Statement of Dan Guttman, Jan. 23, 2002

In the interim since the 1988 Price-Anderson Act amendments, Federal court decisions construing the law, electric utility industry restructuring, and inquiries and enactments treating revelations of Cold War era radiation exposures to citizens, soldiers, and nuclear weapons workers have highlighted issues which merit attention in current Congressional consideration of the Price-Anderson Act. This testimony will seek to identify some of these questions, which, of course, are now framed by the events of September 11, 2001.

Courts have agreed that the 1988 Price Anderson Act Amendments fundamentally restructured the law by: (1) creating a federal cause of action (Apublic liability@) for claims related to nuclear incidents; where such claim exists, state law based claims on the facts are, with limited exception, precluded; ^[2] (2) providing that the legal principles, or rules of decision, for determining public liability are rooted in state law. However, in the context of this agreement, and with further developments since 1988 in mind, issues that warrant current attention include:

(1) What conduct will trigger, and require, Price Anderson Act jurisdiction?

Court decisions call into question: (a) whether the Act covers conduct that is intentional (as well as conduct that is accidental); (b) whether the Act requires that the defendant(s) be party to an indemnification agreement with the government; (c) whether the Act reaches into disputes regarding common commercial products; for example, watch dials.

Congress may wish to resolve conflicts or misunderstandings on the basis for, and scope of, Price-Anderson Act jurisdiction raised by court decisions.

(2) Are Acts of Terrorism Covered by the Act?

The Price Anderson Act (through the definition of Apublic liability@) excludes claims Aarising out of acts of war,@ raising obvious questions about the Act=s coverage of damage and injuries stemming from acts of terrorism.

Congress may wish to consider whether the Price-Anderson Act should be amended to expressly address terrorist acts. Does Congress intend to cover Aacts of terrorism?@ If so, is the current statutory wording clear enough to embrace this intent? If the intent is not to cover nuclear accidents caused by acts of terrorism, how will they be covered? Assuming the intent is to cover such acts, what kind of finding or declaration will be required to trigger the Act --- and who shall be empowered to make this finding?

(3) Will The Retrospective Unit Owner Funding Required by the Act be Available in the Deregulation Era?

The Act relies on nuclear unit owners to make Aretrospective@ (i.e., post-accident) contributions where the initial tier of insurance is exhausted by an accident. Under the Act=s present terms, and given the current number of operating units, this obligation may be in the range of $80-90 million per unit -- or over $ 9 billion dollars. The Aretrospective@ nuclear plant owner obligation, in short, is relied on to provide the lion=s share of funding for relief in a major accident.

Since 1988, the utility industry has undergone profound restructuring, hallmarked by nuclear unit divestitures, corporate restructuring, and the consolidation of nuclear unit ownership. This restructuring, particularly when coupled with the well-known financial difficulties of major California utilities and Enron, raises questions about the premises of retrospective funding. The basic concern was identified in the NRC=s 1998 Price-Anderson report to Congress, and it has just been underscored by a December, 2001 GAO report, which found that NRC reviews of license transfer applications did not provide adequate assurance that new corporate owners will have sums needed to provide for future decommissioning costs.

Indeed, the form restructuring is taking may render the public particularly vulnerable to funding shortfalls. As the GAO report observed, nuclear units are being consolidated under a limited number of Afleet@ owners. This consolidation may yield important benefits in safety, reliability, and accountability. On the other hand, consolidation of ownership raises the possibility that the owner may have to bear retrospective payment burden measured in the hundreds, not tens, of millions, and the further possibility that the ripple of effects of an any nuclear accident on any utility system may cause cross-the-board unit shutdowns that will leave the Afleet@ owner without revenue sources to pay retrospective commitments.

Congress should act to assure that industry restructuring does not come at the cost of the integrity of the Act=s funding, whether by assuring that NRC license transfers provide for the needed commitments, specifying particular commitments (e.g., prepayment or reserve for Price Anderson obligations as condition for license transfer), or providing for a review and further steps thereafter.

(4) Should There be Clear and Consistent Treatment of Willful or Reckless Misconduct?

Potential liability for willful or reckless misconduct appears to differ depending upon whether the actor is a NRC licensee, a Department of Defense contractor, or a Department of Energy contractor. In the first case, courts have indicated that actors may, to some degree that itself may benefit from clarification, be liable for punitive damages; in the second case, procurement rules provide for limitation on indemnification in the case of willful misconduct, in the third case there is no evident limitation on indemnification.

Congress may wish to consider whether there is reason for the differing set of rules and, if not, to provide for a clear and consistent set.

(5) When Should State Established Duty(ies) of Care be Preempted?

Courts agree that the 1988 Amendments create a federal cause of action that is rooted in state law rules of decision, but have generally held that the duty of care owed by Price-Anderson defendants is that stated in Federal dose exposure regulations, to the exclusion of state law duty of care standards.

Congress may wish to consider whether this exception to the Act=s reliance on state standards is warranted, particularly where the state standard may supplement, but not conflict with, the federal standard of care.

(6) What is the Burden of Proof to Show Causation of Injury Where Records are Inadequate?

In order to obtain Price-Anderson compensation, an individual may need to show not only that he or she was exposed to radiation hazard and that he is now sick, but also that the exposure caused the sickness. The difficulties of determining that harm to a specific individual (e.g., cancer) was caused by a specific exposure(s) to radiation are well understood, particularly when the injury manifests itself years after the exposure. We now know that when the government (and its contractors) exposed citizens, soldiers, and workers to radiation during the Cold War those responsible for exposures too often failed to keep the records, and provide for the monitoring, that might help determine cause and effect B and provide for compensation B at years remove. In light of this new understanding, Congress and the Executive branch have adopted the principle that where injured citizens show that they were likely exposed to potentially injurious amounts of radiation, the government (or contractors or further designees) bears the burden of providing exposure and monitoring data needed to defeat claims that the injury was caused by the exposure.

Congress may wish to consider the express incorporation into the Price-Anderson Act of the principle that those who expose citizens to radiation risk without providing for recordkeeping and monitoring bear the burden of showing that their conduct is not the cause of resulting injury.

(7) Is Justice Done by Current Statutes of Limitations Provisions Which May Preclude Recovery Where Injury is Latent for Years?

At least one court has indicated that adherence to the letter of the Price Anderson Act required it to do injustice by dismissing a case involving an alleged Anuclear incident@ because of the failure of the state statute of limitations to contemplate injury from radiation exposure -- i.e., injury that may be latent for many years before visible manifestation..

Congress may wish to revisit the workings of Price Anderson Act statutes of limitations where state law does not adequately contemplate the reality that some radiation injuries may be hidden for years before discovery.

1. Jurisdictional Requirements

1. Is an Indemnification Agreement a Prerequisite to the Triggering of Price-Anderson Jurisdiction?

Is an indemnification agreement a prerequisite for the triggering of Price-Anderson?

In Gilberg v. Stepan Co., 24 F. Supp 2d 325 (D. N.J. 1998) the court found that the existence of a Price-Anderson indemnity agreement with the government is key to the determination of whether a radiation release is covered by Price Anderson.

The case dealt with alleged contamination of the surrounding community from thorium tailings at a chemical plant that operated from 1918 to 1956. The court noted that the Atomic Energy Act authorized the NRC to license the production and possession of nuclear materials. Price Anderson did not mandate, as it does in regard to power plant licensees, that these further licensees be subject to assured pools of coverage. The Stepan court concluded that an Aoccurrence@, under the definition of Anuclear incident,@ Acan only be an event at the location of or the contract location as those terms are defined as an applicable indemnity agreement.@ In the absence of such agreement, the court found, Price Anderson does not apply.

The Court explained:

While it is true that any thorium or thorium tailings at the facility may have been the subject of AEC or NRC licenses for source and/or byproduct materials...licenses for these types of materials have never been subject to Price-Anderson=s financial protection provisions. Therefore, neither the AEC nor the NRC would have entered into an indemnification agreement covering activity conducted under such licenses. In the absence of an indemnification agreement, entered into under 42 U.S.C. Section 2210 and covering the activities which give rise to the liability alleged, there can be no Aoccurrence,@ that is no event at the site of Alicensed activity@ that would constitute a Anuclear incident.@ Without a nuclear incident, there is no claim for public liability, and without a claim for public liability there is no federal jurisdiction under Price-Anderson.[fns. Omitted]

Stepan=s conclusion was embraced in Heinrich v. Sweet, 62 F. Supp. 2d 282 (D.Mass. 1999), which involved claims related to human radiation experiments conducted by doctors and universities under Atomic Energy Commission contract.

Nothing in [the Supreme Court=s Silkwood decision] suggests that the absence of an indemnity agreement makes [the Act=s] jurisdictional provisions inapplicable. Furthermore, as quoted...the jurisdictional provisions of [the Act], as amended by the 1988 Amendments, appear broad enough to create a federal forum for any tort claim even remotely involving atomic energy production.

Gassie v. SMH Swiss Corp., 1998 U.S. Dist. Lexis 2003 (E.D. La. Feb. 17, 1998) was a class action claiming injury from the leak of tritium (a radioisotope used to produce luminescence) from Swatch watches. The defendant was an NRC licensee. The Court found that the claim was a public liability claim arising out of a nuclear incident B and, under Price Anderson, therefore subject to removal from state to Federal court and treatment under the Act:

Although the words Aany nuclear incident@ were employed by Congress to convey the broad scope of the jurisdictional grant, there is little support in the legislative history or in other legal precedent for the idea that a products liability case, such as the one Plaintiffs have filed in this one, to conclude that the leaking of tritium from Swatch Watches constitutes a nuclear incident in terms of the Price-Anderson Act. However, there is also little support to negate Defendants= argument that Plaintiffs= claims constitute a public liability action arising from a nuclear incident. In fact, the unambiguous words of the Price-Anderson Act indicate that Plaintiffs= claims do constitute a public liability action arising from a nuclear incident.

The court concluded that Price-Anderson would apply to tritium leaks from watches, unless Plaintiffs could establish (which the court found they did not) that the NRC permitted regulatory control of byproducts to be assumed by the State ( Louisiana in the case at hand).

II Post September 11: Are Acts of Terrorism Covered by the Act, or Are they Excluded as AActs of War@?

After September 11, there is obvious need to consider the applicability of Price-Anderson to nuclear incidents stemming from terrorist activity. It is not clear whether, and under what circumstances, the Act would cover damage and injury resulting from terrorist conduct.

The Act=s definition of Apublic liability@ excludes Aclaims arising out of an act of war.@ See 42 U.S.C. Section 2014(w)(ii). Thus, depending on the definition of AActs of War,@the Price-Anderson Act may include or exclude the consequences of terrorist activity.

Congress should consider whether it wishes to revisit the Aacts of war@ exclusion, to provide clarification of what is intended in light of recent events. For example:

Does Congress intend that the Aacts of war@ exclusion is also intended to exclude Aterrorist@ conduct? If so, does the Act currently make this clear? If Congress intends the Act to provide for terrorist accidents, does the current language make that clear? Where there is uncertainty about particular Aterrorist@ conduct, who (e.g., Congress and/or the Executive or the court) will be responsible for determining the scope of the exclusion, and by what means (e.g., Presidential directive, NRC review)? In the absence of clarification, the answers to such questions may fall by default to the courts, which would plainly benefit from Congressional guidance.

III. Is The Act=s Reliance on Retrospective Funding Reliable in Light of Utility Industry Restructuring?

Retrospective premium payments comprise the lion=s share of potential funding in the case of a severe accident. Given current industry deregulation, there is need to assure that these payments will be available if needed.

Price-Anderson creates a two-tier system to provide funding to the current liability limit of approximately $9.4 billion. Pre-paid private insurance set at $200 million is to be supplemented by retrospective deferred payments on each unit in the event of an accident requiring additional sums. The deferred payments are based on a formula where reactor owners each provide an equal amount per unit per accident to the limit of $9.4 billion. (For example, assuming 110 reactors are operating, a per unit payment of $83.9 million would yield $9.23 billion).

At the time of the 1988 Amendments, the landscape was still dominated by vertically integrated utilities with names that likely incorporated the name of the locality or region long served.

Since 1988, names and corporate structures have changed beyond ready recognition. Some vertically integrated utilities have divested themselves of nuclear units, others have sought to build fleets of units, and new entrants into the business have considered purchasing units. Moreover, as experiences in California and with Enron show, the once unthinkable prospect of the bankruptcy of a purveyor of electric Autility@service has now become quite thinkable.

In theory, the NRC will assure the continued adequacy of funding through reviews conducted in the transfer of unit licenses to new owners. In December 2001 the General Accounting Office (AGAO@) reported on the adequacy of NRC oversight of decommissioning funding in the restructuring environment.^[5]

In the interim since the 1988 Amendments, however, courts have generally found that federal standards govern to the exclusion of state standards -- without need for analysis of the potential for conflict between the two.

For example, in Roberts v. Florida Power & Light, 146 F. 3d 1305 (11^th Cir. 1998), the plaintiffB a former nuclear power plant worker suffering from terminal cancer B alleged, among other things, that Florida Power & Light (AFPL@):

unreasonably exposed him to more radiation than was necessary, that the company did not help him take precautionary steps, such as buying appropriate clothing, and that FPL did not warn him of the danger of working at the plant.

The plaintiff alleged that these failures were violations of duties owed to him under the common law of the state of Florida. FPL successfully sought to dismiss Mr. Roberts= suit on grounds that Mr. Roberts did not plead that the FPL plant had exceeded federally-determined radiation standards.

A related question is whether a plaintiff in a case where there is no extraordinary nuclear occurrence determination must show that his/her exposure exceeded the federal numerical dose limit,

In In Re: TMI, 67 F.3d 1103 (3d Cir. 1995), the court considered whether individual plaintiffs had to show that they were exposed in excess of the permissible level. Defendants argued that even where the defendant admittedly violated the permissible level, each plaintiff had to show that he/she was exposed in excess of the permissible level The court held that: Athe duty of care is measured by whether defendants released radiation in excess of Section 20.105 or 20.106, as measured by the boundary of the facility, not whether each plaintiff was exposed to those excessive radiation levels.@ The court added that A[o]f course, plaintiffs must still prove causation and damages before they may recover.@

In Roberts v. Florida Power & Light, however, as the court of appeals summarized, the district court found that:@[s]ince there was no extraordinary nuclear occurrence involved in this case, the district court concluded that under the Amendments Act, the plaintiffs must allege and prove that the defendant breached its duty of care by exposing Bertram Roberts to an amount of radiation in excess of federally defined permissible radiation dose standards.@ This holding was affirmed by the court of appeals: A[a]s plaintiffs have failed to allege that FPL breached its duty of care by exposing Bertram Roberts to an amount of radiation in excess of the permissible amount allowed by federal regulation, they have failed to state causes of action for negligence, strict liability or loss of consortium.@^[18]

^[1] The experience includes: (1) counsel to municipally and cooperatively owned electric systems in the purchase of nuclear power plant ownership shares and power supply, and related decommissioning costs;(2) special counsel to Senator David Pryor in oversight of Department of Energy contracting; (3) Executive Director, President Clinton=s Advisory Committee on Human Radiation Experiments; (4) Commissioner, U.S. Occupational Safety and Health Review Commission; (5) counsel, nuclear weapons workers union (OCAW, and its successor PACE) on matters including the environmental cleanup of the weapons complex, the privatization of the U.S. Enrichment Corporation, and the Energy Employees Occupational Illness Compensation Act; (6) adviser to Nye County, Nevada, on matters related to the potential Yucca Mountain repository; (7) adviser to the special delegation to the United States of the Chancellor of Austria regarding the Temelin nuclear power plant.

^[2] For example, the Court of Appeals for the Third Circuit stated in In Re TMI, 940 F. 2d 832 (3d Cir. 1991), cert denied, 112 S. Ct. 1262 (1992):

The Amendments Act creates a federal cause of action which did not exist prior to the Act, establishes federal jurisdiction for that cause of action, and channels all legal liability to the federal courts through that cause of action...Congress clearly intended to supplant all possible state causes of action when the factual prerequisite of the statute are [sic] met.

^[3] Stepan notes that the vast majority of litigated cases either dealt with indemnified facilities (e.g., power plants) or did not address the issue of whether indemnification was a requisite to Price-Anderson jurisdiction. Stepan addressed two prior cases, including Kerr-McGee Corp. v. Farley, 115 F. 3d 1498 (10^th Cir. 1997), cert denied 118 S. Ct. 880 (1998) discussed below, which appeared to find Price-Anderson jurisdiction commensurate with NRC licensing authority.

^[4] See also, Bohrmann v. Maine Yankee, 926 F. Supp. 211 (D. Maine) where the court found that an intentional tort theory, as provided by Maine law, could be pursued under Price-Anderson. (AThere is no reason apparent to this Court to believe that Congress intended that a defendant be insulated from liability for intentional acts solely by complying with the federal safety standards...); Caputo v. Boston Edison Co., 924 F. 2d 11 (1^st Cir. 1991)(worker injury claim for intentional infliction of emotional distress removed to federal court pursuant to Price Anderson Amendment Act of 1988, dismissed for lack of factual support).

^[5] ANRC=s Assurance of Decommissioning Funding During Utility Restructuring Could be Improved,@ GAO-02-48, December 2001.

^[6] The GAO elaborated, at page 21:

when plant owners requested that their operating licenses for eight plants be transferred to a contractor, NRC maintained the existing level of assurance by continuing to hold the plant owners responsible for collecting decommissioning funds. In addition, when NRC approved requests to transfer licenses related to the sale of 15 plants, decommissioning funding assurances were increased because the selling utilities prepaid all or most of the projected decommissioning costs, and either the sellers or the new owners provided additional financial guarantees for those projected costs that were not prepaid. However, when NRC approved requests to transfer licenses in which the new licensee intended to rely on periodic deposits into external sinking funds for decommissioning, it did not always obtain the same level of financial assurance...Among other things, NRC approved two requests to transfer ownership of 25 plants without verifying that the new owners would have guaranteed access to the decommissioning charges that their affiliated entities would collect.

^[7] AThe Price-Anderson Act: Crossing the Bridge to the Next Century a Report to Congress,@ Prepared by ICF Incorporated for the U.S.Nuclear Regulatory Commission. See Appendix A.

^[8] The report explained:

The 1979 NRC staff study determined that assessments at the $10 million level were manageable but that problems might arise at the $20 million, and higher, assessment levels. The 1983 Report to Congress, using financial data from 1981, demonstrated that assessments at the $50 million level per reactor could pose major problems for all four of the utilities and especially for the two with more than one reactor each. It also showed how utilities began to evidence financial distress at assessment levels ranging between $10 and $20 million. That finding supported the 1979 NRC staff study's findings that recommended limiting the maximum assessments to $10 million per year, because higher assessments could cause financial distress.Using the Melicher method to evaluate the four utilities, this analysis concludes that the maximum annual assessment that all four utilities could afford seems to range between $20 and $50 million. This is consistent with the previous analyses' findings concluding that the maximum assessment level utilities could afford was between $10 and $20 million, which equal $16 and $32 million, respectively, in 1996 dollars when adjusted for inflation. However, the current deregulatory environment, which may lead to restructuring within the nuclear power industry, may impact the ability of some nuclear power entities to handle a $20 million annual retrospective premium assessment.

^[9] For example, a Afleet@ owner may face the shutdown of much or all of its fleet if an accident elsewhere is caused by a design flaw common to the fleet units. When nuclear unit ownership was relatively dispersed, it might be hypothesized that individual utilities could offset the impact of cross-the-board nuclear unit shutdowns by generation (and related revenues) from other generation sources; will this be the case under restructuring?

^[10] See, Federal Acquisitions Regulations ‑‑ Part 52; Solicitation Provisions and Contract Clauses; 52.250‑1 ‑‑ Indemnification Under Public Law 85‑804 (Apr 1984).

^[11] 42 U.S.C. Section 2210(s) provides:

No court may award punitive damages in any action with respect to a nuclear incident or precautionary evacuation against a person on behalf of whom the United States is obligated to make payments under an agreement of indemnification covering such incident or evacuation.

^[12] Court decisions that indicate that punitive damages are still available make plain that punitive damages cannot be had against the government, but make less plain what this means. For example; (1) if punitive damages must come from funding other than that provided by the government, what does this mean when the government stands as ultimate indemnitor? (2) is the test whether the funding comes from the first or second tier of payments, and, if so, by what rationale does one determine which pot the punitive damages come from? (3) are punitive damages always available from those who are not directly indemnified by the government (e.g., a contract supplier to an indemnified utility)?

^[13] The Court concluded:

Because there is no conflict between the Amendments Act and the substantive laws of Pennsylvania which allow punitive damages, we will instruct the district court to proceed with the litigation of these matters in a manner consistent with this opinion. In so doing, we emphasize that the district court has authority to prioritize the various claims if punitive damages are awarded and that the Price-Anderson Act=s tri-level insurance scheme is easily adaptable to such a prioritization of claims. It cannot be gainsaid that Aif there is a limited fund, priority should be given to compensating those who have been injured rather than conferring windfalls on those who have already been compensated.@.. We see nothing in the Act that precludes a district court from using its discretion to limit or even preclude punitive damages in accordance with the financial constraints of the fund and the Act=s prohibition against punitive damage awards being paid out of the federal layer of insurance. However, we do not express any view as to whether the district court should so exercise its discretion.

^[14] In Smith v. General Electric 938 F Supp 70 (D.Mass 1996), the court explained in denying General Electric=s Motion to dismiss the claims against it:

The purpose of the channeling provision of the Price-Anderson Act is to make third party vendors like GE indemnitees of nuclear plant operators like Boston Edison. The Act does not exonerate GE of its legal liability, it merely shifts the obligation to pay damages to Boston Edison. The distinction between an indemnitee and a party immune from suit is critical, especially in a punitive damages context...As the Third Circuit pointed out in TMI...the limitation on punitive damages in the 1988 Amendments Act applies only when the United States is an indemnifying party...

The basis of plaintiff=s punitive damages claim is the allegation that GE knowingly and recklessly sold defective fuel rods to Boston Edison. While it is true that Price-Anderson will eventually require Boston Edison to indemnify GE for any damages, to dismiss GE at this stage as a party would hinder plaintiffs from developing proof of knowing or reckless conduct on GE=s part.

^[15] Perhaps by contrast, in O=Conner v. Commonwealth Edison, 13 F. 3d 1090 (7^th Cir. 1994)(pipefitter sues utility) the Seventh Circuit noted, in dicta at footnote 13: ASilkwood=s holding regarding damages was overruled by the Amendments Act which specifically bars punitive damages.@ See, for the same language, footnote 5 to Nieman v.NLO Industries, 108 F. 3d 1546 (6^th Cir. 1997),

^[16] The courts have further held that the Federal standard to be applied is the applicable numerical standard, and not ALARA (the AAs Low as Reasonably Achievable@ principle). See, e.g. In Re: TMI, 67 F.3d 1103 (3d Cir. 1995)(Awe note that no court appears to have actually applied ALARA as part of the duty of care.@) Carey v. Kerr-McGee, 60 F. Supp. 2d 800 (N.D. Ill. 1999) identifies McCafferty v.Centerior Service Comm 983 F Supp 715, 718 (N.D. Ohio 1997) as a decision which finds ALARA to be applicable. However, that decision agreed that the occupation dose limits B not ALARA B defines the standard of care.

^[17] The Supreme Court recorded that the NRC had Adetermined that Kerr-McGee=s only violation of regulations throughout the incident was its failure to maintain a record of the dates of two urine samples submitted by Silkwood.@

^[18] Similarly, in Lokos v. Detroit Edison, 67 F. Supp. 2d 740 (E.D. Mich. 1999)(individual claim of cancer related to occupational and community exposure to Fermi Power Plant), the court stated that:A[t]o prevail in their PLA, plaintiffs must prove two essential elements: (1) Mrs. Lokos= exposure exceeded the federal numerical dose limits; and (2) such overexposure caused her to suffer a compensable injury under the Amendments Act.@ The plaintiff, pointing to the TMI decision, argued that a breach of duty occurs whenever excessive radiation is released, whether or not anyone is present in the area exposed. The Court stated that in TMI defendants admitted that the permissible levels were exceeded at the site boundary, and there was no such evidence in the case at hand.

^[19] The Committee=s Report is available as The Human Radiation Experiments: Final Report of the President=s Advisory Committee (Oxford, 1996)(AFinal Report@).The Final Report contains a ACitizen=s Guide@ to accessing the documents and other materials reviewed by the Committee. Page references in this testimony are to the Oxford edition.

^[20] Section 3626 (ADesignation of Additional Members of Special Cohort@) empowers an expert panel to determine whether there are classes of workers Awho likely were exposed to radiation but for whom it is not feasible to estimate with sufficient accuracy the dose of radiation they received.