TESTIMONY ON EXTENSION OF THE PRICE-ANDERSON ACT SHELBY T. BREWER ASSISTANT SECRETARY FOR NUCLEAR ENERGY BEFORE THE SUBCOMMITTEE ON ENERGY AND THE ENVIRONMENT JUNE 11, 1984 We appreciate, Mr. Chairman, the opportunity to appear before the Committee to participate in this hearing on the Price-Anderson Act (an amendment, enacted in 1957, to the Atomic Energy Act of 1954). Price-Anderson is applicable both to commercial activities licensed by the Nuclear Regulatory Commission (NRC) and to Government activities in defense, production, and research and development. Last year, in accordance with Section 170p of the Atomic Energy Act, the NRC and the Department of Energy (DOE) submitted reports on their respective areas of application of Price-Anderson. My testimony today, Mr. Chairman, will be restricted largely to the applications of Price-Anderson to DOE programmatic activities, and will reflect the findings of our report to Congress last year. The Department has a major interest, additionally, in the commercial development of nuclear power and, hence, an interest in the application of Price-Anderson to licensed facilities. However, we are not prepared at this time to present a full exposition of our views on the commercial applications of the Act. Price-Anderson Fundamentals: Government Indemnification and Limits of Liability Before discussing our recommendations relating specifically to DOE contractual activities, it is well to review the principal features of the Price-Anderson Act. It is a In 1957, the Price-Anderson legislation was added to the Atomic Energy Act of 1954 to afford financial protection to the public and to licensees and contractors of the Government. system for prompt and efficient settlement of third-party claims resulting from nuclear incidents and for protection of licensees and contractors from open-ended liability. Thus, it serves both the public and the operators of nuclear facilities. For nuclear powerplants licensed by the NRC, the Price-Anderson system engages three sources of indemnification (see figure): A. Private underwriters (insurance required of licensees by - the AEC and now by the NRC) B. C. - A retrospective premium assessment system a pool that is the aggregate of retrospective fees at $5 million per Government indemnification, if the amounts from A and B are less than the total liability. The Act called for a limit of liability per incident of $560 million or the sum of A plus B, whichever is larger (Section 170e). The Government portion of this liability could not exceed $500 million. The remainder, or $60 million, was to be provided by private insurance (A), as required by the NRC under authorities provided by the Act (Section 170a). As the number of licensed reactors has grown, the retrospective system (B) has displaced the Government indemnification component (C). Also, the private insurance component (A) has been increased by $100 million over the minimum of $60 million initially required. Because the total of private insurance (A) and retrospective assessments (B) now exceeds $560 million (the original liability ceiling per incident), there is no longer a requirement for Government indemnification in the case of licensed reactors, and the liability ceiling will continue to increase as more reactors are licensed. In the case of DOE contractors, Price-Anderson provides for two sources of indemnification: private underwriters, if required by the agency; and Government indemnification. Since the cost of any private insurance obtained by a Government cost-reimbursement contractor would be passed on to the Government, DOE and its predecessor agencies have not required their contractors to carry such insurance. Instead, the Government is a self-insurer. As with the provisions relating to commercial facilities, the maximum Government indemnification was set at $500 million. For Government programmatic activities, the effective liability limit is $500 million per incident, whereas the limit for licensed commercial activities was $560 million (before retrospective assessments and private insurance displaced Government indemnification) and is presently $585 million. This is because the AEC and its successor agencies have not required private insurance for its contract activities, for the reason stated above. Another distinction between the two applications of the Act is that the ceiling for contractual activities does not increase with time, because there is no retrospective assessment provision. Price-Anderson should be regarded as a societal process for dealing with an extraordinary event. It is a process designed to deal constructively and equitably with third-party liability claims. From the outset, the structure of the statute struck a balance between unprecedented levels of public protection and a limit on the total liability covered by private insurance and by Government indemnity. Amendments made in 1966 further facilitated recovery by plaintiffs, by establishing a system of waivers of defenses applicable to extraordinary nuclear Occurrences, and amendments in 1975 reaffirmed that the "limitation of liability serves primarily as a device for facilitating further Congressional review of such a situation, rather than an ultimate bar to further relief of the public." Thus, Price-Anderson protection embodies several mutually dependent parts. These mutually dependent parts are the limit on liability, the economic channeling of liability, the umbrella coverage, and the waiver of defenses. In combination, these provisions discourage unlimited and spurious claims while providing a trigger point for Congressional review and prospective action; protect the public by expediting adjudication proceedings; and relieve claimants of the burden of proving fault, through the waiver of defenses for an extraordinary nuclear occurrence. DOE Recommendations on Application of Price-Anderson to On August 1, 1983, the Department submitted its views on the application of Price-Anderson to DOE programmatic activities, as required under Section 170p of the Act. The report contained five recommendations: |