The Multinational Monitor

MAY 1986 - VOLUME 7 - NUMBER 9


T H E   N E C L E A R   Q U A G M I R E

Limiting Liability

Ensuring U.S. Industry Survival

by Kathleen Welch

Just two days after the world learned of the Soviet nuclear disaster, a key U.S. House of Representatives committee was scheduled to cast final votes on the renewal of the Price-Anderson Act, the law that limits nuclear industry liability for disasters. Faced with a hearing room full of cameras and reporters, the Interior Committee postponed action until the Chernobyl accident moved off the front pages.

Enacted nearly thirty years ago, the Price-Anderson Act shields the nuclear industry from responsibility for damages in excess of $660 million for accidents at nuclear reactors. Liability for accidents at Department of Energy nuclear facilities, or in the transportation, storage or disposal of nuclear waste is limited to only $500 million.

The Atomic Energy Act of 1954, which paved the way for the Price-Anderson Act, ended the government monopoly on the development of nuclear power and was intended to spur private investment in commercial nuclear power. Despite various financial incentives, industry was unwilling to make substantial investments because corporate officials feared that vast liability could result from a nuclear accident.

The vice president of Westinghouse Electric Corporation, which later became the largest manufacturer of nuclear reactors. testified that his company would not build even a test reactor unless Congress provided protection against public liability. A representative of General Electric (GE), now also a major reactor manufacturer, was even more emphatic, stating "categorically'' that GE would withdraw from the nuclear field, and would halt work on the Dresden Station-the first commercial reactor-unless Congress passed a limitation on liability.

An Atomic Energy Commission Report, published in 1957, highlighted the importance of limited liability. That report, known as 'WASH-740,' estimated that a large nuclear accident could cause $7 billion in property damage alone. as well as 3,400 fatalities and 43,000 serious injuries. In the face of the nuclear industry's ultimatum and despite the evidence that damages from a nuclear accident could be massive, Congress enacted the Price-Anderson Act.

The original Act limited the nuclear industry's responsibility to the amount of insurance available on the private market-$60 million in 1957. Congress also committed the federal government to pay $500 million so that the total amount of money available to all victims of an accident would be $560 million. The authors of the statute never claimed that the money provided would fairly compensate victims; in fact, Senator Clinton Anderson said the $560 million figure, was picked because they didn't want to frighten the country or Congress to death, but still wanted to "solve the problem" of unlimited liability.

Congress limited the Price-Anderson Act to a ten-year term, believing that by the mid-1960s the industry would be more confident and would accept the risks of operating nuclear reactors. But Congress extended the Act for ten years in 1966, and again in 1975. Industry representatives testified that commercial nuclear power was not viable without the continued limitation on liability. The 1975 Act, which will expire in 1987, currently has a $660 million liability cap.

The original authors of the statute recognized that it might be politically impossible to sell a program that committed the federal government to bear responsibility for a nuclear accident, which could cost billions of dollars. They also knew that the public might voice doubts about any commercial endeavor with such vast potential for destruction.

An internal study by the Federal Insurance Administration estimated that a serious accident at Three-Mile Island would have resulted in $16.8 billion in property damage to residents within 20 miles of the plant. With a $660 million liability cap, victims of such an accident would receive just a few cents for every dollar of property lost. Put another way, the family owning a $50,000 house would receive around $2,000 in compensation and would have to pay the remaining $48,000 out of their own funds.

Unfortunately, the damages from a nuclear accident would not be limited to property within 20 miles of a nuclear reactor. Radiation could spread as far as 500 miles from the reactor. According to the 1975 Nuclear Regulatory Commission-sponsored Reactor Safety Study, a study now discredited because it underestimated the risks of nuclear power, an accident at a commercial reactor could cause 3,300 immediate deaths from radiation sickness, 45,000 deaths from cancer, 240,000 thyroid nodules requiring operations, and 5,100 genetic mutations.

Studies done for the Nuclear Regulatory Commission (NRC) show that if a "worst case" nuclear accident occurred at the Indian Point plant just north of New York City, area residents could incur over $300 billion in damages. Because of the Price-Anderson Act, however, victims would only receive a few cents on the dollar in compensation. The only other source of compensation would be Congress-and ultimately taxpayers.

And even though cancers and thyroid injuries may take 10 to 40 years to surface, the Price-Anderson Act arbitrarily requires that all claims be filed within 20 years of the accident. Moreover, it may not be possible to give any money to property owners and others who would suffer immediate injuries until the total figure for all the claims is known, since each citizen's recovery depends on the total recovery of everyone who has been injured. Unless it is possible to predict the size of all future claims, this flaw in the Act could hold up even the minimal payments provided for up to 20 years.

Property insurance policies uniformly exclude coverage for damage from a nuclear accident. Even automobile policies contain this exclusion. Because the industry will not offer this insurance, homeowners cannot purchase it at any price. Even Lloyd's of London, which insures against everything from an injury to a dancer's legs to rain on the day of a parade, refuses to sell home or automobile insurance against a nuclear accident.

With more than 100 nuclear reactors either operating or under construction in 34 states, risk of a nuclear accident threatens virtually every American. The DOE operates almost 300 facilities which could pose nuclear hazards; and nuclear waste shipments will pass through nearly every state for decades to come.

Although there may be disagreement on how best to provide for the victims of a major nuclear accident, few argue that the Price-Anderson Act provides compensation which is just, fair, or adequate.

Nuclear industry watchdogs maintain, however, that not only is this law unfair to the American public, it also promotes industry disregard for safety standards.

"The nuclear industry will be most responsible for safety measurers if they are held solely responsible for payment on all damages," said Sheila McDonald, a representative of the National Taxpayers' Union.

In the Supreme Court case challenging the PriceAnderson Act, the Atomic Industrial Forum, the nuclear industry's trade association, stated that removing the limitation on liability could cause utilities to "refrain from completing pending projects" and "lead to [the] shutdown of existing reactors." Perhaps the strongest statements were made on behalf of Babcock and Wilcox (B&W), the manufacturer of the reactor at Three-Mile Island. B&W predicted that without the limitation on liability, there would be a "de facto moratorium" on the construction of nuclear reactors, and possibly even "mass exodus from the nuclear industry."

Today, nuclear utilities contribute all of the $660 million to the post-accident compensation system. All other members of the industry-reactor manufacturers, architect-engineers, parts suppliers-bear virtually no financial responsibility for an accident. Few other industries in this country enjoy a similar exemption from the traditional rules of liability.

Imposing liability on companies who cause harm helps to deter negligent and reckless conduct and gives victims the right to seek full compensation for their injuries. Switzerland, Japan, South Africa, and West Germany all have systems of unlimited liability for nuclear accidents. Explaining the West German policy last year, the secretary general of that country's nuclear regulatory agency, Thomas Roser, said "Unlimited liability shows clearly that the political decision-makers as well as the nuclear plant operators are convinced that nuclear power is a safe and reliable source of energy."

In the wake of the Chernobyl accident, the American nuclear industry has launched an advertising campaign to convince the public of the safety of U.S. nuclear reactors. At the same time, the industry is lobbying Congress to renew strict limits on liability for nuclear accidents. Even if Congress does not renew the PriceAnderson Act, however, operating reactors and reactors currently under construction will continue to retain the guarantee that their liability will be limited to $660 million in the event of a nuclear accident.

Against the industry's effort to retain the PriceAnderson Act in present form, Republican Senator Robert Stafford of Vermont, Chairman of the Senate Environment and Public Works Committee, has introduced a bill that would both increase nuclear industry accountability and ensure that the public would be more fully compensated for nuclear accident damages.

And in the House, Rep. Morris Udall, D-Ariz., chairman of the Interior Committee, introduced a bill that increased the limitation on liability to $10 billion, to be paid in full by utilities owning nuclear reactors. However, after committee and subcommittee negotiations, a compromise between a proposal to increase the liability to only $2 billion and one to raise it to $8 billion was finally set at $6.5 billion.

But, according to Rep. Edward Markey, D-Mass., chairman of the House Subcommittee on Energy Conservation and Power, the bill still "needs a lot of work."

"It's incredible that after the worst accident in the history of nuclear power, the committee elected to reduce the liability count from $8 billion to $6.5 billion," Markey said.


Kathleen Welch is an energy specialist for the U.S. Public Interest Research Group in Washington, D.C.


Table of Contents