On October 11, 2001, the House Energy and Commerce Committee began mark-up of H.R. 2983, the reauthorization of the Price-Anderson Act, which guarantees taxpayer subsidized insurance for the nuclear industry. The Committee mark-up will continue in the next few days and the issue will then be considered by the whole House.
The Price Anderson Act is anti-consumer because it asks taxpayers to assume most of the liability for nuclear accidents. If the nuclear industry does not have enough faith in its own technology to take full responsibility for their own mishaps, then nuclear energy does not deserve the public support Price Anderson provides. When Congress first created Price Anderson 44 years ago, they made it clear the Act was temporary legislation designed to prop up an infant industry. After so many decades and billions in subsidies, it is time to retire this boondoggle.
Call your Representative, especially members of the Energy Committee, and urge them to vote "no" on H.R. 2983. All Representatives can be contacted through the Capitol Switchboard at (202) 224-3121.
The Price Anderson Act a law that subsidizes nuclear power by creating liability protection for nuclear accidents will expire in August 2002. The nuclear industry is working hard to ensure that the bill is reauthorized and expanded to cover a new generation of nuclear plants. Several bills have been introduced in the 107th Congress to renew the Act for another ten year period.
The primary mission of the Act is to subsidize shareholders value in nuclear power by placing a cap on the amount nuclear reactor owners pay in the event of a catastrophic accident or terrorist attack. This makes capital investment in the nuclear industry more attractive to investors because their risk is minimized and fixed. As a result, the cost of nuclear power is subsidized, since owners of nuclear reactors are spared from paying full insurance premiums which would cover the full costs of their business. As a result, Price Anderson encourages reliance on this inherently dangerous fuel source, needlessly placing Americans at risk to toxic radiation exposure should an accident or attack occur at a nuclear power plant. Ominously, while the Price Anderson Act limits the financial responsibilities of nuclear power corporations, the Act provides insufficient insurance coverage to compensate for nuclear accident victims injuries and loss.
Consequently, the Act is a dual-edge sword for the public that it purportedly protects. The legislation was intended first of all to bolster investor confidence, whereas victim compensation is secondary. Price Anderson establishes only phantom insurance for the public, then provides a real bailout mechanism for the nuclear energy industry by reducing its need to pay for insurance, subsidizing the industry at the taxpayers' expense. Understanding how the Act provides a crutch for nuclear energy is important for all citizens concerned about the United States continued reliance on nuclear power and the vulnerability of nuclear power to terrorist threats.
What is the Price Anderson Act?
The Price Anderson Act became law in 1957 as part of amendments to the Atomic Energy Act of 1954. The Act sets a limit on the monetary liability of companies for a nuclear accident, and defines the procedural mechanisms for the industry s insurance coverage.
The Act requires that nuclear reactor owners obtain $200 million in insurance liability coverage from a private insurer, referred to as primary financial protection. One company Connecticut-based American Nuclear Insurers provides 100 percent of this primary financial protection. In the event of an accident that exceeds $200 million in damages, all 103 nuclear reactor operators in America must pay up to $88 million per reactor to cover costs meaning the potential total insurance pool financed by private interests is $9.3 billion ($200 million primary financial protection + $88 million from each of the 103 reactor operators).
What are the Problems with Price Anderson?
Public Citizen's main concern with Price Anderson is that corporations are not liable for the entire costs of their own nuclear accidents. Since corporations under Price Anderson are only responsible for around two percent of the estimated cost of a serious accident, nuclear power corporations are largely immune from the responsibilities of operating an inherently dangerous facility in America's communities.
In the wake of the 1979 Three Mile Island accident, the federally-funded Sandia National Laboratory prepared a report on behalf of the Nuclear Regulatory Commission (NRC). This 1982 study estimated that damages from a severe nuclear accident could run as high as $314 billion or more than $560 billion in 2000 dollars. Since that study, the NRC has developed "more realistic" modeling improvements to the agency s probabilistic risk assessment. A review of their 1982 study "found that property damages would be twice as much as those calculated in 1982, solely on the basis of the modeling improvements made." In addition, the Chernobyl catastrophe has cost the nations of Russia, Ukraine and Belarus $358 billion. This Chernobyl total, however, is vastly understated, since it does not attempt to estimate the costs to other nations, which also experienced health costs from the far-reaching nuclear fallout.
Therefore, the $9.3 billion provided by private insurance and nuclear reactor operators represents less than two percent of the $560 billion in potential costs of a major nuclear accident. Since the nuclear reactor operators have their liability capped through Price Anderson, that means taxpayers would be responsible for hundreds of billions of dollars in costs from a foul-up by a private corporation or a terrorist attack.
A second major problem is that Price Anderson is blind to comparative differences in risk among reactors and arbitrarily treats the whole industry uniformly. Higher-risk reactors - including older, relicensed reactors - are not required to carry correspondingly higher levels of insurance coverage. Moreover, the Price Anderson Act does not stipulate security requirements to protect against terrorism at insured reactors. In light of the tragic events of September 11, there should be a thorough and independent assessment of the security needs at U.S. nuclear power facilities before reauthorization of Price Anderson is even considered.
A third major problem with Price Anderson is that it distorts the economic viability of the nuclear power industry since taxpayers cover the industry s insurance costs. A 1990 study calculated that without Price Anderson, nuclear power corporations would pay more than $3 billion annually in order to fully insure their operations.
Not surprisingly, the nuclear industry has fought hard to keep the Price Anderson liability limit. In sworn testimony before Congress in May 2001, John L. Quattrocchi, senior vice-president of the company that provides most of the private insurance for the nuclear industry (American Nuclear Insurers) stated, "[k]nowing the extent of one s liability provides economic stability and incentives that would not exist without a limit." Translation: taxpayers, not the nuclear industry, should bear the brunt of the potential risks of a severe nuclear accident, in order to make their company a stable investment for shareholders.
A fourth problem is that Price Anderson was originally intended by Congress to be a temporary solution to what they thought was a temporary problem the refusal of private insurers to underwrite the risks of nuclear power. In a 1957 report, the U.S. Senate wrote that Price Anderson would only be needed for ten years because "& the problem of reactor safety will be to a great extent solved and the insurance people will have had an experience on which to base a sound program of their own."
But the historical record debunks this initial optimism. Nuclear reactors continue to experience significant safety problems. These safety concerns have increased substantially in the wake of the September 11 terrorist attacks.
Fifth, Price Anderson does not guarantee victims of accidents or attacks fair compensation. The industry s claim to the relatively-paltry $9 billion liability is not necessarily accurate. The Price Anderson Act fails to clearly stipulate the industry s exact responsibility in the text of the law, in terms of the execution of the Act's provisions, or in terms of the actual funding of the insurance coverage.
The text of the Price Anderson has definitions which are very open-ended, giving the NRC wide discretion to fill in the blanks. In addition, the Act is vague on what the government's financial obligations are in the event funds are unavailable from the nuclear industry. The total effect is large opportunity to evade responsibility if there is an accident and victims require payment of damages. Thus, the Act has no fault liability for reactor operators, and injured victims are precluded from directly suing vendors or manufacturers responsible for the accident.
The execution of the law after a major accident poses legal hurdles to a victim seeking compensation. The Act states that jurisdiction over an accident falls to the federal district court. Thus, the Act restricts plaintiffs ability to utilize any state laws which go above and beyond federal protections. Furthermore, no fault liability limits reactor operator accountability even if they are reckless or criminally negligent. Moreover, Price Anderson protects nuclear operators from punitive damages that are not covered under their private insurance coverage.
Similarly, Price Anderson Act indemnifies Department of Energy nuclear contractors even in cases of gross negligence and willful misconduct, which seems to discourage contractor accountability and a safety culture. No other government agency provides this level of taxpayer indemnification to non-government personnel.
Why the Act is important now?
The President and leaders in Congress, touting the viability of nuclear power to meet America s energy needs, are calling for the construction of a new generation of nuclear reactors. Since the nuclear industry has admitted that they would be unable to compete with alternative energy sources without this billion-dollar subsidy, Congress is now debating Price Anderson renewal. If the nuclear power industry is willing to propose building new reactors in America s communities, the least they could do is stand behind their own technology and accept 100 percent liability for any nuclear accident that occurs. Safety would become a serious concern for the industry if they knew that they actually would have to pay for anything that goes wrong. In light of the September 11 attacks, security limitations at nuclear power plants are all the more serious. Continuing to hide behind Price Anderson s taxpayer bailout is dangerous for America s communities and pocketbook.
