Going without insurance is described as "going naked" in insurance industry lingo. Going without insurance for the worst hazards in the nuclear power industry is business as usual.
One need not look back very far to see the problem. In March 2011, the Fukushima-Daiichi nuclear power plant disaster, triggered by an earthquake followed by a tsunami that overwhelmed all of Japan's safeguards, melted down three reactors, displaced 160,000 people and caused an estimated $250 billion in damages and other still-unfolding economic consequences.
Today, in the United States, we have 104 operating nuclear plants producing electricity. The owners, operators, and government regulators who oversee them say an event like Fukushima will not happen here. And even if it did, they insist, there is enough liability insurance in place to cover the damages. The actual amount of that insurance coverage: just $12.6 billion.
You don't need an advanced degree in calculus or risk analysis to see that something doesn't add up, and to start feeling a bit...naked. But when it comes to nuclear insurance, naked is the fashion designed for the American public.
A catastrophic accident in the US could cost way more than $12.6 billion. A worst-case scenario study in 1997 by the Brookhaven National Laboratory estimated that a major accident could cost $566 billion in damages and cause 143,000 possible deaths. Another such study, by Sandia National Laboratories in 1982, calculated the possible costs at $314 billion. Adjusted for inflation, that would put both estimates close to the trillion dollar range today. So $12.6 billion wouldn't cover much.
After Fukushima, which was only the second worst such accident behind the 1986 Chernobyl meltdown in the former Soviet Union, the US Nuclear Regulatory Commission and its staff scrambled to reappraise the adequacy of their own safety regimens for nuclear power plants. And they re-examined the sufficiency of the limited insurance available to indemnify the American people against property damage, loss of life and other economic consequences of nuclear accidents. Then the NRC hastened to publish the "lessons learned" from the Japanese catastrophe to show they were on top of things. Though the previously existing US system had been described as virtually fail-safe, federal regulators found that improvements were possible after all and ordered that they be made.
But one not so small thing remained unchanged, post-Fukushima: the tightly capped insurance system. Of course, raising the amount of insurance required to operate nuclear plants would be expensive. The nuclear industry, which provides 20 percent of all of the country's electrical power, is not eager to incur additional expenses like higher insurance premiums for more coverage. Oh, but the nuclear power industry doesn't actually pay premiums on most of the insurance coverage that supposedly is available (more about that later.)
First, a little history. After solving the scientific and technological issues of splitting the atom, the biggest problem the nuclear industry faced in its infancy was obtaining accident insurance coverage. Without insurance, investors were unwilling to provide start-up capital. But the insurance industry was nervous. After all, this was back in the 1950s, and who knew then how safe -- or dangerous -- this new power source might turn out to be? So insurers were refusing to assume unlimited levels of liability.
But President Dwight D. Eisenhower was determined to develop "Atoms for Peace," and he worked with a cooperative Congress to remove all roadblocks. Their solution to the insurance obstacle was a new federal law, the Price-Anderson Act of 1957, which simply imposed federally-decreed limits on liability from accidents at non-military nuclear facilities. The law, amended several times since then, allowed the creation of insurance pools to cover accidents. Today the plan has two tiers. The first tier is a $375 million insurance policy for which each nuclear plant must pay premiums ranging between $500,000 and $2 million a year, depending on plant size and other factors. If a plant has an accident and $375 million is not sufficient to cover resulting damages the second tier kicks in and all the other plant operators around the country must chip in up to $111 million each to indemnify victims until the $12.6 billion cap is reached.
By the way, if you live near a nuclear plant, or even many miles away, you cannot buy your own private insurance policy to protect your home against nuclear accidents, thanks to the Price-Anderson law.
The nuclear industry and the insurance industry both understood the hard realities of the risk. In testimony to the Senate Energy and Natural Resources Committee on May 24, 2001, John L. Quattrocchi, then senior vice president for underwriting at the American Nuclear Insurers pool, put it bluntly: "The simple fact is there is always a limit on liability -- that limit equal to the assets of the company at fault."
Meanwhile, corporations that own nuclear plants have devised spin-off schemes, erecting legal firewalls to protect the parent company if their limited-liability subsidiary actually operating the plant goes under as the result of an accident.
Pennsylvania's Three Mile Island nuclear power plant suffered a partial meltdown in March, 1979. Victor Gilinsky was the senior sitting member on the Nuclear Regulatory Commission when that accident happened. According to Gilinsky, now retired, "There is no insurance for an extreme event."
Now, as scientists warn of climate change, rising sea levels, stronger hurricanes and a host of other environmental threats related to global warming it might not be unreasonable to re-examine protections afforded the public. Small-scale accidents at nuclear plants continue to happen. A big one, like Fukushima or worse, may have a low probability level. But it isn't impossible.
True, nuclear plants contribute little or no greenhouse gas emissions to the overburdened atmosphere compared to the coal-fired plants that add so much to global warming. But there is another factor to consider when weighing the nuclear option. Originally licensed for 40 years of operational life, most US nuclear plants are approaching or have already exceeded that period. So far, 73 such plants have been given 20-year extensions, and with retrofitting and extensive upgrades, some are expected to function to an age of 80 years. Lets all keep our fingers crossed.
Miles Benson is a correspondent for Link TV's Earth Focus. He has a distinguished career as a daily print journalist. From 1969 till his retirement in 2005, was a correspondent for the Newhouse Newspaper group, which included 30 daily newspapers. He covered the US Congress for 15 years and then the White House for 16 years, wrote a weekly political column and covered national politics and public policy.
When Sheila Russell decided to move back to her ancestral home in Bradford County, Pennsylvania, she wanted to start a new life. A seventh-generation Russell, whose family had settled the land in 1796, the last year of George Washington’s presidency, she left her corporate job at a catalog company to do what she loved best: farming.
There was only one problem: shale gas. As luck would have it, the Russell farm happened to sit on top of the Marcellus shale, a large underground formation rich in natural gas. In 2010, just as Ms. Russell was embarking on her new career in organic farming, Chesapeake Energy drilled two shale-gas wells across the road, less a thousand feet from the farm.
Although not worried at first and even hopeful that future royalties from the gas may help her expand her business, Ms. Russell soon found herself in a nightmare, when she discovered that one of the wells on her property had been leaking methane gas into the ground, due to a faulty casing, for over a year.
Today, Sheila Russell has stopped drinking the water from her private well and even refuses to water her produce with it, preferring instead a nearby spring-fed pond. Water tests have shown elevated levels of methane and metals, still within state norms, but she does not want to take any chances.
"It's a concern for me, it's a concern for my customers," she says. "We all thought [the gas] was a lot of money coming and that it was safe. And it’s neither safe, nor a money-maker. Do I stay on this seventh-generation farm and keep it going? I don’t know."
Sheila Russell's case is hardly an exception. Bradford County, a bucolic region in northern Pennsylvania full of woodlands, rolling hills, and pastures dotted by red barns and hay bales, with a population of just 63,000 people, has been undergoing a massive industrial transformation for the past few years, as both American and international companies have joined the rush for gas.
This is not the first natural-resource boom in Bradford County. In the nineteenth and early twentieth centuries, coal mining and logging were big economic drivers -- until the coal ran out and the hills were hills were stripped bare -- but the shale gas may prove to be the biggest industry yet.
About 2,000 shale-gas wells have been drilled and permitted in the county so far, making it the most heavily drilled region in Pennsylvania and the Marcellus as a whole. And while the economic benefits for companies, larger leaseholders, and some local businesses have been significant, the gas rush threatens to undermine the venerable farming and dairy operations in the area, while creating a host of environmental and social problems.
The changes are hard to ignore. From a sleepy Pennsylvania town on the banks of the Susquehanna River, Towanda, the county's seat, has metamorphosed into a real boomtown, with industry trucks and large pickups jamming the single main street. Crime has gone up by about 40 percent, while rents and food prices have skyrocketed.
Meanwhile, new restaurants and hotels have sprung up along the river valley to service the rig and pipeline workers, many of them coming here from as far as Texas, Oklahoma, and Mississippi.
Since 2008, when drilling for shale gas began in the county, revenues from sales tax have jumped up 61 percent, while unemployment has hovered at around six percent, lower than the national average. So far, local landowners have received $160 million in leases, which have boosted spending, as well as the county's tax base.
"The shale gas industry has had a very positive economic impact on the region" says Anthony Ventello, the executive director of Progress Authority, the local chamber of commerce, pointing out that the gas industry continues to bring in new investments. A new 800 MW gas-fired power plant, worth between 600 and 800 million dollars, has been already planned, while other, smaller gas-related projects are soon to follow.
"We're looking to create a value-added economy and not just ship natural gas out of here like a third-world country," he says.
Yet, behind the upbeat statistics, a darker side lurks. Blowouts, toxic spills, water contamination, and gas migration have accompanied development.
Chesapeake Energy, the company with the most substantial presence, was fined $900,000 -- the largest environmental fine in the state’s history -- for allowing gas migration to contaminate the water of 16 families in the county in 2010. Later, a blowout of one of the company’s wells caused large amounts of "produced water" -- liquid waste associated with shale gas extraction -- to spill into Towanda creek. In Bradford County, according to the Department of Environmental Protection, overall there have been more than 600 violations so far.
Most often, accidents occur due to faulty casing and cementing, with gas and a variety of dangerous metals migrating into the water table. The industry calculates that six percent of all new wells have some kind of casing or cementing problem, but in reality that percentage could be much higher.
Carol French, a long-time dairy farmer, experienced the adverse consequences of shale-gas drilling first hand, when her well water turned white and murky in 2011. Soon, her whole family started having skin rashes, while her 24-year old daughter fell extremely ill with intestinal, liver and spleen problems (she quickly improved when she moved away from the farm). Meanwhile, the family's cattle began suffering from skin rashes and breeding issues.
"I got to see my farm lose 90 percent of its property value," she says. “I’m losing my milk market and probably I won’t be able to sell my cows. The gas industry had negatively impacted our health, our water, our business, our society."
Mrs. French has made the conscious decision to keep her dairy operation going, despite the fact that there are about 340 shale-gas wells within a ten-mile radius of her farm. Many of her neighbors, on the other hand, have simply opted to take the money from their gas leases and sell their dairy herds. Out of about 12 dairy farmers in the immediate vicinity, only three have kept their farms running, according to Mrs. French's estimates. Even the local milk hauler has gone on to work as a truck driver for the shale-gas industry.
Another serious impact has been the fragmentation of farmland by the wells pads, compressor stations, and the thousands of miles of pipelines already crisscrossing the hills or currently under construction.
Certainly, there are other factors contributing to the decline of dairy farms in Bradford County, beyond the gas industry. Low milk prices and expensive feed have kept the business on the edge of survival for years and many have seen the windfall from gas leases and royalties as the perfect exit.
The choice was clear for Howard Keir, a neighbor of Carol French. After leasing the mineral rights of his property to Chesapeake Energy, he immediately sold off his dairy herd. He believes shale-gas extraction is generally safe and today has three wells on his property, out of which he soon expects to receive royalties.
"With the price of milk going mostly down, farmers were going out of business anyway, so you can’t blame it all on the industry," he says.
Anthony Ventello, of the chamber of commerce, agrees. "Don’t get me wrong, but farming is doomed, no matter what you do. It has to do with milk prices mostly. Yes, things will change, but I don’t see that as a danger."
Anecdotal evidence suggests that some farmers use the proceeds from gas exploration to upgrade their operations, but the general trend has been in the opposite direction.
A 2012 study by Penn State’s College of Agricultural Sciences draws a direct correlation between the decline of cow numbers and dairy production in areas with higher drilling activity. Between 2007 and 2010, in counties with 150 or more gas wells cow numbers have decreased by 18.7 percent on average, compared to only 1.2 percent decrease in counties with no Marcellus wells. In Bradford County the decline has been 18.8 percent for that time period.
Timothy Kelsey, professor of agricultural economics and a co-author of the study, sees a danger for the entire dairy industry in the region if the decline continues.
"If the number of farms and agricultural activity fall too low, these essential supporting businesses [like feed stores, large animal veterinarians, machinery dealers, and agricultural processors] will leave or quit, making it difficult for remaining farmers to access needed inputs and markets and thus remain in business," he writes.
If such domino effect takes place and farming and dairy production in Bradford County collapse along with the entire supply chain, even the large financial inflow from the shale gas industry might not be able to make up for the difference.
A law that came into effect last year in Pennsylvania, Act 13, tries to mitigate some of the negative effects of shale gas drilling by providing an impact fee. In 2012, Bradford County received $8.2 million with another $6.8 million projected for 2013.
"It's a chunk of change that Bradford County never had before," says Mark Smith, one of the county commissioners. "Is it enough? I don't think we know that answer yet."
Without a doubt shale gas has made a serious contribution to the economy of Bradford County and Pennsylvania as a whole, yet risking a sustainable industry like farming for an unsustainable one like fossil-fuel extraction may prove too expensive in the end.
Already a bust is on the horizon: drilling in the county has seen a substantial decline, from 408 shale-gas wells drilled in 2011 to 149 well through November of 2012, due to low gas prices. The construction of thousands of miles of pipeline continues in preparation for the new boom when prices pick up, but it is far from certain whether farming in the area could recover so easily.
"The story is always different at the kitchen table where they come to sign you on than it is out in the field," says Bruce Kennedy, a long-time farmer whose family roots in Pennsylvania go back 200 years. In 2011, three accidents related to shale gas extraction happened on his property, including a large diesel spill.
"My grandfather always taught me to leave a place better than you found it. I don’t mind people going after the gas, but it doesn't entitle them to abuse the place. You have to be a good steward of the land."
Reporting for this article was funded by the Pulitzer Center on Crisis Reporting and Calkins Media. Dimiter Kenarov is a freelance journalist based in Istanbul, Turkey. To learn more about the impacts of fracking, visit Link TV's ISSUE: Fracking page.