Up & Atom


On December 17, the NRC published a report to Congress on the continuing need for and any potential modifications to the Price-Anderson Act (PAA). The NRC was required to submit the report, “Public Liability Insurance and Indemnity Requirements for an Evolving Commercial Nuclear Industry,” by the end of 2021.

The NRC recommends extending the PAA for only 10 years, rather than the typical 20 years. This recommendation is driven primarily by the beginning of the deployment of advanced reactor designs. The NRC also does not recommend repealing or modifying any specific provisions, though it does make a few minor recommendations relating to the treatment of nonprofit operators and international coverage.

The PAA was originally enacted in 1957 as part of the development of the commercial nuclear power industry. The PAA has been extended on several occasions, most recently in the Energy Policy Act of 2005 when Congress extended the PAA for an additional 20 years through 2025, while modifying certain elements of the framework. It also required the NRC to submit a report by December 31, 2021 “concerning the need for continuation or modification of [the PAA]” and “include recommendations as to the repeal or modification of any of the provisions of [the PAA].” The US Department of Energy is also obligated to submit a report by the end of 2021, which it began with its July request for public comment on potential changes to the parts of the PAA applicable to and administered by the DOE.

As background and as relevant to the nuclear power industry, the PAA establishes a comprehensive statutory scheme that is designed to meet two main policy objectives. The first is protecting the public against losses from personal injury or property damage arising out of nuclear incidents involving the design, construction, operation, or maintenance of nuclear facilities, or the possession, handling, or use of nuclear materials. The second objective is encouraging the development of the nuclear industry by imposing a statutory limitation on the total commercial liability arising out of a nuclear incident and indemnifying any person or entity who might otherwise be liable.

As administered by the NRC, the PAA generally covers accidents or malicious attacks occurring during (1) the transportation of nuclear fuel or materials to a covered site, (2) the storage of nuclear fuel both pre- and post-irradiation, (3) the operation of the reactor and any radioactive emissions or effluents, and (4) transportation of nuclear fuel or materials from a covered site for disposal. To do so, the PAA and NRC’s implementing regulations establishes a two-layered framework in which power reactor licensees must participate to ensure sufficient funds are available to cover potential third-party liability. The two layers are (1) a “primary” layer that consists of a site-specific insurance policy, and (2) participation in a “secondary” layer, which provides for retrospective pro rata premium assessments from other reactor licensees to cover the public liability for claims and costs in excess of the primary layer. The PAA also serves as the mechanism to meet the US government’s obligations under the Convention on Supplemental Compensation. Last, the PAA sets the procedural requirements to assert a claim for compensation based on harm caused by a nuclear incident.

The NRC’s report contains a strong endorsement of the PAA’s success in meeting its primary statutory objectives goals:

Created to meet the two objectives stated in the Price-Anderson Act, the structured payment system, currently providing billions of dollars in liability coverage and consisting of the two layers of financial protection as discussed throughout this report, has operated for over 60 years with effective cost, assured that significant funds are available to the public to satisfy claims if a nuclear event were to occur, and enabled private sector participation in the nuclear power industry.

The report notes that the cost to the public of this support to the reactor community has been negligible because the amount of the primary layer of third-party liability coverage that reactor licensees must acquire effectively has eliminated the US government’s indemnity obligations for large, operating commercial reactors. It also notes that the nuclear power industry has raised the amount of the primary layer over time.

Among other issues, the report considered whether the amount of financial protection provided by the PAA is adequate. Although it noted that the total of $1.044 billion in total costs to address the 1979 accident at Three Mile Island were less than the primary layer under PAA, the report evaluated whether the amount of the primary layer should be increased given that the damages resulting from the Fukushima Dai-ichi accident in 2011 have exceeded $200 billion to date and are ongoing. Because of the safety record of the US nuclear fleet, including NRC-imposed safety-enhancement measures that help mitigate the potential consequences of an event, there has been little or no experience in the United States with major offsite damages. The report instead looked to information from probabilistic risk assessments (PRAs) contained in nuclear power plant license renewal applications to identify “the most extreme projected nuclear accident in terms of offsite economic loss” and determine whether an increase in the PAA amount is necessary. The estimates ranged from $6.05 billion to $56.8 billion, suggesting that Congress may be called upon under the PAA to provide additional compensation that exceeds both the primary and secondary layer. However, this is already contemplated in the PAA as it exists today, and so the NRC concludes that no change would be necessary.

Nonetheless, as required by the Energy Policy Act of 2005, the report recommends “modest” changes to the PAA to clarify the prohibition on punitive damages and the coverage of legal defense costs for nonprofit licensees. It also recommends that Congress take into account the PAA’s role in meeting US obligations under the Convention of Supplementary Compensation for Nuclear Damage before undertaking any modifications to the act.

Looking ahead to the next generation of nuclear reactor designs, the report concludes that, “based on current knowledge and anticipated development of these new nuclear technologies, the Price-Anderson Act adequately addresses the new nuclear technologies or provides the NRC discretion to address the insurance and indemnity requirements for these new reactor technologies.” Thus, the NRC expects no changes to the PAA to be necessary to address new reactor technologies. However, the NRC expects that the deployment of these advanced technologies over the next 10 years will inform whether any changes are necessary to the PAA. Therefore, the NRC only recommends that the PAA be extended by 10 years, giving Congress the ability to evaluate a course correction if necessary.

Morgan Lewis routinely counsels clients on the application of the PAA, both in terms of providing adequate protection for licensed activities for and addressing claims that result from a nuclear incident. We will continue to follow any future developments related to the PAA.