Senator AIKEN. Mr. Chairman, is there any proposal to charge a fee for insurance under these projects to the contractors? Representative PRICE. The indemnification begins, of course, above the amount set by the Commission as to the insurance that the contractor must carry. Senator AIKEN. Is there a reserve accumulated for the purpose of paying damages? The reason I am asking that: I have got to leave in a few minutes for the mutual security markup and we do insure American investments overseas. But there is a charge of one-half of 1 percent for doing it. Representative PRICE. Mr. Vogel might be able to talk to you on the problem that exists overseas in indemnification. Senator AIKEN. I suppose any accumulation of a reserve for payment of damages would probably be pretty small, if there was a real catastrophe that occurred. Mr. VOGEL. The liability of the Government to indemnify goes up to $500 million. Representative PRICE. But they have to get appropriations to do that. There is no pool or anything for that $500 million. This was just set as a principle, that the Government accepts indemnification up to $500 million in the case of a catastrophic incident. But this begins only after the private insurance that is available in a pool that a large group of insurers have set up, to insure these types of projects. The next witness will be Mr. Maurice Axelrad, of the New York State Office of Atomic Development. STATEMENT OF MAURICE AXELRAD, NEW YORK STATE OFFICE OF ATOMIC DEVELOPMENT Mr. AXELRAD. My name is Maurice Axelrad. I am counsel for the New York State Office of Atomic Development. The New York State Office of Atomic Development appreciates this opportunity to bring to the attention of the Joint Committee several existing problems with respect to the transportation of radioactive maerials through certain facilities in the State of New York. Although we have been primarily concerned with these problems insofar as they may impede the successful growth of the atomic energy industry within the State, it is evident that their potential impact is nationwide, and we believe that the Joint Committee will be deeply interested in assuring that they are satisfactorily resolved. Last year, when this Office became aware that several agencies within the State had promulgated, or were considering, regulations pertaining to the control of radioactive shipments, a meeting was held to explore the problems associated with such regulations and the possibility of a uniform approach. Represented at a meeting in New York City on November 16, 1960, were the New York City Department of Health, New York State Department of Health, State Public Service Commission, U.S. Atomic Energy Commission, Port of New York Authority, State Thruway Authority, Triborough Bridge and Tunnel Authority, Bureau of Explosives of the American Association of Railroads (representing also the ICC), and this office. It was decided at that meeting that a small committee comprised of those agencies most directly concerned be established to work on mutual problems. The State Committee on Transportation of Radioactive Materials was subsequently constituted and consists of representatives of the New York City Department of Health, the State Department of Health, the New York State Thruway Authority, the Triborough Bridge and Tunnel Authority, the Port of New York Authority, a bistate authority of New Jersey and New York, and this office. One of the most pressing problems facing the Transportation Committee was the apparent unavailability to the public authorities of adequate "first person" property damage and "loss of revenue" insurance coverage for nuclear incidents occurring in the course of transportation of radioactive materials which may damage, destroy or impair the use of the facilities. These authorities were becoming increasingly concerned over the exclusion of nuclear losses inserted in their all-risk policies beginning in 1959. Partly because of this problem, the Triborough Bridge and Tunnel Authority had banned all radioactive shipments from its facilities except for very small quantities; the Port of New York Authority had banned virtually all such shipments from its tunnels, and imposed restrictions on certain types of such shipments over its bridges; and the New York State Thruway Authority was in the process of preparing regulations affecting radioactive shipments. The particular problems encountered by these agencies, and their views thereon, are detailed in letters to the Director of this Office from the Port of New York Authority, dated June 30, 1961; from the Triborough Bridge and Tunnel Authority, dated July 13, 1961; and from the New York State Thruway Authority, dated July 14, 1961. I would appreciate having these letters included in the record of this hearing. Representative PRICE. Without objection, they will be included. (The letters referred to follow :) THE PORT OF NEW YORK AUTHORITY, Mr. OLIVER TOWNSEND, Director, Office of Atomic Development, DEAR MR. TOWNSEND: In response to your request, I have set forth the following review of our consideration of the important problem of maintaining financial protection against the risk of nuclear reaction, nuclear radiation, and radioactive contamination at facilities of the Port of New York Authority. As the bistate agency of New York and New Jersey, we have considered this problem in cooperation with other agencies of these States. In our close liaison with the New York State Office of Atomic Development, we have given this problem careful attention in connection with the overall necessity for the proper operation of port facilities to keep pace with the use of nuclear energy for peaceful purposes. With your encouragement and support, we have invited and repeat our invitation that the NS Savannah utilize our newly built Brooklynport authority piers. The facilities for which the Port of New York Authority is responsible include: 6 interstate bridges and tunnels between New York and New Jersey; namely, the George Washington Bridge, the Holland Tunnel and the Lincoln Tunnel connecting Manhattan Island with New Jersey, and the Goethals Bridge, the Bayonne Bridge and the Outerbridge Crossing linking Staten Island and New Jersey; the 4 metropolitan airports; namely, New York International, La Guardia, Newark, and Teterboro; many of the pier facilities in the New YorkNew Jersey Harbor; a union bus terminal; 2 truck terminals; Union Inland Freight Station No. 1 in Manhattan; and 2 heliports, one on the West Side and one on the East Side of Manhattan Island. Until port authority bridge and tunnel property damage and toll revenue insurance policies were renewed on February 20, 1959, these facilities were insured against virtually all risks of physical injury which might result in property damage or loss of revenues. After that time, the bridge and tunnel policies could no longer truly be called all-risk policies since they now contain the following exclusion: "This company shall not be liable for loss by nuclear reaction or nuclear radiation or radioactive contamination, all whether controlled or uncontrolled, and whether such loss be direct or indirect, proximate or remote or be in whole or in part caused by, contributed to, or aggravated by the peril (s) insured against in this policy; however, subject to the foregoing, and all provisions of this policy, direct loss by fire resulting from nuclear reaction or nuclear radiation or radioactive contamination is insured against by this policy." Thus, the six bridges and tunnels connecting Metropolitan New York with northern New Jersey are without financial protection in the event of an incident involving radioactive materials. Other port authority facilities are insured by a fire and extended coverage insurance policy. This is a named perils policy which generally does not cover losses caused by nuclear reaction, nuclear radiation or radioactive contamination. The port authority is not supported by the tax revenues of either New York or New Jersey, nor can it pledge the credit of either State. More than $1 billion has been raised to build the terminal and transportation facilities for which the authority is responsible, through the issuance of bonds backed solely by the revenues derived from these facilities. The bonds are amortized, and the facilities maintained and developed through charges to users. Clearly, the authority cannot be expected to take the risk that one of its essential public facilities be put out of commission or otherwise seriously damaged by an incident against which the authority is not insured. After your office contacted us in August 1959, members of the port authority staff met with your counsel to discuss our mutual concern over problems affecting the shipment of radioactive materials in the port of New York district. We came to the conclusion, after an examination of the relevant legislation in this field, that no statutory or other replacement now exists for the insurance coverage eliminated by the nuclear exclusion which has been engrafted on the port authority bridge and tunnel property damage and toll revenue insurance policies. You and your staff have assured us and the Atomic Energy Commission has reassured us that the possibility of an incident is remote. Of course, even more remote contingencies are covered by our existing insurance. Therefore, as a public agency responsible for these terminal and transportation facilities, and in view of the expansion of the nuclear industry in the United States and the attendant rise in shipments of radioactive materials, we deemed it advisable to ascertain the possibility of again obtaining insurance to cover the hazards to port authority bridges and tunnels involved in shipments of radioactive materials as well as the possibility of obtaining such insurance for the first time to cover other port authority facilites. Your assistance has been vital in this endeavor. However, despite our best efforts and the efforts of other public agencies throughout the country to obtain coverage against radiation hazards, we were not successful in 1959 or 1960 or the first 5 months of this year. It may be of interest to note at this point that notwithstanding the lack of financial protection, shipments of radioactive materials across port authority bridges is generally permitted under specific rules and regulations. Because of the almost impossible decontamination problems which would result from an incident in a tunnel, port authority tunnels are virtually closed to such shipment. But the increasing use of our facilities for shipments of radioactive materials makes it increasingly important that financial protection against damage to these facilities from such shipments be obtained. In conjunction with your office and representatives of the State of New Jersey, we have been in close contact with the Atomic Energy Commission on this matter. After a series of meetings which is still continuing, we are sure that the AEC is fully cognizant of the needs of such public agencies as ours. Our meetings with the Atomic Energy Commission resulted from the Commission's desire to ship irradiated fuel elements from European countries to the United States through pier facilities in the port of New York. The story of these shipments, which have not yet taken place, is detailed in somewhat abbreviated form in the correspondence which I have attached to this letter: a letter I sent to Mr. Algie A. Wells, Director of the Division of International Affairs of the Atomic Energy Commission, dated April 29, 1960; the reply by Mr. Wells' Deputy, Mr. Myron B. Kratzer, dated September 30, 1960; Mr. Kratzer's further letter, dated May 3, 1961, and my reply, dated June 16, 1961. The entire problem of financial protection was thoroughly examined at the meeting last month at which you were cochairman with Mr. Robert A. Kaye, Chief of the Atomic Energy Commission's Traffic Management Section. The meeting was well attended by AEC representatives and by representatives of various terminal and transportation authorities concerned with this problem.1 At that time, we were advised by the AEC that under present law, this problem could be met only by the insurance industry or by remedial legislation. Less than 2 weeks ago, largely due to your effective work in cooperation with other representatives of New York and New Jersey agencies, the Inland Marine Insurance Bureau advised us that some modification of its previously adamant position against insuring these risks may be possible. It has, in fact, forwarded to us a form of endorsement which would modify its stringent bridge and tunnel policy nuclear exclusion clause. This endorsement was presented by the insurance companies with no prior consultation with us as to the form of endorsement which would be satisfactory. The form of endorsement is not satisfactory and does not solve the problem. It is however, a very real step forward and there is every reason to be believe that if the insurance industry would consider the needs of the terminal and transportation authorities, a satisfactory form of endorsement may be reached without protracted difficulty or delay. The insurance industry has not yet advised us as to the cost of such coverage nor the amount of damages which they are willing to assume. The monetary limits on liability and the amount of the premium were left blank and are still blank on the forms we received. These hurdles may be even more substantial than the form of the endorsement. Whether or not they can be solved is up to the insurance industry and its evaluation of the risks it is asked to assume. The problem of carrying forward the principle of such coverage from authority bridges and tunnels to other authority terminal and transportation properties, however, does not seem to us to be at all difficult and is likewise largely up to the insurance industry. In all frankness, we have been giving extremely serious thought to joining with you and other agencies affected in presenting the problem of financial protection to the Congress and seeking the assistance of the Congress in the solution of this problem. We believe that we are confronted with a situation which is every bit as serious as that which faced manufacturers who desired to enter the field of peacetime nuclear industrial development prior to the passage of the Price-Anderson Act. Even with the possibility of substantial profit some time in the future, they could not risk entering this field. We have no prospect of any financial gain at all. We have no wish for any gain from the handling of shipments of radioactive materials. We are more than willing to be of assistance in the development of the nuclear industry. But we do not believe that it is right that this public agency of the States of New York and New Jersey and other similar agencies throughout the United States be asked, in return for their assistance, to run risks of substantial damage to property, loss of revenue and liability to others without financial protection. Measured against the revenues which are derived or which conceivably may be derived in the future from such shipments, the risk assumes its true pro 1 Representatives at this meeting included: John A. Derry, Director, Division of Construction and Supply, AEC; P. M. Lum, Chief, Property and Supply Management Branch, C. & S., AEC: V. I. Gruber, Traffic Management, C. & S., AEC; Murray Chais, Traffic Management, C. & S., AEC; W. J. Satterfield, Jr., Chief, Insurance Section, FIN, AEC; Leslie F. Spalding, Chief, Claims, Insurance Section, FIN, AEC; W. J. Minsch, Jr., Counsel, Production, C. & S., OCC, AEC; L. M. Trosten, OCC, AEC; Charles F. Eason, Counsel, Federal-States Relations, OCC, AEC; Eber R. Price, Assistant Director, L. & R., AEC: Lester R. Rogers, Assistant Director, L. & R., AEC; G. W. Morgan, Federal-State Relations Branch, M. & S., AEC; Charles R. Coughman, Federal-State Relations Branch, M. & S., AEC; T. J. King. Program and Fiscal Branch, RD, AEC: Maurice Axelrad, counsel, New York State Office of Atomic Development: Milton D. Stewart, New York State Thruway Authority; John P. MacArthur, New York State Thruway Authority; Meyer Scheps, assistant general counsel, Triborough Bridge and Tunnel Authority; Michael S. Zarin, attorney, the Port of New York Authority; and Lawrence S. Friedman, assistant insurance manager, the Port of New York Authority. portions. Tolls or fees, even at a doubled rate, are insignificant compared with the extra costs involved in accepting such shipments. Therefore, to measure such revenue against possible risk of damage is, of course, completely unrealistic. Other agencies, similar to the port authority, have decided that they will not accept such shipments. We are advised that the Triborough Bridge & Tunnel Authority, whose facilities include the Triborough Bridge, the Bronx Whitestone Bridge, the Throgs Neck Bridge, the Brooklyn-Battery Tunnel and the QueensMidtown Tunnel, prohibits the shipment of radioactive materials, that the Massachusetts Turnpike Authority prohibits the shipment of radioactive materials and that there are other terminal and transportation authorities in various parts of the country which currently prohibit or which are thinking seriously of prohibiting such shipments on the ground that, at the present time, they are unable to secure adequate insurance or other financial protection. Be that as it may, we agree with you that in view of the recent expression of interest on the part of the insurance industry in assuming responsibilities in this field, the industry should be given every opportunity to do so and a request for direct congressional assistance may be premature. We also think it well and concur in your belief that the Joint Congressional Committee on Atomic Energy should be apprised of the problems of the terminal and transportation authorities in this area so that the committee, as well as the insurance industry, and the Atomic Energy Commission, may be informed. If you wish, you may feel free to use this letter for that purpose. On the strength of the new and most welcome attitude of the insurance industry, I believe that it will prove most productive to devote the next several months to an attempt to work out the problems in the area with insurance company representatives. We shall be pleased to continue to cooperate with you and representatives of other agencies in these efforts. The failure of these efforts will inevitably result in the constriction of desirable transportation routes for shipments of radioactive materials; and then congressional action may prove to be the only way to relieve the problem. The success of these efforts will be a landmark of the development of atomic energy for peaceful purposes. Sincerely yours, Mr. ALGIE A. WELLS, ROGER H. GILMAN, Director of Port Development. THE PORT OF NEW YORK AUTHORITY, Director, Division of International Affairs, DEAR MR. WELLS: During recent weeks, port authority representatives and representatives from the States of New York and New Jersey have been meeting with Mr. Robert Berte of your Division and a number of other members of the staff of the Atomic Energy Commission, including attorneys of the Office of General Counsel in reference to the AEC's proposal to ship irradiated fuel elements from European countries through pier facilities at the port of New York. One of the primary problems the Port of New York Authority is still considering in regard to these shipments through its own marine terminals is the problem of financial protection in the event of an accident. At this time we do not know the attitude of the owners of other piers at the port. As we see it, this problem has two parts. First, the necessity for protection from claims against the port authoriy. Second, the necessity for protection against losses due to property damage at port authority facilities. This problem arises principally from the atomic incident exclusions in our standing insurance. We were advised at our meeting in Washington on April 11 that it is possible for the port authority to be fully protected against claims resulting from mishaps in the course of these shipments. We have been assured that such protection could be made available by carefully tailoring the relevant indemnity agreements so as to take advantage of the benefits which the Price-Anderson Act makes available. It was suggested that we write to you in order to receive confirmation of this advice and assurance that such protection will be provided. |