Free Response - District Court of Federal Claims - federal

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No. 98-488C (Judge Braden)

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

SACRAMENTO MUNICIPAL UTILITY DISTRICT,

Plaintiff,

v.

UNITED STATES OF AMERICA,

Defendant.

SACRAMENTO MUNICIPAL UTILITY DISTRICT'S RESPONSE TO THE GOVERNMENT'S POST-TRIAL BRIEF

OF COUNSEL: David S. Neslin Timothy R. Macdonald ARNOLD & PORTER LLP 370 Seventeenth Street, Suite 4500 Denver, CO 80202 (303) 863-1000 October 18, 2005

Howard N. Cayne ARNOLD & PORTER LLP 555 Twelfth Street, N.W. Washington, D.C. 20004 (202) 942-5899

Counsel of Record for Plaintiff Sacramento Municipal Utility District

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TABLE OF CONTENTS Page INTRODUCTION ...........................................................................................................................1 ARGUMENT...................................................................................................................................3 I. SMUD's Development Of Dry Storage Was Caused By The Government's Anticipated And Actual Failure To Begin Accepting Spent Fuel. ......................................3 A. B. SMUD Is Not Precluded As A Matter Of Law From Recovering Costs Prior To 1994. ..........................................................................................................4 The Evidence Establishes That The Government's Announced Delays Caused SMUD To Pursue Dry Storage During The Period From 1992 Through 1996...........................................................................................................5 1. 2. The Government Confuses The Real World With A Hypothetical Non-Breach World That Did Not Exist After 1987.....................................7 SMUD's Desire To Facilitate Rancho Seco Decommissioning And Encourage Prompt Fuel Receipt By DOE Cannot Be Divorced From The DOE's Anticipated Delay In Performance................................14 SMUD's Recognition That DOE Might Be Able To Site An MRS Does Not Negate Causation. ......................................................................17 The Government's Economic Argument Is Misguided And Unrealistic. .................................................................................................19

3. 4. C.

The Evidence Establishes That The Government's Actual Delay Caused SMUD To Restart And Continue With The Dry Storage Project During The Period From 1997 Through 2002. ..................................................................21 1. The Government Relies Upon An Oversimplified Non-Breach World That Ignores Disincentives To Continuing With The Dry Storage Project. ..........................................................................................24 The Fact That SMUD's Reassessments Were Precipitated By Delays In The Dry Storage Project Is Irrelevant........................................30 The Government's Economic Argument Fails for Multiple Reasons. .....................................................................................................31

2. 3.

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II.

In The Non-Breach World, The Government Would Have Operated At A Reasonable Rate Of Acceptance........................................................................................37 A. B. The Evidence Demonstrates That DOE Would Have Performed At A 3000 Ton Rate.................................................................................................................39 The Evidence Demonstrates That DOE Shared The Intent of Preventing Utilities From Having To Build Additional At-Reactor Storage And Reducing The Backlog Of SNF Located At Reactors. ..........................................48 The Government's Only Argument On The Acceptance Rate Is The DCS Theory That Has Been Rejected By Every Court To Consider It..........................53

C. III.

The Potential For Early Acceptance Through Exchanges And Shutdown Priority, As Well As The Possibility Of Campaigns, Would Have Factored Into SMUD's Decision Making In The Non-Breach World.....................................................................58 SMUD's Mitigation Efforts Were Reasonable. .................................................................64 A. B. The Government's Argument Regarding Wet Storage Is Wrong And Fails To Show That SMUD Was Unreasonable In Pursuing Dry Storage. ....................67 The Government's Argument Regarding Transportation Casks Misunderstands The Facts And Fails To Show That SMUD Was Unreasonable In Pursuing Dry Storage..................................................................71 The Government's Argument Regarding "Dry Transfer" Is Incomplete, Fails To Address The Facts, And Fails To Show That SMUD Was Unreasonable In Pursuing Dry Storage..................................................................75 The Government's Argument Regarding The NAC Cask Ignores The Facts And Fails To Show That SMUD Was Unreasonable In Pursuing Dry Storage. ..................................................................................................................79

IV.

C.

D.

V. VI.

It is Undisputed That SMUD's Damages Were Foreseeable.............................................82 SMUD Has Met Its Burden of Proving the Certainty Of Its Damages..............................83 A. B. SMUD Has Claimed Only Those Labor Costs Directly Attributable To The Dry Storage Project.........................................................................................85 The Evidence Establishes That The SMUD's Indirect Labor Burden Costs Are Incremental To The Government's Breach.....................................................88

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C.

SMUD Would Not Have Incurred The Costs Of Loading and Transferring Its Fuel To The ISFSI In The Non-Breach World And Therefore SMUD Is Entitled To Recover Such Costs. ...........................................................................90 The Evidence Supports SMUD's Offsets As Proposed.........................................92

D. VII.

The Government's Remaining Attempts To Undermine SMUD's Damages Have No Factual Basis And Should Be Rejected........................................................................93


A.

The Government Cannot Use The Result Of Its Own Breach The Transfer Of Fuel To Dual Purpose Canisters To Argue It No Longer Has Any Obligations Under The Contract.............................................................94 The Court Need Not Address Whether GTCC Waste Is Covered Under the Contract Because SMUD Has Not Claimed Damages For The Storage Of Such Waste.............................................................................................................96 The Government's Proposed Deduction For SMUD's Damaged Fuel Is Based On Speculation. .........................................................................................101 The Government's Proposed Deduction For The "88-Month Delay" Is Overly Simplistic And Unsupported By The Law And The Evidence................105 The Government Offers No Factual Support For Its Argument That SMUD Should And Could Have Mobilized Its Labor Force Only Three Months Prior To The Start Of The Project. .........................................................110 SMUD's Fuel Was Still In The Pool In 2002, And Thus SMUD Did Not Realize Any Wet Storage "Savings" In 2002. .....................................................111 The Government Has Offered No Factual Basis To Support Its Alleged Decommissioning "Savings." ..............................................................................112 SMUD's ISFSI Operation And Maintenance Costs Are A Direct Result Of The Breach And Would Not Have Been Incurred In The Non-Breach World. ..................................................................................................................113 There Is No Basis For The Government's "Unavoidable Costs" Deduction.......114


B.

C. D. E.

F. G. H.

I. VIII.

The Government Does Not Dispute That SMUD Gave DOE Adequate Notice Of Its Pursuit Of And The Costs Associated With Dry Storage. ..........................................115

CONCLUSION............................................................................................................................115

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TABLE OF AUTHORITIES Page(s) CASES AES Tech. Sys., Inc. v. Coherent Radiation, 583 F.2d 933 (7th Cir. 1979) .............................................................................................86 Am. Capital Corp. v. United States, 66 Fed. Cl. 315 (2005) .........................................................................................................3 Am. Dredging Co. v. United States, No. 58633, 1951 WL. 5376 (Ct. Cl. July 9, 1951)...........................................................110 Augustine Med., Inc. v. Progressive Dynamics, Inc., 194 F.3d 1367 (Fed. Cir. 1999)..........................................................................................39 Bigelow v. RKO Radio Pictures, 327 U.S. 251 (1946)...................................................................................................95, 103 Bluebonnet Sav. Bank, FSB v. United States, 266 F.3d 1348 (Fed. Cir. 2001)..........................................................................................81 Bonjorno v. Kaiser Aluminum & Chemical Corp., 752 F.2d 802 (3d Cir. 1984)...............................................................................................19 Boston Edison Co. v. United States, 64 Fed. Cl. 167 (2005) .......................................................................................................53 Boyajian v. United States, 423 F.2d 1231 (Ct. Cl. 1970) .............................................................................................88 Cal. Fed. Bank v. United States, 395 F.3d 1263 (Fed. Cir. 2005)........................................................................................3, 9 Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652 (2003) .....................................................................................38, 39, 53, 57 Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th Cir. 2000) ...........................................................................................20 Consumers Energy Co. v. United States, 65 Fed. Cl. 364 (2005) ...........................................................................................40, 53, 56

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Convoy Co. v. Sperry Rand Corp., 672 F.2d 781 (9th Cir. 1982) .............................................................................................86 Danzig v. AEC Corp., 224 F.3d 1333 (Fed. Cir. 2000)..........................................................................................13 David Nassif Assocs. v. United States, 557 F.2d 249 (1977)...........................................................................................................39 David Nassif Assocs. v. United States, 644 F.2d 4 (Ct. Cl. 1981) ...................................................................................................39 De Graffenried v. United States, 2 Ct. Cl. 640 (1983) ...........................................................................................................84 Dunn Appraisal Co. v. Honeywell Info. System Inc., 687 F.2d 877 (6th Cir. 1982) .............................................................................................86 ECDC Envtl., L.C. v. N.Y. Marine & General Ins. Co., No. 96-Civ-6033, 1999 WL 777883 (S.D.N.Y. Sept. 29, 1999) .......................................86 Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002)..........................................................................................60 Entergy Nuclear Generation Co. v. United States, 64 Fed. Cl. 336 (2005) .................................................................................................40, 53 Entergy Nuclear Indian Point 2, LLC v. United States, 64 Fed. Cl. 515 (2005) .......................................................................................................53 Essex Electro Eng'rs, Inc. v. Danzing, 224 F.3d 1283 (Fed. Cir. 2000)..........................................................................................39 First Heights Bank, FSB v. United States, 422 F.3d 1311 (Fed. Cir. 2005)..........................................................................................94 Florida Power & Light Co. v. United States, 64 Fed. Cl. 37 (2005) .........................................................................................................38 Florida Power & Light Co. v. United States, 66 Fed. Cl. 93 (2005) .........................................................................................................38 Forest Envtl. Servs. v. United States, 5 Cl. Ct. 774 (1984) ...........................................................................................................64

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Freeport Sulphur Co. v. S/S Hermosa, 526 F.2d 300 (5th Cir. 1976) .................................................................................85, 86, 89 Genmoora Corp. v. Verdesca, 939 F.2d 1149 (5th Cir. 1991) .............................................................................87, 88, 110 Haynes v. United States, 61 Fed. Cl. 788 (2004) .....................................................................................................114 Home Sav. of Am., FSB v. United States, 399 F.3d 1341 (Fed. Cir. 2005)........................................................................63, 66, 70, 81 Home Sav. of Am. v. United States, 57 Fed. Cl. 694 (2003) .......................................................................................................66 Honorable v. Easy Life Real Estate System, 100 F. Supp. 2d 885 (N.D. Ill. 2000) .................................................................................36 Ill. Brick Co. v. Illinois, 431 U.S. 720 (1977)...........................................................................................................36 In re Aluminum Phosphide Antitrust Litig., 893 F. Supp. 1497 (D. Kan. 1995).....................................................................................20 In re Cambridge Biotech Corp., 186 F.3d 1356 (Fed. Cir. 1999)..........................................................................................39 Indiana Michigan Power Co. v. United States, 57 Fed. Cl. 88 (2003) .................................................................................37, 39, 40, 52, 53 Indiana Michigan Power Co. v. United States, 60 Fed. Cl. 639 (Fed. Cl. 2004), aff'd 422 F.3d 1369 (2005) ....................................2, 3, 68 Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005).................................................................................. passim J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557 (1981)...................................................................................................60, 103 Johnson Mgmt. Group CFC, Inc. v. Martinez, 308 F.3d 1245 (Fed. Cir. 2002)....................................................................................... 105 Joy Mfg. Co. v. Sola Basic Indus., Inc., 697 F.2d 104 (3d Cir. 1982)...............................................................................................84

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In re Kellett Aircraft Corp., 186 F.2d 197 (3d Cir. 1950), aff'd in part, 399 F.3d 1341 (Fed. Cir. 2005) .....................66 Koby v. United States, 53 Fed. Cl. 493 (2002) .................................................................................................77, 79 Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).........................................................................................................106 Lepage's Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003)...............................................................................................19 Locke v. United States, 283 F.2d 521 (Ct. Cl. 1960) ...........................................................................60, 82, 84, 103 Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000)..........................................................................................54 McAbee Const. Inc. v. United States, 97 F.3d 1431 (Fed. Cir. 1996)............................................................................................39 Northern Helex Co. v. United States, 524 F.2d 707 (Ct. Cl. 1975) ...............................................................................................64 Omni Corp. v. United States, 41 Fed. Cl. 585 (1998) .......................................................................................................52 Phillips v. United States, 230 Ct. Cl. 805 (1982) .......................................................................................................64 Robinson v. United States, 305 F.3d 1330 (Fed. Cir. 2002)..........................................................................................63 S.W. Eng'r Co. v. Cajun Elec. Power Coop., Inc., 915 F.2d 972 (5th Cir. 1990) ..............................................................................................86 Sacramento Municipal Utility District v. United States, 63 Fed. Cl. 495 (2005) .......................................................................................................53 Southern Nuclear Operating Co. v. United States, No. 98-614 (Fed. Cl. Apr. 7, 2004)....................................................................................38 Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563 (1931).................................................................................................103

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System Fuels, Inc. v. United States, No. 03-2642C, 2005 WL 1804314 (Fed. Cl. July 29, 2005) .............................................69 T.C. Bateson Const. Co. v. United States, 319 F.2d 135 (Ct. Cl. 1963) ...............................................................................................64 Tennessee Valley Auth. v. United States, 60 Fed. Cl. 665 (2004) .................................................................................................53, 82 The Long Island Sav. Bank, FSB v. United States, No. 92-517-C, 2005 WL. 2249742 (Fed. Cl. Sept. 15, 2005)............................................94 United States v. Ins. Co. of N. Am., 131 F.3d 1037 (D.C. Cir. 1997) .........................................................................................39 United States v. The John R. Williams, 144 F.2d 451 (2d Cir. 1944).........................................................................................85, 86 Washington v. Armstrong World Indus., Inc., 839 F.2d 1121 (5th Cir. 1988) ...........................................................................................88 Westfed Holdings, Inc. v. United States, 55 Fed. Cl. 544 (2003) ...................................................................................................... 64 Wilner v. United States, 23 Cl. Ct. 241 (1991) ...............................................................................................104, 105 Willred Co. v. Westmoreland Metal Mfg. Co., 200 F. Supp. 59 (E.D. Penn. 1961) ....................................................................................86 Wilson v. Marquette Elecs., Inc., 630 F.2d 575 (8th Cir. 1980) .............................................................................................86 Yankee Atomic Elec. Co. v. United States, No. 98-126C, 2004 WL 1535686 (Fed. Cl. 2004) .............................................................59 Yankee Atomic Elec. Co. v. United States, No. 98-126C (Fed. Cl. June 26, 2003)...............................................................................38

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STATUTES 42 U.S.C. § 10101(12) ...................................................................................................................98 42 U.S.C. § 10131(a)(2)(A) ...........................................................................................................52 42 U.S.C. § 10134(b) ....................................................................................................................76 42 U.S.C. § 10156(a)(1).................................................................................................................82 42 U.S.C. § 2021c(b)(1)...............................................................................................................100 OTHER AUTHORITIES 10 C.F.R. § 51.44(a)(2)(iv) ............................................................................................................99 10 C.F.R. § 60.2 .............................................................................................................................98 10 C.F.R. §§ 61.55-61.59...............................................................................................................29 10 C.F.R. § 72 .......................................................................................................................10, 11 48 Fed. Reg. 16,590 (Apr. 18, 1983) ..................................................................................... passim 48 Fed. Reg. 54,391 (Dec. 2, 1983) ...............................................................................................82 52 Fed. Reg. 5992 (Feb. 27, 1987) ............................................................................................... 99 54 Fed. Reg. 22,578 (May 25, 1989) .............................................................................................99 60 Fed. Reg. 13,424 (Mar. 13, 1995)...................................................................................100, 101 66 Fed. Reg. 51,823 (Oct. 11, 2003)............................................................................................100 H.R. 3809, 97th Cong. (1982)........................................................................................................98 Restatement (Second) of Contracts § 204 (1981) ....................................................................38, 39 Restatement (Second) of Contracts § 251 (1981) ..........................................................................13 Restatement (Second) of Contracts § 350 (1981) ........................................................64, 65, 70, 76

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

SACRAMENTO MUNICIPAL UTILITY DISTRICT, Plaintiff, v. THE UNITED STATES OF AMERICA, Defendant.

) ) ) ) ) ) ) ) ) ) ) )

No. 98-488 C (Judge Braden)

SACRAMENTO MUNICIPAL UTILITY DISTRICT'S RESPONSE TO THE GOVERNMENT'S POST-TRIAL BRIEF

INTRODUCTION After SMUD filed its opening Post-Trial Brief ("Pl. Br.") in this case, the Federal Circuit issued its decision in Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005). That decision supports SMUD's claims in this case. In Indiana Michigan, the Federal Circuit rejected the government's argument that utilities in the spent fuel cases were not entitled to recover "pre-breach" damages. Id. at 1374-75. The Court held that "[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 (emphasis added). The Court further found that: It would have been improvident for [the utility] to have waited until January 1998 before deciding what to do with its nuclear waste. Indeed, the losses which the utilities are obligated to

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mitigate are not merely pecuniary unto themselves, e.g., the increased cost of obtaining storage for SNF on short notice. Id. In addition, the Court explained that "[h]aving 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." Id. at 1375 (emphasis added). The Federal Circuit reaffirmed the principle that "mitigation is appropriate where a reasonable person, in light of the known facts and circumstances, would have taken steps to avoid damage," and that the "[the utility] is `not precluded from recovery . . . to the extent that [it] has made reasonable but unsuccessful efforts to avoid loss.'" Id. (quoting Restatement (Second) of Contracts ("Restatement") § 350 (1981) (alteration in original). The Court also concluded that, on the facts of that case, the trial court's finding of no damages was supportable and that the plaintiff was not entitled to recover future damages at present, but could return to court and "obtain recovery for post-breach damages as they are incurred." Id. at 1375-77.1 Here, SMUD seeks no future damages. It seeks only the costs that it incurred in a reasonable effort to "to find alternate storage for SNF" in light of DOE's many announcements

1

In that case, the utility had not built an on-site dry storage facility and primarily sought to recover future damages that it might incur to purchase casks and build an Independent Spent Fuel Storage Installation ("ISFSI") in the future. 422 F.3d at 1376. The actual past costs that the utility sought were for a "re-racking" of its spent fuel pool (to expand the capacity), an aborted investment in the Private Fuel Storage initiative that was being considered for an Indian reservation in Utah, and an Advanced Purchase Agreement that was considered an equity investment in future casks that the utility did not pursue. Indiana Michigan Power Co. v. United States, 60 Fed. Cl. 639, 655-59 (Fed. Cl. 2004), aff'd 422 F.3d 1369 (2005). SMUD is not seeking any costs related to the re-rackings of its spent fuel pool, SMUD never made any investment toward the Private Fuel Storage initiative in Utah, and SMUD never entered into any type of equity investment for casks. Furthermore, unlike Indiana Michigan, SMUD has actually Footnote continued on next page

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of failure and delay. The Federal Circuit's decision demonstrates that SMUD would have been "improvident" had it done nothing in response to the government's delays. SMUD, in the exigencies of the real world, was "placed in a position where [it was] required to find alternate storage for SNF," id., and it responsibly did so at a reasonable cost it is now entitled to recover. The litany of defenses and deductions urged by the Government all fail for the reasons set forth below. ARGUMENT I. SMUD's Development Of Dry Storage Was Caused By The Government's Anticipated And Actual Failure To Begin Accepting Spent Fuel.

Whether the causation standard employed here is the "definitely established" standard endorsed in California Federal Bank v. United States, 395 F.3d 1263, 1267 (Fed. Cir. 2005), or the "substantial factor" standard articulated in Indiana Michigan, 422 F.3d at 1373, or the "direct result" standard urged by the government, Defendant's Post-Trial Brief ("Gov. Br.") at 5-6,2 the evidence establishes that the government's long anticipated and then actual failure to begin accepting spent fuel in January 1998 caused SMUD: (1) to initiate and proceed with its dry storage project during the period from 1992 through 1996; and then (2) to continue with that

Footnote continued from previous page purchased its dry storage canisters, completed its ISFSI, and transferred all of its fuel to the ISFSI. 2 This Court rejected the government's "direct result" standard earlier this year, noting that the Federal Circuit's California Federal decision endorsed "a different standard, i.e., the causal connection between breach and the loss . . . must be definitely established." Am. Capital Corp. v. United States, 66 Fed. Cl. 315, 395 n.55 (2005) (quotation omitted).

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project through multiple reevaluations during the period from 1997 through 2002. The government's arguments to the contrary fail for the reasons set forth below. A. SMUD Is Not Precluded As A Matter Of Law From Recovering Costs Prior To 1994.

At the outset, the government argues that the Federal Circuit's decision in Indiana Michigan "held that plaintiffs in spent nuclear fuel cases are not entitled to recover damages arising before 1994." Gov. Br. at 7. The Federal Circuit, however, made no such ruling. The Federal Circuit's actual holding was that the particular plaintiff there, Indiana Michigan, had authorized the reracking projects at issue "in the normal course of business" and that such reracking "was not affected by 1987 and 1989 DOE announcements projecting delays." 422 F.3d at 1376. The government's argument also ignores the Federal Circuit's direction that "[m]itigation is appropriate where a reasonable person, in light of the known facts and circumstances, would have taken steps to avoid damage." Id. at 1375. Although the Federal Circuit found it "beyond debate" that the government's 1994 announcement of delay had such effect and that in fact utilities had a legal obligation to begin mitigating in 1994, id., the Court did not, contrary to the government's assertion, issue an industry-wide ruling that mitigation efforts were only reasonable after that date. Thus, SMUD is not foreclosed by Indiana Michigan from recovering mitigation costs incurred prior to 1994.

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B.

The Evidence Establishes That The Government's Announced Delays Caused SMUD To Pursue Dry Storage During The Period From 1992 Through 1996.

The documentary evidence in this case establishes: (i) that in 1987, 1988, and 1989, the government made multiple announcements that the opening of the federal repository would be delayed substantially, see, e.g., PX 109 at 5; PX 118 at 6; PX 113 at 2, 10, 22; PX 142 at 4-5; PX 143 at 15; PX 144; PX 169 at vii; (ii) that, although DOE hoped to be able to develop an interim facility, referred to as a Monitored Retrievable Storage ("MRS") facility, DOE recognized that doing so would necessitate the identification of a state that was willing to host the site and the elimination of statutory restrictions that required the repository be close behind the opening of an MRS, see, e.g., PX 143 at 15; PX 169 at x, 11-12; PX 188 at 5; PX 217 at 3-4, 19-23, 30-31; PX 231 at 4; PX 294 at 3; (iii) that those government statements led SMUD to reasonably conclude that it would have to store spent fuel at Rancho Seco for an uncertain and extended period of time, see, e.g., PX 176 at 59; PX 297 at 7; and PX 528 at 2; and (iv) that this belief drove SMUD to develop the dry storage project, see, e.g., PX 259 at 2; PX 269A; PX 363 at 7, 8. This documentary evidence was corroborated by the testimony of various witnesses, including: SMUD's former General Manager, David Freeman, see Designations Appendix (Dckt. #310) at 2288-89, 2290-91, 2310-13; SMUD's Assistant General Manager, Jim Shetler,

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see Tr. at 154, 160, 172, 194, 360; SMUD's former Fuel Disposition Manager, Rita Bowser, see Designations Appendix (Dckt. #310) at 2237-40, 2251-52; and SMUD's former fuel management consultant, Saul Levy, see Motion For Leave to File Testimony of S. Levy & R. Powers, dated March 7, 2005 ("Levy Motion") (Dckt. #300) at 111, 143. The government largely ignores the documents and testimony upon which SMUD relies.3 Instead, the government argues that causation is negated because SMUD's initial decisions to pursue dry storage: were made in 1990-1992 in the non-breach world; were made for business reasons unrelated to the DOE's anticipated delay in performance; acknowledged that DOE had the technical capability of building an MRS; and were driven by projections that the project would pay for itself by 1998. Each of these arguments must fail, however, as they are all founded upon SMUD documents that were influenced by and predicated on the DOE's announcements that it would not open a fuel repository until 2010 at the earliest, and DOE's lack

The government quibbles with SMUD's citation of PX 297 in support of its statement that Mr. Levy prepared his report in light of DOE's announcements of likely delay in performance. Gov. Br. at 14, n.7. The Levy report itself, however, confirms the accuracy of the statement in question. See infra § I.B.1 (quoting relevant portions of report). The government also disputes SMUD's reliance on PX 363, the Nuclear Regulatory Commission's ("NRC's") 1994 Environmental Assessment on the Rancho Seco ISFSI ("EA") on the ground that the EA's discussion of the possibility of an MRS by 1998 is inconsistent with SMUD's contemporaneous documents. Gov. Br. at 26, n.16. In fact, however, the NRC's discussion of the obstacles and uncertainty facing an MRS is entirely consistent with SMUD's contemporaneous documents, which consistently characterize the MRS as a possibility. Compare PX 363 at 7 with, e.g., PX 176 at ii, 65; DX 202 at 0019251 (describing shipment of fuel to MRS as a "possibility"). In addition, the government ignores the fact that the EA was a contemporaneous document that formed the basis of SMUD being able to proceed with its ISFSI development. Moreover, the government ignores SMUD's primary use of the EA, which was to corroborate that shipping fuel to a permanent repository was SMUD's preferred solution and that the absence of such a repository made dry storage SMUD's primary alternative. See Pl. Br. at 25-26.

3

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of progress confirms this fact. These breach world documents do not support the government's conjectures as to what SMUD would have done in the non-breach world. 1. The Government Confuses The Real World With A Hypothetical Non-Breach World That Did Not Exist After 1987.

The government contends that causation is negated because SMUD's initial consideration of and decisions regarding dry storage occurred during the period of late 1989 through 1992, which was many years before the government was required to begin accepting spent nuclear fuel from utilities and was, according to the government, "by definition the `but for' [or non-breach] world." Gov. Br. at 12, 15, 27 & n.17. This erroneous contention ignores the fact that during the period from late 1989 through 1992 SMUD was living in the real world, where it was already known that DOE was not developing the necessary transportation system to accept fuel, that DOE was missing the milestones for developing the repository, that DOE's acceptance of spent fuel would probably be delayed substantially, and that SMUD's need to store such fuel at Rancho Seco would be extended accordingly. As SMUD's Assistant General Manager Jim Shetler testified at trial, "we had knowledge that DOE was not going to perform on time" and "that was one of the basic premises on which we went forward in looking at how do we handle a shutdown plant at Rancho Seco and then dealing with the fuel." Tr. at 464 (Shetler). This knowledge colored all of SMUD's actions during the period in question and drove its initial decisions regarding dry storage, as evidenced by the very documents on which the government relies. For example, the government quotes several excerpts from the March 1990 Levy report, which recommended a transportable dry storage system (in particular, a fleet of

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dual-purpose casks) "to keep open the possibility" of off-site shipment to an MRS in 1998. Gov. Br. at 13-14 (citing PX 176). A transportable system was thought necessary to keep open the possibility of shipment precisely because the government was not developing the transportation casks and infrastructure necessary and required by the Contract. PX 44, Art. IV.B.2. Furthermore, the government's selective quotations ignore other statements in the Report which specifically discuss the likelihood of delayed fuel acceptance by DOE and the corresponding increase in fuel storage costs and complication of decommissioning for SMUD: If the ultimate disposal of [spent] fuel is in the contemplated federal repository, the costs will extend over a long period of time, especially if the federal repository gets delayed. In that sense, shutdown plants and, in particular, Rancho Seco with its forced shutdown will incur greater costs than operating plants for storage of their spent fuel and that differential will rise if the federal repository is postponed. Originally, the Department of Energy (DOE) had planned to accept spent fuel by 1998. Recently DOE has delayed the repository date to 2010 and there is a good chance that further schedule slippages may occur. * * *

It is concluded that the only certain path for rancho Seco spent fuel disposition is to continue the present secured, monitored storage in the cooled plant fuel pool until DOE pick-up under the NWPA as Amended (1987) and DOE disposal in the permanent geologic repository contemplated in that Act. The schedule for DOE pickup is currently highly uncertain with the earliest conceivable pickup date beginning in 1998 and a much more likely pickup date well after 2010. As long as the fuel remains in the fuel pool, the costs associated with security, cooling, and monitoring will continue; and furthermore, options for plant decommissioning and other uses of the site will be limited or precluded. PX 176 at 3, 59 (emphasis in original).

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Other portions of the Levy report repeatedly acknowledge the uncertainties surrounding DOE's spent fuel program and the possibility of an MRS. See id. at 14 (referencing "schedule delays in the civilian waste repository program"), 39 (noting that an MRS "has not received final authorization by Congress" and that "if approved, shipment preference, in the eyes of the DOE management, would remain with operating plant spent fuel"), 56-57 (referring to the "uncertain climate" of DOE's spent fuel program), 64 (mentioning "widely publicized discussions about delays in spent fuel pickup and priority in pickup for spent fuel from operating reactors"), 65 (describing DOE performance in 1998 as "[t]he most uncertain element" and stating that the transportable dry storage recommendation "only assumes that it is possible that this could happen"). Nor does the government respond to Mr. Levy's testimony that the anticipated delay in DOE performance was "the key assumption" in his report and that if he had assurance that DOE would begin accepting fuel in 1998 he would have recommended that SMUD leave its fuel in wet storage. Levy Motion (Dckt. #300) at 111, 143.4 Thus, considered in context, Mr. Levy's dual purpose dry storage recommendation, which SMUD largely pursued (albeit with less-costly dual-purpose canisters instead of a fleet of casks), was an attempt to respond to the uncertainties and anticipated delay in DOE's fuel acceptance.5 Mr. Levy is a particularly credible witness as he was an independent consultant and has performed no work for SMUD since 1990. See Levy Motion (Dckt. #300) at 23-29. SMUD did not subpoena Mr. Levy to testify live at trial because his 79 years old and lives in Campbell, California. Id. at 3. 5 Even if other factors operated in confluence with the uncertainties and delays in DOE's program, the Federal Circuit has directed that the breach need not "be the sole cause" of the loss, and that the "existence of other factors operating in confluence with the breach will not necessarily preclude recovery based on the breach." California Federal, 395 F.3d at 1268.
4

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The same is true of the October 3, 1991 Board meeting, which considered SMUD's dry storage strategy. The government selectively quotes several excerpts from the meeting transcript regarding decommissioning, dry storage costs, and the possibility of an MRS. Gov. Br. at 19-23. These excerpts, however, often precede or follow other statements indicating that the dry storage strategy was driven by the desire to reduce costs and facilitate decommissioning in the event of a substantial delay in fuel removal by DOE. For example, immediately after Fuel Disposition Manager Rita Bowser discussed the possibility of an MRS, which the government quotes extensively on pages 21-22 of its brief, she concluded as follows: Our particular ISFSI strategy and our procurement of the 10 CFR 72 license and our use of dual purpose casks, which don't require a spent fuel pool, provide the District some assurance that even without a repository, long-term dry storage will not preclude the decommissioning of the remainder of Rancho Seco. DX 274 at 62-63 (emphasis added). Similarly, immediately before General Manager David Freeman discussed the prudency of developing dry storage "in case" DOE could receive the casks, which the government quotes on page 22 of its brief, he stated the following after a question about the implications of DOE "not moving ahead": I think its important to realize that it's entirely possible to keep this spent fuel in dry casks or in a building that we could build at Rancho Seco indefinitely. But the decommissioning of the reactor could take place or not take place. And, indeed, there are a number of people which believe that on-site storage and not moving the fuel all over the country in any kind of vehicles ­ whatever they are, no matter how strong they are ­ that that's not the wisest thing to do. But we don't have to cross that bridge at the moment.

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Id. at 67 (emphasis added). And at the same meeting, SMUD Director Frank Bounaiuto emphasized the uncertainties surrounding DOE's performance and raised the possibility that DOE might never accept SMUD's fuel: You know, the initial issue of ­ that there's going to be some sort of a DOE repository is so far from being a reality. I've been subscribing by mail to both the Nevada papers and the New Mexico papers for over a year now . . . . But to think that there's going to be a DOE repository in either one of those States is at best a dream. And if it gets to be any more than just an idea, you're going to see on a national scale NIMBY issues you can't even imagine. Given that, I think it's unrealistic for this Board to think that fuel is ever going to leave Sacramento County. Id. at 70-71. Thus, the evidence indicates that, even in 1991, SMUD anticipated a potentially lengthy delay in DOE performance and reasonably and prudently sought through dry storage to mitigate the resulting effects.6 The same is also true of the testimony by Mr. Shetler that the government quotes on page 15 of its brief to suggest that SMUD pursued dry storage to reduce storage costs and

The government also quotes a brief colloquy between Board President Smeloff, Assistant General Manager Shetler, and General Counsel Schori to argue that SMUD had not contemplated that dry storage would respond to the DOE's anticipated delay. Gov. Br. at 22-23. However, the quoted language does not involve the question of whether SMUD was taking action because of DOE's projected delay, but the separate issue of whether SMUD was entitled to compensation. As the Court is well aware, until rejected by both the D.C. Circuit and Federal Circuit, the government argued throughout the 1990s that it had no obligation to compensate utilities for the delays in performance. In addition, other language from the same meeting, discussed above, confirms that the dry storage project was specifically intended to respond to the DOE's anticipated delay, and Mr. Shetler specifically disagreed with the government's contention at trial. See Tr. at 341, 463-64 (Shetler).

6

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facilitate fuel acceptance by DOE irrespective of DOE's anticipated delay. When read in its entirety, Mr. Shetler's testimony proves just the opposite, that DOE's anticipated delay increased the importance of the storage cost and fuel acceptance considerations: A. Well, I think obviously with wet storage, the benefit was it probably had the most assurance DOE was going to take it in its current form. The downside of that was we were becoming increasingly unsure when that might be and what the overall cost of continuing to store that might be. What dry storage offered was a cheaper way of dealing with storage of the fuel, so less impact from a cost standpoint. And at least in looking at what Mr. Levy was pulling together, based on potential options, a possibility that it would also be in a form that could facilitate transport to the DOE in the long term and perhaps even sooner than the repository, if another mechanism were to come up. * Q. A. * *

And you also mentioned that it was uncertain as to when DOE might take title to the fuel. That's correct. At this point in time, the information in the industry and the DOE was putting out was by 2010 at the earliest.

Tr. at 172, 174 (emphasis added to identify testimony not quoted by government). Indeed, virtually all of the evidence relied upon by the government from the early 1990s references the uncertainties and potentially significant delays associated with the DOE's receipt of spent fuel, which is understandable as those uncertainties and potential delays influenced virtually all of SMUD's actions regarding fuel storage during the period. See, e.g., DX 164 at 1 (stating that dry storage "would allow shipment of the fuel by 1998 if a storage site is identified by DOE by that date") (emphasis added); DX 194 at 1-12 to 1-13 (noting that "spent fuel disposition is outside the District's control due to the uncertain timing of DOE's" permanent

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repository); DX 202 at 0019251 (stating that the permanent DOE repository is "now scheduled at the earliest for 2010" and describing earlier shipment to an MRS as a "possibility"); DX 280 at 0029423 (depicting fuel being transferred to DOE in or after 2010); DX 291 at 0029409 (same); DX 348/PX 259 at 0027248 (projecting dry storage savings "from 1998 through 2010 (the proposed opening of the Federal Geologic Repository)"); DX 481 at 0033398 (noting that DOE may start accepting spent fuel between 1998 and 2013 and that SMUD was prepared to store spent fuel until 2027 and beyond).7 Thus, the record confirms that when SMUD made its initial decision to pursue dry storage it was aware of and motivated by the substantial uncertainty and likelihood of delay associated with DOE's performance, that is, it was already living in and its actions were driven by the breach world. Because of this uncertainty and potential delay, SMUD's Fuel Disposition Manager, Rita Bowser, sought adequate assurances of due performance from DOE during the 1990-1991 period, but her requests were uniformly unsuccessful. See Designation Appendix (Dckt. #310) at 2238-40 (Bowser); id. at 64-65, 74 (Langstaff).8 Under these circumstances, Even the government's expert witness on causation, Mr. Hamal, conceded that SMUD knew about the DOE's announcements of delay when it entered into its initial dry storage contract in 1992. See Tr. at 2891 (Hamal) (stating, with regard to the announced delay of the repository until 2010, "that it had been announced, and I believe that the board knew that as well"). Mr. Hamal testified that "at this time frame, the board recognized the potential for DOE starting to pick up fuel could be 2010, you know, which wouldn't be from SMUD necessarily, but from the industry." Id. at 2927. Mr. Hamal agreed that in the early 1990s, "they [had] in their mind that DOE would not be picking up the spent fuel." Id. at 2926-27; see also id. at 2936. 8 Under Restatement § 251, a party to a contract has the right to demand "adequate assurance of due performance" where "reasonable grounds arise to believe that the obligor will commit a breach of non-performance that would of itself give the obligee a claim for damages for total breach." As the relevant comment explains, this rule rests "on the principle that the parties to a contract look to actual performance `and that a continuing sense of reliance and security that the promised performance will be forthcoming when due, is an important feature of the bargain.'" Id. at cmt a (citing UCC § 2-609, cmt. 1); see also Danzig v. AEC Corp., 224 F.3d 1333, 1337-38 Footnote continued on next page
7

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SMUD reasonably responded to the uncertainty and anticipated delay by pursuing dry storage, and DOE's actions thereby caused SMUD to incur the damages at issue. 2. SMUD's Desire To Facilitate Rancho Seco Decommissioning And Encourage Prompt Fuel Receipt By DOE Cannot Be Divorced From The DOE's Anticipated Delay In Performance.

The government next argues that SMUD's pursuit of dry storage to facilitate the decommissioning of Rancho Seco and encourage prompt fuel receipt by DOE was not "in any way related to the government's post-1998 delay in the acceptance of [spent fuel]." Gov. Br. at 11; see also id. at 9-10. This argument is mistaken as SMUD's desire to facilitate its decommissioning and encourage receipt of its fuel were intertwined with and driven by DOE's anticipated delay. That delay magnified the importance of those considerations because it meant that SMUD might have to store its spent fuel for several decades and such storage could complicate SMUD's decommissioning and increase its costs. This relationship is welldocumented by the record in this case.9

Footnote continued from previous page (Fed. Cir. 2000) (adopting Restatement § 251 and citing principle that parties need a sense of reliance and security that performance will be forthcoming). This provision is instructive in that it underscores the importance of having reasonable assurance of future performance, which SMUD lacked throughout the period in question. 9 The fundamental relationship between fuel acceptance and decommissioning was recognized by the DOE in developing the Standard Contract, which authorizes DOE to give priority to spent fuel from permanently shutdown reactors like Rancho Seco. See PX 44, Art. VI.B.1(b). In adopting this provision, the DOE explained that "[t]his type of priority is necessary to prevent reactors from waiting 20 or 30 years to be decommissioned after they finish generating electricity." Final Rule, 48 Fed. Reg. 16,590, 16,593 (Apr. 18, 1983).

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For example, as noted above, the March 1990 Levy report explains, in connection with the likelihood of DOE fuel receipt after 2010, that continued wet storage of the fuel would extend SMUD's security, cooling, and monitoring costs, as well as limit or preclude SMUD's decommissioning options. PX 176 at 59. At the October 3, 1991 Board meeting, General Manager David Freeman and Fuel Disposition Manager Rita Bowser both pointed out that dry storage at an ISFSI would provide assurance that long-term fuel storage at the site in the absence of a repository would not preclude the decommissioning of Rancho Seco. DX 274 at 63 (Bowser), 67 (Freeman). Other SMUD documents similarly relate the anticipated delay in DOE performance to the need to reduce storage costs and facilitate decommissioning. The 1992 staffing summary sheets that recommended authorizing contract negotiations and then approving the contract with Pacific Nuclear both specifically reference the savings that will result from the transfer of fuel to dry storage during the period of the government's delay, from 1998 to 2010. See PX 259 at 2; PX 269A. The EA, issued by the NRC in 1994, states that the "absence of a Federal repository makes storage of spent fuel in dry shielded canisters above ground SMUD's primary alternative." PX 363 at 8. Although the option of leaving the fuel in the pool was discussed, it was considered "undesirable" because of the continued costs to maintain the pool and the delay in decommissioning that would result. Id. This relationship is further illustrated by the testimony of SMUD's Assistant General Manager, Jim Shetler, who explained the effect of the uncertainty and potential delay in DOE's performance as follows:

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Well, I think the issue that we were looking at was we were now talking rather than maybe eight or ten years of storage, a couple of decades of potential storage. * * *

So what we were looking at is how do we deal with storing this fuel for the long haul. How do we do it safely? How do we do it with the potential of losing experienced people? And how do we do it in a method that is cost-effective? And also how do we do it in a method that would hopefully allow for DOE receipt? Ultimately. Tr. at 160 (Shetler). Mr. Shetler also explained that while SMUD's decommissioning strategy was not dependent upon dry storage, the two were related, particularly as DOE's delay was anticipated to extend well beyond 2008: Well, the driver to go to [dual purpose dry storage] was really where we were with DOE acceptance. The decommissioning plan itself was somewhat independent of where the fuel was stored. We ultimately, because we elected to go to dry storage based on the DOE's failure to perform, did wrap in the dry storage as a piece of the decommissioning plan. The decommissioning plan envisioned that we would place the plant in some sort of safe storage mode, mothball mode. It could be done whether the fuel was in wet storage or not. And come back in 2008. If the DOE had performed under the original schedule, the fuel would have been gone by then. What we were faced with was the fact that the fuel would not be gone. Also the fact that obviously the DOE wasn't going to be performing in that timeframe, so the decision to go to dry storage was one around having to deal with the cost of storing fuel for the long-term. Decommissioning could have been accomplished whether the fuel was in dry storage or wet storage, depending on the performance of the DOE. If that continued to drag out, then ultimately we would have to do something with getting access to the spent fuel.

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Id. at 216-17. Thus, SMUD's pursuit of dry storage to facilitate decommissioning and encourage DOE receipt of its fuel was directly related to and caused by the substantial anticipated delay in DOE performance. If DOE had been planning to perform in 1998 and SMUD had adequate assurance that it would do so, SMUD could have pursued its decommissioning strategy and planned for the certainty of DOE removal of its fuel.10 3. SMUD's Recognition That DOE Might Be Able To Site An MRS Does Not Negate Causation.

The government attempts to make much of the fact that SMUD documents from the early 1990s acknowledged that DOE "could" begin accepting spent fuel in 1998 through an MRS, and that, if DOE did so, the use of dual purpose dry storage could encourage prompt acceptance of SMUD's fuel. See Gov. Br. at 15-16, 22-25. However, the documents in question merely recognize that an MRS could be sited by 1998, that is, that such siting was technically possible, not that it was likely or that it could be done without changing the Nuclear Waste Policy Act ("NWPA"). See DX 164 at 1 (noting that dry storage would allow fuel shipment by 1998 if DOE storage were available); DX 274 at 62 (explaining that the likelihood of an MRS opening in 1998 would depend upon the passage of legislation delinking the repository and MRS); DX 280

10

The government also argues that causation is disproven by SMUD's assumption for decommissioning funding purposes that all of its fuel would be removed by 2010. Gov. Br. at 23-24 n.15. Mr. Shetler explained, however, that this was simply a planning assumption that "allowed [SMUD] to come in with a decommissioning estimate that met our targets from a rate standpoint" and that "would be review[ed] and adjust[ed] . . . on an annual basis, once we had better information." Tr. at 474; accord id. at 478-79.

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at 0029434 (assuming either operation of MRS in 1998 or repository in 2010); DX 291 at 29418 (same). Other documents similarly reflect SMUD's recognition that the opening of an MRS in 1998 was highly speculative. See, e.g., PX 176 at 65 (describing 1998 fuel acceptance as "[t]he most uncertain element" and explaining that Levy's transportable dry storage recommendation "only assumes that it is possible that this could happen"); DX 202 at 001925 (describing shipment of fuel to MRS as a "possibility"); PX 297 at 7 (noting interim storage is "not currently an option"). This was also confirmed by the testimony of Assistant General Manager Shetler: A. [I]f there was a potential for any kind of interim storage facility that could take the fuel earlier, having fuel in a dual purpose system would hopefully expedite the ability to get fuel moved there. So we recognized that was a possibility. We also recognized that the probability was up in the air. Q. A. Excuse me, sir? Was up in the air, that the probability was obviously not certain.

Tr. at 254-55; accord id. at 278, 295, 350, 400-01 (Shetler); see also Designations Appendix (Dckt. #310) at 2310-13 (Freeman) (testifying that his view in the early 1990s was that an MRS "wasn't going to work"); Tr. 534-35 (Redeker) (testifying that his view in 1993-1994 was that an MRS "was unlikely" to "open any time substantially before the repository"). Moreover, SMUD's hope that a dual purpose dry storage system could encourage prompt DOE acceptance of its fuel if an MRS were developed was itself driven by DOE's

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announcements of delay and the fact that DOE was not developing the necessary transportation casks or system that would allow it fully to perform its obligation. See Tr. at 1371-72, 1376, 1458 (Stuart). Those announcements indicated that SMUD faced a delay of at least 12 years in the removal of its spent fuel. According to the Levy report, SMUD's only hope of avoiding such an extended and costly delay was through a dual purpose dry storage system. See PX 176 at ii (discussing DOE repository delay until 2010 and explaining that transportable dry storage offered "the best opportunity" for early offsite shipment to DOE or interim onsite acceptance by DOE). As Mr. Shetler succinctly explained at trial, "we weren't going to get fuel moved any other way." Tr. at 349 (Shetler). 4. The Government's Economic Argument Is Misguided And Unrealistic.

Finally, the government argues that causation is negated because SMUD believed that "the cost savings by moving to dry storage were so great that the dry storage project would pay for itself by approximately 1998." Gov. Br. at 17, 20, 23, 27. This economic argument is misguided for several reasons. First, its use of economic calculations prepared in the actual breach world to speculate about what SMUD would have done in the hypothetical non-breach world is inappropriate. These calculations were not self-implementing or treated as dispositive, but were developed and considered as only one of several factors in SMUD's decision-making. As discussed above, the other factors all reflected or were driven by the anticipated delay in DOE's performance. There is no persuasive evidence that SMUD would have made the same decisions regarding dry storage in the absence of such delay. See supra § I.B.1-3.

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The inappropriateness of the government's approach is confirmed by case law holding that, for purposes of "measuring what hypothetically would have happened," the but for world must be "offense-free." Lepage's Inc. v. 3M, 324 F.3d 141, 165 (3d Cir. 2003); see also, e.g., Bonjorno v. Kaiser Aluminum & Chem. Corp., 752 F.2d 802, 312 (3d Cir. 1984) (hypothetical world should be "free of the defendants' exclusionary activities"); In re Aluminum Phosphide Antitrust Litig., 893 F. Supp. 1497, 1501 (D. Kan. 1995) (comparison should reflect what would have happened "absent illegal conduct"). The government's approach is inconsistent with this fundamental concept as the calculations were prepared in the breach world and their development and use were colored by the DOE's anticipated delay. Thus, the government has failed to demonstrate "a `but for' market, free of the restraints and conduct alleged." Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1055 (8th Cir. 2000). Second, SMUD's cost projections during this period were not uniform as the government suggests and its model assumes. Although many documents used an $8 million savings figure as the government contends, a number of others used lower figures. See, e.g., DX 159 at 085630 ($.5 to $1 million savings); PX 176 at 58 (same); DX 251 at 2 ($6 million); PX 991 at 0330410 ($33 million over 12 years); PX 363 at 8 ($6 to $8 million); see also Tr. at 265 (Shetler) ("There were various estimates that were generated over the course of that period, anywhere from a million dollar savings to 8 to 10 million dollars worth of savings."); id. at 476-77 (Shetler) ("We're not dealing with absolute knowledge. We're dealing with best guesses and assumptions").

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Notably, the staffing summary sheets presented to SMUD's Board of Directors in June and September 1992 requesting authorization to negotiate and sign the initial dry storage contract with Pacific Nuclear projected that the total savings over DOE's anticipated 12 year delay would be only $33 million, or less than $3 million per year. See PX 259 at 2; PX 269A.11 The government does not account for these different numbers, which reflect the difficulty of making estimates and the uncertainty regarding the savings to be achieved in the real world. Third, the government's approach fails to account for the effects of non-economic factors on SMUD's decision-making. SMUD's considerations were never limited to a straight economic analysis, but encompassed various other considerations, such as the risk of losing its place in the DOE fuel queue and thereby further delaying fuel acceptance and the risk of cost increases and delays in completing a first-of-a-kind project. These risks are discussed infra in Section I.C.3, and would have led SMUD not to pursue dry storage in a true non-breach world where SMUD had reasonable certainty that DOE would begin performance in 1998. C. The Evidence Establishes That The Government's Actual Delay Caused SMUD To Restart And Continue With The Dry Storage Project During The Period From 1997 Through 2002.

By the mid-1990s, substantial DOE delay in accepting spent fuel had become a certainty. In May 1994, the DOE "unequivocally announced . . . that it would not meet its contractual

11

The government contends that the $33 million figure is unreliable because Mr. Shetler could not confirm whether it included the dry storage capital costs. See Gov. Br. at 41. Although Mr. Shetler acknowledged that he could not definitively answer that question, he stated his belief that the figure reflected the difference in operating savings and that an adjustment for capital costs would be inappropriate. Tr. at 209, 405-07, 485. Even if the capital costs were added the annual savings would increase to only about $4 million per year.

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obligations beginning in 1998." Indiana Michigan, 422 F.3d at 1375; see also PX 351. In May 1995, the DOE made a similar announcement, see PX 410, and in December 1996, the DOE again formally notified utilities of the delay, see PX 500. As the Federal Circuit recently recognized, SMUD and the other utilities "were in fact obligated to take mitigating steps" under these circumstances. Indiana Michigan, 422 F.3d at 1375. Thus, DOE's actual failure to begin accepting fuel from utilities in January 1998 simply confirmed what was already known: that its performance would be delayed by many years. Against this backdrop, SMUD decided in 1997 to restart and continue with the dry storage project, which was th