¡ B 779,952 INDEMNITY AND REACTOR SAFETY Phoenix HL 9698 .13 U52 A4793 1959 Lis HEARINGS BEFORE THE SUBCOMMITTEE ON dup RESEARCH AND DEVELOPMENT AND THE SPECIAL SUBCOMMITTEE ON RADIATION OF THE JOINT COMMITTEE ON ATOMIC ENERGY CONGRESS OF THE UNITED STATES EIGHTY-SIXTH CONGRESS SECOND SESSION ON INDEMNITY AND REACTOR SAFETY 58511 APRIL 26 AND 27, 1960 PART 2 1 Printed for the use of the Joint Committee on Atomic Energy THE Umazocon f OF MICHIGAN APR 27 1973 PHOENIX LIBRARY UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON: 1960 HE UNIVERSITY OF MICHIGAN LIBRARIES SEP 2 6 1960 Phoenix JOINT COMMITTEE ON ATOMIC ENERGY CLINTON P. ANDERSON, New Mexico, Chairman CARL T. DURHAM, North Carolina, Vice Chairman RICHARD B. RUSSELL, Georgia JOHN O. PASTORE, Rhode Island ALBERT GORE, Tennessee HENRY M. JACKSON, Washington BOURKE B. HICKENLOOPER, Iowa HENRY DWORSHAK, Idaho GEORGE D. AIKEN, Vermont WALLACE F. BENNETT, Utah CHET HOLIFIELD, California MELVIN PRICE, Illinois WAYNE N. ASPINALL, Colorado ALBERT THOMAS, Texas JAMES E. VAN ZANDT, Pennsylvania CRAIG HOSMER, California WILLIAM H. BATES, Massachusetts JACK WESTLAND, Washington JAMES T. RAMEY, Executive Director JOHN T. CONWAY, Assistant Staff Director DAVID R. TOLL, Staff Counsel SUBCOMMITTEE ON RESEARCH AND DEVELOPMENT MELVIN PRICE, Illinois, Chairman CARL T. DURHAM, North Carolina JAMES E. VAN ZANDT, Pennsylvania CRAIG HOSMER, California JOHN O. PASTORE, Rhode Island ALBERT GORE, Tennessee BOURKE B. HICKENLOOPER, Iowa SPECIAL SUBCOMMITTEE ON RADIATION CHET HOLIFIELD, California, Chairman MELVIN PRICE, Illinois JAMES E. VAN ZANDT, Pennsylvania CRAIG HOSMER, California JOHN O. PASTORE, Rhode Island HENRY M. JACKSON, Washington BOURKE B. HICKENLOOPER, Iowa GEORGE D. AIKEN, Vermont CLINTON P. ANDERSON, New Mexico, (ex officio) CARL T. DURHAM, North Carolina (ex officio) п * Theenix Lib. Gitt 54.73 Added Copy NOTE These hearings are entitled "Part 2" because similar hearings on "Indemnity and Reactor Safety" were held April 29 and 30, 1959, during the 86th Congress, 1st session. ш CONTENTS HEARING DATES Page 123 189 190 190 190 124, 190 124 124 124, 190 Tuesday, April 26, 1960_. Wednesday, April 27, 1960_ 1 ATOMIC ENERGY COMMISSION WITNESSES McCone, John A., Chairman__ Graham, John S., Commissioner.. Pittman, Dr. Frank K., Director, Division of Reactor Development_ 1 1 1 1 Finan, William F., Assistant General Manager for Regulations and Safety Kratzer, Myron, Division of International Affairs. Lowenstein, Robert, Office of General Counsel Price, Harold L., Director, Division of Licensing and Regulation. 1 STATEMENTS OF WITNESSES (BY ORGANIZATION OR AFFILIATION) Advisory Committee on Reactor Safeguards: Silverman, Dr. Leslie, Chairman_ McCullough, Dr. C. Rogers, Vice Chairman_ Goodman, Leo, United Auto Workers, AFL-CIO_- 1 T 236 236 259 Haugh, Charles J., vice president, Travelers Indemnity Insurance Co., on behalf of Nuclear Energy Liability Insurance Association. 157 Johnston, Senator Lyndon B., read by Harry McPherson_ McVey, Mr. and Mrs. Jackson, Houston, Tex___ 258 1 259 1 1 Yarborough, Senator Ralph, represented by Richard Yarborough…. 258 1 Yount, H. W., executive vice president, Liberty Mutual Insurance Co., on behalf of Mutual Atomic Energy Liability Underwriters.-. 148 STATEMENTS SUBMITTED FOR THE RECORD Biemiller, Andrew J., AFL-CIO.. 264 Dorsett, J. Dewey, general manager, Nuclear Energy Liability Insurance Association_ 177 173 170 175 156, 167 Haugh, Charles J., vice president, Travelers Indemnity Insurance Co-- Heard, Manning W., executive vice president, Hartford Accident & Indemnity Co- Mann, Guy E., senior vice president, Aetna Casualty & Surety Co.. Yount, Hubert W., executive vice president, Travelers Indemnity In- surance Co. ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Biographical data of the members of the Advisory Committee on Reactor Safeguards. "Notice of Proposed Rulemaking," article from the Federal Register of May 23, 1959, Title 10-Atomic Energy, Chapter I-Atomic Energy Commission…. Tabulation of the Advisory Committee on Reactor Safeguards letters by project for period January 1, 1959, to April 15, 1960_. CORRESPONDENCE INSERTED IN THE RECORD Decker, R. J., assistant secretary, Mutual Atomic Energy Liability Under- writers, to the Joint Committee, dated May 3, 1960, furnishing a list of policies issued to nonprofit educational institutions operating reactors or critical facilities - Hollingsworth, R. E., Deputy General Manager, AEC, to Senator Clinton P. Anderson, dated March 31, 1960, concerning financial protection required of reactor licensees__ 220 203 238 155 178 ▼ VI CONTENTS Hollingsworth, R. E., General Manager, Atomic Energy Commission, to James T. Ramey, executive director, Joint Committee on Atomic Energy, dated May 8, 1960, supplying information on (a) premiums charged Battelle Institute and Armour Foundation, (b) time fuel units will be shipped to BONUS site near Rincon, P.R., and (c) nonprofit institutions holding liability policies - Hydeman, Lee M., and Berman, William H., atomic energy research project, University of Michigan Law School, to Senator Clinton P. Anderson, dated April 21, 1960, concerning a study just completed and a proposed study of organization of atomic energy functions at the Federal level. Luedecke, A. R., General Manager, Atomic Energy Commission, to James T. Ramey, executive director, Joint Committee on Atomic Energy, dated May 18, 1960, supplying information on licensing of reactor con- struction sites__ Mann, Guy E., Aetna Casualty & Surety Co., to John F. Floberg and John S. Graham, Commissioners, AEC, dated January 21, 1960, expand- ing on two points that arose during discussion before the Joint Com- mittee__ Morehouse, E. W., vice president, General Public Utilities Corp., to Harold Price, Director, Division of Licensing and Regulation, Atomic Energy Commission, dated May 3, 1960, submitting comments on proposed amendments to the Commission's regulations published in the Federal Register February 11, 1960_. Ramey, James T., executive director, Joint Committee on Atomic Energy, to Lee M. Hydeman and William H. Berman, atomic energy research project, University of Michigan Law School, dated April 28, 1960, on the proposed study to be undertaken by the university-- Sporn, Philip, American Electric Power Service Corp., to Harold L. Price, Director, Division of Licensing and Regulation, Atomic Energy Com- mission, dated April 30, 1960, commenting on notice of proposed rule- making published in the Federal Register February 11, 1960- Thomsen, C. J., vice president and treasurer, Texas Instrument, Inc., to Senator Clinton P. Anderson, dated April 25, 1960, concerning its safety program and suggesting that indemnity arrangements of the Price- Anderson Act be made applicable to fuel fabricators - - Page 134 265 214 177 217 266 215 128 APPENDIX AEC report to the Joint Committee on operations under section 170 of the act of 1954, as amended March 31, 1960_. 267 INDEMNITY AND REACTOR SAFETY TUESDAY, APRIL 26, 1960 CONGRESS OF THE UNITED STATES, SUBCOMMITTEE ON RESEARCH AND DEVELOPMENT, SPECIAL SUBCOMMITTEE ON RADIATION, JOINT COMMITTEE ON ATOMIC ENERGY, Washington, D.C. The subcommittees met, pursuant to notice, at 10 a.m., in room P-63, the Capitol, Hon. Melvin Price (chairman of the subcommittee) presiding. Present: Representatives Price and Van Zandt. Also present: James T. Ramey, executive director; David R. Toll, staff counsel, Joint Committee on Atomic Energy. Representative PRICE. The committee will be in order. The Subcommittee on Research and Development, and the Subcom- mittee on Radiation, are holding joint public hearings today on atomic energy indemnity problems, and tomorrow's session will be on reactor and radiation safety problems, including site selection, and the operations of the Advisory Committee on Reactor Safeguards. This morning we have requested AEC witnesses to testify on the Commission's indemnity program under Public Law 85-256, the Price-Anderson amendments of 1957, and also on current indemnity problems in the foreign field. The Price-Anderson amendments were enacted by the Congress in 1957 to solve what had previously been described during hearings in 1956 and 1957 as a major roadblock to development of the peaceful uses of atomic energy. The amendments set up a framework, whereby AEC may require licensees to provide "financial protection," or pri- vate insurance, up to determined amounts, taking into consideration certain factors, including cost of private insurance and the type, size, and location of the facility. Above the "financial protection" that AEC may require, a governmental indemnity up to $500 million is provided by the statute, in order to provide protection for the public in the remote event of a reactor accident, and then limitation of liabil- ity procedures are included in the statute. Each year since passage of the amendments, the Joint Committee has held hearings on the indemnity program, and on related safety questions, including the activities of the Advisory Committee on Re- actor Safeguards, which was made a statutory committee by these amendments. During the past year, AEC has made some progress in closing po- tential "gaps" between the private insurance available and the Gov- ernment indemnity. It is hoped that AEC will continue these efforts in order to provide full protection for the public without "gaps" in the indemnity program. 123 124 INDEMNITY AND REACTOR SAFETY After discussing the domestic program and new regulations this morning, we will discuss problems of foreign indemnity. This after- noon we are scheduled to hear testimony from representatives of the insurance syndicates. I understand the witnesses this morning will be Mr. William F. Finan, Assistant General Manager for Regulations and Safety, AEC; Mr. Harold Price, Director of the Division of Licensing and Regula- tion, AEC; and Mr. Robert Lowenstein, Office of General Counsel, and Myron Kratzer, Division of International Affairs. We are glad to have you with us this morning, gentlemen. Are you going to lead off, Mr. Finan? STATEMENT OF WILLIAM F. FINAN, ASSISTANT GENERAL MAN- AGER FOR REGULATIONS AND SAFETY; HAROLD L. PRICE, DI- RECTOR, DIVISION OF LICENSING AND REGULATION; ROBERT LOWENSTEIN, OFFICE OF GENERAL COUNSEL; AND MYRON KRATZER, DIVISION OF INTERNATIONAL AFFAIRS, ATOMIC ENERGY COMMISSION Mr. FINAN. Mr. Chairman, with your permission we would like to have Mr. Harold Price deliver our statement on the first subject to be covered this morning, the indemnification of licensed activities. Representative PRICE. I might also state on behalf of the committee the fact that there are so few members present this morning is not indicative of the lack of interest in this particular subject, but due to the fact that we have several conflicting meetings this morning. Mr. Price. Mr. PRICE. Mr. Chairman, I will present part of this prepared state- ment, dealing with indemnification of licensed activities. PART I. INDEMNIFICATION OF LICENSED ACTIVITIES Since the Joint Committee held hearings on the Government's indemnity program approximately a year ago, the Commission has completed and issued two effective amendments and one proposed amendment to the Commission's rules governing the financial protec- tion requirements imposed on reactor licensees and the indemnity agreements to be executed by the Commission with such licensees. COMPREHENSIVE REVISION OF PART 140 The first of the effective amendments supersedes the provisions of the original part 140, which was issued in September 1957, shortly after enactment of the Price-Anderson Indemnity Act. The amend- ment prescribes revised requirements as to the amounts of financial protection required to be maintained by reactor licensees. It estab- Îishes fixed amounts of financial protection-ranging from $1 to $21½ million-for reactors licensed to operate at relatively low power levels. The previous minimum amount of financial protection required to be maintained was $250,000. Representative PRICE. Mr. Price, could you tell us why the mini- mum amount was raised from $250,000 to $2.5 million? 1 INDEMNITY AND REACTOR SAFETY 125 Mr. PRICE. Yes, sir. When we first put out the regulation right after the enactment of the act, we had information on projected costs of insurance, but I am afraid we had not had time to look at the prob- lem of potential damage by the smaller reactors as much as we could have on more study. What we have done here is to recognize that for these small reactors-these are very small research reactors beginning with the training reactors on up to 10 kilowatts-first the real small reactors, these training reactors, we don't believe there is much damage likely, but the cost of insurance for $1 million is not too much more than the cost for $250,000. Representative PRICE. What are the figures? Mr. PRICE. I don't have them in my mind, Mr. Chairman. The in- surance people will be able to give them. They may differ by reac- tors. It maybe goes up by a factor of a third or 50 percent jumping from $250,000 to a million. Representative PRICE. I recall when we were working on the origi- nal legislation that there was great concern expressed by operators of small research reactors over this matter. What would be their sit- uation? Mr. PRICE. There is another reason for this change. At the time we issued the first regulations, the law required the educational insti- tutions as well as other reactor owners to buy insurance. The educa- tional institutions made a great plea that they could not buy insur- ance or could not afford any at all, and in some instances they did not have authority. Representative PRICE. When you are speaking of educational, you are talking about the general rather than the special amendment we passed to take care of the State universities. Mr. PRICE. It was primarily the State universities. Representative PRICE. That was taken care of by the bill. Mr. PRICE. That is right, but at the time we passed the original reg- ulation and passed this low minimum, it had not been taken care of. Since then you have eliminated any problem with respect to the edu- cational institutions by exempting them from financial protection re- quirements. You have fixed the law so that the indemnity takes hold at $250,000. So we don't now for purposes of fixing financial protec- tion requirements have to consider any problems of the educational in- stitutions. Representative PRICE. I remember the time the act was under consid- eration, it was not so much the plea of the larger educational institu- tions, the State universities and so forth, that there be some considera- tion to holding the amount down. It was more from the presentation made by research institutes like Armour Institute in Chicago, Battelle Institute at Columbus, Ohio. How would they be affected? I am not speaking of one particular institution, but these types. Mr. PRICE. The amendment dealing with educational institutions. did not exempt them. So they are subject to the financial protection. requirements and the amount of insurance that they would have to buy will be raised by this amendment. How much the premium goes up for Battelle and Armour, I don't have here before me, but I would be glad to supply it for the record. 126 INDEMNITY AND REACTOR SAFETY Representative PRICE. I think you should supply it for the record, because that is the basic point at issue, that is, just what this will do to such institutions. Mr. PRICE. That is right.. But we also have the problem that the same kind of research reactors and critical facilities are also operated by manufacturers of reactors, the industrial concerns. So we have to fix this minimum so it fits a fair requirement for them as well as for the people like Battelle and Armour. I will be glad to get that for the record and submit it. (See letter, dated May 8, 1960, from R. E. Hollingsworth, General Manager, AEC; p. 134. Representative PRICE. You may proceed. Mr. PRICE. The previous formula for determining amounts of finan- cial protection for the larger reactors; that is, $150 per thermal kilo- watt, has been revised by the amendment to include a factor for the population density surrounding the reactor site. Mr. TOLL. Mr. Price, is this new formula any simpler than the previous formula that was put out by the tentative regulations? Do you have to be a Ph. D. mathematician in order to figure out the amount of financial protection required? Mr. PRICE. Much simpler. I think this is a real simple formula. It requires no mathematics at all, just simple arithmetic. All it re- quires is to be able to multiply the power level at one point, take the square root at another point, and count the population in the sur- rounding areas and do some division. This is real simple. Would you like to have it explained? Mr. TOLL. Could you please describe how that would be done for a typical reactor? Mr. PRICE. I will be glad to work it out for a typical reactor. It is just a matter of multiplying the power level in thermal mega- watts by $150,000, the same base amount that we had before. That is the power level factor. Multiply that by the population factor. The population factor is determined by counting the people in a radius based on power level, and weighing that population in propor- tion to the square of the power level, which roughly measures the damage at various distances from a reactor that people could suffer. Representative PRICE. That is very simple. Mr. PRICE. I should not have tried to explain it. I should have just submitted it for the record. Representative PRICE. You may proceed. Mr. PRICE. As we advised the Joint Committee by letter dated March 31, 1960 (p. 178), the nuclear energy liability insurance syn- dicates recommended the adoption of a formula which differs from the formula contained in the Commission's amendment. Public com- ments on the syndicates' recommended formula have been invited. We have publicly announced our intention to reevaluate, before the end of this year, the financial protection requirements in the amend- ment in the light of experience gained with the formula during this year and the public comments on the syndicates' proposed formula. We believe that for the time being the formula in the new amendment represents an improvement over that previously contained in the regu- lations and is a fair one. К ཆ INDEMNITY AND REACTOR SAFETY 127 The other principal changes made by the amendment are: (1) The incorporation of a requirement that holders of construction permits who are authorized to store and possess special nuclear mate- rial at their reactor sites for use as reactor fuel maintain financial protection in the amount of $1 million; and (2) The incorporation of procedures to exempt nonprofit educa- tional institutions and Federal agencies from the financial protection requirements. APPROVAL OF THE NUCLEAR ENERGY LIABILITY POLICY The second effective amendment approves the furnishing of proof of financial protection in the form of nuclear energy liability insurance now being offered by the Nuclear Energy Liability Insurance Associa- tion (NELIA) and the Mutual Atomic Energy Liability Underwriters (MAELU). This new form differs from the previous form of policy discussed at last year's hearings on governmental indemnity in several respects. These include extension of coverage to protect against nuclear incidents occurring in the course of transportation of nuclear materials to the reactor location without regard to whether the trans- portation originated at a Government facility. The previous form of policy provided coverage of transportation to the reactor only if the transportation was from a Government-owned facility. Representative PRICE. Mr. Price, while you are on the subject of extensive coverage, do you think that the provision of the act should be extended to fuel element fabricators? Mr. PRICE. Mr. Chairman, as you know, the act now, while it is mandatory with respect to reactors and other facilities, it is discre- tionary under the act for the Commission to extend it to fuel element fabricators and various isotope licensees that are handled under the materials licensing procedure rather than as facilities. I don't know whether it ought to be made mandatory or not. I can tell you what we have done. We have done some work studying the problem in order to determine the magnitude-whether there is really a need to extend Government indemnity. As we reported to you last year, we had just made a contract with Convair to make a study of the potential hazards in various material handling operations. This report has just come within the last week or so. We have not had a chance to analyze it, but we would hope on the basis of that we could come to some conclu- sions as to whether it ought to be extended. Representative PRICE. May we have the report for the committee files? Mr. PRICE. I think it has been sent to the committee. Representative PRICE. I would like to include in the record a tele- gram received this morning from C. G. Thompson of Texas Instru- ments, Inc., on the subject of the extension of coverage to fuel fabri- cators. This telegram indicates a great deal of uncertainty on the part of such contractors. Have you had much contact with fuel fabricators asking for an extension of coverage? Mr. PRICE. Yes, sir. We have had a good many discussions with various representatives and groups of people on this subject. I would not know how offhand to characterize the attitude. I know that there 128 INDEMNITY AND REACTOR SAFETY are some companies in the fuel fabrication business that have strongly recommended that we extend it. This has a lot of problems for us. Maybe we ought to do it. After this Convair study has been analyzed we will have to come to a decision. (The telegram referred to follows:) Hon. CLINTON P. ANDERSON, DALLAS, TEX., April 25, 1960. Chairman, Joint Committee on Atomic Energy, Old Supreme Court Chamber, Room P-63, the Capitol, Washington, D.C.: Texas Instruments, Inc., takes great pride in the important role which it has been able to play, through the activities of its subsidiary, M. & C. Nuclear, Inc., in the advancement of the nuclear energy industry on a private enterprise basis. These nuclear energy activities have been carried on pursuant to a careful safety program, which is subject to periodic review in the light of changing circum- stances and new information. We also are aware of the great public purposes which are served by the Price- Anderson Act. We feel that it will advance the public interest and will be of benefit to the nuclear energy industry as well as to others, if the indemnity arrangements of the Price-Anderson Act are made applicable to fuel fabricators in a position such as ours. It is our understanding that the Atomic Energy Com- mission already has authority under existing provisions of the Price-Anderson Act to determine by rulemaking proceedings otherwise, that the Price-Anderson indemnity arrangements shall be made applicable to fuel fabricators. We hope that this change will be made without delay. The annual review of atomic energy indemnity problems, which the Joint Committee on Atomic Energy has scheduled for the hearings on April 26 and 27, 1960, affords an appropriate occasion to reemphasize the importance of this matter. It is felt that every encouragement should be given to the Atomic Energy Commission to deal with this problem promptly, so that the existing uncertainty can be removed as speedily as pos- sible. Texas Instruments, Inc., requests that this statement be included in the record of the hearings scheduled for April 26 and 27, 1960. C. J. THOMSEN, Vice President and Treasurer, Texas Instrument, Inc. Mr. PRICE. I might say that in view of the fact that indemnity is not now available, these companies are carrying in connection with their fuel element plants far more insurance than they are carrying for small reactors at the same location. This they do in self-protec- tion. But the real question is, if the insurance they are buying is really enough to protect the public, and we or the Congress think it is not too costly, that could be the answer, to leave it like it is. Mr. TOLL. The Commission has been studying this for quite a while. Mr. PRICE. Yes, but not very intensively, because we have not re- garded it as an acute problem as the reactor problem where we knew we had large potential damage in case of a bad accident. Representative PRICE. Mr. Ramey. Mr. RAMEY. Is this fuel element question both on licensees and AEC contractors? Mr. PRICE. I was addressing my remarks to the companies that are licensees in fuel element fabrication. It is entirely possible that the Commission contract operations where Price-Anderson has been ex- tended under contract would cover companies in connection with their fuel element fabrication. Mr. LOWENSTEIN. On the contract side, the Commission has been following the same policy as with respect to licensees. The deter- mination will be made whether to apply it to licensees and to Commis- sion contractors, based in part on the contract study. Mr. PRICE. Have any of the contractors already been covered? I don't know. INDEMNITY AND REACTOR SAFETY 129 Mr. LOWENSTEIN. I am not sure. Mr. RAMEY. As I recall in previous years several of the contractors felt very strongly that the Commission should extend coverage under their indemnity agreements. I recall it was under study at that time. Outfits like Sylvania-Corning and so on. Mr. PRICE. That is right. Representative PRICE. You may proceed. Mr. PRICE. Provisions in the new policy extend the period of no- tice to the Commission which must precede suspension of the policy by the insurers from 12 hours to at least 1 full business day of the Commission. The new policy also enlarges the amount of insurance potentially applicable to a common occurrence under circumstances where the facilities involved in the common occurrence have purchased insur- ance from the same syndicate. The policy form approved by the amendment is included as an appendix to the regulation, which has been published. PROPOSED AMENDMENT TO PART 140 A proposed amendment to part 140, which has been published for public comment, sets forth two revised forms of indemnity agree- ments to be executed by the Commission and reactor licensees sub- ject to the financial protection requirements. You will recall that in August 1958 and May 1959 the Commission published a form of indemnity agreement for public comment. There are a number of significant revisions in the new proposed forms of indemnity agree- ments; hence, further public comment has been requested before we make the new forms effective. The principal changes in the new proposed forms of indemnity agreement are described on pages 5 and 6 of the Commission's report to the Joint Committee on "Operations Under Section 170 of the Atomic Energy Act of 1954, As Amended," dated March 31, 1960. (The report referred to appears in the appendix on p. 267.) As a result of the changes in the new form of nuclear energy liabil- ity insurance policy and the changes proposed in the revised forms. of indemnity agreement, the gaps identified in the 1959 indemnity re- port to the Joint Committee have, to a substantial degree, been re- duced or eliminated. These include the coverage of transportation to the facility, the "common occurrence" problem, the potential gap due to the absence of an automatic reinstatement provision in the liability insurance policies, and the prior notice of suspension to the Commission. PROPOSED LEGISLATION By letter dated April 15, 1960, to the Joint Committee, the Com- mission recommended the adoption of several amendments to the Atomic Energy Act of 1954, as amended. One of those recommended amendments would amend the act to eliminate coverage of liability for damage to property which is at the site of, and used in connection with, the licensed activity. The Commission believes that enactment of this proposed amend- ment is desirable. Coverage of liability for damage to onsite prop- erty diminishes the $500 million indemnity protection available to the general public under the Commission's indemnity agreements. There 130 INDEMNITY AND REACTOR SAFETY does not appear to have been, nor does it appear likely that there will arise any need for, Government coverage of onsite property. Com- mercial property insurance for such property is available at the present time up to $60 million. As we understand it, the basic pur- poses of the Government indemnity afforded by the Price-Anderson Act were twofold: (1) to protect the public in the event of a large- scale accident, and (2) to remove the deterrent to the entry of private companies in a business in which there is a large potential third-party liability. Extending Government indemnity for the protection of the investment in the reactor plant itself is not needed for these purposes. In proposing this amendment, we recognize that, if the amendment is enacted, there may be uninsurable risks, not covered by the Commis- sion's indemnity, for liability for damage to licensed reactors to the extent that the damage to the reactor exceeds the amount of nuclear energy property insurance available. This recommended amendment is identical to the first of two amend- ments recommended by the Commission to the Congress by letter dated April 8, 1959. In this connection, I point out that in the 1959 indemnity hearings before the Joint Committee several witnesses testified in favor of the proposed amendment, while one testified against it. The second proposed amendment recommended by the Commission last year would have authorized the Commission to fill temporarily the possible gap resulting from the absence of an automatic reinstate- ment provision in the nuclear energy liability insurance policies avail- able from NELIA and MAELU insurance syndicates. We believe that this second proposed amendment is no longer neces- sary. The nuclear energy liability insurance policies offered by the Nuclear Energy Liability Insurance Association and Mutual Atomic Energy Liability Underwriters insurance syndicates contain an aggre- gate-limit-of-liability provision. The face value of the policies is not automatically reinstated after payment of claims. Because of the absence of an automatic reinstatement provision, payments by the insurer under the policy, in the event of a nuclear incident, might, unless filled by the Commission, result in a gap in the financial pro- tection furnished by the licensee until the insurers reinstate or other appropriate steps are taken. The second proposed amendment was intended to give the Com- mission specific authority to fill this gap for a reasonable period of time until the insurers have had reasonable opportunity to reinstate or the licensee has had opportunity to furnish protection in some other form. Comments which have been filed by interested members of the pub- lic in response to notices of proposed rulemaking issued by the Com- mission in 1958 and 1959 have urged that the AEC should, and has the authority under existing law, to fill this gap. (See pp. 77, 93, 101, 109, and 121 of the Joint Committee hearings on "Indemnity and Re- actor Safety," held on Apr. 29 and 30.) The Commission has reconsidered the pertinent provisions of the Price-Anderson Act and has concluded that the Commission has legal authority to fill this potential gap. Accordingly, the Commission has included provisions in the proposed revised indemnity agreement un- der which the Commission would temporarily fill this potential gap and no longer recommends adoption of the proposed amendment. INDEMNITY AND REACTOR SAFETY 131 Representative PRICE. I want to commend the Commission on this later action that you referred to. I think it was a proper decision. Mr. PRICE. I think before we go into the second part of the state- ment, I would like to ask you a few questions about the items that you mentioned in part I. How is the 1958 amendment for nonprofit designation of institu- tions working out? Mr. PRICE. As far as we are aware, it is working out fine. Since that time I know of no instance where an educational institution has come in complaining that they can't build a reactor in view of the indemnity problem. We had many educational institutions in a posi- tion, before you passed that amendment, saying that they just did not see how they could afford to own a reactor under the previous requirements. This was primarily because under their constitutions or statutes a large number of them felt that they had no authority to buy insurance for this purpose, that is, to spend State money for this purpose. Since that time those complaints have disappeared. Under that amendment, as you know, the Government indemnity picks up from $250,000. So there is a potential gap for the first $250,000. I don't think we consider this as anything to worry about for two reasons. First, many of the educational institutions, including some State institutions that thought they had authority to do it, have bought liability insurance for that first $250,000 voluntarily. Representative PRICE. Those do so under the State constitutions. Mr. PRICE. I think that applies to possibly half of them. My in- formation is that there are a dozen or so-I could get an accurate list for the record-State institutions that have not. Representative PRICE. I think it could be that we may have that in the record during the consideration of this special bill. I think it should definitely be in the record of these hearings also. (See letter dated May 8, 1960, from R. E. Hollingsworth, General Manager, AEC.) Mr. PRICE. Yes, sir. With respect to those dozen or so State insti- tutions that have not voluntarily elected to buy insurance, or that could not, I don't think we at the present time regard that as a great problem, because you have a defined amount, $250,000. If they did have an accident, the State legislature could deal with the problem after the fact, if they wanted to. They could make a special appro- priation for the benefit of the people injured. All I am trying to say is that this is a defined amount in terms of the kinds of liability we are talking about here. It is very small. The fact that some of the educational institutions have no coverage for that first $250,000 has certainly been no deterrent to the State educational institutions building these small training and research reactors. Representative PRICE. If the insurance pool gives notice of intent to suspend the policy-this is in reference to page 4 of your state- ment-will the AEC require the reactor to shut down? Mr. PRICE. This we would have to decide on the basis of the facts of the particular case. The chances are that we would because one full working day's notice would just about give us time to do nothing more than to just close it down until we could take a look to see how bad the situation was. 132 INDEMNITY AND REACTOR SAFETY Representative PRICE. Can the insurance pool arbitrarily cause a reactor to be shut down? Mr. PRICE. Their right to do it is a contract right in the policy. I don't know quite how to answer the word "arbitrarily." I think they would be in great trouble contractually with their customer if they did it arbitrarily. This is to protect them in the event their inspection shows what they regard as a hazardous situation that they have called to the attention of the reactor owner and he refuses to do anything about it. Representative PRICE. They have to give a substantial reason. Mr. PRICE. I am not sure I could be good at interpreting this con- tractual requirement. Maybe Mr. Lowenstein would like to comment on it. Mr. LOWENSTEIN. They would certainly have to give a reason. Mr. PRICE. I think that is right. Representative PRICE. Still on page 4 of your statement is there still a common occurrence gap? Mr. PRICE. I think there possibly is. The problem that we dealt with here is a situation like this. Let me give an example. There are two reactors that are not too far apart and there is a common occurrence. Let us assume that both reactors bought their insurance from MAELU. Let us assume that each one had to buy $10 million, or a total of $20 million. If there is a common occurrence, MAELU would only be liable under its policy for its pool capacity which is $16.5 million, roughly. I thought it was $13.5 million. It is $13.5 million. There would be that gap. We would have required insur- ance of $10 million on each reactor, a total of $20 million. Both of them bought their policies from MAELU. Under this provision, MAELU would only be liable up to its pool capacity which is $13.5 million. Of course, the same situation would apply in case NELIA in respect to their $40-million-odd capacity. We have not resolved this. Our recommendation is to the insurance syndicates that they insure each other so as to wipe out that gap. They are considering it, but it has not been resolved. Representative PRICE. You have made the recommendation that they reinsure themselves so that the full $60 million would be available. Mr. PRICE. Yes. Representative PRICE. You have made that recommendation to the insurance companies. Mr. PRICE. Yes, sir. I am sure they have that under consideration. Representative PRICE. I would like to read the language of the re- this amendment necessary in view of the 1957 Joint Committee report which explained the meaning of public liability and specifically ex- cepted damage to property located at the site of, and used in con- nection with, the activity where the incident occurred? Mr. PRICE. If that was the only thing we had to read I would say absolutely not. But our lawyers think that the plain language of the act as written contradicts that statement in the report, and that we are bound by the text of the statutee. It is our feeling that this is really a technical drafting matter that happened at the time of the passage of the act. Our main reason, as we have stated here, for recommending the revision is we just do not believe, for the reason you just gave, that the Congress wanted to cover this situation. INDEMNITY AND REACTOR SAFETY 133 Representative PRICE. On page 6 of your statement, Mr. Price, is port. This is Report 435, 85th Congress, 1st session, to accompany the Price-Anderson Act. I would like to read the full language of that paragraph: The definition of public liability as language to make it expressly applicable to damage to property of persons indemnified except that which is located at the site of, and used in connection with, the activity where the incident occurs. If there is a reactor incident, there would be no claim for damages to the reactor which could be included in the indemnification of the Governinent. Mr. PRICE. That is absolutely the interpretation and the language of the law insofar as situations where the reactor owner himself is the one liable. But this problem that we are talking about relates to a situation where the person liable is somebody like a fuel element sup- plier, and we are talking about claims that the reactor owner would have against him. I certainly agree with you, Mr. Chairman, as to the import of the language that you read from the report. I think this is just a naked legal problem that the lawyers feel that the text of the applicable provision of the statute itself is so plain that we are not able to reach à different interpretation. Representative PRICE. I have not heard any objection to the amend- ment, except some people feel it is unnecessary. Mr. Toll, do you have any questions? Mr. TOLL. Yes. Could you interpret the statute a little bit differ- ently than you now are, giving some weight to this language in the report, so as to reach the desired goal? As I understand it, you want to make sure that this type of liability won't be covered by the Govern- ment indemnity, but will be covered by commercial property insur- ance. Mr. PRICE. That is right. Mr. TOLL. That would seem to be consistent with this language in the committee's report at the time of reporting out the bill. Mr. PRICE. It is entirely consistent with the language of the report. As I say, the trouble is with the plain language of the statute itself. There is another problem here. Even if we interpret it as excluding this property, in the face of the plain language of the statute in a situation where a supplier is the one liable, it could turn out that our interpretation did not make any difference, that the law means just what we say now we think it means. Mr. TOLL. I might say, Mr. Chairman, this has been included in a proposed bill which the Commission has forwarded to the Joint Com- mittee, which encompasses a number of other subjects, and will be explored further during legislative hearings, probably in May. Representative PRICE. Will you proceed with your statement, Mr. Price? Mr. PRICE. Mr. Chairman, that concludes the part that I have any familiarity with. I believe Mr. Kratzer, with your permission, will give the testimony on part II, if that is agreeable. Representative PRICE. Yes. I think Mr. Toll has a few questions to ask. Mr. TOLL. Mr. Price, I would like to ask you a few questions on the report which the Commission submitted to the Joint Committee on April 1, which have not been covered in your oral statement here. 58511-60-pt. 2- -2 134 INDEMNITY AND REACTOR SAFETY On page 8 of the report (appendix, p. 273), you mentioned a number of problem areas that are still under study. One of these was trans- portation of nuclear fuel to and from reactors outside the territorial limits of the United States, such as if there might be an accident while the fuel was in transit to Hawaii, Alaska, or Puerto Rico. What progress are you making in finding a solution to that prob- lem? Mr. PRICE. I think our position is that the statute does not cover that transportation. I will have to ask Mr. Lowenstein to back me up. I think we have thought that for the time being, at least until recently, we did not have a problem. We are about to have it with respect to the Puerto Rican reactor. It was not important enough to recommend legislation at the present time. Mr. LOWENSTEIN. At this session. This may need to be tied in with the foreign indemnity international transportation question. We felt it would be desirable to have a little bit more time and see how solu- tions to those problems emerge and we may need to fit this in with those. I might identify one problem that we thought about in studying this question. That is, suppose the fuel elements were carried to Puerto Rico from the United States by ship, and the ship cracked up and there was a nuclear incident on some island not within the United States, but between the United States and Puerto Rico. You can see how you can get into questions of foreign law and nuclear incidents in foreign countries. We thought we needed to study it some more. Mr. TOLL. This arises because of the definition of nuclear incident that ties it down to within the United States. Mr. LOWENSTEIN. Yes, sir. Mr. TOLL. You don't believe there is any way you can cover the transitory situation under the language of the statute. Mr. PRICE. Not under this statute. Mr. TOLL. When will the Commission be shipping fuel rods down. to Puerto Rico, or some components? Mr. PRICE. I suppose some have already been shipped for the little training reactor they have, which is fairly inconsequential. Mr. TOLL. They are building a fair-sized research reactor, and later a power reactor. Mr. PRICE. The schedule for the power reactor calls for the start of construction this summer. I don't have in mind the scheduled completion date but it must be in late 1961 or more likely in 1962. Mr. LOWENSTEIN. I think that would be about right. I don't know the exact date. Mr. PRICE. I would be glad to get the time when they need the fuel and put it in the record, if you like. (See item (b) in letter dated May 8, 1960, to the Joint Committee from AEC, reprinted below.) U.S. ATOMIC ENERGY COMMISSION, Washington, D.C., May 8, 1960. Mr. JAMES T. RAMEY, Executive Director, Joint Committee on Atomic Energy, Congress of the United States. DEAR MR. RAMEY: During the hearings held April 26, 1960, by the Subcom- mittee on Research and Development and the Special Subcommittee on Radia- tion of the Joint Committee on Atomic Energy on "Domestic and Foreign INDEMNITY AND REACTOR SAFETY 135 ! Atomic Energy Liability and Indemnity Problems," Mr. H. L. Price was re- quested to supply for the record information as to (a) the amounts of liability insurance premiums charged Battelle Memorial Institute and Armour Research Foundation for financial protection maintained under the original 10 CFR Part 140 as compared with the premiums chargeable for the revised limits of insur- ance required by the revised Part 140 which became effective May 7, 1960; (b) the approximate time when the first fuel elements are expected to be shipped from the United States to the site of the boiling nuclear superheater (BONUS) power station planned for construction near Rincon, P.R.; and (c) those nonprofit educational institutions, licensed by AEC to operate a nuclear reactor, which have purchased a nuclear energy liability policy (facility form). As to (a), Battelle Memorial Institute elected to purchase, at a 1960 advance premium of $13,750, nuclear liability insurance in the amount of $2 million (the amount of financial protection required of Battelle was $450,000 under the original pt. 140). Under the present part 140, Battelle is required to main- tain financial protection in the amount of $2.5 million. The Nuclear Energy Liability Insurance Association has advised that, in accordance with rating procedures promulgated by the National Bureau of Casualty Underwriters, the latter amount of insurance ($2.5 million) will cost Battelle $15,525, or an in- crease in their annual advance premium of $1,775. Under the original part 140, Armour Research Foundation maintained insur- ance equal to its financial protection requirement of $250,000 at an annual ad- vance premium of $3,000. Armour's new financial protection requirement is $1.5 million which, according to information furnished to the Commission by the Mutual Atomic Energy Liability Underwriters (the Mutual Insurance Rating Bureau establishes rates for MAELU), will raise Armour's yearly advance pre- mium from $3,000 to $7,000. With respect to item (b), above, the tentative schedule for the BONUS reactor calls for completion of construction and loading of fuel by December of 1962. Accordingly, it is expected that the first fuel elements will be shipped to the Rincon site sometime during the second or third calendar quarter of that year. We are also enclosing a list of nonprofit educational institutions referred to in item (c) above who have purchased nuclear energy liability insurance (facility form). The list is based upon information furnished to the Commission by the nuclear liability insurance syndicates. Sincerely yours, R. E. HOLLINGSWORTH, General Manager. The following information identifies AEC reactor licensees found to be non- profit educational institutions which the insurance syndicates have identified as holders of a NELIA or MAELU nuclear energy liability policy (facility form): Educational institution Catholic University of America__. Colorado State University. Iowa State University--- Massachusetts Institute of Technology Oregon State College_ Stanford University. University of Akron.. University of California__ University of Delaware. University of Florida__ University of Michigan_. University of Wyoming_- Virginia Polytechnic Institute__ Worcester Polytechnic Institute___. Location Washington, D.C. Fort Collins, Colo. Ames, Iowa. Cambridge, Mass. Corvallis, Oreg. Stanford, Calif. Akron, Ohio. Berkeley and Los Angeles, Calif. Newark, Del. Gainesville, Fla. Ann Arbor, Mich. Laramie, Wyo. Blacksburg, Va. Worcester, Mass. Mr. TOLL. I have one other question I would like to ask about a possible gap that has sometimes been mentioned. I wonder what you have been doing on it. Assume that the insurance syndicates are in- suring three or four or more large power reactors and an incident occurs in State X that perhaps uses up $50 or $60 million of the in- } 136 INDEMNITY AND REACTOR SAFETY surance coverage. I have been informed that the insurance policies reserve the right that if they make a payout on one reactor, they can, upon certain notice, reduce the coverage in other policies cover- ing other reactors. Is that correct? Mr. PRICE. I am not sure I know the answer to that. My recollec- tion is that they do reserve the right to reduce these amounts if they think their capacity is impaired. But I am not sure. Mr. LOWENSTEIN. My impression is, and I am not sure, either, that they have to keep it in for the year. But the insurance people are here. I have been informed that the answer to that is "No." Mr. HAUGH. The answer to the question, as I understand it, Mr. Toll, is "No." If I understood your question, let me paraphrase it. There are three reactors, all of whom are over 100,000 kilowatt elec- trical capacity, so each has purchased $60 million liability insurance. If I understand your question, one of them has a very serious incident and for the sake of discussion it involved $50 million of cost. The insurance on the other two reactors is not affected. The other reactors still have the $60 million that they originally purchased. The first one where there was an incident now has less, $10 million of insurance, after the $50 million, and it has no more unless and until that $50 million or any part of it had been reinstated. But the other two reactors were not at all affected by the amounts of their insurance, either. Mr. TOLL. Is it a firm pool so far as they are concerned? So long as there is not an incident at their own reactor, the policy cannot be reduced? Mr. HAUGH. That is right. They are not affected. All those pol- icies terminate at the end of a year. They go right on and the follow- ing year they continue to purchase insurance again. Those other two are not affected at all, in our hypothetical example. Mr. TOLL. Do I understand that each policy has to be renewed each year? Mr. HAUGH. That is right. Mr. TOLL. It is possible that the following year the insurance syn- dicate might wish to reduce the amount of the pool if they have had to make out a substantial payment? Mr. HAUGH. If by some chance there were any withdrawals from the syndicates, and the amounts available became less, they would be in a position where it would not be possible for them to issue that much. That has not happened up to the present time. I hesitate to say because nothing is impossible. I would say it would depend on the following year. We have every reason to anticipate that they will continue to have $60 million. Mr. TOLL. Thank you. That has been mentioned to me, at least, as a possible gap. But I think in view of Mr. Haugh's explanation, it is not a gap that would not arise until the end of the year, if then. Representative PRICE. Would you proceed? Mr. FINAN. With your permission, Mr. Chairman, we will turn to "Part II: Problems of Foreign Indemnity," with our testimony handled by Mr. Kratzer. Representative PRICE. I read ahead on the first page. Before you start the statement, I think there ought to be a brief explanation of the fact of what OEEC is considering. INDEMNITY AND REACTOR SAFETY 137 L A Mr. KRATZER. Yes, sir. I wonder if I might refer that question to Mr. Naiden of the Office of General Counsel, who has the legal com- petence in this field. Representative PRICE. Would you tell us the nature of the OEEC convention? Mr. NAIDEN. Yes. The OEEC is considering a draft convention which provides for absolute liability, exclusive liability, a liability ceiling of $15 million which may by State legislation be lowered to $5 million, that is, protection up to $15 million which by action of the local government could be reduced to $5 million. I think those are the essential provisions of it. We are told it is near signature, although after signature it will have to be ratified. Representative PRICE. Does that complete your explanation of the OEEC convention? Mr. NAIDEN. I would be glad to answer any questions that I am able to. Representative PRICE. That will follow. I wanted to have in the record what the OEEC contemplated. You start here with an amendment. Mr. NAIDEN. I have tried to cover the essentials of it, the essential legal principles and the amount of money. If there are some ques- tions beyond that, I will try to answer them. Representative PRICE. Mr. Toll has one right now. Mr. TOLL. One of the provisions of primary interest to an Ameri- can supplier is the question of recourse rights under the OEEC con- vention. Could you explain what those are? Mr. NAIDEN. Yes. Right of recourse has been restricted to those who intentionally-I think that is the word-who commit fault intentionally. Mr. TOLL. Is that companies or individuals? Mr. NAIDEN. It is a right of recourse restricted to individuals. Mr. RAMEY. Could you explain for the layman what is meant by "recourse"? Mr. NAIDEN. I can, Mr. Ramey. I assume you are not one of the lay persons to whom you refer. Mr. RAMEY. These are educational hearings, however, Mr. Naiden. Mr. NAIDEN. Right of recourse is what someone, a reactor operator, who has to pay damage to a third person injured by a nuclear inci- dent. If the XYZ company in the United States manufactured a reactor and shipped it to Europe, and it caused a reactor incident there, the operator wants to be able to turn around and sue the XYZ company. The provision in the OEEC convention which is pertinent to this would preclude any right of recourse by the reactor operator except against an individual who had intentionally caused the diffi- culty which led to the nuclear incident and in turn to the damage. Mr. TOLL. Is there exception as to any rights that might arise out of contract provisions? Mr. NAIDEN. Yes, we always include this. It is a little difficult to take it seriously, because I don't know of any American manufacturer who will contract in this way. However, the reactor operator might insist on it in the negotiation. To repeat, I don't know of any Amer- ican manufacturer who would afford this right by contract. Mr. TOLL. Unless there is a possibility that this provision in the treaty is an invitation to the European operator to negotiate on this 138 INDEMNITY AND REACTOR SAFETY 1 point and try to obtain a contract provision that is more favorable from his point of view. Mr. NAIDEN. Perhaps, Mr. Toll, but he has the right to negotiate anyway. Mr. TOLL. He would not have the right, I wouldn't think, if the treaty refused to recognize, regardless of any contract provisions, any right of recourse. Mr. NAIDEN. I think I would agree with you. Whether or not a provision in the treaty could be overridden by a provision in the contract is a question that I had not thought of until this minute. I would hesitate to give you an offhand opinion. I think you are probably right, though. Mr. TOLL. Thank you. Representative PRICE. Would you proceed, Mr. Kratzer? Mr. KRATZER. Yes, sir. Mr. Chairman, we are able to make the following status report in the foreign indemnity field. The OEEC convention may finally be near signature by at least some of the member nations. We are advised that this signing may take place in May. Following sig- nature, however, there must be ratification. The two primary issues which needed to be resolved before signature were these: (1) should the convention contain a provision permitting state indemnification above the level of insurance or other financial security required to be maintained by reactor operators; and (2) should there be recourse against producer-suppliers where a showing of fault could be made? The first issue was resolved by inclusion in the convention of a pro- vision which does permit signatories to the convention to pass national legislation providing for indemnification above the insurance cover- age. Signatories providing for such indemnification would be free to give it effect with respect to nationals of other signatories on the basis of reciprocity, or to impose any other conditions. Representative PRICE. Mr. Ramey has a question. Mr. RAMEY. Under the Euratom convention, how would this tie in with that? Mr. KRATZER. I think that goes to the question of where the Eur- atom convention stands. Of course, the basic purpose of the Euratom convention would be to provide coverage above the $15 million which is provided by the OEEC convention. A draft of the Euratom con- vention has been prepared. However, in light of the new changes in the OEEC convention, which relate to this very question of na- tional coverage above the $15-million limitation, the Euratom con- vention obviously requires some reworking to harmonize it with the OEEC convention as it now stands. So I think that the answer to your question is that we have to wait and see how the Euratom con- vention is going to be redrafted in this regard. The purpose is to provide, within the Euratom states, mandatory additional coverage above the $15-million limitation. Mr. RAMEY. How much was that? Mr. KRATZER. The figure that has been talked about, as I recall it, is $75 to $100 million, but it is not an agreed figure as yet. Mr. RAMEY. That will take some more time, then. This question of timing on these coverages is of some importance, particularly to American manufacturers. INDEMNITY AND REACTOR SAFETY 139 T Mr. KRATZER. That is very true, sir. We of course are more than anxious to see the Euratom convention proceed. I think that they do have this difficulty of having to harmonize it with the OEEC con- vention, and this cannot be done with any finality until the OEEC convention is signed off on which we hope will take place in May, and ratified, of course. I think the answer, and this is subject to some further checking, is that the contracts of our American manufacturers are going ahead with the inclusion of contingencies that call for the development of a satisfactory resolution of this matter. We naturally are going to press to have the Euratom convention put back in shape as early as possible. I think they are talking about some time this fall for fairly definitive action on it. Mr. RAMEY. That would be after the SENN project possibly might be submitted for approval. The Mr. KRATZER. Yes, sir, that is correct. As I said, I think the SENN contract has in it a contingency with respect to this matter. SENN contract with the reactor supplier, that is to say. Representative PRICE. Proceed, Mr. Kratzer. Mr. KRATZER. With regard to the second point, the Italian repre- sentatives in the deliberations have not agreed with the other OEEC countries to restrict rights of recourse to (1) rights against individuals who intentionally cause damage and (2) rights specifically created by contract. It is believed among other OEEC members that Italy will sign the convention despite retention of such restrictions on rights of recourse. Euratom is also preparing a third party liability convention which will be built on the OEEC convention. This complementary system will provide for a high level of mandatory state indemnification above the OEEC limits. The question of the amount remains to be settled, but the figure most frequently discussed ranges from $75 to $100 million. The IAEA Panel of Experts established to draft third-party lia- bility convention completed its work in January of this year, and recently submitted its report to the Director General. At the April meeting of the Board of Governors, it was agreed to submit this con- vention to member governments for review, with comments to be returned by such governments by August 31, 1960. Then either a new small panel of government representatives will be convened to revise the draft convention in the light of the comments or a diplomatic con- ference will be called to revise and sign the convention. In early March 1960, the IAEA convened in Vienna a Panel of Experts representing 21 member countries to consider the principles of a nuclear ship convention. Prior to the meeting the International Maritime Committee had drafted a convention which dealt with this problem. This Panel devoted 1 week to a discussion of the major issues involved and there appeared to be at least some agreement re- garding the necessity for state indemnification over and above com- mercial cover. Again, there was difference of opinion as to the amount and how it should be provided-by national legislation, pool- ing arrangements, or ad hoc parliamentary action after a particular incident. No definite decision was reached, but it is possible that this Panel will convene again for one more meeting, probably in June or 140 INDEMNITY AND REACTOR SAFETY July. Subsequent to such a meeting, or perhaps in lieu of it, a diplo- matic conference will, we are advised, be called by the Belgian Gov- ernment in late 1960 or early 1961 to draft an international conven- tion. The United Kingdom, Germany, and Switzerland each brought into effect comprehensive atomic energy laws during the past year establishing the frames of reference within which their respective national atomic energy efforts will operate. Each of the laws re- quires maintenance of certain insurance levels by reactor operators, but only the German law provides for state indemnification (500 million marks, or $125 million). The United Kingdom and Swiss laws provide that their respective Parliaments shall consider supple- mentary relief in the event that insurance protection is deemed inade- quate in any particular incident. Italy, Japan, Sweden and the Netherlands are in varying stages with respect to their proposed comprehensive atomic energy legislation. No estimate can be given at this time concerning specific provisions and ultimate effective dates. In summary, there has been some progress. During the last year the Government has sent a number of representatives abroad to meet- ings. The newness of the subject, the differences in legal systems, and the political aspects of the problem are some of the reasons why progress has necessarily been slow. Our plan for the future is to continue to support the work of all countries and international organizations which have an interest in perfecting adequate systems of financial protection. In time, the general public in all these countries will, we believe, demand systems which will provide for financial protection whether they be public or private. Representative PRICE. Mr. Kratzer, you may have answered this question in the last paragraph on page 11, but why has the OEEC convention been delayed so long? Mr. KRATZER. There were several problems encountered, Mr. Price. After a convention was drafted which appeared to have the agree- ment at least on the working level of all the countries involved, this difficult question of state indemnification came to the fore again, not that it had not been considered during the course of the development of the convention. The French representatives, in particular, when the convention was considered within their Government, raised seri- ous questions about it. As a result of that, this new change which we described and which provides a system for optional state increase in the coverage came into being. I personally feel that is an improve- ment in the thing. Secondly, the Italian question arose with respect to the right of re- course. This has been a further delaying factor. I think the general answer to your question, which we recognize is not an entirely grati- fying answer, is that when you have this number of countries, each with its own legal system, its own insurance industry, its own parlia- mentary system, trying to get together on a matter like this, it just does not move quickly. Representative PRICE. Do we know what the amount of the OEEC pool is? Mr. KRATZER. I am informed that the European insurance com- panies can cover up to the $15 million per incident. Is that correct, Mr. Naiden? INDEMNITY AND REACTOR SAFETY 141 Mr. NAIDEN. Yes. There has been some speculation that it might be higher, but this is approximately correct as far as we know. Representative PRICE. What do our people think about the ade- quacy of this pool? Mr. KRATZER. You are referring to our industry representatives primarily, Mr. Price? Representative PRICE. Yes, people over here are interested in it. Mr. KRATZER. I believe that we would all be pleased to see a higher figure. On the other hand, I am not prepared to say that this limita- tion in conjunction with the limitation of liability and the exclusive liability of the operator does not provide adequate protection for our industry. The people who might feel that they are not adequately protected by this system are the European public. Is that a fair an- swer, Mr. Naiden? Mr. NAIDEN. I don't know that they are or are not adequately pro- tected on the other side. What we have concerned ourselves primarily with, Mr. Price, is insulating American suppliers against catastrophic lawsuits. As Mr. Toll pointed out, it has been a long road, and we are not home yet. But we have advanced somewhat. What I am trying to say is this-the lawsuits have been our primary concern. The other question is for the national legislatures to resolve. Representative PRICE. Has it come to the point where you feel that it is necessary for the various States over there indemnifying over this amount? Mr. NAIDEN. I am sorry, I don't understand. Representative PRICE. Should the various States over there be re- quired to indemnify above the OEEC pool? The States themselves. Mr. NAIDEN. We have always given this as our opinion, but it is difficult for this Government to pass its opinion along to another one. The French have taken the most militant attitude on this lately. There has been some progress in this direction. It is showing up in the maritime field where the representatives that were last at Vienna. realized that nuclear ships are not going into ports anywhere in the world unless there is adequate provision for financial protection, whether it be commercial or private. But the protection apparently must exceed $15 million which has been the number that the insurance industry, I believe, has discussed in Europe. I am not absolutely sure that number is correct. It might be a few million higher. Representative PRICE. What would be the effect on SENN reactor plans, if Italy insists on its recourse rights? Mr. NAIDEN. Mr. Price, I think the supplier, General Electric, would be the proper person to answer that question. We are spectators to some extent in that question. I don't know whether they would ship or not. It would be for them to decide. Representative PRICE. Mr. Ramey. Mr. RAMEY. Is the OEEC convention term a 10-year term? Mr. NAIDEN. Statute. Mr. RAMEY. Yes. Mr. NAIDEN. I think it provides for a 10-year statute of limitations. I have that here if you will give me a moment to look. Mr. RAMEY. I was thinking more of just the convention itself. Mr. NAIDEN. The term of the convention? I am sorry, I don't recall, Mr. Ramey. 142 INDEMNITY AND REACTOR SAFETY Mr. RAMEY. It is my impression that it is a 10-year life, and it would have to be extended. I think the one question is: Does the convention apply throughout the life of any reactor approved or con- structed during the 10-year period, or does it cut any protection at the end of 10 years even though a project was started or completed or approved during that period? Mr. NAIDEN. Mr. Ramey, I do not know the answer to that. I could speculate, but rather than speculate, I would prefer to give you a statement for the record. Mr. RAMEY. Perhaps you could give us a statement for the record. Mr. NAIDEN. I would be pleased to do that. Mr. RAMEY. Also, include if it is a terminable type of convention whether that would inhibit outfits from going into the project. Mr. NAIDEN. I should think it would. If the right of recourse were to come into being again at the end of 10 years, I would not think that the supplier would feel he had adequate protection. I will have to check this, and furnish it for the record. (The material referred to follows:) Article 22 of the OEEC convention provides that the "convention shall remain in effect for a period of 10 years from the date of its coming into force." It provides further that any contracting party, after completion of the original 10-year period, may, by giving 12 months' notice to the Secretary-General of the OEEC, terminate the application of this convention to itself. After the period of 10 years, the convention shall "remain in force for such contracting parties as have not terminated its application *** and thereafter for successive 5-year periods for such contracting parties as have not terminated its application at the end of one of such periods of 5 years." Under the interpretation we have been given of the above provisions, the convention would cease to apply to a contracting party giving proper notice to terminate application of the convention to itself, regardless of whether a reactor had been approved, started, or completed while the convention was in force. Representative PRICE. Mr. Toll. Mr. TOLL. Do you think there is any relationship between the fact that Italy is the country that is insisting on broader recourse rights. than our suppliers would like, and Italy is also the only country that has a proposed reactor under the Euratom program? Mr. KRATZER. I think any answer to that would be speculative. I assume you mean that since the problem is closer at hand, they have thought about it a little harder. I can't do anything other than specu- late on that. I think actually there are many countries in the OEEC whose potential acquisition of a reactor is close enough at hand so that they must have given some very hard thought to this matter. So I don't really attribute it to that. Mr. NAIDEN. May I add something? Mr. TOLL. Yes. Mr. NAIDEN. The Italian representatives-I am not sure they were representatives of the Italian Government in the Vienna discussions relating to the maritime convention-took the same position. They wanted recourse. I don't know that the Italians will take this position in the Euratom situation. I can't speak to that. I do not know that this is the position of the Italian Government. At least it is not the position of the Italian Government as yet. It may very well become the position of the Italian Government. I think the Department of State should more properly speak to that. INDEMNITY AND REACTOR SAFETY 143 ▸ Representative PRICE. You mentioned the International Agency Panel of Experts on the subject of indemnification. What are the es- sentials of the International Agency convention? Mr. KRATZER. I would like to ask Mr. Naiden to answer that ques- tion, if I might, sir. Mr. NAIDEN. The IAEA convention is a little more difficult to de- scribe. I don't think it prescribes channeling or exclusive liability in the operator. That is left to national law. There are a number of other matters that are left to national law, Mr. Price. I have not examined this convention in some time. I would rather submit a comparison of the differences to you in writing than to discuss it. I think the principal difference is the latitude which it allows local governments in providing for standards which are different than those in the convention, relating to amount and to channeling. Mr. RAMEY. It doesn't have a minimum amount of liability? Mr. KRATZER. My understanding is that it does not yet. It would provide one. But this is a matter which is left to the agreement still to be worked out by a larger group of states. I think we should point out with respect to the Agency convention that the panel of experts which drafted it was a private panel. In other words, the members were not representatives of their governments, but rather experts who have competence in this field. So that a question such as the limitation of liability, the actual numerical limitation which should apply, was one which was outside of their competence to speak to. It has to be filled in later, so to speak. Mr. NAIDEN. I think I can escape supplying any written material if the committee will allow me to read two sentences. Representative PRICE. That is fine. Mr. NAIDEN (reading): The approach to the Agency convention is in most respects similar to that of the OEEC. One major exception is that the liability of the operator is exclusive only if there is no contrary national legislation by a signatory. An- other variation from the OEEP convention is that more general language is used and in several provisions the internal legislation of contracting states is made the applicable law. Representative PRICE. Do you have any observation to make on the fact that you have the International Agency, OEEC, and Euratom, and then all the various states involved in this problem. Does that lead to confusion on the whole subject? Mr. NAIDEN. Yes. Representative PRICE. Where do you think we stand? What hope do our contractors who are seeking business have for early solution of the indemnification problems? Mr. NAIDEN. My answer would be this, Mr. Price: Little by little we make some progress. We would hope that before the reactors go critical that there will be conventions which will control this. It is difficult to be sure. We have explored with our own suppliers on a number of occasions what we might do to speed things up, to clarify difficult questions such as recourse in the Italian situation where the GE reactor, as Mr. Toll points out, happens to be. I should say the Euratom reactor happens to be building. Other than to continue to work, I know of no solution. 144 INDEMNITY AND REACTOR SAFETY Representative PRICE. Has the progress been sufficient to give you a little encouragement rather than discouragement that these matters will be worked out? Mr. KRATZER. I would be willing to answer that question in the affirmative. I think there are some definite signs of progress on the horizon. In the case of Germany where we have an actual indemnifi- cation statute with a substantial limit of liability is one example. In the case of OEEC there is a necessary presumption that the present statute will be signed and ratified reasonably promptly. But it has made definite progress. Mr. RAMEY. Are there 15 nations in OEEC? Mr. KRATZER. My recollection of the membership is 14, but I would have to check that, Mr. Ramey. It is approximately that. correct number is 18.) Mr. RAMEY. Euratom is six and IAEA is eight. Representative PRICE. They all overlap. (The Mr. KRATZER. There is that overlap. I would say in response to your earlier question, Mr. Price, that while there is overlap and some confusion between these various efforts, they are not in any sense of the word competitive efforts. Representative PRICE. It might be even helpful. Mr. KRATZER. That is correct. It has to be that way in reality. Nothing that Euratom can do can solve the problem outside of Eur- atom. Nothing that the OEEC can do can solve the problem outside of their membership. So there does have to be widening circles of attack on this problem. I think that the trend that we see, which is more or less inevitable, is that the bigger the organization, the more general and, let us say, vague their convention or statute, whatever form it might take, becomes. Representative PRICE. Because of the organization they could agree as to the type of indemnification program they would adopt. Mr. KRATZER. That is right. Mr. RAMEY. On your IAEA you have the problem, in comparison to Euratom or OEEC, of the underdeveloped countries. Mr. KRATZER. Yes, sir. Mr. RAMEY. Where you have independent underdeveloped coun- tries you would probably have an inclination for absolute liability and having it rather stiff on the manufacturer as compared to an indus- trial country that might be more sympathetic to the manufacturer. Mr. KRATZER. That is right. Mr. NAIDEN. May I add this, Mr. Price. I think Mr. Kratzer's comment is well taken. Little by little these conventions have moved forward. The Government of the United States, it is my impression at least, has done what it could do to move these conventions along. Mr. Max Isenberg of the Department of State has been in Europe now for 3 years working on the OEEC convention, among other mat- ters, and the convention has reached the point now where it is ready for signature. There may be some reservations, but what we report now is more than we had last year. Whether the convention will be ratified-one can only report on the observations of the representa- tives of the foreign governments on a question such as this. The Maritime Convention has also moved on. I don't want to retrace his steps, but Mr. Kratzer is right. But we still don't have one signed INDEMNITY AND REACTOR SAFETY 145 and sealed and delivered. If this is the ultimate measure of success, we are not successful yet. Representative PRICE. Mr. Toll. Mr. TOLL. The United States is not a member of OEEC, but don't we have some quasi-official responsibility in these meetings or partici- pation as a technical adviser or something like that? Mr. KRATZER. Actually I am told we are an associate member of OEEC. I don't know precisely what that means in terms of the statute except that we are not a voting member. As you say, we do participate. We are privy to their consultations and we do partici- pate and provide technical advice. We have done that through Mr. Isenberg's presence in Paris continuously since the undertaking of this convention. Mr. TOLL. So far as the Euratom reactors are concerned, such as SENN, the U.S. Government is providing research and development assistance and contemplates certain other types of assistance. Should not our Government representatives have a responsibility to move this thing along and to indicate the concern of our Government to the European Governments, and not just leave the suppliers with the ball to carry? It seems to me our Government is participating in this program, too, is it not? Mr. KRATZER. We certainly feel that responsibility, Mr. Toll. We have done just that. We have attempted to move these things along and to urge the solution of problems on them. As I say, it is not clear to us and we certainly are open to any suggestions, how we can play more than an advisory and urging role in the solution of these problems in foreign jurisdictions. Mr. TOLL. I think we could eventually say that we are not going to provide a guarantee or certain types of assistance unless this problem is solved. Mr. KRATZER. Yes, that is correct. Of course, under the Euratom program the Government itself is necessarily indemnified. But this does not help the manufacturers, as you point out. The balance you have to make here, looking at it from the standpoint of advancing the interests of our industry in these transactions, is how tough a line you can take before you interfere with rather than promote the chance of a sale finally being consummated. Representative PRICE. Mr. Naiden, either you or Mr. Kratzer men- tioned something about France giving attention to the indemnifica- tion. Were you tying that to the maritime? Mr. NAIDEN. The remark about the French being militant about state indemnification? Representative PRICE. Yes. Mr. NAIDEN. That relates both to the maritime and OEEC conven- tions. In both cases the French have taken the same position. Representative PRICE. Are they making separate programs out of the maritime indemnification as against the other type of reactors? Mr. NAIDEN. Yes. The maritime convention would cover nuclear ships and nuclear incidents arising out of accidents on those ships, and only that. Representative PRICE. When you say that maritime convention, is this an OEEC maritime convention? Mr. NAIDEN. No, sir. 1 146 INDEMNITY AND REACTOR SAFETY Representative PRICE. Or are various governments involved? Mr. NAIDEN. Would you like me to explain that? Representative PRICE. Yes. Mr. NAIDEN. The maritime convention was originally drafted by private maritime lawyers who banded together in an organization called the International Maritime Committee. They held a meeting last year in Yugoslavia. Representatives of all the 22 countries which belong to the International Maritime Committee, private lawyers and not government, met, drafted the convention, and then following that the Agency took cognizance of it, and it was then considered at Vienna by a panel of experts, and I use the word "expert" only because it was on the top of the invitation which came to Mr. Clarence Morse, the Maritime Administrator, who was our U.S. representative at the panel meeting in Vienna. The next thing that will happen, Mr. Price, is the diplomatic con- ference which will be called by the Belgian Government in Brussels to consider this convention. Representative PRICE. You say there are 22 nations? Mr. NAIDEN. Yes. Representative PRICE. In that group of nations, how many of them have a ship reactor program or maritime program? Mr. NAIDEN. A program. Representative PRICE. Yes. Mr. NAIDEN. As distinguished from a ship? Representative PRICE. How many are interested in building a nu- clear powered ship for the merchant marine? Mr. NAIDEN. Merchant ship? Representative PRICE. Yes. Mr. NAIDEN. I am advised by Mr. Carrico of the Maritime Admin- istration and the Atomic Energy Commission the answer is 10. Representative PRICE. Ten of the 22 have given consideration to nuclear ships? Mr. NAIDEN. I didn't know it was that large a number. This must include everybody who has written a memo. Mr. CARRICO. No. They have active nuclear ship studies in various stages. West Germany has three in project stage, for example. Eng- land has three proposals now ready for submission for a ship. In the case of Japan it is as many as 20 paper ships. They are very thorough studies but they are entirely on paper. Others are in varying degrees. But they have active nuclear ship programs. Representative PRICE. Would you identify yourself to the reporter? Mr. CARRICO. Paul Carrico, Maritime Administration. Representative PRICE. Mr. Ramey. Mr. RAMEY. On your maritime convention, has any consideration been given to a comparable requirement that we have in the Price- Anderson law, that safeguard reports be made public on merchant ships and other maritime plants? As I recall in the case of the Nautilus going into Copenhagen, the main objection was that they didn't know whether this was a safe reactor. Without a safeguard report on it, they decided they didn't want something coming in there. This is something that is liable to happen in a number of places with the Savannah, unless you have a safeguard report. Do you have any comments on that? $ INDEMNITY AND REACTOR SAFETY 147 ! ་ Mr. NAIDEN. Mr. Ramey, I think Mr. Carrico should answer this question, because I believe it relates to the safety of life at sea confer- ence and port inspection and things of this sort. I know it doesn't relate to the maritime convention. Mr. RAMEY. It doesn't tie in with the indemnity at all? Mr. CARRICO. No. Mr. NAIDEN. I am not saying it doesn't tie in with the indemnity in the generic sense, but it is not considered in the maritime conven- tion. This deals exclusively with legal liability principles and, we hope, with the amount of money that will be available to pay claims for damages. Mr. CARRICO. It ties in only, sir, with the statement in his liability convention that the ship must be properly licensed by the owning state or licensing state. That licensing is governed or will be gov- erned, it is contemplated, by the safety of life at sea convention, which provides standards for the design, construction, and operation in both national and international waters of nuclear ships. They would be covered by his liability convention only by reference to the licensing provision. Mr. RAMEY. How about insurance? Does it tie in with that? Mr. CARRICO. This same convention requires the state to set the pri- vate financial protection that must be available or carried by the owner of that nuclear vessel. This means that the licensing state must require the private protection which is then covered by the liability convention. Mr. NAIDEN. May I add one word? The maritime convention, I be- lieve, contemplates either private insurance or protection being pro- vided by the government. This question has not been settled yet. Pre- sumably it would ultimately be settled at the final go-around at the Brussells diplomatic conference. Representative PRICE. Do the legislative acts of the United King- dom and Germany and Switzerland include provision for maritime operation? Mr. CARRICO. No, sir. Mr. NAIDEN. It certainly does not in the case of the United King- dom. I don't know that the Swiss have any ships, Mr. Price. I don't think it includes the Swiss. I can't speak to the German legislation. Mr. CARRICO. The German and British specifically exclude nuclear ships. As he says, I don't think the Swiss have a ship. Representative PRICE. Some of our people spent a lot of extra hours on Lake Geneva on one ship. Mr. NAIDEN. I don't want to speak as an authority on whether the Swiss have ships or not, Mr. Chairman. But I don't think they have any nuclear ships. I can say that and I don't mean to be facetious. Representative PRICE. I would like to ask a question about the Swiss and United Kingdom laws. Are they regarded as satisfactory by our suppliers. Mr. KRATZER. I can't answer that question, Mr. Price. I am not cer- tain that we have had any expressions of opinion on that from them. We know that in both cases they provide for supplementary coverage after an incident occurs. Representative PRICE. They don't provide government indemnity. Mr. KRATZER. They don't have a mandatory indemnity. 148 INDEMNITY AND REACTOR SAFETY Representative PRICE. The German laws do. Mr. KRATZER. That is correct. Representative PRICE. Gentlemen, unles you have any further com- ments to make, that will conclude the hearing for this morning. The committee will reassemble in this room at 2 o'clock this afternoon. The first witness the afternoon will be Mr. Yount, of the Liberty Mutual Insurance Co. (Thereupon at 11:40 a.m., a recess was taken until 2 p.m. the same day.) AFTERNOON SESSION Representative PRICE. The committee will come to order. This is a continuation of the hearing of the Research and Develop- ment Subcommittee and the Special Subcommittee on Radiation to consider atomic energy liability and indemnity problems, both do- mestic and foreign. The first witness this afternoon will be Mr. H. W. Yount, executive vice president, Liberty Mutual Insurance Co., on behalf of the Mutual Atomic Energy Liability Underwriters. Mr. Yount, we are glad to have you before the committee. We have always appreciated the counsel and the information that you have brought to us on this subject in the last few years. STATEMENT OF H. W. YOUNT, EXECUTIVE VICE PRESIDENT, LIBERTY MUTUAL INSURANCE CO., ON BEHALF OF MUTUAL ATOMIC ENERGY LIABILITY UNDERWRITERS Mr. YOUNT. Mr. Chairman, with your permission, I will ask the other gentlemen interested in this matter to sit up here, which might facilitate the handling of questions. Representative PRICE. Will you identify them for the record? Mr. YOUNT. Mr. Richard Butler, secretary of the Travelers In- surance Co., who is a member of the governing committee of NELIA. Mr. De Roy Thomas, who is counsel for NELIA. Mr. Charles Haugh, vice president of the Travelers, who is the second witness representing NELIA. My name is Hubert W. Yount. I am executive vice presi- dent of the Liberty Mutual Insurance Co., representing the Mutual Atomic Energy Liability Underwriters. Mr. Chairman, I have a prepared statement which I will read. By way of introduction, however, I would like to get on the record a brief history of the activities of the insurance companies in this field for the past 5 years. It was a little more than 5 years ago when we were invited to attend a joint informal conference with the Joint Committee, members of the Commission, and other segments of industry, to discuss the prob- lems that were brought about by the passage of the Atomic Energy Act of 1954. As a result of that meeting, we were asked to submit to both the Commission and the Joint Committee a statement as to what we, as a segment of private enterprise, could do to implement the program. We submitted several reports to the Commission and subsequently to the committee, pointing out what we intended to do, pointing out that if this program was to be successful from our standpoint, certain minimum requirements would be necessary. We felt that the pre- INDEMNITY AND REACTOR SAFETY 149 vention of loss was one of the most important aspects of it, and that in connection with that it would be part of our job in addition to furnishing indemnity, such as we could mobilize, to provide a pre- vention service so that we would minimize the number of these un- fortunate events we are talking about. Also, that we would like to see maintained a strong, active Advisory Committee on Reactor Safeguards. Since that time we have worked very closely with the Commission and with the Joint Committee and have submitted our views on nu- merous occasions. Because we have the feeling that our views may not have been expressed on some occasions with sufficient clarity we asked for an opportunity this afternoon. Representative PRICE. We are always glad to have you here, Mr. Yount, and we appreciate the fact that we did have your views in the preparation of this program. Mr. YOUNT. Referring now to my statement, those representatives of the nuclear energy liability insurance pools present requested an opportunity to state their views with respect to the operation of the indemnification program under section 170 of the Atomic Energy Act. We believe that the present official policies, both legislative and ad- ministrative, will, if continued, make difficult the maintenance of a sound nuclear energy insurance program. The net effect of these poli- cies, as we see them, is a gradual attrition in the insurance require- ments and subsequently in the degree of participation of the private insurance industry in the development of a nuclear energy program. We believe that a primary objective of the Atomic Energy Act of 1954 and the amendments thereto was to permit the development of the nuclear industry under private enterprise to the maximum extent practicable. We also understand that this is to be accomplished with maximum attention to the protection of the health and safety of the public. Five years ago we were requested by your committee to indi- cate how our segment of the private enterprise system-namely, the insurance industry-could contribute to this program. For a detailed review of what we have accomplished, I refer you to my statement submitted to the Commission on January 19, 1960, a copy of which is included in the records of your committee. Representative PRICE. I think it would be worth while to include it in these hearings. So without objection, it will be a part of this rec- ord. I am referring to your statement of January 19. Mr. YOUNT. Yes, sir. (The statement referred to appears on p. 167.) Mr. YOUNT. A sound insurance program in a field with the hazards inherent in the development of nuclear energy must be predicated first on the development of a sound program for the inspection and pre- vention of loss because this is a primary requirement for protecting the health and safety of the public as well as protecting the interest of the insurance pools and the Government. Second, if an unfortunate event should occur there must be an adequate claim service staff to investigate and appraise loss and damage and finally, there must be the payment of financial indemnity to those damaged or injured. It has occasionally seemed to us that the present policies tend to overlook the first two aspects of such a program and imply that indemnifica- tion is enough. 58511-60-pt. 2—3 150 INDEMNITY AND REACTOR SAFETY r By that I mean simply, Mr. Chairman, that to the extent that any person engaged in the nuclear industry is not required to carry any insurance, the net effect is to substitute indemnification solely and that the prime requisites of prevention and the regular inspection and appraisal of operations to prevent loss are lost sight of. The gradual attrition of the insurance function to which I refer is illustrated first by the decision of the committee and the Congress 2 years ago to reduce the financial protection required of colleges and nonprofit institutions, and more immediately by decisions of the Atomic Energy Commission now before you. Specifically I refer to- (1) The low level of financial protection required of licensees under part 140 of the Commission regulations, as transmitted to the Joint Committee with the Commission's annual report of operations under section 170 of the act. (2) The decision of the Commission not to require financial protection of Commission contractors engaged in activities which would qualify for a license if the facilities used were privately owned. The result of these policies is that the nuclear energy liability insur- ance pools may not now, and probably will not in the foreseeable fu- ture, have an adequate base for a sound liability insurance program described above. First, the pools may find themselves insuring so few production and utilization facilities that they will not achieve the spread of risk necessary for sound insurance. Second, the amounts of financial protection required of licensees are set so low that the Gov- ernment is invading the field of private insurance. I will address my- self solely to the second point-the contractor program-and Mr. Haugh will cover the first-the level of financial protection to be fur- nished by licensees. I am certain that everyone here expects that eventually, and possibly in not too long a time, nuclear energy will be used for the economical production of power and heat, and for other useful purposes. Once that goal is achieved, or even in sight, it is certain that private organi- zations will be operating not only nuclear reactors but other types of production facilities. I cannot believe that at that time the Federal Government is going to insist on providing insurance at less than cost or at no cost to private organizations engaged in the nuclear energy industry for profit. Nevertheless, the present policies of the Govern- ment, as outlined above, appear to us to lead to that result. In order to avoid this result with respect to insurance, a policy and a program should be established such that the nuclear energy industry will even- tually provide the funds to pay all nuclear losses, other than those resulting from a major nuclear disaster. Simply stated, the insurance device shifts the risk of loss from the insured who pays the premium to the insurance company which in turn distributes the losses among all policyholders of the same class. An insurance company cannot indefinitely pay for the nuclear or any other industry losses out of its surplus. It cannot charge increased premiums to other classes of policyholders in order to pay nuclear losses. On the contrary, in the long run the money for nuclear insur- ance losses and expenses must come from the nuclear energy indus- try. To achieve that result a broad spread of risk is essential. For INDEMNITY AND REACTOR SAFETY 151 that reason we believe it contrary to the public interest for the Com- mission to take out of the nuclear energy liability insurance market all of its contractor operations and particularly the reactors in the power reactor demonstration program. It appears likely that for the next few years a majority of the power reactors built will be paid for in whole or in part by Government funds, even though operated by private utilities or, in other words, will be built under the power reactor demonstration program. For the Federal Government to pro- vide insurance at less than cost to the utility operating such a re- actor is to embark on a program which will put the Government. squarely into the insurance business. Furthermore, it is shifting to the taxpayers and probably permanently, a risk of loss which should be borne, under a sound insurance program, by the entire nuclear energy industry. In identical letters sent April 1 to Mr. Dorsett of NELIA and Mr. Gibson of MAELU, Mr. Hollingsworth, Deputy General Manager of the Commission, justified the Commission's policy in the following language: The Commission's present policy for indemnifying contractors who operate its reactors, as you know, conforms to the long settled policy of the Federal Government to assume its own risks. No circumstances have been brought to our attention which, in our opinion, would justify different treatment, for in- surance purposes, of such reactors as Elk River, Hallam, Piqua, and Shipping- port than is accorded to other AEC-owned reactors. Accordingly, the Commis- sion does not consider that it has a proper basis for changing its policy at this time nor has the Bureau of the Budget Bulletin No. 60-2 been construed as requiring revision of the present policy. The insurance industry has no objection to the policy of the Fed- eral Government to assume its own risks. However, we construe the phrase "assume its own risks" to mean the risk of liability for loss re- sulting from the operations of the Federal Government first, through its own employees or second, through contractor operations which are not, for security or for other strongly persuasive reasons, a proper subject of insurance. We do not construe that phrase to include the risk of loss to Government contractors, particularly fixed-price con- tractors. Further, we take strong exception to the Government's providing indemnity from the ground up to a utility which is super- vising, operating, and maintaining a reactor for the production of power for sale by that utility, even though the Government paid in whole or in part for the reactor. Such policy seems to us to be con- trary to the announced intent of Congress in passing the Atomic En- ergy Act of 1954, and particularly the Price-Anderson amendment, now section 170 of the act. I might add parenthetically at that point, Mr. Chairman, that ownership of a machine in previous history of government has not been deemed to be a sufficient cause for the Government to assume insurance with respect to it. During the war we insured operations for contractors with millions of dollars worth of equipment owned by the Government, and there was never any question raised as to Gov- ernment assumption of liability on those operations. These particular reactors that we are discussing here are operated by non-Government people. They are operated for the purpose of sale of power, and they have been taken entirely out of the financial protection program. 152 INDEMNITY AND REACTOR SAFETY Representative PRICE. Are you saying during the war you did insure Government-owned equipment that was being operated by pri- vate operators? Mr. YOUNT. That is correct. Representative PRICE. Could you give some instances? Mr. YOUNT. I could cite one large manufacturer of aircraft, that was one of the largest in the business, that is millions of dollars of Government owned machine tools in its plant. I was informed that they had to provide insurance protection covering the physical loss to such Government-owned production tools. So far as workmen's com- pensation and public liability were concerned, there was never any question about Government assumption of liability. The contractor purchased regular insurance protection. Representative PRICE. Your position here is that these reactors are in that same category. Mr. YOUNT. Yes, that they are merely Government-owned equip- ment being used by someone else for a private purpose. Summarizing, we believe this proposal is contrary to public policy for the following reasons: (1) It is based upon the assumption that the protection of the health and safety of the public is adequately met by the payment of Government indemnity, without the benefit of the loss prevention services of skilled personnel available from the nuclear energy insur- ance pools and their member companies. Parenthetically, again, Mr. Chairman, in the report I have men- tioned previously I have summarized those activities in this statement of January 19 (p. 167). (2) It reduces the amount of indemnity protection available to the public below the amounts available when insurance protection is re- quired by as much as $60 million. (3) It shifts to the taxpayers the risk of loss that should be borne by the entire nuclear energy industry. (4) It is an unjustified invasion into the field of private insurance. (5) It makes difficult the development and maintenance of a sound nuclear energy liability insurance program which we hold to be in the public interest. The Government policies under discussion cannot be justified on the premise that the cost of nuclear energy is so high as to be a de- terrent to progress in the nuclear energy field. Given an adequate spread of risk, NELIA and MAELU have developed a premium plan which will, we believe, produce the funds necessary (1) to pay ex- penses other than loss expenses, (2) to pay for ordinary losses and loss expenses, and (3) permit the accumulation of a reserve for catastro- phe losses. Over a period of years, if there are no catastrophe losses, this plan will result in the losses and expenses actually incurred by the insurers, determining the final cost of insurance to those persons en- gaged in the atomic energy industry. For a more comprehensive dis- cussion of that premium plan, I refer you to pages 6 and 7 of my statement which was made to and filed with the Commission on Jan- uary 19 (p. 167) and an additional copy of which has been submitted at this hearing for the records of the Joint Committee. Just to refresh your memory, Mr. Chairman, if we have no losses. whatever under the premium plan we have devised, the amount of re- turn in the 11th year will be from 67 to 75 percent of the initial pre- INDEMNITY AND REACTOR SAFETY 153 mium in the first year of a 10-year program. In other words, be- ginning 11 years after the fact, each person who was in the program in the first year will get back the average savings that have been accumulated over the period as a percentage applicable to the first year. That might reduce the cost of the deposit as much as 67 to 75 percent if we had no losses whatever. Representative PRICE. Have you had any losses so far? Mr. YOUNT. We have had no personal injuries losses that I know of today. We may have had a property damage loss or two. That remains to be seen. The physical damage pools have had a few in- cidents reported which may ultimately develop into a loss, but the losses have been practically negligible today. I think I am correct, Mr. Butler. Mr. BUTLER. I am not aware of any losses due to bodily injuries. Representative PRICE. No claims have been filed? Mr. BUTLER. No claims have been filed. Mr. YOUNT. I should say we have had some events in which some- one may allege that some damage will result at a future time, but nothing has happened yet. Our position on the questions I have discussed has been made clear to members of the Commission and the Commission staff. We re- quested an opportunity to appear before the Joint Committee today because we believe that the present policies of the Commission, with respect to levels of financial protection required of licensees and with respect to the indemnity program for certain Government-owned reactors, if continued and developed will defeat the objective that ultimately the United States develop a self-sustaining nuclear energy industry of which private insurance must be an essential part. We are convinced, moreover, that these are not matters of mere adminis- tration, but rather involve questions of fundamental policy. We appreciate very much the opportunity given to us to present our views to the Joint Committee. We did not come down, Mr. Chairman, prepared to talk about too much detail. We can, if you want to ask questions later. We thought that the matters of major policy which seem so important to us should be given prior consideration at this hearing. Representative PRICE. We are glad to have your comments and views, Mr. Yount, and I assure you they will be studied carefully by the committee. We recognize the fact that we are still in an entirely new field and we don't know exactly where we are going in it, and it is still open for study. I assure you that the committee will follow this closely and give full consideration to the points that you have raised. Mr. Yount, I have a few questions here. On page 2, at the bottom of the page, you say: I think it has always been recognized that it will take a number of years for the insurance pool to build up a sound base. Would you care to comment on that? We know it is going to take a little while to build a sound base. So this is not strange to us. Would you care to comment further on that? Mr. YOUNT. Our view, Mr. Chairman, has been that even if we put all of the nuclear operations into the pool, it would take quite a while to build it to a sound basis. So our concern has been that we start a 154 INDEMNITY AND REACTOR SAFETY policy, as I have called it, of attrition, of cutting back here and cut- ting back there, and now on the whole reactor demonstration program and throwing it out entirely, so that we are not building very much of a base. The more we do that, the longer it is going to take to get an adequate base. Representative PRICE. Of course, this is a field where we know at least for some time there will be a shortage of customers. Would you care to express further your views on the exemption that we did make for colleges and nonprofit institutions? Mr. YOUNT. That, I think, we recognize fully was a very difficult problem for some of the colleges that faced constitutional provisions. Representative PRICE. The committee was faced with the situation that unless we did something, we might be barring some of the major educational institutions in the contract from the atomic energy re- search program. Mr. YOUNT. We had thought in the first few years of this program the major source of income we would have, the major base for build- ing up some kind of a reserve, would be from the hundreds of small reactors that might be developed. When the college indemnification program was adopted, that cut away the bulk of the expected market. and in the reactor field left us immediately looking only to a few power reactors that might come along. Representative PRICE. You mean by that when you were giving consideration to setting up your pool and establishing your rate, you gave consideration to the large number of small reactors? Mr. YoUNT. That is right. We thought that they would furnish a sound basis on which to build. If we could get more of those in op- eration faster, we would develop a gradual reserve on which to build and move from that into the power field. Of course, that has not quite developed as any of us planned it. Representative PRICE. There was an important consideration as you made your study to determine what your premiums would be. Mr. YOUNT. I would say it was one of the important considerations; yes. Representative PRICE. Mr. Toll. Mr. TOLL. Mr. Yount, could you tell us how many of the uni- versities have purchased insurance from you? This morning AEC witnesses testified that even though exempt, it was their understand- ing that a number of the universities had gone to the syndicates to get coverage anyway. Mr. YOUNT. We can get that information for you. I don't have it. It is on record with the Commission. Do you have it, Mr. Butler? Mr. BUTLER. I should be the one to have that, but I haven't got it. I would speculate that the figure is around 15, but we can supply it very easily. Mr. TOLL. We would like to have that for the record, if you could. (The information referred to is as follows:) MUTUAL ATOMIC ENERGY LIABILITY UNDERWRITERS, JOINT COMMITTEE ON ATOMIC ENERGY, Capitol Building, Washington, D.C. Chicago, Ill., May 3, 1960. GENTLEMEN: As you know, Mr. H. W. Yount of the Liberty Mutual Insurance Co. and other insurance industry representatives testified before the Joint INDEMNITY AND REACTOR SAFETY 1 155 Committee on Atomic Energy on April 26, 1960, concerning the operations of the Atomic Energy Commission under section 170 of the Atomic Energy Act of 1954. During the course of this testimony, the committee asked if the Mutual Atomic Energy Liability Underwriters would furnish a list of the policies issued to nonprofit educational institutions licensed to operate either reactors or critical facilities. Accordingly, the following nonprofit educational institutions have purchased from MAELU a nuclear energy liability policy (facility form) subject to an aggregate limit of liability of $250,000 : MF-11__. MF-23___ MF-24 Binder No-20___ Very truly yours, Policy number and insured Massachusetts Institute of Technology. Worcester Polytechnic Institute. Iowa State University. University of Delaware. R. J. DECKER, Assistant Secretary. Representative PRICE. Would it be that the universities could not do anything about it anyway? Under their State constitutions they were prohibited from insuring themselves. They would not be a possible client anyway. We had thought We write insur- Mr. YOUNT. I think there is that aspect of it. that there might be a way around that, of course. ance today for a lot of institutions that are exempt under the charity and eleemosynary groups. We write that by way of an exemption. I think the real problem was not that they could not do it, but they could not get the money to spend for the purpose. Representative PRICE. In the State of Illinois, they could not do it under the State constitution. Mr. YOUNT. I realize that constitutional problem. Representative PRICE. There were a number of those States. Mr. YOUNT. We have had to get a number of State laws changed as a result of the program. I don't think we have had constitutional changes. All of us are cooperating to get the State laws changed. Representative PRICE. We gave consideration to urging these vari- ous institutions in this category to seek changes in their constitutions. They threw up their hands because many of them recognized the fact that it would almost be impossible to do. Mr. YoUNT. I think we recognize fully the practical problems that were inherent in those situations. Representative PRICE. The other nonprofit institutions that possibly had a chance to get a waiver of exemption, do you feel the majority would let themselves go without this type of insurance, at least up to a minimum limit, even though it might be possible to participate in the program without it? Mr. YOUNT. I don't know, Mr. Price. I have had a feeling, and this is strictly a feeling, that the first losses we are going to get are going to be out of colleges and universities probably. I don't look for a big blow in one of these big reactors. I think we are going to hurt individuals or outsiders who are working in and around reactor premises. I think there is where you are going to get a few nasty claims. Frankly, $250,000 won't cover one bad compensation claim. If a compensation carrier is on the man who is hurt there and he is an outsider, they have subrogation rights against the colleges and pools 156 INDEMNITY AND REACTOR SAFETY and so on. If it is not the pool, it is the college. I would think they would not dare go without insurance if they are permitted to pur- chase it. Mr. TOLL. According to the AEC report submitted to the commit- tee on April 1, they now have licensed 23 nonprofit educational in- stitutions. If the number is 14 that are getting coverage, that means that at least a majority of those participating are getting insurance in spite of the exemption. Mr. YOUNT. They are buying $250,000 instead of perhaps a more reasonable figure of a million or so. Mr. TOLL. The figure of $250,000, I think you recognize, was put into the statute because that was the minimum amount then being re- quired by the AEC in 1958. Mr. YOUNT. I think we understand the motivation thoroughly. I thought it necessary to point out the implications so far as our partic- ular operation is concerned. Mr. RAMEY. Do you think we ought to raise that to a million since the AEC has raised its minimum? Mr. YOUNT. Actually since you are on this question of limits, a million dollar limit is not a high limit in liability today. We have all sorts of little operations that buy a million dollars. Representative PRICE. What is the difference in the premium be- tween $250,000 and a million dollars? Mr. YOUNT. It roughly doubles; $250,000 is about 50 percent of the premium for a million. It goes up in somewhat inverse geometric ratio. Mr. BUTLER. There is greater likelihood of loss in the first $250,000 so that the next $750,000 costs the same price as the first $250,000. Representative PRICE. Thank you very much, Mr. Yount. Mr. YOUNT. Thank you. (A supplementary statement by Mr. Yount follows:) SUPPLEMENTARY STATEMENT OF HUBERT W. YOUNT In the presentation of objections to the Commission policy with respect to the assumption of insurance on Government-owned reactors operated by power in- terests, Chairman Price asked for amplification of the statement that in previous practice Government ownership had not entailed assumption of insurance. During the war the policy of the Department of Defense was to require con- tractors to carry insurance on all operations. In order to minimize costs a so-called War Department rating plan was adopted and became part of stand- ard insurance practice in 1940. The usual requirements were for standard workmen's compensation, employers' liability, and general public liability at the limits customary to business concerns at that time. Such insurance was written under the plan mentioned above which was in effect a cost-plus plan with a maximum. In some ways it compares realistically with the plan adopted by the insurance industry for insuring nuclear energy projects-the difference being the so-called long term retrospective rating plan for the latter projects. During the course of the war the Defense Plant Corporation built a number of buildings which were used by contractors for defense production. The De- fense Plant Corporation also owned some unknown quantity of machine tools for defense production. I have now verified the fact that the Defense Plant Cor- poration or the contractors using such plants, or both, purchased insurance on such property from the insurance industry. In addition, in at least one instance machine tools used by a contractor and owned by the Government were used under contract which required their return in good condition and necessitated the purchase of insurance on such tools and equipment. In a ddition, all of the standard forms of public liability insurance and work- men's compensation were carried by such contractors. The practice with INDEMNITY AND REACTOR SAFETY 157 respect to requiring the War Department rating plan varied somewhat as be- tween the armed services. For instance, the aircraft industry was partly in- sured under regular rating plans and partly under War Department rating plans. In either event the presence or absence of Government-owned facilities or equipment did not entail Government assumption of insurance. It seems perfectly obvious that ownership alone is not the source of loss or the cause of claims being produced. Claims arise out of operations. Opera- tions will be performed on the Government-owned reactors in question by agencies engaged in the sale of power. In this respect they appear no different than the defense contractors mentioned above. If ownership alone creates liability the provision of the Atomic Energy Act of 1954 under which ownership of all special nuclelar material remains in the hands of the Government would indicate that the liability for any phase of the nuclear program involving spe- cial nuclear materials would require Government assumption of risk. The Com- mission policy, as well as the legislative policy, has been in the opposite direc- tion. In fact, the act requires users of special nuclear material to absolve the Government of liability which might attach because of ownership of the ma- terial used. Representative PRICE. Mr. Haugh, we are glad to have you with us again. As in the case of Mr. Yount, we express our appreciation to you for the help you have given us all through the consideration of this indemnity problem. STATEMENT OF CHARLES J. HAUGH, VICE PRESIDENT, TRAVELERS INDEMNITY INSURANCE CO., ON BEHALF OF NUCLEAR ENERGY LIABILITY INSURANCE ASSOCIATION Mr. HAUGH. Thank you. I appreciate that sir. I do want to thank you and the committee for the opportunity to appear before you. I want to thank you and Mr. Van Zandt and the entire com- mittee. I would like at the outset to first say that I endorse com- pletely the statements that Mr. Yount has made. They go for our group in NELIA as well as the group in MAELU. I mention this in case there is any doubt in anybody's mind as to whether there were differences of opinion between the two groups; there are not. If I may, I will read from the prepared statement, and will be very glad to undertake to answer any questions you may have, sir. Representative PRICE. You may proceed. Mr. HAUGH. My name is Charles J. Haugh and I am a vice presi- dent of the Travelers Indemnity Co. I am also chairman of the Atomic Energy Committee of the American Insurance Association, and my company is a member of the Governing Committee of the Nu- clear Energy Liability Insurance Association (NELIA), on behalf of which organization I appear today. My statement relates to the amounts of financial protection re- quired of indemnified licensees through the application by the Atomic Energy Commission of paragraphs a. and b. of section 170 of the Atomic Energy Act of 1954, as amended. In an effort to be brief I will not review the financial protection formula for reactors con- tained in an attachment to the report of the Atomic Energy Com- mission to the Joint Committee on Atomic Energy on operations un- der section 170 dated March 31, 1960 (appendix, p. 289). Neither will I describe the specific changes in that formula that we recommend. All this and much more is contained in material from our industry that is already before your committee. The material I refer to consists 158 INDEMNITY AND REACTOR SAFETY of five statements submitted at a meeting with Commissioners Flo- berg and Graham and members of the Commission staff on January 19, 1960, by Mr. Yount of the Liberty Mutual Insurance Co., Mr. Heard of the Hartford Accident & Indemnity Co., Mr. Mann of the Aetna Casualty & Surety Co., Mr. Dorsett of NELIA and myself; and also two letters written to Commissioners Floberg and Graham by Mr. Mann and myself on January 21 and 22, 1960, respectively (pp. 166 to 183). The record of hearings before this joint committee, going back to 1956, indicates a clear desire on the part of the Congress that the insurance industry assemble a large capacity against liability for nuclear incidents so that there would be a buffer to protect the enor- mous indemnity made available by the Price-Anderson amendments of 1957 against remote but possible major catastrophes. In response a capacity of no less than 60 million per installation was created and worked into a form to include such unique features as coverage for anyone who may be liable and coverage for offsite employees and property of the person found liable. This involved great effort and expense and for some time the insurance industry proceeded on the not unreasonable assumption that this capacity would be employed in material amounts. We now find that we are mistaken. I think I can illustrate my point by a summary of our estimates of the financial protection the new regulation will require for licensed reactors and critical assemblies now in operation and insured by the pools. One reactor has a power level above 100,000-kilowatt elec- trical and is not affected by the regulation because, for a reactor of that capacity, the law itself requires financial protection equal to total available insurance capacity of $60 million. The balance are as follows: 12 reactors or critical assemblies at.. 5 reactors or critical assemblies at.. 3 reactors or critical assemblies at_ 4 reactors or critical assemblies at_. 3 reactors or critical assemblies at. Average financial protection (27). 13 at 1 site; 2 would qualify for $1,000,000 if separately located. 22 at 1 site, 1 would qualify for $1,000,000 if separately located. T 1 $1, 000, 000 ¹1, 500, 000 2 3, 500, 000 $ 8, 250, 000 4 * 9, 900, 000 3, 433, 000 34 at 1 site; 3 would qualify for various lesser amounts if separately located. 3 at 1 site; 2 would qualify for $1,000,000 if separately located. As Note that 20 of the 27 facilities fall in the range of limits from $1 million to $3,500,000. These are common limits for people to buy when their exposures have nothing to do with nuclear energy. a matter of fact, in my letter of January 22, 1960, to Commissioners Floberg and Graham I cited over 100 examples of limits of $10 mil- lion or more on nonnuclear operations. Let me turn from this to the limits purchased from NELIA and MAELU by fuel fabricators and chemical concerns because this is another impressive comparison. As yet the Commission has not found that these risks present sufficient catastrophe hazard to warrant the application of indemnity so the limits they buy are those they themselves feel are proper for their operation. If I may, I would like to reiterate here, these are operations that are not required under the rules and regulations of the Commission to furnish financial responsibility, but these are operators which of INDEMNITY AND REACTOR SAFETY 159 their own free will are purchasing insurance, and they are determin- ing what they believe reflects the amounts of insurance they should have to protect themselves. These are much less hazardous than reactors. The 2 pools are presently insuring 19 such risks at the following limits: 1 risk__ 1 risk. 5 risks.. 6 risks. 2 risks. $2, 000, 000|1 risk_ 3, 000, 0002 risks. risk. 5, 000, 000 1 10, 000, 000 15, 000, 000 $15, 500, 000 20, 000, 000 60, 000, 000 Average limit (19) 12, 395, 000 - If I may, I would like to compare that to the average limit of $3,433,000 on the 27 reactors that are required to put up financial responsibility. Representative PRICE. Mr. Toll has a question. Mr. TOLL. Mr. Haugh, does that depend to any extent upon the cost of the insurance? In order to obtain $60 million coverage of a fuel fabricator, would the premium for that be less than $60 million coverage of a power reactor? Mr. HAUGH. Mr. Butler has the details. Mr. BUTLER. I don't want to contradict Mr. Haugh who said that the fuel fabricators were less hazardous than the reactors, but we change fuel fabricators more than some of the smallest reactors. Their charges would not be comparable to the charges for the Dres- den reactor or the large test reactors. They could be higher than the charges for a critical assembly or a small reactor. Mr. HAUGH. The charges depend upon the conditions that exist in the individual operation and its location. Representative PRICE. You may proceed. Mr. HAUGH. I understand that a study is being made to help to determine whether fuel fabrication and related operations should be brought under the indemnity. The insurance industry finds itself awaiting the results of this study with mixed feelings. On the one hand we have never opposed the giving of indemnity in areas where we have been unable to perform, so that in theory the outcome should not matter to us one way or the other. On the other hand, unless a decision to extend indemnity is accompanied by a change in the ap- proach to financial protection requirements, we face the unpleasant prospect of still further Government inroads into the markets avail- able to us. We do not believe that section 170 was designed to afford a sub- stitute for private insurance. Nevertheless, the present adminis- trative pattern under the licensee program accomplishes just such a result. It exposes Government funds and resources to liabilities which industry may suffer in areas where financial protection is readily available in the form of private insurance. The insurance industry at the request of Congress and the Commission has created facilities so that it can absorb substantial amounts of liability arising from the nuclear hazard. We know of no reason why these facilities should be discarded in favor of Government indemnity. Insurance, just as other segments of business, should be given a full opportunity to participate in the private development of the atom. At present no reactor now in operation and affected by the Commission regula- 160 INDEMNITY AND REACTOR SAFETY tion needs to provide financial protection equal to as much as one- sixth of the available capacity. I am satisfied that the maximum loss potential of a 1-megawatt reactor in a populated area is at least $60 million, but what is the financial protection required for such a reactor? Exactly $1.5 million. Is this a pricing problem? I do not think so. The cost of $60 million of insurance on the smallest reactor is $31,000 per year. The comparable figure for the largest licensee reactor in operation is $260,000 per year and other prices range between these. These prices are the deposit premiums. You will recall Mr. Yount in his statement called attention to the fact that under the rating provisions under which these two syndicates operate, it is possible in the event of no losses for the insureds to receive as a return anywhere from two thirds to three fourths of the premium they paid in that year, depending wholly on the losses incurred under the policies. In other words, if it should happen that there are no losses, these costs would be adjusted retroactively by as much as two-thirds to three- fourths. Representative PRICE. In other words, it is possible for this max- imum figure of $260,000 to be cut two-thirds. Mr. HAUGH. That one could be cut as much as three-fourths, as suming no losses ultimately. It might turn out to be 25 percent of that premium as the net final cost. It is all dependent upon what happens in the future as respects losses. It would not be increased retroactively. It might be reduced depending on what losses were incurred. Mr. Yount calls my attention to something. I want to rectify that. Assuming no losses in this industry and not that individual risk. No nuclear losses to the syndicates during the 10-year rating period. Representative PRICE. In this pool. Mr. HAUGH. That is right, to the pools. Representative PRICE. Not the overall industry. Mr. HAUGH. No. It has nothing to do with losses outside of what is in the pool. It is limited wholly to losses in these pools. Representative PRICE. Could you as a matter of comparison give us an idea of what the insurance premium would be on $60 million on a normal conventional operation? Mr. HAUGH. That depends on what the operation is. If it were for a factory, the first thing we say is what does it make, how large is it, where is it located. It is extremely difficult for me to answer. I will say this to you, sir. You are talking about nonnuclear hazards. Representative PRICE. Just a conventional powerplant. Mr. HAUGH. Did we work some up on a powerplant? Mr. BUTLER. We never worked up a price for $60 million. For one thing, there would not be any market for $60 million. Mr. HAUGH. They would never buy it for general liability. Mr. BUTLER. You could not assemble that much capacity for a normal operation. The highest limit I am aware of anyone carrying is something in excess of $20 million. There may be higher. People don't go around talking about the limits they carry. They consider that private information. They assemble these limits from two or three different markets. They might buy the first piece from my company, another piece from another company, and another piece R > INDEMNITY AND REACTOR SAFETY 161 from another market. Even the companies involved do not always know the total limit involved. Mr. HAUGH. I think you were interested in premiums, were you not, Mr. Price, for general liability? Representative PRICE. I realize that would be a confidential matter. Mr. HAUGH. You appreciate that no risk likes to have its name used and how much premium it pays for the public record. I can say to you that we have liability risks covering industrial operations, in- dividually insured, whose premiums get into hundreds of thousands of dollars. We have such risks on our books. I think probably Mr. Yount could say the same thing. Those which I have in mind hap- pen to have little or no nuclear operations, but I understood you were interested in just that. Representative PRICE. A comparison of the conventional operations. Mr. HAUGH. Those would be extensive industrial operations to have a liability premium run that high. Hazards vary tremendously. You get into chemical operations and the hazard may become much greater than some industrial operations where there is relatively little public exposure. I was not talking of workmen's compensation ex- posure, and I am sure you were not either. We do have liability premiums that run that high. If you have an operation that has a fleet of automobiles, then it really runs into substantial premiums that they pay. Representative PRICE. Mr. Toll. Mr. TOLL. Because of your possible refund provision, it would seem that at least three-fourths of the premiums that you now receive are being used to build up a pool; is that correct? Mr. HAUGH. Let me say what we are doing is this. The loss ele- ment of the premium which ranges from two-thirds to three-fourths, depending on the size of the thing, is being set aside for one of two purposes. It will either be used to pay losses or it will ultimately be returned to the policyholders in these syndicates. So it is being set aside just as you say for the purpose of building a potential fund to meet future unknown losses. We hope there won't be any heavy catastrophe losses in the early years. If there are, we, the companies, will just have to put up the money for it. Mr. TOLL. At the end of 10 years, if there are no accidents, you are not going to return all of that pool, are you? Won't you keep some for the next 10 years? Mr. HAUGH. We are operating on a 10-year cycle. Mr. Yount points out that I should call attention to the fact that these funds are being set aside and are not turned over to the individual companies in the pool. The pools retain them intact as a reserve for future losses or future returns. It operates on a 10-year moving average. After 10 years, when we start the 11th year, we look at the aggregate experience of the pools. Let us assume there were no losses in the 10 years. Then the loss reserve assignable to the first year is eligible to be returned because in the 11th year we are building up a new source of income. If losses have been incurred but do not exceed the 10-year loss reserves, there will still be a return but the amount will obviously be smaller. So you really have a 10-year moving average for build- ing up of loss provisions. Mr. TOLL. What are your overhead costs now? Do you have any technical people on your payroll? 162 INDEMNITY AND REACTOR SAFETY Mr. HAUGH. Yes, we have. Mr. TOLL. To check out safety and so on? Mr. HAUGH. We have in the syndicates. In the first place, there is the cost of operating syndicates. I can't tell you how much it was but there was a very substantial cost incurred in trying to get this into operation. That I think is gone, frankly. The individual com- panies, a number of us, had to spend a great deal of time and dollars to get the thing organized and get it in operation. Heretofore, as Mr. Butler pointed out, there has never been a demand on us for any- thing like $60 million of insurance; $20 million was almost unheard of; $10 million was a substantial amount. Now we have the expenses of operating the syndicates. We have to pay premium taxes. Com- mission is paid on this business as in all insurance business, but in this case the amount is very modest. There are provisions for inspection expenses. As Mr. Yount stressed in his statement, we believe one of the important functions is not just the payment of losses but the pre- vention of losses. We have inspection groups that we send to inspect sites before any reactor has ever been constructed at all. We want inspection reports on the site, the progress reports, and then when the reactor is loaded, we will have periodic inspections as to how it is being operated, to do all we can to prevent ever having to pay any loss. We don't expect ultimately not to pay any loss, but we would like to keep from paying a catastrophe loss. We would like to keep losses to a minimum. It is to our benefit, and that of industry and everybody else. Mr. RAMEY. To what safety reports do you have access in ascertain- ing the site and the hazards situation? Mr. HAUGH. When we are advised that a reactor is going to be lo- cated at a given place, having been advised that an organization has been licensed to construct a reactor at a given site. When they apply for insurance, they advise us as to where the reactor is to be located, an idea as to the type of reactor, the power of the reactor, and we then bring this to the attention of our committee of engineers. We have had them cleared, this group is given Q clearance. These people de- termine from their point of view the hazards and submit reports to our underwriting committees with their statements pertaining to the entire thing. Mr. RAMEY. They have access to the ACRS reports of the Com- mission? Mr. HAUGH. That is right, and the hazards summary report. Mr. RAMEY. And the Hazard Evaluations Branch also of the AEC? Mr. HAUGH. Yes. Mr. RAMEY. Do they discuss informally with Commission repre- sentatives? Mr. HAUGH. I think upon occasion they do, yes. In other words, frankly we are trying as best we can to get all the available informa- tion we can to determine everything possible to be done and handling it properly with a minimum of loss. Representative PRICE. You may proceed. Mr. HAUGH. To me this does not seem much for putting $60 mil- lion of assets at risk for each installation. However, if the charges seem high at first blush, bear in mind that the applicable rating plan returns unused loss and claim dollars on a 10-year cycle. In the INDEMNITY AND REACTOR SAFETY 163 1 presence of perfect experience for the industry these returns will range from two-thirds to three-quarters of the total premiums de- pending on size. Thus the indemnity provision of the act is being applied in a man- ner not only to serve its announced purposes of protecting the public and encouraging the development of the atomic energy industry, but also to so operate as to drive the insurance industry out of a large part of the nuclear liability field. I am confident that was not the purpose of the act nor the purpose of the Commission, but that is the effect of the Commission's regulation. I am here today to enter a vigorous protest on behalf of the insur- ance industry. I thank you for this opportunity to appear and bring to your atten- tion the situation which has been created by these regulations. Once again, if I may, sir, I want to say this. We were given a fair opportunity to discuss this with the members of the Commission. I referred to that previously. They treated us very fairly. They gave us ample opportunity to present our views, which we have done. They have indicated, I believe, in their report and in the communication to us, that they have in mind reviewing these regulations before the end of the year, again in the light of all these facts. Frankly, we think it is sufficiently important not to wait until the end of the year, but we think it is essential that further consideration be given now to these points, because we firmly believe in all fairness that the suggestions we offered are eminently fair to the reactor op- erators, the licensees and to the insurance companies, and are unfair to no one. That is why we are presenting this at this time, sir. Representative PRICE. Mr. Haugh, in your statement you refer to the fact that the smallest type reactor for $60 million insurance would pay a premium of $31,000 a year. Mr. HAUGH. That is right. Representative PRICE. What would the premium be on $250,000 limit? Mr. BUTLER. $750. Representative PRICE. For a million it would be double. Mr. BUTLER. Exactly double. Representative PRICE. In this indemnity problem, we all feel the necessity of developing some sort of public hazard protection. I don't think we rushed into it. We considered this for several years. Mr. HAUGH. That is right. Representative PRICE. I know I had a bill pending even before the Commission came up with a program. I think that was in the hopper at least 2 years before the Commission finally came up with a sug- gested program. Do you feel that this problem could have been han- dled and the liability problem solved without this indeminfication legislation? Mr. HAUGH. Mr. Price, I am not arguing against the indemnification. Representative PRICE. I am not arguing with you. I am just talk- ing back and forth. We know that we have a problem. We have done our best up to this point of trying to work it out. The problem calls for further study and probably some adjustment. I have never known of any legislative act or any program that did not call for adjustment. 164 INDEMNITY AND REACTOR SAFETY Mr. HAUGH. That is right. My impression is this. I am basing this on the hearings of a couple of years ago or more when there were a number of hearings at which various segments of industry- not the insurance industry but let me call it the power industry and related industry-were appearing indicating that first they wanted greater protection against the potential liability. It was at that point that we were urged to furnish more. We set out to organize the syndicates. My recollection is that the record will show that industry generally commended that effort and said they appreciated it, but it was still not enough. It is highly improbable but it is possible there might be a catastrophic loss far be- yond anything that has been envisioned. It was as the result of that that the indemnity provision allowing up to $500 million was inserted in the act. As I understood it, that in effect was to supplement available insur- ance coverage to reassure industry that in the highly improbable event that there was a catastrophe involving hundreds of millions of dollars, that the Government would pick up the loss beyond anything that could possibly be taken care of by the insurance industry. Representative PRICE. It was this fear of the unknown that made it almost impossible for the industry itself to meet the liability problem. Mr. HAUGH. That is right. We don't argue for one moment against the Government stepping in and saying if insurance can take care of the hazard only up to this point, say $60 million, very well, if there is more needed, we, the government, will supplement that by going be- yond. We have no quarrel with that. Representative PRICE. Possibly if you had known exactly what the limitation might be, you could have gone to $100 million. But you get to the point where the unknown enters into this. Mr. HAUGH. Exactly. I believe in some of the casual discussions, industry talked of a possible loss being as much as $10 billion. Nobody knows what it might be. We had no disagreement with that. What we are talking to, sir, is these parts of the regulations that substitute Government indemnity, shall I say, at a very nominal cost for insur- ance that is available, and which we would be very hapy to sell. That is what we are talking to. We don't disagree with you, sir, on the problems you encounter with educational institutions and institutions. that have immunity under the law. As has been pointed out here, some of them have sought to purchase insurance. We have been happy to sell it to them. The way the law now reads, they buy $250,000 and the indemnity supplements it. If they wanted to buy it, we would be happy to sell them more before the indemnity came into it. We understand, too, that there are some that could not purchase it. That we understand and we don't quarrel with it. Representative PRICE. I hope you won't think we are quarreling with you at any time. We just seek information. Mr. HAUGH. I can't tell you how much we appreciate opportunities to meet with you and your committee and discuss these things very frankly and very freely. It is an ideal atmosphere in which we are able to present our side of the problem. We are not quarreling. There are very few things that do not have at least two sides to them. Representative PRICE. Do you think the amendments to the act, section 170, have done anything to generate business for the private insurance companies in the nuclear field? INDEMNITY AND REACTOR SAFETY 165 Mr. HAUGH. You mean in the sense that it might have encouraged industry to get into the atomic field? To that extent it would, yes. It would to that extent. Representative PRICE. Mr. Toll. Mr. TOLL. I would like to refer to the language of the statute on this point, subsection (b) of section 170. As I understand it, it is directly related to this question. It has to do with the amount of financial protection that the Commission shall require. It says: The amount of financial protection required shall be the amount of liability insurance available from private sources, except that the Commission may establish a lesser amount on the basis of criteria set forth in writing, which it may revise from time to time, taking into consideration such factors as the following: (1) The cost and terms of private insurance; (2) The type, size, and location of the licensed activity and other factors pertaining to the hazard; and (3) The nature and purpose of the licensed activity. Then there is a proviso for large reactors of 100,000 kilowatts electrical or greater. They shall be required to take out the maximum available from private sources. Mr. HAUGH. That is right. Mr. TOLL. I would like to ask you if you don't agree that the Com- mission is not expected to require $60 million in all cases? Mr. HAUGH. I think it was clearly the intent not to require $60 mil- lion in all cases. I think that is right. I base that upon some of the discussions that were had before this committee in the early stages. It must have been at least 2 years ago. I think I am right in saying that I took the position that ideally it should be that everyone should purchase the maximum amount of insurance and indemnity should apply over that. In the course of that discussion the question came up, But how much will you charge for it? At that time we were not in a position to say what we were going to charge for anything. We said we are frank to tell you we right now don't know what our charges would be. We would make them to reflect the hazard. The reason I recall this so vividly is that I think it was Mr. Cole who was on the committee at that time, who suggested that for a very, very small reactor, using the smallest possible reactor, when you get above some figure, maybe it is $50 million, you would not charge anything. I said I certainly would. I don't know how I could give insurance to anybody for nothing. I would say that the charge would be quite modest without being able to define what the modest charge would be. Certainly I can't conceive of anyone saying I would give it away. That is equivalent to saying that there is no possible hazard. If that were true, you didn't need the indemnity and you didn't need the insurance above $50 million. Actually I think on these very, very small reactors our charges do get down in the higher figures to a modest charge. They go to $500 per million, and it is possible for these small reactors to get a return. as much as two-thirds of the $500. I think that is a pretty modest sum of money to collect for saying in exchange that I will hold myself liable for as much as a million dollars. That is quite a lot of dollars. Another reason we are talking to higher amounts than this $250,000. We really have a fair number of individual automobile owners who carry as much as a million dollars on a private passenger automobile. 58511-60-pt. 2 -4 166 INDEMNITY AND REACTOR SAFETY There is no question of a nuclear hazard or anything else like it. In this day and age, and I am not talking to nuclear hazards, individual liability claims of a quarter of a million, a half a million and three- quarters of a million are not unheard of. At one time we made up a ist, trying from memory as best we could, both from clippings and individual claim files, to list individual claims running into six figures. It is amazing how long the list gets. Representative PRICE. Actually it is not unusual for a man who is in any sort of active position driving a car to have at least a minimum of $300,000 of public liability. Mr. HAUGH. Exactly. That is greater than this $250,000 we are talking about for a reactor. A reactor is considered an abnormal hazard. We don't think an automobile is an abnormal hazard. As Mr. Price says, $300,000 is nominal. Frankly, I would not dare drive my car with a limit as low as $300,000. Mr. TOLL. There is one other thing here. The AEC, by letter dated March 31, 1960 (p. 178), forwarded to the committee a copy of a letter from Mr. Haugh to Commissioners Floberg and Graham. Mr. HAUGH. Yes. Mr. TOLL. Enclosing comparison of amounts of financial protection for reactors under the AEC regulations as compared with the formula proposed by the pool. I would suggest that this be included in the record. Representative PRICE. Without objection it will be included in the record, and also the various papers that you referred to in your state- ment, Mr. Haugh, if they are not already submitted to the committee. Mr. HAUGH. Could I put them in the record? Do you have copies, or shall I furnish you additional copies? I referred to the January 19 letter and the exhibits accompanying it. Representative PRICE. Mr. Haugh referred to several papers. Mr. TOLL. We would be glad to have one more copy just to be sure. Mr. HAUGH. I would like, if I might, to put that in the record. It is the statement of January 19, and also the letters of January 21 and 22 to which you referred, Mr. Toll. Representative PRICE. That may be done. (The document and other material submitted by Mr. Haugh fol- low :) Mr. JOHN O. GUNN, NUCLEAR ENERGY LIABILITY INSURANCE ASSOCIATION, Joint Committee on Atomic Energy, U.S. Senate, Washington, D.C. New York, N.Y., May 3, 1960. DEAR MR. GUNN: As you know, Mr. Charles J. Haugh, vice president, the Travelers Indemnity Co., testified before the Joint Committee on Atomic Energy on April 26, 1960, concerning the operations of the Atomic Energy Commission under section 170 of the Atomic Energy Act of 1954. During the course of his testimony, the committee requested a copy of the statements submitted to the Atomic Energy Commission on January 19, 1960, by the following casualty insurance executives: 1. Hubert W. Yount, executive vice president, Liberty Mutual Insurance Co., Boston, Mass.; 2. Manning W. Heard, executive vice president, Hartford Accident & Indemnity Co., Hartford, Conn.; 3. Charles J. Haugh, vice president, the Travelers Indemnity Co., Hartford, Conn.; : 167 INDEMNITY AND REACTOR SAFETY .. .. 4. Guy E. Mann, senior vice president, the Aetna Casualty & Surety Co., Hart- ford, Conn.; 5. J. Dewey Dorsett, general manager, Nuclear Energy Liability Insurance As- sociation, New York City, N.Y. Copies of these statements are enclosed. In addition, we are enclosing copies of the supplementary statements submitted to the Commission by Mr. Mann dated January 21, 1960, and Mr. Haugh, dated January 22, 1960. The committee also asked NELIA to furnish a list of the policies issued by NELIA to nonprofit educational institutions licensed to operate either reactors or critical facilities. The following institutions have purchased from NELIA a nuclear energy liability policy (facility form), subject to an aggregate limit of liability of $250,000: 1. The regents of the University of Michigan. 2. Colorado State University. 3. Catholic University of America. 4. Regents of University of California (Berkeley campus). 5. The University of Akron. 6. University of Wyoming. 7. Board of Control, State of Florida for the University of Florida. 8. Oregon State Board of Higher Education for and on behalf of Oregon State College. 9. Cornell University. 10. The regents of the University of California (Los Angeles campus). 11. Washington State University. 12. The board of trustees of Leland Stanford Junior University. 13. Virginia Polytechnic Institute. 14. The board of trustees of the University of Illinois. If we can be of any further assistance, please do not hesitate to let us know. Yours very truly, DEROY C. THOMAS, Assistant General Manager. PRIVATE INSURANCE AND THE FINANCIAL PROTECTION REQUIREMENTS OF THE ATOMIC ENERGY ACT OF 1954, AS AMENDED Statement submitted by Hubert W. Yount, executive vice president, Liberty Mutual Insurance Co., Boston, Mass., to U.S. Atomic Energy Commission on January 19, 1960 My name is Hubert W. Yount, executive vice president, Liberty Mutual In- surance Co., Boston, Mass. I am also chairman of the Underwriting Committee of the Mutual Atomic Energy Reinsurance Pool. In order to understand the position and objectives of our industry, I will state briefly what our American insurance companies, stock and mutual, have done since the enactment of the Atomic Energy Act of 1954. This has required a major effort to put our com- panies in a position to provide the insurance service and protection which we were told would be required by persons operating nuclear facilities or furnishing services to such facilities and were necessary for the protection of the public. Five years ago the Atomic Energy Commission appointed a group of insur- ance executives to study the insurance problems which would result from private industrial participation in the new program. We respectfully refer you to the first and second reports made to the Commission by the group.¹ After deciding that the hazards were insurable and that an intensive program of loss preven- tion and inspection service was imperative, the members of this group took the lead within the respective segments of the industry in developing a broad pro- gram of insurance coverage and service. The first step was the organization of three pools, or syndicates, to write insurance for nuclear facilities. By June 1956 these three pools-Nuclear En- ergy Liability Insurance Association (NELIA), Nuclear Energy Property In- surance Association (NEPIA), and Mutual Atomic Energy Reinsurance Pool (MAERP)—through their more than 300 member companies in the United States and worldwide participation of foreign reinsurers, had marshaled for 1 AEC release No. 662, dated July 13, 1955; AEC release No. 796, dated Mar. 19, 1956. 168 INDEMNITY AND REACTOR SAFETY any one location an aggregate underwriting capacity in excess of $125 million. Of this capacity, the largest amount ever before offered in the worldwide his- tory of insurance, $60 million was made available for nuclear energy liability insurance, $46,500,000 from NELIA and $13,500,000 from the mutual companies, through a primary underwriting syndicate, Mutual Atomic Enery Liability Un- derwriters (MAELU), which is in turn reinsured by the mutual pool (MAERP). Having developed maximum insurance capacity, a second problem was that of the coverage which would be provided. Because the insurance capacity devel- oped was believed insufficient to meet the losses which might result from a major nuclear catastrophe, Government indemnity was finally provided under the Price-Anderson Act after nearly 2 years of hearings and discussions. Dur- ing the past 3 years, representatives of NELIA and MAELU have worked with the staff of the Commission, with the Joint Committee of the Congress, and with the atomic energy industry in a cooperative effort to develop a sound nu- clear energy liability insurance program supplemented by a sound Government indemnity program. These programs have been designed primarily for the pro- tection of the public but also give the protection needed by those directly en- gaged in the atomic energy industry. As a result of this effort the operator of a nuclear facility can now buy a nu- clear energy liability policy facility form which is not only the broadest liability insurance contract ever written in the United States and elsewhere but also pro- vides more capacity than any previously written. The amount of protection offered is a maximum of $60 million. The policy covers, first, any person or organization (except the United States or any of its agencies) legally respon- sible for the occurrence of a nuclear incident arising out of the operation of the insured facility is an insured under the policy. Second, the policy covers damage to property of an insured which is away from an insured facility. Third, the policy protects an employer or his workmen's compensation carrier against loss by reason of injuries to his employees who are employed away from the facility. The policy is not written for a limited term, but rather re- mains in effect from its effective date until terminated in accordance with its terms. In this connection, see insuring agreements I, II, and IV of the policy, a copy of which is attached to this memorandum. A third major problem has been the development of a specialized loss preven- tion and inspection service which we have regarded as an absolute require- ment for the protection of the public, the Government and of our own companies. Casualty insurance is not satisfied merely with payment or indemnity but re- In that gards the prevention of losses as one if its more important functions. connection it has been dealing with radiation sources and radiation injuries since the turn of the century. Since 1954 the casualty companies have em- ployed or trained a number of health physicists and other engineers in nuclear problems. They have also trained other engineers in radiation detection and safety. As a result, NELIA and MAELU are giving operators of insured nu- clear facilities an inspection and loss prevention service that they would find difficult, if not impossible, to get anywhere else. In addition, NEPIA and MAERP inspectors on the physical damage problems of nuclear insurance and are also trained in safe operation and in the protection of the property of the facility. All of these inspectors work with facility operators to prevent damage to facilities, injuries to employees and to the persons and property of the public. They cooperate with the Commission in enforcing its safety regulations. These services are today a normal part of the insurance business which long ago abandoned the concept that mere indemnity for a loss sustained is an adequate answer to the perils incident to modern industrial operations. A fourth problem has been the organization and mobilization of our casualty industry experience and personnel to handle the special types of claims result- ing from nuclear hazards. Through their member companies, NELIA and MAELU have available for their policyholders the services of thousands of skilled field claimsmen now working in insurance company offices throughout the United States. Within a few hours after receipt of notice of an incident either NELIA or MAELU will have claimsmen at the scene to start investiga- tion into the cause of the accident and the extent of any resulting injury to persons or property. NELIA and MAELU have together perfected plans for the investigation and handling of claims resulting from a nuclear disaster. In cooperation with members of the staff of the Commission they are working on the preparation of a list of physicians and hospitals qualified to treat persons suffering from radiation injuries. They are likewise compiling a list of quali- INDEMNITY AND REACTOR SAFETY 169 fied nuclear physicists and other experts whose services will be valuable in connection with the investigation of a nuclear incident, the decontamination of property and other technical problems which will follow such an occurrence. In the investigation and handling of claims and defense of suits resulting from a nuclear incident, the work of field claimsmen will be supervised and guided by experienced claimsmen and lawyers on the home office staffs of the member companies of NELIA and MAELU. Some of those companies have given selected members of their home office departments special training to fit them to deal with the peculiar problems they will meet in supervising the investigation and handling of claims and suits resulting from nuclear incidents. The technical services above described, which the policyholders of MAELU and NELIA will receive, are not ordinarily for sale as such. They parallel the services given by a casualty insurer to its industrial risk policyholders. Such services are part of the modern concept of insurance which includes not only the acceptance of risk of loss, but the prevention and control of loss and the spreading of the cost of service and losses over as wide a base as possible. This principle of insurance spread would be violated if the Commission should fail to require any financial protection as proposed with respect to certain projects or should require inadequate financial protection as respects other projects. What is perhaps of even more importance, however, is the implied willingness to sacrifice public protection through the prevention of loss. In- demnification after a loss is a poor substitute for the prevention of loss to the extent that the services described above can prevent or minimize losses. It should not be necessary to subsidize the cost of necessary services on nuclear hazards from other business. It is only equitable that such exposures should provide through a broad premium base adequate income to maintain a proper standard of service. This cannot be accomplished unless the Commission ap- plies broadly and equitably the requirements for financial protection. A fifth problem has been that of pricing and premium determination for nuclear liability insurance coverage and service. The aggregate of the premiums for any kind of insurance must be an amount sufficient to cover losses and expenses, plus a margin for profit and contingencies. Over the years the cost of any kind of insurance is determined by experience. In most lines of property and casualty insurance, underwriters, from analysis of past premiums and losses, with due consideration to present trends and changing times, can determine with reasonable accuracy the losses and expenses which will be incurred on business written. Such a determination is not possible with respect to nuclear energy liability insurance. The nuclear arts are still new, changing, experimental. There is no past experience on which to base premiums. Moreover, there is present a risk, remote but nevertheless real, that catastrophe costing many millions of dollars will occur. Hence, the problem facing NELIA and MAELU was to develop a premium plan which would produce the funds necessary (1) to pay expenses other than loss expenses, (2) to pay for ordinary losses and loss expenses, and (3) to permit the accumulation of a reserve for catastrophe losses, and which would, over a period of years, if there were no catastrophe losses, result in the losses and expenses actually incurred by the insurers determining the final premiums paid by those persons engaged in the atomic energy industry. The industry credit rating plan adopted by NELIA and MAELU, meets the requirements above outlined. The initial premium charged an insured for nuclear energy liability insurance is a provisional premium. A proportion of every provisional premium received is set aside in a reserve fund. That propor- tion ranges from 67 percent on small risks to a maximum of 75 percent on large risks. The funds so accumulated will be used only for the payment of losses and loss expenses and for return premiums on cancellations for a period of 10 years. During the 11th year, if the losses and loss expenses incurred, including reserves for unpaid losses and loss expense, during the 10-year period are less than the total aggregate deposits in the reserve fund for the 10-year period, a refund will be made to first year policyholders. To illustrate, assume that at the end of 10 years there is in the reserve fund a balance of $10 million, after deducting losses and loss expenses incurred. Assume further that the provisional premiums paid the first year were 2 percent of the aggregate 10-year provisional premiums. Two percent of the reserve fund balance, or $200,000, would be distributed ratably among the first year insureds. This procedure will be repeated annually SO long as the rating plan remains in effect. In the event unfavorable loss experience makes impossible a refund 170 INDEMNITY AND REACTOR SAFETY for any year, the provisional premium paid by each insured for that year be- comes the final premium for that year. If and when the rating plan is ter- minated, any amount remaining in the reserve fund will be disbursed in accord- ance with the provisions of the plan, or in other words will be used for the pay- ment of losses and loss expenses or for refunds to insureds. In short, the rating plan so operates that it is certain that approximately 70 percent of the pro- visional premiums paid to NELIA and MAELU on nuclear energy liability in- surance will be used to pay losses and loss expenses or returned to the purchaser of such insurance. If the aggregate of losses and loss expenses exceed the aggregate amount allocated to the reserve fund, the members of NELIA and MAELU and their reinsurers stand the loss. Admittedly, today no one knows whether the provisional premiums established by the rating bureaus for facilities insured by MAELU and NELIA are reason- able and adequate, too low or too high. Only the experience of a number of years will answer those questions. One fact is certain, however, and that is that the industry credit rating plan will so operate that the ultimate cost of nuclear energy liability insurance will be reasonable. Furthermore, it should be noted in passing that the development expenses of the nuclear program to our casualty companies to date reflecting the time and travel of salaried per- sonnel-legal, underwriting, loss prevention, claim, actuarial, and other technical people cannot possibly be recouped in the foreseeable future through the com- pany expense allowances in our nuclear liability insurance premium income. To conclude, the members of NELIA and MAELU at a substantial expense, have placed themselves in the position to act as a supplier to the atomic energy industry-a supplier, first, of broad insurance protection and second, of needed Both facets of this program are loss prevention, claims, and legal services. essential to the atomic energy industry and to the public. The development expenses in building this program have been comparable to those of other segments of industry active in the nuclear energy field. The casualty insurance industry undertook the program I have described at the request, I should say the urging, of the Joint Committee of the Congress and of the Atomic Energy Commission. We submit the Government should not usurp a field in which private industry is not only ready and willing to perform at reasonable cost but to provide services not otherwise available for the protection of the public. PRESENT POSITION OF THE INSURANCE INDUSTRY IN THE ATOMIC ENERGY PROGRAM Statement submitted by Manning W. Heard, executive vice president, Hartford Accident & Indemnity Co., Hartford, Conn., to U.S. Atomic Energy Commis- sion on January 19, 1960 My name is Manning W. Heard and I am executive vice president of the Hartford Accident & Indemnity Co. of Hartford, Conn. Having just heard from Mr. Yount the history of the extensive nuclear energy insurance facilities created by the insurance industry, stock and mutual, at the urging and request of the Congress and the Atomic Energy Commission, may we describe the position in which the insurance industry now finds itself? We feel that we are being denied a significant part in the development and utilization of atomic energy for peaceful purposes. And yet we find congressional and executive expressions of governmental policy clearly indicating that the insurance industry, like other private enter- prise, should be invited to play an important part in the growth and develop- ment of the atomic industry. ,, 1 The policy of the United States with respect to the position of private enter- prise-in which insurance plays a vital part-was clearly enunciated in section 1 of the original Atomic Energy Act of 1954, wherein it was declared that a purpose of that act was to "strengthen free competition in private enterprise. The concept of teamwork between government and industry is woven into the legislative history of the original Atomic Energy Act of 1954. May we quote from Senate Report No. 1699 accompanying that act : 1 “SECTION 1. Declaration. "Atomic energy is capable of application for peaceful as well as military purposes. therefore declared to be the policy of the United States that- It is "b. the development, use, and control of atomic energy shall be directed so as to promote would peace. improve the general welfare, increase the standard of living, and strengthen free competition in private enterprise." "The Atomic Energy Act of 1954 containing this declaration of policy was adopted by both Houses of Congress by votes which included a majority of both parties."-Atomic Ind. Reporter, 203: 4. > INDEMNITY AND REACTOR SAFETY 171 : • "We do not believe that the efforts of free enterprise, using its own resources and moneys, are by themselves adequate to achieve the speediest possible attack. on the goal of peacetime power. Neither do we believe that maximum progress toward this objective will be afforded by an effort relying exclusively on gov- ernmental research and development, using the public's moneys. We believe, rather, that teamwork between government and industry-teamwork of the type encouraged by these amendments-is the key to optimum progress, effi- ciency, and economy in this area of atomic endeavor" (U.S. Code Congressional and Administrative News, 83d Cong., 2d sess. 1954, p. 3464). It is the present state of this teamwork between government and the insur- ance industry which brings us before you today. After the passage of the original Atomic Energy Act of 1954, it became apparent that the atomic industry's inability to secure adequate financial pro- tection against the risk of unprecedented liability was threatening the national objective." On March 25, 1957, the Chairman of the Atomic Energy Commission, at hearings held by the Joint Committee on Atomic Energy, highlighted that the lack of adequate protection against liability was one of the major obstacles to atomic energy development.³ To remove this major obstacle, steps were taken to amend the Atomic Energy Act of 1954. On September 2, 1957, the President approved Public Law 85-256 (71 Stat. 576) and therein we find a clear expression of congressional and exec- utive intent to the effect that U.S. funds may be made available not for all but for a portion of the damages suffered by the public from nuclear incidents.* We emphasize that the Congress declared that "the United States may make funds available for a portion of the damages" because it is our position before you today that an administrative pattern has arisen which in the licensee pro- gram has made U.S. funds and resources needlessly paramount to those avail- able from private insurance industry and, in the contractor program, administra- tive action has excluded private insurance almost entirely. Both, we submit, are inconsistent with the findings and statement of policy of the Congress of the United States. Sections 170b and 170g were enacted in 1957 to carry out the governmental policy of using "to the maximum extent practicable, the facilities and services of private insurance organizations." 2 "To the extent that private industry is unable to secure adequate financial protection against the risk of unprecedented liability and is consequently reluctant to proceed without such protection, the achievement of a major national objective is threatened." Columbia University Legislative Fund, Financial Protection Against Atomic Hazards (January 1957). (Prepared as an independent research project for Atomic Industrial Forum, Inc.) P. 1. 3 "The advocacy of the atomic energy industry for protection against liability certainly has not lessened since last year. A few indications supporting this conclusion can be found in the statements made by members of the industry at a meeting of the Atomic Industrial Forum on this subject on Jan. 22, by the forum's report on "Financial Protec- tion Against Atomic Hazards," by the forum's poll of its members which indicated that lack of adequate protection against liability was one of the major obstacles to atomic energy development, and by the consensus expressed at the recent meeting of the American Management Association" (p. 3, statement by Lewis L. Strauss, "Insurance and Indemnity Legislation"). "SEC. 2. Findings: The Congress of the United States hereby makes the following findings concerning the development, use, and control of atomic energy: "i. In order to protect the public and to encourage the development of the atomic energy industry, in the interest of the general welfare and of the common defense and security, the United States may make funds available for a portion of the damages suffered by the public from nuclear incidents, and may limit the liability of those persons liable for such losses. [Emphasis supplied.] 5 170b. The amount of financial protection required shall be the amount of liability insurance available from private sources, except that the Commission may establish a lesser amount on the basis of criteria set forth in writing, which it may revise from time to time, taking into consideration such factors as the following: (1) The cost and terms of private insurance; (2) the type, size, and location of the licensed activity and other factors pertaining to the hazard; and (3) the nature and purpose of the licensed activity: Provided, That for facilities designed for producing substantial amounts of electricity and having a rated capacity of 100,000 electrical kilowatts or more, the amount of financial protection required shall be the maximum amount available from private sources. Such financial protection may include private insurance, private contractual indemnities, self- insurance, other proof of financial responsibility, or a combination of such measures. 170g. In administering the provisions of this section, the Commission shall use, to the maximum extent practicable, the facilities and services of private insurance organizations, and the Commission may contract to pay a reasonable compensation for such services. Any contract made under the provisions of this subsection may be made without regard to the provisions of section 3709 of the Revised Statutes, as amended, upon a showing by the Commission that advertising is not reasonably practicable and advance payments may be made. - 172 INDEMNITY AND REACTOR SAFETY In reference to these sections, it is of real interest to note the following com- ments contained in Senate Report No. 296 (85th Cong., 1st sess.): In reference to 170b: "One point of caution should be mentioned. The reference to the cost of in- surance in this subsection is not intended to encourage the Commission to under- cut the amounts of private insurance provided at reasonable rates" (S. Rept. 296, p. 20). In reference to 170g: "Subsection g requires the Commission to use to the greatest extent practicable the facilities and services of private insurance organizations. Under the bill, as drafted, the Commission is authorized to use the services of those organizations which could provide real services to the Commission without requiring the Commission to build up an organization of its own" (S. Rept. 296, p. 23). These are congressional expressions of governmental policy, but the Congress has not been alone. As recently as September 21, 1959, the Executive Office of the President, Bureau of the Budget, stated in Bulletin No. 60-2 that: “2. Policy.-It is the general policy of the administration that the Federal Government will not start or carry on any commercial-industrial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels." To summarize this background of congressional and executive policy-but, unfortunately, not administrative implementation-may we quote from the re- port of Columbia University's "Financial Protection Against Atomic Hazards" (p. 46): "There is general agreement that whatever Government program is adopted, insurance or indemnity, there should be room for the activity of private insurers, and that the Government should not cover liability from the ground up. Total Government indemnity would be at odds with the intent expressed in the 1954 act to develop atomic energy within the framework of private enterprise where consistent with overall objectives. Furthermore, such action would be contrary to the practice which the Government has generally followed in other 'insurance' programs. Where the Government has entered an area of possible conflict with private insurance, its entry has usually been conditioned on the nonavailability of insurance in the private market." With the door thus opened for the insurance industry to play its part in the promotion of the peaceful use of atomic energy, what did it do? What team- work did it offer? Private insurance industry, stock, and mutual, did this: (1) It created, administered, and financed the stock and mutual nuclear energy liability insurance pools (NELIA and MAELU) and amassed the un- precedented liability capacity of some $60 million which is presently avail- able. (2) It assumed, under standard policies, the new and unknown burden of the nuclear energy hazard in workmen's compensation insurance. (3) It assumed, under standard policies, the new and undefined hazards arising out of the use of commercial radioactive isotopes. We are not here merely to "sell insurance" nor do we suggest that adminis trative regulations be biased on our behalf; but we would be less than frank if we did not insist that the insurance industry be treated before the Commission on a parity with all other private industry pursuant to expressed congressional and executive policy. The insurance business is, in a very real sense, the trustee of the public's money. The very concept of insurance is to collect premiums from the many and pay claims to the few-and when administrative action needlessly restricts the use of private insurance and its underwriting capacity, it undermines and prej- udices the validity of the insurance concept. The nuclear liability pools cannot insure just a few risks without violating the fundamental premise of insurance that there be a fair spread of risk. If, by administrative action, the insurance industry is denied such fair spread of risk and if, after it has created vast insurance capacity at the request of the Congress and the Commission, only a small part of that capacity is used be- cause of administrative action, then the insurance position of our industry be- comes untenable. Administratively, we are being denied the climate in which we can live: 1. The licensee program-which will be discussed later-wherein limits of financial protection, and hence the area to be insured, have been proposed at levels so low that it would scarcely cover the injuries to a few people; and INDEMNITY AND REACTOR SAFETY 173 2. The contractor program-which also will be discussed later-wherein private insurance has been completely bypassed in favor of governmental indemnity, for example, in the power demonstration reactor program at Shippingport. We submit not that the insurance industry be specially favored but only that it not be excluded from what we view as our legislated right to participate in the future of atomic energy development on a reasonably sound insurance basis. We believe this to be in the public interest. JANUARY 19, 1960. My name is Charles J. Haugh and I am a vice president of the Travelers In- demnity Co. The memorandum that Mr. Dorsett submitted with his letter of November 20, 1959, to Chairman McCone points out that the method of determining amounts of financial protection proposed by the Commission has little relation to hazard. There are three things that strike me forcibly in this connection. The first, of course, is the small amounts of financial protection the regulations would call for in many instances. The second is the insurance limits purchased by those who work with nuclear material, but who do not qualify for Government indemnity. The last is the expressions in the record about the unlikelihood of the in- demnity ever coming into play. Taking the points in order, let me cite a few examples of required financial protection. A 1-megawatt research reactor located anywhere must furnish $1,500,000 of financial protection as against available insurance of $60 million. Now, I am not talking about the probability of an incident, but rather what could happen if it did occur. I suspect that a maximum credible incident in such a reactor in a thickly populated area could cause great injury to persons and property and the resulting costs might even exceed $60 million. I recognize that all this does not leave the public without a means of recovery, but it is also clear to me that Government indemnity is being injected as the source of that recovery in preference to insurance available from the liability pools. Similar illustrations can be drawn for a variety of situations, up to the point where the proposed regulations intersect the statutory requirement of maximum available insurance. For brevity, I offer only two. A 20-megawatt test reactor in a medium population location would have to provide $3,900,000 of financial pro- tection, and a 50-megawatt power reactor in a low population area would have to provide $7,500,000 of financial protection. These figures are not realistic in terms of potential hazard, and one byproduct of this is that Government funds from the indemnity are needlessly exposed in an area where the insurance in- dustry stands ready to perform. Would reactor operators be content with insurance limits of this order if Government indemnity were not present and they were making their own in- dependent appraisal of hazard? We think not, for two reasons. First, limits of $10 million or more are frequently found in fields having nothing to do with the nuclear energy hazard. Second, there are concrete examples right in NELIA and MAELU. Chemical concerns and fuel fabricators working with appreciable quantities of clean cold special nuclear material do not come under the indemnity at this time. To my knowledge, the 2 pools are presently insuring 19 such risks, and the limits they have bought are: 1 risk at. 2 risks at- Millions $2 3 5 risks at_ 5 risks at_ 10 2 risks at_ 15 1 risk at.. 15.5 2 risks at_. 20 1 risk at___. 60 19 risks at (average limit)- 12 174 INDEMNITY AND REACTOR SAFETY If the study the Commission is making of the need for application of indemnity to fuel fabrication shows that it should be extended to these operations, will the level of financial protection be set low so that another segment of the market for insurance will be stripped away? The early record is replete with indications that the indemnity was thought of as a last resort and not as a regular working tool in otherwise insurable areas. Before the Joint Committee hearings in 1956 on governmental indemnity Sena- tor Anderson sent an open letter to interested parties. Among other things he said (p. 2 of the record): "2. We need information on the range of rates to be charged by the private insurance industry. We recognize that this is difficult for the newly organized syndicates. But Congress must know whether private reactor operators and equipment manufacturers are going to be able to afford private insurance- otherwise the Government indemnity might extend downward to an unreasonable extent. We can't buy a pig in a poke.' [Emphasis added.] 9 29 In the same 1956 hearings I find a colloquy between Representative Cole and Chairman Strauss (p. 7 of the record) speculating on possible increase in private insurance capacity in future years. Hope was expressed that this would come about with the accumulation of knowledge and experience. I submit, gentle- men, that if the present stifling climate is continued, there is a greater chance of insurance capacity shrinking than expanding. There will not be what we call a “book of business" to support the occasional heavy exposure of assets on the largest reactors. The May 9, 1957, report of the Joint Committee to Congress has a reference on page 9 to the anticipation of the committee that "there never will be any call on the fund for payments***" and on page 20 of the same report the following appears in the discussion of section 170b: "One point of caution should be mentioned. The reference to the cost of insur- ance in this subsection is not intended to encourage the Commission to undercut the amounts of private insurance provided at reasonable rates. Since the pro- gram is so new, and no experience as to the rates established the Commission must be in a position to set the amount of financial protection required at an amount lower than amount of private insurance offered if the rates appear high and all other factors indicate a lower amount is appropriate." [Emphasis added.] To the best of my knowledge the Commission has not expressed the opinion that the prices and rating systems employed by the liability insurance pools produce unreasonable rates. This is understandable in that any loss and loss expense dollars not actually used for their intended purpose will be returned to customers through the operation of the long-term rating plan. Finally, I turn to the speech Senator Anderson made in the Senate on August 16, 1957, when the bill that became Public Law 85-256 was passed. One sen- tence reads: "The best estimate of all who are concerned with the field is that the Govern- ment will probably never have to make any payments under this statute." This does not sound to me like a man who was thinking in terms of $1,500,000 of financial protection for a 1-megawatt reactor or $3,900,000 to $7,500,000 for good-sized test and power reactors. I should say here that I feel just as strongly as the previous speakers about the right of the insurance industry as a segment of private enterprise to per- form where it can do so. I also know that they join with me in the feeling that when we find the Government moving into our house, criticism is not our sole We function. We should record our objections and we are doing that here. recognize an equal obligation to say what we think is equitable. With that in mind, let me make some more detailed points on the proposed regulation. In our opinion, the items of power level and population proposed by the Com- mission are reasonable as a means of establishing amounts of financial protec- tion for reactors. A population index can be unsatisfactory as a measure of property values, but we do not have an alternative to propose that would recog- nize property values in a numerical formula. Consequently, our quarrel is not with the items as such, but rather with the manner in which the Commission proposes to employ them. For power level the original straight line approach of $150 per kilowatt is retained so that financial protection proceeds in even steps from the minimum to $60 million at 400-megawatt thermal. It seems patent to us that since rela- INDEMNITY AND REACTOR SAFETY 175 tively small reactors can conceivably cause damage well above $60 million, fail- ure to employ larger proportions of available insurance capacity is the substitu- tion of indemnity for it. We recommend that the straight line be replaced by a curve that rises sharply in the lower power levels and then tapers off so as to reach total available capacity at 400-megawatt thermal. The curve we have in mind is based on three times the square root of the licensed power level in ther- mal megawatt multiplied by 1 million to produce an amount of financial protec- tion prior to the application of a population factor. Our thought on the population criteria is that the values which have been assigned to the indices are too small. The proposed range is from 1 to 1.5 ap- plied as a multiplier to the amount of financial protection obtained from the power level of the reactor. Admittedly, no set of values is subject to exact statistical proof, but we just do not think that a reactor incident in a thickly populated area would produce only half again as much damage as the same incident in the middle of a desert. We recommend that the values of the popu- lation indices be revised to range from 1 to 4. Lastly, with regard to a minimum amount of financial protection, we certainly agree that the absolute minimum of $1 million contained in the proposed regula- tions should be retained. STATEMENT OF GUY E. MANN, SENIOR VICE PRESIDENT OF THE AETNA CASUALTY & SURETY Co. AT INSURANCE INDUSTRY MEETING WITH ATOMIC ENERGY COM- MISSION JANUARY 19, 1960 My name is Guy E. Mann and I am senior vice president of the Aetna Cas- ualty & Surety Co. Mr. Haugh has stated our position on what we believe to be the inadequate amounts of underlying financial protection required of licensees. We are equally disturbed that the Atomic Energy Commission has decided, in its discretion, to completely exclude private insurance against the nuclear energy hazard from the entire contractor program and to grant its contractors Government indemnity from the first dollar of liability loss. As you know, section 170d of the Atomic Energy Act of 1954 as amended by Public Law 85-256 gives the Commission discretionary authority to require its contractors to provide financial protection and to furnish Government indem- nity above the amount of financial protection required. This authority is ap- plicable to lump sum as well as cost type contracts and to contracts and proj- ects financed in whole or in part by the Commission. We submit that the decision to give Commission contractors complete in- demnity for liability claims and losses arising out of the nuclear energy hazard and thereby exclude private insurance from an area where it has demonstrated its capability to perform at reasonable cost is inconsistent with congressional intent, the policy of this administration toward private enterprise and the financial protection required by the Commission under the licensee program. We respectfully ask that this decision be reconsidered. In urging reconsideration, we wish to emphasize that the insurance industry is not opposed to Government indemnity for Commission contractors in the protection of the public but we do believe that indemnity should only be used to the extent that private insurance is unavailable or cannot fully fill the need. We believe the decision of the Commission is inconsistent with congressional policy as expressed in the report from the Joint Committee on Atomic Energy accompanying S. 2051 printed on May 9, 1957. In the section-by-section anal- ysis, the following appears on page 21: "Subsection d authorizes the Commis- sion to treat with its own contractors in the same way it can treat with licensees under the provisions of this bill." The existing decision to require no financial protection of Commission con- tractors results in different, rather than the same, treatment of contractors and licensees. It also results in less protection to the public than is available for a comparable operation engaged in by a private licensee. We also believe it to be inconsistent with administration policy in that it puts the Government and public funds in direct competition with private enter- prise. Bureau of the Budget Bulletin No. 60-2 issued September 21, 1959, states: "It is the general policy of the administration that the Federal Gov- ernment will not start or carry on any commercial industrial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels." 176 INDEMNITY AND REACTOR SAFETY It further provides: "Because the private enterprise system is basic to the American economy, the general policy establishes a presumption in favor of Government procurement from commercial sources." The bulletin then goes on to recognize three compelling reasons for exceptions to this general policy. These are (1) national security, (2) relatively large and disproportionately higher costs, and (3) clear unfeasibility. In our opinion, a more consistent program with respect to the requirement of financial protection under the contractor program would be to utilize available private insurance by requiring Commission contractors to provide financial protection in the amounts established under section 170b for licensees in every case where the activity performed by a contractor would qualify for a license. Such a decision would place comparable activities under both the licensee and contractor programs on an equal basis so far as the protection afforded the public and the use of private insurance were concerned. It would also recog- nize the general policy of the Congress and the administration and the excep- tions enumerated by the Budget Bureau. The insurance industry is fully prepared to provide nuclear energy liability insurance on all operations which would qualify for a license under existing Commission regulations and safety standards. Because of this, it seems to us that the decision to substitute indemnity for private insurance in the segment of the contractor program militates against, rather than presumes in favor of, private enterprise. We wish to make it completely clear that we have no objection to the use of indemnity from the first dollar of loss where the contractor is engaged in operations for the Commission involving national security or hazards which would not qualify for license under existing regulations. We recognize that such activities, while involving risk of substantial loss, are justified for military or perhaps other reasons. The nuclear insurance liability pools were formed, at the urging of the Com- mission and the Congress, to provide liability protection for operations which, while hazardous, were deemed to be sufficiently safe to warrant licensing by the Commission. We are, therefore, particularly disturbed that power reactors operated by Commission contractors under the power reactor demonstration pro- gram should involve no underlying insurance. Specifically, we are referring to reactors such as those at Shippingport, Piqua, Elk River, and Hallam. We see no difference between a utility operating such a reactor as a contractor and a utility operating its own licensed reactor and strongly believe that both should be subject to identical requirements as to financial protection. The fact that the Commission owns the reactor in one case and not in the other does not affect the hazard or the need for equal protection of the public and the legitimate interests of private enterprise. General taxpayer funds should not be committed for liability claims and losses to a greater extent under the contractor program than the licensee program as long as equal private insurance coverage is available. It seems likely that the power reactor demonstration program will be the principal vehicle by which large scale power reactors will be tested over the next few years. This likelihood is supported by the two press releases issued by the Commission on December 29, 1959, with respect to the boiling water and organic prototype reactors and the small pressurized water power reactor for which proposals have been received or requested. It therefore follows that exclusion of private insurance on these risks will make it impossible for the insurance industry to develop the spread of risk so essential to sound insurance operation. In the development of the peacetime uses of nuclear energy, we, together with other segments of private industry, need broader experience. We need it so that our rating procedures and our safety engineering and claim service can be refined and perfected. This experience cannot be gained if we are to be ex- cluded from a principal market as far as power reactors are concerned. It is our sincere belief that the present decision should be rescinded and that the Commission should require financial protection of its contractors engaged in operations which would be eligible for licensing. We urge you not to use indemnity as a substitute for insurance but only as a supplement to available private insurance. Essentially, all we seek is that the same principles be applied to both the licensee and contractor program with respect to the use of underlying financial protection and the application of Government indemnity. We appreciate the opportunity to present our views on this subject which is so vital to us and are ready to cooperate with the Commission and its staff in any way possible. INDEMNITY AND REACTOR SAFETY 177 SUMMARY STATEMENT, J. DEWEY Dorsett, General MANAGER, NUCLEAR ENERGY LIABILITY INSURANCE ASSOCIATION In summary then, the liability pools feel that through administrative decision, the Commission, in its licensee program and contractor program, has indicated an intention to afford indemnity in areas where private insurers are able and willing to perform. In the licensee program, the proposed formula fixing amounts of financial protection would effectively bar private insurance from a substantial market. In the contractor program, private insurers have been almost completely excluded from the market even in areas where the indemnified operations are virtually identical to those conducted under the licensee program. We urge you to reconsider these contemplated and existing Commission policies which militate against the efforts of Congress and the administration to foster private enterprise, in which we all believe. THE AETNA CASUALTY & SURETY Co. Hartford, Conn., January 21, 1960. Mr. JOHN F. FLOBERG, Mr. JOHN S. GRAHAM, Commissioners, Atomic Energy Commission, Washington, D.C. GENTLEMEN: I appreciate very much the courtesy which you extended to me, and others, on Tuesday afternoon during our discussion of the amount of financial protection which might be required of licensees and Commission contractors. A copy of my prepared remarks is enclosed. I would also like to take this opportunity to expand somewhat on two points which came up during the discussion period. First of all, we do recognize that many parts of industry, in addition to our- selves, are plagued with a lack of business in the nuclear field. I am sure that we will all agree that the growth of the private use of nuclear energy has not been as rapid as was initially expected. Specifically, what troubles us is that we not only find ourselves with a smaller volume of potential business than was originally anticipated, but a significant portion of this potential business avail- able at the present time has been denied us through the Commission's decision, in effect, not to reimburse its contractors for the purchase of nuclear energy liability insurance. Whatever growth results under the contractor program, it will mean nothing to our industry if the existing decision should stand. Turning to the question of why we consider contractor operations such as those at Hallam more like Dresden than Hanford-it is my understanding that the contractors at Hallam and Shippingport operate Government-owned reactors producing steam which is sold for commercial purposes. This is what is done at Dresden and Yankee under the licensee program. Because these four opera- tions are essentially the same in their manufacture of power for public sale, we believe they should be subject to the same financial protection requirements. On the other hand, there are operations at Hanford and Oak Ridge which do not directly involve the commercial use of nuclear energy but rather are main- tained for governmental use, which presumably would not be subject to the licensee program. We have not asked that private insurance be purchased for such operations. As a matter of fact, where the two types of operations are being carried on at the same site we feel that we cannot offer the facilities of NELIA and MAELU because of the difficulty of identifying the source if a loss should occur. We fully recognize that the Federal Government does not purchase insurance protection covering its own property, but it has been our experience that con- tractors of the Commission, the Department of Defense, and other Federal agencies, customarily purchase liability and other forms of insurance to protect operations involving Government contracts even though the cost is borne di- rectly or indirectly by the Government. The decision to grant first dollar in- demnity in effect eliminates the possibility of insurance being purchased by the contractor and we believe this involves a change in existing practice which has very grave implications to our business. Once again, may I express my personal appreciation for the time you afforded to us. Sincerely, GUY E. MANN. 178 INDEMNITY AND REACTOR SAFETY Hon. CLINTON P. ANDERSON, U.S. ATOMIC ENERGY COMMISSION, Washington, D.C., March 31, 1960. Chairman, Joint Committee on Atomic Energy, Congress of the United States. DEAR SENATOR ANDERSON: There is enclosed for the information of the Joint Committee a letter dated January 22, 1960, addressed to Commissioners Floberg and Graham by Mr. Charles J. Haugh, vice president, the Travelers Indemnity Co., attaching a statement presented by Mr. Haugh to the Commissioners on January 19, 1960, on behalf of the Nuclear Energy Liability Insurance Associa- tion (NELIA) and Mutual Atomic Energy Liability Underwriters (MAELU). The letter and statement urge that the Commission adopt a formula for de- termining amounts of financial protection required of reactor licensees which differs from the formula contained in the proposed amendment to 10 CFR part 140 published by the Commission for public comment on May 1, 1959. The formula recommended by the syndicates would, in some cases, require higher amounts of financial protection than would be required by the Commission's formula. The present effective regulation prescribing amounts of financial protection has been in effect since September 1957 and needs to be revised in several respects, including a revision in amounts of financial protection required. For this reason, the Commission has approved for publication as an effective rule the proposed amendment to part 140 published for public comment on May 1, 1959. A copy of the effective amendment is being forwarded to the Joint Committee by separate letter. It is the Commission's intention, however, to reevaluate its financial protec- tion requirements, not later than December 31, 1960, in the light of such new information and further experience as may then be available. The reevaluation will include the formula proposed by the insurance syndicates. In publishing the effective amendment to part 140, therefore, the Commission is also inviting comments from interested members of the public on the syndicates' formula and is providing a 90-day period within which such comments may be submitted. Sincerely yours, R. E. HOLLINGSWORTH, Deputy General Manager. THE TRAVELERS, January 22, 1960. Hon. JOHN F. FLOBERG, Commissioner, U.S. Atomic Energy Commission, Washington, D.C. Hon. JOHN S. GRAHAM, Commissioner, U.S. Atomic Energy Commission, Washington, D.C. GENTLEMEN: I do want to thank you for the opportunity we had to meet with you and your staff last Tuesday, the 19th, and, also, for the friendly reception we were given. I hope we were able to convey our belief that we are faced with some serious problems. There were some points and questions that came up during the discussion on which I will try to enlarge here. Mr. Dorsett is furnishing copies of all of our statements to your staff, but an additional copy of mine is attached hereto for your convenience. I believe it was Commissioner Floberg who pointed out that everyone in the atomic energy business is suffering from a lack of customers. We recognize the existence of this fundamental difficulty at this stage and are ready to accept our share of any risks that go with it. However, the point we were trying to make at the meeting was that the low levels of financial protection called for by the proposed part 140 regulation are seriously depleting the business that could come to us from such customers as are available. It is hard for us to see how there can be a problem of overinsurance on any but the smallest research reactors if the $500 million of Government indemnity is truly needed. I said in my statement that liability insurance limits of $10 million or more are frequently found outside the nuclear energy field. One of you asked if I could give examples to support my statement. It is difficult to be very specific on this subject for two reasons: INDEMNITY AND REACTOR SAFETY 179 1. Those concerns which purchase high limits on their normal operations seldom look upon this fact as public information. 2. By the very nature of the way in which insurance is written, liability limits of this magnitude are almost always accumulated from two or more markets. It is not unusual for a company like my own, which is a primary writer, to be unaware of the total limits carried by some of our customers. However, I do feel that my statement is correct and in a quick personal survey of sources I consider highly responsible, we have accumulated the follow- ing information about concerns which carry liability insurance limits of $10 million or more on nonnuclear operations: Chemical and petroleum_ Utilities___. Manufacturers. Other Concerns 29 8 28 6 I am told that every single certificated schedule airline in the United States could be added to this list. I don't know how many airlines there are. During the discussion I offered some simple hypothetical examples of the application of the square root curve which we believe should replace the straight line which is used in the proposed regulation to relate financial protec- tion to power level. You asked if I could be more specific about this, and in an exhibit attached hereto there is a comparison of the curve to the straight line for eight actual reactors. Because of the courtesy of your staff in furnish- ing us with estimated population quotients for these same reactors, we have been able to complete the examples so as to show the effect of the change which we believe should be made in the population factors. In connection with these population factors, you will note that we have retained the same steps as those appearing in the proposed regulation, but have assigned a value to each one of six-tenths of a point so that the lowest value is 1 and the highest 4. I should also add that your staff gave us population quotients for four large reactors. They have been omitted from the exhibit because they produce $60 mlilion of financial protection under either formula. In closing, let me thank you again for your consideration. Sincerly, CHARLES J. HAUGH, Vice President. 180 INDEMNITY AND REACTOR SAFETY Comparison of amounts of financial protection for reactors produced by the proposed part 140 regulation with the amounts resulting from the changes proposed by the insurance industry Financial protection Population factor Total financial protection Thermal Reactor power Square root of Straight line Square root Sum of popula- Proposed Insurance Proposed regu- Insurance in- level power (2) X150,000 curve tion quo- level (3) X3,000,000 tient regula- tion proposed industry lation dustry proposed (4)X(7) (1) (2) (3) (4) (5) (6) (7) (8) (9) Carolinas-Virginia.. 60.5 7.8 $9,075, 000 $23, 400, 000 322 1.0 1.0 $9,075,000 (5) X (8) (10) $23, 400, 000 Westinghouse WTR.. 60.0 7.7 9, 000, 000 23, 100, 000 1, 560 1.1 1.6 9, 900, 000 36, 960, 000 Northern States Power 203.0 14.2 30, 450, 000 42, 600, 000 1, 679 1. 1 1.6 33, 495, 000 60, 000, 000 General Electric Vallecitos boiling-water reactor. Consumers Power-Hallam. 50.0 7.1 7,500,000 21, 300, 000 2, 193 1.1 1.6 8, 250,000 34, 080, 000 240.0 15.5 36, 000, 000 46, 500, 000 708 1.0 1.0 36, 000, 000 46, 500, 000 Rural Cooperative-Elk River. 73.0 8.5 10, 950, 000 25, 500,000 1,670 1.1 1.6 12,045, 000 40, 800, 000 City of Piqua.. 45.5 6.7 6,825,000 20, 100, 000 5, 574 1.3 2.8 8,872, 500 56, 280, 000 Argonne experimental boiling-water reactor. 60.0 7.7 9, 000, 000 23, 100, 000 6, 214 1.3 2.8 11, 700, 000 60, 000, 000 INDEMNITY AND REACTOR SAFETY 181 NUCLEAR ENERGY LIABILITY INSURANCE ASSOCIATION, New York, N.Y., November 20, 1959. Hon. JOHN A. MCCONE, Chairman, U.S. Atomic Energy Commission, Washington, D.C. DEAR MR. MCCONE: At the urging of Congress and the Atomic Energy Com- mission the stock casualty insurance industry in the United States through the Nuclear Energy Liability Insurance Association has assembled a market ca- pacity of $46.5 million per risk. NELIA is specially designed to insure nuclear liability exposures and its full capacity is offered to the bulk of the operators who require this protection. Two years have elapsed since the passage of the Price-Anderson amendments to the Atomic Energy Act of 1954, providing Government indemnity to certain operators in the nuclear energy field. During the course of this 2-year period a pattern of administrative decision has emerged for the employment of available private insurance to underlie Government indemnity. Our industry is gravely concerned with the fact that where these adminis- trative decisions operate, insignificant amounts of our capacity are being em- ployed. In some instances our capacity is not being used at all. We conclude that to a great degree Government indemnity is being employed as a substitute for, rather than a supplement to, available liability insurance. We cannot be- lieve that this carries out the intention of the Congress and we know that it is not the policy of the administration (Bureau of the Budget Bull. 60–2). In order that you may fully appreciate the position in which we find ourselves after making an unusual and expensive effort to create a market, we think it important that you afford an opportunity for a small group of executives of our member companies to meet with you before definitive regulations on the use of private insurance by AEC contractors and licensees are promulgated. I am attaching a memorandum which reviews the history to date. Most sincerely, J. DEWEY DORSETT, General Manager. FINANCIAL PROTECTION UNDER TILE PRICE-ANDERSON ACT Since March 1955, when the insurance study group was created by the Atomic Energy Commission to study the problems created by the expanding industrial participation in atomic energy, the casualty industry has cooperated whole- heartedly with the Commission and industry to afford needed liability protection against the nuclear hazard. Through the nuclear liability pools, the Nuclear Energy Liability Insurance Association (NELIA) and the Mutual Atomic Energy Liability Underwriters (MAELU), a capacity of $60 million per installation has been amassed. This capacity represents that available from almost all domestic casualty insurers and includes available reinsurance from the worldwide market. The contract of insurance which has been made available through the pools to operators of nuclear facilities includes such unique features as coverage for anyone who may be liable and coverage for damage to the offsite property of the person found liable. Never before has liability insurance been written which provides such blanket protection together with such massive limits. The nuclear liability insurance program was undertaken to help remove an impediment to the private industrial development of the atom and to meet the unique needs of our industrial customers venturing into this new field. How- ever, the motives of casualty insurers were not entirely altruistic. It was ex- pected that the formation of the nuclear liability pools would obviate the need for Government entry into areas where private insurance was willing and able to perform. Such expectations have proven to be ill founded. In both the licensee and contractor programs, the Commission, through ad- ministrative decision, has entered into direct competition with private insurers. These decisions seem inconsistent with the announced policy of the Eisenhower administration that the Federal Government will not provide services that can be procured from private enterprise through normal business channels (Bureau of the Budget Bull. 60-2). They also conflict with the fact that the insurance industry, at the urging of the Commission and the Congress, has expended time, money, and effort to provide a vehicle to afford nuclear liability protection. 58511-60-pt. 25 182 INDEMNITY AND REACTOR SAFETY LICENSEE PROGRAM In connection with the Commission's licensee program, Director Harold Price and his staff proposed a tentative formula for the determination of the amount of financial protection to be required. Representatives of NELIA and MAELU met with Director Price and his staff to discuss his proposed formula. It was pointed out that the proposed formula would produce inadequate amounts of financial protection not commensurate with the hazards involved. When the revised form of proposed regulation was promulgated in May of this year NELIA and MAELU again pointed out in a letter to Director Price that the levels of financial protection required under the proposed regulation were inadequate. From subsequent discussions with Director Price's staff, there is no reason to believe that there is any disposition to change the final regulation to meet the objections to the inadequate levels of financial protection required. Subsection b of section 170 of the Atomic Energy Act of 1954, as amended by Public Law 85-256, 85th Congress, sets forth the criteria for determining the amount of financial protection to be required. It provides in part: "b. The amount of financial protection required shall be the amount of liabil ity insurance available from private sources, except that the Commission may establish a lesser amount on the basis of criteria set forth in writing, which it may revise from time to time, taking into consideration such factors as the fol- lowing: (1) the cost and terms of private insurance, (2) the type, size, and location of the licensed activity and other factors pertaining to the hazard, and (3) the nature and purpose of the licensed activity :" Thus, the act permits the Commission to establish amounts of financial pro- tection less than the amount of liability insurance available from private sources on the basis of certain criteria. In our judgment, the formula set out in the notice of proposed rulemaking last May does not observe the statutory criteria for the establishment of lesser amounts of financial protection. The conflict between the Commission's proposed regulation and the act is borne out by an examination of the explanatory material which accompanies the notice of pro- posed rulemaking. That material makes it clear that the formula proposed by the Commission has little or no relation to the hazards involved. The explana- tion states: "The amount of financial protection which would be required under these amendments for any given reactor should not be construed as indicating what the potential or probable damages might be if a serious accident involving that reactor were to occur. An attempt to calculate a dollar amount of damages which might be caused by an accident involving any licensed reactor would re- quire complex and lengthy theoretical studies, the results of which would depend upon the type and validity of the assumptions (as to the various cir- cumstances of the theoretical accident) made in undertaking the study. The results would in almost every case be without significance for purposes of this regulation because the reactor accidents postulated for study purposes and the theoretical consequences calculated for such accidents, are not likely to be simi- lar to those, if any, which will occur. It is consequently more significant for purposes of this regulation to devise equitable means for calculating amounts of financial protection to be required for reactors authorized to operate at the more substantial power levels, based upon relative differences with respect to power level and locations; and to specify fixed amounts for reactors authorized to operate only at the relatively lower power levels" [emphasis added]. Thus, the Commission, instead of weighing the "factors pertaining to the hazard," as required by section 170b, has decided "to devise equitable means for calculating amounts of financial protection." Certainly, the attempt to produce “equitable" gradations downward from $60 million, presently available, has no relation to hazard. The $60 million figure in no way measures the potential or probable damage which would result if a serious incident occurred at a power reactor having a rated capacity of 100,000 electrical kilowatts or more. The figure merely represents the amount of casualty insurance available from pri- vate sources. Certainly, support cannot be found for the formula in the criteria in section 170b referring to the cost and terms of private insurance. A million dollars of insurance limit will cost a larger operator considerably more than it will cost a smaller reactor operator, because magnitude of risk is an important factor in determining the premium to be charged. Actually, the insurance premiums themselves affect the equity which the Commission seeks. INDEMNITY AND REACTOR SAFETY 183 The practical effect of these administrative decisions is illustrated in the coverage that NELIA has written to be used by its customers as evidence of "financial protection." There are only 12 of these contracts. Three are at a limit of $250,000 and there is one each at $750,000, $1 million, $2 million, $8 million, and $46,500,000. Four more carry limits above $8 million but in each of these cases the required financial protection is below that figure and the higher limit is present because the facility is performing operations such as fuel fabrication that do not qualify for indemnity. Obviously, the operators of these facilities feel that the higher limits are necessary to protect them from the liability arising from the hazards involved. It should be pointed out that it is understood that the task of establishing a formula for financial protection which squares with the requirements of sec- tion 170b is difficult. Representatives of NELIA have devoted considerable study to the problem and have some detailed thoughts as to its solution. Of course, they are always available for consultation with the Commission. CONTRACTOR PROGRAM The Commission has elected not to require its contractors to furnish under- lying financial protection although 170d of the Atomic Energy Act of 1954 as amended by Public Law 85-256, 85th Congress, gives the Commission discretion in this matter. Thus, indemnity attaches from the first dollar when it is ex- tended under the contractor program. This administrative decision has resulted in substantial encroachment upon private enterprise. It seems especially unfortunate that the reactors at Piqua, Elk River, Hallam, and Shippingport, which are a part of the power reactor demonstration program, should be granted complete indemnity as a substitute for private insurance. These operations appear to be private industrial projects which have been sub- sidized by the Commission. It is difficult to see why private insurance should be barred from performing in this area and, possibly, other areas of the con- tractor program. As a closing thought, the casualty insurance industry finds it strangely in- congruous that it should be asked by the Commission to afford claim service in an area such as the power reactor demonstration program, where complete in- demnity has been afforded in lieu of available private insurance. Mr. TOLL. The enclosure to your letter gave comparative figures under your formula and the AEC formula for several reactors. As an example, the Carolina-Virginia AEC proposal would be a little over $9 million. Under your formula it would be $23 million. Mr. HAUGH. $23,400,000 Mr. TOLL. Westinghouse reactor, AEC proposal would be $9,900,- 000; your proposal would be $36,960,000. Mr. HAUGH. That is right. Mr. RAMEY. And they have had an accident? Mr. HAUGH. That is what we understand. I didn't bring it out. Mr. TOLL. That accident didn't involve any public liability. Mr. BUTLER. None so far as we know. Mr. YOUNT. Not yet. Mr. TOLL. This chart included four AEC owned reactors. I pre- sume it was to compare the types of reactors, because under the AEC present regulations, AEC doesn't require any financial protection for something like the EBWR at Argonne. Mr. HAUGH. That is right, but as Mr. Yount has said we are asking that these reactors be brought into the financial protection formula. Mr. TOLL. Under AEC's formula, financial protection would be $11,700,000 and under your formula it would be $60 million. Mr. HAUGH. That is right. Mr. TOLL. That is the Argonne EBWR. 184 INDEMNITY AND REACTOR SAFETY Mr. HAUGH. That is right. Mr. TOLL. Why is there so much difference? Mr. HAUGH. One reason for that is that you will notice the popula- tion factor under our formula is much more substantial. We work out $23,100,000 without injecting the population factor. When you bring that in, the Commission's population factor would be 1.3. Multiplying by 1.3, they increase their $9 million to $11.7 million. I increase our $23 million by 2.8. It is located where there is a substantial popula- tion. We think where there is an increased population density, there is a greater potential hazard. We do not disagree with the basic principles of the Commission in their determination of a population factor. We are in accord with that. The difference lies in this. Their population factors range from a minimum of 1, which has no effect. If you multiply something by 1, that is where you came in. It goes up to 1.5. We cannot agree that the potential hazard of a reactor located in a city where there is a heavy population is only 50 percent greater than the same reactor located in the middle of a desert. In our for- mula, we say that it ranges from a factor of 1 to 4. None of these we illustrated here worked out as high as 4. We say follow the same procedures that the Commission established for determining popula- tion. But let the factors range from 1 to 4 instead of from 1 to 1.5. You may say I picked an absurd example, comparing one that is in the center of Chicago to one that is in the desert. Let us put it in Nevada or the New Mexico desert. Senator Anderson might object to New Mexico. Put it in Wyoming. Actually it must be that the hazard is very substantially greater for a reactor that is in Chicago or Boston or New York or San Francisco or Cleveland or St. Louis, you can go on and name the community, than that same reactor located miles from any concentration of population. We can't believe that the most hazardous is only one and a half times the least hazardous. We say that just does not add up. I will admit it is judgment. Our range of 1 to 4 is judgment just as the Commission's 1 to 1.5 is judgment. We just urge that we think our judgment in that case is considerably, I say modestly, sounder and better justified just on its face than the limited range they used. That accounts for a substantial part of this difference. You will notice that in columns 4 and 5, which are the two indica- tions before you apply the population factor, their formula would have $9 million. Ours without population would be $23,100,000. The addition of their population factor changed $9 million to $11.7 million. Our population factor changed $23 million to $60 million, because it is in an area with a fairly high concentration of population. If it should get out of control, it would involve a great deal of valu- able property in a concentrated area, and a great many more people. Mr. TOLL. Some of these, without even taking into account the population factor-your requirement, for example, at General Elec- tric VBWR is roughly three times the AEC formula; and then, when you take into account the population factor, you come out in your formula with a requirement of over $34 million as compared to the AEC requirement of $8 million. Mr. HAUGH. That is quite right. It does. Mr. RAMEY. Vallecitos is in a relatively remote area. INDEMNITY AND REACTOR SAFETY 185 Mr. HAUGH. Relatively much more because the population factor is 1.6 and the Commission's is 1.1. Again may I call attention to this. While those look like pretty sizable figures to go from $7.5 million to $34 million, may I again revert to the amounts of insurance that are purchased by industries where there is no indemnity and they deter- mine for themselves what they think their potential hazard is, and they would like to buy enough insurance to cover it. May I point out that they get into some much more sizable figures. We have one here, and offhand I am not sure which one it is-I think it is not one that I would call a terrifically hazardous operation— that wanted $60 million. They just want to be sure. They are per- fectly willing to pay the money to be sure that they are covered for $60 million. There are two more which voluntarily buy $20 million. The regulations don't require them to buy it at all. They are deter- mining for themselves what they think the hazard is. These are for operations where, under the regulations as of now, they are not re- quired to put up financial responsibility and yet they will buy these sums. Mr. TOLL. I believe the AEC has published your letter and figures and asked for comments from the rest of industry by the end of this year. Mr. BUTLER. Ninety days I think they asked for comment. Mr. HAUGH. About 30 of those days are gone. Mr. TOLL. They said that the Commission's intention is to reevalu- ate its requirements not later than December 31, 1960, in the light of such new information and further experience as may then be available after receiving comments. Mr. HAUGH. The Commission did. Frankly, the reason we are presenting this now is that I think perhaps in the past-and I blame no one but ourselves-we have not been as outspoken as we should be on some of our views where we differ. I am not doing it in the sense of quarreling with the Commission. Where our views differ I think we probably should say so. That is what I am undertaking to do now in a friendly and constructive way, to say that we happen to differ with the Commission and we believe thus and so, and here is why we believe as we do. The Commission did advise us in a letter just as you have pointed out there, sir, that they had in mind reviewing these again at the end of the year. My only difference with them is that I would like to review them at the end of this week instead of the end of this year, and get this cleared up more promptly, if I could. When I said cleared up, all I meant was to substitute the figures I have been urging for the others. Representative PRICE. Mr. Ramey. Mr. RAMEY. I have a question for Mr. Yount. On page 4 of your statement in commenting on the power demonstration reactors, you say: It appears likely that for the next few years the majority of the power reac- tors built will be paid for in whole or in part by Government funds, even though operated by private utilities or, in other words, will be built under the power reactor demonstration program. Under the private demonstration program where the Government contributes research and development money to a private reactor, as 186 INDEMNITY AND REACTOR SAFETY in the case of PRDC or this South Carolina project, the reactor is owned by the private utility and they do take out insurance, don't they? Mr. YOUNT. I believe the regulations contemplate that. What we can't understand is why the ownership makes the difference. Ship- pingport is in exactly the same category. It is being managed by a private utility and power sold for private purposes. Why would you exempt insurance in one case and not the other? Mr. RAMEY. I think Shippingport may be an exception in that kind of category, because that was constructed under the act before it was amended in 1954. You don't have any Shippingport arrangements since that time where you have a private utility. You have co-ops operating them, and you have municipalities doing so, but not your private organizations. Mr. YOUNT. I think our position would be that where anyone is selling power or engaged in a commercial operation, that ought to be part of the total nuclear insurance pool. Incidentally, since you raised that question and since I wrote this, I have the announcement from the Commission that Puerto Rico was moving into the same category. Mr. RAMEY. It is true, though, that this was considered during the time that the Price-Anderson bill was passed. I don't think people were caught by surprise, shall we say? Isn't that so? Mr. YOUNT. I would say we were caught by surprise because we have assumed from the outset as part of our long-range planning that Shippingport and these other reactors would be part of the program. Representative PRICE. Did that enter into your thinking when you were having discussions with the Commission in setting up your program? Mr. YOUNT. It never occurred to us that they were going to issue this kind of an order in the early part of our discussions. When the early indications were that they were thinking along that line, we objected, and we have been objecting ever since. Mr. TOLL. Don't you think it makes some difference who is actually going to be paying the premium? If the Federal Government is actually going to be paying the premium, then the Federal Govern- ment is paying for insurance it may not need in the sense that it has the capacity to take care of claims itself. Mr. YOUNT. I don't believe that is the proper criteria. Actually you can argue that the Government is paying the premium on every one of these, if you want to. You make certain allowances or the Commission makes certain allowances for research and development, and so on. There are so many million dollars being spent and the Government is making certain allowances for it. You call the amount the Government allows for this purpose, but it all goes into the pot. I don't think your argument is valid. Mr. RAMEY. Of course, the Government's policy on Government- owned facilities, as Mr. Hollingsworth's letter indicated, is that they don't take out insurance, they don't pay taxes. They treat it as a Government operation. For this first crop of reactors, I think this is just what they have done. When these reactors are disposed of, as under the law they are required to be, then presumably the munici- INDEMNITY AND REACTOR SAFETY 187 pality or co-op or private utility in the case of Shippingport, would then come under the insurance program. Representative PRICE. Are there any further questions? If not, thank you very much, Mr. Haugh. Mr. HAUGH. Thank you, Mr. Price. I appreciate this opportunity. Representative PRICE. We appreciate your attendance here and your presentation, as well as Mr. Yount's and the other gentlemen who have accompanied you. The committee will stand adjourned until 10 a.m., tomorrow morning. (Thereupon at 3:25 p.m., Tuesday, April 26, 1960, a recess was taken until Wednesday, April 27, 1960, at 10 a.m.) INDEMNITY AND REACTOR SAFETY WEDNESDAY, APRIL 27, 1960 CONGRESS OF THE UNITED STATES, SUBCOMMITTEE ON RESEARCH AND DEVELOPMENT, SPECIAL SUBCOMMITTEE ON RADIATION, JOINT COMMITTEE ON ATOMIC ENERGY, Washington, D.C. The subcommittees met, pursuant to recess, at 10 a.m., in room P-63, the Capitol, Hon. Melvin Price (chairman of the subcommittee) presiding. Present: Representatives Price, Holifield, Van Zandt, and Hosmer. Also present: James T. Ramey, executive director; David R. Toll, staff counsel, Joint Committee on Atomic Energy. Representative PRICE. The committee will be in order. The Subcommittee on Research and Development, and the Sub- committee on Radiation, are continuing joint public hearings this morning on indemnity matters, and related reactor and radiation safety problems, including site selection, and the operations of the Advisory Committee on Reactor Safeguards. We have requested AEC witnesses to testify on proposed amendments to the AEC regu- lations concerning licensing procedures (p. 50), and standards for protection against radiation (p. 20), and also on other reactor and radiation safety matters, including the operations of the Advisory Committee on Reactor Safeguards. Later this morning we have asked to hear from Dr. Silverman and Dr. McCullough of the Advisory Committee on Reactor Safeguards. We will continue the hearings this afternoon. Since the AEC statements were not delivered to the committee staff until after 8 p.m., last night, and to the committee offices until after 9 a.m., this morning, the committee and staff have not had adequate time to prepare for the hearings, and therefore a further hearing on these subjects may be necessary at some future date. Our first witness this morning is Mr. John A. McCone, the Chair- man of the AEC, who is accompanied by other members of the Com- mission and the AEC staff. Representative HOLIFIELD. Mr. Chairman, before Mr. McCone starts, I would like to just say this, gentlemen. This is a poor way to run a railroad, if you will permit me to say so, to put a statement of such importance in our hands 15 or 20 minutes before we go into a hearing. You have been aware of the intent of the committee for over 2 months to hold a hearing on this subject. I think it is a lack of co- operation on your part in supplying a statement at this late date. It arrived in my office at 20 minutes to 10, and I left at 10 minutes to 10 to come over here. Under those circumstances, it does not give the 189 190 INDEMNITY AND REACTOR SAFETY members of the committee or the staff a chance to look over and exer- cise any judgment at all upon the matters that are brought forth. Therefore, we are precluded from asking any questions except snap questions which occur to us as we read through the material. In the future I just want to say this, that when I am chairing the committee, if we are presented at this late date with a statement, I am going to adjourn the committee meeting until some future date to give us a chance to look at the material. STATEMENT OF JOHN A. McCONE, CHAIRMAN; ACCOMPANIED BY JOHN S. GRAHAM, COMMISSIONER; WILLIAM FINAN, ASSISTANT GENERAL MANAGER FOR REGULATIONS AND SAFETY; HAROLD PRICE, DIRECTOR, DIVISION OF LICENSING AND REGULATIONS; DR. FRANK K. PITTMAN, DIRECTOR, DIVISION OF REACTOR DE- VELOPMENT, ATOMIC ENERGY COMMISSION Mr. MCCONE. Mr. Chairman, I am extremely sorry and apologetic for the fact that this statement did not reach you until this late date. The Commission staff have been, I think, most diligent in the past in following the request of the Joint Committee to have the statements in their hands at least 24 hours in advance of the opening of the hearing. I personally am not cognizant of the reasons for this delay in this instance. However, I will see that it will not happen again. I can add to your feelings, because neither Commissioner Graham nor I got copies of this statement until we were leaving the office to come here this morning. Representative HOLIFIELD. You can readily see the position in which it puts a member that wants to understand what he is doing in a committee hearing, when he is faced with a very complicated and technical document such as this without any chance at all to have prior access to it. It just puts us in the position where about all we can do is to receive the statement. Mr. MCCONE. I think that is very true. I think these statements must be in your hands in advance so that they can be studied by your staff and by the committee members themselves. We will see that practice is followed in the future. Representative HOLIFIELD. I appreciate that very much. Representative PRICE. I think to make the record clear, the Com- mission was alerted to this hearing about April 1. About 2 weeks ago you had a letter from the committee as to the exact time of the hearing. I think it is an important enough issue that if we do crowd the Commission too strongly and make it difficult for them in the preparation of such a statement-I realize that a great deal of work has to go into the preparation of these statements-I think you will find the committee willing that you delay the hearings until such time as the statements are adequately prepared. It is important that we do have the statements within a reasonable time before the hearing so that the staff and the members can go over them, and be prepared to question the witnesses. Mr. MCCONE. I think that is true, Mr. Price. In all areas, but most particularly in this area, because here we are dealing with the question of regulations and public health and safety, and I think this is a matter that must be considered deliberately and carefully. INDEMNITY AND REACTOR SAFETY 191 Representative PRICE. We don't want to put an undue burden on the staff. We are in the same position you are and we recognize the work that is involved. I would much rather be advised that you could not make the time schedule so that we could delay the hearing until you were prepared. Mr. Ramey. Mr. RAMEY. Just to complete the record on this, I think the Com- mission staff, particularly the General Manager's Office, had co- operated with the committee staff in trying to identify some of the questions involved, particularly in relation to these regulations. This came up first in the 202 hearings, you may recall, when they had a chart that compared the regulations. We did have a meeting on that. That was several weeks ago. We did go over a couple of weeks ago what we thought might be considered in this hearing today. But between that time and now, we did not make much progress, if I may put it that way. Representative PRICE. Will you proceed, Mr. Chairman. Mr. MCCONE. The prepared statement which was submitted to you a few minutes ago will be read by Mr. Price, who will continue his testimony. After he finishes reading it, if there are any questions, or should you desire a statement from me or from Commissioner Graham, we are here for that purpose. Representative PRICE. Will you proceed, Mr. Price. Mr. PRICE. Mr. Chairman, this testimony will cover the Commis- sion's proposed amendments to title 10, Code of Federal Regulations, part 50, the licensing of production and utilization facilities. We will mention part 20 but it has been our plan to cover that at the radiation hearings next month. We will also cover here reactor site selection, including the prob- lem of alternate sites, organizational matters, and the work of the Advisory Committee on Reactor Safeguards. First are the proposed licensing amendments relating to produc- tion and utilization facilities. This portion of the testimony deals with three recently proposed amendments to the Commission's facility licensing regulations. These proposals consist of (1) an amendment to section 50.10, title 10, Code of Federal Regulations, which would clarify the extent to which construction of a nuclear facility may proceed prior to the insurance by the Commission of a construction permit; (2) an amendment of section 50.35, title 10, Code of Federal Regulations, which would provide for the issuance of a construction permit in cases where the site and general design concept were acceptable but safety determina- tion on particular features depended upon completion of a develop- ment program; and (3) an addition to a section 50.57, title 10, Code of Federal Regulations, which would establish the bases for issuing provisional operating licenses under certain circumstances. Before discussing the proposed amendments, I should like to point out that they are proposed rules issued for public comment and have not yet been issued as effective regulations. The proposed amendment to section 50.10, title 10, Code of Federal Regulations: The first of the proposed amendments is related to the provisions of section 101 of the act. This section prohibits the acquisition, pro- 192 INDEMNITY AND REACTOR SAFETY duction, or manufacture of a utilization or production facility without a license from the Commission. The current regulations contain a general restatement of the statutory provisions in section 101 of the act. The proposed amendment would clarify the extent to which construction of a nuclear facility may proceed prior to the issuance by the Commission of a construction permit. The amendment would make it unlawful to begin the construction of a production or utiliza- tion facility on a site on which the facility is to be operated until a construction permit has been issued. It would continue to permit site acquisition, exploration, and excavation, as well as the procurement and manufacture of components of the facility, in the absence of a construction permit. The laying of foundations and other onsite. construction work on a nuclear facility by an applicant would, how- ever, be prohibited prior to issuance of a construction permit. Representative HOLIFIELD. On this point, where is your clarifica- tion? What do you clarify in this? It seems to me that you make it unlawful for them to begin the construction of production or utili- zation facility on a site, but you allow them to buy the site, explore it, and excavate. I don't know whether that "excavate" means digging it out for foundations or whether it means exploring it to find out where your bedrock is. I don't know exactly what it means. But if you allow all of that prior to granting a construction permit, does this or does it not put pressure on the Commission to grant a construction license? Mr. PRICE. Mr. Holifield, many companies have already acquired sites for powerplants years ago. They may or may not be suitable for a reactor installation. We don't think we ought to preclude them from offering those sites to find out if they are acceptable from a safety standpoint. Representative HOLIFIELD. I agree with you on that. Mr. PRICE. If we made this regulation cutoff at the point of future acquisition we would find ourselves in the position of questioning the purpose for which people buy land, and we don't think it is necessary to do that in the interest of safety. Representative PRICE. In other words, your clarification of this would put the burden of proof completely upon the applicant to justify either the site that he acquired previously or the site he was going to acquire, and also it is perfectly clear that any expense he goes to in excavation or exploration of this site is completely on his own, and that it obligates the Commission in no way to follow through with a permit. Mr. PRICE. That is absolutely right. Anything that the company does before getting a construction permit is completely at the com- pany's risk, and we have not by this regulation blessed it at all. Representative HOLIFIELD. That seems to be a logical position for you to take. Representative PRICE. I think it is a logical position, but it goes back to your original question whether it does not at the same time make room for the application of pressure, because they have gone this far. Mr. PRICE. Mr. Price, it is a question of at what point we ought to make this regulation start taking hold. I think we are all in agreement that we don't want to preclude land acquisition. We could INDEMNITY AND REACTOR SAFETY 193 stop short and say don't move any dirt, don't build any roads, and don't start digging. It gets us in a position where we are quarreling and questioning people if we cut off prior to that as to what they are digging for. Besides, there is a limit to the amount of money they can spend in those efforts. We just thought that the easy point to make this cutoff would be when they start building the nuclear facil- ity-start doing actual construction work at the site. Representative PRICE. Your regulation says permanent facility. Mr. PRICE. That is right. Representative PRICE. What do you mean by permanent facility? Mr. PRICE. That means the reactor facility. Representative PRICE. It does not mean any of the other supporting facilities? Mr. PRICE. That is right. Representative PRICE. Any other type of building that they might need. Mr. PRICE. Temporary buildings, temporary construction sheds, things like that, this would not prohibit. This is open for comment. We have gotten some comments not very many. The Commission has not decided that this is going to be the cutoff point. This is what we have exposed for public comment. Representative PRICE. Would the permanent facilities take in the turbogenerator facilities? Mr. PRICE. We had not intended that it would. Let me give you an example: Take the case of the Hallam facility. They are going to have a powerplant there whether they hook up a nuclear reactor or not. As a matter of fact, I think they probably are already build- ing, or have built, the conventional part of it. They are planning now to build a reactor, and are building it to generate heat. We just had not thought that we ought to be in a position where when people start building conventional facilities we start snooping around and questioning what they are going to use it for. They can always hook it up with a conventional boiler. I say always; maybe not too con- veniently. Representative PRICE. The permanent facilities apply to the reactor. Mr. PRICE. That is right, and necessary facilities to make it operate. Representative HOLIFIELD. How does your procedure here comport with the procedure of the FCC in granting licenses? Mr. PRICE. I am not familiar in detail with that, Mr. Holifield. I think their rules, as I understand it, prohibit construction without a permit. What they use as the cutoff point I don't know. Whether they prohibit the land acquisition or whether they stop them short of digging, I would be glad to try to find out for the record. Representative HOLIFIELD. Does your staff know that? Mr. FINAN. I can add a little bit to that. As I understand it, the FCC is normally confronted with a problem of a type which at least up to this date the AEC has not had to deal with; that is, they have had more than one applicant for a television station for one channel. If they were to permit one of those applicants to go ahead with any kind of construction, it would create a public impression that that applicant had an inside track and they would not be objective later when they made a decision as between several applicants. Under those circumstances, as I understand it, they not only prohibit any 194 INDEMNITY AND REACTOR SAFETY type of construction on a site, but their rule goes so far as to indicate that if it actually starts, the applicant, even if he later is granted the license, cannot build his transmitter on that site. He has built a white elephant. It is a very stringent regulation and it is designed to deal with the particular situation that they normally have to deal with, which is several applicants for one very small available part of the radio spectrum. So far as you know, this Commission has not been up against that problem. Representative HOLIFIELD. Your reason for not having such strin- gent regulations is that you are not granting an exclusive type of li- cense, such as FCC grants to a television or radio station. Other additional sites could be granted in the same neighborhood if other applicants wanted to build additional nuclear reactors in that neigh- borhood. Whereas, in the case of the FCC, this would probably not be possible, at least on the same wavelength, and there are very few wavelengths open. Mr. FINAN. That is correct, sir. Representative PRICE. Mr. Ramey. Mr. RAMEY. I think, however, that may not be even entirely the case now on some sites. Certainly in the future it won't necessarily be the case. Take your Point Loma situation right now. You are going to have competition in the sense of safety for sites where the safety problem is a particularly important one. To have one outfit to go ahead might put you in a spot in any particular area in the same way as the FCC. Mr. FINAN. As Mr. Price has indicated, this is not an easy decision that the Commission will have to make. The proposal seems to be one which, on balance, would create a minimum amount of difficulty in any given situation. With respect to letting them dig a hole in the ground, they are not only not in a position to invest a vast amount of money, but when they start digging a hole in the ground we do not want to get into a posi- tion of having to get into an argument with the applicant as to whether that hole would be later used for a cafeteria or office building or conventional features, or whether in fact the reactor foundation was going to go in it. Mr. RAMEY. Apparently in the case of the FCC, it is possible to enforce the regulation. It is a procedure that has been in effect. The AEC law, as you know, was modeled after the FCC Act in terms of the statutory language and some of the regulations. I don't quite see the logic of the argument there. Mr. PRICE. Mr. Ramey, the Commission could change this when it acts and say all right, we will let them buy the land and no more. They cannot cut the brush down, they cannot build a temporary road, they cannot do anything. We just felt when we exposed this for comment that letting the people, without reference to use at all, go as far as clearing the land and starting to dig would not commit them enough to the site that that would be any pressure on us that we would worry about at all. There is another reason for the cutoff point here. It relates to the safety issue. Once they start pouring concrete they are fixing the kind of containment, if any, they are going to have. That relates to safety. So we said, no, this regulation says you have to stop before * r INDEMNITY AND REACTOR SAFETY 195 you start putting this permanent facility up because now you are dealing with the safety questions. Representative PRICE. With this notice, they are less likely to do these things in the fututre. Mr. PRICE. This regulation as written, sir, is an absolute prohibi- tion. They won't do it without violating the law. Representative HOLIFIELD. What particular case is this revision based on? Mr. PRICE. Mr. Holifield, I could not say that it is based on any particular case. Representative HOLIFIELD. Does this pertain to the Northern States application? Mr. PRICE. It is true that Northern States, after the application was filed in the absence of a regulation defining the point at which they had to get a construction permit before going any further with it, were told that in view of the fact we did not have a regulation there was no legal objection to their pouring the foundations and they did start. We felt, and I think we have been feeling for some time, that this is not a good position to leave us or industry in, not knowing just what the cutoff point is. We thought we ought to have a regulation that makes it clear what the cutoff point is. Representative HOLIFIELD. I agree with you on that point. At the point you said all right, it is going ahead, could you not have said, if you want to go ahead, that is your responsibility? Mr. PRICE. We did say that. Representative HOLIFIELD. You did say it? Mr. PRICE. Yes, sir. Representative HOLIFIELD. Now you are putting that principle into a formal regulation? Mr. PRICE. Not only that. We are not letting them go ahead beyond a certain point until they get our approval. Representative HOLIFIELD. In other words, you are stopping them, as I see it in your last three sentences of the first paragraph on page 2, laying foundations and other on-site construction work on a nuclear facility by an applicant would be prohibited prior to the issuance of a construction permit. Mr. PRICE. That is right. Representative VAN ZANDT. Is it not true, Mr. Price, that some of these companies and corporations have decided to construct a nuclear facility on real estate they already own? Mr. PRICE. Yes. Representative VAN ZANDT. And have owned? Mr. PRICE. Sure, maybe for 50 years for all I know. They buy their land way in advance usually. Representative VAN ZANDT. Is there any situation where they have actually gone ahead to the point of pouring concrete so it has been necessary for the AEC to deny the application? Mr. PRICE. No, sir. Representative VAN ZANDT. How long has the general provision of law requiring the AEC to grant permits been in effect? Mr. PRICE. Since 1954. 196 INDEMNITY AND REACTOR SAFETY Representative VAN ZANDT. Have you written a policy to cover this general problem? In other words, have you spelled out the require- ments based on the provision of law? Mr. PRICE. Yes, we have had regulations in effect since early 1955. This is the first time we have dealt with the particular point of how far can a company proceed with its project before it gets a construc- tion permit. Representative VAN ZANDT. Let me put the question this way: Does the AEC have a criterion these corporations must meet? Mr. PRICE. In order to get a construction permit? Representative VAN ZANDT. That is right. Mr. PRICE. We don't have any published criteria. We published some for comment last summer and we have not acted on it. Representative VAN ZANDT. Since 1954, how many times has the AEC changed the criteria or regulations in connection with applica- tion permits? Mr. PRICE. I don't know quite how to answer that, Mr. Van Zandt. We have amended the regulations on a number of times. Representative VAN ZANDT. That is better language, amended the regulations. Mr. PRICE. I could not give you an offhand answer as to how many times. Representative VAN ZANDT. These amendments you speak of, do they result from additional experience the AEC has gained as the re- sult of dealing with these problems? Mr. PRICE. Yes, sir. Representative VAN ZANDT. The small pressurized water reactor the Commission is considering for location involving Dairyland Wis- consin and Jamestown, N.Y., has the AEC set up a new location re- quirement as far as this project is concerned? Mr. PRICE. NO, sir, what we did there, when the sites that were pro- posed for those reactors turned out to be unsuitable was this: Let me first say when the invitations were put out for those proposals last summer, in the absence of any rules on site, the invitation invited the prospective municipalities' attention to the proposed site criteria that we had issued for public comment last May or June, for their guidance. The sites you are talking about did not meet those criteria. I hesitate to call them criteria. Anyway, they could not have qualified under that. We have since then sent out some guidance as to what kind of exclusion areas and distancies from population they ought to look for in order to qualify. Representative VAN ZANDT. The information on guidance, when was it sent out? Was it recently? Mr. PRICE. First last summer with the proposal. Recently, within the past several weeks. Representative VAN ZANDT. What difference is there in the two re- leases containing information on guidance? Mr. PRICE. I think there is this difference. The proposal of last summer which was for general applicability just gave a general indi- cation that there ought to be some thought given to the size of the ex- clusion area. That gave some examples for a particular size reactor, as to how far it ought to be from populated places, in ranges of numbers. We did not try to be definitive, and those numbers were related only 21 INDEMNITY AND REACTOR SAFETY 197 to power level. When those two cases did not qualify, the guidance that we sent back was related to the particular size reactor we are talk- ing about. There we suggested, and it is not a rule, just for their guidance, that they seek exclusion areas of 1,500 to 2,000 feet and dis- tance from populated places of around 3 to 5 miles. This is not a rule, but it is intended as guidance for the people that want to try to find sites for this particular proposal. Representative VAN ZANDT. Did the Committee on Reactor Safe- guards review both the Wisconsin and the Jamestown, N.Y., pro- posals? Mr. PRICE. No, sir. They reviewed the Jamestown proposal, and they and the staff of the Commission rejected it. As far as the Wis- consin proposal is concerned, the Commission rejected that without referring it to the ACRS. Representative VAN ZANDT. Late yesterday afternoon I had a tele- phone call from the Congressman who represents the Jamestown, N.Y., district, and he stated very frankly the AEC had changed the rules of the game. In other words, from the information furnished, you are now asking them to meet requirements they were not asked to meet last summer. Mr. PRICE. Mr. Van Zandt, I don't believe it is a change of rules. They are now being given more specific advice on what kind of dis- tances to look for than the general guidance they were given when the Reactor Division put out the proposals last summer, that is right. Representative VAN ZANDT. Mr. Price, if we adopt the amendment. the Commission proposes, can we then understand that the AEC will issue a firm criteria and this confusion prevailing in the past will be eliminated? Mr. PRICE. I believe that is right, sir. I assure you that there is no more important subject that the Commission and the Advisory Committee on Reactor Safeguards are devoting their time to, and have been, than this important subject of site criteria. It is a complex problem. Representative VAN ZANDT. Has the Commission sufficient experi- ence now to establish a firm criteria or regulations? Mr. PRICE. Let me qualify the word "firm," and I think the answer is "Yes." Representative VAN ZANDT. That is all, Mr. Chairman. Representative HOLIFIELD. You know in the April 14 Nucleonics. Week is the first time we heard of this particular situation that Mr. Van Zandt has been questioning you about. I think it would be well to read into the record at this time this part of the comment on this particular problem. It starts out: "Is SPWR mystery? Who is ahead? Who imposed the new site rules?" Five municipal or cooperative utility bids to build a 16.5 megawatt small sized pressurized water reactor have been under evaluation by the AEC, the cities of Jamestown, N.Y., Detroit, Mich., and La Crosse, Wis. In Nucleonics' analysis February 16 showed only Dairyland met AEC terms and offered to finance a superheater and only Dairyland provided a site out of town 20 miles away, the others proposing downtown sites. Early this week Dairyland received a surprise phone call from Oak Ridge, the field office administering SSPWR project for AEC, imposing new site criteria. A 2,000-foot radius total exclusion area around the reactor and the edge of the site to be 5 miles from the heavily populated fringe of the population center. Oak Ridge is said to have no expla- nation of the new rule having been advised of it only 4 days earlier by AEC 58511-60—pt. 2- -6 198 INDEMNITY AND REACTOR SAFETY headquarters. Dairyland was baffled because nothing was said about such conditions when the AEC team inspected the new site earlier. Who adopted the rule, when, and why? A check at AEC indicated that the Hazards Evalu- ation Branch knew of no such regulation. HEB will recommend that they be moved farther from population centers. Such a recommendation had been made in the case of the Jamestown, N.Y., site by both HEB and ACRS. But Jamestown was the only site of the five presented to HEB for review. Does this mean that Jamestown bid had been chosen as the winning one? (James- town declined all comment as did Oak Ridge.) And if so, why was Dairyland required to comply with new criteria. One hypothesis would have it that AEC first picked Jamestown as SSPWR sweepstakes winner, but then wanted to see if it could get a new proposal. At press time, the full story was not yet clear- and so on. So it seems to me that your invitation as I analyze it put out on Oc- tober 1, 1959, and proposals came in on December 15, then on April 7 a letter was received from AEC Oak Ridge, Tenn., signed by Mr. Sapiri, the manager, in which he said: Confirming the telephone call of Dr. Cope, our Washington headquarters has requested that we approach you regarding the possibility of obtaining a revised proposal in connection with your small pressurized reactor project based on site criteria as follows: 1. An exclusion area with a minimum radius of 2,000 feet surrounding the reactor. 2. Edge of site to be 5 miles from the fringe of population center if the inter- vening area is not likely to be an area of heavy population buildup in the future (hills unsuitable for residential area, and so on). This distance may be reduced to 3 miles minimum. This request results from various hazards considerations developed by our headquarters staff, which have indicated problems in connec- tion with the site previously proposed by you. While we recognize the shortness of notice to you, we would appreciate your indication of whether or not you might be in a position to submit such a revised proposal as early as practical and when such a proposal might be made. We can provide additional informa- tion or otherwise be of further assistance in this matter if you desire to meet further with us with respect to this matter- and so on. Signed "R. F. Sapiri, Manager." It seems to me that this is evidence of pretty poor procedure on the part of the AEC. As far as I know, the ACRS was never called into this. Were they? Mr. PRICE. The ACRS was called in on the Jamestown site, and the ACRS as well as the staff of the Commission thought it was not a suitable site. Representative HOLIFIELD. How about the Dairyland site? Mr. PRICE. We did not even refer that to the ACRS. It was such a small site and had some features about it, we did not see how it could possibly pass. Representative HOLIFIELD. This letter that I read was in regard to the Dairyland site. It had nothing to do with the Jamestown site. It looks to me as though your change in April, changing the rules giving them an additional rule after someone had visited the site had some- one visited the site? Mr. PRICE. I expect a number of people visited it. Representative HOLIFIELD. I mean from the AEC. Mr. PRICE. That is right. Representative HOLIFIELD. It took them 4 months or 412 months from the time of the proposal to come back with a change in the rules. Had there been some previous indication that the site they had picked at Dairyland seemed to be all right? It was 20 miles away from any major population. INDEMNITY AND REACTOR SAFETY 199 Mr. PRICE. Yes, sir. It was a site that was 200 feet wide at the base of the triangle, and zero at the apex of the triangle with the main line of the railroad going right on one side, and the river on the other side. It just was not considered to be room enough. Sure it was out in the country. Representative HOLIFIELD. Why wasn't it told to them when they made their proposal? Didn't they give you this information at that time? Mr. PRICE. Mr. Holifield, I think it ought to be pointed out that these proposals that the Commission had to evaluate involved more than safety questions. A number of proposals were made pursuant to this invitation. They were analyzed for a number of matters as well as safety. As fast as the safety questions were referred to the safety people and to the ACRS, they were acted on. I don't see how, until those proposals had come all the way up through the various review stages from Oak Ridge to the people in Washington who had to look at it that any particular man that went out and visited it could have acted and thrown them out. That is simply what happened. Representative HOLIFIELD. I am not going to argue with you about. the safety of this site, because I don't know anything about it. I am talking about procedure. You spoke of a railroad and a river. Shippingport is, what, six times as big as this little reactor? Representative PRICE. What is the size of this proposed reactor? Mr. PRICE. Sixteen megawatts. Representative HOLIFIELD. Shippingport is at least five times that big, and will be six with the new core. It is right on the river, and it is right close to the railroad, as I remember. Mr. PRICE. It is not on the river like this reactor would have had to be. Representative HOLIFIELD. You can jump off the site into the river. Mr. PRICE. You can almost jump from the reactor into the river on the Dairyland site. Representative HOLIFIELD. You would have to be a little better jumper to do this at Shippingport but it is right on the bend of the main river there, and it is six times as big. I have another letter from Sapiri to Mr. Magets, under date of April 19. I won't read the whole thing. It says that- We plan to obtain further details in regard to the acceptable site criteria and will contact you as soon as this action is completed. At that time should you continue to desire to meet with us at La Crosse, we will be very pleased to arrange such a visit. So apparently there is going to be some more rules put out in addi- tion to this. As I say, I am not passing judgment on site, because I have not seen the map or anything else on this site. What I am talk- ing about is the procedure of letting these people go ahead and build their dream castles for several months and then kicking the founda- tion out and letting it fall into the river or across the railroad track, I don't know which. Mr. PRICE. Mr. Holifield, I wonder if I could say this. It is true. that the Commission does not have formally published site criteria, but the chronology as far as this is concerned is that as of last summer when the invitations were put out, these people were given 200 INDEMNITY AND REACTOR SAFETY for their guidance the proposed site criteria that the Commission had put out for public comment. Perhaps it would be useful in this context to get into the record the portions of that document that relates to this problem of exclusion area and distance. With your permission, I would like to have it put in the record, because I don't believe that the subsequent guidance that we have given them since the first sites were turned down are inconsistent with that. I can introduce it, or if you permit me, I could read it. These are two short paragraphs. Representative PRICE. If they are short paragraphs, why don't you read it? Mr. PRICE. These are the parts of the proposed criteria that were put out last summer, which relate to the distance problem they are confronted with. Representative PRICE. This was available to them? Mr. PRICE. This was available to them last summer. Representative PRICE. Not only available to them; it was sent to them. Did they have it in their hands so that they could study it? Mr. PRICE. I could not answer whether copies were given to them. I understand that the invitation called their attention to it for their guidance. I would be greatly surprised if they did not have it. Mr. RAMEX. Would you quote that language? Mr. PRICE. Yes. Mr. RAMEY. Where the invitation says that they are to consider it? Dr. PITTMAN. The language of the invitation is several paragraphs, Mr. Price, if I could read it. Representative PRICE. I think you should read it, because it is ap- parently an important point of the discussion. Dr. PITTMAN. The invitation went out on August 4. I will correct. that date. It said in part under a section called "General Consider- ations and Site Selection": A number of factors are identified below for general guidance purposes which are considered basic to selection and evaluation of reactor sites: (a) Exclusion distance around power reactors— Representative HOLIFIELD. But it was not noted as to how far. Dr. PITTMAN. I will read what we say about that. Each power reactor should be surrounded by an exclusion area under the com- plete control of the operator of the facility. The size of the area will depend upon many factors including among other things the reactor power level, de- sign features, and containment and site characteristics. (b) Population density in surrounding areas.-Power reactors should be lo- cated in areas of low population density. (c) Meteorological considerations.-The capabilities of the atmosphere for diffusion and dispersion of airborne radioactivity should be considered in assess- ing the vulnerability of the area surrounding the site. Thus, a high probability of good diffusion conditions and a wind direction pattern away from vulnerable areas during periods of slow diffusion would enhance the suitability of the site. (d) Seismological considerations. The earthquake history of the area in which the reactor is to be located is important and affects the design and con- struction of the facility and its protective components. A site should not be located on a fault. (e) Hydrology and geology.-The hydrology of ground and surface water, including site drainage and the geology of the site should be favorable for the management of any radioactively contaminated liquid and solid effluents that might accidentally result from reactor operation. INDEMNITY AND REACTOR SAFETY 201 : : Then there is another paragraph. The Commission has published and invited public comments on a statement of factors for consideration in site selection. The initial version of the text may be obtained by reference to notice of proposed rulemaking published May 23, 1959, in the Federal Register and entitled "Factors Considered in Site Evaluation for Power and Test Reactors." That was the extent to which we at that time put into the invitation for proposals any criterion for the site. You must remember that we did no know specifically who was going to be presenting so we had to be somewhat general. With the conditions that existed at that time; namely, all of these uncertainties about what the criteria should be, we felt that it would be wrong at the time of this proposal to do other than by reference to refer to the document which had been put out for comment, and which Mr. Price can quote. Representative HOLIFIELD. But you referred them to a document which had been put out for comment. Dr. PITTMAN. That is right. Representative HOLIFIELD. And which had neither the approval nor disapproval of the Commission. Mr. PITTMAN. Precisely. It was not made a condition of the invi- tation that those criteria be met in the proposal submitted by the proposers. Mr. RAMEY. It did not say it was for guidance, either. Dr. PITTMAN. This whole section was general considerations and was given for general guidance purposes. So it is under a section that started out: A number of factors are identified below for general guidance purposes which are considered basic. Representative PRICE. If they had attempted to find out what the criteria were, what information would they have received? Mr. PRICE. That is what I would like to read. Unless you wish, I won't read the parts about hydrology and so forth, but this distances part, I would. Representative HOLIFIELD. Read the pertinent part and we will put the whole thing in the record (see p. 203). Mr. PRICE. Section (b), "Exclusion Distance Around Power and Test Reactors." Each power and test reactor should be surrounded by an exclusion area under the complete control of the licensee. The size of this exclusion area will depend upon many factors, including among other things reactor power level, design features and containment and site characteristics. The power level of the reac- tor alone does not determine the size of the exclusion area. For any power or test reactor a minimum radius on the order of one-quarter mile will usually be found necessary. For large power reactors a minimum exclusion radius on the order of one-half to three-quarter mile may be required. Test reactors may require a larger exclusion area than power reactors of the same power. Now, paragraph (c) population density in surrounding areas: Power and test reactors should be so located that the population density in surrounding areas outside the exclusion zone is small. It is usually desirable that the reactor should be several miles distant from the nearest town or city, and for large reactors, a distance of 10 to 20 miles from large cities. Where there is a prevailing wind direction, it is usually desirable to avoid locating a power or test reactor within several miles upwind from centers of popula- tion. Nearness of the reactor to airfields, arterial highways and factories is discouraged. 202 INDEMNITY AND REACTOR SAFETY 1 This is what they had for whatever guidance they thought they could get out of it. Representative PRICE. How large a site did you say they included in their proposal? Mr. PRICE. I think Dr. Pittman could give the figures better than I could. I do recall that the Dairyland proposal was in terms of acres, maybe fractions. My recollection is that it was a triangle, about 200 feet at the base, going up to a point, with the main line of the Burlington going along one side of it, and I believe there is even a retaining wall to the river on the other side. Representative HOLIFIELD. Is it occupied by a conventional plant now? Mr. PRICE. This I don't know. I think it may be. Representative HOLIFIELD. Do they own the surrounding land? Mr. PRICE. I don't know whether they do or not, Mr. Holifield, but it would not have made any difference to our technical people because if they are going to put it in that triangle, the river on that one side that close, and the railroad- Representative PRICE. What would be the average width of the side? Two hundred at the base, and it goes to an apex. The average width would be considerably less than 200. Mr. PRICE. My recollection is maybe 200 is the average. It may have been 400 at the base. Dr. PITTMAN. The total acreage of the site was close to 5 acres. On the Jamestown site, it was approximately 35 acres. Mr. RAMEY. Don't your rivers normally constitute a part of your exclusion area? Isn't that one of the reasons why in addition to having cooling water, being near a river is normally regarded as a good thing for a reactor? Mr. PRICE. Yes, that is right. Mr. RAMEY. I don't think mentioning a river has anything to do with safety. Mr. PRICE. Mr. Ramey, the problem here is not that there was a river nearby for use of the water. The problem is that the reactor would have to be wedged in so close between the railroad and the river. I would like to correct the record if I am wrong on the base of this triangle. I don't recall whether it was 200 or 400 feet.¹ Representative PRICE. I don't think anybody would attempt to defend the site. It is a matter of procedure, to make certain you did not change signals in the middle of the game. Mr. PRICE. Mr. Chairman, on that point, following the turndown of those two reactors on safety grounds, guidance was given them on what kind of distances to look for and the suggestion was for their guidance that they consider an exclusion area of 2,000 feet, or 1,500 to 2,000 feet, and a distance from towns of 3 to 5 miles. I really think that is consistent with the guidance that they had to begin with. I agree it is more specific than what I just read. But it seems to me it is consistent. Representative PRICE. Would you proceed with your statement? Mr. PRICE. I believe Mr. Holifield asked me to introduce this whole document in the record, and with your permission, I will do it. Representative PRICE. Without objection it will be included in the record. 1 Mr. Price subsequently informed the committee that the correct figure was 200 feet. INDEMNITY AND REACTOR SAFETY 203 1 (The document referred to follows:) TITLE 10-ATOMIC ENERGY CHAPTER I-ATOMIC ENERGY COMMISSION NOTICE OF PROPOSED RULEMAKING (Published in the Federal Register on May 23, 1959) The Commission is considering the formulation of an amendment to its regula- tions to State site criteria for evaluation of proposed sites for nuclear power and test reactors and is publishing for comment safety factors which might be a basis for the development of site criteria. In view of the complex nature of the environment, the wide variation in en- vironmental conditions from one location to another and the variations in reactor characteristics and associated protection which can be engineered into a reactor facility, definitive criteria for general application to the siting problems have not been set forth. All interested persons are invited to submit comments and suggestions on the following site factors and on development of definitive criteria for evaluation of sites for power and test reactors which might be incorporated in the Com- mission's regulations. All interested persons who desire to submit written com- ments and suggestions should send them to the U.S. Atomic Energy Commission, Washington, D.C., attention: Division of Licensing and Regulation within 30 days after publication of this notice in the Federal Register. "FACTORS CONSIDERED IN SITE EVALUATION FOR POWER AND TEST REACTORS "a. General. The construction of a proposed power or test reactor facility at a proposed site will be approved if analysis of the site in relation to the hazards asociated with the facility gives reasonable assurance that the potential radioactive effluents therefrom, as a result of normal operation or the occurrence of any credible accident, will not create undue hazard to the health and safety of the public. "There are wide possible variations in reactor characteristics and protective aspects of such facilities which affect the characteristics that otherwise might be required of the site. However, the following factors are used by the Com- mission as guides in the evaluation of sites for power and test reactors. The fact that a particular site may be deemed acceptable for a proposed reactor facility when evaluated in the early phases of the project, does not determine that the reactor will eventually be given operating approval, or indicate what limitations on operation may be imposed. Operating approvals depend on de- tailed review of design, construction and operating procedures at the final con- struction stages. "b. Exclusion Distance Around Power and Test Reactors. Each power and test reactor should be surrounded by an exclusion area under the complete con- trol of the licensee. The size of this exclusion area will depend upon many factors including among other things reactor power level, design features and containment, and site characteristics. The power level of the reactor alone does not determine the size of the exclusion area. For any power or test reactor, a minimum radius on the order of one-quarter mile will usually be found necessary. For large power reactors a minimum exclusion radius on the order of one-half to three-quarter miles may be required. Test reactors may require a larger ex- clusion area than power reactors of the same power. c. Population Density in Surrounding Areas. Power and test reactors should be so located that the population density in surrounding areas, outside the ex- clusion zone, is small. It is usually desirable that the reactor should be several miles distant from the nearest town or city and for large reactors a distance of 10 to 20 miles from large cities. Where there is a prevailing wind direction it is usually desirable to avoid locating a power or test reactor within several miles upwind from centers of population. Nearness of the reactor to air fields, arterial highways and factories is discouraged. d. Meteorological Considerations. The site meteorology is important in evalu- ating the degree of vulnerability of surrounding areas to the release of air-borne radioactivity to the environment. Capabilities of the atmosphere for diffusion and dispersion of air-borne release are considered in assessing the vulnerability to risk of the area surrounding the site. Thus a high probability of good 204 INDEMNITY AND REACTOR SAFETY diffusion conditions and a wind direction pattern away from vulnerable areas during periods of slow diffusion would enhance the suitability of the site. If the site is in a region noted for hurricanes or tornadoes, and design of the facility must include safeguards which would prevent significant radioactivity releases should these events occur. "e. Seismological Considerations.-The earthquake history of the area in which the reactor is to be located is important. The magnitude and frequency of seismic disturbances to be expected determine the specifications which must be met in design and construction of the facility and its protective components. A site should not be located on a fault. "f. Hydrology and Geology. The hydrology and geology of a site should be favorable for the management of the liquid and solid effluents (including pos- sible leaks from the process equipment). Deposits of relatively impermeable soils over ground water courses are desirable because they offer varying de- grees of protection to the ground waters depending on the depth of the soils, their permeability, and their capacities for removing and retaining the noxious components of the effluents. The hydrology of the ground waters is important in assessing the effect that travel time may have on the contaminants which might accidentally reach them to the point of their nearest usage. Site drain- age and surface water hydrology is important in determining the vulnerability of surface water courses to radioactive contamination. The characteteristics and usage of the water courses indicate the degree of risk involved and de- termine safety precautions that must be observed at the facility in effluent con- trol and management. The hydrology of the surface water course and its physical, chemical, and biological characteristics are important factors in evaluating the degree of risk involved. "g. Interrelation of Factors.-All of the factors described in paragraphs b. through f. of this section are interrelated and dictate in varying degrees the engineered protective devices for the particular nuclear facility under con- It is neces- sideration, and the dependence which can be placed on such devices. sary to analyze each of the environmental factors to ascertain the character of protection it might afford for operation of the proposed facility or the kind of restrictions it might impose on the proposed design and operation." Mr. PRICE. This brings us to the proposed amendment to section 50.35 of title 10, Code of Federal Regulations. We are now in the middle of page 2. The second proposed amendment is designed to revise the criteria for issuance of construction permits. At the present stage of develop- ment of nuclear reactors, particularly power and testing reactors, most new proposed facilities incorporate features having varying de- grees of advanced technology. In almost all of these cases further re- search and development work is required to prove out the feasibility of major features or components of the project. This research and development work is usually scheduled to be conducted concurrently with construction of the facility. If construction of these projects were prohibited until completion of the research and development work, there would be a delay in these reactor programs which in some cases might be as long as several years. All of the licensed power and testing reactors now under construc- tion have been authorized under provisional construction permits issued pursuant to section 50.35 of the Commission's regulations. That section provides: 50.35. Extended time for providing technical information. Where, because of the nature of a proposed project, an applicant is not in a position to supply initially all of the technical information otherwise required to complete the application, he shall indicate the reason, the items or kinds of information If the omitted, and the approximate times when such data will be produced. Commission is satisfied that it has information sufficient to provide reasonable assurance that a facility of the general type proposed can be constructed and operated at the proposed location without undue risk to the health and safety INDEMNITY AND REACTOR SAFETY 205 . of the public and that the omitted information will be supplied, it may process the application and issue a construction permit on a provisional basis without the omitted information subject to its later production and an evaluation by the Commission that the final design provides reasonable assurance that the health and safety of the public will not be endangered. Under the above quoted section 50.35, the extent to which the Commission is required to make a judgment as to the results of the applicant's proposed research and development program, as a pre- requisite to issuance of a construction permit, is unclear. The proposed amendment would make it clear that the Commission may issue a construction permit even though development work re- mains to be done to provide a basis for safety determination on par- ticular features of a facility. The amendment would eliminate the necessity of attempting to prejudge the results of future research and development programs. Issuance of a construction permit under this amendment would, however, require a determination that the site is suitable for a reactor of the power level and general design concept proposed. Applicants granted construction permits under the proposed amendment would be on notice as to the unresolved safety questions. and their risks in proceeding with construction of the proposed projects. The amendment, however, would provide a mechanism for subsequent approval of specific design features if justified by the information supplied by the applicant. A substantial period of time is required for construction of large power and test reactors. As much as As much as 3 or more years may be re- quired from the time the first concrete is poured until construction is completed. In many cases, research and development, needed to verify the safety and reliability of certain features of the proposed reactor and to complete the design of certain components, may be car- ried out while construction proceeds. At the present stage of the art, each major power reactor project includes proposed features of substantial novelty. To require that the safety questions with respect to such features be resolved by com- pletion of development work before commencement of construction would set back the reactor program for periods ranging from about 1 to 3 years. This proposed amendment would continue and clarify the policy of allowing the holder of a provisional construction permit to assume the risk that he may construct reactor components which will not be approved by the Commission. This risk would clearly be on the permit holder, particularly since provisional construction permits is- sued under this section would identify the "major features or compo- nents on which further research and development work is needed." Moreover, it is a risk which the permittee is not required to take. If he chooses he can postpone construction until the Commission has approved all important design features. I should like to point out also that the issuance of provisional con- struction permits under the proposed rule would be discretionary; and that a request for such a permit could be denied by the Commis- sion where the safety questions were of such magnitude as to make it appropriate that the applicant be required to reduce some of the un- certainties before obtaining a permit. 206 INDEMNITY AND REACTOR SAFETY This proposed amendment does not change the safety requirements which must be satisfied before an operating license is issued. Representative HOLIFIELD. This takes you off the hook as far as any future research and development work is concerned. You don't have to project any judgment at all in advance of the research and development work as to certain component parts which are as yet undeveloped and which may be developed in the future. Mr. PRICE. That is right. Representative HOLIFIELD. However, as I understand it, you retain full right to stop at any time this so-called provisional construction permit and put the AEC on record as being against further construc- tion, if in your judgment at that time you feel that they have not de- veloped at some point along the line component parts of high enough safety standards. Then you can deny the operating permit. Mr. PRICE. Yes, sir; we reserve the right to deny the operating permit. Representative HOLIFIELD. You could deny further construction if it is a provisional construction permit. Mr. PRICE. Mr. Holifield, I think the Commission has a legal power to do that. What this does is to put the burden on the applicant to proceed with these special components at his risk. The provisional permit would identify these special problems. He would be on notice that he would have to satisfy the Commission on those before he got an operating permit. This would not necessarily mean at any given time the Commission might say he will never make it, so we will stop him from constructing in the middle of construction. I think once we let him get started, we might very well let him finish, but he is on notice that until we are satisfied on these points, he cannot get an operating license. Representative HOLIFIELD. There again you build up the pressure of tremendous investment on a particular site, and it is going to take a very strong-minded Commission to deny an operating permit once you allow it to go so far that a company puts $30 or $40 million into the design of a reactor. Mr. PRICE. Mr. Holifield, unless we adopt the rule that we will not let anybody start until they have completed the research and develop- ment, and proven the thing out to the last detail, I think that pressure you are talking about is there, and the Commission just has to stand up to it. Mr. RAMEY. I think that is the old argument that was brought up in the PRDC case. It is the reductio ad absurdum argument. There are other ways of handling the matter; namely, of setting possibly higher standards on site selection and requiring the provision of alternative sites where you have substantial R. & D. work necessary to prove out safety. Mr. PRICE. We accept that proposition. Mr. RAMEY. You say here, to require that the safety questions with respect to such features be resolved by completion of development work before commencement of construction would set back the reactor program for a period ranging from 1 to 3 years. That sounds like it is the only way. But there are other ways. Mr. PRICE. Stringent site requirements. I have read here the fact that this regulation that I am talking about does require that before INDEMNITY AND REACTOR SAFETY 207 this provisional permit be issued the Commission be satisfied that the site is suitable for a reactor of this general design concept. Mr. RAMEY. This general design concept. Mr. PRICE. That is right. Mr. RAMEY. Let us take the Northern States case. You have a boiling-water reactor but they propose to make a superheater out of it. Would that reactor satisfy the concept of being of the general design suitable for the site? Mr. PRICE. Yes, sir. Mr. RAMEY. If they put in the superheat, if the research and de- velopment work does not pan out really good, can they go ahead and run it? Mr. PRICE. They will have to run it without superheat if it doesn't pan out. Representative PRICE. Answer the first question, Mr. Price. It would not necessarily be. You would have to take another look at it. Mr. PRICE. All I am saying is that the Northern States case has already been approved by the ACRS and the Commission staff and has gone through hearing. Representative PRICE. The way I understood Mr. Ramey's question is that you had approved the site for the general concept of a reactor. His question was, "If they changed from a boiling water reactor to a superheat, would the site approval still stand?" Would you take another look at it? Mr. PRICE. Mr. Price, the Northern States case has already gone through the point of a decision by the hearing examiner, which is a favorable decision. I probably ought not to be judging it in the light of these new criteria, but maybe I better say I think it would fit all right. What we would be determining would be that the site is all right for a reactor of this general design concept, knowing that they are talking about nuclear superheat. But we would be telling them, as we actually did in the case of the recommendations to the hearing examiner, that we are not now signing off on the superheat feature. Representative HOLIFIELD. In other words, if there is a new com- ponent part of the design which lacks background history, knowledge of construction and operation, you would, in effect, say to them: If you want to put this feature on, the rest of your reactor we know is all right for the site; if you put on this superheat featture you must also qualify on that, or else you cannot use it. You will have to go back to the original ap- proved design. Mr. PRICE. We have approved the site for the whole project, but we are saying we do not know whether we are going to let them use superheat or not. Representative HOLIFIELD. What did you say? Mr. PRICE. We have already approved the site for the entire design knowing that they plan nuclear superheat, but since they have not fin- ished research and development work on nuclear superheart, we are putting them on notice if that doesn't pan out they will not be allowed to use nuclear superheat. Representative HOLIFIELD. As a matter of fact, then, you are doing what I say. You are reserving approval on that phase. Mr. PRICE. That is right. 208 INDEMNITY AND REACTOR SAFETY Representative HOLIFIELD. You say each major power reactor proj- ect includes features of substantial novelty, at the bottom of page 4. You would consider that superheat might qualify under the words "substantial novelty" in this case? Mr. PRICE. That is right. These may be unfortunate words, but that is the kind of thing we are talking about. Representative HOLIFIELD. I am not pinning you to those particular words. That was a way of saying that while the general design might be approved, as far as those features which were as yet not completely developed, you would reserve judgment on them and the burden of proof would be upon the reactor constructor to satisfy your criteria. of safety before an operational permit would be granted on that par- ticular phase of the reactor. Mr. PRICE. That is right. He is privileged to come in any time between now and the time he is ready to go critical when he thinks he has his case proven on that point. Representative HOLIFIELD. Would it be your policy, then, to refer that type of a problem to your Reactor Safeguard Committee or would you decide it administratively? Mr. PRICE. No, sir. We would refer it to the Advisory Committee. on Reactor Safeguards as we are required to do for all licensed power and test reactors, and as we in fact do as a matter of policy for all the nonlicensed cases. Representative PRICE. Mr. Ramey? Mr. RAMEY. Again in this example this is a demonstration reactor that is supposed to develop an improvement in the art. You get yourself in a situation where by going ahead under this kind of a policy you may not be actually advancing the art. At this site you may have to be running an ordinary, conventional, boiling-water reactor rather than a superheat reactor; whereas, if you would have had imposed a rather high standard of site selection initially, so he locates it way out in the sticks someplace, and with the idea that he is going to be running a superheat reactor from the start, then you would be advancing your developmental program. Mr. PRICE. Mr. Ramey, I would not want to imply that there was not imposed a high standard for site selection in that case. Sure, it can turn out that the superheat develops a safety problem so bad that you would not let them run it. If that is the case, and they have to run it without superheat, you have not developed that particular part of the art. I do not know why that argues against letting them try it. Representative HOLIFIELD. I think the reservation of judgment on your part would indicate that an administrative decision would really be the controlling factor here. As a counterfactor to Mr. Ramey's suggestion, which is a valid suggestion, there would be the fact that there would be tremendous pressure upon that reactor constructor to make a safe superheat. Because of your reservation of approval and because of the money invested in it, there would be tremendous pressure upon him to design toward that safety factor which you seek. Mr. PRICE. That is right. Representative HOLIFIELD. So in the last analysis it would come back to the integrity of the administration and of the AEC's judg- INDEMNITY AND REACTOR SAFETY 209 ! ment as to whether they had, in effect, achieved the goal of safety or not. Mr. PRICE. Yes, sir. Fortunately, there are pressures on these people to operate these things safely that tie in with our safety re- quirements. They cannot afford to have any bad accidents. Representative HOLIFIELD. There are also a lot of economic pres- sures- Mr. PRICE. They work the other way. Representative HOLIFIELD. That are not on you. Mr. PRICE. That is right. Representative HOLIFIELD. This is where the balance of judgment as far as the safety of the people is concerned in the last analysis lies in your hands rather than upon the man who is trying to achieve an economic goal as well as a safety goal. Representative VAN ZANDT. I would like to develop a little more information on the experience of the AEC to date. Mr. Price, how many permits have been denied, if any? Mr. PRICE. I ought to know offhand. I am not sure that any have been formally denied. Representative VAN ZANDT. Have you postponed any? Mr. PRICE. A lot of cases have been postponed because we were not satisfied with the information that we had developed. We have just developed the fact this morning that for all practical purposes the safety question has been decided negatively in the case of that par- ticular Jamestown site, and the Dairyland site did not go all the way through a formal procedure. Representative PRICE. How many sites have you rejected? Mr. PRICE. I do not have the figures offhand. I know that in the case of Piqua, the site was moved. Representative HOLIFIELD. Point Loma was rejected. Mr. PRICE. Point Loma was rejected. Representative HOLIFIELD. Humboldt Bay was rejected. Representative PRICE. Will you supply for the record the sites that were rejected and those that were changed after a site rejection? Mr. PRICE. I would like to submit it for the record, if I may. (See letter dated May 18, 1960, p. 214.) Representative VAN ZANDT. Mr. Chairman, after the permit for construction has been granted, have there been any cancellations by the Commission because of the type of reactor and the unsolved or unresolved safety questions, and so forth? Mr. PRICE. I do not believe any licenses have been canceled that have been issued. There have been instances where modifications to the license have been made which we thought were in the interest of safety. Sometimes modifications in the course of amendments that the company wants to make. I think there may be one incident where, because of some trouble in startup of a small reactor, we issued a consent order suspending the operation until we could look at it again. Representative VAN ZANDT. Has there been any cancellation on the part of the builder or the corporation? In other words, where he has been granted a permit, has he abandoned the project? Mr. PRICE. I do not believe there are any cases like that. 210 INDEMNITY AND REACTOR SAFETY Representative VAN ZANDT. Getting back to your statement again on page 2, Mr. Price, you say it would continue to permit site acqui- sition, exploration, excavation, as well as the procurement and manu- facture of components of the facility in the absence of a construction permit, delaying foundations and other outside construction work of nuclear facility by an applicant would be prohibited prior to the issuance of a construction permit. My understanding of those two sentences is this: They could go ahead with the components and manufacture them. Mr. PRICE. That is right. We did not think we ought to interfere with their placing of purchase orders on long leadtime items. Representative VAN ZANDT. Still, you would not let them go ahead. Mr. PRICE. But they could not assemble them on the site. Representative VAN ZANDT. In other words, they could go ahead with the manufacture of the components, but they could not start laying the foundation. Mr. PRICE. That is right; or assembling any of the permanent facilities. Representative HOLIFIELD. This would give them the advantage of the long leadtime which obtains in many of these components. Mr. PRICE. That is right. Representative HOLIFIELD. Some of them have to be constructed in a year, or maybe 2 years. Mr. PRICE. That is right. Also, a lot of the procurement is con- ventional components. We certainly do not want to be in a position where we have to question why a man ordered a motor. Representative VAN ZANDT. What is the average leadtime on components? Mr. PRICE. I am afraid that is out of my department. I know it takes several years to build these reactors. Dr. PITTMAN. I would say generally the pressure vessel is the long- est leadtime item and it is of the order of 18 months to 2 years. Representative HOLIFIELD. How about one of these large generators? Dr. PITTMAN. I think the problem on the generator, sir, is a ques- tion of how many of the companies like GE and Westinghouse have backlog orders. I would rather not try to put a figure on the record. Representative HOLIFIELD. This means that they have to get their orders in early to get on the line. Dr. PITTMAN. Yes, sir; just so they are sure they are there. The type of thing we are talking about here is getting the steel for the pressure vessels on order so it can get into a rolling schedule so it can fit into any reasonable schedule. Representative PRICE. And your fuel elements. Dr. PITTMAN. I am not sure that many people would order fuel elements this far ahead of a construction permit unless it is an off-the- shelf item. If there is a developmental program involved, the chances are that you would not have enough information this far ahead. Generally those developments carry on well into the construction period and the fuel element design may change rather radically dur- ing the course of the construction. I doubt that the fuel elements themselves might be. Control-drive mechanisms might very well be. Representative VAN ZANDT. What has been the experience of the AEC as far as safety is concerned in the present operating reactors? INDEMNITY AND REACTOR SAFETY 211 Mr. PRICE. Mr. Van Zandt, there have been some incidents of vari- ous kinds. They have all been of a minor nature. I am pretty sure there has been no case of an offsite exposure. I am not even sure there has been a case of exposure to employees. I think there may be. I would like to submit for the record on this. (See letter dated May 18, 1960, p. 214.) Mr. PRICE. There may have been in the case of some of the reactor operations under this program, the licensing program, where, in fuel handling or something like that, there was maybe a slight exposure above what we call the permissible limits. That would be the way I would have to characterize it. Representative VAN ZANDT. Therefore, any incidents based on what you have said would apply mostly to employees only. Mr. PRICE. That is right. There has been nothing that you could characterize as a major overexposure. Representative VAN ZANDT. And nothing offsite whatsoever? Mr. PRICE. I believe that is right, but I would like to submit for the record on both points. Representative VAN ZANDT. Very well. (See letter dated May 18, 1960, p. 214.) Representative PRICE. Mr. Toll? Mr. TOLL. Mr. Price, at least one of the persons who has commented on your proposed regulations has suggested that this type of construc- tion permit be referred to as a "limited" construction permit rather than a "provisional" construction permit. а What is your comment on that possibility? Mr. PRICE. Mr. Toll, I would really like to be excused from an- swering it definitively. We have received five or six letters-I believe seven letters-commenting on these amendments. The time for com- ment has either just expired or is about to expire. We have not gone back to the Commission with these comments yet for action. I would like to have some time to study those comments more than I have done to date to answer your question. I am aware of that particular comment. I do not know what I would like to recommend to the Commission on it. Mr. TOLL. I think the Commission published these proposed regula- tions in the Federal Register on February 11 and provided 60 days for comments. So that would have expired about the 14th of April. Mr. PRICE. It has recently expired. All I can tell you is that we have not yet finished analyzing the comments and have not taken them back to the Commission. So my position is not established. I would like not to express it off the cuff. Representative PRICE. Will you proceed with your statement, Mr. Price? Mr. PRICE. On page 6, the proposed amendment to add section 50.57 to title 10, Code of Federal Regulations, part 50. The third proposed amendment has no specific counterpart in the existing regulations. It would provide for the issuance of provisional operating licenses in cases where: (1) Because construction is not yet completed, a finding can- not be made that construction has been completed in compliance with the terms and conditions of the construction permit; or 212 INDEMNITY AND REACTOR SAFETY (2) There are involved features, characteristics, or components of the proposed facility as to which it appears desirable to obtain actual or further operating experience before issuance of an operating license for the full term, up to 40 years, requested by the applicant. The proposed provisional operating license procedures recognize that construction of large power and testing reactors is often not completed until some time after fuel is loaded in the facility. Intro- duction of fuel into the facility and commencement of operations are precluded under the current rules prior to conversion of the construc- tion permit into an operating license. The current rules provide for conversion of a construction permit to an operating license upon completion of construction of the facility in compliance with the terms and conditions of the construction permit and subject to any necessary testing of the facility for health and safety purposes. Thus, the procedure proposed in the third amendment would eli- minate the potential procedural delays inherent in the current rules between completion of construction for initial operation and actual loading of fuel. Representative HOLIFIELD. I want to go back a minute, Mr. Price, to the second 50.35 provision. As I say, we have not had a chance to study this properly and to come to any firm conclusion on the matter. It would seem to me that you are clarifying areas which have hereto- fore been cloudy. Mr. PRICE. And based on the fact that we have had to live with what we have had and we have learned a little bit from it. Representative HOLIFIELD. As far as the general design of these re- actors is concerned, the technology is so well proven at this time that in most instances—I do not say in all instances because we may have an exotic design like this high temperature gas reactor of Philadelphia Electric Co.-where the whole design is, in effect, still in question. Going back to your description, I am assuming that in general you have enough background information to approve the general design. There may be novelty features such as the superheat in the Northern States case which is yet to be proven. At the same time you are clarifying this, you are taking the Com- mission, you might say in common terms, off the hook in prognosti- cating the results of an R. & D. program. You are putting the respon- sibility upon the manufacturer of the reactor or the constructor of the reactor. Mr. PRICE. It puts us in a much stronger position. Representative HOLIFIELD. It puts you in a much stronger position, provided you have a counterforce to offset the pressure which will be brought to bear upon you to accept something which is not safe. Mr. PRICE. That is right. Representative HOLIFIELD. At this point, it would seem to me that a body such as your Advisory Committee on Reactor Safeguards should exercise the judgment on the safety of this matter rather than INDEMNITY AND REACTOR SAFETY 213 administrators of the AEC. In other words, this should be a technical judgment at that point, and not an administrative judgment. What I am trying to say is that judgment should be based upon an objective technical evaluation rather than on such pressures as might be brought to bear upon an administrative body. Mr. PRICE. I assure you, Mr. Holifield, when the Commission makes these judgments they make them on the basis of the technical judgment given in the advice from the Advisory Committee on Reactor Safe- guards and the technical judgment of the staff, and any other people that are brought into it. So it is always based on technical. Representative HOLIFIELD. No, it is not always. It has not been in the past. There have been occasions where administration judgment, and I can point to PRDC as one of them, administrative judgment did overrule the technical scientific evaluation of the situation. This is the point I am aiming at. A heavier obligation will lie on the administrators of this program to take every precaution in that final judgment as to the safety of these component parts or these novelty differences in the reactors. Mr. PRICE. All I am trying to say, Mr. Holifield, is that I agree it is a heavy responsibility. It does have to be made on the basis of tech- nical advice. Representative HOLIFIELD. What you are actually doing here is postponing your exercise of judgment until the R. & D. is done and the reactor constructor says "I have the answer here." At that point you still have to make the decision. Mr. PRICE. That is right. But in all cases, even under the old rule, the Commission has reserved and has to reserve the power to say no if something does not pan out at the time of the operating license. Here we think we are in a stronger position and the company is in a better position, too, because they have been put on notice as to the particular features that might bear special attention. Representative HOLIFIELD. I am not being critical. I am trying to evaluate in my own mind on short notice what you are trying to do. Representative PRICE. Mr. McCone, I understand you have to get away for an appointment at noon and the committee would not want to hold you up. Would you care to make any comments to the com- mittee before you leave? Mr. MCCONE. Yes, I would, Mr. Price. I would suggest, since the witness has one more page to read in connection with these amend- ments, that he read that. My time is not such. Then I have just a few brief remarks. Representative PRICE. Mr. Price, will you proceed and then Mr. McCone will make his statement. Mr. PRICE. This amendment also is designed to enable the Commis- sion to authorize preliminary operation of the facility to obtain actual operating experience with respect to particular features, character- istics, or components of the facility before issuance of an operating license for the full term of years requested by the applicant. It would permit the issuance of provisional operating licenses only where there is reasonable assurance that the activities authorized by the provisional operating license can be conducted without endanger- ing the health and safety of the public. Such activities would be con- ducted under appropriate license limitations. 58511-69-pt. 2 2– -7 214 INDEMNITY AND REACTOR SAFETY Provisions would be made for reports by the licensees and for in- spections by the AEC staff to be sure that the Commission is kept fully informed of operations under the provisional operating license. If adopted, the proposed provisional operating license procedure would require at least one additional formal hearing in the case of power and testing reactors, making a minimum of three formal hear- ings in these cases. The first hearing would occur at the construction permit stage; the second at the provisional operating license stage; and the third upon conversion of the provisional operating license to a final operating license. Public comments: Notices of the proposed amendments were pub- lished in the Federal Register on February 11, 1960, allowing a 60-day period for the filing of written comments or objections by interested persons. Comments have been received from seven companies and other organizations. With your permission, I should like to submit copies of the comments for incorporation in the record of this hearing. Representative PRICE. Without objection, it will be printed in the record. (The material to be furnished follows:) Mr. JAMES T. RAMEY, ATOMIC ENERGY COMMISSION, Washington, D.C., May 18, 1960. Executive Director, Joint Committee on Atomic Energy, Congress of the United States. DEAR MR. RAMEY: In the course of the April 27, 1960, hearing on problems of reactor and radiation safety, several items of information were requested to be submitted for the record. The following is a list of the topics together with the requested information relating thereto : (a) The number of construction permits denied by AEC.-The Commission has not formally denied any construction permit on grounds that a proposed project did not meet the standards for issuance of such a permit as set out in 10 CFR, part 50. At the applicant's request, one application which was in- complete as filed was denied without prejudice to submission of a new applica- tion at a later date. Six other applications for permits to construct reactors were withdrawn by the respective applicants because of changes in their plans. One construction permit was revoked because the applicant, after issuance of the permit, withdrew his application. (b) Reactor sites rejected by AEC.-Five proposed reactor sites have been rejected by AEC for reasons of public health and safety. These included a site on the west side of the Miami River near Piqua, Ohio, for the organic moderated reactor; a site near Jamestown, N.Y., for a pressurized water reactor; another near Genoa, Wis., for the same reactor; the Point Loma, Calif., site for the experimental low-temperature process heat reactor; and a site near Middleton, Conn., for a high power aircraft reactor experiment. (c) Reactor sites changed after rejection.-In one instance a new site for a reactor was selected after rejection by AEC of an originally proposed site. This was the Piqua, Ohio, reactor project referred to in (b), above. The second site, on the east side of the Miami River near Piqua, was subsequently approved. In the case of the Elk River reactor project, the proposed site was enlarged to increase the area of land which would be under control of the facility operator. (d) Licensee experience with reactor safety as regards onsite and offsite exposures.-There have occurred two instances in which persons at a reactor site received radiation exposures in excess of permissible limits. The first in- volved an employee who, during a refueling operation, received a spot exposure of 60-150 rem to his arm. There was no resultant erythema. The second in- volved an employee who, during the handling of a storage cask containing a purposely defected fuel element which had been irradiated in a reactor test loop, received an exposure of 100-150 rem to the thyroid. Investigation of this incident is in progress. There have been no exposures above permissible limits to persons offsite. INDEMNITY AND REACTOR SAFETY 215 4. During the hearing, Mr. H. L. Price submitted for the record copies of com- ments theretofore received by AEC on proposed amendments to part 50 of the regulations for the licensing of production and utilization facilities. Comments have since been received from two additional organizations and copies are enclosed herewith. Sincerely yours, A. R. LUEDECKE, General Manager. Mr. HAROLD L. PRICE, AMERICAN ELECTRIC POWER SERVICE CORP., New York, N.Y., April 30, 1960. Director, Division of Licensing and Regulation, U.S. Atomic Energy Commission, Washington, D.C. DEAR MR. PRICE: This letter is written in response to the invitation for comments which accompanied the notice of proposed rulemaking published in the Federal Register February 11, 1960. We are interested in these proposals as an electric utility system which has a present and future interest in nuclear power. We are a member of the Nu- clear Power Group, Inc., which is taking part with Commonwealth Edison Co. in the Dresden facility. As a member of the east central nuclear group we are collaborating with Florida utilities in the ECNG-FWCNG project. In these ac- tivities, as well as in our attempts to follow closely all matters of interest to utilities in the nuclear field, we have observed AEC regulatory actions as applied in the range of cases thus far dealt with by the Commission. Our comments on the pending proposals are the result of the experience just described as well as many years of experience as a regulated utility system under numerous types of Federal and local regulation. My comments are given in the order in which the three proposals were pub- lished on February 11, 1960. 1. Beginning construction.-The proposed ruling as to what action can and what action cannot be taken with respect to a facility before a construction per- mit is issued is, I think, a very desirable move on the part of the Commission. I am hopeful, however, that before this proposal is promulgated in final form the prohibited and unprohibited activities can be spelled out even more ex- plicitly. Specifically I have in mind that such things as access roads, utilities, railroad spurs, and the like ought to be included in site preparations allowed without a permit. I would hope that items of this kind would be expressly mentioned in the ruling as allowable without a permit. The prohibition against beginning construction of any portion of the perma- nent facility on the site might be construed to go further than necessary to give effect to the Atomic Energy Act and sound policy. I urge that auxiliary build- ings not directly involved in the nuclear part of a facility be expressly excluded from this prohibition. Examples are structures for offices, machine shops, and the like. In the same spirit, in cases where a turbine building is entirely sepa- rate from the nuclear facility, I would eqpressly exclude it from the prohibi- tion as I gather the AEC has done in at least one official action recently. The foregoing comments are made in the interest of rendering AEC rulings as explicit as compatible with law and policy. Action by the AEC along these lines will afford maximum opportunity for owners of nuclear facilities to exer- cise their own judgment about the planning and timing of their activities with- out encroaching on the AEC's responsibility to assure safety of the nuclear por- tion of the project, which assurance of safety appears to be the prime objective of the construction-permit procedure. By amplifying the proposed rule as I have suggested, nothing could be done in the construction at the site of any portion of the nuclear part of the facility without a permit and these are the only parts which-apart from the site itself-have any bearing on safety. For the rest, the proposal in its present terms allows heavy expenditures of money in site preparation and offsite work without a permit if the owner elects to make them. The clarifications and extensions which I am advocating do not change the spirit of the proposal. 216 INDEMNITY AND REACTOR SAFETY 2. Construction permits.-We believe that there is general agreement on the need for simplifying and speeding up issuance of construction permits wherever possible. The law as it now stands by its minimum requirements with respect to issuance of such permits already makes the proceedings with respect to them necessarily lengthy. Anything that can reasonably be done to speed up the process, consistently with safety requirements and due process to all those having a legitimate interest, seems to me important in the interest of establish- ing this new industry on a businesslike basis. We have observed that in several recent cases procedure has been simplified by providing for issuance of a notice of hearing, prior to completion of ACRS review and report, and in such notice setting a date for hearing soon after com- pletion of ACRS action. It is to be hoped that this method of proceeding will commend itself as a permanent feature of AEC action, since by this device alone many days can be saved in construction-permit procedure. It seems to me, also, that the time has come when room should be allowed for an expedited procedure where an application for the construction permit is uncontested. Where there is agreement among the applicant, the Commission staff, and the ACRS, and no intervention protesting the application has been filed, it should be possible to adopt the practice which is employed by other regulatory agencies under analogous conditions. I recognize that the law may require that a "hearing" must be held, but that requirement would be satisfied if a public hearing date were specified with appropriate notice; upon that date the applicant and Commission staff would convene with the trial examiner to assemble pub- licly, without the necessity of oral testimony and elaborate findings and conclu- sions, the documentary record required as a basis for the permit. Upon satisfy- ing the trial examiner that the record has thus been completed before him, it should, in my opinion, follow automatically that the construction permit issue effective at that time. In this connection, I might call your attention to the procedure successfully followed by the Securities and Exchange Commission under its rule 23, which has gone even further than my suggestion to eliminate unnecessary delay where there are no contested issues. The suggested method of proceeding would, of course, in no way affect the opportunity for or the requirement of a more extensive hearing where there are any contested issues. 3. Provisional operating licenses.-The third proposal establishes a new kind of operating license to be called a "provisional operating license." This proposal, It would appear, as a it seems to me, may be a step in the wrong direction. practical matter, to create a need for at least three separate hearings instead of the two required under prevailing practice in connection with any project; as things now stand there must be a hearing on the construction permit and another on the permanent license. Now it would be necessary, under this pro- posal, also to hold a hearing on a provisional operating license. It seems to me that nearly always the objectives which are implicit in the proposal could be achieved by the adoption of a procedure by the AEC under which the applicant for permanent license would have his hearing on that appli- cation shortly before completion of construction of his facilities. In that hear- ing the record would be completed so far as possible at that juncture. Permanent licenses when issued can be subject to a variety of conditions. But I would have the effective date of the permanent license subject only to the con- dition that an appropriate official of the AEC had certified to the trial examiner that the facility was completed in accordance with the requirements of the construction permit, application for license and such other conditions precedent to issuance as might be developed at the hearing. Under my proposal, the AEC officials would visit the facility, see that it had in fact been completed in keeping with the applicable requirements and would thereupon file a certificate to that effect with the trial examiner; with such filing the permanent license would thereupon become effective still subject, of course, to such conditions subse- quent as law and policy require. I make this criticism of the proposed provisional operating license and ad- vocate my alternative because I believe strongly that wherever possible we should work toward streamlined procedures. At best the regulatory process for nuclear facilities is bound to be complicated. I believe that I am only giving expression to a general policy of the Commission and the Congress in urging that a procedural step should not be created that I think is unnecessary and can safely be avoided. Sincerely yours, PHILIP SPORN. INDEMNITY AND REACTOR SAFETY 217 Mr. HAROLD PRICE, GENERAL PUBLIC UTILITIES CORP., New York, N.Y., May 3, 1960. Director, Division of Licensing and Regulation, U.S. Atomic Energy Commission, Washington, D.C. DEAR MR. PRICE: The following comments are submitted in connection with the proposed amendments to part 50 of the Commission's regulations published in the Federal Register for February 11, 1960. The comments are based in part on the experience of our subsidiary, Saxton Nuclear Experimental Corp., in obtaining a construction permit for the Saxton nuclear power project and on the problems we foresee in further licensing proceedings. 1. Prohibition on starting construction.-We welcome an official ruling by the Commission as to those activities which are permissible prior to the issu- ance of a construction permit and those which are not. While we cannot say that the absence of such a ruling seriously affected the Saxton project, it did add an element of uncertainty in scheduling procurement and construction work. As we understood the proposed regulation, it would prohibit the laying of foundations for the reactor and its enclosure prior to the issuance of a con- struction permit. We have no objection to this feature of the proposed regula- tion, since the foundations of the reactor and its bulidings would normally be directly related to the design of the reactor facility and since it seems reason- able to prohibit work which might tend to freeze the design of the reactor and enclosure prior to AEC review of the safety aspects of the facility and con- clusion of the construction permit proceedings. We believe, however, that the regulation could and should be more explicit in permitting other site activities, including construction work, where questions of nuclear safety are not involved. In its present form the proposed regulation states that the prohibition against construction does not apply to "site explora- tion or excavation.” We believe that the regulation should be expanded to make clear that the prohibition also does not apply to site preparation, such as con- struction of access roads, railroad spurs, and transmission lines. Further, the regulation should permit the construction of permanent buildings, other than the reactor building itself, where problems of nuclear hazards are not involved in the design of the structure. These would include service buildings, such as machine shops or storage facilities, and might in some nuclear powerplants include the turbine building where this building is separate from the reactor building and independent in its design from a safety standpoint. 2. Issuance of construction permits.--The proposed prohibition on starting construction of the reactor facility prior to issuance of a construction permit adds emphasis to the need for simplifying construction permit proceedings wherever possible. We believe, however, that AEC's present procedures are in general satisfactory and, because of the obvious necessity for careful review by the Commission of applications for construction permits, and in view of the present statutory requirements regarding the submission of projects to the Advisory Committee on Reactor Safeguards and the holding of a public hearing on the application, that the opportunities for simplifying present procedures are limited. One important improvement has already been made in the procedures which were in effect at the time of the proceeding on Saxton's application for a con- struction permit; i.e., AEC procedures now permit the issuance of a notice of hearing without waiting for completion of the ACRS review and report and the fixing of a hearing date shortly after the ACRS report is expected to be- come available. The practical effect of this change in procedure is to reduce to interval between the application and issuance of a permit by as much as a month. We hope that this change will become a permanent feature of AEC's licensing procedures. The only other important opportunity for timesaving which we see has to do with the hearing procedure itself. Where, as in the case of the Saxton project, there are no substantive differences between the applicant and the AEC staff and where no third person has intervened to contest the issuance of a permit, we do not believe that the procedures now followed by the Commission serve a public purpose commensurate with the time and expense involved for both the applicant and the Commission. 218 INDEMNITY AND REACTOR SAFETY Under present procedures the applicant is expected to appear at the hearing with suitable witnesses to repeat in condensed form matters which have already been fully covered in the application itself. AEC staff witnesses also testify as to the results of the staff review of the project. Following the hearing, both applicant and the AEC staff go through a time-consuming process of preparing proposed findings and conclusions which further repeat and condense matters covered in the application and AEC staff review. Time must then be allowed for preparation of an intermediate decision by the hearing examiner. If, as is currently the situation, the hearing examiner has a crowded docket, substan- tial delay in the intermediate decision may be inevitable. Assuming that both the applicant and AEC staff are content with the intermediate decision, which in an uncontested proceeding would be the normal situation, there is a further waiting period of 20 days prior to the issuance of a construction permit, during which the Commission may decide on its own motion to review the decision. While the Commission can, of course, waive all or any part of its 20-day period, the time necessarily consumed in obtaining a Commission waiver is likely to be almost as long as the 20-day period itself. The result of present procedures in the case of the Saxton project was an interval of approximately 2 months between the hearing and the actual issuance of the permit. It is difficult to see under present procedures how this 2-month period could be substantially re- duced, and it is not difficult to visualize in the case of future projects an even greater interval resulting from the workload which present procedures place on both the AEC staff and the hearing examiner. We suggest that in uncontested proceedings the function of the hearing ought simply to be to insure the completeness of the public record on which the issu- ance of a construction permit is based and the consistency of the proposed permit with the Atomic Energy Act and AEC regulations. This record might consist merely of the application and supporting documents filed by the appli- cant, the statement of AEC staff conclusions on the pertinent issues (e.g., the safety of the project and the technical and financial qualifications of the appli- cant), the report of the ACRS, and the form of construction permit proposed to be issued. Issuance of the construction permit could then be ordered promptly by the hearing examiner after review of the record. We suggest further that the hearing examiner's order become immediately effective upon waiver by the applicant and the AEC staff of any right of appeal to the Commission. 3. Provisional operating licenses.-We have substantial reservations about the proposed amendment to part 50 which contemplates the issuance of provisional operating licenses as an intermediate procedure prior to the issuance of a final operating license. The net effect of the provisional operating license, as we understand the proposed regulation, would be to subject applicants to a mini- mum of three formal hearings prior to the issuance of the final operating li- cense -one in connection with the construction permit, a second in connection with the provisional operating license, and a third in connection with the final operating license. Under the proposed regulations, provisional operating licenses may be issued "where a finding required for the issuance of a final operating license cannot be made because construction of the facility has not been completed." The proposed regulation is, we understand, based on the premise that evidence of the completion of the facility must be adduced at the public hearing and that a formal finding of completion based on the record at the hearing is a neces- We do not sary prerequisite to a decision to issue a final operating license. believe that such a finding is required by the Atomic Energy Act or necessary in the interests of the public health and safety. Normally an applicant can be expected to apply for an operating license before the facility is completely finished. This is a matter of necessity, in view of the length of time involved in the processing of the application, so that the reactor can begin operation promptly after its completion. We think it appro- priate under these circumstances for the applicant to explain at the hearing what remains to be done in order to complete the facility, including any pre- operational testing which may be required, and for the Commission to with- hold the actual issuance of the operating license until the facility has been com- pleted in accordance with the application and the necessary preoperational tests have been successfully concluded. We see no reason, however, why the hear- ing examiner should not at the conclusion of the hearing direct the issuance of a final operating license contingent on such completion and preoperational testing and contingent upon an inspection and report by an appropriate AEC INDEMNITY AND REACTOR SAFETY 219 official. Such a procedure would, in our view, fully comply with the require- ment of the Atomic Energy Act that operating licenses be issued upon comple- tion of the facility and would fully protect the public interest in the safety of the project. To the extent that our recommendations in this area may be incon- sistent with the actions taken by the Commission in connection with the oper- ating license for the Westinghouse test reactor, we urge that the Commission reconsider the procedures adopted in that case. The notice of proposed regulation explains that the provisional operating license is designed in part to overcome a procedural difficulty growing out of AEC's present practice. AEC currently requires that an operating license be issued prior to fuel loading and therefore at a time when the reactor may not have been "completed" in the sense that certain work, such as placing the head on the pressure vessel, may necessarily have to be accomplished after fuel has been loaded into the reactor. It does not seem unreasonable to us to regard the reactor as completed for purposes of issuing an operating license, within the meaning of the Atomic Energy Act and existing AEC regulations, when the reactor is ready for fuel loading and all that remains to be done is to install reactor components which normally follow the fuel loading. A possible alterna- tive, and one which would also obviate the need for a provisional operating license, would be to treat fuel loading as a part of the work authorized by the construction permit and to issue an operating license once the fuel has been loaded and all reactor components put in place. Sincerly yours, E. W. MOREHOUSE, Vice President. Mr. PRICE. In May of 1959, the Commission published for public comment a proposed revision of part 20 of title 10 of the Code of Fed- eral Regulations. Numerous comments have been received and placed under study. The Commission expects to discuss this matter during next month's hearings on radiation standards. Representative PRICE. Mr. McCone. Mr. MCCONE. Mr. Chairman and members of the committee, I would like to take this opportunity to express the Commission's views on this matter of regulation and the discharge of our responsibilities for health and safety of the public. We look upon this as one of the most important functions of the Commission, and I want to assure the committee that it is given con- tinual and careful study and attention by the Commission as a whole. As you know, these matters are handled as we sit in our regulatory responsibility with the records of our meetings carefully maintained and transcribed so that there are records of all actions taken. The Commission and the staff have had a close and continuing rela- tionship with the Advisory Committee on Reactor Safeguards. I would like to comment that I feel that this is a committee of the high- est possible standards. I had occasion to examine the background of each of the members of the Committee recently in connection with the appointment of two eminent scientists, Dr. Ergen and Dr. Thompson, to the Committee, which now stands at 14 members. With your permission, Mr. Chairman, I would like to insert in the record a brief history of their background and scientific competence, because I think it is important for your committee and the public to know the competence of this organization that works so closely with the Commission in an advisory capacity. Representative PRICE. Without objection, it will be inserted in the record. (Biographical data of the members of the Advisory Committee on Reactor Safeguards follow:) 220 INDEMNITY AND REACTOR SAFETY Name Profession Advisory Committee on Reactor Safeguards members Service Years in reactor tech- nology, radi- ation safety, or environ- mental health problems Years on ACRS Re- actor Safety Committee 19 1212 Dr. Leslie Silverman Mechanical engineer-indus- trial hygiene. Dr. Franklin A. Gifford, Jr... Meteorologist Dr. Willard P. Conner. Dr. Harvey Brooks. Physical chemist. Physicist. Kenneth R. Osborn. Engineer. Dr. Henry W. Newson. Physicist. Dr. R. L. Doan. do. Dr. William K. Ergen. Professor of engineering in environmental hygiene and director of the radiological hygiene program of the Harvard University School of Public Health. On Harvard faculty 21 years. Research and development on radioactive gaseous effluent control since 1948. Also consulting engineer in air pollution control, industrial hygiene, and industrial ventilation since 1938. Chief meteorologist, Weather Bureau office, Oak Ridge, since 1955. Research meteor- ologist with U.S. Weather Bureau, 1950-55; area chief meteorologist, 1945-50, North- west Airlines; meteorologist, U.S. Army, 1943-45. Technical assistant to director of research center since 1960; manager, Physics Division, Hercules Powder Co., 1943-60, and research chemist 1942-43; research fellow, 1940-42; teaching assistant, Wisconsin, 1936–39. Professor of applied physics, Division of Engineering and Applied Physics, Harvard University, since 1950, and research associate, Harvard Underwater Sound Labora- tory, since 1954; research associate and associate division head, Research Laboratory, KAPL, 1946-50; professor of engineering research, Pennsylvania State University, 1945-46; Office of Scientific Research and Development, 1941-45. Consultant to the AEC Division of Reactor Development since 1954. Chief engineer, Allied Chemical Corp., General Chemical Division. Varied technical experience in design, research, development, production, and administration with Allied Chemical since 1935. Appointed chief engineer in 1946. Professor of physics, Duke University, 1948 to present; research and development, Oak Ridge National Laboratory, 1946-48; physicist, Los Alamos Scientific Laboratory, 1945-46; technical expert, Hanford Engineering Works, 1944-45; research and develop- ment, Clinton Laboratories, 1943-45; University of Chicago (including service at Metallurgical Laboratory), 1936-43; University of California, Radiation Laboratory, 1934-36. Manager of Atomic Energy Division, Phillips Petroleum Co., since 1951; director of re- search, Phillips Petroleum Co., 1950; director of research, Clinton Laboratories, Oak Ridge, 1943-45; director and chief administrative officer, Metallurgical Laboratory, University of Chicago, 1942-43; associate director of research, Phillips Petroleum Co., 1936-42 and 1945-50; research physicist, University of Chicago, 1933-36; research engi- neer, Western Electric Co., 1926-33; National Research Council fellow, University of Chicago, 1926. Fellow of American Physical Society and AAAS; director, American Nuclear Society; member, American Chemical Society. Physicist, radio engineer, Physicist, Oak Ridge National Laboratory, 1951 to present; physicist, Fairchild Engine biophysicists. & Aircraft, NEPA Division, 1947-51; radio engineer, RCA, 1945–47; physicist, Min- neapolis-Honeywell, 1942-45. $ ୪ 8 112 9 9 14 6 CO 9 9 9122 112 13 9 13 (2) 9 INDEMNITY AND REACTOR SAFETY 221 8 (2) 9 9 26 1½ Donald A. Rogers. Dr. C. Rogers McCullough... Reuel C. Stratton. Dr. Theos J. Thompson.. Mechanical engineer. Manager, project analysis, Central Research Laboratory, Allied Chemical Corp. Affi- liated with Allied Chemical (& Dye) Corp. since 1924. Manager, central engineering, 1951-59. Chemical engineer and advisory engineer, Atmospheric Nitrogen Corp. and Solvay Process Co. (of ACC), 1924-51. Instructor, mechanical engineering, Cornell University, 1922-24. Chemist, chemical engineer. Project specialist, Research and Engineering Division, Monsanto Chemical Co., since 1957; Deputy Director for Hazards Evaluation, Division of Civilian Application, Atomic Energy Commission, 1956-57; assistant director, Development Department in Research and Engineering Division, director of Power Pile Division, Clinton Lab- oratories, Monsanto Chemical Co., 1928-56; research chemist and chemical engineer, Swann Research, Inc., 1926-28; chemist, Hygrade Lamp Co., 1922-26. Assistant director of research (chemical and nuclear), Travelers Insurance Co., 1919 to present; assistant chief chemist, New Departure Manufacturing Co., 1916-17; chemist, Scovill Manufacturing Co., 1916. Chemical engineer Dr. Charles R. Williams. Industrial hygienist. Dr. Abel Wolman. Chemist, physicist, engineer. Professor, nuclear engineering, Massachusetts Institute of Technology, 1955 to present; designer, director, MIT nuclear reactor; staff member, Los Alamos Scientific Labora- tory, 1952-55; chairman, Design Committee Omega West Reactor; physicist, lecturer in physics, and physics head teaching assistant, University of California, 1947-52. Instructor in physics, U.S. Military Academy, West Point, N. Y., 1944-46. Harvard University, School of Public Health, 1936 to present, now associate professor of applied industrial hygiene; Liberty Mutual Insurance Co., 1934 to present, now assist- ant vice president and director of industrial hygiene services, loss prevention depart- ment; consultant, Health Division, Los Alamos Scientific Laboratory. Consulting engineer and professor of sanitary engineering, the Johns Hopkins University. With Johns Hopkins since 1938. Public health engineer, Maryland State Department of Health, 1915-38. Chairman, National Research Council Committee on Sanitary Engineering and Environment since 1942. Chairman, National Water Resources Board, 1934-42. Sanitary engineer. James B. Graham Dr. Dick Duffey. Executive secretary Technical secretary U.S. Army, 1945-56, communications and radiological engineering; radiological safety engineer, U.S. Air Force, 1956–58. Professor in charge of nuclear engineering program, University of Maryland, since 1954; nuclear engineer at Hanford, Wash., and area manager, St. Louis, Atomic Energy Commission, 1947-54; U.S. Army, Manhattan district, as technical officer, 1942-47; Union Carbide & Carbon, 1940-42. 9 15 19 1 Present Chairman. 2 4 months. 3 Former chairman. • 8 months. 46 9 8 2 13 (1) 222 INDEMNITY AND REACTOR SAFETY Mr. MCCONE. Additionally, we have made some important changes in our organization for handling this matter, as I reported in the 202 hearings, Mr. Dwight Ink as Assistant General Manager, car- ries a basic responsibility in this area, and we have more recently appointed Mr. Finan, who for years was with the Bureau of the Budget as Assistant Director in charge of Government organization, to the position of Assistant General Manager for Regulation and Licensing. Representative PRICE. This is a new position that you have estab- lished? Mr. MCCONE. This is a new position that was established by the Commission out of recognition of the very great and growing im- portance of these activities. There is a problem which I want to bring to your attention, and that is that the law as it now stands establishes really two authorities responsible or advisory to the Commission in this area. Sometimes we get conflicting advice and this presents the Commission with a problem. The staff under Mr. Finan is charged with the responsibility of ad- vising the Commission in connection with its responsibilities in regu- latory and safety matters, and the Advisory Committee on Reactor Safeguards, under section 29 of the Atomic Energy Act of 1954, I believe, is advisory to the Commission and under section 182 (b) has specific statutory responsibility for reviewing each of the applica- tions under sections 103 and 104 (b) and submitting a report thereon which is made public by law. This sometimes presents us with a problem. But a greater problem is the fact that this is a growing field. It is a field in which the health and safety of more and more people are being affected. There are more projects. If we are successful in our efforts to reduce the cost of nuclear power, there will be an increasing number of projects to deal with. Therefore, it appears to me that in spite of the diligent work on the part of the ACRS and the hard work on the part of the staff that the time is approaching when we must reconsider the organiza- tion of this matter of the question of health and safety in connection with all matters of this type, most particularly the licensing of power reactors. We have had a little talk here about the question of site criteria. I think this is a problem that must be settled to avoid the very un- fortunate and to the Commission disappointing situation that has re- sulted in Jamestown and La Crosse and Point Loma and elsewhere. We think that perhaps the technology has advanced to a point where even the document that Mr. Price read from and which was intro- duced into the record (p. 203) might be made even more definitive so that prospective constructors of nuclear powerplants can proceed with a little more assurance. This I have discussed at length with the staff, and also with the Advisory Committee on Reactor Safeguards. I assure you it is no easy problem because there are many imponderables and there are many uncertainties, and in trying to simplify the problem for the purpose of, let us say, promoting or inspiring the construction of reactors, we do not want to take steps which might not be in the best interests of the public generally. INDEMNITY AND REACTOR SAFETY 223 However, I am satisfied that in the very near future we can improve our requirements or our site criteria and, therefore, the prospective builders can be better informed. I am becoming concerned about the workload on the ACRS. Later in this testimony Mr. Price will indicate to you rather dramatically by the number of meetings, the number of projects they have had to consider, how it has increased from 1957 to 1958 and to 1959, and will even be greater in 1960. This, I think, we have to think about. After all, this group of 14 men, each one holding an extremely important position in industry or in educational institutions, cannot be expected to give too many days a month to this job. What we propose to do is this: Over the next several months we are going to carry on a concerted study of this whole question of licensing, of the discharge of the Commission's responsibilities in this field. This study will be made by the staff of the Atomic Energy Commission and members of the AČRS. I would hope out of that study we could come before you with some recommendations for improvements in the organization. Whether this will involve a separation of the functions of promo- tion and administration on the one hand, and licensing on the other, I do not know. But as you gentlemen know, in other areas, such as the Civil Aeronautics Board and the Maritime Administration, and so forth, there came a time when it seemed desirable to separate the regulatory and the administrative functions. I am not here to say that we are at that point in this field, but we are at a point where we must improve our machinery for doing this job. Representative HOLIFIELD. You may or may not know that in 1956 at my request the chairman instructed Mr. Ramey and Mr. Toll to make a study of this whole problem of divorcement of the licensing and regulatory functions from the promotional function. Our staff is studying now to bring our 1956-57 study up to date. We recognize that this problem exists. I am glad to note that you are aware that it is becoming heavier and you are concerned with it, too. I think sooner or later there has to be some solution to this problem. I think that solution has to be made in the public interest and it has to be made in such a way that the Commission itself is not continually placed under the criticism of confusing its safety regulations with its promotional objectives, both of which are valid and both of which are necessary. I am hoping that something can be suggested to us that will solve this problem. Mr. MCCONE. I know of your interest. I know of the 1957 study conducted at your direction. I know from reports that have been made to me that your staff is considering bringing that up to date. I am merely pointing out to you that the problem is much more dif- ficult now than it was 2 years ago. Representative HOLIFIELD. It is so difficult that we have not been able to come up with an answer. Mr. MCCONE. And 2 years from now it will be even more difficult than it is now from an administrative standpoint. I would hope that you suggest to your staff that they work with this group that we will set up and maybe early next year we can consider some revisions 224 INDEMNITY AND REACTOR SAFETY that would be in the interest of better administration and to give the public complete assurance that their interests are being taken care of and not subordinated to the promotional interests, let us say. With respect to the three proposed amendments to regulations, the Commission has reviewed those and they support them. We recog- nize the point you make, Mr. Holifield, that pressures are bound to build up. We think, however, that these regulations are designed to minimize, to relieve us from irresistible pressures, rather than to place us in the position where pressures might be such that we would be forced out of recognition of investment and initiative on the part of outsiders to accede to the pressure. I. therefore, hope that this committee, in considering these amend- ments, will support them. They may be subject to some modification as we study the comments that we receive. I have not had an oppor- tunity to study them personally, but I intend to do so. Mr. Price, I wanted to make those statements. In summary, I feel this is a problem. It is being handled well by competent people with- in the staff and within the ACRS. There have been some rough spots on the road, but you must realize that we are in a new business here and we are now trying or testing the practicality of regulations that have been developed over recent years. We are changing them and amending them and improving them as we see that doing so is in the interest of the public and the interest of better administration. Secondly, we recognize looking down the road that there has to be a different arrangement for handling this matter and we intend to come up with some recommendations in early January to you which might involve legislation. I cannot forecast how this study is going to come out. I appreciate your suggestion that this group work with your staff. Representative PRICE. Thank you very much, Mr. McCone. I see it is 5 minutes to 12. I imagine it will take at least another half hour or 45 minutes with you, Mr. Price. I wonder if you could come back at 2 o'clock? Mr. PRICE. I am entirely agreeable, sir. I am at your service. Representative PRICE. I think we had better recess now and come back at 2 o'clock. (Whereupon, at 11:55 a.m., the subcommittees recessed, to recon- vene at 2 p.m. the same day.) AFTERNOON SESSION Representative PRICE. The committee will be in order. This is a continuation of the meeting of the Subcommittee on Re- search and Development and the Special Subcommittee on Radiation to consider the problem of reactor and radiation safety. Mr. Price, will you continue with your testimony? Mr. PRICE. Mr. Price, we concluded this morning at the end of part I. The first couple of paragraphs on part II on site selection, and what we are doing about criteria was pretty fully discussed. I can submit this or read it, as you wish. Representative PRICE. I think that was fairly well discussed this morning. It will be included in the record. INDEMNITY AND REACTOR SAFETY 225 . t Mr. PRICE. The last part of the section deals with the special prob- lem of whether applicants should show a consideration of alternate sites. That was not discussed. I will either read that or submit it at your pleasure. Representative PRICE. I think you may read that. This is the organizational matter you referred to. Mr. PRICE. It is the last part of part II. Then on organizational matters, most of that I would like to submit, because the Chairman. covered that also this morning. Representative PRICE. I think you might pick up where you think it is essential that we have some discussion here. Mr. PRICE. Very well, then, I will begin at the bottom of page 9, the last paragraph. We have been asked to comment on a suggestion that the Atomic Energy Commission require applicants to offer alternate sites and to justify the particular site proposed in comparison to other sites. Site selection by an applicant covers many complex factors in addi- tion to the purely safety considerations. With respect to power re- actors, the additional factors include the location of existing power transmission and generation facilities, potential load growth and mar- kets to be served by the new reactor, transmission costs, availability of sites, availability of water for coolant purposes, proximity to rail- road lines, land costs, and many others. The Commission's reactor licensing regulations are based on the philosophy that site selection is the applicant's responsibility, site approval is the Commission's responsibility. Whereas site selection involves economic as well as safety considerations, site approval by the Commission should involve only safety considerations. If a site does not meet the safety requirements it must be rejected by the Commis- sion. If it does meet safety requirements it should be approved. A mandatory requirement that alternate sites be considered by ap- plicants would produce one of three situations. First, alternate acceptable sites. To require a formal showing of having considered alternate sites and then to require that the appli- cant go to an alternate site which is considered more safe than his pre- ferred site, which also meets safety requirements, would put the Com- mission in the position of selecting the applicant's site. This could not be done without judging economic considerations, and the Com- mission has been reluctant to do this in the regulatory program where health and safety and national defense and security are the statutory criteria. I will skip the next sentence, please. (b) Alternate unacceptable sites. The Commission will not ap- prove an unsafe site simply because it is safer than an alternate unsafe site. This being the case, imposing a regulatory requirement that evi- dence of having considered alternate sites be presented would not pro- vide applicants offering alternate unacceptable sites any protection against delay not already available to them, and would not offer any advantage from a safety point of view to the Commission. (c) One site acceptable-others unacceptable. In this situation there would be a theoretical advantage to the applicant who presented alternate sites. If his preference site proved unacceptable but his al- ternate site were acceptable he would avoid the delay involved in seek- 226 INDEMNITY AND REACTOR SAFETY ing another site. However, he can protect himself on this score under the present rules by having an alternate site lined up. In fact, he is not prohibited from submitting alternate sites if he chooses to do so. It has been argued that the advantage of an alternate site require- ment would be to impose on applicants the discipline of considering alternate sites before making a selection, and that this would tend to avoid the selection of sites merely on the basis of superficial or slight convenience to the applicant. As a practical matter, however, we do not believe that adoption of this requirement would result in a sub- stantial advantage. The extensive information required of applicants, the extensive review given applications by the AEC staff and ACRS, provide compelling incentives for applicants to give thorough consideration to the safety factors involved in site selection. Safety is always relative. In many cases there may be some more remote site at which a reactor could theoretically be placed, if all other considerations are ignored. It should not be our objective, however, to press for the location of reactors in ever more remote areas. nuclear reactors-power, test, or research reactors-are to fulfill their promise, we should emphasize (1) technical development to assure that they can safely be operated in locations where they can contribute to our economic well-being; and (2) a vigorous regulatory program which will thoroughly evaluate the suitability of proposed sites in re- lation to the proposed reactor and in which a construction permit will be denied in any situation where there is doubt as to the suitability from a safety point of view of a proposed site for the proposed activity. If We believe that whatever advantages might be achieved by adoption of a requirement that applicants include consideration of alternate sites, can better be gained by other means, principally, by encourag- ing applicants to obtain review of proposed sites at a very early stage of their programs, and by the development and publication of site. criteria. The first of these methods will be advanced by the proposed construction permit amendments recently published by the Commis- sion for public comment. The second, development of site criteria, is difficult; but as explained this morning we believe such criteria must be developed, and we and the Advisory Committee on Reactor Safe- guards are determined to solve this complex problem. Representative PRICE. Mr. Price, I think you went pretty thor- oughly into the matter of the steps in the consideration of the sites for the small second-round reactors, but I would like to ask what were the steps in the selection of the Point Loma site for the process heat reactor. Was the Commission in on the original site survey? Mr. PRICE. Was the Commission in on the original site? Representative PRICE. Yes. Mr. PRICE. The Commission had one or more members of its staff participate with the Department of Interior in the review of these sites. it? Representative PRICE. Was the Department of Defense also in on Mr. PRICE. I don't think the Department of Defense was. The De- partment of Interior, I think possibly they may have looked at four, five, or six sites. You must understand that the selection was for all purposes other than safety, as I recall, a problem for the Department INDEMNITY AND REACTOR SAFETY 227 of Interior. Of the sites looked at, Point Loma was initially selected. At that point, the Commission referred the site for formal review to its own hazards evaluation staff, and to the Advisory Committee on Reactor Safeguards. Representative PRICE. Exactly what point was this? How far had it gone on the site selection? Mr. PRICE. I think it had gone to the point where Point Loma had been identified as the preferred site on the various criteria that were applicable, including things other than safety. Representative PRICE. Who had identified it up to this point as being the preferred site? Mr. PRICE. I am getting now into information that I am not sure I can be accurate on. My understanding is that subject to safety this was primarily a decision that affected the Department of the Interior, and they were the ones who conducted the site selection process. I would like to ask Dr. Pittman if he can help out on that. Dr. PITTMAN. Mr. Price is essentially right. The site is for the Department of the Interior saline water program. Representative PRICE. You mean the Department of the Interior went this far before it brought the Commission in? Dr. PITTMAN. No, the Commission had a representative from the Commission that went around and looked at the various sites. I think it was a member of Mr. Price's staff. Representative PRICE. Was anyone from the Safeguards Commit- tee or the hazards group on the team? Mr. PRICE. Yes, sir; a member of the hazards evaluation staff served as adviser to the selection board. Representative PRICE. But no one representing the Advisory Committee? Mr. PRICE. NO. Once it got to the point that a particular site was determined to be the preferable site, it was immediately referred to the Safeguards Committee. Dr. PITTMAN. Could I comment further to clarify this a little? The selection board that was set up by the Department of the Interior with AEC people and representing Mr. Price as advisers, recom- mended to the Department of Interior any one of three sites. The selection of the sites was carried out by the Department of the Inte- rior for the purpose of the selection among those three. The state- ment was made in a letter which, I guess, I signed to Mr. Miller of the Department of the Interior, that from the standpoint of the AEC any one of the three sites was acceptable. This was meant to be stat- ing that at the staff level we were saying the safety of the site, as well as other aspects, were satisfactory. Representative PRICE. You say from the standpoint of AEC, even though there was no consultation? Dr. PITTMAN. It was from the standpoint of the AEC staff, signed by me, to the staff man in the Department of the Interior. Representative PRICE. In other words, it was not strictly from the standpoint of the AEC itself. Dr. PITTMAN. It had not been to the Reactor Safeguards Com- mittee up to that time, sir. Representative PRICE. I am trying to understand what sort of clearance they had from the AEC to the point where they would make 228 INDEMNITY AND REACTOR SAFETY a determination on a site without it being passed on by the Reactor Safeguards Committee. Mr. PRICE. It is a question of which comes first, Mr. Price. At the point when the selection board made its recommendations, the advice that the selection board had, and that Dr. Pittman had, rep- resenting the contracting arrangement, was advice from one of the members of our safety staff that had served as a consultant. It was understood by everybody, if this or another site were picked as the preferred one, that it would have to be formally reviewed by the Division of Licensing and Regulations. At that time they had gotten consulting services from a person. It turned out that the Advisory Committee turned the site down and since we have gone this far, I think we ought to tell you that I think this is the only case where the technical staff of the Hazards Evaluation Branch differed from the Advisory Committee. Representative PRICE. What puzzles me is why the Reactor Safe- guards Committee would be brought in last and after you have already made a determination that the Department of the Interior acted on. It would seem to me that the Reactor Safeguards Com- mittee should be in the picture much earlier than that. Mr. PRICE. I think at that point, Mr. Price, it had merely been identified as the preferred site. Representative PRICE. I understand that. It would seem to me if I were going to identify the site in any way at all, before I did, I would want to know what the judgment of the Advisory Committee was. Mr. PRICE. It is a question of at what stage do you get your formal safety determinations by the Commission and get the advice of the ACRS. Looking back on the confusion that has resulted to the ex- tent that I would have any to do with it again, I would say let us not really identify the chosen site until we have finished up with safety. Then somebody would say why worry about the safety ques- tions when you know you are going to turn it down for 10 other reasons. Representative PRICE. In other words, you identified this site strict- ly on the basis of geography. Mr. PRICE. I was not doing anything. Representative PRICE. When I say you, I mean the Commission. It would seem that it did not go to the full extent of analyzing the safety factors. There would not be any particular reason why you would make a determination. Mr. PRICE. I think if we had brought in the ACRS earlier they would have had to examine a large number of sites. This was a mat- ter of culling out sites on the basis of criteria in addition to safety criteria. Once they had identified a site they thought they would like to have, it immediately went to the ACRS. Representative PRICE. I might follow that point if it were not for the fact that they announced the selection of the site. Mr. PRICE. I think the information got public. Dr. PITTMAN. I am not sure they announced it or not. I don't know the answer to your question that there was a public announce- ment. There probably was. INDEMNITY AND REACTOR SAFETY 229 Representative PRICE. It seemed that we were informed of the lo- cation of the site at Point Loma before we know that the ACRS had adversely passed upon the location of the site. Dr. PITTMAN. I think this is probably right. It was announced on the basis of my letter to Mr. Miller. Representative PRICE. This is just another matter of procedure where you would eliminate a lot of difficulty if all this coordination is done prior to the final determination of a site and made publicly known. Mr. Ramey. Mr. RAMEY. I had a question on this alternative site business. On page 10 in the middle paragraph, talking about alternative sites, you say: If the site does not meet safety requirements, it must be rejected by the Com- mission. If it does meet the safety requirements, it should be approved. That sounds like site selection is a black and white open and shut proposition. Then over on page 12, you say, though, "Safety is always relative," and then in your points (a) and (b), it sounds like considering alternative sites is a matter that is just entirely theoretical. Then you come to (c) and you put out that there might be some sense in considering alternative sites. Mr. PRICE. No advantage could be gained by the applicant under the present regulations. When I say that safety is relative, what I am trying to say is that you don't have the concept of absolute safety when you are dealing in these kinds of situations. That is all that is intended to mean. So far as the statement that if a site does meet safety requirements it ought to be approved, that is simply saying, after you have looked at a site and looked at what the man wants to put on it, if you are satisfied that this from all safety standpoints that we and the ACRS can think of as being reasonable, that this is suit- able, then I am saying we ought to approve it. That is all I am trying to say. Mr. RAMEY. Then under (c) you point out that it is up to the applicant, if he want to protect himself on the site business, he can have alternative sites. It seems to me that the Commission also has a stake in these things, particularly on the second-round project. The Commission is putting in by far the greatest amount of money. It has possibly as large a stake. Mr. PRICE. That is a different problem, Mr. Ramey. I am only talking now about the licensing process and what ought to go in the regulations. Mr. RAMEY. When do you say this? Mr. PRICE. If I didn't say it, I thought I was talking about man- datory regulatory requirements. Mr. RAMEY. Don't your requirements on licensing apply equally well to these other reactors? Don't you have your parallel procedure? Mr. PRICE. The safety requirements are the same. The difference is in the second-round cases the Commission picks the site and of course the Commission frequently looks at a number of sites. Mr. RAMEY. Are you saying now that on your second round, do your parallel procedures provide for alternative sites? 58511—60-pt. 2— 8 230 INDEMNITY AND REACTOR SAFETY Mr. PRICE. No. I am saying that the regulatory procedures Mr. RAMEY. Isn't that covered by regulation? Mr. PRICE. Yes. Mr. RAMEY. Does it provide for alternative sites? Mr. PRICE. No. Mr. RAMEY. Then how does the Commission look at alternative sites? Mr. PRICE. The point is that in this case where the Commission goes out under the demonstration program, where the Commission is putting money into the case, as was true in the case of Jamestown and the Wisconsin case, those sites are initially accepted or rejected before they ever get to any parallel procedures. We don't use the parallel procedures to determine whether the Reactor Division ought to put money into the case. Those sites never did get to the stage of parallel procedures. Mr. RAMEY. Yes. Wouldn't it make sense, though, in your parallel procedure, if you are following alternative site arrangement, to rec- ognize it? Mr. PRICE. I don't think so. If, by the time it goes to the hearing procedure, the ACRS and the staff are satisfied on the safety aspects and satisfied on the site, there is no reason that we can think of that would serve any purpose to explore alternate sites in the parallel procedures. Mr. RAMEY. I didn't mean explore. Under item (c) you have a finding that would indicate in your procedure that the applicant of the Commission, in that case, had considered alternative sites. That is all (c) relates to. Mr. PRICE. If they have one site that is acceptable from a safety standpoint, we don't see what good it would do to have a showing on alternate sites. That is our position. It may turn out in these paral- lel procedures cases, if the site is considered to be an unsatisfactory one from the safety standpoint, the Reactors Division would drop it because they would not want to spend money to start it. You would not even get to the parallel procedure. Mr. RAMEY. In the meantime you have rather substantial delays? Mr. PRICE. That is true. But look at these cases of some of these municipalities, for example. Sometimes they are limited in sites. If a municipality or company just has one site that they can offer and that is it, it seems to me we ought to give it a fair shake and see if it is satisfactory. Mr. RAMEY. There is one other aspect. We discussed this amend- ment that Mr. Holifield said would take the Commission off the hook on projects where substantial research and development were required on safety aspects. Would it make sense in that type of reactor pro- posal, whether it is under the demonstration program or whether it is a private licensee, to require that the applicant present evidence that he had considered alternative sites? This is not the run-of-the- mill kind of reactor proposals. This is the kind of proposal that would presumably be making an addition to the technology. It would be an advanced type of reactor. Mr. PRICE. From a regulatory standpoint on safety, I don't think we think so. Whether in a particular case the Reactor Division. would think that this particular investigation of a new feature and INDEMNITY AND REACTOR SAFETY 231 the particular research and development program is something that they want to support with Government money, that is a separate problem. Mr. RAMEY. On this type of arrangement, would the Reactor De- velopment Division then issue policies on how they would handle their projects in relation to sites so that proposers would have an oppor- tunity to know what they were facing? Dr. PITTMAN. I suppose I should answer that rather than Mr. Price. It seems to me that there might be cases where because of the unusual nature of a reactor and because we don't want to be delayed in our developmental program, that we might ask the proposers to submit alternate sites. When they came in, if one was not acceptable, another one could be used. Not from the regulatory standpoint, but purely from the standpoint of saving time if it looked like there might be a problem on the initial site. If this were the case, this would be stated in the invitation at the time it was issued. Representative PRICE. Mr. Van Zandt. Representative VAN ZANDT. Dr. Pittman, could you name the high energy power reactors in operation at the present time? Dr. PITTMAN. Yes, sir. The only high power reactors that are in operation at the present time are the Shippingport reactor and the Dresden reactor, if you will exclude the test reactors that we have, such as the MTR and ETR. The only power reactors in operation. at this moment of significant power are the Dresden and Shipping- port reactors. There are other reactors operating. Representative VAN ZANDT. Then of all of the high energy power reactors in operation at the moment, is the experimental boiling- water reactor at Arco. Dr. PITTMAN. Yes. I was not calling that high power. If you are including that, there is the EBWR and the SRE. Representative VAN ZANDT. Where is the SRE located? Dr. PITTMAN. That is the Santa Susana reactor experiment. The Vallecitos boiling-water reactor at Vallecitos; the OMRE at Idaho; the Shippingport reactor- Representative VAN ZANDT. That is at Arco, Idaho? Dr. PITTMAN. Yes; that is the organic moderated reactor experi- ment. The Shippingport reactor, the Dresden reactor, and the homo- genous reactor experiment is an operable reactor that is not in opera- tion. Representative Van Zandt. What about the Army package reactor at Belvoir? Dr. PITTMAN. I had not included that. I have only the civilian power reactors. The Army package reactor is in operation. It is relatively low power. Representative VAN ZANDT. What about the Westinghouse reactor? Dr. PITTMAN. The Westinghouse and GE test reactors are both in operation. Representative VAN ZANDT. Getting back for a moment to the Jamestown and Dairyland reactor proposals, Doctor, is the Commis- sion action on the selection of the reactor manufacturer going to be held up because of the delay in the selection of the site for the reactor? Dr. PITTMAN. Our proposal on that, sir, is this: We have, as you know, proposals from a series of reactor manufacturers. It is our 232 INDEMNITY AND REACTOR SAFETY intention to proceed with the selection program and to make recom- mendations to the Commission on the selection of the reactor manu- facturer to be used in this case. Naturally we cannot go forward with the final details of the contract until such time as the site is selected, but we do propose to carry these along. Representative VAN ZANDT. The manufacturer will be selected? Dr. PITTMAN. Yes, sir. That is our present proposal. Representative VAN ZANDT. Under the second round program, the utility company may purchase the reactor plant after 5 or 10 years of Commission operating contract expires. Is that so? Dr. PITTMAN. That is right. Representative VAN ZANDT. The reactor exclusion area will prob- ably make it necessary to choose a site for the reactor outside of the utility company's district. Therefore, if and when the utility buys the plant after the operating period covered by the Commission con- tract, it will probably have to pay taxes on a multimillion-dollar plant to the district in which the plant is located. The question is: Has any consideration been given to this item and its effect on the resultant increased cost of energy from the plant compared to other competing plants located in the utility company's district? Dr. PITTMAN. I think it is perfectly obvious, sir, that the utility company in preparing the proposal and selecting the site that it has placed in the proposal has taken this into account. It certainly is not a fact taken into consideration by the hazards evaluation people whose only problem is to evaluate the hazard. The question is not one that has been raised with the Reactor Development Division but I am quite sure it has been taken into consideration by the utility com- panies prior to the time they submit their proposal; namely, in the selection of the site they are proposing. Representative VAN ZANDT. Mr. Chairman, I notice the presence of our colleague from New York, Congressman Charles Goodell, who represents the 43d District in which Jamestown is located, and I would like the record to show his presence which is indicative of the great interest he has in this subject. Representative PRICE. Would the Congressman desire to make a statement or comment on this matter? Representative GOODELL. I don't believe so at this time. Thank you, sir, I appreciate the opportunity. Representative PRICE. The record will show the attendance of the Congressman. Will you proceed, Mr. Price. Mr. PRICE. Mr. Price, this gets us to part III. The first part of part III on organization was covered by the chairman this morning. With your permission, I would like to just submit that for the record, and drop down to the bottom of page 15. Representative PRICE. Very well. (The information referred to follows:) PART III. ORGANIZATIONAL MATTERS On February 17, 1960, during the annual hearings before this committee on the development, growth, and state of the atomic energy industry, there was a brief discussion among members of the committee and Commission witnesses about whether the licensing and regulatory functions presently vested in the Commission should be transferred to another agency established for the purpose INDEMNITY AND REACTOR SAFETY 233 i or whether some other less drastic statutory reorganization should be considered. I understand that the committee desires the Commission to make some addi- tional comments about this matter at this time. As you gentlemen are well aware, the question of how best to organize for the conduct of the total complex of atomic energy functions, including the regulatory activities, has been the subject of intermittent discussion, study and testimony ever since the enactment of the Atomic Energy Act amendments of 1954. As the Commission has accumulated experience with its regulatory responsibilities and related health and safety activities it has taken progressive steps to improve and strengthen its internal organization for their administration. The Commission believes that the existing framework of law gives it con- siderable latitude within which it can continue to improve its internal organiza- tion for health and safety regulation and related activities as further experience is acquired. Moreover, through the implementation of Public Law 86-373 the Commission expects to be relieved of many of the detailed duties of regulation as they are taken over by the several States. We are not prepared at this time to suggest that any change be made in the provisions of the Atomic Energy Act of 1954, as amended, relating to regulatory organization, including those having to do with the Advisory Committee on Reactor Safeguards. Between now and the next session of the Congress the Commission intends to review the organiza- tion of atomic energy licensing and regulatory functions; seek out ways of improving necessary interagency relationships in connection with such matters; and carefully to evaluate the results of the recent internal reorganizations within the Commission which were aimed at strengthening our health and safety activities. We shall be happy to make the results of those reviews available to this committee. The workload of the Commission and the Advisory Committee on Reactor Safeguards in the review of the safety aspects of reactor projects has gradually increased during the past 3 years. Mr. PRICE. The last paragraph at the bottom of page 15: As re- quired by the Price-Anderson Act of 1957, all power and testing re- actors subject to licensing are referred by the Commission to the com- mittee for an advisory report to the Commission. In addition, simi- lar types of reactors owned by the Government, including reactors constructed by the Department of Defense, are also referred to the committee for its advice. All hazards summary reports submitted to the Commission by applicants in these cases are furnished to the com- mittee for its review. Procedures have been worked out between the committee and the AEC staff under which the Hazards Evaluation Branch of the Divi- sion of Licensing and Regulation, after making its detailed study of the safety aspects of each case, prepare a staff analysis for the use of the committee. The report which the Commission submitted to the Joint Commit- tee on March 31 discussed the work of the committee during the past year in some detail. With your permission I should like at this time to introduce into the record some statistics covering the work of the Advisory Committee on Reactor Safeguards. I understand that the Chairman of the ACRS is scheduled to appear before you later today to discuss the work of the committee in greater detail. This is merely a simple table which I believe has already been furnished to the committee. Representative PRICE. Yes. We have copies of it. Without ob- jection, it will be inserted in the record. (The information referred to appears on p. 238.) Mr. PRICE. The Chairman of the Advisory Committee on Reactor Safeguards is scheduled to appear before you later today to discuss the work of the committee in greater detail. 234 INDEMNITY AND REACTOR SAFETY f Mr. Chairman, that concludes our prepared statement. Representative PRICE. Thank you very much, Mr. Price. We ap- preciate your testimony and your presentation here today. Mr. PRICE. Thank you, sir. Representative PRICE. Mr. Graham, do you have any comment to make? Mr. GRAHAM. I have just one, Mr. Chairman. Maybe this sounds like a self-serving declaration in regulatory matters, but I think it may be of interest to your committee that we have tried to pay par- ticular attention to the regulatory process in the sense of considering the hearing examiner as if he were the Federal district court judge, and that the applicants and their attorneys should present their case and have it as well-prepared as if they were going into a court to pre- sent a case. This, we think, has shown some results and improvement in the type of presentation of the evidence. To repeat, sír, I just wanted to make this as a sort of followup of what we have been trying to do in the development of the new proce- dures that have been discussed, here today. All of this is a part of try- ing to separate out the rather close line between when a construction permit ends and when an operating license begins. I just make this, sir, as an observation regarding the follow-on part of actually getting into the court, if you can do that, and the quantum of evidence. The more recent cases, as it seems to us, have been better prepared by the attorneys for the applicants who have had now for perhaps a year a notice of the direction in which we were trying to go. That is all I have, sir. Representative PRICE. We are familiar with what we believe the good job the hearing examiner has done up to this point. The com- mittee would certainly commend him for a job he has been doing. What is the status of the proposed Compliance Division? Mr. FINAN. I can answer that question. We are still in the process of selecting a head for that Division. In the meantime the work in- volved, as the committee probably knows, has been handled and is currently being handled as a part of our Inspection Division. So it is not an area in which work is being neglected. It is a part of this re- cent reorganization of the Commission which has not yet been im- plemented because we have not yet selected the head of this unit. Representative PRICE. I would like to also ask another question in connection with the Reactor Safeguards Committee. In the opinion of the Commission, should the ACRS be provided with a full-time staff of technical experts? Mr. FINAN. I can comment on that, Mr. Chairman. Up to the pres- ent time the working arrangements we have had have involved the technical work which underpins both the work of the Commission and the ACRS and is focused in our Hazards Evaluation Branch. I am sure this was among the issues that the chairman had in mind this morning when he said that the Commission intends to take a fresh look at literally everything we are currently doing in the licensing and reg- ulation area. As of today, the practice has been to get the technical staff work done on a day to day, 365-day-a-year basis, within the staff of the AEC itself, and not to set up two separate hazards evalua- tion staffs. INDEMNITY AND REACTOR SAFETY 235 '', Representative PRICE. We recognize the system under which they are working now. They go out loud about it. I wonder if they might not be more effective if they also had a technical staff of their own. Mr. FINAN. I am afraid, Mr. Price, in view of what the Chairman said this morning, I would be put in the position of prejudging the results of a fresh look at this matter if I attempted to go beyond saying what has been the practice up to the present time. This will be one of the issues that will be looked at. Representative PRICE. I am not saying this on the basis of any com- plaints I have had on the subject. I am just thinking out loud about this and the possible limitations of the effectiveness of the ACRS. Perhaps there is not any. If they have to rely on other people's staffs, there is a possibility that it could be. Mr. FINAN. Both of these groups are serving the Commission. As you know, the ACRS is an advisory committee. Representative PRICE. This is a peculiar part that Congress did in providing a statutory committee. While there is no indication as far as we know that there is any difficulty involved, there is room for such differences when you rely on other people's staffs rather than your own direct staff. Mr. FINAN. I have the impression that we have had nothing here but the closest cooperation. We have had no complaints from ACRS. Representative PRICE. I have not had any complaints, either. Mr. FINAN. We have had, I may say, expressions of concern that I share and are shared elsewhere in the Commission about the current size of the staff in our Hazards Evaluation Branch. There is no doubt but what that will have to be expanded. This has been more of a shar- ing of concern on the part of members of the ACRS and those of us on the Commission staff rather than something you might say was in the nature of a complaint about the arrangement. Representative PRICE. I have heard no complaint on the arrange- ment. I could see a situation where the ACRS might want to under- take an inspection project immediately and might call for technical help from the Commission and they may be busy on another job. Who would get the priority in such a matter? I don't say this has arisen. It is a possibility. Mr. FINAN. I would want to emphasize that at this point I would not want to support or defend this arrangement or contend that it ought to be maintained permanently, because our Chairman this morning made a statement which made it very clear this would have to be among the several matters that would be looked into in connec- tion with another look at our safety and health activity. Representative PRICE. I understand. Are there any further ques- tions? If not, thank you very much. The next witness this afternoon will be Dr. Leslie Silverman, chair- man of the Advisory Committee on Reactor Safeguards, and the vice chairman of that committee, Dr. C. Rogers McCullough. Dr. Silverman, we want to express our appreciation to you for coming down here. We understand that you had to skip another meeting at Rochester to make this appearance, and we are glad to have you, Dr. McCullough. 236 INDEMNITY AND REACTOR SAFETY STATEMENT OF DR. LESLIE SILVERMAN, CHAIRMAN, ADVISORY COMMITTEE ON REACTOR SAFEGUARDS; ACCOMPANIED BY DR. C. ROGERS McCULLOUGH, VICE CHAIRMAN Dr. SILVERMAN. Mr. Chairman, I do not think my distinguished colleague on my left needs any introduction, but perhaps I need a short one since I just took over the chairmanship on December 31 of last year and will be the chairman of ACRS for this calendar year. I am professor of engineering in environmental hygiene and direc- tor of the radiological health program at Harvard University's School of Public Health. I have been active in teaching research and con- sultation in the fields of environmental health control, industrial hygiene, air pollution control, radiation control, for 21 years. The Advisory Committee on Reactor Safeguards appreciates this opportunity to appear before the Joint Committee on Atomic Energy. I am accompanied today by Dr. McCullough, who has been chairman of the ACRS from the inception of the statutory committee in the fall of 1957, until December 31, 1959. Since our last appearance before your committee, the Commission. has appointed two new members, Dr. William K. Ergen, Oak Ridge National Laboratory; and Dr. Theos J. Thompson, Massachusetts Institute of Technology. The total membership of the committee now stands at 14. I be- lieve we are authorized to have 15. Dr. Ergen is a highly competent. reactor physicist and Dr. Thompson an equally competent nuclear engineer. Both have first-hand knowledge of reactors and their oper- ation. These additions have strengthened the committee in its bal- ance of disciplines which we believe to be necessary for adequate safety review. I might interject to say that our committee now includes, as far as we know, all the disciplines that would be necessary in arriving at a full consideration of all the environmental problems associated with site selection and reactor construction and operation. The committee, by its own rules of practice, has adopted a proce- dure which calls for the holding of elections at the end of each calen- dar year to elect a chairman and vice chairman. In December 1959, the committee elected Dr. Leslie Silverman as its chairman. Dr. McCullough has agreed to serve during a brief interim period. as vice chairman of the committee. Dr. Richard L. Doan has been elected vice chairman and will succeed Dr. McCullough shortly. The Committee recognizes that its role is advisory in nature. As you are aware, the Committee is made up of persons holding full-time jobs outside the U.S. Atomic Energy Commission. Dr. McCullough has been spending about half of his time on Committee work during the past year. At this point I would like Dr. McCullough to acquaint you with the Committee's operations during 1959. At the conclusion of his testi- mony I will resume and cover the events since January 1, 1960. Representative PRICE. I might say that the Committee is very familiar with Dr. McCullough's fine services in this area and hope that the fact that you are stepping aside does not mean that you are going to leave this entirely. Dr. McCULLOUGH. I do not plan to, sir. Thank you. INDEMNITY AND REACTOR SAFETY 237 A Mr. Chairman and gentlemen, this review of the operations of the Advisory Committee on Reactor Safeguards will take in the entire year of 1959, even though this overlaps to some extent the testimony by this Committee a year ago. Dr. Silverman will deal with the oper- ations of the committee in 1960. The year 1959 was a busy one for the Advisory Committee on Re- actor Safeguards. The full Committee held 10 meetings during the I may say that some of and considered 26 specific reactor cases. year these cases were reviewed more than once. The Committee also held 15 subcommittee meetings, 4 of which were at the reactor site or at a location where the subcommittee could see actual reactor opera- tions or components. We feel that this is an important feature to keep the Committee familiar with the practical facts in the power reactor operations. During the year 1959 the Dresden nuclear power station construc- tion was completed and the Committee was engaged in the review of the safety aspects of this facility in order to permit the construction permit to be converted into an operating license. Actually the review for this purpose had started in June 1955, when the Committee considered the environmental factors of the site and the basic characteristics of the reactor. The Dresden nuclear power sta- tion was the first large licensed power reactor and, in fact, is the largest nuclear power reactor in the world today. Because it was the first, and because of its large size the review of this reactor posed some problems. It is planned to discuss these prob- lems somewhat later in this presentation. I think it is worth adding, sir, the fact that the Committee is well impressed with the decisions of the hearing examiner in this case. In our opinion, he showed an excellent grasp of the essential issues and arranged the license provisions so that the applicant would not be unreasonably burdened while at the same time his decision pro- tected the public. To resume the submitted testimony, in reviewing the 26 cases, the Committee has written its advice in the form of 30 letters to the Hon- orable John A. McCone, Chairman of the U.S. Atomic Energy Com- mission. (See attached table, p. 238.) Representative PRICE. Without objection, the table and the other material I see there will be included in the record. Dr. McCULLOUGH. Yes, sir. 238 INDEMNITY AND REACTOR SAFETY (The tables referred to follow:) Tabulation of the Advisory Committee on Reactor Safeguards letters by project for the period Jan. 1, 1959, to Apr. 15, 1960 1959 ADVICE RELATING TO ISSUANCE OF CONSTRUCTION PERMITS OR City of Piqua (Piqua, Ohio) EQUIVALENT Dates Jan. 12 May 18 July 25 Jan. 15 Sept. 14 Carolinas-Virginia tube reactor_. Nuclear merchant ship, NS Savannah - Hallam nuclear power facility. Experimental gas-cooled reactor. I Rural Cooperative Power Association (Elk River, Minn.) Heavy water components testing reactor - Saxton reactor.. Pathfinder atomic powerplant.. 111 11 ADVICE RELATING TO ISSUANCE OF OPERATING LICENSES OR I Dec. 14 Mar. 16 July 25 Do. Aug. 17 Sept. 14 Do. f Do. Dec. 14 -{D EQUIVALENT Consolidated Edison Co. (containment) S-1-C (submarine reactor prototype) - CANEL..._ Lockheed radiation effects reactor - Hanford production reactors- Dresden nuclear power station_ SPERT-II reactor.. X-10 annealing - Westinghouse testing reactor (60-megawatts) - Experimental boiling water reactor (100-megawatts) HTRE 3-A__ 1960 I 1 1 1 1 I F 1 ADVICE RELATING TO ISSUANCE OF CONSTRUCTION PERMITS OR EQUIVALENT 1 1 Jan. 12 Mar. 16 Do. Sept. 14 May 18 25 July May 18 Sept. 14 May 18 Oct. 12 July 25 Do. Nov. 14 Do. Nov. 16 1 1 1 1 I I 1 1 1 1 1 T I Plutonium test reactor - Nuclear merchant ship, NS Savannah_ Carolinas-Virginia tube reactor. Pathfinder atomic powerplant- Hallam nuclear power facility. 1 Peach Bottom atomic power station (site) 1 1 I I - 1 1 1 1 I Boiling nuclear superheater (BONUS) power station Experimental low temperature process heat reactor Small size pressurized water reactor. Humboldt Bay powerplant (P.G. & E.) New production reactor.. Big Rock plant (Consumers Power Co.) – I I ADVICE RELATING TO ISSUANCE OF OPERATING LICENSES OR Yankee nuclear power station_ EQUIVALENT Vallecitos boiling water reactor. Hanford power levels.. NASA Plum Brook reactor facility 1 1 1 1 1 1 1 1 1 1 1 1 T 1 1 1 I 1 1 1 1 Feb. 1 Do. Do. Do. Feb. 8 Mar. 14 Do. Do. Do. Do. Do. Do. Feb. 1 Feb. 8 Mar. 14 Do. INDEMNITY AND REACTOR SAFETY 239 : ! A Dr. McCULLOUGH. In addition to these specific letters of advice, the committee keeps the Commission currently informed of the progress on cases under review. The committee has also made the Commission aware of its discussions on the problem of site criteria. There will be further mention of this point later in the testimony. It may be of interest to the Joint Committee on Atomic Energy to learn how the committee has functioned. In general terms, for licensed cases the committee receives its information through the staff of the Atomic Energy Commission in the Division of Licensing and Regulation in the form of hazards summary reports and their amend- ments submitted by the applicant in accordance with the regulations of the Commission. The reports are distributed to the committee members for their study. In major cases a subcommittee is appointed. When there ap- pears to be sufficient information to warrant it, a subcommittee meet- ing is arranged. Representatives of the applicant and members of the Hazards Evaluation Branch, Division of Licensing and Regula- tion, attend and study the case. These meetings are for the purpose of free discussion of the tech- nical problems. These discussions usually result in an identification of the key safety issues. In a number of cases additional informa- tion and study by the applicant is required prior to an appearance before the full committee. In large and complex reactors, only parts of the system are dis- cussed in any one subcommittee meeting. The subcommittee makes a report to the full committee. The Hazards Evaluation Branch con- tinues its study of the project and prepares a report prior to the ACRS meeting, at which the case is to be considered. Subcommittees consist of a relatively few members of the ACRS and, therefore, it is possible to go into more detail than in a full com- mittee meeting. The purpose is to make sure that all of the essential points are considered and to save the full committee's time in the con- sideration of a case. Generally, matters which the subcommittee has considered and dis- missed as solved or considers to be of small importance need not be reconsidered by the full committee. However, it should be clear that the full committee can reopen any aspect of a case and discuss it until satisfied that all safety matters are adequately settled. The subcommittee system has functioned reasonably well in the 15 subcommittee meetings during 1959. The Hazards Evaluation Branch had representatives present during all but one of these meet- ings, the exception being a meeting of the Environmental Subcom- mittee. As Dr. Silverman will tell you, the committee has found the subcommittee system a useful one and plans to continue to utilize this method of saving the time of the full committee. As part of the subcommittee review system, the committee has called upon highly qualified scientists and engineers to assist in its reviews. These men, frequently obtained from the national laboratories, study specific aspects of the various problems and assist the subcommittees in the understanding of these special areas which in some cases require further study and experiment. I would like to interpolate here, sir, to say that the national lab- oratories and the Reactor Development Division, under whose juris- 240 INDEMNITY AND REACTOR SAFETY diction these laboratories come, have been most cooperative in assuring us the services of really competent people in this field. These same experts also attend full committee meetings to guide and assist the committee as a whole. As a general rule, the ACRES believes that an applicant for the operation of a reactor facility should appear at an ACRS meeting at least once before any major step in the licensing procedure is taken; namely, the issuing of a construction permit and the issuing of an operating license. This insures consideration of all essential safety aspects and gives the committee the advantage of the explanation of the design and operating procedures by the applicant. In other words, we hear from the technical people concerned with the design and the people that are going to operate it. We hear from their own mouths just how they approached the problem. We feel this is a very essential part of the procedure. The Dresden reactor deserves additional comment since it was the first large power reactor licensed. In my opinion, there have been procedural fumbles on the part of the Advisory Committee on Re- actor Safeguards in handling the case. We do not feel that we have omitted any essential safety considerations as far as we can determine, and we have been very conscientious in looking at the case, but we do feel that perhaps matters could have gone a little more smoothly. One can make excuses that because it was the first case that we should expect some of these procedural fumbles, but there is no reason why we should not profit from these mistakes. There were four meetings in 1959 of the applicant with the full committee and two subcommittee meetings. The number of meetings with the full committee is perhaps more than necessary, but the mag- nitude of the project does not make this seem too onerous. However, the timing of these meetings was unfortunately; two of them were at a stage where delay of the project was a possibility. Actually, by dint of considerable effort on the part of the committee, the staff of the Commission, and the hearing examiner, the applicant did not experience any delay due to the regulatory procedure. The lesson that can be derived from this experience is projects should be reviewed at a very early stage. All of the essential features should be listed and a plan or schedule made for their consideration at an appropriate later time. This is a checklist, if you please. There should be a review of this plan by a technical staff and a sub- committee of the ACRS. Where information is lacking, the appli- cant should be asked to supply it. Consideration of these parts should be scheduled well in advance in order that the necessary reviews by the ACRS subcommittee and the ACRS as a whole can be carried out in an orderly fashion and without causing delay to the applicant. The ACRS feels that the problem of criteria and standards for power and test reactors is important. In November 1959 the com- mittee recommended to the Commission that a study be made by a full-time technically competent group to determine if there exists. adequate basis for the selection of criteria at this time. It has also recommended that this group judge what additional research is required to produce needed criteria. The committee recog- nizes that the nature of the problem may be such that firm and detailed criteria and standards for all parts of the reactor system may not be INDEMNITY AND REACTOR SAFETY 241 possible at this time and it may be that primary reliance must be placed upon the judgment of a technical group. The existence of sound criteria when they can be set forth will pro- vide a basis for design from the safety point of view which will be a guide for the reactor designer and a standard of acceptance for those performing the safety review. As an added bonus, it should then be possible to assure the safety of a nuclear plant in a manner which can be understood by the layman. This is difficult to bring about if reliance is based entirely on subjective technical judgment. I would like to interpolate--we understand that an ad hoc commit- tee has been formed by the Commission as a steering group to review this proposal of the AČRS. The ACRS has commented on a number of reactor sites and in most cases has been able to agree that the reactor proposed was acceptable for the site selected. The committee has used criteria in giving this advice. So many complex factors have gone into accepting these sites that writing them in the form of criteria was considered an impossible job. There was also reluctance to write these criteria because of the fear they would be misinterpreted and would acquire a sancity beyond their value. We now believe the time has come to put these criteria in writing. It is clear that different reactors require different site criteria. In other words, the reactor system must fit the site. Accordingly, the committee is suggesting that the first written site criteria should be for power reactors. Two reactor types having a large amount of developmental back- ground, the boiling water and the pressurized water reactors, would be the logical first choice for a start. Other types should be added as rapidly as sufficient information is available. It would be easier if we had some substantial amount of experience with the operation of large power reactors; but, as you well know, the only large plant experience is about 22 years' operation of the Shippingport pressured water reactor. There is also a substantial amount of experience with naval reactors. In the case of boiling reactors there have been a long series of tests, the BORAX experiments, and operating experience with the Val- lecitos boiling water reactor and the experimental boiling water re- actor at Argonne National Laboratory. In addition, the Dresden reactor is now operating in the power range. As time goes on, we will acquire rapidly the actual experience with large plants needed as a basis for adequate criteria. In the first place, it seems proper that the design of the reactor system should be in accord with sound, conservative engineering prin- ciples with a careful evaluation of all the features which might result in serious failures. Wherever applicable codes or standards exist, these should be complied with not only in a strict literal sense, but in accord with their spirit as well. There should be at least three mechanical or physical safeguards. against accidents, plus the additional safeguard of thoroughly com- petent and well-trained operating personnel. I would like to add that we consider this a most important feature. 242 INDEMNITY AND REACTOR SAFETY If these principles are preserved, it is all but incredible that there will be a serious accident which will affect the public. It is the opinion of the ACRS that all reactors on which the committee has given favorable advice do, in fact, comply with these specifications and that a serious accident is all but seemingly incredible. At the same time, the committee is well aware that seemingly in- credible accidents do happen, so that one should not be lulled into a feeling of false security. Even though all means of avoiding a serious accident have been provided, some criteria for the specifications of the design should be set in terms which bear a relation to the level of potential damage to which the public is currently exposed in normal, day-to-day activities. In other words, it should be in relative context with the kind of life. that we live and the kind of things we are willing to tolerate in our normal industrial and everyday experience. Representative HOLIFIELD. What is the status of this schedule now, Doctor? Dr. McCULLOUGH. This has been studied by the environmental sub- committee and is going to be considered at our next committee meet- ing. We would like to have, as I will deal with presently, some work to check this out to make sure it does make sense by comparing it with actual sites. The committee is currently proposing such criteria which have the elements of radiation exposure of large numbers of people surround- ing a reactor site to distances up to 20 to 50 miles comparable to the radiation they experience from natural sources, the genetic damage, the possible injury of a small number of people, and the possible seri- ous injury of only a very few people. Let me emphasize again that every precaution would be taken against an accident and that there would be provided means whereby all people would have a reasonable chance to escape any serious injury. The committee has been working on this general concept for over a year now and believes that real progress has been made. Before releasing any specific numbers, or even semiquantitative values, these should be examined in the light of actual reactor designs and sites to make sure that the criteria written accurately express the precautions which the committee feels should be taken and do not inadvertently bar reactors or locations which do adequately protect the health and safety of the public, but which do not happen to fit the kind of words we have written down in our first attempts. Checking out the criteria requires staff work on the part of com- petent people and there has not yet been sufficient manpower available to do this. The committee urges that this be done as soon as possible. Representative HOLIFIELD. Where would you get that manpower and who are you urging, Doctor? Dr. MCCULLOUGH. We give advice to the Commission. We feel that this manpower would have to be provided for by the Commission in some way or another. Dr. SILVERMAN. Mr. Chairman, I am going to take over here and discuss some of the projects which are current and some, because of their very nature, have extended over a period of more than 1 year and obviously Dr. McCullough did have occasion, as chairman, to direct the review of certain of these projects. INDEMNITY AND REACTOR SAFETY 243 I The first one we have listed here is the nuclear merchant ship, NS Savannah. There is a subcommittee on this which has held two meetings, and the whole committee has had three reviews of the project. The committee is awaiting further information so that it may proceed with its review. I might interject here that there are indications in the tables at the rear as to timing on some of the letters of advice. Representative HOLIFIELD. In your report to the AEC on the Savan- nah you state that more consideration should be given to containment than is now planned. Dr. SILVERMAN. Yes, sir. Representative HOLIFIELD. Is this being done? Dr. SILVERMAN. It was our impression that it was, sir. We raised some concern about pressure testing of the vessel and about penetra- tions. Our understanding is that further examination of the problem is being carried out. Representative HOLIFIELD. Where do you get that understanding- from the grapevine or do you get a formal reply to your recommenda- tions? Dr. SILVERMAN. We do not get any formal reply. We wait until the applicant comes in for the next review and ask him what he has done, sir. If it appears that the matter should be followed more closely, then we request staff advice in the matter. Representative HOLIFIELD. If this is an urgent recommendation, it would seem to me it is a serious recommendation and it would be worthy of a reply as to what the intent of the Commission is on this subject. Dr. SILVERMAN. There is a letter pending, Mr. Holifield, which has not been answered. That is as far as I can carry it. Representative HOLIFIELD. In other words, a letter pending from you to the Commission? Dr. SILVERMAN. That is right. Representative HOLIFIELD. From which you have not received an answer. Dr. SILVERMAN. That is correct. The next project is the Humboldt Bay powerplant, Pacific Gas & Electric Co. A subcommittee has reviewed this project twice and the applicant has appeared before the whole committee three times. I might interject that I am chairman of the subcommittee in the P.G. & E. case. The ACRS concluded that on the basis of informa- tion submitted, and the study by the staff and the ACRS, a reactor of the proposed general type-boiling water-could be constructed at the proposed site if housed in a pressure-vessel-type containment. The applicant's proposal, however, included a new concept of con- tainment called pressure suppression. The committee is not yet con- vinced that this system will offer the same amount of protection to the public that a pressure vessel would. Representative HOLIFIELD. They have had some tests on this pres- sure suppression, as I understand it. Dr. SILVERMAN. They have tested the principle on a small scale. Representative HOLIFIELD. From their extrapolation figures, they believe that this would offer an element of protection strong enough, 244 INDEMNITY AND REACTOR SAFETY as I understand it, to make less necessary a very expensive contain- ment vessel. Is that true? Is that their contention? Dr. SILVERMAN. It is their contention; that is right, sir. Representative HOLIFIELD. You do not accept that contention? Dr. SILVERMAN. No. I believe we have very valid technical reasons for making this exception. We feel that the tests that have been con- ducted have been on such a scale as not to permit the degree of extra- polation that is proposed. We also feel that the tests should have been conducted in order to get adequate measurements of the degree of condensation, because the design of the pressure suppression chamber will call for proper evaluation of strengths of materials that would be involved. We believe the concept is good and if it is successful by extended tests that would satisfy the committee, it would be a real advance in the art. We believe if this were actually proved that it would repre- sent a savings in cost and would also be more effective containment. Because of this, and because of the precedent it would establish, we feel that as much technical qualification for such a proposal should be provided to assure the committee and all the consultants we have had that the margin of safety is acceptable. This is the reason we are asking for a test of a scale which would be comparable to the reactor and to have assurance that these tests are conducted at pressures and with steam under the same conditions as might occur under the maximum credible accident they propose. Representative HOLIFIELD. Would this be an expensive test? Dr. SILVERMAN. I have heard figures, Mr. Holifield, that would in- dicate that this test might cost them $100,000. But the saving on containment for this reactor and subsequent ones would justify that type of expenditure in our opinion. I am not prepared to back up this $100,000 estimate. This is the contention of the Pacific Gas & Elec- tric Co. Representative HOLIFIELD. I had a briefing on this theory of pres- sure suppression. It seemed to me quite an attractive possibility. I certainly would not want to pass technical judgment on it. If it would work out, it would cut down this tremendous cost of these con- tainment vessels considerable. At the same time, I would want the words that I speak not to cause the ACRS in any way to relax their ideas on the safety in this matter because too much is at stake. I feel that this safety factor is of tre- mendous importance. I feel that one reactor accident or incident, if you want to call it that, in this country that would contaminate a large area and injure a considerable number of people, would set back this industry for 25 or maybe 50 years. Therefore, I would not want anything I said to indicate that I thought the economics of the situation should preclude as much cer- tainty as possible on the safety aspect of it. Dr. SILVERMAN. May I add something here, Mr. Holifield? We think there have been some statements made with regard to cost of containment that have not been placed in the right perspective. As far as we have been able to determine by evaluation of the projects, the containment vessel itself will run from 5 to 15 percent of the cost of the project. INDEMNITY AND REACTOR SAFETY 245 We feel this is a small price to pay for the safety of the public. For that reason, the saving on the so-called pressure suppression system is not as large a figure percentagewise, as one might anticipate, unless you look at the dollars themselves. However, there are some other features of it that make safety even better if it works, and that is that you contain all the fission products below grade and with adequate earth shielding, which is not the case of a pressure vessel above ground. But that always rests on the basis that we must be satisfied that the condensation of all steam or most of the steam that would raise the pressure in the surrounding chamber would be adequate. Representative HOLIFIELD. And that your containment vessel would still contain the residual force after it came out of the water. Dr. SILVERMAN. That is right. This system, if you have been briefed on it there is no need for me to go on further, involves a small refueling building above it which is not very pressure tight. I would also like to comment on the fact that all other types of containment vessels are tested full scale. This is part of the thinking of members of the committee. This one was not proposed to be tested full scale and it is a question of whether or not it should be. You recognize that all of the containment vessels are raised to 14 times design pressure to check for leaks and integrity. This is where the differences lie in satisfying the committee members. Representative HOLIFIELD. There is no way of accurately setting up a scale for extrapolation by a small experiment. Dr. SILVERMAN. We understand there is a proposed test which the Pacific Gas & Electric is now conducting. The arrangement of the pressure suppression tubes is on a circular basis, the test involves taking a segment which represents one-forty-eighth of the total cir- cumference, that is a pretty small piece of pie. It is full scale with regard to the 14-inch pipe and with the steam pressure at 1,250 p.s.l. and with the proposed release flow rates. Condensation studies will be carried out on this scale only. We understand that P.G.&E. is proceeding with this. This still does not satisfy the question of full scale test on the full unit. This has to be ironed out. May I proceed? Representative HOLIFIELD (presiding). Yes. Dr. SILVERMAN. The next case is Consolidated Edison Co., Indian Point plant. This reactor project was reviewed by the ACRS and a favorable report rendered. A construction permit has been issued. During the 12th and 13th meetings of the ACRS the containment for this reactor was reviewed and found good. The committee re- cently received additional information which it is studying. Enrico Fermi Atomic powerplant, Power Reactor Development Co: The ACRS in 1959 resumed its study of this reactor system. Since March 1959 there have been two presentations to the full ACRS and two subcommittee meetings. Additional subcommittee meetings are planned as well as reviews by the whole committee. Representative HOLIFIELD. When is that plant supposed to go on power? Dr. SILVERMAN. The project has been delayed actually by some of their own planning. It is my impression it is to come in for an op- erating permit early next year. I do not know their present schedule 58511-60-pt. 2——————9 246 INDEMNITY AND REACTOR SAFETY accurately. They have changed their plans and plan to operate at a low power level for an extended period. The timing of full power operation I cannot give you, sir. Dresden Nuclear Power Station, Commonwealth Edison Co.: Ac- cording to the order by the hearing examiner, the reactor must be reviewed after it has attained half power and before going to full power. The applicant unfortunately experienced trouble with the control rod system. Information on half-power operation and on the experience with the modified control system is expected very shortly. The committee has expressed the opinion that on the basis of the information avail- able to it now there is no danger in permitting the reactor to operate while the data are being studied. Representative HOLIFIELD. We understand that this plant went on the line last week. Dr. SILVERMAN. At a lower power level. Representative HOLIFIELD. About 60 megawatts, and it is now oper- ating, I understand, at 90 megawatts, which is half of its planned power, I believe. Dr. SILVERMAN. Yes. They are to come in for a hearing next week, as a matter of fact, in regard to going above half power. Representative HOLIFIELD. From the reports, it is running very smoothly and they are experiencing no trouble with it at this time. Mr. Ramey? Mr. RAMEY. Do you think that is sufficient time to come in for a hearing based on its operations at the present time? Dr. SILVERMAN. It was the intention of the committee that they would come in at this time with all of their operating information and their experience to date. I think it went critical in October some time. Then they had to take it down. They had some control rod problems, as you know. To answer your question specifically, I think on the basis of boiling water experience, which is included in their philosophy of experience, this is a reasonable time to decide to go up in power level. Representative HOLIFIELD. Was the ACRS invited to see any of the preliminary runs on this? Dr. SILVERMAN. No, sir; we were not. Representative HOLIFIELD. Would you ordinarily go out for the first trial runs of a reactor of this type? Dr. SILVERMAN. We do not believe that this is called for. We do like to make an inspection of the facility and we did this last Febru- ary. At that time it was 90 percent completed. We looked over the containment, the site, the generator building, and so on. Our visit actually is not an inspection. There is an AEC inspection division which follows up on such matters and often reports to us. Representative HOLIFIELD. I suppose the instrumentation record- ing will tell you all you need to know on this when you see it after it is test run, will it not? Dr. SILVERMAN. If the instrumentation recordings are reliable at the locations as proposed and they can report back on their ion cham- ber results flux and the power level readings. We are interested in determining the progress they have made and it is our intention on the day after this hearing to review the case with the staff. INDEMNITY AND REACTOR SAFETY 247 Mr. RAMEY. Did the ACRS call attention to possible design prob- lems with the Dresden control rods when you first considered it, either informally or formally? Dr. SILVERMAN. We have raised some concern about control rod design and operation. We wrote a letter on May 18, 1959, which describes some of this concern. This raised some concern even though the rods had been tested at San Jose, according to the manufacturer, several thousand times. As a result of some changes that were incorporated in the system be-- tween San Jose and Dresden-that is, the two tests were not exactly comparable there were some difficulties. We understand they are ironed out. Representative HOLIFIELD. Proceed, sir. Dr. SILVERMAN. The next item is the experimental low-pressure heat reactor. The first site presented to the committee for this reactor, Point Loma, Calif., was considered unsuitable from a safety point of view by the committee. Another site is under consideration. Representative HOLIFIELD. When was the ACRS brought into that problem? Dr. SILVERMAN. We have the dates here. The first time we were brought into it was when we discussed with the chairman and the Commission the need for us (the ACRS) to know early about these sites and that was January 28, 1960. Immediately after that meeting, General Luedecke asked if we could be of assistance. We reviewed the case at our committee meeting in March. These are the timings. There was a news release apparently indicating Point Loma in October of last year. On January 28 we were asked by General Luedecke to try to provide ACRS guidance by February 8, as there were some Department of the Interior negotiations pending. On February 3 we received the Sargent and Lundy report. On February 6 I made the visit to Point Loma. I happened to be in California on other business and made it a point to go down to San Diego and inspect the site. On March 10 to 12 the full committee. considered Point Loma. On March 14 we sent a letter of advice to Mr. McCone. Representative HOLIFIELD. What were the important factors in dis- carding this site, or recommending against it? Dr. SILVERMAN. There were a number. The first thing I would start with would be the reactor plant itself, which is somewhat experi- mental in nature. It is described as an experimental low-pressure heat reactor. They proposed to do some changing in the core in sub- sequent experiments. Representative HOLIFIELD. Wasn't that by its own nature a fairly safe type of reactor, low-pressure and so on? Dr. SILVERMAN. Remember, they were attempting to use low-cost materials in the loops. Carbon steel loops. The next reason that we had was with regard to the limited distance available for exclusion. There was concern about the very poor meteorology, the fact that in- versions come down to 400 feet. It is not just the inversions we wor- ried about, but their persistence in this area. This is an area, as you well know, which is subject to the same kind of meteorology as Los Angeles, and you may have prolonged spells 248 INDEMNITY AND REACTOR SAFETY of inversion holding down contaminants for a long time. This is not necessarily related to accidents alone, but might obviously make an accident, if one did occur, much more severe. There is also the question of the difficulty in meeting part 20 be- cause of such lack of dilution. Another factor we felt was very im- portant is the fact that the ocean currents are very low in turbulence and stagnant at this site. It has been difficult to get sewage to dis- charge from the Point. Another factor which we felt should be weighed into this consider- ation was the high population density of San Diego within 3 to 5 miles. We also were concerned with a mobile population that I would not approve of for a reactor of this nature; namely, the visitors to the national monument at Cabrillo, which amount to a million a year. Representative HOLIFIELD. That was very near this point? Dr. SILVERMAN. It is within a quarter of a mile. It depends on whether you do it as the crow flies or walk up the hill. It is very close and there is only a single road for evacuating the people. The personnel that would have to be evacuated, as you well know, are tourists who, while they may have cars, are not necessarily the ones who would panic the least under such a circumstance. This was all part of our decision. That is not necessarily tech- nical. It is somewhat policy, you might say, but it is nevertheless a part of the evaluation. Representative HOLIFIELD. I understand that there was a strong objection by the Naval Reactor Branch people for this location also. Dr. SILVERMAN. We did not let that enter into our considerations. There was no word passed to us, although we had been informed previously that the Navy had talked about berthing nuclear subs nearby on the other side. We did not evaluate this site on the basis of what the Navy might have said. Representative HOLIFIELD. The movement of water in San Diego Harbor is, comparatively speaking, sluggish? Dr. SILVERMAN. That is right. Representative HOLIFIELD. In case there was any involuntary dis- charge of reactor material into the harbor it would not be dispersed into the sea as rapidly as it should be? Dr. SILVERMAN. The experience with sewage, and there was an extended study of that particular area in 1952, has been very pessi- mistic. They have had to put long outfall pipes to keep this sewage from contaminating beaches. We understand that this is always a problem. Dr. McCULLOUGH. The outflow had to go out to 10,000 feet to get it sufficiently far away from the beach. This is because the surface currents in that area are toward the beach. Representative HOLIFIELD. It is approximately 2 miles out to sea? Dr. McCULLOUGH. That is right. Representative HOLIFIELD. What about the timing of bringing you into this? Wouldn't a great deal of time have been saved if you had been brought into this matter earlier? You have pointed out many of these patently observable factors and you could have done that if you had been brought into the consideration of it earlier. INDEMNITY AND REACTOR SAFETY 249 Dr. SILVERMAN. I can only support the need to bring us in as early as possible to avoid embarrassment to the applicant, to avoid undue expense, and to avoid problems that may be more political in nature that may come up subsequently. I can only emphasize the great need we feel to be brought in as early as possible. There are some contractual considerations that make this difficult, as you may well understand. We feel as a com- mittee we can render advice as early as possible and that the question of disclosure for such cases can be handled properly by the Commission. Mr. RAMEY. Sometimes your advice might be informal or of a preliminary nature before it actually comes up as a formal matter? Dr. SILVERMAN. That is correct. We have been asked to give in- formal opinions on many occasions. I think when we met with the Commission in January I emphasized this point to Mr. McCone and the other members; that we would like to be brought in as early as possible. Let me say that I believe that the Commission recognizes this and is anxious to see that we are informed as early as possible. Representative HOLIFIELD. Would you be responsive to a request from an applicant for a site, or would your authority go back to the Commission? Dr. SILVERMAN. We are not supposed to engage in any contacts with applicants. All the requests must come through the Commission. Representative HOLIFIELD. I think that is the proper procedure, incidentally. Dr. SILVERMAN. Yes, sir. Representative HOLIFIELD. It does mean that your timetable is set by the Commission. Dr. SILVERMAN. It is. Representative HOLIFIELD. And as to your activity. Dr. SILVERMAN. We have tried to cooperate to the fullest extent. I can speak with regard to this in more than one case where we have upset our own personal timetables to satisfy these needs which we feel are very fundamental in regard to the development of these programs. We came down for a review of the California situation as soon as we could. I had difficulty getting to Washington because of the snow- storms in early March. I think we gave Mr. McCone promptly the advice that he requested in regard to these problems. Representative HOLIFIELD. Proceed. Dr. SILVERMAN. The next case that I am going to mention is the small-size pressurized water reactor. A site location at Jamestown, N.Y., was presented to the committee. The ACRS considered this proposal unsuitable from a safety point of view. Representative HOLIFIELD. That was discussed this morning, so you may go right ahead. Dr. SILVERMAN. Yes, sir. The next item is location of large power reactors in California. At the request of the Commission, a study was made and a special meet- ing of the full ACRS was convened in March 1960 to consider the siting of large power reactors in the State of California. The infor- mation which was available was reviewed and advice thereon was given to the Commission. 250 INDEMNITY AND REACTOR SAFETY Representative HOLIFIELD. Do you feel the factor of temperature inversion, particularly in southern California, is going to be a bar to the installing of large reactors anywhere south of that part or not? Dr. SILVERMAN. Not completely, if consideration is given to the need for holdup of contaminants and releasing them at desirable periods. This has been proposed by one of the reactor constructors. They have agreed that they would do substantially what is being done for the Savannah and the NASA reactor at Sandusky. All fission gases that would normally be released to a stack will not be released but will be monitored and held back if weather conditions are pessi- mistic. This is the only way you can compensate for the differences in meteorology. Representative HOLIFIELD. Would this involve a great expense in the way of compounding these gases? Dr. SILVERMAN. We were led to believe that this was not going to be an additional expense that could not be conceived of at the time in the price that was proposed for the reactor. Dr. McCULLOUGH. May I add, according to our meteorological ex- perts, the whole southern California coast from about Santa Barbara down to the Mexican border, and perhaps extending a little north of Santa Barbara, is subject to this persistent inversion problem. We have focused on it to a great extent at Point Loma. Point Loma seems to be about the worst part. There are local variations as you go up and down this coast. This is troublesome if you are going to put pollutants into the air because they do not get thoroughly mixed. Through further study you find that there are local variations, al- though this general statement is true, so if you select a place which has one of the more favorable localized situations and couple it with a lack of a high population density, I think there may be some sites in that area which are suitable from a safety point of view. This needs to be studied in more detail. Representative HOLIFIELD. This is quite important. We have Los Angeles Light & Power which is considering a large plant. There is a letter of intent out now between Southern California Edison Co. and Westinghouse for another large plant. If this factor has not been explored thoroughly, it should be explored thoroughly as a guidance to these people because they are planning, as you know, to invest, I think in one case, $70 million and in another case I am not quite aware of how much. It is a pretty important subject. Dr. McCULLOUGH. I think so. Representative HOLIFIELD. If you get away from the seacoast and get behind the mountains, you do not have the temperature inversion, but you also have the problem of lack of water in the desert areas. You get away from temperature inversion, but then you are faced with the lack of water. Dr. SILVERMAN. We did review all these problems, including the earthquake problem and what additional costs might be necessary there. We were reassured there was not anything that would not be counted in their cost estimate. We recognize the difficulties and all the factors that must be considered. Representative HOLIFIELD. You have referred a full report on this to the Commission? 4 INDEMNITY AND REACTOR SAFETY 251 Dr. SILVERMAN. Yes, sir; we have. We were asked to consider it on, I would say, a short notice, but I believe the Commission did not have too much advance information either. We agreed to review it. This was the case where I said we had difficulty getting members to Washington because of the March storms. May I proceed? Representative HOLIFIELD. At this point, I think Mr. Toll has some questions to ask you. Mr. TOLL. Dr. Silverman, this is not directly related to reactors, but it is to radiation safety. I believe you made a trip out to inspect the uranium mills in the West. I do not know how you manage to do all these activities, but this was to inspect the safety of some of these mills. I wonder how you found the conditions there, and whether there were excessive levels of radiation in the mills? Dr. SILVERMAN. I do not know just quite how to answer this, Mr. Toll. I think I am now talking in a different position than as chair- man of ACRS. I am sure you appreciate that. Mr. TOLL. Yes; I do. Dr. SILVERMAN. Under this situation I am a consultant to the Di- vision of Licensing and Regulation on the problem of air contami- nation in the mills. At the same time I went to Point Loma-it was on the same trip-and on the return I stopped in Colorado. I was asked to look at the two mills out there. Actually I saw three that have varying degrees of air contamination. The problem is not one of radiation, I can assure you. This is mostly insoluble uranium with small amounts of radium. The prob- lem is, as we regard insoluble uranium and not the radium problem of the water which is in the Animas River. The problem is one of chemical toxicity of insoluble and soluble uranium and the levels that are set, even though on a microcurie basis, actually are on the basis of chemical toxicity of uranium. To answer your question basically, I would say that some of the mills I saw were in excellent condition. I saw no reason why there was any concern. They had excellent ventilation systems, excellent. air cleaning for their operations, and in my opinion there was no significant evidence of overexposure of personnel. The radiation values of the film badge techniques would indicate that the film badge would have to stay in the storage hopper for some length of time in order to get enough exposure to measure. On the other hand, there were some others that, by our present part 20 regulations, are not meeting the standard. I am not trying to pin the tail on any particular donkeys here. I do not think this is the right place to do it. Mr. TOLL. Without taking any more time of the committee at this time, I think at Mr. Holifield's suggestion, we have asked for a re- port on the uranium mills from the AEC and it is due to the com- mittee fairly soon. We will probably get more information at that time. While you were here, I thought it might be helpful to get your comments. Dr. SILVERMAN. I did submit a report to the Commission. As a matter of fact, we plan to review the situation Friday because, at my 252 INDEMNITY AND REACTOR SAFETY suggestion, some sampling was done by Los Alamos in several of the mills on that matter. Representative HOLIFIELD. Proceed, please. Dr. SILVERMAN. We have some general comments here, Mr. Chairman. The committee considers that reactors under design and construc- tion after having been granted a construction permit are also under study. Any information available as addenda to the hazards sum- mary report or from briefings is highly desirable in evaluating these complicated power sources. Their construction requires an appreciable amount of time and if new information is made available promptly, there should be ade- quate time to obtain a satisfactory review of various parts of the system. The committee is pleased to note that the record in this country so far as radiation accidents with reactors are concerned continues to be extremely good. We hope that this record will be maintained. The committee believes that it is important that it receive promptly all information relating to radiation accidents as they occur. Some minor accidents have occurred. There are obvious lessons which can be learned from these which are related to the prevention of their recurrence. Perhaps more important, these experiences help us to interpret the possible consequences of accidents of a more serious nature. In addition to the information about accidents, the ACRS believes: that it is important that it be currently informed in all matters relat- ing to reactor safety, such as reactor safety research, new techniques, materials and component testing, operator training, et cetera. I might interject at this point that the staff has been very coopera- tive in supplying us with information, the reactor safety studies that are being made, and other programs that are being conducted with Commission support. Representative HOLIFIELD. Do the AEC and its private contractors keep you pretty well informed currently, or is there a lag or failure? Dr. SILVERMAN. I would not say there is any failure. I think the lag that is present depends on the accumulation of enough informa- tion to present a comprehensive story. We have tried to keep abreast of the reactor fuse program and the containment studies. We re- ceive reports continuously. However, some of the accidents have oc- curred some time before they filter down to us in the way of reporting. I think this is because of more than one feature. The Commission does not always get the full story right away, either. To continue, early information relating to proposed reactor sites will be most useful in the selection of the most suitable site and at the same time expedite its selection. I do not think I have to reemphasize this, but I think we have already covered the importance of early information in regard to the proposed sites. The committee has always considered that it is important for its members to keep abreast of developments in the industry by attend- ance at technical meetings, reactor safety symposia, membership on standards committees, et cetera. In addition, members of the ACRS have found that visits to reactor installations have been helpful to INDEMNITY AND REACTOR SAFETY 253 the understanding of the problems which confront the reactor de- signer and operator. I might say that we try at least once a year to visit some of the installations that are in progress in conjunction with the Hazards Evaluation Branch. Some of our subcommittee meetings are held at the site. The Yankee Subcommittee on one occasion met at the site. The Dresden site was visited by the full committee. The PRDC site was visited by the full committee. Any number of others have been reviewed. The staff of the ACRS office is now composed of two technical ad- ministrative men and two nontechnical secretaries. The two technical administrative personnel are here, Mr. Fraley, executive assistant, and Mr. Graham, the executive secretary. In addition, when needed, the Commission provides the committee with legal counsel in order to furnish guidance in the regulatory formalities of the review process. Attached to this report is a summary of our informational letters to the chairman covering the various letters of advice that we have supplied. Representative HOLIFIELD. Dr. Silverman, as I gather in looking at these visits that you have made, and this additional material here, there is a pretty heavy burden on the membership. Dr. SILVERMAN. May I make a few comments here about this? Representative HOLIFIELD. Yes. I would like you to go into this subject rather fully. Tell us the extent of your burden and if you feel there is a necessity for lightening that burden, how the situation can be improved, and whether you need additional consultants or addi- tional staff members. Dr. SILVERMAN. First let me just comment a little bit on advisory committees. I happen to be in the unique position of serving on the Department of Defense Advisory Committee on Medical Sciences and on the Sur- geon General, Public Health Service, Advisory Committee on Com- munity Air Pollution. I can assure you that the activities of the ACRS, in my opinion, are perhaps the most laudatory, not because I am chairman, but because of the fact that we render advice without any restraint or inhibition by the agencies involved. Representative HOLIFIELD. I hope it continues that way. Dr. SILVERMAN. I am not being critical of the other agencies, but the Department of Defense committee I am on meets twice a year. The Public Health Service committee I am on sometimes does not meet in a year. Some of the actions that those committees take are over a prolonged period. I think I can compliment my colleagues for their industriousness and effort. We get out our reports almost immediately after reviews of projects. There is very little time lost between the time we write a letter and the time Mr. McCone receives it. In terms of the burden, we recognize that our colleagues are full time in other activities, that they cannot spend a major portion of their time on these projects, with the exception of Dr. McCullough, who has been extremely industrious in this regard. He has carried 254 INDEMNITY AND REACTOR SAFETY the ball for the committee for a long time and has done a very thorough job. We feel that the subcommittee system which we have adopted re- lieves the burden on the committe as a whole. I personally do not feel that the burden that we now have is any greater in this year than it was last year, and I have been on the committee since 1958. I served as a consultant to the committee earlier. We have begged, borrowed, or stolen consultation, you might say, by help from the na- tional laboratories where many of the competent investigators are and where much of the experience lies. We have used these people often. We have used two outside consultants on conventional power plant components or on special problems. There are many occasions. when we could use more help and we would like to get this help if it is possible. We do not want to be in conflict with other hazards evaluations of the Commission. We recognize that the Hazards Evaluations Branch has quite a burden. In many respects they are undermanned. We recognize that the Inspection Division is undermanned in terms of keeping up with the problem. This is not intended to be critical, but we would feel that our burden might be lightened somewhat in terms of having more staff aid. We would also like to point out that we have switched the com- mittee from a monthly meeting basis to a bimonthly meeting basis. This has reduced the load on the full committee. The actual time invested in other subcommittee meetings therefore can be distributed as a load to the rest of the committee. I can't give you an exact figure, but we have something like 20 subcommittees with duplicating memberships in a sense on parts of the committees. We put one en- vironmental man, one reactor physicist, and one reactor operator ex- perienced man on the committee. Sometimes there may be two or three. In some of the cases they are more complex, such as the environmental subcommittee which has the largest membership, hav- ing seven members. Representative HOLIFIELD. How do you spread your 2 technical men and 2 nontechnical secretaries through 20 subcommittees ? Mr. RAMEY. Perhaps he does it in the same way the joint commit- tee does their staff. Dr. SILVERMAN. I might say that these two capable men have been very versatile. We have to assign one of them at a time to a sub- committee. They also have to keep aware of all the documents that come in and get them out to the committee with some comments. Representative HOLIFIELD. Then your answer is that they work concurrently with the different subcommittees ? Dr. SILVERMAN. That is right. They have to be versatile. Representative HOLIFIELD. Very much as Mr. Ramey and our staff do. Dr. SILVERMAN. We do get a great deal of support from the Haz- ards Evaluation Branch, and they submit to us their hazard sum- mary report reviews. We have set up a schedule when these come in and we think they are doing a very competent job. They are prob- ably as hard pressed as the committee is in many respects. The burden that the committee bears actually is in number of power and test reactor projects. We don't have to worry about the little fellows any more. The staff handles those completely. We are only con- INDEMNITY AND REACTOR SAFETY 255 cerned with 10 megawatts and above for power and test reactors. So this load that we may have may increase to the point where in the future something different may apply. But at the moment I per- sonally don't feel that the burden can not be borne by our present mode of operation. We would be helped by more staff aid. Representative HOLIFIELD. Refresh my mind how you are paid. Are you paid on a per diem basis plus your travel and hotel expenses? Dr. SILVERMAN. We are paid on the same $12 per day of any AEC employee as far as per diem goes. Representative HOLIFIELD. That is what the Congressmen are allowed, too. Dr. SILVERMAN. Yes, sir. We are actually consultants in the sense that we are appointees and are paid per day of service, whether it be here or at our home facility. Representative HOLIFIELD. Are you allowed to hire additional con- sultants other than your regular staff? Dr. SILVERMAN. That has been a problem. Many of our consult- ants are unpaid. We have at the present time on our roster I believe two paid consultants on a per diem basis. That conforms to all AEC regulations. In fact, they are in exactly the same position I am when I am a consultant to the D.L. & R. on the mill and uranium cases. This is all on a per diem basis. Dr. McCULLOUGH. But the other consultants we get from the na- tional lab, we are just freeloading on them. Dr. SILVERMAN. Yes, sir. They are unpaid consultants. Representative HOLIFIELD. What happens in the case of their travel time? Dr. SILVERMAN. This is freeloading, too, because the National Lab- oratories have agreed to supply the travel for them to come and give us assistance. Mr. RAMEY. That probably makes sense, rather than to separately negotiate with them and go through all the redtape and everything. The committee borrows national lab people in the same way. Dr. SILVERMAN. We don't see any objection to this as long as the Director of the National Laboratory believes it is a contribution to the activities of the Commission. It seems to me this is part of their obligation. Representative HOLIFIELD. The act allows the Atomic Energy Com- mission to call on other agencies in this matter. Dr. SILVERMAN. I was in the same position before I became a mem- ber of ACRS. Harvard has a contract with the Commission on the problem of air and gas cleaning, and I was freeloaded on for some time before I became part of the ACRS. Representative HOLIFIELD. What is there about making a schedule for the review of a reactor? Dr. SILVERMAN. Dr. McCullough has given this more thought than I have. I think there are two kinds of schedules. Perhaps he had better explain the section he referred to in his text. Dr. MCCULLOUGH. In the text I was talking about, if you take a large power reactor, I think it is proper to sit down and make an out- line of the features of the reactor which you just look at to assure yourself that the design is adequate for what they are proposing. So you make a technical outline of pressure vessel, control system, waste-disposal container, and the whole gamut of the features. Then 256 INDEMNITY AND REACTOR SAFETY you try to assign a time for subcommittee meeting in general terms when you will consider this. You look to see if the information is currently available. Sometimes it is not. You try to match your program of consideration of subcommittee meetings and consultant considerations to that outline. So you have a time matching and you have a manpower matching for the outline. This is what I was re- ferring to. I think this is very important to do on all big cases. Representative HOLIFIELD. But it is not important for small re- actors? Dr. McCULLOUGH. No. Dr. SILVERMAN. The only thing I was going to add to this is that there is another schedule which the staff of the Commission has al- ready proposed to you, and that is the timing with regard to reviews. in relation to the license hearings. That is not the type of schedule we are concerned with in safety reviews. Representative HOLIFIELD. Do you thing it is the ACRS's business to write criteria on site selection or not? Dr. SILVERMAN. We believe it is part of our obligation to give as- sistance to the Commission in developing site criteria. We have un- dertaken to work with the Commission on this problem of developing site criteria. Many of these problems may be reduced to certain for- mulations, but there are a few complex things, as we have tried to indicate to you, that are not ever going to be reduced to a simple formula. Representative HOLIFIELD. In any event each reactor would have certain features that would have to be reviewed on, you might say, a new basis because of the advance of the art; is that not true? Dr. SILVERMAN. I think as developments come along, for example, the pressure suppression system we talked about, this is an advance. You have to look at your containment criteria again. Somebody de- velops a new type of control mechanism. Then you have to revise your control rod criteria. I think you can set down certain values which, on the basis of present understanding and the development of the art, would give you a degree of safety which we feel must be provided by exclusion by population density. You know population densities are not something you can control. They keep moving in. The only con- trol you have is up to the exclusion distances, and that is it. This is something that then may have to call for some forecasting, you might say. Representative HOLIFIELD. We have seen this occur in the location of practically every municipal airport. They locate it out in an unpopu- lated area, and the first thing you know they have subdivided the land close to the airport and the next thing is a complaint in regard to the noise that the airplanes make. Dr. SILVERMAN. That is right. Representative HOLIFIELD. So I suppose we are up against the same thing on these reactors. That makes your site selection all the more important, and it makes this exclusion area all the more important. Dr. SILVERMAN. It makes it important that you have control over the exclusion area. This is one of the problems that has come up in some of the recent cases where the control could not be provided. Representative HOLIFIELD. Unless there are some further questions, or if you have something further to offer, I want to say we appreciate your appearance. INDEMNITY AND REACTOR SAFETY 257 Dr. SILVERMAN. The only thing I want to comment on is the question of standards. There seems to be a great deal of interest among the pri- vate industry concerned with nuclear progress in standards. We want to assist all we can in developing standards. Standards, as you know, are based on experience. Reactor experience in power reactors of large size is minimal. So that the efforts toward standardization, the efforts to try to arrive at some standard criteria values as a means of getting people off the hook in some respects are a little premature. But we certainly want to support the development of standards. Many of the standards now relate to nonnuclear situations and are being extrapolated to nuclear conditions where radiation damage and so on have not been completely evaluated. Mr. RAMEY. Dr. McCullough served on our steering committee in getting up the hearings that we hope to have in the latter part of May on this thing. You have been very helpful to us. Dr. McCULLOUGH. Thank you. Representative HOLIFIELD. In concluding this particular part of the hearings on the part of your testimony, I think I speak the sentiments of the full committee that we want to commend you folks for the fine job that you are doing and the careful job you are doing and the fact that you are so concerned with the safety in this field. We realize the economic pressures and other things are always in existence in a sit- uation like this, where we are dealing with this type of very danger- ous material. We hope that you will maintain your same fine record of looking at this from the safety standpoint, and let other people worry about the economic standpoint. In other words, don't let the economic standpoint cause you to adulterate your own convictions in regard to safety. As I said, if we have one large-scale incident in this country, we might just as well wash out the whole atomic power program. You know that this committee amended the law to put your committee in a statutory position. Dr. SILVERMAN. Yes, sir. Representative HOLIFIELD. We did that because we wanted it thor- oughly understood that we realized the importance of your Committee, and we wanted you to have statutory obligations as well as obligations in an administrative way to the agency for which you work. We want you to maintain your independence. If the time comes when this burden of work is greater than the staff that you are allowed, I hope you will make it known to this committee. We are not asking you to build an empire or anything like that, but we do recognize, as Chair- man McCone has said, that this problem is getting larger and larger, and it is going to require more and more time. We certainly want this particular phase of it not to suffer when we are putting in hun- dreds of millions of dollars into research of every kind. We are not averse to the comparatively small expense that is involved in protect- ing the people of the United States from what could be a tremendous catastrophe if it is not looked after carefully. Dr. SILVERMAN. We certainly appreciate your commendation, Mr. Holifield, and we will continue to serve as we have in the past. If we do have cause for more assistance, we will make our request known. Representative HOLIFIELD. Thank you, sir. You are excused. Dr. McCULLOUGH. Thank you. 258 : INDEMNITY AND REACTOR SAFETY Representative HOLIFIELD. The Chair understands that Mr. Harry McPherson, representing Senator Johnson, and Mr. Richard Yar- borough, representing Senator Yarborough, are in the audience. Will you please come forward and identify yourselves? Mr. MCPHERSON. I am Harry McPherson. Mr. YARBOROUGH. I am Richard Yarborough, representing Senator Yarborough. Representative HOLIFIELD. Do you gentlemen have a statement to make? STATEMENT OF HON. LYNDON B. JOHNSON, A U.S. SENATOR FROM THE STATE OF TEXAS, READ BY HARRY MCPHERSON Mr. MCPHERSON. Very brief. I am Harry McPherson, represent- ing Senator Lyndon Johnson. I want to express Senator Johnson's interest and concern in the case of Mr. Jackson McVey of Houston, Tex. As your distinguished committee knows, Mr. McVey and his coworkers were exposed 3 years ago to radioactive particles from a pellet of iridium. Since that time Mr. McVey has suffered pain, economic loss, and psychological fear. They have carried burdens that no American family had before. They have want and anxiety. They will continue to know, and with all of us who are concerned with public safety in the new atomic industry. The people of Texas are confident that they can play a useful part in the peaceful develop- ment of atomic science. They are also concerned that the history of Jackson McVey and his family may be repeated many times. They are appreciative of the efforts of the Joint Committee to secure assist- ance for Mr. McVey and they are hopeful that this hearing will bring to light information that will benefit McVey and the workers of the future who will face the peculiar hazards inherent in the use of peace- ful atomic energy. It is Senator Johnson's hope and belief that the Joint Committee will explore every aspect of this history. It is certainly uniquely qualified to do so. STATEMENT OF HON. RALPH YARBOROUGH, A U.S. SENATOR FROM THE STATE OF TEXAS, REPRESENTED BY RICHARD YAR- BOROUGH Mr. YARBOROUGH. I wish to express Senator Yarborough's concur- rence in those thoughts. He had hoped to be here this afternoon, and may still be able to make it, and will perhaps have something further to say at that time. Representative HOLIFIELD. If Senator Yarborough comes in, we will certainly hear him. Mr. Our next witness is Mr. Leo Goodman, of the AFL-CIO. Goodman requested an opportunity to testify before the subcommit- tee concerning an accident that occurred on March 17, 1957. I under- stand that Mr. Jackson McVey and his wife, Mrs. Jackson McVey, are with Mr. Goodman. Mr. McVey is one of two employees who were subjected to radiation in the accident. An informal briefing was held on April 7, 1960, at which Mr. Goodman and Mr. McVey discussed this matter with the staff of INDEMNITY AND REACTOR SAFETY 259 the JCAE. The AEC has been furnished a record of that briefing and has been requested to furnish the Joint Committee answers to certain allegations. We are awaiting the Commission's answer. I might say that it was furnished to them recently, and I suppose the answer will be forthcoming in due time. Now, Mr. Goodman, Mr. and Mrs. McVey, the committee welcomes you before us today. Mr. Goodman, if you have a statement, you may proceed. STATEMENT OF LEO GOODMAN, UNITED AUTO WORKERS, AFL-CIO, AND MR. AND MRS. JACKSON MCVEY, HOUSTON, TEX. Mr GOODMAN. Mr. Holifield, I want to first commend this com- mittee for granting us this opportunity to be heard. I also want to particularly commend the committee for the hearings which have been going on the past 2 days. I think this matter of public safety and the concern and the excellent work you have been doing in bring- ing out the issues involved prove the serious attention which you have been giving to this most important aspect to the development of this science. I will not attempt today to review the entire record which was made in the hearing before the staff on April 7. Mr. RAMEY. May I interject a technical point? It was not a hear- ing, Mr. Goodman. This was an informal session. Mr. GOODMAN. Then may I ask that this entire transcript made at this discussion be included in this record so that it will be unnecessary for us to review the full detailed facts that were brought out at that time? Representative HOLIFIELD. We will take that under consideration before the full committee. Mr. GOODMAN. In addition to the presentation on April 7 in which the request for assistance of this committee was made in regard to the health and financial needs of the victims of this Kellogg accident, we urged that the rules and regulations and where necessary the law be changed in order to avoid the unsatisfactory and unnecessary ex- perience which has befallen victims of this accident. Because they are here themselves to tell you what happened I would like to ask at this time to ask Mr. Jackson McVey if he would please advise the committee of the experiences he has gone through, and why he feels that the AEC has responsibility for what has happened to him since this accident. I want to repeat my earlier commendation to the committee and particularly to Congressman Melvin Price for the work he has done in regard to employee radiation hearings and the staff meeting we had on this subject the other day. Now, Mr. McVey, why, in your opinion, is AEC responsible for what has happened to you? Mr. McVEY. In my opinion, the Atomic Energy Commission should have made Kellogg Co., the M. W. Kellogg Co., enclose the hot cell as we had requested on numerous occasions. If they had done that, this tragedy would have never happened. I might give you a brief rundown on what happened. I was open- ing a can of iridium 192 pellets. The hot cell was designed to handle solid iridium pellets. There was no top on the hot cell. As I opened ! 260 INDEMNITY AND REACTOR SAFETY the can, the iridium dust exploded into the air, and I breathed this dust and contaminated myself and the laboratory. I stayed because I had to, to prevent this dust from escaping out of the lab into the area in which the city of South Houston is situated. I removed my lab clothes and left the laboratory, taking my street clothes from the locker and took a shower. I put on my street clothes, not realizing that the contamination had gotten into the lockers and onto my street clothes, and I, unbeknownst, carried this home and contaminated the family. This is the first publication, "Health Physics," that I have seen printed on this type of radioisotope and the biological effects that it has on a person; 19.3 percent of iridium 192 goes to the liver; 4 percent goes to the kidneys; 6.4 percent goes to the blood; 5.6 percent goes to the muscle; 3.1 percent goes to the bone. All of the symptoms of radiation sickness I have withstood. My health has been impaired. I cannot work. People shun me when I ask for a job. I think it is the Atomic Energy Commission's responsibility to take care of me. Mr. GOODMAN. During the course of the April 7 hearing, I made a series of charges of malfeasance of office, pinpointing the responsibil- ity of the Atomic Energy Commission directly for the failure to meet the responsibilities of the victims of this accident, and to secure redress in their negligence suit filed in the Federal court in Houston, Tex. It was quite a major surprise to me to find that instead of meet- ing the needs of these people, that the Commission used its resources primarily and extensively, I should say, to try to prevent the jury from making a finding in their behalf, though the party sued was the third party, the Phillips Petroleum Co., and this was due to the in- tricaries of Texas law. I would like to include that series of charges, if I may, in the record at this point, and ask Mrs. Jackson McVey if she would tell us what the problem has been in her family as a result of the experience that they lived through in connection with the exposures that resulted from the clothing contamination which Mr. McVey brought home to the family. Mrs. McVey. Mrs. McVEY. When he brought the contamination home, we didn't know it, and we lived with this contamination for 1 month. It was not released to the public for at least 21 days or more. When we moved into our new house, our house was contaminated. All of our furniture that we had was contaminated. Our clothing was gone, plus we had been ill from this contamination. We thought at first it was the flu. But we all got sick and were vomiting and had diarrhea. My husband had a blood change. Since then we have found out that three of the family, myself, and my husband, and my son, have cata- racts, and my oldest daughter in the beginning had a blood change. We don't know what the future is going to be for our children, and I think something should be done about them. If I had ever known that this company would not have provided proper precautions for their employees, I certainly would not have had my husband working over there. It was my encouragement that he went over there and applied for that job. We had friends at first, but they just would not have anything to do with us because they were afraid of us. Gradually it became better. But financially we have been in a terrible state. My neigh- bors have loaned me clothes to come up here and donated us money so بت INDEMNITY AND REACTOR SAFETY 261 we could come up here and appear before you so that you could hear our side of the story. Representative PRICE. Mr. Goodman, do you have any further state- ment? Mr. GOODMAN. During the April 7 hearing there was some ques- tion among members of the staff as to whether or not one aspect of the allegations that I made related to the issuance of a new license to this company or to a new department of this company. I have docu- mentary proof of the fact that the Commission itself did not consider its continuing relationship with the Kellogg Co. as covering only the construction department. If this record of April 7 is included in this record of this hearing, I would like to include therein a series of letters dated November 29, 1957, January 15, 1958, and a modifica- tion of the temporary suspension order signed by Mr. H. L. Price, dated November 2, 1957. In the letter dated January 15, 1958, the following transactions are recorded: (1) Projector CA-107 was transferred to the construction department under license No. 31-246-3 as projector CA-104. (2) The encapsulated force in projector CA-104 was removed, loaded into projector CA-108, and shipped to the Ohio State University. (3) A 5 curie source was loaded into projector CC-1230 and delivered to the U.S. Navy Mine Defense Laboratory, Panama City, Fla. (4) Shipment of eight sources was made to Isotopes Specialty Co., Inc., at Burbank, Calif. Because of these items which were not known to us at the time of the April 7 meeting, hearing, or whatever the transcript is to be called, I want to withdraw my withdrawal during that hearing of the allega- tion that the company did continue its operations in violation of the regulations after the new license of May 17, 1957, was issued. This is merely a technical point to clear up the record. I think the staff will confirm that the new letters do prove the continuation of the operations of the plant not only for decontamination purposes, which some people have thought, but rather to sell some of their equipment to the organizations listed. I believe that we have here, members of the committee, an illustra- tion of the very serious problem we have in continuing under our present procedures. During our hearings on employee radiation haz- ards last year, some of us from organized labor pointed out the diffi- culties that we would have because of the inadequacy of State stat- utes, and because of the inadequacy of trying to deal with these cases. under the pattern of workmen's compensation and tort and negligence law which prevails in the States. I hope it will be possible, and I have recommended to the AEC and I hope this committee likewise would set up a continuing study group to see how it may be possible to change the rules and regulations so that other families, future victims of radiation accidents, will not have to live through the ex- periences that have been lived through by the McVeys and the North- ways. I am very happy to advise the committee at this time that I have been approached by the Atomic Energy Commission regarding the medical care problems and the occupation and social rehabilita- tion of the McVeys. I understand that the Commission discussed this 58511—60—pt. 2-10 262 INDEMNITY AND REACTOR SAFETY problem at a meeting of the Commission the day before yesterday, and I would like to ask Mr. Dwight Ink if at this time he would confirm the offer made to us in regard to the McVeys. Representative PRICE. I might say, Mr. Goodman, that after the informal hearing, we had with you and Mr. McVey, between our staff and you and Mr. McVey, the Joint Committee suggested that the AEC obtain a thorough medical examination of Mr. McVey from a research standpoint as well as a humanitarian standpoint, because I think we ought to know the facts about this case. We will probably also look at this case from the standpoint of the adequacy of licensing regula- tions and workmen's compensation as it affects radiation accidents. Mr. GOODMAN. Mr. Chairman, I wonder if I might ask that the committee include, as it seems to me appropriate, any action taken on behalf of the McVeys would be taken to include the Northways, the and worker who thought he could find a job if he changed the scene, therefore went out to the west coast. Representative PRICE. I could not speak for the AEC but I under- stand consideration is being given to suggestions that have been made by the committee in this case. Mr. GOODMAN. Would Mr. Ink care to comment on what our prob- lem is at the moment? Representative PRICE. Mr. Ink, would you care to make any com- ment in reply to the question directed to you by Mr. Goodman? Mr. INK. Yes, I would be very happy to. Representative PRICE. Would you identify yourself for the purpose of the record? Mr. INK. Dwight Ink. Assistant General Manager of the Atomic Energy Commission. This matter has been discussed within the AEC. It has been discussed with the Commissioners. We recognize the mental anguish which Mr. McVey and his family have undergone during the past months. I am sure that their privacy has been in- vaded in a most unfortunate way. Much of the publicity, I am sure, has been a really difficult personal problem for Mr. McVey and his family. Apart from any questions of liability of the Commission or the com- pany or the responsibility of Mr. McVey at the time of the incident— these are matters which are involved in litigation, and I do not wish to get into these areas-the Commission is hopeful that a careful medi- cal review of Mr. McVey's physical condition can be made, in part with a view to ascertaining whether there are any medical factors which might be a consideration in his seeking employment and look- ing toward rehabilitation. Our exploration of this has just gotten underway, and we are not in a position to discuss the details of what kind of arrangement we think might be made. We are, however, hope- ful that these can be developed very rapidly. We will certainly advise you of whatever progress we may make along these lines. Representative HOLIFIELD. Mr. Chairman, in your absence, Mr. Goodman offered the staff briefing which was held at your direction in view of the fact that you were not able to be there at that particular time. I know of no precedent for taking the staff briefing and enter- ing it as a part of the official record. I would make the following suggestion, that this briefing and the additional letters and other exhibits that have been offered be held until we get the answer from INDEMNITY AND REACTOR SAFETY 263 ܐ܂ the Commission which we have requested, and that they consider printing it as a committee document. Representative PRICE. I have checked with the committee staff and have been informed that there is no classified material and no confi- dential nature to the material that is in the staff summary there. Representative HOLIFIELD. I would make this suggestion. I recog- nize that we are not capable right now of passing on this matter. I would request that my suggestion be referred to the full subcommittee or the full committee for action. Representative PRICE. The committee will accept the brief of the staff and decide at a later date whether it should be inserted as part of the record of this hearing. Mr. INK. Mr. Chairman, in the event that the committee should decide to do this, I would like to request, and I believe this is implicit in Mr. Holifield's comment, that our responding comments be incor- porated as a part of the same document. Representative HOLIFIELD. I made that reqeust. I particularly asked that we consider printing it as a committee document in view of the fact that I know of no precedent where a briefing by a staff has been included as though it were a committee hearing. That is why I ask that action not be taken on it at this time until we can have at least a quorum of the committee together to pass on this. Mr. INK. Thank you. It was not our understanding that this was a hearing. Representative PRICE. In this connection, Mr. Goodman, if you or Mr. McVey desire to add any additional statement, you may, for the consideration of the committee when it takes up the matter of how to treat this material. Mr. GOODMAN. Thank you very much, sir. I would like to make one last comment, and include a letter in the record, if I may. I call particular attention to the fact that Mr. Ink's comments related to Mr. McVey and his family and no offer, as I understand it, in relation to Harold Northway and his family. In this connection I would like. to read into the record a letter from Mr. Northway dated April 5, 1960, saying: Dear Mr. GOODMAN: In your contact with Congress it would be deeply appre- ciated if you could assist me in presenting my case in whatever light you may deem necessary. You are hereby authorized to do all the things necessary to further my cause as well as use my story in the interest of trying to help other workers who will no doubt suffer the same fate as of Mr. McVey and myself. It would be appreciated also if you would send me any data on the developments to date that you may have and as suggested to you on the telephone today. I wish personally to thank you for what you have done in the past and for the interest of organized labor in the future of atomic workers. Very truly yours, Thank you very much. H. E. NORTHWAY. Representative PRICE. Thank you, Mr. Goodman, and thank you, Mr. McVey and Mrs. McVey. We appreciate having you here and we are sympathetic to the situation you are in as a result of this accident. The record will be held open for 2 weeks or more for the submission of further statements. The committee will stand adjourned. 264 INDEMNITY AND REACTOR SAFETY (The following material was submitted for the record:) AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, Washington, D.C., April 27, 1960. Hon. CHET HOLIFIELD, Chairman, Special Subcommittee on Research, Development and Radiation, Joint Atomic Energy Committee, Washington, D.C. Dear CongrESSMAN HOLIFIELD: Enclosed with this letter are recommendations by the American Federation of Labor and Congress of Industrial Organizations on proposed rulemaking by the Atomic Energy Commission with respect to fac- tors considered in site evaluation for power and test reactors. These recommendations were submitted to Mr. John McCone, Chairman of the Atomic Energy Commission on August 24, 1959, by our secretary-treasurer, Wil- liam F. Schnitzler. On behalf of the AFL-CIO I request that this material be included in the hearings record before your subcommittee with respect to atomic energy in- demnity problems and on operations of the Advisory Committee on Reactor Safeguards. Sincerely yours, ANDREW J. BIEMILLER, Director, Department of Legislation, Chairman, Staff Subcommittee on Atomic Energy and Natural Resources. AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, Washington, D.C., August 24, 1959. Mr. JOHN C. MCCONE, Chairman, U.S. Atomic Energy Commission, Germantown, Md. DEAR CHAIRMAN MCCONE: Enclosed you will find the comments and recom- mendations of the American Federation of Labor and Congress of Industrial Organizations, regarding the Commission's notice of proposed rulemaking, pub- lished May 23, 1959, in the Federal Register, proposing to amend the Commis- sion's existing regulations on factors to be considered in site evaluation of nuclear power and test reactors. The AFL-CIO endorses the emphasis the Commission is now placing on safety criteria to protect the health and safety of concentrations of population near proposed sites of nuclear reactors. We hope however, that before the Com- mission adopts amended regulations, it spells out in more detail and in clear and understandable language, just how the criteria will be applied in actual evaluation of the proposed reactor site. Otherwise, in our opinion, the proposed amendments, if placed into force as they now stand, will lack necessary sub- stance and will not be adequate to the problem. Sincerely yours, WILLIAM F. SCHNITZLER, Secretary-Treasurer. RECOMMENDATIONS BY THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS ON PROPOSED RULEMAKING BY THE ATOMIC ENERGY COMMISSION WITH RESPECT TO FACTORS CONSIDERED IN SITE EVALUATIONS FOR POWER AND TEST REACTORS (PUBLISHED IN THE FEDERAL REGISTER MAY 23, 1959) The American Federation of Labor and Congress of Industrial Organizations has long urged the need for the strongest possible safeguards to be accorded both workers on jobs involving exposure to ionizing radiation and the public at large. Our interest, therefore, extends not only to regulations dealing with occupational exposure to ionizing radiation, but with the effect as well, of con- struction and operation of nuclear power and test reactors upon the general safety of population concentrations in the vicinity. We feel that these regulations, as proposed, are more of a description of criteria to be used in determining location of reactor sites, than the working out of detailed language which will provide the fullest safety yardstick possible. INDEMNITY AND REACTOR SAFETY 265 The AFL-CIO urges that- (1) The use of atomic energy be so controlled and licensed that the threat of malfunction and accident be reduced to the lowest humanly pos- sible minimum by uniform and adequately enforced standards. (2) The Commission show greater sensitivity to recommendations and warnings of its Reactor Safeguards Committee. This must be done in or- der that preliminary evaluation of the reactor site problem may be accom- plished before the proposed project is pushed too far in the direction of the construction stage in research, design, and financial commitments, and done within the framework of the general feasibility and safety features of the proposed project. (3) That these proposed regulations are written with less vagueness and in less broad generalities. The regulations as proposed, give the Com- mission entirely too much leeway in determining site locations. The Com- mission's experience in evaluating the locations of a large number and variety of reactor designs is sufficient to produce more definite and more detailed regulations within the broad criteria it has listed in its proposed site making announcement of May 23, 1959. The AFL-CIO urges that the Commission take into consideration these factors as we have outlined them and use the more detailed site selection regulations to stimulate the general advance of the nuclear power industry, both on land and on sea with the maximum health and safety protections afforded to workers and the general public. Finally, we feel that the Commission is placing the proper emphasis on public safety in connection with the location of nuclear power and test reactors, near concentrations of population. This philosophy as the Com- mission knows, will receive the full support of the AFL-CIO, if carried forward into uniform and workable regulations. ATOMIC ENERGY RESEARCH PROJECT, THE UNIVERSITY OF MICHIGAN LAW SCHOOL, Ann Arbor, Mich., April 21, 1960. Senator CLINTON P. ANDERSON, Senate Office Building, Washington, D.C. DEAR SENATOR ANDERSON: As you know, our atomic energy research project at the University of Michigan Law School has just completed a study on the international control of nuclear maritime activities. We now propose to turn our full attention to the matter of the organization of atomic energy functions at the Federal level of government. Our discussions with a number of interested individuals, both inside and outside the Govern- ment, has indicated general agreement with our view that it is time for a thor- ough reevaluation of this matter. Our study will consist of an analysis of the complications engendered by the fact that promotional, operational, and regulatory functions are combined in the Atomic Energy Commission. In addition, the functions of the Atomic Energy Commission will be analyzed in terms of their relationship to activities of other Federal departments and agencies. Primary attention will be given to those functions which relate to radiation safety in private activities. Our objective is to determine the need for and various alternatives for changes in organiza- tional structure. As a basis for conclusions and recommendations, we will draw upon analogies provided by governmental structures in other areas of Federal regulatory activity. We plan to solicit the views of a large number of persons once our own thoughts have developed more fully. Discussions to date have given every indication of cooperation on the part of the Joint Committee Staff, the Atomic Energy Commission; other Government agencies concerned, and the Atomic Industrial Forum. Our hope is to publish our study toward the end of this year. Very sincerely, LEE M. HYDEMAN. WILLIAM H. BERMAN. 266 INDEMNITY AND REACTOR SAFETY Mr. LEE M. HYDEMAN, Mr. WILLIAM H. BERMAN, CONGRESS OF THE UNITED STATES, JOINT COMMITTEE ON ATOMIC ENERGY, April 28, 1960. Project Directors, Atomic Energy Research Project, University of Michigan Law School, Ann Arbor, Mich. DEAR MESSRS. HYDEMAN AND BERMAN: Senator Anderson has asked me to thank you for your letter to him dated April 21, 1960, concerning your proposed study of the organization of atomic energy functions at the Federal level of government. As you know, the Joint Committee staff made a study in 1956-57 entitled "A Study of AEC Procedures and Organization in the Licensing of Reactor Facilities," which was published in April 1957. As mentioned by Senator Anderson during the section 202 hearings this year, it is planned that the Joint Committee staff will undertake a study of AEC organizational problems, including licensing and safety aspects, during the fall of 1960. The commitee staff will, of course, be very glad to cooperate with your study and I suggest that you contact either me or Dave Toll as your plans become more definite. Sincerely yours, JAMES T. RAMEY, Executive Director. (Thereupon, at 4:35 p.m., the hearing was concluded.) APPENDIX ATOMIC ENERGY COMMISSION REPORT TO THE JOINT COMMITTEE ON ATOMIC ENERGY ON OPERATIONS UNDER SECTION 170 OF THE ATOMIC ENERGY ACT OF 1954, AS AMENDED, MARCH 31, 1960 The Atomic Energy Commission submits herewith its annual report on operations under section 170 of the Atomic Energy Act of 1954, as amended. As in previous years, the report is concerned with indemni- fication of licensed activities, indemnification of activities conducted under contracts with the Commission, and international and maritime indemnity. The report also summarizes the operations of the Advisory Committee on Reactor Safeguards. 267 PART I INDEMNIFICATION OF LICENSEES The Commission's report of March 31, 1959, to the Joint Com- mittee described the regulatory actions theretofore taken to implement the provisions of the Price-Anderson Act. The report also listed a number of problems remaining to be resolved, particularly the reduc- tion of potential gaps between the financial protection required of licensees and the indemnity protection afforded by the Commission. These problems have been the subject of extensive consultation with groups representative of the reactor industry and the insurance syndicates. The present report describes the indemnity regulations put into effect by the Commission during the past year or published as pro- posed rules. With respect to the so-called gaps in coverage, most of the problems discussed in the 1959 report have been resolved, in part through changes made by the insurers in their form of policy and in part by revisions in the Commission's proposed forms of indemnity agreement. The Commission has completed and has issued, as effective rules, two amendments to its regulations (10 CFR pt. 140) on financial protection requirements and indemnity agreements. These amend- ments prescribe revised requirements as to the amounts of financial protection which must be furnished by reactor licenses, and approve the furnishing of proof of financial protection in the form of nuclear energy liability insurance now being offered by Nuclear Energy Liability Insurance Association (NELIA) and Mutual Atomic Energy Liability Underwriters (MAELU). The Commission has also issued for public comment a proposed amendment which would prescribe the forms of indemnity agreement to be executed by the Commission and reactor licensees. This is a further revision of the proposed amendment initially published for comment on August 28, 1958, and republished on May 1, 1959. The importance of the form of indemnity agreement and the significance. of revisions made following its initial publication are believed to warrant a further opportunity for public comment before it is issued as an effective rule. The provisions of the new amendments to part 140, both effective and proposed, and the major changes made in their text following their original publication as proposed rules, are discussed below. Financial protection requirements The first effective amendment issued by the Commission supersedes the provisions of the original part 140 published in the Federal Register on September 11, 1957. The principal provisions of the amendment, to be effective 30 days after it is published in the Federal Register, are: (a) revision of the formula for determining amounts of financial protection for the larger reactors subject to licensing by AEC 269 270 INDEMNITY AND REACTOR SAFETY to take into account population density; (b) establishment of fixed amounts of financial protection for reactors licensed to operate at relatively low power levels; (c) addition of a requirement that each holder of a reactor construction permit desiring to possess and store special nuclear material at the reactor site for ultimate use as fuel in the reactor have (prior to issuance of the materials storage license) financial protection in the amount of $1 million; (d) incorporation of procedures for the exemption of nonprofit educational institutions and Federal agencies from the financial protection requirement; and (e) clarification of information which must be submitted to AEC by licensees who furnish financial protection in the form of their own resources (self-insurance). The text of this amendment is attached as enclosure I of this report. On January 19, 1960, NELIA and MAELU recommended to the Commission the adoption of a formula, for determining amounts of financial protection to be required of reactor licensees, which differs. from the formula contained in the effective amendment of part 140. The statement of considerations preceding the text of the amendment sets forth the Commission's intention to reevaluate its financial protection requirements not later than December 31, 1960, and invites. public comments on the syndicates' proposed formula. Changes in the nuclear energy liability policy The NELIA and MAELU pools have incorporated several changes in the nuclear energy liability policy since last year's report. The new policy has been approved by the Commission as financial protec- tion and is designated the "Nuclear Energy Liability Policy (facility form) February 1, 1957 (second revision)." It differs from the pre- vious policy primarily in the following respects: (a) The new policy includes coverage of nuclear incidents occurring in the course of transportation of nuclear materials to the reactor from any location, without regard to whether the trans- portation originated at a Government facility. The earlier policy provided coverage during transportation to the reactor only if the transportation was from a facility owned by the United States. (b) The period of prior notice to the Commission before the insurers can make a policy suspension effective has been in- creased from 12 hours to midnight of the business day next following the date on which the Commission receives notice of suspension. (c) With respect to a "common occurrence" (defined in the insurance policy as an occurrence or series of occurrences involv- ing nuclear material in the course of transportation to or from, or discharged over a period of time from, two or more reactor loca- tions), the previous form of policy limited the total amount of liability of the insurers to the highest limit of liability specified in the applicable policies. Under the new form of policy, the limit of liability of the insurers has been increased to (i) the capacity of the insurance syndicates¹ or (ii) the aggregate amount of insurance applicable to the common occurrence, whichever is lower. 1 The NELIA and MAELU syndicates write separate rather than joint coverage and the policies of each syndicate limits its liability for a common occurrence to the capacity of its own pool. That is, NELIA limits its liability to $46.5 million and MAELU limits its liability to $13.5 million. INDEMNITY AND REACTOR SAFETY 271 1 The amendment to part 140 approving the policy is attached as enclosure II of this report. The new forms of indemnity agreements Enclosure III sets forth the two revised forms of indemnity agree- ment which have been published for public comment. One (sec. 140.76, app. B) is the agreement which the Commission would execute with organizations who submit the NELIA-MAELU policy as proof of financial protection; the other (sec. 140.77, app. C) is the agreement which the Commission would execute with organizations furnishing proof of financial protection in the form of their own resources. The principal changes in these forms of indemnity agreement since last year's report include the following: (a) The new form of indemnity agreement includes common occurrence provisions which are similar to the common occurrence provisions in the new NELIA and MAELU insurance policy. (b) Provisions are included to protect against double coverage in the event of a nuclear incident in transportation of nuclear material between two indemnified licensed facilities. Under these provisions, the shipper's agreement would be applicable and the consignee's agreement would not be applicable. (c) Licensees furnishing proof of financial protection in the form of their own resources are required "to indemnify and hold harmless all persons indemnified as their interest may appear from public liability * * *"" This obligation includes coverage of liability for damage to on-site property. Because the NELIA- MAELU policy, with minor exceptions, does not cover such lia- bility, the indemnity agreement requires licensees furnishing the policies as financial protection to indemnify any person against liability for damage to on-site property. Such an indemnity obli- gation of the licensee would be insured under the nuclear energy property insurance policy available from the property insurance pools-Nuclear Energy Property Insurance Association (NEPIA) and Mutual Atomic Energy Reinsurance Pool (MAERP). (d) Under the Price-Anderson Act, the Commission is au- thorized to indemnify against any legal liability arising out of a covered nuclear incident and to indemnify against damage to property of persons legally liable for the nuclear incident. How- ever, damage to property of persons legally liable may only be covered by the Commission's indemnity if such damage is covered under the terms of the financial protection maintained by the licensee and if such property is not located at the site of and used used in connection with the activity where the nuclear incident occurs. The NELIA-MAELU policy form does not cover damage to property of persons legally liable which is located at the reactor site, although it does cover damage to offsite property of the insured. The proposed form of indemnity agreement to be executed with licensees furnishing proof of financial protection in the form of a NELIA or MAELU policy has been clarified to exclude coverage of damage to onsite property of persons. liable for the nuclear incident. (e) A provision has been added to the indemnity agreement under which the Commission would fill a "gap" between the financial protection and the Commission's indemnity obligation, which would result from payments made by the insurers under a 272 INDEMNITY AND REACTOR SAFETY nuclear energy liability insurance policy. (The NELIA-MAELU form of policy does not provide for automatic reinstatement.) The provision in the new form of indemnity agreement includes a "floor," so that the Commission obligation under this provision would not go below $1 million. In the event that the licensee does not obtain reinstatement of the required amount of financial protection within 90 days after the date of a payment under the policy, the Commssion may issue an order requiring the licensee to furnish financial protection in another form. In 1959, legislation was recommended for specific authority to fill this gap. Since then there have been a substantial number of comments received as to the desirability of the Commission's filling this gap and whether there is really a need for legislation. The comments are practically unanimous that the Commission. has the authority, under existing law, to fill this gap and should do so. Accordingly, after reconsideration and in light of the comments, the Commission has concluded that it has the power to fill the gap through the exercise of its rulemaking authority. (f) Another change is the addition of a provision which pro- vides that bankruptcy or insolvency of the licensee or any other person indemnified would not relieve the Commission of its indemnity obligations under the agreement. Resolution of potential gaps in protection Almost all licensees required to furnish financial protection are doing so by purchasing the nuclear energy liability insurance policy offered by NELIA and MAELU. To provide protection to the public, to licensees and to their suppliers, as contemplated by the Price-Anderson Act, the scope of coverage of the financial protection furnished by licensees and that afforded by the Government indemnity should meet as closely as possible. As a result of the above-described revisions in the policy and the agreement, the "gaps" identified in the 1959 indemnity report to the Joint Committee have, to a substan- tial degree, been reduced or eliminated. These include the scope of transportation coverage; the "common occurrence" problem; rein- statement of coverage by insurers after payments under policies; and the 12-hour prior notice of suspension. Proposed legislation requested in 1959 On April 8, 1959, the Commission transmitted to the Congress two recommended amendments to the indemnification provisions of the Atomic Energy Act of 1954, as amended. The first of these proposed amendments would amend the Price- Anderson Act to eliminate from the Commission's indemnity obliga- tion coverage of liability for damage to "onsite" property, i.e. where the liability rests with persons other than the operator of the facility. Such coverage of liability for damage to onsite property diminishes the $500 million indemnity available to the general public under the Commission's indemnity agreement. There does not appear to have been, nor does it appear likely that there will arise any need for Government coverage of damage to onsite property. Commercial insurance against damage, at least up to $60 million, to onsite property is available from the property insurance syndicates (NEPIA and MAERP). The Commission continues to regard enactment of this amendment as being important and in keeping with the congressional intent at the time of enactment of the Price-Anderson Act, namely, 1 INDEMNITY AND REACTOR SAFETY 273 that the Government indemnity not include damage to or destruction of the nuclear facility. The NELIA-MAELU liability insurance policies furnished by reactor licensees as financial protection do not cover liability of other persons for damage to onsite property. Accordingly, in order that the licensee furnish financial protection covering such liability, a provision has been incorporated in the proposed indemnity agreement which would require the licensee to indemnify other persons who may be liable for damage to onsite property up to the amount of financial protection. It has been determined that this is required under existing provisions of the law. However, if the proposed amendment, previously mentioned, were to be enacted this provision in the indemnity agreement would be eliminated. It should be noted also that, from the standpoint of the industry in general, the problem of liability for damage to onsite property has been ameliorated by the inclusion of a provision in the NEPIA-MAERP nuclear energy property insurance policies waiving any right of subrogation against. various classes of suppliers who might be liable for onsite property damage. The other proposed amendment recommended to Congress would authorize the Commission to fill temporarily the gap arising out of the absence in the nuclear energy liability insurance policy of an auto- matic reinstatement provision. As previously noted, the proposed revised indemnity agreement would include a provision under which the Commission, subject to the conditions set forth therein, could fill this gap. The proposed amendment, therefore, is no longer considered necessary. Problem areas still under study A number of other specific questions remain to be resolved and are under study by the Commission. They include- (a) Transportation of nuclear fuel to and from reactors outside the territorial limits of the United States.-As presently written the Atomic Energy Act authorizes indemnification of nuclear inci- dents occurring at reactor sites in Hawaii, Alaska, or Puerto Rico, but incidents occurring in the course of transportation between such sites and the continental United States would not be covered if the incident occurs outside the territorial limits of the United States. (b) Clarification of subsection 53e. (8) of the 1954 act.-Section 53e. (8) of the act, applicable to all organizations licensed by the Commission to use and possess special nuclear material, is as follows: (8) except to the extent that the indemnification and limitation of liability provisions of section 170 apply, the licensee will hold the United States and the Commission harmless from any damages resulting from the use or possession of special nuclear material by the licensee. Comments received in response to publication in 1958 of the pro- posed indemnity agreement suggested a need for revising sub- section 53e. (8) to delineate licensees' obligations. Questions raised with respect to the subsection included: whether it applies to governmental liability for injury to third parties; whether it covers damage to Government property; whether it applies at all to licensees required to maintain financial protection; and whether it applies to cases where the Government is at fault. 274 INDEMNITY AND REACTOR SAFETY (c) Indemnification of materials licensees.-Under section 170 of the Atomic Energy Act, the Commission must enter into an indemnity agreement with licensees of production or utilization facilities. The Commission is granted discretion to extend simi- lar indemnity to materials licensees. Numerous comments re- ceived in response to proposed part 140 amendments urged that the Commission extend Price-Anderson indemnification to li- censees, such as fuel element fabricators, authorized to possess. substantial quantities of special nuclear material for purposes. other than reactor operation. As was reported last year, the Commission contracted with the Convair Division of General Dynamics Corp. for a study, one of the purposes of which is to provide basic information on the types of accidents that might occur in plants handling nuclear materials, the consequences of such accidents and estimates of the upper limits, if any can be set, on the damages that might result. Such information will assist in determining whether there is a need to extend financial protection and indemnity requirements to licensees of materials. The report on the study is expected to be received in early April 1960. (d) Remaining "common occurrence" gap.-The gap resulting from the common-occurrence provision of the policy and the absence of a comparable provision in the previous form of agree- ment has been eliminated by inclusion of a common occurrence provision in the new form of indemnity agreement. However, there still remains a further potential gap. This is due to the fact that, although the Commission's obligations under the com- mon occurrence provisions begin at an amount equal to the sum of all applicable insurance required under the regulations or $60 million, whichever is lower, NELIA and MAELU limit their responsibility to the capacity of their respective pools; that is, if all of the insurance policies applicable to the common occurrence are issued by one of the syndicates, the obligation of the insurers would not exceed the capacity of the particular syndicate ($46.5 million in the case of ÑELIA or $13.5 million in the case of MAELU). This gap would be eliminated by the adoption of provisions by the syndicates, which would make the combined capacity of the syndicates available for a common occurrence. Administration of licensee indemnity By the end of February 1960, 44 reactor licensees were covered by Commission indemnity; included were 16 private organizations, 23 nonprofit educational institutions, and 5 Federal agencies. Of the 16 private organizations subject to the financial protection requirements in part 140, 14 are carrying nuclear liability insurance and 2 are fulfilling their financial protection obligations by means of their own resources. The licensed nonprofit educational institutions and Federal agencies are exempt from the financial protection require- ments. The insurance syndicates have informed the Commission, however, that a number of the former have purchased nuclear liability insurance. The syndicates have also informed the Commission that no claims. have thus far been filed under any of the liability policies issued by them to reactor licensees. PART II INDEMNIFICATION OF ACTIVITIES CONDUCTED UNDER CONTRACT WITH THE COMMISSION As reported in previous years, under authority contained in section 170d. of the Atomic Energy Act of 1954, as amended by Public Law 85-256, 85th Congress, the Commission adopted a policy of entering into agreements of idemnification extending the statutory indemnity- (a) To AEC contractors engaged in the operation of nuclear reactors; (b) To AEC contractors engaged in operating production or utilization facilities; (c) To AEC construction contractors whose work may place them under the risk of occurrence of a substantial nuclear incident; and (d) Subject to authorization by the General Manager, to any other AEC contractors, other than those specified in (a), (b), and (c), who engage in activities involving the risk of occurrence of a substantial nuclear incident. In carrying out this policy the Commission has executed statutory indemnity agreements as to 43 contracts. These agreements cover all of the major AEC installations operated by AEC contractors who are eligible under Commission policy for indemnity agreements. To date, there have been no claims filed under the statutory indemnity and consequently no expenditure of money. The insurance industry has made its claims adjusting service available, if needed, in the area of statutory indemnity for either AEC licensees or AEC contractors. A definitive agreement for the furnishing of claims adjusting service has been executed by the Com- mission and the National Association of Independent Insurance Adjusters. Representatives of the Commission and other insurance groups are continuing to negotiate written agreements outlining arrangements for claims adjusting service. 275 PART III MARITIME INDEMNITY PROBLEMS NS SAVANNAH FOREIGN ACCEPTANCE AGREEMENTS As reported to the Joint Committee on January 26, 1960, we have initiated negotiations with the United Kingdom for an agreement on the conditions under which the NS Savannah would operate in United Kingdom ports and territorial waters. The major area of divergence of views was that related to indemnity for the ship. The United Kingdom sought to have the United States, with respect to claims arising out of a nuclear incident involving the Savannah in United Kingdom waters, agree (i) to submit to suit in United Kingdom courts without asserting its sovereign immunity from suit, (ii) not to assert the conventional shipowner's limit of liability, (iii) to admit absolute liability, (iv) to accept exclusive liability, and (v) not to assert the defense of the statute of limitations for a period of 10 years after any such nuclear incident. With reference to the latter three points, U.S. representatives pointed out that the Price-Anderson indemnification covers any per- son who is found legally liable as a result of a nuclear incident arising out of the operation of the Savannah, and that such liability is deter- mined by the law in effect at the time and place where the incident occurs. The British should not expect the U.S. Government to accept a stricter standard of liability than was applied to British nationals, nor to agree to provide protection against damage to British nationals under more favorable terms than it afforded protec- tion to U.S. nationals. The U.S. Congress had afforded indemnity only against legal liability. The standards of legal liability have been established by the British Parliament for operators of land- based reactors and these standards could be extended to nuclear- ship operators to, in part, accomplish United Kingdom objectives. Further, parliamentary action would provide protection to United Kingdom nationals which would be generally applicable in the case of nuclear ships. Such protection would presumably be highly de- sirable if nonmilitary nuclear ships from other countries are sailing the high seas before resolution of the liability problem is accom- plished by international convention. Finally, it was pointed out by U.S. representatives that neither congressional action nor U.S. gov- ernmental commitments could completely resolve the liability prob- lem as presented by the British. Channeling of liability, for example, could not be accomplished by such action. The United Kingdom agreed to seek executive or legislative action on the latter three points and indicated that it would expect the United States to resolve the first two as a condition of acceptance. Private insurance protection for nuclear ships One significant conclusion has been reached by the marine insurance underwriters: coverage, with a limit in the amount of $14 million 276 INDEMNITY AND REACTOR SAFETY 277 (corresponding with the £5 million private protection required in the United Kingdom Nuclear Installations Act), could be provided for the hull and collision risk, nuclear cargoes, conventional cargoes on or damaged by nuclear ships, and for third party liability of nuclear ships. At least one American underwriter has criticized this limit as being "entirely too low," but a higher alternative figure has not been offered. Third party liability draft convention The Comité Maritime International, whose membership consists of the maritime law associations of about 35 maritime nations, adopted, in September 1959, a proposed international convention covering the liability of nuclear-powered merchant ships. The proposed con- vention is patterned after that of the OEEC for land-based nuclear installations; it provides for absolute liability, the channeling of all liability to the owner and private insurance protection to be set by the licensing state. The amount of state indemnification above the limit of private protection was not established by the CMI because they felt that this matter should be left for consideration by governments. The CMI also recommends that- some form of international machinery should be agreed upon to facilitate and insure the carrying out of these obligations. No specific machinery or organization was suggested. Traditionally, draft maritime conventions have been circulated by the Government of Belgium, which has then called a diplomatic conference of maritime nations that may become signatories to such conventions. It was concluded that the nuclear liability problem has an important new characteristic-state indemnification above the limit of private protection-and that an established intergovern- mental agency is the proper channel for the sponsoring of a meeting for the adoption of a convention having substantial financial effect upon governments. As a result of this view, the State Department recommended to the governments of 20 maritime nations that the International Atomic Energy Agency, with assistance from the Intergovernmental Maritime Consultative Organization and the Government of Belgium, assume responsibility for sponsorship of the convention. Subsequently, an ad hoc Panel of Experts was sum- moned by the International Atomic Energy Agency to Vienna for consideration of a third-party liability convention for nuclear ships. The Panel discussed the principles of the CMI draft as its reference point. The Chairman of this Panel was the Vice Premier of Belgium, who is also President of the CMI. Although most of the experts are governmental officials, they did not attend as governmental representatives. The principle of governmental indemnification over and above the private protection available found general support among the Panel members. At the end of the meeting the Panel agreed to consider a summary report of the discussion which will be prepared by the Secretariat before June 1, at which time a second Panel meeting will occur, probably in Vienna. After that the Director General is expected to refer the matter to the Belgian Government for the calling of a diplomatic conference, either late this year or early 1961. The IAEA plans to cooperate in this effort. 58511-60-pt. 2- -pt. 2——————11 PART IV PROBLEMS OF FOREIGN INDEMNITY The question of providing adequate protection to the public and to suppliers and manufacturers of equipment utilized in nuclear facilities in the event of harm resulting from a nuclear incident has been a major concern to the Atomic Energy Commission. It was recognized at the commencement of the peacetime applications of nuclear energy that its full and free development would be contingent upon achieving an equitable distribution of the potentially great risks involved. The extent to which American industry is willing to participate in foreign activities is directly proportional to satis- factory protection from liability for injury resulting from a nuclear incident. During the past year there have been strong efforts to develop satisfactory solutions to the problem of third-party liability through both international conventions and national legislation. Consider- able progress has been made with respect to solving the problems of liability arising in connection with land-based facilities. During the same period, much attention has been given to the question of nuclear ship third-party liability protection and there have been positive developments in this area. The following is a brief summary of the status and some of the principal provisions of each of the conventions being prepared: Conventions applicable to land-based reactors OEEC. The Council of Ministers of the OEEC is expected to consider the final draft convention prepared by the OEEC experts in late March or early April and is expected to recommend that it be signed by member states. After signature, the convention would be referred to the member government for their consideration and ratification. With ratification by five governments the convention will become effective. The convention channels absolute liability for a nuclear incident to the reactor operator and provides that his maximum liability shall be limited to $15 million (with signatories having the right to reduce this ceiling, but not below $5 million). Such liability must be covered by insurance or other satisfactory financial security. Also included is a clausemaking optional govern- mental indemnification on a national basis above the $5 million figure. To the extent that such indemnification is provided for by a signatory, it would not be necessary for that government to abide by the provisions of the convention, but it could apply other principles on a bilateral basis. Another important provision is one which limits the right of recourse of the operator (1) to any individual who in- tentionally causes a nuclear incident or (2) where so provided by contract. Euratom.-A draft convention has been prepared by Euratom which would be dependent upon, and supplement, an approved OEEC 278 . INDEMNITY AND REACTOR SAFETY 279 convention. Its primary purpose is to provide a much stronger and mandatory system of governmental indemnification considerably above the insurance limits prescribed in the OEEC convention. No decision has been made by Euratom on the level of indemnity which will be provided nor whether it will be based on national commit- ments, a pooling arrangement or a combination of both; $75 to $100 million has been the most frequently mentioned level of indemnity. IAEA.-A panel of private experts, convened by the Director General of the IAEA and representing 10 member states, met 4 times during 1959 and drafted an international convention concerning civil liability for nuclear hazards. This convention will soon be submitted as part of a final report to the Director General who, in turn, plans to submit it to all member nations for official government consideration. Its approach, in most respects, is similar to that of the OEEC con- vention. One major exception is that the liability of the operator is exclusive only if there is no contrary national legislation by a signatory. Another variation from the OEEC convention is that more general language is used and in several provisions the internal legislation of contracting states is made the applicable law; e.g., there are no exonerations for armed conflict or grave natural disaster unless the contracting states expressly so provide. Conventions applicable to maritime reactors Comité Maritime Internationale.-During 1959, the Comité Mari- time Internationale developed and agreed on a draft third party liability convention applicable to nuclear ships. The Comité, com- posed of representatives of national maritime law associations, concluded its work at Rijeka, Yugoslavia, in September and recom- mended that an ad hoc diplomatic conference be convened in order to permit all governments with an interest in such a convention to reach agreement on its provisions. The Comité looked to the principles developed by the OEEC and adopted most of those pertinent to nuclear ships. However, because governments were not officially represented, no serious effort was made to grapple with the crucial question of governmental indemni- fication. It was decided to leave this to a diplomatic conference. IAEA. To follow up his efforts on a land-based reactor third party liability convention, the Director General has convened a new panel of government-instructed, private experts from 21 countries to consider further the draft convention developed by the Comité at Rijeka. The question of providing for governmental indemnification is the primary interest of the new group. It is hoped that the panel's work can be completed in time to permit calling an ad hoc diplomatic conference in the fall of 1960. National legislation The Two National Governments, the United Kingdom and West Germany, passed laws covering liability for nuclear hazards. United Kingdom Nuclear Installations Act, effective in 1959, provides (1) for strict and exclusive liability of the operator of a nuclear instal- lation; (2) that insurance or other financial protection up to 5 million pounds must be obtained; and (3) that although no limit on liability is created, if aggregate claims exceed 3 million pounds the situation must be reported to Parliament and the operator's liability may not 280 INDEMNITY AND REACTOR SAFETY extend beyond the insurance coverage unless reimbursement is provided by parliamentary action. West German legislation, effective on January 1, 1960, provides for strict liability, but similar to Price-Anderson, does not channel lia- bility. Insurance or other financial protection must be obtained, the amount varying depending on the particular installation. A signifi- cant provision in this law is that the West German Government will indemnify against third party claims up to a maximum of DM500 million (approximately $125 million) less the amount of private insur- ance coverage. In addition, Switzerland and Japan are now in the process of con- sidering specific legislation. Given the inability of the private insurance market to provide a sufficiently high level of protection, the necessity of providing for substantial governmental indemnification above the modest levels of maximum liability being established in the several conventions has been consistently and continuously urged by the Atomic Energy Com- mission. These efforts have not been as successful as might be hoped, but we believe there is increasing realization of the importance of such a provision. There are several specific areas in which the United States has taken an active role. Chronologically, they are as follows: (a) The United States has been represented from the outset. (1957), in an advisory capacity, in the efforts of the OEEC to develop a third party liability convention. It is believed that the expression of U.S. views in this work has been instrumental in developing views on important principles among the other participants consonant with ours. (b) În developing the joint program with Euratom, specific agreement was reached that concerted efforts would be made by the Community to develop and secure adoption of suitable meas- ures to protect equipment manufacturers, other suppliers, and participating utilities against third party liability. (c) A private expert from this country has been participating on the panel convened by the IAEA to draft the international third party liability convention applicable to land-based reactors. (d) The U.S. Government participated in the efforts of the Comité Maritime Internationale to the extent of offering informal advice to private U.S. experts active in the CMI. (e) The U.S. Government has strongly supported the plans of the IAEA to convene a panel to consider the drafting of an internation nuclear ship convention. + PART V OPERATIONS OF THE ADVISORY COMMITTEE ON REACTOR SAFEGUARDS Pursuant to the provisions of section 182b. of the Atomic Energy Act of 1954, as amended, all license applications for power and testing reactors are required to be reviewed by the Commission's Advisory Committee on Reactor Safeguards. The Commission also obtains the Committee's advice on the nuclear safety aspects of all major reactor projects constructed or operated under contract with the Commission. The same practice is observed on all major reactor projects which the Department of Defense submits to the Commission for review. Through February 29, 1960, the Advisory Committee held nine meetings, each usually of 2 to 3 days' duration. In the course of its meetings, the Committee reviewed and rendered advice to the Com- mission on the safety aspects of 7 reactor projects subject to licensing, 3 Commission-owned reactor projects subject to parallel hearing procedures, and 11 AEC and Department of Defense projects. Copies of the Committee's reports to the Commission on all of these cases have previously been furnished to the Joint Committee. The cur- rent status of each of the projects is described below. Similar infor- mation on classified reactor projects is being submitted separately. Reactor projects subject to licensing Each of the following power and test reactor projects is subject to licensing. A safety evaluation of such projects is performed by the Commission's technical staff and each project is referred to the Ad- visory Committee on Reactor Safeguards for review and advice. Before issuance of a construction permit or operating license, public hearings are held in accordance with section 189 of the act. Carolinas Virginia nuclear powerplant. After reviews by the Com- mission's technical staff and discussions with the ACRS, the Com- mittee concluded that a reactor of the general type proposed may be constructed at the Parr, S.C., location with reasonable assurance that it can be operated without undue risk to the health and safety of the public. A public hearing was held on February 23 and 26, 1960, on the proposed issuance of a construction permit and the case is now pending before the hearing examiner. The license applicant esti- mates that the reactor will achieve criticality in July 1962. Commonwalth Edison Co. (Dresden nuclear power station).-Follow- ing review and report by the ACRS and the holding of public hear- ings, a limited license was issued on September 28, 1959, pursuant to order of the hearing examiner, authorizing operation of the Dresden. facility up to 1 megawatt (thermal). On October 12, 1959, the ACRS submitted a further report to the Commission, stating that the re- strictions contained in the technical specifications submitted in an amendment to the application, together with the restrictions previ- 281 282 INDEMNITY AND REACTOR SAFETY ously outlined, will provide reasonable assurance of adequate protec- tion of the public. On November 16, 1959, pursuant to an order issued by the hearing examiner on November 12, 1959, an amended license was issued authorizing Commonwealth to bring its reactor up to a power level of 315 thermal megawatts, or 50 percent of its rated power. Upon reaching this level, Commonwealth is to submit a re- port to the Commission on the reactor's operating conditions and characteristics. If no good cause is shown to the contrary at a hearing to be held on the sixth day after receipt of the report, a license per- mitting full 630-megawatt operation will be granted. The Dresden reactor achieved criticality on October 15, 1959. Mechanical diffi- culties in control rod drive mechanisms later delayed completion of the startup and low power tests. The company has advised that these difficulties have been resolved and tests resumed. General Electric Co. Vallecitos boiling water reactor (VBWR).—At its meeting in January 1960 the ACRS reviewed data submitted by the company for authorization to accomplish certain internal modifica- tions and operate the reactor with a new fuel arrangement, including a new type of control rod and modified control rod drive mechanisms, and with both turbine-driven and electrically-driven coolant circula- tion pumps. The Committee concluded that the plant can be modi- fied as proposed and operated without undue risk to the public. Notice has been published that a hearing will be held on April 5, 1960, to consider amending the company's license. Northern States Power Co.-This project comprises the construction and operation of a 66 megawatt (electrical) controlled recirculation. boiling water reactor, with nuclear superheater, at a location near Sioux Falls, S. Dak. Following its review of the proposed reactor, the Advisory Committee reported on December 14, 1959, that, although the reactor incorporates new developmental features and problems which must be resolved before operation, the approach presented by the applicant will enable construction of the reactor at the site with reasonable assurance that it can be operated without undue hazard to the public. A public hearing on proposed issuance of a provisional construction permit to Northern States Power Co. was held on February 15, 1960. No petitions to intervene were filed. The case is now pending before the hearing examiner. The company estimates that the reactor will go critical in June 1962. Saxton Nuclear Experimental Corp.-This company filed an applica- tion dated July 23, 1959, for a license to construct and operate a 20-megawatt (thermal) pressurized water reactor on a site southeast of Altoona, Pa. The ACRS reviewed the project at its September 1959 meeting and advised the Commission that there is reasonable assurance that a reactor of this general type can be constructed and operated at the designated site without undue risk to the public. A public hearing on the proposed issuance of a construction permit was held on December 15, 1959. No petitions to intervene were filed. Pursuant to the order of the hearing examiner, a construction permit was issued on February 11, 1960. The reactor is scheduled for startup in January 1962. Westinghouse testing reactor (WTR).-After receipt of an ACRS report and public hearings held on March 25 and June 11, 1959, the Commission on June 19, 1959, ordered issuance of a license to West- inghouse, authorizing operation of its testing reactor at thermal power INDEMNITY AND REACTOR SAFETY 283 : : levels up to 20 megawatts. Westinghouse subsequently filed an amendment to its application seeking authority to increase the power level to 60 megawatts in eight incremental steps. The ACRS re- viewed this application in November 1959. It reported to the Com- mission that, subject to certain restrictions, the WTR can be operated at 60 megawatts without undue hazard to the public. The company's license was amended accordingly on January 8, 1960. Yankee Atomic Electric Co.-This company has from time to time submitted additional information with respect to the reactor being built in accordance with its construction permit. By amendments to its basic application, Yankee has submitted information designated as the final hazards summary report and has identified those provisions. of this report which it proposes be incorporated as technical specifica- tions in the permit and any operating license. The ACRS reviewed these amendments at its January 1960 meeting and reported to the Commission that the broad problems indicated at the time of the issuance of the construction permit have been resolved and that this reactor can be operated without undue risk to the public. A hearing was held March 3, 1960, to consider Yankee's request for amendment to its construction permit and the matter is pending with the hearing examiner. Another hearing will be held with respect to converting the permit to an operating license. The company expects that the reactor will go critical in September 1960. Reactor projects subject to parallel procedures In accordance with Commission policy, provision is made for public participation in the review of safety considerations of reactors not located on Commission-owned installations and which are to be operated as parts of conventional electric utility systems. In accord- ance with this policy, public hearings are held in connection with the issuance of construction and operation authorizations for such projects. The safety evaluation of these projects follows the same procedure as for projects subject to licensing. The reactor projects to which these parallel procedures were applied during the past year are described below: City of Piqua power reactor.-The design of this reactor was reviewed at the May and July 1959 meetings of the Advisory Committee. After the May review, the Committee advised that the new site pro- posed was acceptable provided adequate containment was constructed and the reactor adequately designed. After its July meeting, the Committee advised the Commission of the Committee's conclusion that this reactor may be constructed and operated at the site selected without undue risk to the public. A public hearing was held on No- vember 20, 1959, to consider the issuance of an authorization for the construction of the reactor. No petitions for intervention were filed. The hearing examiner issued his intermediate decision on January 7, 1960, authorizing the contractor to proceed with construction. The decision became final on January 28, 1960. A final hazards summary report will be reviewed by the ACRS prior to operation of the reactor. A public hearing will also be held before operation is authorized. According to present schedule, it is expected that the reactor will achieve criticality in May 1961. Rural Cooperative Power Association reactor (Elk River).-At its August 1959 meeting, the ACRS reviewed_this project with AEC staff members and the contractors. The Committee subsequently 284 INDEMNITY AND REACTOR SAFETY reported to the Commission that it believes that this proposed reactor may be constructed with reasonable assurance that it can be operated at the site indicated without creating an undue hazard to the health and safety of the public. The project was set down for public hearing on November 10, 1959, to consider authorization of construction. The hearing examiner's intermediate decision authorizing construc- tion became final on January 9, 1960. A final hazards summary re- port will be reviewed by the ACRS prior to operation of the reactor. A public hearing on the matter of authorizing operation will also be held. The reactor is expected to go critical in November 1960. Consumer Public Power District reactor (Hallam).-This 240-mega- watt (thermal) sodium-graphite reactor, to be located in Lancaster County near Hallam, Nebr., is being constructed by the Commission for operation by Consumers Public Power District. The ACRS con- sidered the design of the facility at its July 1959 meeting and reported that the proposed reactor can be constructed with reasonable assurance that it can be operated without undue risk to the health and safety of the public. This opinion was, in part, based on the satisfactory operating experience with the SRE at Santa Susanna. Subsequently the design of the Hallam reactor was reexamined and modified in light of the occurrence of damage to fuel element cladding at the SRE. The Committee, at its January 1960 meeting, reviewed a report of the safeguards evaluation of recent SRE experience applicable to the Hallam reactor, and noted the new design features which had been incorporated in the latter facility. Based upon this review, the ACRS reiterated its opinion that the Hallam reactor can be constructed without undue risk to the public health and safety. A public hearing has been set for April 8, 1960, on the matter of authorization to pro- ceed with construction of this facility. First criticality is scheduled for March 1962. Other Commission-owned reactor projects The safety evaluation of these projects follows the same procedures as for projects subject to licensing, except the cases involving military reactors and reactors located on Commission-owned sites are not set down for formal public hearings. Heavy water components test reactor (HWCTR).—The HWCTR is a 60-megawatt heavy water moderated and cooled reactor for the pur- pose of testing natural uranium fuel elements. The ACRS reviewed the design of this reactor at its July and September 1959 meetings. and concluded that the reactor can be constructed with reasonable assurance that it can be operated without undue risk to the health and safety of the public. The final design is presently nearing com- pletion and construction of the facility is about 20 percent completed. The estimated first criticality date is June 1961. Oak Ridge National Laboratory graphite reactor (X-10).—As a result of the Windscale incident of October 1957, during which a release of radioactivity occurred when an attempt was made to anneal the graphite in the reactor, a detailed review of the procedures to be followed in the annealing of the graphite moderated X-10 reactor at Oak Ridge was conducted by the Commission and the ACRS. It was concluded that the stored energy in the graphite could be released safely by the proposed method which involves allowing the tempera- ture of the graphite to rise slowly under carefully controlled conditions to a predetermined value higher than the normal operating tempera- INDEMNITY AND REACTOR SAFETY 285 ture. The annealing is scheduled to be conducted in the summer of 1960. Experimental gas-cooled reactor (EGCR).-This reactor, now under construction at the Oak Ridge National Laboratory, is to be both a power and experimental reactor. The plant is designed to produce. 85 thermal megawatts at a gas outlet temperature of 1,050° F. and pressure of 230 pounds per square inch gage, and 25 megawatts of net electrical power. It is also designed to accommodate eight tubes through the core in which experimental loops eventually will be in- stalled. The proposed design of this reactor, its containment, and the reactor site were reviewed by the ACRS, and they concluded that this facility could be constructed at this site with reasonable assur- ance that it could be operated without undue hazard. The Commis- sion staff recommended that further studies be made concerning the adequacy of the proposed containment leakage specifications, and hazards associated with the conduct of the proposed experimental program. These studies, the final hazards analysis and the operat- ing procedures that eventually will be developed will be reviewed prior to the operation of the EGCR. SPERT II.-The SPERT II reactor, now under construction at NRTS, is a heterogeneous water-cooled and moderated reactor de- signed for operation at pressures up to 300 pounds per square inch gage and temperatures up to 400° F. with a coolant flow rate of up to 20,000 gallons per minute. This reactor will be used to study the influence of various moderators and reflectors on reactor kinetics. The facility will provide for both static and flow tests with reactor cores employing either light or heavy water as a moderator-reflector, and tests using solid reflector materials. The facility is in a remote location as a protective measure against possible accidental releases of radioactivity. In addition, the more hazardous experiments that are contemplated for SPERT II will be conducted only when favor- able meteorological conditions prevail. The ACRS concluded that the facility could be operated as proposed without undue hazard. The reactor achieved criticality in March of 1960. Nuclear merchant ship (NS "Savannah").—The construction of the nuclear powerplant, hull, and fittings of the NS Savannah is continu- ing. Initial loading of the reactor is scheduled for this summer. The ACRS and Commission staff are continuing their review of the safety aspects of the design of the nuclear powerplant and ship as it has been developed by the contractors. The latest report on the Savannah by the ACRS was made in February 1960. Further safety reviews on design and operating procedures of the Savannah will be conducted by the ACRS and the Commission staff before startup of the reactor. Modifications of the experimental boiling water reactor (EBWR).— The EBWR has been operating successfully and safely at the Argonne National Laboratory since December 1956 at power levels up to 62 thermal megawatts. In July 1959, the reactor was shut down to permit the modifications necessary for increasing its power to 100 thermal megawatts in order to demonstrate the fuel economy of this reactor type and to investigate the factors which would tend to limit the ultimate power density of such natural circulation boiling water reactors. The ACRS concluded that with minor modifications the reactor could be operated as proposed without undue hazard. 58511—60—pt. 2—12 286 INDEMNITY AND REACTOR SAFETY Hanford Road.-The Committee reviewed the safety considerations of a proposal from the State of Washington to construct a State highway across the southwest portion of the Hanford Reservation, and concluded that construction and use of this highway as proposed would not result in a significant hazard to the health and safety of the public. The Commission concurred in this judgment and informed appropriate State officials that they had no objections from a safety standpoint to the construction of the proposed highway. Plutonium recycle test reactor (PRTR).-The PRTR is a 70-megawatt (thermal) heavy water cooled and moderated experimental reactor being built by the Commission at Hanford. The reactor is of the pressure-tube type designed to operate at pressures up to 1,025 pounds per square inch gage and outlet coolant temperatures up to 530° F. The purpose of the reactor is to explore the feasibility of a reactor which generates its own fuel from fertile material alloyed into its fuel elements. The latest review of this reactor by the ACRS oc- curred in January 1960. Steps are now being taken to include the recommendations arising out of this review in the final safety analysis. of the PRTR to be prepared by the plant designers and operators. The analyses will be reviewed by the Commission prior to first critical- ity which is presently scheduled for August 1960. Department of Defense reactor projects In accordance with established procedures military reactor projects. of the Department of Defense are referred to the Commission for evaluation of safety. In the course of the evaluation the projects are referred to the ACRS for review and advice. Lockheed radiation effects reactor (RER).--The RER is a 10-mega- watt Department of the Air Force reactor operated for the purpose of investigating radiation effects on large-scale aircraft components and systems. Following startup in December 1958, this reactor has been operated at low-power levels except for a small amount of full- power operation performed for the purpose of determining reactor performance characteristics and environmental effects. The ACRS recommended a program of low-power operation for the RER until several conditions could be met. These included several improve- ments in the instrumentation and control systems, accumulation of operating experience, and inspections comparable in objectives to those of the AEC. A program for improvement of the instrumentation and control system is currently in progress. The AEC staff has inspected the facility and administered examinations to the operating group. Full-power operation of this facility will not be recommended to the Air Force until all improvements have been completed. Other activities The Commission staff has continued to keep the ACRS informed on actions taken on small research and training reactors which are not referred to the Committee for review and advice since they present no significant or novel safety problems. The staff has also continued its briefings to the Committee on the Commission's reactor safety research program. Among the subjects presented during the past 12 months were discussions of the results of research programs on metal-water reactions and the results and significance of tests con- ducted on the SPERT I experiment. Briefings were also presented INDEMNITY AND REACTOR SAFETY 287 on the Commission's program for investigating the feasibility of nu- clear superheat. The Division of Inspection has also continued its practice of briefing the Committee on the results of inspections of reactor facilities. In connection with the Commission's program to develop more de- tailed reactor safety standards and criteria, the ACRS suggested that a study be conducted on a full-time basis by the Commission to de- termine whether available knowledge is sufficient to determine de- tailed criteria, and whether this problem is susceptible to solution by planned research or whether primary reliance must be placed upon judgment and experience in evaluating reactor safety. A panel of experts has been formed to assist the Commission in establishing the scope, timing and direction of this study of reactor safety criteria. The following are members of the panel: Dr. Theos J. Thompson, director, MIT nuclear reactor, Massa- chusetts Institute of Technology. Dr. Miles Leverett, manager of development laboratories, Gen- eral Electric ANP Department. Dr. Warren E. Nyer, manager, reactor projects branch, Phillips Petroleum Co. Dr. Hood Worthington, director, Technical Division, Explosive Department, E. I. du Pont de Nemours Co. James H. Sterner, M.D., medical consultant to the AEC, East- man Kodak Co., Rochester, N.Y. Dr. Bernard I. Spinrad, director, Reactor Engineering Division, Argonne National Laboratory. It is hoped that this panel can report the results of its study and submit recommendations in the reasonably near future. Membership of the Advisory Committee on Reactor Safeguards Two additional members were added to the Advisory Committee. in 1959, bringing the present membership to 14. The new members are Dr. William K. Ergen, principal physicist, Oak Ridge National Laboratory, and Dr. Theos J. Thompson, director, MIT nuclear reactor, Massachusetts Institute of Technology. The following is the present membership of the Committee: Dr. Leslie Silverman, Chairman; professor of engineering in environmental hygiene, director of radiological hygiene pro- gram, Harvard University School of Public Health, Boston, Mass. Dr. C. Rogers McCullough, Vice Chairman; project specialist, Research and Engineering Division, Monsanto Chemical Co., Washington, D.C. Dr. Harvey Brooks, dean of engineering and applied physics, Harvard University, Cambridge, Mass. Dr. Willard P. Conner, Jr., technical assistant to director of research center, Research Department, Hercules Powder Co., Wilmington, Del. Dr. R. L. Doan, manager, Atomic Energy Division, Phillips Petroleum Co., Idaho Falls, Idaho. Dr. William K. Ergen, principal physicist, Oak Ridge National Laboratory, Oak Ridge, Tenn. Dr. Franklin A. Gifford, Jr., meteorologist in charge of the Oak Ridge office, U.S. Weather Bureau, Oak Ridge, Tenn. 288 INDEMNITY AND REACTOR SAFETY Dr. Henry W. Newson, professor of physics, Duke University, Durham, N.C. K. R. Osborn, chief engineer, General Chemical Division, Allied Chemical Corp., New York, N.Y. D. A. Rogers, manager of project analysis, Central Research Laboratory, Allied Chemical Corp., Morristown, N.J. Reuel C. Stratton, assistant director, Department of Research, the Travelers Insurance Cos. of Hartford, Conn. Dr. Theos J. Thompson, director, MIT nuclear reactor, Massa- chusetts Institute of Technology, Cambridge, Mass. Dr. Charles R. Williams, assistant vice president, Liberty Mutual Insurance Co., Boston, Mass. Dr. Abel Wolman, head, Department of Sanitary Engineering and Water Resources, the Johns Hopkins University, Baltimore, Md. ENCLOSURES TO AEC REPORT ENCLOSURE I TITLE 10-ATOMIC ENERGY CHAPTER 1-ATOMIC ENERGY COMMISSION PART 140-FINANCIAL PROTECTION REQUIREMENTS AND INDEMNITY AGREEMENTS The following amendments to Part 140 constitute a comprehensive revision to this part. Notice of proposed issuance of the following rules was published in the Federal Register on May 1, 1959 (24 F.R. 3508). A detailed statement of considerations explaining the provisions of the following amendments was published with the notice of proposed rule making at 24 F.R. 3508. Comments filed by interested persons have been given careful consideration. Except for sections 140.3, 140.6, 140.12, 140.15 and 140.17, the provisions of the following amendments are the same as those incorporated in the notice of proposed rule making. Section 140.6 (concerning reports) has been rewritten to clarify the obligations of an indemnified licensee following a nuclear incident and to eliminate the filing of extensive reports by a licensee until the extent of the incident and the need for such reports and records have been determined by the Commission. Minor changes, mainly of a drafting nature, have been made in paragraphs 140.3(j), 140.12(b)(4) (ii), 140.15(a) and 140.17(b). Sections 140.11 and 140.12 establish the amount of financial protection to be maintained by reactor licensees. They are substantially similar to the correspond- ing provisions in the proposed rule published on May 1, 1959. Representatives of the Nuclear Energy Liability Insurance syndicates (“NELIA” and “MAELU”) have urged that the Commission require, in some cases, the maintenance of higher levels of financial protection than are required under the following rules. Their recommendations are set forth particularly in a letter dated January 22, 1960, and the attachments thereto, from Charles J. Haugh, Vice President, The Travel- ers Insurance Company. This letter and the attachments are available for public inspection in the Commission's Public Document Room, 1717 H Street NW., Washington 25, D.C. Copies of the aforesaid letter may be obtained upon request to the Director, Division of Licensing and Regulation, U.S. Atomic Energy Com- mission, Washington 25, D.C. The Commission plans to reevaluate the provisions of sections 140.11 and 140.12 in the light of comments received from the Nuclear Energy Liability Insurance syndicate, and comments received from interested members of the public, not later than December 31, 1960. All interested persons who desire to submit comments for the consideration of the Commission on the proposals filed by the nuclear energy insurance syndicates and their member companies should send them to the U.S. Atomic Energy Com- mission, Washington 25, D.C., Attention: Director, Division of Licensing and Regulation within 90 days after publication of this notice in the Federal Register. Effective 30 days after publication in the Federal Register, 10 CFR Part 140, "Financial Protection Requirements and Indemnity Agreements," is amended to read as follows: 289 290 INDEMNITY AND REACTOR SAFETY Sec. SUBPART A-GENERAL PROVISIONS 140.1 Purpose 140.2 Scope 140.3 Definitions 140.4 140.5 140.6 140.7 Fees. Interpretations Communications Reports 140.8 Specific exemptions SUBPART B-PROVISIONS APPLICABLE TO APPLICANTS AND LICENSES OTHER THAN FEDERAL AGENCIES AND NONPROFIT EDUCATIONAL INSTITUTIONS 140.10 Scope 140.11 Amounts of Financial Protection for Certain Reactors 140.12 Amount of Financial Protection Required for Other Reactors 140.13 Amount of Financial Protection Required of Certain Holders of Construction Permits 140.14 Types of Financial Protection 140.15 Proof of Financial Protection 140.16 Commission Review of Proof of Financial Protection 140.17 Special Provisions Applicable to Licensees Furnishing Financial Protection in Whole or in Part in the Form of Liability Insurance 140.18 Special Provisions Applicable to Licensees Furnishing Financial Protection in Whole or in Part in the Form of Adequate Resources 140.19 Failure by Licensees to Maintain Financial Protection 140.20 Indemnity Agreements 140.51 Scope SUBPART C-PROVISIONS APPLICABLE ONLY TO FEDERAL AGENCIES 140.52 Indemnity Agreements on SUBPART D-PROVISIONS APPLICABLE ONLY TO NONPROFIT EDUCATIONAL INSTITUTIONS 140.71 Scope 140.72 Indemnity Agreements AUTHORITY: § 140.1 to 140.72 issued under sec. 161, 68 Stat. 948; 42 U.S.C. 2201. Interpret or apply sec. 4, Public Law 85-256; Public Law 85-744. SUBPART A-GENERAL PROVISIONS § 140.1 Purpose. The regulations in this part are issued to provide appropri- ate procedures and requirements for determining the financial protection required of licensees and for the indemnification and limitation of liability of certain licensees and other persons pursuant to section 170 of the Atomic Energy Act of 1954 (68 Stat. 919), as amended. § 140.2 Scope. (a) The regulations in this part apply to each person who is an applicant for or holder of a license issued pursuant to Part 50 of this chapter to operate a nuclear reactor. (b) (1) Subpart B does not apply to any person subject to subpart C or D. Subpart C applies only to persons found by the Commission to be Federal agen- cies. Subpart D applies only to persons found by the Commission to be nonprofit educational institutions with respect to licenses and applications for licenses for the conduct of educational activities. (2) Any applicant or licensee subject to this part may apply for a finding that such applicant or licensee is subject to the provisions of subpart C or D. The application should state the grounds for the requested finding. Any application for a finding pursuant to this paragraph may be included in an application for license. § 140.3 Definitions. Definitions. As used in this part, (a) "Act" means the Atomic Energy Act of 1954 (68 Stat. 919) including any amendments thereto. (b) "Commission" means the Atomic Energy Commission or its duly author- ized representatives. (c) Federal agency" means a Government agency such that any liability in tort based on the activities of such agency would be satisfied by funds appropriated by the Congress and paid out of the United States Treasury. (d) "Financial protection" means the ability to respond in damages for public liability and to meet the costs of investigating and defending claims and settling suits for such damages. (e) "Government agency" means any executive department, commission, in- dependent establishment, corporation, wholly or partly owned by the United States of America which is an instrumentality of the United States, or any board, bureau, division, service, office, officer, authority, administration, or other estab- lishment in the executive branch of the Government. (f) "Nuclear reactor" means any apparatus, other than an atomic weapon, designed or used to sustain nuclear fission in a self-supporting chain reaction. INDEMNITY AND REACTOR SAFETY 291 (g) "Person" means (1) any individual, corporation, partnership, firm, asso- ciation, trust, estate, public or private institution, group, Government agency other than the Commission, any State or any political subdivision thereof, or any political entity within a State, any foreign government or nation or any political subdivision of any such government or nation, or other entity; and (2) any legal successor, representative, agent, or agency of the foregoing. (h) "Source material" means source material as defined in the regulations con- tained in Part 40 of this chapter. (i) "Special nuclear material" means (1) plutonium, uranium 233, uranium enriched in the isotope 233 or in the isotope 235, and any other material which the Commission, pursuant to the provisions of section 51 of the Act, determines to be special nuclear material, but does not include source material; or (2) any material artificially enriched by any of the foregoing, but does not include source material. (j) "Testing reactor" means a nuclear reactor which is of a type described in section 50.21(c) of Part 50 of this chapter and for which an application has been filed for a license authorizing operation at: (1) a thermal power level in excess of 10 megawatts; or (2) a thermal power level in excess of 1 megawatt, if the reactor is to contain: (i) a circulating loop through the core in which the applicant proposes to conduct fuel experiments; or (ii) a liquid fuel loading; or (iii) an experimental facility in the core in excess of 16 square inches in cross-section. § 140.4 Interpretations. Except as specifically authorized by the Commission in writing, no interpretations of the meaning of the regulations in this part by any officer or employee of the Commission other than a written interpretation by the General Counsel will be recognized to be binding upon the Commission. § 140.5 Communications. All communications concerning the regulations in this part should be addressed to the Atomic Energy Commission, Washington 25, D.C., Attention: Division of Licensing and Regulation. § 140.6 Reports. (a) In the event of bodily injury or property damage arising out of or in connection with the possession or use of the radioactive material at the location or in the course of transportation or in the event any claim is made therefor, written notice containing particulars sufficient to identify the licensee and reasonably obtainable information with respect to the time, place, and circumstances thereof, or the nature of the claim shall be furnished by or for the licensee to the Commission as promptly as practicable. The terms "the radioactive material", "the location", and "in the course of transportation" as used in this section shall have the meanings defined in the applicable indemnity agreement between the licensee and the Commission.2 (b) The Commission may require any person subject to this part to keep such records and furnish such reports to the Commission as the Commission deems necessary for the administration of the regulations in this part. § 140.7 Fees. (a) Each licensee shall pay a fee to the Commission at the rate of $30 per year per thousand kilowatts of thermal capacity authorized in its license: Provided, That no fee shall be less than $100 per annum for any nuclear reactor. Such fee shall be due for the period beginning with the date on which the applicable indemnity agreement is effective and shall be paid in accordance with billing instructions received from the Commission. (b) Where a licensee manufactures a number of nuclear reactors each having a power level not exceeding 3% megawatts, for sale to others and operates them at the licensee's location temporarily prior to delivery, the licensee shall report to the Commission the maximum number of such reactors to be operated at that location at any one time. In such cases, the fee shall equal $100 multiplied by the number of reactors reported by the licensee. In the event the number of reactors operated at any one time exceed the estimate so reported, the licensee shall report the additional number of reactors to the Commission and additional charges will be made. If experience shows that less than the estimated number of reactors have been operated, appropriate adjustment in subsequent bills will be made by the Commission. § 140.8 Specific exemptions. The Commission may, upon application by any interested person, grant such exemptions from the requirements of this part as it determines are authorized by law and are otherwise in the public interest. A proposed form of indemnity agreement was published in the Federal Register on August 28, 1958 (23 F.R. 6681), for public comment. It is expected that a final form of indemnity agreemet will be pub- lished at an early date as Appendix B to this part. 292 INDEMNITY AND REACTOR SAFETY SUBPART B-PROVISIONS APPLICABLE ONLY TO APPLICANTS AND LICENSEES OTHER THAN FEDERAL AGENCIES AND NONPROFIT EDUCATIONAL INSTITUTIONS § 140.10 Scope. This subpart applies to applicants for and holders of licenses issued pursuant to Part 50 of this chapter authorizing operation of nuclear reac- tors, except licenses for the conduct of educational activities issued to, or applied for by, persons found by the Commission to be nonprofit educational institutions and exept persons found by the Commission to be Federal agencies. § 140.11 Amounts of financial protection for certain reactors. (a) Each licensee is required to have and maintain financial protection (1) in the amount of $1,000,000 for each nuclear reactor he is authorized to operate at a thermal power level not exceeding ten kilowatts; (2) in the amount of $1,500,000 for each nuclear reactor he is authorized to operate at a thermal power level in excess of ten kilowatts but not in excess of one megawatt; (3) in the amount of $2,500,000 for each nuclear reactor other than a testing reactor or a reactor licensed under section 104b of the Act which is is authorized to operate at a thermal power level exceeding one megawatt but not in excess of 10 megawatts; and (4) in the amount of $60,000,000 for each nuclear reactor he is authorized to operate and which is designed for the production of electrical energy and has a rated capacity of 100,000 electrical kilowatts or more. (b) In any case where a person is authorized pursuant to Part 50 to operate two or more nuclear reactors at the same location, the total financial protection required of the licensee for all such reactors is the highest amount which would otherwise be required for any one of those reactors: Provided, That such financial protection covers all reactors at the location. § 140.12 Amount of financial protection required for other reactors. (a) Each licensee is required to have and maintain financial protection for each nuclear reactor for which the amount of financial protection is not determined in section 140.11, in an amount determined pursuant to the formula and other provisions of this section: Provided, That in no event shall the amount of financial protection required for any nuclear reactor under this section be less than $3,500,000 or more than $60,000,000. (b) (1) The formula is: x=B times P. (2) In the formula: X Amount of financial protection in dollars. B=Base amount of financial protection. P=Population factor. (3) The base amount of financial protection is equal to $150 times the maxi- mum power level, expressed in termal kilowatts, as authorized by the applicable license. (4) The population factor (P) shall be determined as follows: (i) Step 1. The area to be considered includes all minor civil divisions (as shown in the 1950 Census of Population, Bureau of the Census, or later data available from the Bureau) which are wholly or partly within a circle with the facility at its center and having a radius in miles equal to the square root of the maximum authorized power level in thermal megawatts. (ii) Step 2. Identify all minor civil divisions according to the same census which are in whole or in part within the circle determined in Step 1. Determine the population of each such minor civil division (according to the same census or later data available from the Bureau of the Census). For each minor civil divi- sion, divide its population by the square of the estimated distance to the nearest mile from the reactor to the geographic center of the minor civil division: Pro- If the vided, That no such distance shall be deemed to be less than one mile. sum of the quotients thus obtained for all minor civil divisions wholly or partly within the circle is 1000 or less, the population factor is 1. If the sum of these quotients is more than 1000 but not more than 3000, the population factor is 1.1. If the sum of these quotients is more than 3000 but not more than 5000, the population factor is 1.2. If the sum of these quotients is more than 5000 but not more than 7000, the population factor is 1.3. If the sum of these quotients is If the more than 7000 but not more than 9000, the population factor is 1.4. sum of these quotients is more than 9000, the population factor is 1.5. (c) In any case where a person is authorized pursuant to Part 50 of this chapter to operate two or more nuclear reactors at the same location, the total financial INDEMNITY AND REACTOR SAFETY 293 protection required of the licensee for all such reactors is the highest amount which would otherwise be required for any one of those reactors: Provided, That such financial protection covers all reactors at the location. (d) Except in cases where the amount of financial protection calculated under this section is a multiple of $100,000, amounts determined pursuant to this section shall be adjusted to the next highest multiple of $100,000. permits. § 140.13 Amount of financial protection required of certain holders of construction Each holder of a construction permit under Part 50 of this chapter authorizing construction of a nuclear reactor, who is also the holder of a license under Part 70 of this chapter authorizing possession and storage only of special nuclear material at the site of the nuclear reactor for use as fuel in operation of the nuclear reactor after issuance of an operating license under Part 50 of this chapter, shall (during the period prior to issuance of the license authorizing operation of the reactor) have and maintain financial protection in the amount of $1,000,000. Proof of financial protection shall be filed with the Commission in the manner specified in Section 140.15 prior to issuance of the license under Part 70 of this chapter. § 140.14 Types of financial protection. (a) The amounts of financial protection required under this part may be furnished and maintained in the form of: (1) An effective policy of liability insurance from private sources; or (2) Adequate resources to provide the financial protection required by § 140.01 or § 140.12; or (3) Such other type of financial protection as the Commission may approve; or (4) Any combination of the foregoing. (b) In any case where the Commission has approved proof of financial protec- tion filed by a licensee the licensee shall not substitute one type of financial protection for another type without first obtaining the written approval of the Commission. $140.15 Proof of financial protection. a) (1) Proof of financial protection in the case of licensees who maintain financial protection in whole or in part in the form of liability insurance shall (with respect to such insurance) consist of a copy of the liability policy (or policies) together with a certificate by the insurers issuing such policy stating that said copy is a true copy of a currently effective policy issued to the licensee. The licensee may furnish such financial protection in the form of the nuclear energy liability insurance policy set forth in Appendix "A" of this part. (2) Such proof may, alternatively, consist of a copy of the declarations page of a nuclear energy liability policy in the form set forth in Appendix "A" and issued to the licensee: Provided, that such policy form has been filed by the insurers with the Commission. The declarations page shall be accompanied by a certificate by the insurers stating that said copy is a true copy of the declarations page of a currently effective policy and identifying the policy (including endorse- ments) by reference to the policy form which has been filed by them with the Commission. (3) The Commission will accept any other form of nuclear energy liability insurance as proof of financial protection, if it determines that the provisions of such insurance provide financial protection under the requirements of the Com- mission's regulations and the Act. (b) Proof of financial protection in the case of licensees who maintain financial protection in whole or in part in the form specified in section 140.14(a)(2) shall consist of a showing that the licensee clearly has adequate resources to provide the financial protection required under this part. For this purpose, the applicant or licensee shall file with the Commission: (1) Annual financial statements for the three complete calendar or fiscal years preceding the date of filing, together with an opinion thereon by a certified public accountant. The financial statements shall include balance sheets, operating statements and such supporting schedules as may be needed for interpretation of the balance sheets and operating statements. (2) If the most recent statements required under subparagraph (1) have been prepared as of a date more than 90 days prior to the date of filing, similar financial statements, prepared as of a date not more than 90 days prior to the date of filing, should be included. These statements need not be reviewed by a certified public accountant. (c) The Commission may require any licensee to file with the Commission such additional proof of financial protection or other financial information as the Commission determines to be appropriate for the purpose of determining whether the licensee is maintaining financial protection as required under this part. 294 INDEMNITY AND REACTOR SAFETY (d) Proof of financial protection shall be subject to the approval of the Commission. (e) The licensee shall promptly notify the Commission of any material change in proof of financial protection or in other financial information filed with the Commission under this part. § 140.16 Commission review of proof of financial protection. The Commission will review proof of financial protection filed by any licensee or applicant for license. If the Commission finds that the licensee or applicant for license is maintaining financial protection in accordance with the requirements of this part, approval of the financial protection will be evidenced by incorporation of appro- priate provision in the license. § 140.17 Special provisions applicable to licensees furnishing financial protection in whole or in part in the form of Liability insurance. In any case where a licensee undertakes to maintain financial protection in the form of liability insurance for all or part of the financial protection required by this part, (a) The Commission may require proof that the organization or organiza- tions which have issued such policies are legally authorized to issue them and do business in the United States and have clear ability to meet their obligations and (b) At least 30 days prior to the termination of any such policy, the licensee shall notify the Commission of the renewal of such policy or shall file other proof of financial protection. § 140.18 Special provisions applicable to licensees furnishing financial protection in whole or in part in the form of adequate resources. In any case where a licensee undertakes to maintain financial protection in the form specified in section 140.14(a) (2) for all or part of the financial protection required by this part, (a) The licensee shall file with the Commission at least annually, before such dates as are specified in the applicable written approval issued by the Commission pursuant to Section 140.16, a balance sheet and operating state- ment prepared and certified by a certified public accountant in accordance with conventional accounting practices. (b) The Commission may require such licensee to file with the Commission such additional financial information as the Commission determines to be appropriate for the purpose of determining whether the licensee is maintain- ing financial protection as required by this part. § 140.19 Failure by licensees to maintain financial protection. In any case where the Commission finds that the financial protection maintained by a licensee is not adequate to meet the requirements of this part, the Commission may suspend or revoke the license or may issue such order with respect to licensed activities as the Commission determines to be appropriate or necessary in order to carry out the provisions of this part and of section 170 of the Act. § 140.20 Indemnity Agreements. (a) The Commission will execute and issue agreements of indemnity pursuant to the regulations in this part or such other regulations as may be issued by the Commission. Such agreements, as to any licensee, shall be effective on: (1) The effective date of the license (issued pursuant to Part 50 of this chapter) authorizing the licensee to operate the nuclear reactor involved; or (2) The effective date of the license (issued pursuant to Part 70 of this chapter) authorizing the licensee to possess and store special nuclear material at the site of the nuclear reactor for use as fuel in operation of the nuclear reactor after issuance of an operating license for the reactor, whichever is earlier. No such agreement, however, shall be effective prior to September 26, 1957. (b) (1) The general form of indemnity agreement to be entered into by the Commission with licensees subject to this subpart is set forth in Appendix "B".³ The form of indemnity agreement to be entered into by the Commission with any particular licensee under this part shall contain such modifications in the form in Appendix "B" as are provided for in applicable licenses, regulations, or orders of the Commission. (2) Each licensee who has executed an indemnity agreement under this part shall enter into such agreements amending such indemnity agreement as are required by applicable licenses, regulations or orders of the Commission. 3 See footnote to section 140.6. INDEMNITY AND REACTOR SAFETY 295 SUBPART C-PROVISIONS APPLICABLE ONLY TO FEDERAL AGENCIES § 140.51 Scope. This subpart applies only to persons found by the Commis- sion to be Federal agencies, which have applied for or are holders of licenses issued pursuant to Part 50 of this chapter authorizing operation of nuclear reactors. NOTE: Federal agencies are not required to furnish financial protection. § 140.52 Indemnity Agreements. (a) The Commission will execute agreements of indemnity with each Federal agency subject to this subpart pursuant to the reg- ulations in this part or such other regulations as may be issued by the Commis- sion. Each such agreement shall contain such provisions as are required by law and such additional provisions as may be incorporated therein by the Commission pursuant to regulation. Such agreements, as to any licensee, shall be effective on: (1) The effective date of the license (issued pursuant to Part 50 of this chapter) authorizing the licensee to operate the nuclear reactor involved; or (2) The effective date of the license (issued pursuant to Part 70 of this chapter) authorizing the licensee to possess and store special nuclear material at the site of the nuclear reactor for use as fuel in operation of the nuclear reactor after issuance of an operating license for the reactor, whichever is earlier. No such agreement, however, shall be effective prior to September 26, 1957. SUBPART D-PROVISONS APPLICABLE ONLY TO NONPROFIT EDUCATIONAL INSTITUTIONS § 140.71 Scope. This subpart applies only to applicants for and holders of licenses issued for the conduct of educational activities to persons found by the Commission to be nonprofit educational institutions, except that this subpart does not apply to Federal agencies. NOTE: Financial protection is not required with respect to licenses issued for the condut of educational activities to persons found by the Commission to be non-profit educational institutions. § 140.72 Indemnity Agreements. (a) The Commission will execute agree- ments of indemnity with each person subject to this subpart in accordance with this part or such other regulations as may be issued by the Commission. Each such agreement shall contain such provisions as are required by law and such additional provisions as may be incorporated therein by the Commission pursuant to regulation. Such agreements, as to any licensee, shall be effective on: (1) The effective date of the license (issued pursuant to Part 50 of this chapter) authorizing the licensee to operate the nuclear reactor involved; or (2) The effective date of the license (issued pursuant to Part 70 of this chapter) authorizing the licensee to possess and store special nuclear material at the site of the nuclear reactor for use as fuel in operation of the nuclear reactor after issuance of an operating license, whichever is earlier. No such agreement shall be effective as of a date earlier than August 23, 1958, except that the Commission may upon good cause found, make such agreement effective as of a date prior to August 23, 1958. In no event may the agreement be effective as of a date prior to September 26, 1957. Appendix "A"-Form of Insurance Policy (to be added later). Appendix "B"--Form of Indemnity Agreement (to be added later). NOTE: The reporting requirements contained herein have been approved by the Bureau of the Budget in accordance with the Federal Reports Act of 1942. Dated at Germantown, Maryland, this 30th day of March, 1960. (Signed) A. R. LUEDECKE, General Manager (For the Atomic Energy Commission). 296 INDEMNITY AND REACTOR SAFETY ENCLOSURE II TITLE 10-ATOMIC ENERGY CHAPTER I-ATOMIC ENERGY COMMISSION PART 140-FINANCIAL PROTECTION REQUIREMENTS AND IN- DEMNITY AGREEMENTS On August 28, 1958 (23 F.R. 6681, 6684), and on May 1, 1959 (24 F.R. 3508), the Atomic Energy Commission published for public comment two proposed amendments to Part 140 "Financial Protection Requirements and Indemnity Agreements". One proposed amendment included a form of indemnity agreement to be entered into between the Commission and nuclear reactor licensees. Under the second proposed amendment, the Commission proposed to grant approval by rule to the furnishing of financial protection in the form of the nuclear energy liability insurance policy form then available from the NELIA and MAELU syndicates (Nuclear Energy Liability Association and Mutual Atomic Energy Liability Underwriters, respectively). Following publication of the proposed amendments, interested members of the public have submitted many helpful comments and suggestions. The comments and suggestions received have been taken into consideration by the Commission in the adoption of the following amendments. The amendment set forth below approves, as proof of financial protection, the revised form of nuclear energy liability insurance policy currently available from NELIA and MAELU (Section 140.75, Appendix "A"). The revised form of nuclear energy liability insurance policy set forth in Ap- pendix "A" has been filed with and approved by a substantial number of state insurance agencies and has been issued by the syndicates to many AEC licensees in lieu of the binders previously in effect. The new insurance policy differs from the form previously published in the Federal Register on August 28, 1958, and May 1, 1959, primarily in the following respects: 1. The new form includes coverage of nuclear incidents occurring in trans- portation of nuclear materials to the reactor from any location, without regard to whether the transportation originated at a Government facility. The pre- vious form provided coverage during transportation to the reactor only if the transportation was from a facility owned by the United States. 2. The period of prior notice to the Commission before the insurers can make a policy suspension effective has been increased from 12 hours to at least one full business day. 3. The new form excludes coverage for risks resulting from the transportation of "useful" or "commercial" isotopes. The NELIA and MAELU organizations have explained that such coverage is afforded in conventional liability policies. 4. With respect to a common occurrence, the aggregate insurance under all nuclear energy liability insurance policies issued by each syndicate has been expanded from the limit of liability of the highest applicable policy to the total pool capacity, if the facilities involved in the common occurrence have in the aggregate purchased that amount of coverage from the synidcate. 5. At hearings held before the Joint Committee on Atomic Energy on April 29, 1959 (Hearings Before the Joint Committee on Atomic Energy, "Indemnity and Reactor Safety," page 4), Commission representatives testified that, among other things, the phraseology of the common occurrence provision in the insurance policies may cover more situations than intended by the syndicates. To clarify the intent of the insurance syndicates, a statement was subsequently furnished to the Joint Committee on Atomic Energy on behalf of NELIA and MAELU (Hearings, page 42). With respect to the common occurrence provision, the syndicates said: "The Commission, in the statement made to the Joint Committee, has expressed doubt that the common occurrence provision in the policy (condition 4) has the meaning intended, and particularly that it may be construed, under subparagraph (a), to be applicable to bodily injury or property damage resulting from the con- flation of fission products discharged from two or more reactors as a result of separate, distinct occurrences at each such reactor. The persons responsible for the policy language did not intend any such result but, on the contrary, intended that if two reactors at different locations 'blow' at or about the same time, the applicable limit of liability of each reactor's policy will be available for resulting claims, and condition 4 will not be applicable. In brief, the pools (MAELU and INDEMNITY AND REACTOR SAFETY 297 NELIA) intend subparagraph (a) to apply only to situations where the gradual accumulation of nuclear materials discharged or dispersed over a period of time from two or more nuclear facilities, whether in the course of their normal opera- tion or as a result of undetected malfunction or accidental leakage of effluents. A simple illustration is the contamination of a watershed as the result of the con- tinued operation of two or more facilities for a period of time, without the occur- rence of an incident, identifiable in time, at any of the facilities. "Even if the construction of subparagraph (a) of condition 4 feared by the Commission is possible, the pools could not take advantage of it because of the settled principle of law that if a provision in an insurance policy is ambiguous, the provisions must be given the ineaning most favorable to the insured. “It is submitted that the provisions of the Price-Anderson Act particularly the definition of 'nuclear incident,' and subsection (c) and (e) of section 170, require that with respect to Government indemnity any occurrence or series of occur- rences to which the policy's common occurrence provision is applicable should be construed as one nuclear incident. Otherwise the Government would be liable, in such a situation, not for $500 million but for multiples thereof." The general approval contained in the following amendment of the form of policy now offered by NELIA and MAELU should not be construed as indicat- ing that it is the only form of nuclear energy liability insurance policy which the Commission will approve. The Commission will accept any other form of nuclear energy liability insurance policy as proof of financial protection under this part if it concludes that such other form provides adequate financial protection under the requirements of the Commission's regulations and applicable legislation. The Commission will welcome further comments and suggestions concerning these amendments. Effective thirty days after publication in the Federal Register, Part 140, Title 10 CFR, is amended by adding the following Appendix. APPENDIX "A" [Sec. 140.75] NUCLEAR ENERGY LIABILITY POLICY (FACILITY FORM) The undersigned members of hereinafter called the "companies" each for itself, severally and not jointly, and in the respective proportions herein- after set forth, agree with the insured, named in the declarations made a part hereof, in consideration of the premium and in reliance upon the statements in the declarations and subject to the limit of liability, exclusions, conditions and other terms of this policy: INSURING AGREEMENTS I Coverage A-Bodily injury and property damage liability To pay on behalf of the insured: (1) all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage caused by the nuclear energy hazard, and the companies shall defend any suit against the insured alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy; but the companies may make such investigation, negotiation and settlement of any claim or suit as they deem expedient; (2) costs taxed against the insured in any such suit and interest on any judgment therein; (3) premiums on appeal bonds and on bonds to release attachments in any such suit, but without obligation to apply for or furnish such bonds; (4) reasonable expenses, other than loss of earnings, incurred by the insured at the companies' request. Coverage B-Damage to property of an insured away from the facility With respect to property damage caused by the nuclear energy hazard to property of an insured which is away from the facility, to pay to such insured those sums which such insured would have been legally obligated to pay as damages therefor, had such property belonged to another. 298 INDEMNITY AND REACTOR SAFETY Coverage C-Subrogation—Offsite employees With respect to bodily injury sustained by any employee of an insured and caused by the nuclear energy hazard, to pay to the workmen's compensation carrier of such insured all sums which such carrier would have been entitled to recover and retain as damages from another person or organization, had such person or organization alone been legally responsible for such bodily injury, by reason of the rights acquired by subrogation by the payment of the benefits required of such carrier under the applicable workmen's compensation or occu- pational disease law. An employer who is a duly qualified self-insurer under such Îaw shall be deemed to be a workmen's compensation carrier within the meaning of this coverage. This Coverage C does not apply to bodily injury sustained by any person who is employed at and in connection with the facility. This Coverage C shall not constitute workmen's compensation insurance as required under the laws of any state. Definition of insured II The unqualified word "insured" includes (a) the named insured and (b) any other person or organization with respect to his legal responsibility for damages because of bodily injury or property damage caused by the nuclear energy hazard. Subdivision (b) above does not include as an insured the United States of America or any of its agencies. Subject to Condition 3 and the other provisions of this policy, the insurance applies separately to each insured against whom claim is made or suit is brought. Definitions Wherever used in this policy: III "bodily injury" means bodily injury, sickness or disease, including death resulting therefrom, sustained by any person; property damage" means physical injury to or destruction or radio-active contamination of property, and loss of use of property so injured, destroyed or contaminated, and loss of use of property while evacuated or withdrawn from use because possibly so contaminated or because of imminent danger of such con- tamination; "nuclear material" means source material, special nuclear material or byproduct material; "source material," "special nuclear material," and "byproduct material" have the meanings given them in the Atomic Energy Act of 1954, or in any law amendatory thereof; "spent fuel" means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in any nuclear reactor; "waste" means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (1) or (2) thereof; "the facility" means the facility described in the declarations and includes the location designated in Item 3 of the declarations and all property and operations at such location; "nuclear facility" means "the facility" as defined in any Nuclear Energy Liability Policy (Facility Form) issued by the companies or by The term "nuclear facility" also means (1) any nuclear reactor, (2) any equipment or device designed or used for (a) separating the isotopes of uranium or plutonium, (b) processing or utilizing spent fuel, or (c) handling, processing or packaging waste, (3) any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235, (4) any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; : INDEMNITY AND REACTOR SAFETY 299 "indemnified nuclear facility" means (1) "the facility" as defined in any Nuclear Energy Liability Policy (Facility Form) issued by the companies or by (2) any other nuclear facility, if financial protection is required pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, with respect to any activities or operations conducted thereat; "nuclear reactor" means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material; "nuclear energy hazard" means the radioactive, toxic, explosive or other hazardous properties of nuclear material, but only if (1) the nuclear material is at the facility or has been discharged or dispersed therefrom without intent to relinquish possession or custody thereof to any person or organization, or (2) the nuclear material is in an insured shipment which is (a) in the course of transportation, including handling and temporary storage incidental thereto, within the territorial limits of the United States of America, its territories or possessions, Puerto Rico or the Canal Zone and (b) away from any other nuclear facility; "insured shipment" means a shipment of source material, special nuclear material, spent fuel or waste, herein called "material," (1) to the facility from a nuclear facility owned by the United States of America, but only if the transportation of the material is not by predetermination to be inter- rupted by the removal of the material from a transporting conveyance for any purpose other than the continuation of its transportation, or (2) from the facility to any other location except an indemnified nuclear facility, but only until the material is removed from a transporting conveyance for any purpose other than the continuation of its transportation. Application of policy IV This policy applies only to bodily injury or property damage (1) which is caused during the policy period by the nuclear energy hazard and (2) which is discovered and for which written claim is made against the insured, not later than two years after the end of the policy period. This policy does not apply: EXCLUSIONS (a) to any obligation for which the insured or any carrier as his insurer may be held liable under any workmen's compensation, unemployment compensation or disability benefits law, or under any similar law; (b) except with respect to liability of another assumed by the insured under contract, to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured; but this exclusion does not apply to bodily injury to any person who is not employed at and in connection with the facility if the insured has complied with the requirements of the applicable workmen's compensation or occupational disease law re- specting the securing of compensation benefits thereunder to his employees; (c) to liability assumed by the insured under contract, other than an as- sumption in a contract with another of the liability of any person or organi- zation which would be imposed by law on such person or organization in the absence of an express assumption of liability; (d) to bodily injury or property damage due to the manufacturing, handling or use at the location designated in Item 3 of the declarations, in time of peace or war, of any nuclear weapon or other instrument of war utilizing special nuclear material or byproduct material; (e) to bodily injury or property damage due to war, whether or not de- clared, civil war, insurrection, rebellion or revolution, or to any act or condi- tion incident to any of the foregoing; (f) to property damage to any property at the location designated in Item 3 of the declarations, other than aircraft, watercraft or vehicles li ensed for highway use, provided such aircraft, watercraft or vehicles are not used in connection with the operation of the facility; (g) to property damage to nuclear material in the course of transportation to or from the facility including handling or storage incidental thereto; 300 INDEMNITY AND REACTOR SAFETY Im A (h) under Coverage B, to property damage due to neglect of the insured to use all reasonable means to save and preserve the property after knowledge of the occurrence resulting in such property damage. 1. Premium CONDITIONS The named insured shall pay the companies the advance premium stated in the declarations, for the period from the effective date of this policy through December 31 following. Thereafter, at the beginning of each calendar year while this policy is in force, the named insured shall pay the advance premium for such year to the companies. The advance premium for each calendar year shall be stated in a written notice given by the companies to the named insured as soon as practicable prior to or after the beginning of such year. Such advance premiums are estimated premiums only. As soon as practicable after each December 31 and after the termination of this policy, the earned premium for the preceding premium period shall be computed in accordance with the companies' rules, rates, rating plans, premiums and minimum premiums applicable to this insurance. If the earned premium thus computed for any premium period exceeds the advance premium previously paid for such period, the named insured shall pay the excess to the companies; if less, the companies shall return to the named insured the unearned portion paid by such insured. The named insured shall maintain records of the information necessary for premium computation and shall send copies of such records to the companies as directed, at the end of each calendar year, at the end of the policy period and at such other times during the policy period as the companies may direct. 2. Inspection; suspension The companies shall be permitted to inspect the facility and to examine the insured's books and records at any time, as far as they relate to the subject matter of this insurance. If a representative of the companies discovers a condition which he believes to be unduly dangerous with respect to the nuclear energy hazard, a representative of the companies may request that such condition be corrected without delay. In the event of non-compliance with such request, a representative of the com- panies may, by notice to the named insured, to any other person or organization considered by the companies to be responsible for the continuance of such danger- our condition, and to the United States Atomic Energy Commission, suspend the insurance with respect to the named insured and such other person or organization effective 12:00 midnight of the next business day of such Commission following the date that such Commission receives such notice. The period of such suspen- sion shall terminate as of the time stated in a written notice from the companies to the named insured and to each such person or organization that such condition has been corrected. 3. Limit of liability; termination of policy upon exhaustion of limit Regardless of the number of persons and organizations who are insureds under this policy, and regardless of the number of claims made and suits brought against any or all insureds because of one or more occurrences resulting in bodily injury or property damage caused during the policy period by the nuclear energy hazard, the limit of the companies' liability stated in the declarations is the total liability of the companies for their obligations under this policy and the expenses incurred by the companies in connection with such obligations, including (a) payments in settlement of claims and in satisraction of judgments against the insureds for damages because of bodily injury or property damage, payments made under parts (2), (3) and (4) of Coverage A and payments made in settlement of claims under Coverages B and C; (b) payments for expenses incurred in the investigation, negotiation, settlement and defense of any claim or suit, including, but not limited to, the cost of such services by salaried employees of the companies, fees and expenses of independent adjusters, attorneys' fees and disbursements, ex- penses for expert testimony, inspection and appraisal of property, examination, X-ray or autopsy or medical expenses of any kind; (c) payments for expenses incurred by the companies in investigating an occurrence resulting in bodily injury or property damage or in minimizing its effects. Each payment made by the companies in discharge of their obligations under this policy or for expenses incurred in connection with such obligations shall reduce INDEMNITY AND REACTOR SAFETY 301 ง by the amount of such payment the limit of the companies' liability under this policy. If, during the policy period or subsequent thereto, the total of such payments made by the companies shall exhaust the limit of the companies' liability under this policy, all liability and obligations of the companies under this policy shall thereupon terminate and shall be conclusively presumed to have been discharged. This policy, if not theretofore canceled, shall thereupon automatically terminate. Regardless of the number of years this policy shall continue in force and the number of premiums which shall be payable or paid, the limit of the companies' liability stated in the declarations shall not be cumulative from year to year. 4. Limitation of liability; common occurrence Any occurrence or series or occurrences resulting in bodily injury or property arising out of the radioactive, toxic, explosive or other hazardous properties of (a) nuclear material discharged or dispersed from the facility over a period of days, weeks, months or longer and also arising out of such properties of other nuclear material so discharged or dispersed from one or more other nuclear facilities insured by the companies under a Nuclear Energy Liability Policy (Facility Form), or (b) source material, special nuclear material, spent fuel or waste in the course of transportation for which insurance is afforded under this policy and also arising out of such properties of other source material, special nuclear material, spent fuel or waste in the course of transportation for which insurance is afforded under one or more other Nuclear Energy Liability Policies (Facility Form) issued by the companies, shall be deemed to be a common occurrence resulting in bodily injury or property damage caused by the nuclear energy hazard. With respect to such bodily injury and property damage (1) the total aggregate liability of the companies under all Nuclear Energy Liability Policies (Facility Form), including this policy, applicable to such common occurrence shall be the sum of the limits of liability of all such policies, the limit of liability of each such policy being as determined by Condition 3 thereof, but in no event shall such total aggregate liability of the companies exceed $46,500,000; (2) the total liability of the companies under this policy shall not exceed that proportion of the total aggregate liability of the companies, as stated in clause (1) above, which (a) the limit of liability of this policy, as determined by Condition 3, bears to (b) the sum of the limits of liability of all such policies issued by the companies, the limit of liability of each such policy being as determined by Condition 3, thereof. The provisions of this condition shall not operate to increase the limit of the companies' liability under this policy. 5. Notice of occurrence, claim or suit In the event of bodily injury or property damage to which this policy applies or of an occurrence which may give rise to claims therefor, written notice con- taining particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to or the companies as soon as practicable. If claim is made or suit is brought against the insured, he shall immediately forward to or the companies every demand, notice, summons or other process received by him or his representative. 6. Assistance and cooperation of the insured The insured shall cooperate with the companies and, upon the companies' request, attend hearings and trials and assist in making settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of any legal proceedings in connection with the subject matter of this insurance. The insured shall not, except at his own cost, make any payment, assume any obliga- tion or incur any expense. 7. Action against companies-Coverages A and C No action shall lie against the companies or any of them unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the companies. Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under 58511-60-pt. 2—13 302 INDEMNITY AND REACTOR SAFETY this policy to the extent of the insurance afforded by this policy. No person or organization shall have any right under this policy to join the companies or any of them as parties to any action against the insured to determine the insured's liability, nor shall the companies or any of them be impleaded by the insured or his legal representative. Bankruptcy or insolvency of the insured or of the in- sured's estate shall not relieve the companies of any of their obligations hereunder. 8. Action against companies-Coverage B No suit or action on this policy for the recovery of any claim for property dam- age to which Coverage B applies shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with and un- less commenced within two years after the occurrence resulting in such property damage. 9. Insured's duties when loss occurs-Coverage B In the event of property damage to which Coverage B applies, the insured shall furnish a complete inventory of the property damage claimed, showing in detail the amount thereof. Within ninety-one days after the occurrence resulting in such property damage, unless such time is extended in writing by the com- panies, the insured shall render to the companies a proof of loss, signed and sworn to by the insured, stating the knowledge and belief of the insured as to the following: identification of such occurrence; the interest of the insured in the property destroyed or damaged, and the amount of each item of property damage claimed; all encumbrances on such property; and all other contracts of insurance, whether valid or not, covering any of such property. The insured shall include in the proof of loss a copy of all descriptions and schedules in all policies. Upon the companies' request, the insured shall furnish verified plans and specifications of any such property. The insured, as often as may be reasonably required, shall exhibit to any person designated by the companies any of such property, and submit to examinations under oath by any person named by the companies and subscribe the same; and, as often as may be reasonably required, shall produce for examination all books of account, records, bills, invoices and other vouchers, or certified copies thereof if originals be lost, at such reasonable time and place as may be designated by the companies or their representatives, and shall permit extracts and copies thereof to be made. 10. Appraisal-Coverage B In case the insured and the companies shall fail to agree as to the amount of property damage, then, on the written demand of either, each shall select a com- petent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand. The appraisers shall first select a competent and disinterested umpire and, failing for fifteen days to agree upon such umpire, then, on request of the insured or the companies, such umpire shall be selected by a judge of a court of record in the state in which the property is located. The appraisers shall then appraise each item of property damage and, failing to agree, shall submit their differences only to the umpire. An award in writing, so item- ized, of any two when filed with the companies shall determine the amount of property damage. Each appraiser shall be paid by the party selecting him and the expenses of the appraisal and umpire shall be paid by the parties equally. The companies shall not be held to have waived any of their rights by any act relating to appraisal. 11. Subrogation In the event of any payment under this policy, the companies shall be subro- gated to all the insured's rights of recovery therefor against any person or organiza- ton, and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Prior to knowledge of bodily injury or property damage caused by the nuclear energy hazard the insured may waive in writing any right of recovery against any person or organization, but after such knowledge the insured shall not waive or otherwise prejudice any such right of recovery. The companies hereby waive any rights of subrogation acquired against the United States of America of any of its agencies by reason of any payment under this policy. The companies do not relinquish, by the foregoing provisions, any right to restitution from the insured out of any recoveries made by the insured on account of a loss covered by this policy of any amounts to which the companies would be entitled had such provisions, or any of them, not been included in this policy. ( INDEMNITY AND REACTOR SAFETY 303 12. Other insurance If the insurance afforded by this policy for loss or expense is concurrent with insurance afforded for such loss or expense by a Nuclear Energy Liability Policy (Facility Form) issued to the named insured by _hereinafter called "concurrent insurance," the companies shall not be liable under this policy for a greater proportion of such loss or expense than the limit of liability stated in the declarations of this policy bears to the sum of such limit and the limit of liability stated in the declarations of such concurrent policy. If the insured has other valid and collectible insurance (other than such con- current insurance or any other nuclear energy liability insurance issued by the companies or to any person or organization) applicable to loss or expense covered by this policy, the insurance afforded by this policy shall be excess insurance over such other insurance; provided, with respect to any person who is not employed at and in connection with the facility, such insurance as is afforded by this policy for bodily injury to an employee of the insured arising out of and in the course of his employment shall be primary insurance under such other insurance. 13. Changes Notice to any agent or knowledge possessed by any agent or by any other person shall not effect a waiver or a change in any part of this policy or estop the com- panies from asserting any right under the terms of this policy; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy executed by on behalf of the companies. 14. Assignment Assignment of interest by the named insured shall not bind the companies. until their consent is endorsed hereon; if, however, the named insured shall die or be declared bankrupt or insolvent, this policy shall cover such insured's legal representative, receiver or trustee as an insured under this policy, but only with respect to his liability, as such, and then only provided written notice of his appointment as legal representative, receiver or trustee is given to the companies within ten days after such appointment. 15. Cancelation This This policy may be canceled by the named insured by mailing to the companies and the United States Atomic Energy Commission written notice stating when, not less than thirty days thereafter, such cancelation shall be effective. policy may be canceled by the companies by mailing to the named insured at the address shown in this policy and to the United States Atomic Energy Commission written notice stating when, not less than ninety days thereafter, such cancelation shall be effective; provided in the event of non-payment of premium or if the operator of the facility, as designated in the declarations, is replaced by another person or organization, this policy may be canceled by the companies by mailing to the named insured at the address shown in this policy and to the United States Atomic Energy Commission written notice stating when, not less than thirty days thereafter, such cancelation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice. The effective date and hour of cancelation stated in the notice shall become the end of the policy period. Delivery of such written notice either by the named insured or by the companies shall be equi- valent to mailing. Upon termination of cancelation of this policy, other than as of the end of December 31 in any year, the earned premium for the period this policy has been in force since the preceding December 31 shall be computed in accordance with the following provisions: (a) if this policy is terminated, pursuant to Condition 3, by reason of the exhaustion of the limit of the companies' liability, all premium theretofore paid or payable shall be fully earned; (b) if the named insured cancels, the earned premium for such period shall be computed in accordance with the customary annual short rate table and procedure, provided if the named insured cancels after knowledge of bodily injury or property damage caused by the nuclear energy hazard, all premiums theretofore paid or payable shall be fully earned; (c) if the companies cancel, the earned premium for such period shall be computed pro rata. Premium adjustment, if any, may be made either at the time cancelation is effected or as soon as practicable after cancelation becomes effective, but payment or tender of unearned premium is not a condition of cancelation. 304 INDEMNITY AND REACTOR SAFETY 16. Company representation (a) Any notice, sworn statement or proof of loss which may be required by the provisions of this policy may be given to any one of the companies, and such notice, statement or proof of loss so given shall be valid and binding as to all companies. (b) In any action or suit against the companies, service of process may be made on any one of them, and such service shall be deemed valid and binding service on all companies. (c) is the agent of the companies with respect to all matters pertaining to this insurance. All notices or other communications required by this policy to be given to the companies may be given to such agent, at its office with the same force and effect as if given directly to the com- panies. Any requests, demands or agreements made by such agent shall be deemed to have been made directly by the companies. at 17. Authorization of named insured Except with respect to compliance with the obligations imposed on the insured by Conditions 5, 6, 7, 8, 9, 10 and 11 of this policy, the named insured is authorized to act for every other insured in all matters pertaining to this insurance. 18. Changes in subscribing companies and in their proportionate liability By acceptance of this policy the named insured agrees that the members of liable under this policy, and the proportionate liability of each such member, may change from year to year, and further agrees that regardless of such changes: (1) each company subscribing this policy upon its issuance shall be liable only for its stated proportion of any obligation assumed or expense incurred under this policy because of bodily injury or property damage caused, during the period from the effective date of this policy to the close of December 31 next following, by the nuclear energy hazard; for each subsequent calendar year, beginning January 1 next following the effective date of this policy, the subscribing companies and the proportionate liability of each such company shall be stated in an endorsement issued to form a part of this policy, duly executed and attested by the of on behalf of each such company, and mailed or delivered to the named insured; (2) this policy shall remain continuously in effect from the effective date stated in the declarations until terminated in accordance with Condition 3 or Condition 15; (3) neither the liability of any company nor the limit of liability stated in the declarations shall be cumulative from year to year. 19. Declarations By acceptance of this policy the named insured agrees that the statements in the declarations are the agreements and representations of the named insured, that this policy is issued in reliance upon the truth of such representations and that this policy embodies all agreements between the named insured and the companies or any of their agents relating to this insurance. In Witness Whereof, each of the subscribing companies has caused this policy to be executed and attested on its behalf by the and of duly countersigned on the declarations page by an authorized representative. For the subscribing companies By INDEMNITY AND REACTOR SAFETY 305 Subscribing companies Proportion of 100% Nuclear Energy Liability Policy No. (Facility Form) DECLARATIONS Item 1. Named Insured Address (No. Street Town or City State) day of Item 2. Policy Period: Beginning at 12:01 A.M. on the 19, and continuing through the effective date of the cancelation or termination of this policy, standard time at the address of the named insured as stated herein. Item 3. Description of the Facility: Location 1 1 1 I 1 1 Type 1 1 1 1 I 1 11 1 | 1 1 I 1 [ The Operator of the facility is Item 4. The limit of the companies' liability is $. the terms of this policy having reference thereto. Item 5. Advance Premium $__ subject to all Item 6. These declarations and the schedules forming a part hereof give a com- plete description of the facility, insofar as it relates to the nuclear energy hazard, except as noted Date of Issue 19. Countersigned by Authorized Representative NUCLEAR ENERGY LIABILITY POLICY (FACILITY FORM) AMENDMENT OF TRANSPORTATION Coverage (Indemnified Nuclear Facility) It is agreed that the definition of "insured shipment" in Insuring Agreement III is amended to read: "insured shipment" means a shipment of source material, special nuclear material, spent fuel or waste, herein called "material," (1) to the facility from any location except an indemnified nuclear facility, but only if the transportation of the material is not by predetermination to be interrupted by removal of the material from a transporting conveyance for any purpose other than the continuation of its transportation, or (2) from the facility to any other location, but only until the material is removed from a trans- porting conveyance for any purpose other than the continuation of its transportation.' Effective Date of this Endorsement Issued to Date of issue To form a part of Policy No.---- For the Subscribing Companies By Countersigned by Endorsement No. 1 I Dated at Germantown, Maryland, this 30th day of March 1960. (Signed) A. R. LUEDECKE, General Manager (For the Atomic Energy Commission). 306 INDEMNITY AND REACTOR SAFETY ENCLOSURE III ATOMIC ENERGY COMMISSION [10 CFR Part 140] FINANCIAL PROTECTION REQUIREMENTS AND INDEMNITY AGREEMENTS The following proposed amendments are intended to establish the form of indemnity agreement which the Commission would execute with licensees furnishing insurance policies as proof of financial protection (Appendix "B"); and to establish the form of inde unity agreement which the Commission would enter into with licensees furnishing proof of financial protection in the form of the licensee's resources (Appendix "C"). The forms of indemnity agreement which the Commission will enter into with nonprofit educational institutions and federal government agencies are in preparation. The revised proposed form of indemnity agreement contained in Appendix "B" will be entered into by the Commission with licensees who furnish proof of financial protection in the form of the insurance policy in Appendix "A", section 140.75. The principal changes in this form of indemnity agreement as compared with that published for public comment on August 28, 1958, and May 1, 1959, include the following: 1. The new form of indemnity agreement includes common occurrence provi- sions (Article I, par. 3; Article II, par. 7; Article III, par. 4) which are similar to the common occurrence provisions in the NELIA and MAELU insurance policy (Appendix "A", section 140.75). Inclusion of the common occurrence provision in the indemnity agreement goes far towards eliminating a gap in protection which might otherwise exist. The common occurrence provisions in the indemnity agreement do not fully eliminate the gap in coverage which may result from a "common occurrence. A remaining possible gap is due to the fact that, although the Commission's obliga- tions under the common occurrence provisions begin at an amount equal to the sum of all applicable insurance required under the regulations or $60,000,000, whichever is lower, NELIA and MAELU limit their responsibility to the capacity of their respective pools; that is, if all of the insurance policies applicable to the common occurrence are issued by one of the syndicates, the obligation of the insurers would not exceed the capacity of the particular syndicate ($46,500,000 in the case of NELIA or $13,500,000 in the case of MAELU). 2. Provisions are included (Article I, par. 4(c)) to protect against double cover- age in the event a nuclear incident occurs in transportation of nuclear material between two idemnified licensed facilities. Under these provisions, the shipper's agreement would be applicable and the consignee's agreement would not be applicable. Parenthetically it may be noted that a principal purpose of provisions covering transportation "to the location" is to cover shipments of nuclear fuel directly from a fuel element fabricator's plant to the site of the reactor in which the elements will be used as fuel. 3. Licensees furnishing proof of financial protection in the form of their own resrources are required "to indemnify and hold harmless all persons indemnified as their interest may appear from public liability ***." This obligation includes coverage of liability for damage to on-site property. Because the form of NELIA- MAELU policy does not cover such liability, the indemnity agreement requires licensees furnishing the policies as financial protection to indemnify any person against liability for damage to on-site property (Article II, par. 2(b)). On April 8, 1959 the Commission recommended to the Congress that the indemnity provisions of the Atomic Energy Act of 1954 (section 170) be amended to eliminate coverage of liability for damage to so-called "on-site" property. If the recommended amendment is enacted, paragraph 2b., Article II, of `the proposed indemnity agreement would be deleted and a corresponding change would be made in the provisions of Article III of the Agreement. 4. Under the Atomic Energy Act of 1954, as amended, the Commission is required to indemnify against damage to property of persons indemnified, pro- vided that such property is covered under the terms of the financial protection and is not located at the site of, and used in connection with, the activity where the nuclear incident occurs. The financial protection provided by the NELIA- MAELU Policy form covers damage to property of persons indemnified only if .. J INDEMNITY AND REACTOR SAFETY 307 .. i. : : : the property is away from the site. The form of indemnity agreement in Appendix "B" has been clarified to exclude coverage of damage to on-site property of persons liable for the nuclear incident (Article III, par. 2). 5. A provision has been added to the indemnity agreement (Paragraph b. of Item 2 of the Attachment thereto) under which the Commission would fill a "gap" between the financial protection and the Commission's indemnity obliga- tion, which results from payments made by the insurers under a nuclear energy liability insurance policy. The provision includes a "floor", so that the Com- mission obligation under this provision would not go below $1 million. In the event that the licensee does not obtain reinstatement of the amount of financial protection within ninety days after the date of a payment under the policy, a provision has been added under which the Commission may issue an order requiring the licensee to furnish financial protection in another form (Article II, par. 2(a)). The changes described above with respect to Appendix "B", have been incorporated, as appropriate, in Appendix "C". Notice is hereby given that the Commission is considering adoption of the following amendments. All interested persons who desire to submit written comments and suggestions for consideration in connection with the proposed amendments should send them to the United States Atomic Energy Commission, Washington 25, D.C., Attention: Director, Division of Licensing and Regulation, within sixty days after publication of this notice in the Federal Register. Com- ments received after that period will be considered if it is practicable to do so, but assurance of consideration can not be given except as to comments sent to the Director within the period specified. 1. Amend section 140.20(b) to read as follows: (1) The general form of indemnity agreement to be entered into by the Commission with licensees who furnish financial protection in the form of the nuclear energy liability insurance policy set forth in Appendix "A" is contained in Appendix "B". The general form of indemnity agreement to be entered into by the Commission with licensees who furnish financial protection in the form specified in Section 140.14(a) (2) is set forth in Appendix "C". (2) The form of indemnity agreement to be entered into by the Commission with any particular licensee under this part shall contain such modifications of the applicable form in Appendices "B" and "C", as are provided for in applicable licenses, regulations or orders of the Commission. (3) Each licensee who has executed an indemnity agreement under this part shall enter into such agreements amending such indemnity agreement as are required by applicable licenses, regulations or orders of the Commission. 2. The following Appendix "B" is added: APPENDIX "B" [Sec. 140.76] This indemnity agreement # is entered into by and between the (hereinafter referred to as the "licensee") and the United States Atomic Energy Commission (hereinafter referred to as the "Commission") pursuant to subsection 170c. of the Atomic Energy Act of 1954, as amended, (hereinafter referred to as "the Act"). As used in this agreement, ARTICLE I 1. "Nuclear reactor," "byproduct material," "person," "financial protection," "source material," and "special nuclear material" shall have the meanings given them in the Atomic Energy Act of 1954, as amended, and the regulations issued by the Commission; 2. "Amount of financial protection" means the amount specified in Item 2 of the Attachment annexed hereto. 3. (a) "Nuclear incident" means any occurrence or series of occurrences at the location or in the course of transportation causing bodily injury, sickness, disease, or death, or loss of or damage to property, or loss of use of property, arising out of or resulting from the radioactive, toxic, explosive, or other hazardous properties of the radioactive material. (b) Any occurrence or series of occurrences causing bodily injury, sickness, disease or death, or loss of or damage to property, or loss of use of property, arising out of or resulting from the radioactive, toxic, explosive or other hazardous properties of— 308 INDEMNITY AND REACTOR SAFETY i. the radioactive material discharged or dispersed from the location over a period of days, weeks, months or longer and also arising out of such proper- ties of other material defined as "the radioactive material" in any other agreement or agreements entered into by the Commission under subsection 170c. of the Act and so discharged or dispersed from "the location" as defined in any such other agreement, or ii. the radioactive material in the course of transportation and also arising out of such properties of other material defined in any other agreement entered into by the Commission pursuant to subsection 170c. of the Act as "the radioactive material" and which is in the course of transportation shall be deemed to be a common occurrence. A common occurrence shall be deemed to constitute a single nuclear incident. 4. "In the course of transportation" means in the course of transportation within the United States, including handling or temporary storage incidental thereto, of the radioactive material to the location or from the location provided that: (a) with respect to transportation of the radioactive material to the location, such transportation is not by pre-determination to be interrupted by the removal of the material from the transporting conveyance for any purpose other than the continuation of such transportation to the location or temporary storage incidental thereto; (b) the transportation of the radioactive material from the location shall be deemed to end when the radioactive material is removed from the trans- porting conveyance for any purpose other than the continuation of trans- portation or temporary storage incidental thereto; (c) "in the course of transportation" as used in this agreement shall not include transportation of the radioactive material to the location if the material is also "in the course of transportation" from any other "location" as defined in any other agreement entered into by the Commission pursuant to subsection 170c. of the Act. 5. "Person indemnified" means the licensee and any other person who may be liable for public liability. 6. "Public liability" means any legal liability arising out of or resulting from a nuclear incident, except (1) claims under state or Federal Workmen's Com- pensation Acts of employees of persons indemnified who are employed at the location and in connection with the licensee's possession, use or transfer of the radioactive material; and (2) claims arising out of an act of war. 7. "The location" means the location described in Item 4 of the Attachment hereto. 8. "The radioactive material" means source, special nuclear, and byproduct material which (1) is used or to be used in, or irradiated by the nuclear reactor or reactors subject to the license or licenses designated in the Attachment hereto, or (2) which is produced as the result of operation of said reactor(s). 9. "United States" when used in a geographical sense includes all Territories and possessions of the United States, the Canal Zone and Puerto Rico. ARTICLE II 1. At all times during the term of the license or licenses designated in Item 3 of the Attachment hereto, the licensee will maintain financial protection in the amount specified in Item 2 of the Attachment and in the form of the nuclear energy If more than one license liability insurance policy designated in the Attachment. is designated in Item 3 of the Attachment, the licensee agrees to maintain such financial protection until the end of the term of that license which will be the last to expire. The licensee shall, notwithstanding the expiration, termination, modi- fication, amendment, suspension or revocation of any license or licenses designated in Item 3 of the Attachment, maintain such financial protection in effect until all the radioactive material has been removed from the location and transportation of the radioactive material from the location has been completed as provided in paragraph 4, Article I, or until the Commission authorizes the termination or the The Commission will not unreasonably modification of such financial protection. withhold such authorization. 2. (a) Upon the occurrence of any event which reduces the limit of liability provided under the said policy, the licensee will promptly apply to his insurers for reinstatement of the amount specified in Item 2 of the Attachment (without reference to paragraph b. of Item 2) and will make all reasonable efforts to obtain such reinstatement. In the event that the licensee has not obtained reinstatement of such amount within ninety days after the date of such reduction, the Commis- INDEMNITY AND REACTOR SAFETY 309 : ... sion may issue an order requiring the licensee to furnish financial protection for such amount in another form. (b) The licensee undertakes and agrees to indemnity and hold harmless all persons indemnified, as their interest may appear, from public liability for damage to property which is at the location. 3. The licensee agrees that it will hold the United States and the Commission harmless from any damages resulting from the use or possession of special nuclear material by the licensee. 4. The obligations of the licensee under paragraphs 2(b) and 3 of this Article, together with any public liability satisfied by the insurers under the policy or policies designated in the Attachment hereto, shall not in the aggregate exceed the amount of financial protection with respect to any nuclear incident, including the reasonable costs of investigating and settling claims and defending suits for damage. 5. The obligations of the licensee under paragraphs 2(b) and 3 of this Article shall apply only with respect to nuclear incidents occurring during the term of the license designated in Item 3 of the Attachment. If more than one license is designated in Item 3 of the Attachment, the obligations of the licensee under paragraphs 2(b) and 3 of this Article shall apply only with respect to nuclear incidents occurring prior to the end of the term of that license which is the last to expire. The obligations of the licensee under paragraphs 2(b) and 3 of this Article shall not apply with respect to nuclear incidents occurring prior to the effective date of this agreement as specified in the Attachment. 6. Upon the expiration or revocation of any license designated in Item 3 of the Attachment, the Commission will enter into an appropriate amendment of this agreement with the licensee reducing the amount of financial protection required under this Article; provided, that the licensee is then entitled to a reduction in the amount of financial protection under applicable Commission regulations and orders. 7. With respect to a common occurrence, if the sum of the amounts specified in Item 2 of the Attachment hereto and the Attachments annexed to all other applicable agreements exceeds $60,000,000, the obligations of the licensee under this agreement shall not exceed a greater proportion of $60,000,000 than the amount specified in Item 2 of the Attachment hereto bears to the sum of such amount and the amounts specified in Item 2 of the Attachments annexed to all other applicable agreements. As used in this paragraph, and subparagraph 4(b), Article III, "other applicable agreements" means each other agreement entered into by the Commission pursuant to subsection 170c. of the Act in which agreement the nuclear incident is defined as a "common occurrence.” 8. The obligations of the licensee under this Article shall not be affected by any failure or default on the part of the Commission or the Government of the United States to fulfill any or all of its obligations under this agreement. Bankruptcy or insolvency of any person indemnified other than the licensee, or the estate of any person indemnified other than the licensee, shall not relieve the licensee of any of his obligations hereunder. ARTICLE III 1. The Commission undertakes and agrees to indemnify and hold harmless the licensee and other persons indemnified, as their interest may appear, from public liability. 2. With respect to damage caused by a nuclear incident to property of any person legally liable for the nuclear incident, other than property which is located at the location, the Commission agrees to pay to such person those sums which the Commission would have obligated to pay under this agreement if such prop- erty had belonged to another. The obligation of the Commission under this paragraph 2 does not apply to property damage due to neglect of the person indemnified to use all reasonable means to save and preserve the property after knowledge of a nuclear incident. 3. The Commission agrees to indemnify and hold harmless the licensee, and other persons indemnified as their interest may appear, from the reasonable costs of investigating, settling and defending claims for public liability. 4. (a) The obligations of the Commission under this Article shall apply only with respect to such public liability, such damage to property of persons legally liable for the nuclear incident, and such reasonable costs described in paragraph 3 of this Article as in the aggregate exceed the amount of financial protection. (b) With respect to a common occurrence, the obligations of the Commission under this Article shall apply only with respect to such public liability, such 310 INDEMNITY AND REACTOR SAFETY damage to property of persons legally liable for the nuclear incident, and to such reasonable costs described in paragraph 3 of this Article, as in the aggregate exceed whichever of the following is lower: (1) the sum of the amounts specified in Item 2 of the Attachment hereto and the Attachments annexed to all other applicable agreements; or (2) $60,000,000. 5. The obligations of the Commission under this Article shall apply only with respect to nuclear incidents occurring during the term of the license designated in Item 3 of the Attachment. If more than one license is designated in Item 3 of the Attachment the obligations of the Commission under this Article shall apply only with respect to nuclear incidents cccurring prior to the end of the term of that license which is the last to expire. The obligations of the Commission under this Article shall not apply with respect to nuclear incidents occurring prior to the effective date of this agreement as specified in the Attachment. 6. The obligations of the Commission under this and all other agreements and contracts to which the Commission is a party shall not in the aggregate exceed $500,000,000 with respect to any nuclear incident. 7. The obligations of the Commission under this Article, except to the licensee for damage to property of the licensee, shall not be affected by any failure on the part of the licensee to fulfill its obligations under this agreement. Bankruptcy or insolvency of the licensee or any other person indemnified or of the estate of the licensee or any other person indemnified shall not relieve the Commission of any of its obligations hereunder. ARTICLE IV 1. When the Commission determines that the United States will probably be required to make indemnity payments under the provisions of this agreement, the Commission shall have the right to collaborate with the licensee and other persons indemnified in the settlement and defense of any claim and shall have the right (a) to require the prior approval of the Commission for the settlement or payment of any claim asserted against the licensee or other person indemnified for public liability or damage to property of persons legally liable for the nuclear incident which claim the licensee or the Commission may be required to indemnify under this agreement; and (b) to appear through the Attorney General of the United States on behalf of the licensee or other person indemnified, take charge of such action and settle or defend any such action. If the settlement or defense of any such action or claim is undertaken by the Commission, the licensee shall furnish all reasonable assistance in effecting a settlement or asserting a defense. 2. Neither this agreement nor any interest therein nor claim thereunder may be assigned or transferred without the approval of the Commission. ARTICLE V The parties agree that they will enter into appropriate amendments of this agreement to the extent that such amendments are required pursuant to the Atomic Energy Act of 1954, as amended, or licenses, regulations or orders of the Commission. ARTICLE VI The licensee agrees to pay to the Commission such fees as are established by the Commission pursuant to regulation or order. INDEMNITY AND REACTOR SAFETY 311 : UNITED STATES ATOMIC ENERGY COMMISSION Indemnity Agreement No. Item 1. Licensee Address ATTACHMENT Item 2.a. Amount of Financial Protection Item 3. Item 4. Item 5. 1 I 1 1 I 1 T 1 1 1 1 1 b. With respect to any nuclear incident, the amount specified in this Item 2 of this Attachment shall be deemed to be reduced to the extent that any payment made by the insurer or insurers under a policy or policies specified in Item 5 of this Attachment reduces the aggregate amount of such insurance policies below $-- -; provided that (1) the amount specified in this item shall in no event be deemed to be reduced to less than $1 million; and (2) the amount specified in this item shall not be deemed to be reduced to an amount less than the aggregate amount of insurance available for such nuclear incident under all policies specified in Item 5 of this Attachment. License Number or Numbers Location Insurance Policy No.(s) M., on the day of I 1 1 The Indemnity Agreement designated above, of which this Attachment is a part, is effective as of 19____, and shall continue until the effective date of the expiration or termination of the agreement pursuant to the Atomic Energy Act of 1954, as amended, and applicable regulations or orders of the Commission. For the United States Atomic Energy Commission By For the (Name of Licensee) By Dated at Germantown, Maryland, the day of 19 3. The following Appendix "C" is added: APPENDIX "C" [Sec. 140.77] This indemnity agreement # is entered into by and between the (hereinafter referred to as the "licensee') and the United States Atomic Energy Commission (hereinafter referred to as the "Commission") pursuant to subsection 170c. of the Atomic Energy Act of 1954, as amended, (hereinafter referred to as "the Act"). As used in this agreement, ARTICLE I 1. "Nuclear reactor," "byproduct material," "person," "financial protection," "source material," and "special nuclear material" shall have the meanings given them in the Atomic Energy Act of 1954, as amended, and the regulations issued by the Commission; 2. Amount of financial protection" means the amount specified in Item 2 of the Attachment annexed hereto; 3. (a) "Nuclear incident" means any occurrence or series of occurrences at the location or in the course of transportation causing bodily injury, sickness, disease, or death, or loss of or damage to property, or loss of use of property, arising out of or resulting from the radioactive, toxic, explosive, or other hazardous properties of the radioactive material. (b) Any occurrence or series of occurrences causing bodily injury, sickness, disease or death, or loss of or damage to property, or loss of use of property, arising out of or resulting from the radioactive, toxic, explosive or other hazardous properties of i. the radioactive material discharged or dispersed from the location over a period of days, weeks, months or longer and also arising out of such prop- erties of other material defined as "the radioactive material" in any other 312 INDEMNITY AND REACTOR SAFETY agreement or agreements entered into by the Commission under subsection 170c. of the Act and so discharged or dispersed from "the location" as defined in any such other agreement, or ii. the radioactive material in the course of transportation and also arising out of such properties of other material defined in any other agreement entered into by the Commission pursuant to subsection 170c. of the Act as "the radioactive material" and which is in the course of transportation shall be deemed to be a common occurrence. A common occurrence shall be deemed to constitute a single nuclear incident. 4. "In the course of transportation" means in the course of transportation within the United States, including handling or temporary storage incidental thereto, of the radioactive material to the location or from the location provided that: (a) with respect to transportation of the radioactive material to the loca- tion, such transportation is not by pre-determination to be interrupted by the removal of the material from the transporting conveyance for any pur- pose other than the continuation of such transportation to the location or temporary storage incidental thereto; (b) the transportation of the radioactive material from the location shall be deemed to end when the radioactive material is removed from the trans- porting conveyance for any purpose other than the continuation of trans- portation or temporary storage incidental thereto; (c) "in the course of transportation" as used in this agreement shall not include transportation of the radioactive material to the location if the material is also "in the course of transportation" from any other "location" as defined in any other agreement entered into by the Commission pursuant to subsection 170c. of the Act. 5. "Person indemnified" means the licensee and any other person who may be liable for public liability. 6. "Public liability" means any legal liability arising out of or resulting from a nuclear incident, except (1) claims under state or Federal Workmen's Compensa- tion Acts of employees of persons indemnified who are employed at the location and in connection with the licensee's possession, use or transfer of the radioactive material; and (2) claims arising out of an act of war. 7. "The location" means the location described in Item 4 of the Attachment hereto. 8. "The radioactive material" means source, special nuclear, and byproduct material which (1) is used or to be used in, or irradiated by, the nuclear reactor or reactors subject to the license or licenses designated in the Attachment hereto, or (2) which is produced as the result of operation of said reactor(s). 9. "United States" when used in a geographical sense includes all Territories and possessions of the United States, the Canal Zone and Puerto Rico. ARTICLE II 1. The licensee undertakes and agrees to indemnify and hold harmless all persons indemnified, as their interest may appear, from public liability. 2. With respect to damage caused by a nuclear incident to property of any person legally liable for the incident, the licensee agrees to pay to such person those sums which such person would have been obligated to pay if such property had belonged to another; provided, that the obligation of the licensee under this paragraph 2 does not apply with respect to: (a) Property which is located at the location and used in connection with the licensee's possession, use or transfer of the radioactive material; (b) Property damage due to neglect of the person indemnified to use all reasonable means to save and preserve the property after knowledge of a nuclear incident. 3. The licensee agrees that it will hold the United States and the Commission harmless from any damages resulting from the use or possession of special nuclear material by the licensee. 4. The obligations of the licensee under paragraphs 1, 2, and 3 of this Article shall not in the aggregate exceed the amount of financial protection with respect to any nuclear incident, including the reasonable costs of investigating and set- tling claims and defending suits for damage. 5. The obligations of the licensee under paragraphs 1, 2, and 3 of this Article shall apply only with respect to nuclear incidents occurring during the term of the license designated in Item 3 of the Attachment. If more than one license is INDEMNITY AND REACTOR SAFETY 313 [1 : : 1 : : designated in Item 3 of the Attachment, the obligations of the licensee under paragraphs 1, 2, and 3 of this Article shall apply only with respect to nuclear inci- dents occurring prior to the end of the term of that license which is the last to expire. The obligations of the licensee under paragraphs 1, 2, and 3 of this Article shall not apply with respect to nuclear incidents occurring prior to the effective date of this agreement as specified in the Attachment. 6. Upon the expiration or revocation of any license designated in Item 3 of the Attachment, the Commission will enter into an appropriate amendment of this agreement with the licensee reducing the amount of financial protection required under this Article; provided, that the licensee is then entitled to a reduction in the amount of financial protection under applicable Commission regulations and orders. 7. With respect to a common occurrence, if the sum of the amounts specified in Item 2 of the Attachment hereto and the Attachments annexed to all other applicable agreements exceeds $60,000,000, the obligations of the licensee under this agreement shall not exceed a greater proportion of $60,000,000 than the amount specified in Item 2 of the Attachment hereto bears to the sum of such amount and the amounts specified in Item 2 of the Attachments annexed to all other applicable agreements. As used in this paragraph, and in subparagraph 4(b), Article III, "other applicable agreements" means each other agreement entered into by the Commission pursuant to subsection 170c. of the Act in which agreement the nuclear incident is defined as a "common occurrence". 8. The obligations of the licensee under this Article shall not be affected by any failure or default on the part of the Commission or the Government of the United States to fulfill any or all of its obligations under this agreement. Bank- ruptcy or insolvency of any person indemnified other than the licensee, or the estate of any person indemnified other than the licensee, shall not relieve the licensee of any of his obligations hereunder. ARTICLE III 1. The Commission undertakes and agrees to indemnify and hold harmless the licensee and other persons indemnified, as their interest may appear, from public liability. 2. With respect to damage caused by a nuclear incident to property of any person legally liable for the nuclear incident, other than property which is located at the location and used in connection with the licensee's possession, use or transfer of the radioactive material, the Commission agrees to pay to such person those sums which the Commission would have been obligated to pay under this agreement if such property had belonged to another. The obligation of the Commission under this paragraph 2 does not apply to property damage due to neglect of the person indemnified to use all reasonable means to save and preserve the property after knowledge of a nuclear incident. 3. The Commission agrees to indemnify and hold harmless the licensee, and other persons indemnified as their interest may appear, from the reasonable costs of investigating, settling and defending claims for public liability. 4. (a) The obligations of the Commission under this Article shall apply only with respect to such public liability, such damage to property of persons legally liable for the nuclear incident, and such reasonable costs described in paragraph 3 of this Article as in the aggregate exceed the amount of financial protection. (b) With respect to a common occurrence, the obligations of the Commission under this Article shall apply only with respect to such public liability, such damage to property of persons legally liable for the nuclear incident and to such reasonable costs described in paragraph 3 of this Article as in the aggregate exceed whichever of the following is lower: (1) sum of the amounts specified in Item 2 of the Attachment hereto and the Attachments annexed to all other applicable agreements; or (2) $60,000,000. 5. The obligations of the Commission under this Article shall apply only with respect to nuclear incidents occurring during the term of the license designated in Item 3 of the Attachment. If more than one license is designated in Item 3 of the Attachment the obligations of the Commission under this Article shall apply only with respect to nuclear incidents occurring prior to the end of the term of that license which is the last to expire. The obligations of the Commission under this Article shall not apply with respect to nuclear incidents occurring prior to the effective date of this agreement as specified in the Attachment. 6. The obligations of the Commission under this and all other agreements and contracts to which the Commission is a party shall not in the aggregate exceed $500,000,000 with respect to any nuclear incident. 314 INDEMNITY AND REACTOR SAFETY 7. Obligations of the Commission under this Article, except to the licensee for damage to property of the licensee, shall not be affected by any failure on the part of the licensee to fulfill its obligations under this agreement. Bankruptcy or insolvency of the licensee or any other person indemnified or of the estate of the licensee or any other person indemnified shall not relieve the Commission of any of its obligations hereunder. ARTICLE IV 1. When the Commission determined that the United States will probably be required to make indemnity payments under the provisions of this agreement, the Commission shall have the right to collaborate with the licensee and other persons indemnified in the settlement and defense of any claim and shall have the right (a) to require the prior approval of the Commission for the settlement or payment of any claim asserted against the licensee or other person indemnified for public liability or damage to property of persons legally liable for the nuclear incident which claim the licensee or the Commission may be required to imdennify under this agreement; and (b) to appear through the Attorney General of the United States on behalf of the licensee or other person indemnified, take charge of such action and settle or defend any such action. If the settlement or defense of any such action or claim is undertaken by the Commission, the licensee shall furnish all reasonable assistance in effecting a settlement or asserting a defense. 2. Neither this agreement nor any interest therein nor claim thereunder may be assigned or transferred without the approval of the Commisssion. ARTICLE V The parties agree that they will enter into appropriate amendments of this agreement to the extent that such amendments are required pursuant to the Atomic Energy Act of 1954, as amended, or licenses, regulations or orders of the Commission. ARTICLE VI The licensee agrees to pay to the Commission such fees as are established by the Commission pursuant to regulation or order. UNITED STATES ATOMIC ENERGY COMMISSION Item 1. Licensee Address ATTACHMENT Indemnity Agreement No. 1 I Item 2. Amount of Financial Protection Item 3. License Number or Numbers Item 4. Location M., on the day of I I 1 I 1 The Indemnity Agreement designated above, of which this Attachment is a part, is effective as of 19____, and shall continue until the effective date of the expiration or termination of the agreement pursuant to the Atomic Energy Act of 1954, as amended, and appli- cable regulations or orders of the Commission. For the United States Atomic Energy Commission By For the By Dated at Germantown, Maryland, the (Name of Licensee) day of 19___.. Dated at Germantown, Maryland, this 30th day of March 1960. (Signed) A. R. LUEDECKE, General Manager (For the Atomic Energy Commission). UNIVERSITY OF MICHIGAN 3 9015 00130 7530 DATE DUE :