for Central and Eastern Europe, was briefed about our concerns on the case, including the recommendations that the Canada Account should not be used to finance Cernavoda given that a majority of Parliamentari