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Price Anderson Act

The Billion Dollar Taxpayer Subsidy for Nuclear Power

Public Citizen's Critical Mass Energy and Environment Program 3aug01

The Price Anderson Act is anti-consumer because it asks taxpayers to assume most of the liability of nuclear accidents. If the nuclear industry cannot have enough faith in its own technology to guarantee full responsibility for their own mishaps, then nuclear energy does not deserve these continued taxpayer subsidies. When Congress first created Price Anderson 44 years ago, they made it clear the Act was temporary legislation. After so many decades and billions in subsidies later, it is time to retire this boondoggle.

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. Proponents of nuclear power are using their influence to ensure that this liability coverage would be expanded to new reactors.

The primary mission of the Act is to subsidize shareholders' value in nuclear power by placing a cap on the amount of insurance protection, thereby limiting the nuclear utilities' liability. This makes capital investment in the nuclear industry more attractive to investors because the risk is minimized and fixed. More subtly, the Price Anderson Act is intended to create the illusion that sufficient insurance coverage is available to compensate victims of nuclear accidents for injuries.

Consequently, the Act is a dual-edge sword for the public that it purportedly protects. Indeed, the legislative intent indicates that investor confidence is the first directive, whereas victim compensation is secondary. But, ultimately, the Price Anderson Act is smoke and mirrors legislation. It 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 and then subsidizing its insurance at the taxpayers' expense. Understanding how the Act supports and promotes nuclear energy is important for all citizens concerned about the United States continued reliance on nuclear power.

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 insurance coverage. This fact sheet only addresses the Price Anderson provisions which apply to commercial reactors. Subsequent Public Citizen fact sheets will focus on those provisions covering private contractors hired by the Department of Energy.

The Act requires that nuclear reactor operators/owners obtain $200 million in insurance liability coverage from a private insurer - referred to as 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 $88.095 per reactor to cover costs - meaning the potential total insurance pool financed by private interests is $9.28 billion ($200 million primary financial protection + $88.905 million each by 103 reactor operators).

What are the Problems with Price Anderson? The 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, taxpayers are forced to pay for the rest.

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 in 1982. This study estimated that damages from a severe nuclear accident could run as high as $314 billion - or more than $560 billion in 2000 dollars. The Chernobyl catastrophe has cost the nations of Russia, Ukraine and Belarus $350 billion already, according to their governments. 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 $9.28 billion represents less than two percent of the estimated $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 associated with a foul-up by a private corporation.

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 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 for reactor operators to save money and increase profits at the public's expense.

But 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 Senate report, the 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, and the nuclear industry remains unwilling to assume the risks of its own operations.

Even 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. As a result, independent government agencies like the Nuclear Regulatory Commission have wide discretion to fill in the blanks and adjust the insurance requirements on an individual basis. 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.

Price Anderson stipulates that liability for an accident extends through the nuclear reactor operator to other parties like manufacturers or designers. 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.

Nonetheless, the execution of the law after a major accident poses legal hurdles to a victim seeking compensation. First, 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.

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 offer 100 percent liability for any nuclear accident that occurs. After all, safety would become a serious concern for the industry if they knew that they actually would have to pay for anything that goes wrong. Continuing to hide behind Price Anderson's taxpayer bailout is dangerous for America's communities and pocketbook.

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