Price-Anderson and the oil spill

By A. David Rossin

This past summer, we watched political near-hysteria toward BP, the giant energy company. Oil from an uncapped well in the Gulf of Mexico was gushing on every newscast. Booms and vessels were at work trying to contain and capture the oil. Birds and animals were shown covered with slimy goo.

Americans were angry at BP, and the company’s executive spokesman in the early days and weeks appeared arrogant. Even with cameras on the wellhead, BP was accused of cover up information that neither the company, the Coast Guard, the academics who were heard nightly, or the news media knew.

The President demanded and got a commitment of $20 billion from BP as a fund to cover losses of lives, livelihoods, and property.

For myself and many of my colleagues, the incident brought back memories from 1979 of Three Mile Island. Executives of the plant at the time were pressured to talk before they had a chance to know all the details. Several regulators went off half-cocked about a disaster waiting to happen, and the media listened to every activist that could be found. The Pennsylvania governor ordered an evacuation of pregnant women and small children, even as his top nuclear technical person was trying to tell him that there was no reason to do so.

The necessary element in the Price-Anderson Act (PA) was that it placed a limit on liability that a single company would face in the event of a nuclear incident. This was essential because Ralph Nader had tipped his hand. Nader threatened to challenge the validity of every nuclear utility bond because the companies faced an “unlimited liability.” No probabilistic argument could counter that ploy, and Nader knew it.

PA covered damages from Three Mile Island. When all were paid, the amount was small.

Committed congressional representatives quickly went to work. It took seven years before Congressman Morris “Mo” Udall (D., Ari.) and his dedicated staff made changes in 1987. The monetary liability changed. It had been $540 million for the licensee and then an industry insurance pool, which added a layer of a couple of hundred millions, and then the federal government would assume the rest of the damage claims.

After 1987, every licensee was liable for $100 million – up to $16 billion for a national liability pool.

The nuclear industry is proud of its excellent record. No large claims have ever been made for a commercial nuclear accident.

Price-Anderson has survived intact since 1987.  Will it survive the Gulf oil spill?

The law that covers off-shore oil operations seems similar to Price-Anderson. It limits the liability for a single accident to $75 million for the company of record.

There is heavy pressure on Washington about amending the oil law. That would be ex post facto for the BP disaster, so that angle may not be constitutional. But the political sentiment is rising, driven by extensive media coverage.

The Wall Street Journal already carried two op-eds by academic economists with the messages: “Why BP should be held fully liable for all economic damages” and “The best way to deter future spills is to expose drillers to the full costs of any mistake and not let any company without proper insurance near an oil derrick.”

U.S. oil consumption has not decreased due to the oil spill.  Economists will soon have to think about an energy-poor nation with a major thirst for gasoline, oil products, and natural gas. The oil not pumped from the Gulf will be purchased from other nations.

*  *  *  *

If anyone thinks that claims following a nuclear power plant incident would be limited, that would be dreaming. Even if the leak of radiation turned out to be limited, Mr. Nader and his followers would arise fighting.

The linear non-threshold theory of radiation health effects would generate the headlines. That’s the angle that Congress would be pressured to use to set the ultimate numbers of cancer victims.

It would be on every network, with even more amateurish reporting than we saw surrounding the Gulf.

At the June ANS meeting in San Diego, NRC Chairman Jazcko told the opening plenary session that the NRC will initiate a new study to update the 1990 work on cancers near a few selected nuclear plant sites. That study showed no relationship between plant locations and cancers and has stood the test of time.  It has continually been attacked by anti-nuclear critics because it did not demonstrate what they thought it should.

The National Research Council of the National Academy of Sciences will manage the new study. The first phase had been announced. This phase will be a study to choose a methodology and to evaluate whether it will be feasible to find meaningful answers.

The NRC says that there is a lot more data now.

The first shoe has already dropped. A newspaper in South Carolina reported on September 13 that the region around the Oconee nuclear plant will be studied.  Some residents were quoted as saying, “It’s about time.”

Stay tuned for falling shoes!

A. David Rossin

A. David Rossin is an independent consultant on nuclear power safety, materials, energy policy and nonproliferation. He is an educator and speaker and is currently teaching an “Energy Politics” course at the Sarasota campus of the University of Florida.  Among his many distinguished accomplishments, Rossin was previously Assistant Director of the Argonne Reactor Engineering Division (1967-69) and Director of Research for Commonwealth Edison Co. (1972-81). He served as Director of the Nuclear Safety Analysis Center at EPRI from 1981-86.

Rossin served Assistant Secretary for Nuclear Energy (U.S. Department of Energy, 1986-87).  He is a former President of the American Nuclear Society (1992-93).

3 responses to “Price-Anderson and the oil spill

  1. BP’s Gulf Catastrophe is Big Oil’s Three Mile Island: Will They Learn from the Nuclear Industry how to Achieve Environmental Safety and Operational Surety?
    Mark Miller and Jim Hylko
    Today, all of Big Oil (ExxonMobil, Royal Dutch Shell, Chevron Corporation, ConocoPhillips) should be equally concerned with the crisis being faced by BP. This is because precisely the same thing could happen to any one of them in the future. Competing energy companies must share with one another (and enforce upon one another) the “best management practices” which enabled the commercial nuclear industry to achieve its very impressive accomplishments since the TMI Accident.
    The public cry for more and stronger regulatory oversight will never result in as effective improvements as peer-imposed requirements. This is because the regulatory process is, of necessity, long, drawn out, deliberative and one-size-fits-all. As a result, many of the resultant regulations are less effective than they were initially intended to be. Furthermore, their development is necessarily and heavily influenced (political, lobbyist and public hearing influences) by the industry that they are designed to regulate. Rather than rhetoric and “camera dressing” that is part of the regulatory development process, peer-imposed requirements go directly to a clear objective and are not subject to the inevitable distortions that may be the final product of even the best-intended regulatory development.
    Make no mistake that unambiguous, fair, consistent, enforceable regulations are an absolute necessity. However, their effectiveness can only be expected to go so far. Beyond that, aggressive proven-to-be-effective “best management practices” developed by peer-competitors and imposed with an unwavering focus on both public safety and the industry’s survival is essential.
    The idea of removing liability limits for companies that cause environmental harm that is being considered may be a good idea. It will properly re-focus risk/cost/profit evaluations, rather than encouraging profit-motivated safety shortcuts that are more likely to occur if a commercial entity knows that taxpayers (or ratepayers) will “pick up the tab” for anything in excess of published liability limits.
    Following the tragic accident at Three Mile Island (TMI) Unit #2 in 1979, executives from all of the U.S utilities who operated nuclear power plants convened a meeting at which they resolved “Never Again”. Their concern was real, not just for the public and environment’s well being, but for the very survival of commercial nuclear power generation. They recognized, that in spite of the fact that no actual environmental harm resulted from the TMI accident, the public would call for an immediate shutdown of all remaining power plants in this country if another significant accident occurred at any of the remaining operating nuclear power plants. The utility consortium’s objective was to establish a program that specified appropriate safety standards including those for management, quality assurance, operation procedures and practices, and independent evaluations. Also, it was clear that there must be systematic gathering, review, and analysis of operating experience at all nuclear power plants, coupled with an industry wide communications network to facilitate the speedy flow of this information to affected parties. From that meeting came the Institute for Nuclear Power Operations (INPO). Their mission: to promote the highest levels of safety and reliability – to promote excellence – in the operation of commercial nuclear power. They go about achieving this mission by a very aggressive and transparent , straightforward process which includes:
    • establishing performance objectives, criteria and guidelines for the nuclear power industry
    • conducting regular detailed evaluations of nuclear power plants, and
    • providing assistance to help nuclear power plants continually improve their performance.
    INPO’s primary objectives were focused on public safety and operational assurance, not profitability. However, a pleasant surprise occurred when the INPO recommendations became the operational standard that all commercial utilities lived by. Availability factors and profits skyrocketed! As is often the case, safety professionals strive incessantly to convince management that safety doesn’t cost money; it actually makes money! INPO’s beneficial impact on the nuclear utilities is dramatic, undeniable proof of those arguments.
    Commercial nuclear power went from availability factors of around 70% in the 1980’s to consistently above 91% in 2010. This is due, in part, to the INPO-inspired “best management practices” that were imposed by peer utility operators rather than any “regulatory requirements” enforced by the Nuclear Regulatory Commission (that were necessarily less ambitious than peer-imposed objectives). Big Oil would do well to consider this success in light of the enormous stakes involved in continuing to provide oil to the market with reasonable assurance that they can do it without a repeat of the BP Gulf Disaster.
    Now, 30 years after TMI, Big Oil is facing the same crisis that faced the nuclear industry in 1979. Will Big Oil recognize the opportunity to adopt a proven, successful model that the INPO experience provides to rescue their industry from a painful demise or a new profusion of costly any marginally effective regulations for which the public is clamoring? What they (and the public) needs is assurance that things will operate as designed, not insurance to pay for accidents when they don’t.
    End note: The world will continue to demand oil to satisfy its insatiable need for energy. World economies are directly tied to the availability of energy, and oil plays a prominent role in this reality. It is in the interest of the world’s consumers of oil that Big Oil achieves the highest possible operational safety assurances in addition to continuing as a viable and profitable industry. This will enable them to provide their valuable commodity at the lowest prices to consumers with the assurance that this success is being achieved with the highest possible assurance of being achieved safely. Punitive damages and compensation for accidents may look and feel good for a short while, but they pale in comparison to doing the right things the first time. Ask any resident of the Gulf Coast who is affected by the BP spill: “Would you rather have your livelihood back, or would you like a compensation check from BP?”

  2. While I agree that a company such as BP should bear the brunt of the cleanup and income reimbursement costs, I don’t think that they are solely responsible for the recent events in the Gulf. The government , which forced the deep water drilling by its over-restrictive policies enacted to prevent what actually occured; a massive oil disaster for the coast. Of all of the funds that have been spent by the Energy Dept one would think that some of that money could have funded research into the failure modes for that equipment. Such research could have produced the kinds of data necessary to guide the government inspection teams in assessing BP’s equipment integrity and predicting the likelyhood of the events that brought about the failures that preceded the blowout. Similar research should be the primary focus of The Energy Dept. and NRC in going forward with new construction of nuclear power plants. If this isn’t done, then major uncertainties concerning safety should hold up progress toward our reduction of dependence on foreign oil through nuclear power. This, in turn will continue our shaky situation as it relates to deep water oil production.

  3. While I agree in part with what Leonard says, I believe that the oil industry would be BEST served if they were able to impose some “best management practices” on themselves (as peers). This, of course, means that they would have to establish some “ground rules” regarding areas from which they could mutually benefit by sharing with one another without losing whatever real or perceived “competitive edge” that they had over one another. The alternative is to let the slower, less effective mechanism of government regulations and government-funded research “impose” what is required of them. Regulations will always be necessary as a minimum standard of performance, but REAL advances will most likely come from WITHIN the industry itself. In order to survive and thrive (like the commercial nuclear power industry did) the oil industry needs to challenge itself to achieve levels that far exceed the minimum standards that regulations can impose.

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