A Japan-reactor repeat in the United States could cost the government dearly

Taxpayers, not the utilities, would be liable for most of the bill.

An American nuclear power-plant accident similar to the ongoing disaster in Japan would leave taxpayers on the hook for billions, and perhaps hundreds of billions, of dollars in health and economic damage claims, risk experts estimate.

Federal law puts most nuclear-accident liability on the shoulders of taxpayers, but regulators have not enforced safety standards vigorously enough to fully safeguard against those risks, economists Geoffrey Heal and Howard Kunreuther wrote in a 2009 paper that warned of excessive taxpayer exposure to the risks of nuclear catastrophe.

Heal, a professor at Columbia University, and Kunreuther, of the Risk Management and Decision Processes Center at the University of Pennsylvania's Wharton School of Business, acknowledge that the risks and costs of a nuclear accident in the United States are difficult to quantify. But they say that the upper-end damage estimates of a full core meltdown are almost "unimaginable."

The prospect of such an accident, while low, suddenly seems more imaginable in the wake of the simultaneous failures of three reactors at Japan's Fukushima Daiichi Nuclear Power Station, following the 8.9-scale earthquake and massive tsunami that struck the country on Friday.

Heal and Kunreuther sketch a deadly and expensive example of how bad a U.S. nuclear accident might be: A meltdown at the Indian Point nuclear-power station 25 miles north of New York City, they write, could eventually kill some 64,000 people - damage that they calculate at $384 billion - and inflict $50 billion to $100 billion in economic costs. Nightmare scenarios involving lost nuclear material that ends up in terrorists' hands, or the long-term evacuation of New York City, would dramatically increase the costs.

The Price-Anderson act limits private liability for those costs to $375 million for an individual company, plus $12.6 billion from an industry liability pool, leaving taxpayers on the hook for the rest. That transfer of liability creates conditions for moral hazard - an incentive for an electric utility, in this case, to take on too much risk because the utility would not bear the full costs of a catastrophic event.

The Nuclear Regulatory Commission is supposed to be taxpayers' guard against that risk. But, Heal and Kunreuther write, it's far from clear that regulators have done the job adequately: "There is empirical evidence that the NRC does not aggressively pursue and penalize mismanagement of nuclear-power stations, and that the federal authorities are not sensitive to the increase in potential costs associated with siting near densely populated areas."

In a phone interview on Monday, Heal gave the NRC a "5 out of 10" on a regulatory rating scale and raised concerns over whether the agency had adequately prepared for the possibility of a large American earthquake shaking a nuclear facility. In California, home to two working nuclear plants, Heal said that a massive radiation release would inflict damage "in the billions and billions of dollars."

U.S. regulators must quickly learn the still-unfolding lessons from the Japanese plant failures, he said, including whether plant operators there took any safety shortcuts.

"The priority in this country now is to focus very heavily on reactors that are in a seismic zone," Heal said, adding, "The NRC is supposed to be our guarantee against moral hazard. But if the NRC isn't keeping its game up to scratch, the risk from moral hazard is tremendous."