Free Motion in Limine - District Court of Federal Claims - federal

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84.

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97.

038

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125.

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Information" by Andrew J. Yates andMarkB. Cronshaw, Journal of Environmental
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Article entitled "Marketable Emission Permits: Efficiency, Profitability, and SubstitutabilityU by Rose Anne Devlin and R. Quentin Grafton, Canadian Journal of Economics
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Article entitled "Attifudes Toward Risk and Compliance in Emis sion Permit Markets" by Shaul Ben- David , David Brookshire, Stuart Burness , Michael McKee arid Christian Schmidt , Land Economics , November 2000, 76 (4)
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Article entitled "Too Much Ma,rket? Conflict Between Tradabie Pollution Allowances and The "Polluter Pays" Principle" by Jonathan Remy Nash, Harvard Environmental Law Review, Vol. 24, 200
from RECLAIM" by Dale B. Thompson, Natural Resources Journal, Vol. 40 , Summer

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WOO

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Article entitl~ "An

ExpyrimentalJnvestigation of the Seller Ince~tives inth~ EPA' Emission Trading Auction" by Timothy N. Caso~ The American EConomic ReView September 1995, Vol. 85 , No.
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Article from Nuclear Energy Institute entitled "Utilities ~eek Court Order-Requiring Energy Department To Dispose of Used Nuclear Fuel ' Immediately, '" February 19, 1998
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:0"\

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042

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, 150.

Discussion Paper entitled "Cost Savings San Allowance Trades? Evaluating the SOl Emission Trading Program to Date" by Dallas Burtraw, Resources for the Future
February 1996

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White Paper ~titled "Responsible

, 152.

Nuclear Waste DisposalanUnmet Obligation sponsored by The New England Council , Inc., Yankee Atomic Electric company, Connecticut Yankee Atomic Power Company, February 2001

Miscellaneous Documents
153.
Cases arising Under the Standard Contract At 10 C. F . R. Part 961 Pending Before The

Court of Federal Claims
154.
155;

Delivery Commitment Schedules
Final Delivery Schedules

156.
157. 158. 159.

Binder entitled " Spent Nuclear Fuel Litigation Fee Adequacy Rev~ews
Bi~der entitled " Spent Nuclear Fuel Litigation Total System Life Cycle Costs

Binder entitled " Spent Nuclear Fuel Litigation - MRS , Volume 1"
Binder entitled " Spent Nuclear Fuel Litigation - MRS , Volume 2"

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Exhibit C

OFF Acceptance Schedule For Yankee Atomic s SNF

Under Plaintiffs Aggregrate Acceptance Schedule

Year
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Beginning , Inventory

Acceptance
of

SNF

Ending Inventory

127.41 107. 97. 79. 79. 62. 53. 35. 26. 17.

19. 17. 17. 8.41 17.

107:71

97. 79. 79. 62.
53. 35. 26.
17.

17.

Source: Backup materials to Frank Graves ' Expert Witness Report.

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...
Document 816-6 Filed 06/01/2004 Page 9 of 13 PROTECTED MATERIAL TO BE DISCLOSED ONLY IN ACCORDANCE WITH
UNITED STATES COURT OF FEDERAL CLAIMS PROTECTNE ORDER

~" I

REPORT OF DANIEL R. FISCHEL RE: CONNECTICUT Y ANi(EE A TOMle POWER COMPANY V. UNITED STATES

QUALIFICATIONS.

I am Director, co- Chairman and co- President
ing firm that specializes in the applicatian .of econamics ta a variety

of

Lexecon Inc., a consult-

of

legal and regulatory

issues. I am alsa the

Lee and Brena Freeman Prafessar

.of

Law and Business at The University
.of. The University .of

.of

Chicaga Law Schaol. , I have served previously as Dean
and Economics Program.

Chicaga Law

, Schoal~ Director of the law
and as ProfeSsor of

at The University

of

Chicaga Law Schaol
.of

Law and Business at The University

of

Chicaga Graduate Schoal

Busi-

ness.
Both my research and my teaching , have concerned the economics

corporatelaw~ I also have lectured widely in this area. i have published appraximatelyforty
articles in leading legal ahd economic$ jaurnals and am coauthor, with Judge Fran~ Easterbrook
of the Seventh Circuit Court of

Appeals , ofthe book
of

The Economic Structl,lre

.of

Corparate Law

(Harvard University PreSs). Courts

an levels, including the Supreme Court

of

the United

States , have cited my articles as authoritative.
114 S. Ct 1439 (1994);

See , e.

Central aank v. Rrst Interstat~ Bank
Edgar v.
.of

~sic Inc. v. Levinsan , 485 U. S. 224 , 246 n. 24 (1988); and

MITE Corp. , 457 U' S. 624 , 643 (1982). My curriculum vitae, which cantains a .list

my publica-

tions , is attached hereta as Exhibit A.
I have served as a consultant .or adviser an econamicissues ta, among
ethers, the UnitedS1ates Securities and Exchange Cammissian, The National Assaciation

Securities Dealers,. the

New Yark Stack Exchange , the ChicagaBaard
of

of

Trade, the United

States Department

.of

Labor, the United States Department

Justice , the Federal Deposit

InsuranceCorparatian , the Resolution Trust Corporatian , and the Federal Trade Cammission.

046

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I am a member of the American Economics Association and the American

Rnance Association. I am also a member of the Board of Directors of the Center for the Study
of the Economy and the State at The University of Chicago , and former Chairman of the

American Association of law Schools' Section on Law and Economics. I have testified as an
expert witness in multiple proceedings in federal and state courts across the country, as detailed

in Exhibit A. My billing rate is $1 000 per hour.
INTRODUCTION AND SUMMARY OF CONCLUSIONS.
In 1982, Congress, enacted the, Nuclear Waste Policy,Act (" NWPA" ) which

II.

created a program for the permanent disposal of spent nl.Jcle~r

fuel

rSNF") and , high-level

radioactive waste (" HLWjgenerated by domestic commerciai nuclear power plants. Complaint
) entered into a contract in 1983 1l7. Pursuant to the NWPA, the Department of Energy (" DOE"

with plaintiff ConnecticUt Yankee Atomic Power Company (" Connectic(jt Yankee ) which

provided that the government would accept and dispose permanently of Connecticut Yankee
SNF and HLW in retum:far1he payment of fe~s by Connecticut Yankee.

Id. ,

1MI 1 & 8.

DOE

entered into similar

UJdbca;ts with the owners of other commercial nuclear power plants

(referred to in the contracts as " Purchasers ) at about the sarne time. Among other things~

these contracts provided that DOE would begin acceptance of nuclear waste by January 31
1998.

., 11 10. I understand that the Court has found that DOE partially breached Connecticut

Yankee s contract by failing to commence acceptance by the January 31 , 1998 deadline. '
Connecticut Yankee claims that as a result of the partial breach, it h~s

been forced to incur andwilHncur substantial additional costs to continue to store its nuclear
waste on site. Complaint. 11
23.

One of plaintiff' s experts , Mr. Frank C. Graves , claims that " had

DOE commenced acceptance of spent fuel by January 31 , 1998 with a reasonable aggregate

acceptance rate, it should and would have completed removal of spent fuel from Plaintiffs
facility by August 2001~" Frank C. GravesExpert Witness Report (" Graves Report" ), at 3. , Mr.
Graves admits that " (i)n order to achieve removal by this date , Plaintiff would need to SW?P

, removal slots with other Purchasers" but concludes not only that sufficient exchaRges would

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have occurred, but also that " Connecticut Yankee would receive net revenues of $7. 8 million" by
exchanging slot~.

, at 3-4. Based on these cpnclusions, another one of plaintiff's experts, Dr.

Kenneth T. Wise, has opined that Connecticut Yankee s "total minimum damages " are $119.

million. Expert Report on Damages Incurred by Connecticut Ya ~kee Due to The Department of

Energy s Partial Contract Breach Pr~par~d by Kenneth T. Wise , Ph. D (WIse Report" ), a17-8.
This figure represents the sum of the estimated incremental costs of on-site storage through
2010 that Connecticut Yankee wilt incur, in the ~Breach WorIdi as well f:l~;.th~ foregone exchange

receipts that-Mr. Grave$ claimsJt woUld haye received in the "Non- Breach World"

7. ,,:~ I have, been asked by the Department of JU,stice ttranalyze plaintiff's
damage claim froman economiC?
assisted by members of Lex;econ
perspective. In connettion with

my analysis, l h~vebeen

professional staff. , Exhibit B lists the materials we have

reviewed. Based on this review ~nd analysis, and my knowledge and experience , I have
reached two, principal conclusions:
The claimed dam(3ges do not result from DOE' s failure to commence disposing SNF andf'lLW by January 31 , 1998. '
. Plaintiff's

damage claim is speculative because it depends on future events assumes that the DOE shoul~ have implemented a particular schedule for the disposal of Purchasers ' SNF and HLW, assumes that DOE would accept Greater Than Class C (" GTCC" ) waste and "failed fuel" under this acceptance schedule, and assumes that exchanges of allocation slots between program participants wo~ld minimize aggregate ~t-reactor storage costs.

I elaborate upon and explair) the bases for these conclusions in the remainder of this

report.
THE CLAIMED DAMAGES DO NOT RESULT FROM DOE' S FAILURE TO COMMENCE DISPOSING SNFAND HLW BY JANUARY 31, 19~8.

III.

Connecticut Yankee s only generating plant was a nuclear facility in

Haddam Neck, Connecticut which was permanently shut down in 1996. Complaint, 1mS & 22.
Connecticut Yankee s claimed damages consist of the costs associated with storing its nuclear
, waste on site until at least 2010. Connecticut Yankee s Pre-Trial Brief of Legal Points and

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Authorities Relied Upon (" Pre-Trial Brier), at 8. The claimed damages do not result from DOE'
fail~re to commence disposing SNF and HLW by January 31, 1998, because if DOE had started

disposing SNF and HLW by January 31, 1998, but did not dispose of all of plaintiffs nuclear
waste prior to 2010, then plaintiff still would have -to store nuclear waste on site through 2010

and still would have to incur the costs that it claims asdamages.

1 In other words, the claimed

d~mages do not result from the partial breach of contract found by the Court
IV.

PLAINTIFF' S DAMAGE CLAIM IS SPECULATIVE"

Asdes' cribed above, plaintiff's damage'eJaim consist~ ofthe estimated
incremental costs of on-site storage through 20;10th~t' plair'itiffwdutd have avoided if it had been'
able to dispose of all of its nuclear waste by 2001 , as Mr; G~ves Concludes it would have.
Therefore. plaintiff's damage cI~im depends critiCally on Mr. Graves ' conclusion. However, Mr.

Graves ' con clusion is speculative because it depends on a s eries of interrelated assumptions
about future events, the " non-breach world" aggregate acceptance schedule, exchanges, GTCG

and failed fuel. Each of these critical assumptions ' i~ discUssed below.
Assumptions about Future Event~

10.

A p~)ftion of the claimed damages consists of "other continuing costs " that

plaintiffs experts claim plaintiff ~iII incur ~ntil its nucle~r Waste is accepted and removed; ,
plaintiffs experts assume that this will nbt occur until a't'ieast 2010: Wise Report , at 5-6. This
portion of plaintiff's claimed damages is ' speculative because it depends on futureevents.

Assumptions about the " Non- Breach" Aggregate Acceptance Schedule

1. Plaintiff' s damage claim depend$ on the assumption thaI all at plaintiffs nuclear waste would have been removed because plaintiff's experts assume t hat the costs' of storing nuclear and waste do not vary with the amount of inventory at the site. See Graves Report. note 5 Charles W. Pennington Expert Witness Report , at 2-3 & 6-7:-When a dry storage system
(known as an independent spent fuel storage installation or " ISFSI") is used to store nuclear waste, the number of dry storage canisters will vary with the amount of inventory. Id. However, the initial and decommissioning costs of dry storage canisters are relativefy low.
2. Moreover, if plaintiff were to recover the claimed damages and did not incur these costs , the

difference between plaintiffs projected costs and plaintiffs actual costs would be a windfall '

Id.

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11.

Plaintiffs damage claim assumes not only that DOE should have started

disposing of fuel by January 31, 1998, but also that DOE should and would have continued to

dispose specified amounts of nuclear fuel at specified dates thereafter. The assumed amounts
are ~et ' forth in Table 1 of the Graves Report. whtch shows an assumed/acceptance rate of

200 MTU in 1998'and 1999, 2, 000 MTU in 2000 and 2001, 2, 700 MIenn 2002 and 3000MTU
in each subsequent year.

Economic Efficien
12.

Plaintiffs experts claim that this assumed " non;.br~ach world" ' aggregate

acceptance schedule is economically efficieht, arguing that a slower acc~ptance rate would
impose additional unnecessary storage requirements and costs on PurchaserS. " Graves

Report; at8; John W. Bartlett Expert Witness Report (" Bartlett Report" ), at9. However, theii'
, analysis does not establish that the assumed " non-breach world" aggregate acceptance

schedLilewould be economically efficient because it does not take into. account how the

assumed acceptance schedule would affect other relevant costs. As, Dr. Bartlett notes:

The total cost toutinties of storing and disposing of spent fuel..
- the

. can

be divided'

intQ thre~ parts. One is the program costs cOntracting utilitY has or will pay to the government for the serviCes specified in the Standard Contracts~ A second is at-reactor ~pent fuel storage costs - the sum 9f the cOsts each contracting utility has or will incur storing spent fuel prior to it being accepted: by the gQvernmenl A third is loading costs - the sum of the Costs each q)ntractlng utility will incur loading spent fuet into casks provided t)y th~ goyern~ent pU,rsuant to tt)e Standard Contracts for transport to a government facility.)Bartlett Report, at 2-

sum of the fees each

3) ,

Plaintiff's experts have not shown that the assumed acceptance schedule minimizes the sum of
program costs . at-reactor storage costs and loading costs.

3 In fact , plaintiffs experts ' reports do

not provide any analysis of how the assumed acceptance schedule would affect program costs
and loading costs.

continued)

3. In order to show that a proposed acceptance schedule was socially efficient , one would also
have to take into account external , societal costs , such as the costs associated with

to the plaintiff.

050