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

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) NORTHERN STATES POWER COMPANY, ) ) Plaintiff, ) ) v. ) No. 98-484C ) (Senior Judge Wiese) UNITED STATES OF AMERICA, ) ) Defendant. ) __________________________________________)

DEFENDANT'S POST-TRIAL BRIEF

PETER D. KEISLER Assistant Attorney General

OF COUNSEL: JANE K. TAYLOR Office of General Counsel U.S. Department of Energy 1000 Independence Avenue, S.W. Washington, D.C. 20585 ALAN J. LO RE Senior Trial Counsel STEPHEN P. FINN JOSHUA E. GARDNER MARIAN SULLIVAN Trial Attorneys Commercial Litigation Branch Department of Justice 1100 L Street, N.W. Washington, D.C. 20530 March 27, 2007

JEANNE E. DAVIDSON Director

HAROLD D. LESTER, JR. Assistant Director

ANDREW P. AVERBACH Trial Attorney Commercial Litigation Branch Civil Division Department of Justice 1100 L Street, N.W. Attn: Classification Unit 8th Floor Washington, D.C. 20530 Tele: (202) 305-3315 Fax: (202) 307-2503 Attorneys for Defendant

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TABLE OF CONTENTS TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 I. II. CHRONOLOGY OF EVENTS RELEVANT TO NSP'S CLAIM . . . . . . . . . . . . . . . . . . 9 FACTS RELATING TO STANDARD CONTRACT AND RATE OF ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 A. B. The Original Provisions Of the Nuclear Waste Policy Act . . . . . . . . . . . . . . . . . 17 The "Standard Contract For Disposal Of Spent Nuclear Fuel And/Or High-Level Radioactive Waste" Was Created Through Notice And Comment Rulemaking In The Federal Register . . . . . . . . . . . . . . . . 20 1. 2. 3. C. D. E. F. The Proposed Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Public Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 The Final Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Plaintiff's Execution Of Its Standard Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Issuance Of The Mission Plan And Its Amendments . . . . . . . . . . . . . . . . . . . . . 27 The 1987 Amendments To The Nuclear Waste Policy Act . . . . . . . . . . . . . . . . . 29 DOE's Issuance Of Annual Capacity Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 1. 2. 3. The 1987 Through 1990 Annual Capacity Reports . . . . . . . . . . . . . . . . . 31 The 1991 Annual Capacity Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 The 1992 Through 1995 Annual Capacity Reports . . . . . . . . . . . . . . . . . 35

G.

Program Documents Reflect Planned Acceptance At An MRS Facility . . . . . . . 37 1. 2. Program Reassessment And 1991 Draft Mission Plan Amendment . . . 37 Preliminary Estimates Of The Total-System Life Cycle Cost For The Restructured Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

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H. I.

Industry Submission Of Delivery Commitment Schedules . . . . . . . . . . . . . . . . . 39 NSP's Submission Of Delivery Commitment Schedules . . . . . . . . . . . . . . . . . . 40

DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 I. REGARDLESS OF WHETHER IT CHARACTERIZES ITS EXPENDITURES AS "MITIGATION DAMAGES," NSP BEARS THE BURDEN OF ESTABLISHING ALL ELEMENTS OF ITS DAMAGES CLAIM, INCLUDING CAUSATION, FORESEEABILITY, AND REASONABLE CERTAINTY . . . . . . . . . 41 A. NSP's Effort To Characterize Its Damages As "Mitigation Damages" Does Not Eliminate Its Obligation To Prove Causation, Foreseeability and Reasonableness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 NSP's Burden Includes The Obligation To Establish A Reasonable "But For" World Against Which To Measure Whether DOE's Delay "Caused" It To Incur Incremental Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 NSP Has The Burden Of Demonstrating That Its Claimed Damages Were Foreseeable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 NSP Must Prove Its Damages With Reasonable Certainty . . . . . . . . . . . . . . . . . 54

B.

C.

D. II.

NSP CANNOT ESTABLISH THE NECESSARY CAUSAL LINK BETWEEN CERTAIN OF ITS CLAIMED DAMAGES AND DOE'S DELAY, OR THAT ALL OF ITS CLAIMED DAMAGES WERE FORESEEABLE AND REASONABLY CERTAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 A. NSP Would Have Built A Dry Storage Facility Regardless Of DOE's Delay In Accepting SNF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 1. The Time At Which DOE Would Have Arrived To Accept NSP's Spent Fuel Was Not Known At The Time Of The Decision . . . . . . . . . . 55 Substantial Uncertainty Existed In The Late 1980s As To The Extent To Which A Third Rerack Would Increase The Capacity Of The Spent Fuel Pool At Prairie Island . . . . . . . . . . . . . . . . . . . . . . . 55 Even Assuming DOE Performance Commencing In 1998, The Potential For A Plant Shutdown And Worker Exposure Would Have Rendered A Third Rerack Cost Prohibitive . . . . . . . . . . . . 60

2.

3.

ii

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4.

In Light Of Its Prior Representations To The Minnesota Public Utilities Commission, NSP Is Estopped From Asserting That It Would Have Performed A Third Rerack At Prairie Island . . . . . . . . . . . . . . . . . . . . . . 74 Effect Upon Damages Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

5. B.

NSP's "Mitigation" Efforts Stem From Decisions Made Prior To The Time That That It Was Clear That DOE Acceptance Would Be Delayed And, In The Absence Of Efforts To Obtain Adequate Assurances, Their Costs Are Not Recoverable As Damages . . . . . . . . . . . . . . . . . . . . . . . . . 79 The Damages Sought By NSP For Costs Resulting From State Legislative Mandates Are Unrecoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 i. The Government Is Not Responsible For The Downstream Political Consequences Of Its Delayed Performance . . . . . . . . . . . . . . . . 83 Effect Upon Damages Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

C.

ii. D.

NSP's Investment In The Private Fuel Storage Venture Is Not Recoverable . . . 92 i. ii. The Investment In PFS Was Unforeseeable And Speculative . . . . . . . . . 92 NSP Has Failed To Establish That It Has Actually Been Damaged By Its Investment In PFS . . . . . . . . . . . . . . . . . 93 Effect Upon Damages Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

iii. E.

NSP Cannot Establish Causation For Certain Costs That It Allegedly Incurred For Internal Labor And "Overheads" . . . . . . . . . . . . . . . . . . 98 i. ii. NSP's Internal Labor And Overheads Were Not Incremental . . . . . . . . . 98 Effect Upon Damages Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

F.

Additional Issues Affecting Costs That Would Have Been Incurred Had DOE Timely Commenced Performance . . . . . . . . . . . . . . . . . . . 102 1. NSP Would Have Expended $30,679,574 On A Dry Storage Facility In The "But For" World . . . . . . . . . . . . . . . . . . . . . . . . 102 An Offset Is Warranted For The Cost NSP That Avoided Of Loading Casks To DOE . . . . . . . . . . . . . . . . . . . . . . . 104 iii

2.

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3.

The Government Is Not Responsible For The Costs That NSP Incurred In Obtaining A Transportation License For Its TN-40 Casks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 An Adjustment Is Warranted For Dry Storage Costs At GE-Morris . . . 107

4. III.

NSP'S CLAIM FOR ITS "COST OF CAPITAL" IS A LEGALLY UNSUPPORTED ATTEMPT TO RECOVER PREJUDGMENT INTEREST . . . . . . 114 A. Interest Is Not Recoverable Against The United States Government Under The Standard Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 NSP's Cost Of Capital Damages Constitute Interest In Violation Of The No-Interest Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Even If NSP Was Correct That Cost of Capital Is The Same As AFUDC, It Has Identified No Waiver Of Sovereign Immunity That Would Allow Such Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 Effect Upon Damages Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

B.

C.

D. IV.

NSP HAS FAILED TO ESTABLISH THAT DOE WAS OBLIGATED TO ACCEPT SNF AT A RATE SUFFICIENT TO PRECLUDE THE NEED FOR ADDITIONAL AT-REACTOR STORAGE AFTER 1998 OR AT A SIMILAR RATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 A. NSP Cannot Recover Damages Without Demonstrating Entitlement To The Rate Of Acceptance That It Advocates . . . . . . . . . . . . . . . 114 NSP Has Failed To Prove That DOE Was Obligated To Perform At A 3,000 Rate Sufficient To Preclude Additional At-Reactor Storage After 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 1. NSP Ignores The Contractual Mechanism For Ascertaining The Acceptance Rate Under The Standard Contract . . . . . . . . . . . . . . . . . . . 120 a. From The Time Of Contract Formation, The Parties Expected That The DCS Process Would Be The Mechanism Through Which The They Would Make Their Respective Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 NSP Actively Engaged In The DCS Process . . . . . . . . . . . . . . . 122

B.

b.

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c.

The Suspension Of The DCS Process in 1996 Neither Undermines The Validity Of The 1991 ACR Nor Evidences Bad Faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

2.

NSP Has Failed To Establish That The Parties Expected A Rate Sufficient To Preclude The Need For Additional Storage After 1998 . . 127 a. As A Matter Of Law, This Court Should Not Consider Parol Evidence In Determining DOE's Performance Obligations Under The Standard Contract . . . . . . . . . . . . . . . . . 127 Even If The Court Were To Consider Parol Evidence, NSP Has Failed To Establish That The Parties Understood That DOE Would Accept SNF At The Rate It Claims . . . . . . . . . . . . 130

b.

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

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TABLE OF AUTHORITIES Cases Abbott Labs. v. Brennan, 952 F.2d 1346 (Fed. Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 AES Tech. Sys., Inc. v. Coherent Radiation, 583 F.2d 933 (7th Cir. 1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 American Sci. & Eng'g, Inc. v. United States, 8 Cl. Ct. 129 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 Aviation Contractor Employees, Inc. v. United States, 945 F.2d 1568 (Fed. Cir. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Barrow Utils. & Elec. Co-op. v. United States, 20 Cl. Ct. 113 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Bell v. United States, 404 F.2d 975 (Ct. Cl. 1968) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Bel Pre Health Care Center, Inc. v. United States, 24 Cl. Ct. 495 (1991), aff'd, 980 F.2d 745 (Fed. Cir. 1992) (table) . . . . . . . . . . . . . . . 116 Blake v. Califano, 626 F.2d 891 (D.C. Cir. 1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Bluebonnet Savs. Bank v. United States, 67 Fed. Cl. 231 (2005), aff'd, 466 F.3d 1349 (Fed. Cir. 2006) . . . . . . . . . . . . . . . . . . . . 45 Bluebonnet Savs. Bank v. United States, 266 F.3d 1348 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Boyajian v. United States, 423 F.2d 1231 (Ct. Cl. 1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Brandon & Tibbs v. George Kevorkian Accountancy Corp., 277 Cal. Rptr. 40 (Cal. Ct. App. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

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Brookfield Constr. Co. v. United States, 228 Ct.Cl. 551, 661 F.2d 159 (1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 California Fed. Bank v. United States, 395 F.3d 1263 (Fed. Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Castle v. United States, 48 Fed. Cl. 187 (2000), aff'd in relevant part, 301 F.3d 1328 (Fed. Cir. 2002) . . . . . . 108 Citizens Fed. Bank v. United States, 474 F.3d 1314 (Fed Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47, 88 City of Tacoma, Dep't of Public Utilities v. United States, 31 F.3d 1130 (Fed. Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Coast Fed. Bank, FSB v. United States, 48 Fed. Cl. 402 (2000), rev'd on other grounds, 309 F.3d 1353 (Fed. Cir. 2002), vacated, 320 F.3d 1338 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Columbia First Bank v. United States, 60 Fed. Cl. 97 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Craft v. United States, 233 F.3d 358, 374 (6th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Coyle's Pest Control, Inc. v. Cuomo, 154 F.3d 1302 (Fed. Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Cuyahoga Metropolitan Housing Auth. v. United States, 65 Fed. Cl. 534 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Danzig v. AEC Corp., 224 F.3d 1333, (Fed. Cir. 2000), cert. denied, 532 U.S. 995 (2001) . . . . . . . . . . . . . . . . 81 Data Gen. Corp. v. Johnson, 78 F.3d 1556 (Fed. Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 David Nassif Assocs. v. United States, 214 Ct. Cl. 407, 557 F.2d 249 (1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115, 117 Davis v. Wakelee, 156 U.S. 680 (1895) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

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Department of Energy v. Westland, 565 F.2d 685 (CCPA 1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 District of Columbia v. United States, 67 Fed. Cl. 292 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 England v. Contel Advanced Sys., Inc., 384 F.3d 1372 (Fed. Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108, 112 Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Gardner Displays Co. v. United States, 171 Ct. Cl. 497, 346 F.2d 585 (Ct. Cl. 1965) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Granite Mgt. Corp. v. United States, 74 Fed. Cl. 155 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Hercules, Inc. v. United States, 24 F.3d 188, 200 (Fed. Cir. 1994), aff'd on other grounds, 516 U.S. 417 (1996) . . . . . 91 Hughes Communications Galaxy, Inc. v. United States 271 F.3d 1060 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 In re Application for Certificate of Need for Construction of an Independent Spent Fuel Storage Installation, 501 N.W. 2d 638 (Minn. Ct. App. 1993), review denied (July 15, 1993) . . . . . . . . . 13, 85 Indiana Michigan Power Co. v. Department of Energy, 88 F.3d 1272 (D.C. Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80, 131 Indiana Michigan Power Co. v. United States, 60 Fed. Cl. 639 (2004), aff'd,, 422 F.3d 1369 (Fed. Cir. 2005) . . . . . . . . . . . . . . . . . . 109 Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim J.D. Hedin Constr. Co. v. United States, 456 F.2d 1315 (Ct. Cl. 1972) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47, 49

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Jetco, Inc. v. United States, 11 Cl. Ct. 837 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Julius Goldman's Egg City v. United States, 697 F.2d 1051 (Fed. Cir. 1983), cert. denied, 464 U.S. 814 (1983) . . . . . . . . . . . . . . . 123 Krauss v. Greenbarg, 137 F.2d 569 (3d Cir. 1943) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48, 49 Krofft Entertainment, Inc. v. CBS Songs, 653 F. Supp. 1530 (S.D.N.Y. 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Landmark Land Co. v. Federal Deposit Insur. Corp., 256 F.3d 1365 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Lewis Jorge Constr. Mgmt, Inc. v. Pomona Unified Sch. Dist., 102 P.3d 257 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Library of Congress v. Shaw, 478 U.S. 310 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108, 113 McAbee Constr, Inc. v. United States, 97 F.3d 1431 (Fed. Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Marshall v. United States, 164 F. Supp. 221 (Ct. Cl. 1958) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 Massengill v. Guardian Mgt. Co., 19 F.3d 196 (5th Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Mays v. Trump Indiana, Inc., 255 F.3d 351 (7th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Menne v. Celotex Corp., 861 F.2d 1453 (10th Cir. 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Modern Sys. Tech. Corp. v. United States, 979 F.2d 200 (Fed. Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

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Myerle v. United States, 33 Ct. Cl. 1 (1897) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53, 87 National By-Prods., Inc. v. United States, 186 Ct. Cl. 546, 405 F.2d 1256 (1969) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Nebraska Public Power District v. United States, 73 Fed. Cl. 650, 673,appeal certified, 74 Fed. Cl. 762 (2006), petition for appeal granted, Misc. Docket No. 843, 2007 WL 779291 (Fed. Cir. Mar. 1, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Neeley v. Bankers Trust Co. of Tex., 757 F.2d 621 (5th Cir. 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Northern States Power Co. v. United States Dept. of Energy, 128 F.3d 754 (D.C. Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Old Stone Corp. v. United States, 450 F.3d 1360 (Fed. Cir. 2006), cert. denied, 2007 WL 789098 (U.S. Mar 19, 2007) . . . . . . . . . . . . . . . . 51, 52, 53, 86, 87 Pacific Gas & Electric Co. v. United States, 73 Fed. Cl. 333, reconsideration denied, 74 Fed. Cl. 779 (2006), appeal pending, No. 2007-5046 (Fed. Cir. docketed Jan. 24, 2007) . . . . . . . . . . . . passim Point Productions A.G. v. Sony Music Entertainment, Inc. 215 F. Supp. 2d 336 (S.D.N.Y. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Precision Pine & Timber, Inc. v. United States, 72 Fed. Cl. 460 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Quiman, S.A. de C.V. v. United States, 39 Fed. Cl. 171 (1997), aff'd, 178 F.3d 1313 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . . 53 Ramsey v. United States, 121 Ct. Cl. 426, 101 F. Supp. 353 (1951) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Ridge Runner Forestry v. Veneman, 28 F.3d 1058 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Roseburg Lumber Co. v. Hadigan, 978 F.2d 660 (Fed. Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

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Rumsfeld v. Applied Cos., 325 F.3d 1328 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Sacramento Mun. Util. Dist. v. United States, 70 Fed. Cl. 332 (2006), appeal pending, No. 2007-5052 (Fed. Cir. docketed Feb. 6, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51, 84, 103 Selman v. United States, 204 Ct. Cl. 675, 498 F.2d 1354 (1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Shann v. Dunk, 84 F.3d 73 (2d Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Shyface v. Secy of Health and Human Servs., 165 F.3d 1344 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Singer Co. Librascope Div. v. United States, 215 Ct. Cl. 281, 568 F.2d 695 (1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Tennessee Valley Authority v. United States, 69 Fed. Cl. 515 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43, 100, 110 Transamerica Equip. Leasing Corp. v. Union Bank, 426 F.2d 273, 274 (9th Cir. 1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 United States v. Mescalero Apache Tribe, 207 Ct. Cl. 369, 518 F.2d 1309 (1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 United States v. Thayer-West Print Hotel Co., 329 U.S. 585 (1947) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 United States Steel Corp. v. United States, 618 F. Supp. 496 (CIT 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Wang Lab., Inc. v. Applied Computer Sciences, Inc., 958 F.2d 355 (Fed. Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Wells Fargo Bank, N.A. v. United States, 88 F.3d 101 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Wickham Contracting Co. v. United States, 12 F.3d 1574 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107, 112

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Wickham Contracting Co. v. GSA, GSBCA No. 8675, 92-3 BCA ¶ 25040, 1992 WL 88326 (GSBCA 1992), aff'd, 12 F.3d 1574 (Fed. Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Wilner v. United States, 23 Cl. Ct. 241 (1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Wilson v. Marquette Elecs., Inc., 630 F.2d 575 (8th Cir. 1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249, 292 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Statutes 28 U.S.C. § 2516 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 41 U.S.C. § 601 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 42 U.S.C. § 10131 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 42 U.S.C. § 10132 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 42 U.S.C. § 10133 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 42 U.S.C. § 10134 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 42 U.S.C. § 10135 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 42 U.S.C. § 10139 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 42 U.S.C. § 10161 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 29 42 U.S.C. § 10162 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 42 U.S.C. § 10168 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 42 U.S.C. § 10172 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 42 U.S.C. § 10221 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 27, 132 42 U.S.C. § 10222 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 38, 39 xii

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42 U.S.C. § 10242 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 42 U.S.C. § 10243 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 42 U.S.C. § 10250 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Minn. St. § 116C.77 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30, 75 Minn. St. § 116C.771 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 71 Minn. St. § 116C.773 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 90 Minn. St. § 116C.779 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88, 96 Minn. St. § 116C.83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 96 Minn. St. § 216B.1645 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 90, 92 Legislative Materials S. Rep. No. 100-152 (Sept. 1, 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Regulations and Administrative Materials 10 C.F.R. § 72.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 10 C.F.R. § 961.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 27, 33 48 C.F.R. § 43.205 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 48 Fed. Reg. 5458 (Feb. 4, 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 21 48 Fed. Reg. 16590 (Apr. 18, 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 25 Other Sources Arthur L. Corbin & Joseph M. Perillo, Corbin on Contracts (rev. ed. 2005) . . . . . . . . . 50, 52, 88 Dan B. Dobbs, Law of Remedies (2d ed. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Keeton et al., Prosser and Keeton On The Law Of Torts (5th ed. 1984) . . . . . . . . . . . . . . . . . . . 47 Restatement (Second) of Contracts, § 344 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

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Restatement (Second) of Contracts, § 351 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51, 52, 84 Rstatement (Second) of Contracts, § 352 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) ) ) Plaintiff, ) ) v. ) ) UNITED STATES OF AMERICA, ) ) Defendant. ) __________________________________________) NORTHERN STATES POWER COMPANY,

No. 98-484C (Senior Judge Wiese)

DEFENDANT'S POST-TRIAL BRIEF Pursuant to this Court's order dated December 4, 2006, defendant, the United States, respectfully submits the following post-trial brief. SUMMARY OF ARGUMENT At the beginning of trial, we explained to the Court that this case is about causation. Although plaintiff, Northern States Power Company ("NSP"), has advocated a relaxed standard of causation in its post-trial brief and has even eschewed the issue of causation in favor of a mitigation analysis, the parties' dispute requires resolution of one critical factual issue: whether NSP would have opted in the late 1980s to construct a dry storage facility at Prairie Island had it believed that the Department of Energy ("DOE") would timely commence accepting fuel pursuant to the Standard Contract in 1998. If NSP would have decided to build dry storage irrespective of the delay in DOE's performance, then, no matter what label is attached to the legal

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standard, any partial breach by the Government cannot be said to have "caused" the vast majority of the damages that NSP claims.1 NSP failed at trial to meet its burden of proving that it would have decided not to build a dry storage facility if it believed that DOE would have commenced performance pursuant to the Standard Contract in 1998. In fact, the evidence that NSP offered conclusively demonstrated that dry storage was necessary and was the only reasonable option available at the time. The same considerations that underlie NSP's primary argument in its post-trial brief ­ that it acted reasonably by building a dry storage facility in the "actual" world ­ dictate that it would have

The Court has already made a finding with respect to liability in this case. However, in contesting the existence of a breach the Government was specifically enjoined, via a writ of mandamus issued by the United States Court of Appeals for the District of Columbia Circuit, from relying upon the "Unavoidable Delays" clause of the Standard Contract to excuse its delayed performance. See Northern States Power Co. v. United States Dept. of Energy, 128 F.3d 754, 760 (D.C. Cir. 1997). We have consistently argued that the D.C. Circuit overstepped its jurisdiction and authority in issuing this writ of mandamus (given that the judicial review provision of the NWPA, 42 U.S.C. § 10139, does not permit the D.C. Circuit to review contract administration matters). Recently, in Nebraska Public Power District v. United States,73 Fed. Cl. 650, 673 (2006) (Allegra, J.), this Court determined that the writ of mandamus was void because, in issuing the writ, the D.C. Circuit "operated in excess of its jurisdiction and, specifically, without an appropriate waiver of sovereign immunity." This Court subsequently certified its decision for interlocutory appeal to the United States Court of Appeals for the Federal Circuit, Nebraska Public Power District v. United States, 74 Fed. Cl. 762 (2006), and, on March 1, 2007, the Federal Circuit issued an order granting Nebraska Public Power's petition for permission to appeal. Nebraska Public Power District v. United States, Misc. Docket No. 843, 2007 WL 779291 (Fed. Cir. Mar. 1, 2007). The Government reserves the right to challenge any determination of liability with respect to the Standard Contract if the writ of mandamus is lifted or otherwise deemed inapplicable.

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made the same prudent decision in the absence of a partial breach by DOE (i.e., in the "but for" world). In the actual world, NSP opted in the late 1980s for dry storage, as opposed to other alternatives, because of the prohibitive cost of a plant shutdown and the possibility that these alternatives would not create enough space to ensure Prairie Island's continuous operation. This same consideration would undoubtedly have driven NSP's decisionmaking process in the "but for" world, as the company weighed the very realistic possibility that, even had DOE begun industry-wide performance in 1998, a rerack of Prairie Island's spent fuel pool (the alternative NSP now claims it would have chosen) would not have created enough space to keep Prairie Island in continuous operation. Such a decision would necessarily have been made in the presence of substantial uncertainty not only about how much additional space a rerack could have created, but also about when and at what rate DOE would begin accepting fuel at Prairie Island. Similarly, in the actual world, NSP rejected a potential alternative for its storage needs, rod consolidation, because it determined that that alternative would have endangered the health and safety of its employees. In the "but for" world, NSP, as a rational decisionmaker, an employer, a publicly held company, and a utility regulated by the state of Minnesota, would have had no reasonable choice but to reject an alternative that would have subjected its employees to the same hazards. NSP's statements that it acted reasonably in the actual world simply prove too much. An array of witnesses who appeared at trial concluded that the only reasonable alternative for NSP to take in the "but for" world was the same as the one it took in the actual world ­ to construct a dry storage facility. Tellingly, this conclusion was articulated not only by the Government's witnesses (including Dr. Jonathan Neuberger, whose analysis the Court repeatedly 3

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endorsed as a proper method for predicting how a company might make a rational decision in the presence of uncertainty), but by NSP's own employees and spokespersons, whose testimony confirms that the company would not have performed a rerack in the absence of a breach. Indeed, in an effort to convince the Minnesota authorities in the early 1990s to approve the company's plans for dry storage, NSP representatives stated without qualification that dry storage would be a superior option to reracking, even if DOE were to begin accepting fuel from the nuclear industry in 1998 (in other words, under the same circumstances that comprise the "but for" world). NSP believed (and, in a recurring theme of this litigation, its employees and representatives consistently testified in judicial proceedings) that reracking would be an inferior option to dry storage even in the event of DOE performance, yet now would have the Court believe that, in the "but for" world, it would have taken the road that it so thoroughly discredited before the Minnesota authorities. NSP should be bound to the sworn testimony and representations that it provided when it sought permission to build a dry storage facility, even if the truths that it offered concerning reracking are no longer convenient. Because NSP failed to meet its burden of establishing that it would have performed a third rerack at Prairie Island had it believed that DOE would timely commence accepting spent fuel, the only form of damage to which NSP may be entitled in this case is the difference between the cost of the dry storage facility that it constructed in the actual world and the cost of the dry storage facility that it would have constructed in the "but for" world, together with the costs that NSP incurred through 2004 in connection with the Monticello dry storage facility. This amount totals $20,802,226.

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Even if NSP had proven that it would not have constructed a dry storage facility at Prairie Island in the "but for" world, several components of the damages that it claims must necessarily be excluded either as a matter of fact or as a matter of law, or both. First, any amounts that NSP has been required to pay arising from the mandates enacted by the Minnesota legislature and from NSP's settlement with the Mdewakanton Dakota Tribe at Prairie Island are not properly claimed against the Government. The legislative mandates themselves were unforeseeable to NSP's own employees, including its own Chief Executive Officer, James Howard, in the early 1990s and, a fortiori, were unforeseeable to DOE nearly ten years earlier, at the time of contract formation. Further, both the mandates and the tribal settlement are several causal steps removed from the decision to build dry storage and are the result of unforeseeable and intervening forces, most notably the independent decision of the Minnesota legislature to enter the fray and exact concessions from NSP because of NSP's desire to continue generating nuclear power. The United States is not a guarantor against state legislation aimed at its contracting partners and, in the event of a breach, is not responsible for additional costs imposed upon its contracting partners by the states in which they conduct business. Second, the United States is not responsible for any losses that NSP claims to have incurred as a result of NSP's participation in a speculative business venture known as Private Fuel Storage LLC ("PFS"). The United States Court of Appeals for the Federal Circuit has unequivocally held that investment in PFS is too speculative and unforeseeable to form the basis of a damage award in a spent nuclear fuel case. Indiana Michigan Power Co. v. United States, 422 F.3d 1369, 1376 (Fed. Cir. 2005). This analysis is particularly apt where, as here, NSP continued investing in PFS long after it had made arrangements for its spent fuel needs at Prairie 5

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Island and could have placed its spent fuel in PFS as a customer rather than an owner. Further, the evidence adduced at trial proves only that NSP made an investment in PFS. Regardless of whether NSP's participation in PFS was motivated by profit, there is no evidence anywhere in the record suggesting that the staggering sum that NSP invested (which exceeded the contribution of all other utilities) has been reduced to nothing or that the company, in which NSP has an ownership interest, has absolutely no cash or other assets on hand. In the absence of proof demonstrating that NSP's investment is valueless, there is no basis for a damage award. Third, NSP has failed to prove that several of the components of damage that it has identified are incremental to the partial breach. Most notably, it has failed to demonstrate that certain overheads, internal labor costs, and the auxiliary building crane upgrade that it performed would not have occurred in the absence of the Government's failure timely to commence spent fuel acceptance. In fact, the evidence adduced at trial indicates that NSP would have incurred the same costs in these categories irrespective of the delay in DOE's performance. In the absence of proof that these costs were incremental to the partial breach, NSP is not entitled to recover these components of its damages claim. Fourth, NSP's claim for its cost of capital is, as Dr. Neuberger and our accounting expert, Larry Johnson, described, conceptually and practically identical to prejudgment interest that is not available against the Government unless otherwise provided by contract or statute. NSP's cost of capital damages are little more than an attempt to obtain an award of prejudgment interest despite the absence of any waiver of sovereign immunity relating to such an award, and are not an appropriate component of damage.

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Finally, NSP asserts that the Court need not resolve the issue of the acceptance rate, yet, at the same time, attempts to demonstrate that the parties contemplated that the DOE would begin accepting at a rate sufficient to preclude the need for additional at-reactor storage after 1998. NSP's legal and factual arguments on this issue are unavailing. To the extent that NSP asserts that the Court need not resolve the issue of rate, it is not correct. There is no dispute that, no matter what acceptance rate is applied, NSP would not have had any allocations for Prairie Island until 1999, at the earliest, and that it needed some way to meet its spent fuel storage needs between 1994 (when NSP originally believed that its spent fuel pool capacity would be exhausted) and the date of DOE's acceptance of enough fuel from Prairie Island to keep the plant operating. However, the company cannot prove what the "but for" world would have looked like (and thereby provide a basis for comparison to the actual world for purposes of damages) without establishing a rate at which DOE was required to accept spent fuel. Further, the rate of acceptance is central to the issue of causation. NSP cannot prove that the "but for" world would have been different ­ i.e., that it would have decided in the late 1980s to perform a third rerack ­ without showing that it could reasonably have believed, given the terms of the Standard Contract, that a rerack would be sufficient to bridge the gap between 1994 and the date of DOE's initial acceptance of fuel. NSP failed to make such a showing. NSP suggests that, pursuant to the Standard Contract, it was entitled to believe that "DOE would perform at a rate to avoid additional at-reactor storage after 1998." Pl. Post-Tr. Br. at 12, 92. However, such a belief is belied by DOE's repeated rejections of requests by industry groups, of which NSP was a member, to agree to any contract obligation imposing such a rate or contractually to tie the rate of acceptance to the industry generation rate or the need to reduce the 7

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accumulated backlog of spent fuel. NSP, in essence, maintains an indefensible proposition that a reasonable rate under the contract is one that was specifically rejected during contract negotiations and that the nuclear industry, including NSP, unsuccessfully attempted to insert through amendment. NSP's inability to prove that the rate that it advocates was incorporated into the Standard Contract is fatal to its causation argument. Under the terms of the Standard Contract, which did not require publication of a allocation commitment for individual reactors until 1991, the precise contours of DOE's performance would not have been known to NSP in the late 1980s, when the company was forced to decide how to resolve its fuel storage dilemma. In the absence of the specific rate that NSP advocates, the rate of acceptance was yet another uncertainty that the company would have needed to consider in making its operating decisions. Faced with the possibility of running out of space in its spent fuel pool in 1994, NSP was required in the late 1980s to determine how to meet its storage needs with incomplete information about how much fuel DOE would accept once it began accepting fuel and when it would accept it. Moreover, it would have been imprudent for NSP to make decisions about its future storage needs based solely upon a confluence of favorable events. Thus, even if NSP were confident in the late 1980s that DOE would, in fact, begin industry-wide performance in 1998, NSP would still have been required to make its decision with uncertainty concerning the rate of acceptance, the exact time that DOE would arrive to accept its spent fuel, and the efficacy of in-pool technology to permit it to bridge the gap between 1994 and the date of DOE's arrival. NSP made the only appropriate choice in the actual world and, operating under the uncertain conditions that necessarily confronted it, would have made the same prudent decision in the "but for" world. 8

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STATEMENT OF FACTS I. CHRONOLOGY OF EVENTS RELEVANT TO NSP'S CLAIM

Pursuant to the Court's instructions issued in Court on December 1, 2006, we provide the following chronology of events relevant to NSP's satisfaction of its spent fuel storage needs, including its decision to construct a dry storage facility at Prairie Island, its investment in PFS, and proceedings before the Minnesota Public Utilities Commission ("PUC") and Legislature. A recitation of facts pertaining to identification of the rate of acceptance pursuant to the Standard Contract is provided in a separate section that appears after this chronology. Date 1983 Event NSP executes three Standard Contracts covering spent fuel stored at Prairie Island (PX 56), spent fuel generated and stored at Monticello (PX 57), and spent fuel generated at Monticello but stored by General Electric in Morris, Illinois (PX 58). Laura McCarten prepares a spent nuclear fuel strategic plan with respect to Prairie Island. NSP projects that, based upon current conditions, the accumulation of spent fuel at Prairie Island will exceed the effective pool capacity of 1354 fuel assemblies by 1994. NSP proceeds with a rod consolidation demonstration program as a possible solution. Reracking is not listed among the alternatives considered. PX 398B at NSP-0001635, NSP-0001638; Tr. 417:18-421:21, 604:10-12 (McCarten). NSP News publishes an article stating that reracking is impossible because the "current racks have the assemblies as close together as possible." DX 47 at NSP-0073091; Tr. 948:21-952:18 (Kapitz). April 11, 1988 McCarten circulates a draft public information strategy report containing a "Rod Consolidation Q & A." In response to the question, "Why doesn't NSP re-rack the fuel pool to hold more assemblies as it has done before?," the Q & A states that "NSP already has re-racked the Prairie Island spent fuel pool to the fullest extent possible. There is not enough room to move whole assemblies any closer together." Tr. 593:17-596:21 (McCarten); DX 61 at NSP-0072972.

1987

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September 1988

Laura McCarten and Jon Kapitz prepare a "Prairie Island Spent Fuel Storage Technology Evaluation Report," in which they recommend that NSP pursue dry storage at Prairie Island instead of rod consolidation. McCarten and Kapitz recommend rejecting rod consolidation as an alternative due to the potential for rod consolidation to negatively affect plant operations and the potential for personnel exposure. PX 399 at NSP0037000; Tr. 478:21-479:11, 604:18-605:21, 620:4-13 (McCarten). NSP decides to construct a dry storage facility. PX 400; Tr. 655:13-657:6 (McCarten). At time of this decision, James Howard, NSP's Chief Executive Officer, understood that the last rerack had put the assemblies as close together as technically possible. Howard participated in and approved the decision. Tr. 1943:9-1944:11, 2000:1-13 (Howard). NSP News publishes another article stating that the second rereack at Prairie Island "put the assemblies as close together as possible." DX 78 at NSP-0027299. McCarten and Howard still believe this to be true at the time the article is published. Tr. 611:8-612:12 (McCarten), 2000: 1-14 (Howard). McCarten also states in the article that dry storage "will be less intrusive on plant operations and offers the advantage of being modular. That is, NSP can buy the casks as needed and stop buying them when the DOE starts accepting spent fuel." DX 78 at NSP-0027299; Tr. 617:15618:9 (McCarten). McCarten prepares a handwritten document entitled, "Cost for rerack and two-tiered rack," in which she assumes, based upon her "engineering judgment," that a rerack of Prairie Island pool could increase its capacity by 20 percent. DX 77; Tr. 518:12, 520:10-17, 505:7-17 (McCarten). McCarten believes that a 20 percent increase would enable the plant to continue to operate until "sometime in 1999." McCarten provides this information to the Minnesota Environmental Quality Board ("MEQB"). Tr. 519:13-16. In April, NSP applies for a certificate of need ("CON") to the PUC. PX 403. The application is amended in November to correct various errata. PX 60; Tr. 544:11-14 (McCarten). In its November submission, NSP informs the PUC that "[i]t may be possible to increase the PI Pool capacity by reracking. However, the maximum increase achievable by reracking is estimated to be about 20%." PX 60 at KRGNSP03789; Tr. 663:3-20 (McCarten). The estimated cost of a rerack is $8-10 million. PX 60 at KRGNSP03832; Tr. 550:18-23 (McCarten). NSP projects that, assuming a rerack, normal plant operation could continue "[t]hrough 1998" before the pool is exhausted. Id.; Tr. 550:1310

Late 1988/ early 1989

February 1990

1990

1991: Application for Certificate of Need

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17(McCarten). NSP estimates that the cost of a dry storage facility loaded with 48 casks would be $40 million. PX 60 at KRGNSP03833. The CON application is accompanied by and expressly incorporates an environmental impact statement ("EIS"), which the MEQB prepared at the request of NSP. The EIS is based in large part upon information provided directly by NSP. PX 403 at NSP-0070247, PX 420; Tr. 496:16-497:18 (McCarten). On the basis of information provided by NSP, the MEQB concludes that, "[b]ased on engineering judgment, reracking the pool to a more compact rack design would gain only 200-250 more spaces," an increase of between 14.4 percent and 18 percent of licensed capacity. PX 420 at NSP-0063082; Tr. 637:8-639:2 (McCarten). Neither the MEQB nor the PUC performs an independent engineering analysis of the reracking assertions that NSP provided to the MEQB. The MEQB later notes that "the record established that a third reracking (single level) would provide approximately 200 to 250 more spaces (20 percent) or about enough for three years of storage (1998)" and that "there was no technical or procedural basis for challenging NSP's reracking analysis." PX 679 at NSP-0057469; Tr. 4232:4-4233:3 (Leonard). NSP's recognition in 1991 that the 20-percent figure represented the maximum amount of increase that it believed it could achieve is corroborated by subsequent statements by two employees. In 1994, Joe Jensen writes that NSP has "consistently stated" that "rerack is an inferior option to dry cask storage" and would "increase storage capacity only 20%," DX 145 at NSP-0100713; 1068:7-15 (Kapitz). Another employee, James Alders, compiles a "Dry Cask Alternatives Study" in 1995 for submission to the Minnesota Legislature and concludes, in a description of the events leading to the CON application, that "the rerack option[] was originally rejected because . . . [r]erack would only have increased the plant's storage capacity by 20 percent" and would "result in increased radiation exposure to plant workers," and that "[t]he costs associated with rerack and a premature plant shutdown would have been excessive." PX 489 at NSP-0001409; PX 49 at KRGNSP11063; Tr. 1393:22-1396:2 (Alders). In sworn testimony in support of NSP's application for a CON, McCarten states that "[a] 20 percent increase in the pool capacity would take up, allow normal operation, full power operation, though 1998. We would then be faced with shutdown in 1999." DX 107 at 56-57; Tr. 634:17635:23 (McCarten). NSP's application for a CON includes a table indicating that, based upon projected discharge rates, Prairie Island will have accumulated 1,665 spent fuel assemblies by May 26, 1999, an 11

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amount that exceeds the licensed capacity of the pool even after a rerack that achieves a 20-percent increase. PX 403 at NSP-007268; Tr. 644:18645:10 (McCarten). In the errata to the CON application, NSP also states that the dry cask storage facility is a better option for its storage needs, even if DOE were to commence performance under the Standard Contract by accepting spent fuel not at a repository but at an MRS. NSP states that dry storage "provides optimal flexibility and allows NSP to obtain only the storage needed until the DOE begins removing spent fuel from PI for shipment to a monitored retrievable storage facility or a permanent repository." NSP further notes that "the possibility of an MRS facility becoming available [prior to 2010] strongly supports the use of a Dry Cask Storage Facility because of its ability to add additional storage capacity in small increments." PX 60 at KRGNSP03789, KRGNSP03795; Tr. 628:2-12, 631:16-24 (McCarten), 4275:18-4276:11 (Schwartz); see also DX 95 at NSP-0000277; Tr. 4321:1-13 (Schwartz) (table appended to CON application indicating that, were DOE to begin performing in 1998, NSP would still require dry storage). In October 1991, Michael Schwartz , President of Energy Resources International and consultant to NSP, provides rebuttal testimony in further support of NSP's application for a CON. Schwartz, whom NSP later characterizes as the "most knowledgeable witness" to have testified before the PUC because of his extensive experience as the nuclear industry's liaison to DOE, states that performance at a monitored retrievable storage facility ("MRS") beginning at 1998 is "not an unrealistic possibility." DX 103 at NSP-0003124; PX 778 at NSP-0055798; Tr. 4263:6-7, 4302:1-12 (Schwartz). However, Schwartz, who was operating under the assumption that allocations could not be shared between Prairie Island and Monticello, cautions that NSP will not receive allocations for Prairie Island until 2001 (pursuant to the oldest fuel first ("OFF") queue that the Standard Contract mandates). For this reason, Schwartz states that the PUC should assume that any authorization for a dry storage facility should be enough to carry NSP not merely through 1999, but through 2001, when Prairie Island has its first allocation. DX 103 at NSP-0003124-25; Tr. 4264:7-23, 4317:244318:23 (Schwartz). In a brief submitted to the PUC in February 1992, NSP relies on Schwartz's testimony to support its contention that DOE could begin accepting fuel pursuant to the Standard Contract at an MRS in 1998, but that, even if it did, NSP would need to make arrangements to store spent fuel through 2001. PX 778 at NSP-0055717; Tr. 4292:14295:1 (Schwartz).

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September 18, 1991 James Howard writes to Secretary of Energy James Watkins, seeking to April 15, 1992 assurance that DOE will timely perform under the Standard Contract. Howard seeks such an assurance as a means of demonstrating to the "nay sayers" in Minnesota that the proposed dry storage facility will not be permanent. PX 492, 496; Tr. 2024:11-2031:20 (Howard). April 1992 An administrative law judge of the PUC recommends denial of NSP's application for certificate of need on the grounds that the application is for a permanent facility and therefore requires legislative approval under Minnesota law. However, the ALJ finds (and the PUC subsequently endorses the conclusion) that reracking and rod consolidation, among others, are "not the first choices of any party" and are "technically inferior to dry cask storage due to substantially higher risks of accidents and worker exposure." PX 61 at KRGNSP04125-26; PX 749; Tr. 673:3-674:4 (McCarten). The ALJ's decision with respect to the permanence issue is subsequently reversed by the PUC, which grants a limited certificate of need for a dry storage facility. PX 61 at KRGNSP04136; Tr. 566:1-567:3 (McCarten). However, on June 8, 1993, the ALJ's decision is reinstated by the Minnesota Court of Appeals, and, on July 15, 1993, the Minnesota Supreme Court denies to review the matter, prompting legislative review. See In re Application for Certificate of Need for Construction of an Independent Spent Fuel Storage Installation, 501 N.W. 2d 638 (Minn. Ct. App. 1993), review denied (July 15, 1993). May 29, 1992 Secretary Watkins responds to James Howard's April 15, 1992 letter, stating that DOE is "committed to fulfill the mandates imposed by the [NWPA]" and, specifically, to begin performance through an MRS in 1998. Howard is "delighted" to receive this letter and issues a news release the same day. According to Howard, NSP "supports the MRS concept," and the schedule proposed by Secretary Watkins, which contemplates performance at an MRS beginning in 1998, represents a "firm commitment with a solid timetable." DX 314, PX 497; Tr. 2034:32038:22 (Howard) The Minnesota Legislature conducts hearings related to NSP's application for a certificate of need. Tr. 1244:3-12 (Novak). These hearings, conducted during an interim session, are the most extensive in the history of the state and involve the "most controversial issue that the state has dealt with." Tr. 1270:5-1271:13 (Novak). Kris Sanda, at the time the Commissioner of the Minnesota Department of Public Services, describes the legislative process as a "long, contentious and winding road" in which 13

1993

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one never knew from one day to the next what was going to happen. Tr. 1126:19-23, 1202:2-1202:24 (Sanda). Early 1994 A bill authorizing the construction of a dry storage facility at Prairie Island and containing wind mandates is introduced by State Senator Steven Novak. Tr. 1228:9-22 (Merriam). Although the bill initially stalls in the Environment and Natural Resources Committee, in the estimation of Senator Raymond Merriam, it is going to get to the Senate floor and ultimately pass, without additional mandates. Tr. 1219:4-1222:10; 1230:1-10 (Merriam). Sensing an opportunity "to get something in addition to what was in" the original version, Senator Merriam introduces several additional energy source requirements (i,e., mandates other than that pertaining to wind energy) into the bill. Tr. 1222:9-15; 1230:1-23 (Merriam). In response to an inquiry concerning the feasibility of reracking, McCarten informs Senator Novak by letter that the PUC had previously found pool reracking to be technically inferior to dry storage and entailed a greater health and safety risk, and that the PUC "rejected reracking for reasons of cost, practicality, and safety." McCarten estimates that a plant shutdown from May 1995 through early 1998 will cost between $408 and $560 million, mostly attributable to the cost of replacement power. The Minnesota Legislature has this information at its disposal in considering legislation. PX 592; Tr. 1289:5-1290:24 (Novak). The dry storage facility is completed and casks are ready to be loaded, pending legislative approval. Tr. 1492:5-24 (Northard). David Sparby of NSP makes a presentation in Mescalero, New Mexico, to approximately 20 utilities as part of effort to enlist other utilities in the PFS venture. At this time, PFS was not assumed to be in operation until 2002. DX 143 at SN179006; Tr. 1494:23-1497:5 (Northard). Minnesota Session Law Ch. 641, S.F. No. 1706, is enacted into law. The law authorizes the immediate loading of five casks of spent fuel onto a dry storage facility at Prairie Island, an additional four casks upon certification from the MEQB that NSP has made progress toward siting an additional dry storage site in Goodhue County and has complied with certain mandates concerning wind power, and an additional eight casks upon satisfaction of additional mandates concerning wind power and biomass power. PX 198 at KRGNSP11417 (Minn. Laws 1994, Ch. 641, S.F. No. 1706, Art. I, Sec. 2, codified at Minn. St. § 116C.771).

March 1994

March 1994

March 24, 1994

May 10, 1994

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The law further provides that the authorization for dry cask storage is not effective until the governor, on behalf of the state, and the public utility operating the Prairie Island nuclear plant enter into an agreement binding the parties to the terms of sections 2 and 3 and the mandate for 200 megawatts of windpower and 75 megawatts of biomass required by December 31, 2002, in article 3, section 2, subdivision 1, and section 3. The Mdewakanton Dakota Tribal Council at Prairie Island is an intended third-party beneficiary of this agreement and has standing to enforce the agreement. PX 198 at KRGNSP11417-18 (Ch. 641, S.F. No. 1706, Art. I, Sec. 4, codified at Minn. St. § 116C.773). May 20, 1994 NSP and the State of Minnesota execute the contract contemplated by Minn. Stat. Ch. 641, S.F. No. 1706, Art. I, Sec. 4. PX 804; Tr. 1694:121695:18 (Wilensky). NSP makes its initial capital contribution to PFS. PX 1057 (Sieracki Demonstrative No. 39); Tr. 2707:25-2709:9 (Sieracki); 1504:20-24 (Northard) (identifying work order number 12.40.27-03 as PFS capital contributions). Thirty-three utilities, including NSP, make contributions to phase I of PFS, which includes a feasability study for the project. Twelve utilities, including NSP, subsequently make contributions during phase II (preliminary design work and licensing study); and eight, including NSP make contributions during phase III (preparation of NRC license). NSP also makes contributions during Phase IV, which includes subscription agreements and the construction phase. NSP contributes more to the project than any other utility. Tr. 1506:7-1511:25 (Northard). Fall 2002 NSP decides to seek legislative authorization for additional dry storage at Prairie Island. Tr. 1674:4-8 (Wilensky). In an effort to be a "good neighbor," NSP begins discussions with the Mdewakanton Dakota Tribe at Prairie Island concerning its request for legislative authorization for additional casks. During these discussions, the tribe raises concerns that would exist regardless of whether NSP receives authorization to store additional assemblies in dry storage, namely, the tribal land's proximity to the Prairie Island plant and the 15

November 1995

Early 2003

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health and safety hazards posed by a catastrophic nuclear accident. Tr. 1734:10-1737:6 (Wilensky). NSP begins negotiations with the tribe even though NSP publicly states that it believes that the legislature possesses the authority to increase the amount of casks authorized for dry storage at Prairie Island. Tr. 1731:151732:22, 1734:24-1735:5. May 29, 2003 Minnesota Session Law Ch. 11 (H.F. 9), is enacted into law. Among other provisions