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1. Lets talk about risk, liability, and insurance for power plants in the nuclear industry. Domestic law, international agreements, and industry structure have led to us creating one of the broadest, most effective liability regimes of any energy source. (thread)
2. To start, lets do a pre-test. Is the Price-Anderson Act in the United States a subsidy for the nuclear industry?
3. An initial caution – I’m simplifying this for a tweetstorm, it can get complicated quickly. Anyways, lets start with the basics: what is legal liability? Basically, if you harm a third party, you owe them money, under common law or statutory law
4. However, liability related to radiological safety at commercial nuclear power operations face unique challenges. Meltdowns are so rare that its hard to calculate an actual risk and, in the very low chance an event occurs, the damage could be so high to sink any private company
5. Accordingly, there are three international multi-lateral treaties that govern nuclear liability: the Paris Convention, the Vienna Convention, and the Convention on Supplementary Compensation (CSC) iaea.org/sites/default/…
6. Other than China, all major nuclear countries are in a convention. Paris is Western Europe+partners, Vienna is former Soviet States, the Joint Protocol joins both, and the CSC is a new ‘US-led’ initiative (in graphic, India has since joined the CSC) wnti.co.uk/media/74430/6%… 
7. Members of conventions agree to certain liability requirements in domestic legislation. By participating in the same convention, countries streamline nuclear trade by providing clear guidance on liability rules, avoiding international legal disputes world-nuclear.org/information-li…
8. As an example, if company X in country A supplies a reactor in country B, but the two countries don’t have compatible domestic laws, country B’s legal system could apply liability on company X, even if they had no fault. Nuclear trade then becomes an international incident
9. All three international conventions enshrine a “best practice” nuclear liability principle: channeling of liability to the operator of a nuclear facility. Effectively, if a nuclear incident occurs, the facility operator is solely and wholly liable. See nyuelj.org/wp-content/upl…
10. There are three primary rationales behind this liability channeling. First, the nuclear operator is the end-use part of the supply chain. They operate the final system that is a nuclear plant. They are in the best position to prevent a catastrophic accident
11. 2nd, and critically, liability channeling ensures damage from a nuclear event is covered and that persons or communities do not go uncompensated. Domestic laws prevent operators from suing other (potentially negligent) companies and require waiving normal liability defenses
12. When I was in high school, I clerked at a law firm that did construction malpractice. Many small projects ($1-5 million) had dozens of subcontractors. When there was a problem, they all sued each other. Lawsuits lasted as long as a decade, and parties rarely made whole
13. Imagine that happening with a major nuclear accident. The nuclear operator would sue contractors, contractors would sue each other, x party would sue other x party, etc. Very quickly, you end up with a legal mess and, tragically, no or incomplete compensation for damage
14. Finally, liability channeling is necessary for the existence of a diversified nuclear supply chain. The size of potential nuclear liability can kill any company. Without clear channeling to a specific part of the supply chain, all companies bear an astronomical risk
15. Historically, this was essential as Westinghouse and other supply chain companies would not have small practices in the nuclear industry if potential liability threatened their entire business. Of course, things are different now as we just build corporate liability shields
16. That last point is important. In absence of liability channeling and other policies, companies would just handle nuclear liability by creating corporations to contain liability at the daughter corp’s market cap. See Seaborn, Sam and oil tankers en.wikipedia.org/wiki/Sam_Seabo…
17. In the United States, our domestic nuclear liability legislation is the Price-Anderson Act, formally known as the Atomic Energy Act of 1954, as amended. Price-Anderson has three major elements
18. First, Price-Anderson WAIVES sovereign immunity for damages resulting from government activities. Basically, if DOE or the military cause nuclear damages, the govt has to pay. In absence of Price-Anderson, there is no govt responsibility for this damage and no legal recourse
19. Second, Price-Anderson channels liability to the nuclear operator, as described above. Nuclear operators can't employ traditional liability defenses, unlike every other company. If PA is a “subsidy”, this is it, an inter-industry one, from nuclear suppliers to operators
20 .The 3rd major part of Price-Anderson, and the part usually identified as a “nuclear subsidy,” is a shared public-private insurance scheme. This scheme creates a tiered system. The caps provided by these tiers are needed for private insurance nrc.gov/reading-rm/doc…
21. It’s worth noting that intentionally malicious acts, like sabotage, terrorism, or acts of war, are covered by this policy. In almost all of other cases of corporate liability,, these types of incidents provide a liability defense (*cough* they’re externalized *cough*)
22. The first tier requires nuclear operators to obtain private insurance for the first $450 million (currently) in offsite damage. This part is not a subsidy. Notably, Three Mile Island squarely fell into this tier, and this tier alone
23. The second tier creates an industry-wide insurance pool which currently covers >$12 billion. Every reactor in the country participates (~$130 million each). If company A caused an accident, whether unavoidable or through negligence, companies B through X still need to pay
24.This part is also not a subsidy, at least not from the taxpayer to industry. If I was a nuclear operator, this would piss me off (I’d be responsible for damages from other operator’s operations)
25. Critically, the ‘US-led’ CSC treaty, which just entered into force in 2015, effectively globalizes part of this this tier. Up to 2/3 of the first ~$300 million of damage in this tier would be paid for by the other CSC member countries. If this is a subsidy, its one of a kind
26. The trade-off is that the US is responsible for ~1/3 of the damage between ~$400-700 million in other CSC countries. As this global insurance pool benefits US exporters (through CSC liability channeling) Congress is requiring exporters to cover this energy.gov/gc/convention-…
27. Again, a "subsidy" is a poor way to describe company's covering liability incidents in other countries with no direct taxpayer cost...
28. As Japan is a CSC member and the CSC is now in effect, US exporters would pay more than $100 million if Fukushima occurred today. Fukushima is >$100 billion in damages, so it’s small, but it’s the only way the US nuclear supply chain is directly exposed to nuclear liability
29. Note, this second tier does not base unit contributions on risk or size. Advanced nuclear units over 100 MW in size are as liable as a 1 GW existing reactor, despite being magnitude smaller and up to magnitudes safer. Some SMRs are partially excluded nrc.gov/docs/ML1115/ML…
30. Now we get to the portion of Price-Anderson that most nuclear opponents identify as a public subsidy: if a nuclear incident exceeds the $13.5 billion of Tier 1, CSC, and Tier 2 funding, Price-Anderson effectively codifies the United States as the insurer of last result
31. If there is damage above this amount, the Act directs the President to quantify the damage and provide potential funding options to Congress. If Congress does not act, the US effectively will pay for this damage as disaster relief
32. Is this a subsidy? It depends on how you define subsidy. The US taxpayer has paid $0 for commercial nuclear accidents to date. Even if a severe accident occurs, Congress can pass legislation requiring the nuclear industry to cover any additional damage
33. Effectively, if a severe accident occurs, Congress can require the nuclear industry to pay for everything in damages, even if only one actor in the industry is at fault. The entire sector could collapse b/c of this regime
34. In terms of probabilities and risk, such a situation is highly unlikely (probably less likely that a major asteroid hitting a US city, but I digress). There are no other industries, energy or otherwise, that have a legislative industry mechanism like this
35. Comparably, many other catastrophic risks in energy have no or insufficient liability regimes. Liability is capped at a company’s market cap. There is no shared industry insurance pool. Many situations show the US as “insurer of last resort”
36. To put it another way, if Price-Anderson is a formal subsidy because it (barring semi-mandated legislation) puts catastrophic level damages on the US taxpayer, all other industries have informal catastrophic liabilities subsidies at much lower levels. Lets run through some
37. In 2003, First Energy, not exercising due care to maintain their transmission lines, caused the largest blackout in North American history, taking out power to as many 50 million US and Canadian customers for up to 4 days, with $50+ billion in damages energy.gov/oe/services/el…
38. How much were they responsible for liability-wise? $0. Even with statutory and related FERC reforms since, blackout liability is not actually a thing. This demonstrates how the concept of liability and risk are socially constructed
39. Today’s electric grid means that any large enough grid participant could cause a $1+ billion blackout. Given cybersecurity and other emerging issues, even a renewable facility can (NEGLIGENTLY) cause billions in damages w/o liability. Damages are likely to be uncompensated
40. Tragically, wildfire liability has become another example of a multi-billion dollar liability catastrophe for the energy industry. PG&E, through normal and negligent grid operations, caused billions of damages (greater than their market cap) ourenergypolicy.org/pge-bankruptcy…
41. And by damages I mean burn people alive, raze entire communities, and threaten fragile ecologies. They are in deep trouble because California law holds them responsible, but bankruptcy means many victims will be uncompensated absent a taxpayer bailout (a “wires” ‘subsidy’)
42. Beyond electricity, the BP Horizon oil spill could have been a liability nightmare. Congress capped oil spill liability at $75 million. The accident cost >$61 billion, with BP voluntarily paying billions in damage to maintain their social license reuters.com/article/us-oil…
43. If BP didn’t want to pay that, US liability laws effectively would have shielded (and subsidized) most of the oil spill damages (though not necessarily clean-up)
44. And the biggest energy-related liability of them all: historic carbon emissions. US power utilities alone have trillions in liabilities. We have no legal regime for that and, if CLC gets their way, we’ll excuse it for a measly carbon price
45. However, unlike nuclear liability, which has largely not occured in the US and is highly unlikely to, this damage is guaranteed to. The only question is whether its a moderate or high amount of damage
46. To conclude, the focus on the liability regime for catastrophic nuclear meltdown risks as a subsidy is myopic. The US govt is always the insurer of last resort, Price-Anderson 1) formalizes that role and 2) enables the govt to impose costs on an entire industry, uniquely
47. All-in-all, the US nuclear liability regime has been effective, protects the rights of injured parties, internalizes most or all liability risks within the industry, and even cause inter-industry liability channeling that act. No other industry has anything like it
48. So, what do you think? Time for a post test: Is Price-Anderson a subsidy for the nuclear industry?
49. Final fun fact: PA covers DOE activities and DOE retains ownership over U.S. space nuclear power systems. Price-Anderson technically covers any radiological damages from the New Horizons spacecraft, among others. So if aliens have claims, we’re ready pluto.jhuapl.edu/Mission/Spacec…
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