Alert 02.03.21
Federal Support for Defense Uses of Advanced Nuclear
2021 will present opportunities for the advanced nuclear and space exploration sectors, but companies should be cognizant of complex compliance standards.
Alert
Alert
08.11.21
This client alert was updated to reflect DOE's extension of the comment deadline to October 25, 2021.
The U.S. Department of Energy has issued a notice of inquiry requesting comments concerning the need for continuation or modification of the provisions of the Price-Anderson Act as administered by DOE. The comments will assist DOE in the preparation of a report it plans to submit to Congress by the end of this year. Comments are due no later than October 25, 2021.
Background
Enacted in 1957 to encourage the development of nuclear power and nuclear activities, the PAA establishes a financial compensation framework in the event of a nuclear incident, ensuring equitable compensation to victims and limiting the total liability to which an individual or entity can be subject.
In the context of the DOE, the PAA provides DOE indemnification to all DOE contractors that undertake activities involving the risk of a nuclear incident. This indemnification provides coverage to all persons who could be legally liable for the incident, up to a statutory limit (currently $13.7 billion), is not subject to availability of funds, and is mandatory and exclusive. The indemnification allows contractors to perform services for DOE while being able to manage the rare but potentially costly risk of damages associated with a nuclear incident.
Congressional Report and Requested Comments
The PAA was initially set to expire unless extended by Congress and has been extended several times. Currently, the authority of DOE to grant the DOE Price-Anderson indemnification ends on December 31, 2025, unless extended again by Congress. When Congress last extended the PAA, in 2005, it directed that DOE submit a report to Congress by December 31, 2021, regarding whether the DOE-administered provisions of the PAA should be continued, modified, or eliminated. DOE is currently preparing this report, and the comments it has requested will be used to assist DOE in developing the report.
DOE’s notice of inquiry includes a non-exhaustive list of 25 questions to facilitate public comment. These questions generally address the existence, continuation, scope, and potential modification of the PAA as it relates to DOE. For example, DOE’s questions ask about the need to continue PAA indemnification, whether it should be made permanent, the availability of private insurance, and the impact elimination would have on DOE’s mission. The notice of inquiry also includes a number of questions regarding the need to modify the PAA to address unique circumstances raised by advanced nuclear reactors, microreactors, or other changes in the industry, as well as the applicability of the PAA to the deployment of fusion reactors.
Request for Comment on Section 934 of the EISA
One other item raised in DOE’s notice of inquiry relates to section 934 of the Energy Independence and Security Act of 2007 (EISA) and the Convention on Supplementary Compensation for Nuclear Damage (CSC). The CSC is an international treaty that establishes a global nuclear liability regime to address legal liability and compensation in the event of a nuclear incident. The CSC was ratified by the U.S. in 2006, entered into force in 2015, and at present has eleven member countries, and nineteen signatory countries.
Among other things, the CSC establishes an international supplementary fund to provide an additional tier of compensation beyond that available under a party’s national law. In other words, in the event of a sufficiently costly nuclear incident, all of the parties to the CSC would contribute to the supplementary fund to provide additional compensation to the victims of the nuclear incident.
To facilitate its obligations under this provision of the CSC, in 2006 Congress passed section 934 of the EISA, Convention on Supplementary Compensation for Nuclear Damage Contingent Cost Allocation. Section 934(e) establishes a retrospective risk pooling program which requires that “each nuclear supplier shall participate in a retrospective risk pooling program in accordance with this section to cover the contingent cost resulting from a covered incident outside the United States that is not a Price-Anderson incident.” Due to the potential costs required in the event of a nuclear incident triggering the CSC’s supplementary compensation fund (tens of millions of dollars), section 934 allocates significant contingent costs to U.S. suppliers.
Section 934(e) directs DOE to establish the formula for allocation among nuclear suppliers of the costs under such a risk pooling program. However, developing this formula has proven exceedingly difficult due to the ambiguity and complexity of section 934. (For example, section 934’s definition of “nuclear supplier” subject to the risk pooling program could theoretically include any company that had ever provided any products, services, software, technology, to any nuclear facility outside of the U.S.) Almost fifteen years after the passage of section 934, DOE has still been unable to promulgate regulations for the risk pooling program, leaving nuclear suppliers in a state of uncertainty regarding the risks to which they could be subjected in the event of a nuclear incident.
Further, it is rare for the U.S. to impose its treaty obligations on a defined class of U.S. companies, and certain vendors have expressed the view that the CSC’s obligations are inherently sovereign obligations.
DOE’s request for comment on the section 934 provides nuclear suppliers with an opportunity to express their concerns about the risk pooling program and inform DOE that its report should suggest that Congress remove or replace the risk pooling program. Doing so would bring the U.S. in line with other CSC members, remove a DOE requirement that the agency has not been able to meet after more than a decade, and eliminate a significant element of risk for U.S. suppliers at a time when the government should be working on making the U.S. nuclear industry more competitive internationally.
Next Steps
Due to the importance to DOE contractors of PAA indemnification, the way PAA indemnification may be impacted by advanced or microreactors, and the opportunity to urge DOE to ask Congress to eliminate the uncertainty created by EISA section 934, nuclear suppliers and DOE contractors may submit comments expressing their support for the continuation of PAA, as well as suggest potential modifications that may be more tailored to their industry segment or account for coming advancements in nuclear technology.