Is Nuclear “Safe’? Let Price-Anderson Expire in 2025

“Nothing is so permanent as a temporary government program.”

– Milton Friedman

It was supposed to be a ten year window to allow commercial nuclear power to prove its economy and safety. But the Nuclear Industries Indemnity Act of 1957 (Price-Anderson Act), capping damage claims and establishing a fund “to protect the public and to encourage the development of the atomic energy industry,” is still with us today, some two-thirds of a century later.

The 1957 law’s limit of $60 million per plant (about 10x in today’s dollars) was supplemented by an up-to-$500 million indemnification guarantee per accident. [1] These provisions, vetted among the parties, was just enough to remove a major barrier to the commercialization of nuclear power for electric utilities and for Westinghouse, GE, and others to build. Rate base incentives for utilities was also crucial for the new energy industry, one providing competition to coal and hydro for electrical generation.

No payouts resulted in the ten-year period, but the private sector was not ready to stand on its own. The involved parties lobbied for $100 million per accident, which became $74 million in a 10-year extension in 1966, a small increase in real terms. This first extension would not be the last….

Enough time to stand on its own? Nope, the third extension came in 1975 (for 12 years), the fourth in 1988 (15 years), the fifth in 2002, sixth in 2003 (14 years), and the seventh in 2005 (20 years). 

Surely, 67 years after the initial “temporary” law, the nuclear industry can let Price-Anderson expire on its own terms in 2025 and let the private insurance market sort things out. Commercial nuclear power is safe, right? Claims under Price-Anderson have been small or none, right? The collected $13 billion can ensure a smooth transition to the private market, right?

Wrong! The nuclear industry will have none of it. And they want 20 years, not 10 as is the current chatter on the Hill. So what gives …? (As of this writing, an extension was considered last year but tabled.)

Eighth Extension?

The case for yet another extension comes from the Nuclear Institute itself. States Deputy General Council Jerry Bonanno:

Development and deployment of advanced nuclear technologies, along with continued operation of the existing nuclear fleet, are vital to meeting U.S. climate and energy security goals. To meet those goals, both the federal government and private sector are making significant investments in advanced nuclear technology.   

For such investments to continue and grow, there needs to be certainty with respect to how legal liability will be handled in the unlikely event of a nuclear incident. For more than 65 years, the Price-Anderson Act has provided that certainty. 

Price-Anderson has functioned well to protect the public by ensuring adequate funds are available to pay valid public liability claims, while also encouraging private sector investment in nuclear power. The Act is unique in the amount of private funds it makes available to protect the public. In fact, the sum of non-governmental funds made available pursuant to Price-Anderson in the U.S. exceeds the sum of non-governmental funds provided by the next ten highest liability frameworks in the world combined.    

But a key provision of the Act—the authorization for the Nuclear Regulatory Commission and Department of Energy to indemnify licensees and contractors—will expire in 2025. This authority has been extended multiple times, most recently for 20 years through the Energy Policy Act of 2005. 

The promise is that nuclear is safe and self-sustaining…. The happy talk from NI’s Bonanno continues:

In a December 2021 report to Congress, the Nuclear Regulatory Commission (NRC) concluded that Price-Anderson has “assured that significant funds are available to the public to satisfy claims if a nuclear event were to occur, enabled private sector participation in atomic energy, and operated for over 60 years with minimal cost to the taxpayer.” In its report, the Department of Energy (DOE) concluded that continuation of the Act is “in the best interests of DOE, its contractors, its subcontractors and suppliers, and the public.”

Despite these conclusions, the NRC report recommended only a 10-year extension—half that of the 20-year extension provided in 2005. In support of this shorter-term extension, the report cited the need to allow Congress to consider trends in advanced reactor development, as well as potential increases in plant shutdowns and decommissioning. But neither of these considerations warrant limiting Price-Anderson’s extension to a decade. To the contrary, short-term extension would create uncertainty at exactly the wrong time.

Then comes the Net Zero pitch from Bonanno (and call for open-ended government subsidies):

Both the private sector and U.S. government are making substantial investments in new nuclear technologies to help meet net-zero emissions targets and energy security needs over the next several decades. Successfully bringing these technologies to market requires a stable liability framework, which would be provided by a long-term or permanent extension of the Act.

Specifically, investors and advanced reactor developers are already taking on uncertainty in a variety of areas (construction, supply chain, regulatory, etc.) to make new plant deployment a reality. Maintaining the Price-Anderson indemnification authority throughout the period that advanced reactor development and licensing is likely to be underway avoids introducing additional uncertainty related to liability, which could stall efforts to deploy these vital technologies.  

Federal subsidies have come, he notes, to slow down decommissioning:

With respect to decommissioning, the trend of reactor shutdowns noted in NRC’s 2021 report has not continued, and additional shutdowns are unlikely due to the 2022 Inflation Reduction Act’s production tax credit for operating nuclear plants and the Civil Nuclear Credit Program established by the bipartisan Infrastructure Investment and Jobs Act in late 2021.

Also, as acknowledged in NRC’s report, the Price-Anderson system would continue to make a significant amount of non-governmental funding available, even if plant shutdowns continued.

More subsidies … Bonanno of the Nuclear Institute continues:

Fortunately, the ADVANCE Act introduced by Senators Shelley Moore Capito, Tom Carper and Sheldon Whitehouse would provide a 20-year extension of the indemnification provisions of the Price-Anderson Act. The proposed 20-year extension matches the duration provided in the Energy Policy Act of 2005.

Given the pressing need for advanced reactor technologies to meet the climate and energy security challenges facing the nation, a longer-term extension (i.e., 40-50 years) or permanent reauthorization would send an even stronger signal to investors and developers that the foundational liability provisions of the Price-Anderson Act will remain intact and would better reflect the urgent need to bring these crucial technologies to fruition.   

Bonanno concludes:

The Price-Anderson Act has been meeting its twin aims of protecting the public and encouraging the development of commercial nuclear power for more than 65 years, with minimal costs to the federal government and the U.S. taxpayer. The next extension of the Act should promote the continued achievement of those twin aims over the long term. 

Let Price Anderson Expire (BAS Argument)

The anti-nuclear group Bulletin of Atomic Scientists wants an end to Price-Anderson, not a back room unpublicized extension:

On the night of July 27 [2023], the US Senate passed the National Defense Authorization Act for fiscal year 2024. The Senate-approved bill included a 20-year extension of the Price-Anderson Nuclear Industries Indemnity Act, which provides that if there are any offsite lives and property lost in a severe reactor accident, nuclear industry manufacturers and builders cannot be held liable. The extension of the act also includes another controversial provision—the adequacy of funds provided by the act for compensating victims of a nuclear accident.

The approval last month of this extension came without any public hearings and was introduced in Congress in a rather troubling manner. The extension’s backers, knowing it would face rough sledding in an open hearing, first attached it to the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act of 2023, which was then placed on the Senate legislative calendar on July 10 and added to the “must-pass” National Defense Authorization Act….

The potential problem of a government bailout was explained by BAS:

The act currently provides about $13 billion for post-accident public compensation, with the funds coming over time from a self-insurance scheme funded by the owners of nuclear power plants. But the estimated cost of the 2011 Fukushima accident—several hundred billion dollars—dwarfs the Price-Anderson amount.

Yet, there is more. If an accident was to lead to widespread and long-term nuclear plant shutdowns, as occurred in Japan, it isn’t clear the owners would be able to meet their financial obligations. What’s clear is that after a severe nuclear accident, the issue of compensation would land in the lap of Congress.

Final Comment

A free market, classical liberal position is fair field, no favor. Government policy should not pick winners and losers. The U.S. nuclear industry should prepare to transition away from mother-may-I to private markets to assess its viability under insurable safety protocols. If improvements are required by self-interested private parties (insurers), then those need to be made. If a particular reactor is too expensive with required upgrades, then a decommissioning plan may be necessary. Just let the market decide.

—————

[1] An annual indemnification fee was assigned to owners, $30 per megawatt (1957 fee). Private insurers were exempted from antitrust to pool their resources for coverage. With protection estimated at one-fourteenth of the potential total cost of a nuclear plant accident, the taxpayer was in play, and tort risk was otherwise placed on potential victims. An indication of this were “nuclear exclusion” clauses in homeowner insurance policies from radiation damage.

The post Is Nuclear “Safe’? Let Price-Anderson Expire in 2025 appeared first on Master Resource.