[Senate Report 109-346]
[From the U.S. Government Publishing Office]





                                                       Calendar No. 636
109th Congress                                                   Report
                                 SENATE
 2d Session                                                     109-346

======================================================================



 
CONVENTION ON SUPPLEMENTARY COMPENSATION FOR NUCLEAR DAMAGE CONTINGENT 
                          COST ALLOCATION ACT

                                _______
                                

               September 25, 2006.--Ordered to be printed

                                _______
                                

    Mr. Inhofe, from the Committee on Environment and Public Works, 
                        submitted the following

                              R E P O R T

                   [To accompany S. 3879, as amended]

    The Committee on Environment and Public Works, to which was 
referred a bill (S. 3879) to implement the Convention on 
Supplementary Compensation for Nuclear Damage, and for other 
purposes, reports favorably thereon with an amendment, and 
recommends that the bill, as amended, do pass.

                    GENERAL STATEMENT AND BACKGROUND

    This bill modifies Section 170 of the Atomic Energy Act of 
1954, known as the Price-Anderson Act (42 U.S.C. 2210 et seq.). 
The bill modifies the Price-Anderson Act to implement the 
Convention on Supplementary Compensation for Nuclear Damage 
States (hereafter, CSC or the Convention) in the United States 
(U.S.).
    The Senate Committee on Environment and Public Works has 
jurisdiction over the nonmilitary environmental regulation and 
control of atomic energy. This includes both legislative and 
oversight authority pertaining to the operations of the Nuclear 
Regulatory Commission (NRC) and compensation for environmental 
releases of radionuclides under the Price-Anderson Act.
    The CSC creates a legal framework for defining, 
adjudicating and compensating civil liability resulting from 
covered nuclear incidents that is consistent with the existing 
U.S. nuclear civil liability system. In addition, it 
establishes an international supplementary compensation fund in 
the event that such an incident exhausts the funds made 
available, in accordance with the Convention, by the party in 
which the incident takes place.
    The CSC was adopted on September 12, 1997, in Vienna at the 
41st General Conference of the International Atomic Energy 
Agency (IAEA), and signed by the United States on September 29, 
1997, the day it was opened for signature. On November 15, 
2002, the President transmitted the CSC to the Senate for 
advice and consent to ratification. The Senate Foreign 
Relations Committee reported the Convention to the full Senate 
on July 29, 2006, and the Senate gave its advice and consent to 
the Convention on August 3, 2006.
    The CSC will enter into force 90 days after at least five 
States with a minimum of 400,000 units of installed nuclear 
capacity have deposited an instrument of ratification, 
acceptance or approval with the IAEA. To date, 13 countries 
have signed the CSC, and Argentina, Romania, and Morocco have 
ratified it.
    Congress passed the Price-Anderson Act in 1957 to ensure 
that adequate funds would be available to compensate victims of 
a nuclear accident. It also recognized that the risk of 
extraordinary liability that companies would incur if a nuclear 
accident were to happen would render insurance costs 
prohibitively high, and thwart the development of nuclear 
energy.
    The original Price-Anderson Act authorized government 
indemnification for only 10 years, until August 1, 1967. 
Congress extended the Act, in 1965 and 1975 for additional 10-
year periods, in 1988, for an additional 15 years, in 2003 for 
the remainder of fiscal year 2003, and in 2005, until 2025. In 
addition, in 2005, as part of the Energy Policy Act of 2005 
(Public Law 109-58), Congress increased the annual premium 
payments from $10,000,000 to $15,000,000 per reactor and 
addressed modular reactors with a total generating capacity of 
1,300 megawatts as a single reactor.
    S. 3879 would establish a funding mechanism under the 
Price-Anderson Act for the U.S. contribution (``contingent 
costs'') to the international nuclear liability compensation 
system that would be established by the CSC, which has not 
entered into force.
    With respect to incidents covered by the Price-Anderson 
Act,\1\ S. 3879 would cover the contingent costs by using the 
existing funding mechanism established by the Price-Anderson 
Act in a manner that would neither increase the amount that a 
nuclear power plant operator would otherwise contribute nor 
decrease the amount otherwise available to compensate victims. 
The bill modifies the way the Price-Anderson funding system 
would operate, as described in Sections 4 and 5.
---------------------------------------------------------------------------
    \1\Principally Sec. 170 of the Atomic Energy Act of 1954 (42 U.S.C. 
2210 et seq.), which establishes a liability cap and compensation 
system for U.S. nuclear incidents.
---------------------------------------------------------------------------
    With respect to incidents outside the United States not 
covered by the Price-Anderson Act, S. 3879 would allocate the 
contingent costs among nuclear suppliers that the CSC relieves 
from the risk of potential liability resulting from incidents 
outside the United States that are not covered by the Price-
Anderson Act.

                      SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section identifies the short title of the Act as the 
``Convention on Supplementary Compensation for Nuclear Damage 
Contingent Cost Allocation Act of 2006''

Section 2. Findings and purpose

    Under this section, Congress finds that the Price-Anderson 
Act establishes a liability system for a nuclear incident 
involving a commercial power plant or a Department of Energy 
(DOE) nuclear contractor, which provides a prompt and equitable 
process for recovering compensation for damage caused by the 
nuclear incident, provides an assured source of funds for the 
payment of this compensation, and channels liability for 
covered claims to this assured source of funds. The CSC 
establishes an international system comparable to and 
compatible with the Price-Anderson system. The CSC benefits 
potential victims by assuring that substantial funds will be 
available to compensate damage caused by nuclear incidents by 
establishing minimum requirements for the amount of 
compensation available under the national laws of member 
countries and by providing for an internationally financed 
compensation fund to supplement the amounts available under 
national law. The CSC benefits U.S. nuclear suppliers who face 
potentially unlimited liability for nuclear incidents outside 
the coverage of the Price-Anderson Act by replacing potentially 
open-ended liability with a predictable regime. Congress finds 
the CSC also benefits U.S. nuclear facility operators that may 
be liable for public liability under the Price-Anderson Act by 
providing an additional source of compensation for nuclear 
incidents covered by the Price-Anderson Act. The United States 
should fund any contributions that it may be required to make 
to the Convention's supplementary compensation fund in a manner 
that neither upsets settled expectations based on the liability 
regime established in the Price-Anderson Act nor shifts to 
Federal taxpayers liability risks for nuclear incidents at 
foreign installations.
    The purpose of the bill is to allocate the U.S. 
contribution to the international compensation system 
established by the Convention.

Section 3. Definitions

    This section defines terms used in the Act:
           ``Commission'' refers to the Nuclear 
        Regulatory Commission.
           ``Contingent costs'' refers to the amount 
        that the United States could contribute to the 
        international fund established by the Convention. These 
        costs are contingent on the occurrence of a nuclear 
        incident that triggers the obligation to contribute. 
        The amount is dependent on the amount of nuclear damage 
        resulting from the nuclear incident and the identities 
        of the other countries that belong to the Convention.
           ``Convention'' refers to the Convention on 
        Supplementary Compensation for Nuclear Damage.
           ``Covered incident'' refers to a nuclear 
        incident that comes within the scope of the Convention. 
        In general, a covered incident is a nuclear incident in 
        a country that belongs to the Convention or during 
        transportation to or from such a country.
           ``Covered installation'' refers to a nuclear 
        installation that comes within the scope of the 
        Convention and at which the occurrence of a nuclear 
        incident could trigger the obligation to contribute to 
        the international fund.
           ``Covered person'' refers to a person that 
        may be a nuclear supplier for purposes of this Act. A 
        covered person may be either (1) a United States 
        person, or (2) any other person to the extent such 
        other person conducts activities in the United States. 
        A covered person may not be the United States or any 
        agency or instrumentality of the United States.
           ``Nuclear supplier'' refers to a covered 
        person or successor that either (1) provides goods or 
        services to a covered installation, or (2) engages in a 
        shipment of nuclear materials that could result in a 
        covered incident.
           ``Price-Anderson incident'' means a covered 
        incident that comes within the scope of the Price-
        Anderson Act.
           ``Secretary'' refers to the Secretary of 
        Energy.
           ``United States'' refers to the same 
        geographic area as the definition of ``United States'' 
        in the Atomic Energy Act, which includes the 50 states, 
        the District of Columbia, Puerto Rico, the Canal Zone, 
        the Territorial Sea as defined in Presidential 
        Proclamation 5928 (December 27, 1988), and the 
        territories and possessions of the United States.
           ``United States person'' refers to (1) any 
        individual who is a United States resident, national or 
        citizen, or (2) any entity that is organized under the 
        laws of the United States or any state, territory, 
        possession, or commonwealth of the United States, or 
        any political subdivision thereof.

Section 4. Use of Price-Anderson funds

    This section provides that if a nuclear incident is covered 
by the Price-Anderson Act, then a portion of the funds made 
available for public liability under the Price-Anderson Act 
will be used to cover the contribution by the United States to 
the international fund established by the CSC. The use of 
Price-Anderson funds to cover the contribution by the United 
States to the international fund shall not decrease the 
limitation for liability for nuclear damage.

Section 5. Effect on amount of public liability

    This section provides that, with respect to an incident 
covered by the Price-Anderson Act, funds made available to the 
United States from the international fund established by the 
CSC will be used to pay persons indemnified under the Price-
Anderson Act. In addition, this section provides that the 
limitation on the amount of public liability under the Price-
Anderson Act will be increased by the net amount of funds that 
the United States receives from the international fund (that 
is, the actual amount of funds received less the amount of the 
contribution by the United States to the international fund).

Section 6. Retrospective risk pooling program

    This section requires a nuclear supplier to participate in 
the retrospective payment program established by the bill to 
cover the costs resulting from an incident outside the United 
States that is covered by the Convention but not covered by the 
Price-Anderson Act. The amount of the retrospective payment by 
a nuclear supplier will be determined after a nuclear incident 
occurs by allocating the amount of the contribution by the 
United States to the international fund among nuclear suppliers 
according to a risk-informed assessment formula developed by 
the Secretary of Energy. In developing this formula, the 
Secretary need not limit the examination to ``covered 
installations'' in countries that have ratified the Convention, 
but also may consider covered installations in countries that 
have signed the Convention and in other countries that the 
Secretary concludes are likely to join the Convention within a 
reasonable period of time.
    In developing the formula, the Secretary must take into 
account certain risk factors that focus on the extent of the 
potential liability of a nuclear supplier that could result 
from its goods and services relative to the goods and services 
of other nuclear suppliers. The formula is expected to exclude 
nuclear suppliers that do not provide goods or services 
specifically for nuclear facilities outside the United States 
or whose goods or services are not likely to result in 
significant potential liability outside the United States.
    The Committee believes the Secretary should also ensure 
that the burden imposed by the risk-informed formula among 
nuclear suppliers is shared in a fair and equitable manner, and 
that the contingent cost is not allocated disproportionately to 
one supplier. Accordingly, the formula may provide for a 
minimum and maximum share to be borne by nuclear suppliers not 
otherwise excluded from the formula. Further, the Secretary 
should endeavor to ensure that nuclear suppliers do not 
undervalue their goods and services in order to shift greater 
liability onto other nuclear suppliers, and that the 
implementation of Section 6 of the Act does not create an 
incentive for nuclear suppliers to shift their business 
activities off-shore in order to avoid or minimize their 
obligations under the Act or the formula. Given the variability 
of prices of nuclear goods and services in the market and the 
lack of any necessary connection between the price of a good or 
service and the risk or hazard it poses, the share of the 
contribution assessed on a nuclear supplier should be 
determined principally by the risks and hazards associated with 
such nuclear supplier's goods and services, as indicated by the 
factors listed in the Act.
    The Secretary is to determine the formula not later than 
three years after enactment and every five years thereafter, 
and to issue a report to Congress assessing the effects of the 
implementation of the Convention on the U.S. nuclear industry 
and suppliers within five years of enactment of this Act. Once 
the initial report is completed, the Committee believes 
periodic reporting to assess the effects of the implementation 
of the Convention on the U.S. nuclear industry and nuclear 
suppliers is warranted, and should be conducted in regular 
increments of at least every five years. In each report, the 
Secretary should assess whether there appears to be a 
significant risk that the requirements of this Act could have a 
material adverse effect on the competitiveness or availability 
of U.S. nuclear suppliers and shall suggest mitigating actions 
where appropriate.
    Generally, in implementing this Act and, in particular, in 
arriving at the risk-informed assessment formula under Section 
6(b)(3), the Committee believe the Secretary should seek to (i) 
minimize any adverse competitive impact of this Act on nuclear 
suppliers in the United States or foreign markets and (ii) 
avoid discouraging nuclear suppliers from engaging in 
manufacturing, research and development or other activities in 
the United States or from participating in U.S. Government-
sponsored projects or activities either in the United States or 
abroad.

Section 7. Reporting

    This section authorizes the Secretary of Energy to collect 
information needed to develop and implement the assessment 
formula. The section also requires the Secretary to make 
information available to nuclear suppliers and insurers to 
facilitate the creation of a voluntary private insurance system 
to cover potential payments by nuclear suppliers under the 
retrospective risk pooling program established by the Act. The 
section also requires entities to make information available to 
the Secretary to help develop and implement the assessment 
formula.

Section 8. Effect on liability

    This section provides that liability for a covered incident 
may not be limited to less than 300 million Special Drawing 
Rights (the amount prescribed in paragraph 1(a) of Article IV 
of the Convention), unless an explicit law is enacted. 300 
million Special Drawing Rights currently equal approximately 
$420 million.

Section 9. Payments to and by the United States

    This section sets forth the procedure for the Secretary of 
Energy and nuclear suppliers to follow in the event of a call 
for funds under the Convention so that the deferred payments 
are made to the Treasury of the United States and conveyed from 
the Treasury to the appropriate entity in fulfillment of the 
obligation of the United States tocontribute to the 
international fund established by the Convention. In the event a 
nuclear supplier defaults on its obligation to make a deferred payment, 
this section authorizes the Secretary of Energy to seek recovery from 
the supplier of the payment, appropriate interest, and civil penalties 
up to twice the amount of the payment.

Section 10. Limitation on judicial review; Cause of action

    This section provides a right to sue the person legally 
responsible for a nuclear incident under the Convention for 
damage resulting from a nuclear incident for which a court of 
the United States has jurisdiction under the Convention, but to 
which the Price-Anderson Act does not apply. This section 
ensures a cause of action will be available in all situations 
where United States courts have jurisdiction over a nuclear 
incident, including a nuclear incident during transportation, 
for which federal or state law may not currently provide a 
cause of action against the person responsible for the nuclear 
incident as defined by the Convention.
    This section also assigns jurisdiction to the United States 
Court of Appeals for the District of Columbia Circuit for 
appeals and reviews of claims resulting from a nuclear incident 
for which a court of the United States has jurisdiction under 
the Convention, but to which the Price-Anderson Act does not 
apply. This assignment does not affect the jurisdiction of the 
Supreme Court under chapter 81 of title 28 of the United States 
Code.

Section 11. Right of recourse

    This section clarifies that this Act does not provide the 
operator of a covered installation a right of recourse against 
a nuclear supplier or any other person.

Section 12. Protection of sensitive United States information

    This section provides that neither this Act nor the 
Convention should be construed to require the disclosure of 
Restricted Data, Formerly Restricted Data, information relating 
to intelligence sources or methods, or national security 
information.

Section 13. Regulations

    This section authorizes the Secretary of Energy and the 
Nuclear Regulatory Commission to issue rules to implement this 
Act, including rules on how the Price-Anderson Act and this Act 
interact. The Secretary and the Commission will exercise this 
authority over areas for which they are responsible. The 
section provides that any implementing rules must be consistent 
and equitable and ensure that the financial and operational 
burden on a Commission licensee not increase as a result of the 
enactment of this Act. This section should not be construed to 
eliminate, limit, or otherwise affect any other regulatory 
authority that the Secretary or the Commission already 
possesses.

Section 14. Effective date

    This section provides that the Act becomes effective on the 
date on which the Convention on Supplementary Compensation for 
Nuclear Damage enters into force for the United States.

                          LEGISLATIVE HISTORY

    On September 8, 2006, Senator Jim M. Inhofe introduced S. 
3879. The bill was referred to the Senate Committee on 
Environment and Public Works. On September 13, 2006, S. 3879, 
as amended, was favorably reported by the committee to the full 
Senate.

                                HEARINGS

    No committee hearings were held on S. 3879.

                             ROLLCALL VOTES

    The Committee on Environment and Public Works met to 
consider S. 3879 on September 13, 2006. Senators Inhofe and 
Jeffords proposed an amendment, which was agreed to by voice 
vote. The bill, as amended, was voted favorably by voice vote.

                      REGULATORY IMPACT STATEMENT

    In compliance of section 11(b) of rule XXVI of the Standing 
Rules of the Senate, the committee finds that S. 3879 does not 
create any additional regulatory burdens, nor will it cause any 
adverse impact on the personal privacy of individuals.

                          MANDATES ASSESSMENT

    In compliance with the Unfunded Mandates Reform Act of 1995 
(Public Law 104-4), the committee finds that this bill would 
impose no Federal intergovernmental unfunded mandates on State, 
local, or tribal governments.

                          COST OF LEGISLATION

    Due to time constraints the Congressional Budget Office 
estimate was not included in the report when received by the 
committee, it will appear in the Congressional Record at a 
later time.

                        CHANGES IN EXISTING LAW

    Section 12 of rule XXVI of the Standing Rules of the Senate 
requires the committee to publish changes in existing law made 
by the bill as reported. Passage of this bill will make no 
changes to existing law.

                                  
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