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Hydroelectric Relicensing and Nuclear Energy
Subcommittee on Energy and Air Quality
Dr. E. Womack
Summary This testimony is on behalf of the Energy Contractors Price-Anderson Group in support of extension of the Price-Anderson Act before its expiration on August 1, 2002. Failure to extend Price-Anderson would result in substantially less protection for the public. Without Price-Anderson protection, most private contractors and suppliers could not prudently take the financial risks associated with assisting DOE to perform its vital cleanup, national defense, and other missions. The Price-Anderson indemnity system should be continued in substantially its present form, as recommended in the March 1999 DOE Report to Congress. This year, several comprehensive energy bills containing nearly identical Price-Anderson extension provisions have been introduced in the House of Representatives (H.R. 1679) and the Senate (S. 388, S. 472 and S. 597). We support extension of the DOE contractor provisions of these bills whose simplicity, similarity and bipartisan nature reflect a consensus on a simple extension of Price-Anderson. We further note that the President's National Energy Policy Report also supports extension of the Act. Testimony Mr. Chairman and Members of the Subcommittee, my name is Allen Womack and I am President of BWX Technologies, Inc. I am here this morning representing fellow Department of Energy contractors through the Energy Contrac-tors Price-Anderson Group.- 1 I am accompanied by Omer F. Brown of Harmon, Wilmot & Brown, L.L.P., counsel to the Group. We appreci-ate this opportu-nity to testify before your Subcom-mit-tee and for the fact that you have scheduled this hearing about extension of the Price-Anderson Act ("Price-Anderson"). Price-Anderson Act authority of the Department of Energy provides indemnity protection for nuclear risks associated with DOE contracts and is to expire on August 1, 2002. We are here today to ask for its renewal. We support extension, sooner rather than later, to ensure there is not a break in this vital authority next year. Protection of the public has been the principal purpose of Price-Anderson. Failure to extend Price-Anderson would result in substantially less protection for the public in the event of a nuclear incident at a DOE site or in transportation. Moreover it would greatly inhibit the Department of Energy in attracting and hiring the kinds of contractors needed to tackle some of the tough work that lies before them. For almost 45 years, through Price-Anderson, the Congress has been able to ensure the availabili-ty of adequate funds to the public (now about $9.4 billion) in the unlikely event of a catas-trophic nuclear accident. In addition, other benefits to the public include such provisions as emergency assis-tance payments, consolida-tion and prioritization of claims in one court, channeling of liability permitting a more unified and efficient approach to processing and settlement of claims, and waivers of certain legal defenses in the event of a large accident ("extraordinary nuclear occurrence"). The 1988 Price-Anderson Amendments Act required DOE and the Nuclear Regulatory Commission (NRC) to submit to Congress reports containing their recommendations for continuation, repeal or modification of the Price-Anderson Act. The DOE Report was submitted to Congress in March 1999 recommending an extension. NRC's Report, which also strongly recommended an extension (with relatively minor changes), was filed in October 1998. The 1999 DOE Price-Anderson Report makes five basic recommen-da-tions, which we support: (1) DOE indemnification of its contractors for nuclear risks should be continued without substantial change, because it is "essential to DOE's ability to fulfill its statutory mission." The Report further makes the point that DOE indemnification guarantees the availability of funds to ensure prompt and equitable compensation for the public, provides for consoli-dating claims in one federal court, and minimizes protracted litigation. DOE goes on to state that Price-Anderson indemni-fication is cost-effective, pointing out that DOE payments to date "have not been significant." (2) The amount of DOE indemnification (about $9.4 billion) should not be decreased. (3) DOE indemnification should continue to provide broad and mandatory coverage of activities conducted under contract for DOE. (4) DOE should continue to have authority to impose civil penalties on for-profit contractors, subcontractors and suppliers for nuclear-safety violations. (5) The 1997 International Atomic Energy Agency Convention on Supplemen-tary Compensation for Nuclear Damage (CSC) should be ratified, and conforming amend-ments to the Price-Anderson Act should be adopted. (Technically, U.S. ratification of the CSC would have little impact on the portions of the Price-Anderson Act applicable to indemnification of DOE contractors. The CSC is of more relevance to commercial nuclear activities, which would enjoy substantial benefits from its ratification by the United States and other countries. For example, the CSC would provide a portion of the funds for a power plant accident in the United States through international contributions.) This year, we have seen several comprehensive energy bills containing nearly identical Price-Anderson extension provisions introduced in the House of Representatives (H.R. 1679) and the Senate (S.388, S.472, and S.597). These are based on last year's bipartisan Senate bill, S.2162 (106th Congress), introduced by Senator Frank Murkowski (R-Alaska) and Senator Jeff Bingaman (D-New Mexico). We support extension of the DOE contractor provisions of these bills whose simplicity, similari-ty and bipartisan nature reflect a consensus on a simple extension of Price-Anderson. We further note that the President's National Energy Policy Report also supports extension of the Price Anderson Act. Without Price-Anderson protection, most private contractors and suppliers could not prudently take the financial risks associated with assisting DOE to perform its vital cleanup, national defense, and other missions. Price-Anderson indemnifica-tion is not a "subsidy" to DOE contractors and suppli-ers. It simply is the only viable substitute for the commercial insurance that prudent contrac-tors doing work for the Federal Government would purchase, if they could, to protect thems-elves, and the public. Attached to the 1999 DOE Report to Congress is a letter from American Nuclear Insurers (ANI) indicating that commercial insurers are not in a position to guarantee that any nuclear liability insurance would be written for DOE facili-ties. It further states that even if it were, it could not replace the $9.4 billion of indemnity granted under the Price-Anderson Act, since ANI has been limited to nuclear liability limits of only $200 million. In any case, ANI observed that it would be much easier for it to write nuclear liability insurance for new DOE facilities than for existing ones. The insurers said, for facilities which have, in some cases, operated for decades, ANI "would have obvious concerns about picking up liability for old exposures, which may well preclude insurability." Even if some limited private insurance were available for some DOE nuclear activities, it would not protect against all nuclear hazards, and would increase Government costs substantially, as the DOE Report to Congress observes. Few nuclear claims have ever been paid by the Government, so DOE has concluded it is cost-effective for the Government to continue to self-insure the nuclear risks associated with its own activities. With regard to safety, Price-Anderson indemnification does not provide a disincentive to safety any more than the purchase of liability insurance by an indivi-dual or a corporation provides a disincentive to safe-ty. There are existing criminal laws to punish egregious beha-vior. Furthermore, in the 1988 Amendments, Congress added enhanced criminal and civil penalty provisions to further encourage DOE "contractor accountability." These provisions, which now are being rigorously enforced, were added to enable DOE to impose civil fines of up to $110,000 per day and increased criminal penalties for violations of DOE nuclear safety rules. DOE also can hold contractors accountable by other actions, such as award-fee reductions, stop-work orders, contract modifica-tion, and contract revocation. There would be strong reluctance on the part of existing and potential contrac-tors to do nuclear business with the Department if autho-rity to enter into Price-Anderson indemnity agreements were discontin-ued. The strong reluctance, if not refusal to do business, would apply especially to contractors whose nuclear activities are only a small percent-age of their overall busines-ses. This would lessen competi-tion and otherwise increase costs to the Government. The strong resistance also would extend to subcon-tractors and equipment suppliers, including many small businesses through-out the country, who might be held liable for an accident but not have the financial resources to cover that liability or the legal defense costs associated with such litiga-tion. Reducing the number of potential contractors and suppliers to DOE would obviously have an adverse impact on their costs. Of even greater concern would be the potential adverse impact upon the overall quality and safety levels of DOE contract work since the most qualified and most safety conscious contractors and sup-pliers would most probably be the first to abandon DOE work because of inade-quate liability protec-tion. Con-tractor coverage prior to Price-Anderson often was incon-sistent, subject to individual contract idiosyncrasies, inapplicable to subcon-tractors, and subject to the availability of appropriated funds. Subsection 170d was carefully designed to correct many of these deficiencies and to provide a uniform system of public protection. Without Price-Anderson, DOE would be faced with performing its missions with small, lightly capitalized contractors or Federal employees. In those situations, the public would not be as well protected. Contractors without assets could not pay claims. Use of Federal employees would mean that the Federal Tort Claims Act would apply, which would eliminate jury trials and the possibility of class actions, and require the submission of individual administrative claims. The Price-Anderson system specifically was developed to provide assurance that significant sums of money would be available over an extended period of years to make prompt payment to victims in the remote case of a nuclear accident. The only fundamen-tal change since the original adoption of Price-Anderson in 1957, has been the revolutionary change in the American tort system, most of which has occurred over the last twenty-year period. This change has increased greatly the unpredictability of the probable dollar damages resulting from any major accident, whether it is nuclear or non-nuclear in nature. This makes a system such as Price-Anderson only more essential for the period beyond 2002. Unlike NRC-licensed nuclear power plants that are "grandfathe-red" under Price-Anderson (i.e., their coverage lasts for the duration of their license), DOE sites and facilities are not. Most DOE contracts expire in five years or less. Indemnity in DOE contracts signed or extended prior to the Act's expiration will remain in effect for the duration of the contract, but contracts entered into or extended after that date will have no indemnity. There are major DOE contracts that will be coming up for renewal as early as September 2002. Therefore, it is critical to the public to have Congress renew the Act before its 2002 expira-tion. In conclusion, the Price-Anderson indemnity system should be continued in substantially its present form. It should also be clarified that the Act does apply to the new National Nuclear Security Adminis-tration. After nearly forty-five years of Price-Anderson Act indemnifi-cation, private industry has assumed, as Congress intended, a larger role in assisting the Federal Government in carrying out its own nuclear activities without any significant damage or injury to the public. In other words, Price-Anderson contractor indemni-fication is a system that has worked well. It should promptly be extended again. Thank you again for this opportunity to testify before your Subcommittee.
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