Free Memorandum of Contentions of Fact and Law - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS BOSTON EDISON COMPANY, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. 99-447C No. 03-2626C (Judge Lettow)

ENTERGY NUCLEAR GENERATION CO., Plaintiff, v. UNITED STATES OF AMERICA, Defendant.

DEFENDANT'S MEMORANDUM OF CONTENTIONS OF FACT AND LAW PETER D. KEISLER Assistant Attorney General JEANNE E. DAVIDSON Director HAROLD D. LESTER Assistant Director ALAN J. LO RE Senior Trial Counsel Commercial Litigation Branch Civil Division 1100 L Street, N.W. Washington, D.C. 20530 Attorneys for Defendant

JANE K. TAYLOR Office of General Counsel U.S. Department of Energy 1000 Independence Ave., S.W. Washington, D.C. 20585 SCOTT R. DAMELIN PATRICK B. BRYAN STEPHEN FINN JOSHUA E. GARDNER SONIA ORFIELD Civil Division 1100 L Street, N.W. Washington, D.C. 20530 April 30, 2007

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TABLE OF CONTENTS SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 I. THE ORIGINAL PROVISIONS OF THE NUCLEAR WASTE POLICY ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 THE DEPARTMENT OF ENERGY'S PROMULGATION OF THE STANDARD CONTRACT THROUGH NOTICE AND COMMENT RULEMAKING IN THE FEDERAL REGISTER . . . . . . . . . . . . . . . . . . . . . . . . 9 A. B. C. III. IV. V. VI. The Proposed Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Public Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 The Final Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II.

BOSTON EDISON'S EXECUTION OF ITS STANDARD CONTRACT . . . . 13 ISSUANCE OF THE MISSION PLAN AND ITS AMENDMENT . . . . . . . . . . 14 THE 1987 AMENDMENTS TO THE NUCLEAR WASTE POLICY ACT . . . 15 DOE'S ISSUANCE OF ANNUAL CAPACITY REPORTS . . . . . . . . . . . . . . . 16 A. B. C. The 1987 Through 1990 Annual Capacity Reports . . . . . . . . . . . . . . . . . 16 The 1991 Annual Capacity Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 The 1992 Through 1995 Annual Capacity Reports . . . . . . . . . . . . . . . . . 19

VII.

PROGRAM DOCUMENTS REFLECT PLANNED ACCEPTANCE AT AN MRS FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 A. B. Program Reassessment And 1991 Draft Mission Plan Amendment . . . . 20 Preliminary Estimates Of The Total-System Cost For The Restructured Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

VIII.

INDUSTRY SUBMISSION OF DELIVERY COMMITMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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IX. X. XI.

BOSTON EDISON DECIDES TO SELL ITS PILGRIM FACILITY . . . . . . . . 24 ENTERGY'S PURCHASE PRICE FOR PILGRIM . . . . . . . . . . . . . . . . . . . . . . 25 BOSTON EDISON'S DECOMMISSIONING FUNDING PARAMETERS WITH REGARD TO THE PILGRIM AUCTION . . . . . . . . . . . . . . . . . . . . . . 25 BOSTON EDISON'S COMPLAINT AND ASSIGNMENT OF CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

XII.

DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 I. BOSTON EDISON BEARS THE BURDEN OF ESTABLISHING ALL ELEMENTS OF ITS CLAIM, INCLUDING LIABILITY, CAUSATION, FORESEEABILITY, AND REASONABLE CERTAINTY . . . . . . . . . . . . . . . 30 A. Boston Edison Has The Burden Of Proving All Elements Of Its Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Plaintiffs' Burden Includes The Obligation To Establish A Reasonable "But For" World Against Which To Measure Whether DOE's Delay "Caused" The Damages Asserted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Boston Edison Has The Burden Of Demonstrating That Its Claimed Damages Were Foreseeable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Boston Edison Must Prove Its Damages With Reasonable Certainty . . . 35

B.

C.

D. II.

BOSTON EDISON'S CLAIM FOR THE DIMINISHED SALES PRICE OF THE PILGRIM PLANT IS A CLAIM FOR UNRECOVERABLE CONSEQUENTIAL DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 A. A Plaintiff May Not Obtain Consequential Damages For An Alleged Breach Of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Boston Edison's Sale Of Pilgrim To Entergy Is Not Directly Related To The Standard Contract, But Rather Constitutes An Independent And Collateral Undertaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Contrary To Boston Edison's Assertion, The Government Is Not Somehow Precluded From Challenging The Foreseeability Of The Damages Sought By Boston Edison . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

B.

C.

III.

BOSTON EDISON'S CAUSATION THEORY FAILS BECAUSE IT CANNOT -ii-

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MEET ITS BURDEN OF PROVING THAT DOE WAS OBLIGATED TO ACCEPT SNF PURSUANT TO A QUALITATIVE TWO-PART TEST OR AT AN ANNUAL RATE OF 3,000 MTU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 A. The NWPA Did Not Require Acceptance Of SNF At A 3,000 MTU Rate Or Under Any Particular Qualitative Standard . . . . . . . . . . . . . . . . 43 The Standard Contract Did Not Require Acceptance of SNF At A 3,000 MTU Rate Or Pursuant To Any Qualitative Test . . . . . . . . . . . . . . . . . . 45 Causation And Resultant Damages Should Be Determined Against The Acceptance Obligations Developed Pursuant To The Schedule Mechanism In The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 1. The Acceptance Schedule Was Established In The Dealings Between The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Boston Edison Will Be Unable To Establish That The Fees Which It Paid Into The NWF Were Based Upon Any Particular Rate Of SNF Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

B.

C.

2.

IV.

BOSTON EDISON CANNOT ESTABLISH THE NECESSARY CAUSAL LINK BETWEEN ITS CLAIMED DAMAGES AND DOE'S DELAY . . . . . . 52 A. Entergy's Use Of A Particular Discount Rate And Financing Method Was Unaffected By DOE's Delay In SNF Acceptance . . . . . . . . . . . . . . 52 Entergy Did Not Include Costs Associated With Re-Racking Pilgrim's Spent Fuel Pool In Its Valuation Model, And Would Not Have Paid More For Pilgrim Absent The Additional Racks . . . . . . . . . . . . . . . . . . 54

B.

V.

BOSTON EDISON DID NOT TRANSFER A GREATER AMOUNT TO ENTERGY RELATED TO THE DECOMMISSIONING TRUST FUND DUE TO THE GOVERNMENT'S DELAY IN SPENT FUEL ACCEPTANCE . . . . 54 A. The NRC's Minimum Decommissioning Trust Fund Formula Expressly Excludes SNF Storage And Disposal Costs . . . . . . . . . . . . . . . . . . . . . . 54 Boston Edison's Contention Regarding The Transfer Of "Excess" Trust Fund Amounts Is Factually Unsupported . . . . . . . . . . . . . . . . . . . . . . . . 56 Events That Occurred After The Signing of the Purchase And Sale Agreement Are Irrelevant In Determining Whether Boston Edison Transferred More Money To Entergy As A Result Of DOE's Delay In -iii-

B.

C.

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SNF Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 VI. BOSTON EDISON FAILS TO REDUCE FROM ITS CLAIM THE COSTS ASSOCIATED WITH LOADING SNF TO DOE . . . . . . . . . . . . . . . . . . . . . . . 60 BOSTON EDISON'S RECOVERY OF FUTURE COSTS RELATING TO RE-RACKING, AND DECOMMISSIONING, AS WELL AS BOSTON EDISON'S ALLEGED DAMAGES RELATING TO ENTERGY'S DISCOUNT RATE, VIOLATE THE COURT OF APPEALS RULING IN INDIANA MICHIGAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 BOSTON EDISON'S ALLEGED RETENTION OF THE RIGHT TO SUE THE GOVERNMENT FOR CLAIMS ASSOCIATED WITH DOE'S DELAY IN ACCEPTANCE THAT POSTDATE THE PILGRIM SALE IS INVALID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 BOSTON EDISON CANNOT ESTABLISH THAT DOE ACTED WITH A SPECIFIC INTENT TO HARM IT, PRECLUDING ITS CLAIM FOR BREACH OF THE DUTY OF GOOD FAITH AND FAIR DEALING . . . . . . 64

VII.

VIII.

IX.

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

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TABLE OF AUTHORITIES CASES Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Bluebonnet Sav. Bank, FSB v. United States, 67 Fed. Cl. 231 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 60 Bluebonnet Sav. Bank, F.S.B. v. United States, 339 F.3d 1341 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 32 Bohac v. Department of Agric., 239 F.3d 1334 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Boston Edison Co. v. United States, 64 Fed. Cl. 167 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42, 43 Boston Edison Co. v. United States, 67 Fed. Cl. 63 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 California Fed. Bank v. United States, 395 F.3d 1268 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Citizens Federal Bank v. United States, 474 F.3d 1314 (Fed. Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Coast Fed. Bank, FSB v. United States, 48 Fed. Cl. 402 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Columbia First Bank, FSB v. United States, 60 Fed. Cl. 97 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Consolidated Gas Supply Co. v. Federal Energy Regulatory Comm'n, 745 F.2d 281 (4th Cir. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Fifth Third Bank of Western Ohio v. United States, 402 F.3d 1221 (Fed. Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

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First Height Banks v. United States, 57 Fed. Cl. 162 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Granite Management Corp. v. United States, 74 Fed. Cl. 155 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Indiana Michigan Power Co. v. United States, 60 Fed. Cl. 639 (2004), aff'd, 422 F.3d 1369 (Fed. Cir. 2005) . . . . . . . . . . . . . . . . . . . 67 Indiana Michigan Power Co. v. United States, 88 F.3d 1272 (D.C. Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Kingsbury v. United States, 215 Ct. Cl. 136, 563 F.2d 1019 (1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63, 64 Krauss v. Greenbarg, 137 F.2d 569 (3d Cir. 1943) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Krofft Entertainment, Inc. v. CBS Songs, 653 F. Supp. 1530 (S.D.N.Y. 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Krueger Assoc. v. American Dist. Tele. Co. of Pa., 247 F.3d 61 (3rd Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Landmark Land Co. v. Federal Deposit Insur. Corp., 256 F.3d 1365 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 LaVan v. United States, 382 F.2d 1340 (Fed. Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Menne v. Celotex Corp., 861 F.2d 1453 (10th Cir. 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Mosley v. City of Northwoods, Missouri, 415 F.3d 908 (8th Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Murphy v. Missouri Dep't of Corrections, 372 F.3d 979 (8th Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 -vi-

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Myerle v. United States, 33 Ct. Cl. 1 (1897) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30, 31, 32 Nebraska Public Power District v. United States, 73 Fed. Cl. 650 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Nebraska Public Power District v. United States, 74 Fed. Cl. 762 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Northern Helex Co. v. United States, 207 Ct. Cl. 862, 524 F.2d 707 (1975), cert. denied, 429 U.S. 866 (1976). . . . . . . . 31, 34 Northern State Power Co. v. United States Dept. of Energy, 128 F.3d 754 (D.C. Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Olin Jones Sand Co. v. United States, 225 Ct. Cl. 741 (1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 38, 42 Pacific Gas & Electric Co. v. United States, 73 Fed. Cl. 333 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Patterson v. United States, 173 Ct. Cl. 819, 354 F.2d 327 (1965) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Point Prods. A.G. v. Sony Music Entm't, Inc., 215 F. Supp. 2d 336 (S.D.N.Y. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Quiman, S.A. de C.V. v. United States, 39 Fed. Cl. 171 (1997), aff'd, 178 F.3d 1313 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . 31 Ramsey v. United States, 121 Ct. Cl. 426, 101 F. Supp. 353 (1951) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 36, 37 Roseburg Lumber Co. v. Madigan, 978 F.2d 660 (Fed. Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Rumsfeld v. Applied Cos., 325 F.3d 1328 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Sacramento Municipal Utility District v. United States, 74 Fed. Cl. 727 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

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San Carlos Irrig. & Drainage Dist. v. United States, 877 F.2d 957 (Fed. Cir. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557 (Fed. Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 36 Scott Timber Co. v. United States, 33 F.3d 1358 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37, 42 Shyface v. Secretary of Health & Human Servs., 165 F.3d 1344 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012 (Fed. Cir. 1996), . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim WestFed Holdings, Inc. v. United States, 52 Fed. Cl. 135 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 White v. Delta Constr. Int'l, Inc., 285 F.3d 1040 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Willems Indus., Inc. v. United States, 155 Ct. Cl. 360, 295 F.2d 822 (1961) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

STATUTES 10 C.F.R. 50.75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 10 C.F.R. § 961.11, Art. II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim 48 Fed. Reg. 16590, 16591 (Apr. 18, 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 48 Fed. Reg. 5458 (Feb. 4, 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9, 10, 45 48 Fed. Reg. at 5462 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12 42 U.S.C. §§ 10101-10270 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 S. Rep. No. 100-152, at 1 (Sept. 1, 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 31 U.S.C. § 3727 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63, 64 42 U.S.C. § 10131(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 -viii-

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42 U.S.C. § 10139 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 42 U.S.C. § 10162(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 42 U.S.C. § 10168(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 16, 50 42 U.S.C. § 10172(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 42 U.S.C. § 10221 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 14 42 U.S.C. § 10222(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 42 U.S.C. § 10222(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 40 42 U.S.C. § 10242(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) BOSTON EDISON COMPANY, ) ) Plaintiff, ) ) v. ) UNITED STATES, ) ) Defendant. ) ) No. 99-447C ) No. 03-2626C ) (Judge Lettow) ENTERGY NUCLEAR GENERATION CO., ) ) Plaintiff, ) ) v. ) ) UNITED STATES OF AMERICA, ) ) Defendant. ) ) DEFENDANT'S MEMORANDUM OF CONTENTIONS OF FACT AND LAW Pursuant to this Court's order dated February 26, 2007, defendant, the United States, respectfully submits the following memorandum of contentions of fact and law. SUMMARY OF ARGUMENT Unlike the vast majority of other spent nuclear fuel ("SNF") cases that utility plaintiffs have brought in this Court for damages associated with storage costs that actually have been incurred to date in connection with the Government's delay in accepting SNF and high-level radioactive waste ("HLW") from commercial nuclear reactors on January 31, 1998, pursuant to the Standard Contract, this case involves a claim for damages brought by one plaintiff, Boston Edison Company ("Boston Edison"), whose damages theory is based upon the projected SNF storage costs that another plaintiff, Entergy Nuclear Generation Company ("Entergy"), may or

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may not incur at some distant time in the future. Notwithstanding the inherently speculative nature of such a claim, Boston Edison seeks recovery for $123.5 million that it allegedly incurred in connection with its July 13, 1999 sale of the Pilgrim Nuclear Power Station ("Pilgrim") to Entergy because of the Government's delay in beginning acceptance of SNF. Boston Edison's claim for damages is based upon the following unsupported premises: (1) that, in a "but for" world where DOE had begun timely acceptance of SNF, the Government was contractually obligated to accept SNF from the nuclear industry at a rate of 3,000 metric tons per uranium ("MTU") per year, which is a rate that Boston Edison claims would have precluded the need for utilities to add additional at-reactor storage after 1998 (see Boston Edison's Memorandum of Contentions of Fact and Law, dated March 30, 2007 ("Boston Edison's Pretrial Br."), at 5); (2) that, in the "but for" world, Entergy would have paid approximately $74 million more for the Pilgrim plant than it actually paid because it would not have needed to account for approximately $1 million in future spent fuel pool re-racking costs, approximately $39 million in an internally-mandated return on equity, and approximately $34 million to compensate for the inability to finance the purchase through a combination of debt and equity (see id. at 3); and (3) that, in the "but for" world, Entergy would have reduced the monetary amount that it required Boston Edison to transfer to Entergy for purposes of decommissioning trust funding by approximately $86 million (see id. at 2). As discussed below, and as we will establish at trial, these contentions are unsupported by either the law or the facts in this case. As an initial matter, Boston Edison's claims fail as a matter of law, as the claimed damages that Boston Edison seeks in this case were not foreseeable at the time of contract

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formation and otherwise constitute remote and consequential damages that are not recoverable against the Government in a breach of contract action in this Court. It is beyond dispute that Boston Edison's sale of Pilgrim to Entergy does not flow directly from the Standard Contract, but, rather, constituted an independent and collateral undertaking that was wholly separate and distinct from the purposes of the Standard Contract. Accordingly, Boston Edison may not recover the alleged "diminution-in-value" costs that it now seeks against the Government. With respect to the issue relating to the rate of SNF acceptance under the Standard Contract, Boston Edison asserts that, despite no acceptance rate in the contract, DOE was obligated to accept SNF in such a manner as to: (1) "dispose of the current backlog;" (2) "dispose of SNF generated annually," and (3) "preclude the need for further storage of SNF onsite after January 31, 1998." Boston Edison's Pretrial Br. at 5. Boston Edison further asserts that a 3,000 MTU rate of acceptance, after an initial ramp-up period, would meet these goals. Id. Further, Entergy claims that, "should the Court determine it needs to decide the acceptance rate issue . . . a 3,000 MTU per year acceptance rate should apply." Plaintiff Entergy Nuclear Generation Company's Memorandum of Contentions of Fact and Law ("Entergy's Pretrial Br."), at 7. Both Boston Edison and Entergy are incorrect. Contrary to plaintiffs' claim that DOE was somehow contractually obligated to accept 3,000 MTUs of SNF shortly after 1998, it is undisputed that no such term appears in either the Standard Contract or the Nuclear Waste Policy Act of 1982 ("NWPA"), and the evidence at trial will establish that the process, identified in the Standard Contract, to define DOE's obligations with respect to particular utilities started in 1991 with the issuance of the 1991 Annual Capacity Report ("ACR"). Those utilities, such as Boston Edison, that had allocation rights in the first ten

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years of the SNF acceptance program, as identified in the 1991 ACR, submitted delivery commitment schedules ("DCSs") to DOE to identify the SNF that they wished to have accepted. Indeed, Boston Edison followed this established contractual process and submitted a DCS in 1993 for the acceptance of SNF in 1999, which DOE subsequently approved. The 1991 ACR and subsequent approved DCSs of those utilities with an allocation in the first ten years of the repository or interim storage facility ("MRS") form the baseline for any damages analysis. If the Court rejects that argument, a serious question would arise regarding the enforceability of the Standard Contract, given that the rate term, one of the most essential parts of the Standard Contract, would be rendered wholly indefinite.1 In short, we will establish at trial that: (1) neither the NWPA nor Standard Contract required DOE to begin acceptance at any particular rate, let alone the rates that Boston Edison and Entergy advocates; (2) DOE continually and consistently ­ both before and after the parties signed the Standard Contract ­ rejected industry requests to include any qualitative or

In Northern States Power Co. v. United States Dept. of Energy, 128 F.3d 754, 760 (D.C. Cir. 1997), the United States Court of Appeals for the District of Columbia circuit issued a writ of mandamus enjoining the Government from relying upon the "Unavoidable Delays" clause of the Standard Contract to excuse its delayed performance. We have consistently argued that the D.C. Circuit overstepped its jurisdiction and authority in issuing this writ of mandamus (given that the judicial review provision of the NWPA, 42 U.S.C. § 10139, does not permit the D.C. Circuit to review contract administration matters). Recently, in Nebraska Public Power District v. United States,73 Fed. Cl. 650, 673 (2006), this Court determined that the writ of mandamus was void because, in issuing the writ, the D.C. Circuit "operated in excess of its jurisdiction and, specifically, without an appropriate waiver of sovereign immunity." This Court subsequently certified its decision for interlocutory appeal to the United States Court of Appeals for the Federal Circuit, Nebraska Public Power District v. United States, 74 Fed. Cl. 762 (2006), and, on March 1, 2007, the Federal Circuit issued an order granting Nebraska Public Power's petition for permission to appeal. Nebraska Public Power District v. United States, Misc. Docket No. 843, 2007 WL 779291 (Fed. Cir. Mar. 1, 2007). The Government reserves the right to challenge any determination of liability with respect to the Standard Contract if the writ of mandamus is lifted or otherwise deemed inapplicable. -4-

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quantitative minimum rate obligation into the Standard Contract; and (3) contrary to plaintiffs' assertions, plaintiffs cannot identify a single DOE program document that reflects performance beginning in 1998 at a single repository at a 3,000 MTU rate of acceptance after a four- or fiveyear ramp up. The determination of the Government's obligation regarding the rate of acceptance is critical to establishing damages in this case for several reasons. First, Boston Edison's claim for damages associated with "excess" decommissioning funding hinges in large part upon the determination of the rate of acceptance. For example, Boston Edison concedes that, under a 900 MTU rate of acceptance through 2010, (a rate consistent with the Government's expected performance from the early-to-mid 1990s), with a ramp-up to 3,000 MTU by 2015, Entergy would have chosen to construct dry storage in the "but for" world. Consequently, under that rate of acceptance, Boston Edison's claimed "excess" decommissioning damages are cut by roughly 50 percent, as Boston Edison concedes that a substantial portion of the dry fuel storage costs that it alleges are contained in the fund transfer amount would not be incremental to DOE's delay in acceptance. Thus, by Boston Edison's own admission, using the 900 MTU rate of acceptance, with a ramp-up to 3,000 MTU by 2015, reduces Boston Edison's damages calculation by more than $41 million even if Boston Edison otherwise prevails fully on its theory of damages. Boston Edison's Pretrial Br., at 17. Second, because this Court has consolidated the Boston Edison and Entergy cases for purposes of determining, among other things, the proper rate of SNF acceptance, this Court must determine a proper rate of acceptance that will bind Entergy when Entergy ultimately pursues its own damages claim.

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In addition, despite its assertions, Boston Edison will be unable to establish at trial that the price which Entergy paid for Pilgrim was in any way reduced because of DOE's delay in SNF acceptance. Indeed, we will establish through Entergy's contemporneous documents and the testimony of Entergy's own personnel that DOE's delay in acceptance in no way affected the price that Entergy paid for Pilgrim. For example, we expect that Entergy personnel will testify that, although Entergy included in its valuation model for Pilgrim a $17.7 million reserve for unidentified future capital additions, Entergy never specifically identified a cost associated with reracking activities. Indeed, Entergy's personnel will explain that, even had it included the reracking activities in its valuation model, given the relatively de minimus cost, Entergy would not have paid more for Pilgrim absent the rerack. Further, we will establish through the testimony of Entergy personnel that, in using a particular discount rate and rate of return requirements, Entergy did not account for any potential risks associated with DOE's delay in SNF acceptance and, instead, used a generic discount rate associated with many of Entergy's new business ventures. Similarly, contrary to Boston Edison's contentions, we will present testimony from Entergy's own personnel indicating that Entergy did not account for any potential risk associated with DOE's delay in SNF acceptance in its use of equity financing in connection with the Pilgrim sale. We also will establish at trial that Entergy did not require Boston Edison to transfer to Entergy an increased decommissioning trust fund to account for DOE's delay in SNF acceptance. Specifically, we will show that Entergy actually agreed to receive from Boston Edison less than Boston Edison itself originally estimated it would have to transfer to the buyer of Pilgrim plant. Further, we will establish that the amount of the decommissioning transfer was

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consistent with the United States Nuclear Regulatory Commission ("NRC") minimum funding amount, which expressly excludes costs for SNF storage and disposal. We will also establish through the testimony of Entergy personnel that, although Entergy was willing to accept only the NRC minimum, Entergy anticipated that the growth in the decommissioning fund over time would ultimately cover the entire amount of money necessary to fully decommission the plant, including costs associated with the disposal of SNF and the greenfielding of the site. Further, notwithstanding the fact that Boston Edison has the burden to demonstrate the scope of activities in the "but for" world, Boston Edison provides no adjustments to its damages claim for the costs that it avoided as a result of DOE's delay in acceptance. Because of DOE's delay, Boston Edison did not incur costs that it would have incurred had DOE timely performed, such as the costs associated with loading SNF into DOE transportation casks. Consequently, the cost of loading SNF to DOE should be deducted from Boston Edison's damages claim, as it is a cost that Boston Edison would have incurred in the "but for" world that it avoided in the actual world. Accordingly, to the extent that Boston Edison does not present any evidence to establish these "but for" world activities, it fails to meet its burden of proof and cannot establish its claimed damages with reasonable certainty. In sum, we will establish at trial that Boston Edison's diminution-in-value claim is based upon the false premise that Entergy paid less for Pilgrim and that Entergy received more from Boston Edison in its transfer of the decommissioning fund because of DOE's delay in SNF acceptance. At bottom, the only witnesses who can properly answer that question are the individuals at Entergy who were responsible for Entergy's purchase of Pilgrim. We will establish at trial through those witnesses and their contemporaneous documents that DOE's

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delay in SNF acceptance affected neither the amount that Entergy paid for Pilgrim nor the amount that it required Boston Edison to transfer for the Pilgrim decommissioning trust fund. STATEMENT OF FACTS I. THE ORIGINAL PROVISIONS OF THE NUCLEAR WASTE POLICY ACT

On January 7, 1983, the Nuclear Waste Policy Act of 1982 ("NWPA"), Pub. L. 97-425, 96 Stat. 2201 (codified at 42 U.S.C. §§ 10101-10270 (1982)), was enacted. In its statement of the statutory purposes underlying the NWPA, Congress identified the following four objectives: developing repositories to ensure the protection of the public and the environment from the hazards posed by SNF and high level radioactive waste ("HLW"); establishing Federal responsibility and policy for the disposal of SNF and HLW; defining the relationship between the Federal Government and state governments regarding SNF and HLW disposal; and establishing a Nuclear Waste Fund, financed by the utilities, to pay for the costs of the DOE program. Id. § 10131(b). The NWPA authorized the Secretary to enter into contracts with the owners and generators of SNF of domestic origin for "the acceptance of title, subsequent transportation, and disposal of such [SNF]." 42 U.S.C. § 10222(a)(1) (1982). The contracts had to "provide for payment to the Secretary of fees . . . sufficient to offset expenditures" described elsewhere in the statute. Id.

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II.

THE DEPARTMENT OF ENERGY'S PROMULGATION OF THE STANDARD CONTRACT THROUGH NOTICE AND COMMENT RULEMAKING IN THE FEDERAL REGISTER A. The Proposed Rule

On February 4, 1983, the Department of Energy ("DOE"), in furtherance of its obligations under the NWPA, published a notice of proposed rulemaking in the Federal Register, proposing terms for the Standard Contract. See 48 Fed. Reg. 5458 (Feb. 4, 1983). The proposed Standard Contract provided a mechanism for determining the order in which, and the rate at which, the contract holders' SNF would be accepted. As for the order of SNF acceptance, the Standard Contract proposed that DOE would issue an "acceptance priority ranking" ("APR") of SNF and/or HLW, through which SNF and/or HLW would receive acceptance priority based generally upon its age. Id. at 5464 (Art. VI.B.3). Although the proposed Standard Contract did not identify a specific rate by which DOE would accept contract holders' SNF, it provided for DOE's issuance of documents for planning purposes to assist in the eventual definitization of the specific rate and order of SNF acceptance and disposal. Id. at 5463 (Art. V.B.5 & Art. V.B.6). The proposed contract further provided that, following DOE's issuance of planning documents, rates of SNF acceptance, as well as the specific order of SNF acceptance from particular contract holders, would be defined through the contract holders' submission, and DOE's approval, of delivery commitment schedules ("DCSs"). Id. at 5462. The proposed Standard Contract also provided for the contract holders' submission of Final Delivery Schedules ("FDSs"), which would take the annual allocation defined in an approved DCS and refine it to reflect as closely as possible the month(s) and day(s) upon which SNF acceptance would occur. Id. at 5463 (Art. IV.C). The term "DOE facility" in the proposed Standard Contract referred to a facility for

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disposal, in a permanent repository, of the SNF and/or HLW. Id. at 5462 (Art. I.11). The proposed rule provided for written comments to be submitted by March 7, 1983. Id. at 5458. B. Public Comments

DOE received numerous comments in response to the proposed rule. A number of the comments recognized that the Standard Contract did not establish a specific rate at which DOE must accept SNF, and sought to have such a rate included. The Edison Electric Institute ("EEI"), an association of the nuclear power industry to which Boston Edison and Entergy belonged, and whose comments Boston Edison actively endorsed, requested as follows: The contract should include a recognition that DOE will design its facilities with the capacity to receive SNF/HLW at a rate commensurate with the amount of SNF/HLW then being generated together with the accumulated backlog of SNF/HLW. We believe that DOE should be able to take delivery of SNF/HLW equal to that year's generation plus a reasonable share of the backlog. While the contract may not be the appropriate place to commit DOE to a specific numerical receiving rate, DOE should recognize, at least qualitatively, the need to have adequate annual receiving capacity to handle industry needs. DX 2.034, Attachment A at 2 (ARC0010334). Other utilities submitted similar comments seeking firm commitments regarding the rate of SNF acceptance. For example, Tennessee Valley Authority ("TVA") submitted a comment, stating that "a commitment to do no more than start accepting deliveries by 1998 is empty and meaningless without setting forth some reasonable minimum rate of acceptance which corresponds to the purposes of the Act." DX 2.063 at 5 (ARC0010537). Although TVA recognized that, "under the priority ranking system in the draft contract, it would be difficult at the time contracts are executed to give each Purchaser assurances of delivery acceptance at any specific rate," it suggested that "[t]his could, however, be done on an industry wide basis." Id. -10-

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TVA suggested that DOE add a contract provision to provide that "DOE shall start accepting delivery of SNF or HLW not later than January 31, 1998, at not less than the annual rate [at which] SNF and/or HLW is then being produced from civilian nuclear power plants covered by contracts . . . ." Id. DOE also received comments seeking a commitment for DOE to accept SNF at the rates set forth a statutorily-required Mission Plan.2 For instance, Florida Power & Light Company, expressly stated that DOE should create a mandatory obligation that would require DOE to accept SNF and HLW at the rates identified in the Mission Plan, once that plan was approved by Congress. DX 2.043, attachment 1 at 1 (ARC0010439). EEI also suggested that "[t]he definition of `DOE Facility' (Article I.11) should be broadened to include destinations other than the repository." DX.2.34, Attachment A at 4 (ARC0010336). EEI stated that "[t]he contract does not recognize the possibility that DOE might send SNF/HLW to an intermediate location (such as a monitored retrievable storage facility) before it goes to a repository" and "[t]o accommodate this, the definition of `DOE Facility' should be broadened." Id. at 5(ARC0010337). See also DX 2.14 (ARC0010180) (change to contract language "would implicitly recognize DOE's option to reprocess SNF or to utilize Monitored Retrievable Storage prior to permanent disposal"); DX 2.69 (ARC0010625) ("[t]his change would recognize the possibility of DOE shipping SNF/HLW to an intermediate storage facility such as a monitored retrievable storage facility").

In June 1985, in accordance with the requirements of 42 U.S.C. § 10221 (1982), DOE issued the Mission Plan to "provide an informational basis sufficient to permit informed decisions to be made in carrying out the repository program and the research, development, and demonstration programs required under this chapter." 42 U.S.C. § 10221 (1982). -11-

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C.

The Final Rule

On April 18, 1983, DOE issued the Standard Contract as a final rule. The final rule, as promulgated, made certain modifications to the Standard Contract as set forth in the proposed rule. Although the proposed rule provided that "services provided to the Purchaser by DOE under this contract are related to disposal of SNF," 48 Fed. Reg. at 5462, that "disposal" was defined as emplacement in a permanent repository, id., and that such "disposal" services would begin by January 31, 1998, id., the final Standard Contract eliminated any requirement for DOE to begin SNF "disposal" in a permanent repository by January 31, 1998. Instead, the final Standard Contract only required DOE to begin SNF acceptance by January 31, 1998, after the commencement of "facility" operations. 10 C.F.R. § 961.11, Art. II. The "facility" to which the final Standard Contract refers is either a permanent repository to be constructed pursuant to the NWPA or such other facility to which SNF might be shipped by DOE prior to its transportation to a permanent repository. Id. § 961.11, Art. I.10. As the preamble to the final rule expressly recognized, the final Standard Contract would not obligate DOE to have an operational permanent repository by January 31, 1998: The definition of "DOE facility" (Article I.10) was expanded to expressly state, in accordance with the Act, that there may be an interim storage facility (or facilities) which DOE may utilize prior to emplacement in a repository. 48 Fed. Reg. 16590, 16591 (Apr. 18, 1983). DOE did not adopt EEI's suggestion, which Boston Edison and many other utilities endorsed, to incorporate into the contract a requirement that DOE accept SNF at a rate equal to the annual generation rate plus some additional amount to reduce the accumulated backlog. The utilities acknowledged that DOE rejected their requests regarding the inclusion of a qualitative -12-

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description of the acceptance rate in both internal memoranda and correspondence with DOE. In a letter to Robert Morgan of DOE, EEI complained that the Standard Contract as promulgated lacked "standards or milestones for DOE's performance . . . ." DX 32, Attachment 1 at 1 (SN011050).3 The Government will show at trial that DOE determined it could not include this requirement due to the number of uncertainties concerning the acceptance of SNF by DOE beginning in 1998. Instead, the contract provided that the acceptance rate would be developed later through the promulgation of the 1991 ACR. Finally, the Standard Contract contained an integration clause which provided: This contract, which consists of Articles I through XXII and Appendices A through G, annexed hereto and made a part hereof, contains the entire agreement between the parties with respect to the subject matter hereof. Any representation, promise, or condition not incorporated in this contract shall not be binding on either party. No course of dealing or usage of trade or course of performance shall be relevant to explain or supplement any provision contained in this contract. 10 C.F.R. § 961.11, Art. XXII.4 III. BOSTON EDISON'S EXECUTION OF ITS STANDARD CONTRACT

On June 17, 1983, Boston Edison Company executed its Standard Contract with DOE. DX 1. Boston Edison's Standard Contract contained the same terms and conditions as the final rule promulgated by DOE on April 14, 1983. See 10 C.F.R. § 961.11.

DOE likewise did not adopt Florida Power & Light Company's request that DOE add a contract clause obligating DOE to accept SNF and/or HLW under "the schedule and capacities detailed in the approved 1984 DOE Mission Plan . . . ." DX 2.043, attachment 1 at 1 (ARC00010439). The Standard Contract also included a "Disputes" clause which provided a mandatory administrative mechanism for the resolution of disputes arising under the contract. 10 C.F.R. § 961.11, Art. XVI.A. -134/

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IV.

ISSUANCE OF THE MISSION PLAN AND ITS AMENDMENT

In June 1985, DOE issued the Mission Plan, in accordance with the requirements of 42 U.S.C. § 10221 (1982), which was to "provide an informational basis sufficient to permit informed decisions to be made in carrying out the repository program and the research, development, and demonstration programs required under this chapter." 42 U.S.C. § 10221 (1982). In the 1985 Mission Plan, DOE projected for informational purposes that an initial permanent repository would begin operations in 1998 and that a second permanent repository would commence operations in 2006. DX 42 at 25-26 (HQR0031129-30). The schedules contained in the Mission Plan projected annual SNF generation rates from utilities nationwide of approximately 3,000 MTU in 1998 and increasing by 2007 to over 4,000 MTU per year. Id.5 The Mission Plan noted that these schedules were "only an approximation of how the system may operate and is subject to considerable variation. The DOE will further define and specify the system acceptance parameters as the program progresses." DX 42 at 29 (HQR0031133). The Mission Plan further advised: Under the terms of the contracts for disposal services that have been signed between the DOE and the utilities, an annual capacity report with projected annual receiving capacities and rankings will be issued by the DOE beginning in 1987. In 1991, the DOE will begin to publish firm waste-acceptance schedules for individual reactors, including shipment allocations. DX 90 at 29 (HQR031133). As mentioned above, at the time of the rulemaking, DOE expressly rejected utility requests to make the rates contained in the Mission Plan contractually binding. In the 1987 Mission Plan Amendment, submitted to Congress in June 1987, DOE recommended deferral of
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the date contemplated for operation of the first repository from 1998 to 2003, with the second repository becoming operational by 2023. The Mission Plan Amendment reflected DOE's recognition that acceptance beginning in 1998 could not begin at a permanent repository. DOE explained that its recommendation was based upon experience gained in the program, a budget decrease for fiscal year 1987, and budget uncertainty for fiscal year 1988. Significantly, DOE explained that it could nonetheless begin waste acceptance in 1998 at an MRS facility. DX 48 at 6 (HQR0031634). Consistent with the 1985 Mission Plan, the 1987 Mission Plan Amendment acknowledged the importance of the Annual Capacity Report that would be issued in 1991: namely, that it would be used in the DCS process. DX 48 at 60 (HQR0031687). V. THE 1987 AMENDMENTS TO THE NUCLEAR WASTE POLICY ACT

On December 22, 1987, after DOE submitted the 1987 Mission Plan Amendment, Congress amended the NWPA "to redirect the program for the management and disposal of spent nuclear fuel and high-level radioactive waste under the [NWPA]." S. Rep. No. 100-152, at 1 (Sept. 1, 1987). The 1987 amendments to the NWPA directed DOE to characterize a single site, at Yucca Mountain in Nevada, for development of a permanent repository and to terminate activities at all other sites. 42 U.S.C. § 10172(a). The 1987 amendments also authorized the Secretary to site, construct, and operate one, but only one, MRS facility. 42 U.S.C. § 10162(b). However, the 1987 amendments provided that "construction of [the MRS] facility may not begin until the Commission has issued a license for the construction of a repository under section 115(d)." 42 U.S.C. § 10168(d)(1). Finally, it also provided that "the quantity of [SNF] at the site of such facility at any one time may not exceed 10,000 metric tons of heavy metal until a

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repository under this Act first accepts [SNF]." Id. § 10168(d)(3).6 This later restriction was imposed to avoid the perception that an MRS would became a de facto repository. VI. DOE'S ISSUANCE OF ANNUAL CAPACITY REPORTS A. The 1987 Through 1990 Annual Capacity Reports

Beginning in 1987, in compliance with the NWPA and the language of the Standard Contract, DOE issued an "Annual Capacity Report." As each of these ACRs expressly stated, "[a]s specified in the Contract, the ACR is for planning purposes only and thus is not contractually binding on either DOE or the Purchasers." DX 47 at 2 (HQR0012713) ("projections in this initial report are based on current plans and best available information; they are not contractually binding"), DX 55 at 1 (HQR0012617), DX 64 at 2 (HQR0012494). Further, each of the ACRs from 1987 through 1990 contained the following, or substantially similar, language: Beginning in 1991, the ACR acceptance ranking will be converted into an Annual Priority Ranking for receipt of SNF/HLW. In 1992, based on this priority ranking, the Purchasers will submit to DOE for approval, Delivery Commitment Schedules identifying the SNF/HLW that Purchasers propose to deliver to the DOE waste management system (WMS). Once approved, these schedules will become the basis for Final Delivery Schedules to be submitted by the Purchasers not less than 12 months before the date of DOE's anticipated acceptance of title to the SNF/HLW and subsequent transport to a DOE facility. DX 47 at 2 (HQR0012713), DX 55 at 2 (HQR0012618), DX 64 at 2 (HQR0012494).

The 1987 amendments to the NWPA also established the Office of the Nuclear Waste Negotiator. 42 U.S.C. § 10242(a). That office was to seek to enter into negotiations with states and Indian tribes to "attempt to reach a proposed agreement" with them through which a state or Indian tribe "would agree to host a repository or [MRS] facility with such State or reservation." Id. § 10243(a). The authorization for that office expired in 1994, id. § 10250, without any agreements with any states or Indian tribes. -16-

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B.

The 1991 Annual Capacity Report

In December 1991, DOE issued its "Annual Capacity Report" for that year. DX 73 at 1-2 (HQR0012362-HQR0012363). The 1991 ACR was significant because it was the last ACR that would be issued prior to the contract holders' submission of DCSs beginning January 1, 1992, and was specifically referenced in the Standard Contract. See 10 C.F.R. § 961.11, Art. V.B.1. In that regard, the 1991 ACR provided that, "[b]eginning in January 1992, the Purchasers may submit Delivery Commitment Schedules (DCS) to DOE identifying the range of SNF that the Purchasers propose to deliver to the Federal Waste Management System (FWMS) beginning sixty-three months thereafter." DX 73at 2 (HQR0020804). It also stated that "[t]he Purchasers' allocations for each delivery year are presented in Tables A.1 through A.10 in Appendix A, and should be used as the basis for submitting DCSs." Id. at 2, 7. As dictated by the Standard Contract, the 1991 ACR specified the rate of acceptance for the first 10 years of the DOE program, beginning in 1998. Specifically, the 1991 ACR specified the following acceptance rate:

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TABLE 2.1 Projected Waste Acceptance Rates for Spent Nuclear Fuel Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 TOTAL SNF (MTU) 400 600 900 900 900 900 900 900 900 900 900 8,200

DX 73 at 5 (HQR0020807). This rate was created with the knowledge that no permanent repository would be available by January 31, 1998. Id. at 4 (HQR0020806). Instead, "the waste acceptance projections used in this ACR are representative of a FWMS [Federal Waste Management System] configuration authorized by the NWPA, which includes a Monitored Retrievable Storage (MRS) facility." Id. In particular, the rates were "consistent with the 10,000 MTU storage capacity limit contained in the NWPA for an MRS facility before a repository starts operation." Id. DOE noted, however, that the schedule assumed that the schedule linkages between the MRS construction and repository construction authorization would be broken. Id. The utility industry recognized the importance of the 1991 ACR in the determination of delivery commitments for performance beginning in 1998. See, e.g., DX 76 at 2 and 3 (SN169910) (UWASTE memorandum explaining that the ACR and APR "are necessary to

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properly complete the DCS forms."); DX 77 at 2 (SN170373) (same); DX 49 at 8 (YDK038298) (UNWMG memorandum describing the 1991 ACR as "contractually binding"). C. The 1992 Through 1995 Annual Capacity Reports

The 1992 ACR, which was issued in May 1993, contained the same acceptance rates as the 1991 ACR. DX 87 at 4 (HQR 0012324). The 1992 ACR also provided that, "[d]uring the first ten years following projected commencement of the Civilian Radioactive Waste Management System (CRWMS) operation, the total quantity of SNF that could be accepted is projected to be 8,200 MTU." DX 87 at v (HQR 0012319). It stated that "[t]his is consistent with the storage capacity licensing conditions imposed on an MRS facility by the NWPA." Id. In 1995, DOE issued a combined APR and ACR to "establish[] the order in which the Department allocates the projected acceptance capacity for commercial [SNF] . . . and to appl[y] projected nominal acceptance rates for the system to the priority ranking in the APR, resulting in individual allocations for the owners and generators expressed in metric tons per uranium (MTU)." DX 102 at 1 (HQR0290678). The 1995 ACR contained substantially similar SNF acceptance rates as the 1991 and 1992 ACRs, identifying a projected nominal waste acceptance rate of 8,200 for the first 10 years of SNF acceptance. Id. at 4 (HQR0290681). The 1995 ACR also contained the following statement: The ACR (see Appendix B) applies a 10-year projected nominal waste acceptance rate to the APR, resulting in individual capacity allocations. In the previous ACR, the projected nominal acceptance rate was based on the assumption of SNF acceptance beginning in 1998 at a Monitored Retrievable Storage facility prior to repository operations. Due to the uncertainty associated with the date of commencement of operation of the waste management system, the annual nominal waste acceptance rates are presented by year(s) of operation of the system rather than by specific calendar year(s). The projected nominal acceptance rates also -19-

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reflect the capacity limit imposed by the Act on such a storage facility prior to repository operations. These projected nominal waste acceptance rates are presented in Table 1. The Department will continue to process DCS submittals on an annual basis. Id. at 3-4 (emphasis added). The 1995 ACR further provided that the capacity allocations listed in the ACR "form the basis for the Purchasers' submittal" of DCSs. Id. at 1. VII. PROGRAM DOCUMENTS REFLECT PLANNED ACCEPTANCE AT AN MRS FACILITY A. Program Reassessment And 1991 Draft Mission Plan Amendment

In November 1989, the Secretary of Energy submitted a report to Congress regarding DOE's reassessment of the program. In this report, DOE stated that it would be unable to begin operations at a permanent repository until 2010 because there was insufficient time to perform the scientific investigation necessary. DX 435 at vii-x (EDB001449-1452). Significantly, DOE also stated that it planned "to work with Congress to modify the current linkages between the repository and the MRS facility and to embark on an aggressive program to develop an integrated MRS facility for spent fuel." Id. DOE further advised that, "if the linkages [were] modified, it [was] likely that waste acceptance at an MRS facility could begin by 1998 or soon thereafter." Id. In September 1991, DOE issued another Draft Mission Plan amendment, which provided further details upon the "action plan" set forth in the Secretary's 1989 Reassessment. DX 70 at HQR0030799. In accordance with the 1989 Reassessment, the 1991 Draft Mission Plan Amendment reaffirmed DOE's plans to begin performance in 1998 at an MRS: To achieve the objective of timely and adequate waste acceptance, we plan to develop an MRS facility that is to start waste acceptance in 1998. To make this possible, the President's legislative package for the National Energy Strategy includes a provision to repeal the schedule linkages established in the Nuclear Waste Policy Amendments of 1987 (Amendments Act). This -20-

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could also be achieved by congressional enactment of a negotiated siting agreement reached through the efforts of the Nuclear Waste Negotiator. Id. at 18 (HQR0030825). The schedule set forth in the 1991 Mission Plan Amendment showed acceptance by DOE up to the 10,000 MTU limit upon the MRS until the repository began operations in 2010. Id. at 205-206. B. Preliminary Estimates Of The Total-System Cost For The Restructured Program

DOE's anticipation of performance at an MRS by 1998 was also reflected in the cost analyses that it performed around the time of the 1991 ACR to support the adequacy of fees collected for the Nuclear Waste Fund. The 1 mil per kilowatt hour fee that contract holders pay was set by Congress when enacting the NWPA. 42 U.S.C. § 10222(a)(2). Pursuant to the NWPA, DOE is required annually to assess whether the fees collected pursuant to statute are adequate to fund all of the efforts necessary to implement the NWPA. 42 U.S.C. § 10222(a)(4). The Secretary is to advise Congress if he finds the fee inadequate. Id. To determine whether the fee is adequate, DOE first prepares a Total System Life Cycle Cost report, in which it projects the total cost of the program. This total system cost projection is based upon the projected number of years that the program is estimated to operate, projected transportation requirements, projected interest rates, and other factors. The current program plans, including acceptance rate projections, type and location of receiving facilities, and the scope of the transportation program, are the basis for the total cost estimate. In its Preliminary Estimates of the Total-System Cost For The Restructured Program: An Addendum to the May 1989 Analysis of the Total Cost for the Civilian Radioactive Waste Management Program, December 1990 ("1990 PETSC"), DOE utilized a schedule that was explicitly based upon acceptance starting in 1998 at an MRS. DX 65, at PNL1071666-68. SNF -21-

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acceptance in the first ten years are identical to the first ten years under the 1991 ACR schedule, with the exception of the second year of acceptance, where the 1990 PETSC contemplates that 400 MTU rather than 600 MTU would be accepted. Id. This schedule also shows what DOE anticipated the transition from a repository to an MRS would look like. Id. In year eleven and year twelve of acceptance, 900 MTU would be accepted at a permanent repository. In years thirteen through seventeen, 1,800 MTU would be accepted, and only in year eighteen (2015) would the system accept 3,000 MTU. Id. VIII. INDUSTRY SUBMISSION OF DELIVERY COMMITMENT SCHEDULES

By letter dated March 4, 1992, the DOE contracting officer issued a letter to Boston Edison and other utilities, along with the instructions for the submission of DCSs. DX 78. The contracting officer stated that "[t]he allocations in the 1991 Annual Capacity Report (ACR) should be the basis for the DCS submittals." Id. The accompanying instructions provided that purchasers could "begin submitting to the Department of Energy (DOE) Delivery Commitment Schedules (DCS) that identify all spent nuclear fuel (SNF) the Purchasers plan to deliver to DOE beginning 63 months thereafter." Id. The instructions stated that "[t]he DCS provides the Purchasers with the opportunity to inform DOE of their plans for utilizing their allocations of projected Federal waste management system (FWMS) acceptance capacity." Id. They further provided that, "[f]or each allocation listed in the 1991 ACR (or subsequent ACRs, as appropriate), a Purchaser must submit at least one DCS for that allocation at least 63 months prior to the date that the allocation occurs (e.g., if a Purchaser has an allocation in 1998, a DCS must be submitted for that allocation by September 30, 1992)." Id. The instructions also required that the utilities list upon the DCSs the method of delivery to DOE (truck, barge, or rail) and fuel handling crane capacities.

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The DCS instructions were developed with the full participation of the nuclear industry. See, e,g., DX 436, DX 68, DX 71, DX 59. After DOE issued the instructions, utilities met with DOE again to discuss the instructions. DX 80. Recognizing the need to submit DCSs to claim allocations, many utilities submitted timely DCSs that were approved by DOE. For example, Wisconsin Electric Power Company ("WEPCO") submitted DCSs for all of its allocations in the first ten years of acceptance in 1992. Eight other utilities also submitted DCSs for all of their allocations in the first ten years of contract performance after 1998. Moreover, every utility with an allocation in 1998 and 1999, with the exception of one utility, submitted a DCS for that allocation. All of those DCSs were approved by DOE. All but two utilities with allocations in 2000 submitted DCSs that were approved by DOE. On December 6, 1993, DOE approved a DCS that Boston Edison had submitted for acceptance of 3.88 MTU of SNF between January 31, 1999, and January 30, 2000. Through its approval of this DCS, DOE agreed to accept 3.88 MTU of SNF from Boston Edison at some point in time between January 31, 1999, and January 30, 2000. On January 18, 1995, DOE approved a DCS that Boston Edison had submitted for acceptance of 25.42 MTU of SNF between January 31, 2000, and January 30, 2001. Through its approval of this DCS, DOE agreed to accept 25.42 MTU of SNF from Boston at some point in time between January 31, 2000, and January 30, 2001. Subsequently, on January 25, 1996, DOE approved a DCS that Boston Edison had submitted for acceptance of 82.60 MTU of SNF between January 31, 2001, and January 30, 2002.7 Through its approval of this DCS, DOE

On September 29, 1998, after DOE announced that it would be unable to perform by 1998, Boston Edison also submitted a DCS for acceptance of 11.41 MTU of SNF between January 31, 2004, and January 30, 2005. By letter dated November 24, 1998, Beth Tomasoni, the DOE contracting officer, informed Boston Edison that DOE "is not able at this time to approve your DCS submittal" and, "[c]onsequently, the Department hereby waives until further notice the -23-

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agreed to accept 82.608 MTU of SNF from Boston at some point in time between January 31, 2001, and January 30, 2002. IX. BOSTON EDISON DECIDES TO SELL ITS PILGRIM FACILITY

In 1997, in the wake of the deregulation of electricity markets at both the Federal and state levels in the late 1990s, Boston Edison decided to sell its Pilgrim plant, along with its entire electric generating business unit, through a competitive auction process. Boston Edison's auction represented the first sale of a nuclear power plant in the nascent, deregulated marketplace for nuclear power plant assets.8 Boston Edison engaged the services of the Reed Consulting Group to conduct the auction upon behalf of Boston Edison. Among other services performed, Reed Consulting was involved in drafting the offering memoranda, soliciting potentially intereste