Fukushima Fires Up Atomic Industry’s Removal-of-Liability Drive

Japan will introduce legislation this year to ratify a controversial treaty backed by General Electric Co. and other atomic-plant manufacturers seeking protection from damage claims caused by nuclear accidents.

The treaty, known as the Convention on Supplementary Compensation for Nuclear Damage or CSC, will encourage experienced U.S. companies to assist in the cleanup and decommissioning at the Fukushima atomic accident site, Japan’s Foreign Ministry said in a statement today.

Protection from accident claims is needed because of the dangers and risks that remain at Fukushima, said U.S. Deputy Energy Secretary Daniel Poneman in an interview in Tokyo yesterday. The plant has three melted reactors and thousands of tons of radioactive water.

“The important thing is to do everything that we can to facilitate the cleanup and decontamination of the Fukushima site,” Poneman said. The CSC is a means to support U.S. companies in that role, he said.

Poneman was in Tokyo to attend a meeting of the U.S.-Japan Bilateral Commission on Civil Nuclear Cooperation, which was established after the March 2011 accident at Tokyo Electric Power Co. (9501)’s Fukushima Dai-Ichi plant.

The CSC puts all liability for accidents at a nuclear power plant on the operator of the facility. To cover potential damage claims, CSC member countries would each contribute the equivalent of about $465 million. An atomic plant operator would have access to that fund after paying out an equivalent amount itself.

CSC Critics

Critics of nuclear power, environmental group Greenpeace among them, say the CSC acts as a subsidy for atomic power plant makers, such as GE, Toshiba Corp.’s Westinghouse unit and Areva SA of France, by shielding them from accident claims.

The Fukushima disaster three years ago shows the treaty is flawed, say the critics. The most costly civilian nuclear accident on record -- estimates of $108 billion and counting -- broke the back of the operator Tokyo Electric. It was saved from bankruptcy by a government bailout. In other words, taxpayers.

“Capping the amount of liability that either the nuclear operator or the state would be responsible for fundamentally limits the amount that victims can be compensated for,” Kendra Ulrich, an energy campaigner with Greenpeace International in Amsterdam, said.

Stephen Burns, head of legal affairs at the OECD’s Nuclear Energy Agency, disagreed, saying countries are free under the pact to make operators liable for damages beyond the $930 million covered by the treaty, he said.

Japan Key

Japan’s ratification would activate the treaty in the country, the U.S. and three other nations that have joined, and could encourage more to participate.

The “Japanese government recognizes the importance of participating in the regime for compensation for nuclear damage, and intends to conclude the CSC,” according to the Foreign Ministry statement. It indicated that would take place this year, without setting a firm date.

Beside the Fukushima issue, the treaty is gaining momentum as Japan and the U.S. seek to export more nuclear technology due to a drop in domestic demand. Japan has retreated from a nuclear expansion following the Fukushima accident, while the shale natural gas boom has snuffed out what was labeled a nuclear renaissance in the U.S.

New Nuclear?

“The prospects of new nuclear in the US and Japan are not very good,” David Robinson, senior research fellow at Oxford Institute for Energy Studies in Oxford, England, said in an e-mail. “The logical step for the nuclear business is to look where governments are keen to support nuclear.”

China, which the World Nuclear Association says has more nuclear reactors planned or under construction than any other country, has also been in talks with the U.S. about joining the treaty, Poneman said.

China’s Ministry of Environmental Protection and Energy Administration did not respond to faxed messages seeking comment.

India, which plans $175 billion in atomic power plants, has signed the CSC though never ratified it. Under current laws, Nuclear Power Corp. of India Ltd. can seek damages from suppliers for defective equipment or materials in an accident.

GE is uncomfortable with India’s rules on liability, GE India Chief Executive Officer Banmali Agrawala said in an interview with the Business Standard in October last year.

More to Follow

Getting Japan to ratify the CSC may convince other countries to follow, said Akihiro Sawa, a fellow at the policy institute affiliated with the Keidanren business group. Keidanren, Japan’s dominant lobbyist, counts Japanese power utilities and nuclear plant suppliers among its members.

“Japan will be regarded as a model for other countries,” said Sawa, a former director at the environmental policy division of Japan’s trade ministry.

The U.S., Argentina, Morocco and Romania are the only countries to have ratified the CSC. Combined they have 316 gigawatts of installed nuclear capacity, according to the International Atomic Energy Agency.

The addition of Japan’s 131 gigawatts would carry the treaty past the 400-gigawatt threshold needed for it to come into force. Canada, with 46 gigawatts, introduced legislation this year to implement the treaty, though it has yet to ratify.

GE’s support for the treaty has included warnings to Canada’s government that its business in that country “is inhibited -- and could be jeopardized -- by Canada’s inadequate liability regime,” according to documents obtained by Greenpeace through a public records act request.

Protecting America

Gary Sheffer, GE’s vice president for communications and public affairs in the U.S., didn’t respond to an e-mail seeking comment.

Areva said in a statement it supports broad adherence to international nuclear liability treaties. Toshiba is “carefully watching” Japan’s steps toward ratification, said company spokeswoman Midori Hara, who declined further comment.

The U.S. is pushing the CSC because its nuclear industry needs new markets, said Tom Vanden Borre, a researcher in nuclear liability law at the Catholic University of Leuven in Belgium.

Countries with plans to build nuclear power plants are important because the U.S. hasn’t had a new atomic plant begin service since 1996, he said.

“It’s merely to protect the American industry and nothing more.”

To contact the reporter on this story: Jacob Adelman in Tokyo at jadelman1@bloomberg.net

To contact the editors responsible for this story: Peter Langan at plangan@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net Indranil Ghosh

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.