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VANCOUVER, British Columbia (Reuters) - The Canadian firm running an aging nuclear reactor needed by the world's medical community is falling short on plans to replace it, according to an auditor's report released on Wednesday.
The report also raised concerns that government-owned Atomic Energy of Canada Ltd has not addressed actions requested by Canada's Nuclear Safety Commission in a 2005 review of the Chalk River facility, the world's main supplier of medical isotopes.
"A significant risk to the successful completion of the project has been the unresolved technical issues related to operating in compliance with regulatory requirements," the federal auditor general warned.
The Chalk River nuclear facility in eastern Ontario supplies more than two-thirds of the global supply of medical isotopes used for cancer tests and other medical procedures. A maintenance shut-down of the facility late last year triggered an international shortage.
The incident also sparked a political storm in Canada when Prime Minister Stephen Harper's government temporarily reopened the 50-year-old reactor in mid-December against the wishes of the government safety regulators.
The auditor general's 41-page review of AECL, the federally owned nuclear technology company, was completed in August but not released until on Wednesday.
Harper replaced AECL's chairman and chief executive in mid-December amid the controversy over the shutdown.
The auditor's report cited strategic problem on the isotope facility, as well as the need to replace other aging facilities at Chalk River and develop of a new generation of Candu nuclear reactors -- which Canada markets internationally.
The company had planned to have a new advanced Candu reactor on the market, but design and licensing changes have pushed up costs and put Canada at a competitive disadvantage in marketing the system, according to the report.
AECL said in a statement that its new board had reviewed the report and "its management has initiated actions to address all of the recommendations included in the report and will continue to monitor the corporation's progress."
AECL had planned to have two new isotope production reactors and a processing facility in operation by 2000, but with costs rising the first reactor is not expected until October 2008, according to the report.
"The project is on a tight schedule and AECL's time margin to complete the reactors by 2008 and 2009 has been reduced," the auditor's report warned.
The company shut down the Chalk River reactor in November, and safety regulators did not want it to restart until it completed agreed-to changes in coolant pumps and the facility's emergency power supply.
The minority Conservative government won approval in Parliament to order the plant restarted to resume production of medical isotopes.
Among the concerns believed raised by regulators was the ability of the facility 180 km (115 miles) northwest of Ottawa to handle seismic events.
In a regularly scheduled meeting between AECL and the regulators on Wednesday, it was reported there were two small earthquakes near the facility in December, since it was restarted by the government.
Neither disrupted the plant's operation.
The meeting did not give details of the quakes, but Environment Canada records indicate there was a magnitude 3.6 quake near Deep River, Ontario, on December 23 and a 3.0 magnitude quake near Pembroke, Ontario, on December 20.
Reporting Allan Dowd, Editing by Rob Wilson