Accidents and Bookies: North Carolina Judge Declares Price-Anderson Act Unconstitutional

On March 31, 1977, federal Judge James B. McMillan of the Western District of North Carolina declared the Price-Anderson Act,¹ which limits total liability for damages from accidents involving civilan nuclear power reactors, to be an unconstitutional deprivation of due process and equal protection. Judge McMillan's decision in Carolina Environmental Study Group v. United States Atomic Energy Commission,² is certain to elate opponents of nuclear power development, who view Price-Anderson as the fulcrum of nuclear power issues. Although the decision concerns only two plants (containing four reactors) in North and South Carolina, it is likely to be appealed directly to the Supreme Court³ in view of its surprisingly audacious legal conclusions.And depending on the case's result in the Supreme Court, Congress may have to face, after only a two-year rest, the thorny issue of nuclear accident compensation.

Legal and Factual Setting

The Atomic Energy Act of 1954⁴ brought the previously military technology of nuclear power into the civilian sector and subjected it to a stringent licensing scheme under the aegis of the Atomic Energy Commission (AEC). As originally passed, the Act did not consider a liability or compensation mechanism for injuries resulting from the new technology. But in 1956 and 1957, commercial enterprises that would be investing in nuclear energy declared that the possibility — though remote — of a catastrophic nuclear accident stood as a roadblock to the successful expansion of commercial nuclear power in the United States.⁵ Thereupon, Congress passed what has come to be known as the Price-Anderson Act, which, in its current version, establishes a ceiling on liability arising from a nuclear accident of $560 million,⁶ of which $500 million is guaranteed by the federal government and, subject to some modifications discussed below, $60 million in financial protection is to be supplied by the operator of a nuclear power plant.

Crucial to the establishment of these limits was the somewhat puzzling premise that the risk of a serious accident at a nuclear facility was infinitesimal but that private enterprise nevertheless needed a secure upper limit on liability before it would invest in nuclear power.The basis for the second half of this premise was a report prepared by the Atomic Energy Commission in 1957 that concluded that a catastrophic accident involving a small (500 megawatt) nuclear reactor would cause 3,400 deaths, 40,000 injuries, and $7 billion in property damages.⁷ Because this amount of liability was apparently excessive, Congress passed Price-Anderson in 1957, to last for a term of ten years, extended it and imposed absolute liability on nuclear facility operatiors in 1966, and, most recently, extended it to 1987.⁸ Like the original Price-Anderson Act, the latest version draws support from the conclusions of a document (the Rasmussen Report) sponsored by the Nuclear Regulatory Commission (NRC; successor to the regulatory functions of the AEC) that forecast damages from a major accident at a small (500 megawatt) nuclear facility to be 92 deaths, 200 injuries, and damages totaling $1.7 billion.⁹

The challenge to Price-Anderson in Carolina Environmental Study Group involves two nuclear facilities under construction by the Duke Power Company, each with twin reactors, called the McGuire Nuclear Station, rated at 1,180 megawatts per reactor and located about 17 miles northwest of Charlotte, North Carolina, and the Catawba Nuclear Station located about 15 miles southwest of Charlotte on Lake Wylie, South Carolina. Plaintiffs include property owners near the plants and some who have moved away from the area because the plants are being constructed. The same group had in 1973 challenged the construction of the McGuire Station on the grounds that the AEC inadequately considered breach-of-reactor containment accidents and alternatives in its National Environmental Policy Act (NEPA) environmental impact statement (EIS) and that the AEC was illegally biased toward nuclear power development. In Carolina Environmental Study Group v. AEC,¹⁰ however, the D.C. circuit affirmed the AEC's decision to license the facility, holding that the Commission adequately complied with NEPA.

Procedural Hurdles: Standing and Ripeness

In light of the Rasmussen Report's finding that the risk of a catastrophic accident is on the order of one in a million per reactor per year,¹¹ it seems, at least theoretically, difficult for a plaintiff to challenge Price-Anderson because its absolute liability and compensation mechanisms are not triggered until an accident has occurred [7 ELR 10095] and the NRC determines that the incident is "extraordinary."¹² Thus, this argument would go, a challenge to Price-Anderson is not justificable until an accident has occurred because no one has yet been injured, and plaintiffs would therefore lack standing to sue and would be dismissed on ripeness grounds in view of the contingent nature of the injury. Defendants in Carolina Environmental Study Group advanced both of these assertions, and both were sharply rebuffed by Judge McMillan, albeit with differing legal support.

Standing is a difficult issue in environmental controversies,¹³ but it has been broadened in the past few years so that nerly any allegation of concrete injury will suffice to obtain judicial review of claimed statutory violations. Yet it is not clear that standing has been similarly broadened in constitutional challenges to statutes.¹⁴ As currently formulated, a plaintiff must allege that he has been injured in fact and that he comes arguably within the zone of interest protected by a statute.¹⁵ But a plaintiff must also show that his injury can be differentiated from that of the general public,¹⁶ and that some causal nexus exists between the claimed illegal action and his injury.¹⁷

Judge McMillan took great pains to show that plaintiffs satisfied two of these tests. He meticulously set out the present and possible injuries from the nuclear plant construction to these plaintiffs. In essence, these injuries amount to nuisance claims for small radiation leaks and a rise in ambient water temperature from the reactor cooling towers and the fear of radioactivity release on or near their property from a nuclear catastrophe. Certainly to the extent that such events might occur at the McGuire or Catawba plants the plaintiffs might be injured and have standing to challenge the plants' construction whereas upwind or distant persons might not have similar injuries.

But these facts do not justify a constitutional challenge to Price-Anderson, which, on its face, has nothing to do with the construction of nuclear facilities but only with compensation for injuries caused by any nuclear facility.¹⁸ Judge McMillan had to establish that Price-Anderson was causally connected to these nuclear plants, which he vigorously attempted to do. Quoting extensively from testimony by witnesses representing nuclear industry interests in the 1956-57 congressional hearings on Price-Anderson, the judge concluded that without the Act, nuclear power plants would not be built. Thus, Price-Anderson was a "but for" cause of nuclear construction and, in particular, of the construction of the McGuire and Catawba plants. This causal connection, as a factual matter, is the sufficient condition to a challenge to Price-Anderson.

The court did not explicitly discuss one of the other necessary conditions to the challenge — the zone of interests test. Yet the omission is of little consequence, since the test is easily satisfied in this case. One purpose of the Atomic Energy Act is to promote nuclear energy "consistent with the common defense and security and the health and safety of the public."¹⁹ Plaintiffs' nuisance claims of environmental injury come under this provision, in light of Price-Anderson's applicability to "nuclear incidents," which involve any injury from nuclear materials,²⁰ as well as injury from "extraordinary nuclear occurrences," to which strict liability applies.²¹

Resolution of the ripeness issue is less obvious, but Judge McMillan drew on particularly strong legal support for his conclusion that the issue was ripe for decision. Simply stated, the ripeness claim is that a challenge to Price-Anderson is not justiciable until an accident has occurred that causes injury. This claim would, if successful, create the anomaly of a statute (Price-Anderson) fostering conditions (nuclear power development) that would provoke a catastrophe but would be subject to challenge only after the catastrophe occurs. Nevertheless, ripeness is a facially appealing argument because of the attenuated contingency of a nuclear accident since ripeness cases turn on a plaintiff's complaint that concerns anticipated conduct which has uncertain impacts. In answer to this, Judge McMillan virtually dismissed the Rasmussen Report conclusions and, drawing on expert testimony from the court hearings, concluded as a matter of fact that the risk of a nuclear accident is "not fanciful but real," because, in part, the risk of an accident with major consequences from one of the four Duke Power Company reactors is two percent over the combined service life of the reactors. Hyperbolically, the judge disclaimed the role of "a bookie."²²

There can be little dispute that the controversy is ripe insofar as it concerns the immediate, low-level radiation emissions from the subject nuclear plants which will at some foreseeable time start operating. The more serious problem is with the ripeness of the claim against the compensation provision for nuclear accidents, for the injuries involved cannot be present until the accident occurs. To deal with this, Judge McMillan relied on the Regional Rail Reorganization Act Cases,²³ in which owners of interests in the Penn Central railroad claimed that a government scheme requiring reorganization of the Penn Central would erode their equity in the railroad. The Supreme Court, acknowledging that this "erosion-taking" [7 ELR 10096] was contingent upon delay in implementation of a final railroad system plan, held that failure to decide the case would raise the "distinct possibility"²⁴ that the taking would occur and that:

Where the inevitability of the operation of a statute against certain individuals is patent, it is irrelevant to the existence of a justiciable controversy that there will be a time delay before the disputed provisions will come into effect.²⁵

While the Carolina Environmental Study Group ripeness ruling thus seems correct, it contradicts the holding in an earlier case in which a three-judge federal court in the District of Columbia ruled that plaintiffs could not challenge the constitutionality of Price-Anderson since the contingent possibility of a nuclear accident made the controversy not ripe for adjudication. Conservation Society of Southern Vermont v. Atomic Energy Commission²⁶ appears to turn on the fact that plaintiffs alleged only an interest in nuclear nonproliferation, which the court found to be not cognizable under Price-Anderson. This pleadings difference may distinguish the cases, but it is also significant that the Conservation Society court did not cite the Regional Rail Reorganization Act Cases in its ripeness discussion.

Due Process and Equal Protection

After finding the cause of action justiciable, Judge McMillan found on the merits that the Price-Anderson Act unconstitutionally deprived plaintiffs of property without just compensation and denied them equal protection. Notwithstanding the superficial appeal of these conclusions to nuclear power opponents, in each instance the court mislabeled constitutional theory and carried out an exercise in fuzzy thinking.

The judge confused the notion of compensation for injuries under Price-Anderson and the theory of just compensation for takings of private property for public use:

The Act violates the Due Process Clause because it allows the destruction of property or the lives of those affected by nuclear catastrophe without reasonable certainty that the victims will be justly compensated.²⁷

Plaintiffs alleged that the construction of the nuclear facilities and the significant risk of accidents in excess of Price-Anderson limits diminished their property values.²⁸ If the court was responding to these allegations, then it slipped over, without explanation, the thin line separating the due process from this property deprivation clause. It is well settled that mere diminution of property value by government action is not compensable under the Fifth Amendment. Moreover, the judge failed to establish the tenuous proposition that an accident at a privately-owned nuclear power station, through Price-Anderson, takes property for public use.

By rearranging labels, it is possible to reconstruct the court's due process arguments into some order. In terms of procedural due process, the court held that the utilities give no quid pro quo for their liability limits. For instance, Price-Anderson's purpose in terminating lengthy claims litigation²⁹ is not met once claims pass 15 percent of the liability limit ($84 million) because at that point a federal court must establish a distribution plan for allocating funds, a process that could take years. Furthermore, the court asserted, nuclear plant operators give up nothing by waiving the defenses of negligence, assumption of risk, and governmental immunity, since nuclear power generation arguably will be governed by principles of strict liability in the event of a catastrophic accident.³⁰

The court also employed sub silentio a substantive due process rationale by saying that the amount of recovery is not rationally related to the potential losses. In other words, any liability limit is inherently unfair to injured persons. Furthermore, the court said, Price-Anderson tends to encourage irresponsible nuclear plant construction in violation of the Atomic Energy Act's prescription that nuclear power development be consistent with the public safety and health.³¹ The factual basis for the court's assertion is arguable, because nuclear power advocates assiduously assert that their quality control is not lowered by Price-Anderson's protection.³²

The court's ruling on equal protection holds that Congress guaranteed a benefit to the whole society (nuclear power development), but arbitrarily imposed the costs of the burden on a particular segment of society (those injured by a nuclear catastrophe). The court used two basic reasons: that the risk of a major accident is irrationally placed on those living near a nuclear plant and the liability limitation does not serve any legitimate public purpose. The irrational geographic basis underlying the benefit-burden allocation is clearly at odds with a society-wide scheme such as Price-Anderson. Butthe court again misapplies labels by saying that the Act does not serve a legitimate public purpose. The court had already shown that Price-Anderson fostered nuclear development, which Congress had declared to be an important national policy. What the court should have done was strike down Price-Anderson as underinclusive,³³ that is, visiting the burden of the societal benefit of nuclear power on only a few rather than requiring the nation as a whole to absorb the costs of a nuclear accident. The court hinted at this rationale by suggesting that a rational compensation scheme would be a liability pool among operators or full compensation of victims directly out of the federal treasury.

[7 ELR 10097]

Policy Issues

At the least, Carolina Environmental Study Group hastens the conclusive consideration of Price-Anderson by the Supreme Court. At most, the decision adds fuel to the argument that nuclear power development ought, after 20 years of experience, to proceed on its merits without the unusual protections of Price-Anderson. The latter issue will not easily die, since an important brick in the foundation of Price-Anderson — the Rasmussen Report and its ancestors — has been severely criticized as giving unrealistically low damage estimates based on faulty assumptions and methodology concerning the total scope of injuries from nuclear power use.³⁴ Indeed, a report recently issued by the Union of Concerned Scientists, a group opposed to nuclear power, alleges that the AEC and NRC ignored internal criticisms of the Rasmussen study and concealed evidence of deficiencies in the study.³⁵

It is, of course, difficult to predict how, if at all, the Supreme Court will deal with Carolina Environmental Study Group. One factor that must enter into the decision, however, is the recently-amended rules of the NRC which implement Price-Anderson's command³⁶ to increase the privately-sponsored portion of the liability pool by assessing retrospective premiums on reactor operators.³⁷ The premium was set at $5 million per reactor, which, with 63 reactors presently operating, places an immediate $315 million available for disbursement in the event of an accident. As the number of reactors increases, this premium pool will eliminate the need for the umbrella of Price-Anderson's limits.

The policy implications of Carolina Environmental Study Group stretch farther than the borders of the Western District of North Carolina. The decision may spur the further scrutiny of Price-Anderson in other courts. It may also encourage nuclear power opponents to test public acceptability of nuclear power in more state voter initiatives.³⁸ In addition, there is the threat of litigation involving state public utility commission licensing over the economic feasibility of nuclear power for electricity generation, with or without Price-Anderson.³⁹

Indeed, irrespective of whether Carolina Environmental Study Group is upheld on appeal, it is a legitimate question to ask whether 20 years of "temporary" protection for a no-longer-fledgling industry is not enough and nuclear power now ought to stand without crutches. It may be that the factual basis of Price-Anderson — unwillingness of the investment community to support nuclear power because of its unproven nature — no longer exists. Also, employing a constant dollar amount for the liability limit in a period of rapid inflation makes little sense for maintaining adequate, although limited, compensation. Finally, some direction from the Carter Administration is necessary to determine the extent of nuclear power in the nation's future energy mix, but at present the policy is subject to divergent interpretation. So long as the risks of nuclear power are not acceptable to nuclear proponents without the protection of Price-Anderson, there will remain the troubling question of the propriety of public assumption of those same risks.

1. 42 U.S.C. § 2210.

2. 7 ELR 20315 (W.D.N.C. Mar.31, 1977).

3. 28 U.S.C. § 1252. On April 29, defendant Duke Power Company filed a notice of appeal with the district court.

4. 42 U.S.C. § 2011 et seq.

5. Green, Nuclear Power: Risk, Liability, and Indemnity, 71 MICH. L. REV. 479, 484 (1973).

6. 42 U.S.C. § 2210(e).

7. ATOMIC ENERGY COMM'N, THEORETICAL POSSIBILITIES AND CONSEQUENCES OF MAJOR ACCIDENTS IN LARGE NUCLEAR PLANTS (1957) (Brookhaven Report).

8. P.L. 94-197, 89 Stat. 1111-15 (Dec. 31, 1975), amending 42 U.S.C. § 2210.

9. AEC, Summary Report, 16 ATOMIC ENERGY L.J. 177, 202 (1974).

10. 510 F.2d 796, 5 ELR 20181 (D.C. Cir. 1975).

11. NUCLEAR REGULATORY COMM'N, REACTOR SAFETY STUDY: AN ASSESSMENT OF ACCIDENT RISKS IN U.S. COMMERCIAL NUCLEAR POWER PLANTS, EXECUTIVE SUMMARY 9, 11 (1975).

12. 42 U.S.C. § 2014(j).

13. Comment, The Revival of the Standing Defense in Environmental Litigation, 7 ELR 10031 (Feb. 1977).

14. Comment, Constitutional Challenge to the Price-Anderson Act: Ripeness and Standing Before the Holocaust, 1976 DUKE L.J. 967, 977, 980.

15. Association of Data Processing Service Org. v. Camp, 397 U.S. 150 (1970).

16. Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208 (1974).

17. Warth v. Seldin, 422 U.S. 490 (1975).

18. Price-Anderson applies to injuries caused by low-level emissions as well as to injuries resulting from catastrophic accidents. Report of the Joint Comm. on Atomic Energy (May 9, 1957), reprinted in JOINT COMM. ON ATOMIC ENERGY, SELECTED MATERIALS IN ATOMIC ENERGY INDEMNITY AND INSURANCE LEGISLATION, 93d Cong., 2d Sess. 245 (1974).

19. 42 U.S.C. § 2013(d).

20. 42 U.S.C. §§ 2014(q), 2210(e).

21. 42 U.S.C. § 2210(n)(1).

22. Carolina Environmental Study Group v. United States Atomic Energy Comm'n, 7 ELR 20315, 20319 (W.D.N.C. Mar. 31, 1977).

23. 419 U.S. 102 (1974).

24. Id., at 123-25.

25. Id., at 143.

26. No. 19-72 (D.D.C. Apr. 16, 1975), reprinted in 121 CONG REC. S22360 (daily ed. Dec. 16, 1975).

27. Carolina Environmental Study Group v. United States Atomic Energy Comm'n, 7 ELR 20315, 20323 (W.D.N.C. Mar. 31, 1977).

28. Comment, supra note 14, at 1007.

29. 42 U.S.C. § 2210(o).

30. W. PROSSER, LAW OF TORTS § 78, at 516; Note, Nuclear Torts: The Price-Anderson Act and the Potential for Uncompensated Injury, 11 NEW ENGLAND L. REV. 111, 119-26 (1975).

31. 42 U.S.C. § 2013(d).

32. Hearing To Consider Whether Financial Risk to Utilities Under the Price-Anderson System Should Be Increased Before the Joint Comm. on Atomic Energy, 94th Cong., 2d Sess. 30 (1976).

33. F.S. Royster Guano Co. v. Virginia, 253 U.S. 412, 415 (1920); Tussman & tenBroek, The Equal Protection of the Laws, 37 CALIF. L. REV. 341 (1949).

34. Authorities are collected in Comment, supra note 14, at 1010-15.

35. Ford, A History of Federal Nuclear Safety Assessments: From WASH-740 Through the Reactor Safety Study (Union of Concerned Scientists, Apr. 1977).

36. 42 U.S.C. § 2210(b).

37. 42 FED. REG. 46 (Jan. 3, 1977, amending 10 C.F.R. pt. 140. The amount of private insurance available for nuclear facility operators was recently increased to $140 million from $125 million. 42 FED. REG. 20139 (Apr. 18, 1977).

38. See Comment, Fallout from the California Nuclear Initiative, 6 ELR 10174 (Aug. 1976).

39. Hearing, supra note 32, at 20.