energy unless the liability problem is solved. If there is to be a market, I think a man is foolish to continue investing to meet a market which will not exist. That is the whole problem in a nutshell. I think there has to be a market. I don't think the public will stand as they get more information either the public in terms of business or all types of business or the public who have no connection with the project--for the creation of a market if this problem cannot be solved. Since I see no way of solving it except by congressional action, then I arrive at the conclusion that congressional action is necessary. Representative VAN ZANDT. In other words, this committee has the ball and we have to carry it. Mr. McCUNE. You said that. Representative VAN ZANDT. Thank you. Representative COLE. You don't dispute it, do you? Mr. McCUNE. No, sir. I think it is a very heavy responsibility. This is just really the nub of the whole problem. Representative PRICE. Mr. Chairman, I want to compliment Mr. McCune upon a strong, frank, and honest statement of the position that he, representing one of the major contributing companies in this program, finds himself in. I think he very forcefully indicates that if we are to have a power reactor development program, with private industry participating, Congress must provide an indemnity program. I think that we have about reached an impasse and an obstacle that we cannot overcome without favorable congressional action on this legislation. The CHAIRMAN. Thank you very much, Mr. McCune. You always give us a good statement and we appreciate your being frank. I, for one, believe that it is necessary that we adopt this measure in order to get along with this job. I have felt that way for some time. Mr. McCUNE. Thank you very much. (Mr. McCune's comments on proposed amendments to S. 715 and H. R. 1981 referred to on p. 146 and his comments on S. 1684 follow :) Hon. CARL T. DURHAM, GENERAL ELECTRIC CO., Chairman, Joint Committee on Atomic Energy, Congress of the United States, Washington, D. C. DEAR CHAIRMAN DURHAM: In the course of my testimony on liability legislation you requested my comments on the amendments to S. 715 and H. R. 1981, proposed by the Atomic Energy Commission. These amendments raise questions both of policy and of law and it has not proved practical to separate them for purposes of discussion. The attached memorandum, prepared with the help of counsel, deals with policy and legal issues. With the exception of the change suggested with respect to licensed activities for the account of other Government agencies (which seems to me undesirable) and one or two other matters, the general intent of the Commission amendments appears to be to broaden the protection afforded by the bills to the public and to industry. Accordingly, although we have differed with some of the specific suggestions made by the Commission, I believe that its basic approach is to be commended. My general views as to the importance and urgency of this legislation and the fundamental soundness of S. 715 and H. R. 1981 have been made clear in my March 26 testimony. Sincerely yours, F. K. MCCUNE, AMENDMENTS TO S. 715 AND H. R. 1981, PROPOSED BY THE ATOMIC COMMENTS OF GENERAL ELECTRIC CO. 1. A number of the Commission's proposed amendments to S. 715 and H. R. 1981 are designed to refine the language, or to deal more explicitly with certain points, or to make administrative changes or minor alterations. The proposed amendments of sections 2 (i), 53 (e) (8), 170f, 170g, 170i, and 170j, and three of the changes in section 170a (express exclusion of export licenses, express provision for maintenance of financial protection, and the express provision that the indemnity shall run from the Commission to the licensee), fall into one or more of these categories and seem acceptable. Other changes (in sec. 170c and d) would provide that the indemnity authority apply for a full 10-year period. A year has passed since the original introduction of the bills, and this change seems appropriate. Again, that portion of proposed section 117 which would provide that costs of investigation, defense and settlement of claims would be covered by indemnity seems desirable, although this provision would probably require clarification of the limit of liability language in section 170e (see discussion under 6 below). 2. The Commission would exclude from the scope of section 170a and c cases where the licensed activity is for the account of another Government agency. Section 170c of the bills makes the obvious point that the indemnity would not run to another Government agency. However, the bills have generally been construed as providing that all other persons who might be subject to liability arising out of or connected with a licensed activity for the account of a Government agency would be covered by Government indemnity (Joint Committee report on S. 4112, p. 12; Columbia report, p. 53, fn. 319). The arguments of policy in favor of covering Government-financed as well as privately financed activities are made most cogently in the Columbia report (pp. 53-54). The need of the public for protection is essentially the same in both cases. Facilities operators, suppliers, and others also need protection. Separate legislation to cover each agency means at best long delays in solving the problems. We hope that the Joint Committee will provide in this legislation the protection required. 3. The Commission amendments, as we read them, make essentially the following changes in section 170a with respect to the kinds of licensed activities to be covered by the bill: (i) They remove the discretion granted to the Commission with respect to licenses for source or byproduct material. (ii) They make financial protection and indemnity mandatory with respect to certain cases where licenses are granted with respect to special nuclear material. The change referred to in (i) seems undesirable. It is not now possible to foresee all the risks which may arise with respect to byproduct material particularly, nor is it possible to say with assurance that available insurance coverage with respect to those risks will be adequate. Granting discretion to the Commission certainly does not harm and may, in the light of subsequent developments, prove quite helpful. As to the cases involving special nuclear material licenses dealt with in the amendments, it would seem reasonable to expect that the Commission, under the bills as introduced, would exercise its discretion to require financial protection and grant indemnity. Accordingly, it would seem that in this area, the bills as introduced are satisfactory. 4. The Commission has urged that its indemnity authority in the contract program be coextensive with its authority in the licensing program. The Columbia report takes essentially the same position (pp. 53-54). We believe that section 170d ought to apply at least to those activities which are covered in section 170c. An amendment along the lines suggested in the testimony on behalf of the New York City Bar Association (Tr. 211) which would give protection to the public and industry in all cases where there was a risk of a substantial nuclear incident would seem desirable. 5. Some liability of reactor operators, suppliers and others connected with a project may not be covered by the insurance syndicates' liability policy, and the amount available to pay claims will be uncertain because the face amount of the policy includes the obligation of insurers to pay investigation, litigation and other expenses. We believe that the more reasonable interpretation of S. 715 and H. R. 1981 in their present form is that (i) they do not contemplate that the financial protection required will exceed either in amount or scope of coverage the available insurance, and that (ii) the Government indemnity is intended to apply to all public liability (as defined in the bill) which is not covered by the required financial protection, so that the public and industry will be afforded full protection. As we see it, the basic purpose of one set of Commission amendments (sec. 11j, proposed sec. 11p, the proposed new last sentence of sec. 170b, sec. 170c, and sec. 170d) is to make these conclusions clearer and more explicit. This purpose is a sound one. We had hoped that the committee's intent could be clarified. If the committee believes that amendments are required, then it would seem desirable not to tie the amendatory language so closely to the language of the draft liability policy. By dealing only with specific cases where there may not be full protection, the amendments leave open the possibility that other cases cannot be taken care of. Moreover, the Commission's proposed language itself raises questions of interpretation. It would seem that if the committee's intent is to assure full protection to the public and to industry, then any amendatory language might be framed more simply and in terms of general principles, so as to say in effect (i) in section 170b that financial protection would not be required except to the extent that insurance was available in the United States market and (ii) in sections 170c and d that the indemnity would apply to any public liability not covered by the required financial protection. An additional point in this connection should be made about the definition of "nuclear incident" which the Commission would amend in its proposed section 11p. This definition does no more than state the factual circumstances in which the liability protection becomes applicable. It does not define the type of liability with respect to which protection is to be provided. This purpose is served by the definition of "public liability" which appears in section 11u of the bills as introduced. Accordingly, the amendment embodied in proposed section 11p appears unnecessary. 6. Our understanding of the basic insurance situation with respect to offsite property is this: Nuclear property damage coverage is not presently expected to be generally available for such property. However, liability (including liability of one insured to another) for harm to offsite property is expected to be covered in the nuclear liability policy made available by the syndicates. S. 715 and H. R. 1981, as introduced, contemplate indemnity against liability for offsite property (again including liability of one person indemnified to another). This leaves the reactor owner and, indeed anyone else contributing to a nuclear project, in essentially the same position with respect to offsite property as members of the general public—that is, an owner of offsite property cannot be compensated for harm to such property unless he establishes a liability on the part of some other person. Under such a system there can be cases where a particular operator or supplier could not obtain compensation for damage to offsite property, even though all other persons sustaining such damage were able to obtain such compensation. The Commission has attempted to deal with this problem by a new section 111 which defines the term "indemnity" to include an obligation on the part of the Government to pay the persons indemnified for damage to offsite property. The specific language suggested by the Commission may be read in a number of ways. But no matter how read, the proposed amendments represent a significant alteration of the scheme of the bills, since, as we understand it, the committee intended that the bills should be keyed to liability. If the committee believes a different approach is appropriate, then it should be recognized that departing from the premise that the bill should deal only with liability requires reexamination of other provisions. For example, the language of section 170e relating to the limit of liability, as well as the language prescribing a procedure for allocating available indemnity funds among claimants, would seem to require clarification if the Commission's amendments are accepted. Other changes might have to be made in sections 170c and 170d. 7. In their present form, the bills exclude claims under State or Federal Workmen's Compensation Acts of employees of persons indemnified who are employed in connection with the activity where the nuclear incident occurs (sec. 11u). The Commission amendments (sec. 11v) would abolish the distinction based on whether the employees were employed in connection with the activity where the incident occurs. In last year's Joint Committee report accompanying S. 4112 (June 22, 1956) the distinction drawn in the bills with respect to workmen's compensation claims of employees is based on certain assumptions as to determination of premiums (p. 8). The Commission's explanation of its proposed amendment does not challenge these assumptions, and it does not appear necessary to make the Commission's suggested change. However, we have no objection to this change provided it is made clear that the committee is preserving what appears to be the intent of both the bills as introduced and of the Commission amendments— namely, that (i) claims of employees asserting a tort or common law liability and (ii) subrogation claims of employers or insurers are within the definition of legal liability. 8. A good deal of the testimony on the Commission amendments has dealt with the question of the protection to be afforded with respect to liability incurred by a trespasser or a stranger to the project out of which the nuclear incident arises. We share the hope expressed by some members of the committee and by others that the insurance syndicates will be able to provide coverage against liability of such persons. If, however, the syndicates are unable to do so, it would seem unfortunate if the public were denied the full protection of the Government indemnity. Accordingly, we think that the Commission's basic approach is a sound one. However, we believe that the intent could be more simply and clearly effectuated by language in section 170c and section 170d to the effect that the indemnity would apply to public liability not covered by the required financial protection, rather than by the more elaborate language changes suggested by the Commission. 9. The bills as introduced, authorize the Commission, in determining the amount of financial protection to be required, to take into account the cost of private insurance. These provisions, as we read them, do not authorize the Commission to pass upon the reasonableness of rates but only to decide how much financial protection it will require a licensee to provide in a situation where there is only one source from which insurance may be obtained. Presently, it appears that the rates for liability coverage, although quite high, will be livable where large facilities are involved. However, where smaller facilities and smaller companies or institutions are involved there may be a real problem. Also, it is not possible to predict what the rate situation will be in the future. We recognize the concern of the insurance companies, but on balance believe that the bills as introduced are more desirable than the Commission amendments in this area. Mr. JAMES T. RAMEY, GENERAL ELECTRIC CO., April 3, 1957. Executive Director, Joint Committee on Atomic Energy, Washington, D. C. DEAR MR. RAMEY: Your letter of March 22 requested my comments on Senate bill 1684 during the hearings last week. I did not have time to prepare any written testimony and the matter did not come up in discussion. As I understand the bill, the purpose is (1) to provide a formal status in law for the Safeguards Committee, (2) to provide that its findings shall be made public, as well as the Commission's, (3) to assure that there are public hearings with regard to safeguards. My comments are as follows: 1. I see no objection to a formal status for the Safeguards Committee. We need a committee of some permanence and continuity and will continue to need it for another 10 years at least. It seems to me that the proposed bill provides a basis under which distinguished persons in private pursuits could serve without having to withdraw from those pursuits. 2. I favor final safeguards reports being published. Also, I believe that, as is the case at present, submissions on the question of safeguards should be public. I believe that the deliberations of any group considering these should be private. They are partly jury and partly investigators, and I think must be free to deliberate in private as is the case with any jury. My concern is not with the principle of public findings-which I endorse-but with the mechanics of obtaining free discussion and competent uninhibited analysis up to the point of public release. As I read S. 1684, this is what is contemplated. 3. I am in favor of either mandatory public hearings or notice being given in some way so that a public hearing is requisite if any responsible group wishes such a hearing. I believe that lacking such procedure, findings might be subject to retroactive attack and there will be a concomitant sense of insecurity on the part of licensees. 4. There are some possible practical problems on which I think testimony might be taken from those who are actually trying to do this job. Presently the Committee is an advisory one to the Commission and the Commission has a staff charged with this responsibility. The precise roles of the Commission staff and of the Committee and the relationships between the two groups should be carefully considered. For example, as I understand it, a Committee member can have the Commission staff perform physical analysis, thermal analysis, or any other type of work requisite to the formation of a sound opinion and presently can work back and forth in this manner. A complete barrier between the Committee and the working staff of the Commission would, I believe, result in the Committee requiring a complete staff of its own. I would certainly recommend that the ideas of those specifically engaged in this work should be obtained on this and other points. I trust that the above observations will be of value to you. FRANCIS K. MCCUNE, Vice President and General Manager, Atomic Products Division. The CHAIRMAN. The next witness is Mr. Arthur Murphy, of the atomic energy committee of the New York Bar Association. STATEMENT OF ARTHUR W. MURPHY, ON BEHALF OF THE SPECIAL COMMITTEE ON ATOMIC ENERGY OF THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK Mr. MURPHY. Thank you, sir. The CHAIRMAN. Do you have a statement? Mr. MURPHY. I have a statement. The CHAIRMAN. You may proceed, Mr. Murphy. Mr. MURPHY. My name is Arthur W. Murphy. I am appearing in behalf of the special committee on atomic energy of the Association of the Bar of the City of New York. As some of you know, I directed the atomic insurance study conducted by the Legislative Drafting Research Fund of Columbia University on behalf of the Atomic Industrial Forum. The work of the insurance study was completed last January and our recommendations are contained in the final report on Financial Protection Against Atomic Hazards, published by the Forum. It is my understanding that copies of the report have been made available to the Joint Committee. At the outset, I should state that our committee is strongly in favor of legislation of the kind represented by H. R. 1981 and S. 715. We believe that legislation of this kind is necessary to achieve the objective of the 1954 Atomic Energy Act of securing maximum participation by private industry in the development of atomic energy. But of perhaps even greater importance is the need to provide a substantial measure of protection to the public in the event of a catastrophic nuclear accident. If the question were asked by the Joint Committee whether to enact the bills in their present form or to enact no legislation, we would unhesitatingly urge that the bill be enacted as is. In this connection, it seems appropriate to point out that we believe that the question of protecting the public is essentially independent of any decision on the question of increased Government activity in the development of atomic power. The threat of damage to the public will be the same whether the program is carried on by |