Free Response to Motion - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

YANKEE ATOMIC ELECTRIC COMPANY

Plaintiff
No. 98- 126C

(Senior Judge Merow)

UNITED STATES OF AMERICA
Defendant.

YANKEE ATOMIC'S OPPOSITION TO GOVERNMENT' S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING PRIORITY FOR SHUTDOWN REACTORS

JERRY STOUCK

Spriggs & Hollingsworth 1350 I Street , NW , Ninth Floor Washington , DC 20005

Counsel for Plaintiff YANKEE ATOMIC ELECTRIC COMPANY

Of counsel:
Robert Shapiro

SPRIGGS & HOLLINGSWORTH
April 6 ,

2004

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TABLE OF CONTENTS
PAGE

The Court Has Already Ruled That A Trial Is Necessary To Resolve Yankee Atomic s Damages Claim , Including Subsidiary Issues Such As Those Addressed In the Present Motion. .............."..............................................................................................
II.

The Government Mischaracterizes Yankee Atomic s Position On Shutdown Priority.......
The Government' s Motion Fails To Address The Relevant Issue: Damages.....................

III.

Evidence From The "Breach Wodd" Reflects The Consequences Of The Government's Breach And Is Not Probative On Issues Pertaining To Yankee
Atomic s Damages Or DOE' s Performance Obligations. ...................................................

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TABLE OF AUTHORITIES
PAGE

Cases
Commonwealth Edison Co. V. United States 56 Fed. Cl. 652 (2003) ................... 2 , 3 , 6, 7 , 12 , 13

HN Wood Products, Inc. V. United States,

2003 WL 23175395 (Fed. Cl. , Dec. 19 2003) .......... 6
Cir. 1996)

Indiana Michigan Power Co. V. DOE 88 F.3d 1272 (D. c.

......................................... 8

Pacific Far East Line, Inc. V. United States 394 F. 2d 990 (Ct. Cl. 1968)..................................... 6

Roedler V. DOE 255 F. 3d 1347 (Fed. Cir. 2001) .................................................................... 4 , 13
Other Authorities
RCFC 56(A)....................................................................................................................................
48 Fed. Reg. 16590 , 16593 (April 18 , 1983) ..................................................................................

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

YANKEE ATOMIC ELECTRIC COMPANY

Plaintiff
No. 98- 126 C

(Senior Judge Merow)

UNITED STATES OF AMERICA
Defendant.

YANKEE ATOMIC' S OPPOSITION TO GOVERNMENT' S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING PRIORITY FOR SHUTDOWN REACTORS
The government's " motion for partial summary judgment" (" Mot.") on the shutdown

plant priority issue is without merit and should be denied. In essence , the motion asks the Court
to ignore an explicit contract provision that the government , in drafting the contract

acknowledged was important. Such an explicit and important contract provision cannot be
ignored.

The Court Has Already Ruled That A Trial Is Necessary To Resolve Yankee Atomic s Damages Claim, Including Subsidiary Issues Such As Those Addressed In the Present Motion.
Initially, the government' s motion is not really a motion for summary judgment , because

it does not seek judgment in the government's favor " upon all or any part (ofJ a claim or
counterclaim " as Rule 56 requires.
See

RCFC 56(a). Rather , this motion is simply another

opportunity for the government to argue its view of one subsidiary issue bearing upon Yankee
Atomic s damages claim. The Court has already recognized , however , in rejecting the
1 This
Opposition should also be deemed applicable to

Connecticut Yankee

v.

United States No.

98- 154C , and

Maine Yankee

v.

United States

No. 98- 474C.

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government' s previous "motion for partial summary judgment" on the rate of acceptance issue

that Yankee Atomic s damages claim -- including subsidiary issues like those involved in these

government motions -- must go to trial. Order of June 26
denied for this reason alone.

2003. The

present motion should be

II.

The Government Mischaracterizes Yankee Atomic s Position On Shutdown Priority.
In any event , the government's motion rests on a complete mischaracterization of Yankee

Atomic s position on shutdown priority. The government asserts , for example , that Yankee

Atomic is claiming that the parties ' contract
down plants. See

requires

DOE to grant priority acceptance to shut

Mot. at 3 (" Contrary to the Yankees ' allegations , Article VI.B.l. (b) of the

Standard Contract does not translate into a mandatory consideration of priority in the

development of a schedule for acceptance ofSNF.

). The government' s

characterization of
Notwithstanding the

Yankee Atomic s position is wrong. The contractual language is "may
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. "
Contract ,

Art. VI.B.l. (b)( emphasis added).

The permissive nature of the provision for shutdown plant priority does not, however
permit the Court to ignore the explicit terms of Article VI.B. (b). Rather , as explained in " the
well reasoned ruling in

Commonwealth Edison

which this Court " adopted

here

see

Order of

June 26 , 2003

(c)ourts should read contract provisions to ' effectuate the spirit and purpose ' of

the entire contract such that' an interpretation which gives a reasonable meaning to

all of its

parts

will be preferred to one which leaves a portion of it useless , inexplicable , inoperative , void

insignificant , meaningless , superfluous or achieves a weird and whimsical result. ",
Commonwealth Edison Co. v.

United States

56 Fed. Cl. 652 , 662 (2003) (emphasis added)

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(citations omitted). Accordingly, the Court must recognize that the contract provision allowing
shutdown priority is not "useless " or " superfluous
id. but rather, that the provision has a

meaning consistent with the "' spirit and purpose ' ofthe entire contract.'"

Id.

Overwhelming evidence shows that a significant purpose of the contract here , and of the

undedying statute (the Nuclear Waste Policy Act - "NWP A"), was to help utilities avoid
additional on-site storage costs after 1998. See generally

DOE documents and deposition

testimony cited in and appended to Yankee Atomic s opposition ("Rate Motion Opposition

Brief' ) to the government' s motion for partial summary judgment on the rate of acceptance
particulady at pp. 12- 14 ofthat brief and at A2- , 217, 275, 285, 354-

, 421-

1631 3246 3329 ofthe appendix to that brief. Indeed , as noted in

Commonwealth Edison
see

addition to comparable statements in DOE' s draft "Mission Plan" from 1983
667

56 Fed. Cl. at

(t)he deposition testimony of several DOE officials involved with the SNF program

supports plaintiff s assertion that the intent of the NWP A and the parties was to avoid the

construction by utilities of additional at-reactor storage.

Id.

That intent must be given effect in

this case , and shutdown plant priority is one of the contractual tools available to DOE to help

avoid the construction by utilities of additional at-reactor storage.
The government' s mischaracterization of Yankee Atomic s position on shutdown priority

appears to be disingenuous because Yankee Atomic recently spelled out its position in
interrogatory responses provided pursuant to the Court' s August 29 , 2003 Order , which in turn
granted the government's motion seeking such responses. Those interrogatory responses
explained that:

Yankee Atomic contends that DOE would have had a duty to accord priority in the acceptance of spent fuel and HL W from utilities that have permanently shut down reactors , if such priority were necessary to avoid a situation where the utility would

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otherwise have to store spent fuel and HL Won-site for an

extended period of time. In its damage claim , Yankee Atomic contends that if DOE had performed its obligations to accept SNF and HL W at a reasonable rate in 1998 , utilities with shut down reactors would have been able to have exchanged acceptance allocations such that the grant of priority in the acceptance of spent fuel would not have been necessary. Yankee Atomic contends further that if the market for exchanges of acceptance allocations would not have sufficiently developed in the non-breach wodd to enable such prompt removal , DOE would have granted priority acceptance to utilities with permanently shut down reactors to the extent necessary to ensure such prompt removal.
A2- 3 (Yankee Atomic Interrogatory Responses served October 1 , 2003 , Response No. 17);
also

see

A4- 9, id. Responses 18- 19, 21 (elaborating and citing documentary and other testimonial

support).

This statement of Yankee Atomic s position was nothing new. It elaborated the position

Yankee Atomic has taken from the outset in its pretrial submissions and proposed factual

findings. For example , Yankee Atomic s proposed findings 81 and 82 state that both DOE and
utilities "understood and intended" that DOE would implement priority acceptance from shut
down reactors , as provided in the contracts if and as necessary" to carry out the intentions and

objectives of the parties and the undedying statute including the understanding and intention
that DOE would avoid , to the extent reasonably possible , imposing on Contracting Utilities

incremental and avoidable costs of on-site storage of spent fuel." More fundamentally, Yankee
Atomic s position on shutdown priority dovetails both with the " spirit and purpose " of the
contract as recognized in

Commonwealth Edison and with the objectives of the parties and ofthe
s pretrial submissions. See Roedler

NWP A described in that decision and in Yankee Atomic

DOE 255 F. 3d

1347 ,

1352 (Fed. Cir. 2001) (addressing one of the same contracts involved here

and instructing: " (fJor determination of contractual and beneficial intent when , as here , the

,"

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contract implements a statutory enactment , it is appropriate to inquire into the governing statute
and its purpose

Nor can the government legitimately dispute that , at the time of contract formation , DOE considered the contract provision for shutdown plant priority to be essential in order to carry out

DOE program objectives. When the contracts were being developed , several utilities with operating plants requested that DOE omit the provision for shutdown plant priority. DOE
rejected that request , explaining " (t)his type of priority is
necessary

to prevent reactors from
48 Fed.

waiting 20 or 30 years to be decommissioned after they finish generating electricity. "
Reg. 16590 ,

16593 (April 18 , 1983) (emphasis added). The first director of the DOE spent fuel

program, Robert Morgan , testified that he agreed with this statement in 1983 , explaining:

Q. What did you mean necessary to prevent them from waiting 20 to 30 years

A. We didn t want to hold up D and D of a reactor site.

Q. "D and D" referring to?
A. Decommissioning and. . . I don t remember the acronym. Shutting down the
reactor.

Q. Was that one of your objectives , to avoid-(objection)
Q. -- to avoid holding up --

A. a utility from D and D?
Q. Yes.
A. Decommissioning. We didn t want to do that.
Q. That was an

objective of yours?

A. Yes.

);

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Al1- 12 (Morgan Dep. Tr. at 314- 15.
Where a contract provision is "necessary" to achieve DOE program objectives , and is

plainly helpful in allowing one class of utilities avoid additional onsite storage costs - consistent
with the " spirit and purpose " of the contract - the provision cannot be disregarded. And
although the contractual provision for shutdown plant priority is permissive , settled law required
the government to exercise its discretion reasonably.

E.g. , Pacific Far East Line, Inc.

v.

United

States 394 F.2d 990 , 998 (Ct. Cl. 1968) ("A party vested with contractual discretion must

exercise his discretion reasonably and may not do so arbitrarily or capriciously.

HN Wood

Products, Inc.

v.

United States 2003 WL 23175395 at *8 (Fed. Cl. , Dec. 19 2003) (same).

III.

The Government' s Motion Fails To Address The Relevant Issue: Damages.
The government' s

motion is also fundamentally misdirected because , while

acknowledging that "the issue before the Court is the measure of the damages " Mot. at 2 , the

motion does not address that issue. Instead , the government dwells on the contract' s waste
acceptance planning provisions ,

and persists in arguing for strained and incorrect interpretations

of those provisions.
As noted in Commonwealth Edison

(and above), " (t)he

deposition testimony of several
assertion that the intent of the

DOE officials involved with the SNF program supports plaintiffs

NWP A and the parties was to avoid the construction by utilities of additional at-reactor storage.

56 Fed. Cl. at 667. In this case , Yankee Atomic
additional at-reactor storage. "
Instead ,

was not able

to avoid construction. . . of

Yankee Atomic was forced to spend millions to build a

2 To the extent determination of Yankee Atomic s damages involves interpretation of the contract , the legal framework is straightforward and settled , and the government' s motion adds recognizes (t)he purpose of contract interpretation is to nothing. As Commonwealth Edison carry out the intent of the parties. . . to ' effectuate the spirit and purpose ' of the entire contract." 56 Fed. Cl. at 662.

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spent fuel dry storage facility to allow it to decommission its nuclear plant in a cost-effective
manner. See

A13 (picture of Yankee Atomic s dry storage facility). Yankee Atomic s nuclear

plant is shut down. Had DOE used the shutdown plant priority provision for its intended
purpose , within the context of a waste acceptance program that otherwise was fully operational

beginning in 1998 as intended - and contractually required - then Yankee Atomic would not
have incurred the dry storage construction costs and other damages claimed in this case.
Ultimately, despite the government' s efforts to confuse the issue , the damages

determination in this case is quite straightforward. The basic question is whether costs that
Yankee Atomic has incurred and will incur for extended on-site spent fuel storage would have

been incurred if DOE had performed its contract obligations. Because the government has no
real answer to that question , it has attempted to confuse the issue by harping on various contract

provisions that address aspects of spent fuel removal scheduling. Those contract provisions are

not the issue in this case. DOE' s schedule for removal of spent fuel and HL W is not the issue in
this case. The issue in this case is Yankee Atomic s damages - would the substantial costs that
Yankee Atomic has incurred to store spent fuel have been incurred if DOE had performed as

intended? The upcoming trial will appropriately focus on that issue , not on the various
subsidiary " schedule

issues " that

Commonwealth Edison

has already largely rejected , but that the

government apparently continues to hope will distract the Court from the real damages issue.
IV.

Of The Evidence From The " Government' s Breach And Is Not Probative On Issues Pertaining To Yankee Atomic s Damages Or DOE' s Performance Obligations.
Breach World" Reflects The Consequences

The government's motion is further misguided because it relies on evidence from the

breach" wodd that has no probative value regarding the likely behavior of DOE and utilities in
the " non-

breach" wodd , where DOE would have commenced spent fuel removal in January

1998 , and " continued" removal thereafter see Commonwealth Edison 56 Fed. Cl. at 664

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(quoting contract , Art. II), "without qualification or condition

Indiana Michigan Power Co.

DOE 88 F. 3d

1272 , 1276 (D. C.

Cir. 1996). It is true that Yankee Atomic sought priority based

on its shut down status in the mid- 1990' , and DOE refused. But by that time DOE' s inability to

meet the 1998 date was palpable; DOE by then had given up on having a repository by 1998 , and

was struggling to develop an "MRS" -- Monitored Retrievable Storage facility -- which
assuming DOE could obtain a statutory change to " de- link" the MRS from the repository, might
have been ready by 1998. See

Rate Motion Opposition Brief at 45- 46.

In short ,

when Yankee

Atomic requested shut down priority in the mid 1990' , DOE' s spent fuel program was wholly

inoperative and was sinking rapidly into default. To provide for shutdown priority in that context is akin to re-arranging the deck chairs on the Titanic. DOE naturally declined to expend
time or effort doing so. Notably, Yankee Atomic s expert , Frank Graves , explains in his report

(and will explain at trial) how and why DOE' s breach has severely disrupted the behavior of
utilities and DOE with respect to acceptance scheduling issues. See

Expert Report of Frank C.

Graves at 16- 19.

The situation would have been entirely different in the "non-breach" wodd - where DOE

would be performing "without qualification or condition Indiana Michigan 88 F.3d at 1276 -as confirmed by the deposition testimony of Susan Klein , the government' s Rule 30 (b)(6)

witness on various scheduling issues , including " (t)he role and purpose of the provision on

priority for shutdown reactors. . . .

See

A18 (Notice of Rule 30(b)(6) Deposition at 5):

Q. If DOE had begun accepting fuel in 1998 at a 3 000 MTU rate or . . . a reasonable ramp-up to a 3 000 MTU rate , do you have an opinion as to whether DOE could have given priority to shutdown reactors without harming or prejudicing the rights of operating utilities.
(objection)

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I think that would be policy considerations It could have given. A. that would be looked at , but it would make it certainly

Q. Would have made it easier?

A. Much easier , yes.
A23 (Klein 30(b)(6) Dep. Tr. at 524- 525) (emphasis added);
see

A22 (similar). Indeed , before

the DOE program went seriously off course , the government commissioned studies to investigate

which nuclear waste acceptance scenarios were the most reasonable and cost-effective. One
such study in 1989 , entitled Spent Fuel Acceptance Scenarios Devoted to Shutdown Reactors:

A Preliminary Analysis " A25- 73 , analyzed " a class of acceptance schemes in which the

acceptance capacity of the federal radioactive waste management system is allocated principally
to shutdown commercial reactors. . . .
!d.

at 29. That study reached conclusions that are

comparable to the conclusions of Yankee Atomic s experts Dr. Bartlett and Mr. Graves

specifically, that significant program cost efficiencies could be realized by giving priority to
spent fuel located at shutdown plants and at operating reactors with full fuel pools:

An allocation scheme that combines shutdown reactor priorities with eady priority for pools with imminent need for additional storage capacity could largely provide the best features of each scheme , and result in a combined at-reactor cost (for both additional storage capacity and operations after last discharge) about $1. 3 billion lower than the reference OFF (oldest- fuel first) case.
Id. at 64. See

Expert Report of Frank Graves at 11- 12; Expert Report of John Bartlett at 10- 12.

Studies such as that quoted above demonstrate that DOE , back when its program was still afloat - i.
, before it became clear that DOE would not perform by 1998-- was vitally interested both

an efficient schedule for nuclear waste acceptance

and

in avoiding additional costs to utilities for

on-site waste storage.

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Testimony of John Bartlett , DOE' s spent fuel program director in the early 1990'

supports the same conclusion. In the course of explaining his opinion about the proper schedule
for waste removal , Dr. Bartlett testified at his deposition as follows:
Q. Can you

tell me what you mean by "the proper pace " in that

sentence?

A. It' s a pace to avoid inventories at reactors that would force
them to shut down basically. . . .

Q. When you say the industry should not be disruptedA. No shutdowns forced or reactors that are already shut down prevented from going into decommissioning. . . .

Q. . . . You gave me two reasons. One had to do with not having to shut down eady. The other aspect was for shutdown reactors. Would you explain to me what the issue is for shutdown reactors?

A. If the shutdown reactors are seeking to decommission and they
still have spent fuel , they have to maintain the spent fuel storage capability, which is a very expensive proposition , and it prevents them from effectively decommissioning the site. . . .
A78 , 79 80- 81 (Bartlett Dep. Tr. at 163 , 164 , 165- 66).

In dismissing the relevance of such documentary and testimonial evidence , and the
contractual provision for shutdown priority to which it relates , the government persists in mangling the actual contract language (in addition to disregarding the contract' s " spirit and
purpose ). The government' s motion misstates the significance of the contract' s " oldest
fuel

first" (" OFF") concept , asserting that the contract "provides that ' acceptance priority ' for
contract holder SNF and HL W" shall

be based upon the age of the SNF and/or HL W as

calculated from the date of discharge of such material from the civilian nuclear power reactor. ",

Mot. at 4 (quoting Contract , Art. VI.B.1.(a)) (emphasis added by government' s motion). That is

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not what the contract provides. First ,

the contract' s spent fuel removal planning provisions were
See, e.
as an eady step in the

not fully thought through in 1983 , and are thus both incomplete and ultimately unclear.
Yankee Atomic s Rate Motion Opposition Brief at 29- 30.
Nevertheless ,

planning process the contract does indicate that "the Purchaser shall submit to DOE the delivery
commitment schedule(s) which

shall identify all SNF and/or HLW the Purchaser wishes to
" Contract Art. V. B.l.

deliver to DOE.

(emphasis added). In the non-breach wodd , where

DOE' s nuclear waste disposal program would be operating "unconditionally" as intended , shut

down plants would have "wish(ed) to deliver

all

of their spent fuel and HLW. That is because

by delivering all such material to DOE , shutdown plants would have avoided precisely the
additional costs that constitute Yankee Atomic s damages in this case: the costs of constructing

on-site dry storage facilities to allow decommissioning to proceed , and , after decommissioning is
complete , the costs of operating the on-site storage facilities for an indefinite period oftime.

Conversely in the non-breach wodd , operating utilities with ample available pool space would

not have a reason to "wish" to deliver any spent fuel or HL W - they could just place it in their
fuel pools at relatively little additional cost.
Second , although the contract provision cited by the government (Article VI.B.l. (a);

see

Mot. at 4) does describe an oldest fuel first " queue " adherence to that queue is heavily qualified
(e

)xcept as may be provided for" in the separate provision for shutdown priority and also

except as otherwise provided for" in the contract's provisions for " Exchanges " and " Emergency
Deliveries. "
Contract ,

Art. VI.B.l.(a) & (b). This entire set of contract provisions only kicks in

however , if the delivery commitment planning process encounters a constraint -- specifically, in

the situation where " d)elivery commitment schedules for SNF and/or HL W may require the

disposal of more material than the annual capacity of the DOE disposal facility (or facilities) can

,"

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accommodate. "

Contract ,

Art. VI.B. 1. In that event

(t)he following acceptance priority
exceptions

ranking will be utilized " namely the OFF "queue " with the explicit
shutdown priority and emergency deliveries noted above.

for exchanges

Although the provisions in the contract for spent fuel removal planning are not a model
of clarity, evidence that is both overwhelming and uncontroverted

makes certain things clear.

As Dr. Bartlett summarized the situation:

at this point I can say no one ever expected OFF to be used as an actual implementation method. . . .

A. Well ,

. . . It was just widely recognized that this would be a very inefficient way of doing things , and it would be far better to have a system where you , well , frankly, campaigned and made effective use of the resources of the system; but at the time it was all very qualitative , you know , how should this system run , because it was very premature to even think about those details. . . .

. . . It was qualitative discussion of the inefficiency of the off system an expectation that implementation would in fact involve some kind of a SWAPs system or something like that to make it
more effective.

A. The

standard contract provides wiggle room on every aspect. sets the OFF schedule as a paradigm, as a baseline , but it provides for swaps , it provides for shut- down reactors , et cetera.
383).

A75 , 76-

82 (Bartlett Dep. Tr. at 157 , 161-

Ultimately for present purposes , it is enough to recognize that the potential for shutdown

priority is an explicit and important part of the contract. Through its adoption
Commonwealth Edison,

this Court has already determined that the contract does not dictate a

waste acceptance schedule. 56 Fed. Cl. at 663 (" (T)he Standard Contract , including specifically
the ACR and DCS process , does not contain or create a SNF acceptance rate. ). Thus , in determining Yankee Atomic s damages , the Court must recognize (1) that DOE' s removal

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schedule would have been a reasonable one that gave effect to all provisions of the contract that

bear on the removal schedule , (2) that the schedule would have been consistent with the
overwhelming evidence of the intentions of the parties and the obj ectives of the NWP A see

Roedler 255 F.3d at 1352 , and (3) that the schedule , ultimately, would thus have given effect to
the " spirit and purpose " of the contract.
Commonwealth Edison 56 Fed Cl. at 662.

Indeed , even in breach wodd , if and when DOE ever begins performance and despite the

disruptions already caused by DOE' s breach , Ms. Klein testified that shutdown priority is
possible:
Q. You haven

t prejudged and foreclosed the possibility; is that

fair to say?

A. That's fair

to say.

A22 (Klein , 30(b)(6) Dep. Tr. at 516).

Consistent with the discovery record , the trial evidence will show that , from the inception

of the DOE spent fuel program in 1983 right up to the present day, all parties recognized that

utilities like Yankee Atomic with shut down plants should not have to incur additional costs of
on-site storage in order to decommission their plants , or further costs for long- term on-site
storage long after decommissioning is otherwise complete. The parties ' contract , to the contrary,
was designed and intended to allow Yankee Atomic to avoid

those costs. And the explict

contract provision for shutdown priority was an integral part of that contract design.

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The government's motion for " partial summary judgment" on shutdown plant priority
should be denied.

Respectfully submitted

s/Jerrv Stouck

Dated: April 6 , 2004

JERRY STOUCK Spriggs & Hollingsworth 1350 I Street , N. , Ninth Floor Washington , D. C. 20005 (202) 898- 5800 (phone) (202) 682- 1639 (facsimile)
COUNSEL FOR PLAINTIFF YANKEE ATOMIC ELECTRIC COMPANY

Of Counsel:

Robert L. Shapiro SPRIGGS & HOLLINGSWORTH
271264v2