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Price-Anderson Act:
Unnecessary & Irresponsible

 

BACKGROUND

Congress is considering reauthorization of the Price-Anderson Act, which, since first enacted in 1957, has served as the nuclear industry's limited liability policy. To understand the magnitude and purpose of Price-Anderson, try this simple exercise: Take out your home- or business-owner insurance policy and look for the "Nuclear Hazard Exclusion Clause."

What does this mean? It means that individual members of the public are prohibited from purchasing protection from a nuclear accident. The insurance industry--the professional-risk assessor--recognized from the start that nuclear power was too dangerous to fully insure. The government realized that no utility would ever build an atomic reactor because no utility would ever open itself to the potential consequences of an accident. So the federal government and the nuclear industry lobby found someone else to foot the rest of the bill: the public. Through the Price-Anderson act, nuclear utilities can afford insurance that they could never obtain in real market circumstances. Moreover, Price-Anderson has a liability cap well below the compensation needed to cover most nuclear accident consequences.

NON-INSURABLE AT ANY COST

At the dawn of the atomic age, the insurance industry's refusal to fully insure the nuclear industry created the need for federal intervention. Congress gave the infant technology "protection against potentially enormous liability claims in the event of a nuclear accident," a benefit no other U.S. industry ever has received. According to May 2001 congressional testimony from American Nuclear Insurers (ANI), Congress convinced the insurance companies to create a joint underwriting association (ANI) so that "insurers (could) find a way to insure what was then a fledgling technology."

Offered originally as 10-year temporary training wheels, "to encourage the private development of nuclear power" (ANI testimony) the Price-Anderson Act of 1957 has now provided the atomic industry with a permanent wheelchair for financial immunity from mistakes and accidents that can environmentally devastate whole countries, cripple economies and sicken entire populations.

Without this liability shelter, nuclear reactors would never have split the first atom. ANI recognized this when it testified "the Act has been critical in enabling us to provide stable, high quality insurance capacity for nuclear risks in the face of normally overwhelming obstacles for insurers—those obstacles being catastrophic loss potential, the absence of credible predictability…without the "ups and downs" (or market cycles) that have affected nearly all other lines of insurance." (emphasis added) Left to market forces, the nuclear industry is uninsurable and financially non-viable. With the Act, the public is denied financial protection from the enormous health costs and economic losses from a catastrophic accident.

NOT ENOUGH TO COVER ACCIDENT CONSEQUENCES

With his National Energy Policy, President Bush is now calling upon Congress to reauthorize the Price-Anderson Act before it expires in August 2002. Last amended in 1988, the Price-Anderson Act is a fairly complicated system in which nuclear utilities—as a group—purchase a small level of insurance for accidents (currently $200 million). For damages above that, each reactor would be assessed $10 million per year for about 7.5 years. The total amount available to compensate accident damages thus depends on how many reactors are operating. The proposed reauthorization of Price-Anderson in the House of Representatives would increase the assessment to $15 million per year per reactor—for a total pot currently of about $12 billion. Is this enough? No.

A 1982 Sandia National Laboratories study, leaked to Rep. Edward Markey (D-Mass.), quantified the consequences of a catastrophic nuclear power accident in the U.S. Besides potentially causing thousands of early deaths and cancers, an accident could cause as much as $313 billion in damages, or about $600 billion today with inflation. The 1986 Chernobyl nuclear accident has cost Ukraine, Belarus and southern Russia an estimated $350 billion.

PRICE-ANDERSON IS A SUBSIDY TO A FAILED, DANGEROUS TECHNOLOGY

ANI states that Price-Anderson is not a subsidy to the nuclear industry because, although it caps industry liability, there is a defacto liability cap to any industry: "the limit equal to the assets of the company at fault." But the point isn’t just the compensatory sum, which falls well below the assets of nuclear utilities. As long as the liability cap exists, it is the taxpayers and ultimately the accident victims and their descendents, not the industry, that would pay damages that exceed its artificial limit.

The ability to hold corporations fully financially liable as a deterrent to reckless business practices is a cornerstone of civil law. In reality, Price-Anderson offers an aging nuclear power fleet under increased energy market competition the principle of limited liability as a growing disincentive to safety. A deteriorating nuclear power plant provided with a full liability exemption is more likely to take short cuts that pit profit-margins against safety-margins as a routine course of business.

REACTORS WITHOUT CONTAINMENT DON’T DESERVE PRICE-ANDERSON SUBSIDY

If Price-Anderson were not reauthorized, existing reactors would still be covered by its current provisions. The only reason to extend the commercial provisions of the Act is to encourage the construction of new reactors. As Vice-President Dick Cheney recently admitted, without extension of Price-Anderson to new reactors, "Nobody's going to invest in nuclear power."

The nuclear industry’s promotion of new reactor designs, such as the Pebble Bed Modular Reactor (PBMR) as "inherently safe" stands in stark contrast to its call for extending limited liability to these new reactors. Indeed, the industry is seeking even lower assessments for the PBMR design than exist for current reactors.

The tragic events of September 11, 2001, served to highlight the fact that nuclear reactors pose a great security risk. The "new generation" of so-called "inherently safe" reactors such as the PBMR have no containment structure. This simple, frightening fact makes them extremely vulnerable to terrorist attack, and shows the hypocrisy of the nuclear industry. Industry claimed, in a continued, unsupported flurry of self-denial, that Chernobyl couldn’t happen in the US because our reactors have containment. Now they are calling a new generation of containment-lacking reactors "inherently safe" but they also claim these reactors are not safe enough to insure without a law limiting utility liability.

If the nuclear industry is the safe, market viable and mature industry it claims to be, it can be held accountable for the real cost of doing business. If the public is to believe this "free market" oratory then every nuclear power plant designer, supplier and operator should be required to internalize the insurance costs to the full extent of the risks and consequences associated with splitting the atom to create electricity. However, were Congress to lift the liability cap and require full insurance liability for as long as it takes to pay off an accident, utilities would likely abandon this technology for safer, cheaper, cleaner and renewable electricity generation.

Cindy Folkers, October 2001

For more information, contact Nuclear Information and Resource Service, 1424 16th Street NW, #404, Washington, DC 20036. 202.328.0002; fax: 202.462.2183; nirsnet@nirs.org; www.nirs.org