Preventing Nuclear Meltdown: Assessing Regulatory Failure in Japan and the United States

Daniel Kaufmann and Veronika Penciakova

Many wonder whether Japan’s nuclear disaster could have been averted. The embattled operator of the Fukushima nuclear plant, Tokyo Electric Power Company (TEPCO), has borne the brunt of criticism; its numerous failures over the years are certainly well known. However, Japan’s Nuclear and Industrial Safety Agency (NISA), responsible for regulating the nuclear industry, also ought to be subject to particular scrutiny for allowing TEPCO to operate despite its past safety and disclosure violations. We thus ask what types of regulatory failure may have contributed to Japan’s nuclear crisis and assess whether the U.S. Nuclear Regulatory Commission (NRC) is at risk of committing similar errors.

Regulatory failure occurs when the regulatory system is deeply flawed – such as when it over- or under-regulates or when the regulatory design is based on “old science”. Regulatory failure also happens when agencies inadequately fulfill their oversight, supervisory and enforcement functions. Failures by regulatory agencies can go undetected for some time until they are exposed by a crisis, such as the BP oil spill in 2010 and the financial crisis that originated in Wall Street in 2008. When assessing regulatory failure, it is important to distinguish between at least three different types of failure: lack of resources, mismanagement and poor technical expertise, and capture of the regulator by the regulated. Episodes of regulatory failure result from different combinations of subpar performance in some or all of these components.

Which dimensions were associated with the failures at Japan’s regulatory agency? Does the U.S. nuclear energy regulator face similar challenges? Let us review each of the three types of failures in the context of Japan’s NISA and the U.S.’s NRC.

Lack of Resources: When regulators lack the resources to hire staff, provide adequate training and expend the money necessary to monitor industries, regulatory concerns may go undetected and failure may result. The evidence does not suggest that Japan’s NISA or the U.S.’s NRC lacked sufficient resources to effectively implement regulations.

Mismanagement and “Old Science”: The regulatory system may sometimes over-regulate (business start-ups) or under-regulate (in finance, oil and nuclear power) due to ideological reasons or inadequate use of the latest knowledge and techniques. Even when regulators have a sufficient mandate to regulate and are provided adequate resources, they may still be ineffective at implementing and enforcing regulations and overseeing the operations and preparedness of the plants. The lax application of regulations and resistance to adoption of the latest scientific know-how and technical expertise regarding risk assessments can cause regulatory failure. Also, regulation and knowledge mismanagement can distort the incentives for industries to meet safety standards.

Japan: The Fukushima nuclear crisis has exposed NISA’s failure to respond to the evolving scientific data and technology and to enforce regulations stringently. Since the 1980s, NISA has failed to act on warnings it received regarding the resilience of reactor containment structures to core meltdowns and the ability of plants to withstand earthquakes and tsunamis. This is particularly worrying since Japan has historically been prone to both earthquakes and tsunamis. For instance, in 2007 a 6.8-magnitude earthquake resulted in 1,200 liters of radioactive water leaking into the Japan Sea. The plant operator, TEPCO acknowledged that the reactors had not been designed to withstand an earthquake of that size.

Japan’s nuclear power safety regulations appear to be based on assessments of maximum earthquake and tsunami events derived from the modern historical record. However, these methods do not take into consideration uncertainties that account for a non-zero likelihood of a more devastating future earthquake and tsunami, even though risk assessment models that do so currently exist. Moreover, NISA has largely left the task of risk assessments and emergency response planning to plant operators and has merely published voluntary guidelines on advances in regulations rather than issuing concrete binding regulations. NISA is only now starting to order nuclear power plants in Japan to inspect devices and equipment and formulate emergency plans.

NISA has been lax in ensuring the adherence to safety regulations of Japan’s nuclear power plants. In 1999, 20 tons of radioactive water leaked into the Tsuruga plant from a cracked pipe. Even though a similar pipe had sprung a leak in 1996, these pipes were not inspected in subsequent years. In 2004, five workers were killed when super-heated steam burst from a pipe at a reactor run by Kansai Electric. It was later discovered that the pipe had not been inspected in five years.

NISA has also remained passive in addressing the nuclear industry’s long history of deception and cover-ups by different private operators, including but not limited to TEPCO. In 2002, five top executives from TEPCO resigned over a string of safety record cover-ups, including the falsification of containment vessel tests and shroud safety records. In fact, in 2002 four major nuclear companies admitted to concealing evidence of cracked containment structures from NISA. In 2007, seven of the 12 public utilities admitted to having falsified past safety records. And at a basic level, it is now emerging that TEPCO’s disaster response plans that had been drawn in case of an accident at the Fukushima plant were totally inadequate: they merely called for one stretcher, a satellite phone, and 50 protective suits. Again, this raises serious questions not only about TEPCO, but about NISA’s oversight.

United States: While a degree of regulatory laxity plagues the NRC, it results more from lax enforcement of regulations than from failure to heed warnings or private sector deception. The NRC’s Office of the Inspector General uncovered 24 instances in which nuclear plants failed to report defects in equipment that could pose safety risks. In the last eight years, the regulator has not imposed any penalties on plant operators for such infractions.

For 15 years, the NRC allowed a water containment system to leak in New York despite the problem being documented. In South Carolina, a plant operator had to shut down reactors twice in six months. One of the shutdowns was caused by a power shortage in an electrical cable that had been installed in 1986 and was not up to standard. In New Jersey, a nuclear plant was relicensed in 2009 even though it lacked a reactor containment shell that could withstand a jet crash. Within seven days of its relicensing, an ongoing leak of radioactive tritium-polluted water was uncovered. These regulatory oversights in the U.S. likely contributed to several accidents, but none are as severe as those in Japan.

The US regulatory system faces a particular challenge regarding the handling of the vast amounts of spent fuel. At the beginning of 2010, nearly 65,000 metric tons of spent fuel was being stored at U.S. nuclear power plants. The NRC does not have limits on the amount of time fuel can remain in spent fuel pools and has not mandated, for instance, the transfer of spent fuel to dry casks, which are located away from reactors. Currently, nearly 10 times as much fuel is located in spent fuel pools than in the reactors. This is worrying as the pools are not protected by containment shells as the reactor cores are.

However, whereas Japan has tended to use outdated risk-assessment methodologies, the NRC has been more proactive in utilizing the latest technology to address potential safety risks. Although in the U.S., the types of risks nuclear plants face are different (such as lower risks of tsunamis afflicting power plants), risk assessments carried out in the U.S. do consider each plant’s geographical location and all plants have to take into account the risk of potential terrorist attacks. In recent years, the regulator has adopted some new risk assessment techniques in their plant-by-plant reviews. Some of the modeling techniques used in the U.S. also takes into account the risks of potentially devastating future natural disasters.

In Japan, mismanagement results from the regulator’s failure to adopt the latest technology and to punish private sector deception. In the U.S., the problem seems to center around general weaknesses in regulatory oversight and lack of a spent fuel strategy. While the U.S. NRC’s mismanagement and challenges in technical expertise appear to be less severe than those of Japan’s NISA, improved regulatory enforcement by the U.S. NRC may still be warranted.

Capture: The incentives for regulators to effectively implement regulations can also become distorted when industry actors exert undue influence over the regulatory process.

Japan: The influence of the nuclear industry over NISA occurs through various channels. NISA is not an independent regulator and is therefore even more susceptible to outside influence. NISA is housed under the Japan’s Ministry of Economy, Trade and Industry (METI), which promotes the nuclear sector domestically and abroad. METI has very close connections to the nuclear industry and has been charged with distorting information presented to public officials on nuclear energy and orchestrating the defeat of alternative energy development legislation. The METI has made it clear that expanding Japan’s nuclear power industry is of central importance to the government’s growth strategy. As such, it has been instrumental in the launching of the International Nuclear Energy Development of Japan Co. (JINED), a public-private partnership headed by TEPCO to sell nuclear reactor contracts to developing countries. In the fallout from disaster, it seems the government has recognized the danger of this conflict of interest and there are now reports that the Japanese government is considering splitting NISA from METI.

Japanese officials also have an incentive to be deferential to private sector counterparts since retiring public officials often obtain prominent private sector jobs in a practice called amakudari, or “descent from heaven” (a practice in the U.S. known as the “revolving door”). It is not uncommon for individuals involved in the nuclear sector to act at different times in the licensing, rulemaking and inspections process. For instance, a director general of the Ministry of Economy, Trade and Industry (METI) obtained a job with TEPCO after leaving his regulatory post. Private nuclear power industry companies may also have a direct role in shaping regulations. When the government convened a panel to revise nuclear regulatory standards in 2005, 11 of the 19 members on the panel were from the nuclear industry.

United States: The NRC faces similar types of regulatory capture challenges, but the agency is an independent regulatory agency and therefore not involved in the promotion of the nuclear industry. Yet it receives 90 percent of its funding from industry fees, which potentially compromises its independence.

One report suggests that the NRC has acted in some cases more to safeguard the interest of the nuclear power industry than the public. Nearly half of NRC employees surveyed by the agency in 2002 said they feared raising safety concerns might undermine their career. Also, as is common in other regulatory agencies in the United States, NRC employees often pass through the revolving door. There have been some isolated cases when regulators have accepted gifts from and made decisions in favor of future employees prior to leaving the NRC. In one recent case, a commissioner voted on a matter that benefitted three nuclear companies, two of which he was negotiating an employment contract with at the time.

In the United States, the NRC is connected to the nuclear sector through industry efforts to influence the legislative process. Last year, the U.S. nuclear industry spent nearly $54 million to lobby Congress and employed 12 former members of Congress as lobbyists. Some of the top supporters of the nuclear power sector have also been some of the largest recipients of campaign contributions from this sector. There are many examples of this type of lobbying. For example, Exelon, one of the U.S.’s largest nuclear operators, contributed to the campaigns of the House minority whip and the Energy and Commerce Committee chairman and contributed to 14 of the 19 members in the House of Representatives from states where Exelon owns reactors.




Veronika Penciakova

Research Analyst and Data Specialist, Development Assistance and Governance Initiative

The manifestations and extent of regulatory capture in Japan and the U.S. differ, with the problem seemingly more acute in Japan. However in both countries, regulators have had their incentive to regulate effectively distorted by the influence of the nuclear industry. In the fallout from the Fukushima crisis, the role of numerous actors will be scrutinized, including TEPCO and the Japanese government. But, the role of Japan’s nuclear regulator should not be underestimated. By failing to sanction plant operators for safety infringements and to heed safety warnings, NISA allowed the private sector to continually skirt regulations. NISA may not have been properly empowered to mandate changes in the private sector. In addition, whatever de jure mandates they may have had, they did not forcefully implement in practice. To a significant extent, it appears that regulatory capture of NISA by Japan’s nuclear industry turned the regulator into a caretaker of industry rather than one for public safety.

The U.S.’s nuclear and regulatory situation differs from Japan’s. The evidence suggests that the NRC is not effectively enforcing regulations. The NRC’s regulatory struggles do not stem from private sector deception, but from a degree of regulatory capture (there are some instances of undue influence) and particularly from the weak enforcement of existing rules.

In the United States, the NRC will imminently be undertaking a 90-day review of the country’s 104 reactors. But in addition an in-depth review should also be conducted by a fully independent commission (akin to the Kemeny Commission established in the aftermath of the Three-Mile nuclear power accident), which would review how the NRC could more effectively implement existing regulations and conduct plant-specific “stress tests” of seismic risks with the purpose of revoking licenses in cases where standards do not conform to the risks exposed by the latest technology. The independent study should also look into an industry-wide strategic approach to safely managing the storage of spent nuclear fuel, which poses a particular risk in the United States.