UPDATE 3-Canada pulls plug on costly medical reactor plan

(Adds MDS response)

By David Ljunggren

OTTAWA, May 16 (Reuters) - Canada said on Friday it was scrapping a nuclear reactor project designed to produce medical radioisotopes, a move that means half the world's supply will be made by a 50-year-old reactor that was temporarily shut down for safety reasons last year.

The Canadian Association of Nuclear Medicine said the announcement was "a major concern" and said Ottawa had to ensure it could access back-up supplies.

The aging National Research Universal (NRU) reactor at the Chalk River facility in eastern Ontario, operated by Atomic Energy of Canada Ltd (AECL), produces about half the world's supply of the radioisotopes.

The NRU was supposed to be replaced in 2000 by AECL's MAPLE project, which consisted of two small reactors, but they have been plagued by technical problems and cost overruns. AECL said on Friday it was scrapping the project.

A shutdown of the NRU reactor late last year caused a shortage of radioisotopes, which are used in cancer tests and other medical procedures.

Chalk River produces medical isotopes for Canadian health care company MDS Inc (MDS.TO: Quote, Profile, Research, Stock Buzz) and its MDS Nordion division, which is responsible for about half of world supply.

"The decision to discontinue development of the MAPLE reactors will not impact the current supply of medical isotopes as commercial agreements between MDS Nordion and AECL provide for isotope production to continue through (the) NRU and associated facilities in Chalk River," said AECL.