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Senators in attendance:

Senator Kim Carr, Minister for Innovation, Industry, Science and Research

Mr Mark Paterson, Secretary

Ms Jessie Borthwick, Acting Deputy Secretary

Mr Tim Mackey, Deputy Secretary

Dr Richard Green

Mr Bill Peel, Executive General Manager

Mr Chris Birch, General Manager, Research, Development and Venture Capital

Ms Wendy Launder, General Manager, Development & Commercialisation

Ms Judith Zielke, General Manager, Innovation

Mr Paul Sexton, General Manager, Customer Service

Dr Russell Edwards, State Manager, NSW

Ms Melissa McClusky, Head of Division

Ms Chris Butler, General Manager

Mr Richard Byron, General Manager, Human Resources and Facilities

Mr Trent Rawlings, Manager, Business Collaboration

Ms Susan Charles, Manager, Marketing and Communication

Ms Michele Clement, Manger, Budget Policy and Strategic Planning

Ms Alison Young, Assistant Manager Operation Sunlight, Corporate Strategy

Ms Jocelyn McGill, Senior Project Officer Operation Sunlight, Corporate Strategy

Mr Jeff Reithmuller, Manager, Corporate Strategy

Ms Cherie Ellison, General Manager, Business Collaboration Branch

Mr Brad Medland, General Manager, Corporate Finance

Mr Ken Pettifer, Head of Division

Mr Mike Sibly, Manager, Online eBusiness Services

Ms Trish Porter, General Manager, ICT Systems

Mr Steve Stirling, General Manager, ICT Operations

Mr Barry Jones, Head of Division

Ms Paula Thomas, General Manager, Governance and Systems, Enterprise Connect

Mr Ken Miley, General Manager, Trade and International

Ms Sue Weston, Head of Division

Mr Tony Greenwell, General Manager, Business Conditions

Mr Michael Schwager, General Manager, Small Business and Deregulation

Mr Richard Snabel, General Manager, Industry Policy and Economic Analysis

Ms Ann Bray, Acting General Manager, Business Registration and Licensing

Mr Craig Pennifold, Head of Division

Ms Tricia Berman, General Manager, Innovation Policy

Mr Peter Chesworth, General Manager, Pharmaceuticals and Enabling Technologies

Ms Stella Morahan, General Manager, Cooperative Research Centres 

Mr Tony Weber, General Manager, Innovation Analysis

Mr Philip Noonan, Director General

Ms Fatima Beattie, Deputy Director General

Mr Doug Pereira, General Manager, Corporate Services Group

Mr Steve Payne, Head of Division

Mr Ivan Donaldson, General Manager, Australian Building Codes Board

Mr Mark Durrant, General Manager, Automotive and Engineering

Dr Michael Green, General Manager, Manufacturing Innovation

Mr Mike Lawson, General Manager, Competitive Industries

Mr Alan Coleman, Manager, Competitive Industries Branch

Mr James Roberts, General Manager, Analytical Services

Professor Graham Durant, Director

Ms Anne-Marie Lansdown, General Manager, Research Infrastructure

Mr David Luchetti, General Manager, Science Policy and Programs

Ms Mary Finlay, General Manager, International Science and Collaboration

Mr Mark Thomas, Acting General Manager, Research Policy Compacts and Funding

Dr Adrian Paterson, CEO

Dr Ron Cameron, General Manager, Strategy, Government and International Relations

Mr Douglas Cubbin, General Manager, Business and Enterprise

Mr Steve McIntosh, Senior Advisor, Government Liaison

Professor Margaret Sheil, Chief Executive Officer

Ms Leanne Harvey, General Manager, Research Excellence

Mr Andrew Cameron, Chief Financial Officer

Dr Megan Clark, Chief Executive

Dr Alastair Robertson, Deputy Chief Executive, Science Strategy and Investment

Mr Mike Whelan, Deputy Chief Executive, Operations

Professor Penny D. Sackett, Chief Scientist of Australia

CHAIR (Senator Hurley) —Welcome. I declare open this public meeting of the Senate Economics Legislation Committee. The Senate has referred to the committee the particulars of proposed expenditure for 2009-10 and related documents for the Innovation, Industry, Science and Research, Resources, Energy and Tourism and Treasury portfolios. The committee must report to the Senate on 25 June 2009 and it has set 31 July 2009 as the date by which answers to questions on notice are to be returned.

Under standing order 26 the committee must take all evidence in public session. This includes answers to questions on notice. Officers and senators are familiar with the rules of the Senate governing estimates hearings. If you need assistance, the secretariat has copies of the rules. I particularly draw the attention of witnesses to an order of the Senate of 13 May 2009, specifying the process by which a claim of public interest immunity should be raised and which I now incorporate in Hansard.

The document read as follows—

Order of the Senate—Public interest immunity claims

That the Senate—

(a) notes that ministers and officers have continued to refuse to provide information to Senate committees without properly raising claims of public interest immunity as required by past resolutions of the Senate;

(b) reaffirms the principles of past resolutions of the Senate by this order, to provide ministers and officers with guidance as to the proper process for raising public interest immunity claims and to consolidate those past resolutions of the Senate;

(c) orders that the following operate as an order of continuing effect:

(1) If:

(a) a Senate committee, or a senator in the course of proceedings of a committee, requests information or a document from a Commonwealth department or agency; and

(b) an officer of the department or agency to whom the request is directed believes that it may not be in the public interest to disclose the information or document to the committee, the officer shall state to the committee the ground on which the officer believes that it may not be in the public interest to disclose the information or document to the committee, and specify the harm to the public interest that could result from the disclosure of the information or document.

(2) If, after receiving the officer’s statement under paragraph (1), the committee or the senator requests the officer to refer the question of the disclosure of the information or document to a responsible minister, the officer shall refer that question to the minister.

(3) If a minister, on a reference by an officer under paragraph (2), concludes that it would not be in the public interest to disclose the information or document to the committee, the minister shall provide to the committee a statement of the ground for that conclusion, specifying the harm to the public interest that could result from the disclosure of the information or document.

(4) A minister, in a statement under paragraph (3), shall indicate whether the harm to the public interest that could result from the disclosure of the information or document to the committee could result only from the publication of the information or document by the committee, or could result, equally or in part, from the disclosure of the information or document to the committee as in camera evidence.

(5) If, after considering a statement by a minister provided under paragraph (3), the committee concludes that the statement does not sufficiently justify the withholding of the information or document from the committee, the committee shall report the matter to the Senate.

(6) A decision by a committee not to report a matter to the Senate under paragraph (5) does not prevent a senator from raising the matter in the Senate in accordance with other procedures of the Senate.

(7) A statement that information or a document is not published, or is confidential, or consists of advice to, or internal deliberations of, government, in the absence of specification of the harm to the public interest that could result from the disclosure of the information or document, is not a statement that meets the requirements of paragraph (1) or (4).

(8) If a minister concludes that a statement under paragraph (3) should more appropriately be made by the head of an agency, by reason of the independence of that agency from ministerial direction or control, the minister shall inform the committee of that conclusion and the reason for that conclusion, and shall refer the matter to the head of the agency, who shall then be required to provide a statement in accordance with paragraph (3).

(d) requires the Procedure Committee to review the operation of this order and report to the Senate by 20 August 2009.

(Agreed to 13 May 2009.)

(Extract, Journals of the Senate, 13 May 2009, p.1941-42)

CHAIR —Officers called upon for the first time to answer a question should state their name and position for the Hansard record and witnesses should speak clearly into the microphone. Please make sure all mobile phones are turned off. The committee will begin today’s proceedings with the Australian Nuclear Science and Technology Organisation and will then follow the order as set out in the circulated program. I welcome Senator Carr, the Minister for Innovation, Industry, Science and Research and officers of ANSTO. I would particularly like to welcome Dr Paterson to his first estimates hearing as CEO of ANSTO. Minister or officers, would you like to make an opening statement?

Senator Carr —No.

CHAIR —We will get straight into questions then. Senator Abetz.

Senator ABETZ —It begs the question, Mr Paterson, any relative or not?

Mr Paterson —None that I am aware of.

Senator ABETZ —Minister, can I ask you have you visited ANSTO since becoming minister?

Senator Carr —No.

Senator ABETZ —Dr Paterson or Dr Cameron, I understand we have got some nuclear waste material returning under contractual arrangements, can you shed any light on that?

Dr Cameron —Yes. Under the agreements we have both with the United Kingdom government and the French government, the spent fuel that was sent overseas for reprocessing has been reprocessed and the waste material gets returned to Australia. There are contractual arrangements in both cases that determine the timing of that. The earliest timing would be around about 2011, but there are provisions under the contract for us to have extensions of that period of time, so we are presently looking at negotiating those. The French fuel will return about 2015. With the United Kingdom fuel, as I said, we have opportunities to negotiate with them about an extension of time. The original contract really said two years after the period of cementation of our waste, which is occurring right now.

Senator ABETZ —So the United Kingdom was 2011 and France was 2015?

Dr Cameron —That is correct.

Senator ABETZ —Was the provision in the contract to extend that period of time for both the UK and French contracts or just the UK contract?

Dr Cameron —Just for the UK contract.

Senator ABETZ —So no matter what, in 2015 Australia will need to be prepared to receive—what do I call this again, the material?

Dr Cameron —It is intermediate-level waste.

Senator ABETZ —Does the extension in the UK contract have a time limit on it, that Australia can seek an extension of X years?

Dr Cameron —Yes, it has a time limit because the waste is currently at the Dounreay nuclear power site in Scotland, and the intention of Dounreay is to clean up that site and to close it down. They are working very hard to do that.

Senator ABETZ —Do we know what date they want to close their facility?

Dr Cameron —The date of closure would be the date of final closure, so our waste would have to be removed much before that.

Senator ABETZ —Exactly, and that is why I am asking have they set a certain date for the closure of that Scottish facility?

Dr Cameron —Yes, their intention was 2020, but, of course, we would have to have removed our waste much before that.

Senator ABETZ —And the extension in the contract, for how many years is that?

Dr Cameron —Our intention would be to try as much as we can to get the two dates of return to be the same.

Senator ABETZ —The two dates as in the French and the UK?

Dr Cameron —That is correct.

Senator ABETZ —So 2015. Minister, can I ask how we are proceeding with getting a facility to house this intermediate level waste?

Senator Carr —It is a matter you will have to raise through the DRET—

Senator ABETZ —Sorry, through?

Senator Carr —Through the Department of Resources, Energy and Tourism, which is the responsibility of Minister Ferguson.

Senator ABETZ —In relation to this contract to accept the intermediate level waste, was that a contract arranged between ANSTO and the UK government or the Australian government and the UK government? How did that work? What is ANSTO’s responsibility to in fact take that intermediate-level waste?

Dr Cameron —It is a contract between ANSTO and what was at the time the United Kingdom Atomic Energy Agency, which has morphed a few times in its history, and now it is with the Nuclear Decommissioning Authority of the United Kingdom.

Senator ABETZ —Thank you for that. That would suggest, Minister, that within your specific portfolio responsibility, within the next few years you have an agency that has the responsibility to pick up this intermediate-level waste and store it somewhere. I would have thought you would have taken more than just a passing interest in this by flicking it through to Minister Ferguson. I am just wondering what you, as minister, or indeed, Mr Paterson, what the department is doing in relation to its responsibilities via its agency ANSTO?

Senator Carr —I think I have already indicated to you, Senator, that these are the responsibilities of another department and another minister. By saying that, you should not conclude that I do not have an interest, the department does not have an interest or ANSTO does not have an interest. It is a simple statement of fact in regard to the administrative orders. I would, again, draw your attention to the relevant agency, and I would be, I am sure, only too happy for those officers to address questions on this matter.

Senator ABETZ —Basically, as I understand your answer then, if Minister Ferguson is unable to come up with a solution by the year 2015, an agency of your department might find itself in a diabolical position, being contractually bound to take intermediate-level waste without a facility to deposit it. Therefore, I would have thought there would be more than just a passing interest. Can I ask you, Mr Paterson, as to whether any departmental agency work has been undertaken in cooperation with the resources, energy and tourism department to house this intermediate-level waste?

Mr Paterson —Senator, as the minister has already indicated, it is the responsibility of the Resources, Energy and Tourism portfolio, and they will be on at estimates tomorrow morning. They have portfolio responsibility for dealing with nuclear waste materials. Yes, an agency of the portfolio in ANSTO has a responsibility in relation to its own nuclear material. I am sure that there is active cooperation between the agency of the portfolio and the resources, energy and tourism department, but they are the ones responsible for administering nuclear waste arrangements in this country.

Senator ABETZ —So the department is not in discussions with the resources, energy and tourism department about the issue that ANSTO will be facing.

Mr Paterson —It is a matter of particular concern to ANSTO and the resources, energy and tourism department, which has portfolio responsibility in relation to nuclear waste.

Senator ABETZ —We know that. I am just wanting to know whether the department—

Mr Paterson —I have answered your question.

Senator ABETZ —I want to know whether the department has had any liaison or discussions with resources, energy and tourism—

Mr Paterson —None that I am aware of.

Senator ABETZ —Thank you. Very easy, isn’t it, when you actually answer the questions? Dr Paterson, what discussions has ANSTO had with resources, energy and tourism in relation to this intermediate-level waste?

Dr Paterson —Thank you for the question. I have had meetings with officials of the department in which the issues that you have raised were discussed and the timescales that have been alluded to by Dr Cameron were confirmed. In addition, I had a meeting with Minister Ferguson in which there was a brief discussion about the timescales.

Senator ABETZ —Is ANSTO satisfied that the timescales that have been put forward by resources, energy and tourism will meet ANSTO’s requirements?

Dr Paterson —The role that ANSTO has played is to bring the relevant dates to the attention of the department. The department has indicated that they will revert to us when they are in a position to confirm a joint strategy.

Senator ABETZ —You would no doubt be monitoring and keeping a watching brief on that. I imagine you would be taking a keener interest and watching developments, rather than just saying, ‘We’ll leave it to you until 2011 or 2015.’ Is there regular liaison between ANSTO and resources, energy and tourism?

Dr Paterson —I believe that there has been and there will continue to be regular interaction. ANSTO also reviews its own position regularly and understands its obligations.

Senator ABETZ —Is there, for example, a joint working party between ANSTO and resources, energy and tourism to progress this?

Dr Cameron —During the period of the previous government and this government, we have met regularly with the relevant officers. Certainly during all the periods when they are looking at the design for a repository and store, we provided technical advice on that. The department is very aware of the position that we have with regard to the return of the waste. We keep them regularly updated and they keep us regularly updated. At the moment there are some legislation issues to be resolved. We are very aware of their process and they are very aware of ours.

Senator ABETZ —Minister, I assume that the legislative responsibility lies with Minister Ferguson, not you?

Senator Carr —That is right.

Senator ABETZ —Dr Cameron or Dr Paterson, have you been having regular input in relation to the legislative framework that is being developed?

Dr Cameron —No. The legislative process is really with the department. ANSTO is a technical organisation. We will provide technical advice. We do not provide legal advice. Really the legislative process and the acquisition of the site is very much the department’s responsibility. They come to us often for information about the nature and types of sites they should be looking for, but it clearly is the department’s process that is being followed.

Senator ABETZ —Have the discussions concerning the proposed legislation suggested a site certain and, in relation to that site certain, have you been providing technical information as to its suitability?

Dr Cameron —You will remember that, when these sites were originally identified, there were assessments done and we provided input into that. However, with regard to the current legislative process, that is entirely within the department.

Senator ABETZ —To your knowledge, will the legislation deal with the issue of the site, as in nominate the site and the area?

Dr Cameron —I think that is a question you should put to the department. My understanding is it is facilitation legislation.

Senator ABETZ —Who can take me through the PBS? Who should I be asking?

Dr Paterson —Pose questions through me, and I will defer to my colleagues if it should be required.

Senator ABETZ —Thank you. On page 136 of the PBS, the left-hand column of table 1.1 has $135 million in it. Where has that money come from? Was that a capital reserve? Where did that figure come from?

Dr Paterson —That figure covers future capital obligations to maintain the agency’s asset base, the automation of radiopharmaceuticals production, and to meet employee entitlement liabilities.

Senator ABETZ —But where did it originate from? Did it come out of general revenue of this year’s budget by way of a government grant, or were these funds held by the agency?

Dr Paterson —This represents prior year amounts, largely of a capital nature, and appropriations that have largely been of a capital nature.

Senator ABETZ —If these are, as I suspected, capital funds, what are they being employed for in the coming financial year?

Mr Cubbin —In the coming financial year, these funds are earmarked for a range of capital projects. ANSTO has a 10-year strategic asset development plan to do appropriate capital works on our sites to replace buildings, because quite a lot of the buildings are old. There is also a large chunk of money in there associated with the automation of our radiopharmaceutical production facility. We also have money in there associated with depreciation of the OPAL reactor.

Senator ABETZ —So that $135 million will all be allocated to capital works and capital matters.

Mr Cubbin —In the majority, yes. ANSTO has a five-year rolling capital plan and we have projects from prior years. Most projects run over multiple years. Also, in that funding, because it is reserves, we have money to cover things such as our employee liabilities associated with things such as long-service leave, annual leave et cetera.

Senator ABETZ —How much of this $135 million will not be actually used for what a layman like myself might understand as capital works?

Mr Cubbin —The estimate would be somewhere in the order of $20 to $25 million.

Senator ABETZ —$20 to $25 million is being used for which aspects of a non-capital nature? Can you set them out for us?

Mr Cubbin —It is predominantly for things like employee entitlements. We have got quite a large long-service leave and annual leave liability.

Senator ABETZ —So we are now drawing on capital reserves to pay employee entitlements in ANSTO?

Mr Cubbin —That is not correct.

Dr Cameron —This sum of money is reserves, so it includes both capital funding and our employee entitlements—it is all lumped together as one. As Mr Cubbin said, it is primarily capital but we also use it for reserves. In addition, we have reserves for purchasing fuel ahead, and that would be included in that as well.

Senator ABETZ —We have got a mixture of capital and other reserves. How or where can I find a disaggregation of that so I can be assured? I am assured by what you tell me but, if there is a document that confirms that, I would be even more assured that the amounts set aside for capital are only spent on that and other reserves are only being spent on employee entitlements.

Dr Ron Cameron —Senator, that is in our annual report and we would be very happy to send you a copy.

Senator ABETZ —Can you assist me with a page number in the annual report? If not, that is fine. If somebody could find that for me later, that would be very helpful. How was the $20 million diverted from the education infrastructure fund? Was that a decision by government, Minister?

Senator Carr —Yes.

Senator ABETZ —The education infrastructure fund, which had previously been set up, had $20 million taken out of it for the benefit of ANSTO. What is that $20 million going to be used for?

Dr Adrian Paterson —That $20 million is going to be used for an accelerator centre of excellence, which will include two major new accelerated investments and new instruments for the Bragg Institute, which is the neutron facility at the OPAL reactor.

Senator ABETZ —All for capital expenditure?

Dr Adrian Paterson —It is all capital.

Senator ABETZ —Unfortunately, in some other aspects of the government’s total budgetary framework we have seen infrastructure funding being used for skills training as well, and that then blurs the distinction from what most people would see as capital expenditure. You are assuring me that in this case the education infrastructure fund is being used for capital investments?

Dr Adrian Paterson —I am assuring you of that, Senator.

Senator ABETZ —Can I have confirmation that the very effective school program that you run with school visits is ongoing?

Dr Adrian Paterson —The school program is continuing and we are monitoring the attendance of that program monthly. It remains a very key part of our public extension activities and outreach.

Senator ABETZ —It is excellent to hear that. The numbers are continuing?

Dr Adrian Paterson —The numbers have been somewhat down over the last couple of months. We think that that is related to the particular timing of the school holidays and the other holidays, but we will keep tracking that and seek to ensure that the numbers are retained and grow.

Senator ABETZ —Excellent, because if I might make a request to ANSTO that in the pursuit and need for more science graduates in this country, excursions by school children to facilities such as ANSTO I think can play a very important role for the future of our country in developing the appetite for young students to pursue a career in science. Whilst to highly qualified scientific individuals from time to time it might be seen as non-core business, it is vitally important for the general science community and uptake of science in our nation that programs such as this continue.

Dr Adrian Paterson —Senator, we will continue to do that. I made the decision to become a scientist standing next to a research reactor in another country. I know how important these programs are and we will continue to strengthen it.

Senator ABETZ —There is no stronger an advocate than a convert, so that is great to hear, Dr Paterson. Whereabouts was that? It might be completely unrelated might I add to these estimates, but just out of interest?

Dr Adrian Paterson —Thank you, Senator. It was at the SAFARI reactor in South Africa. I was on a schools program and had been transported up to Pretoria to go and stand next to this reactor as part of that program. It was a unique experience and had a big impact on me.

Senator ABETZ —For somebody without any scientific background at all, can I assure you that it was somewhat of a unique experience for me to see the OPAL reactor and facilities at ANSTO and hold one of those rods. I trust that rod is still working and has not malfunctioned or anything like that! Can you tell us, more seriously though, about the reactor and how that is working for us?

Dr Adrian Paterson —Senator, as we said, the reactor is in operation. At the last cycle of operation we achieved 99 per cent availability, which is a very high number, the highest we have achieved since the OPAL was brought into service. During the cycle it has been pretty good as well and we will close that cycle off in a few days time. We still have the challenge of the reflector vessel defect and we are working very hard to understand that and to take the appropriate mitigation actions within that. The beam lines are working excellently and the Bragg instruments that are in service already are well deployed. We just had a second call for the Bragg instruments, and we are in the final stages of securing a licence for the production of radiopharmaceuticals, particularly the molybdenum-99. The team has worked extremely hard and OPAL is in good shape but still facing future challenges mitigating the risks of the defects that have been identified.

Senator ABETZ —When was the reflector defect first identified?

Dr Adrian Paterson —It was identified in early 2007.

Senator ABETZ —And progress is being made?

Dr Adrian Paterson —Progress is being made. We have regular technical meetings with INVAP to review the different solutions which are being proposed to mitigate the risk. We also had intensive interactions with them to understand that they shared the same view that we have with all of those initiatives and actions. We have put in place a process by which we continuously review these as new information comes to hand, and I am reasonably assured that we will, during the November outage, be able to trial some new mitigation initiatives in order to see if we can deal with aspects of this leak.

Senator ABETZ —Do we have a contractual arrangement with somebody that will help cover the costs, if not defray all the costs associated with this reflector defect?

Dr Adrian Paterson —As we have indicated in previous submissions, there is a linkage between a number of different areas of the contract. In the most recent contract negotiations we have been able to come up with a proposed package. That proposed package, which deals with all of the technical matters, the financial obligations and the other obligations, is now in a legalisation process where we now have them all appropriately linked to maintain a very strong position for ANSTO and to ensure that we have a positive and committed INVAP working with us.

Senator ABETZ —I understand that part of the ANSTO facility and the reactor provides us with medical isotopes for medical treatment within Australia and whilst the reactor was off-line we were importing from around the world. Are we now making our own? Are we replacing these imports? Where are we at with that issue?

Dr Adrian Paterson —We continue to import the feedstock molybdenum-99 materials to put in our own generators. That import is from South Africa, but the samarium, yttrium and the iodine is now manufactured in our own reactor and is provided to the nuclear medicine community.

Senator ABETZ —Excuse my ignorance of all those terms and what all those elements or compounds might do, but what does that represent of that which we now produce here? Is that 20 per cent, 30 per cent of what we used to produce here?

Dr Adrian Paterson —In terms of the actual availability of the individual isotopes, it is sufficient for the local needs. Regarding molybdenum, which is the largest used medical isotope in the world as it converts to technetium-99m, we continue to import that and we will continue to import it even as we ramp up production to provide assurance of supply and limited impact on patient outcomes.

Senator ABETZ —When do we anticipate that we will be able to wean ourselves off the imports?

Dr Paterson —It is difficult to be absolutely deterministic about that, but the process requires the securing of a licence from ARPANSA which will licence the facility for nuclear safety purposes. We have already received the medical licensing from the Therapeutic Goods Administration and once that licence has been secured we will be able to enter into full domestic production. However, in the interim, we continue to develop the capabilities of the plant and have been permitted by ARPANSA to undertake additional commissioning runs and all of those are adding to our confidence in our ability to operate the plant in a reliable and predictable way. The plant at this point is not, in my view, fully reliable and predictable and therefore it is prudent to continue the import of moly-99 from South Africa.

Senator EGGLESTON —Could I just jump in there and ask a question, Dr Paterson? Last time we were told that isotopes were being rationed and not all centres were getting isotopes. Could you tell us what the situation is now? Are there any centres around Australia which are receiving a limited supply? Could you go into some detail on that matter?

Dr Paterson —Thank you, Senator. The rationing takes place when the supply from South Africa is itself constrained in some way. The two constraints are the amount of molybdenum-99 that is in the product that they ship to us; this is sometimes not as much as is estimated on their side. When we receive it and validate the import, sometimes it is too little for total supply. In other cases, captains of aircraft have the ability to unload the moly-99 and not ship it and this has a big impact on the assurance of supply. We are obviously very concerned about this and take action through increasing the work periods of our staff who very often work long hours and over weekends to mitigate these risks to Australian patients.

Senator EGGLESTON —Could I just ask you what you mean by captains have the ability to unload? Are you telling us that on flights from South Africa, I presume, the captains of the aircraft are saying, ‘We won’t take the molybdenum’?

Dr Paterson —I am going to ask Dr Cameron to speak on this. He is an international expert on these supply matters and is in fact—

Senator EGGLESTON —To what extent is this happening?

Dr Cameron —Senator, approximately once every two weeks or some two or three weeks, we do suffer an interruption to supply. This just emphasises to us the importance of our own indigenous source of radiopharmaceuticals. What happens with regard to aircraft is you get what is termed ‘denial of shipment’ where, because of the weight of the plane or because of the other materials on the plane, the captains have the ability to say that they will not carry certain things at the same time. For example, if they have another hazardous chemical on the flight, they often will not want to put radioactives with it. There are occasions, either because of a weight restriction or because of the type of cargo that they are carrying, that they do not carry the radioactives as well. I have to say elsewhere in the world, this is a much more serious problem than here. Qantas in general is a very good and reliable airline.

Senator EGGLESTON —Thank you, but what does that translate to in terms of provision of services to Australian patients? Does it mean that supplies are low in Australia and, if so, what do you do? How do you ration out the supply of radioisotopes? Are there areas of Australia which are disadvantaged in the sense of patients not being able to have scans or radioisotope treatments and would they be in the more peripheral capital cities?

Dr Paterson —We have an emergency protocol in place with the chair of the Australian and New Zealand Society of Nuclear Medicine and the physicians in nuclear medicine. When there is any indication that there will be a shortage of supply, we contact them and we work with them to come up with a rational and effective way of communicating with the community the shortage of supply and the best way to mitigate those risks. In general, for most of the shortages, it would mean a delay in the scans rather than a denial of the scans because these can be rescheduled at a later time. However, this is not helpful to patients and it is not helpful to the nuclear medicine community to have this type of uncertainty. As Dr Cameron has said, domestic supply and assurance of domestic supply is one of the ways to reduce that risk.

Senator EGGLESTON —There are two questions though: how long are the delays and what cities are not getting the radioisotopes? For example, are Hobart, Perth and Adelaide missing out while Sydney, Melbourne, Brisbane and Canberra get radioisotopes?

Senator ABETZ —Only worry about Hobart and Perth!

Senator EGGLESTON —I added the other cities to give balance or the semblance of.

Senator ABETZ —And St George.

Dr Paterson —The protocol with the Society of Nuclear Medicine is intended to avoid geographical maldistribution, so there is very careful thought given to ensuring geographical distribution, high-risk patient distribution and a number of other principles that are in place. The reason that we involve the nuclear medicine community in this way is that it is impossible to be absolutely deterministic about these things; it is better to have an ongoing collegial discussion in which we share views. The typical delay for technetium-99m availability is of the order of three days. Given the nature of these scans, this is inconvenient but it is certainly something that is within the normal timing of patient treatments and diagnoses.

Senator EGGLESTON —You would say that no patients are being seriously disadvantaged or would you not say that?

Dr Paterson —I would never say that patients are not being seriously disadvantaged. I think that any failure of supply has an impact. However, we do consult with the nuclear medicine community to understand the impact and they have indicated to us that there has been no ultimate negative health outcome as a result of the delays in shipment. Nevertheless, ANSTO is not happy with a situation where any patient is disadvantaged by lack of availability.

Senator LUDLAM —Thank you for coming in this morning and I would just like to also record my thanks for the detailed answers that I received to questions I put on notice a couple of months ago in March. I would like to spend a bit of time this morning going back through some of those answers and just clarifying a couple of matters, and then I have some more general questions. Referring specifically to my question of 11 March which I think had about 42 parts, firstly to the final commissioning of the OPAL reactor. You have said in the answer here that you expect ‘to soon receive formal recognition for the full conclusion of commissioning from ARPANSA’. Has that occurred yet or could you define ‘soon’ for us?

Dr Cameron —The situation is that we have a number of conditions on our licence. We have a licence to operate from ARPANSA for OPAL and we have a number of conditions on that licence and we are working through those conditions in the time frame that we have agreed with the regulator. There is no restriction on our operation.

Senator LUDLAM —But in your language, you have a commissioning plan that has been executed but it has not yet been recognised, using your words, from ARPANSA.

Dr Cameron —The issue there is that the commissioning plan that we put in required also for us to do what is called contract performance and demonstration tests. ARPANSA were interested in the outcome of those as part of their process. The commissioning plan has now been executed and those tests will be completed or have been completed. This is only just a matter of documentation; this is not a matter of any real significance to us but they have to formally write back and say that they have accepted all the results from those contract performance tests.

Senator LUDLAM —Okay, so we do not have ARPANSA at the table but you have no idea what is meant by ‘soon’; you are just expecting it soon?

Dr Ron Cameron —No, ‘soon’ we assume would be soon but the timing is a workload issue for them.

Senator LUDLAM —Minister, is that something you are able to help us out with given that we do not have ARPANSA here?

Senator Carr —That is the Department of Health and Ageing. Senator Ludlam, I suggest you would have to go around to the health estimates and speak to them.

Senator LUDLAM —Sure, thank you. Just going to part (3), there are still some moneys to be recovered from INVAP and you have said ANSTO will recover money paid to INVAP for fuel supplied that was out of spec. What is the process for recovering that money?

Dr Cameron —That is correct. There was some money to be recovered because the fuel elements were defective, and we declared them defective and therefore not usable. As Dr Paterson indicated earlier, we have worked towards a framework for concluding all the contractual issues together, and that is included in that particular framework.

Senator LUDLAM —In (6) you say:

Claims for an additional value of approximately $10 million have yet to be resolved …

Is that process proceeding smoothly, or is there some difficulty recovering the funds that are outstanding?

Dr Paterson —What we have done in our negotiations with INVAP, which are still subject to legalisation and therefore are not fully confirmed, is to take all of these outstanding matters and to weigh them and balance them against each other to get to a final conclusion of this phase of the contract negotiations. We have therefore asked them to take a certain view of the additional claims that they have made. They have conceded certain aspects of that, but that is still subject to legalisation. There has been significant process in packaging all of the remaining issues, balancing them appropriately and finding an effective way forward. But we are waiting for a review by their lawyers and by our lawyers of the proposed text and the reduction of that text to a legal form. I cannot promise that all of the matters are indeed resolved, but the spirit of the negotiations and the intent to reach a conclusion were very strong on both sides. There is a non-binding document which describes all of those agreements.

Senator LUDLAM —So that is still ongoing. Do you have any idea when these matters will be finally settled? It has been going for a couple of years.

Dr Paterson —The intention is to bring them to closure as soon as we can from a legal perspective. I would not want to anticipate the timescale because the legalisation process is not yet complete.

Senator LUDLAM —What are ANSTO’s legal costs? Are they identified separately in your annual report for this sort of work?

Dr Paterson —These are not documented separately.

Senator LUDLAM —Are you able to tease out for us what you are spending on lawyers to get these things reconciled?

Dr Paterson —We would like to take that question on notice and revert to you.

Senator LUDLAM —Thank you. Going to the construction of the heavy water plant, I believe that has been signed off now and that that is the way ANSTO wants to proceed with rectifying the defects in the reflector vessel. Can you tell us what your strategy is from here on? Do you plan on constructing the cost and the timelines of the plant?

Dr Paterson —The heavy water plant is part of the package of finalising the negotiations. There is a mutually agreed position that it would partially mitigate the issues that relate to the defect. It is not a full mitigation of the defect, and we have given INVAP the go-ahead to progress the engineering and the planning for the installation of a heavy water plant, subject to the legalisation process.

Senator LUDLAM —Can you tell me if I have this approximately right? Light water is leaking into the heavy water vessel and that is diluting it to the point where the reactor is not fu.ctioning, so you need a heavy water plant to top up the diluted water?

Dr Paterson —Essentially the reactor continues to function, but the quality of the neutrons produced is degraded over time because of the dilution of the heavy water. The function of the heavy water is to reflect the neutrons back into the core area. We would not operate the reactor for users if the degradation reaches a level where it is not sustainable from a science management and from an irradiation point of view. There is a good predictor of the time that that takes and there is a good understanding of the impact of the light water ingress and its impact on reactor performance. It would not be correct to say that the reactor is non-functional; it is just that the reactor planning has to take account of the absolute level of heavy water to light water in the reflector vessel.

Senator LUDLAM —So rather than patching the leaks it is intended to have a plant that basically just keeps that material topped up?

Dr Paterson —The range of mitigation actions that we are taking are not dependent only on the heavy water plant. When the full range of mitigation actions are put in place the heavy water plant will form part of that, but at this point we are not sure whether it is a large part or a small part of the solution.

Senator LUDLAM —Yet you have asked INVAP to commence engineering work on constructing one.

Dr Paterson —Yes. There are three reasons for that. The first is so that they can properly secure long-lead items. The second is so that we can evaluate the engineering and do the necessary licensing actions with ARPANSA. The third reason is that it is a mitigation action; therefore, it makes sense to progress it.

Senator LUDLAM —Can you tell us what the operating costs of that plant will be in an average year? Is it possible to estimate that?

Dr Paterson —My understanding is that the operating costs will be estimated in the detailed engineering phase. It will depend to some degree on how the plant is used and serviced.

Senator LUDLAM —So you cannot tell us how much it will cost, and I presume that will also depend on how much water you find you are having to replace. Will INVAP be responsible for maintaining and paying for the operation of that plant for the life of the reactor, or will all of those costs be borne by ANSTO?

Dr Paterson —The cost of the plant will be borne by INVAP. The cost of operations will be borne by ANSTO. We will do a full life cycle cost assessment, because there are some upsides for us in being able to deal with the heavy water in the plant that is active all the time. There are some estimates that suggest that we will not, for example, have to replace the heavy water after 10 years, and this would constitute a major saving. We will only be able to determine any increases in costs or net benefits once the life cycle costing has been completed.

Senator LUDLAM —Where does the heavy water come from? Do we import it from somewhere?

Dr Paterson —The heavy water that we are currently utilising came from Argentina but there are several sources of supply around the world, and this should not be a constraint.

Senator LUDLAM —I suppose we will be hearing more about that at future estimates sessions. When do you anticipate that you will have a final set of strategies that are costed on the table?

Dr Paterson —We will have a set of strategies in particular relating to the heavy water plant once we have the detailed engineering and once the outcome of the other mitigation actions is known.

Senator LUDLAM —This is not an open-ended process. You must be able to tell us when you anticipate having that data.

Dr Paterson —The next stage to which we are going to formally engage on the heavy water plant is in six months time. It is difficult to be absolutely determinate about the costs. Therefore, I would not want to create the impression that we can fully estimate these costs now or in six months time.

Senator LUDLAM —What happens in six months time that would give you greater certainty?

Dr Paterson —We will have the detailed engineering on the heavy water plant for discussion with INVAP.

Senator LUDLAM —Do you have a date for that? Is it exactly six months from this week?

Dr Paterson —The planning month is November and the meetings will take place during the course of that month.

Senator LUDLAM —So you may be making a decision on that early next year.

Dr Paterson —The full mitigation decisions will probably be during the first quarter of next year.

Senator LUDLAM —I want to pick up on a couple of things that might have been my error in the questions that I put to you. You have said a couple of times that there were no design flaws in the drawings and the materials that you received from INVAP.

Senator Carr —What question numbers are you referring to?

Senator LUDLAM —Questions (33) and (39). I am trying to get my head around where the errors occurred. It was not an error in design but errors in interpretation of the drawings and then errors in manufacturing. Would that be correct?

Dr Paterson —Our understanding of this defect is that it is likely that it was not a weld manufacturing defect but a fabrication defect when it was assembled into the plant. That is the most likely hypothesis, but there is still a reasonable assumption that it might have been a manufacturing defect. The root cause analysis and all of the work that we have done on this defect suggest that it was a construction fabrication defect rather than a manufacturing defect.

Senator LUDLAM —Therefore, there was nothing wrong with the designs but something went wrong getting them off the paper?

Dr Paterson —The design remains robust.

Senator LUDLAM —Can you tell us a little bit about the insurance that ANSTO holds? You are indemnified against a major accident or a major radiation exposure to the public, but you have said in (42) that you hold commercial insurance. Can you tell us something about the kind of insurance that an agency like ANSTO requires?

Dr Cameron —Yes, certainly. We obviously hold all the normal insurances you would expect an organisation to hold, including those related to our occupational health and safety issues. We obviously hold professional indemnity and public liability insurance. With regard to nuclear insurance, we are covered generally under the Comcover arrangements. The issue with regard to nuclear indemnity is particularly important with regard to third parties. For example, contractors and others working for us need to be covered under those arrangements; that is the point of the nuclear indemnity insurance. In addition of course, it does mean that in the very unlikely event of there being a need for people outside to claim, there is a provision that would allow those claims to be covered if they exceeded the insurances that we hold.

Senator LUDLAM —I gather for householders it is not possible to claim for damages against radiation accidents so that would just be put to ANSTO rather than to your insurer as a household; is that how it would work in practice?

Dr Cameron —The process would be, of course, we would discuss it with our insurers and our insurers would decide whether that was in their remit of insurance. If, as I said, that was to exceed what was already insured, there is the nuclear indemnity that allows us to have support from government beyond that level.

Senator LUDLAM —Up to what value are you insured for that kind of event?

Mr McIntosh —The insurance policy is to an amount of $50 million, so for anything beyond the $50 million the indemnity would then be invoked.

Senator LUDLAM —That is helpful, thank you. If we can just go to some of the basic budget items, you received $6.4 million over three years to meet increased costs for reactor fuel. Can you just tell us why fuel costs are increasing and what is behind that? Do we still purchase the fuel entirely from INVAP or are the costs coming from elsewhere?

Dr Cameron —The issue is about fuel for the OPAL reactor. A number of things have changed. One is that the cost of uranium itself has increased significantly; in addition, the cost of enriching that uranium has also increased significantly; third, the cost of transportation has also increased. There are a number of compounding factors meaning that those costs have gone up significantly over the last few years.

Senator LUDLAM —Is the fuel imported from the United States or from Argentina?

Dr Cameron —No, we purchase our fuel for the OPAL reactor from the French from a company called CERCA in France. However, I think you are referring to the fact that the enriched uranium comes from the United States and then is sent to the manufacturer who puts it into fuel elements and sends it onto us. It is American obligated enriched uranium.

Senator LUDLAM —That is where the OPAL fuel is returning to after it is burnt in the reactor?

Dr Cameron —Correct. Under the current arrangement, American obligated enriched uranium goes back to the United States after the fuel is spent.

Senator LUDLAM —In rough numbers, if we include the cost of the fuel, the enrichment and the transport, to what order are the increases compared with what you estimated the cost of fuel would be?

Dr Cameron —Those are exactly the sum of money which we have asked for under this particular—

Senator LUDLAM —$6.4 million over three years.

Dr Cameron —Correct and that related directly to the contract that we signed with the French manufacturers for the fuel.

Senator LUDLAM —Thank you, but how much is the increase? Is that 50 per cent over budget? How much was it relative to what you were expecting to pay?

Dr Cameron —I would not be able to be confident in giving you an exact number but it was between 50 and 100 per cent. If you would like us to provide that number we can do so.

Senator LUDLAM —Yes, if you could pin that down for us, I would appreciate that. Apologies if Senator Abetz covered this while I was out of the room, but regarding revenues from independent sources in the budget statements in table 2.1. Revenues from other independent sources are quite a bit. Can you just describe for us what those independent sources are?

Dr Paterson —The commercial income is predominantly from radiopharmaceutical sales; secondly, from the work of our minerals arm which undertakes work for people working on naturally occurring radioactive materials; thirdly, silicon irradiation; and then we get some small income streams from rentals and service provision.

Senator LUDLAM —Are those revenues itemised in your annual reports?

Dr Cameron —Not broken down like that.

Senator LUDLAM —Is there a reason why they are not published?

Mr Cubbin —There is no need for us to disclose them under the reporting standards, so we just do not go down to that level, but we can break it down if you would like us to.

Senator LUDLAM —I am just trying to get a sense of how important to your revenues is the radiopharmaceuticals part of your business.

Dr Paterson —Senator, if I could suggest that we could provide the radiopharmaceuticals figure but I would not like, for example, to declare the silicon irradiation figure because it is a small client base and we create a commercial-in-confidence.

Senator LUDLAM —It would be helpful to know the radiopharmaceuticals breakdown as a proportion of those revenues. That would be helpful.

Mr Cubbin —The radiopharmaceuticals is in the order of about $22 million.

Dr Cameron —Senator, if we could refer you to page 78 of the annual report.

Senator LUDLAM —I do not have it in front of me but I can refer to—

Dr Cameron —That would give you the breakdown of those.

Senator LUDLAM —Great, thank you.

Dr Paterson —It is also reflected on page 141 of the PBS, Senator.

Senator LUDLAM —Thank you.

Dr Paterson —The number is $26 million.

Senator LUDLAM —Thank you. I have got a couple more and then I will let somebody else have a go. With your deliverables for 1.1, you point out ‘completion of requested reports on national security issues.’ Can you just tell us what those were?

Dr Paterson —Yes, we are obviously part of a process of assisting with national security and border protection issues. As part of that, we have a publicly funded research agencies grouping which seeks to work with the end users to provide them with services and advice as they request it. Obviously, those particular issues are national security issues but we just indicate that ANSTO is fully involved and works with all those end user agencies to enhance national security and border protection for Australia.

Senator LUDLAM —Thank you. Just one final question: given the amount of time that the reactor was closed down and that you are still not confident enough of domestic production to stop the imports, I am just wondering how much work is done at ANSTO into non-reactor methods of producing medical radioisotopes, particularly moly-99 but others. Is that something that is under active consideration—are you looking for alternatives?

Dr Paterson —We have very carefully followed the development of non-reactor techniques. In fact, there has been a recent series of discussions in the public domain about this. We are also tracking it through a number of bilateral interactions and discussions. At the management breakaway last week, we have decided to put together an internal paper on this so that we can understand the short-, medium- and long-term implications of the potential for developing moly-99 by alternative routes. It is just a prudent practice to know what is happening and to have a good insight into it. My belief is that we will probably, within the seven to 10 year time frame, see the first attempts to produce moly-99 on a reasonable economic basis using accelerator based techniques. My view is that the cost will be very high initially and it is unclear how long the learning curve will be. But, we are certainly well aware of these developments, we track them actively and we all understand them deeply.

Senator LUDLAM —Great. Is that research that ANSTO will be conducting and be engaged in?

Dr Paterson —We will be doing two types of things: one will be desktop research—that is, gathering information and networking with the people involved in this domain. In addition, we will be working with those who are looking at those accelerator types of solutions to understand the developments and how fast it is going, and we will be making tech and economic assessments. We will not be, with our relatively low-power accelerators, undertaking any direct accelerator research.

Senator LUDLAM —Thank you for that.

Senator CAMERON —When did ANSTO put the proposition to government to build the OPAL reactor?

Dr Cameron —The government decision was in September 1997 and obviously the submission went to cabinet during the early part of the year.

Senator CAMERON —How much time did you spend preparing the submission prior to 1997?

Dr Cameron —There were a number of events that took place which were all part of the process. Back in 1993, there was an enquiry conducted by Professor Ken McKinnon into the need for a replacement research reactor. We had to put together a lot of information for that. The inquiry came up with a rather inconclusive position indicating that some other conditions needed to be fulfilled. We worked over that period of time from 1993 to deal with those issues. All of that preliminary activity and work which we did was put into the final case.

Senator CAMERON —So, this OPAL reactor spent about 16 years in gestation?

Dr Cameron —Yes, it is about that period of time. When it was first a gleam in our eye is perhaps a bit before that.

Senator CAMERON —Submission went to government in 1997?

Dr Cameron —That is correct.

Senator CAMERON —When did you get the go-ahead to build?

Dr Cameron —In September 1997.

Senator CAMERON —Is that a normal lead time for a small reactor like this in terms of bringing it to where it is now?

Dr Cameron —That is a difficult question to answer because the process is very dependent on the national situation with regard to approvals. The time to construct it is pretty well known and is within quite tight bounds but of course each country has a different set of approvals. This went through a very extensive approval process with environmental impact statements, public works committee processes, three licensing processes and two senate enquiries. There was a very detailed and extensive period of approval prior to us being able to go out to tender and finally sign a contract with INVAP.

Senator CAMERON —Could you give us a date when you expect the plant to be fully reliable?

Dr Paterson —Research reactors globally have very coherent and clear missions these days. Certainly, we have already achieved our first level of reliability on neutron provision in the Bragg Institute. However, in order to fully satisfy that community which is a slightly different question, we have to change the basis of our fuel strategy. What I am trying to convey, Senator, is that these machines tend to evolve their emissions over time. Full reliability and radioisotope supply will be difficult to predict until we know the mitigation of the current defects. We will not be able to give an exact date by which the machine could be declared reliable. In the case of neutron beam instruments, it is already effective, which is a slightly different idea.

Senator CAMERON —Is this an Argentinean design?

Dr Paterson —It is an Argentinean design with an Australian client function. The Australian client function really assisted in setting the user specifications—

Senator CAMERON —I am not interested in the client function. So it is an Argentinean design—

Dr Paterson —Correct.

Senator CAMERON —manufactured in Argentina was it?

Dr Cameron —The contract has a provision for at least 50 per cent local content and in fact, we achieved nearly 60 per cent local content. That was delivered by a consortium of John Holland and Evans Deakin Industries. A lot of the civil construction, the air conditioning and the electricals, et cetera, were all done locally. INVAP were responsible for the nuclear core bit of the reactor and that is manufactured by them.

Senator CAMERON —Was it an Argentinean construction team that came in and did the reactor?

Dr Cameron —That is correct.

Senator CAMERON —The problem leak is in the reactor area. Why can it not be patched?

Dr Paterson —Can I comment on that? It is likely that one of the mitigation actions would be the ability to clamp the leak and with the clamp to essentially patch it. Nuclear practice suggests that you always take a conservative approach, so in any attempt to mitigate the risk at the moment, we want to be able to reverse out of if it is not successful. Therefore, one takes a very considered and careful approach before finalising any mitigation strategy.

Senator CAMERON —When you say clamp, is this a flange?

Dr Paterson —It would be a clamp over the flange, yes.

Senator CAMERON —Is that a welded flange?

Dr Paterson —The defect is in a weld. I think reasonable practice would suggest that we would mechanically clamp rather than weld.

Senator CAMERON —Was that weld subject to X-ray prior to commissioning?

Dr Paterson —It was subject to dye penetration tests from my understanding and these did not show any pre-existing defect.

Senator CAMERON —Okay, thank you.

Proceedings suspended from 10.08 am to 10.21 am