Saturday, June 28, 2008

The Price-Anderson Act

Prefatory Note:

A visitor generously suggested ways to improve the accuracy of this article and its present version was written after receiving his comments.


For as long as I can remember, anti-nukes have been claiming that the Price-Anderson Act protects nuclear power plants from liability. The plants are so dangerous, they claim, utilities won't accept responsibility for them.

The facts are very much different. A copy of the law can be found here.

I should say at the outset that I am not an attorney and therefore am not qualified to interpret law or court decisions. That said, when anti-nukes claim that the law protects utilities from liability, they conveniently leave out the fact that the liability limits only apply to federal courts, not to state courts. But don't take my word for it. Here is an excerpt from the US Supreme Court decision in the case of SILKWOOD v. KERR-McGEE CORP., decided January 11, 1984. [source]

"In sum, it is clear that in enacting and amending the Price-Anderson Act, Congress assumed that state-law remedies, in whatever form they might take, were available to those injured by nuclear incidents. This was so even though it was well aware of the NRC’s exclusive authority to regulate safety matters. No doubt there is tension between the conclusion that safety regulation is the exclusive concern of the federal law and the conclusion that a State may nevertheless award damages based on its own law of liability. But as we understand what was done over the years in the legislation concerning nuclear energy, Congress intended to stand by both concepts and to tolerate whatever tension there was between them. We can do no less. It may be that the award of damages based on the state law of negligence or strict liability is regulatory in the sense that a nuclear plant will be threatened with damages liability if it does not conform to state standards, but that regulatory consequence was something that Congress was quite willing to accept."

On the other hand, even this decision accepts the popular view that the original purpose of Price-Anderson was to encourage companies to enter a new field. Since the field is no longer new, one could ask why the law continues to exist. I think the answer lies in the other benefits. One benefit is that it clarifies the US Government’s responsibilities. Every aspect of nuclear energy, including design, construction, and operation, is supervised by the Federal Government. In the case of an accident, and in the absence of legislation, the Government very likely would find itself in the position of defendant. The act clarifies this point: the Government would only be on the hook after all other coverages, from commercial insurance and owners’ assets, have been paid out. A second benefit is that victims of an accident could recover their damages without suing. Under liability law, they would have to determine who was at fault and prove it in court. The process would take years and, even if they won, they’d lose because lawyers would take most of the money. Under Price-Anderson, they’d only have to show they had taken losses and they’d be compensated.

As it is, Price-Anderson is a requirement for anyone doing nuclear work. It doesn’t limit victims’ ability to recover damages. What it does is to guarantee that money will be there to pay them.


Anonymous said...

Have you noted that the Price-Anderson Act is actually called “Indemnification and limitation of liability”?

I have to say the act's text is very hard to read, but with a little help from wikipedia and after reading the act over and over, I understood the following.

You are right to say that the act does not protect nuclear plant operators from all liability (except for punitive damage which are forbidden). It does, however, cap the liability and furthermore creates a system where any liability would be largely paid by third-parties.

Firstly, the act requires operator to provide insurance against liability with the highest protection available “at reasonable cost and on reasonable terms from private sources”, which seems to be the least one can expect. This protection currently is, according to wikipedia, about $300 million per plant.

Secondly, if an accident leads to a liability higher than that insured – but less than $10 billion –, the Nuclear Regulatory Commission (NRC) would immediately indemnify the victims (speeding-up, as you mentioned, the indemnification process). Subsequently, all nuclear plant operators, not just the liable one, would have to pay an amount of up to about $100 million per plant, but not more than $15 million a year, to reimburse the NRC. In essence, this creates a cost-sharing system for liability in the nuclear industry, guaranteed by the federal state.

Thirdly, if the costs exceed $10 billion, the industry is no longer liable for anything above that. The congress must then take whatever measures it considers best to indemnify victims (i.e. the taxpayer would pay).

In other words, the act means that the operator of a nuclear plant suffering an accident would have to pay at most $100 million from his pocket, only if his liability exceeds $300 million and irrelevant of the amount of damage. The industry as a whole would have to pay at most $10 billion, again, irrelevant of the amount of damage.

I am not particularly anti-nuclear, but if you want to defend nuclear energy as a solution to excessive carbon dioxide emissions, I'd recommend you choose your battles wisely: the Price-Anderson act is not something to be proud of. By reducing the direct cost of a nuclear plant accident to its operator to a surprisingly low level (about 2% of the cost of building a new plant), the act certainly is not contributing to trust in this industry. And trust is what the nuclear industry is lacking most.

Also, I don't see where you've read that victims would not need to sue for damage. I did understand the act makes provisions to speed-up and streamline victims' liability actions, and to prevent certain types of defences against these claims, in case of a major catastrophe, but it would still happen in court.

Red Craig said...

Anonymous, thanks very much for taking the trouble to go through the article. I want it to be as accurate as possible and I don't doubt that your familiarity with such matters is much better than mine.

You've got me on the law's title. I think originally the law was written to limit liability. Strictly speaking it still does, but the limit has been raised as the industry has matured to the point where it exceeds what any accident could plausibly cost in a US reactor. Consider Three Mile Island, where the accident destroyed the reactor but the total claims paid were $151 million, according to Wikipedia. If you like, we can discuss the differences between US reactors and the Soviet monstrosity at Chernobyl.

It seems to me that the Supreme Court decision expressly allows for punitive-damage lawsuits under state law. The text is pretty clear and I don't see how I could misinterpret it, although I have no qualifications for making such interpretations.

The main point of contention seems to be that if an accident exceeds $10 billion the owner gets off easy because he only has to pay $100 million. But there also is the problem of losing the value of the plant. Without Price-Anderson, the owner of a destroyed plant would have very limited ability to pay damages to the victims. With Price-Anderson, the other plant owners would pay the damages up to $10 billion, except probably the stricken plant's share.

Is it right for the government to face possible costs? I think it's inevitable, because of the government's close involvement in the design, construction, and operation of the plants. If nuclear opponents really oppose government exposure, then they also should oppose government regulation. It's a free-market economy, right? Let the owners decide for themselves what level of safety they will provide. If an accident occurs it will be up to the victims to collect whatever they can from the one plant owner, who will have just lost a plant.

I think you're right that the law imposes a public-relations burden on the industry. It gives anti-nukes a cudgel to use. But I believe Congress wrote the law to clarify the government's responsibilty for any accidents that might occur and to ensure money would be available to pay victims. To me it seems like a reasonable thing for Congress to do. But if it will make Greenpeace more content with nuclear energy, then I'd be OK with old-fashioned liability laws.

With respect to the no-fault provisions, I believe they are covered in sections (m) and (n). The courts clearly are involved but the law provides for a special caseload management panel made up of federal judges who review the information and award payments. I've always heard that Price-Anderson allows for payments without a lawsuit, on the same terms as no-fault insurance, and I read these two sections to spell that out in detail. Again, I'm not qualified to offer opinions.

I don't mind re-writing this article to make it more accurate. I'll mull your comments over and do what I can to improve it.

Many thanks,


Thank you for de notice