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The '''Price-Anderson Nuclear Industries Indemnity Act''' |
The '''Price-Anderson Nuclear Industries Indemnity Act''' (commonly called the Price-Anderson Act) is an act of the [[Congress of the United States]]. Its main purpose is to indemnify the nuclear industry against liability claims arising from nuclear incidents. Instead, it establishes an industry-funded insurance system (worth $10 billion in [[2005]]), and promises compensation by the federal government for larger claims. The act was considered necessary as an incentive for the private production of nuclear energy, because companies were unwilling to invest in the industry without such limitation on liability. The Act currently covers all non-military nuclear facilities constructed in the United States before [[2026]]. Some environmental, consumer and taxpayer watchdog groups, as well as one federal agency, have described the act as a government subsidy to the nuclear power industry. Some argue that it removes important legal remedies from the public, but the Supreme Court held that it did not. |
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==How the law works== |
==How the law works== |
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Revision as of 20:10, 24 December 2005
Template:Totallydisputed The Price-Anderson Nuclear Industries Indemnity Act (commonly called the Price-Anderson Act) is an act of the Congress of the United States. Its main purpose is to indemnify the nuclear industry against liability claims arising from nuclear incidents. Instead, it establishes an industry-funded insurance system (worth $10 billion in 2005), and promises compensation by the federal government for larger claims. The act was considered necessary as an incentive for the private production of nuclear energy, because companies were unwilling to invest in the industry without such limitation on liability. The Act currently covers all non-military nuclear facilities constructed in the United States before 2026. Some environmental, consumer and taxpayer watchdog groups, as well as one federal agency, have described the act as a government subsidy to the nuclear power industry. Some argue that it removes important legal remedies from the public, but the Supreme Court held that it did not.
How the law works
Power reactor licensees are required by the act to obtain the maximum amount of insurance against nuclear related incidents which is available in the insurance market (as of 2005, $300 million per plant). Any claim within this amount is paid by the insurance company. Any remaining claims are paid by the Price-Anderson fund, up to the value of the fund at that time. The fund is financed by the reactor companies, each of whom is obliged to contribute up to $95.8 million in the event of an accident at any plant belonging to one of them. The total (approximately $9.5 billion) depends on this individual amount multiplied by the number of reactors (currently 103). No money is paid into the fund unless a claim occurs, but fund administrators are required to arrange financing for the fund so that claimants can be paid rapidly. Actual payments by companies are capped at $15 million per year until either a claim has been met, or their maximum individual liability has been reached. Individual liabilities are indexed against inflation with 5 yearly reviews.[1]
The Nuclear Regulatory Commission (NRC) is required to submit a report on the cost of an incident to the courts and to congress. If claims are likely to exceed the fund value, then the President is required to submit proposals to congress detailing the cost, recommendations for raising funds needed, and a detailed plan for full and prompt compensation to those affected. The act reserves the right to make further charges to plant operators as part of such a measure. Should Congress fail to provide for compensation, claims could still be made under the Tucker Act for failure by the federal government to carry out its duty to compensate claimants.
The law makes a number of changes to the procedure which would otherwise apply to claims for damages in individual states:
- Jurisdiction is transferred to federal courts rather than those of the state concerned.
- All claims from the same incident are consolidated into one court, which is responsible for prioritising payouts and sharing funds equitably should there be a shortfall.
- Companies are expressly forbidden to defend any action for damages on the grounds that an incident was not their fault.
- An open-ended time limit is applied, which allows claimants three years to launch a claim, but only starting from the time they discover damage.
- Individuals are not allowed to claim punitive damages against companies. (This act makes no provision for punishing companies responsible for an incident, but nuclear licensing regulations specify fines for breeches of safety regulations and criminal charges apply unaffected.)
Price-Anderson covers Department of Energy (DOE) facilities, private licensees, and their subcontractors including the USEC uranium enrichment plants, national laboratories and the Yucca Mountain disposal site. Any payments from the fund for accidents arising at DOE facilities come from the US treasury. The fund size for such installations is set by legislation (also at $9.5 billion), rather than being based upon the number of plants contributing to the fund.
Nuclear insurance pools have paid out some $151 million ($70 million of which was related to the 1979 Three Mile Island partial core meltdown) and the DOE has paid out $65 million since Price-Anderson was enacted.
History of the Act
The Act is named for Congressman Charles Melvin Price (D-Ill.) and Senator Clinton Presba Anderson (D-N.M.), both of whom eventually chaired Congress's Joint Committee on Atomic Energy.
Congress introduced the Price-Anderson act in 1957 with the intention of encouraging the development of the private nuclear power industry. The atomic energy act of 1946 had created a framework for operation of nuclear plants under government control. This itself followed the development of nuclear technology during World War II when the purpose had been the creation of nuclear weapons. It was intended to apply this technology to civilian industry, particularly generating electricity. In 1954 the Atomic Energy Act Amendments act removed the government monopoly on operating such plants by creating a licensing system for private operators. An experimental power plant was constructed, but private industry expressed grave concern about the prospects for profitable operation of such plants.
In particular, companies were concerned about harm which might be caused to the public in a worst-case nuclear accident. Such an accident would likely bankrupt any company held responsible and liable to pay for restitution. The companies maintained that such an accident was extremely unlikely, but that the consequences for them would be disastrous, and therefore they were not willing to become involved in such an industry. It was determined that no insurance company was willing to take on the risk of indemnifying a company against such a huge liability, nor could an insurance company make a commitment beyond its own resources to pay. This appeared an insuperable barrier to private development of nuclear power.
To address this issue, Congress introduced the Price-Anderson act in 1957. This required companies to obtain the maximum possible insurance cover against accidents, determined to be $60 million, and provided a further government commitment of $500 million to cover any claims in excess of the private insurance. Companies were relieved of any liability beyond the insured amount for any incident involving radiation or radioactive releases regardless of fault or cause. The act was intended to be temporary, and to expire in August 1967 as it was assumed that once the companies had demonstrated a record of safe operation they would be able to obtain insurance in the private market.
By 1966 it had become apparent that the industry would still be unable to obtain private insurance, so the act was extended for a further 10 years. A provision was added which prevented companies from offering certain defenses to damages claims (particularly defenses which claimed that the accident had not been their fault). A time limit was also introduced, giving claimants three years after discovering harm in which to make a claim. This was a minimum time limit, any longer period specified by state law would still apply, and allowed claims to be made many years later where immediate harm had not been apparent. The alterations were intended to make the process of suing a company easier, and to remove discrepancies in different states where different laws applied. The new provisions only applied to incidents where a significant escape of radioactive material was deemed to have occurred (an ENO, extraordinary nuclear occurrence).
In 1975 the act was again extended, up to 1987. The total amount of insurance remained the same, but a provision was added requiring each of the 60 or so reactors to contribute between $2 million and $5 million in the event of an uninsured accident. Insurance requirement for each individual company was increased to $140 million. These measures reduced the contribution of the federal government to the insurance pool. However, an explicit commitment was made that in the event of a larger accident, Congress would 'take whatever action is deemed necessary to provide full and prompt compensation to the public for all public liability claims resulting from a disaster of such magnitude'.
In 1988 the act was extended for 15 years up to August 2002. Individual insurance for each generator was now increased to $200 million, and total fund to $9.5 billion. For each reactor owned, a company was liable to contribute up to $63 million towards compensation for any claim against any company, though this could only be recovered at a maximum rate of $10 million per year. Assessments were to be adjusted for inflation every 5 years. The same level of indemnity was provided for government DOE facilities, while small reactors (education and research) were required to obtain $250,000 insurance and had a government backed pool of $500 million in the event of accident. The act provided for all cases resulting from one incident to be heard in a federal court, rather than local courts.
In February 2002 the act was extended to December 2003. It was extended to 2017 after some debate in 2003. The individual insurance for each site was increased to $300 million while fund contributions per reactor were increased to $95.8 million. In 2005 it was extended again through 2025 in the Energy Policy Act of 2005.
Constitutional Challenge
The constitutionality of the Price-Anderson Act was challenged in 1975 (Duke Power vs. Carolina Environmental Study Group, Inc.) and upheld by the Supreme Court in June, 1978. The suit had challenged the act on two grounds — first, that it violated the Fifth Amendment because it did not ensure adequate compensation for victims of accidents, and that it violated the Fourteenth Amendment because it treats nuclear accidents differently to other accidents.
The court summarised the circumstances leading up to the act:
- Private industry responded to the Atomic Energy Act of 1954 with the development of an experimental power plant constructed under the auspices of a consortium of interested companies. It soon became apparent that profits from the private exploitation of atomic energy were uncertain and the accompanying risks substantial. Although the AEC offered incentives to encourage investment, there remained in the path of the private nuclear power industry various problems - the risk of potentially vast liability in the event of a nuclear accident of a sizable magnitude being the major obstacle. Notwithstanding comprehensive testing and study, the uniqueness of this form of energy production made it impossible totally to rule out the risk of a major nuclear accident resulting in extensive damage. Private industry and the AEC were confident that such a disaster would not occur, but the very uniqueness of nuclear power meant that the possibility remained, and the potential liability dwarfed the ability of the industry and private insurance companies to absorb the risk. Thus, while repeatedly stressing that the risk of a major nuclear accident was extremely remote, spokesmen for the private sector informed Congress that they would be forced to withdraw from the field if their liability were not limited by appropriate legislation.
The court also concluded:
- it is clear that Congress' purpose was to remove the economic impediments in order to stimulate the private development of electric energy by nuclear power while simultaneously providing the public compensation in the event of a catastrophic nuclear incident.
- The record supports the need for the imposition of a statutory limit on liability to encourage private industry participation and hence bears a rational relationship to Congress' concern for stimulating private industry's involvement in the production of nuclear electric energy.
- the Price-Anderson Act does, in our view, provide a reasonably just substitute for the common-law or state tort law remedies it replaces.
- The District Court's finding that the Act tends to encourage irresponsibility in matters of safety and environmental protection cannot withstand careful scrutiny, since nothing in the liability-limitation provision undermines or alters the rigor and integrity of the process involved in the review of applications for a license to construct or operate a nuclear power plant, and since, in the event of a nuclear accident the utility itself would probably suffer the largest damages.
- We view the congressional assurance of a [then] $560 million fund for recovery, accompanied by an express statutory commitment, to "take whatever action is deemed necessary [438 U.S. 59, 91] and appropriate to protect the public from the consequences of" a nuclear accident, 42 U.S.C. 2210 (e) (1970 ed., Supp. V), to be a fair and reasonable substitute for the uncertain recovery of damages of this magnitude from a utility or component manufacturer, whose resources might well be exhausted at an early stage.
- There is no equal protection violation, since the general rationality of the Act's liability limitation, particularly with reference to the congressional purpose of encouraging private participation in the exploitation of nuclear energy, is ample justification for the difference in treatment between those injured in nuclear accidents and those whose injuries are derived from other causes.
Criticisms
The law is not without its detractors, including the libertarian thinktank Cato Institute, Greenpeace International, Public Citizen, Taxpayers for Common Sense and other interest groups, who charge that Price-Anderson has amounted to a giveaway to private industry at the American taxpayers' expense. Public Citizen has been particularly critical of Price-Anderson, arguing that it understates the risks inherent in atomic power and does not require reactors to carry enough insurance — as a result taxpayers would have to foot most of the bill for a catastrophic accident.[2]
The law has also been criticized by environmental groups such as Green Scissors, who assert that Price-Anderson distorts the energy market by providing companies and their financiers a financial incentive to remain invested in nuclear energy but not to explore other sustainable energy technologies. [3] According to the United States Public Interest Research Group the subsidy to the nuclear industry has been estimated at between $366 million and $3.5 billion annually, or $3.5 million to $33 million per reactor per year [4]
Price-Anderson has been criticized by many of these groups for a portion of the law that indemnifies Department of Energy and private contractors from nuclear incidents even in cases of gross negligence and willful misconduct (although criminal penalties would still apply). "No other government agency provides this level of taxpayer indemnification to non-government personnel", Public Citizen. The Energy Department counters those critics by saying that the distinction is irrelevant, since the damage to the public would be the same. [5]
The Act provides no fault liability for reactor operators, and injured victims are precluded from directly suing vendors or manufacturers responsible for an accident. Its critics argue that it poses legal hurdles to victims seeking compensation by removing state jurisdiction and restricts plaintiffs ability to utilize any state laws which might go above and beyond federal protections.