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No. 98-488C (Judge Braden)
IN THE UNITED STATES COURT OF FEDERAL CLAIMS
SACRAMENTO MUNICIPAL UTILITY DISTRICT,
Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant.
SACRAMENTO MUNICIPAL UTILITY DISTRICT'S PROPOSED FINDINGS OF FACT TO ACCOMPANY ITS POST-TRIAL LEGAL BRIEF
OF COUNSEL: David S. Neslin Timothy R. Macdonald ARNOLD & PORTER LLP 370 Seventeenth Street, Suite 4500 Denver, CO 80202 (303) 863-1000 August 22, 2005
Howard N. Cayne ARNOLD & PORTER LLP 555 Twelfth Street, N.W. Washington, D.C. 20004 (202) 942-5899
Counsel of Record for Plaintiff Sacramento Municipal Utility District
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TABLE OF CONTENTS Page I. II. Introduction And Overview..................................................................................................1 Background. .........................................................................................................................2 A. B. III. Disposal Of Nuclear Waste And Passage Of The NWPA.......................................2 SMUD and Its Development of a Dual-Purpose Dry Storage System. .................12
The Government's Failure To Begin Acceptance Of Spent Nuclear Fuel and SMUD's Response. ............................................................................................................20 A. B. C. Eleven Years Of Announced Delay And DOE's Ultimate Failure to Begin Acceptance in 1998................................................................................................20 SMUD's Initial Decision To Pursue Dry Storage..................................................27 SMUD's Continued Reevaluation Of The Project And Commitment To Proceed In Light Of Breach. ..................................................................................32
IV.
SMUD's Damages As A Result of Breach.........................................................................37 B. A. B. SMUD's Damages from 1992 to 1997. .................................................................41 SMUD's Damages From 1998 To 2003. ...............................................................43 SMUD's Total Damages........................................................................................48
V.
Acknowledged Offsets To Damages..................................................................................50 A. B. C. D. E. F. Gantry Crane Upgrade. ..........................................................................................50 Spent Fuel Building Upgrades. ..............................................................................51 Fuel Inspection Offset............................................................................................52 On-Site Drop Mitigation Offset. ............................................................................53 Loan Workout Offset. ............................................................................................54 $2 Million In "Double Counting." .........................................................................54
VI.
SMUD's Commercially Reasonable Management Of The Project. ..................................55 A. Wet Pool Storage....................................................................................................66
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B. C. VII.
Store-Only Dry Storage Systems. ..........................................................................71 The "NAC" System................................................................................................75
Disputed Offsets Raised At Trial. ......................................................................................79 A. B. C. D. E. Wet Storage Costs..................................................................................................79 Costs to Transfer Fuel From Wet to Dry Storage. .................................................81 SMUD Labor Costs................................................................................................82 Labor Burden. ........................................................................................................84 Decommissioning Costs.........................................................................................86
VIII.
Additional Issues Raised By Government. ........................................................................90 A. B. C. Greater Than Class C Radioactive Waste..............................................................90 Failed Fuel. ............................................................................................................92 Canisters.................................................................................................................96
IX. X.
Rate. .................................................................................................................................104 Notice...............................................................................................................................108
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IN THE UNITED STATES COURT OF FEDERAL CLAIMS
SACRAMENTO MUNICIPAL UTILITY DISTRICT, Plaintiff, v. THE UNITED STATES OF AMERICA, Defendant.
) ) ) ) ) ) ) ) ) ) ) )
No. 98-488 C (Judge Braden)
SACRAMENTO MUNICIPAL UTILITY DISTRICT'S PROPOSED FINDINGS OF FACT
Plaintiff Sacramento Municipal Utility District ("SMUD") submits the following posttrial Proposed Findings of Fact ("PFF"). I. 1. Introduction And Overview. In accordance with the Nuclear Waste Policy Act of 1982, 42 U.S.C. §10101 et
seq. ("NWPA"), DOE and SMUD entered into a contract for the acceptance and disposal of SMUD's spent nuclear fuel ("SNF") and/or high-level radioactive waste ("HLW") on June 13, 1983. See Contract for the Disposal of Spent Nuclear Fuel between DOE & SMUD (June 13, 1983) (Plaintiff's Exhibit ("PX") 44) ("Contract" or "Standard Contract"). 2. SMUD has paid the Department of Energy ("DOE") a total of approximately $40
million in fees under its Contract with DOE, thus satisfying its obligation of performance under the Contract. See Memorandum Opinion dated Jan. 19, 2005 at 4 ("Memorandum Opinion") (noting "SMUD has paid all applicable fees required by the DOE Standard Contract"); Gov't Answer at ¶ 22 (noting payment of fees is undisputed).
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3.
With interest, those fees were worth approximately $100 million in 1997. Letter
from J. Schori at 2 (Mar. 14, 1997) (PX 528). Today, SMUD's payments to DOE under the Contract would be worth far more than $100 million.
4.
DOE has breached its reciprocal obligation under the Contract
the "quid pro quo
created by Congress" in the D.C. Circuit's words
to commence acceptance of spent nuclear
fuel ("SNF") and high-level radioactive waste ("HLW") by January 31, 1998, and thereafter to remove SNF and HLW from contracting utilities, including SMUD, in a reasonable manner. Indiana Michigan Power Co. v. United States, 88 F.3d 1272 (D.C. Cir. 1996); Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1342 (Fed. Cir. 2000). 5. Because of the government's breach, SMUD has incurred substantial damages
resulting from the design, licensing, and fabrication of its own on-site storage facility, referred to as an Independent Spent Fuel Storage Installation or ISFSI, for the long term dry storage of its spent fuel. As detailed further below, SMUD has incurred $21,553,462 in damages from 1992 to 1997 and $55,049,870 in damages from 1998 to 2003. See PFF ¶¶ 199-241. II. Background. A. 6. Disposal Of Nuclear Waste And Passage Of The NWPA.
Nuclear reactors generate electricity by using ceramic pellets containing uranium
oxide placed in the core of the reactors; these solid pellets are sealed in metal rods, or pins, which are approximately sixteen feet long. Transcript ("Tr.") at 117-118 (Shetler). 7. 8. The rods are bundled together into an overall fuel assembly. Id. The fuel assemblies are placed in the reactor vessel, where the nuclear fission
reaction occurs. In SMUD's case, the reactor was designed to hold 177 fuel assemblies. Tr. at 122 (Shetler).
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9.
Spent nuclear fuel is nuclear power plant fuel that has been burned (irradiated) in
a nuclear reactor to the point where it no longer contributes efficiently to the nuclear chain reaction that produces heat to generate electricity. At that point, the SNF must be removed from the core and replaced. Tr. at 132 (Shetler). 10. When SNF leaves a nuclear reactor, it is thermally hot and highly radioactive. Tr.
at 138 (Shetler). 11. Much of the thermal heat dissipates after about five years, but the SNF remains
potentially dangerous for much longer periods of time. Tr. at 147 (Shetler). 12. Once the fuel assemblies are permanently discharged from the reactor, they are
transferred to a spent fuel pools or "wet pool" on the nuclear reactor site. Tr. at 132-33 (Shetler). 13. Spent fuel is stored in a pool in order to allow it to cool and to provide shielding
from the lethally radioactive fuel. Tr. at 138 (Shetler). 14. 15. Spent fuel pools are pools of borated water. Tr. at 137-139 (Shetler). The SNF assemblies are stored in stainless steel storage racks underwater in the
spent fuel pools. Tr. at 137 (Shetler). 16. Once a spent fuel pool becomes full, the SNF must be moved from the pool and
placed into storage, either on site at the nuclear reactor or elsewhere. Tr. at 133 (Shetler). 17. As of January 31, 1998, there was 37,000 metric tons of spent nuclear fuel that
had been permanently discharged from commercial nuclear power plants and was being stored at locations across the country. E. Supko Written Direct at 20 (PX 1002). 18. In the 1950s, under the authority of the Atomic Energy Act of 1954, as amended,
42 U.S.C. §§ 2011, et seq., and President Eisenhower's Atoms-for-Peace program, the federal government embarked upon a program to encourage and sponsor the peaceful use of atomic
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energy. Florida Power & Light Co. v. Westinghouse Elec. Corp., 826 F.2d 239, 244 (4th Cir. 1987). The development of a commercial nuclear electric industry was the centerpiece of this program. 19. One of the major issues surrounding public acceptance of nuclear power and the
willingness of the private sector to embrace nuclear power in the 1950s was the need to provide for the permanent disposal of SNF and other high-level waste ("HLW") discharged by the production of nuclear-generated electricity. S. Rep. No. 96-548, at 10 (1980), reprinted in 1980 U.S.C.C.A.N. 6933, 6933. 20. The disposal of SNF has been described as the "most pressing" concern in the
promotion and sustenance of this country's nuclear power industry. Id. at 10, reprinted in 1980 U.S.C.C.A.N. at 6933-34; Florida Power, 826 F.2d at 246 (stating that the government's assumption of the responsibility to dispose of SNF was "critical to the promotion of a nuclear power industry"). 21. As part of its program to encourage the development of a nuclear power industry,
the federal government agreed early on to assume the responsibility for the permanent disposal of SNF. This commitment is reflected in the Atomic Energy Commission's ("AEC") statement of its "Policy Relating to the Siting of Fuel Processing Plants and Related Waste Management Facilities," adopted in 1970, which provides that "[d]isposal of high-level radioactive fission product waste material will not be permitted on any land other than that owned and controlled by the Federal Government." 10 C.F.R. Part 50, App. F. 22. In the 1960s and early 1970s, the general understanding was that the "fuel would
be stored onsite for an interim period until such time as it could be taken and reprocessed for reuse." Tr. at 116 (Shetler).
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23.
In order to reprocess fuel, one "would cut up the assembly and through chemical
treatment, recover the uranium or plutonium that's in the fuel pellets and be able to re-pelletize that, repackage it and reuse it in nuclear assemblies." Id.. 24. The government's effort to manage the disposal of SNF and HLW was redirected
when, in 1977, President Carter issued an executive order in 1977 that effectively halted reprocessing of spent nuclear fuel by private industry. 13 Weekly Comp. Pres. Doc. 502, 503 (1977); see also H.R. Rep. No. 97-785, pt. 1, at 46-47 (1982); see also Tr. at 119 (Shetler) ("In the 1970s during President Carter's administration, it was determined for primarily nuclear nonproliferation purposes that reprocessing would not be a method for dealing with spent fuel in the United States. And so reprocessing was basically stopped as an alternative."). 25. Thus, at the time of Contract formation, and today, there are no alternative
methods of disposing of spent nuclear fuel for a commercial utility. 42 U.S.C. § 10222(b) ("No [SNF or HLW] may be disposed of by the Secretary ... unless the generator or owner of such [SNF or HLW] has entered into a contract with the Secretary under this section."); see also PFF ¶¶ 20-24, 32-40. 26. The majority of spent fuel pools existing at nuclear reactor sites were sized with
the intention that SNF would be stored therein temporarily before being shipped to a reprocessing facility. H.R. Rep. No. 97-785, pt. 1, at 47. 27. The lack of a reprocessing alternative meant that the SNF eventually would have
to be removed from the pool and stored in a safe and secure location. Id. 28. This SNF storage crisis was one of the primary catalysts for the promulgation of
the Nuclear Waste Policy Act. As Representative Bereuter stated, "[w]aste storage cannot
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continue in the temporary, unsafe fashion that it has maintained for these decades. We are just courting disaster if we continue to take that course." 128 Cong. Rec. 27,775 (1982). 29. Representative Moorhead explained that Congress needed to address not only
long-term permanent disposal of SNF but also the short-term problem of storage of SNF and/or HLW: It is clear that comprehensive nuclear waste disposal must provide not only for the long-term problem of permanent disposal of nuclear waste, but it also must alleviate the short-term problem of a lack of interim storage capacity for spent nuclear fuel. A June 1982 Report, prepared for the Nuclear Regulatory Commission, projects that as many as 39 nuclear power plants in 19 States may run out of onsite storage capacity by 1990. This would inevitably result in plant shutdowns, and clearly this would be a disaster that must be prevented. 128 Cong. Rec. 26,314 (1982). 30. Senators reiterated this concern when debating the Nuclear Waste Policy Act. For
example, Senator McClure, the chief sponsor of the NWPA in the Senate, stated [We] . . . begin to run into the problem that there is not enough room to store all those rods at that site, in the pools that have been constructed, because they were not designed to do that . . . They will have to apply some new technologies on that site, or they will have to shut down because they cannot refuel. There is a time urgency, and it can be satisfied. 128 Cong. Rec. 7,974 (1982). 31. On January 7, 1983, after being signed by President Reagan, the Nuclear Waste
Policy Act of 1982 ("NWPA"), Pub. L. 97-245, 96 Stat. 2201 (codified at 42 U.S.C. §§ 1010110270 (1982)) was enacted. 32. In enacting the NWPA, the federal government assumed the legal duty to "provide
for the permanent disposal" of spent nuclear fuel and/or high-level radioactive waste from
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utilities across the country by providing long-term storage of such waste. See 42 U.S.C. § 1013(a)(4). 33. In the NWPA, Congress expressly acknowledged that "[a] national problem has
been created by the accumulation of . . . spent nuclear fuel from nuclear reactors." 42 U.S.C. § 10131(a)(2). 34. The NWPA provided for the safe, permanent disposal of the wastes of nuclear
power generation by the federal government, an obligation which the federal government had recognized since the passage of the Atomic Energy Act of 1954. See Corrected Appendix to Accompany SMUD's Motion to File Designated Deposition And Trial Testimony, dated February 24, 2005 (hereinafter "Designations Appendix") (Dckt. #310) at 1709 (Lawrence), 2039-40 (Rusche); Robert Morgan, Remarks Before the International Atomic Energy Agency, at 3 (October 12, 1983), (PX 52); 128 Cong. Rec. 26,317 (1982) (Representative Skeen); 128 Cong. Rec. 8,002 (1982) (Senator McClure); see also 42 U.S.C. § 7133(a)(8)(C) (providing for the creation of the Department of Energy with responsibility for "the establishment of temporary and permanent facilities for storage, management, and ultimate disposal of nuclear wastes"). 35. One of the key purposes of the NWPA was to impose upon the government a firm
schedule and deadline by which the government would assume responsibility for the disposal of commercially-generated SNF. See 42 U.S.C. § 10131(b)(1) (indicating that one purpose of the NWPA was "to establish a schedule for the siting, construction, and operation of repositories" to receive SNF and high-level waste). 36. Congress intended that DOE's acceptance of SNF, beginning in 1998, would be
expeditious and timely. See 42 U.S.C. § 10222(a)(5) (mandating that contracts provide that DOE "shall take title to the high-level radioactive waste or spent nuclear fuel involved as expeditiously
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as practicable upon the request of the generator or owner of such waste or spent fuel") (emphasis added). 37. DOE officials recognized that the requirements for its spent fuel program were to
implement a program that would: (1) avoid the need for utilities such as SMUD to build additional SNF storage space at their reactor sites after 1998, and (2) accept SNF at a rate that would reduce the existing SNF backlog to allow timely decommissioning. Designations Appendix (Dckt. #310) at 137 (Barrett), 452-53 (Milner), 2084 (Rusche); see also E. Supko Written Direct at 16-20, 39-43 (PX 1002); Indiana Michigan v. United States, 57 Fed. Cl. 88, 89 (2003); Commonwealth Edison v. United States, 56 Fed. Cl. 652, 657 (2003); Tennessee Valley Authority v. United States, 60 Fed. Cl. 665, 674 n.10: Yankee Atomic Electric Co. v. United States, No. 98-126, 2004 WL 1535688, *7 (Fed. Cl. June 28, 2004). 38. Robert Morgan, the first Director of the Office of Civilian Radioactive Waste
Management ("OCRWM"), indicated the government's intent of was that "beginning in 1998 utilities will not have to provide any additional storage facilities on site." Designations Appendix (Dckt. #310) at 1980 (Morgan). 39. Representative Mariott stated: We need a national waste repository, and it must be in place by the turn of the century. All waste that is now stored is temporarily stored. . . . Without a proper repository for interim and permanent waste, as many as 28 nuclear power plants may be forced to close for lack of storage. 128 Cong. Rec. 26,310-26,311 (1982). 40. The NWPA set January 31, 1998 as the date for DOE to begin spent nuclear fuel
removal and required DOE and the owners and generators of SNF and HLW to enter into contracts calling for DOE to dispose of waste beginning on that date. 42 U.S.C. § 10222(a) (1982); see also id. § 10222(b) ("No [SNF or HLW] may be disposed of by the Secretary ... -8-
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unless the generator or owner of such [SNF or HLW] has entered into a contract with the Secretary under this section."). 41. Pursuant to the NWPA, DOE established a Standard Contract for Disposal of
Spent Nuclear Fuel and/or High-Level Radioactive Waste. See Final Rule, 48 Fed. Reg. 16,590 (Apr. 18, 1983); 10 C.F.R. § 961.11. 42. The Standard Contract provides that "[t]he services to be provided by DOE under
this contract shall begin, after commencement of facility operations, not later than January 31, 1998 and shall continue until such time as all SNF and/or HLW from the civilian nuclear power reactors . . . has been disposed of." Contract Art. II (PX 44). 43. The NWPA contemplated a series of steps which would lead to the operation of a
repository and acceptance of SNF and HLW beginning in January 1998. 42 U.S.C. §§ 1013210145; H.R. Rep. 97-785, pt. 1, at 32-34 (1982); Indiana Michigan Power Company v. Dep't of Energy, 88 F.3d 1272, 1277 (D.C. Cir. 1996). a. DOE was to issue guidelines for site characterization 180 days after
January 7, 1983. 42 U.S.C. § 10132(a) (1982). DOE was then to nominate five sites for site characterization for selection as the site for the first repository. 42 U.S.C. § 10132(b)(1)(A) (1982). b. DOE was to recommend site characterization at three of the nominated
sites by January 1, 1985. 42 U.S.C. § 10132(b)(1)(B) (1982). Upon approval of these site recommendations by the President, DOE was to conduct site characterization at the approved sites. 42 U.S.C. § 10133 (1982).
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c.
By March 31, 1987 the President was to submit a recommendation to
Congress to site the first repository at one of the three characterized sites. 42 U.S.C. § 10134(a)(2)(A) (1982) (now amended). d. After the President's recommendation, the state or Indian tribe where the
recommended site was located had the opportunity to disapprove the selection, and Congress could then override that disapproval. 42 U.S.C. §§ 10134-10136 (1982) (now amended). e. After the site recommendation was complete, DOE was to submit an
application for construction authorization to the NRC within 90 days. 42 U.S.C. § 10134(b) (1982). The NRC would then act on the application within four years of submission. 42 U.S.C. § 10134(d) (1982). 44. These provisions were intended to create a schedule leading to the establishment
of a repository in 1998. A House report on an early version of the NWPA containing similar interim deadlines noted: "With respect to the establishment of a repository, the purposes are to establish a schedule for the siting, construction, and operation of repositories that will provide assurance that the public and the environment will be adequately protected from the hazards posed by high-level radioactive wastes." H.R. Rep. 97-785, pt. 1, at 32 (1982). 45. The NWPA provided that "the Secretary is authorized to enter into contracts with
any person who generates or holds title to high-level radioactive waste, or spent nuclear fuel, of domestic origin for the acceptance of title, subsequent transportation, and disposal of such waste or spent fuel." 42 U.S.C. § 10222(a)(1). 46. The NWPA further required all utilities to enter into the Contract by providing
that the execution of a contract with DOE is a prerequisite to the issuance or renewal of a nuclear
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power plant license by the Nuclear Regulatory Commission ("NRC"). 42 U.S.C. § 10222(b)(1)(A). 47. Congress expected the contracts to be a quid pro quo under which DOE would
dispose of waste and the utilities would pay for the service. H.R. Rep. No. 97-491, pt. 1, at 58 (1982), reprinted in 1982 U.S.C.C.A.N. at 3824 ("Section 124 authorizes the Secretary to contract with utilities ... to provide repository services in exchange for payments. . . ."); H.R. Rep. No. 97-491, pt. 1, at 59 (1982), reprinted in 1982 U.S.C.C.A.N. 3825 (DOE is "responsible for disposing of [SNF] ... in permanent disposal facilities, beginning not later than January 1998, in return for the payment of fees established by this section." (emphasis supplied)). See also Indiana Michigan Power Company v. Dep't of Energy, 88 F.3d 1272, 1276 (D.C. Cir. 1996); Alabama Power Co. v. Dep't of Energy, 307 F.3d 1300, 1302 (11th Cir. 2002). 48. Having required utilities to pay fees into the Nuclear Waste Fund for removal of
SNF starting in January of 1998, DOE did not intend that the utilities would have to pay again to build additional on-site storage. Designations Appendix (Dckt. #310) at 276-78 (Barrett). 49. In 1983, the parties anticipated and intended that if a repository was not
operational in time for DOE to begin acceptance of SNF by January 31, 1998, DOE would take title to the fuel at the utility site and pay for its dry storage. See Memorandum Accompanying Draft Mission Plan Strategy at 2 (Sept. 15, 1983) (PX 50) (noting "the lack of existence of particular type facilities will not delay or postpone the acceptance of spent fuel" and stating one possibility in the event of non-performance would be for DOE to "take title to the spent fuel, have it placed in dry storage casks and pay a rental fee to the utility to store the casks on-site at the reactor").
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50.
DOE assured utilities that it would take responsibility for "additional storage" if
the repository was delayed, even if that meant providing for storage "at reactor sites." PX 69, Vol. II at 9-6. 51. DOE official Keith Klein testified that at the time the Contract was signed, DOE's
plans in the event of delay in repository were that DOE "would take title or--or potentially at the reactor sites and provide dry storage casks. I think we were thinking ideally transportable dry storage casks or--or at least baskets that could be put into a transport cask." Designations Appendix (Dckt. #310) at 1137-38 (Klein). 52. VI.B.1.b. 53. DOE explained at the time of Contract formation that the shutdown priority The Contract allows DOE to grant "priority" to shutdown reactors. Contract Art.
provision in the Contract was "necessary to prevent reactors from waiting 20 or 30 years to be decommissioned after they finish generating electricity." Final Rule, 48 Fed. Reg. 16,590, 16,593 (Apr. 18, 1983) (PX 30). B. SMUD and Its Development of a Dual-Purpose Dry Storage System.
54.
Sacramento Municipal Utility District ("SMUD") is a municipal utility district in
the State of California. Tr. at 110-111 (Shetler). 55. Because SMUD is a public agency, SMUD does "not have stockholders like an
investor-owned utility would." Tr. at 111 (Shetler). Rather, SMUD's customers are its owners. 56. SMUD is responsible for providing electric power to private residents,
commercial enterprises, and industry in its service area. SMUD serves a population of approximately 1.3 million and has approximately 550,000 customers. Tr. at 113 (Shetler).
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57.
SMUD gets electricity from a variety of sources, including hydro generation,
cogeneration plants, and renewable technologies. Tr. at 113-14 (Shetler). 58. SMUD also purchases power on the wholesale market to meet requirements and
reduce costs. Tr. at 113-14 (Shetler). 59. (Shetler). 60. The members of the Board are elected for staggered four-year terms, and each SMUD is governed by an elected seven member Board of Directors. Tr. at 111
represents a different geographic area within SMUD's service area. Tr. at 111 (Shetler). 61. The Board of Directors makes policy decisions for SMUD and appoints the
General Manager, who is responsible for all of SMUD's operations. Tr. at 111-12 (Shetler). 62. Rancho Seco Nuclear Generating Station ("Rancho Seco") was built on
approximately 2400 acres of land in southeast Sacramento County in the mid-1970s. Tr. at 131 (Shetler). 63. The nuclear power plant at Rancho Seco was a pressurized water reactor licensed
to operate through 2008. Tr. at 122, 291 (Shetler). 64. As a result of various outages at SMUD during the 1980s, and the resultant
increases in rates, in 1988 the citizens of Sacramento put an initiative on the ballot proposing to close down Rancho Seco. Tr. at 127-28 (Shetler); Tr. at 876 (Ferreira). 65. A majority of SMUD's Board of Directors were in favor of continuing to support
Rancho Seco and placed a counter-initiative on the ballot in 1998 that proposed keeping Rancho Seco operating for up to eighteen months as a trial period, which would be followed by another electoral vote on whether to continue operation of the plant. Id.
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66.
The 1988 vote to close Rancho Seco failed by approximately 1%, 51% to 49%.
Tr. at 877 (Ferreira). The vote to continue the operation of Rancho Seco for the trial period passed by about 3% or 4%. Id.; Tr. at 128 (Shetler). 67. As a result of a surplus of power in California in the late 1980s, SMUD was able
to negotiate long-term contracts for backup power supply at favorable fixed rates. Tr. at 887-91 (Ferreira). Because SMUD could purchase this replacement power at a comparable cost to operating Rancho Seco at least 75% of the time, which was right around the national average, the executive management team recommended to the Board in 1980 that Rancho Seco be shut down. Tr. at 890-93 (Ferreira). 68. Of the five Board members at the time in 1989, four favored continued operation
of Rancho Seco. Tr. at 893 (Ferreira). 69. The Board of Directors, however, represented to the public that if the result of the
election was a vote to shutdown the plant, the Board would initiate shutdown immediately. Tr. at 895 (Ferreira) (noting "the board had conveyed to the community that . . . they would allow the customers to vote on the outcome of and the future of the nuclear power facility, so it's unlikely that the board at that point would take a position that would be in conflict with . . . what the customer base was supporting at that time"). 70. The second election regarding the future of Rancho Seco was held in June 1989.
By a vote of approximately 53% to 47%, the voters elected to close Rancho Seco. Tr. at 128 (Shetler); Tr. at 893 (Ferreira). 71. The Board of Directors initiated shutdown of the Rancho Seco nuclear power
plant on June 7, 1989. Tr. at 129 (Shetler).
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72. (Shetler). 73. 133 (Shetler). 74.
There are no current plans for reuse of the Rancho Seco plant. Tr. at 136
At the time of shutdown, SMUD had 493 spent nuclear fuel assemblies. Tr. at
The most recent estimate for the total cost of decommissioning Rancho Seco,
projected through the end of 2008 in present year dollars, is $524 million. Tr. at 698 (Redeker). 75. 698 (Redeker). 76. Decommissioning involves the dismantlement and decontamination of the plant SMUD has incurred approximately $300 million in decommissioning costs. Tr. at
and site in a manner that satisfies the NRC's requirements. 77. Total decommissioning of a nuclear power plant cannot be accomplished until all
of the spent nuclear fuel and high-level radioactive waste is removed from the site. Tr. at 2624 (Burford). 78. During its operation and through 2002, Rancho Seco utilized a wet pool for the
storage of its spent nuclear fuel. Tr. at 137, 140-41 (Shetler). 79. A crane is used to move the fuel assemblies from the reactor vessel into the spent
fuel pool, to move assemblies around within the pool, and to load the assemblies into a canister. Tr. at 133 (Shetler); 508-510 (Redeker). 80. At the time of shutdown, all of the spent fuel was stored in SMUD's spent fuel
pool, DOE already had begun announcing delays in its repository program, and SMUD began studying its options for managing the spent fuel at Rancho Seco in light of the likelihood that DOE would not begin performance in 1998. See PFF ¶¶ 117-132.
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81.
SMUD's pursuit of a dry storage system was closely coupled with a
demonstration project involving DOE as suggested by the 1990 study by SMUD's consultant, S. Levy Incorporated. See PFF ¶¶ 128-130. 82. The demonstration project was spurred on in part by Fiscal Year 1991
appropriations in which Congress directed DOE to pursue a cooperative research and demonstration project to demonstrate dual-purpose casks. Tr. at 187 (Shetler); Tr. at 2234-43 (Williams). 83. In 1991, SMUD began negotiations with DOE for a demonstration project and
began developing potential specifications for a dry storage system. PX 220, 224, 229, 233, 236, 245, 246, 253, 258; see also PFF ¶¶ 296, 573. 84. In December 1991, SMUD issued a Solicitation for Dual Purpose Casks and
Request for Proposal, seeking proposals from vendors for casks that could be used for an on-site dry storage facility. See Memorandum Regarding Solicitation for Dual Purpose Cask and Proposers Site Visit (Dec. 5, 1991) (PX 233); Request for Proposal (Jan. 15, 1992) (Defendant's Exhibit ("DX") 308). 85. SMUD shared its solicitation and specification for the dual purpose casks with
DOE officials. PX 229, 236; see also Tr. at 980-81 (Field). 86. SMUD received five bids from different storage vendors for the cask and canister
portion of the storage facility, ranging from approximately $12 million to $72 million. See Staffing Summary Sheet (DX 35) (listing five bidders and total bids); Tr. at 981-82 (Field). 87. The proposed bids did not include the necessary costs of SMUD engineering
activities, oversight, management, nor the costs of loading and transferring the fuel to the ISFSI. Tr. at 982 (Field).
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88.
SMUD's dry fuel canisters are large metal containers that hold a total of twenty-
four spent nuclear fuel assemblies. Tr. at 142 (Shetler). 89. SMUD's canisters were designed for two purposes: 1) dry storage of the fuel in a
storage facility, and 2) ultimate transport on highways in a cask. Tr. at 143 (Shetler) ("The cask provides the shielding necessary to handle the device out of the water or the canister out of the water and also provides the support structure for shipping and protecting the fuel during transportation."). 90. At the time SMUD contracted for its system, no company had a cask or canister
that was licensed for both storage and transportation of SNF--a "dual-purpose" system. Tr. at 190 (Shetler); Tr. at 2249 (Williams). 91. SMUD signed a contract with Pacific Nuclear, the lowest bidder, for a dual-
purpose dry storage system in October 1992 after a thorough and complete evaluation. See SMUD Contract E-776 (Sept. 25, 1992) (PX 267); DX 315. 92. Pacific Nuclear's original cost and schedule estimate for the dry-storage project
assumed that the majority of the design work was completed because Pacific Nuclear already had a licensed storage-only canister system, the NUHOMS system, and a licensed transport-only cask, the 125-B cask, that it believed it could convert to a dual-purpose (storage and transport) system with modest technical changes. Tr. at 537-38 (Redeker); 985-87 (Field). 93. In early 1993, within months of SMUD and Pacific Nuclear signing the contract,
the NRC advised Pacific Nuclear that additional testing would be required for the design of the casks and canisters to insure that the system was sufficient for safe transport of SNF. PX 267, 295; Tr. at 537-38 (Redeker).
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94.
Pacific Nuclear and SMUD initially expected two or three rounds of questioning
from the NRC, but received at least seven. PX 845. 95. Pacific Nuclear changed its name to Vectra Technologies after acquiring ABB
Impell in 1993. DX 442. 96. Because the contract changed in scope over the course of the project, SMUD and
Vectra signed 11 different change orders formally memorializing these changes. See SMUD Contract E-776 and accompanying change orders (PX 267); see, e.g., Tr. at 225 (Shetler) (noting contract change to accommodate NRC requirement of impact limiter testing); PFF ¶¶ 294. 97. Vectra had contracts with a number of other utilities to develop dry storage
systems. Tr. at 997-99 (Field). The Vectra dry storage systems were named the "NUHOMS" system. Tr. at 1003-04 (Field). 98. These utilities, including SMUD, often collaborated in their interaction with
Vectra and formed a working group called the NUHOMS Owners Group. Tr. at 1003-04 (Field). 99. After three years of meetings and negotiations, SMUD and DOE officially signed
a Cooperative Agreement in December 1994. Notice of Financial Assistance Award (Sept. 30, 1994) (PX 371). 100. In 1996, as a result of additional NRC-required testing, SMUD informed DOE
that there likely would be additional costs for the dual-purpose cask as part of the DOE / SMUD Cooperative Agreement. PX 449. 101. In January 1997, NRC issued a "Demand for Information" ("DFI") to Vectra
asking why the NRC should not halt Vectra's fabrication activities based on quality assurance concerns. PX 509.
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102.
In the late 1990s, many vendors of dry storage systems were experiencing similar
technical and financial difficulties as Vectra in developing their own dry storage systems. Tr. at 997-1000 (Field); Tr. at 578-79 (Redeker). 103. (Field). 104. In November 1997, Transnuclear West, Inc. ("TNW") purchased Vectra's assets Vectra declared bankruptcy in October 1997. Tr. at 237 (Shetler); Tr. at 997
out of the bankruptcy estate. Tr. at 238 (Shetler). 105. By order of the bankruptcy court, TNW agreed to complete the SMUD project
without profit. Tr. at 634 (Redeker); PX 585. 106. In May 1998, NRC gave TNW approval to begin limited fabrication of NUHOMS
components. PX 580. TNW and its subcontractors began fabrication for SMUD's project in late 1998, early 1999. Tr. at 1141 (Field); Plaintiff's Demonstrative Exhibit ("PX Dem.") 75. 107. In September 1998, the NRC issued a transportation license to TNW under 10
C.F.R. Part 71 concluding that the design for the cask and canisters would be sufficient for offsite transportation of SNF. PX 596. 108. In September 2000, the NRC issued a storage license to SMUD under 10 C.F.R.
Part 72 concluding that SMUD could store SNF in its ISFSI using the licensed canister design. PX 962. 109. In September 2000, SMUD received the first completed canister. See Rancho
Seco Weekly Updates at SMUD 0010102 (PX 640). 110. (Redeker). SMUD loaded the first canister with spent nuclear fuel in April 2001. Tr. at 665
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111.
SMUD ultimately received 21 dual-purpose canisters and loaded each of them
with 24 separate fuel assemblies (except for one canister that holds only 13 assemblies). Tr. at 144-46 (Shetler); Tr. at 496-522 (Redeker). 112. Each of the 21 dual-purpose canisters, loaded with SMUD's spent nuclear fuel,
have been placed in SMUD's Independent Spent Fuel Storage Installation ("ISFSI") for storage. Tr. at 665-68 (Redeker). 113. The ISFSI is composed of twenty-two horizontal storage modules located on a
concrete pad. Tr. at 144-45 (Shetler). 114. The horizontal storage modules are made of concrete, which provides shielding
for the spent nuclear fuel, and includes vents for the circulation of air for cooling purposes. Tr. at 145 (Shetler). 115. SMUD used the single transportation cask to move each of the canisters from the
wet pool to the ISFSI. Tr. at 144-46 (Shetler), 496-00 (Redeker). 116. (Redeker). III. The Government's Failure To Begin Acceptance Of Spent Nuclear Fuel and SMUD's Response. A. Eleven Years Of Announced Delay And DOE's Ultimate Failure to Begin Acceptance in 1998. SMUD finished loading the fuel into the ISFSI in August 2002. Tr. at 668
117.
Beginning in 1987, DOE made periodic announcements indicating that it would
not meet the July 31, 1998 starting date for spent fuel acceptance under the Standard Contract and that its acceptance of such fuel from SMUD and other utilities would be delayed until 2010 or later.
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a.
In its January 1987 Draft Mission Plan Amendment DOE announced that
it would not begin accepting spent fuel at the permanent repository until 2003, and his announcement was repeated in its March 1987 Monitored Retrievable Storage Submission to Congress and its June 1987 Final Mission Plan Amendment PX 109 at 5; PX 113 at 2; PX 118 at 6. b. In its June 1988 Draft Mission Plan Amendment and 1988 Annual
Capacity Report, DOE similarly projected that waste acceptance would not begin at the permanent repository until 2003. PX 143 at 15; PX 142 at 5. c. In its November 1989 Report to Congress on Reassessment of the Civilian
Radioactive Waste Management Program ("Reassessment Report"), DOE announced that the repository would not begin operations until at least 2010. PX 169 at vii. d. In its May 1994 Notice of Inquiry in the Federal Register ("Notice of
Inquiry"), DOE stated that "[t]hus far, neither the efforts of the Department nor any other organization . . . have achieved the level of success needed to realize significant success in developing a site by 1998" and expressed its "preliminary view" that it had "no obligation to accept spent nuclear fuel in 1998." PX 351 at 3, 4. e. In its May 1995 Final Interpretation of Nuclear Waste Acceptance Issues
in the Federal Register ("Final Interpretation"), DOE stated its conclusion that its obligation to commence fuel acceptance by January 1998 was conditional upon the existence of an operating repository or interim storage facility constructed under the NWPA, reiterated its belief that "the earliest possible date for acceptance of waste for disposal at a repository is 2010," and acknowledged that utilities would have to plan for the long-term storage of spent fuel in light of this delay. PX 410 at 3, 9.
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118.
In mid-1988, DOE sent SMUD a letter stating that its projected waste acceptance
would not begin until 2003, a 5-year delay in performance. PX 144. 119. Although DOE suggested in the late 1980s and early 1990s that it might still meet
the 1998 start date by accepting fuel on an interim basis at a monitored retrievable storage facility ("MRS"), it also recognized that this would not only require that the federal government identify a host site, but also that Congress amend the NWPA and abolish the statutory linkages between an MRS and the repository. These linkages prohibit development of an MRS until after the NRC authorizes construction of the repository, 42 U.S.C. § 10168(d)(1), and effectively preclude operation of an MRS until three years before the repository opens. PX 169 at 19; Designations Appendix (Dckt. #310) at 20-21 (Milner); Designations Appendix (Dckt. #310) at 775 (Barrett). a. In its June 1988 Draft Mission Plan Amendment, DOE recognized that
because of the statutory linkages between an MRS and the repository, it was unlikely to begin accepting fuel at an MRS in 1998. PX 143 at 15. b. In its November 1989 Reassessment Report, DOE stated that "the current
linkages between the repository and the MRS program make it impossible for DOE to accept waste at an MRS facility on a schedule that is independent from that of the repository," and that if the current statutory linkages were maintained, then an MRS could not open before 2007. PX 169 at x, 17. c. In its 1990, 1991, and 1992 Annual Capacity Reports, DOE similarly
recognized that "[i]f the current linkages to the repository are maintained, it is estimated that commencement of facility operations and initial acceptance of SNF/HLW by the DOE would not start until 2007." PX 188 at 5; PX 231 at 4; PX 294 at 3.
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d.
In 1992, DOE publicly announced that it would not be able to open an
MRS by 1998. DOE Acknowledged Last Week That It Will Not Be Able to Build a Monitored Retrievable Storage (MRS) Facility by 1998, Inside Energy With Federal Lands at 14 (Dec. 21, 1992) (PX 973). 120. In the 1989 to 1991 time frame, the head of DOE's Office of Civilian Radioactive
Waste Management, John Bartlett, and his deputy, Ron Milner, verbally advised SMUD that there were delays in the development of the permanent repository. Designations Appendix (Dckt. #310) at 2237, 2339-40 (Bowser). 121. Other actions during the early 1990s confirmed that the receipt of spent fuel by
DOE before at least 2010 was unlikely. a. The General Accounting Office found in 1991 that an MRS was unlikely
to open by 1998. PX 217 at 3-4, 19-23, 30-31. b. Efforts to locate a voluntary host for an MRS were unsuccessful and were
legislatively terminated in the early 1990s. PX 265 (trade press article discussing opposition to siting MRS in Wyoming); PX 363 (Environmental Assessment) at 7 (discussing lack of siting success and legislative termination; PX 283 at 2 ("letter from then-Secretary of Energy Watkins stating that "[t]he Office of the Nuclear Waste Negotiator . . . has spent more than two years seeking a voluntary host and site for an MRS facility. That office has not been able to identify a viable candidate site that can be recommended to Congress by June 1993 and that will permit spent fuel receipt by January 1998 as planned. Thus, alternative actions are required."). c. DOE did not meet any siting, engineering, permitting, or construction
milestones for the development of an MRS. Tr. at 2170-73 (Kouts).
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d.
DOE officials testified and DOE documents confirm that an MRS was
unlikely by 1993 and not viable by 1994 and 1995. See Designations Appendix (Dckt. #310) at 43-44, 205-08 (Barrett) (testifying that by Oct. 1993, when the funding for the MRS was cut by Congress, an MRS was "unlikely"); id. at 223, 273 (testifying that by late 1994 and early 1995, the MRS concept was "not viable"); Designations Appendix (Dckt. #310) at 419-22 (Milner) (testifying that DOE had given up plans for an MRS by 1994); Designations Appendix (Dckt. #310) at 649 (Brownstein); see also PX 380 at 1 (DOE December 1994 Program Plan concluding that "by 1993, it had become clear that continuation of the Program with then current approach was no longer a viable option"). e. DOE's program to develop transportation cask designs for collecting and
transporting spent fuel from utilities, known as the Cask Systems Development Program ("CSDP") "experienced long delays and was cancelled by 1993." I. Stuart Written Direct at 3 (PX 1001) (noting that "[w]hen cancelled, the program had not produced a functioning cask, notwithstanding the fact that the Government had spent approximately $100,000,000 on the project according to the GAO"); see also Tr. at 1403-04 (Stuart). f. DOE failed to make progress on the development of a repository. Dep.
Des. at 44-45 (Freeman); Dep. Des. 52, 57, 62-63, 151-53 (Bowser). 122. In December 1996, DOE advised SMUD by letter "that DOE anticipates it will be
unable to begin acceptance of spent nuclear fuel for disposal in a repository or interim storage facility by January 31, 1998." PX 500. This letter further reinforced SMUD's decision to develop dry storage because it indicated that DOE would not accept fuel on a timely basis. Tr. at 593 (Redeker).
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123.
These DOE announcements, statements, and actions led SMUD to believe that
DOE would probably not begin accepting spent fuel until sometime well after 1998, and that SMUD would probably have to continue to store spent fuel at Rancho Seco until well after 2010. This belief initially arose in the late 1980's and became more certain throughout the 1990s. a. In the 1989 to 1990 period, it was apparent to SMUD that DOE probably
would not begin accepting spent fuel in 1998, and SMUD retained S. Levy, Incorporated ("Levy") to evaluate its options for managing the spent fuel at Rancho Seco in light of this probability. Tr. at 154-55, 158 (Shetler). b. In 1990, Levy reported to SMUD that the "schedule for DOE pickup is
currently highly uncertain with the earliest conceivable pickup date being 1998 and a much more likely pickup date well after 2010." PX 176 at 59. c. By late 1990, SMUD had a "pretty firmly held belief that . . . we shouldn't
count on DOE picking up the fuel . . . in the next decade" based on statements at industry meetings, trade journal coverage, and the lack of congressional and physical activity. Designations Appendix (Dckt. #310) at 2251-52 (Bowser). d. SMUD's General Manager from 1990 to 1994, David Freeman, testified
that, based on his prior experience as Chairman of the Tennessee Valley Authority, the prospect for an MRS was a "dream" and that he "didn't think the above-ground storage option was going to happen." Designations Appendix (Dckt. #310) at 2310-13 (Freeman). e. Although SMUD was hopeful that an MRS could be developed, it
recognized that this would require legislative action and considered this unlikely to occur. Designations Appendix (Dckt. #310) at 2313 (Freeman) (testifying that his view
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regarding the MRS was "that that dog wasn't going to hunt"); Tr. at 254, 440-441, 466468 (Shetler); Tr. at 534-35 (Redeker). SMUD understood that DOE abandoned the MRS process sometime in the mid-1990s. Tr. at 441 (Shetler). f. By 1992, SMUD was projecting that DOE's acceptance of spent fuel
would be delayed by 12 years from 1998 until 2010. PX 259 at 2; PX 269A; Designations Appendix (Dckt. #310) at 2290 (Freeman) (explaining that "my recollection is more the date when you, the government, in plain English, told us that it would be 2010 before you would pick it up"); Tr. at 209 (Shetler). g. In a March 1993 Environmental Assessment on decommissioning Rancho
Seco, SMUD stated that a federal repository for spent fuel is "not currently available and no such repository is expected to be in place until approximately 2010" and that interim storage by DOE "is also not currently an option." PX 297 at 7. h. DOE's May 1994 Notice of Inquiry and May 1995 Fuel Interpretation
provided additional evidence to SMUD that DOE would not begin accepting fuel in 1998 and raised questions about DOE's ability to begin fuel acceptance in 2010. Tr. at 556, 566-67, 573 (Redeker). Tr. at 253, 258 (Shetler). i. In its March 1997 response to DOE's December 1996 delay letter, SMUD
noted that DOE's anticipated failure to begin accepting spent fuel in 1998 meant that "continued, long-term on-site storage at Rancho Seco will be necessary for the foreseeable future." PX 528 at 2. 124. DOE's expected and actual failure to begin accepting fuel in 1998 was a "basic
premise" behind SMUD's efforts to develop the dry storage system. Tr. at 463-64 (Shetler).
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B. 125.
SMUD's Initial Decision To Pursue Dry Storage.
By the time that SMUD's Rancho Seco reactor prematurely shut-down in
June 1989, DOE was already projecting that it would probably not begin accepting spent fuel in 1998. PFF ¶¶ 117-120. 126. During the remainder of 1989 and early 1990, SMUD sought to evaluate its
options for managing the spent fuel at Rancho Seco in light of the probability that DOE would not begin accepting fuel in 1998. Tr. at 155 (Shetler). 127. This forced SMUD to consider how to manage spent fuel at a non-operating
reactor for up to several decades in a manner that would be safe, and cost-effective and would allow for the anticipated loss of experienced staff over time. Tr. at 160 (Shetler). 128. SMUD retained Levy to analyze its fuel storage options given that DOE's fuel
acceptance was likely to be delayed. Tr. at 158 (Shetler); PX 176. 129. The Levy study evaluated 15 fuel storage options for Rancho Seco, including both
wet and dry storage, and suggested that SMUD pursue dry storage. PX 176 passim. a. It noted that the DOE pickup schedule was "highly uncertain" and that
pickup would likely occur "well after 2010." PX 176 at 59; see Motion for Leave to File Testimony of S. Levy & R. Powers, dated March 7, 2005 ("Levy Motion") (Dckt. #300) at 143 (Levy Dep.) ("The key assumption in that report was that DOE would not be able to receive spent fuel in the permanent repository until 2010."). b. It determined that the most certain storage approach would be continued
wet storage until disposal at the DOE repository in 2010 or later, but that dry storage in transportable casks offered the best opportunity for early offsite shipment to an interim
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DOE storage facility or for interim acceptance by DOE onsite at the Rancho Seco facility. PX 176 at ii, 56-65. c. Under these circumstances, the Levy study "strongly recommended" that
SMUD pursue the transportable cask option, particularly if coupled with a joint SMUD/DOE demonstration program to resolve any technical or regulatory requirements for such casks. Id. 130. Based upon the Levy study, SMUD decided in 1990 and 1991 to pursue a dual
purpose dry storage system to address the uncertainties and prospective delay associated with DOE acceptance, while continuing to consider further wet storage as an option. Tr. at 193, 20910 (Shetler); Designations Appendix (Dckt. #310) at 2251-53 (Bowser). 131. 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). 132. In deciding to negotiate and execute the contract with Pacific Nuclear in 1992 for
the design and development of the dry storage casks and canisters, SMUD assumed that the opening of the federal repository would be delayed by 12 years and projected that dry storage would yield substantial savings during this period. PX 259 at 2; PX 269A; Tr. at 209 (Shetler). 133. SMUD was not driven by the date of DOE's performance obligation under the
Contract, but rather by DOE's announcements that it would not begin performance until at least 2010. Dep. Des. at 42-43 (Freeman).
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134.
If SMUD had assurance that DOE would begin accepting fuel in 1998, then
SMUD would have kept its spent fuel in wet storage and not contracted for the development of a dry storage system in 1992. a. Tr. at 194 (Shetler) ("I think our first alternative and our preference would
have been to keep it in the pool and have DOE receive the fuel on the original schedule, such that it would be offsite in a timely manner. Based on the schedule delays that were known in the early 1990s, what we're facing is a significant cost associated with delays in that performance and then having to store that for a long period of time."). b. Tr. at 360 (Shetler) ("Q...you had testified that had you had assurances
from DOE that it would have begun acceptance in 1998, you would have kept your spent fuel in the pool, correct? A. Correct. Q. And that's based on your concern that the risks of pursuing a first of its kind technology, correct? A. That and any risks associated with DOE not accepting the fuel as standard form in accordance with the original schedule."). c. Designations Appendix (Dckt. #310) at 2288-89 (Freeman) (SMUD's
actions "were driven by the fact that the federal government had taken our money, hadn't come to take our [spent fuel], and was telling us they weren't going to come until at least 2010, which put us in a horrible financial situation...."). d. Levy Motion (Dckt. #300) at 111 (Levy Dep.) ("If a repository was
available by 1998 and DOE actually said they're going to do that, that it will be available, it would have changed my recommendation. Q. How? A. I would have stayed in the pool. Q. So it's your testimony that had you believed that the Department of Energy could have had a federal repository by 1998, your recommendation would have been for SMUD spent nuclear fuel to stay in the wet pool? A. To stay in the pool, yes.")
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135.
In August 1994, the NRC issued an Environmental Assessment on the Rancho
Seco ISFSI. PX 363 (Att. 2). The Environmental Assessment states that shipping spent fuel to a permanent repository "is SMUD's primary solution to the storage of spent fuel at Rancho Seco; however, no permanent Federal repository is available." Id. at 7. Accordingly, [t]he absence of a Federal repository makes storage of spent fuel in dry [storage] SMUD's primary alternative." Id. at 8. 136. DOE's May 1994 Notice of Inquiry and May 1995 Final Interpretation reinforced
SMUD's decision to develop dry storage because they indicated that DOE would neither accept spent fuel on a timely basis nor provide interim assistance. Tr. at 253, 258 (Shetler); Tr. at 55657, 567 (Redeker). 137. The dry storage project was part of SMUD's decommissioning plan for Rancho
Seco, and was expected to facilitate decommissioning. However, it was not a prerequisite for decommissioning. Decommissioning was not initially projected to begin until 2008 due to funding limitations, continued operation of the spent fuel pool would not have precluded SMUD from decommissioning the remainder of Rancho Seco, and SMUD eventually began active decommissioning of the site in the 1990s while the pool was in operation. Tr. at 215-18 (Shetler); 696-97 (Redeker). 138. SMUD consistently projected that dry storage would reduce annual savings
operating and maintenance costs of fuel storage, but the estimated amount of these savings varied over time due to changes in assumptions and new information. Tr. at 265, 476-77 (Shetler); see also, e.g., PX 176 at 58 ($.5 - $1 million); PX 269A (less than $3 million); PX 272 at 2 ($6 million); DX 280 at SMUD-0029434 ($8 million); see PFF ¶¶ 341-344, 347-48.
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139.
Thus, DOE's announcements and other actions during the late 1980s and early
1990s created significant uncertainty about its future spent fuel acceptance and led SMUD to believe that it would probably have to continue to store fuel at Rancho Seco pool for an extended period and that any opportunity for earlier fuel receipt by DOE would require dry storage. This uncertainty and belief caused SMUD to decide to contract for dry storage in 1992 and to continue with the dry storage project from 1992 until the work was suspended in 1996. PFF ¶¶ 125-138. 140. In 1994, the Chairman of the NRC, Ivan Selin, recognized that "[t]he history of
spent fuel management in this country has taken several turns, with a final resolution still out of reach. Several repository programs have started, stalled, and stopped. The latest effort at Yucca Mountain is progressing but, at best, is years from the early phases of licensing, much less the actual underground disposal of spent fuel." PX 357 at 1. 141. The NRC Chairman also concluded with respect to a Monitored Retrievable
Storage facility that "no such facility is clearly on the horizon." PX 357 at 1. 142. Because of these facts, the NRC Chairman explained that "[a]ll of these recent
developments have changed the circumstances that we face in spent fuel management. The obvious conclusion is that an increasing number of plants, both operating and permanently shutdown reactors, will have to provide for additional spent fuel storage on-site for a longer period than originally planned, and even after plant decommissionings, prudence requires that provision be made for continual, stand-alone on-site storage." PX 357 at 1. 143. The NRC Chairman further noted that "[a]n operational high-level waste
repository remains years away in a program that has suffered substantial delays in the past. The future of the MRC is uncertain. Most plants have expanded their pool storage by re-racking to
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the extent possible. Clearly, the use of a dry cask storage system at reactor sites is increasingly becoming the only available option for continued operation of many of our nation's nuclear plants." PX 357 at 3. 144. Mr. Ivan Stuart, who had extensive interactions with both DOE and the utilities,
explained that "it is clear to me that they [the utilities] felt, because of the extensive delay in DOE program, that they needed to consider options, and one of their, the options that they almost all considered was the utilization of dual-purpose containers or casks." Tr. at 1458. C. SMUD's Continued Reevaluation Of The Project And Commitment To Proceed In Light Of Breach.
145.
By 1997, SMUD believed that an MRS would not be developed, that DOE would
not begin accepting spent fuel until at least 2010, and that SMUD would have to continue to store fuel at Rancho Seco for an extended and unknown period. PX 500; see PFF ¶¶ 121-124. 146. At that time, almost all work on the dry storage system had stopped due to
technical issues between Vectra and the NRC, the NRC's issuance of a demand for information to Vectra, and Vectra's bankruptcy. PX 509, 511; PFF ¶¶ 101-06; 293-94. 147. When work on the dry storage system stopped, the project was behind its initial
schedule and the costs exceeded its initial budget. The NRC had not yet issued a transportation or storage license, neither the cask nor any canisters had yet been fabricated, and a variety of licensing, design, and manufacturing issues remained open. Although SMUD expected that these issues would be resolved, it recognized that they posed obstacles that could further complicate and delay completion of the project. Tr. at 628-29 (Redeker) ("This was a troubled project, costs are going up, schedule is moving out. And quite frankly, I was extremely nervous. This was my job and it wasn't working out very well"). PFF ¶¶ 297-304.
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148.
SMUD also recognized that there was a risk that DOE might later declare
canistered fuel to be "non-standard" fuel under the Standard Contract and attempt to move such fuel to the end of the fuel acceptance queue. If this occurred, it would further delay the acceptance of SMUD's fuel. PX 286 at SMUD-0009332; PX 319 at 1-2; PX 320; PX 325; Tr. at 173, 218 (Shetler). 149. Under these circumstances, SMUD comprehensively reevaluated and reanalyzed
its spent fuel storage strategy during the period from December 1996 through May 1997 (the "1997 Reevaluation"). This reevaluation went through multiple iterations and involved consideration of nine alternatives, including other dry storage systems and leaving the spent fuel in the spent fuel pool. PX 502 at 1; PX 503; PX 519 at 18-20. 150. The 1997 Reevaluation was driven by SMUD's expectation that DOE would not
begin accepting spent fuel for many years and SMUD's assumption that fuel would remain at Rancho Seco until approximately 2027. Tr. at 238 (Shetler); PX 519 at 19. 151. The 1997 Reevaluation sought to assure that SMUD pursued the most cost-
effective, yet safe fuel storage strategy, while recognizing that the longer the fuel remained in wet storage the higher the costs would be. PX 512 at 2; Tr. 596:22-598:12 (Redeker). 152. The 1997 Reevaluation ultimately concluded that continuing with the current dry
storage project was the best fuel storage option available under the circumstances because SMUD would have to store the Rancho Seco fuel for at least another 20 or 30 years and dry storage would minimize the costs over the long period of DOE's delay in performance. PX 524; PX 538 at 9, 12; Tr. at 604, 610, 620 (Redeker). 153. In March 1997, in response to the DOE's December 1996 delay letter (PX 500),
SMUD submitted a letter to DOE requesting that DOE take title to SMUD's spent fuel, as DOE
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had done at the Fort St. Vrain reactor in Colorado, and pay the costs of "continued on-site storage of spent fuel . . . at the Rancho Seco site." PX 528 at 3. SMUD concluded that "[i]t is now time for DOE to honor its contractual obligation by accepting spent fuel as soon as possible and to reimburse utilities such as SMUD for their interim storage costs in the meantime." Id. at 3. 154. DOE's announced failure to live up to its contractual obligations caused SMUD to
proceed with the dry storage project in 1997. Tr. at 593, 619-22 (Redeker); Tr. at 905-07 (Ferreira) (explaining that "had DOE responded favorably and was willing to assume responsibilities, then we would not have continued with the dry fuel storage program"). 155. If SMUD had assurance that DOE would begin accepting spent fuel in 1998, then
SMUD would have abandoned the dry storage project at t