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Nuclear Energy

The Price-Anderson Act

Pro   Con

Price-Anderson has operated for over 25 years without cost to the taxpayer, while the government has collected more than $30 million in annual indemnity fees.1

Although the Price-Anderson Act limits liability, the right to sue under tort law does not automatically insure the right to collect. If a utility's assets are exhausted, subsequent claimants would be left with uncollected awards. This prospect might cause claimants to rush to the courthouse, while the present system provides for orderly and equitable compensation.2

Price-Anderson successfully removed the deterrent to private sector participation in the nation's nuclear power programs.3

Price-Anderson worked well in its only major test, following the 1979 Three Mile Island accident, the only nuclear incident involving payments to the public.4


The present liability limitations imposed by the Price-Anderson system deny victims the full use of tort remedies in the event of a nuclear accident causing damages exceeding the limitation.5

There has been no provision to increase liability limits to keep pace with inflation.6

The present system does not have any mechanism to collect premiums or funds from nuclear suppliers, architect-engineers, and others who are involved in nuclear activities.7

The system creates a subsidy to the nuclear industry, without making a similar system available to other industries in which hazardous materials are used.8

The limitation on liability provisions protect the assets of utilities and suppliers, creating a disincentive to the safe operation of nuclear reactors.9

Present Price-Anderson provisions do not ease the burden of proof for claimants to show that latent cancer or other injuries resulted from a nuclear accident.10

Price-Anderson reduces the cost of nuclear power below the free market cost, which encourages its use at the expense of other forms of energy.11

AMA Commentary

The Price-Anderson Act was originally passed in 1957 as an amendment to the Atomic Energy Act of 1954. The two major objectives of the statute were to ensure adequate compensation to the victims of a nuclear power plant accident, and to promote private industry's participation in the development of nuclear power by limiting its liability in the event of an accident.12

Although the Price-Anderson Act was envisioned to last just ten years, at which point utilities would have gained enough operating experience to convince insurance companies that nuclear power plants were a good risk, Price-Anderson remains in effect today, having been renewed twice.13

In the face of consistently dire projections about the potential consequences of nuclear power plant accidents, the private insurance industry has never been willing to assume more than a fraction of the nuclear industry's projected insurance needs. Prior to the passage of Price-Anderson, an Atomic Energy Commission-initiated report known as WASH-740 estimated that a major "worst-case" reactor accident could cause 3,400 deaths, 43,000 injuries, and $7 billion in property damage.14

When WASH-740 was revised in 1964-65 to account for the larger reactors then being designed, the new figures indicated that there could be as many as 45,000 deaths, 100,000 injuries, and $17 billion in property damage. A study known as WASH-1400, released in October 1975, concluded that a rare core melt could cause up to 3,300 early fatalities, 45,000 early illnesses, and $17 billion in property damage. In November 1982, Sandia National Laboratories concluded in its CRAC2 study that the consequences of accidents may vary a great deal depending upon the reactor site, and under unfavorable conditions early fatalities could reach 50,000 and property damage could run as high as $314 billion.15

Despite the potentially massive dimensions of a major nuclear power plant accident, the original Price-Anderson Act provided a $560 million limit on liability for nuclear power plant operators, consisting of the maximum amount ($60 million) of private insurance available and $500 million from the federal government. In addition, contractors working under the AEC were shielded from all liability, with the federal government insuring them with the same $500 million ceiling. In the event that an accident resulted in damages exceeding these figures, Congress was charged with the obligation to "thoroughly review the particular incident and...take whatever action is deemed necessary and appropriate to protect the public from the consequences of a disaster of such magnitude."16

When Price-Anderson was renewed in 1966, a new provision known as the Extraordinary Nuclear Occurrence (ENO) was added. In the event of an ENO, defined as "an event resulting in substantial offsite release of radiation and likely to result in significant personal injury or damage to property," the licensee or contractor was required to waive traditional defense of State tort laws in order to facilitate recovery by plaintiffs. Another 1966 amendment enhanced the insurance pool's ability to make emergency assistance payments following a nuclear accident. Still, total overall liability coverage remained the same.17

Under the terms established by the amended and renewed 1977 Price-Anderson Act, utilities were made liable for up to $700 million, drawn from a combination of industry-financed insurance and an assessment of $5 million on each reactor in operation.18 The assessment, created by a 1977 amendment to the act, effectively phased out federal indemnity of NRC licensees.19 Congress is still required to review any case where damages exceed these liability limits.20

In July 1986, the United States General Accounting Office (GAO) issued a report titled "Financial Consequences of a Nuclear Power Plant Accident." In the report they analyzed, on a reactor-by-reactor basis, how "average catastrophic accident consequences" compare with the liability ceiling provided for by Price-Anderson. The report concluded that, under the [then] $665 million Price-Anderson limit, only 4 percent of all potentially serious reactor accidents would be adequately covered, and a $6.5 billion limit would cover 95 percent of the reactors. The report also stated that, according to NRC officials, the financial consequences of a catastrophic accident under severe weather conditions could be up to 10 times greater than average consequences.21

On July 31, 1987, the House of Representatives approved a bill which re-authorized the Price-Anderson Act, raising the liability of utilities to $7 billion in the event of a nuclear power plant accident. The bill is currently pending in the Senate. In the meantime, those plants currently holding construction permits or operating licenses are insured under the terms established by the 1977 Price-Anderson legislation.22

1 American Enterprise Institute for Public Policy Research, "Renewal of the Price-Anderson Act,' Legislative Analysis No. 50, 99th Congress, Washington, D.C., August 1985, pp. 14-16.
2 United States Nuclear Regulatory Commission, "The Price-Anderson Act -- The Third Decade," NUREG-0957, December 1983, p. 1-1.
3 Ibid., p. 1-2.
4 American Enterprise Institute for Public Policy Research, op. cit., p. 8.
5 United States Nuclear Regulatory Commission, NUREG-00957, op. cit., p. 1-2.
6 Ibid.
7 Ibid.
8 Ibid.
9 Ibid.
10 Ibid.
11 American Enterprise Institute for Public Policy Research, op. cit., p. 15.
12 "Price-Anderson Act Amendments Act of 1986," 99th Congress, 2d Session, Report 99-310, pp. 2-3.
13 Timothy Aeppel, "Limiting the nuclear industry's liability," Christian Science Monitor, April 27, 1987, p. 3.
14 "How Much Could A Nuclear Accident Cost?", "Price-Anderson Campaign Literature, 1987.
15 William C. Wood, Nuclear Safety; Risks and Regulation (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1983), pp. 40-48.
16 "Price-Anderson Act Amendments of 1986," op. cit., p. 4.
17 Ibid.
18 Aeppel, op. cit.
19 "Price-Anderson Act Amendments of 1986," op. cit., p. 5.
20 Aeppel, op. cit.
21 United States General Accounting Office, "Financial Consequences of a Nuclear Power Plant Accident," GAO/RCED-86-193BR, July 1986, p. 20.
22 Doug Teper, Price-Anderson campaign,private conversation, November 9, 1987.