Price-Anderson Act (1957)
Price-Anderson Act (1957)
The Price-Anderson Act, passed in 1957, limits the liability of civilian producers of nuclear power in the case of a catastrophic nuclear accident. In the case of such an accident, damages would be recovered from two sources: private insurance covering each plant and a common fund created by contributions from each nuclear power plant. This common fund would cover the difference in damages between the private insurance and the liability limit.
The act, named for its chief sponsors, Senator Clinton Anderson (NM) and Representative Melvin Price (IL), was passed to encourage private investment in nuclear power production. It was part of a general strategy to encourage and stimulate nuclear power production in the private sector. Without such liability limitations, the risk of nuclear power for utilities and manufacturers would be too great. Private insurance companies were not willing to underwrite the risks due to the uncertainty involved and the potential magnitude of damages.
The law requires the private operators to carry the maximum amount of private insurance available ($65 million in the late 1950s). The upper limit for liability was set at $560 million per accident for personal damages, with the common fund covering the difference (between $65 million and $560 million). Once the liability limit is reached this law protects the operator from further financial liability. In addition to setting liability limits, the law establishes a common fund for victims to draw on if the utility did not have the ability to pay damages up to the liability limit. In return for this limited liability, utilities had to accept sole responsibility for accidents; equipment manufacturers would not be liable for any damages.
The Price-Anderson Act serves as a subsidy to the nuclear power industry. If it were not for this liability limitation, it is unlikely that any private firms would have become involved in the production of nuclear power. As a further incentive to private industry, the federal government set the liability limits at a very low level. This was done despite a 1957 government estimate of the damages due to a catastrophic accident: 3,000 immediate deaths and $7 billion in property damage.
In 1977, the Carolina Environmental Study Group filed a lawsuit, claiming that the Price-Anderson Act was unconstitutional because it was a taking of private property without just compensation, a violation of the Fifth Amendment. If a nuclear accident did occur and compensation was limited, the argument went, a taking of private property had occurred and compensation was limited in advance. A federal district court ruled for the environmental group: the act was unconstitutional. In 1978, however, the Supreme Court overturned this ruling, maintaining the constitutionality of the Price-Anderson Act.
The 1988 amendments to the act increased the liability limit per accident from $720 million to $7.2 billion, with the utilities continuing to contribute to a common fund to help pay for any damages if a major accident did occur. The private insurance coverage was set at $160 million per plant, with the common fund to make up the over $7 billion difference. These liability limits will last through 2003. Despite this tremendous increase in liability limits, the nuclear power industry was pleased to retain any liability limit in the face of significant opposition. The amendments also protect U.S. Department of Energy nuclear contractors from damage claims and limit the liability for nuclear waste accidents to $7 billion.
[Christopher McGrory Klyza ]
Kruschke, E. R., and B. M. Jackson. Nuclear Energy Policy. New York: ABC-Clio, 1990.
Mazuzan, G. T., and J. S. Walker. Controlling the Atom: The Beginnings of Nuclear Regulation 1946–1962. Berkeley: University of California Press, 1985.