Free Post Trial Brief - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS SACRAMENTO MUNICIPAL UTILITY DISTRICT, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) )

No. 98-488C (Judge Braden)

DEFENDANT'S POST-TRIAL BRIEF Pursuant to this Court's order dated July 27, 2005, defendant, the United States, respectfully submits its post-trial brief.1 SUMMARY OF ARGUMENT Plaintiff, Sacramento Municipal Utility District ("SMUD"), bore the burden at trial of proving that its claimed damages were caused by the Department of Energy's breach of the Standard Contract For Disposal Of Spent Nuclear Fuel And/Or High-Level Radioactive Waste ("Standard Contract"). SMUD failed to prove that the Department of Energy's breach caused the tens of millions of dollars in costs that it has claimed as damages in this case. In addition, even if the Court were to conclude that SMUD had met its burden of showing that it incurred

For the convenience of the Court, we incorporate by reference the various pre-trial briefs the Government has submitted in this case, including the Government's motion for partial summary judgment concerning the rate and schedule of SNF acceptance; the Government's motion for partial summary judgment concerning the status of Greater Than Class C radioactive waste; and the Government's motion to exclude the testimony of Eileen Supko. Additionally, we incorporate by reference the Government's post-trial response to the Court's show cause order. We note that plaintiff similarly has incorporated by reference its previous briefing on several of these issues. Although RCFC 5.2(b)(3) appears to limit the incorporation of previous briefing in a brief or memorandum, we believe it is in the interest of the speedy and inexpensive administrative of justice to incorporate by reference our previous briefing rather than refile the voluminous previous briefing in this case. See RCFC 1. Accordingly, we request that the Court permit the Government to incorporate by reference the above-cited briefs. In the alternative, we request that the Court permit us to refile those briefs at the Court's convenience.

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costs as a result of DOE's breach, SMUD has failed to establish that the damages it seeks are supported by the evidence or are reasonable. As the United States Court of Appeals for the Federal Circuit recently held, plaintiffs in spent nuclear fuel cases are precluded, as a matter of law, from recovering costs allegedly associated with mitigating the Government's breach of the Standard Contract before 1994. Indiana Michigan Power Co. v. United States, No. 04-5122, 2005 WL 2173563, *4 (Sept. 9, 2005). Accordingly, as a matter of law, SMUD is not entitled to recover as mitigation damages costs it expended and is claiming in this case prior to 1994. Further, as the Federal Circuit made clear, the fact that a plaintiff engages in alleged mitigation activities does not relieve the plaintiff of meeting its burden of demonstrating that those activities were the direct result of the breach. Id. at *5. As discussed below, like the plaintiff in Indiana Michigan, SMUD has failed to demonstrate that any costs related to its pursuit of dual-purpose dry storage was directly related to the Government's breach of the Standard Contract. As we demonstrated at trial, SMUD shut down its Rancho Seco nuclear facility in 1989 and immediately committed to decommissioning the Rancho Seco site. As part of this decommissioning effort, SMUD made its decision to pursue dry storage in 1990 ­ eight years before DOE was obligated to begin the acceptance of SNF on an industry-wide basis and 11 years before DOE was obligated to begin accepting SNF from SMUD. Rather than pursue dry storage because of DOE's delay in acceptance, SMUD made the decision to pursue dry storage because of its belief that the Government could perform in a timely manner and, indeed, that DOE might accept SMUD's SNF earlier than DOE was contractually obligated to do so. In fact, SMUD made its decision to pursue dry storage for reasons entirely independent of the

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Government's delay in acceptance; it believed that it could save anywhere from $8-$12 million in annual operation and maintenance costs by placing its SNF into dry storage and shutting down its wet pool and facilitate decommissioning Rancho Seco. As we established at trial, even when SMUD revisited its decision to place its SNF into dry storage in the mid-to-late 1990s, SMUD consistently decided to continue with the project precisely because it believed that the substantial savings in wet pool operation and maintenance costs would pay for the incremental cost to complete the project in approximately two to three years ­ well before the Government's last acceptance of SMUD's SNF in the "but for" nonbreach world, and long before the SNF pool would otherwise be emptied. Consequently, because SMUD's decision to place its SNF into dry storage was not driven by, and would not have changed absent, the Government's breach, SMUD has failed to meet its burden of demonstrating that the Government's delay in acceptance caused SMUD to incur the costs associated with dry storage. At trial, SMUD attempted to show that, despite DOE's express rejection of such a term during contract negotiations, DOE was somehow obligated to accept SNF at an annual steadystate rate of 3,000 metric ton units ("MTUs") from nuclear utilities. Pl. Br. 74-75. As a threshold matter, because we demonstrated at trial that SMUD believed its dry storage project would pay for itself prior to or concurrently with DOE's first acceptance of SMUD's SNF, the Court need not reach the issue of DOE's rate of SNF acceptance. However, to the extent the Court believes the determination of the rate and schedule of SNF acceptance is relevant to determining SMUD's damages, SMUD has failed to meet its burden of establishing that DOE was contractually obligated to accept SNF at a 3,000 MTU steady-state rate of acceptance. Nor did SMUD meet its burden of establishing that its acceptance rights would be moved forward in

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the queue, or how those rights would otherwise be affected, based upon the use of various contractual provisions such as exchanges and priority for shutdown reactors. Thus, even if the Court believed that the rate and schedule of DOE's acceptance of SNF was relevant to a determination of SMUD's damages, SMUD failed to meet its burden of establishing that DOE was contractually obligated to accept SNF and/or HLW at a 3,000 MTU steady-state rate (or at any other particular rate, for that matter). Even if SMUD could somehow establish that its claimed damages were caused by the Government's delay in the acceptance of its SNF, SMUD's damages claim suffers from significant flaws. First, assuming the Court viewed SMUD's actions as an attempt to mitigate its alleged damages, SMUD has failed to engage in reasonable mitigation. As we showed at trial, SMUD could have left its SNF in its wet pool, and had it done so, SMUD would be unable to claim any damages against the Government until after the last acceptance of SMUD's SNF by DOE in the "but for" world. Instead of leaving its SNF in its wet pool, SMUD decided, for business reasons, to place its SNF into dry storage at a cost of almost $80 million. Under these circumstances, SMUD's attempt at mitigation is unreasonable. At a minimum, SMUD's damages claim fails to include as an offset the substantial annual savings that it realized as a result of eliminating its wet pool and placing its SNF into dry storage. Second, even if SMUD's decision to pursue dry storage constituted reasonable mitigation, its decision to pursue dual-purpose dry storage does not, and the mere fact that SMUD pursued dry storage does not necessarily mean that SMUD can claim the costs associated with such storage as damages. Although SMUD clearly had storage options other than dualpurpose dry storage, SMUD chose dual-purpose dry storage because it would facilitate

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decommissioning and result in a significant cost savings. However, as we established at trial, DOE is contractually obligated to provide a transportation cask to SMUD at the time that DOE accepts SMUD's SNF. To the extent that SMUD has usurped that contractual obligation from DOE by pursuing "first-of-its-kind" dual-purpose dry storage technology, resulting in tens of millions in costs, the inclusion of such costs in SMUD's damages claim is inappropriate. This is particularly true where other storage-only dry storage technologies were available when SMUD made its decision to pursue dry storage. In fact, even if SMUD's decision to pursue dualpurpose dry storage otherwise was reasonable, its decision to reject the NAC-STC cask, which had already incurred the initial "pain and suffering" of licensing, as its dry storage system was unreasonable. Finally, as we demonstrated at trial, SMUD's damages claim suffers from significant flaws, such as the inclusion of non-incremental costs and offsets for benefits SMUD received by pursuing dual-purpose dry storage. At bottom, SMUD failed to meet its burden of proving that DOE's breach caused SMUD to pursue dry storage or that its pursuit of dual-purpose dry storage constitutes reasonable mitigation. DISCUSSION I. SMUD BEARS THE BURDEN OF PROVING EVERY ELEMENT OF ITS DAMAGES CLAIMS, INCLUDING CAUSATION, AND RESULTANT DAMAGE

To recover damages, a plaintiff "must prove the requirements for an award of damages by a preponderance of the evidence," and these "requirements include: causation, foreseeability, and reasonable certainty in the amount of damages." Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400, 413-14 (2004). According to the precedent of this circuit, SMUD bore the burden of

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introducing clear proof that it was injured as a direct result of DOE's delay in accepting its SNF. Myerle v. United States, 33 Ct. Cl. 1, 27 (1897). The venerable decision in Myerle continues to represent the binding standard of this circuit. Glendale Federal Bank v. United States, 239 F.3d 1374, 1382 (Fed. Cir. 2001) (holding that non-breaching party may recover reliance "damages for any losses actually sustained as a result of the breach"). Further, the "measure of damages to be applied in the particular case is irrelevant until the claimant has established the fact of losses that were the natural and proximate result of the breach of contract." Willems Indus., Inc. v. United States, 155 Ct. Cl. 360, 376, 295 F.2d 822, 831 (1961). "Absent tangible proof of damages, [a party] may not recover for an alleged injury." Roseburg Lumber Co. v. Madigan, 978 F.2d 660, 667 (Fed. Cir. 1992). Further, SMUD bore the burden at trial of establishing a realistic "but for" world. Bluebonnet Sav. Bank FSB v. United States, No. 95-532C, 2005 WL1983695 (Aug. 16, 2005) (citing Coast Fed. Bank, FSB v. United States, 48 Fed. Cl. 402, 430 n.25 (2000); Southern Cal. Fed. Sav. & Loan v. United States, 57 Fed. Cl. 598 (2003), aff'd in relevant part, Nos. 04-5036, 04-5038, 2005 WL 2001022 (Fed. Cir. Aug. 22, 2005)). Indeed, as the Federal Circuit recently explained, "[t]he presence of a duty to mitigate does not perforce make the pre-breach costs incurred by [plaintiff] to store its SNF recompensable; appellant must prove foreseeability, causation, and reasonableness." Indiana Michigan, 2005 WL 2173563, at *5. At trial, SMUD bore the burden of establishing that its claimed damages are not speculative, remote, or unforeseeable. Quiman, S.A. de C.V. v. United States, 39 Fed. Cl. 171, 183 (1997), aff'd, 178 F.3d 1313 (Fed. Cir. 1999). It further bore the burden of establishing reasonable certainty as to each item within its damages claims. Wells Fargo Bank, 88 F.3d at

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1023; see also Restatement (Second) of Contracts § 352 cmt. a ("[a] party cannot recover damages for breach of a contract for loss beyond the amount that the evidence permits to be established with reasonable certainty"). SMUD has failed to meet its burden in this case. In short, the law required SMUD to establish at trial that, "but for" DOE's failure to begin acceptance of SNF from commercial nuclear utilities by 1998, and from SMUD in 2001, SMUD would not have built its dry storage facilities, the cost of which it now claims as damages from the Government. As we established at trial, and as we set forth in detail below, SMUD has failed to carry its burden. Indeed, the record unequivocally establishes that SMUD's decision to build dry storage and the costs associated therewith are wholly independent of DOE's breach. Consequently, SMUD is not entitled to the costs associated with its dry storage system. II. SMUD CANNOT ESTABLISH THAT THE GOVERNMENT'S BREACH OF THE STANDARD CONTRACT CAUSED ITS PURPORTED DAMAGES RELATED TO ITS PURSUIT OF DRY STORAGE A. SMUD Is Precluded As A Matter Of Law From Recovering Any Of Its Claimed Costs Prior to 1994

The Federal Circuit recently held that plaintiffs in spent nuclear fuel cases are not entitled to recover damages arising before 1994 because the plaintiffs' duty to mitigate only arose when DOE issued its May 1994 notice of inquiry "unequivocally announcing" that it would not perform by January 31, 1998. Indiana Michigan, 2005 WL 2173563, at *4; PX 351. In other words, because mitigation is a duty, and not a right, SMUD's obligation to mitigate any alleged breach by the Government necessarily did not arise until the May 1994 notice of inquiry, at the earliest. Accordingly, as a matter of law, SMUD may not recover any alleged costs incurred prior to DOE's issuance of the May 1994 notice of inquiry. 7

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B.

SMUD Pursued Dry Storage For Reasons Wholly Unrelated To The Government's Delay In SNF Acceptance 1. SMUD Decided To Pursue Dry Storage Eight Years Before The Government Was Obligated To Commence SNF Acceptance a. SMUD's Rancho Seco Plant Had A Troubled Operating History, Resulting In Its Premature Shutdown In 1989

To understand why SMUD made the business decision to place its SNF into dry storage, the Court should consider the history of SMUD's Rancho Seco Nuclear Generating Station. SMUD's Rancho Seco facility began operating in 1975. From the outset, Rancho Seco was plagued by a poor performance history, including multiple extended outages and placement on a watch list by the Nuclear Regulatory Commission ("NRC") of reactors constituting the "greatest safety significance." DPFOF ¶ 13. In fact, during the mid-1980s, Rancho Seco suffered a 27month outage, from December 1985 though early 1988. DPFOF ¶ 14. During the 14-year life span of the Rancho Seco plant, the plant was non-operational more than it was operational. Id. As S. David Freeman, SMUD's general manager, explained, . . . [SMUD was] a very troubled utility at the time. They had raised the electric rate seven or eight times. They had a nuclear power plant, that if it were an employee, you would have fired it because it operated half the time . . . . DPFOF ¶ 15. As a result of the extended outages, SMUD had to pay for replacement power, which accounted for half of Rancho Seco's overall generation of electricity. DPFOF ¶ 16. Consequently, SMUD had to raise rates for its ratepayers significantly during the mid-to-late 1980s. Id. Rancho Seco's extended outages, coupled with the significant rate increases, resulted in the placement on the local ballot two separate voter initiatives to close Rancho Seco, the 8

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second of which, dated June 6, 1989, passed. Id. SMUD's Board of Directors immediately agreed to abide by the wishes of the voters and shut down the facility the following day. DPFOF ¶ 17. At the time of the premature shutdown, Rancho Seco was licensed by the NRC to operate through 2008. Id. These events occurred nine years before DOE was obligated to begin the acceptance of SNF from the industry generally, and 12 years before SMUD contends that DOE was obligated to begin the acceptance of SMUD's SNF. DPFOF ¶ 18. b. As A Result Of Rancho Seco's Premature Shutdown In 1989, SMUD's Focus Was To Eliminate Its Part 50 Operating License

Upon the decision to shut down Rancho Seco, SMUD personnel placed their focus upon decommissioning the plant. On December 8, 1989, following the shutdown of Rancho Seco, SMUD completed the defueling of the Rancho Seco nuclear reactor. SMUD stored all 493 of its SNF assemblies in the wet storage pool within its spent fuel building. Shortly after its decision to shutdown Rancho Seco, SMUD created a Decommissioning Task Force to initiate planning for decommissioning and to place the plant in a "protective lay-up" condition. DPFOF ¶ 19. SMUD had two primary goals after Rancho Seco's premature shutdown in 1989. First, SMUD sought to decommission the plant as quickly as possible. Tr.263:11-15 (Shetler) (explaining that SMUD's goal was to reduce its "nuclear footprint" as quickly as possible). To achieve this goal, SMUD had to decommission its Rancho Seco facility. Tr.263:16-18 (Shetler). The Rancho Seco site could not be decommissioned until its pool was eliminated. Tr.617:2-4 (Redeker). By placing its SNF into dry storage, SMUD gained the ability to decommission its wet pool. Tr.263:25-264:1-3 (Shetler). By decommissioning its wet pool, SMUD in turn had the

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ability to decrease the amount of staff and ultimately reduce its costs associated with Rancho Seco. Tr.264:4-10 (Shetler); Tr.833:2-12 (Redeker) (explaining that SMUD's goal was to (1) complete dry storage project in order to abandon its wet pool, (2) decommission Rancho Seco, and (3) reduce ongoing operation and maintenance costs). The decommissioning of Rancho Seco was undisputedly an important element in SMUD pursuing dry storage. Def. Counter-Designation of R. Bowser, at Tr.229:24-230:5 (Sept. 16, 2004); DPFOF ¶ 20a. In addition to decommissioning Rancho Seco, SMUD's second goal regarding the Rancho Seco plant was to achieve the removal of SMUD's SNF from the site as quickly as possible. Indeed, SMUD wanted to persuade DOE to accept SMUD's fuel earlier than it was otherwise entitled under the Standard Contract and as soon as possible. DPFOF ¶ 20b. SMUD believed that dry storage could help it achieve both of these goals. First, dualpurpose dry storage represented the quickest and cheapest way to decommission the Rancho Seco facility, because SMUD could not decommission its wet pool as long as SNF remained in the pool. In the early 1990s, SMUD estimated that ceasing wet pool operations would result in an annual savings of as much as $8 million.2 DX 287, at SMUD 0018294. Second, SMUD believed that dual-purpose dry storage presented the best chance that DOE would accept SMUD's SNF under the Standard Contract through the use of a Monitored Retrievable Storage ("MRS") system by 1998.3 Id., Tr.254:21-25 (Shetler) ("[I]f there was a potential for any kind of

This annual savings would later be estimated to be as much as $12 million. This annual estimated savings represented the difference between wet pool storage operation and maintenance costs and dual-purpose dry storage operation and maintenance costs. The MRS was a Federal storage facility that had been contemplated by Congress since the inception of the Nuclear Waste Policy Act in 1982. See 10 U.S.C. § 10161. The MRS would have served as interim storage until DOE could build a permanent Federal repository. See 10
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an 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."); Tr.278:15-19 (Shetler). Indeed, SMUD believed that, if it had its SNF in dual-purpose dry storage by 1998, DOE could accept SMUD's SNF at an MRS on a schedule as good as, if not better than, the schedule for acceptance at a Federal geologic repository. Tr.704:22-705:1 (Redeker) (explaining that although SMUD's first acceptance in non-breach world would have been 2001, SMUD believed its SNF could be accepted earlier at an MRS); DX 202, at Attachment at SMUD 0019251 ("Storage in transportable casks offers the best opportunity explored to keep open the possibility of early offsite shipment, possibly as early as 1998 should DOE develop a . . . MRS."); DX 217, at SMUD 0025576 (stating that "the District believes that by storing spent fuel in dual purpose storage and transport casks that early acceptance by DOE would be possible"); DPFOF ¶ 21.4 Significantly, SMUD's pursuit of its two stated goals was wholly independent of the Government's delay in the acceptance of SNF. In fact, neither of these two goals, which were discussed in the early 1990s, was in any way related to the Government's post-1998 delay in the acceptance of SNF. DPFOF ¶ 23. Indeed, Mr. Shetler testified that, in early 1990, SMUD's "primary goal" was "to try and get the fuel in the safest mode, low cost mode and ultimately in the DOE's hands as soon as possible." Tr.150:22-151:1, 152:12-14 (Shetler). Mr. Shetler explained that "SMUD was no longer in the nuclear business, if you will. They are not going to be generating electricity from

generally 42 U.S.C. § 10162(b), et seq. Notably, SMUD's own expert, Ivan Stuart, believed that SMUD's placement of its SNF into dual-purpose dry storage increased the chances that DOE could timely accept SMUD's SNF. Tr.1374:15-25 (Stuart). 11
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nuclear power from our perspective, it was in our ratepayer's best interest to minimize the cost and get the fuel in a position where DOE could take it." DPFOF ¶ 24. As the facts at trial established, SMUD began considering and planning for dry storage nine years before DOE was to begin accepting SNF from the nuclear industry, and more than a decade before DOE would have been obligated to even begin the acceptance of SMUD's SNF in the non-breach world. Indeed, as early as September 1989, SMUD was considering placing its SNF into dry storage. DX 125, at SMUD 0020872 (noting that "spent fuel will be placed in wet storage in the existing spent fuel pool initially and then dry cask storage following the appropriate fuel decay period."); Tr.268:10-23 (Shetler) (acknowledging that dry storage was an option SMUD was considering at the time and it was the option SMUD ultimately pursued); Tr. 1064:8-13 (Field) (admitting that SMUD began considering dry storage option within months after the June 1989 shutdown of Rancho Seco). SMUD made similar statements in October and December 1989, where SMUD assumed, for purposes of its proposed decommissioning plan, that it would place its SNF into dry storage beginning in 1995. DX 134, at SMUD 0027908; Tr.271:22-272:1 (Shetler) (explaining that dry storage was one of the planning assumptions SMUD was considering as of December 1989); Tr. 1070:3-5, Tr.1071:1-3 (Field) (acknowledging that, as of October 1989, dry storage was "certainly" an option, that cost studies regarding dry storage were being conducted, and that "considerable system reductions" were possible with dry storage); DPFOF ¶ 25. Consequently, SMUD's initial plans to pursue dry storage in 1989 were necessarily made independent of the Government's breach of the Standard Contract in 1998.

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c.

SMUD's Board Of Directors Made The Decision In 1990 That SMUD Place Its SNF Into Dry Storage

Similarly, SMUD's ultimate adoption of a dry storage plan in 1990 was made independent of the Government's 1998 breach of the Standard Contract and, indeed, focused upon early performance by DOE. In February 1990, SMUD decided to retain Saul Levy, Inc. ("Levy") as a consultant to evaluate SMUD's storage options for its SNF. Levy provided SMUD a report with its ultimate conclusions on March 31, 1990. DX 165. Levy considered 15 different storage options for SMUD's SNF and reached the following conclusion: The option that offered the best opportunity to keep open the possibility of early off-site shipment, potentially as early as 1998 under a Monitored Retrievable Storage facility ("MRS"), was storage of SMUD's SNF in transportable casks. DPFOF ¶ 27.5 Levy "strongly recommended" that SMUD pursue this option in conjunction with a demonstration program with DOE to develop the dual purpose cask system. DPFOF ¶ 28. Levy explained that, to accomplish this objective, SMUD should "[e]nter into discussions with the DOE aimed at DOE acceptance of the Rancho Seco spent fuel in 1998." Id. Notably, Levy acknowledged that:

Mr. Freeman could not recall Saul Levy or the report that he issued. DPFOF ¶ 30. Mr. Freeman explained his managerial philosophy as follows: Let me just state for the record that a general manager of a utility can do one of two things; they can either manage the utility or read all the paper. There is not enough time to do both, and I chose to manage the utility. So I initialed a lot of routine things without reading them and am proud of it. Id. 13

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. . . the only way to be prepared for DOE success in establishing a site by 1998 is to proceed towards storage in transportable casks. No other alternative that could accomplish this objective was found in the course of this study. Id. Saul Levy presented his recommendations for the disposition of SMUD's SNF at the March 21, 1990 meeting of the Rancho Seco Committee of the SMUD Board of Directors.6 See DX 159. Levy recommended that: SMUD pursue alternative of having all of its spent fuel in transportable storage casks before 1998 primarily because it could lead to shipment to DOE facility by 1998 or to DOE interim acceptance of spent fuel at site by 1998. DPFOF ¶ 31. In explaining the rationale for recommending transportable storage casks, Levy reiterated that it "provides [the] earliest opportunity to ship fuel off-site." Id.7 SMUD relied upon the recommendations made by Mr. Levy in planning for the disposition of its SNF. DPFOF ¶ 32. SMUD management agreed with Levy's recommendation to pursue dual-purpose dry storage and, consequently, in March 1990, SMUD's Board of

The Rancho Seco Committee was a committee of the SMUD Board of Directors that oversaw activities at Rancho Seco related to the demobilization of the workforce and development of future plans. SMUD has suggested that Mr. Levy prepared his report "in light of DOE's announcements of likely delay in performance" and refers to a March 30, 1993 supplement to a California Environmental Quality Act environmental report that SMUD submitted to the Nuclear Regulatory Commission. Pl. Br. 22-23 (citing PX 297). Yet, this March 30, 1993 submission to the NRC says no such thing. Rather, all this submission indicates is that a permanent Federal repository was not expected until approximately 2010, and that interim storage was not "currently" an option. PX 297, at SMUD 0018875. Of course, DOE had no obligation to have an interim storage facility available by 1993. In short, nothing in this submission to the NRC is suggestive of the fact that Mr. Levy prepared his report "in light of DOE's announcement of delays." This is particularly true given his recommendation that SMUD pursue dual-purpose dry storage so that DOE could accept its SNF in an MRS by 1998. 14
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Directors approved of the Rancho Seco general manager's pursuit of the purchase of a dualpurpose storage system. Id. Mr. Shetler explained at trial that: What dry storage offered was a cheaper way of dealing with storage of 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 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. Tr. 172:17-24 (Shetler). Indeed, SMUD's contemporaneous documents reflect its belief that, at the time it made the decision to pursue dry storage, it believed that DOE could timely perform under the Standard Contract. For example, immediately after the March 1990 Board of Directors meeting, SMUD's general manager, David Boggs, drafted a letter to the Secretary of Energy indicating that, "[a]s a result of the [Levy] study, it was decided that the District pursue dual purpose (storage and transportation) casks or storage only casks that could be effectively interfaced with the early receipt by the DOE of Rancho Seco's spent fuel and subsequent use of the casks by DOE." DPFOF ¶ 34. Mr. Boggs' letter also assumed that DOE could identify an SNF storage site by 1998. Id. The clear goal of Mr. Boggs' letter was to encourage DOE's performance by 1998.8 Consequently, more than eight years before DOE was to begin the acceptance of SNF on an industry-wide basis, and more than a decade before DOE was to begin the acceptance of SMUD's SNF, SMUD decided to place its SNF into dry storage, and assumed that DOE could begin performance in the non-breach world on a timely basis.

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Consistent with this decision to place its SNF into dry storage, Dan Keuter, the Chief Nuclear Officer of Rancho Seco at the time, presented the results of the Levy report at the April 25, 1990 Rancho Seco Committee meeting. See DX 174. Mr. Keuter explained SMUD's strategy as follows: [S]et up a demonstration program and construct three dual purpose casks by 1993. At that time, 72 fuel assemblies would be loaded into the three casks and monitored until the DOE takes possession of them in 1998. The remaining 493 assemblies will be maintained in wet storage until 1993. At that time, we should have a commitment from DOE regarding fuel acceptance in 1998. Our decision point regarding concrete casks or dual purpose casks is in 1993. If the DOE will not take our fuel in 1998, or if the dual purpose casks do not prove feasible, we will award a contract to build concrete casks and load the fuel in them by 1995. .... If a commitment can be obtained from DOE to take possession of the spent fuel by 1998, whether onsite or offsite, then dual purpose casks should be pursued. If a commitment cannot be obtained, onsite concrete cask/canister storage by 1995 should be pursued. This is the earliest that we can put our spent fuel in concrete casks, since it must decay for approximately five years before it is put in cask storage. DPFOF ¶ 35. Clearly, as of the date SMUD made the decision to pursue dry storage, it believed that DOE could timely perform under the Standard Contract.9

SMUD's contemporaneous documents unequivocally reflect that, by May 1990, SMUD had eliminated consideration of leaving its SNF in the wet pool. For example, in a presentation concerning Rancho Seco's decommissioning cost study, SMUD indicated that seven different storage options were evaluated ­ four involving dry storage and three involving wet storage. DPFOF ¶ 36. The evaluation indicated that SMUD had rejected each of the wet storage options because "wet [storage is] more expensive than dry." Id. As it turned out, of course, DOE did not make a commitment to accept SMUD's SNF by 1998. Yet SMUD appears to have continued with the dual-purpose dry storage project without serious reconsideration of Mr. Keuter's conclusion: If DOE was not going to accept SNF by 1998, the lower cost storage-only dry storage was preferred. 16

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d.

SMUD's Early Implementation Of Its Dry Storage Project

SMUD's early work on the dry fuel storage project unequivocally reflects that: (1) it pursued the dry storage project because it believed that DOE could perform in a timely, and perhaps even early, manner; and (2) it 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. In short, the trial record plainly reflects that SMUD was not motivated in the early 1990s by an "impending" breach by DOE, but instead pursued dry storage for business reasons wholly unrelated to the Government's 1998 breach of contract. On June 7, 1990, Rita Bowser, the Rancho Seco Nuclear Fuel Disposition Project Manager who was responsible for the day-to-day oversight of the implementation of SMUD's dry storage project, submitted to Mr. Keuter a copy of SMUD's independent spent fuel storage installation ("ISFSI") licensing and engineering strategies.10 DPFOF ¶ 37. In the memorandum transmitting the strategies, Ms. Bowser explained that she was "working with both Licensing and Engineering to immediately implement the generic licensing and design activities necessary for the establishment of the Rancho Seco [ISFSI]." DPFOF ¶ 38. Notably, Jim Field, the chief engineer at Rancho Seco who worked on the specification for SMUD's dry storage project,

Although Ms. Bowser and Ken Miller were project managers for the implementation of the dry storage project, they did not have the authority to make the decision to pursue dry storage. DPFOF ¶ 39. Indeed, Ms. Bowser repeatedly stated throughout her deposition that she was a "fairly junior" Rancho Seco staff member. Id. In fact, during Ms. Bowser's deposition, counsel for SMUD objected to questions from Government counsel on the basis that, "Miss Bowser does not speak on behalf of SMUD." DPFOF ¶ 40. The decision to pursue dry storage would have been made at a higher level of management than Ms. Bowser and Mr. Miller. DPFOF ¶ 41. However, Mr. Shetler stated at trial that he would rely upon the work of Ms. Bowser and Mr. Miller as part of the overall dry storage planning strategy. Id. 17

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admitted at trial that no one ever told him SMUD was pursuing dry storage because DOE was not going to perform. DPFOF ¶ 42.11 That same month, Ms. Bowser requested that a work order be opened for "licensing and engineering activities related to dry storage disposition." DPFOF ¶ 44; DX 187; Tr.174:18-24 (Shetler) (explaining that it was SMUD standard practice to open up a work order to start collecting costs once a new project is initiated). In fact, SMUD appears to have requested charges of at least $4 million dollars to this work order prior to 1992. DPFOF ¶ 45. Similarly, Luana Holst, SMUD's supervisor of nuclear records and documents, who along with Jim Field was responsible for the collection of work orders to be included in SMUD's damages claim, admitted at trial that this work order related to SMUD's dry storage project, but that this work order was not included in SMUD's damages claim. DPFOF ¶ 45. Ms. Bowser testified at her deposition that, in fact, SMUD was incurring costs associated with its dry storage project before June 1990. DPFOF ¶ 46. The following month, SMUD filed with the NRC a document entitled "Plan For Ultimate Disposition of Rancho Seco Nuclear Generating Station." DPFOF ¶ 47. The document, which is a regulatory requirement, served to "provide the NRC with a status report in the form of advance and preliminary District plans for the ultimate disposition of [Rancho Seco], prior to the filing of the District's [decommissioning plan]." Id. Consistent with its prior discussion of its intentions, this document reiterated SMUD's plan to place its SNF into dry storage. DPFOF ¶ 48. Additionally, this document stated that "[i]t is expected that spent fuel will be accepted by

Mr. Field also admitted at trial that, at the time he became involved in implementing SMUD's dry storage plan, SMUD was not considering store-only dry storage, but was only pursuing dual-purpose dry storage. DPFOF ¶ 43. 18

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DOE before decommissioning is initiated." Id. Mr. Shetler explained at trial that, as of July 1990, SMUD planned on initiating decommissioning in the 2008 or 2009 time frame. Id. Further, similar to its previous statements, SMUD once again expressed its belief that an MRS was expected to be in operation in "about 1998." Id. On May 20, 1991, SMUD submitted its proposed decommissioning plan to the NRC. DPFOF ¶ 49. Mr. Shetler, who was responsible for reviewing the proposed decommissioning plan, testified at trial that the proposed decommissioning plan would have reflected SMUD's then-current intentions. Tr.287:1-3, Tr.288:1-2. In its plan, SMUD reiterated its intention to place its SNF into dry storage, to have its ISFSI licensed and constructed by 1993, and to transfer its SNF to dry storage by 1998. DPFOF ¶ 49. Further, consistent with SMUD's March 1990 draft decommissioning cost study, SMUD's April 1991 decommissioning cost study that it submitted to the NRC as part of its proposed decommissioning plan again "presumes the availability of [an MRS] facility such that DOE can meet its obligation to begin receiving fuel by 1998." Id. Additionally, in a June 28, 1991 briefing to the Nuclear Regulatory Commission concerning its decommissioning plan, SMUD represented that it would save $8 million a year from moving its SNF from wet storage to dry storage. DPFOF ¶ 50. On October 3, 1991, Rancho Seco management presented its decommissioning plan, including its dry storage strategy, to the SMUD Board of Directors. DPFOF ¶ 51.12 At this

As of October 1991, the SMUD Board of Directors was composed of Ed Smeloff, President; Peter Keat, Vice President; Joe Bounaiuto; Dave Cox and Wendy B. Reid. DPFOF ¶ 52. None of these Board members had a background working in the nuclear industry. Id. At the time, Mr. Smeloff was a consultant advising the California State Legislature. Id. Mr. Keats owned a book store in Sacramento. Id. Mr. Bounaiuto was a high school teacher. Id. Mr. Cox worked as an insurance broker at an insurance agency. Id. Ms. Reid worked as an employee of the California Energy Commission. Id. 19

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meeting, SMUD staff presented its best information to the Board with respect to its dry storage plans. Id. Although much of the presentation was made by Rancho Seco staff members Ms. Bowser and Mr. Miller, SMUD chose not to present those witnesses at trial and instead relied upon the trial testimony of Mr. Shetler, who explained at trial that he ultimately would have reviewed and approved of whatever was presented to the Board of Directors at this meeting. Id.13 Mr. Shetler told the Board of Directors at this meeting that SMUD's fuel disposition project was "tied very strongly" to its decommissioning program. DPFOF ¶ 53; see Tr.772:3-8 (Redeker) (acknowledging that there is a "direct link" between SMUD's dry fuel storage options and its decommissioning efforts). Both Mr. Miller and Ms. Bowser repeatedly told the Board at this meeting that SMUD expected to achieve an $8 million annual savings by transferring its SNF from wet storage to dry storage, or $80 million over a ten-year period. DPFOF ¶ 54. Mr. Miller told the Board that the reason SMUD staff recommended moving to dry storage was "because we can prudently save the District a great deal of money over the storage period." Id. Indeed, at trial Mr. Shetler agreed that the $8 million in annual savings was a factor in SMUD's decision to place its spent fuel into dry storage. Id. Ms. Bowser emphasized to the Board the significant cost savings SMUD could achieve by transferring its SNF into dry storage, explaining: If you look at the fact that a repository isn't projected until 1998, or an MRS until 1998, with a repository in 2010, and it will take

General Manager Freeman did not object to the proposal Mr. Shetler and his staff made to the Board of Directors. DPFOF ¶ 51. 20

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DOE approximately 10 years to accept all of SMUD's fuel, the cost savings can range somewhere between $60 to $156 million over the lifetime of decommissioning. DPFOF ¶ 55. Mr. Shetler explained at trial that this difference between $60 million and $156 million in savings reflected the difference in assumptions between DOE acceptance at an MRS beginning in 1998 compared to DOE acceptance at a Federal repository beginning in 2010. DPFOF ¶ 56. In response to a question regarding the estimated timing for DOE's acceptance of SNF, Ms. Bowser told the Board: MS. BOWSER: As a best case, without any negotiations with other utilities which are permitted to improve your place in the queue, they accept it in a policy that's called OFF, oldest fuel first. The first assemblies from Rancho Seco would be scheduled to be received three years after a facility opens, be that a monitored retrievable storage facility or a final repository. That's in the best case. And it would take approximately ten years from the opening of the facility or an additional seven years from the receipt of our first fuel for them to take the remainder of our assembly. In a worst case, it would be considerably longer, perhaps up to 20, 25 years. PRESIDENT SMELOFF: So, it's three years after the Federal Government develops an MRS that they would be required to begin to take spent fuel. MS. BOWSER: Yes. They may take our first assembly in the best case. * * *

PRESIDENT SMELOFF: And is that likely to be 1998 or is that ­

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MS. BOWSER: At this time, it is likely that an MRS could be sited by 1998; however, there needs to be some congressional action that would delink the final repository from the MRS. Right now, the two are linked so that you can't actually start to operate an MRS until you've sited a final repository. With the situation at Yucca Mountain, that seems like it will be tied up in litigation for a while. So, there is actually legislation in the Congress to delink the facilities which would make an MRS likely in 1998. DPFOF ¶ 57. General Manager Freeman expressed his agreement with Rancho Seco staff's proposal to place its SNF into dry storage, stating, "I think getting the fuel into casks and having them transportable in case the Department of Energy has a really good place to take them, it's a prudent thing to do." DPFOF ¶ 58. Rancho Seco staff believed that, regardless of the timing of DOE's performance in accepting SNF, placing SMUD's SNF into dry storage would ensure that it could timely decommission the rest of Rancho Seco. DPFOF ¶ 58. Remarkably, at the time Rancho Seco staff made its proposal that the Board pursue dualpurpose dry storage in October 1991, the notion that dry storage was in response to the Government's potential inability to begin SNF acceptance in 1998 had not even been contemplated. The following discussion took place at the October 3, 1991 meeting: PRESIDENT SMELOFF: What is the legal responsibility of the Department of Energy to take the fuel beginning in 1998. Suppose, for whatever reason ­ lack of authorization of Congress, failure to characterize the Yucca Mountain site ­ they are simply unable to take the fuel? Do they have any legal responsibility to compensate us for the storage of this fuel? ASSISTANT GENERAL MANAGER SHETLER: We might want to do a review on that.

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MS. SCHORI: Yes, I suspect we should review that. I think their obligation is a contract obligation. And the question you're asking is whether or not they're in breach of contract if they fail to take the fuel. And I think probably I should look at that ­ DPFOF ¶ 59.14 The following day, October 4, 1991, SMUD submitted to the NRC its application to construct and operate an ISFSI. DPFOF ¶ 60. On October 17, 1991, Mr. Shetler presented to the SMUD Board of Directors a presentation similar to the one presented at the October 3, 1991 meeting. DPFOF ¶ 61. This presentation indicated that there was an $8 million annual savings from transferring SMUD's fuel from wet storage to dry storage, and an estimated capital cost of $20 million. Id. Mr. Shetler agreed at trial that, based upon these numbers, which were provided to the Board, the cost of going to dry storage would pay for itself in two-and-a-half years. Id. Further, Mr. Shetler agreed that these figures represented SMUD's best estimates at the time and that SMUD utilized these numbers for its planning assumptions concerning the storage of its SNF. Id. Additionally, the presentation assumed either an MRS by 1998 (with final acceptance of SMUD's fuel in 2008), or a Federal repository in 2010 (with final acceptance of SMUD's fuel in 2020). DPFOF ¶ 62. The SMUD Board of Directors issued a resolution that same day approving "the proposal to construct a spent fuel storage facility." DPFOF ¶ 63.15

Ms. Schori was the general counsel for SMUD at the time of the October 1991 Board of Directors meeting, and she eventually became the General Manager of SMUD. Further, despite the burden of proof lying squarely on SMUD in this case, SMUD failed to call at trial Ms. Schori, Mr. Freeman, Mr. Keuter or any of the members of the SMUD Board of Directors. Notably, as late as 1994, SMUD represented to DOE that, when it made the decision to pursue dual-purpose dry storage, it assumed DOE would timely perform under the Standard Contract. On May 24, 1994, DOE published a Notice of Inquiry ("NOI") regarding its responsibility to accept SNF after January 31, 1998, and sought comments from the nuclear industry. DPFOF ¶ 64a. Specifically, DOE requested industry comments upon: (1) whether it 23
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SMUD issued requests for proposals ("RFPs") for the design and fabrication of the dualpurpose casks in December 1991. DPFOF ¶ 65. That same month, Mr. Shetler made a presentation concerning SMUD's decommissioning and spent fuel disposition plans to the California Senate Committee on Energy and Public Utilities. DPFOF ¶ 66. This presentation contained a slide identical to the one utilized with the Board of Directors in the October 17, 1991 meeting, indicating an $8 million in annual savings and the possibility of an MRS by 1998. Id. Mr. Shetler acknowledged at trial that these were the best assumptions SMUD had at the time. Id. General Manager Freeman approved of the concepts contained in Mr. Shetler's presentation. Tr.358:2-359:8 (Shetler).

had a statutory obligation to accept SNF beginning in 1998 in the absence of an operational repository; (2) the need for interim offsite storage prior to the opening of a permanent repository; and (3) the potential option of offsetting some of the financial burden to the industry through the use of the Nuclear Waste Fund. Id. In response to DOE's NOI, SMUD submitted a letter on September 21, 1994 and explained to DOE its belief that SMUD began its dry storage project believing that DOE would perform the Standard Contract in a timely manner. DPFOF ¶ 64b. Specifically, SMUD stated that: After a referendum of SMUD's electorate on June 6, 1989, Rancho Seco ceased operating on June 7, 1989. Since then, SMUD has been proceeding with activities to begin the decommissioning of Rancho Seco and to provide required assurances to the NRC that the District will have sufficient funds available to pay for the decommissioning. However, SMUD has not provided funds in its Decommissioning Trust for spent fuel storage after 2010. When When funded in 1991, the Trust assumed that DOE would accept all of Rancho Seco's fuel starting in 1998, including the queue, by 2010. Id. In other words, SMUD's response to the NOI provides further evidence that SMUD's decision to pursue dry storage was wholly independent of DOE's breach of the Standard Contract. 24

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On April 2, 1992, the SMUD Board of Directors approved of the evaluation process and criteria proposed by Rancho Seco management to be used in the selection of a vendor for the dual-purpose casks. DPFOF ¶ 67. Three months later, on July 7, 1992, Rancho Seco management requested that the Board authorize SMUD's general manager to negotiate and execute a contract with Pacific Nuclear Services, Inc. to purchase dual-purpose casks. DPFOF ¶ 68. The staffing summary sheet presented to the Board of Directors containing the request explained: In 1990, the Board of Directors, as a result of a District study performed by S. Levy, Inc., concurred the General Manager should pursue the purchase of a dual purpose casking method. The purpose of this activity was to enable the District to dry store Rancho Seco spent nuclear fuel at an onsite location, shutdown the Spent Fuel Building, and further reduce decommissioning costs. Id. Mr. Shetler testified at trial that, both before and after this July 7, 1992 meeting, SMUD believed there was a possibility that DOE could establish an MRS by 1998 to begin the acceptance of SNF. DPFOF ¶ 71. Mr. Shetler characterized SMUD's belief as to the chances of an MRS as a "50/50 proposition." Id. Astonishingly, as SMUD itself concedes in its proposed finding of facts, "SMUD believed that the development of a dual purpose dry storage system would help address the uncertainties and prospective delay associated with DOE fuel acceptance by encouraging prompt DOE acceptance of SMUD's spent fuel whenever it began performance and by reducing annual operation and maintenance costs over the long-term if DOE did not begin accepting fuel until 2010 or later. Tr. at 172-73, 345-46 (Shetler)." Pl. PFOF ¶131. Indeed, in December 1994, SMUD still believed there was a possibility that DOE could begin accepting SNF in an MRS by 1998, and was representing this assumption to members of the general public. DPFOF ¶ 72; DX 481, at SMUD 0033398; Tr.383:17-24, Tr.388:19-21 25

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(Shetler) ("I think we still had an expectation there was a possibility it could happen, yes."); Tr.705:2-5 (Redeker). In a presentation as part of a public workshop ­ which General Manager Schori was aware of and did not make changes to its contents ­ SMUD management indicated that SMUD assumed performance from DOE between 1998 and 2013, and that all of SMUD's SNF would be accepted within a 14-year queue. DPFOF ¶ 72. SMUD's belief that there was a possibility that DOE would begin acceptance of SNF in 1998 continued into 1995. DPFOF ¶ 73.16 In short, as SMUD repeatedly recognized both at the time and at trial, through at least 1994 SMUD continued to believe that DOE could perform the Standard Contract in a timely manner. Simply put, the overwhelming evidence adduced at trial clearly establishes that SMUD's decision to pursue dry storage was not the result of DOE's breach of the Standard Contract. Accordingly, SMUD failed to establish at trial that its decision to place its SNF into dry storage was a "direct result" of the Government's delay in performance, particularly when it believed there was a "50/50" chance that the Government would perform in a timely manner and that SMUD believed the pursuit of dual-purpose dry storage was advantageous regardless of when

SMUD's belief in 1994 that DOE could timely perform through the use of an MRS is consistent with the general belief in the industry. Tr.1377:3-19 (Stuart) (acknowledging that there was a general belief in the industry that the government was spending money on the MRS, and that an MRS might break the logjam regarding the acceptance of SNF under the standard contract). In fact, even after 1995, Mr. Stuart, as an employee of NAC International, was having discussions with individuals from DOE regarding the possibility of an MRS. DPFOF ¶ 75. Further, SMUD's reliance upon the NRC's 1994 Environmental Assessment on the Rancho Seco ISFSI as "corroborating" the causal relationship between DOE's "anticipated delay" and SMUD's decision is misplaced. Pl. Br. 25 (citing PX 363). Regardless of the NRC's view on the possibility of an MRS by 1998, SMUD's contemporaneous documents unequivocally reflect that SMUD believed, at least into 1995, that DOE could accept SNF by 1998 in an MRS. 26

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DOE began performing under the Standard Contract. See, e.g., California Fed. Bank v. United States, 395 F.3d 1263, 1267-68 (Fed. Cir. 2005) (rejecting "substantial factor" test and holding that the causal connection between the breach and the damages alleged must be "definitively established").17 SMUD represented this belief to DOE, the NRC and the general public throughout this time period. Tr.401:2-7 (Shetler). It is only now, in its current litigation posture, that SMUD has attempted to construct a post hoc self-serving reason for its dry storage decision. This position is belied by the evidence at trial and should be rejected by this Court. SMUD's decision to place its SNF into dry storage, a full eight years before the Government's obligation to begin acceptance from the industry in general, and 11 years before the Government's obligation to begin acceptance of SMUD's SNF, was not caused by the Government's breach of the Standard Contract. Rather, as demonstrated at trial and as discussed above, SMUD made a business decision based upon its status as a shutdown utility. SMUD determined that the placement of its SNF into dry storage made business sense based upon its desire to decommission, its projected cost savings of $8-12 million a year, and, most importantly, its belief that the placement of its SNF into dual-purpose dry storage could facilitate DOE's early acceptance at an MRS. These objectives have nothing to do with the Government's delay in performance. Indeed, despite the Government raising these significant flaws in SMUD's causation argument at trial, SMUD's post-trial brief is absolutely silent on this issue. SMUD's sole

SMUD makes the curious argument that SMUD would not have contracted for dry storage in 1992 in the "but for" world. Pl. Br. 2. Of course, 1992 is by definition the "but for" world, particularly in light of this Court's determination that the Government breached the Standard Contract on January 31, 1998. In fact, by 1992, DOE had not made any announcement suggesting that it would not perform with SNF acceptance at an MRS beginning in 1998. 27

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argument is that, because the Government's 1998 performance as of 1990 was "uncertain," that "uncertainty" somehow justified or drove SMUD's decision to pursue dual-purpose dry storage. Of course, as explained above, such a contention is wholly unsupported by the actual facts of this case, as demonstrated by SMUD's own documents. Consequently, SMUD has failed to establish that the Government's breach of the Standard Contract in 1998 caused it to pursue dry storage in the early 1990s. See Indiana Michigan, 2005 WL 2173563, at *7 (affirming trial court's conclusion that utility's rerack of spent fuel pool, which it began to expend funds on in 1989, was not caused by Government's delay in the acceptance of SNF). 2. SMUD's Reevaluation Of Its Decision To Place Its SNF Into Dry Storage Was Unrelated To The Government's January 31, 1998 Delay In SNF Acceptance

Apparently recognizing the futility of its argument that SMUD's decision to place its SNF into dry storage over a decade before the Government was obligated to accept SMUD's SNF can constitute recoverable mitigation, SMUD presents the novel argument that its revisiting

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of the dry storage decision at several times after 1998 somehow establishes causation.18 This argument does not withstand even casual scrutiny. First, SMUD has presented absolutely no legal support for the proposition that, despite the fact that it made the decision to pursue dry storage 11 years before the Government was obligated to accept SMUD's SNF, because of 88 months of delays in SMUD's dry storage project (none of which SMUD has even attempted to allege were the fault of DOE), SMUD's reconsideration as a result of these delays can somehow create a causal link between SMUD's dry storage project and DOE's 1998 breach of the Standard Contract. Simply put, SMUD's novel causation theory lacks any legal support.

SMUD does not even attempt to suggest that its 1993 reevaluation of its dry storage project somehow was the direct result of the Government's breach. Indeed, it is beyond dispute that this 1993 reevaluation was motivated solely by its concern that, by placing its SNF into canisters, SMUD would render its packaged fuel as either non-standard or unacceptable. DX 425, at SMUD 0027391 (indicating that 1993 reevaluation was to "quantify [the] risk" of placing its SNF into canisters and potentially making its fuel nonstandard or unacceptable); Tr.367:4-17 (Shetler) (explaining reason for 1993 reevaluation was based upon concerns about DOE's acceptance of canistered fuel and the ability to license its first-of-a-kind dual-purpose dry storage system). In fact, the 1993 evaluation also included a "base case" which assumed that SMUD would place its SNF into dry storage and assumed a 2000 start date for DOE acceptance of SNF, and that all fuel would be accepted under DOE's then-planned receipt schedule of 15 years. Id., at SMUD 0027393, SMUD 0027390; Tr.374:1-14 (Shetler) (explaining that the "base case" was the plan SMUD was moving forward with at the time, that it assumed an MRS by 1998, and was the reference point against which all other options were compared); DPFOF ¶ 76a-d. This 1993 analysis plainly reflects a belief on the part of SMUD that DOE could would perform by 1998, and its reevaluation was motivated by its concerns over the storage container in which it would place its SNF. Further, SMUD's 1993 reconsideration itself proves that SMUD pursued dual-purpose dry storage irrespective of the Government's breach. SMUD effectively concluded that the benefits of pursuing dry storage outweighed any potential risk in a delay in DOE's acceptance of SMUD's SNF caused by the placement of SMUD's SNF into canisters. 29

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Second, even if SMUD could somehow demonstrate, as a matter of law, that its reevaluations of its dry storage project could potentially have been caused by DOE's delay, as we demonstrated at trial, SMUD's decision to reevaluate its dry storage project was not motivated by the Government's breach of the Standard Contract, and its decision to continue with the dry storage project was not caused by the Government's breach.19 As demonstrated at trial and as explained below, SMUD's reevaluations were motivated by substantial delays in the dry storage project, and its decision to continue with the project was based upon the significant cost savings that it would realize regardless of any delay. In fact, SMUD determined that the project would pay for itself before DOE's first scheduled acceptance of SMUD's SNF in the non-breach world. Consequently, SMUD's consistent decision to stay the course clearly was not caused by the Government's delay in acceptance after 1998. Significantly, even after SMUD concluded that DOE would breach the Standard Contract, SMUD recognized that, regardless of the breach, the pursuit of dry storage project was the best option financially. Specifically, in October 1996, Mr. Shelter presented a paper at the TLG Conference, in which he stated:

Notably, when Mr. Field initially put SMUD's damages claim together on April 16, 2004, he started the collection of costs beginning in 1997 at the direction of counsel. DPFOF ¶ 77. These post-1996 costs totaled $60.1 million. Id. Mr. Field acknowledged at trial that SMUD's initial plan was to have its SNF loaded into dry storage by 1998, and, had it loaded its SNF by that date, there would not be costs associated with most of the work order numbers contained in SMUD's April 2004 damages claim. Id. Indeed, it was only after Mr. Field's deposition in this case that SMUD submitted a revised damages claim, asserting $20 million in damages running from 1992-1996. DPFOF ¶ 78. SMUD's revision of its damages claim is an explicit acknowledgment of the fact that, but for the significant delays in SMUD's dry storage program, it would have suffered no damages in this case, as any costs incurred would have been before the Government's partial breach in 1998. 30

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[t]he economic aspects of keeping spent fuel in the spent fuel pool as opposed to dry storage indicate that the capital costs associated with dry storage can be recovered in less than two years and a substantial amount can be recovered over the period the plant is in SAFSTOR. DPFOF ¶ 79. Mr. Shetler projected an annual cost of operating the wet pool of $15.1 million dollars, an annual cost of operating dry storage of $3.8 million, and the total capital costs of dual-purpose storage of $18 million. This was SMUD's best estimate at the time. Id.20 Mr. Shetler explained at trial that General Manager Schori was aware of the general substance of this presentation, and that he would not have made this presentation if she disagreed with any of the general substance contained in the presentation. Id. Similarly, Mr. Field authored a paper in 1996 in which he stated that, "[r]ecovery of the investment in such a [dry] storage system and facility would be realized in less than three years." DPFOF ¶ 81. At trial, SMUD attempted to show that it revisited its 1990 dry storage decision throughout the 1990s because of DOE's breach. The trial record, however, establishes that SMUD's reevaluation of its dry storage decision was not driven by DOE's breach, but rather by concerns associated with the dry storage project's escalating costs and increasing delays. SMUD's revisiting of its decision was due to the fact that, almost from its inception, SMUD's dry storage project suffered from massive delays and significant cost overruns. As Mr. Redeker explained at trial: We were doing re-evaluations because the project started getting into trouble. There started being cost overruns and started being issues and we said if there are problems with this, with this project, why don't we leave the fuel in the spent fuel pool.

On July 25, 1996, Mr. Miller authored a study in which he estimated that the total cost for the dry storage project would total approximately $21.3 million. DPFOF ¶ 78. 31

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Tr. 535:12-27 (Redeker), Tr. 628:25-629:1 (Redeker) ("This is a troubled project, costs are going up, schedule is moving out."); DPFOF ¶ 82. Yet, every time SMUD performed a reevaluation, it concluded that the project paid for itself so quickly that DOE's breach of the Standard Contract was immaterial to its consideration as to whether to continue with the dry storage project. DPFOF ¶ 83. SMUD reevaluated its dry storage project on several occasions throughout the mid-tolate 1990s and early 2000 time frame. These evaluations were performed by Rancho Seco staff under the direction of Mr. Redeker. DPFOF ¶ 84. Mr. Redeker testified at trial that he would report the result of these analyses to the Board of Directors and that he endeavored to provide the Board with the most accurate and best information that he could. Id. For example, SMUD conducted a reevaluation of its 1990 dry storage decision on March 3, 1997. DPFOF ¶ 85. By this point, the dry storage project was "well underway." Tr.910:7-9 (Ferreira). The reason SMUD conducted the 1997 reevaluation was because its dry storage vendor, Vectra, stopped work on the dry storage project. DPFOF ¶ 85. Indeed, Mr. Redeker acknowledged at trial that, as of the 1997 reevaluation, the dry storage project was floundering, and it was somewhat unclear as to whether the project would even continue. Id. The 1997 reevaluation concluded that the most cost-effective option was to continue with the current dual-purpose dry storage concept on an unexpedited schedule because of "reduced staff and the use of contractors." DPFOF ¶ 86. This option assumed that SMUD's SNF would be loaded into dry storage by August 31, 1999. Id. The 1997 evaluation also concluded that store-only dry storage was not a preferred option, because it would delay SMUD's ability to

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decommission its wet pool, thereby resulting in additional costs in maintaining its Part 50 operating licen