Free Proposed Findings of Fact and Conclusions of Law - 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 PROPOSED FINDINGS OF FACT Defendant, the United States, submits the following post-trial proposed findings of fact ("DPFOF"). I. THE NUCLEAR WASTE POLICY ACT AND THE PROMULGATION OF THE STANDARD CONTRACT 1. On January 7, 1983, Congress enacted the Nuclear Waste Policy Act of 1982

("NWPA"), Pub. L. 97-425, 96 Stat. 2201 (codified at 42 U.S.C. §§ 10101-10270 (1982)). 2. The NWPA authorized the Secretary to enter into contracts with the owners and

generators of SNF of domestic origin for "the acceptance of title, subsequent transportation, and disposal of such [SNF and HLW]." 42 U.S.C. § 10222(a)(1) (1982). The contracts had to "provide for payment to the Secretary of fees . . . sufficient to offset expenditures." Id. 3. On February 4, 1983, DOE, in furtherance of its obligations pursuant to the

NWPA, 42 U.S.C. § 10222, published a notice of proposed rulemaking in the Federal Register, proposing terms for the "Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste" ("Standard Contract") mandated by the NWPA, 42 U.S.C. § 10222. See 48 Fed. Reg. 5458 (Feb. 4, 1983).

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4.

Although the proposed Standard Contract itself did not identify a specific rate by

which DOE would accept contract holders' SNF, it provided for DOE's issuance of documents for planning purposes to assist in the eventual definitization of the specific rate and order of SNF acceptance and disposal: DOE shall annually provide to the Purchaser pertinent information to support waste disposal program cost projections, project plans and progress reports. Beginning on April 1, 1991, DOE shall issue an annual acceptance ranking for receipt of SNF and/or HLW at the DOE repository. This priority ranking shall be based on the age of SNF and/or HLW as calculated from the date of discharge of such material from the civilian nuclear power reactor. The oldest fuel or waste will have the highest priority for acceptance, except as provided in paragraph B.3 of Article VI of this contract. 48 Fed. Reg. 5458, 5463 (Feb. 4, 1983) (Art. V.B.5 & Art. V.B.6) (emphasis added). 5. The proposed rule requested that written comments had to be submitted by March

7, 1983. 48 Fed. Reg. at 5458. 6. Certain utilities and nuclear industry groups requested that DOE insert into the

Standard Contract a specific rate of acceptance. DX 0076.063 at ADM002.0482, DX 64, at SMUD 0011731. 7. On April 18, 1983, DOE issued the terms of the Standard Contract as a final rule.

48 Fed. Reg. 16590, 16592 (Apr. 18, 1983). In the final Standard Contract terms, DOE expressly chose not to include a minimum rate obligation in the Standard Contract because, as of 1983, DOE did not know what DOE's capabilities would be in 1998 and was unwilling to commit to the minimum rate obligations that the utilities proposed. Def. Counter-Designation of R. Morgan, at Tr.57:20-23, Tr.129:11-17, Tr.203:16-19 (3/21-22/02).

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8.

In the final rule, DOE also modified the definition of the "facility" to which SNF

could be delivered beginning in 1998. Although the proposed rule would have required delivery to a repository in 1998, the final rule provided that DOE could deliver SNF in 1998 either to a repository or to "such other facility(ies) to which [SNF and/or HLW] may be shipped by DOE prior to its transportation to a" permanent repository. 10 C.F.R. § 961.11, Art. I.10. 9. The final rule also included provisions providing DOE with the sole discretion to

approve exchanges by utilities of approved delivery commitment schedules, and to grant utilities that had shutdown priority in the acceptance queue. 10 C.F.R. § 961.11, Art. V.E, VI.B.1(b). 10. The final rule did not provide any provision allowing transportation campaigns,

but instead generally required that DOE accept SNF under oldest-fuel-first principles. 10 C.F.R. § 961.11, Art. IV.B.5(a). 11. The final rule expressly granted DOE the discretion to defer the acceptance of

failed fuel if DOE determined that the disposal of such fuel was not technically feasible. 10 C.F.R. § 961.11, Art. VI.A.2.b. 12. II. SMUD and DOE signed the Standard Contract on June 14, 1983. DX 88.

OVERVIEW OF THE RANCHO SECO NUCLEAR FACILITY 13. SMUD's Rancho Seco facility began operating in 1975. Tr.114:20-21 (Shetler).

From the outset, Rancho Seco was plagued by a poor performance history, including multiple extended outages and placement upon a watch list by the Nuclear Regulatory Commission ("NRC") of reactors constituting the "greatest safety significance." DX 10; Tr.120:17-121:14 (Shetler); Direct Testimony of Cliff Hamal, at ¶ 30. 14. During the mid-1980s, Rancho Seco suffered a 27-month outage, from December

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1985 though early 1988. Tr.155:13-16, Tr.156:1-3 (Shetler). During the 14-year life span of the Rancho Seco plant, the plant was non-operational more than it was operational. Direct Testimony of Cliff Hamal, at ¶ 29. 15. S. David Freeman, SMUD's general manager characterized SMUD's operating

history as follows: . . . [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 . . . . Def. Counter-Designation D. Freeman, Tr.24:14-18 (7/16/04). 16. As a result of the extended outages at the Rancho Seco facility, SMUD had to pay

for replacement power, which accounted for half of Rancho Seco's overall generation of electricity. Tr.127:6-16 (Shetler). Consequently, SMUD had to raise rates for its ratepayers significantly during the mid-to-late 1980s. Tr.127:17-18 (Shetler). 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 second of which, dated June 6, 1989, passed. Tr.127:22-23, Tr.155:21-22 (Shetler); Tr.876:1-4 (Ferreira). 17. The following day, SMUD's Board of Directors immediately agreed to abide the

June 6, 1989 referendum to close Rancho Seco. Tr.129:1-12 (Shetler); Tr.895:1-10 (Ferreira). At the time of the shutdown, Rancho Seco was licensed by the NRC to operate through 2008. DX 248, at SMUD 0029716. 18. SMUD's shutdown of its Rancho Seco facility occurred nine years before DOE

was obligated to begin the acceptance of SNF from the industry generally, and 12 years before DOE was obligated to begin the acceptance of SMUD's SNF. 4

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III.

SMUD PURSUED DRY STORAGE IN 1990 FOR REASONS WHOLLY UNRELATED TO THE GOVERNMENT'S 1998 BREACH OF THE STANDARD CONTRACT A. As A Result Of Rancho Seco's Premature Shutdown In 1989, SMUD's Focus Was To Decrease The Size Of Its Nuclear Footprint Upon the decision to shut down Rancho Seco, SMUD personnel placed their

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focus upon decommissioning the plant. DX 122; DX 125; DX 131; DX 133; DX 134; DX 139. On December 8, 1989, following the shutdown of Rancho Seco, SMUD completed the defueling of the Rancho Seco nuclear reactor. DX 135, at SMUD 0000501. SMUD stored all 493 of its SNF assemblies in the wet storage pool within its spent fuel building. DX 141, at SMUD 0019082. Shortly after its decision to shutdown Rancho Seco, SMUD created a Decommissioning Task Force to initiate planning for decommissioning and to place the plant into a "protective lay-up" condition. DX 122; DX 125. 20. SMUD had two primary goals after Rancho Seco's premature shutdown in 1989. a. First, SMUD sought to reduce its nuclear footprint as quickly as possible.

Tr.263:11-15 (Shetler). 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). SMUD believed that, 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 gained the 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). SMUD recognized that its desire to decommission Rancho Seco was an important element in SMUD's decision to pursue dry storage. Def. Counter-Designation of R. Bowser, at Tr.229:24-230:5 (9/16/04). 5

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b.

Second, SMUD sought the removal of its SNF from the site as quickly as

possible. SMUD hoped that dry storage would lead DOE to accept SMUD's fuel earlier than it was otherwise entitled under the Standard Contract and as soon as possible. Tr.264:11-15 (Shetler). 21. SMUD believed that dry storage could help it achieve both of these goals. First,

dual-purpose 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 any radioactive materials, including SNF, remained in the pool. DX 721, at SMUD 061592; Tr.734:21-735:8; 736:7-737:9 (Redeker) (acknowledging cost in maintaining Part 50 license, and inability to eliminate Part 50 license until wet pool is decommissioned). In the early 1990s, SMUD estimated that ceasing wet pool operations would result in an annual savings of as much as $8 million. DX 287, at SMUD 0018294. Second, SMUD believed that dual-purpose dry storage presented the best chance of having DOE accept its SNF under the Standard Contract through the use of a Monitored Retrievable Storage ("MRS") system by 1998. Id.; Tr.254:21-25 (Shetler) ("[I]f there was a potential for any kind of 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). SMUD believed that, although its first acceptance in the non-breach world would have been 2001, its SNF could be accepted earlier at an MRS if it had its SNF in dual-purpose dry storage by 1998. Tr.704:22-705:1 (Redeker); DX 202, at Attachment at SMUD 0019251 ("Storage in transportable casks offers the best opportunity explored to keep open the possibility of early off-site shipment, possibly as early as 1998 should DOE develop a . . .

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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"). 22. 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). 23. SMUD's pursuit of its two stated goals were wholly independent of the

Government's delay in the acceptance of SNF. Neither of these two goals, which were discussed in the early 1990s, were in any way related to the Government's post-1998 delay in the acceptance of SNF. See DPFOF ¶¶ 20-22. 24. Mr. Shetler testified that, in the early 1990 time frame, 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, Tr.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 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." Tr.152:16-21 (Shetler). 25. 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

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shutdown of Rancho Seco). In October and December 1989, 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.1071:13 (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). B. SMUD's Board Of Directors Made The Decision In 1990 That SMUD Place Its SNF Into Dry Storage In February 1990, SMUD retained Saul Levy, Inc. ("Levy") as a consultant to

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evaluate SMUD's storage options for its SNF. DX 144. On March 31, 1990, Levy provided SMUD a report with its ultimate conclusions. DX 165. 27. 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. DX 165, at SMP 0680004. 28. Levy "strongly recommended" that SMUD pursue this option in conjunction with

a demonstration program with DOE to develop the dual-purpose cask system. DX 165, at SMP 0680004. 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., at SMP 0680067. Notably, Levy acknowledged that:

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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., at SMP 0680070. 29. 30. SMUD did not submit Saul Levy's report to DOE. Tr.184:24-185:2 (Shetler). S. David Freeman, SMUD's general manager at the time, could not recall Saul

Levy or the report that Mr. Levy issued. Def. Counter-Designation D. Freeman, at Tr.38:16-22 (5/16/02). 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. Def. Counter-Designation D. Freeman, at Tr.48:13-22 (5/16/02). 31. 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. 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. Id., at SMUD 085624 (emphasis added). In explaining the rationale for recommending transportable storage casks, Levy reiterated that it "provides [the] earliest opportunity to ship fuel off-site." Id. at SMUD 085632. 32. SMUD relied upon the recommendations made by Mr. Levy in planning for the

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disposition of its SNF. Tr.273:16-20 (Shetler). SMUD management agreed with Levy's recommendation to pursue dual-purpose dry storage, and, consequently, in March 1990, SMUD's Board of Directors approved of the Rancho Seco general manager's pursuit of the purchase of a dual-purpose storage system. Tr.172:2-7, Tr.193:1-8 (Shetler) ("As a result of our review of the Saul Levy report and his recommendation, our recommendation to our board was that we pursue that option and go and look at dual purpose transportable system."). 33. After the Levy recommendation, SMUD saw dry storage as a "cheaper way" of

dealing with fuel storage that could facilitate transport to DOE perhaps even sooner than to a Federal repository. Tr.172:17-24 (Shetler). 34. 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." DX 164 (emphasis added). Mr. Boggs' letter also assumed that DOE could identify an SNF storage site by 1998. Id. 35. 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 meeting of SMUD's Rancho Seco Committee. 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 10

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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. Id. at SMUD 0018522 (emphasis added). 36. By May 1990, SMUD had eliminated consideration of leaving its SNF in the wet

pool. 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. DX 179, at SMUD 0000392. The evaluation indicated that SMUD had rejected each of the wet storage options because "wet [storage is] more expensive than dry." Id. C. 37. SMUD's Early Implementation Of Its Dry Storage Project On June 7, 1990, Rita Bowser, the Rancho Seco Nuclear Fuel Disposition Project

Manager who had the day-to-day project management oversight for implementing SMUD's dry storage project, submitted to Mr. Keuter a copy of SMUD's independent spent fuel storage installation ("ISFSI") licensing and engineering strategies. DX 188; Tr.311:20-25 (Shetler). 38. In the memorandum transmitting the strategies, Ms. Bowser explained that she

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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]." DX 188, at SMUD 0019288 (emphasis added). 39. 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. Tr.177:7-19 (Shetler). Ms. Bowser considered herself a "fairly junior" Rancho Seco staff member. Def. Counter-Designation of R, Bowser at Tr.65:4-9, Tr.96:6-10, Tr.121:2-8, Tr.201:6-16, Tr.208:8-20 (9/16/04). 40. 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." Def. Counter-Designation of R. Bowser, at Tr.108:15-22, Tr.154:17-18, Tr.150:20-21 (9/16/04) (objecting to questions on grounds that it calls for speculation as to what were SMUD's intentions). 41. The decision to pursue dry storage was made at a higher level of management than

Ms. Bowser and Mr. Miller. Tr.177:12-14 (Shetler). However, Mr. Shetler relied upon the work of Ms. Bowser and Mr. Miller as part of the development of SMUD's overall dry storage planning strategy. Tr.312:1-5 (Shetler). 42. Jim Field, the chief engineer at Rancho Seco who worked on the specification for

SMUD's dry storage project, recognized that no one ever told him SMUD was pursuing dry storage because DOE was not going to perform. Tr.1071:13-20 (Field). 43. At the time that Mr. Field became involved in implementing SMUD's dry storage

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plan, SMUD was not considering store-only dry storage, but was only pursuing dual-purpose dry storage. Tr.1072:8-19 (Field). 44. In June 1990, Ms. Bowser requested that a work order be opened for "licensing

and engineering activities related to dry storage disposition." 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). 45. SMUD requested charges of at least $4 million dollars to this work order prior to

1992. DX 258; DX 187. 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. Tr.1231:19-22, Tr.1236:12-20, Tr.1269:7-12 (Holst). 46. Ms. Bowser recognized that SMUD was incurring costs associated with its dry

storage project before June 1990. Def. Counter-Designation of R. Bowser, at Tr.134:2-6 (916/04). 47. In July 1990, SMUD filed with the NRC a document entitled "Plan For Ultimate

Disposition of Rancho Seco Nuclear Generating Station." DX 194. 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. at SMUD 0025395; Tr.280:5-9 (Shetler). 48. Consistent with its prior discussion of its intentions, SMUD's "Plan For Ultimate

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Disposition of Rancho Seco Nuclear Generating Station" reiterated SMUD's plan to place its SNF into dry storage. DX 194, at SMUD 0025406. Additionally, this document stated that "[i]t is expected that spent fuel will be accepted by DOE before decommissioning is initiated." Id., at SMUD 0025406. As of July 1990, SMUD planned upon initiating decommissioning in the 2008 or 2009 time frame. Tr.285:16-19 (Shetler). Further, similar to its previous statements, SMUD once again expressed its belief that an MRS was expected to be in operation in "about 1998." DX 194, at SMUD 0025438. 49. On May 20, 1991, SMUD submitted its proposed decommissioning plan to the

NRC, which reflected SMUD's then-current intentions. DX 248; Tr.287:1-3, Tr.288:1-2 (Shetler). 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. DX 248, at SMUD 0029733. 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. at SMUD 0030074 (emphasis added). 50. 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. DX 255, at SMUD 0029454. 51. On October 3, 1991, Rancho Seco management presented its decommissioning

plan, including its dry storage strategy, to the SMUD Board of Directors. DX 274. At this meeting, SMUD staff presented its best information to the Board with respect to its dry storage

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plans. Tr.357:10-13 (Shetler). 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. Tr.313:9-13 (Shetler). General Manager S. David Freeman did not object to the proposal that Mr. Shetler and his staff made to the Board of Directors. Tr.357:14-16 (Shetler). 52. 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. DX 274, at SMUD 0027402. None of these Board members had a background working in the nuclear industry. Tr.322:2-323:25 (Shetler). At the time, Mr. Smeloff was a consultant advising the California State Legislature. Tr.321:17-20 (Shetler). Mr. Keats owned a book store in Sacramento. Tr.322:6-10 (Shetler). Mr. Bounaiuto was a high school teacher. Tr.322:14-23 (Shetler). Mr. Cox worked as an insurance broker at an insurance agency. Tr.323:2-5 (Shetler). Ms. Reid worked as an employee of the California Energy Commission. Tr.323:10-13 (Shetler). 53. Mr. Shetler told the Board of Directors at this meeting that SMUD's fuel

disposition project was "tied very strongly" to its decommissioning program. DX 274, at SMUD 0027409; Tr.772:3-8 (Redeker) (acknowledging that there is a "direct link" between SMUD's dry fuel storage options and its decommissioning efforts). 54. Both Mr. Miller and Ms. Bowser repeatedly told the Board at the October 1991

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. DX 274, at SMUD 0027419, SMUD 0027433-34, SMUD 0027436. Mr. Miller told the Board that SMUD staff

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recommended going to dry storage "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. Tr.266:710 (Shetler). 55. During the October 1991 meeting, Ms. Bowser emphasized to the Board the

significant cost savings that 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 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. DX 274, at SMUD 0027436 (emphasis added). 56. 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. Tr.327:20-24 (Shetler). 57. 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.

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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 ­ 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. DX 274, at SMUD 0027465-66 (emphasis added). 58. 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." DX 274, at SMUD 0027471-72. Rancho Seco staff believed that, regardless of the timing of DOE's performance in accepting SNF, placing SMUD's SNF into dry

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storage would ensure that it could timely decommission the rest of Rancho Seco. Id. at SMUD 0027466-67. 59. When Rancho Seco staff made its proposal that the Board pursue dual

purpose 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. 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 ­ DX 274, at SMUD 0027468-69 (emphasis added). 60. The following day, October 4, 1991, SMUD submitted to the NRC its application

to construct and operate an ISFSI. DX 276. 61. 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. DX 280. 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. at SMUD 0029434. Mr. Shetler agreed that, based upon these numbers, which were provided to the Board, the dry storage project would pay for itself in two-and-a-half years. Tr.329:10-14 (Shetler). 18

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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. Tr.329:21-330:1-4 (Shetler). 62. Mr. Shetler's October 17, 1991, 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). DX 280, at SMUD 0029434. 63. The SMUD Board of Directors issued a resolution that same day approving "the

proposal to construct a spent fuel storage facility." DX 282. 64. In 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. a. On May 25, 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. PX 351; 59 Fed. Reg. 27007 (May 25, 1994). Specifically, DOE requested industry comments upon: (1) whether it 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. b. 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. 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 19

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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 funded in 1991, the Trust assumed that DOE would accept all of Rancho Seco's fuel starting in 1998, including the queue, by 2010. DX 462, at SMUD 0019624 (emphasis added). D. 65. SMUD Awards Dry Storage Contract To Pacific Nuclear In December 1991, SMUD issued requests for proposals ("RFPs") for the design

and fabrication of the dual-purpose casks. DX 293. 66. Also in December 1991, Mr. Shetler made a presentation, which had the approval

of General Manager Freeman, concerning SMUD's decommissioning and spent fuel disposition plans to the California Senate Committee on Energy and Public Utilities. DX 291; Tr.358:2359:8 (Shetler). 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. DX 291, at SMUD 0029418, SMUD 0029411. These assumptions were the best that SMUD had at the time. Tr.332:2-4 (Shetler). 67. On April 2, 1992, the SMUD Board of Directors approved the evaluation process

and criteria proposed by Rancho Seco management to be used in the selection of a vendor for the dual-purpose casks. DX 348. 68. 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. 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 20

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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. DX 344, at SMUD 0027221 (emphasis added). 69. Two days later, on July 9, 1992, the SMUD Board of Directors had a meeting

that was attended by Ivan Stuart, a vice president at Nuclear Assurance Corporation and currently one of SMUD's expert witnesses in this case. DX 353, at SMP 0310940. NAC was one of the bidders on the dry storage project. Id. Mr. Stuart asked the SMUD Board of Directors why the performance schedule changed between the request for proposal and the time that SMUD evaluated the bids. Id. Mr. Stuart also expressed concern to the Board of Directors that the NRC had not licensed Pacific Nuclear's NUHOMS system for transportation. Id. 70. On August 21, 1992, NAC's president, John Stobbs, sent a letter to Mr. Freeman

indicating that SMUD has "so unfairly treated our company [NAC], that I am compelled to write directly to you and request your intervention and reversal of plans apparently underway at SMUD." DX 365. Mr. Stobbs referred to Mr. Stuart's unsuccessful efforts to persuade the SMUD Board of Directors and noted that SMUD's request for proposal clearly requested bids on dual-purpose casks that had already been approved by the NRC, or that where close to NRC approval, so that SMUD could receive the casks by mid-1993. Id. Mr. Stobbs noted that NAC was currently the only vendor that had a cask in the NRC review process. Id. Mr. Stobbs also wrote that SMUD had changed the terms of the proposal without allowing NAC the opportunity to re-bid. Id. Mr. Stuart further warned SMUD that the multi-element sealed canister ("MESC") concept that SMUD had selected was neither licensed by the NRC nor acceptable to DOE for transportation off-site to a DOE facility. Id. at RS 005062. Mr. Stobbs concluded his letter by 21

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indicating that, "[i]n view of all the above facts, I must conclude that [SMUD's] bidding process has not followed the customary propriety of equal treatment of all bidders." Id. 71. Both before and after the July 7, 1992 meeting, SMUD believed there was a

possibility that DOE could establish an MRS by 1998 to begin the acceptance of SNF. Tr.400:2124 (Shetler). Mr. Shetler characterized SMUD's belief as to the chances of an MRS as a "50/50 proposition." Tr.440:25-441:2 (Shetler) (emphasis added). 72. In December 1994, SMUD 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. DX 481, at SMUD 0033398; Tr.383:17-24, Tr.388:19-21 (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 ­ of which General Manager Jan Schori was aware and the contents to which she did not make changes ­ 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. DX 481, at SMUD 0033398; Tr.386:15-387:11 (Shetler). 73. SMUD's belief that there was a possibility that DOE would begin acceptance of

SNF in 1998 continued through 1995. Tr.710:16-20 (Redeker). 74. 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). 75. Even after 1995, Mr. Stuart, as an employee of NAC International, was having

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discussions with individuals from DOE regarding the possibility of an MRS. Tr.1381:1-5 (Stuart). 76. In 1993, SMUD reevaluated its decision to pursue dual-purpose dry storage. This

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). a. The 1993 evaluation included a "base case" which assumed that SMUD

would place its SNF into dry storage, assumed a 2000 start date for DOE acceptance of SNF, and assumed that all fuel would be accepted under DOE's then-planned receipt schedule of 15 years. DX 425, at SMUD 0027393, SMUD 0027390; Tr.374:1-14 (Shetler) (explaining that the "base case" was the plan with which SMUD was moving forward at the time, that it assumed an MRS by 1998, and that it was the reference point against which all other options were compared). b. Consistent with previous estimates, this 1993 evaluation of SMUD's

storage options included, as an assumption, an $8 million in annual savings from transferring its SNF from wet storage to dry storage. DX 425, at SMUD 0027393. In 1993, SMUD also assumed $15.8 million in capital costs, which reflected all of the costs related to the construction of the dual-purpose dry storage system at that time. Tr.471:16-22 (Shetler). SMUD's 1993 evaluation assumed that SMUD would begin loading SNF into dry storage beginning in mid-1995 and that the dry storage project would pay for itself in less than two years. DX 425, at SMUD

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0027393; Tr.372:25-373:3 (Shetler) (explaining that the numbers utilized in the evaluation were accurate at the time). c. Mr. Shetler, the author of the 1993 reevaluation, ultimately recommended

that SMUD continue with the licensing and construction of the dry storage project. DX 425, at SMUD 0027382. d. Then-General Manager Freeman concurred with this recommendation.

Tr.370:7-10, Tr.374:15:23 (Shetler). E. 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 When Mr. Field initially assembled SMUD's damages claim, dated April 16,

77.

2004, he collected costs beginning in 1997 at the direction of counsel. Tr.1172:5-11 (Field); PX 762, at SMUD 044014. These post-1996 costs totaled $60.1 million. Tr.1174:6-8 (Field); PX 762, at SMUD 044014. Mr. Field acknowledged at trial that SMUD's initial plan was to have its SNF loaded into dry storage by 1998 and that, 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. Tr.1178:3-6, Tr.1180:12-15 (Field). In other words, SMUD would have had virtually no costs associated with its dry storage project after 1998 had SMUD adhered to its initial plan. 78. It was only after Mr. Field's deposition in this case that SMUD submitted a

revised damages claim, asserting $20 million in damages for the period extending from 19921996. Tr.1183:20-1184:25 (Field). 79. Even after SMUD concluded that DOE would breach the Standard Contract,

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SMUD recognized that, regardless of the breach, the pursuit of dry storage project was the best option financially because it paid for itself quickly. Specifically, in October 1996, Mr. Shelter presented a paper at the TLG Conference, in which he stated: [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. DX 657, at MOF 023696 (emphasis added). 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 estimate was SMUD's best at the time. Tr.390:16-19 (Shetler). General Manager Schori was aware of the general substance of this presentation, and Mr. Shetler would not have made this presentation if Ms. Schori disagreed with any of the general substance contained in the presentation. Tr.389:20-390:2 (Shetler). 80. 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. DX 613; Tr.722:8-14 (Redeker). 81. Similar to Mr. Shelter's paper, 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." DX 682; Tr.1078:7-21 (Field) (explaining that the 1996 paper contained "the best information available at the time I wrote the paper"). 82. SMUD's revisiting of its decision to pursue dual-purpose dry storage was due

solely 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:

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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. Tr.535:12-27, Tr.628:25-629:1 (Redeker) ("This is a troubled project, costs are going up, schedule is moving out."). 83. Every time that 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 ¶¶ 79-81, 85-87, 89-90, 103, 105, 109. 84. SMUD reevaluated its dry storage project on several occasions throughout the

mid-to-late 1990s and early 2000 time frame. These evaluations were performed by Rancho Seco staff under the direction of Mr. Redeker. Tr.712:22-25 (Redeker). 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. Tr.716:25-717:9 (Redeker). 85. SMUD conducted a reevaluation of its 1990 dry storage decision on March 3,

1997. DX 721. By this point, the dry storage project was "well underway." Tr.910:7-9 (Ferreira). SMUD conducted the 1997 reevaluation because its dry storage vendor, Vectra, stopped work on the dry storage project. Tr.723:20-724:12 (Redeker). Mr. Redeker acknowledged 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. Tr.725:22-726:2 (Redeker). 86. The 1997 reevaluation concluded that SMUD's most cost-effective option was to 26

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continue with the current dual-purpose dry storage concept on an unexpedited schedule because of "reduced staff and the use of contractors." DX 721, at SMUD 061590. This option assumed that SMUD's SNF would be loaded into dry storage by August 31, 1999. DX 721, at SMUD 061600. The 1997 evaluation also concluded that store-only dry storage was not a preferred option, because it would delay SMUD's ability to decommission its wet pool, resulting in additional costs in maintaining its Part 50 operating license. DX 721, at SMUD 061592; Tr.734:21-735:8, Tr.736:7-17 (Redeker). 87. In conjunction with the 1997 reevaluation, Mr. Redeker made a presentation to the

Board of Directors in which he represented that the annual cost savings from going from wet storage to dry storage would be $10-$12 million. PX 519. Similar to the 1993 reevaluation, Rancho Seco management recommended to the SMUD Board of Directors that it continue pursuing the existing dual-purpose dry storage project, and the Board concurred with that recommendation. Tr.612:10-11, Tr.619:23-24 (Redeker). 88. Under SMUD's 1997 analysis, the cost of going to dual-purpose dry storage

would have paid for itself by 2001 ­ the year that SMUD would have had its first acceptance of SNF from DOE under the terms of the Standard Contract. DPFOF ¶¶ 86, 87, 109. 89. Throughout this time period , SMUD management repeatedly represented that it

would save $10-to-$12 million annually by placing its SNF into dual-purpose dry storage. a. In May 1997, Mr. Redeker made a presentation to the SMUD Board of

Directors in which he presented the 1997 study of SNF storage options and represented that there would be annual savings of $10-$12 million by placing its SNF into dual-purpose dry storage. DX 755, at SMUD 061109.

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b.

Similarly, in a May 2, 1997 letter from SMUD's external lobbyist to

SMUD's in-house lobbyist discussing a meeting that SMUD management had with staff members of its congressional delegation, SMUD management indicated that it would save "approximately $10 to $12 million dollars annually in labor, maintenance, safety, and security expenses," after the SNF was transferred from the wet pool to dry storage in mid-1999. DX 749, at SMUD 062342. c. On June 3, 1997, Mr. Redeker made a presentation to the SMUD Board

Finance Committee, indicating identical annual cost savings by going to dry storage. DX 760, at SMUD 0028714. d. Four months later, in October 1997, Mr. Redeker made a presentation to a

subcommittee of the SMUD Board of Directors, the Board Integrated Resources and Customer Service Committee, in which he again represented an annual savings of $10-$12 million. DX 794, at SMUD 062405. In this October 1997 presentation, Mr. Redeker indicated that the capital costs associated with completion of the dual-purpose dry storage were $23 million. DX 794, at SMUD 062422; Tr.761:4-11 (Redeker) (stating that he put the best information he could in these presentations and believed the information was accurate). e. By October 1997, SMUD had expended $17 million on capital expenses

associated with the dry storage project. DX 794, at SMUD 062422; Tr.766:21-24 (Redeker). However, for purposes of its payback analysis, SMUD looked at capital costs that were expected in the future, rather than costs already incurred. Tr.766:25-767:3 (Redeker). 90. The Government's expert economist, Cliff Hamal, conducted an analysis of

SMUD's 1997 reevaluation and concluded that SMUD would not have rationally abandoned its dry storage project given the substantial annual savings that SMUD assumed at the time. Direct

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Testimony of Cliff Hamal, at ¶ 78. Mr. Hamal explained that SMUD's own 1997 analysis demonstrates that it would achieve payback of its investment from the savings achieved from moving from wet to dry storage by 2002 and that this payback analysis does not include consideration of other cost benefits to SMUD's decommissioning program. Id. Even assuming the acceptance rate schedule that SMUD has argued in this litigation, Mr. Hamal concluded that the net present value of the savings achieved from the dry storage program would be $13 million (and that the savings would be as much as $30 million under a slower acceptance schedule). Id. Based upon SMUD's own study, Mr. Hamal concluded at trial that there was no basis for concluding that SMUD would have cancelled the dry storage project at the time of the 1997 study. Id. 91. Mr. Hamal also explained that, even if SMUD had demonstrated that it would

have abandoned its dry storage project had DOE not breached the Standard Contract, SMUD would not be entitled to any costs prior to the date of abandonment, nor would it be entitled to any of the termination costs, as these would have been costs incurred in the non-breach world. Id. at ¶ 80. SMUD has never identified or quantified the costs associated with contract termination. 92. SMUD made the conclusion to continue with its dual-purpose dry storage project

not just internally, but also announced its decision to the general public, including DOE. On March 14, 1997, SMUD's General Manager, Jan Schori, wrote a letter to DOE in which she indicated that "SMUD is spending $20 million in capital for the dry storage and transportation system in an effort to enhance safety at the site and to reduce substantially the interim annual costs of wet storage." DX 729, at RS 006102 (emphasis added); Tr.738:17-20 (Redeker) (explaining that he prepared this letter and wanted the information contained therein to be the best

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it could be). Ms. Schori also indicated in her letter that SMUD was incurring approximately $800,000 a month in wet storage costs and that it anticipated incurring approximately $125,000 a month once SMUD placed its SNF into dual-purpose dry storage. DX 729, at RS 006101. SMUD represented to DOE that it anticipated an annual savings of $8 million based upon moving its SNF from wet storage to dry storage. Tr.741:13-17 (Redeker). SMUD further indicated to DOE that all of SMUD's SNF would be in dry storage by December 1999. DX 729, at RS 006101; Tr.740:3-6 (Redeker). Consequently, as of March 1997, SMUD anticipated that the cost of going to dry storage would pay for itself in two-and-a-half years, or by mid-2002. 93. According to Mr. Shetler, SMUD officials believed that one of the major

impetuses for revisiting SMUD's dry storage decision during the mid-to-late 1990s and early 2000 was the increased costs that SMUD was experiencing with the dry storage project. Tr.375:6-13 (Shetler); Tr.597:3-15 (Redeker) (explaining that SMUD conducted 1997 analysis of storage options "in anticipation that things might not go well" with its dry storage vendors). 94. Specifically, one of the primary drivers for SMUD revisiting its decision during

this time period was the manufacturing issues related to SMUD's vendors. Tr.375:17-25 (Shetler). 95. SMUD's then-general manager, Mr. Ferreira, believed at that time that, because of

the relative cost-benefit of dry storage, it was in SMUD's best interest to move forward with the dry storage project as of 1997. Tr.910:22-911:6 (Ferreira). 96. Mr. Ferreira believed that, in assessing the risks associated with continuing with

the pursuit of the dual-purpose dry storage system, SMUD focused not upon "sunk" costs, but the so-called "going forward" costs to complete the project. Tr.914:16-915:6 (Ferreira). Mr. Ferreira

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further believed that, if SMUD could move its fuel to dry storage at the costs projected in 1997, dry storage would lower SMUD's costs and reduce the risks associated with maintaining fuel in SMUD's wet pool. Id.; Tr.913:25-914:12 (Ferreira). 97. Mr. Ferreira acknowledged that ultimately it is SMUD's customers, rather than

DOE, that bears the financial risk of SMUD's pursuit a first-of-its kind storage technology. Tr.928:13-16 (Ferreira). Similarly, Mr. Shetler believed that the substantial costs and schedule delays that SMUD faced in its dry storage project were "the risk one takes when you become the first person out the door." Tr.383:11-16 (Shetler). 98. On February 3, 1998, Mr. Redeker made a presentation to SMUD's Board

Finance Committee in which, consistent with other contemporaneous presentations, he stated: "there is a significant cost savings to have fuel in dry storage (between 10 to 12 million dollars per year) primarily due to decreased staff costs to maintain the fuel in dry storage." DX 819, at SMUD 0085312; Tr.768:24-769:10 (Redeker) (stating that he received this document in normal course of business and made no changes to document). 99. Claims. 100. After SMUD filed its lawsuit in this case, SMUD revisited its dry storage decision On June 9, 1998, SMUD filed its complaint in the United States Court of Federal

several more times, and, as in previous evaluations, concluded that it made economic sense to continue with its dry storage project. Tr.652:21-23 (Redeker) ("I concluded that there was still a significant positive net present value" of continuing with the dual purpose dry storage project). 101. According to Mr. Redeker, these reevaluations occurred, not because of the

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Government's breach, but because "our project was continuing to cost a lot." Tr.651:19-20 (Redeker). 102. Rather than explain that DOE's partial breach of the Standard Contract caused

SMUD somehow to change or modify its dry storage plans, Mr. Shetler explained that DOE's partial breach simply "reinforced our decision that we were making the right decision in putting the fuel in dry storage based on what we were seeing from the lack of performance." Tr.242:25243:1-3 (Shetler). 103. In a September 1998 presentation to Board Integrated Resources and Customer

Services Committee, Mr. Redeker indicated $10-$12 million in annual savings by moving to dual-purpose dry storage. DX 871, at SMUD 062619. Mr. Redeker indicated that SMUD had already invested $24 million into its dry storage project and that it was projected that the project could be completed for an additional $13 million. DX 871, at SMUD 062627; Tr.773:13-23 (Redeker). Mr. Redeker testified at trial that these figures represented SMUD's best estimate at the time. Tr.775:6-7 (Redeker). 104. Based upon SMUD's own payback analysis performed in September 1998, in

which SMUD only looked at capital costs that had yet to be incurred, SMUD's dry storage project would have paid for itself by some time in late 1999 -- two years before its first scheduled acceptance by the Government. DPFOF ¶¶ 103, 109. 105. In December 1999, SMUD conducted a net present value analysis comparing the

cost of wet storage versus dry storage. PX 642, at SMUD 062826. This analysis concluded that SMUD could complete the dry storage project for $15.3 million. Id.; Tr.847:13-848:16 (Redeker).

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106.

As in previous analyses, under this analysis, SMUD's dry storage project paid for

itself prior to SMUD's first scheduled acceptance in 2001 by the Government under the Standard Contract. DPFOF ¶¶ 105, 109. 107. In a February 2000 update to this study, SMUD estimated that the project could

pay for itself prior to 2008. PX 672, at SMUD 062797; Tr.851:1-12 (Redeker). 108. As late as June 2003, SMUD's General Counsel, Steve Cohn, was unsure

whether SMUD's decision to place its SNF into dry storage was caused by the Government's delay in the acceptance of SNF. In a June 2003 e-mail to SMUD's accounting expert in this case, Brian Brinig, Mr. Cohn explained that, "[i]n addition, SMUD spent over 60 million in capital funds to transfer our spent fuel to a new dry storage facility," and "[t]he purpose of that was to reduce our ongoing operating costs (and/or mitigate the government's damages) from about 10 to 12 million a year to 2 million a year." PX 950, at SMUD 090279 (emphasis added); Tr.1299:61302:23 (Brinig) (acknowledging receipt of e-mail and his understanding that e-mail described what the case was about). 109. Under SMUD's own payback analysis, which it conducted multiple times over

nearly a decade, the cost of pursuing dry storage paid for itself long before DOE's final acceptance of SMUD's SNF ­ even under SMUD's litigation-driven position regarding the acceptance rate. The following chart represents SMUD's payback analysis:

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110.

SMUD's several payback analyses unequivocally demonstrate that SMUD

believed its dry storage project would pay for itself prior to the final shipment of its SNF. As Mr. Hamal explained at trial, "[a]s long as SMUD concluded that the capital cost of its dry storage program could be recovered from operating cost savings in just a few years, the project will pay for itself before all of SMUD's fuel would be accepted by DOE in a non-breach world. Thus, the program would be economically justified and not properly included as damages." Direct Testimony of Cliff Hamal, at ¶ 75. Further, Mr. Hamal explained that the cost savings calculations that SMUD performed in the 1990s did not consider how Rancho Seco's overall decommissioning is facilitated by closing its pool and that, had the pool not be closed, SMUD's decommissioning efforts to date could not have been accomplished. Id., at ¶ 76. 111. Although SMUD's July 1992 staffing summary sheet indicates that SMUD would

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realize "an estimated savings of approximately $33 Million by dry storing spent nuclear fuel," DX 344, at SMUD 0027222, no SMUD witness could explain the source of this figure, or how this figure compared to the consistent $8-12 million in annual savings that is identified in dozens of contemporaneous documents and to which multiple witnesses testified at trial. a. Mr. Shetler did not know whether the $33 million number represented net

savings over the course of the project or gross savings, or even whether the figure represents a net change to a prior decommissioning cost estimate. Tr.405:7-11, Tr.485:13-23 (Shetler). b. Mr. Shetler could not explain whether the $33 million in savings included

the amount of capital costs associated with the dry storage project. Tr.405:17-20 (Shetler). Other than stating that the $33 million figure represented a comparison between wet and dry storage options, Mr. Shetler could not explain what this $33 million figure represented. Tr.405:21-406:3 (Shetler). c. In a presentation given by Mr. Shetler concerning the approval of the

Pacific Nuclear contract, Mr. Shetler indicated that the dry storage proposal "mitigates potential decommissioning cost increases of $21 million, based on SAR/suggested design." PX 991, at SMP 0330404. Mr. Shetler did not know whether this $21 million would be added to the $33 million to determine actual annual cost savings. Tr.481:14-25 (Shetler). 112. The Government's expert economist, Cliff Hamal, provided unrefuted testimony

that, in light of Mr. Shetler's testimony, it was unreasonable to interpret the $33 million figure as an indication of operating savings from 1998 through 2010, particularly because that number would be inconsistent with other contemporaneous documents. Direct Testimony of Cliff Hamal, at ¶ 70.

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IV.

SMUD FAILED TO PROVE THAT DOE WAS CONTRACTUALLY OBLIGATED TO ACCEPT SNF AT AN ANNUAL RATE OF 3,000 MTUs 113. There is no rate of acceptance specified in either the NWPA or the Standard

Contract. DX 88; Tr.1481:15-20 (Supko). 114. The administrative record unequivocally reflects that DOE rejected for inclusion

in the Standard Contract both the two-part test relied upon by Ms. Supko and the 3,000 MTU steady state rate. a. DOE published the Standard Contract at issue here as a "proposed rule" in

the Federal Register. See 48 Fed Reg. 5458 (Feb. 4, 1983). b. In response to that proposed rule, several nuclear utilities and industry

groups submitted comments, requesting, among other things, that DOE place into the Standard Contract an obligation requiring DOE to accept SNF at some pre-determined minimum rate or to adopt as contractual obligations the acceptance rates that would be identified in the statutorilyrequired Mission Plan. c. For example, the Tennessee Valley Authority ("TVA") stated that "a

commitment to do no more than start accepting deliveries by 1998 is empty and meaningless without setting forth some reasonable minimum rate of acceptance with corresponds to the purposes of the Act." DX 0076.063, at ADM002.0482. TVA recognized that, "[o]f course, under the priority ranking system in the draft contract, it would be difficult at the time contracts are executed to give each Purchaser assurances of delivery acceptance at any specific rate," but suggested that "[t]his could, however, be done on an industry wide basis." Id. TVA suggested that DOE add a contract provision to provide that "DOE shall start accepting delivery of SNF or

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HLW not later than January 31, 1998, at not less than the annual rate [at which] SNF and/or HLW is then being produced from civilian nuclear power plants covered by contracts . . . ." Id. d. Similarly, on January 20, 1983, the American Public Power Association

("APPA"), of which SMUD was a member,