ML20205G748

NRC Staff Study Concerning Financial Protection Against Potential Harm Caused by Sabotage or Theft of Nuclear Matls

ML20205G748
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Issue date:	06/30/1975
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NUCLEAR REGULATORY COMilSS10:1 STAFF STUDY CONCERNIt1G

. FINANCIAL PROTECTION AGAINST POTENTIAL HARM CAUSED BY SAB0TAGE OR THEFT OF NUCLEAR MATERIALS

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, a TABLE OF CONTENTS Part i Page INTRODUCTION -

I. STATEMENT OF THE PROBLEM 4 II. PRESENT SCOPE OF PRICE-ANDERSON COVERAGE OF DAMAGES CAUSED BY SABOTAGE OR THEFT OF NUCLEAR MATERIALS 8 A. The Significance of an Illegal Act 9 B. Geographic Limitations on Coverage 13 III. ANALYSIS OF THE RIBIC0FF AMENDMENT 17 IV. ALTERNATIVE APPROACHES TO THE PROBLEM 19 APPENDIX "A" CURRENT SECURITY REQUIREMENTS APPENDIX "B" EVENTS BEARING UPON DEVELOPMENTS AND EVOLUTION OF. SECURITY REQUIREMENTS APPENDIX "C" CORRESPONDENCE WITH INSURANCE POOLS o

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j NUCLEAR REGULATORY C0ffilSSION STAFF STUDY CONCERNING FINANCIAL PROTECTION AGAINST POTENTIAL HARM CAUSED BY SAB0TAGE OR THEFT OF NUCLEAR MATERIALS

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Introduction The Price-Anderson Act E affords the public substantial financial protection against damages that might arise from certain peaceful uses of nuclear materials, through a combination of private insurance and supple- I I

mental federal government indemnity agreements covering licensed produc-tion and utilization facilities. U The Act has the practical effect of imposing strict and exclusive liability, to a statutory ceiling of $560 l

million dollars for a single nuclear incident. ]

l Although the relevant provisions of the Act are cast in broader terms, I

the types of incidents primarily contemplated by the draftsmen of the '

original 1957 statute were of an accidental nature U -- for example, t'

if The Act is section 170 of the Atomic Energy Act of 1954, as amended, and the related definitions in section 11 of that Act. 42 U.S.C. 2210, 2014.

y For convenience, and because similar considerations generally apply, discussion herein is directed primarily to licensed nuclear power reactors, except as otherwise noted. Licensees of large power reactors are required by the Act to maintain the maximum amount of available private insurance, presently $125 million. Section170(b). Other l- facility licensees may maintain lesser amounts of insurance, ld. d The

, Comission has discretion to extend the Price-Anderson system to materials licensees, but that discretion has not been exercised. This study does not cover unlicensed contract activities involving nuclear materials.

The major portion of such contracting activities is now within the

, jurisdiction of the Energy Research and Development Administration, pur-

suant to the Energy Reorganization Act of 1974. Differing considerations t

may apply to such activities.

t y See H. Rep. No. 435, pp. 2-3, 8-10, 85th Cong.,1st Sess.

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accidents that might result from malfunctioning equipment at a reactor.

More recently, concerns have been increasingly expressed about damages that might result from sabotage of facilities or " diversion" of nuclear materials -- an imprecise term usually connoting theft. Attention has focused in particular on the possibility that a terrorist or criminal group with the requisite technical expertise might steal sufficient mate-rial to construct and detonate a crude nuclear bomb. In response to these concerns, Senator Ribicoff sponsored an amendment to proposed legislation in the 93d Congress (H.R.15323)' to modify and extend the Price-Anderson Act. The amendment, adopted in the Senate but deleted by the Conference Committee, was designed to extend Price-Anderson coverage to potential harm caused by sabotage or theft. The Conference Committee report stated in this regard that --

"The conferees agreed to eliminate this amendment because the feasibility and ramifications of such inclusion required detailed study. In particula'r the role of private insurance in relation to Governmental indemnity, as well as their relationship to safeguard regulations, requires further consideration. The cunferees expect the Atomic Energy Commission to conduct a study of this problem and report to Congress with recommendations by early next year. The Joint Committee will then conduct hearings to determine what, if any, legislative changes are required." H. Rep.

No. 93-1306, p. 3.

The bill was subsequently vetoed by the President, but the veto was occasioned by an unrelated provision. O This study has been prepared in response to the conferees' request.

4f The Presidential veto was based on section 12 of the Act, under which the legislation might have been nullified by a subsequent concurrent resolution of both Houses. The President viewed this provision as an unconstitutional incursion upon his veto pnwer. See House Document No.93-370, vetoing H. R.15323.

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In order to obtain a range of viewpoints on the subject within the limited time available, the Comission staff met informally or spoke with persons associated with industry and public interest groups, I and the nuclear liability insurance pools. The staff has considered the varied views expressed in those discussions in its preparation of this study.

Because a principal issue presented is the willingness of the nuclear lia-bility insurance pools to extend presend Price-Anderson coverage, their positions with respect to various issues were formally solicited by Senator Ribicoff and also by the Commission staff. Included as Appendix C are Senator Ribicoff's August 12, 1974 letter, the replies by the pools to it, the Commission staff's letter of October 9,1974, and the pools' replies of December 16, 1974, and January 14, 1975.

This study includes --

a statement of the problem;

-- an analysis of the present scope of Price-Anderson coverage with respect to damages that might arise from sabotage or theft of nuclear materials;

-- an analysis of the Ribicoff amendment; and

-- an analysis of alternative approaches to the problem; 4

5] Industry contacts included the Atomic Industrial Forum, Edison Electrical Institute, American Public Power Association and the National Rural Electric Cooperative Association. Public interest group contacts included Friends of the Earth, Congress Watch, and the Sierra Club.

The Staff did not formally solicit nor did these organizations submit position papers. However, the Staff believes that the views expressed through these informal contacts were fairly representative of the positions of the named groups.

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1. STATEMENT OF THE PROBLEM The sabotage and theft scenarios contributing to current safeguards concerns are based largely on three relatively recent developments --

increased terrorist activity; public availability of technical information concerning the construction of nuclear bombs; and possible increased use of weapons-grade materials in the fuel , cycles associated with nuclear power generation. For example, the authors of a report to the Energy Policy Project sponsored by the Ford FoundationN have described a variety of scenarios involving theft of nuclear materials and subsequent blackmail, contamination of an area, or detonation of a crude nuclear bomb.

The current generation of light-water cooled reactors uses a low-enrichment type of uranium fuel which is not of weapons grade. This mate-rial could not be made into a bomb unless those stealing it also had access i

to highly sophisticated isotope enrichment facilities which in the United States are now owned and operated exclusively by the federal government.

Those few reactors licensed to use highly-enriched uranium and plutonium --

weapons grade fuel -- are presently subject to more stringent safeguards requirements than those appliqable to most reactors.

Present concerns arise in part from the possibility of increased use of recycle plutonium and highly-enriched uranium in reactor fuel. U Such ,

pf Nuclear Theft: Risks and Safeguards, by Mason Willrich and Theodore Taylor (Ballinger, 1974).

y In August 1974, the AEC staff issued a draft " Generic Environmental Statement on Mixed 0xide Fuel (GESMO)" which assesses the environmental impacts of widespread use of recycle plutonium in reactor fuel. Outside coments have been received on the staff draft, but the Commission has not formally acted on this proposal.

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'i ' e material could be used to construct a nuclear explosive and, because of its high radiotoxicity, plutonium could be a threat to public health if released through an act of sabotage. While, in our judgment, the possi-bility of successful construction of a " basement bonb" may have been over-stated in some quarters, for purposes of this study the possibility cannot be disregarded.

I A significant aspect of the problem is that some nuclear-related damages not covered by Price-Anderson are also not covered by any other form of insurance. For example,'the standard form homeowner's insurance policy contains a " radiation" clause which excludes from coverage damages caused by nuclear incidents, whether by radiation or explosion. Although similar exclusions are generally not included in life and health insurance l policies, they may be found in other kinds of property insurance. As a result, public protection issues posed here are not limited to whether some fonn of protection should be provided' for those wh'o cannot afford insurance, or for those who lack the prudence to protect themselves.

An assessment of the risks posed by possible sabotage or theft of nuclear materials is necessarily beyond the scope of this study. Because of

the multiple human variables involved and the lack of any experience with such incidbnts, among other factors, it may never be possible to quantify such risks with any precision. The degrees of risk posed -- whatever they may be -- are, of course, directly related to the sffectiveness of eafeguards t

measures imposed on facility licensees, and others legally possess ug nuclear

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materials. An outline of current safeguards requirements is included as AppendixA.8.f Current concerns about sabotage and theft of nuclear materials have created broad recognition of a need for rigorous examination of the safeguards area. Congressional recognition of that need is emphasized by section 204 of the Energy Reorganization Act of 1974, which established an " Office of Nuclear Material Safety and Safeguards," under a Director who may report directly to the Commission. This newly-created office has broad responsibilities in the safeguards area. Another provision of the Act (section 204(b)(2)(C)) directs the Commission to conduct a study of the need for and feasibility of estab-lishing a security agency within this Commission for the performance of safe-guards functions.

A need for more stringent safeguards procedures was recognized in the AEC

' staff's draft environmental impact statement on the use of recycle. plutonium in light water reactors issued in August 1974. E Because recycle plutonium has characteristics more inherently dangerous than low-enriched uranium fuel, the draft impact statement concluded that safeguards objectives "will not be fully met for Pu recycle by current safeguards measures." The staff concluded, however, that some combination of new safeguards measures could deal adequately with the problems posed, should the Commission decide to proceed with wide-scale authorization of mixed-oxide fuels. The staff environmental review of

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An historical outline of events bearing upon the evolution of the 8/ Comission's present safeguards requirements is included as Appendix B.

9,] See note 7, supra.

N* o mixed oxide fuels, including safeguards' issues, has not been approved by the Commission. However, the staff has underway a broad study of safeguards issues raised by plutonium recycle, which is to be coordinated with the Congressionally-mandated federal security agency study.

We refer to these developments to reemphasize that an assessment of the effectiveness of current safeguards measures is necessarily beyond the scope of this study. Indeed, as suggested hereafter, the results of safeguards studies currently underway may bear strongly on the proper resolution of the present problem. This relatively narrow study proceeds on two basic assump-tions which rest on the staff's judgment and experience. First, that recent increases in terrorist activities and the possible increased volumes of mate-rials in the nuclear fuel cycles create some risk to the public, in whatever way that risk is measured. Second, that regardless of the thoroughness and sophistication of safeguards measures that may be implemented in the future, l

" fail-safe" measures cannot be achieved. Although we believe that risks to the public from sabotage and theft will be small, given a soundly conceived and implemerited safeguards approach, they cannot, at least at this juncture, be dismissed as inconsequential. l l

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II. PRESENT SCOPE OF PRlCE-ANDERSON COVERAGE OF DAMAGES l CAUSED BY SABOTAGE OR THEFT OF NUCLEAR MATERIALS l

The present Price-Anderson system, as previously implemented by the l AEC in insurance and indemnity agreements, has a distinct geographic frame of reference. The agreements provide coverage for damages emanating from a specifically described site or from the' transportation of nuclear material to or from such " covered" sites. This conceptual scheme makes it possible to analyze present coverage of damages caused by sabotage of facilities or theft of nuclear materials with reference to three types of hypothetical rituations. First, sabotage of a nuclear facility resulting in radioactive contamination of the surrounding area. Second, sabotage of a shipment of nuclear material, similarly resulting in contamination of the surrounding area. In these first two situtations, as a pr'actical matter, explosion damage could not occur. Third, successful theft. of nuclear material from a facility, or from a shipment of material. In this last case, damages could be caused later from another location, either by deliberate contamination of an area or, conceivably, by detonation of a crude nuclear bomb.

Whether the present Price-Anderson system would cover damages caused in these hypothetical situations turns primarily upon two questions which focus separately on the character of the act causing the damage and the geographical location of the source o'f the damage. Does coverage extend to damages caused by a deliberate, illegal act of sabotage or theft? Assuming such damages are covered, does coverage extend to damages emanating from a location remote from afacilityorhlannedtransportationroute? The answers to these questions e

g may depend upon the circumstances of the particular case. Nevertheless, as discussed below, the staff believes that, as a general proposition, damages otherwise covered by Price-Anderson are covered notwithstanding the fact i

that they are caused by sabotage or theft. Accordingly, damages caused in j the first two situations hypothesized above would be covered. However, the staff believes that the Price-Anderson system as presently implemented probably does not extend to damages emanating from a location remote from a facility or planned transportation route.E Accordingly, damages caused in the third situation hypothesized above, flowing from a successful theft of nuclear material, would not be covered.

I A. The Significance of an Illegal Act The present scope of Price-Anderson coverage is derivable from the I

statute itself, from the standard forms of insurance and indennity agreements prescribed by the Connission pursuant to statutory authority (10 CFR 140.91, 140.92), and from applicable legal doctrines. Turning first to the question wh' ether the illegal nature of the act affects coverage, the basic coverage provisions of the statute are written in very broad terms. The overall pur-pose of the statute is to protect the public from damages arising out of nuclear incidents. The phrase " nuclear incident" is broadly defined to mean "any occurrence ... causing ... bodily injury, sickness, disease, or death, or loss of or damage to property, or loss of use of property arising out of or resulting from the radioactive, toxic, explosive, or other hazardous pro-perties of . . . ' nuclear . . . material ." Sectionll(q). The statute provides 10/ As noted below, there is some doubt whether the present statute authorizes the Commission to extend insurance and indemnity agreements to these situations.

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that the Commission's contracts of indemnity, which are intended, in gen-eral, to be co-extensive in coverage with the private insurance contracts, "shall cover public liability arising out of or in connection with the licensed activity. " Section170(c)(emphasisadded). And the term "public liability" is, in turn, defined to mean "any legal liability arising out of or resulting-from a nuclear incident", with three specified exceptions.

Especially relevant here is an exception for " claims arising out of an act of war." Section11(w). With respect to this exception, the report of

! the Joint Committee accompanying Price-Anderson as originally enacted expressly stated that:

"Any single act of sabotage would be covered by the indemnification provisions of the bill if it could not be proven to be an act of war." 11/

It may nevertheless seem somewhat ironic that an insurance-indemnity l

scheme paid for by a licensee would cover damages caused by a third person over whom the licensee has no control. The net result is that saboteurs and thieves are insulated from liability. But this " omnibus coverage" feature i f was deliberately incorporated into the Price-Anderson scheme. The statute expressly defines " person indemr.ified" to mean "the person with whom an indemnity agreement is executed and an other person who may be liable for public liability . .. (emphasis added). Section11(t). The primary reason cited at the time for this feature was to extend coverage to incidents for which equipment designers, manufacturers or others might eventually be proved responsible, and to preclude actions against them. Another example in-volved a hypothetical airplane pilot who might accidentally crash into a reactor. E But an overall purpose of " omnibus coverage" -- spplicable 1

11/ H. Rep. No. 435, 85th Cong. ,1st Sess. , p.18.

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to saboteurs as well as to equipment manufacturers -- was to promote expeditious and certain payment of claims. To that end, damage claimants are channeled, as a practical matter, to the insurance and indemnity funds, subject to certain ..

I exceptions inapplicable here. E Claimants would have no legal recourse f I

against others.

The provisions of the standard fonts of insurance and indemnity agreements )

prescribed by the Commission (10 CFR 140.91,140.92) implement the quoted statutory provisions. Particularly relevant in this connection are provisions particularizing the statutory waiver of certain defenses in the event of a serious nuclear incident. The " Waiver of Defenses Endorsement" to the Nuclear Energy Liability Policy (Facility Form) provides that the insured licensee waives --

"any issue or defense as to the conduct of the claimant or the fault of the insured, including but not limited to ...

unforeseeable intervening causes, whether involving the conduct of a third person or an act of God...."

The same waiver language is contained in the prescribed form of indemnity agreement between the Commission and the licensees. An attempted defense to a claim resulting from an act of' sabotage or theft probably would fall within the category of an " intervening cause ... involving the conduct of a third person."

But such defenses would be precluded by these express waivers in the insurance and indemnity contracts. Like damages resulting from an "act of God" -- e.g.

an earthqua!:e -- they are compensabfe. -

1,3/ The conclusion that the statute contemplates coverage of damages caused

/ by illegal acts is reinforced by a provision in section 170(h) relating to waiver of defenses in the event of an " extraordinary nuclear occurrence."

That section provides that such waivers shall not apply --

to injury or damage to a claimant or to a claimant's pro-perty which is intentionally sustained by the claimant or_

which results from a nuclear incident intentionally and wrongfullycausedb]theclaimant. (Emphasis added.).

Thus, damages suffered by the wrongdoer himself are not covered, but the damages he inflicts on otherr; are covered.

I 12 - ' i The only apparent basis for an argument that illegal acts -- such as sabotage of a reactor -- are not covered by Price-Anderson would be language in the insurance agreements implementing the statutory "act of war" exclusion.

This provision excludes from coverage --

bodily injury or property damage due to war, whether or not declared, civil war, insurrection, rebellion or revo-lution, or to any act or conditions incident to any of the foregoing.

Because terms like " insurrection" and " revolution" have no precise legal meaning in this context, the line between them and the " single act of sabo-tage" referred to by the Joint Committee might be difficult to draw in some cases. Generally speaking, however, this exclusion appears to contemplate a relatively widespread and actual disruption of the civil order. 5 The mere fact that a group of terrorists may label themselves " revolutionaries" would not necessarily make their actions a " revolution" within the meaning of this exclusion. .

In the event of a serious nuclear incident and unwillingness on the part of the insurance companies or the government to concede liability, questions concerning the scope of Price-Anderson coverage would ultimately be determined by the federal courts. Although many of the questions presented would be of first impression -- the Price-Anderson compensation machinery is unique in many respects and has never been construed by the courts -- there are gener-ally-applicable legal doctrines to guide the judicial approach. For example, it has long been held that doubtful questions of interpretation are to be resolved against insurers and in favor of insureds and beneficiaries. E l

14/ See Home Ins. M. v. Davila, 212 F. 2d 731, 735-738 (C.A.1,1954);

H. Rep. 435, 85th Cong.,1st Sess. at p.18.

15/ See, e.g. , Equitable Safety Ins. Q. v. Hearne, 87 U.S. 494 (1874).

T' Quite apart from abstract legal doctrine, the uniqueness of a serious nuclear incident and the comparative equities of injured parties, licensees, l

and the government would probably affect a court's view of the case. As

! Justice Jackson stated in dissent in Dalehite v. United States, 346 U.S.15, 49 (1953), a damage suit arising out of the Texas City disaster -- I "This is one of those cases that a judge is likely to leave by the same door through which he enters. As we have been told by a master of our craft, 'Some theory of liability, some philosophy of the end to be served by tightening or enlarging the circle of rights and remedies, is at the root of any decision in novel situations when analogies are equivocal and precedents are silent.'" 16/  :

In the event of a serious nuclear incident caused by theft or sabotage, it seems likely that a judicial awareness of who is in a better position to bear the. loss would resolve a doubtful legal question in favor of coverage. As Justice Jackson observed in Dalehite, "[I]njury so sudden and sweeping should l

not lie where it has fallen." I_d. at 54.

The foregoing analysis demonstrates that, at least as a general proposition, damages otherwise covered by the present Price-Anderson system are covered l

notwithstanding the fact that they are caused by an illegal act, such as sabo-tage or theft. We next consider the significance of the geographical frame of reference incorporated in the present Price-Anderson system.

B. Geographic Limitations on Coverage As noted previously, the present Price-Anderson system, as implemented in outstanding insurance and indemnity agreements, has a geographic frame of reference. The underlying assumption was that damages would emanate from a l

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16] The quotation is from Cardozo The Growth o_f_ the Law, p.102 (emphasis in the original).

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1 facility site or from a planned transportation route. Aside from the successful theft possibility on which recent attention has focused, there was no reason to suppose that that would not be the case when the forms of agreements were drafted. A practical reason for adopting this geographic site-related concept is that the statute excludes from coverage damages to property " located at the site of and used in connection with the licensed activity where the nuclear incident occurs." Section11(w). However, dam-ages to a licensee's property located off-site would be covered.

Licensee insurance coverage and government indemnity apply to damages occurring in the course of transportation of nuclear materials to or from an indemnified facility. The waiver of defenses provision of Price-Anderson re-fers expressly to nuclear occurrences happening "in the course of transportation of [ nuclear] material ... to or from a production or utilization facility."

I Section 170(n). The Nuclear Energy Liability Policy (Facility Form) contains the following provision with respect to coverage of the transportation of nuclear material:

"'[I]nsured shipment' means a shipment of source material, special nuclear naterial, spent fuel or waste, herein called

' material,' (1) to the facility from any location except an indemnified nuclear facility, but only if the transportation of the material is not by predetennination to be interrupted by removal of the material from a transporting conveyance for any purpose other than the continuation of its transportation, or (2) from the facility to any other location, but only until the material is removed from a transporting conveyance for any purpose other than the continuation of its transportation."

- Similarly, the Government indemnity agreements cover any liability arising out of or resulting from a nuclear incident occurring "in the course of transportation" of nuclear material . The definition of the phrase "in the course of transportation" in the indemnity agreements is essentially similar

L' to the definition of " insured shipment" used in the insurance policies.

Thus, when 'either.the point of origin or the point of destination of a ship-ment of nuclear material is an indemnified facility, the material is afforded j Price-Anderson protection during transit by the terms of the financial protec-tion and indemnity agreements. E/

It seems clear, therefore, that acts of sabotage or attempted theft resulting in damages emanating from a facility site or planned transportation route -- the first two situations previously hypothesized -- would be covered by the present Price-Anderson system. It is impcrtant to note, however, that the quoted definition of " insured shipment" in the insurance contracts seems to say that an " insured shipment" loses that status if and when the material is diverted from a planned transportation route. And the definition of " extra-ordinary nuclear occurrence" -- the concept which triggers the waiver of defenses provision in the event of a serious nuclear incident -- contains a similar geographic frame of rererence. As relevant here, the phrase is defined to mean --

"any event causing a discharge or dispersal of [ nuclear]

material ... from its intended place of confinement in amounts offsite, or causing radiation levels offsite....

As used in this subsection, 'offsite' means away from

'the location' or 'the contract location' as defined in the applicable Commission indemnity agreements...."

Section 11(j).

M/ Examples cf these situations would be (1) shipments from a fuel fabrica-tion plant [nonindemnified] to a nuclear power plant [ indemnified]

and (2) from a fuel reprocessing plant [ indemnified] to a licensed waste

, disposal site [nonindemnified]. Where both the points of origin and destination are indemnified facilities, the n?terial is covered during transit by the financial protection and indemnity agreements maintained by the licensee at whose facility the shipment originated. An example of this situation would be a shipment of. spent fuel from a nuclear power plant to a fuel reprocessing plant. Since it is in the transportation phase of any nuclear fuel cycle in wSich nuclear material is generally considered most vulnerable to sabotage or theft (See draft GESMO, P. V-II), the public would be protected at the present time under the pro-visions of the Price-Anderson Act for any incidents that resulted during transportation to or from indemnified facilities.

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r This definition appears to contemplate that covered incidents would only .

occur at a licensed facility (the site) or at a location to be defined in the indemnity agreements, since the phrase " discharge or dispersal" would nor-mally connote the immediate cause of the damage itself. For this language to reach a successful theft and subsequent contamination or detonation from an-other location -- the third situation previously hypothesized -- the terms

" discharge or dispersal" would have to be read to include the theft itself.

Such a reading is awkward, to say the least.

Such a limited geographical . frame of reference is also reflected in the government indemnity agreements. "The location" referred to in the statutory definition of " extraordinary nuclear occurrence" is defined in individual agreements to mean the site of the particular facility. A nuclear incident, to which coverage is keyed, is in turn defined to mean an occurrence "at the location or in the course of transportation." The phrase "in the course of transportation" is separately defined in such a way as to exclude situations in which material is diverted from the planned route, as follows --

"The transportation of the radioactive material from the location shall be deemed to end when the radioactive material is removed from the transporting conveyance for any purpose other than the continuation of transportation or temporary storage incidental thereto."

It seems clear, for example, that a successful theft of material from "the transporting conveyance" would be for a purpose "other than the continuation of transportation."

That the Price-Anderson system as presently structured probably would not cover damages following a successful theft of nuclear material results primarily from the geographic limitations written into the insurance and indemnity agree-

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.( O ments. Although such geographic limitations appear to be implicit in certain provisions of the statute lSI it is at least arguable that future agreements could be written to cover some such cases. However, the AEC's longstanding practice in implementing the statute with geographic limits, and with the knowledge of the Joint Ccamittee, might be viewed as precluding such an expan-sionofcoverage.}O/ Moreover, existing insurance contracts probably could not be rewritten over the insurer's objections. In any event, there is another practical problem in this approach, which also inheres in the Ribicoff amendment, to which we now turn.

III. ANALYSIS OF THE RIBIC0FF AMENDMENT The amendment sponsored by Senator Ribicoff in the last Congress would i i

have changed the statutory definitions of " extraordinary nuclear occurrence" j (section ll(j)) and " nuclear incident" (section ll(q)) to read, in pertinent part, as follows (amendatory language underscored):

"j . The term ' extraordinary nuclear occurrence' means any event causing a discharge or dispersal of source, special nuclear, or byproduct material from its intended place of confinement, or of such material that is illegally diverted from its intended place of confinement, in amounts offsite, or causing radiation levels offsite, which the Commission determines to be substantial, and which the Commission deter-mines has resulted or will result in substantial damages to persons offsite or property offsite.... As used in this sub-section, 'offsite' means away from 'the location' or 'the contract location' as defined in the applicable Commission indemnity agreement, entered into pursuant to section 170." .

1 1,8/ Most notably, the site-related aspects of the definition of " extraordinary

, nuclear occurrence" quoted above.

i 1,9/ C f,. power Reactor Development Corp. v. International Union, 367 U.S.

396, 408 (1961).

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"q. The term ' nuclear incident' means any occurrence, in-cluding an extraordinary nuclear occurrence, within the United States causing, within or outside the United States, bodily injury, sickness, disease, or death, or loss of or damage to property, or loss of use of property, arising out of or resulting from the radioactive, toxic, explosive, or other hazardous properties of source, special nuclear, or byproduct material, including such material that is illegally diverted from its intended place of confinement...."

These amended definitions, when read with other relevant provisions of the Act, were intended to extend Price-Anderson coverage to damages caused by illegal acts, such as sabotage or theft. As Senator Ribicoff stated during Senate floor debate --

My amendment insures that the public is as well protected by these [ Price-Anderson] indemnity provisions from the consequences of nuclear theft as it is from the consequences of a nuclear accident." 120 Cong. Rec. S 14584 (daily ed.).

Senator Ribicoff was proceeding on the assumption that the present Price-Anderson system provides compensation "only for victims of a nuclear industry accident." Id. As discussed in the previous section, we believe that the present system is not limited to accidents, but that it extends to sabotage at a site or in the course of planned transportation. The Ribicoff 4

amendment would, of course, reinforce that conclusion. In addition, however, the amendment clearly was intended to extend present coverage to the successful theft situation, where radiation or explosion damage emanates from a location remote from a reactor site or planned transportation route. It is possible, however, that the amendment would not fully achieve that result.

The Price-Anderson system is constructed on the assumption that damages will emanate from an identifiable licensed activity. Consistent with that as-sumption, insurance and indemnity agreements are executed with reference to a specific activity. In order to recover under Price-Anderson, a claimant must prove damages and a causal relationship between them and a particular licensed l

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I activity. But in a case of successful nuclear theft, it might be impossible to determine which licensee, if any, was t'he victim of the theft. In such a

! situation, the Ribicoff amendment would not as a practical matter operate to extend Price-Anderson coverage. j i

In addition to this practical question, the Ribicoff amendment raises difficult policy questions which we next discuss in relation to alternative approaches to the problem.

IV. ALTERNATIVE APPROACHES TO THE PROBLEM A program of public protection against risks of nuclear sabotage and theft could involve payments by licensees, the insurance pools, the federal government, or some combination of the three. The basic policy considerations l

applicable to any approach may be sumarized before separate discussion of the ]

advantages and disadvantages of particular approaches. We turn first, however, to a factor which, in our view, should not control the policy choice.

A premise of the Ribicoff amendment was that it would motivate licensees to upgrade safeguards. Senator Ribicoff pointed out that the insurance com-panies would retain the option of extending or refusing coverage and that

" insurance companies will be reluctant to cover nuclear thefts if safeguards are inadequate." 120Cong. Rec.S14586(dailyed.).

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The nuclear liability insurance pools have raised questions about this aspect of the Ribicoff amendment. As one of the pools states --

We doubt that this indirect technique would prove to be successful. Two basic assumptions on which it rests are sus-pect. The first is that the threat of liability acts as a deterrent to careless behavior or as a stimulus to extra-ordinary care. Many would doubt the truth of this proposition.

Whatever validity it may have would seem to vanish if the threat of loss were transferred to insurers or diffused by industry-wide assessments.

The second assumption implicit in the proposal is that the standards private insurers .could accept for safeguarding nuclear material are the appropriate standards for protecting the public. Insurers would be the first to acknowledge that they have no special expertise that would warrant reliance on their judgment for such a purpose.

In short, we do not feel there is any justification for imposinq absolute liability upon the nuclear industry for the purpose of upgrading safeguards. We believe that the question of appropriate safeguards against the theft of nuclear material should be resolved by the more direct method of analyzing the hazards at each step in the production and utilization process and developing specific responses. 20/

Although we believe that insurance industry scrutiny of safeguards could have beneficial effects, we do not believe that hea.y ieliance should be placed upon that factor as a means of insuring effective safeguards.

Safeguards standards are an express statutory responsibility of the Commission.

Whatever impact the insurance industry may have upon safeguards, ultimately, it is for the Commission to develop and promulgate effective standards and to see to it that they are carried out to the letter by every affected licensee.

20/ Memorandum of NELIA, Appendix C, pp. 2-3.

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( As we view it, a basic policy question presented by any approach to the present problem is: who shall bear the cost? The protection scheme

! provided by the present Price-Anderson Act divides costs between the nuc-lear industry and, potentially, the federal government. That scheme was adopted in 1957 to protect the public and at the same time to give a fledg-ling industry protection against heavy liabilities for low probability but high consequence accidents, thereby removing a barrier to private industry participation in the development of nuclear power. As the industry has developed toward naturity, the continuing need for this unique government indemnity system for a particular private industry has been increasingly called into question. Accordingly, the Price-Anderson amendments passed last year -- but vetoed by the President for an unrelated reason -- adopted the approach of phasing out governmental indemnity in the near future and 1

substituting a two-layer insurance scheme under which licensees would bear l

l substantially the full cost, with a limitation on. liability which would

" float" upward as new facilities were licensed.

l A developed, private-enterprise industry should, as a general proposi-tion, pay the costs for protection against risks of accidents entailed in ,

i pursuit of a commercial endeavor. The basic issue presented here is whether i it is reasonable that, in addition to accidents, the costs of risks asso-ciated with acts of sabotage and theft should also be borne by private l

1 industr'.

As noted prev!ously, the Price-Anderson system assumes that damages l

could be identified with a particular licensee, and that assumption could  ;

i break down in the case of successful nuclear theft. In that situation, l

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there may be an element of arbitrariness in assigning the full cost of the loss to private industry. The material in question may have been stolen from the federal government or from a federal contractor. Or it may have been smuggled into this country from abroad. To be sure, it may be reasonable, depending upon the circunstances, to presume that the material came from pri-vate industry. But it nevertheless may be argued that the governmera ehould assume at least a portion of the costs in a situation where damages result from nuclear materials the source of which cannot be proved, b The case for a reasonable relationship between cost and responsibility has a broader dimension. The justification for imposing on licensees the full cost of protection against accidents -- as under last year's proposed modification of Price-Anderson -- is that licensees may reasonably be held '

accountable for them. Accidents are "their fault." The waiver of defenses feature of the Act merely recognizes that it may be difficult to prove " fault" in the traditional legal sense, and that, under all the circumstances, placing

- the burden on the public would be unfair.

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1 Imposition of the full costs of damages flowing from such situations  !

could conceivably raise constitutional questions. By hypothesis, no J specific licensee would be liable for the damages. And, in view of ,

the possibility that the materials may have been stolen from a non-industry source, it is doubtful w' 'her liability could be imposed on the industry as a whole. Com Hall v. E. I. DuPont De Nemours

& Co., Inc., 345 F. Supp. 353, 370-J81 (E.D.N.Y.,1972), where plain-tiffs sought to impose joint liability on all major domestic manu-facturers of blasting caps in accident cases involving unidentifiable blasting caps. The fact that neither a specific licensee nor the industry as a whole would otherwise be liable is not necessarily dispositive.

The " omnibus coverage" feature of the present Price-Anderson scheme 1 (see p.10, supra) contemplates that third persons over whom licensees l' have no control are protected by the insurance purchased by the li-censee. Such costs may be justifiably imposed by government as costs  ;

of doing business where, at a minimum, it is the licensee's material that causes the damage. But where, as in the situation hypothesized, it cannot even be shown that the material causing the damage came l from private industry, it seems questionable whether the full costs of ,

i such damages could be imposed on industry as a condition of doing '

business.

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It is arguable that .this reasoning is' not fully applicable to sabotage i

! , and theft risks, as distinguished from accidents. It.is one thing to require l a licensee to warrant the safety of his equipment. That is his customary t

responsibility. It may be quite another thing, for example, to expect a licensee to repel an armed terrorist attack. This observation, of course, is applicable in part to the present Price-Anderson system which, as we have shown, covers damages that might flow from sabotage at a site or in the transportation of nuclear material.

l At the present time, licensees bear the major portion of safeguards costs and responsibilities, subject to Commission standards and inspections. The Commission's ongoing safeguards studies -- relating to the possible widespread use of recycled plutonium and to the desirability of a federal security agency to perform safeguards functions -- may indicate the appropriateness of sub-stantial shifts in safeguards responsibilities between licensees and the fed- i eral government. The results of these studies, therefore, may also have a bearing on the appropriate allocation of the costs of protecting the public against risks of sabotage and theft. ,

Another policy question related to the present problem is whether Price-Anderson coverage-(or some other form of protection) should extend to payment i

of extortion demands based upon threats of use of stolen materials, and payment I of consequential damages -- such as evacuation costs -- flowing from such

. threats. The present Price-Anderson Act would not reach such payments because

-the definition of " nuclear incident" (section 11(q)) refers only to actual damages to persons'or property resulting from the hazardous properties of nuc-lear materials. While the issue is debatable, in our judgment, a formal sys-tem for paying such extortion demands should not be established. Such a sys-tem could have the effect of encouraging nuclear extortion. However, considera-tion might be given to covering consequential damages flowing from extortion threats. '

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i In the light of these generally applicable policy considerations, we '

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turn to an examination of the available approaches to the problem.

1. Ad hoc Compensation Legislation for Particular Incidents. Under this approach, Congress need take no action at this time. Legislation providing compensation for damages arising from an incident not covered by Price-Anderson -- such as a successful theft of nuclear materials -- could be enacted if and when such an event occurs. This is what happened eventually in the wake of the Texas City disaster. Following the Supreme Court's deci-sion in the Dalehite case that the federal government was not liable for the Texas City damages, the Congress enacted a special claims statute in recogni-tion of its " compassionate responsibility." 69 Stat. 707-709. The statute authorized the Secretary of the Army to process and pay claims for death, bodily injury and property damage. However, ind.ividual claims in each category were limited to $25,000. .

The principal advantage of this approach is that it obviates the need to establish in advance elaborate compensation machinery to cover a highly specu-lative future event. As contrasted with an insurance scheme, there would be no need to set necessarily somewhat arbitrary premiums with reference to a largely unquantifiable hazard -- a drawback also applicable to the present Price-Anderson system. Rather, Congress could tailor the remedy to fit the facts of the case.

, There are disadvantages to this approach, principally the prospect of-substantial delay in payment of claims. In the Texas City case, the claims statute was ena'cted in 1955, more than eight years after the disaster. By contrast, the present Price-Anderson scheme contemplates rapid payment of 9

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claims, even authorizing partial payments before final determination of total claims. Another disadvantage is the uncertainty in whether a future Congress would respond fully to the need. Assistance extended as a matter of grace may fall short of damages actually sustained, as evidenced by the l

limitations on payment contained in the Texas City legislation. Furthermore, under this approach it may not be possible to impose any liability on a li-l 1 censee after the fact in the event of an' incident involving licensed '

material .

2. Extension of Price-Anderson Coverage to Damages Arising out of l Successful Nuclear Theft. As previously described, this was the intention of the Ribicoff amendment. The principal advantage of this approach is that I it would provide a relatively quick and certain remedy for injured members of the public -- at least where the source of the material could be identified '

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! with a particular insured licensee. .

A possible practical disadvantage of this approach has been discussed previously. There could be a case of successful nuclear theft where it may be impossible to attribute the nuclear material to a particular facility. i In such a case, the Price-Anderson schene of insurance policies and indemnity agreements running to particular licensees would not afford coverage.

Under the present Price-Anderson system, insurance industry participa-tion is voluntary. Accordingly, another possible disadvantage of this ap-proach is that the insurance industry may be unwilling to extend coverage to the successful theft and similar hazards. The attached industry position papers suggest a possible unwillingness on their part to provide the same degree of protection provided under the present system. As a matter of constitutional law, we believe that the Congress probably could require the l industry to insure against these hazards, assuming the adequacy of premiums

I and overall reasonableness of the statutory scheme. E But such mandatory participation would represent a marked departure from the present Price-Anderson scheme, and raise separate practical and policy questions.

3. 'A Separate Insurance System to Cover Theft and Sabotage _. The practical problem that a simple extension of Price-Anderson might not cover damages arising from a successful nuclear theft might be met by establishing a

" pooling" insurance scheme, under which the source of the material would be irrelevant. Such a scheme might also include sabotage risks covered by the present Price-Anderson system. Although transfer of sabotage risks to such an insurance pool is not necessitated by the source identification problem, similar factors would govern the insurance industry's assessment of both theft and sabotage risks, and, consequently, the setting of premiums.

Assuming the practicality of this approach, and the willingness of the liability pools to underwrite substantial coverage, it would ensure certain and relatively prompt payment of claims. But this approach, of course, would impose the full costs of these risks on the nuclear industry. As previously suggested, the fairness of that allocation may be open to some question.

Allocation of the cost of a " pooling" insurance scheme could be affected by the resolution of the basic safeguards issue -- should industry or government have primary responsibility? Should that issue be resolved in favor of government responsibility -- e.g. in the form of a federal security 22/ Such legislation would be within the power of Congress to regulate interstate comerce. The insurance industry is subject to this power.

See United States v. Southeastern _ Underwriters Ass'n. 322 U.S. 533 (1944).

The Supreme Court has upheld State compulsory assigned risk legislation, applicable to automobile insurers, over constitutional objections. See California State Automobile Association Inter-Insurance Bureau v. Maloney, 341 U.S.105 (1951).

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e force -- then it might be appropriate that the government pay some share of the costs of an insurance program designed to cover a failure in the government's security system.

4. A " Deferred premium" System. The Price-Anderson modification and exten-sion bill passed last year (see p. 21, supra.) would have gradually substi-tuted a " deferred premium" compensation system for the present government in- )

i demnity scheme which comes into operation after private insurance coverage is I exhausted. The premiums would have been set by the Comission and payable only in the event of a nuclear incident for which private insurance proved to be l inadequate. Such a system could be modified to make it applicable to all sabo-tage and theft incidents, including a " pooling" feature to cover an unidenti-fiable source incident. The basic insurance now carried by licensees under l

Price-Anderson would be inapplicable to sabotage and theft risks. .

There are two principal advantages in this approach. First, it would

'not depend upon insurance industry funds, or, necessarily, upon the industry's participation. Second, it would not require advance commitment of substantial funds by the nuclear industry for a highly speculative event that may never occur.

A disadvantage of this approach, as recognized in last year's bill, is that some facility licensees might not be in a position to pay a substantial deferred premium when called upon to do so. In that situation, the govern-ment would have to pay the " premium", subject to possible reimbursement, if l the system is to work.

l Subject to the possibility of defaulting licensees, this approach, like the conventional insurance approach, imposes the entire cost on the nuclear 1 industry. In so doing, it raises essentially the same policy questions.

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5. Expand Government Indemnity Coverage Without Insurance Participation.

The government could commit itself, in legislation, to pay the costs of damascs caused in the future by sabotage or theft of nuclear materials.

Administrative machinery for investigation, processing and payment of claims could be established in this Commission, or this function could be handled by private insurance companies under contracts with the Commission.

The advantages of this approach are relative?y swift and certain payment of claims. As to possible disadvantages, this approach, of course, is con-trary to the premise embodied in last year's Price-Anderson legislation --

that the aovernment should phase out its indemnity _ role in the nuclear field.

But, again, it is arguable that different considerations may apply to risks of sabotage and theft.

6. Government Indemnity Coverage Generally Applicable to Terrorist Activities.

The government could commit itself, in legislation, to pay the costs of dam-ages arising out of any terrorist activities, whether nuclear-related or other- I wise. Administrative machinery for tne handling of claims would have to be established, perhaps in a new federal agency.

Such a program would, of course, increase public protection against a risk that is becoming increasingly common on the world scene. An argument can be made for government indemnity, since it is the traditional function of government to protect against terrorist activities. This approach

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rejects the notion that nuclear risks should be singled out for special treat-ment. To the victim of a terrorist act, it may make little difference ,

/ whether the cause was a nuclear explosion, a poisoned water supply, or a l

gun.

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l Such a broad indemnity proposal would raise a number of practical and policy questions. There would be definitional problems in defining "ter-rorist" activities so as to exclude street crime. And some may question whether street crime should be excluded, since protection against it is also I a government function. Should the program be expanded in that direction, it would become quite costly. And in the case of an incident involving licensed nuclear materials, this approach could be viewed as discharging licensees from payment of an appropriate social cost of doing business.

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e APPEUDIX "A"

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- .' CURRENT SECURITY REQUh(EMENTS A. Regulations Presently in Ef fec,t_ E Fixed Sites An applicant for a license to operate an enrichment or repro-l cessing facility is required to submit to the Comrnission a physical security plan with respect to vital equipment, vital areas and isolation zones, and to demonstrate how the applicant will. comply with the Commission's regulations in Chapter 10, Part 73 of the Code of Federal Regulations. (Physical Protection of Plants and Materials). 3_/ . Each applicant for a license to operate a fuel processing and fabrication plant, wherein a strategic quantitiy of special nuclear material4 /

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will be processed, mdst submit a physical security plan and show how there will be compliance with 10 CFKPart 73. E The application will

-not be approved unless the plan is determined to be adequate.5/

• 10 CFR,Part 73 contains specifications for physical security of processing", fabrication ~and reprocessing plants which' possess i strategic quantities of special nuclear material.10 CFR 73.507/ -

l Regulations specifiy requirements .which have the force and effect of law.

[ Part 73 defines (1) a vital area as one which contains vital equipment l within a structure, (2) vital equipment as any equipment, system, device or material, the failure, destruction or release of which could directly or indirectly endanger the public health and safety by exposure to radiation and (3) isolation zone as any area, clear of all objects which could conceal or shield an individual, adjacent to a physical barrier, which is monitored l- to detect the presence of individuals or vehicles.

-N'10CFR 50.34 (c) which became effective December 6,1973 1 1

4/ Uranium-235 (conta Med in uranium enriched to 202'. or more in the uranium-235 isotope), uranium-233, or plutonium alone or in combination in a cuantity of 5,000 grams or more computed by the formula, grams equals (grams contained l U-235) + 2.5 (grams U-233 + grams plutonium).

SfiOCFR 70.22 (h) .

6/-10CFR 70.23 (a) (10) 2/Became effective March 6,1974. See An.nex 1 to Appendix A for full text.

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specifies what is necessary in respect to armed guards, physical barriers and monitors, personnel access and searches, alarms, communica-tions, response to abnormal activity and liaison with local law enforcement.

10 CFR 73.60 0/contains addiIional provisions relating to physical security which are applicable to all licensees who possess strategic quantities of special nuclear material. The provisions cover access and exit controls, monitoring and alarms.

An applicant for a license to operate a commercial nuclear reactor must submit a physical security plan pertaining to vital equipment, vital areas and isolation zones.9/ However, physical security specifications for commercial reactor sites, presently consisting almost ent;irely of light.

water reactors using low-enriched uranium,.]Ol have been effected as licensing conditions in order to achieve the Commissions objectives, rather than through the Comission's rule making authority. Other types of reactors which use highly enriched uranium (such as High Temperature l Gas Reactors) or plutonium, would come within the provisions of 10 CFR ,

73.60. ,

In-Transit Licensees who transport, or deliver to a carrier for transport, ,

strategic quantities of special nuclear material, must comply with the

, 8]Became effective March 6,197T. See Annex 2 to. Appendix A for full text.

9/10CFR 50.34 (c) 10floys ' enriched; uranium is adaptable for bomb making by increasing the

-enrichment by means of highly sophisticated technology.

APPENulX "A"

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requirements of 10 CFR 73.30 through 73.36.b These sections, which are set out in full in Annex 3 to Appendix A require such measures as hand to hand exchange of receipts, tamper indicating seals on containers, armed esco and comunications capability. Special measures are particularized for For example, shipments by road must shipments by road, air, rail and sea.

be protected by an armed escort vehicle or transported in a specially designed vehicle which reduces the vulnerability to diversion.

B. Guides _12/

Although the Code of Federal Regulations has not heretofore set forth specific requirements for the physical protection of nuclear power plants using low enriched uranium, since November 6,1973 it has The adequacy required applicants for licenses to submit security plans.

of thescplans have been judged by comparison with AEC Regulatory Guide 1.17,

" Protection of Nuclear Power Plants Against Industrial Sabotage" which adopts by reference ANSI E Standard M18.17" Industrial Security for Nuclear Pot 2r Plants" dated March 23, 1973. 5 Regulatory Guide 1.17 was published in June 1973. It specifies onsite, armed and uniformed guards, alarms annuciating in two stations, self-checking and tamper indicating alarms, tests of communications each shift and test of other security equipment at least every seven days. ,

11/ Principal portions of these regulations became effective March 6,1974 12/ Guides provide licensees with advice on measures which may be employed' However, these measures do not neces-to meet Commission requirements.

Guides sarily exclude other means by which compliance can be effected.

are advisory rather than mandatory.

13/ American National Standards Institute, Inc.

ANSI standards,which may not conform with 14f Final approval by ANSI 7/18/73.Comission regulations or guidas are de acceptable standards of practice to meet predetermined needs so that industry can solve problems uniformly.

APPENDIX "A" a

s.

ANSI Standard 18.17 contemplates the establishment of three -

security areas for nuclear power plants, " increasing in the degree of protection provided as one approaches the vital equipment and facilities of the plant": (1) owner-controlled area, (2) protected area, and (3) vital area. Separate procedures for control, access, identification, searches, surveillance, enforcement, etc. are designated for each area.

It is stipulated, "The security program shall provide for adequate manpower to respond to a security threat without affecting safe operation of the plant". And, "If the owner organization determines that arming the ~ plant security force is desirable, members of the security force shall be trained in the use of their assigned weapons . . .". It is pointed .

out that electronic devices and response forces may be factors in reducing the number of guards otherwise required. Treatment is given to training, administrative control, coar.unications and response forces.

Regulatory Guide 1.17 is a revision of, and superseded, Safety Guide 17 issued October 27, 1971. Safety Guioe 17 provided counsel w'ith respect to control of' access, selection of personnel, monitoring of vital equipment and design and arrangement of equipment.15/

C. Rules Pending Imnlementation. '

Power Reactors On November 13, 1974, the Commission published for public .

comment a number of amendments to10 CFR part 7316/ These amendments would I

Spe Federal Annex 3 toVol.

Register, Appendi'x 39, A foEo.

220 - wa text of fffetl b)N0d [nat the action was 1

eing taken"in view of the increase in terrorist activities and the general availability of information concerning possible use of special nuclear material as a basis. of terrorist activities."

I APPEi401X "A"

M require all nuclear power plant licensees (under Part 50) to meet' .

standards of physical security similar to those which are currently required for fuel cycle facilities, regardless of the enrichment or type of material used in the r[ actor. Additional protective measures would be required with respect to (1) hardening of the control room,

. (2) access, identific.ation and personnel search procedures, (3) vehicle

. cargo search, (4) hardening of containment, (5) hardening the central alam station, and (6) a capability of remote observance of the isolation zone and clear area.

Transportation further amendments to 10 CFR Part 73 published for coinnent by the Conmission on November 13,1974,would require increased physical protection for shipments of strategic quantities of special nuclear material.10 CFR 73.30 through 73.35would be modified so as to require the following:

1. Outermost container or vehicle must be sealed by tamper- l indicating seals. .

2. Containers weighing less than 5,000. pounds may not be -

shipped by open conveyance. ,

3. Shipments by road must be e-ither (1) in a vehicle which can be inmobilized and has two guards in the cargo vehicle in addition to two guards in an escort vehicle, or (2) in.

12/ A ,termWhich means providing greater penetration resistance. l e

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i an armored car containing two guards, accompanied by two

. guards in each of two' escort vehicles, unless communication coverage is always available during the shipment in which case only two guards in one escort vehicle are recuired,

4. Shipments by air including exports must be made on US registered aircraft and accompanied by two guards.

5. Shipments by rail must be escorted by five guards.

G. Shipments by sea must be on Am erican Flag vessels. Exports ,

shall be accompanied by two guards. .

7. All transfers of special nuclear material must be monitored l l

by two guards.

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APPEHOIX "A"

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7 AdNEX 1 .

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(5) Admittance to a material access j

$ 73.60 A&lhional repirements for the ph)eical pmwike of are<lat nucle , arca shall be under the control of au- i

,meterist as fimed since. thorlied individunts and lim'ted to indl.

In addition to the applienble require-vidum who Wre hch am W M-ments of 113.50, each licenace aho pur- I {0) ' dor e itry into a material ac-suant to the regulations in lYrt 10 of cess arca, packnges shall be searched for this chapter precats at saty site or con- devices such as firearms, esplosives, in-l tiguous sites suojcet to control by the cendlary devices, or countericit substi-licensee urantum-235 (contained in tute Items which could be used for theft utanhun enriched to 20 percent or more or diverr. ton of special nuclear material.

In the U-2351sotope), uranlum 233, or (7) Methods to observe individuals plutonium talone or in any comt,ination within mrtterial access areas to assure in a quantity of 5.000 grams or spore that special nuclear material is not di-computed by the formula. grams = (grams verted shall be provided and used on a contained U-235) + 2.5 (crams U-233 + continuing basis.

grams plutonium) r.hnll protect the spe. (b) Exit requirement. Each individual, cial nuclear mnterinJ from t!) cit or di- packnge, and vehicle shall be rearched version as follows. for concenled special nuclear material (a) Access requirements. (1) Special before exitinc from a innterial access nuclear material shall be stored or proc- a Mm p cased only in a matertal access area. No M h h,n d ny be activilles other than thor.c wh,ch require g access to speelut nucienr n'aterial or of equipment capable of detecting the equipment employed in the proecss, use, """

or storage of special nuclent material, d m M W d alw i materint.

shnJ1 be permitted within a snaterial rac- (c) Defection cid requiremesst. Each cess agca, unoccupied material necess area shall be (2) Material access areas r. hall be .lo. locked and protected by an int wlon cated only within a protected area to alarm on active status. All emergency which access is controlled. exits shall be continuously aJarmed.

(3) Special nuclear innterial net in process shall be stored in a vault equip- (d) Testina anti maintenance. Each i

I ped with an intrusion alnrm or in a licenne sh:di kst and tnain'.c.ir. ' * -""

vault. type room, and each such vault alas ms, phpical L.u rtese, md c>U.cr de-or vault-type room shall te controlled v!ces utill2xd pursuant. to the wquire-as a separate material necess 'trea. ments of this section as fo!!ows:-

(4) Enriched uranium scrap la the (1) Intrusion alarms, physical bar- -

form of rmall pieces, cutangs, chips, w- riers, and other devices uM for material lutions or in other forms which result protection shall be maintained in oper-

! rom a manufneturing procen, contained able condition.

In 30-gallon or larger containers, with a (2) Each intruston alarm shall be in-urnnium-235 content of less than 0.25 spected and testert for operability and re-grams per liter, may be stored within a quired functional performance at the be-locked nnd separately fenced area which sinning nnd end of each interval during is within a larger protected area pro- which it is used for material protection, vided that the stornre aren la no closer but not less frequently than once every '

than 25 feet to the perimeter of the pro- seven (1) dnFs.

teeted area. 'nie storage aren when un- (e) Trds section is effective March 6, occupied shall be protected by a guard 1974, or watchman who shall patrol at inter.

vals not exceedmg 4 hours4.62963e-5 days <br />0.00111 hours <br />6.613757e-6 weeks <br />1.522e-6 months <br />, or by intru-slon alarms.

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2-l ANNEX 1 (Continued)  !

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tion within the protnted aren, who shall (5) Individunts not err. ployed by the be capable of cal l.ing fee v.ststanco from lleen ec shall be evorted I,y n watchman- other guards and waM..nen and from or other Individual destenated by the local law cidorcemer $ nuthoritles.

licensce, while l': a protected area and (2) The alarm stations required by

r. hall be bndget. to Indiente that an escort paragraph (d 6 t 18 of this section shall I is regulred. In nddition, each individunt have conventional telephone r.crvice for '

nM cmployed by the llecruce shnll be re- communication with the law enforce-qulted to reelster his name, date, time, ment authorities as desertbed in para.

purpose of visit, employment aftntntion- graph (e)(1) of this section.

l citizenship, name and badge number of (3) To provide the capability of con-I the escort, and nnme of the individual to tinuous comnmnieblion, two-way rndio be visited.10xcept Ior a driver of a dellv- voice communicatlan shnll be estabitshed cry or service vehicle, on Individual not in addition to conventional telephouc j employed by the licensce who requires service between local Inw enforcement j frequent and extended ecccss to a pro- authoritics and the f acility and shall teeted crea or a vital n'en need not be termlnate at the facility in a continu.

escorted provided such Individunn is pro- ously manned central alarm station ,

vided with a picture bedce, which he within the protected area. I must receive upon entrnn e mto the pro- (4) All communtentions equipment, l l tected nrea nnd whleh he must return including ofuite equjpment.shall rernain I i

cach time he leaves the protected aren. operable f rom independent power sources l l which indientes (1) nonemployce-no in the event of loss of primnry power.

escort required, til) arcas to which nece% (f) Tesfing orid maintermnce. Each l !s authorl?c 1, nt,d (111) the period for 1!censec shall test and maintain intrusion  ;

which necess has been authonred. alanns, ernergency alarms, cornmun!ca-

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! (0) No vehicles used primarily for the (Jons equipment, physical barriets, and l l conveyance of indhiduals shall be per- other twurity rch.ted devices or cquip-( mttted within a protected taen tucept ment uttiited pursunut to this sevtlun as t tmder emerf;ency conditions, follows:

l ('D Keys. locks, combin4tions, and re- (1) All alarms, cor1municationr, equip.

I lated equinment shM) be controlled to Inent, physical bturriers, and other secu.

minimite ihe possibility of compromise rity related devices or equipment shall be and promptly changed whencver there is maintained in operable and effectiva evidence that they base been compro- condition.

mised. Upon terminnttor. of emplcyment (2) Each intrusion alarm shall be of nny emrloyee, keys. Jocks, combina- funcuonally tcsted for operability and tions, and related equipment to which required performance at the beginning that employee had t.ecess shall be and end of each interval during which changed. It is used for security, but not less fre-(d) Defceffort olds. (1) All alarms re- quently than once every seven (7) days.

riulted pursuant to this part shnll an- (3) Communications equ!pment shall nuncinte in a continuously mramed cen- be tested for operability and perform-tral alarm station locnted within the ance notless frequently than once at the protected prea and in at lenst one other beginn.ing of each security personnel continuously manned station, not neces- work shif t,.

sarily within the prott eted aren, such (g) Response requirement. (1) The that n single act cannot remove the en- licensee shall estaolish liaison with pab!!!Ly of calling for ast.! stance or other- local law enforcement nut.horf tles. In de-wise respondlnc to en nlirm. All ale...ns veloping his physical security plan, the ,

' sh:ill be self-checkine and tamper indi- liceruee shall take secount of the prob-

• cating. The annunientlen M an plarm nt able s!ze and response time of the local the onsite central alwn sutmn shall law enforcement authority assistance.

2ndiente the type of nlarm te ;:., intru- (2) Upon detection of abnormal pres-ston alarm, emergency exit plarm, etc3 ence or netivity of persons or vehicles and beation. All intt usion alarms. cmcr. witidu an isolation F.one, a protected gency extt alarms, ninem systems, and area, a material acecas area or a vital hne rupervimiy systenu shall et mint- area, or upon evidence of intrusion into mum meet the performnnec end tella- a protected nrea, a material access area bility levrl4 indtented uy GSA Inicilm or a vital area, the factitty security or-l'cdcral fipeelflention W-A- 004 50 13 ganization shall (1) determine shether (GS A-l%S) . or not a threat exists, ilt) asseas the ex-(21 All cmerecocy crite in each pro- tent of.the threat, if any, and (111) take Lected nren and each vitnl aren shall be irrimedtale raensures to neutrallre the alas pu d. threat, cjther by r.pproprinte action by -

tc) Communicction requircr tents. (1) . facility guards or by enJitng for assist.

Each quird or watrhmnn on duty shn!! ance from local law anforcement au- m.,,,

he ennnb!c of mnl+nnlaimt conunuum thorilles. or buth.

commtede:.tlon with nr. Individunt in n (h) This secuan is effocalve Starch 8 continuously snanned central alarm sta- , 1974.

l }

ANNEX 2 v

j l

(4) An isolation zone shall be main-l t 73,50 Hequiremenin fue phraient pm- tained around the phyr,1 cal barrier at the tution of licenaed uthitm. perimeter of the protceted area and any -

In addition to any other re<pitrements part of n buildtng used as part of that of this part, cach Mcensee who h ruthor. physical tnrrier. The l$olation une shall tzed to operate a fuel reproccah'a plant be monitored to detcet the presence, of pursunnt to Part 50 of this chnrte r or Individuals er vehic!cs within the zone a as to blicw response by armed Enembert who possesses or ur.cs uranium.235 (cor,- of the licensee security organization to talned in urnnlutn curiched 'o 20 perce nt be initla'ed at the time of penetration or more in the U-235 isotope), urnmum cf the protected area. Parung fac!Utles, 233, or plutomum Mene or in any com- both f or employces and visitors, shall be bination in a e,uantity of 5000 grams or.

more computed by the formula, grams = located outside the isolation zone.

(grams containtd J-735) + 2 5 agtnms (5) Isclation zones and clear areas be-

' tween 17arriers shall be provided with t!-

U-233 + grams plutonium), cther than luminatlan suf3clent for the monitoring

~

in the operation of a nuctent reactor 11- required ty paragraph (b) (3) and (4) tensed pursuant to Part 50 of this chap- of this section, but not less than 0.2 foot ter, shall comply with the f ollowing, (a) Physical security organizadon. candles.

(c) Access regtrirements. The licensee (1) The licensee shall estabhsh a secu. ahrd! control all points of personnel and Tity organization, including guards, to Vehicle access into a protected area in-protect his facility agatost industrint cluding shipping or receiving areas, and .

sabotage and the special nuclear mate. into each vital area. Identification of per-Flal in his possession against theft

('D At least one supervisor of the se, sonnel and vehicles shall te made and authorization shan be checked at such curity organization t. hall be on site at points.

au times. (1) At the point of personnel and ve-(3) The lleensec shall estab!!sh, mMn- hicle access into a protected area, all in- em i taln and follow written recurity piccc- dividuals, except employces who possess dures which document the structure of an AEC personnel security cicarance, the security organtintion stad which dc* and all hand-carried pnckuces th411 be tall the dutics of guards, wretchmen, and searched for devicts such as Arcarms, ex-other indhiduals responsible for secu* plosives, and incendtsry devices, or other rity, items which could be used for industrial (4) The beensee shM1 not permit an . sabotage. The f.earch sh;.ll be conducted individual to act as a gue.rd or watch- either 1y r. physlent scarch or by the une of equipment capnble of detectics such man unless such individual has been devices. ICmployees who pozess an AEC properly tralned rmd equipped d)and An hr.s qualified by demonstrating:

un* personnel security c2carence shrd) be derstandmg of the lleensee's secur!.y scarchcd at random intervals, Subsc- ""

the abihty to exc- quent to rcarch, cr! vers of dehvery and l procedures, nnd till cute all duties required of him by such service vehiclcs shall be escorted at all procedures. Ench guard and watchmcn times whlle within the protected area.

shall be requnhfied at least arumnhy. (2) All packages being delivered into Buch requalification shaal be docu* the protectcd area shall te checked for proper identification e.nd authorization.

mented.

(b) Physical barriers. (1) The licensee Packalces other than hand-carried shall locate vital equipment only within packsges shall be searched at random l a vital aren, which, in turr, t.hnll be 1o. intervals.

j cated within a protected area ruch that (3) A picture badge identification sys-l access to vital equipment icquires pr.s. tem shall bc used for allindividuals who sage through at least two physictd bar- arc authorized access to protected arcss I

riers. More than one utal aren may be without escort.

within a ainsle protected nrea. (4) Access to vital areas and materini (2) The lleensec rhM1 locate mMertM acccas arens shnl! be !imited to inds-access nrens only within prutectal nams viduals who are auttwrt:cd accus to vitad equlptnent or spetts! nucicer material such that necess to the mnterial roccess and who requ!re am h necess to perform area requires possnge through at Jeruit two physical barriers. More thnu one their dutics. Authortration for su:b Indl.

material acceu aren may be within a viduMs shnll be provided by the issurmee single protected nren of r.pecially coded numl;cred todres fruh. .

(3) 'lhe phnical barsler at the pc- enting vital nrens und materi:al necess f' Ilmeter of the protected nren shall be areas tc which necess is huthorlud. Is'n- I separnted from any other barrier desig- occupied vital nrens nnd material necess nated as a physical barrict within the areas shall be protected Ly an acuve in- I I

protected aren. and the intervening trusion alarm system. e!

space monitored or periodtenhy checked to detect the presence of persons or ve.

)

l hicles so thnt the f acility sceurity organ!- l r.ation can respond to suspicious hetivity or to the breaching of any physical bar= \

)

rier.

or ee

r .

\s ANNEX 3 -

l Pnys]CA1. PaoTICTIoM or SrsCIM. (f) A llecmce or appllCant for a 11 I N octran M au ntat 1N Tn4wstr y, my gy g g g,g, g _ l

$ 73.30 Cencral requiremen's. approval of proposed procedures for l transport of special nuclear maternal in (a) Execpt na r.pectfled in i 73.3G(a) a malmcr not otherwise nuthortred by or e otherwise nuthostred pursunnt to the regu]ntions of thLs part. Such appil-

$ 13.30(fl. ench heensee who trnm: ports cation rJml] include a description und or who delhcrs to a carrier for transport quantity of the special nuc! car material either urnnium-235 (contr.Med in ura- invched, the origin and destination, the nium entlehed to 20 percent or more in carriers to be used, the expcsted time in the U-2351sotope), urnnium-233, or plu- transit, the number of transfer points.

tonium, or any combinntion of these the communications to be used tbc ve-materials, which is E000 crams or more hicle visualidentineation, and the cargo computed by the formula. grams , security and surveluance measures to be ,_

(grams contained U-235) +2 5 (gTams used.

U-233+ grams plutonium), shnu make (g) Paragraphs (b) (c). (d), and (f) arrancements to assure that such special of this section are effective March 6.

nuclear rnaterial will, if n common or UD' contract carrier is used, be transported under the established procedures of a .6 73.31. Shipment by road, carrier which provides a sy:. tem for the (a) All sidpments by rond shau be physical protection of saluable material made without any scheduled intermedi.

In transit and re outres ar exchange of sie stops to transfer special nuclear ma-hand-to-hand receipts at origin ar* terial or other cargo between the facihty destination and at all points enroute from which it is shipped and the facdity where therc is a transfer of custody. of the receiver.

(b) Transit times of shipments other _,

8" than those specilled in 3 731(b)(3) shall (b) All motor vehicles used to trans-

• be minimized and router shall be se- port special nuclear ruatcrial shall be lected to avoid arens of natural disa. ster equipped with n radiotelephone which or civil disorders. Such shipmenta shall can communicate with r. licensee or his be preplanned to assure that deliverles agent. The lleensee or ncent with whom ,

occur at a time when the receiver at the communications shall be maintained for l final de!!very pomt is present to accept different segments of the shipment shall i reccipt of shipment. 'be predesmunted before a shipment is (c) Special nuclear material shall be made. Calls to such licentee or agent shipped in containers which nre sealed shall be made at least every 2 hours2.314815e-5 days <br />5.555556e-4 hours <br />3.306878e-6 weeks <br />7.61e-7 months <br /> by tamper indienting type senis. The ~ when radiotelephene or conventional container shall also be locked if it is not 2 telephone coverage along the route is in another container or vehicle which is " avn11able to relay posi'.lon and prc.mted "

locked. If inspection of the contniner or ff, route. Call frequency may extend up to vehicle is not required by Stnte or local

• 6 hours6.944444e-5 days <br />0.00167 hours <br />9.920635e-6 weeks <br />2.283e-6 months <br /> when radiotelephone or con-authorities before nnat destination, the " ventional telephone coverage is not outermost container or vehicle shall also available along the preplanned route.

be sented by inmper indienting type seals. No container weighing 500 pounds at which time a conventional telephone or less shall be shipped in open trucks. call shall be made. In the event no call

.allrond flat enrs or box cars and ships. Is received in accordance with these re-

'1T.ls parngraph does not apply to ship- quirements, the lleensee or his nr.ent ments of quantities spec 1Aed in i 73.l(b) shall immedintely notify nn appropriate 5

(3). law enforcement authority and the np-(d) When g1mrds nre used pursunut propriate Atomic Enerry Commission j to It 73.31(c)(ll. 73.3t(c,42) 73.33 and 13.35, the IIcensec shall not permit an Tlegulatory Operations Regional Oftco  !

Individunt to net ns a guard unless Utere listed in Appendix A of this part.

is documentation th.st the individual _

. ban been cuninfled by denotuctrnung an (c) A shipment shall be accompanied under$tnnding of his slutita and respon- by at least two people in the vehicle con-albilitten. Ihc Ilecmee or him neent shn!! talning the shipment, which may be two have doeurnentation umt suards have drivern or one drner nnd an nuthortred been requaltacu annuntly. ., Individual. The vchtete enntnining the shipment shall be under conunuous vis.

(c) Dy Janunry 7,1014 cach lleenace shall submit a pinn outlinme the proce- um) surveillnnee. or one of the drivert

( dures that will be used to snect the re-or author'. zed Individunts shall be in the j cab of the vehtric, nwnke, and not ir a quirements of fi 73.30 through 73.30 and sleepet berth. The shipment shall be sur-13.10(g) includmg n plan for the selec-

• ther protocted by one of the folh wing 1lon qun!!nention. nmi trotning oi ntmed l escort.s, or the specirtentton and destrm methods:

of a specially designed truck or trader an appropriate. %ts pinn shall be fol-lowed by the !!cemee af ter March G.

r 1974' l __

i 1

l l

l t-

2_

i ANNEX 3 (Contin 0ed)

J (e) Export shipments shau be esecs&

-(1) An armed escort consisung of at ed by an unarmed e.uthodsed indleid-least two guards shall accompany the ual. who may be a crew mernber. from ahtpment in a separate escort vehicle. Es*

i c!rts shan maintain continuous vigilance the last terminal in the United States l unul the shipment is unloaded at a for.

for the presenet of conditions or situs- eign terminal. He shall perfonn mont. -

tions which micht threaten the security toring duties at foreign terminals as do.

of the shipment take such action as car-maastances might require to svold inter- acribed !n i 73.35.

(d) 12r.ragraph ic) of this sootlan is fIronce with conun. nous safe passase of the cargo vehicle. provide assistance to. effective March S.1974.

or summon aid for crew of cargo vehicles I 78 33 NP"*"Of "II' la case of ernerseccy. check seals and . (a) A shipment by ran shan be escott-locks at each stop where time permits. ed by two guarda. in the shipment car and observe the oarso vehicle and adfa- or an escort car of the tratri. who shall cent areas during stops or layovers. Con. keep the ab1pment cars under observa-tinuous radio communicauon capability ' t!on and who shau detrain at stops when shall be provided between the cargo ve- practicable and time permits to guard hiele and the escort vehicle. Escort ve. the shipment cars under observaMon. ~

bicles shmH also be equipped with a radio- and eheck car or container locks and telephone. The Ucensee may use his own seals. Radlotelephone communicaUon employees as armed escorts or he may ,

shall be maintained with a neensee or

. use an agent. Only the dr'.ver is requ2 red his agent to relay poution every 2 hours2.314815e-5 days <br />5.555556e-4 hours <br />3.306878e-6 weeks <br />7.61e-7 months <br /> in the vehicle contanrang spedal mudoar or less, and at scheduled stops in the material for ahlpments anvolving an event that radiotelephone coverage was average of less than an hont in trans- not available in the last S hours before portauot , if communloatice 'is main-the stop. The 11censee or agent with I tained during the course of the shimmant - whom communicatons shall- be main-with the licensee or agent monitomng ehe tained for different segments of the ship- l i

shipment. ment shan be predesignated befort a (2) ne shipment shan be made in a

• shipment is made. In the event no call spoolally designed tnick or trailer which As received in accordance with these re. p reduces the vulnersbnity to diveMon. guirments, the Ucensee or his . agent Deslen features of the truck or trailer shad 1mmediately neuty an appropri-shall permit immobillr.ation of the van ate law enforcement authority and the and provide barriere or deterrents to appropriate Atomic Energy Commis-physical penetration of the cargo com- sion 3tegulatory Operations Regional l partment utdea armed ;~ard: are also . Ofnce imed in Appendix A of this part.

used in which case immobuization of (b) Trnnsfers'shall be in acocidance the vehicle is not required. with I 7335.

(d) Transfers to and from other modes (c) This section is effective March 6, of transportauon shau be in accordance 1974-with I 73.35. 873J4 Shipmeat br ass.

(e) Vehicles shnu be marked on . top (a) Shipments shall be made on ves.

with identifying lettezs or numbers sels reaking the minimum ports of enU.

which will permit identification af the vehicle under daylJaht condntions trma Transfers to and imm other modes of transportation shaU be in accordance the air in clear weather at 400. feet with t 73.35. 'Ihere shall be no scheduled above ground levea. The same code of transfers to other ships. At domesuc letters and numbess as those used on ports of can where other cargo is trans-the top shall also be marked on the sides ferred, the shipments shall be peotected and rear of the vehicle to perm 16 Idenu- .

Scation from the ground. In accordance with 3 T335f al.

(b) ne shipment shan be placed in a (f) Wls section is effective March 6 secure compartment widch is locked and I 1974. asaled. Iocks and seats shall be periodi-8 73.32 mp. ment by ate. -

cany inspected in transit. If secessible.

(a) Except as speclAcally approved by by an escort or crew member. l (c) Export shipments shan be escorted the Atomic Energy Cornminion, no by an unarmed authedred tmilvidual, shipment of special imclear matettal who rnay be a crew member from the diali be made in passenger aircraft in last port in the United States until the excess of (1) 20 grams or 20 euries, ahipment is unloaded at a foreign port.

whichever is less, of plutonian or urna* He shall perform monitodng dulles at Sum 433. or (2) 360 grams of trranium* foreign porta as described in i T3.35.

l' 236 (contained in uranium enriched to (d) Ship to-shore communications 30 percent or more in the U-2351sotope4. shall be avauable, and a ship to-shore (b) In ahlpments on cargo alterstt af contact shall be made every twenty-four either uranium 235 (contained in urant* hours to relay position information, and um enriched to 20 pement or more in the status of the shipment. which abau the U-236 isotope), uranium g33 or plu- be . determined by a daily inspection lenium, or any combination of 1hese where posaihle, nts informauon shall e

saaterials which is 5400 grams or me be sent, as often as It is available, to the semputed by the formula. grams == licenate or his agent who makes the ar-(grams contained U-235) + 2.6(grams U* rangements for the protacuon of the 233 + grama plutonium) tJansfers shall shipraent.

be in accordance with i 13.36. Transfers (e) Wis asction is efecMew March 4 shan be sninimised.

1974. ._

^

p t .ee . g I

)

ANNEX 3 (Continued) 8 73.25 Traswfer of spedal muelene (2) The shipment shr.Il be protected at W Each Ucewe who receives a ship.

smateriet. the fint terminal at uhich it arrives in ment of special nuclear nuterial shan the United States and all subsequeng All transfers shall be rnonitored by a term 1hals as pmvided in #17333 through Immediately notify the person who de-suard. An attemate guard shall be des. 73.35 and paragraphs tc) and (f) of this livered the material to a carrier for

(

1xnated at all transfer points to sub-secuan transport of the arrival of the shipment -

statute. if necer.aary. Monikang of spe (c)(1) Each Heensee sho dellters spe, at its destination. In the event such a cial nuclear material to a carrier for shipment fails to arrive at its destination cond eted as Um -

transport shall immediate'y notify the at the estimated time, the consignee, if (a) At scheduled intermediate stops consignee by telephms, telegnph, or a lleensee, or in the case of an export ul e a e edia y

1. .

observe the opening of the cargo com. e]t and D ot f r fl 1 telephone and telegraph, or teletype, the p

{ partment and assure that the shipment t

rtaum includi the n m c!

Director of the appropriate Atomic En-l 1s not removed. The guari shan maintain ergy Commission Regulatory Operations arrival Regt nel Omce listed in Appendix A of continuous visual surv:111ance of the of the shipment at its destination. (2) In

, cargs compartment. Continuous visual the case d a shipment free m board this part, and the licmse or other per-aurvell'ance of the carso cornpartment (f.o. .) the point w.here it is delivered to son who deutered the matertal to a car- -

l I sh H be maintained up to the time the rier for transport. The licensee who made l l vehicle is ready to depart. The guard a carrier for transport, each licensee 8h"U* before the sh!pment is delivered to W WD g

gwa g,

l ahall observe the vehicle unty it hu de. the carrier, obtain written certincation g ,g ,g ,

parted, and shnu notify the licensee or phone and telegraph. or teletype the DI.

om mh a, ta di rector of the appropriate Atornie Energy i

c his agentof thelateststatusimmediately gg p gt

, &bereifter. Commission Regulatory Operations Re-the physical protection arrangements re- gional omce Itsted in Appendix A of the 1 (b) At points where special nuclear Qu! red by 1i 73.30 through 73.35 for 11-material is transferred from a vehicle acuon beg takm to h the sWpet, to storage, from one ve cle to another 1 n*

c]

, 3t , enpt ut to cons!gnee of a shipment, the licensee the (f) Each licensee who makes arrange-ments for phyelcal protection of a ship-

e hipment under n. shall, before the shipment is delivered ment d special nuclear matedal na n.

I tinuous bthesurvelliance by observing to the carrier, obtain sTitten certtoca. quired by ll 73.30 through 73.36 ebmE l the opening of the cargo compartment of immediately conduct a trace investiga-i the incoming vehicle and assuring that tion fiumofthe dehvery thecontractor who shipment at theis f.o.b.

to take , tion of any ahlpment that is lost or un- ,

the ahlpment is complete by checking point that the physical protection ar- accounted for af ter the estimated ar-locks and/or seats. Continuous visuaj ranternents required by AEC tAanual rival time and file a report with the surveillance of a shipment shau be main, Chapters 2401 or 2405 have been made. Commission as specified in 113.11. If tained at au times it is in the terminal (3) Each licensee who delivets special the licensee who conducts the trace in-

' or in storage. Shlowents 2,all be pre.

i nuclear matedal to a carrier for tans- vestigation is not the consignee, ha shall  ;

planned in order to avoid skr4e times port shall alto make armngements with alt.o immediately report the r:sults of his  ;

i la excess of 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br />. Continuous visual the consignee to be not10ed immediately investigation by telephone and telegraph, l i surveillance of.the cargo compartmeng by telephone, telegraph or teletyre, of or teletype to the consignee. t

' shall be maintained up to the time the the arrival of the shipment at its (g) Paragrsphs (a), (b), (c) and f vehiels is ready te depart from the ter- destination. (d) of this section arv effective March 6, l i minal. The guard shall observe the vent. (d) In addition to complying with the 1974. i

cis untu it has departed. and abau notify l the licensee or his age.nt of the latest requirementa specified in paragraphs (c) . l

' status immediately thereafter. and (f) of this section, each Ucermee who l (c) "Ihe guard shall be required to exports special nuclear material shall l

immedlitely notify the carrier and the comply with the requiremcato specified i

in il 73.30 through 73.35, as applicable.

i liccnses who made the arranaements for up to the first point where the shipruent l protection of special nuclear material of.

! any deviation from or attempted inter. is taken off the vehicle outside the United fersnee with schedule er routing. States. The licensee shall also make ar-i rangements with the consignee to be no-l (d) '3his section is erective March 6. tified immediately by telephone and I 1974, I telegraph, teletype, or cable, of the ar-l 6 73.36 M,acellemeone eegelresnente. rival of the shipment at Its destination.

(a) Each heensee who takes deUvery of or of any such shipment that is lost or '

spectil nuclear material free on board unaccounted for after the estimated time

! (f.o.b.) the point at which it 's delivered of arrival at its destinati6n.

to a carrier for transport shall make the arrangIments to assure that cuch special nuclear material will be protected in transit as prescribed in il 73 30 through 13.35, rather than the person who de-livers auch shipment to the carrier for-transport.

(b) Each licensee who imports specla!

nuclear material shall make arrange-ments to assure that such material will be protected in transit an follows:

(1) An individual designated by the .

~

18ccusee or his agent, or as specified by a contract of carriage, shall confinn the container count and examine locAs and/

or seals for evidence of tampering, at the thut place in the United States at which

' the shipment is discharged from the ardving carrier.

' ANNEX 4 SAFETY GUIDE 17 SECTION C

" Means should be provided m nuclear p!.mts, and 'pioeeduies >hould Is* developed and .

iteiplemen:cd to reduce the oppmtunity for and mitigate the eft'ects of succenful industri.d sabotar.e. Particular consideration should be given to control of access, selection of personnel, monitorin,g of vital equipment, and design and arianr.ement of equipment. ,

1. Controlof Arcen-The means provided to .

control access by unauthorized persons to the plant site and to vital areas buildings, and equipment within the nuclear power .

plant should include:

(a) A physical barrier, such as a fence,

- around the facility:

(b) Surveillance of this barrier, such as by roving patrols, closed circuit television, or intrusion alarms; (c) Guards at each point of access:

(d) Locks on vital equipment where co nsist en t with other safety '

requirements

! (c) An organization plan that identifies the persons having line responsibility ,

for security matters; l

i (f) Proced u res for monitoring and controlling the access to and from the plant and the movement of persons ,

weia the plant by tr. car.s. w:i as .

bahir.3 of en.playces, dgnir:; in :c d out of visitor:., i :n : Jing escorts foi

! visitor.s, r.nd ch.;!bTring the crnry on unauthoiized p:: sons atteinpting. to

(.nter vital are n; .

- (r) Pt.;c-d ure> for . ppropriate se irthin; of visi: ors (b)Pr.scedmes for foriiddin : the crtry of un: u thorir ed vehit le, :un! for i

se.1rshi:ie velticia enteriur site: *

(i) Psor+i!nn s assosi.0 d with phric::1 secutihy to deal with, emergencies at Ihe p!:.nl:

(i) Pro,eduies for dealia:t with potential dancer.s, *.uch as bomb threats and cisit disturb.mces, ineleding ptovi:ioni for timely netificatien of the pmper _

nuthoiities:

(1:)Preccdures for imestir ition of Security incidents and for auditint, of the

~--.--. s,ccmity program.

w e neG W

• M*

9

• i

..',,...'. . i

2. 9clection of Perunincl-The means l provided to auure a statT oficliable pla::t I pmonnel thouhl include (a) Est a blis hine n t of employment standanh; ::nd practias that provide for selection of competent, well balanced individu.ds; (b) Procedures for review of ernployee perfoimance; l (c)Procedules for early detcetion of unusual behavioral patterns of employees, such as may result from

. drug abuse: 1 (d) Training of personnel with regaid to plant secuiity. .

3. Monitoring of Vital Equipment-Mcans e should be provided to monitor the status of vital equipment. Procedures should be developed and personnel trained to identify equipment that may have been disabled or whose status may have undergone unauthorized changes (e.g., a valve closed when it should be open).

4. D e s ign and A rra tt g e m e n t of Equipment-Appropriate design features and equipment arrangements should be provided and be consistent with other safety requirements to reduce the opportunity for successful industrial

• sabotage.

i Detailed security measures for the physical protection of the facility against indu> trial sabotage will be withheld from public disclosure as provided in f 2.790 of the -

Commission's regulations in 10 CFR Part 2. "

I e o

6 9

4

.s .' APPENDIX "B" EVENTSBEARINGUPONDEVELOPMENTANDEVOLUTIONOFSECURITYRE0VIREMENT'S A.. 1960-1970 The first privately-owned comercial nuclear power plant became operationalin1960.E Until 1964, all nuclear fuel (special nuclear material) was owned, processed and fabricated by the Federal government, and all nuclear fuel used by the comercial reactors was leased from the Federal government. Legislation was enacted in 1964 permitting private persons, including reactor licensees to purchase and own special nuclear material.

Management concern for protection of valuable property, as well as the public safety, undoubtedly prompted the adoption of many customary industrial security measures for nuclear power plants in the early 1960 s.

Before 1966 industrial sabotage was not generally considered as a separate threat because the effects of potential sabotage were deemed to be ade-quately protected by required safety measures.

Lumb Panel In July 1966 the AEC formed a panel (Lumb Panel)U to conduct an independent review and appraisal of AEC. safeguards policies and procedures for special nuclear materials. The report submitted by the panel on March 10,1967 noted that it had been given its task "because of the growth of the nuclear industry, particularly the quickening pace of nuclear power commitments, and the advent of private ownership of special nuclear materials...".

/

y Dresden. Nuclear Power Station, Unit 1 (August 1960) y Ad Hoc Advisory Panel on Safeguarding Special Nuclear Material, chaired by R. F. Lumb.

. = = . . . _ . _ _ . . _ _ . _ . ..- - - - - -. .. . . - - - . - - - . . . . . _ _ .

The absence of any specific security requirements imposed by the AEC on licensees was highlighted by the Lumb Panel: "Until recently,3/ in the case of licensees the AEC has primarily relied upon the high intrinsic value of special nuclear materials and criminal penalties for safeguards".

In contrast, for AEC contract operations, it said: <

l "The Panel believes that the AEC generally has been responsive to its obligations, under the Atomic Energy Act, for safeguarding special nuclear materials. Over the past twenty years there has evolved a safeguards system applicable to AEC cost-type contractors which incorporates mst of the essential elements for safeguarding special nuclear materials."

The Panel concluded that it was essential that "...an effective worldwide )

international safeguards system be established quickly" and recomended, among other things, (1) establishment of a high level AEC office to I coordinate the safeguards program,b and (2) the development by AEC and  :

licensees of minimum physical protection standards applicable to licensees.

1967 Florida Power and Light Decision In early 1967 in connection with a challenge to the issuance of a construction permit to Florida Power and Light Company (Turkey Point reactors) the 3/ On February 3, 1967 the Commission amended 10 CFR 70 to require each licensee authorized to possess enriched uranium-235 contained in uranium enriched to 20% or more in the uranium-235 isotope, uranium-233 or plutonium in an amount of 5,000 grams or more to submit a description of its material control and accounting program.

y An Office of Safeguards and Materials Management was established under the General Manager' effective July 1,1967. Also in 1967 a Division of Nuclear

/ Materials Safeguards was established under the Director of Regulation.

APPENDIX "B"

-y.

l Commission declared its expectation that the staff, "... in accordance with its practice. . . . assure that appropriate industrial security measures are provided for by the applicant". (emphasisadded)5_/

Department of Defense Responsibility The Department of Defense was deemed to be responsible for protecting industrial facilities against destructive acts of foreign enemies.

In response to inquiries by the Joint Committee on Atomic Energy, 00D wrote to then Chairman John 0. Pastore on January 9,1968, explaining the. policies of D0D toward industrial facilities. The letter stated that the Army was responsible for developing physical security standards, for conducting surveys for assessing vulnerability to sabotage from foreign enemies and for providing guidance to industrial management.

The letter observed that inherent safety features of power reactors make the release of fission products difficult, and "...if the goal is harm to the public, there are far more lethal means that concern us that can affect large numbers...". It was concluded that evaluation of threat potential indicated the present level of effort was adequate.

5/In February,1967 the AEC gave notice of proposed rule making on " Exclusion of Attacks and Destructive Acts by Enemies of the United States in Determining the Issuance of Facility Licenses". (On September 26, 1967 this became 10CFR 50.13). As a consequence of the notice of proposed rulemaking, the Atomic Safety and Licensing Board asked the Commission for guidance on the inclusion

- of sabotage as a' consideration in making findings on a grant of license. The Commission's Memorandum of Order, February 20, 1967, indicates that questions of sabotage potential, as bearing upon public health and safety, were indeed to be considered. if in the realm of industrial (presumably of domestic origin) sabotage as opposed to sabotage of foreign origin, but at the operating license stage rather than construction stage. The Memorandum indicates the responsibility and discretion was with the staff to insure adequate safeguards in distinction to any particulars set forth by rule.

APPENDIX "B"

o The McCullough Report This report was prepared for the AEC by an independent contractor for i

the purpose of an&lyzing the vulnerability of nuclear power plants to i industrial sabotage, assessing the likelihood such acts would adversely affect public safety and recommending desirable safeguard measures.

The report found a paucity of literature bearing upon the subject. It found there were virtually no reports on the vulnerability of generating ,

stations to intentional damage. The consensus from numerous interviews was that industrial sabotage had not constituted a serious problem in the U.S. '

and that the probability of sabotage to nuclear reactors was " extremely low". It was believed that " protective and control devices" in comon use to guard against " accidents or operator error" virtually precluded any sabotage. Mr. Walker L. Cisler, Chairman of the Board of Detroit  !

Edison Company was quoted: .

"Each of the massive and rugged barriers that provide protection from nuclear radiation would in turn protect the heart of the reactor from the saboteur. He would have neither the time, the I i

skill, nor the tools to do an effective job under any plausible conditions."

On the basis of marty interviews, the report determined ". . .there '

have apparently been no recognized or' acknowledged incidents of significant

, sabotage within any generating station in the United States". The burden ofthereport(aswellastheapparentviewthenprevailingwithinthe industry toward the risic of sabotage) may be discerned from the following ~

remarks:

• 6/The contractor was Southern fluclear Engineering, Inc. C. Roger McCullough, ~

ftanley E. Turner and Ray L. Lyerly prepared the report, dated July 1968.

APPEt! DIX "B"

. . . it remains to be determined if the consequences of industrial sabotage could reasonably be expected to constitute a hazard to the health and safety of the public." (p.13)

"Thus, consequences of sabotage - induced accidents would be no more serious than those of' accidents which are routinely considered and protected against, unless a significant fraction of the redundant safeguards equipment is simultaneously sabotaged . . . ." (p.14)

. . . no historical precedents for sabotage to generating stations have been found to justify the anticipation of sabotage . . . ." (p.16)

"The probability of a saboteur having the required prerequisites . . .

is believed to be so low that sabotage of a magnitude capable of endangeringthepublicisvirtuallyincredible."(p.17)

It was recognized by the report that civil disturbances had assumed greater prominence in the previous few years, which actions might increase the threat of sabotage. Damages experienced by electric utilities during urban r10ts were to poles, wiring and transformers rather than generators.

While it was found that almost all generating stations employed some form of plant security, including fences and communications, some used guards who were but unarmed watchmen.

Three recommendations were made by the McCullough report: (1) review plant security measures to assure they adequately deter sabotage; (2) plant procedures should explain what will be done in the event of civil disturbance; and (3) provide assurance that sensitive valves will be monitored to preclude improper positioning.

APPENDIX "B"

AEC Symposia The first AEC Symposium on Safeguards Research and Development was l held in June 1967U and a second was held in October 1969.E At these ,

I t

meetings some attention was given to plant security; however, material I

contrni and accounting and transportation security received predominant atter. ion. )

j It was increasingly recognized at the time of the second symposium ]

that SNM was more vulnerable to theft during the transportation phase than during any of the other phases of the licensed nuclear fuel cycle.

Prior to the symposium, transportation protection had been strengthened by the issuance of 10 CFR Part 73, which required that large shipments of SNM be protected either by an escort or by the use of a common carrier who had an established system for the protection of valuable cargo'in )

J l ~

transit. For the protection of SNM at fixed sites, primary reliance continued to be placed upon materials accountability practices and upon the concept that fiscal responsibility would inherently cause licensees to provide an adequate level of physical protection.

B. 1970-1973 I

As of the beginning of 1970 there were no specific AEC criteria against which the adequacy of physical protection measures for protecting plants were judged. There was no specific requirement that guards be

! armed. However, over the preceding year power reactor applicants had '

been required to submit descriptions of industrial security measures.

E WASH-1076, Proceedings of the AEC Symposium on Safeguards Research and Development, Argonne National Laboratory.

~

U WASH-ll47, Proceedings of the AEC Symposium on Safeguards Research and Development, Los Alamos Scientific Laboratory of the University ,

of California.

APPENDIX "B"

< l

r,. .

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In the fall of 1970 a working group was established within the AEC which iecame known as the Ryan Committee (chaired by John Ryan of the General Manager's Office). Six subcomittees were formed, one of which pertained to physical protection. A final report was made in 1971 which had some degree of impact upon the eventual development of new regulations which became l effective in 1973. Some deficiencies were found in existing security provisions One result of the work of the Ccmmittee was that the responsibility for the determination of safeguards policies in the private sector were transferred from the General Manager to the Director of Regulation .

Also, some intermediate licensing requirements evolved from the Ryan Report .

Joint Committee Inquiry In a letter to AEC. Chairman Glenn T. Seaborg on December 14, 1970, Chairman Chet Holifield of the Joint Comittee on Atomic Energy wrote:

The rash of incidents of suspicious origin resulting in personal injuries, death or serious property damage, which has been occurring

over the past several years, and very recently impacted in Linden, New Jersey, prompts this inquiry to ascertain what the Comission's views are with respect to the adequacy of the physical security of I licensed nuclear facilities.

"The Joint Comittee, during pbblic hearings in the past, and in ,

meetings of its staff with Comission representatives, has been in-formed generally of the steps taken by the Comission through its l

Regulatory arm to assure that proper consideration is given by licensees to protection of nuclear facilities against sabotage.

However, we wonder whether the increase in the frequency and magnitude of destructive acts have suggested the advisability of new Regul'atory j posture." '

APPE CIX "o"

n l The reply to Congressman Holifield from Dr. Seaborg pointed out the work which had been performed by the licCullough group. It was

(- stated that power reactor applicants were requested (there was no re-quirement by rule) by the Regulatory staff to submit security plans, and

( it was noted that a safety guide for security, programs was currently l

underdevelopment.9/ However, it was said that aspects of the prospective l guide were already being used as " interim guidance" for evaluating security measures. Other means in which security practices had been strengthened were explained. The reply closed by saying:

" Actions carried out by professional subversive groups trained in

. sabotage and familiar with the facility have not been previously considered in our reviews. As a result of recent acts of sabotage at nonnuclear facilities, this policy is being reevaluated . . .".

I Chaiman Holifield's inquiry of- December 14,1970, was made soon after an October 27,1970, threat to tilow up Orlando, Flcr$a, with a nuclear bomb unless a payment of one million dollars was made. The extortion demand, which included a 24 hour2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> deadline and a description of a nuclear bomb, was directed to Orlando city officials. For several reasons, including the possibility the material emanated from some foreign source, the AEC could not forthwith assure the city government that-the threat lacked credibility. Payment of the. ransom was under consideration when the threat was determined to be a hoax by a 14 year j old boy.

9/ Safety Guide _17 was published October 27, 1971.

APPENDIX "B" O_

Kansas State Project .

In October 1971 a symposium was held on the campus of Kansas State l University. It was entitled " Symposium on Implementing Nuclear Safeguards" and attended by over 100 experts in the field. The preparatory work had begun in 1970 under the direction of Dr. Robert B. Leachman. The focus of the project was on societal aspects of nuclear materials control, but included the exploration of behavioral characteristics of potential thieves of nuclear material, criminological considerations and characteristics of the material and the industry in relation to other highly valuable or i

dangerous commerce.

l The opening sentences of the preface to the book which compiled the symposium papers 1SY stated:

"With appropriate levels of knowledge and technology, an explosive device of much greater destructive potential than from ordinary explosive materials can be constructed from only about ten kilograms of enriched uranium or plutonium. However, by 1980 many tons of thousands of kilograms of plutonium alone will be processed each year in the facilities preparing fuel for the nuclear-powered generating plants required to meet the world's demand for electricity."

10/ Preventing Huclear Theft: Guidelines for Industry and Government, edited by Robert B4 Leachman and Philip Althoff, Praeger Publishers,1972. This book contains a collection of papers on safeguards by noted authorities such as Leon Rappoport, J. D. Pettinelli, F. Morgan, J. Lovett and others.

I APPENDIX "B" l

l

10 Ralph F. Lumb paper __

j By 1973 the AEC had made substantial progress in particularizing and enforcing security requirements. Ralph F. Lumb, then President of Nuclear Surveillance and Auditing Corporation, remarkedb upon a conclusion of the j Kansas State project that there was a distinct polarization between the nuclear l industry and AEC's regulatory arm. He said: "As the regulatory requirements have increased, there have been industry comments at many meetings to the effect that they are not really necessary: that industry is accustomed to protecting its assets. . .". But Lumb concluded that the argument of financial incentive was without merit because normal industrial practices had not always been employed in safeguarding nuclear material. Lumb noted:

I "Furthermore, industry appears to believe there is no illegal market l for the materials and thus, no apparent incentive for theft of these materials." I l

Lumb, on the other hand, faulted AEC:

l "Without a coherent, comprehensive statement of program objectives

, and requirements from the AEC, industry is apprehensive concerning l l

l the ultimate burden of safeguards. Industry views the current i l

situation as 'ad hoc safeguards' or ' rules and regulations by memo'.

It feels that such an approach is subject to inequitable treatment withintheindustry."E

,11/

1 Volume 1, No. 3, Journal of the Institute of Nuclear Materials Management, September,1972.

1_2f 2 In a press release of October 15, 1973 announcing the publication of new requirements to protect nuclear facilities and materials, the AEC said:

"In the past, security plans for nuclear power plants and fuel reprocessing plants have been approved on a case-by-case basis, but AEC Regulations have contained no specific requirements for them."

APPENDIX "B" e

. 11 -

Lumb's position is borne out in part by the Commission staff's imposition of much more stringent licensing conditions on the first I

applicants to undertake fabrication of significant amounts of plutonium

{

i in reactor fuels, although the conditions were not included in either guides orpublishedrules.E Further Developments in 1973 Contributing further to a climate in which nuclear utilities were more cognizant of the risks they faced and more receptive to ideas to l

improve protection were (1) a workshop on Protection of Special Nuclear Materials and Facilities sponsored by the Atomic Industrial Forum, Inc.,

l in February 1973 and (2) the 1973 development by the American National l

l Standards Institute, Inc., of the ANSI Standard NT8.17, " Industrial Security

! for Nuclear Power Plants."

i l GA0 Reports During the latter part of 1973 and early 1974 the General Accounting Office examined the effectiveness of programs and procedures for safeguarding nuclear material in possession of AEC licensees and contractors and while in transit. In the November 1973 reportb GA0 noted several conditions at

, two licensee / contractor plants which "significantly limited the holders' 13/ See March 15, 1972 letter from C.D.W. Thornton, Director of Division of Nuclear Materials Safeguards to Nuclear Materials and Equipment Corp and March 24, 192 letter from Thornton to Kerr-McGee Corp.

14/ " Improvements Needed in the Program for the Protection of Special Nuclear Material;" B-164105, Report to the Congress by the Comptroller General of the United States, November 7, 197:..

APPENDIX "B" l

l i

__ U

. 12 .

capability for preventing, detecting, and effectively responding to a possible diversion or diversions attempt." GA0 noted the AEC had under-taken an internal study of its physical protection program, that it wa5 completed in 1971, and that AEC was slow in implementing recommendations for strengthening programs. The report said:

"AEC needs to define in greater detail the expected capability of a protection system by providing more specifics relating to its prevention, detection, and response capability."

It snould be pointed out that the Commission had decided to apply more stringent requirements before the November 1973 GA0 report was issued. In fact, the deficiencies noted in the report were corrected by the new Part 73 requirements published for public comrient in February 1973 and , issued in effective form in November 1973.

In the April'1974 report pertaining to transit security, GA0 again referred to these points, and added that they were applicable to the conditions observed relating to material in transit. GA0 said:

"During September and October 1973, we observed the protection afforded 1

l i

APPENDIX "B" l'

- 13 * ,

three large shipments of highly enriched uranium . . . and found that the material was susceptible to a diversion or a diversion attempt."

, . . although the shipments were made in accordance with AEC's reqqiments in effect at the time, the protection afforded the material was inadequate Even before issuance of the GA0 report, AEC had decided to strengthen in-transit protection by placing more stringent requirements upon the firms which were causing the material to be shipped or received (ratherthanupon the carrier) instead of establishing a Government operated or Government controlled system. The Comission believed that adherence to the new regulations would provide sufficient protection for all shipments.

GA0 concluded that while the AEC had been slow to improve in-transit protection, actions taken by the AEC since December, 1972 " represent -

important steps toward accomplishing the objective of the safeguard program." The AEC was urged to closely monitor shipments and strictly enforce new requirements, and then study the feasibility of a Government

, transportation system if the new requirements did not afford necessary protection.

APPENDIX "B" i

1 e ..

C. The Situation in 1974 Willrich and Taylor A report to the Energy Policy Project of the Ford Foundation, written by l Mason Willrich and Theodore B. Taylor and printed at the beginning of 1974,35/

stimulated apprehension in government and industry. Some authorities were dismayed that the authors had spoken so plainly about vulnerabilities, fearing that the work might serve as a textbook for persons with malevolent intentions -- or even inspire nuclear theft or blackmail. Others viewed the report as too negative or overly simplistic. Congress took keen interest in the findings an d recommendations:16/ --

Willrich and Taylor explained that their study contained no classified infonnation. They stated that the unclassified data that they had drawn upon was necessary to understand the risks and to form intelligent judgments I and was available to the public at large. They said their purpose was 1

. . . to provide a means whereby the risk of nuclear theft and the cost of effective safeguards can be weighed, along with other risks and costs, against the very large benefits of nuclear power."

l l l

15/ Nuclear Theft:

! Ballinger Publishing Company, 19/4. Risks and Safeguards; by Mason Willrich 16/ Dr. Taylor testified before the Joint Connittee on Atomic Energy on January 28, 1974.

He also testified on March 12, 1974 before the Ribicoff Subcommittee on Reorganization, Research and International Organizations (Senate Committee onGovernmentOperations).

l APPENDIX "B"

Willrich and Taylor concluded:

(1) Nuclear weapons are relatively easy to make, assuming the requisite nuclear materials are available.

(2) The use of nuclear energy to generate electric power will result in very large flows, in various nuclear fuel cycles, of materials that can be used to make nuclear weapons.

(3) Without effective safeguards to prevent nuclear theft the develop-ment of nuclear power will create substantial risks to the security and safety of the American people and people generally.

(4) The U. S. system of safeguards was incomplete at that time.

(5) A system of safeguards can be developed that will keep the risks of theft of nuclear weapon materials from the nuclear power industry at very low levels.

They recommended:

(1) The AEC should design a detailed system of safeguards for each of the nuclear fuel cycles based on use of the best available technology and institutional mechanisms.

(2) The AEC should consider the establishment of a federal nuclear materials security service with the sole responsibility of protecting nuclear materials subject to safeguards. 4 (3) The AEC should develop and publish a set of procedures for the review of physical security plans submitted by industry licensees.

(4) The U.S. Government should initiate discussions with the Governments of other nations with substantial nuclear power programs with a view to developing a common policy in favor of effective safeguards against nuclear theft anywhere in the world.

APPENDIX "B" er

F-Senator Abraham Ribicoff chaired hearings held by the Senate Committee

)

onGovernmentOperationsE in February and March 1974, the purpose of which was to receive testimony concerning Senate Bills 2135 and 2744 I which related to the establishment of a Department of Energy and Natural )

Resources, Energy Research and Development Administration and a Nuclear

! Regulatory Coninission. As one aspect of the overall problem' concerning the reorganization of the executive branch so as to facilitate l the resolution of energy needs, the hearings looked at the question of safeguards. In citing five vital issues to be addressed relating to future energy needs, Senator Ribicoff asked:

( "Is the AEC adequately safeguarding materials and wastes being generated by the current nuclear power technology?

l Is there adequate planning for the proliferation of these j l dangerous substances - including the threat of terrorist acts and sabotage - that the breeder technology will bring?"

Dr. Theodore Taylor was one of many witnesses before the Ribicoff Subcommittee. He submitted a formal statement and expressed his concern about nuclear theft and sabotage. AEC officials who testified l

voiced some disagreement with Taylor's conclusion about the ease with '

which a crude nuclear weapon could be constructed with equipment readily availabic to the general public.  ;

17L Subcommittee on Reorganization, Research and International Organizations hearings, February 26, 27 and March 12.and 13,1974.

t APPENDIX "B"

{

t Rosenbaum Report I

. A safeguards study, now known as the Rosenbaum Report, was released in April 1974. It had been prepared at the request of the AEC by an independent group chaired by Dr. David M. Rosenbaum. In reviewing changes which have made safeguards such a vital issue, the report observed:

" Terrorists groups h' ave increased their professional skills, intelligence networks, finances, and levels of armaments throughout the world. Inter-national terrorist organizations, particularly those of the Arab1, probably have the ability to infiltrate highly trained teams of 10 to 15 men into this country without detection."

The Rosenbaum report considered that existing attitudes and efforts toward providing security for nuclear material had not matured to the same extent as attitudes and efforts toward safety measures. It expressed the belief that ". . . potential harm to the public from the explosion of an illicitly made nuclear weapon is greater than that from any plausible power i

plant accident. . ." A conclusion was reached in the report that the AEC must make a commitment to reduce security related risks to the public to the

! same level as operational risks.

The report also concluded that " Protection of the comon defense and security against significant armed attack is not a responsibility which is reasonable or equitable to assign to private industry . . . (and therefore) we recommend the establishment of a federal nuclear protection and trans-

, portation service."

In a statement issued on April 26, 1974 commenting on the results of the Rosenbaum report, the Commission said it "is taking a hard look at the study to determine what additional measures would be taken to further strengthen the require-ments to safeguard nuclear meterials from theft."

APPENDIX "B"

Environmental Impact Statement Light water reactors are not now contributing significantly to the safeguards problem. Virtually all of the fuci presently used in nuclear power reactors, or in reactors to become operable in the next several years, consists of low enriched uranium which cannot be made into a bomb without highly sophisticated technology. Although there is a companion hazard of possible environmental irradiation from sabotage of or diversion from these types of reactors, inherent characteristics of material and safety designed features are deemed to reduce the likelihood of such to a low probability. Certain production faciltties and fuel fabrication plants, and material in transit, however, are recognized as more vulnerable and likely targets of attack. Stringent security measures, h:ve therefore been focused upon these plants and transit elements. Safeguards related problems associated with plutonium recycle were considered to be manage-able, although it was recognized that such extensive use of mixed oxide fuel must be accompanied by decisions to implement stricter security measures for protection of the public.

4 APPENDIX "B"

_ 19

• 4

• l 1

A determination was made by the AEC that any decision with respect to wide-scale recycle of plutonium in light water reactors would constitute a major Federal action significantly affecting the quality of the human environment. A draft environmental impact statement was therefore published in August,1974, pursuant to federal statute.E One of the principal issu.es considered is whethbr adequate levels of materials and plant protection can be achieved in a plutonium recycle economy.

According to the draft impact statement, the objective of the safeguards program "will not be fully met for Pu recycle by current safeguards measures".

The AEC staff stated in GESMO that it "has a high degree of confidence that through implementation of some combination of the (following) concepts the safeguards general objective (set forth earlier) can be met for Pu recycle". These concepts include:

(1) Integrated fuel cycle facilities which would raihimize or eliminate critical aspects of transportation.

(2) Hassive shipping containers, special escorts or convoys, Vehicle hardening, improved transit communication and response capabilities. -

(3) New site barrier requirements, surveillance instrumentation and delaying capabilities. '

i (4) Personnel security clearance procedures,19/a Federally operated .

nuclear security force, more advanced systems for monitoring and searching 4

personnel and closer liaison with law enforcement authorities.

18/ A Generic Environmental Impact Statement On the Use of Recycle Plutonium in Mixed Oxide Fuels in Licht Water f<eactors (GESMO); HASH-1327, USAEC 9

19/ The AEC Omnibus Bill enacted August 17, 1974 authorizes the AEC to implement -

a clearance program for persons who have access to special nuclear material.

' APPENDIX "B"

r 1 l

20 -

6 (5) Improving timeliness ar.d sensitivity of system of internal control

, and accountability of plutonium.

(6) Altering the radiological properties of plutonium to make it less susceptible to theft or use in illicit weapon manufacture.

The AEC has continuing studies in progress to reassess safeguards measures in relation to changing social, economic and political conditions. In addition, research and development programs are being carried out to improve various elements of the safeguards system.

A report of the Natural Resources Defense Councilb challenges premises l and findings of the GES!!O, including safeguards aspects. The report is skeptical that safeguards for plutonium recycle can be elevated to an acceptable level, citing opposition is the nuclear industry, sheer difficulty in maintaining perpetual security over immense quantities of material and the deprivatiuns of civil liberties and privacy which,it states, would probably be exacted. A September 26, 1974 letter to Chairman Dixy Lee Ray from Senators Mondale and Hart refers to the r

NRDC report and calls upon the AEC to " state with clarity and detail the safeguard measures it believes are necessary and to defer any action authorizing plutonium recycle until the public and the Congress have had an opportunity to publicly review.the adequacy of the Commission's proposals and to take appropriate action".

l A reply to the Senators gave assurance that all com.ents will be factored into the final environmental statement, and consideration will 20/ The Plutonium Decision: A Report on the Risks of Plutonium Recycle, published in the November 1974 Bulletin of the Atomic Scientists.

APPENDIX "B" 9

L

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l l

be given _ to scheduling a public hearing. A Special Studies Group has been l

~

l-established within the Commission, one function of which will be to make an j l

analysis of safeguards measures for any licensed future use of plutonium l

for fuel of light water reactors, I GA0 Study - Security Agency Assessment l

l The General Accounting Office conducted a follow-on survey to the l

l reviews already mentioned by visiting nine nuclear power plants during 1974. The GA0 letter report to AEC of October 16, 1974, pointed out:

" Licensee and AEC officials agreed that a security system at a licensed nuclear powerplant could not prevent a' takeover for sabotage i

by a small number - as few, perhaps, as two or three - of armed individuals." .

GA0 concluded with:

"AEC needs to (1) give licensees more specific guidance on the level of threats their security systems must be prepared to handle by clarifying the differences between assaults by small groups of discordant individuals and by paramilitary groups, (2) clarify the Government's responsibility for protecting nuclear powerplants against sabotage by paramilitary groups, and (3) establish performance criteria for licensees' total' security systems."

With respect to these findings AEC indicated to GA0 in a letter dated October 31, 1974 that new regulations effective in December 1973 required licensees to submit physical security plans describing measures to be used for the protection of nuclear reactors against sabotage. AEC also brought to the attention of GA0 the serious and complex legal and social problems involved in such concerns, and that Congress had taken cognizance of the problems by including a section in the Energy Reorganization Act of 1974b which 21f Section 204(b)(1)(C), Public Law 93-438, October 11, 1974 APPENDIX "B"

, l i

requires the Nuclear Regulatory Commission to make an assessment of the need for, and feasibility of, a federal security agency.

During the next year, the reply continued, the assessment will be made so as to permit a reasoned determination of the division of responsibility between licensee and governmental authority. It was felt that new directives before completion of the project would be premature and inconsistent with the sense of Congress.

This assessment to be made for a security agency will have wide-ranging impact on the future posture and effectiveness of physical security for power plants, tran'sportation, production facilities and fabrication plants.

Indian Point Intervention The question of the obligation of a license applicant to submit a security plan which will provide for forces strong enough to cope with an &nned attack by other than an " enemy of the United States"E was raised by intevenors in connection with the application of Consolidated Edison Company of New York, Inc. (Indian Point Station Unit So. 2).

2 The Licensing Board decided y that the AEC regulations do not require provision for protection "against an amed band of trained saboteurs intent on seriously damaging the plant and with sufficient knowledge to carry out that mission in a short time".

I I:

2  !

22/10 CFR 50.13 stipulates that a license applicant is not required to provide measures to protect against attacks "by an enemy of the United States". {

g July 14,1972; LDP-72-16 reported at TID-26300 43. 1 l

l APPENDIX "B"

Er.ceptions taken by intervenors were ruled upon by the Atomic Safety and Licensing Appeal Board in a Supplemental Decision on April 25, 1974. The Appeal Board concurred in the judgement of the Licensing Board, saying that the " rationale of the Commission's approach (in 10 CFR 50.13) in not requiring an applicant to protect against the effects of enemy attacks and destructive acts would also apply to an armed band of trained saboteurs

. . . it seems that an applicant should be entitled to rely on settled and traditional governmental assistance in handling an attack . . .

without such reliance, each facility could indeed become an amed camo."

The Appeal Board thought it would be unreasonable to expect the utility j to first ponder whether an attacking force is an enemy of the United States before deciding whether to respond or seek assistance. It felt the probica of an amed group of domestic saboteurs differed insubstantially from that of saboteurs of foreign. origin.

The following views of the Board are especially relevant to the GA0 recommendations and to the Congressional requirement foi a security agency study:

"If an applicant's security plan must be able to deal with such attacks (armed domestic saboteurs), it would have to anticipate, with

~ some accuracy, the size of the force, weapons, and tactics which would. be encountered and design defenses against them. In other words the plan would probably have to provide for waging at least a limited scale war with a group which is not an enemy of the United States."

l The pcrristent questions which evolve from the judgement in this case is whether AEC regulations should nevertheless require the licensee to provide for defending against an armed band of saboteurs or thieves APPENDIX "B"

m

)

(whetherdomesticorforeign),whethersucharequihem".twouldbe socially desirable or practically necessary, and whether fundamental changes are in order concerning the nature and capability of response forces.E Carl Walske Statement j

Some insight into the most recent thinking of the nuclear industry may be gained from the remarks of Carl Walske, President of the Atomic IndustrialForum,Inc. bat a Public Affairs Workshop on October 9, 1974.

Walske endorsed new AEC regulations. He advocated even more improvements

! in security measures. He proposed such developments as a federally l operated communications network, a federal command center for receipt of theft and sabotage reports and the use of governmental forces to protect nuclear material in transit as well as for situations at fixed sites which will require the use of firearms.

~

l l

l 1

l 1

4 Part 73 amendments recently published for public comment would require );

2,4/

reactor licensees, among other things, to train and equip a force of on-site guards to protect the plant against an attacking force.

2_5/

5 The Forum has 625 member firms involved in commercial applications of nuclear energy. _Although the membership had not been polled on safeguards questions, Walske noted the AIF staff had a number of discussions with a good sampling of member representatives.

APPENDIX "B" l

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4 WASHINGTON. D.C. 20510 August 12, 1974 HARTFORD INS. GRO P Iir. Richard A. Schmalz R 7 ^ .Y ' D - t I

Assistant General Counsel '

Hartford Insurance Group p.tJG 1 -) -  !

Hartford Plaza Hartford, Connecticut 0611.5 g,g w g ,y A.;;,T y p,N T'

Dear Mr. Schmalz:

As you know, the Senate on August 8 adopted my amendment to include the consequences of nuclear theft under the indemnity provisions of the Price-Anderson Act. During the debate, I told Senator Pastore that I would forward to the Joint Committee on Atomic Energy,- in time for the House-Senate conference on the bill, the views of the two pools of nuclear insurers on my amendment.

I would apprecieto, therefore, if the Nuclear Energy -

Liability Insurance Association would consider this amendment ,

specifically with respect to the following questions:

1. Is the amendment acceptable to nuclear insurers with the understanding that it does not compel the -insurance in'lustry to write any nuclear policy that it would not ,

otherwise write?

l

2. Under the strict liability terms of Price-Anderson, '

as amended by my amendment, would the pools of nuclear insurers be prepared to write polcies covering nuclear thcCts as well as accidents?

I am advised by tho Joint Committee, that the con ference on Price-Andernon uill be held in about two weckn. Inasmuch

'tr Senator Pastore haa at::ured me th?t the Joint Cole.mittee

!.11 nuait the views N' the nuclMr !ncorers, .'/ou" prompt 1'.'tention to this re :uent woul.1 be appreciated.

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I Mr. Richard ?. 3:hn219 Auguc', 32, 1974 P32e Two i l l

l I have cent an identical letter to Mr. Bert M. Thompson i of the Mutual Atomic Energy Liability Underwriters, which  !

I understand works closely with your group on these matters. i Pleane contact Paul Leventhal of my Subco:nmittee sta ff i r :tou have r ny inquirie. about the amendment;, or neeri any e

informition on nuc3 ear ca t'eguard: Ln ad:lition to uhat he ,

already has 7,ent you, i Thank you for your 4.nterest and cooperation.

1 1

Sincerely,

' p .G y ll Abe Ribicott h -  ;

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. I RECEIVED AljG 1519,/ j, ,

s ,.. . . ,J TIL E II A RT FO R D INS U RAN C E G R O U P HARTFOmo PLAZA. HARTroRD. CONNECTICUT cells Rich AT10 A. SCHM ALZ A.uci u crue..L covuut August 14, 1974 lionorable Abraham Ribicoff United States Senate Senate Office Building F.oem 321

• Washington, D. C.

Re: Ribicoff Amendment - Price Anderson Extension

Dear Senator Ribicoff:

Without having had the opportunity to. bring the questions raised in your letter formally before the Governing Committee of the Nuclear Energy Liability Insurance Association (NELIA), I believe on the basis of conversations with a number of its members that the following would be representative of the attitude of NELIA's membership.

Insurers would generally support the idea that the public should be protected against the financial consequences of extraordinary nuclear occurrences arising out of the theft of nuclcar material.

The amendment does raise, however, a serious public policy question. Should private indus, be held liabic without fault for thefts which might require the marshalling of substantial private protective forces that might, even then, not be sufficient to guarantee safe passage? Insurers would be inclined to feel that the Government should be prepared to assucc the major responsibility for affording the public protection against thefts, includ indemnification from any resulting injury or damage.

Answering your questions more specifically, we believe that our members would consider the (mendment acceptable with the understanding that it does not compel the insurance industry to write exposures it would not otherwise write and that the substance of your remarks in the Congressional Record of August 8 would apply; that is: "The AEC should not read this amendment to require the. insurance industry to write policies covering both risks, or no policies at all."

Our members would give very careful consideration to the possibility of covering the stric

, liability which would be imposed by this amendment, but we cannot state positively that insurance would be availabic. Insurers would have to be satisfied as to the special precautions taken with respect to shipments of nuc1 car materials and might then find it necessary to attach special limitations on the amount cf thcir liability and special conditio-for the coverage.

In the absence of full availability of private insurance, we would favor an approach which l

would provide for government indemnification of private industry upon compliance with reasonable safeguard regulations. -

I understand Mutual Atomic Energy Liabil'.ty Uricrwriters will respond separately to your questions.

Very truly yours, l ,

Mc4d.

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AMERICAN MUTUAL INSURANCE ALLIANCE

[ 666 <Ed=cr:<h. =cdf:dhdct-%=uc&.6~*<io:ceh:=r n-h '&daf:da 1776 F Streat, N.W., Suite 504, h'a shing ton ,

D.C. 200C

.(202) 331-0313 1

August 14, 1974

(

' 1 Joint Committee on Atomic Energy Gentlemen:

. Re: H. R. 15323 The Alliance is the voluntary association representing the nutual insurance companies in the property and casualty insurance business. In this instance, we write on behalf of i our merbers who are organized as " Mutual Atomic Energy Liability Underwriters".

We are opposed to the amendment of Senator Ribicof f which was adopted when this bill was passed by the Senata on A ugust 8.

Although we appreciate the Senator's very proper concern with the problems arising from the theft of nuclear materials which he has graphically described, we believe the subj ect as embodied in his amendment is extremely complex and will require detailed consideration by the insurance industry before it can consider insuring against the hazard involved. For example, study must be given to the magnitude of the risk, the potential losses involved, the security requirements to be borne by insured, insurers or the government, the legislative and insurance pc.,licy language to be employed and the precise extent of the insurance coverage desired.

Consequently, we hopa Senator Ribicof E's amendment will be dropped in confernace, and that the committee will consider l this subj act a f t e:: the issues have baen fully developed.

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UNITED STAVI5 WN ATdMIC ENERGY COMMISSION

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WASHINGTON. O C. 2h45 *

. '%4 g(V OCT 9 1974

. j Mr. Joseph Marrone General Counsel

. Nuclear Energy Liability Insurance Association The Exchange, Loft A, Bldg. 3, Suite 323 Farmington Avenue Farmington, Connecticut 06032 l

Dear Mr. Marrone:

We appreciated the opportunity to meet with you on September 26, 1974 to discuss the question of extending Price-Anderson indemnity to incidents arising out of diversion of nuclear material. As we indicated at the meeting, we are submitting the following questions to you relating to l this general subject area. We understand from our discussion that at this time the Pools may be able to offer only preliminary views pending j

their further consideration of the entire problem. Nevertheless, in view of the necessity of reporting the results of our exam bation of this question to the Joint Committee early next year and the desirability of reflecting the views of the~ insurance!1ndustry, we would appreciate re-ceiving your most considered views at this time, and as appropriate, some indication of the considerations and timing that might be involved in any updating of these views.

1. Do you feel that it would be in the public interest to extend Price-Anderson coverage to incidents arising out of diversion of nuclear materials? What considerations bear on the relative roles that govern-ment and private industry should play in extending this coverage? How would the Pools anticipate participating in whatever coverage is made available through private industry?

2. What is your interpretation of the present nuclear liability insurance coverage relating to incidents arising out of the diversion of nuclear material:

a. At the indemnified site?

b. In the course of transportation (whether the transportation is illicit or not)?

, c. After transportation has ended?

What are the pertinent sections of the Facility Form?

9

Mr. Joscph Harrons . OCT 9 1974 3.

If coverage were to be extended to incidents relating to diversion, what licensees and activitias should be included in this coverage?

4.

Linder what conditions would the Pools be prepared to extend nuclear liability insurance for risks related to diversion? Considaring tha various types of activities that vuuld or should be covered and the Pools' capacity,. what do you feel would be reasonable coverages and ~

exclusions? How do the suggested coverages and exclusions fanpact on ,

the premiums you would charge?

5. . Should coverage under Price-Anderson ba extended to cover losses in addition to personal injury and property danaga arising out of or resulting from nuclear incidenta (e.g. payments made to extortionists who threaten to use diverted material unless a ransom is payed)7 6.

If coverage were to include incidents arising out of identifiable

. diversion of licensed nuclear material, should it ba broadened in such a manner to provida coverage for ineddents arising out of divarted material vhare tha specific source of the material diverted (i.e. the particular licensee) cannot be ascertained?

If there is any additional information that we may provide please do not hesitata to contact us. We hope that you will be able to provide us with answers on to the above this subject withinquestions a month.as We well as any other comments you may have are making this letter available to the mutual

_ response. pool so that tha pools might send sepsrate replies or a combined Sincerely, Sirnr.d. hene D. Satunan Jarome Saltzman, Deputy Chief

' Office of Antitrust & Indemnity Directorate of Licensing

.)

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NUCLEAR ENERGY LIABILITY PROPERTY INSURANCE ASSOCIATION BURT C. PROOM, CPCU

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Ibcember 16, 1974 '

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- b.'%. i: .udt, % Ay Mr. Jerome Saltzman, Ibputy Chief g' N.-4' A Office of Anti. trust and Indemnity .-

Directorate of Licensing United States Atomic Energy Commission M J3 3 Washington, DC 20545

Dear Mr. Saltzman:

We have prepared the attached memorandum in response to your letter of

, October 9,1974 asking for NELIA's views on a number of questions relat-ing to the extension of Price-Anderson indemnity to incidents arising out of the illegal diversion of nuclear material.

The more deeply we go into this matter the more peIplexing the policy implications and technical problems seem to beccmc. The potential in-I pact on the nuclear industry and the public is likely to be far greater than on the insurance industry. We believe it is irportant to obtain.

the widest possible expression of vieas and suggestions for possible solu-tions. A brief sumury of the conclusions reached in our memorandum folloas.

We do not believe there is any justification for imposiSg absolute lia-bility on the nuclear industry for the purpose of upgrading safeguards.

We doubt that the possibility of nuclear harm to the public can be sign-ificantly reduced by this indirect technique. Appropriate safeguards against the theft of nuclear material should be established by the more direct method of analyzing the hazards at each step in the production and utilization process and developing specific responses.

The use of Price-Anderson as a compensation scheme for the victims of nuclear crime is open to serious objections, certainly without substan-tial modificaticns. It may be argued that even a small, less than ideal step is worth taking tcwards a general solution to the problem of compen-sating those injured by criminal activities of any nature. But if it is to be taken, it should be recognized as imposing a unique burden on pri-vate industry. This calls for caution and great care in establishing the measure and extent of coynsation and the relative roles of private l industry and the government.

I 1

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127:

l The Excharrge, Building 3 Lott A Suite 323 / Farmington Avenue / Farrnington. Conner.ticut 06032/(703) 677 7305 3 Engineering Dept. (203) 677 7715 i r l

~

. ,s .

. Mr. Jercrae Saltzmn '

Page 2

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December 16, 1974 -' -

We feel the government should bear, if not all, then by far the greater share of financial responsibility, because keeping the peace has histor-ically been' the function of government. The Rosenbaum Report has estimated the maximum credible threat to the safeguarding of nuclear materials as 15 highly trained men. It seems wholly inappropriate to expect private 3

industry to marshal para-military, forces capabic of frustrating the efforts of such a group.

hhile there are a number of ways for making a possible Pool participation available if coverage is desired, we believe that a separate, special program for the illegal diversion hazard ought to be set up within Price-Anderson. Perhaps a good way for the Pools to participate in such a pro-gram would be through a single group policy issued to the nuclear industry covering the illegal diversion hazard only.

Coverage under present nuclear liability insurance policies for the illegal diversion of nuclear material is limited to but a few of the more insigni-ficant fact situations which can be imagined. On historical grounds what-ever coverage exists for diversion and misuse of nuclear material for des-truction purposes exists by accident and not design. If a special program for covering the illegal diversion hazard is established, the present limited coverage for the hazard should be removed from existing nuclear liabil.ity policies and be replaced by the special program.

If Price-Anderson were to be extended to incidents relating to illegal diversion, we believe that all licensee and contractor activities should be included which involve keeping or transporting of significant quantities of plutonium or enriched uranium.

We believe it would be premature for us to suggest at this time a specific

, liability insurance program for risks related to diversion. Should a con-sensus develop that Price-Anderson ought to be extended to cover this liazard, our members would quite likely be willing to participate at least to the extent of getting an immediate emergency payments program underway. We do not expect, however, that more than a rather small fraction of the full  !

! amunt of coverage presently afforded as financial protection would be  !

available for this hazard.

~

We do not believe that coverage under Price-Anderson should be extended to

, cover payments to extortionists. Such a policy would seem likely to en-courage extortion attempts. The question whether to pay ransom or not should  ;

be resolved on an ad hoc basis by the government at government expense. j Our view is that the only justification for extending Price-Anderson to cover the illegal diversion hazard is to provide swift, sure and reasonable l compensation for the victims of nuclear crimes. Keeping this in mind, we i regard it desirable, if possibic, to include coverage for incidents where there is a reasonable certainty that licensed nuclear material was involved I even though the particular licensee cannot be identified. l l

, l I

l 1

.. au.

t<

. - i . e Fir. Jerome Saltman Page 3 .

. . . . . . . . December 16, 1974 - -- -- - - -- - - - - - - - - - - - - - - - - -- -- - -------

'lhe inpositian of absolute liability upon the nuclear industry should be looked upon solely as a device to trigger a unique ccmpensation system.

Tne statutory liability of private industry under any special program should be exclusive of all other liability. It should be limited to a reasonable amount, not to exceed in any case the sum of any private in-surance and government indemnity available. Consideration should be given to restricting the compensation to individual injured persons to actual econcaic loss.

In our discussions we have only been able to identify sane of the major issues and reach the most tentative conclusions. We hesitate to offer them to you and do so only because we understand the time pressures on your own examination. ,

i Should there be a decision to go forward with the extension of Price-Anderson coverage to incidents arising out of the diversion of nuclear material with the development of a specific program, we will of course be willing to con-sider further the question of participation by the insurance industry. 4 Vey truly yours, ,

f Q0/& T '

ose Shrrono -

ne 1 Counsel -

JM: pan '

Enclosure 6

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. 86 e

a 6

4

}SDRANDUM 0F NELIA 04 .

QUESTIONS RELATING T0,THE EXTENSION OF PRIG-ANDERSON .

INDEhNITY TO INCIDENTS ARISING OUT OF THE ILEGAL DIVERSION OF NUCIIAR MERIAL

~

.. 1 .

2 Do you feel it-would be in the 'public interest to extend Price-Anderson coverage to incidents arising out of diversion of nucicar material?

s .

We believe it is fair to say that the proposal has two major goals:

(1) to bring about a significant reduction in the possibility of serious harm to the public from the theft of nuclear materials and (2) to improve the' financial protection of the public if nevertheless a serious incident" should occur. .

We strongly support these objectives, but we have serious reserva-tions about the methods chosen to reach them. h'e will consider the two objectives sel.arately. '

F

e. .

i LReducing the Possibility of Hann .

l The first goal assumes that an upgraded safeguards program for the Commission's licensees can significantly reduce the possibility of serious harm to the public frem crininal or terrorist activitics on a grand scale.

D e

1 d

I

.h'e cannot condone a relaxed, callous attitude towards safeguarding.

__ :__ nuclear. materials . But we cannot. overlook the. fact .that crininal .or _ terr ._ I ,

1 i orist bands have at their disposal ample resources, other than nuclear,

'~

for causing immense public harm. Or that tightening nuclear safeguards within the United States will not stop them from bringing in nuclear material from foreign sources. Tnis suggests that the problem cust be l tackled on a broad front with the most efficient utilization of resources l

possible.

To reduce the possibility of serious harm to the public the proposal

! reli'es principally on a rather complex indirect method. By imposing absol-1 L

ute liability on the nuclear industry for the consequences of theft, it is hopeful that the industry would be forced to upgrade safeguards to the IcVel at which insurers would be willing to insure or risk heavy finan-cial' loss.' .

t'e doubt that this indirect technique would prove to be successful.

Two basic asst:1ptions on which it rests are suspect. The first is that the threat of liability acts as a deterrent to careless behavior or as a

. stimulus'to;cxtraordinary care. Many would doubt the truth of this pro-position. Niatever validity it may have would seem to vanish if the threat of loss wereI transferred to insurers or diffused by industry-wide assess-

} .

ments. i

(

The second assumption implicit in the proposal is that the standards

~

private insurers would accept for safeguarding nuclear materia 1 are the appropriate standards for protecting the public. Insurers would be t$e first to acknowledge that they have no special expertise that would warrant reliance on their judgment for such a purpose.

In short, we do not feel there is any justification for imposing (Josolute liability upon the nuclear industr/ for the purpose of upgrading i

i '

i

+ safeguards. We believe that the question of ' appropriate safeguards against O '

.. the theft of nuclear material should be resolved by the more direct method of analyzing- the hazards at each step in the production and utilization i

process and developing specific responses.  !

Financial Protectica for the Public Tne second goal of the proposal is to improve the financial protec-tion for the public if a serious incident should occur despite upgraded safeguards.

l 1

Let us assume the situation where the nuclear industry has taken ,

1 every reasonabic precautica and it has not been enough. Neither the in-dustry nor the government has been able to prevent serious harm to the public fran criminal or terrorist activities. hho should bear the loss:

the industry or the government? -

If 'we absolve the industry because it has done all it. reasonably can, the public suffers unless the government steps in. Should the govern-l ment stc'p in for criminally caused nuclear losses but not for other crim-

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inally caused losses perhaps equally or more serious?

If the government steps in, should the masure of compensation be the traditional tort measure of damages nae provided by Price-Anderson which allows recovery of both intangible and econanic loss? We believe consideration should be given to limiting compensation to economic loss; l that is, elements of loss which can be quantified in dollars, such as.

l medical expenses, wage loss, funeral expenses, costs of replacement ser-vices, future lost earnings and property damage.

If industry were to be held liable on some theory of enterprise t

' responsibility for harm it could not reasonably prevent, again we think

. -- ...- . consideration should_be given to . limiting recovery to something less. .than

• full tort damages.

These considerations lead us to believe that the use of Price-Anderson as a compensation scheme for the victins of nuclear crime is open to serious objections, certainly without substantial codifications.

Some may argue that even a small, less than ideal step is worth taking towards a general solution to the problem of campensatirig the victirs of crime. But if it is to be taken, it should be recognized as imposing a unique burden on private industry. This calls for caution and great care in establishing the measure and extent of compensation and the relative roles of private industry and the government. ,

~

, II .'f ';

hhat considerations bear en the relative roles thatjovernment and private industries should play in extending this coverage? . .'^

<p

~

, The Rosenbaum Report has estimated the maximum credible threat to any facility or element of transportation handling special nuclear materials as 15 highly trained men. We look askance at the implications inherent in expecting private industry to hire, equip, train and deploy para-military forces capable of frustrating the efforts of such a group. Keeping the peace has historically been the function of government. . We believe it

! should continue to be so. For this reason alone we feel that govemment should bear, if not all, then by far the larger share of financial respon-sibility. .

r

. i

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' Other important considerations point to the same conclusion.

The pdatest danger ~is' from political groups which will require' political -

responses and solutions. It will be virtually impossible to determine by hard evidence whether licensee, g'overnment contractor or foreign nu-clear material is involved. The effect of absolute liability on achieving I appropriate safeguards will be mibimal, at most.

III .

How would the Pools anticipate participating in whatever coverage is

.made available throunh private industrv?

i i

There are a number of ways for making a possible Pool participatica I

available. 'Ihe ' coverage could be added to existing policies by endorse-men t. Separate policies could be issued to each licensee for the illegal-

. diversion hazard caly. Or the Pools could issue a single group policy to the nuclear industry ' covering the illegal diversion hazard only Several Y,

.. , . factors should be considered in making a choice. '

hhile some insurance coverage will probably be available, it is not likely to approach more than a very small fraction of the present $110

.. million. If a?

• icensees handling or transporting significant quantities I

of plutonit:n or enriched uranium are incitded, present financial protec-tion requirements will have to be extended to facilit'ies not now covefed.

Both the linited capacity and extension of financial protection can pro-4 bably be dealt with better by establishing a separate. financial protec-tion requirement for the illegal diversion hazard.

To ruke a compensation system reasonably comprehensive, the burden of

[.

proving the indentity of the nuclear material may have to be relaxed to 3 the extent that positive identificatica of a particular -licensee's material -

will not be required. We will not be able to assign a loss to any partic-ular policy, except in a purely arbitrary way.

The possibility of multiple nuclear incidents occurring in connhc-

. tion with ordinary operational activities is far more remote than that of a single incident. Given the ruthlessness of those willing to destroy lives and property for blackmail or political purposes, multiple incidents I

arising out of illegal diversion of nuclear material become more probay3e if one is successful. We believe that there would have to be an aggregate limit on any participation by private industry. We would favor placing such a limit on participation by the government as well.

These considerations, as well as several others touched upon in this memorandttn, cause us to believe that a separate, special program ought to e

be set trp within Price-Anderson if coverage is desired for the illegal diversion hazard. We think this program should have lower limits of f' inan-cial protection, its,cwn rating base for private insurance, perhaps internal restrictions on the kind and amount of compensation to individual victims and its own separate ceiling on the combined private industry and government participation. .

, Nuclear liability insurance coverage interpretations relating to in- ,

cidents arising out of the diversion of nuclear material.

^

i

Background

{

l l

The coverage concepts and policy wording of the nuclear liability insurance policies used by the Pools were developed in the la' te 1950's, contemporaneous 1y wid the original Price-Anderson legislation. Few would J a

i rr i 4* . have imagined that we would scon witness wide-spread hip.jackings of giant

' ~ ~""a'irliners and terrorist activities capabic of blackmailing major governments.

The making of an atomic bomb was generally considered at that time to be an impossible task for all but a tiny handful of nations. 'Ihat small l underground groups might succeed by stealing scraps of nuclear material i ,

l was beyond belief, t

i On historical grounds it is apparent that whatever coverage exists under a Facility Form policy for the illegal diversion and misuse 'of nuclear l ..

l -

material for destructive purposes is there by accident and not design.

. lhe Facility Form policy was intended to apply primarily to operations at the site, and to a limited extent, to transportation of nuclear material to and from the site. Thus coverage is provided only with respect to nuclear

. materials (1) at the Facility, (2) discharged or dispersed from the Faci-lity, or (3) in an " insured shipment" which is in the course of transper-tation.within the territorial limits of the policy.

Pertinent Provisions of the Facility Form

."- . g . '" '

}. ,

The basic obligation of insurers under the Nuclear Energy Liability -

Insurance Policy (Facility Form) is stated under Coverage A:

"To pay on behalf of the insured . . . all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage caused by the nuclear energy hazard . . ." -

, The nuclear energy hazard is defined in the policy as: ,,

. . . the radioactive, toxic, explosive, or other hazard-ous properties of nuclear raterial, but only if -

(1) the nuclear material is at the facility or has been discharged or dispersed therefrom without intent to

- relinquish possession or custaly thereof to any per-son or organization, or (2) the nuclear material is in an in:;ured shipnent which

, is (a) in th? course of transportation, including handling and temporary storage incidental thereto, a

e 4 4

'1

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. within the territorial limits of the United States of '

America, its territories or possessions, Puerto Rico ,

d -. .-. .. ._or the Canal' Zone and .(b). . away.. from any. other nuclear _

facility."

An insured shipment is defined as:

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". . . a shipment of source material, special nuclear matcrial, spent fuel or waste, herein called 'materi-

' al,' (1) to the facility from any location except an l indemnified nuclear facility, but cnly if the trans- {

portation of the material is not by predetennination to be interrupted by removal of the material frcm a

. transporting conveyance for any purpose other than the  !

continuation of its transportatica, or (2) from the facility to any other location, but caly until the -

material is removed from a transporting conveyance for

,. any purpose other th:n the continuation of its trans-portation." .

7

' l Coverage Interpretations _

. l

. ]

Numerous fact situations can be imagined which would bring into play l

' l additionai provisions of the Facility Form. To simplify discussion and;'

. . .e -

focus sharply on what we believe are the issues, we will assume several

~

specific ...cuations.

~

j . .

In nil cases we, assume bodily injury or property damage off-site

' caused by the hazardous properties of nuclear material and that the irijury

~.

.v.._.. [

. or damage is not due to war, etc. within the meaning of exclusion (e).

In Case A we assume that a criminal band attempts to take possession of " nuclear material" at the site of an indeanified facility. During the course of its

cfforts, the material is discharged or dispersed from s

the site.

In Case B we assume that a criminal band attempts to ;.

take possession of nuclear material while in an "in-i sured shipment" covered by the policy. During the course of the band's efforts, the material is releas-ed or escapes from its container.

In Case C we assume that the criminal band succeeds in taking possession of nuclear material at an indem-nified site, and the material is released or escapes j

in the course of the band's transportatica of the material from the site to another location.

I '

t nea rin u.

b ' .. '

i In Case D we assume that the criminal band succeeds l - ~ ~~'

in taking possession of nuclear mterial either at . . _ _ .

' ' an indemnified site or from an " insured shipment" covered by the policy and subsequently releases or l

explodes the material in a separate action.

We believe that the legal obligation of an insured to pay damages because of the bodily injury or property damage resulting in Cases A and.

B would be covered by the Facility Form. However, we do not think that the facility operator would be liabic under existing negligence or strict liability principles because of the gross and essentially uncontrollable nature of the intervening cause of loss. We think it may be argued that members of the criminal band would qualify as insureds under the policy with respect to their legal liability for the injury or darrage. Although the objective of Price-Anderson is to compensate the public for nuclear injury arising out of the peaceful use of atanic energy, there is a public policy l

questica involved in extending liability coverage to crifainal bands. l We 'would regard the injury or damage in Case C as totally outside ,

the coverage provided by the Facility Form. We would not consider nuclear material wrongfully . removed from the site as having been " discharged or

<, a dispersed" fram the facility as those words are used in the definitioft

t.  :.. .

of " nuclear energy hazard." We would not regard the transportation by , ,

i the criminal band as an " insured shipment." l 1

We would also regard the injury or damage in Case D as totally out- I side the scope of Facility Form coverage. At the time the nuclear material caused the loss it was not at the facility or in an insured shipment. Nor,  !

as indicated above, would we regard it having been discharged or dispersed from the facility.

/

. I

V ,

If coverage were to be extended to incidents relating to diversion, what licensees and activities should be included in this coverage?

If Price-Anderson were to be extended to incidents of this kind, we believe that all licensee and contractor activities si auld be included which involve the keeping or transporting of significant quantities of

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plutanium or enriched uranica. -

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Under what conditions would the Pools be prepared to extend nuclear liability insurance for ri_sks related to_ diversion? Ccasiderine the various types of activities that would or should be ccvered and the Pools ' cacacity, what do you feel would be ressonable coverages and excluciens? Ecw d'o the suggested coverages n'nd exclusions imoact on the premiums you would charge?

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We think it would be premature for us to suggest at t is time a 'speci- .

h fic liability insurance program for risks related to diversion. The earlier portions of our memorandum express our concern about the public policy ques-tions involved and stress the need for the widest possible expression of.  !

i views.'

^ j Should a consensus develop within the government and the nuclear industry that Price-Anderson should be extended, our menbers would quite likely be ,

l willing to participate at least to the extent of getting an immediate ener-gency payments progran unden<ay. We c'.o not expect, ho <ever, that more than a very small fraction of the full s:nocat of coverage presently afforded as I

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', financial protection would be availabic for this hazard.

. would be whether a generally acceptabic rating plan cculd be developed.

h'c cannot address ourselves to the question regarding the premiums

, we would charge as they depend so directly on the type of compensation j

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plan developed.

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.Should coverage under Price-Anderson be extended to cover losses in addition to personal injury or property damage arising out of or resulting from nuclear incidents (c.g. payments made to extortionists who threaten

, to use diverted material unless a ransom in paid)? *

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h'e believe that coverage under Price-Anderson should not be extended to cover payrrants to extortionists. Such a policy would seem likely to .

encourage extortion attegts. In any cat,e, we believe that the que'sti,on 3

of whether to pay ransom should be resolved on an ad hoc basis by thf

. . government at government expense. .

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• If coverage were to include incidents arising out of the identifiable diversion of licensed nuclear material, should it be broadened in such a manner to provide covernge for incidents arising out of diverted material

where the soccific source of the mterial diverted (i.e. the particularw

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E-- licensee) cannot be ascertained? ------ -

Our view is that the only justification for extending Price-Anderson  ;

is to provide swift, sure and reasonable ccmpensation for the victims of crime. Keeping this in mind, we regard it desirable, if possible, to in-clude coverage for incidents where there is a reasonabic certainty that licensed nuclear mterial was involved even though the particulcr licensee cannot be identified. .

We think that it will be difficult to mke such a detemination cn the basis of hard evidence. Quite likely .a special mechanism not bound by ordin-ary rules of evidence and burdens of proof will be required if the objective is' to be met. .

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Su:rcary and Ccacluding Comments . c. ..

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We believe there is no justification for imposing absolute liability on the nuclear industry for the purpose of upgrading safeguards. -

hhatever coverage presently exists under nuclear liability insurance , .

policies for the. illegal' diversion. of nuclear materi,als exists by accident

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and is . limited to only a few of the factual situations which my be ingined.

The expansion of Price-Anderson into a compensation scheme for the victims of nuclear crime is open to serious objections, certainly without substantial modifications. If it is to be used for such a purpose, a special program should be set up within the Price-Anderson framework. The limited present coverage of nuc1 car liability policies should be replaced by the special program.

The imposition of absolute liability upon the nuclear industry should

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be looked upon solely as a device to trigger 'a unique compensation system.

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- - The government, which must necessarily. bear the primary responsibility. for. .

i keeping the peace, should bear, if not the whole, then by far the greater l

share of the cost. -

The statutory lichility of private industry under the special program should be exclusive of all other ' liability and should be limited to a rea-sonable amount, not to exceed in any case the sum of any private insurance and government indemity available. Consideration should be given to li.-d.t-ing .the amount of compensation to individual injured persons to their economic loss.

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..' EUTUAL Atomic EasRoy ElABILITY UNDERWRITERS  %

One East Wacker Drive Chicago, Illinois 60601 Telephone 467 4090 January 14, 1975 Mr. Jerome Saltzman, Deputy Chief Office of Antitrust and Indemnity Directorate of Licensing United States Atomic Energy Commission Washington , D.C. 20545

Dear Mr. Saltzman:

The Governing Committee of the Mutual Atomic Energy Liability Underwriters (MAELU) has reviewed the questions posed by your letter of October 9,1974. We are also aware of Mr. Marrone's letter and enclosurcs of December 16, 1974, seti.ing forth NEL-PI A's response to your questions.

We are in substantini agreement with the views exprecsed by NEL-PI A. 11cnce, this separate reply by us should not be re:.mrded necessarily as distinguishing the MAELU position from thn of NEL-PIA--but mainly as an effort to stress the points that we feel are most deserving of emphasis.

As a general proposition, we do not dispute the social desirability of compensating hapless victims for losses sustained from the depmdations of criminals. Ilowever, it seems to us

, that the best approach to such compensation is through such private first party insurance as is available, supplemented by Social Security, Medicare, etc.;. and, to fill the gaps, " crime ,

, victim" indemnification from the general revenues of government. j 1

The Ribicoff amendment would propose to transfer the cost of such compensation to the private sector, that is to the nuclear industry, their customers and their insurers. If private insurers  ;

are to be expected to consider underwriting this kind of hazard on f

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p I' Governing Committee:

American Mutual t. lability insurance Company Liberty Mutual Insurse.ce Company Emrioyers Mutual Llabuity insurance company of wisconsin Lumbermens Mutuas casuaity company Sentry Insurance A Mutual Company .

Michigan Mutual Liebelity Company o

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