CBC News has learned the Harper government is considering buying nuclear submarines to replace its problem-plagued fleet of diesel-powered subs, all of which are currently awash in red ink and out of service for major repairs.

The four second-hand subs Jean Chrétien’s Liberal government bought from the British navy in 1998 for $750 million were portrayed at the time as the military bargain of the century.

Instead, they have spent almost all of their time in naval repair yards, submerging Canadian taxpayers in an ocean of bills now totalling more than $1 billion and counting.

One of the subs, HMCS Chicoutimi, has been in active service of the Royal Canadian Navy exactly two days in the 13 years since it was purchased from the Brits.

The Chicoutimi caught fire on its maiden voyage from the U.K. to Canada, killing one sailor and injuring a number of others.

It has been in the repair shop ever since, and isn’t expected back in service for at least another two years and $400 million more in repairs and retrofits.

'In an ideal world, I know nuclear subs are what's needed under deep water, deep ice.'—Defence Minister Peter MacKay

National Defence said this week that one of the subs, the Victoria, could be back in service in 2012.

The other three would remain out of service until at least 2013. One may not be out of the repair shop until 2016.

By that time, the submarines will have cost taxpayers an estimated $3 billion, almost enough to have bought all new subs in the first place.

But the real problem is that by the time the whole fleet is in active service for the first time in 2016, the submarines will already be almost 30 years old with only perhaps 10 years of life left in them.

High-ranking sources tell CBC News the government is actively considering cutting its losses on the dud subs, and mothballing some if not all of them.

Defence Minister Peter MacKay is hinting they might be replaced with nuclear submarines that could patrol under the Arctic ice, something the existing diesel-electric subs cannot do.

Outside the Commons this week, MacKay told CBC News the government is anxious to have its submarine fleet fully operational as soon as possible, providing a “very important capability for the Canadian Forces.”

But asked whether the government might look at other subs, MacKay said: “Well there was a position taken some time ago to go with diesel-electric.

“But you know, in an ideal world, I know nuclear subs are what's needed under deep water, deep ice.”

Nuclear submarines $3B each

Nuclear submarines are hugely expensive — they start around $3 billion apiece — and it is unclear where the Harper government would find that kind of money, much less how it could justify such an enormous expenditure during a period of supposed austerity.

The last time a Canadian government seriously considered nuclear subs was in the late 1980s before then prime minister Brian Mulroney sank the whole program amid a public uproar.

A decade later, the Chrétien government bought the four used diesel subs from the British navy in large part because it was seen as such a huge bargain.

Senator Art Eggleton, who was Liberal defence minister at the time, told CBC News Thursday that his government gave "absolutely no consideration" to buying nuclear submarines, although some inside the navy were pushing for them.

"We were coming out of a period of budget-cutting and nuclear submarines would have been far too expensive."

Instead, the British navy was offering a deal Eggleton said the Canadian military couldn’t refuse — the four diesel-electric submarines mothballed after only two years in service when the Royal Navy switched to nuclear subs.

"We got them at a quarter of the cost it would have cost to build new ones," Eggleton says. "We wouldn’t have had the money to build new ones."

He concedes the Liberal government gave serious consideration to not having submarines at all.

"It was either buy these subs, or get out of the submarine business altogether."

'It makes no difference to our security'

Some defence critics think that’s exactly what the current Conservative government should be considering — scrapping the problem-plagued diesel-electric fleet rather than throwing what they see as good money after bad.

“When you look at the cost of trying to get these things seaworthy again, it just doesn’t make sense," said Steven Staples, president of the Rideau Institute on defence issues.

The Harper government has just awarded a $25-billion contract to build a new fleet of Canadian destroyers and frigates, and Staples says that should be enough.

“Once you are in a hole, the first thing that you should do is stop digging, so I think that it is time to say goodbye to the submarines right now and focus on the new surface fleet.”

Staples says the history of the diesel subs suggests Canada could get by without them.

"The fact that all four submarines are sitting tied up at a dry dock right now doesn’t mean that Canada is in any great danger. It makes no difference to our security.”