Sowell's Law Blog: The Truth About Nuclear Power

Subtitle: Price-Anderson Act Gives Too Much Protection to Nuclear Plants

[UPDATE 7/3/2014- India has its own problems with its version of nuclear liability law. See near end of article. -- end update]

In an earlier article in The Truth About Nuclear Power series, (part 13 see link), several forms of government subsidy for nuclear power were discussed. This article discusses one of those subsidies in more detail, the Price-Anderson Act by which government assumes the liability from a large nuclear accident, after industry reaches the stated cap on its liability. To encourage the nuclear industry to build any plants at all, the inherently unsafe characteristics of nuclear power plants required government shielding from liability, or subsidy, for the costs of a nuclear accident via the Price-Anderson Act.

Even as early as the 1950s, the nuclear industry was aware of the catastrophic nature of a nuclear accident, a meltdown due to a loss-of-cooling-accident, radiation released into the atmosphere or water, and the potential for hundreds of thousands of deaths or even many, many more. Industrial insurance underwriters also were keenly aware of the risks, and had their premiums adjusted accordingly. Utilities that wanted to enter the nuclear power business realized quickly that they could not afford to build the plants, plus pay for insurance premiums. The price for their nuclear-based power would be prohibitive – and the adverse publicity would be devastating. One can imagine the headlines: “Nuclear Disaster Insurance Increases Electricity Prices to Unaffordable Levels.” Or, some similar headline.

Subsequent events have shown that such nuclear calamity is not only possible, but extremely deadly. Three major events have happened to date, at Three Mile Island in 1979 with a reactor core partially melting down, Chernobyl in 1986 with a core explosion, and Fukushima Dai-ichi in 2011 with three reactors melted down and four containment buildings exploded. With hundreds of reactors operating world-wide and almost one hundred more either planned or under construction, more meltdown disasters are inevitable.

With the economic consequences in mind, the industry asked for relief from Congress, and Congress responded with the Price-Anderson Act in 1957. The language of the Act mentions “extraordinary liability that companies would incur if a nuclear accident were to happen…” The extraordinary liability is a result of nuclear activities being classified as an ultrahazardous activity. These activities are defined as an activity that cannot be made safe even with the utmost care taken. Examples include the use and storage of of explosives, blasting such as in mining or quarrying, use, storage and transport of certain chemicals, nuclear materials used in medicine and industry, and nuclear power reactors.

Note that most of these activities have existed long before nuclear energy was discovered. The concept of an ultrahazardous activity is not new; it is merely the proper category in which nuclear energy must be placed. The person or company that engages in ultrahazardous activities bears the risk of any harm to persons or property from that activity - with very limited legal defenses to liability. He also carries insurance to limit his own risk. However, for nuclear power plants, the insurance is simply unaffordable – except as provided for under the Act.

An example from my own industrial experience deals with the use and storage of a certain thermally-unstable chemical. The chemical was a liquid, and was used as an initiator in the production of PVC resin from vinyl chloride monomer. The chemical was packaged in a plastic cube surrounded by cardboard, approximately one foot on each side. The boxes of initiator were stored in a dugout-style bunker with stout walls and a flimsy roof, the entire room kept at below freezing temperature. The nature of the initiator was that it was stable when very cold, but would explode when warmed to something below ambient temperature. A description from an initiator supplier states it is a “refrigerated organic peroxide undergoing self-accelerating thermal decomposition below room temperature.” My company did not have, nor did it require, an act of Congress to limit the liability from using the explosive initiator. Nuclear power is far, far more dangerous than that explosive liquid.

The words of the Price-Anderson Act are excerpted below:

“Congress passed the Price-Anderson Act in 1957 to ensure that adequate funds would be available to compensate victims of a nuclear accident. It also recognized that the risk of extraordinary liability that companies would incur if a nuclear accident were to happen would render insurance costs prohibitively high, and thwart the development of nuclear energy.
. . .
The Price-Anderson Act requires owners of commercial reactors to assume all liability for damages to the public resulting from an ``extraordinary nuclear occurrence'' and to waive most legal defenses they would otherwise have. However, in exchange, their liability will be limited to capped amounts established in the Act.” – Re-Authorization of the Price-Anderson Act, December 9, 2003, Senate Report 108-218.

The Act is all that stands between nuclear plants and total shutdown, immediately. Without it, no nuclear plant would assume the risk of $2 trillion – or more – in damages from an “extraordinary nuclear occurrence” – a meltdown and subsequent deaths of millions of people.

As mentioned earlier, the US has narrowly escaped such an incident at Three Mile Island in 1979, where only by sheer dumb luck did clueless plant operators turn on a water injection pump just before the nuclear fuel melted all the way through the reactor walls. The operators had no clue what they were doing, and actually turned off a water pump earlier in the day that could have prevented the meltdown. The meltdown eroded almost all the way through the reactor walls. This incident was discussed in some detail in Part 21 -- see link.

If an accident occurs, and a million people were to die from radiation, liability would be approximately $7 million per each death, using the US EPA’s value of a statistical life. That alone is $7 trillion, for a single incident. There are many nuclear reactors close to population centers that each contain millions of people: near Miami: Turkey Point and St. Lucie, near Atlanta: Vogtle and Hatch, along the northeast corridor: Three Mile Island (where one reactor melted down but the other continues to operate to this day), North Anna, Surry, Calvert Cliffs, Salem, Limerick, Peach Bottom, Susquehanna, Indian Point, and Millstone, near Chicago: LaSalle, Braidwood, Byron, Dresden, and Quad Cities, near Dallas: Comanche Peak, near San Francisco: Diablo Canyon, and near Phoenix: Palo Verde (a triple-reactor plant). Note that many of the sites listed have two reactors, although some have a single reactor.

Even if a settlement could be reached with each decedent’s estate for $1 million each, a million victims would still require a payout of $1 trillion. It can be seen then, why no nuclear power plants would be built with that amount of potential liability. As the preface to the Price-Anderson Act states, [Congress] “recognized that the risk of extraordinary liability that companies would incur if a nuclear accident were to happen would render insurance costs prohibitively high, and thwart the development of nuclear energy.”

Insurance for Liability

The Act requires each nuclear power plant to carry $300 million in liability insurance for each reactor.

“First, each licensed reactor must carry the maximum amount of insurance commercially available to pay any damages from a severe nuclear accident. That amount is currently $300 million.” -- the Act

Excess Damages beyond Insurance Amount

Excess damages, beyond $300 million, are covered up to approximately $10 billion by requiring all covered commercial reactors to pay up to approximately $100 million each; with approximately 100 US reactors, the total reaches $10 billion. The Act states:

“Any damages exceeding that amount are to be assessed equally against all covered commercial reactors, up to $95.8 million per reactor (most recently adjusted for inflation by NRC in August 2004).Those assessments would be paid at an annual rate of no more than $10 million per reactor. According to the NRC, all of the nation’s 103 commercial reactors are currently covered by the Price-Anderson retrospective premium requirement.

Funding for public compensation following a major nuclear incident would therefore include the $300 million in insurance coverage carried by the reactor that suffered the incident, plus the$95.8 million in retrospective premiums from each of the 103 currently covered reactors, totaling $10.2 billion. On top of those payments, a 5 percent surcharge may also be imposed, raising the total per-reactor retrospective premium to $100.6 million and the total potential compensation for each incident to about $10.7 billion.

Under Price-Anderson, the nuclear industry’s liability for an incident is capped at that amount, which varies depending on the number of covered reactors, amount of available insurance, and an inflation adjustment that is made every 5 years.” -- The Act

Excess Damages Beyond $10 Billion

For a large event with damages beyond $10 billion, the US government assumes the amount above $10 billion.

“The Act provides that in the event that actual damages from an accident are in excess of this amount, [$10.7 billion] Congress will ‘‘thoroughly review’’ the incident and take such action as is necessary to provide ‘‘full and prompt compensation to the public.’’ " -- Price-Anderson Act

Conclusion

The very existence of nuclear power plants depends on Congress renewing the Price-Anderson Act as it periodically expires. Without the government assuming the excess liability, nuclear plants would shut down immediately. No utility company has resources of $1 trillion, and certainly cannot buy insurance in that amount. The Act is the single largest subsidy for nuclear power, greater than loan guarantees ($8 billion roughly for each reactor), the carbon tax on coal plants that benefits nuclear plants due to their “carbon free” power production, no lawsuits being permitted during construction (a limited exception applies), increased electricity prices during nuclear plant construction to avoid paying interest on loans, and operating safety regulations routinely relaxed to allow nuclear plants to continue operating without meeting safety standards.

It is a struggle to think of any other industry that enjoys such a government benefit: what other industry would shut down tomorrow if its uninsurable risks were not borne by the government? The risks are so great, and the cost of insurance is just too high for the nuclear power industry to compete, or even exist, without the comfortable cushion of the Price-Anderson Act.

Indeed, that raises the question: are nuclear plant operators too comfortable, too complacent, due to the certain knowledge that any catastrophic event will be paid first by $300 million in insurance, and then cost them only $100 million each? Any amount over and beyond those limits will be paid for by the US Government. Perhaps nuclear plants would pay more attention to safety, and operating procedures if they knew the plant would shut down or be sold at auction to pay the damages. Perhaps the nuclear industry would be much more self-policing if the limits were $20 billion for each reactor, not the $100 million that exists today. (see link to part 16 for a description of near misses in US reactors over the previous four years)

[UPDATE 7/3/2014: India has its own problems with apportioning civil liability from a nuclear disaster. A Civil Liability for Nuclear Damages Law is nearing completion, but it places risk and costs on equipment suppliers for latent or patent defects, plus inferior service (e.g. installation work). Understandably, nuclear reactor suppliers are not happy. see link. -- end update ]

Previous Articles

The Truth About Nuclear Power emphasizes the economic and safety aspects by showing that (one) modern nuclear power plants are uneconomic to operate compared to natural gas and wind energy, (two) they produce preposterous pricing if they are the sole power source for a grid, (three) they cost far too much to construct, (four) use far more water for cooling, 4 times as much, than better alternatives, (five) nuclear fuel makes them difficult to shut down and requires very costly safeguards, (six) they are built to huge scale of 1,000 to 1,600 MWe or greater to attempt to reduce costs via economy of scale, (seven) an all-nuclear grid will lose customers to self-generation, (eight) smaller and modular nuclear plants have no benefits due to reverse economy of scale, (nine) large-scale plants have very long construction schedules even without lawsuits that delay construction, (ten) nuclear plants do not reach 50 or 60 years life because they require costly upgrades after 20 to 30 years that do not always perform as designed, (eleven) France has 85 percent of its electricity produced via nuclear power but it is subsidized, is still almost twice as expensive as prices in the US, and is only viable due to exporting power at night rather than throttling back the plants during low demand, (twelve) nuclear plants cannot provide cheap power on small islands, (thirteen) US nuclear plants are heavily subsidized but still cannot compete, (fourteen), projects are cancelled due to unfavorable economics, reactor vendors are desperate for sales, nuclear advocates tout low operating costs and ignore capital costs, nuclear utilities never ask for a rate decrease when building a new nuclear plant, and high nuclear costs are buried in a large customer base, (fifteen) safety regulations are routinely relaxed to allow the plants to continue operating without spending the funds to bring them into compliance, (sixteen) many, many near-misses occur each year in nuclear power, approximately one every 3 weeks, (seventeen) safety issues with short term, and long-term, storage of spent fuel, (eighteen) safety hazards of spent fuel reprocessing, (nineteen) health effects on people and other living things, (twenty) nuclear disaster at Chernobyl, (twenty-one) nuclear meltdown at Three Mile Island, (twenty-two) nuclear meltdowns at Fukushima, (twenty-three) near-disaster at San Onofre, (twenty-four) the looming disaster at St. Lucie, (twenty-five) the inherently unsafe characteristics of nuclear power plants required government shielding from liability, or subsidy, for the costs of a nuclear accident via the Price-Anderson Act, and (twenty-six) the serious public impacts of large-scale population evacuation and relocation after a major incident, or "extraordinary nuclear occurrence" in the language used by the Price-Anderson Act. Additional articles will include (twenty-seven) the future of nuclear fusion, (twenty-eight) future of thorium reactors, (twenty-nine) future of high-temperature gas nuclear reactors, and (thirty), a concluding chapter with a world-wide economic analysis of nuclear reactors and why countries build them. Links to each article in TANP series are included at the end of this article.

Additional articles will be linked as they are published.

Part One – Nuclear Power Plants Cannot Compete

Part Two – Preposterous Power Pricing if Nuclear Power Proponents Prevail

Part Three – Nuclear Power Plants Cost Far Too Much to Construct

Part Four – Nuclear Power Plants Use Far More Fresh Water

Part Five – Cannot Simply Turn Off a Nuclear Power Plant

Part Six – Nuclear Plants are Huge to Reduce Costs

Part Seven -- All Nuclear Grid Will Sell Less Power

Part Eight – No Benefits from Smaller Modular Nuclear Plants

Part Nine -- Nuclear Plants Require Long Construction Schedules

Part Ten -- Nuclear Plants Require Costly Upgrades After 20 to 30 Years

Part Eleven - Following France in Nuclear Is Not The Way To Go