The Price-Anderson Act, an amendment to the 1954 Atomic Energy Act, was created to protect the nuclear industry from a potential accident liability so large that it would threaten the future of nuclear power, and to ensure that the public would be compensated for any damage resulting from a nuclear accident.

First passed in 1957, the act has been renewed in 1966, 1975, and 1988, and provides coverage for accidents involving commercial reactors, nuclear research, fuel processing, waste management and weapons production activities performed by DOE contractors.

The act has a bi-level system of insurance for nuclear accidents and a "no-fault" liability system for large accidents. A company buys the first layer of insurance from private insurance firms. The second level of insurance is applied only to operators of large licensed power reactors. If a nuclear accident causes damages exceeding $200 million, each licensed commercial reactor would be assessed a prorated share of the damages in excess of $200 million, up to $75 million per reactor per accident.

In exchange for limiting liability this way, the Price-Anderson Act effectively imposes "strict liability" on the utility involved in an accident determined by the Nuclear Regulatory Commission to be an "extraordinary nuclear occurrence." Strict liability means the utility must waive legal defenses against paying claims, relieving victims of the necessity of proving negligence.

For Eureka County, liability for accidents involving transportation is probably the highest concern.

In the event of an accident involving DOE contractors, as would be the case if Yucca Mountain opens, DOE arranges as indemnity agreement with the contractor to cover damages up to the liability limit. This limit means that the government will not hold the contractors liable, even if they are proven liable in a court of law. In effect, the government agrees to pay all damages incurred up to the commercial reactor liability limit.

If the Nuclear Regulatory Commission or DOE determines that the accident is an "extraordinary nuclear occurrence," then the strict liability provision described above is in effect. So far, there have been no accidents for which this determination has been made. If the accident is smaller, with a release of radioactivity but not of an "extraordinary" amount, then the liability would be determined under state law.

Nevada Deputy Attorney General Harry Swainston stated that in his opinion the state courts would probably view this a an activity for which the defendant, whether it be DOE or the contractor, would be held strictly liable.

If claims exceed the liability limits, the Act says it would be up to Congress to enact legislation to provide full and prompt compensation to the public. However, as an "extraordinary nuclear occurrence" has never been declared, it remains unknown how congressional action would proceed. The financial allocation would be considered as part of the political budgetary process, and would not be an automatic reimbursement for loss.