Free Post Trial Brief - District Court of Federal Claims - federal

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 1 of 110

IN THE UNITED STATES COURT OF FEDERAL CLAIMS : CONNECTICUT YANKEE ATOMIC : POWER COMPANY, : : Plaintiff, : : v. : : UNITED STATES OF AMERICA, : : Defendant. : __________________________________________: __________________________________________

No. 98-154 C (Senior Judge Merow) Filed electronically November 17, 2004

CONNECTICUT YANKEE'S PROPOSED FINDINGS OF FACT

JERRY STOUCK Spriggs & Hollingsworth 1350 I Street, N.W., Ninth Floor Washington, D.C. 20005 (202) 898-5800 (202) 682-1639 (facsimile) Counsel for Plaintiff, CONNECTICUT YANKEE ATOMIC POWER COMPANY

Of Counsel: Robert L. Shapiro SPRIGGS & HOLLINGSWORTH Dated: November 17, 2004

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 2 of 110

TABLE OF CONTENTS Page I. II. III. IV. INTRODUCTION AND OVERVIEW ...............................................................................1 GENERAL FINDINGS .......................................................................................................3 TRIAL WITNESSES...........................................................................................................9 DOE CONTRACT.............................................................................................................16 A. B. C. D. E. F. V. VI. VII. VIII. Background and Purpose .......................................................................................16 Contractual Understandings and Intentions of the Parties Regarding Scheduling Issues...................................................................................................21 Spent Fuel Acceptance...........................................................................................27 3000 MTU is a Reasonable Rate. ..........................................................................29 Sequence of Spent Fuel Removal ..........................................................................36 Shutdown Priority ..................................................................................................41

ISFSI DEVELOPMENT....................................................................................................42 FUEL STORAGE AT GE MORRIS .................................................................................60 RERACKING ....................................................................................................................61 GTCC WASTE ..................................................................................................................65 A. B. Connecticut Yankee's GTCC Waste Is Covered By the Contract.........................66 Regardless of Whether GTCC Waste Is Covered By the Contract, DOE Would Have Accepted GTCC from Connecticut Yankee If It Had Accepted SNF. .......................................................................................................................73

IX. X. XI.

GOOD FAITH AND FAIR DEALING.............................................................................77 DAMAGES........................................................................................................................78 TAKINGS ........................................................................................................................105

ii

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 3 of 110

IN THE UNITED STATES COURT OF FEDERAL CLAIMS : CONNECTICUT YANKEE ATOMIC : POWER COMPANY, : : Plaintiff, : : v. : : UNITED STATES OF AMERICA, : : Defendant. : __________________________________________: __________________________________________

No. 98-154 C (Senior Judge Merow) Filed electronically November 17, 2004

CONNECTICUT YANKEE'S PROPOSED FINDINGS OF FACT Plaintiff Connecticut Yankee Atomic Power Company ("Connecticut Yankee") submits the following post-trial Proposed Findings of Fact ("PFF").1 I. INTRODUCTION AND OVERVIEW 1. Connecticut Yankee has already paid the Department of Energy ("DOE")

approximately $41 million in fees required under the parties' contract ("Contract"), and Connecticut Yankee has performed or is ready to perform all its other contract obligations. Trial Transcript ("Tr.") 2304:17-19; Tr. 2306:12-15 (Bennet). 2. In the aggregate, utilities having similar contracts with DOE have paid the

government over $20 billion (including accrued interest) to cover all appropriate costs of DOE's spent nuclear fuel ("spent fuel") and high level radioactive waste ("HLW") (together, "SNF") disposition program, but less than half that amount has been appropriated to the program. See

1

Sections I-IV and VIII below are substantially similar to the Proposed Findings in Yankee Atomic v. U.S., No. 98-126C and Maine Yankee v. U.S., No. 98-474C.

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 4 of 110

Tr. 4088:1-4089:7 (Pollog); Ron Howe, Michigan Public Service Commission, Nuclear Waste Fund Ratepayer Payments By State Through 3-31-04, at http://www.cis.state.mis.us/mpsc/licenf/nuclear/rep304.pdf (Mar. 31, 2004). 3. DOE breached its reciprocal contract obligation to Connecticut Yankee and others

­ the "quid pro quo created by Congress" in the D.C. Circuit's words ­ to commence acceptance of SNF by January 31, 1998, and thereafter to remove SNF from contracting utilities including Connecticut Yankee in an economically efficient, reasonable manner. Indiana Michigan Power Co. v. United States, 88 F.3d 1272 (D.C. Cir. 1996). - Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1342 (Fed. Cir. 2000). See PFF ¶¶ 54, 55, 60-64, 66 below (addressing DOE performance obligations). 4. Because of the government's breach, Connecticut Yankee has incurred and is

continuing to incur very substantial damages for continued on-site storage of SNF. As detailed below, DOE's partial breach of the parties' Contract has caused Connecticut Yankee to incur damages in the minimum amount of $198,293,973 through the year 2010. See Section X, "Damages," below at PFF ¶ 150. - See P2043.16 (Wise Demonstrative) (accompanying the record as identified and adopted by Dr. Wise). See Tr. 7599:5-7 ("THE COURT: So 2043 and 2043-A shall accompany the record as identified and adopted by the witness."). a. Damages are now expected to accrue in the years beyond 2010 at the

reasonably constant rate of approximately $10.2 million per year in 2002 dollars. See PFF ¶ 173 below. - Tr. 3267:3-3270:22 (Wise); P2043A.24.

2

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 5 of 110

II.

GENERAL FINDINGS 5. Connecticut Yankee is an electric utility company incorporated under the laws of

the State of Connecticut, whose stock is owned by nine utilities. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 6 (re incorporation under the laws of Connecticut). - Tr. 2299:14-2300:6 (Bennet). 6. Connecticut Yankee's only electricity generating facility was a nuclear power

plant located in Haddam, Connecticut, which is now permanently shut down. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 7. - Tr. 2299:14-17 (Bennet). 7. Connecticut Yankee commenced commercial operation of its nuclear power plant

in January 1968. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 8. - Tr. 2300:7-10 (Bennet). 8. Nuclear fuel used in commercial reactors, including the Connecticut Yankee

reactor, is configured into "fuel assemblies," which consist of numerous metallic rods that each contain nuclear fuel pellets and are held together with metallic bindings. - Tr. 1550:12-22 (Bennet) (a fuel assembly is "basically a long rectangular metal cage which holds individual fuel elements or fuel pins, as we call them. They're also known as fuel rods. Those fuel rods are metal and are placed in an array and contain the nuclear fuel pellets that have been placed in there during the fabrication process."). - P1926.001 (demonstrative photograph of fuel assembly).

3

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 6 of 110

9.

When it was operating, Connecticut Yankee's nuclear reactor held and used 157

fuel assemblies in the reactor "core" where fission occurred and generated heat to power steam turbines, which in turn generated electricity. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 15. - Tr. 2300:11-14 (Bennet). - Tr. 1550:23-1551:5 (Bennet). 10. Fuel assemblies that are discharged from the reactor after use are generally

referred to as spent nuclear fuel or spent fuel. - Tr. 1551:6-9 (Bennet). 11. Spent fuel remains highly radioactive for many years, and is potentially hazardous

to humans if not properly handled. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 10. 12. Connecticut Yankee's nuclear power plant was constructed with a fuel pool near

the nuclear reactor, to be used for temporary storage of nuclear fuel after its use in the reactor ("spent fuel"). - Tr. 2588:18-2589:2 (Mellor). 13. The Connecticut Yankee fuel pool is filled with water, which provided a radiation

shield and protected both the spent fuel in the pool and the environment. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 12. - Tr. 2165:15-24 (Heider). - Tr. 1552:13-21 (Bennet).

4

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 7 of 110

14.

Connecticut Yankee's fuel pool contains fuel storage racks, comprised of

individual cells, which can hold one fuel assembly per cell. The racks also contain a neutron poison and provide appropriate spacing for the assemblies, both of which help to prevent criticality. - Tr. 2165:5-14 (Heider). 15. Connecticut Yankee expanded the capacity of its spent fuel pool in 1996 through

"reracking" by adding racks with a higher density (higher number of cells per rack) to the spent fuel pool. See Section VII, "Reracking." - Tr. 2306:16-2307:8 (Bennet). 16. Connecticut Yankee last operated its nuclear power plant in July 1996. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 16. 17. plant. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 18. - Tr. 2302:8-16 (Bennet). 18. As of November 1996, all fuel assemblies then in Connecticut Yankee's reactor In December of 1996, Connecticut Yankee permanently ceased operation of its

had been moved into the fuel pool. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 17. - Tr. 2300:18-2302:6 (Bennet). 19. The total number of fuel assemblies in Connecticut Yankee's fuel pool after the

plant had been shut down permanently and all fuel unloaded from the reactor was 1,019 assemblies, plus approximately five metal canisters of various failed fuel rods.

5

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 8 of 110

- Tr. 2302:17-2303:4 (Bennet). 20. Connecticut Yankee is also presently storing 82 spent fuel assemblies that it had

shipped in the late 1970s to a site in Morris, Illinois for reprocessing under a contractual arrangement with General Electric ("GE"), the owner of the Morris facility. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶¶ 24, 25. - Tr. 2300:18-2302:7 (Bennet). 21. When the Connecticut Yankee plant permanently shut-down its operations in

December of 1996, the business of the company changed. The focus at the plant became decommissioning the site and storing SNF. - Tr. 2502:2-8 (Ms. Jewell-Kelleher). - Tr. 2310:21-2311:4 (Bennet). 22. Decommissioning involves the dismantlement and decontamination of the plant

and site in a manner that satisfies Nuclear Regulatory Commission ("NRC") requirements and the requirements of other Federal regulators, such as the Environmental Protection Agency ("EPA"), and state regulators. - Tr. 1558:20-1559:25 (Bennet). - Tr. 2244:4-2248:16 (Heider). 23. Decommissioning of Connecticut Yankee's site cannot be completed until all

SNF is removed from the pool. - Tr. 2402:4-7 (Bennet). - Tr. 1564:13-1565:4 (Bennet). - Tr. 2151:15-22 (Heider).

6

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 9 of 110

24.

Connecticut Yankee has greater-than-Class C ("GTCC") waste, which includes

metal material known as "reactor internals," that was located near the core of a nuclear reactor and became highly irradiated during the operation of the reactor. - Tr. 1565:5-1566:17; Tr. 2314:25-2315:6 (Bennet). - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 141.a. (re GTCC waste includes material known as "reactor internals"). 25. No site is licensed for disposal of Connecticut Yankee's GTCC waste. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 141.c. 26. Connecticut Yankee has completed development, licensing and construction of its

Independent Spent Fuel Storage Installation ("ISFSI"), including licensing and purchase of all necessary dry storage containers. - Deemed admitted pursuant to the Order of November 4, 1998 because the government did not dispute Connecticut Yankee's March 2003 PFF ¶ 186. 27. During 2002 and early 2003, Connecticut Yankee constructed its ISFSI facility,

which is located between ¾ to 1 mile from the plant. As of trial, Connecticut Yankee had loaded ten (10) spent fuel casks and two (2) GTCC waste casks on to the pad, and was working towards completing the ISFSI fuel loading process by early 2005. - Tr. 2345:7-11; Tr. 2355:3-25; Tr. 2359:12-15 (Bennet). 28. Until Connecticut Yankee's NRC licenses are terminated, Connecticut Yankee

must maintain its corporate existence, and termination of Connecticut Yankee's licenses and regulation cannot occur until all SNF is removed from the site or Connecticut Yankee's responsibility for SNF is otherwise eliminated. - Tr. 2744:12-18 (Thomas) (until "high-level waste [and] fuel is ultimately dispositioned and leaves the site, is taken, if you will, by the DOE, we

7

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 10 of 110

need to maintain [existence] as an NRC licensee to store the fuel and high-level waste."). 29. When it was operating, Connecticut Yankee sold the electricity generated by its

nuclear power plant to its nine sponsor/owner utilities under wholesale power contracts regulated by the Federal Energy Regulatory Commission ("FERC"). Pursuant to the operation of the power contracts, Connecticut Yankee was entitled to recover the costs of generating that electricity, and remains entitled to recover all costs of decommissioning and SNF storage, provided that all such costs could only be recovered at rates approved in proceedings before the FERC under the Federal Power Act. - Tr. 1582:15-1583:17 (Bennet) (re Yankee Atomic's owners). - Tr. 1540:10-16 (Bennet) (rate applications to FERC). - Tr. 2299:22-2300:6 (Bennet) (ownership structure, arrangement with owners and power contracts all generally the same at Connecticut Yankee as at Yankee Atomic, although ownership percentages are somewhat different, and there are some unique owners of Connecticut Yankee). - Tr. 2371:25-2372:4 (Bennet) (purpose and nature of FERC's oversight of Connecticut Yankee's economic activities is exactly the same as its oversight of Yankee Atomic). 30. Connecticut Yankee typically makes a FERC rate case filing every 3-5 years.

Connecticut Yankee applied for a funding plan from the FERC in December 1996, which the FERC approved in April 2000, to provide for the costs of decommissioning and fuel storage. - Tr. 2372:5-22 (Bennet) (Connecticut Yankee typically makes a FERC filing every 3 to 5 years; the next filing date is often prescribed in the settlement agreement resolving prior rate proceeding; there was a settlement agreement of Connecticut Yankee's 1996 FERC case in April of 2000, that settlement agreement specified that Connecticut Yankee's next case be filed July 21, 2004, and it was filed on that date). - Tr. 2315:12-18 (Bennet) (Connecticut Yankee had filed a FERC rate case in December of 1996 and it was still pending when Bennet arrived in December 1997); Tr. 2333:25-2334:11 (Bennet) (April 2000 settlement of

8

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 11 of 110

Connecticut Yankee's 1996 FERC rate case based on January 1, 2000 to-go cost estimate). - Tr. 1650:14-21 (Bennet) (FERC's normal practice and normal policy is five years for rate case filings, "[b]ut in many instances, the terms of the settlement agreement that you've arrived at in your prior rate case has a specified date or specified duration such as, you know, 3, 4, 5 years when the next filing would be due."). - Tr. 1650:1-13 (Bennet) (FERC sets the tariff or level of costs that can be charged under the power contracts). III. TRIAL WITNESSES At trial, Connecticut Yankee presented the evidence supporting its damages claim through the following witnesses: 31. Loring Mills, who had a long career in the nuclear industry, testified about the

development of the Nuclear Waste Policy Act of 1982 ("NWPA") and the DOE waste disposal contracts, and his role in both. Tr. 263:24-299:14; 330:1-455:7. a. From 1958 to 1976, Mr. Mills worked on various aspects of the nuclear

fuel cycle at General Electric Company ("GE"), Kerr-McGee Corporation, and Nuclear Fuel Services. Tr. 264:12-265:9; Tr. 265:17-22; Tr. 266:16-267:24. He served for a time as quality assurance manager for Nuclear Fuel Services' reprocessing plant in West Valley, NY. Tr. 266:16-268:2. b. In 1976, Mr. Mills became a senior executive of the Edison Electric

Institute ("EEI") in Washington, DC ­ a trade association for investor-owned electric utility companies, see D02.034 at 1 ­ where he worked on nuclear fuel cycle issues, including both "front end" issues concerning fresh fuel and, increasingly after reprocessing ceased in 1976-77, "back end" issues concerning spent fuel disposition. Tr. 267:25-269:21. Mr. Mills was actively involved in the late 1970s in developing the Environmental Impact Statement that selected geological disposal for SNF, Tr. 279:119

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 12 of 110

18, and subsequently in developing the NWPA and then the DOE waste disposal contracts. Tr. 270:5-11; Tr. 279:11-16; Tr. 288:4-289:8 (recounting that Mr. Mills suggested the amount of the contractual "one mill" fee). He worked to promote appropriate implementation of the DOE contracts until his retirement in 1993. Tr. 270:16-271:1. 32. Dr. John Bartlett has studied nuclear engineering and worked to design and

implement nuclear technologies since early in the Atomic Age. Tr. 578:10-602:3. He testified both as a fact witness, regarding the DOE spent fuel contracts and programs, and as an expert, offering opinions about an appropriate acceptance rate and schedule for the DOE program. a. Dr. Bartlett taught nuclear engineering at the University of Rochester,

served as a Fulbright scholar teaching nuclear courses in Istanbul, Turkey, Tr. 582:7-17, and assisted in the development of Turkey's nuclear program, Tr. 583:5-10. b. For most of 1969-1978, Dr. Bartlett worked for Battelle at Pacific

Northwest National Laboratory, where he became Manager of Systems Studies in the Nuclear Waste Program Office, a predecessor to DOE's Office of Civilian Radioactive Waste Management ("OCRWM"). Tr. 583:11-18; Tr. 584:11-14. In 1974, Dr. Bartlett led the development of the voluminous Technical Alternatives Document, which compiled information about all technologies used in the management of radioactive waste from the receipt at a storage location to ultimate disposal. Tr. 586:7-22. This document became the basis for DOE's 1980 programmatic environmental impact statement for the national disposal program, which OCRWM now runs. Tr. 586:24-587:4. A principal focus of Dr. Bartlett's work throughout his career has been the measurement of nuclear waste.

10

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 13 of 110

c.

From early 1990 until January 1993, Dr. Bartlett served as the

presidentially-appointed Director of OCRWM. Tr. 590:2-24. d. Dr. Bartlett's consulting career since 1993 has included work on

developing an international spent fuel repository in Australia. Tr. 595:7-597:3; see Tr. 596:9-20 (noting work on receipt of spent fuel from reactors across the world, transportation methods and design of the disposal facility). Dr. Bartlett's experience also includes reactor decommissioning projects, development of NRC regulations, and providing technical support to the EPA in developing standards applicable to Yucca Mountain. Tr. 600:19-602:3. 33. Frank Graves, an economist expert in analyzing and modeling the performance

of markets, particularly utility-related markets, testified regarding what would have been an economically reasonable schedule for spent fuel acceptance had DOE begun performing in 1998. Tr. 741:23-765:4 (Graves) (Mr. Graves' credentials); Tr. 767:8-788:18; Tr. 797:13-798:6 ("mustmove" fuel analysis); Tr. 777:14-781:7 (reasonable acceptance rate analysis); Tr. 800:6-865:11 (modeling of the exchanges market). Based upon his economic models, Mr. Graves also calculated the time when each Yankee utility's SNF would have been removed if DOE had performed. Tr. 825:10-827:6. 34. Charles Pennington, Vice President of Marketing and Business Development for

NAC International ("NAC"), has long been involved in the development, design, and pricing of multi-purpose canister systems for storage and transport of SNF and in evaluating the costs of designing and constructing dry storage facilities at utility sites. Tr. 1051:9-20; Tr. 1052:241054:2. Mr. Pennington provided expert testimony supporting inputs that Mr. Graves used in his analysis, concerning average or representative costs to implement and operate dry storage and

11

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 14 of 110

costs of wet fuel pool storage, as well as historical and projected fuel discharges and remaining spent fuel storage capacities at all domestic commercial nuclear plants. Tr. 1077:23-1112:16. 35. Daniel Collier, Vice President of NAC's consulting operations, was previously

responsible for NAC's brokerage business, where he arranged purchases of nuclear fuel cycle materials and services, matching buyers and sellers. Tr. 1221:22-1222:2. Mr. Collier testified regarding the acceptability among nuclear utilities, based on prior experience, of exchanging various goods and services. Tr. 1219:17-1263:12. 36. Ivan Stuart has substantial expertise, and experience, with the technical and

practical aspects of spent fuel storage and transportation. a. During nearly 30 years at GE's Nuclear Division, Mr. Stuart served as

Manager of Licensing for almost a decade (supervising over 100 engineers), then Manager of Training (again supervising over 100 engineers), and beginning in 1987, as Manager of Waste Management Service, where he had particular responsibility for the Vallecitos Laboratory in California (which studied damaged or failed nuclear fuel and other radioactive material) and the Morris Fuel Storage Facility in Illinois. Tr. 1293:91311:17. b. In March of 1990, Mr. Stuart became Vice President of Engineering at

NAC International, where he had overall responsibility for design and licensing for all of the casks that NAC owned and was selling. Tr. 1341:18-1342:8; Tr. 1343:2-19. He also worked on numerous projects at NAC involving transportation of spent fuel and GTCC waste, including directing one where DOE had contracted with NAC to take research reactor fuel from around the world back to the United States to be stored in South

12

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 15 of 110

Carolina. Tr. 1369:23-1370:1; see Tr. 1362:24-1363:24 (noting work on the Owl Creek Private Storage Project, a private dry storage facility for storage of SNF). c. Mr. Stuart testified as an expert that there were no technical impediments

to DOE's implementation and operation, beginning not later than January 1998, of a robust program for acceptance, transportation and disposal of spent fuel and GTCC waste. Tr. 1376:18-1377:5. 37. Tom Bennet joined Connecticut Yankee in 1997 as the Vice President, Chief

Financial Officer ("CFO") and Treasurer (after nine years as a financial manager at Vermont Yankee and holding the same Vice President and CFO positions at Yankee Atomic since 1995). Mr. Bennet testified at trial as the Vice President and CFO at both Yankee Atomic and Connecticut Yankee. Tr. 1531:1-4; Tr. 1531:14-18; Tr. 2297:14-20. a. In those positions, Mr. Bennet had overall responsibility for all financial

matters at both companies, including preparation of annual long-term cost estimates as well as those submitted to FERC and the October 29, 2002 cost estimate submitted with the damages claim in this case. Tr. 1642:6-22; Tr. 2366:6-19; Tr. 2370:5-19. b. Mr. Bennet testified about decision-making leading to dry storage at both

companies, the process of procuring and implementing dry storage facilities at both companies, and the costs both companies incurred and expect to incur as a result of the government's breach as well as the manner in which both companies account for those costs in the context of their overall accounting for decommissioning activities generally. Tr. 1815:9-1827:13; Tr. 1834:16-1843:2 (Yankee Atomic); Tr. 2293:17-2335:15; Tr. 2342:13-2389:24; Tr. 2462:12-2485:12 (Connecticut Yankee).

13

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 16 of 110

38.

Kathleen Jewell-Kelleher became Connecticut Yankee's Assistant Treasurer in

1999, assuming the Controller position at Yankee Atomic in 1997 and after 17 years at Vermont Yankee in various financial positions, including Controller, progressing to Treasurer in 2000 and adding the Controller title in 2003. Today, she serves as Treasurer and Controller of both Yankee Atomic and Connecticut Yankee. Tr. 1845:10-1849:25; Tr. 2499:25-2500:17. a. As Controller, Ms. Kelleher is responsible at each company for its books

and records, the corporate accounting function, accounts payable, accounts receivable, project accounting, billing, internal and external audit functions, trust fund accounting, and corporate tax accounting, as well as budgeting and long-term forecasting. Tr. 1850:1-12; Tr. 2500:18-2501:5. As Treasurer, Ms. Kelleher is responsible for overseeing the trusts of each company including investment management, as well as cash management of both the corporation and its trusts. Tr. 1850:13-18; Tr. 2501:10-2502:1. b. Ms. Kelleher testified about the costs Yankee Atomic and Connecticut

Yankee have incurred as a result of the government's breach, as well as the manner in which both companies have accounted for such costs that have already been incurred and estimated such costs that are expected to incur in the future. Tr. 1850:1-1900:11; Tr. 2043:3-2056:25 (Yankee Atomic); Tr. 2499:25-2537:20; Tr. 2558:11-2567:4 (Connecticut Yankee). 39. Kenneth Heider has worked in the nuclear field for over 15 years, beginning at

Yankee Atomic in 1988 at the Rowe, Massachusetts site. Tr. 2120:6-10. Mr. Heider has extensive experience with operations, management, spent fuel storage and decommissioning at nuclear power plants. He has held the position of Reactor Engineer at Yankee Atomic (from 1988 to 1990), Tr. 2120:21-2121:16; Manager of the Reactor Engineering Department at Yankee

14

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 17 of 110

Atomic (from 1990 to 1992), Tr. 2122:23-2123:16; Principal Engineer for Yankee Nuclear Services Division ("YNSD") (from 1992 to 1993), Tr. 2124:6-2127:11; Engineering and Licensing Manager for YNSD (from 1994 to 1995), Tr. 2127:14-2133:20; Yankee Rowe Site Manager (from 1995 to 1998), Tr. 2133:21-2134:24; Connecticut Yankee Decommissioning Director (from 1998 to 2000), Tr. 2134:25-2136:19; and Vice President of Yankee Atomic and Connecticut Yankee (from 2000 to present for Connecticut Yankee and 2000 to 2003 for Yankee Atomic), Tr. 2136:20-2140:18, Tr. 2636:13-2637:1. Mr. Heider also has extensive experience in preparing long-term cost estimates, in particular in the areas of fuel storage staffing, security, and regulatory fees. Tr. 2128:17-2129:7; Tr. 2131:8-2133:20; Tr. 2156:6-2157:6; Tr. 2170:222171:15; Tr. 2641:3-2643:1. Mr. Heider testified about the operations, in a heavily regulated environment, of the shut-down nuclear facilities at Yankee Atomic and Connecticut Yankee, as well as about the companies' spent fuel storage issues, decommissioning environment, in particular the impact of decommissioning with spent nuclear fuel on-site, plant security, and the costs incurred by the companies resulting from the continued storage of SNF on-site. Tr. 2141:8-2200:13 (Yankee Atomic); Tr. 2640:7-2641:2; 2643:2-2661:6 (Connecticut Yankee). 40. Russell Mellor testified about Connecticut Yankee's second reracking of its spent

fuel pool, which was completed in the summer of 1996. Prior to his retirement in April 2003, Mr. Mellor was employed at Connecticut Yankee for approximately six years from March 1997, including as Director of Operations and Decommissioning, Vice President of Operations and Decommissioning, and finally as President and Chief Executive Officer. Tr. 2584:5-2585:11. Mr. Mellor's responsibilities included oversight of the spent fuel, and operations of the spent fuel pool. Tr. 2585:17-25.

15

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 18 of 110

41.

Kenneth Wise is an expert in economics and the determination of economic

damages. Dr. Wise holds a bachelor's degree in physics from Harvey Mudd College and a doctorate in economics from the Massachusetts Institute of Technology. Tr. 3188:1-4. Dr. Wise is a principal and founder of the Brattle Group, where he works as a consultant and expert in commercial damages cases, arising from breach of contract, deceptive trade practices, takings, products liability, as well as in environmental cases, involving the allocation of environmental liabilities, insurance recoveries, the economic benefits of noncompliance, and property value impacts. Tr. 3189:25-3191:1. Much of the damages work Dr. Wise has done involves the application of engineering to support his analysis. Tr. 3190:18-21. Dr. Wise has testified on damages issues on 30 different occasions, in federal court, sate court, and before mediators and administrative law judges and arbitrators. Tr. 3190:22-3191:2. At trial in this case, Dr. Wise presented his calculation of the minimum damages Connecticut Yankee is entitled to recover as a result of the government's failure to remove spent nuclear fuel from the plant site. To arrive at damages, Dr. Wise worked closely with the company personnel at Connecticut Yankee to identify and properly calculate the incremental costs that resulted from the government's breach. Tr. 3193:24-3239:10. IV. A. DOE CONTRACT Background and Purpose 42. Since the beginning of the commercial nuclear power industry in this country, the

federal government has been responsible for the disposition of spent fuel. - 10 C.F.R., Pt. 50, App. F. (2004) ("Disposal of high-level radioactive fission product waste material will not be permitted on any land other than that owned and controlled by the Federal Government."). - Tr. 276:3-7 (Mills) ("[F]rom the very beginning of the commercial nuclear program in the United States, it was always understood that the federal government would be responsible for the disposal of waste from the program."); 16

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 19 of 110

276:18-24 (Mills) ("And it was a very well understood arrangement within the federal government at that time within the Atomic Energy Commission, as well as within the industry, that they [the government] would be responsible because of the concern of high-level waste and safety ­ long-term safety that they would be responsible for that."). - Tr. 1680:17-1681:4 (Bennet) ("Well, it's always been our understanding that the federal government would be responsible for disposal of spent fuel. As I described early on, they actually owned the spent fuel. And until commercial power reactors were allowed to own it, that was the primary understanding. But with the high-level waste policy put in place, that put in place the mechanism by which they do that, that's the ­ that set up a reliance we had on their responsibility for spent fuel."). - 42 U.S.C. § 10131(a)(4) (2000). 43. A government solution to the growing backlog of spent nuclear fuel became

urgent in the 1970s after President Carter issued an executive Order in 1977 that effectively halted reprocessing of spent nuclear fuel. - Tr. 274:14-275:23 (Mills) ("in 1977, President Carter at the time stated in April of 1977 that reprocessing of civilian nuclear fuel would be indefinitely deferred."). 44. To provide for the disposition of SNF from commercial reactors, the government

enacted the Nuclear Waste Policy Act of 1982, Pub. L. 97-425, codified at 42 U.S.C. §§ 10101 (2000) et seq. ("NWPA"); see 42 U.S.C. § 10131 (2000) (Findings and Purposes for NWPA). (a) Findings The Congress finds that ­ (1) radioactive waste creates potential risks and requires safe and environmentally acceptable methods of disposal; (2) a national problem has been created by the accumulation of (A) spent nuclear fuel from nuclear reactors; and (B) radioactive waste from (i) reprocessing of spent nuclear fuel; (ii) activities related to medical research, diagnosis, and treatment; and (iii) other sources;

17

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 20 of 110

(3) Federal efforts during the past 30 years to devise a permanent solution to the problems of civilian radioactive waste disposal have not been adequate. * (b) Purposes The purposes of this part are ­ (1) to establish a schedule for the siting, construction, and operation of repositories that will provide a reasonable assurance that the public and the environment will be adequately protected from the hazards posed by high-level radioactive waste and such spent nuclear fuel as may be disposed of in a repository; (2) to establish the Federal responsibility, and a definite Federal policy, for the disposal of such waste and spent fuel. 45. To assure that the government fulfilled its obligations for the disposition of SNF, * *

the NWPA established a program under which the government would be responsible for disposition of commercial SNF, in a geologic repository and/or other federal facility(ies), and nuclear utilities would pay substantial fees designed to cover the costs of that program. See 42 U.S.C. §§ 10101 (2000) et seq.; see 42 U.S.C. § 10131(b) (2000). 46. To assure that the government fulfilled its obligations for the disposition of SNF,

the NWPA required DOE to implement the SNF disposal program by entering into contracts with nuclear utility companies. - 42 U.S.C. § 10222(a) (2000). - Tr. 337:20-338:22 (Mills) ("We [utilities] wanted a firm contract to accomplish the task."). 47. After the NWPA became law, DOE developed a form of "Standard Contract" for

acceptance and disposition of SNF.

18

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 21 of 110

- P29 at 5458-5459 (February 4, 1983 Notice of Proposed Rulemaking for Standard Contract); P31 at 16597-98 (April 18, 1983 Final Rule for Standard Contract). - Tr. 344:11-351:22 (Mills) ("the Department of Energy made the decision that they were going to have the contract in the form of a regulation."). 48. DOE was the drafter of the Standard Contract. - P31; see Tr. 347:6-22 (Mills). 49. On June 22, 1983, Connecticut Yankee and the DOE entered into such a contract

(the "Contract"). - P1CY. 50. In the NWPA, Congress legislated a firm deadline of January 31, 1998 for the

government to begin accepting and disposing of SNF from commercial reactors. 42 U.S.C. § 10222(a)(5)(B) (2000) ("in return for the payment of fees . . . the Secretary, beginning not later than January 31, 1998, will dispose of the high-level radioactive waste or spent nuclear fuel. . . ."). 51. Congress intended that DOE's acceptance of SNF, beginning in 1998, would be

expeditious and timely. - The NWPA mandated that the Contracts provide that DOE "shall take title to the high-level radioactive waste or spent nuclear fuel involved as expeditiously as practicable upon the request of the generator or owner of such waste or spent fuel." 42 U.S.C. § 10222(a)(5) (2000) (emphasis added). - Tr. 3686:18-22 (Morgan) (believed intent of Congress and NWPA was for DOE to remove spent fuel from utilities as fast as it reasonably could). - (6/28/04) Dep. Desig. 5/10/02 Barrett, 1163:10-1166:7 ("Q. Why did you want to work off that [backlog] inventory of spent nuclear fuel as soon as practicable? A. Because I believe that's the intent of the act."). 52. Congress mandated that the activities contemplated by the NWPA be conducted

in a timely manner.

19

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 22 of 110

- See PFF ¶¶ 50-51 above. - The NWPA specified a timetable for siting and licensing repositories. These statutory deadlines required that within 180 days after enactment of the NWPA [i.e., by July 1998], the Secretary of Energy must recommend to the President five sites for possible repository characterization, see 42 U.S.C. § 10132(b)(1)(A) (2000); by January 1, 1985, the Secretary must recommend to the President three sites for actual characterization, see id. § 10132(b)(1)(B); by March 31, 1987, the President must recommend to Congress one site for repository construction authorization, see id. § 10134(a)(2)(A); and by January 31, 1989 (with limited exceptions), the NRC must issue a final decision on construction authorization, see id. § 10134(d). - (6/28/04) Dep. Desig. 4/24/02 Susan Klein, 172:7-14 (DOE's Rule 30(b)(6) witness) ("Q. Do you agree that the Nuclear Waste Policy Act contemplated that process of siting, licensing, and constructing a repository would have been completed by January 1998? [objection omitted] A. I'm thinking. Yes."). 53. The legislative record reflects that an important purpose of the NWPA was to

assure that utilities, including Connecticut Yankee, would not have to incur additional costs to construct or maintain additional on-site storage of SNF after January 31, 1998. See also PFF ¶ 63. - In enacting the NWPA, Congress specifically found that: "A national problem has been created by the accumulation of (A) spent nuclear fuel from nuclear reactors; and (B) radioactive wastes from (i) reprocessing of spent nuclear fuel; (ii) activities related to medical research, diagnosis, and treatment; and (iii) other sources." 42 U.S.C. § 10131(a)(2) (2000). - Congress further found that: "Federal efforts during the past 30 years to devise a permanent solution to the problems of civilian radioactive waste disposal have not been adequate." 42 U.S.C. §10131(a)(3) (2000). - The NWPA was enacted in response to the "spent fuel bottleneck." H. Rep. No. 97-491, pt. 1 at 28 *1982), reprinted in 1982 U.S.C.C.A.N. 3792, 3794; see also H. Rep. No. 97-785, pt.1 at 50 (1982) (House Report to predecessor bill of the NWPA) ("Continued delays in establishing that radioactive materials can be disposed of safely . . . can no longer be tolerated. This is important . . .

20

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 23 of 110

because it is no longer acceptable to allow increasing quantities of nuclear waste to be stored on an interim basis."). B. Contractual Understandings and Intentions of the Parties Regarding Scheduling Issues 54. The Contract provides, as required by the NWPA, that DOE "shall begin"

performing the required services under the Contract "not later than January 31, 1998." P1CY, Art. II. See 42 U.S.C. § 10222(a) (2000). 55. The Contract requires that the DOE shall "continue" the required services, after

commencing not later than January 31, 1998, "until such time as all SNF and/or HLW from the civilian nuclear power reactors specified in Appendix A ... has been disposed of."). P1CY, Art. II. 56. The Contract is silent on the specific acceptance rate under which DOE must

accept SNF from Connecticut Yankee. P1CY. 57. The Contract does not provide a mechanism to determine an acceptance schedule

under which DOE must accept SNF from Connecticut Yankee. See P1CY. 58. The Contract is silent on the specific acceptance schedule under which DOE must

accept and dispose of SNF from Connecticut Yankee. See P1CY. 59. The Contract does not provide a mechanism to determine an acceptance schedule

under which DOE must accept and dispose of SNF from Connecticut Yankee. See P1CY. 60. The Contract states that DOE is responsible "to take title to the spent nuclear fuel

or high-level radioactive waste as expeditiously as practicable upon the request of the generator or owner of such waste or nuclear spent fuel" upon commencement of the repository provided for in the Act. P1CY at 1, second "whereas" clause.

21

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 24 of 110

61.

At the time the Contract was entered into in 1983, the parties anticipated and

intended that a repository would be operational in time for DOE to begin acceptance of SNF no later than January 31, 1998. - Tr. 383:24-384:14 (Mills) ("And there was expectations as indicated by the members of the Department of Energy. I came [sic] name Frank Kaufman specifically, stating that yes, we can satisfy that date. Actually, we believed we can have a repository before that time. And we fully believed that the 15-year advance time was sufficient for this program to actually carry out what was requested."). - P978 (June 1983 Report on Financing the Disposal of Commercial Spent Nuclear Fuel and Processed High-Level Radioactive Waste) at 8-9 (In June of 1983 ­ contemporaneous with the execution of the Contract ­ DOE prepared its first fee adequacy report, an annual analysis required by the NWPA, 42 U.S.C. § 10222(a)(4) (2000), which stated "[I]t is assumed that each of the two geologic repositories will begin receiving either spent fuel discharge or reprocessing waste in 1998 and 2002, respectively. Each repository has a design receipt rate of 3,000 metric tons (MT) a year, although a receiving rate of 1,800 MT is assumed for the first five years."). - See (7/14/04) Dep. Desig. 5/8/02 Barrett, 1050:1-9 (his understanding is consistent with the statement that "When the nuclear waste policy [act] was enacted, it was envisioned that the department would have a repository available for permanent waste disposal in 1998, and the department entered into contracts with the utilit[ies] to begin accepting waste in 1998 on that basis."). - See P516 at 21794 (DOE 5/3/95 Notice re Waste Acceptance Issues) ("the Act originally envisioned that a geologic repository would be in operation, and DOE would be prepared to begin acceptance of SNF by January 31, 1998"); P951 at 27008 (DOE 5/25/94 Notice of Inquiry) ("When the Act was passed, the Department anticipated that a geologic repository would be in operation . . . by January 31, 1998"). - See PFF ¶ 52. 62. In 1983, the parties anticipated and intended that if a repository was not

operational in time for DOE to begin acceptance of SNF by January 31, 1998, then DOE would either construct an alternative facility at which to accept SNF or compensate utilities for the failure to timely accept SNF. P633, attachment at 1-3 (September 1983 DOE Mission Plan

22

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 25 of 110

Strategy Memorandum) ("the lack of existence of particular type facilities will not delay or postpone the acceptance of spent fuel."). 63. At the time of formation of the Contract, the parties recognized that the rate of

DOE's acceptance of utilities' SNF should achieve two objectives: (1) to prevent the nuclear utilities from having to construct or maintain additional at-reactor storage facilities for SNF after January 31, 1998; and (2) to accept SNF at a rate that permitted DOE to keep up with the rate of production of SNF and reduce the existing SNF backlog. - Tr. 341:7-343:2 (Mills) (discussing understanding of utility representatives and high-level DOE officials). - P633 (September 15, 1983 Mission Plan Strategy Memorandum), attachment at 1 (DOE explained its waste acceptance strategy for the SNF program as using "an acceptance rate during the first 5 years such that no utility would have to build additional storage facilities after 1998."). - P678 (December 1983 Morgan Program Overview) (Mr. Morgan publically described the SNF program's strategy as follows: "[B]eginning in 1998, utilities will not have to provide any additional storage facilities on site. During the first year of operation of the repository in 1998, we should be receiving fuel at a rate so that no utility would have to add any further storage facilities either on site or at another location.") (emphasis added); Tr. 3682:123683:19 (Morgan) (confirming that when he directed the SNF program, he thought it appropriate to have enough waste acceptance capability to meet the discharge rate from utilities and to work off the backlog). - P636 at 2-1 (December 1983 Draft Mission Plan) ("The waste materials will be accepted in accordance with a Waste Acceptance Schedule designed to provide an acceptance rate in the first five years such that no utility will have to provide additional storage capacity after January 31, 1998. Subsequently, the acceptance rate will be equal to or greater than the actual discharge rate of spent fuel each year."). - P647, enclosure 1 at 1 (July 23, 1984 DOE Richland Operations Office comments on Draft Mission Plan) ("Based upon our interpretation of the NWPA, the minimum acceptance rate should be based upon the rate at which spent fuel is generated by civilian nuclear power reactors. This would be consistent with the NWPA intent that no power reactor would require additional spent fuel storage after January 31, 1998.").

23

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 26 of 110

- See (6/28/04) Dep. Desig. 4/22/02 Barrett, at 55-56 (agreeing that "the policy behind the act" would call for reductions of the backlog within a reasonable amount of time) ("Our intention was to design a system that would reduce the backlog to a reasonable sense."); (7/14/04) Dep. Desig. 5/1/02 Milner, 73:20-22 ("At the point I joined the program [in April 1984, Tr. 4711:234712:20], my understanding of the intent was to work off the backlog."). - (7/14/04) Dep. Desig. 5/8/02 Barrett, at 1064-65 (intent of the act was that the utilities would pay once into the waste fund and the utilities "would not have to pay again directly out of their own pockets to provide for such storage and disposal during the period that the department failed to comply. . . ."). a. During the notice and comment period on the Standard Contract, the

Edison Electric Institute noted that the Contract was silent on the industry-wide rate of acceptance of SNF. D02.034 at 8, Attachment A, at 2. EEI told DOE that "[w]e 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." Id. b. In publication of the Standard Contract as a final rule, DOE did not

address the acceptance rate comments or disavow the utilities' expressed understanding. P31 (April 18, 1983 publication of Final Rule in Federal Registry). 64. At the time of formation of the Contract, the parties understood that an industry-

wide acceptance rate of 3000 MTU per year would be appropriate to accomplish the objectives identified in PFF ¶ 63 above. - Tr. 509:15-511:15 (Mills) (parties anticipated annual industry discharges of 2,000 to 2,500 MTU and that DOE would work off backlog of already discharged spent fuel at a rate of about 1,000 MTU per year); Tr. 511:22512:12 (Mills) (parties anticipated in 1983 that repository would have capacity of 3,000 MTU per year); Tr. 343:4-14 (Mills) (DOE officials planned spent fuel acceptance from utilities in 1983 at about 3,000 MTU per year). - P420 (July 1983 DOE Report on Financing Disposal of Commercial SNF) at 8 (each repository designed to receive 3,000 MTU per year). - P458 (May 4, 1983 Mills statement on importance of provisions of NWPA) at 4 (expectation that DOE receive about 3,000 MTU per year).

24

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 27 of 110

- P978 (June 1983 DOE Report on Financing Disposal of Commercial Spent Nuclear Fuel) at 11. - See also (6/28/04) Dep. Desig. 4/22/02 Barrett, 59:4-11 (agreeing that "the 3,000 rate would be consistent with [Mr. Barrett's] understanding of the intent of the act to reduce over a reasonable period of time the backlog of spent nuclear fuel throughout the nation . . ."); id. at 56-67 (Mr. Barrett understood in 1986 that the 3,000 rate would accomplish the goal of reducing the backlog). 65. At the time of the formation of the Contract, the parties understood that DOE

would accept about 3000 MTU of commercial spent fuel per year and that this acceptance rate would be achievable by 1998. - Tr. 343:4-14 (Mills) ("Well, there was considerable discussion of what should the capacity be for receiving this waste or spent fuel at a repository. And the capacity that was discussed at that time and has been documented in many ways was the planned activity would be at a quantity of about 3,000 metric ton per year."). - Tr. 385:14-387:7 (Mills) ("And there were discussions on what was a reasonable rate of receipt at a repository from a design standpoint. This is the Department of Energy identifying what is a reasonable design quantity for a repository. And it was discussed. That quantity was discussed while the legislation was being developed. And it was understood that the design rate would be about 3,000 metric ton per year."). - Tr. 386:1-387:7 (Mills) ("Q. Did you have discussions about the 3,000-ton rate with DOE officials at that time? A. Yes, I did. Q. Do you recall specifically with whom? A. I am convinced I had those discussions with Frank Kaufman, with Wade Ballard, with Mike Lawrence. And you know, this was over several years' time that this was being developed. So the number of people that were involved in the program at that time were changing. And I believe at that particular time that Shelby Brewer was the assistant secretary for nuclear energy. And I recall having conversations with Mr. Brewer. There was another individual who had responsibility for the program just before the Nuclear Waste Policy Act, which was Shelley Myers. And I remember having similar conversations with Mr. Meyers. Q. These were conversations in which the 3,000-ton rate was discussed? A. There were many issues discussed. And I am convinced that many times we discussed that rate of 3,000 metric tons. It shows up in many different ways. Q. Okay. And it's your understanding from those conversations that the Department of Energy officials, at least the ones that you mentioned and discussed this with, expected the 3,000-ton rate to be achieved by 1998; is that right? A. They ­ they had said the geologic repository receiving rate would be designed for 3,000-ton per year and they had expected they would be able to achieve that by 1998."). 25

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 28 of 110

a.

The parties' intent and understanding is shown by DOE reports on an

appropriate fee to charge utilities for disposal services, which pre-dated the NWPA and the Contract. These reports reflected rates for the acceptance of commercial spent fuel consistent with, or even greater than, the 3000 MTU. P7 at 18, 21 (1978 Estimate of Charges for DOE Services uses 1800 MTU for first five years, 6000 MTU per year thereafter); P1959 at 9 (1980 Report on Fee uses a rate of 1800 MTU for the first five years and 6000 MTU per year thereafter); P978 at 8 (reporting on prior acceptance rates); see Tr. 390:24-391:17 (Mills) (the 3000 MTU rate for the first repository pre-dated the passage of the NWPA). b. The intent of parties to Standard Contracts at the time of contract

formation that DOE would accept about 3000 MTU of commercial spent fuel per year is reflected in Loring Mills' May 5, 1983 presentation at a conference attended by the industry and DOE. P458; Tr. 357:19-359:1 (Mills) (P458 accurately reflects the substance of his remarks at a conference attended by both nuclear utilities and members of DOE). c. In June of 1983 ­ contemporaneous with the execution of the Contract ­

DOE prepared its first fee adequacy report, an annual analysis required by the NWPA, 42 U.S.C. § 10222(a)(4) (2000). DOE calculated costs based on a program that would accept spent fuel from utilities at a steady state rate of 3000 MTU per year by the sixth year of operations. P978 (June 1983 Report on Financing the Disposal of Commercial Spent Fuel) at 8 and 9 ("It is assumed that each of the two geologic repositories will begin receiving either spent fuel discharge or reprocessing waste in 1998 and 2002,

26

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 29 of 110

respectively. Each repository has a design receipt rate of 3,000 metric tons (MT) a year, although a receiving rate of 1,800 MT is assumed for the first five years."). C. Spent Fuel Acceptance 66. The pace and sequence of DOE's acceptance of SNF from utilities should be

efficient in order to minimize the total cost to utilities of storing and disposing of SNF. - Tr. 609:5-19 (Bartlett) ("The principal goal, if I had to capture it in one word, would be efficiency, to make the system ­ the program efficient."). - Tr. 633:25-634:17 (Bartlett) ("[The acceptance rate for spent fuel] would be efficient in terms of making proper use of the equipment facilities and everything associated with the system so that there's nothing wasted or insufficient with respect to the accomplishment of the objective. . . . When the system is operating efficiently at maximum efficiency, if I can use the phrase, it is operating at minimum cost.") (question omitted). - Tr. 643:6-21 (Bartlett). - P95 at 15 (1985 DOE Mission Plan) identifies timely and efficient acceptance of spent fuel as one of the NWPA's prime objectives: "[T]he program must vigorously pursue the Act's directive to begin accepting spent fuel and high-level waste for disposal no later than January 31, 1998, and to continue to dispose of the waste in a highly efficient manner consistent with the continued orderly operation of the Nation's nuclear power-generation plants." (Emphasis added). - Tr. 3739:4-20 (Morgan) (he agreed with view expressed in Mission Plan that the program must be conducted in a cost-effective manner). - (6/28/04) Dep. Desig. 5/8/02 Milner, 266:23-267:4 (an OCRWM employee since April 1984, including Chief Operating Officer for the past four years); Tr. 4711:23-4712:3 ("Q. Has it been the objective of OCRWM to operate the waste management system in a way that can achieve maximum efficiency? A. Yes. Q. And that's been an objective throughout your time in RW? A. Yeah, I believe it has. Q. And when you consider efficiency in operating the waste management system, is it also proper in your view to take into account utility costs? A. My personal opinion, that should be a consideration.")).

27

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 30 of 110

67.

Structuring the DOE SNF acceptance program to minimize utilities' total costs of

storing and disposing of SNF is consistent with the full cost recovery nature of the Standard Contracts. - Tr. 618:19-619:18; Tr. 635:9-636:7 (Bartlett) ("[G]iven the full-cost recovery as the basis [for operation of the DOE system], you want to operate as efficiently as possible to minimize the costs that are incurred, both by the Department and by the reactors."). - P1CY, Art. VIII.A.4 and at 2 (fourth "whereas" clause). - (6/28/04) Dep. Desig. 5/14/02 Barrett, 178:3-12 ("Q. What is your understanding of the relationship between the objective of economic efficiency and the fuel cost recovery nature of the contracts? [objection omitted] A. I believe it is the federal government's responsibility to prepare a cost-effective system to minimize the costs on the waste generators for societal good."). - Tr. 3739:4-20 (Rusche) (the program must be conducted in a costeffective manner with full cost recovery). - P95 at 423 (1985 Mission Plan definition of "full cost recovery"). - (6/28/04) Dep. Desig. 5/8/02 Milner, 267:23-268:25 ("In my personal opinion, I think it ­ the department should and in fact I think the department did consider utility costs, and that's factored in many decisions what the impacts would be on utility costs."). - See (7/14/04) Dep. Desig. 4/19/02 Trebules, 4:22-5:14 (when working on the Mission Plan in 1984-1985, "I think we used phrases like fiduciary responsibility. People working in the program felt that they had an obligation to try to execute the program efficiently and effectively."). 68. The total cost to utilities of storing and disposing of SNF can be divided into three

parts: at-reactor SNF storage costs; the costs that each utility will incur to load its SNF into casks provided by the government pursuant to the Standard Contracts for transport to a government facility; and the costs of the DOE disposal program (the sum of the fees the utilities have or will pay to the government for the services specified in the Standard Contracts). - Tr. 619:3-18 (Bartlett) ("The program is a full-cost recovery system, or operates under full-cost recovery. And that means that you want to minimize the burden of cost for the Department to receive ­ the cost it incurs to receive the 28

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 31 of 110

things. But you also have the responsibility to minimize the costs to the reactors, to avoid the need for the reactors to expand their spent fuel capacity, to have excess costs associated with the transfer operations, or to have to spend excess monies just for program costs into the Nuclear Waste Fund. So you minimize costs on both sides, everywhere, and the effective full-cost recovery system."). - Tr. 634:18-635:8 (Bartlett) ("The reactors incur what are called program costs, which are the costs that correspond to the fees that are paid into the system to have the fuel received and disposed. They also have the at-reactor storage costs, the costs they incur just to operate and store spent fuel on the site. And they also have the cost associated with their cost associated with the transfer operations to remove spent fuel from storage."). 69. A utility's at-reactor SNF storage costs rise precipitously in two events: (1) if it is

forced to add to its at-reactor storage capacity because its pool fills up, and (2) if it is forced to extend at-reactor storage of SNF after its reactor permanently shuts down and all of its spent fuel has discharged or "cooled" for at least five years. The amount of spent fuel that would trigger one of these events can be thought of as "Must-Move Fuel." Tr. 639:24-643:2 (Bartlett); Tr. 767:8-768:24 (Graves). D. 3000 MTU is a Reasonable Rate. 70. In the 1980s and 1990s, the aggregate amount of Must-Move Fuel at commercial

nuclear reactors could be projected to grow at a rate of about 3000 MTU per year starting in 1998. - Tr. 777:14-778:10 (Graves) ("But on average, over that whole time frame, about a 3,000 metric-ton-per-year rate is the approximate annual average increase in spent ­ in must-move spent nuclear fuel. So that's a benchmark for a reasonable acceptance rate."). 71. Had DOE begun acceptance of spent fuel from utilities by January 31, 1998 at a

rate reasonably ramping up to 3000 MTU per year, the backlog of utility Must-Move Fuel would have been eliminated by 2002, and very few utilities would have been required to obtain or maintain additional at-reactor SNF storage capacity after January 31, 1998. - Tr. 611:18-612:1; Tr. 643:22-645:1 (Bartlett). 29

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 32 of 110

- See (6/28/04) Dep. Desig. 5/10/02 Barrett, at 1368-69 (agreeing that in a "general sense," DOE had established that the 3,000 MTU rate would achieve the objectives of "avoid[ing] not only spent-fuel overflows but pool rerackings to [sic and] allow shut-down reactors to empty their sites."); see also id. at 1370-71 (3,000 MTU rate is consistent with these objectives). 72. In the 1980s and 1990s, the aggregate amount of spent fuel discharges at

commercial nuclear reactors could be projected to be about 2000 MTU per year starting in 1998. Tr. 612:2-5 (Bartlett); Tr. 769:18-771:1 (Graves); P175 (August 17, 1993 PNL Throughput Rate Analysis) (contractor-generated document) at 4-5. 73. An annual acceptance rate of about 3000 MTU of commercial spent fuel would

tend to minimize the costs of the DOE disposal program. - Tr. 633:18-634:12; Tr. 636:25-637:14 (Bartlett) (3000 MTU rate would be efficient). - Tr. 609:20-611:11 (Bartlett) (3000 MTU per year is maximum rate at which spent fuel can be placed into a geologic repository). - Tr. 645:2-12 (Bartlett) (an acceptance rate higher than 3000 MTU per year would be unnecessary and wasteful, because not all of the capacity could be effectively used). - Tr. 612:17-613:8 (Bartlett); Tr. 782:10-783:3 (Graves) (DOE studies show that an annual acceptance rate of 3000 to 4000 MTU would minimize program costs). - P175 (August 17, 1993 PNL Throughput Rate Analysis) (contractorgenerated document) at 4-12 to 4-13 (an annual acceptance rate of 3000 to 5000 MTU would minimize program costs). - (6/28/04) Dep. Desig. 4/22/02 Barrett, at 197-198 (various system studies done in the eighties and early nineties supported the 3,000 MTU rate). 74. A reasonable acceptance rate for commercial spent fuel should include a buffer

capacity above the minimum amount needed to handle the projected needs of utilities in order to be able to handle additional needs for spent fuel acceptance occasioned by previously unanticipated contingencies, such as early shutdowns of nuclear power plants.

30

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 33 of 110

- Tr. 612:6-16 (Bartlett) ("[Y]ou need flexibility and buffering in case there are unexpected discharges. And you also might need to, on an intense basis, at some point, accept a quantity for a shutdown reactor, which is incurring costs for storage that they shouldn't have to incur if the reactor is shut down."). - Tr. 645:20-646:1 (Bartlett). 75. A reasonable acceptance rate should facilitate the use of acceptance campaigns

(taking a sufficient amount of spent fuel from a single facility such that fewer DOE visits to the facility are needed) in order to minimize both utility transfer costs and DOE program costs. - Tr. 1425:6-9 (Stuart) ("It is my opinion that [DOE] would have used campaigns because it is so obvious[ly] a benefit to the program that I can't think of any technical reason not to use a campaign.") - Tr. 1425:16-1426:22 (Stuart) (the use of acceptance campaigns is much more efficient than frequent small pickups of SNF for both utilities and DOE). - Tr. 637:15-639:15 (Bartlett) (utilities incur fixed costs in terms of training, preparation and disruption of operating reactor operations each time they deliver spent fuel to DOE, and campaigns minimize utility transfer costs by minimizing the number of times these costs are incurred). - Tr. 1426:16-22 (Stuart) (DOE uses campaigns and "In fact, it requires it," in transporting research reactor fuel). - (6/28/04) Dep. Desig. 5/14/02 Barrett, at 174-175 (campaigning promotes efficiencies in transportation, loading, cask handling, receipt and turnaround). 76. An acceptance rate of 3000 MTU of spent fuel per year from commercial reactors

would be sufficient to support the use of acceptance campaigns, but a significantly smaller acceptance rate would not. Tr. 639:16-23 (Bartlett) (3000 MTU per year acceptance rate is consistent with the use of acceptance campaigns but 1000 MTU per year acceptance rate would not be). 77. From the time of the formation of the Contract to the present, DOE has been

planning to accept 3000 MTU of spent fuel from commercial utilities.

31

Case 1:98-cv-00154-JFM

Document 344

Filed 11/17/2004

Page 34 of 110

- DOE's draft Mission Plans, and the 1985 Mission Plan, all set forth acceptance rates of 3000 MTU year. P636 at 2-3 (1983 Draft); P683 at 2-2 (1984 Draft); P95, vol. I, at 26-27 (1985 Mission Plan). - (6/28/04) Dep. Desig. 4/22/02 Barrett, at 119-120 (since Mr. Barrett's involvement in the program in 1985: "In '85 and today it has alw