My original understanding was that under the contract provisions, under the old atomic energy provisions, that that is what covered WIPP, and that Price-Anderson was strictly a matter of the private utilities. I guess maybe the reason I am asking that question is because the State in different conversations has asked for a clarification of that, that you have given an opinion that legally it does cover, and I am just wondering to what extent. The coverage of Price-Anderson, the important portion of PriceAnderson is where the money is coming from, at least the way I view it, or am I wrong? Mr. SALTZMAN. I think the problem is that Price-Anderson means two different things according to whether you are talking about licensee indemnity, which is what we have been discussing here, or contractor indemnity, which is unchanged and will be unchanged as far as I know. Assistant Secretary Brewer will be able to discuss it, and Deputy Attorney General Bigelow of New Mexico will also be testifying today on this. But our understanding, we are not involved in WIPP, is simply that it is under contractor indemnity between DOE and its contractor and DOE covers it for $500 million. The program here with the $5 million retro is not involved at all. Mr. LUJAN. How does Price-Anderson apply? Mr. ASSELSTINE. Mr. Lujan, the act sets up, in essence, two PriceAnderson systems. One is for DOE managed programs, and the other is for NRC licensed programs. WIPP is not an NRC licensed facility so it is out of our hands. It is really in DOE's hands. The same provisions under Price-Anderson would apply to WIPP as would apply to DOE's contractor operated facilities. I think the big difference is that the money to pay claims under that program comes from the Federal Government, and the responsibility for managing the Price-Anderson system as it applies to a facility like WIPP is with DOE. Mr. LUJAN. I really cannot understand. Under the contract provision, DOE has the authority and obligation to pay for any accident at WIPP, do they not, under the contract provision with Westinghouse. Mr. ASSELSTINE. I think that is something Mr. Brewer can tell you about. Mr. LUJAN. I will talk to him about it. The CHAIRMAN. The gentleman's time has expired. Mr. CRAIG. No questions. The CHAIRMAN. Any further questions? Gentlemen, we call you up here frequently. I guess you may feel like maybe we are beating up on you from time to time. I want to say that today represents, I think, a fine chapter in NRC history. Here is a situation where you have gone out ahead, made the study, you have some new ideas, and you have explained your position very well here today. I think the chairman and the Commissioners ought to get a little recognition from us when we criticize you so frequently. Thank you very much for being with us today. Mr. PALLADINO. Thank you, Mr. Chairman. The CHAIRMAN. The next witness is Mr. Shelby Brewer, assistant secretary for Nuclear Energy, Department of Energy. Mr. Secretary, thanks for coming here with us today. We will be glad to hear from you. [Prepared statement of Hon. Shelby Brewer may be found in the appendix.] STATEMENT OF HON. SHELBY BREWER, ASSISTANT SECRETARY FOR NUCLEAR ENERGY, U.S. DEPARTMENT OF ENERGY ACCOMPANIED BY SUSAN KUZNICK, ESQUIRE, OFFICE OF GENERAL COUNSEL Mr. BREWER. Thank you, Mr. Chairman. I have with me today a representative of our general counsel's office in the Department, Mrs. Susan Kuznick. Price-Anderson has two applications. One is to licensed commercial nuclear reactors. That element of Price-Anderson is administered by the Nuclear Regulatory Commission. The other is to facilities in support of Department of Energy defense programs, and research and development and production programs. Although we do have a very keen interest in the deployment of commercial nuclear power in this country, and, therefore, the application of Price-Anderson to licensed facilities-my testimony today, Mr. Chairman, will deal largely with the application of Price-Anderson to Department of Energy activities. PURPOSE OF PRICE-ANDERSON Price-Anderson, as it has evolved over the years, embodies several checks and balances which, in aggregate are designed to serve all parties involved. Price-Anderson is designed to serve, first of all, the claimants, third parties injured in a prospective nuclear incident. Second, Price-Anderson serves the operator of nuclear facilities, providing protection from open ended liabilities. Finally, Price-Anderson serves the taxpayer. It is designed to provide an efficient and prompt means of channeling resources to compensate damaged parties, as well as to provide protection to the operators of facilities against open ended and potentially ruinous financial exposure. It further provides, through the liability limit provision, an opportunity, or rather a mandate for Congress to tailor financial solutions if damages and claims in aggregate exceed the limit. In 1957, when Price-Anderson was designed, there was no model in liability insurance for dealing with such an unprecedented industry, such an unprecedented development. We have the prospect of hypothetical events of very small probability, but with theoretically very large consequences. At the time Price-Anderson was designed in 1957, I believe the maximum commercial policy written for industrial hazards was something like $25 million. were The potential maximum damages for nuclear events thought to be very large, but unknown. And the nuclear coverage limits set by Price-Anderson at that time were largely arbitrary. Moreover, the probabilities of such events were thought to be very small. There was no actuarial basis for applying insurance industry norms to this unique industry. Moreover, because there were few prospective plants to come on line at that time, the possibility of spreading risk and gleaning any sort of premium volume would be very small-until the industry was indeed commercialized. In short, there was no existing mechanism for treating liability matters for nuclear power. The result was the Price-Anderson amendment in 1957 to the 1954 Atomic Energy Act. The Price-Anderson amendment sought to balance the policies of the 1954 act, the need for public financial protection, and the needs of industry for financial protection. CHANGES IN PRICE-ANDERSON The Price-Anderson system has been refined significantly since 1957. For one thing, increases in private coverage and the inclusion of retrospective assessments, or the retrospective premium systems in the statute, have displaced the Government indemnification component for licensed commercial activities. Also, the waiver of conventional legal defenses feature has made for a more efficient and prompt societal response to an extraordinary incident. Moreover, the limited liability should not be regarded as an absolute limit, but instead as a limit for prompt compensation. As you know, if claims exceed the limit, Congress is required to consider the shortfall and to tailor a financial response to the exigencies of the case at hand. APPLICATION TO DEPARTMENT OF ENERGY FACILITIES Application of Price-Anderson to Government activities and defense production, research and development, differ in several ways from its application to commercial activities licensed by NRC. First, there is no retrospective assessment component, which means that the limit does not grow with time as it does on the commercial side. Second, there is no requirement for a private indemnification component from underwriters for our contractors, although the agency does have the authority to require private coverage. Thus, the insurance is totally in the form of Government indemnification, because not only is it a Government activity, and a Government obligation ultimately, but also because premium payments for private insurance would come back to the Government in the form of a higher cost of doing business with our contractors. To have several thousand contractors seeking private insurance for which there is little actuarial basis, is thought to be less efficient than Government indemnification in the first place, when, in fact, it will, in effect, end up there anyway. REPORT TO CONGRESS Mr. Chairman, in accordance with section 170(p) of the act, we submitted to Congress last year our views on application of PriceAnderson to Government activities. This report paralleled the NRC report on application of Price-Anderson to licensed commercial activities. Our report contained 5 basic recommendations, two of which touch on the basic concept of Price-Anderson, and the other three of which deal with possible refinements in the scope of its application. First, we recommend that the Price-Anderson system be continued for Department of Energy defense production and research and development activities. We believe, Mr. Chairman, that it is indispensable for the conduct of these programs, programs which have been authorized and mandated by Congress. If the indemnification system were discontinued, there would be a strong reluctance on the part of our contractors to do business with the Government. Also, we believe that the current form of this insurance, that is, Government indemnification, is efficient and cost effective against the alternative of requiring contractors to purchase private policies whose premiums would end up as a Federal outlay anyway. Our second recommendation is that coverage in liability limits for Government activities be made as equivalent as possible to that for the commercial side. We believe that compensation should be independent of the source of the accident, be it a Government activity or a commercial activity. In general, our intent is to discount any notion of sovereign immunity in this regard, that because it is a Government activity that provided the accident source, that our obligations would be any less or the accident any less probable or less severe. Damage is damage, and the cost of compensating for damage should be the same. Our thought, in submitting the report last August, was to adjust the Government limit for Government activities in consonance with increases on the commercial side due to the growth of the limit on the commercial side, as more reactors are brought on line at the $5 million per reactor per incident level. We realized, of course, that this indexing or this arithmetic was wholly arbitrary, that there was very little basis for the original Federal limit of $500 million. There is very little actuarial grounds for even the retrospective limit. But in considering this issue, we believe that it is important to keep firmly in mind that the liability limit is not an absolute limit. În the event that claims and damages exceed the limit, Congress is obliged to consider the matter based on the facts, based on the accident at hand, and tailor an appropriate response. DOE favors for the application to Government activities the current system of protection, which includes a limit, which includes waiver of defenses triggered by an extraordinary nuclear occurence, or ENO, and which includes congressional review if claims exceed the limit. We believe that this provides a large amount of prompt protection to the public without the need for proving fault or negligence; and tends to provide protection of the activity, the program, from open-ended liability. The other three DOE recommendations, Mr. Chairman, deal with the scope of application of Price-Anderson to Government activities. PRECAUTIONARY EVACUATIONS Our third recommendation is that Price-Anderson not be amended to include precautionary evacuations when no nuclear event, in fact, occurs. Evacuations are not ordered or controlled by the Department of Energy. The Department would, in such an event, provide data to State and local officials who would decide whether an evacuation was in order. There is no Price-Anderson equivalent for precautionary evacuations resulting from other nonnuclear hazards such as poison gases, toxic liquids, transport of explosives and so forth. We ask in this recommendation for parity with the response to other potential hazardous accidents. COVERAGE FOR ACTS OF SABOTAGE Our fourth recommendation deals with liability stemming from acts of sabotage when the material involved cannot be traced to a DOE contractor source. Here, again, we ask for parity with responses to other forms of terrorism where the response is not augmented by an omnibus treatment such as Price-Anderson. The fifth and final recommendation is to extend the ENO provision, the waiver of defenses provision, to include nuclear waste management activities such as WIPP. These activities do not now enjoy the ENO provision, because they are neither production facilities or utilization facilities. Those are terms used in the original legislation. We regard this final recommendation as one of conforming the Price-Anderson treatment to include waste management activity. Mr. Chairman, this concludes my oral remarks. We would be happy at this time to answer any questions you might have. The CHAIRMAN. Mr. Seiberling. Mr. SEIBERLING. Thank you, Mr. Brewer. TEXAS CITY DISASTER I do have some questions. First of all, with respect to the obligation for Congress to consider an indemnification of victims of an accident or an incident, do you remember the Texas City disaster in 1947, when 2 ships carrying chemicals under Government contract collided in Texas City harbor, killing 570 people, and estimates of damages ranged from $80 million to $300 million in 1947 dollars? Congress did not pass any compensation legislation for the victims until 1955 and then only $21 million. |