ML20147H756
| ML20147H756 | |
| Person / Time | |
|---|---|
| Issue date: | 12/11/1978 |
| From: | Office of Nuclear Reactor Regulation |
| To: | |
| Shared Package | |
| ML18078B291 | List: |
| References | |
| RTR-WASH-1400 NUDOCS 7812270388 | |
| Download: ML20147H756 (17) | |
Text
S DETAILED RESPONSES RECEIVED FROM AIG d
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uniTco STATES
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. NUCLEAR REGULATORY COMMISSION g
- E W ASHING TON. D. C. 20555 NOV 1 <! 1978 MEMORANDUM FOR
HaroldR.Dentf[nr Director Office of Nuc1%#r Reactor Regulation FROM:
Jerome Saltzman, Chief Antitrust & Indemnity Group Nuclear Reactor Regulation
SUBJECT:
USE OF WASH-1400 IN THE LICENSING PROCESS This is in response to your recent memo subject as above.
I have surveyed appropriate members of my staff and have not found, with one possible exception, any AIG licensing and other regulatory actions or staff positions that have relied on the risk assessment models and results of WASH-1400.
The possible exception pertains to some Congressional' letters, copies attached, in which general risk assessriients of' WASH-1900_.are characterized.
While I believe that we should discontinue the'lise~of Tharacterizations p
of the conclusions of WASH-1400 (e.g., "...on the order of one chance e
i per billion") we should not try to amend letters that have already been V
dispatched.
We are also aware of a draft report from ORNL (NUREG/CR-0222 - Economic Consequences of Accidental Releases from Fuel Fabrication and Radioisotope Processing Plants) that is being produced for NMSS to provide the technical framework for the joint NMSS/NRR review of indemnification for materials licensees.
This study utilizes WASH-1400 data in devising consequence models for nuclear incidents.
However, I understand that NMSS is taking the responsibility of reviewing this study under the same criteria that you furnished to NRR staff, so separate review by NRR is probably unnecessary.
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Jerome Saltzman, Chief Antitrust & Indemnity Group Nuclear Reactor Re'gulation
Enclosures:
Copies of Congressional letters
UNITED STATES y'
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aeo bl';y The Honorable Lee H. Hamilton United States House of Representatives Washington, D. C. 20515
Dear Congressman Hamfiton:
This is in response to your request for information to reply to a communication you received from Edgar K. DeJean, D.D.S.,102 N.
Harrison Street, Salem, Indiana 47167, on April 10, 1978.
The part of the letter to which this response is addressed states:
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" Electricity generated in nuclear reactor plants is more expensive than electricity from conventional fossil fuel plants when one includes the hidden benefits of govern-ment subsidies in funding and insuring (liability) such pl ants. "
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i' We know of no subsidy, unique to nuclear power, in the funding of d
commercial nuclear power plants. With regard to the question on government subsidy in insuring nuclear power plants, the extent of Federal subsidy cannot be precisely detennined.
This is because there is some degree of uncertainty in determining the risk asso-ciated with the operation of a nuclear power plant.
However, the risk is small enough, as indicated below, that any resultant Federal subsidy would not significantly alter cost comparisons between nuclear power and its competitors.
Based on our estimates of costs for the proposed Marble Hill Nuclear Generating Station, the cost of electicity generation (expressed in 1978 dollars) will be about 29 mills per kWh for nuclear and about 33 mills per kWh for coal.
The cost of generating electricity by an oil or natural gas fired plant would be considerably higher.
One way of estimating the effect that an insurance subsidy has on generating costs is by consideration of average annual loss.
Average annual loss would be the amount of accidental loss times the annual probability that the loss will occur; mathematically, this number would be annual risk.
If we simply assume that the Federal govern-ment would pay all claims which might result from any nuclear power plant accident, the average annual loss would be a conservative estimate of the annual Federal subsidy.
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i The Honorable Lee H. Hamilton "
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The average annual loss from nuclear power plant accidents cannot be precisely detemined.
The Reactor Safety Study * (RSS) developed estimates of probabilities and consequences of nuclear power plant accidents.
That study has been the subject of some controversy, but we think the estimates can be useful in considering possible conse-quences of nuclear power plant accidents.
Using those estimates together with other infomation, we have recently estimated the average annual loss from nuclear power plant accidents to be less than $400,000 per reactor per year in 1978 dollars.
We think that the uncertainty in our estimate is less than a factor of ten.
During one year a large power plant would generate about 5.5 bil-lion kilowatt-hours of electricity.
The average annual loss then is less than 0.08 mills per kilowatt-hour.
The previous discussion ignores the fact that under the Price-Anderson Act,** there is a system of private funds and governmental indemnity totalling up to $560 million to pay public liability claims for personal injury and property damage resulting from a nuclear incident.
This Act requires licensees of commercial nuclear power plants having a rated capacity of 100,000 electrical kilowatts or more to provide proof to the Nuclear Regulatory Commission that they have financial (3
protection in the fom of private nuclear liability insurance, or in
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some other form approved by the NRC, in an amount equal to the maximum A'
amount of liability insurance available at reasonable cost and on reasonable tems from private sources.
That financial protection,
$465 million, is comprised of primary private nuclear liability in-surance of $140 million and a secondary retrospective premium insurance layer of $325 million.
In the more than 20 years since the inception of the Price-Anderson program, no payment of Government funds has ever been made under licensee indemnity agreements nor will any payment of Government funds be made unless claims resulting from a nuclear incident, ex-ceed the financial protection layer.
In its traditional sense, the tem " subsidy" connotes payment of money by a government to a person or a private commercial enterprise.
While no payments have ever been made under licensee indemnity agreements since the inception of Price-Anderson in 1957, the Government has collected a total of
$19,689,661 in indemnity fees as of March 31, 1978.
iReactor Safety Study, An Assessment of Accident Risks in U.S. Commercial Nuclear Power Plants.
U.S. Nuclear Regulatory Commission NUREG-74/014.
- Public Law 85-256, as amended; 42 U.S.C. 2210.
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The Honorable Lee H. Hamilton.
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When the Price-Anderson Act was enacted in 1957 and when it was extended in 1965, the Government's involvement as an indemnitor was seen as a temporary necessity.
The utility industry was eventually expected to assume the financial risks of its operations.
The subsidy issue was raised by a number of witnesses during hearings held by the Joint Committee on Atomic Energy in 1974 and 1975 on the extension of the Price-Anderson Act.
Indeed, the legislative proposals submitted by the Administration in both years were sensi-tive to this concern and provided as a major provision, the phase out of Government indemnity.
H.R. 8631, the bill reported out by the Joint Committee in 1975 contained provisions for phasing out Government indemnity by assessing each licensee of a large power reactor a deferred premium which would be calculated as a prorated share of the damages exceeding the base layer of insurance. The Commission was also sensitive to the subsidy argument when it establish d the retrospective premium at $5 million per reactor per incident to the Act (Public Law 94-197).
The only other current subsidy we know of which is unique to the civilian nuclear power industry is uranium enrichment services.
This service is done with security classified equipment at Federal facilities with a charge to users of the service.
Since September, 1977, the charge has been $74.85 per kg separative work units (swu).
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Estimates of the cost of providing the service from a newly construc-(/
ted private facility are $100 per kg swu when all costs including taxes, private industry interest rates, and business profits are in-cluded.
If one ignores any benefits which might accrue to the govern-ment from operating its enrichment facility for commercial purposes and considers the difference between the cost of new plant and current charges to be a subsidy, the subsidy would be approximately 0.4 mills per kWh.
Subsidies of various types are pervasive in our economy.
Accounting for subsidies in one industry, or energy source is difficult; a com-parison between unsubsidized costs of alternative energy sources'is almost impossible.
One should be extremely cautious in drawing con-clusions as to which energy source receives the most subsidies.
For example payments for black lung disease, indirect subsidies to barging, highways, and railroads, Federal and state minerals explor-ation, leasing of mineral rights on public lands, investment tax credit and preference tax and borrowing benefits all are subsidies in varying degree to energy sources which compete with one another.
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The Honcroble Lee H. Hamilton o j
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An attempt to enumerate Federal subsidies is cnntained in a Congressional Staff Study entitled " Federal Subsidy Progrecs," Joint Economic Committee, October 18, 1974; a copy is enclosed.
The section most related to energy subsidies appears to be Fatural Resources which begins on page 96.
By far the largest subsidy listed is the excess of percentage over cost depletion (coewonly called " depletion allowance"). These are granted to extractive industries wherein tax subsidies arc allowed ranging from 22 per-cent of gross income for oil to 5 percent for certain ninerals.
This depletion allowance of $2.96 billion in 1975 compares to approxinately a 560 billion total for all Federal subsidies identified in this study.
In surmcary, government subsidies to varicus energy industries is pervasive. fioreover, the subsidies vary in both type and value from one energy source to another. Therefore it becones an ex-tremely difficult, if not impossible, task to compare the unsub-sidized costs of power production.
Sincerely, Ugned) wnuam J, Dircks Q
William '. Cid5 ty p; W ont E w..m "
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Enclosures:
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The Reactor Safety Study - Executive Sunnary 2.
Congressional Staff Study entitled
" Federal Subsidy Programs" DISTRIBUTION Central Files CA(3)
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O The Honorable Carles Moorhead United States House of Representatives Washington, D.C.
20515
Dear Congressman Moorhead:
We have received from the Energy Research and Development Adminir.tration-your letter dated Aoril' 27,1977, which requested infomation for responding to concerns stated by one of your constituents, Ms. Terry 'Crawford. We hope the following information will be helpful.
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, c-In stating that the Price-Anderson Act was recently struck down as being unconstitutional, Ms. Crawford is alluding to a declaratory judgment rendered on March 31, 1977, by Judge McMillan in the U.S. District Court for the Western District of North Carolina.
The Court held that the t
$560 million limitation of liability provision in the Price-Anderson Act was unconstitutional. The decision leaves untouched all other provisions of the Act. The fiRC and Duke Power Company, who were co-defendants in C
this case, have both filed notices of appeal to the U.S. Supreme Cnurt.
t To place Judge McMillan's decision and Ms. Crawford's statements in perspective it might be helpful to sumarize the major. provisions,of the Price-Anderson Act. As you may recall, the Act was extended on December 31, 1975 for 10 years and modified to establish a three-layer system to pay public liability claims for personal injury and property damage resulting from a nuclear incident The first layer of this system presently provides that all licensees of comercial nuclear power plants having a
,I rated capacity of 100,000 electrical kilowatts or more are required to provide proof of financial protection in the form of private nuclear liability insurance, or in some other fom approved by NRC, in an arrount equal to the maximum amount of liability insurance available from private sources. The maximum amount of private nuclear liability insurance currently available is $140 million.
j The new second layer of the system provides a mechanism whereby the utility industry would share collectively in the risk of damages from a w
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OV nuclear incident exceeding $140 million, the first layer, through the payment of a retrospective premium of up to $5 million per r? actor per incident.
In the event of a nuclear incident causing damages exceeding
$140 million, each licensee would be called upon to pay a prorated share of damages in excess of the first layer up to $5 million per reactor per incident.
Tne third layer, or Government indemnity, will gradually be phased out as more comercial reactors are licensed and licensees participate in the retmspective premium system.
Currently, Government indemnity provides coverage for damages exceeding $140 million up to a maximum of
$560 million.
In August 1977 when the retmspective premium system (second layer) forna11y takes effect, the Goverr.aent indennity layer will coual the difference between $560 million and the sum of the first and second layers of protection. Government indemnity will be phased out when the first and second layers by themselves provide liability coverage of $560 millien. Under the current level of private liability insurance coverage, this will occur when 84 comercial reactors have been ifcensed.
Af ter that point, the limit of liability would increase without limit in increments of $5 million for each new reactor licensed.
To illustrate the three-layer system described above, we may assume that 62 reactors ars licensed (the current actual number).
In the event of a serious nuclear incident, up to 5140 million would be made available O
through the first or primary financial protection layer.
If this amount were not sufficient, then the secondary financial protection layer, or retrospective premium system, would be drawin upon. This would provide up to an additional S310 million for liability coverage above the initial-
$140 million.
($310 millien = 62 licensed reactors X $5 million/ reactor.)
If this were still insufficient, che third layer, Government indemnity, would provide the balance up to the $560 million limit of liability.
Government indemnity in this instance would provide $110 million (i.e.,
$560 million - $310 million - $140 million = $110 million).
Ms. Crawford is concerned that the $560 million limit of liability acts as a " shield" for the nuclear industry and denies the public their "just compensation" in the event of a serious accident. During the course of its considerations of the possible exten., ion or modification of the Price-Anderson Act in 1974 and 1975, Congress apparently accepted the 1
view that there are good reasons for maintaining a limit of liability.
First, $560 million is adequate to cover all but the most extremely improbable accidents. The AEC/NRC report, "An Assessment of recident Risks in U.S. Comercial Nuclear Plants,"
(the Rasmussen Rept c),has shown that a nuclear accident causing damages in excess of $560 million is extremely remote, on the order of one chance per billion. Insurance is based on reasonabis probabilities of liability rather than maximum conceivable damage, Imever renote.
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The Honorable Carlos Moorhead (
5econd, without limitation c' liability, the public night in fact have
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loss assurance of obtaininc co~pensation after a nuclear incident.
Coupled by law with the li-itaticn of liability is a provision for dNondants to vaive defenses such as contributory negligence and short statutes of limitations in the event of an extraordinary nuclear occurrence, which the Ccmission has defined as any offsite ra. iation causing significant injury to persons or property. This provision means that a claimant need only show that injury in fact occurred and was caused by the nuclear incident. Without this provision liability would have to be established in each case on state tort law and procedures and, absent such a system, compensation would be uncertain. Even if a claimant were awarded a judgment, that judgment might be uncollectable if defendant's assets were exhausted.
He uculd like to add that no asnber of the public has ever been injured or killed as a result of an accident at a cormercial nuclear power facili ty.
This safety record has been recognized by the insurance industry through the nuclear insurance pools, which have participated in the plan established by the price-Anderson Act since its inception 20 years ago.
The only claim ;: aid out under an insurance policy used by licensees to provide the financial protection required, involved the shipraent of a spent fuel cask. Leakage frcm the cask required the decontamination. of two trucks used for shipment.
A claim of $3,500 was paid under the' insurance policy.
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We hope the information provided in this letter will be helpful in
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responding to your constituent's concerns.
Sincerely,
Enclosure:
Ltr. from Ms. Terry Crawford dated April 22, 1977 Distribution:
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coverage of liability.,under the Price-
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. Congress o( tije Einiteb Stated 3 bouse of Erpresentatibes hbinsten. D.C.
April 27 1977.
Mr. Eric Beckjord, Director Division Reactor Research & Devel.
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k'ashington, D. C. 20545 Sir:
The attached com:aunication is sent for your consideration.
Please investigate the stateraents contained therein and forward me the necessar-/ information for re-ply, returnira the enclosed corre-spondence with your answer.
You
- truly, c/
CJM:sk M. p.; }
,Te.rry Crawford 2069 Bellevue Dr.
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Ec:. arable Carlos J. Foorhead Ecuse of Representatives
Dear Fd. Itorhead:
P.eference is trade to your recent referral regarding an ingairy nem your co..stituent, Ms. Terry Cruwford.
f Ee have reviewc-d your referral and believe it relates to a program for which the follcwing agency has responsibility:
Mr. Carlton Kamrerer, Director Office of Congressional Affairs Nuclear Regulatory Comission 1717 H Street, NW.
Washington, D.C.
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-1 are, by acpy of this letter, referring your inquiry to that
- .;cncy for appropriate ' action. Further inquiries of this nature
.s'..ould be ce4t to the chove address.
If we can be of further assistance, please contact us.
Sincerely,
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) /V H. Hollister Cantus, Di. rector Office of Congressional Relations
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4 j)ril,22, 1977 The Hon. Carlos f.ioorhead House of Representatives-Washington, D.C.
20515
Dear Representative:
As jou may already know, the Price-Anderson Act was recently struck down as being unconstitutional.
This act has been used as a shield by the nuclear in."svtry against full liability, which is unique only to this industry.
h All you 'ever hear from busi:was and industry is that Q
we need nuclear power to expand oui'. economy. But, these same people deny us of just. compensation if an accident ever occurred.
If the free enterprise system workc as great individuals claim, then the nuclear industry must have T,o as these obtain full. coverage for their technology. They must be rs E nsible for each act that_t_ hey _ permit.
You hear all the time.thet fr.'Rasatussen's study proved that reactors accidents ai'en't likely, yet, d6fDT '.:xe near the coverage ~'to coVErine ~ huge,N t h ey_ ---.
Let' M ee the industry show how saf G Fg1 noTiin~tial loss l e a c,tpqrp----
are by renniring--ful.1 insurr.cen-Yoii chou nuclear powe'r~M_.gake sure that this oroblem is so wishec.
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Terry Crawford t
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JUN 121975 Mr. George F. Murphy, Jr.
E::ecutive Director Joint Comnittee on Atomic Energy Congress of the United States
Dear Mr. Murphy:
With regard to your letter of May 30, 1975, we are pleased to provide you with the following response to an inquiry that you received concerning the Price-Anderson Act.
Th'c Price-Anderson Act, Section 170 of the Atomic Energy Act of 1954, as amended, is presently scheduled to expire on July 31, 1977.
The Act provides a system of private nuclear liability insurance and governmental indeanity totaling $560 million to pay public liability claims for personal injury
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and property damage resulting from a major nuclear accident.
j Under the Act, power reactor licensees are required to
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provide proof to the Nuclear Regulatory Commission (NRC) that they have private nuclear liability insurance or another form of financial protection approved by the NRC.
For power reactors with a rated capacity of 100,000 kilowatts electrical or more, the Act requires that each licensee maintain such protection in an amount equal to the maximum amount of insurance available from private sources (currently $125 million). Above that amount, the law requires that the licensee execute an indemnity agreement with NEC, providing government indemnity for all public liability up to a total of $560 million in insurance and indemnity, at which point the law limits liability.
While licensees do indeed provide approximately 20 percent of the $560 million available to pay claims, they are not required under the present Act to provide any more than this amount, which represents the maximum amount of insurance new available.
The vetoed bill (H.R. 15323) referred to would have extended the Commission's authority to execute indemnity agreements with its licensees to August 1, 1982.
Primarily, the bill n
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t-would have changed the r.uthod of provif.ir.g financial pro tectica so that (1) as government indemnity was phased out by the early 1980s, licensees operating largo power reactors would be providing tho total funds for the payment of public liability claims, and (2) the limitation on liability presently established at $560 million would have gradually increased in direct proportion to the number of nuclear power reactors licensed by the Commission.
The bill specified that financial protection provided by licensees required to have the maximum amount (large power reactors) would consist of two layers:
(1) the existing primary insurance layer ($125 million) furnished by the two nuclear liability insurance pools, Nuclear Energy Liability Insurance Association (NELIA) and Mutual Atomic Energy Liability Underwriters ( LNELU) and provided by all licensees as financial protection and (2) a
" retrospective premium" insurance layer.
The amount of this second layer would depend on the nunber of licensed f acilities and the size of the retrospective premium that would be assessed against each facility licensee in the event of a nuclear incident involving claims in excess of the primary insurance layer.
After the sum of the primary insurance
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present $560 million limit on liability, government indemnity would terminate and the limit on liability would be the sum of the two insurance layers.
The limit would continue to rise as more reactors are licensed, unless the Commission reduced the retrospective premium.
On October 12, 1974, President Ford vetoed H.R.
15323, but solely because of a technical provision unrelated to the bill's basic scheme.
That provision (section 12) was added on the Senate floor and dealt with the comprehensive study by Dr. Norman Rasmussen of the Massachusetts Institute of Technology entitled "An Assessment of Accident Risks in U.S.
Ccmmercial Nuclear Power Plants. "
It would have required the Joint Committee on Atomic Energy to submit an evaluation of the final Rasmussen Study to Congress.
Within 30 days after the JCAE reported to Congress, Congress could, by adoption of a concurrent resolution, make the bill ineffective, thereby, in effect, repealing an enacted law without any action by the President.
The President considered section 12 to be unconstitutional, but stated that he would be " glad to approve" the bill's other provisions "if they stood alone."
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ing tha posci.51; inz.ar in th.:
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- c:1?.e/ faactor safsty r a.ie.s on the concequcncus of reactor accidents such as tha 1957 B cohhaven National Laboratory Study (WASH-740) which did have estimates on property damage ranging from a lower limit of about one half million dollars to an upper limit in the H
ucrst case of seven billion dollars. An important conclusion of the Ercokhaven Study, howevar, was that in the large majority of theoretical reactor accidents considered, the total assured losses would not exceed a few hundred million dollars.
1 Furthernore,as was brought out in the May 1974 Congre_:icnal hearings on the possible modification or extension of the Price-Anderson Act, Dr. Norman Rasmussen testified that he considered the procent S5GO million limit on liability to be a reasonable value at this time to cover all combinations of
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circumstances uhich could reasonably be considered credible.
1 A basic conclusion of the Rasmussen Study, WASH-1400, released in draft form in August 1974 was that " reactor risks are...
smaller than many other man.made and natural risks to which we are exposed as a society and as individuals."
(T In addition, the estimates for both property damage and (j
f atalities and injuries which would result from a nuclear incident were also estimated to be much less than earlier studies concluded.
It is questionable, then whether one can describe the $560 million figure as representing 5 percent, 100 percent or any percentage of a theoretical, highly improbable, major nuclear accident.
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Ue are enclosing a copy of the Sc= mary Report of the Rasmussen Study.
A final report, taking into consideration the many detailed comments raccived on the draft, will be published later in tho year.
We hope this information will be of assistance to you.
Sincerely, i
Carlton Kammerer, Director Office of Congressional Affairs
Enclosure:
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