Free Published Opinion/Order - District Court of Federal Claims - federal

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 1 of 103

In the United States Court of Federal Claims
No. 98-126C Filed Under Seal: September 30, 2006 Unsealed and Reissued: October 4, 2006 ************************************* YANKEE ATOMIC * ELECTRIC COMPANY, * Plaintiff, * * v. * * THE UNITED STATES, * Defendant. * ************************************* Damages for breach of Standard Contract for disposal of spent nuclear fuel and high-level radioactive waste; mitigation; incurred costs for partial breach of contract; foreseeability; substantial causal factor; commercial reasonableness; reasonable certainty; amended and supplemental pleadings; takings; election of remedies; administrative dispute remedy; future offsets; use of expert demonstrative evidence.

Jerry Stouck, Washington, D.C., for plaintiffs. Robert L. Shapiro, Washington, D.C., of counsel. Harold D. Lester, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant, with whom were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director and Kevin B. Crawford, John C. Ekman, Heide L. Herrmann, Russell A. Shultis and Marian E. Sullivan, Trial Attorneys. Jane K. Taylor, Office of General Counsel, United States Department of Energy, Washington, D.C., of counsel. OPINION and ORDER1/ Merow, Senior Judge Three nuclear utilities seek damages for the Department of Energy's ("DOE")'s breach of contract to accept, transport, and dispose of their spent nuclear fuel ("SNF").2/ Substantial storage costs for SNF are borne by utility ratepayers whose rates also reflect the $440.5± million paid or to be paid to DOE under the contracts involved. Breach of contract by the United States has been established. Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1342 (Fed. Cir. 2000). Plaintiffs seek to recover their incurred SNF storage costs from the United States as mitigation expenses ­ commercially reasonable and foreseeable responses to DOE's admitted

This shall also be deemed applicable in Connecticut Yankee Atomic Power Co. v. United States, No. 98-154C and Maine Yankee Atomic Power Co. v. United States, No. 98-474C. Spent nuclear fuel "has been withdrawn from a nuclear reactor following irradiation, the constituent elements of which have not been separated by reprocessing." 42 U.S.C. § 10101(23).
2/

1/

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 2 of 103

decade-long delay in commencing performance. Defendant counters that many, if not most, of the costs would have been incurred regardless of DOE's delay. Trial in this matter consumed seven weeks. INTRODUCTION In 1983, pursuant to the Nuclear Waste Policy Act of 1982 ("NWPA"), Pub. L. No. 97-425, 96 Stat. 2201 (codified at 42 U.S.C. §§ 10101-10270 (2000)) plaintiffs, along with all domestic nuclear utilities, entered into Standard Contracts with DOE wherein, in return for payment of substantial fees, DOE would accept title to, transport and dispose of the utilities' SNF, commencing performance no later than January 31, 1998. Due in part to the highly regulated nature of the industry, entry into Standard Contracts was mandatory. "Nuclear plant operators and utilities were mandated by Congress to enter into Standard Contracts, the terms of which are presented at 10 C.F.R. § 961.11, as a prerequisite to obtaining renewal of their operating licenses." Indiana Michigan Power Co. (hereinafter "Ind. Mich.") v. United States, 422 F.3d 1369, 1372 (Fed. Cir. 2005) (citing 42 U.S.C. § 10222(a)(1)); Maine Yankee, 225 F.3d at 1337 ("`The NWPA effectively made entry into such contracts mandatory for the utilities.'")). DOE did not commence performance by 1998 as required by the NWPA and the Standard Contract. While insisting there will be performance, the date continues to recede from 2010 to 2017, the latest prognosis. Plaintiffs assert that the delay in DOE's performance has resulted in substantial damages. All three plaintiffs' nuclear reactors have been shut down. They contend that if DOE had timely commenced performance, all their SNF would no longer be on-site (or at least they would not be responsible for it); and accordingly, their sites would have been "decommissioned" and available for other use. At trial, damages were presented on actual and future costs for time periods preceding January 31, 1998 (pre-breach) through 2012 (2011 for Maine Yankee). See Yankee Atomic Elec. Co. v. United States, 2004 WL 1535688, at *1-3 (June 28, 2004). Future costs were based in substantial part on cost projections approved by regulators for rate base purposes. As such, these costs were subject to public notice and opportunity for input, analysis and criticism. After trial was completed, the Circuit Court issued its decision in Indiana Michigan and held that, in any suit for breach of an SNF contract, recoverable costs were limited to those actually incurred up to the date the litigation was initiated. Trial, as well as post-trial briefing and proposed findings in the instant cases included future damages based on the then assumption that DOE planned to commence performance in 2010. Following the ruling in Indiana Michigan, the court requested supplemental briefing. Thereafter, plaintiffs' Motion to Amend their Complaints was granted in part, and record evidence was limited to damages actually incurred through 2001 for Yankee Atomic and Connecticut Yankee, and through 2002 for Maine Yankee. These damages involved costs actually incurred as of trial and contained in plaintiffs' pre-trial and trial evidence. Costs asserted for periods beyond these time periods were dismissed without prejudice to their reassertion in future litigation. Upon careful consideration of testimony, argument, documents and exhibits, the court concludes that the plaintiffs reasonably incurred substantial and foreseeable costs in mitigating
-2-

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 3 of 103

DOE's acknowledged impending and substantial delay in commencement of performance of the contracts involved, and that the delay was a substantial causal factor in their respective expenditure decisions. Accordingly, plaintiffs are entitled to recover certain, but not all, mitigation costs claimed as damages for DOE's partial breach in not commencing contract performance by January 31, 1998. Technical summary The nuclear waste problems involved in this litigation commence with the content of the fuel rods. Uranium oxide pellets (little finger-sized) are placed into 12-14 foot metal rods of about the same diameter and bundled together with metallic bands into "assemblies." Each fuel assembly contains about one metric ton of uranium ("MTU"). A fuel assembly is approximately nine inches square and fourteen feet long. (PX 1926.001; Yankee Atomic's Proposed Findings of Fact ("YA PFF") 9; Maine Yankee's Proposed Findings of Fact ("MY PFF") 8; Connecticut Yankee's Proposed Findings of Fact ("CY PFF") 8 and Def.'s Resps.) Assemblies are placed in the reactor core where fission produces heat which is converted to steam to drive turbines and generate electricity. Within twelve to eighteen months, the uranium in the rods becomes relatively inefficient. The reactor is shut down, the assemblies removed and placed on-site in adjacent "wet" pools of treated water where the SNF is cooled for at least five years.3/ Wet pools involved in this litigation are about 80 by 40 feet, are made of concrete, lined with stainless steel and filled with treated water that shields radioactivity. Boric acid, which absorbs neutrons, and spacing in the racks help prevent "criticality" ­ self-sustaining fission reaction resulting from the interchange of neutrons. The assemblies are placed in basket-like racks lowered into the pools. When SNF is removed from the reactor core, it is still capable of attaining criticality. Transporting rods in or out of the reactor core, or in and out of the wet pool, is a complex, expensive and highly regulated process. (YA PFF 11-15 and Def.'s Resp.) See Twp. of Lower Alloways Creek v. Pub. Serv. Elec. & Gas Co., 687 F.2d 732, 737 (3rd Cir. 1982). Storage, and most activities in and around the plant, are regulated by the Nuclear Regulatory Commission ("NRC"). See generally 10 C.F.R. pts. 72-73 (2004). The size and configuration of the spent fuel pool and the racks constrain the number of spent fuel rods that can be stored there. The reactor core can hold only a limited number of rods. Storage need is triggered by the removal of either "spent" fuel or damaged assemblies from the reactor core. Also, repair or inspection of the reactor core requires removal of all the fuel. Irradiated tools are also stored along the walls of the pool. "Pool capacity" refers to the maximum number of rods that can be stored in a pool. "Full core reserve capability" is the maintenance of sufficient unused space in the pool for all the rods in the reactor core. Maintaining full core reserve ("FCR") is a common safety-enhancing practice. (Tr. 2591-92 (Mellor); Tr. 2672, 2676 (Heider); Tr. 2850 (Whittier); Tr. 5430-31 (Abbott).) Certain NRC inspections require a FCR. (Tr. 2857 (Whittier).) While the NRC did not require FCR, such
3/

The Standard Contract requires the SNF to be cooled for five years before disposal by DOE. 10 C.F.R. § 961.11 at App. E(B)(3).
-3-

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 4 of 103

a contingency was preferred. (Tr. 2856 (Whittier).) Maine Yankee had discharged all of its fuel rods into the spent fuel pool for repair of the core's thermal shield and for inspections of the reactor vessel. (Tr. 2857 (Whittier).) Reracking is the use of higher density racks, resulting in a tighter configuration, allowing more fuel assemblies to be stored in the pool. (Tr. 2849 (Whittier); Tr. 2590 (Mellor); Tr. 1552; Tr. 2306 (Bennet); MY PFF 104 and Def.'s Resp.) From 1992 to 1997, Maine Yankee expanded its on-site storage capacity by reracking its spent fuel pool for the third time. (MY PFF 103 and Def.'s Resp.) From 1995 to 1997, Connecticut Yankee expanded its on-site storage capacity by reracking its spent fuel pool for the second time. (CY PFF 109 and Def.'s Resp.) Yankee Atomic reracked in 1979-80, adding a second tier of fuel storage racks. These costs, incurred prior to the signing of the contracts involved here, are not included in Yankee Atomic's requested damages. Yankee Atomic's nuclear reactor core held 76 fuel assemblies. (YA PFF 10 and Def.'s Resp.) Connecticut Yankee's reactor core held 157 and Maine Yankee's held 217. (CY PFF 9; MY PFF 13 and Def.'s Resps.) A full-size demonstration fuel assembly was in the courtroom during trial and a photograph is in the record. (Tr. 1571; PX 1926.001-PX 1926.004.) They, together with other photographs and a miniature display of the components and process of transfer of SNF were helpful in comprehending the magnitude, complexity and costs of the mitigation and storage efforts taken here. Spent fuel remains highly radioactive and hazardous for an extraordinary length of time. (MY PFF 8-10 and Def.'s Resp.) A risk standard of 10,000 years appears to be the current (albeit rejected) design standard for Yucca Mountain, Nevada, the site where DOE plans to store SNF it obtains under the contracts involved in this litigation. See Nuclear Energy Inst., Inc. v. EPA, 373 F.3d 1251, 1266-73 (D.C. Cir. 2004) (rejecting 10,000 year radiation standard as inconsistent with the National Academy of Science recommendations incorporated into Section 801(a) of the Energy Policy Act); 70 Fed. Reg. 49,014-01 (Aug. 22, 2005) (proposed revision to add peak damage standards for a period beyond 10,000 years); 70 Fed. Reg. 53,313-02 (Sept. 8, 2005) (proposed amendment to NRC regulations to implement EPA's proposed additional changes). History The following summary, which is probative with respect to the context in which the parties contracted for the removal and disposal of the SNF is derived in substantial part from Florida Power & Light Co. v. Westinghouse Electric Corp., 826 F.2d 239 (4th Cir. 1987). After the government's Manhattan Project during World War II for the military use of atomic power (at a cost of over $2 billion and an employment force of over 600,000 in 37 installations in the United States and Canada), interest shifted to commercial use of atomic energy. That interest, tempered by public health and safety concerns, culminated in the Atomic Energy Act of 1954 as amended, 42 U.S.C. §§2011 et seq. Therein, Congress declared that the "[s]ource and special
-4-

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 5 of 103

nuclear material, production facilities, and utilization facilities" for the use of nuclear energy were to be treated as "affected with the public interest"and strictly regulated "in the national interest to assure the common defense and security and to protect the health and safety of the public." § 2012(e). The Atomic Energy Commission ("AEC") was created to effectuate this program which included the development of a commercial nuclear electric industry. 42 U.S.C. §§ 2031 et seq. Disposal of SNF posed a "severe potential health hazard" with "complex technical problems." Natural Res. Def. Council v. NRC, 547 F.2d 633, 638 n.10 (D. C. Cir.1976), rev'd in part and remanded in part sub nom., Vt. Yankee Nuclear Power Corp. v. Natural Res. Def. Council, 435 U.S. 519 (1978). Congress accepted federal responsibility for spent fuel disposal. "The stated policy of the Federal Government has always been that the safe disposal of high-level waste is to be accomplished under Federal management." 1980 U.S.Code Cong. & Admin. News at 6934 (emphases added). The AEC assumed responsibility for the spent fuel if reprocessing was not available, announcing that "a [governmental] policy of assuring the nuclear power industry that the Government would, in the event that commercial reprocessing services were not available at reasonable times and conditions when irradiated power reactor fuels were discharged from their reactors, make financial settlement for the materials contained in those elements, and reprocess them."4/ Fla. Power & Light Co., 826 F.2d at 246 (citing a February 27, 1957 Federal Register AEC announcement). The government demonstrated its firm resolution to carry out this 1957 commitment. Although the government's reprocessing facilities required some minimal adaptation in order to process SNF from commercial reactors, Congress, at the instance of the AEC, made funds available for such adaptation in 1959. The government punctually complied with its 1957 commitment. According to the House Report on the NWPA, Congress relied on reprocessing rather than permanent storage. 40 Fed. Reg. 42801-02 (Sept. 16, 1975); 1982 U. S. Code Cong. & Admin. News at 3793. However, plutonium, a key component of nuclear weapons, is a by-product of reprocessing. There was concern that reprocessing would promote nuclear proliferation. Westinghouse Elec. Corp. v. NRC, 598 F.2d 759, 762 n.4 (3rd Cir.1979). Reprocessing suffered other setbacks. Nat. Res. Defense Council v. NRC, 539 F.2d 824 (1976), held that the AEC could not grant licenses for reprocessing facilities or for the transportation of plutonium and uranium mixed oxide fuel pending further regulatory review, although the review

The phrase "financial settlement for the materials" in this announcement referred to the reusable uranium and plutonium in the spent fuel, which could be reclaimed in reprocessing, valued by some estimates to be greater than the cost of recovery and disposal of the fuel. 826 F.2d at 246 n.12. Under the Standard Contract, upon acceptance, the utilities relinquish title, and presumably any value in the SNF, to DOE.
-5-

4/

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 6 of 103

procedure was affirmed. Certiorari was sought. 430 U.S. 944 (1977).5/ Two months later, in October 1976, then-President Carter issued a policy statement urging temporary deferral of reprocessing. 1982 U. S. Code Cong. & Admin. News, 3794. Utilities then sought regulatory approval to rerack their wet pools to increase storage as there was no other way to deal with their spent fuel. "No one disputes that solutions to the commercial waste dilemma are not currently available." Minn. v. NRC, 602 F.2d 412, 416 (D.C. Cir.1979). Reracking was authorized. See 1982 U. S. Code Cong. & Admin. News, 3803. President Carter then banned reprocessing, announcing that "spent fuel reprocessing and the development of advanced plutonium non-based reactors would be indefinitely deferred in this country," but "the Federal government would provide interim storage for utilities' spent fuel." 1982 U.S.Code Cong. & Admin.News, 3794. However, no Congressional authority for interim storage was obtained and no storage facility was then planned or constructed. In October 1977, DOE announced its "New Spent Fuel Policy" implementing President Carter's indefinite suspension of reprocessing. DOE described this new policy as "`a logical extension . . . of the long-established Federal responsibility for permanent disposal of high-level wastes.'" Fla. Power & Light Co., 826 F.2d at 251 (emphasis added.) Permanent storage was planned, backed up by interim storage. Upon payment of an unspecified storage fee, the government would take title to the spent fuel; however, "questions surrounding the permanent disposition of nuclear wastes have not yet been resolved." "If, at some time in the future, the U.S. should decide that commercial reprocessing or other energy recovery methods for spent fuel can be accomplished economically and without serious proliferation risks, the spent fuel [can] either be returned with an appropriate storage charge refund, or compensation could be provided for the net fuel value." Id. at 252. Recently, interest in reprocessing or "recycling" has resurfaced. In the Energy Policy Act of 2005, Congress appropriated $50 million to DOE to explore a "new kind" of reprocessing ­ "advanced fuel recycling technology" or "transmutation techniques." 42 U.S.C. § 16271, 16273 (2005); see also Matthew Wald, Scientists Try to Resolve Nuclear Problem With an Old Technology Made New Again, N.Y. TIMES, December 27, 2005, at D3. In October 1981, President Reagan lifted "the indefinite ban which previous administrations placed on commercial reprocessing facilities in the United States." "We will pursue consistent, longterm policies concerning reprocessing of spent fuel from nuclear power reactors and eliminate regulatory impediments to commercial interest in this technology, while insuring adequate safeguards." That the government failed in meeting "its responsibilities" in this regard was accepted. 17 Weekly Comp. of Pres.Doc., 1101-02 (October 12, 1981). Congress admitted that "[f]ailures in the Federal repository development program, the collapse of the domestic spent fuel
5/

The Supreme Court granted certiorari but remanded the case for consideration of mootness after the several presidential actions noted. 434 U.S. 1030 (1978).
-6-

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 7 of 103

reprocessing industry and quickly deteriorating public confidence in our ability to deal safely with nuclear waste, together with other critical safety and economic issues, were seriously undermining the strength of the domestic nuclear industry" and that "[n]uclear waste management was on its way to becoming a top Federal energy priority." 1982 U.S. Code Cong. & Admin. News, 3794-95. The Nuclear Waste Policy Act The Nuclear Waste Policy Act of 1982 ("NWPA"), Pub. L. 97-425, 96 Stat. 2201 (codified as amended at 42 U.S.C. § 10101-10270), enacted on January 7, 1983, reaffirmed federal responsibility " to provide for the permanent disposal of high-level radioactive waste and such spent nuclear fuel as may be disposed of in order to protect the public health and safety and the environment." 42 U.S.C. § 10131(a); Ind. Mich., 422 F.3d at 1372. Congress recognized that SNF was a national health and safety concern, that the disposal of nuclear waste was a federal responsibility, that 30 years of government attempts to meet this responsibility were inadequate, and that utilities should bear the financial responsibility for storage until the government "accepted" the waste under mandated contracts. "From the beginning of the Atomic Age, it has been a given that the Federal Government has the responsibility for eventual disposal of high level radioactive wastes and spent fuel. However, the absence of specific arrangements for disposal of this material has been a substantial impediment to public acceptance of the use of nuclear energy." (PX 353 at MOL.19980527.0086.0004 (May 17, 1984 Confirmation Statement of Bernard Rusche, President Reagan's nominee for Director of the Office of Civilian Radioactive Waste Management).) The NWPA directed the Secretary of Energy to find an appropriate repository site, 42 U.S.C. §§ 10132-33, and following Presidential and Congressional approval of that selection, proceed with construction authorization through the NRC. Id. §§ 10134-35. A 1987 amendment directed the Secretary to select Yucca Mountain in Nevada. Pub. L. No. 100-23 § 5011, 1001 Stat. 1330 at 22731 (1987) (codified at 42 U.S.C. § 10172). In the event Yucca Mountain proved unsuitable, DOE was directed to terminate site-specific activities and report to Congress. See 42 U.S.C. § 10133(c)(3). Congress directed DOE to "enter into Standard Contracts with all entities that generate or hold title to high-level radioactive waste, or spent nuclear fuel, of domestic origin for the acceptance of title, subsequent transportation, and disposal of such waste or spent fuel." Ind. Mich., 422 F.3d at 1372 (citing 42 U.S.C.§ 10222 (2000)). Utilities would pay fees to the Secretary of Energy for deposit into the Nuclear Waste Fund ("NWF").6/ 48 Fed. Reg. 5,458-01, 5,464 (Feb. 4, 1983).
6/

The Nuclear Waste Fund was established to cover the government's costs. 42 U.S.C. § 10131(b)(4) (1982). The Fund is "composed of payments made by the generators and owners of such waste and spent fuel, that will ensure that the costs of carrying out activities relating to the disposal of such waste and spent fuel will be borne by the persons responsible for generating such waste and spent fuel." Utility breach of contract claims cannot be settled by offsets to future payment obligations. Ala. Power Co. v. DOE, 307 F.3d 1300, 1313-14 (11th Cir. 2002). The Waste Fund cannot be used to finance the participation by the State of Nevada in NRC licensing hearings. (continued...)
-7-

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 8 of 103

Yankee Atomic has paid $22.5 million into the NWF. (YA PFF 1 and Def.'s Resp.7/) Connecticut Yankee has paid approximately $41 million into the NWF, with about $153 million remaining to be paid. (CY PFF 1 and Def.'s Resp.) Maine Yankee has paid approximately $65 million, with about $159 million remaining. (MY PFF 1 and Def.'s Resp.) Plaintiffs have paid a total of $128.5 million into the NWF, with $312 million remaining to be paid for a total of $440.5 million. In the aggregate, nuclear utilities have paid over $20 billion into the NWF.8/ In the end, "DOE was exclusively responsible for SNF collection and disposal in the United States, thereby prohibiting Indiana Michigan or any other nuclear utility from seeking alternative disposal means." Ind. Mich., 422 F.3d at 1374 (citing 42 U.S.C. §10131(a)(4), (b)(2); Roedler v. DOE, 255 F.3d 1347, 1350 (Fed. Cir. 2001)). Nevertheless, the repository at Yucca Mountain remains unbuilt and commencement of contract performance is further on the horizon. Recently, DOE announced that if "requested legislative changes are enacted, the [Yucca Mountain] repository will be able to accept spent nuclear fuel and high-level waste starting in early 2017." www.energy.gov/news/3845.htm (last visited July 27, 2006); see also Nuclear Energy Inst., Inc. v. EPA, 373 F.3d 1251, 1273 (D.C. Cir.2004) (agency's interpretation of environmental risk standards did not comport with statutory dictate to comply with standards of the National Academy of Science); Matthew Wald, Big Question Marks on Nuclear Waste Facility, N.Y. TIMES, Feb. 14, 2006 at C-4. Development of the Standard Contract Because DOE employed a rule making "notice and comment" procedure, the industry had only a thirty day period to comment on a proposed contract valued in the billions that would last for decades. The nuclear industry, however, had substantial input into the formulation of the Standard Contract. DOE met with industry representatives on January 19, 1983. (Tr. 344-45, 472-74 (Mills); Def.'s PFF 21-23.)

(...continued) Nev. v. DOE, 400 F.3d 9 (D.C. Cir. 2005). See N. States Power Co. v. DOE, No. 97-1064, 1998 WL 276581 (D.C. Cir. May 5, 1998) (declining to opine on use of fund to pay breach of contract damages). Reference to individual plaintiff's proposed facts (as well as defendant's response) will be so noted. Defendant does not dispute that, in the aggregate, utilities have paid DOE over $20 billion dollars under the Standard Contract, less than half of which has been appropriated to DOE's repository program. (Def.'s Resp. to Pls.' PFF 2.) Defendant objected to plaintiffs' citation to a Michigan Public Service website to support proposed findings concerning the aggregate level of payments by utilities, asserting the public website cited is not part of the record in this case and cannot be relied upon for this proposed finding. The court may take judicial notice of matters of public record. Fed. R. Evid 201 (b)(2).
-88/ 7/

6/

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 9 of 103

The proposed Standard Contract was published on February 4, 1983 with a 30 day comment period. Comments were received from 85 entities. Utilities noted the lack of a minimum rate at which DOE would "accept" the spent fuel, commenting that "a commitment to do no more than start accepting delivery by 1998 is empty and meaningless without setting forth some reasonable minimum rate of acceptance which corresponds to the purposes of the Act."9/ (DX 2.063 at ACR0010537.) Yankee Atomic's comments contrasted its obligation to its ratepayers who would bear the cost of the substantial up-front fee investment payable in mid-1983 (under the chosen payment option),while DOE's obligations would not begin until almost fifteen years later on January 31, 1998.10/

Recommended changes submitted by Florida Power and Light included a provision that if DOE failed to meet a pick-up schedule in the approved 1984 DOE Mission Plan, DOE would, to the extent permitted by the NWPA, pay for the reasonable and necessary incremental costs of storage, or alternative disposal, incurred by the utilities. Edison Electric Institute ("EEI"), an association of investor-owned utilities, collectively providing approximately 78 percent of the nation's electricity, serving over 67 million customers and the Utility Nuclear Waste Management Group ("UNWMG"), a consortium of 43 utilities, conceded that it may not be appropriate, at least at that time, to have a specific acceptance rate in the Standard Contract. There was simply not enough information then available and the transfer mechanism was not developed sufficiently for the DOE to commit to a specific acceptance rate. Nevertheless, EEI advocated that the Contract provide "that DOE would design the facility with the capacity to receive SNF [and high-level-waste ("HLW")] at a rate commensurate with the amount of SNF/HLW then being generated together with the accumulated backlog of SNF/HLW." (DX 2.034 at ARC0010334.) Tennessee Valley Authority ("TVA") also advocated a rate at least equal to the annual rate of production with consideration for decommissioning plans of the particular utility. (DX 2.063 at ACR0010537.) We are being required to make substantial advance payments for nuclear waste disposal long before the DOE has an operating disposal facility or even an approved plan or site for such a facility. Yankee's advance payments will be included in the cost of power from its plant and will ultimately be paid by electric customers throughout New England. We have a duty to these customers to assure that DOE is fulfilling its end of our bargain. Although Yankee would be contractually required to begin making payments to DOE in mid1983, DOE will not be required to begin fulfilling its obligations until 1998. (DX 2.023 at ADM002.00195.)
-910/

9/

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 10 of 103

Exchanges The majority of commenting utilities wanted to be able to exchange their delivery commitments, but the published proposal did not contain that option. TVA suggested: "Purchaser shall have the right to . . . sell or trade its priority ranking to other Purchasers." (DX 2.063 at ARC0010538.) EEI requested explicit language allowing exchanges. (DX 2.034 at ADM002.029192.) Yankee Atomic and others also made the request. (DX 2.023 at ADM002.00197; DX 2.012 at ADM002.0111 (Northern States Power); DX 2.015 at ADM002.00136 (Consumers Power); DX 2.018 at ADM002.00173 (Gulf States Utilities); DX 2.033 at ADM002.0264 (Portland General Electric).) DOE granted the request; exchanges were provided for in the final Standard Contract. DOE recognized that exchanges were necessary for program efficiency. "After consideration, aside from some complex recordkeeping, this poses no problem ­ no great problem to us and consequently, we [DOE] have accepted this suggestion. It will require our approval and we intend to be reasonable. . . . [w]e felt that it was a necessary component to make that system work efficiently." (PX 30 (DOE Memorandum of April 8, 1983 to and approved by Secretary Hodel concerning the final contract explaining the establishment of exchange rights).) Priority for shut down reactors Despite industry comments opposed to possible priority for shut down reactors, that provision was retained. See 48 Fed. Reg. at 5,464 (proposed contract, Art. VI(B)(3)(b) ("Notwithstanding the age of the SNF and/or HLW, priority may be accorded any SNF and/or HLW removed from a civilian nuclear power reactor that has reached the end of its useful life or has been shut down permanently for whatever reason."); 48 Fed. Reg. at 16,590, Art. VI(B)(1)(b) ("Notwithstanding the age of the SNF and/or HLW, priority may be accorded any SNF and/or HLW removed from a civilian nuclear power reactor that has reached the end of its useful life or has been shut down permanently for whatever reason."). "This type of priority is necessary to prevent reactors from waiting 20 or 30 years to be decommissioned after they finish generating electricity." 48 Fed. Reg. 16,590, 16,593 (April 19, 1983) Supplementary Information, Art. (VI). Final contract On April 18, 1983 DOE issued the final Standard Contract. 48 Fed. Reg. 16,590-01. This contract applies to the delivery by Purchaser11/ to DOE of SNF and/or HLW12/ of domestic origin from civilian nuclear power reactors, acceptance of title

The Standard Contract defines the signing utility as the "Purchaser." 10 C.F.R. § 961.11 (Preamble).
12/

11/

HLW was defined as highly radioactive material resulting from reprocessing and "other (continued...)
- 10 -

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 11 of 103

by DOE to such SNF and/or HLW, subsequent transportation and, with respect to such material, establishes the fees to be paid by the Purchaser for the services to be rendered hereunder by DOE. The SNF and/or HLW shall be specified in a delivery commitment schedule as provided in Article V below. The services to be provided by DOE under this contract shall begin, after commencement of facility operations, not later than January 31, 1998 and shall continue until such time as all SNF and/or HLW from the civilian nuclear power reactors specified in Appendix A, annexed hereto and made a part hereof, has been disposed of. 10 C.F.R. § 961.11 at Art. II (emphasis supplied). DOE's obligation to commence performance was not conditioned on the existence of "a facility."13/ The "not later than January 31, 1998" qualifies that possibility ­ DOE's performance was to begin no later than such time as a "facility" was operational, or January 31, 1998, whichever first occurred. Ind. Mich., 88 F.3d 1272, 1276-77 (D.C. Cir. 1996); N. States Power Co. v. Dep't of Energy, 128 F.3d 754, 760 (D.C. Cir. 1997). Notably, the Standard Contract did not contain an acceptance rate, despite industry comments. Relying on the Standard Contract's amendment provision, Robert Morgan, Director, Nuclear Waste Policy Act, Project Office, on June 11, 1983 (the deadline for executing the Standard Contract was June 30, 1983) wrote to John Kearney, Senior Vice President of Edison Electric Institute: [i]ssues of concern to the industry and the Government can be reexamined, and modifications may be made to the standard contract provided that sufficient justification exists and it does not change the intent of the final rule. This is precisely the reason we have Article XV, `Amendments' in the standard contract. (PX 461.) Each of the plaintiffs here entered a Standard Contract with DOE.14/ (PX 1CY, PX 1MY, PX 1YA.) (...continued) highly radioactive material that the [NRC], consistent with existing law, determines by rule requires permanent isolation." 10 C.F.R. § 961.11 at Art. I(12)(b). The final Standard Contract defined "DOE facility" as "a facility operated by or on behalf of DOE for the purpose of disposing of spent nuclear fuel and/or high-level radioactive waste, or such other facility(ies) to which spent nuclear fuel and/or high-level radioactive waste may be shipped by DOE prior to its transportation to a disposal facility." 10 C.F.R. § 961.11 at Art. I(10). If there was any doubt that the contract was with the United States, explanatory comments prefatory to the published final contract noted that twelve commentors requested the definitions of DOE include successor agencies. DOE declined that request in part because "the Purchaser is not contracting, as such, with DOE, but rather with `the United States of America represented by the U.S. Department of Energy.'" 48 Fed. Reg. at 16,591, Supplementary Information, Art. I.
- 11 14/ 13/ 12/

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 12 of 103

While the Standard Contract did not contain a rate or schedule for the acceptance of SNF and HLW either on an industry-wide basis or by specific utility, it did establish a process by which a schedule and quantities were to develop. This process, although started and abandoned several times, is summarized for background purposes. See Tenn. Valley Auth. v. United States, 69 Fed. Cl. 515, 521 (2006) (noting that "DOE effectively short-circuited this process by its failure to perform under [the] Standard Contract"). Beginning in April of 1991, DOE was to issue industry-wide "acceptance priority rankings" ("APRs") based on the date of discharge of fuel from the reactor ­ oldest fuel first ("OFF").15/ "The oldest fuel or waste will have the highest priority for acceptance, except as provided in paragraphs B and D of Article V (DOE approved-delivery commitment quantities adjusted by plus or minus 20 percent and with up to two month delivery adjustments) and paragraph B.3 of Article VI of this contract (right to reject for improper description)." 10 C.F.R. § 961.11, Art. IV(B)(5)(a) (parentheticals added). "[APR] is, simply speaking, a ranking from earliest to latest of all discharges of commercial spent fuel from utilities and some other non-utility contract holders." (Tr. 3921 (Pollog) ("It ranks basically starting with the earliest of first discharge coming first and the last discharge at the end of the queue.").) The age information came from the RW-859 data forms submitted to DOE periodically by the utilities.16/ "The APR will be used in conjunction with waste acceptance rates to be published in the 1991 Annual Capacity Report ("ACR") as the basis for purchasers to submit delivery commitment schedules ("DCS") beginning January 1992 for the department's approval. In turn, purchasers will have the opportunity to exchange approved DCSs, also subject to departmental approval." (PX 629 at HQR0011537.) "Delivery Commitment" identified "all SNF and/or HLW the Purchaser wished to deliver to DOE."17/ 10 C.F.R. ¶ 961.11 at Art. V(B)(1). Also, the Purchaser could adjust the quantities committed by plus or minus 20 percent

OFF was "based on the age of SNF and/or HLW as calculated from the date of discharge of such material." 10 C.F.R. § 961.11 at Art. IV(B)(5)(a). The report ranked all the fuel by age with notation as to those utilities (as well as others) who had not paid their fees. Cumulative totals were over 22,000 tons. The report highlighted inefficiency that would result if small, haphazard and scattered amounts were picked-up. Witness testimony that campaigning would evolve and DOE would not run the program inefficiently is credited. The "commitment" was that of the utilities, not DOE. From the history, the reason could relate to the cited potential value of recoverables in the waste. The fuel is not truly "spent" but can, through processes beyond the pale of this Opinion, be potentially reprocessed. With transfer of title, the government will be entitled to the proceeds of the SNF. Also, "[t]he Purchaser may change the specific assemblies to be delivered so long as the SNF meets the acceptance criteria of the contract. These adjustments shall be subject to DOE's prior written approval, which approval shall not be unreasonably withheld." 48 Fed. Reg. at 5,463.
- 12 17/ 16/

15/

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 13 of 103

and the delivery schedule by two months until the submission of the "final delivery schedule." Id. at Art. V(B)(2). Adopting in part the reasoning of Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652 665-66 (2003), this court declined to find these provisions created a binding mechanism that limited the amount of SNF DOE was contractually required to accept. Order of June 26, 2003. See also Yankee Atomic Elec. Co., 2004 WL 1535686, at *1 (Fed. Cl. 2004); Systems Fuels, Inc. v. United States, 66 Fed. Cl. 722, 730-32 (2005); Entergy Nuclear Generation Co. v. United States, 64 Fed. Cl. 336, 343 n.8 (2005); Sacramento Mun. Util. Dist. v. United States, 63 Fed. Cl. 495, 503-05 (2005). If the aggregate requests for acceptance exceeded the annual capacity of the disposal facility, acceptance would generally be based on the age of the fuel ­ "OFF": 1. Acceptance Priority Ranking. Delivery commitment schedules for SNF and/or HLW may require the disposal or [sic] more material than the annual capacity of the DOE disposal facility (or facilities) can accommodate. The following acceptance priority ranking will be utilized: (a) Except as may be provided for in paragraph (b) below and Article V.D. of this contract, acceptance priority shall be based upon the age of the SNF and/or HLW as calculated from the date of discharge of such materials from the civilian nuclear power reactor. DOE will first accept from Purchaser the oldest SNF and/or HLW for disposal in the DOE facility, except as otherwise provided for in paragraphs B and D of Article V. 10 C.F.R. § 961.11 at Art. VI(B)(1)(a) (emphasis supplied). The referenced paragraph (b) provides that "[n]otwithstanding the age of the SNF and/or HLW, priority may be accorded any SNF and/or HLW removed from a civilian nuclear power reactor that has reached the end of its useful life or has been shut down permanently for whatever reason." Id. at Art. VI(B)(1)(b). This is referred to as the "priority for shut down reactors." Article V(D) allows DOE to accept emergency deliveries. Article V(B) establishes a process for a utility to submit the amount of waste it wished to deliver to DOE. Background Corporate Facts Maine Yankee, an electric utility company incorporated in Maine, commenced commercial operation of its nuclear power plant, its only electricity generating facility, located near Wiscasset, Maine, in December 1972. (MY PFF 5-7 and Def.'s Resp.) Maine Yankee last generated electricity at its nuclear power plant in December 1996 and decided in August 1997 to permanently cease operation of its plant. (MY PFF 14,16 and Def.'s Resp.) Connecticut Yankee is an electric utility company incorporated in Connecticut. Its stock is owned by nine utilities. Its only electricity generating facility, a nuclear power plant located in

- 13 -

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 14 of 103

Haddam, Connecticut, commenced operations in January 1968. The 550-acre plant is now permanently shut down. (CY PFF 5-7 and Def.'s Resp.) Yankee Atomic is an electric utility company incorporated in Massachusetts. Its only electricity generating facility, a nuclear power plant located in Rowe, Massachusetts, commenced operations in early 1960 and is now permanently shut down. The Yankee Atomic plant last generated electricity in late 1991. (YA PFF 17-18 and Def.'s Resp.) Witnesses The court benefitted from witness testimony, including several venerable pioneers in the nuclear industry, government regulators prior to and at the inception of the NWPA, and those who subsequently developed the spent nuclear fuel program(s). The following persons testified at the trial of this case: Edward Abbott; John Wesley Bartlett; Thomas W. Bennet, Jr.; Ken Blair; Patrice Bubar; John Buchheit; Dan M. Collier; Daniel R. Fischel; Frank Graves; Rudy Grube; Kenneth J. Heider; Daivd Huizenga; R. Larry Johnson; Robert Jordan; Andrew Kadak; Kathleen Jewel-Kelleher; Christopher Kouts; Michael James Meisner; Russell Mellor; Loring Mills; Ronald Milner; Robert L. Morgan; Charles W. Pennington; Thomas E. Pollog; Frances X. Quinn; Benard C. Rusche; Thomas Smith; Todd Daniel Smith; Ivan Stuart; Michael Eric Thomas; Scott Vance; George D. Whittier; Kenneth Tod Wise; and David Zabransky. Liability for breach of contract Breach of contract has been established. Maine Yankee, 225 F.3d 1336, 1343 (Fed. Cir. 2000), aff'g Yankee Atomic Electric Co. v. United States, 42 Fed. Cl. 223 (1998) (DOE's failure to begin disposal services by January 31, 1998 comprises a partial breach of Article II of the Standard Contract); Gould, Inc. v. United States, 67 F.3d 925, 930 (Fed. Cir.1995) (law of the case doctrine bars trial courts from re-litigating issues decided by the appellate court). Ind. Mich., 422 F.3d 1369, 1372-73 (Fed. Cir. 2005) (noting DOE's liability for breach of contract). These cases were tried on a comparison of the real "breach world" to the hypothetical nonbreach world. The court was asked to find and apply an SNF acceptance rate; determine whether or not Greater-Than-Class-C radioactive ("GTCC") waste and failed fuel18/ would have been accepted by DOE; decide if the containers selected, purchased and loaded to store SNF would have been received by DOE for emplacement in a not-as-yet licensed Yucca Mountain repository; determine how and to what extent utilities would have exchanged not-as-yet issued allocations; divine how and to what extent DOE would have granted priority to shut down reactors; and consider other imponderables. These determinations would be factored into the equation to determine what
18/

"[W]hen the fuel is declared spent and being considered for either storage or shipment, it's examined to determine if it's intact or failed. And if the examination shows anything larger than what is called a pinhole in any one of these rods, it is designated as failed or damaged fuel." (Tr. 1409 (Mills).)
- 14 -

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 15 of 103

incremental costs the utilities had (and would have in the future through 2010) in comparison to what would have been spent in the mythical nonbreach world. Indiana Michigan altered the landscape considerably by parsing utility claims into actual expenditures and framing the inquiry as one of mitigation. Damages for mitigation costs incurred When did right or obligation to mitigate begin? Plaintiffs seek to recover costs they incurred in mitigating the impact of DOE's impending delay and partial breach(es). That mitigatory measures were required is "beyond debate." Ind. Mich., 422 F.3d at 1375. The utilities had, at minimum, a good idea that the deadline of January 31, 1998 would not be met and were required to respond appropriately. "Should plaintiffs have waited until [January] 31, 1998 and then decided what to do with their nuclear waste? The court thinks not." See Yankee Atomic, 2004 WL 1535688 at *6; Tenn. Valley Auth. v. United States, 60 Fed. Cl. 665, 674 (2004) (concluding the utility was "justified, indeed obligated, to take steps to minimize its losses in light of DOE's imminent non-performance."). "Once party has reason to know that performance by the other party will not be forthcoming, he is expected to take such affirmative steps as are appropriate in the circumstances to avoid loss by making substitute arrangements or otherwise." Restatement (Second) Contract § 350 cmt. b. May 25, 1994 is the date of DOE's announcement that it would not begin performance under the Standard Contract until 2010 because its planned storage repository would not be ready until then. Notice of Inquiry, Office of Civilian Radioactive Waste Management Waste Acceptance Issues, 59 Fed. Reg. 27,007-02, 27,009 (May 25, 1994). One year later, DOE asserted it had neither a contractual or statutory obligation to accept SNF or HLW, absent a repository or interim storage facility. Final Interpretation of Nuclear Waste Acceptance, 60 Fed. Reg. 21,793-02 (May 3, 1995). The Federal Circuit in Indiana Michigan characterized DOE's May 25, 1994 announcement as "unequivocal," and as a result, "[i]t is beyond debate that because the government unequivocally announced in 1994 that it would not meet its contractual obligations beginning in 1998, the utilities were in fact obligated to take mitigatory steps." Ind. Mich., 422 F.3d at 1375 (emphases supplied). Defendant asserts Connecticut Yankee's and Maine Yankee's decisions to rerack (and certain costs incurred) before May 25, 1994 were too early to be mitigation. (Def.'s Br. Concerning the Effect of Indiana Michigan, pp. 8-9.) Plaintiffs respond that the Federal Circuit determined that May 25, 1994 was the last possible date that the right (or obligation)19/ to mitigate arose. Indiana Michigan's citation to the 1994 DOE announcement was a benchmark of when there was no question the mitigation duty or right commenced ­ the latest, not the earliest date. An earlier date for a particular utility was not foreclosed, but rather dependent upon circumstances known at that time. "Mitigation is appropriate where a reasonable person, in light of the known facts and circumstances, would have taken steps to avoid damage." Ind. Mich., 422 F.3d at 1375 (citing Robinson, 305 F.3d
19/

Defendant maintains that mitigation is a duty, not a right.
- 15 -

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 16 of 103

at 1334 (citing Restatement (Second) of Contracts § 350 cmt. b.). See also First Heights Bank, FSB v. United States, 422 F.3d 1311,1316 (Fed. Cir. 2005) (constraining mitigation by what is fair and reasonable under the circumstances) (citing Home Sav., 399 F.3d at 1353). Reasonableness, in light of particular facts and circumstances, is plaintiff-specific. The 1994 date is the latest date when mitigatory obligations arose ­ whether that obligation or right ripened earlier is dependent on the facts and circumstances of each case and will be examined in appropriate circumstances. With DOE's May 25,1994 statement, there was no question ­ it was "beyond debate" ­ that the obligation to mitigate arose. That it could be debated prior thereto was neither raised nor resolved. To avoid issues concerning the possible application of the statute of limitations, 28 U.S.C. § 2501, mitigation expenses that pre-date the complaint by six-years may be considered. But see Franconia Assocs. v. United States, 536 U.S. 129, 144 (2002). Yankee Atomic's Complaint was filed Feb. 18, 1998; Connecticut Yankee's Complaint was filed March 4, 1998; Maine Yankee's Complaint was filed June 2, 1998. When does it end? What is the date of the "claim?" At trial, plaintiffs presented damage claims that included, in addition to past expenses, future damages out to 2012 (2011 for Maine Yankee). These damage models were complex and evolved pursuant to the court's pre-trial procedure designed to vent accounting issues and limit evidentiary issues. Yankee Atomic, No. 98-126C (November 4, 1998) (Pre-trial Order). Following the Federal Circuit's decision in Indiana Michigan, supplemental briefing was ordered. The parties' view of "past" or "incurred" damages in post-Indiana Michigan briefing and argument were divergent. Defendant would limit damages to those incurred (i.e., paid) as of the date of the filing of the respective complaints in 1998, relying on Indiana Michigan, wherein the Federal Circuit stated that "[b]ecause [the nuclear utility's] claim is premised upon the government's partial breach, its damages were limited to those costs incurred prior to the date of its suit." 422 F.3d at 1376-77 (emphasis added). Plaintiffs urge expanding the definition of "past" to encompass subsequent expenses­ at least to the date of trial. According to plaintiffs, until recently, amending or supplementing their complaints would be an unnecessary formality. Defendant disagreed, characterizing an amended or supplemental complaint as jurisdictional prerequisite to consideration of post-complaint incurred damages. (Def.'s Resp. to Pls.' Supp. Post-Trial Br. Addressing Impact of Indiana Michigan, filed January 5, 2006 at 2.) Discovery, trial and original post-trial briefing encompassed damages through 2011 (2012 for Maine Yankee) including actual-incurred expenses that post-date the filings of the complaints here. Defendant has not alleged prejudice as to consideration of incurred costs. "[T]he Yankees provided actual cost information to the Government against which discovery was taken, and an audit was performed through 2001 (for Yankee Atomic and Connecticut Yankee) and through 2002 (for
- 16 -

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 17 of 103

Maine Yankee). Actual cost information through these years likewise was provided as evidence to the Court at trial." (Def.'s Resp. to Pls.' Suppl. Post-Trial Br. Addressing Impact of Indiana Michigan, filed Jan. 5, 2006 at 8, citing Tr. 2982, 3247-48, 3254, 3259.) At post-Indiana Michigan oral argument, counsel for the defendant admitted that with an amended or supplemental pleading, incurred costs presented at trial would be properly before the court. "Your Honor, if the Plaintiffs filed a motion for leave to add that to this case through an appropriate amended or supplemental complaint, there would be no reason to relitigate those costs that we have already litigated here, so we would not have a problem doing that so long as we're not getting into the cost-estimate years." (Post Ind. Mich. Oral Argument Tr. 42.) Defendant suggested, albeit in the alternative and before the Federal Circuit's decision in Indiana Michigan, that damages be limited to those through the date of trial. (See Def.'s Initial Post-Trial Br. at 71 n.22.) In other pending SNF cases, defendant has not objected to amended complaints to cover damages actually incurred after the filing of the original complaint, providing that there was sufficient time for discovery and examination prior to trial. The Government has been consistent in its interpretation of the Indiana Michigan decision in the other spent nuclear fuel cases pending before the Court. In Systems Fuels, Inc. v. United States, No. 03-2624C, the Government has maintained that trial in that case should consider damages incurred prior to the date that Systems Fuels filed its complaint in this Court, November 2003. In Southern Nuclear Operating Co. et al. v. United States, No. 98-614C, the Government agreed that, if Southern Nuclear filed an amendment to its complaint and consolidated that amended complaint with its original complaint in October 2005, that the damages to be considered in the trial that began in October 2005 could include damages incurred through December 31, 2004, because the Government had an opportunity to examine the basis for these claimed damages during discovery in that case. . . . Finally, in Pacific Gas and Electric Co. v. United States, No. 04-0074C. . . the Government simply explained that it may oppose, and the Court may deny, a motion to amend the complaint if the plaintiff seeks to amend its complaint too close to the date scheduled for trial because of the prejudice to the Government from such an amendment. If the complaint is amended too close to the date of trial, the Government may not have sufficient time to properly examine the damages claimed and the support for those damages and would object to the amendment on these grounds. Def.'s Resp. to Pls.' Mot. for Leave to File its Am. and Supp. Compl. filed January 19, 2006 in Florida Power and Light Co. v. United States, No. 98-483C (Fed. Cl.) at 7-8. We do not oppose [plaintiff's] motion for leave to amend and supplement its complaint or [plaintiff's] proposal that any trial on damages, when scheduled, include consideration of damages allegedly incurred by [plaintiff] through December 31, 2005. However, the leave requested should be conditioned on allowing the Government an enlargement of the presently-scheduled discovery deadline . . . to allow for an appropriate investigation of the claimed damages.
- 17 -

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 18 of 103

Defs.' Resp. to Pls.' Motion for Leave to File its Am. and Suppl. Compl. filed March 10, 2006 in Wisc. Elec. Power Co. v. United States, No. 00-697C (Fed. Cl.) at 1. "The Government has never suggested in the spent nuclear fuel cases that a plaintiff cannot seek leave to file a supplemental complaint pursuant to Rule 15(d)." Resp. by Def.-Appellee, the United States, to Pl.-Appellant's Pet. for Panel Reh'g, at 12, filed Nov. 10, 2005 in Ind. Mich. Power Co. v. United States, No. 04-5122 (Fed. Cir.). "The government has never opposed the filing of supplemental or amended complaints when it doesn't prejudice the government." Yankee Atomic's Reply on its Mot. to Amend Compl., No. 98-126C (filed April 17, 2006), Exh. 1 (Tr. in System Fuels, Inc. v. United States., No. 03-2623C, 12:7-9, Mar. 14, 2006) (gov't counsel).) See also Tenn. Valley Auth. v. United States, 69 Fed. Cl. 515, 523-24 (2006) ("[U]nder [the Rules of the Court of Federal Claims ("RCFC")] 15(a), (b) and (d), . . . TVA has sought and pursued an amended and supplemental complaint alleging damages through [cut-off date of damages set prior to trial and before discovery was concluded]."); Pacific Gas and Elec. v. United States, 70 Fed. Cl. 758, 764-65 (2006) (similar). On May 6, 2006, the court granted in part plaintiffs' Motion to Amend Complaint, filed February 27, 2006. Plaintiffs' Motion proposed that, pursuant to RCFC 54(b), on the basis of trial proceedings to date, a partial final judgment be entered for incurred damages with subsequent partial judgments to issue thereafter as recoverable incurred costs are awarded. Adopting the reasoning of Pacific Gas & Electric Co. v. United States, 70 Fed. Cl. 758 (2006), pursuant to RCFC 15(a), (b) and (d), the Complaints were deemed amended and supplemented to encompass trial evidence in the record and claims for costs incurred by Yankee Atomic and Connecticut Yankee through 2001 and costs incurred by Maine Yankee through 2002. Damage claims beyond these dates were dismissed, without prejudice to their timely assertion in a subsequent action(s).20/ When is past not past? Inquiry does not end, however. The parties quarrel over the definition of incurred or past expenses. At trial (and in the reports of plaintiffs' economic expert Dr. Wise), damages claimed through 2002 were labeled "past," and 2003 and beyond, "future." When Dr. Wise's reports were submitted in March of 2003, 2002 was indeed "past," thus his use of the word "past" referred to the date of his analysis. In reality, costs after 2001 for Yankee Atomic and Connecticut Yankee (after
20/

The defendant had full discovery and trial venting, and certainly would not be prejudiced if costs from the date of the filing of the Complaints here through 2001 or 2002 were resolved at this time and in this action. Here, the Complaint clearly encompassed subsequent costs and was filed before the Federal Circuit's Indiana Michigan decision. See Brandon v. Holt, 469 U.S. 464, 469-71 (1985). "In the case of the continuing contractual obligations owed after an initial suit for partial breach has been filed, subsequent claims for future damages are considered to accrue for the purposes of the statute of limitations at the time such damages are incurred." Ind. Mich., 422 F.3d at 1378. See also Restatement (Second) of Judgments § 26(1)(b).
- 18 -

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 19 of 103

2002 for Maine Yankee) were estimates. Accordingly, only those costs incurred (paid) through 2001 for Yankee Atomic and Connecticut Yankee, and through 2002 for Maine Yankee, which were subject to the government's verification through the court's pre-trial audit process in this case, will be considered in this action.21/ Standards for recoverability of incurred mitigation costs There exist elements of proof that must be met to qualify for a recovery of incurred mitigation expenditures. "The presence of a duty to mitigate does not perforce make the pre-breach costs incurred by Indiana Michigan to store its SNF recompensable; [Indiana Michigan] must prove foreseeability, causation, and reasonableness." Plaintiffs must establish that "(1) the damages were reasonably foreseeable by the breaching party at the time of contracting; (2) the breach is a substantial causal factor in the damages; and (3) the damages are shown with reasonable certainty." Ind. Mich., 422 F.3d at 1373 (citing Energy Capital Corp. v. United States, 302 F.3d 1314, 1320 (Fed. Cir. 2002)). Mitigation efforts must be reasonable. The Federal Circuit in Indiana Michigan confirmed the application of this bedrock principle in ascertaining pre-breach damages for DOE's partial breach: [W]e see no reason why efforts to avoid damages in contemplation of a partial breach should not . . . be recoverable. Section 350, comment b of the Restatement of Contracts advises that "once a party has reason to know that performance by the other party will not be forthcoming, he is expected to take such affirmative steps as are appropriate in the circumstances to avoid loss by making substitute arrangements or otherwise." Indiana Michigan is "not precluded from recovery to the extent that it has made reasonable but unsuccessful efforts to avoid loss." 422 F.3d at 1375 (citing Restatement (Second) of Contracts §350(2)). "[M]itigation damages are available for pre-breach costs should the obligee elect to treat the obligor's breach as partial, while pre-breach damages for anticipatory breach are available should a party elect to treat the obligor's breach as total." Id. "Mitigation is appropriate where a reasonable person, in light of the known facts and circumstances, would have taken steps to avoid damage." 422 F.3d at 1375 (citing Robinson, 305 F.3d at 1333 (citing Restatement (Second) of Contracts §350 cmt. b22/)). "[W]hen mitigating

Indeed, limiting costs to those incurred may work to plaintiffs' advantage. Actual costs were generally higher than estimates. (Pls.' Supp. Post-Trial Br. Addressing Impact of Indiana Michigan, filed Dec. 6, 2005 at 6.)
22/

21/

"The Restatement of Contracts is recognized as an appropriate source of authority in (continued...)
- 19 -

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 20 of 103

damages from a breach, a party `must only make those efforts that are fair and reasonable under the circumstances."' Old Stone Corp. v. United States, 399 F.3d at 1353 (quoting Robinson, 305 F.3d at 1333); see also 11 Corbin on Contracts § 57.11, at 311 (2005 ed.) ("The doctrine of avoidable consequences merely requires reasonable efforts to mitigate damages."); 3 Dobbs: Law of Remedies § 12.6(1), at 127 (2d ed. 1993) ("[T]he damage recovery is reduced to the extent that the plaintiff could reasonably have avoided damages he claims and is otherwise entitled to."). Defendant has the burden of showing that plaintiffs' mitigation efforts were unreasonable. Old Stone Corp. v. United States, 450 F.3d 1360 (Fed. Cir. 2006) (government did not meet burden to establish actual expenditures were not reasonable); Tenn. Valley Auth. v. United States, 69 Fed. Cl. 515, 523 (2006) (citing Restatement (Second) of Contracts § 350(2); First Heights Bank, FSB v. United States, 422 F.3d 1311, 1316-17 (Fed. Cir. 2005); Long Island Savs. Bank, FSB v. United States, 67 Fed. Cl. 616, 642 (2005)). Accordingly, foreseeable and reasonable costs incurred prior to, but substantially caused by, DOE's announced partial breach(es) are recoverable. This court previously recognized the recoverability of pre-partial breach mitigation expenses ­ that is expenses incurred prior to January 31, 1998. Yankee Atomic Elec. Co., 2004 WL 1535688 at *6-7 (Fed. Cl. June 28, 2004); Order of August 29, 2003 at 3 ("[T]he issue with respect to mitigation of damages is grounded in a determination as to reasonable commercial judgment on the part of plaintiff.") (citing N. Helex Co. v. United States, 207 Ct. Cl. 862, 883, 524 F.2d 707, 718 (1975). Damages categories Plaintiffs' trial evidence of damages fell into three cost categories: wet-pool-related, Independent Spent Fuel Storage Installation ("ISFSI") construction (dry storage) and ISFSI operations. Following the limitations imposed as a result of the Indiana Michigan decision precluding future damages, because no ISFSI operation costs have been "incurred" during the time period covered by this litigation, no damages in that category are relevant at this time. Upon due consideration, the court concludes that, with some exceptions, the plaintiffs' mitigation expenditures here meet the standards of Indiana Michigan.

(...continued) contract cases." Hansen Bancorp, Inc. v. United States, 367 F.3d 1297, 1308 n.9 (Fed. Cir. 2004). Also, contract principles governing the sale of goods provide "useful guidance in applying general contract principles." Hughes Commc'ns Galaxy, Inc. v. United States, 271 F.3d 1060,1066 (Fed. Cir. 2001). Damages for partial breach include the costs incurred by the seller in mitigation. "A buyer can obtain cover damages even if it has not cancelled the contract and has accepted a partial delivery . . . ." 24 Williston on Contracts 4th Ed., § 66.44, pp. 610-613.
- 20 -

22/

Case 1:98-cv-00126-JFM

Document 946

Filed 10/04/2006

Page 21 of 103

Foreseeability Mitigation damages must have been "reasonably foreseeable by the breaching party at the time of contracting."23/ Ind. Mich., 422 F. 3d at 1373. That plaintiffs would incur storage expenses of the nature and magnitude sought here was reasonably foreseeable. Yankee Atomic, 2004 WL 1535688, at *7 (June 24, 2003). "`[T]he intent of the NWPA and the parties to the Standard Contract was to avoid the construction by utilities of additional at-reactor storage after January 31, 1998.' DOE's failure to perform under the Standard Contract thus has led to the very thing the NWPA and the Standard Contract were designed to forestall., i.e., the construction of dry storage facilities for spent nuclear fuel at nuclear power electricity generating plants throughout the United States." Tenn. Valley Auth., 60 Fed. Cl. at 674 n.10, citing Commonwealth Edison, 56 Fed. Cl. at 667. Regulators were aware that utilities faced enormous storage costs. DOE planning documents cited avoidance of these costs as a program goal. Whether aspirational goals rather than contractual requirements, the court nevertheless relies on these statements for foreseeability as well as what would have been reasonable or unreasonable performance by DOE, discussed infra. See generally Fed. Group, Inc. v. United States, 67 Fed. Cl 87, 103-04 (2005). The September 13, 1983 Draft Mission Plan24/ summarized DOE's prior planning meetings and decisions and recited DOE's planned "acceptance rate during the first five years such that no utility would have to build additional storage facilities after 1998." (PX 633 at PNL-173-1283). The absence of a repository would not delay the acceptance of SNF; the acceptance rate after five years would equal the annual industry-wide rate discharge of SNF; if necessary, utilities would purchase rights in the shipping queue; storage could be at a geological repository, "buffer storage," and/or a monitored retrievable storage facility ("MRS") and DOE could take title to the SNF, place it in dry storage casks and pay a rental fee to the utility for on-site storage. (Id., at PNL-173-1283-84.) Even in 1983, regulators noted the "current best s