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In the United States Court of Federal Claims
No. 98-614C (Filed July 9, 2007) ******************************* SOUTHERN NUCLEAR * OPERATING COMPANY, * ALABAMA POWER COMPANY, * Damages for breach of Standard Contract for GEORGIA POWER COMPANY, * disposal of spent nuclear fuel and high-level * radioactive waste; mitigation; incurred costs Plaintiffs, * for partial breach of contract; foreseeability; * substantial causal factor; commercial v. * reasonableness; reasonable certainty; waiver. * * THE UNITED STATES, * * Defendant. * ******************************* M. Stanford Blanton, Birmingham, AL, for plaintiffs. Ed R. Haden, K. C. Hairston, Ronald A. Schechter, Jeffrey L. Handwerker, Matthew M. Shultz, of counsel. John C. Ekman, 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 Harold D. Lester, Jr., Assistant Director. Marian E. Sullivan, Stephen Finn, Joshua E. Gardner, and Heide L. Herrmann, Trial Attorneys. Jane K. Taylor, Office of General Counsel, United States Department of Energy, Washington, D.C., of counsel. OPINION Merow, Senior Judge Two nuclear utilities seek damages for the failure of the United States Department of Energy ("DOE") to commence performance of its contract to accept, transport and dispose of their spent nuclear fuel ("SNF").1/ Because of DOE's delay in commencement of performance, these utilities have incurred enormous expenses to construct additional storage for their SNF, passed on to their customers along with the some $825 million in fees plaintiffs have paid under the contract as of 2004. (Tr. 251 (Cocherell).)
Spent nuclear fuel "has been withdrawn from a nuclear reactor following irradiation, the constituent elements of which have not been separated by reprocessing." 42 U.S.C. § 10101(23) (2005).
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The court has jurisdiction over plaintiffs' claims. PSEG Nuclear, L.L.C. v. United States, 465 F.3d 1343 (Fed. Cir. 2006) (holding that the Nuclear Waste Policy Act ("NWPA") did not strip the court of its Tucker Act jurisdiction over claims arising out of the Standard Contract). Partial breach has been established. Indiana Michigan Power Co. v. United States, 422 F.3d 1369, 1372-73 (Fed. Cir. 2005) (finding DOE liable for breach of contract); Maine Yankee Power Co. v. United States, 225 F.3d 1336, 1342 (Fed. Cir. 2000), aff'g Yankee Atomic Elec. Co. v. United States, 42 Fed. Cl. 223 (1998) (DOE's failure to begin performance by January 31, 1998 was a partial breach and "[t]he breach involved all the utilities that had signed the contract the entire nuclear electric industry."). Accordingly, the court granted plaintiffs' motion for partial summary judgment on liability for partial breach of contract. "There is no dispute concerning the fact that the United States, operating through the DOE, failed to meet the contractual requirement to begin disposition of the nuclear waste covered by the Standard Contracts by no later than January 31, 1998." (Order, Apr. 7, 2004, Dkt. 234, 5.) The Federal Circuit held in Indiana Michigan, that while nuclear utilities could not recover their forecasted future costs of storing SNF that DOE contracted to remove, appropriately established and incurred mitigation expenses were recoverable. On September 15, 2005, the parties agreed that trial in this matter would be limited to costs incurred through December 31, 2004. On September 16, 2005, the court ordered that "[t]he scope of the trial proceedings in this matter will comprise damage evidence up to and including December 31, 2004." (Order, Sept. 16, 2005, Dkt. 304, 2.) Plaintiffs' Amended and Supplemental Complaint for damages through December 31, 2004 was deemed filed as of October 11, 2005. (Order, Oct. 26, 2005, Dkt. 315.) After a lengthy trial, the parties submitted post-trial briefs.2/ Oral argument and supplemental briefing followed. Introduction Following the enactment of the NWPA, Pub. L. No. 97-425, 96 Stat. 2201 (Jan. 7, 1983) (codified at 42 U.S.C. §§ 10101-10270), plaintiffs, along with all domestic nuclear electrical utilities, signed Standard Contracts with DOE wherein, in return for the utilities' payment of substantial fees, DOE would accept title to designated SNF at the reactor sites, and transport and dispose of the utilities' SNF, starting on or before January 31, 1998. DOE did not commence performance by January 31, 1998 as required by the NWPA and the Standard Contracts. While DOE insists there will be performance, the forecasted inauguration continues to recede from 2003, to 2010, to 2017, and to 2018, the latest prognosis. Standard Contracts were signed by plaintiffs Georgia Power Company ("GPC") and Alabama Power Company ("APC"). APC owns Plant Farley. GPC holds a majority interest in Plants Hatch and Vogtle.3/ Each of the these electrical plants have two nuclear reactors. (Tr. 134 (Long).) Hatch
Briefing was extensive. Plaintiffs' Post-Trial Brief was 167 pages; defendant's was 186; plaintiffs' Reply was 63 pages.
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GPC owns 50.1% of Plant Hatch and 45.7% of Plant Vogtle. Other owners of Plant Hatch (continued...) -2-
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Unit 1 began operation in 1974; Unit 2 in 1978. Farley Units 1 and 2 started in 1977 and 1981, and Vogtle in 1987 and 1989. Plaintiff Southern Nuclear Operating Company ("SNC") operates the plants and is agent for APC and GPC on matters relating to the Standard Contracts. (Tr. 126-27 (Long).) SNC, APC and GPC are subsidiaries of the Southern Company, a holding company. (Tr. 126 (Long).) Plaintiffs seek reimbursement of their actual costs spent mitigating DOE's delays. Rather than allow their spent fuel pools to completely fill with SNF, which would result in shutting down their reactors, replacing that source of electricity at a much higher cost, plaintiffs decided to incur the relatively lesser expense of additional on-site storage. Substantial costs (the amounts of which are mostly not disputed) were incurred to design, engineer, license, construct, install, load, operate and maintain this additional storage. As described in more detail hereinafter, at Plant Hatch, an Independent Spent Fuel Storage Installation ("ISFSI"), consisting of four highly-engineered concrete pads, each with a capacity to hold twelve dry SNF storage casks, was built. By December 31, 2004, twenty-two casks were purchased, loaded with SNF and placed on the pads. Construction of Plant Farley's ISFSI began in 2000, and as of December 31, 2004, three dry SNF storage casks were purchased but had not been loaded. From 1998 to 2000, Plant Vogtle procured and installed racks to increase the capacity of its spent fuel pool. The actual costs of these mitigation measures are sought in this action. Upon careful consideration of testimony, argument, documents and exhibits, the court concludes that plaintiffs incurred substantial costs in mitigating DOE's acknowledged, continuing and substantial delay in commencement of performance a partial breach of contract, which was a substantial causal factor in these mitigating storage decisions and of the reasonable costs thereof, and that but for the delay, these expenditures would not have been incurred. The court finds that, in the main, those mitigation decisions and costs were foreseeable and reasonable. A brief discussion of the generation of nuclear power provides background for the court's findings and conclusions. Uranium oxide pellets (little finger-sized) are placed into 12-14 foot metal rods and bundled into assemblies, approximately nine inches square. Assemblies are placed in the reactor core, where fission produces heat, which is converted to steam, which drives turbines and generates electricity. (Tr. 142 (Long).) Nuclear-generated power constitutes 16 percent of the total electricity used by plaintiffs' some four million customers4/ and is their most cost efficient and emission-free form of electrical generation. (Tr. 136 (Long).) Louis Long, SNC Vice President, with
(...continued) are Oglethorpe Power Company (30%), Municipal Electric Authority of Georgia (17.7%) and the City of Dalton (2.2%). Plant Vogtle is also owned by Oglethorpe Power Corporation (30%), Municipal Electric Authority of Georgia (22.7%) and the City of Dalton (1.6%). (PX 6 (Kenrich Report) at 1.) APC has about 1.3 million customers consisting of businesses, families and government agencies; GPC serves around 2 million. (Tr. 26-27.) -34/
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35 years of nuclear power generation experience, testified about the importance of these nuclear plants and set the stage for the mitigating decisions discussed herein:5/ A. [T]he Southern system has a system that's about 40,000 megawatts total. In that system, power is generated from basically four different sources. One is our coal plant. That's our largest . . . about 69 percent of the power that's generated by the Southern Company comes from the coal plants. [Sixteen] percent, the second largest generator of electricity in the Southern system is out of our nuclear plants. And then we also have about 12 percent comes from gas and then about 3 percent comes from hydro. So nuclear is the second largest generator of electricity on the Southern system. The importance, though, is really relative to the cost of electricity out of those four sources. And the amount of time that each of these plants will run. Basically, nuclear is the cheapest production cost of any plant out of our system. They are the most valued from an economic viewpoint. We run our nuclear power plants 24 hours a day, seven days a week, as long as we can run them. .... [O]ur nuclear plants, because they are the cheapest, run all the time . . . . The other additional benefit that nuclear has is there are no emissions associated with its generation, no SO2 , no nitrous oxide, and no particulates, no mercury . . . . [N]uclear
Mr. Long received a bachelor's degree in physics from the Georgia Institute of Technology in 1966, a master's degree in nuclear engineering from that institution in 1969 and an MBA from the University of Alabama in Birmingham in 1979. He attended Harvard Advanced Business Management School in 1995. During his senior year and into his first year of graduate school, he calculated fuel burn-up rates at the Savannah River Plant which produced plutonium for weapons. He was in the Army as a weapons analyst, assessing foreign tactical nuclear weapons, for a year and a half before serving in Vietnam. (Tr. 115-16.) After analyzing Soviet and Chinese nuclear weapons for the United States Army in the 1960s, in 1970, he started as a licensing engineer at Plant Hatch, Unit 2, responsible for obtaining the construction permit from the Nuclear Regulatory Commission ("NRC"). Since then, he has managed hundreds of engineers responsible for the operation and modification of Southern Company's three nuclear plants. In 1979, he became manager of procurement for both nuclear and fossil fuel plants for Southern Company Services, a corporate subsidiary. In 1981, he headed the Nuclear Safety and Licensing Group at Southern Company Services which had licensing and support responsibilities. Responsibility for nuclear fuel was added in 1985. In 1987, he was a member of a task force to consolidate operations at all three nuclear plants. In 1988, he was appointed Vice President of Technical Support of Southern Company Services, where he was responsible for in-service inspections, quality assurance, nuclear fuel and regulatory environmental services. In 1990, SNC was formed and he was appointed Vice President of Technical Support. In the conclusions reached herein, the court credits Mr. Long's extensive experience in the nuclear industry. -4-
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is quite candidly the . . . best source of generation we have both in terms of cost and emission for our system. (Tr. 135-38 (Long).) After four to six years, the uranium in the reactor becomes somewhat depleted or "spent," meaning it becomes relatively inefficient for producing electricity. The reactor is shutdown and assemblies (or rods) containing SNF are removed from the core, replaced with "fresh" fuel. The SNF is placed in basket-like racks in adjacent pools filled with treated water to protect against radioactivity. The pools are monitored with highly sophisticated devices to protect the workers and the environment. With rotational planning, generally about one-third of the core is removed during these scheduled refueling shutdowns. Plaintiffs' wet pools are about 30 by 40 feet and 40 feet deep, made of concrete and lined with stainless steel. 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. See Twp. of Lower Alloways Creek v. Pub. Serv. Elec. & Gas Co., 687 F.2d 732, 737 (3d Cir. 1982). Storage, and most activities in and around the plant, are regulated by the NRC. See generally 10 C.F.R. pts. 72-73 (2007). The reactor core can hold only a limited number of assemblies. The size and configuration of the spent fuel pool and racks constrain the amount of SNF that can be stored there. Storage need is triggered by the removal of either "spent" fuel or damaged assemblies from the reactor core, in both instances replaced with fresh fuel. Also, repair or inspection of the core requires removal of all the fuel. "Pool capacity" refers to the maximum number of assemblies that can be stored in the pool. "Full core reserve capability" ("FCR") is the maintenance of sufficient unused space in the pool for all the assemblies in the reactor core. FCR is necessary to accommodate the discharge of the entire reactor core for inspection, maintenance or repair of the reactor. Pool space is also needed to maneuver and store radioactive tools. While the NRC does not require FCR, it is preferred. A reactor with a completely full pool faces shutdown. "Reracking" is the use of higher density racks, with a tighter configuration, allowing more SNF to be stored in the pool. Due to increasing efficiencies in utilizing reactor core uranium, the time between refueling discharges has increased over the years. The two nuclear reactors at both Plants Hatch and Vogtle share one pool. Each of the two reactors at Farley have their own pool. The shared pool at Plant Hatch contains a rectangular section, referred to as the "bathtub" area, used for the operation and storage of neutron monitoring instruments and tools. Historically, the disposal of SNF and high-level waste ("HLW") from the commercial production of nuclear power has been a federal responsibility. See Florida Power & Light Co. v. Westinghouse Elec. Corp., 826 F.2d 239, 244 (4th Cir. 1987) (discussing President Eisenhower's Atoms-for-Peace Program, the passage of the Atomic Energy Act and other pre-NWPA history). -5-
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During the 1970s, when these plants were licensed (for a base term of 20 years with the possibility of renewals) and constructed, SNF was "reprocessed" off-site. See Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249, 253-55 (2006) (summarizing history in this regard). As a result, wet pools constructed prior to 1977 were not designed to store all SNF generated during the life of the plant. In 1977, President Carter effectively halted reprocessing. Id. Absent removal and reprocessing for another use off-site, wet pools were the only existing place for plaintiffs to store their SNF. Lack of capacity in the Plant Hatch and Plant Farley wet pools mandated the construction of dry storage facilities as the wet pools approached their limits. The Vogtle Plant reactors were licensed and constructed after reprocessing was banned and after the implementation of the NWPA. Accordingly, the Plant Vogtle wet pool has larger storage capacity. The 1983 passage of the NWPA 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); Indiana Michigan, 422 F.3d at 1372. The NWPA contained a series of milestones prior to DOE's mandated commencement of performance no later than January 31, 1998. The NWPA directed the Secretary of Energy to find an appropriate repository site, 42 U.S.C. §§ 10132-10133, and following Presidential and Congressional approval of that selection, proceed with construction authorization through the NRC. Id. §§ 10134-10135. A 1987 amendment directed the Secretary to select Yucca Mountain in Nevada as the repository site. 42 U.S.C. § 10172. In the event Yucca Mountain proved unsuitable, DOE was directed to terminate site-specific activities and report to Congress. 42 U.S.C. § 10133(c)(3). The NWPA authorized DOE to enter into contracts with nuclear utilities for the acceptance, transportation and disposal of SNF. Indiana Michigan, 422 F.3d at 1372 (citing 42 U.S.C. § 10222 (2000)). The Act required that the contracts provide that: (A) following commencement of operation of a repository, the Secretary shall take title to high-level radioactive waste or spent nuclear fuel involved as expeditiously as practicable upon the request of the generator or owner of such waste or spent fuel; and (B) in return for the payment of fees established by this section, the Secretary, beginning not later than January 31, 1998, will dispose of the high-level radioactive waste or spent nuclear fuel involved as provided in this subchapter. 42 U.S.C. § 10222(a)(5). Under the Standard Contract, fees paid by the utilities were deposited into the Nuclear Waste Fund ("NWF").6/ Entry into contracts was effectively mandatory. "Nuclear plant operators and
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The NWF was established to cover DOE's costs. 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 (continued...) -6-
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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, 422 F.3d at 1372 (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."); Tr. 461-62 (Hunt).) Plaintiffs have paid approximately $850 million in fees into the NWF as of December 31, 2004 and payments continue. (Tr. 251 (Cocherell).) In the aggregate, nuclear utilities have paid over $20 billion into the NWF. Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249, 256 n.8 (2006). 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." Indiana Michigan, 422 F.3d at 1374 (citing 42 U.S.C. §10131(a)(4), (b)(2)). Notwithstanding the foregoing, the repository at Yucca Mountain remains unbuilt and commencement of contract performance is further out on the horizon. The "best-achievable" date is 2017. Statement of Edward P. Sproat III, Director, Office of Civilian Radioactive Waste Management ("OCRWM"), before the Subcommittee on Energy and Air Quality, Committee on Energy and Commerce, United States House of Representatives, July 19, 2006, available at www.ocrwm.doe/gov/info_library/program_docs/testimonies/July_19_Sproat_testimony.pdf (last visited May 17, 2007). That date may slip to 2018. Sproat Statement before the Senate Appropriations Subcommittee on Energy and Water Development, March 7, 2007, available at www.ocrwm.doe.gov/welcome/index.shtml (last visited May 17, 2007). See also Def.'s Ans. to Second Am. Compl. and Supplemental Compl. ¶ 1 in System Fuels, Inc. v. United States, No. 032624 (Fed. Cl.), Dkt. 125, filed Jan. 30, 2007 (citing Statement of OCRWM Director Sproat before Subcommittee Clean Air, Climate Change and Nuclear Safety, Committee on Environment and Public Works, United States Senate, September 14, 2006, that DOE planned to initiate repository operations in 2017). Damages: Faced with DOE's impending delay in commencement of performance detailed hereinafter, and mindful of long lead times for approval and implementation of storage options required to continue operations, plaintiffs assert their decisions to increase storage, the implementation of those decisions and the reasonable costs thereof were necessary, foreseeable and caused by DOE's partial
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(...continued) 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." 42 U.S.C. § 10131(b)(4). Utility breach of contract claims cannot be settled by offsets to future payment obligations. Alabama Power Co. v. DOE, 307 F.3d 1300, 1313-14 (11th Cir. 2002). The NWF cannot be used to finance the State of Nevada's participation in NRC licensing hearings. Nevada v. DOE, 400 F.3d 9 (D.C. Cir. 2005). See Northern States Power Co. v. DOE, No. 97-1064, 1998 WL 276581 (D.C. Cir. May 5, 1998) (declining to opine on use of the Fund to pay breach damages). -7-
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breach, and are accordingly, recoverable. Plaintiffs also contend defendant did not meet its burden to establish either that these decisions, their implementation or cost, were unreasonable. In addition to asserting plaintiffs did not meet their burden of establishing foreseeability, causation and reasonable certainty in amounts, defendant argues plaintiffs have another burden to establish that their mitigation costs would not have been incurred if DOE had performed in the socalled nonbreach world. Otherwise plaintiffs would have a windfall, defendant insists. In that nonbreach world, defendant asserts DOE would have performed at an annual rate of around 900 metric tons of uranium ("MTU"), and at that rate, plaintiffs would have incurred some, but not all, of the costs sought in damages here; consequently, it is argued, that an award of the damages claimed would put plaintiffs in a better position than if DOE had commenced performance. Plaintiffs urge the court to find that DOE would or should have performed in the nonbreach world at an annual rate of 3000 MTU. At that level, there would not be a windfall DOE would have removed more SNF than plaintiffs have actually placed in storage; accordingly, by reimbursing the costs as sought herein, plaintiffs would not be better off than if DOE had performed. Plaintiffs also contend they need not establish precisely how much SNF DOE would have removed and when. Rather, plaintiffs assert their decisions to construct dry storage at Plants Hatch and Farley, and rerack at Plant Vogtle, were reasonably foreseeable, caused by DOE's acknowledged breach and were reasonable mitigating reactions, the costs of which were shown with reasonable certainty. "The remedy for breach of contract is damages sufficient to place the injured party in as good a position as it would have been had the breaching party fully performed." Indiana Michigan, 422 F.3d at 1373 (citing San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557, 1562 (Fed. Cir. 1997)). "`The general principle is that all losses, however described, are recoverable.'" Id. (quoting Restatement (Second) of Contracts § 347 cmt. c). Mitigation was required. As the Federal Circuit made clear in Indiana Michigan, by 1994 when DOE formally and publically announced it was not going to initiate performance by January 31, 1998, nuclear utilities were obligated to mitigate. In 1994, DOE announced that it would not begin SNF collection 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. 27,007-27,008 (May 25, 1994). One year later, DOE asserted that it had neither a statutory nor contractual obligation to accept the utilities' nuclear waste in the absence of such repository or temporary storage facility. Maine Yankee, 225 F.3d at 1338 (citing Final Interpretation of Nuclear Waste Acceptance, 50 Fed. Reg. 21,793 (1995)). 422 F.3d at 1372. Accordingly, "[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." Id. at 1375. Indiana Michigan's determination that -8-
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mitigation was required by 1994 was based on DOE's public and formal announcement of delay. "`[O]nce 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.'" Id. (quoting Restatement (Second) of Contracts § 350 cmt. b). "Mitigation is appropriate where a reasonable person, in light of the known facts and circumstances, would have taken steps to avoid damage." Id. (citing Robinson v. United States, 305 F.3d 1330, 1334 (Fed. Cir. 2002)). Generally mitigation, or more precisely, the failure to mitigate, reduces consequential damages awarded to a nonbreaching party. "The amount of loss that [the nonbreaching party] could reasonably have avoided by . . . making substitute arrangements or otherwise is simply subtracted from the amount that would otherwise have been recoverable as damages." Restatement (Second) of Contracts § 350 cmt. b. Similarly, "`mitigation damages'. . . are intended to reimburse a nonbreaching party to a contract for the expenses it incurred in attempting to rectify the injury the breach caused it." Citizens Fed. Bank v. United States, 474 F.3d 1314, 1320 (Fed. Cir. 2007) (citing Restatement (Second) of Contracts § 347 cmt. c). "[W]e see no reason why efforts to avoid damages in contemplation of a partial breach should not also be recoverable." Indiana Michigan, 422 F.3d at 1375. The admitted obligation to mitigate DOE's delays does not, however, end the inquiry. "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." Indiana Michigan, 422 F.3d at 1376. Accordingly, "damages are recoverable where: (1) the damages were reasonably foreseeable by the breaching party at the time of contracting; (2) the breach was a substantial causal factor in the damages; and (3) the damages are shown with reasonable certainty." Id. at 1373 (citing Energy Capital Corp. v. United States, 302 F.3d 1314, 1320 (Fed. Cir. 2002)). Mitigation costs must have been "reasonably foreseeable by the breaching party at the time of contracting." Indiana Michigan, 422 F.3d at 1373. That plaintiffs would generally incur storage expenses of the nature and magnitude sought here was foreseeable. 422 F.3d at 1375 ("Having been placed in a position where they are required to find alternate storage for SNF, the utilities must de facto accept responsibility to guard against the environmental impact of improperly-disposed and maintained SNF, a situation which the NWPA was enacted to avoid."). "`[T]he intent of the NWPA and the parties [to the Standard Contract] was to avoid the construction by utilities of additional atreactor 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." Tennessee Valley Auth., 60 Fed. Cl. 665, 674 n.10 (2004) (citing Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652, 667 (2003) (alterations in original); Tennessee Valley Auth. v. United States, 69 Fed. Cl. 515, 528 (2006) ("DOE also recognized that utilities might be forced to build additional on-site storage facilities if DOE were not successful in performing under its contracts for SNF disposal, as reflected by the fact that one of -9-
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DOE's goals was to preclude the utilities' need to provide storage outside their spent fuel pools. . . . In short, the court finds that it was entirely foreseeable to DOE that failure to perform under the contract would result in damages of the nature and magnitude that [plaintiff] claims."). Since before the NWPA, or the formulation of the Standard Contract, DOE was aware that utilities faced enormous storage costs. Indeed, avoidance of these costs was an impetus for, and objective of, the NWPA. From the inception of the SNF program, DOE planning documents cited avoidance of these costs as a program goal. Whether aspirational objectives, goals or contractual requirements, the court relies on these statements for foreseeability as well as what would have been reasonable or unreasonable performance by DOE, discussed infra. Tennessee Valley Auth., 69 Fed. Cl. at 519 (discussing NWPA goals of precluding any need for SNF storage other than in existing wet pools and for reducing accumulated backlogs). See generally Federal Group, Inc. v. United States, 67 Fed. Cl. 87, 103-04 (2005) (discussing aspirational goals vice contractual requirements). Generally, foreseeability is determined at the time of contracting. Indiana Michigan, 422 F.3d at 1373 (affirming the trial court's finding on the evidence that Private Fuel Storage was not foreseeable to the DOE at the time of contracting). However, there may be situations where foreseeability is more appropriately measured at the time of the breach, because that is when the breaching party should be on notice of the ramifications of its actions or failures to act. "There may even be valid reason to fix the foreseeability at the time of the breach rather than at the time of the agreement, for it is at the breach time that the consequences of wrongdoing are more apparent and assessable, and the deterrent accordingly greater." Gardner Displays v. United States, 171 Ct. Cl. 497, 505, 346 F.2d 585, 589 (1965). "Compensation for the plaintiff's losses is to be made with reference to the conditions existing at the time when performance is due and the contract is broken." Pacific Gas & Elec. Co. v. United States, 73 Fed. Cl. 333, 395 (2006) (citing 11 Arthur L. Corbin, Corbin on Contracts § 1005 (Interim ed.1993), quoted in Indiana Michigan, 422 F.3d at 1375-76)). While the general response to a breach must be foreseen, the particular way that a mitigating decision is implemented need not. [A] breaching party should not be liable for damages that "it did not at the time of contracting have reason to foresee as a probable result of such a breach." If it was foreseeable that the breach would cause the other party to obtain additional capital, there is no requirement that the particular method used to raise that capital or its consequences also be foreseeable. "What is required is merely that the injury actually suffered must be one of a kind that the defendant had reason to foresee and of an amount that is not beyond the bounds of reasonable prediction." Citizens Fed., 474 F.3d at 1321 (emphasis supplied) (quoting Restatement (Second) of Contracts § 351 cmt. a (1981) and Joseph M. Perillo, 11 Corbin on Contracts § 56.7 at 108 (2005 rev. ed.)). See also Old Stone Corp. v. United States, 450 F.3d 1360, 1377-78 (Fed. Cir. 2006) (rejecting attenuated causation), cert. denied, 127 S. Ct. 1831 (2007). In this regard, "what must be foreseeable is only that the loss would result if the breach occurred. There is no requirement that the breach itself or the -10-
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particular way that the loss came about be foreseeable." 3 Farnsworth on Contracts § 12.15, at 26061 (3d ed. 2004). Particularly here, where performance is delayed for decades during which technology advances, there may be tension between what may have been foreseeable consequences in the 1980s, vice what may be commercially reasonable mitigation measures when the upcoming delay(s) were announced and when mitigation measures were required, or at the time of the breach. "[M]itigation in a contract that spans the ages is not limited to decades-old technology. . . . [Plaintiffs] were required to mitigate and their selection of these containers was commercially reasonable and defendant did not establish that it was unreasonable." Yankee Atomic, 73 Fed. Cl. 249, 286 (2006). The court notes that, to hold otherwise would be to provide a perverse incentive to non-breaching parties attempting to mitigate their foreseeable damages from a breach of contract through reasonable and appropriate methods. If the most reasonable and appropriate method of mitigating a non-breaching party's foreseeable damages happens to be one that was not available at the time of contracting, and courts were to deny recovery because of this, non-breaching parties to contracts would have a significant disincentive to taking reasonable and appropriate steps to mitigate a breach of contract. Pacific Gas & Elec., 73 Fed Cl. at 419 n.71. The breach must be a "substantial causal factor" in the mitigation decisions. In Citizens Federal Bank v. United States, 474 F.3d 1314, 1318 (Fed. Cir. 2007), the Federal Circuit affirmed application of the substantial factor causation standard in an award of mitigating damages, surveying authority, that "may appear superficially somewhat inconsistent in applying the `substantial factor' and `but for' theories," but finding as a "common thread [that] . . . the selection of an appropriate causation standard depends upon the facts of the particular case and lies largely within the trial court's discretion." Analysis included the Federal Circuit's prior decision in Indiana Michigan applying the substantial causal factor standard to a mitigation award under the Standard Contract. See also Southern California Fed. Sav. & Loan Ass'n v. United States, 422 F.3d 1319, 1337 (Fed. Cir. 2005), cert. denied, 126 S. Ct. 2967 (2006) (affirming the finding that "FIRREA was the principal cause of [the thrift's] recapitalization and was the substantial factor in [the thrift] incurring higher costs of funds after the breach"); Pacific Gas & Elec., 73 Fed. Cl. at 405, 415 (applying substantial factor standard); Sacramento Mun. Util. Dist., 70 Fed. Cl. 332, 362-65 (2006) (awarding mitigation costs substantially caused by DOE's impending breach); Tennessee Valley Auth., 69 Fed. Cl. at 523 (applying substantial causal factor in awarding mitigation costs of constructing and operating dry storage), appeal dismissed, 188 Fed. Appx. 1006 (2006). The Federal Circuit in Indiana Michigan upheld the trial court's finding that DOE's partial breach was not the cause of the utility's decision to rerack its spent fuel pool. Rather, the utility's decision, made six years before DOE formally announced delay, was for independent business reasons. -11-
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Indiana Michigan's pre-breach costs were not caused by any anticipated DOE delay in performance. It authorized the expenditure for its reracking projects in 1989, in the normal course of business, six years before the 1994 Notice of Inquiry announced DOE's inability to begin timely SNF collection. In light of that fact, the trial court found that Indiana Michigan's rerack schedule was not affected by 1987 and 1989 DOE announcements projecting delays in the scheduled January 1998 acceptance start date. And [Indiana Michigan's] decision to perform a full instead of a partial, rerack in 1995 was purely a business judgment which it would have had to pursue irrespective of DOE's partial breach. 422 F.3d at 1376. Mitigating decisions are constrained by commercial reasonableness. Citizens Fed., 474 F.3d at 1321 (stating that the nonbreaching "[thrift's] strategy of raising capital through various types of financing was a commercially reasonable effort to maintain its debt-to-equity ratio, and fair and reasonable efforts to mitigate are all that the law requires") (emphasis supplied)). The "guiding principle" is whether plaintiff acted with "reasonable commercial judgment." N. Helex Co. v. United States, 207 Ct. Cl. 862, 883, 524 F.2d 707, 718 (1975) (internal quotation marks omitted). The mitigating party "must only make those efforts that are fair and reasonable under the circumstances." Home Sav. of Am. v. United States, 399 F.3d 1341, 1353 (Fed. Cir. 2005) (upholding "commercially reasonable effort,"quoting from Robinson v. United States, 305 F.3d 1330, 1333 (Fed. Cir. 2002)). Efforts need not necessarily be successful when viewed in hindsight because "fair and reasonable efforts to mitigate are all that the law requires." Id.; accord Old Stone Corp. v. United States, 450 F.3d 1360, 1368 (Fed. Cir. 2006) ("A non-breaching party may generally recover its mitigation costs incurred in a reasonable effort to avoid loss caused by a breach, even if its efforts prove unsuccessful."); Hughes Commc'n Galaxy, Inc., 271 F.3d at 1067 ("As the victim of the breach, Hughes was within its rights to obtain commercially reasonable substitute launch services . . . ." (cited with approval for recovery of mitigation costs in Old Stone, 450 F.3d at 1368)); Sacramento Mun. Util., 70 Fed. Cl. at 366; Tennessee Valley Auth., 69 Fed. Cl. at 522-23. See also Anchor Sav. Bank v. United States, 59 Fed. Cl. 126, 149 (2003) (referring to "cover" concepts under the Uniform Commercial Code as closely-related to mitigation, deemed by the Federal Circuit to provide "useful guidance" in applying general contract principles). The Federal Circuit in Indiana Michigan confirmed the application of these bedrock principles: Section 350, comment b of the Restatement of Contracts advises that "[o]nce 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."
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422 F.3d at 1375 (alterations in original). See also 3 Dan B. Dobbs, Law of Remedies § 12.6(1)(6), at 127 (2d ed. 1993) ("[T]he plaintiff's damages are adjusted upwards to reflect all the reasonable costs he incurs in attempting to avoid losses, whether or not he was successful in doing so."); Cienega Gardens v. United States, 38 Fed. Cl. 64, 79 (1997) ("Whether or not an attempt to mitigate damages is successful, the non-breaching party may recover for injury incurred during such mitigation as long as the attempt was reasonable."), vacated on other grounds, 194 F.3d at 1231 (Fed. Cir. 1998). "[T]he established standard for evaluating the reasonableness of mitigation efforts is `from the perspective of one viewing the situation at the time the problem was presented.'" Franconia Assocs. v. United States, 61 Fed. Cl. 718, 744 (2004) (quoting Koby v. United States, 53 Fed. Cl. at 498); Tampa Elec. Co. v. Nashville Coal Co., 214 F. Supp. 647, 652 (D. Tenn. 1963) ("The critical factor in determining . . . a plaintiff's duty to mitigate is whether the method which he employed to avoid consequential injury was reasonable under the circumstances existing at the time." (cited in Corbin on Contracts § 57.16 at 349 (rev. ed. 2005)). Generally, the breaching party may not complain that one of several reasonable courses of action were taken. "`The rule of mitigation of damages may not be invoked by a contract breaker as a basis for hypercritical examination of the conduct of the injured party, or merely for the purpose of showing that the injured person might have taken steps which seemed wiser or would have been more advantageous to the defaulter.'" Sacramento Mun. Util., 70 Fed. Cl. at 367 (quoting Koby v. United States, 53 Fed. Cl. 493, 497 (2002) (citing In re Kellett Aircraft, 186 F.2d 197, 198-99 (3d Cir. 1950)). Although defendant disagrees, plaintiffs assert that defendant bears the burden of establishing that mitigating decisions or expenditures were unreasonable. Plaintiffs are correct. In Old Stone, the government breached its contract with the thrift by eliminating regulatory capital. The Federal Circuit rejected the government's claimed error in the trial court's award of the cost of replacement capital in excess of the required regulatory minimum, concluding the government did not prove that the thrift's mitigation efforts were unreasonable. In Home Savings, we recognized that "[w]hen mitigating damages from a breach, a party `must only make those efforts that are fair and reasonable under the circumstances.'" 399 F.3d at 1353 (quoting Robinson v. United States, 305 F.3d 1330, 1333 (Fed. Cir. 2002)); 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."). The government has not shown that it was unreasonable for [the thrift] to replace the entire amount of regulatory capital that was eliminated by FIRREA . . . so that the thrift had a cushion against future losses.
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450 F.3d at 1370 (all but last alteration in original). See also Pacific Gas & Elec., 73 Fed. Cl. at 406; Sacramento Mun. Util., 70 Fed. Cl. at 367 (2006); Tennessee Valley Auth., 69 Fed. Cl. at 523; Yankee Atomic, 73 Fed. Cl. at 264. Once plaintiffs have met their tripartite burdens of foreseeability, substantial causal factor, and reasonable certainty in amount, "[t]o eliminate or reduce [plaintiffs'] mitigation-related damages, the government bears the burden of showing that [plaintiffs'] mitigation efforts were unreasonable." Tennessee Valley Auth., 69 Fed. Cl. at 523 (extensive citations omitted). The court's findings on reasonableness and substantial causation are also informed by Hughes Communication Galaxy, Inc. v. United States, 271 F.3d 1060, 1066-68 (Fed. Cir. 2001) which affirmed an award of the nonbreaching party's pre-breach mitigation costs. By contract, the National Aeronautics and Space Administration ("NASA") was to use its "best efforts" to launch ten of Hughes' satellites on future Space Shuttle missions no later than September 30, 1994. Before that date (pre-breach), following the tragic explosion of the Space Shuttle Challenger in January of 1986, shuttle operations were suspended. President Reagan then announced there would be no more commercial satellite launches. In pre-breach mitigation, Hughes launched five satellites,7/ three on private expendable launch vehicles ("ELVs") (which apparently were reasonably similar to what would have been on a shuttle launch), and two more on the HS-601 satellite which was better suited for Hughes' commercial use, but more expensive. Hughes sued for damages for the increased costs of both types of alternative launches. The government's defense in Hughes, not unlike the defense here, was that the costs of launching the two satellites on the HS-601 were motivated/caused by commercial concerns, not by NASA's announced future breach. The Court of Federal Claims modified damage theories presented by the experts, determining that using its "best efforts" in the nonbreach world, NASA would have launched only five of the maximum ten satellites. The court awarded the actual costs of three ELV launches, took the average of those costs to determine what the "reasonable" cost of launch four and five would have been, and added that extrapolated sum to the mitigation cost award. Affirming, the Federal Circuit cited bedrock contract principles. Damages are to place the nonbreaching party in "`as good a position as he or she would have been had the breaching party fully performed.'" 271 F.3d at 1066 (citing San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557, 1562-63 (Fed. Cir. 1997).8/ The Federal Circuit found no abuse of discretion in the Court of Federal Claims': (1) determination that in the nonbreach world, using "best efforts," NASA would have launched five of the ten Hughes satellites; (2) calculation of the average cost of the three actual launches and application of that average to the remaining two in lieu of an expert's calculation; or (3) selection of parameters for calculating cost escalation other than those used by an expert. 271 F.3d at 1065.
Hughes launched the five satellites in question, from 1985 to 1994, thus "covering" NASA's pre-deadline announcement. Hughes Commc'n Galaxy, Inc. v. United States, 47 Fed. Cl. 236, 240 (2000). San Carlos Irrigation & Drainage was cited by the Federal Circuit in Indiana Michigan, 422 F.3d at 1373. -148/
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Another instructive case is Chain Belt Co. v. United States, 127 Ct. Cl. 38, 115 F. Supp. 701 (1953). There, prior to, but in anticipation of the government's announced impending breach, the nonbreaching party mitigated, a response the court endorsed as not only appropriate, but obligatory, bounded again by reasonableness. [P]laintiff was under an obligation to avoid by a reasonable effort any damages which it should have foreseen and, having done so, it may recover as damages the expense incurred in such reasonable effort to avoid harm . . . . It makes no difference whether the breach has already occurred, or where . . . it is merely impending under circumstances such that it was not reasonable for plaintiff to expect defendant to prevent the harm. 127 Ct. Cl. at 57-58, 115 F. Supp. at 714. Plaintiffs must establish the amount of their recoverable costs with reasonable certainty. Indiana Michigan, 422 F.3d at 1373 (citing Energy Capital, 302 F.3d at 1320 (Fed. Cir. 2002)). "While the amount of damages need not be `ascertainable with absolute exactness or mathematical precision[,]' recovery for speculative damages is precluded." Id. (alteration in original) (quoting San Carlos Irrigation, 111 F.3d at 1563); Southern California Fed., 422 F.3d at 1336 (citing as the threshold evidentiary standard for a damage award. "sufficient evidence from which the court could `make a fair and reasonable approximation of the damages . . . .'") (citing Bluebonnet Sav. Bank v. United States, 266 F.3d 1348, 1357 (Fed. Cir. 2001)). Development of the Standard Contract As background for the court's findings herein, the development of the Standard Contract and the evolution of performance planning by DOE and monitoring by nuclear utilities is summarized. The NWPA authorized DOE to enter into contracts for the acceptance, transportation and disposal of SNF.9/ 42 U.S.C. § 10222(a)(1). Performance was to be as expeditious as practicable beginning no later than January 31, 1998. On February 4, 1983, after receiving preliminary comments from nuclear industry groups, DOE published a proposed Standard Contract. 48 Fed. Reg. 5458-71 (Feb. 4, 1983). The Federal Register Notice stated that "[the NWPA] directs DOE to begin repository operations no later than January 31, 1998." Id. at 5458. There was a 30-day comment period. In a letter to Robert Morgan,
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Congress intended that under the contract, beginning no later than January of 1998, DOE would accept, transport and dispose of SNF and the utilities would pay for these services. H.R. Rep. No. 97-491, Pt.1, at 59 (1982) (DOE "is responsible for disposing of [HLW or SNF] ... in permanent disposal facilities, beginning not later than January 1998, in return for the payment of fees established by this section."); Standard Contract, 10 C.F.R. pt. 961, pmbl. & Art. VII; Indiana Michigan Power Co. v. DOE, 88 F.3d 1272,1276 (D.C. Cir. 1996). -15-
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DOE's interim director, noting that the proposed contract did not contain a rate or a performance standard, APC and GPC requested a performance rate equal to at least the annual rate of SNF production, plus some to work off accumulated backlog, and urged the contract contain language that DOE should take title to SNF "as expeditiously as practicable," a phrase that was not in the published proposal. [W]e would like to emphasize the importance of the annual receipt rate of the disposal facility being designed, to the extent practicable, to be commensurate with the levels of spent nuclear fuel being generated annually and the need to also reduce the back-log of spent fuel as expeditiously as possible. Consistent with section 302(a)(5) of the Act, the contract should express the intent of DOE to take title to spent nuclear fuel as expeditiously as practicable upon request of the generator or owner. (PX 46, 47.) Industry groups and other utilities also complained of the lack of an acceptance rate in the proposed contract. (PX 48 (comments from Edison Electric Institute ("EEI"), an association of investor-owned utilities and the Utility Nuclear Waste Management Group ("UNWMG"), a consortium of 43 utilities).) Bruce Hunt,10/ manager of nuclear fuel for Southern Company, participated in the events and discussions surrounding the development of the Standard Contract and testified that utilities and DOE understood that, consistent with the NWPA, "expeditiously as practicable" meant the removal of enough SNF from reactor sites such that the utilities would not have to add additional at-reactor storage after January 31, 1998. (Tr. 447, 454-55 (Hunt).) On April 18, 1983 DOE issued the final Standard Contract. 48 Fed. Reg. 16,590-01. The "expeditiously as practicable" phrase from plaintiffs' (and others) comments was added as a preamble. "Whereas, the DOE has the responsibility, following commencement of operation of a repository, to take title to the spent nuclear fuel or high-level radioactive waste involved as expeditiously as practicable upon the request of the generator or owner of such waste or spent nuclear fuel . . . . " 48 Fed. Reg. at 16600 (emphasis supplied). (PX 750 at SN059469; PX 751 at SN138239 and SN138176; PX 752 at SNOCO1233.)
Bruce Hunt is the nuclear fuel manager for Southern Company, a position he has held since 1989. He has a bachelor's of science degree in engineering physics from Cornell University and a master of science degree in nuclear engineering from the Georgia Institute of Technology. (Tr. 43940.) He joined Southern Company Services (which later became Southern Company) in 1972. One of his responsibilities starting in 1979 was the development of the contract with DOE. He was aware of pre-contracting activities and, on behalf of GPC and APC, participated in early meetings with DOE. (Tr. 446.) -16-
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This contract applies to the delivery by Purchaser11/ to DOE of SNF and/or HLW of domestic origin from civilian nuclear power reactors, acceptance of title by DOE to such SNF and/or HLW, subsequent transportation, and disposal of such SNF and/or HLW 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, Art. II. DOE's obligation to commence performance was not conditioned on the existence of "a facility."12/ DOE's performance was to begin when a "facility" was operational, or January 31, 1998, whichever first occurred. Indiana Michigan Power Co. v. DOE, 88 F.3d 1272, 1276-77 (D.C. Cir. 1996) (rejecting DOE's position that performance was contingent upon the commencement of the operation of a repository, holding that payment of fees by a utility was the quid pro quo for timely commencement of performance). See also Northern States Power Co. v. DOE, 128 F.3d 754, 760 (D.C. Cir. 1997) (rejecting DOE's position that the delay was "unavoidable" under the delays clause of the contract and reaffirming that "the NWPA directs DOE to undertake the duty to begin taking the SNF by January 31, 1998, whether or not it has a repository or interim storage facility"). GPC signed Standard Contracts for Plant Vogtle and Plant Hatch on June 10, 1983; APC signed for Plant Farley on June 13, 1983.13/ (PX 751, 752, 750 (hereinafter "Standard Contract").) The Standard Contract did not contain an acceptance rate, despite industry urging. Michael Lawrence, Deputy Director of the NWPA Project Office at the time the Standard Contracts were signed, testified that in 1983 it was not possible to specify an exact rate for SNF acceptance that
The Standard Contract defines the signing utility as the "Purchaser." 10 C.F.R. § 961.11 (Preamble). 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, Art. I.10. If there was any doubt that the contract was with the United States, explanatory comments prefatory to the published final contract reported that twelve commentors requested the definition of DOE include successor agencies. That suggestion was declined 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 (alteration in original). -1713/ 12/
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would not begin until 1998. (Lawrence Dep. 62-63, May 20, 2002 (Pls.' Dep. Designation ("PDD") 18.) While the Standard Contract did not contain a rate or schedule for the acceptance of SNF either on an industry-wide basis or by specific utility, it included a process by which a schedule and quantities would be established. Pacific Gas & Elec., 74 Fed. Cl. at 349-51, 366-70; Sacramento Mun. Util., 63 Fed. Cl. at 497, 504-05; Sacramento Mun. Util., 70 Fed. Cl. 339; Tennessee Valley Auth. v. United States, 60 Fed. Cl. at 668 ("The Standard Contract did not establish a specific rate or schedule for the collection of SNF. Rather, it established a process by which a rate would be established for each utility."). This process, although started, stopped and abandoned several times, is summarized for background purposes and because defendant argues the commencement of this process in1991, defines the so-called nonbreach world and caps plaintiffs' damages. As an initial matter, under the Standard Contract, priority of acceptance is generally based on the age of the SNF, calculated from the date the material was discharged from the reactor core. Standard Contract, Art. VI.B.1(a); see also Art. IV.B.5(a) ("[P]riority ranking shall be based on the age of SNF and/or HLW as calculated from the date of discharge of such material from the civilian nuclear power reactor. The oldest fuel or waste will have the highest priority for acceptance, . . . ."). This priority is referred to as Oldest Fuel First ("OFF"). Beginning annually starting on January 1, 1992, utilities were required to submit for DOE's approval, a proposed Delivery Commitment Schedule ("DCS"), specifying the amount of SNF it "wishes to deliver to DOE beginning sixty-three (63) months thereafter." Art. V.B.1. The amount of SNF in a proposed DCS was to be based on OFF allocations from two types of DOE documents Annual Capacity Reports ("ACRs") and Annual Priority Rankings ("APRs"). DOE would accept or reject the submitted DCSs. Any disagreement would be negotiated. To the extent a DCS was approved, the utility would then submit a Final Delivery Schedule ("FDS") some four years later, one year prior to scheduled acceptance, describing in more detail the SNF to be relinquished. The utility could adjust the quantity of SNF by plus or minus twenty percent and the delivery date by two months. Art. V.B. DOE's ACRs Mindful that DCSs were many years hence, beginning in June of 1987, DOE would issue an ACR "for planning purposes." Standard Contract, Art. IV.B.5(b); 48 Fed. Reg. at 16,592 (stating that DOE added a contractual provision for ACRs "at the request of a substantial number of commenters . . . . "). ACRs were non-binding projections of the annual aggregate industry-wide weight of SNF DOE would be accepting for the first ten-years. (Morgan Dep. 139-41, Mar. 21, 2002 (PDD 26).) Every ACR DOE has issued stated it was for planning purposes only and not contractually binding on either the utility or DOE. (PX 4 (1987 ACR) at 2 (June 1987); PX 8 (1991 ACR) at 1-2 (Dec. 1991); PX 14 (2002 APR & ACR) at 1 (July 2004); Tr. 1990-91 (Zabransky) ("The ACR in itself is a planning document.") Nancy Slater-Thompson, the DOE official in charge of receiving and processing DCS submissions in the early 1990s, did not consider them to be binding on either the utility or DOE. (Slater-Thompson Dep. 98-99, June 13, 2002 (PDD 37).) Alan Brownstein, the DOE official responsible for the division that handled DCSs in the early to mid-18-
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1990s, testified they were for planning purposes only. (Brownstein Dep. 376-78, Apr. 10, 2002 (PDD 8); Brownstein Dep. 427, June 14, 2002 (PDD 10); Tr. 1901-02 (Pollog); Lawrence Dep. 131, May 20, 2002 (PDD 18); Morgan Dep. 135, June 25, 2002 (PDD 28).) The first ACR issued in June of 1987 listed all SNF assemblies by date of discharge from the reactor, starting with the oldest (fuel discharged in 1959), cumulating a total of over 18,000 MTU, ending the listing with fuel removed in 1989. The assemblies were grouped into annual capacity segments based on the total amount DOE then-projected accepting. In "Years 1-5," specific allocations of 1200 MTU annually are charted. For example, Year 1 listed the location of the oldest 1200 MTU of SNF. The next four years continued with the next oldest 1200 MTU. After five years at 1200 MTU annually (for a total of 6000 MTU), the allocations for subsequent years were: Year 6 - 2000 MTU; Year 7 - 2650 MTU; Year 8 - 2650 MTU; Year 9 - 2650 MTU; Year 10 - 2650 MTU. The ACR also noted whether transportation would be by rail or truck. The 1987 ACR contemplated initial acceptance at a monitored retrievable storage system ("MRS") beginning in 1998, if Congressional approved DOE's MRS proposal. In that event, repository operations would then begin in 2003. Acceptance of a total of 6000 MTU at an MRS prior to commencement of repository operations was contemplated (1200 MTU annually for the first five years). Future acceptance rates "may differ." (PX 4.) The 1988 ACR (along with the 1988 Draft Mission Plan) delayed receipt at either an MRS or a repository until 2003, reaching an annual combined acceptance rate, using both an MRS and a repository, of 3000 MTU within five years. (Tr. 526-29 (Hunt).) In its draft 1989 ACR, DOE recognized that delay in the repository and conditions imposed on the siting and construction of an MRS facility by the NWPA amendments (further discussed later) made it unlikely that DOE would be able to start accepting SNF significantly before 2003. Recognizing that a delay would increase utilities' need for additional at-reactor storage, DOE was evaluating the costs and impacts of this delay and exploring whether the NWF could be used to cover costs. (PX 6.) DOE's December 1990 ACR utilized two waste acceptance schedules for the first ten years of operation, upper and lower bounding rates for DOE's Waste Management System ("WMS"), including an MRS if statutory conditions were removed and an early site was found. While the 1989 ACR presumed delay in commencement until 2003, the December 1989 ACR projected acceptance starting in 1998 with a ten-year cumulative rate of 24,100 MTU (1200, 1200, 2000, 2000, 2700, then 3000) in the upper bounding case and 7375 MTU (300, 400, 550, then 875) for the lower bounding case. The upper bounding rates assumed that the linkages in the 1987 Amendments to the NWPA would be lifted by Congress. (Tr. 1773-74 (Kouts).) Similar to the 1987 ACR, individual utilities allocations for ten years under both the upper and lower bounding rates were charted, and all SNF was listed through 1992 by date of discharge from the reactor. Under the Standard Contract, it was to be the last in the series of DOE's ACRs. Beginning in April of 1991, DOE would publish its first APR. Under the Standard Contract, the APR would establish the acceptance queue, 10 C.F.R. § 961.11, Art. IV.B.5, a chronological ranking of SNF on an industry-wide basis by date of discharge (earliest to latest), number of assemblies, weight and name of discharging reactor, aggregating the
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total cumulative weight of acceptance.14/ This data had been included in previous ACRs. DOE's 1991 APR also listed the ranking, and stated that it, together with a forthcoming December 1991 ACR, would form the parameters of a utility's future DCS submissions. (PX 9.) "The APR will be used in conjunction with waste acceptance rates to be published in the 1991 [ACR] as the basis for purchasers to submit delivery commitment schedules ("DCS") beginning January 1992 for the department's approval." "The Purchasers' allocations for each delivery year are presented in Tables A.1 through A.10 in Appendix A, and should be used as the basis for submitting DCSs." (DX 97 at 2.) Under OFF,15/ a utility could derive the amount of SNF eligible for pickup by applying the annual acceptance rate from the ACRs, the projected date of commencement of performance and then determining where its SNF was on that continuum. For example, if DOE commenced performance in 1998 at 3000 MTU per year, and a particular utility had 15.7 MTU of SNF with a date of discharge chronologically behind a total of 3100 MTU from other utilities, the first utility could theoretically plan that it could submit a DCS for 15.7 MTU for pickup in 1999. While the chronological listing of discharged SNF remained constant, the acceptance rate and the commencement date, varied.
Discharge date date came from RW-859 data forms submitted to DOE periodically by the utilities. The longer SNF has been out of the reactor the cooler it is. If the aggregate requests for acceptance exceeded the annual capacity of the disposal facility, acceptance would generally be based on 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 material 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, Art. VI.B.1(a). -2015/
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DCSs, which would identify "all SNF and/or HLW the Purchaser wished to deliver to DOE," had to be submitted 63 months five years and three months in advance of the projected delivery year. Standard Contract, Art. V.B.1. In the above example, the utility could submit a DCS for 15.7 MTU for 1999 in 1993 63 months prior to that allocation. The utility could adjust that quantity by plus or minus 20 percent, and the delivery date by two months, until the submission of the "final delivery schedule"issued one year before the delivery date. Art. V.B.2.
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DOE's December 1991 ACR contained only one acceptance r