Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 1 of 111
IN THE UNITED STATES COURT OF FEDERAL CLAIMS (Electronically Filed on February 9, 2007) ) ) ) ) ) ) ) ) ) ) )
NORTHERN STATES POWER COMPANY, Plaintiff, v. THE UNITED STATES, Defendant.
No. 98-484C (Senior Judge Wiese)
NORTHERN STATES POWER COMPANY'S POST-TRIAL BRIEF
Of Counsel: Jay E. Silberg Daniel S. Herzfeld Jack Y. Chu PILLSBURY WINTHROP SHAW PITTMAN LLP 2300 N Street, N.W. Washington, D.C. 20037 (202) 663-8000 (202) 663-8007 (fax) Kerry C. Koep XCEL ENERGY 414 Nicollet Mall, 5th Floor Minneapolis, MN 55401 (612) 215-4583 (612) 215-4544
Alex D. Tomaszczuk PILLSBURY WINTHROP SHAW PITTMAN LLP 1650 Tysons Boulevard McLean, VA 22102-4859 (703) 770-7940 (703) 770-7901 (fax)
Counsel of Record for Plaintiff Northern States Power Company
February 9, 2007
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 2 of 111
TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................................................... v I. INTRODUCTION .................................................................................................................... 1 II. FINDINGS OF FACT............................................................................................................... 6 A. The Nuclear Waste Policy Act Is Enacted To Codify The Federal Government's Longstanding Policy To Dispose Of Spent Nuclear Fuel And To Provide A Firm Schedule For Disposing Of The Waste ............................... 6 B. NSP's Three Standard Contracts And The Expectations At The Time The Contracts Were Signed ................................................................................................ 8 1. NSP's Three Contracts And Its Nuclear Plants .......................................................... 10 2. Both Parties To The Contracts Expected DOE To Perform At A Rate Sufficient To Remove The Need For Utilities To Acquire Additional Storage Capacity After 1998 And To Begin To Remove The Backlog ..................... 12 C. NSP Monitors DOE's Program And Recognizes That Based On DOE's Projected Delay NSP Will Need To Provide Storage Through The End Of The Life Of The Plants As Licensed By NRC ............................................................ 15 D. NSP Decides To Use Dry Storage Technology To Meet Its Need to Provide Storage Until The End Of Life Of The Plants..................................................... 19 1. NSP Evaluates Whether To Use Dry Cask Storage Or Rod Consolidation To Provide Storage Through The End Of The Life Of Plants.................................... 20 2. NSP Never Seriously Considers Further Reracking Because It Would Not Have Met NSP's Needs To Provide Storage Through The End Of The Life Of Prairie Island's NRC Licenses................................................................ 23 3. NSP Chooses The Transnuclear 40 Assembly Dry Storage Cask As The Method To Store SNF ........................................................................... 27 E. The Certificate of Need Proceedings Before The Minnesota Public Utilities Commission And Appeal To The Minnesota Court of Appeals......................... 28 1. NSP Prepares And Submits An Application For A Certificate Of Need To Increase Storage Capacity At Prairie Island ................................................ 28 2. The PUC Considers NSP's Application For A Certificate Of Need .......................... 31
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 3 of 111
3. The PUC Decision Is Appealed And Reversed By the Minnesota Court Of Appeals ...................................................................................... 32 4. During the PUC Proceedings, NSP And The Minnesota Department of Public Service Seek Assurance From DOE Regarding Performance, But Instead DOE States It Has No Obligation To Perform By 1998 Even As It Sends Out Its 1991 ACR........................................................................... 33 F. The 1994 Prairie Island Legislation.................................................................................. 37 G. NSP Incurs Costs By Constructing The ISFSI At Prairie Island And Purchasing And Loading Casks ................................................................................ 41 H. NSP Pursues Private Fuel Storage And An Alternate Storage Site In Goodhue County, Minnesota........................................................................................ 44 1. NSP And Other Utilities Succeed In Licensing Private Fuel Storage Where DOE Failed To Pursue An MRS ..................................................................... 44 2. NSP Incurs Costs In Attempting To Site An Alternative Dry Storage Facility In Goodhue County........................................................................................ 48 I. The Government Breaches The Standard Contracts In 1998 And, To Date, Has Not Yet Begun Performance...................................................................................... 49 1. The Government Renews Its Statement That It Has No Obligation To Perform Beginning In 1998 ................................................................................... 49 2. DOE's DCS Process Through The Prism Of Its Expected Non-Performance ........... 50 J. The 2003 Legislation And The Monticello ISFSI ............................................................ 53 1. NSP Incurred Costs Complying With The Biomass Mandate.................................... 54 2. NSP Incurred Costs Complying With The Mandate To Pay Into And Manage The Renewable Development Fund ...................................................... 55 3. NSP Incurred Costs Complying With The Settlement Agreement With The Mdewakanton Dakota Tribe at Prairie Island To Lift The 17 Cask Limitation .............................................................................................. 57 K. NSP Pursues And Receives A Certificate Of Need To Build A Dry Storage Facility At The Monticello Plant ......................................................................... 58 L. NSP Incurred Actual Cost Of Capital By Financing Its Mitigation Costs ....................... 60
ii
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 4 of 111
III. CONCLUSIONS OF LAW .................................................................................................... 61 A. The Standard Of Review For Mitigation Costs For Breach Of Contract Damages.......... 61 1. Indiana Michigan III Established Mitigation As The Paradigm for Determining Costs For Past Damages In A Partial Breach Case................................ 62 2. NSP's Damages Were Foreseeable............................................................................. 63 3. NSP Need Not Prove Causation Based On The Self-Serving "But For" Model Of Causation Contrived By The Government ................................................. 64 B. NSP's Incurred Costs In Licensing And Constructing On-Site Dry Storage Facilities Were Caused By The Government's Breach And Foreseeable ........................ 67 1. NSP Properly Mitigated The Government's Breach By Licensing And Constructing A Dry Storage Facility And Loading Casks At The Prairie Island Plant.......................................................................................... 67 2. NSP Properly Mitigated Its Damages By Beginning To Plan For The Licensing And Construction Of A Dry Storage Facility At The Monticello Plant................................................................................................... 71 C. NSP's Incurred Costs In Pursuing Off-Site Dry Storage Through Private Fuel Storage Was Caused By The Government's Breach And Was Foreseeable Or Actually Foreseen .................................................................................... 72 D. NSP Reasonably Incurred Mitigation Costs Regarding The Mandates, Which Were Caused By The Government's Breach And Were Foreseeable Or Actually Foreseen .................................................................................... 76 1. In A Heavily Regulated Environment, Actions Of Regulatory Bodies Are Foreseeable .............................................................................................. 78 a. The Minnesota Mandates Are Equivalent To Other Forms Of Taxation Or Rate-Setting................................................................................. 80 b. It Was Foreseeable That Breach Of A Contract Born Of Political Action Would Result In Political Consequences .................................................. 81 c. The Need To Investigate Alternative Sites Was Foreseeable............................... 81 d. Assistance Payments To The Mdewakanton Dakota Tribe Were Foreseeable Or Actually Foreseen ........................................................................ 82
iii
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 5 of 111
2. The Government's Breach And Long Term Expected Non-Performance Caused NSP To Mitigate Its Damages By Complying With The Mandates .............. 84 E. The Government Failed To Show That NSP's Mitigation Efforts Were Unreasonable And, Therefore, Its Asserted Offsets Are Improper .................................. 87 1. The Federal Circuit Did Not Create A Per Se Cut-Off Of 1994 To Recover Mitigation Costs In SNF Cases .................................................................... 87 2. The Government Should Not Receive An Offset For Incremental Labor Costs ........ 89 3. Any Offsets Based On What DOE Might Do When It Picks Up NSP's SNF In The Future Are Speculative............................................................................ 90 F. The Parties Understood That DOE Would Perform At A Rate To Avoid Additional At-Reactor Storage After 1998 And To Begin Reducing the Backlog Of SNF, Which Is A 3,000 MTU Steady-State Rate.......................................... 92 1. The DCS Process Did Not Create Binding Commitments ......................................... 93 2. The Parties Expected Contract Performance At A 3,000 MTU Steady-State Rate After A Five Year Ramp-Up ......................................................... 96 G. NSP Should Receive Its Costs of Capital ......................................................................... 98 IV. CONCLUSION..................................................................................................................... 100
iv
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 6 of 111
TABLE OF AUTHORITIES Cases Abbott Labs. v. Brennan, 952 F.2d 1346 (Fed. Cir. 1991) .............................................................................................. 66 Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234 (Fed Cir. 2004).................................................................................................95 Baltimore Gas & Elect. Co. v. NRDC, Inc., 462 U.S. 87 (1983)...................................................................................................................72 Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 (1946).................................................................................................................71 Bluebonnet Sav. Bank, FSB v. United States, 266 F.3d 1348 (Fed. Cir. 2001)........................................................................................ 74, 78 Brandon & Tibbs v. George Kevorkian Accountancy Corp., 277 Cal. Rptr. 40 (Cal. Ct. App. 1990) .......................................................................................77 Cal. Fed. Bank, FSB v. United States, 395 F.3d 1263 (Fed. Cir. 2005), cert. denied, 126 S. Ct. 344 (2005) ............... 3, 65, 66, 75, 85 Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir. 2005)..........................................................................................95, 98 Centex Corp. v. United States, 55 Fed. Cl. 381 (2003) ................................................................................................................98 Citizens Fed. Bank v. United States, No. 05-5173, 2007 WL 162820 (Fed. Cir. Jan. 24, 2007) ............................................ 2, 64, 80 Citizens Fed. Bank, FSB v. United States, 59 Fed. Cl. 507 (2004) ............................................................................................................ 80 Commonwealth Edison Co. v. United States, 271 F.3d 1327 (Fed. Cir. 2001) (en banc) .............................................................................. 78 Consumers Energy Co. v. United States, 65 Fed. Cl. 364 (2005) .............................................................................................................94 Duquense Light Co. v. Barasch, 488 U.S. 299 (1989)............................................................................................................... 79 Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002)........................................................................................... 2, 61 v
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 7 of 111
Entergy Nuclear Generation Co. v. United States, 64 Fed. Cl. 336 (2005) .............................................................................................................94 Essex Electro Eng'rs, Inc. v. Danzig, 224 F.3d 1283 (Fed. Cir. 2000)................................................................................................95 First Heights Bank, FSB v. United States, 422 F.3d 1311 (Fed. Cir. 2005)......................................................................................... 66, 87 Florida Power & Light Co. v. Westinghouse Elec. Corp., 826 F.2d 239 (4th Cir. 1987) ............................................................................................... 6, 81 Gardner Displays Co. v. United States, 346 F.2d 585 (Ct. Cl. 1965) ...............................................................................................63, 64 Hendler v. United States, 175 F.3d 1374 (Fed. Cir. 1999)............................................................................................... 74 Home Savings of Am., FSB v. United States, 399 F.3d 1341 (Fed. Cir. 2005)................................................................................................63 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) ("In re ISFSI").............................................31, 32, 79 In re Kellett Aircraft Corp., 186 F.2d 197 (3d Cir. 1950).....................................................................................................63 Indiana Mich. Power Co. v. Dep't of Energy, 88 F.3d 1272 (D.C. Cir. 1996) ("Indiana Mich. I").........................................................8, 9, 50 Indiana Mich. Power Co. v. United States, 57 Fed. Cl. 88 (2003) ("Indiana Mich. II"), appeal dismissed, 112 Fed. Appx. 37 (Fed. Cir. 2004).............................................................................93, 96, 97 Indiana Mich. Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005) ("Indiana Mich. III")..................................................... passim Jackson v. Metropolitan Edison Co., 419 U.S. 345 (1974).................................................................................................................78 Koby v. United States, 53 Fed. Cl. 493 (2002) .......................................................................................................63, 69 Landmark Land Co. v. FDIC, 256 F.3d 1365 (Fed. Cir. 2001)................................................................................................74
vi
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 8 of 111
LaSalle Talman Bank v. United States, 317 F.3d 1363 (Fed. Cir. 2003) .........................................................................................98, 99 Locke v. United States, 283 F.2d 521 (Ct. Cl. 1960) ...............................................................................................65, 71 Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000)........................................................................................1, 8, 96 Maine Yankee Atomic Power Co. v. United States, 44 Fed. Cl. 372 (1999), aff'd, 271 F.3d 1357 (Fed. Cir. 2001)................................................78 Minnesota v. United States NRC, 602 F.2d 412 (D.C. Cir. 1979) .................................................................................................79 Northern Helex Co. v. United States, 524 F.2d 707 (Ct. Cl. 1975) .....................................................................................................62 Northern States Power Co. v. United States Dep't of Energy, 128 F.3d 754 (D.C. Cir. 1997) ("Northern States I") ..............................................................50 Northern States Power Co. v. United States, 224 F.3d 1361 (Fed. Cir. 2000) ("Northern States II") .......................................................1, 9 NRDC, Inc. v. United States NRC, 685 F.2d 459 (D.C. Cir. 1982), rev'd on other grounds sub nom. Baltimore Gas & Elect. Co. v. NRDC, Inc., 462 U.S. 87 (1983).............................................72 Old Stone Corp. v. United States, 450 F.3d 1360 (Fed. Cir. 2006), petition for cert. filed, 75 U.S.L.W. 3333 (U.S. Dec. 14, 2006) (No. 06-837)..............2, 63, 78 Pacific Gas & Elec. Co. v. United States, 73 Fed. Cl. 333 (2006) ..........................................................................................64, 65, 90, 91 Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Comm'n, 461 U.S. 190 (1983)..........................................................................................................79, 80 PSEG Nuclear, LLC v. United States, 465 F.3d 1343 (Fed. Cir. 2006)..................................................................................................9 Robinson v. United States, 305 F.3d 1330 (Fed. Cir. 2002)................................................................................................62 S. Cal. Fed. Sav. & Loan Ass'n v. United States, 422 F.3d 1319 (Fed. Cir. 2005), cert. denied , sub nom. Martin v. United States, 126 S. Ct. 2967 (2006) ..........................64, 68 vii
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 9 of 111
Sacramento Mun. Util. Dist. v. United States, 70 Fed. Cl. 332 (2006) ("SMUD").........................................................................65, 90, 91, 92 Sys. Fuels, Inc. v. United States, 65 Fed. Cl. 163 (2005) .............................................................................................................94 Tecom, Inc. v. United States, 66 Fed. Cl. 736 (2005) .............................................................................................................95 Tenn. Valley Auth. v. United States, 69 Fed. Cl. 515 (2006) ..................................................................................................... passim Wickham Constr. Co. v. Fischer, 12 F.3d 1574 (Fed. Cir. 1994)............................................................................................98, 99 Yankee Atomic Elec. Co. v. United States, 54 Fed. Cl. 306 (2002) .............................................................................................................36 Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249 (2006) ..................................................................................................... passim Statutes and Codes Nuclear Waste Policy Act of 1982, Pub. L. No. 97-425, 96 Stat. 2201 (1983)........................................................................ passim Nuclear Waste Policy Amendments Act of 1987, Pub. L. No. 100-203, 101 Stat. 1330-227 (1987) ........................................................18, 72, 81 28 U.S.C. § 2516............................................................................................................................98 42 U.S.C. § 10131......................................................................................................7, 8, 81, 96, 97 42 U.S.C. § 10132....................................................................................................................72, 81 42 U.S.C. § 10133....................................................................................................................72, 81 42 U.S.C. § 10136..........................................................................................................................84 42 U.S.C. § 10137..........................................................................................................................83 42 U.S.C. § 10156..........................................................................................................................84 42 U.S.C. § 10161....................................................................................................................72, 81 42 U.S.C. § 10162........................................................................................................18, 34, 72, 81 42 U.S.C. § 10168..........................................................................................................................18 viii
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 10 of 111
42 U.S.C. § 10169..............................................................................................................72, 81, 84 42 U.S.C. § 10173..........................................................................................................................83 42 U.S.C. § 10173a ........................................................................................................................83 42 U.S.C. § 10195....................................................................................................................83, 90 42 U.S.C. § 10199....................................................................................................................83, 90 42 U.S.C. § 10222............................................................................................................8, 9, 81, 96 42 U.S.C. § 10241..........................................................................................................................34 42 U.S.C. § 10251..........................................................................................................................34 1994 Minn. Sess. Laws Ch. 641 ............................................................................................ passim 2003 Minn. Sess. Laws, 1st Special Session, Ch. 11....................................................40, 53, 55, 58 Minn. Stat. § 116C.77 ..............................................................................................................37, 38 Minn. Stat. § 116C.771 ............................................................................................................38, 39 Minn. Stat. § 116C.773 ..................................................................................................................41 Minn. Stat. § 116C.779 ......................................................................................................40, 55, 56 Minn. Stat. § 116C.80 ..............................................................................................................39, 40 Minn. Stat. § 116C.83 ....................................................................................................................53 Minn. Stat. § 216B.1645 ................................................................................................................58 Minn. Stat. § 216B.2411 ................................................................................................................40 Minn. Stat. § 216B.2423 ................................................................................................................39 Minn. Stat. § 216B.2424 ....................................................................................................40, 54, 86 Rules, Regulations, & Draft Standard Contract 10 C.F.R. Part 50, App. F ................................................................................................................6 18 C.F.R. Part 101....................................................................................................................61, 99 35 Fed. Reg. 17,530 (Nov. 14, 1970)...............................................................................................6
ix
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 11 of 111
48 Fed. Reg. 5458 (Feb. 4, 1983) ....................................................................................................9 48 Fed. Reg. 16,590 (Apr. 18, 1983) ...............................................................................................9 Final Interpretation of Nuclear Waste Acceptance Issues, 60 Fed. Reg. 21,793 (May 3, 1995) .........................................................................................50 Notice of Inquiry, 59 Fed. Reg. 27,007 (May 25, 1994) .................................................................................49, 50 71 Fed. Reg. 66,806 (Nov. 16, 2006).......................................................................................11, 59 Other Authorities 13 Wkly. Comp. Pres. Doc. 502 (1977)...........................................................................................7 11 JOSEPH R. PETRILLO, CORBIN ON CONTRACTS (Rev. ed. 2005).................................................77 3 DAN B. DOBBS, DOBBS LAW OF REMEDIES (2d. ed. 1993)..........................................................76 3 E. ALLAN FARNSWORTH, FARNSWORTH ON CONTRACTS (3d ed. 2004)......................................63 H.R. Rep. No. 97-491, pt. 1 (1982), reprinted in 1982 U.S.C.C.A.N. 3792 .............................6, 81 H.R. Rep. No. 97-785, pt. 1 .............................................................................................................7 RESTATEMENT (SECOND) OF CONTRACTS § 205.............................................................................95 RESTATEMENT (SECOND) OF CONTRACTS § 350 ..................................................................... 62, 76
x
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 12 of 111
IN THE UNITED STATES COURT OF FEDERAL CLAIMS (Electronically Filed on February 9, 2007) ) ) ) ) ) ) ) ) ) ) )
NORTHERN STATES POWER COMPANY, Plaintiff, v. THE UNITED STATES, Defendant.
No. 98-484C (Senior Judge Wiese)
NORTHERN STATES POWER COMPANY'S POST-TRIAL BRIEF Pursuant to this Court's December 4, 2006 Order, Plaintiff Northern States Power Company ("NSP"), respectfully files this post-trial brief, which includes findings of fact and conclusions of law in support of its breach of contract damages claim of $172,154,000. I. INTRODUCTION This trial presented this Court with NSP's compelling claim for breach of contract damages. This Court has already determined that Defendant, the United States (the "Government") is liable for breach of contract. See July 31, 2001 Order (granting NSP's renewed motion for summary judgment on liability); see also generally Northern States Power Co. v. United States, 224 F.3d 1361 (Fed. Cir. 2000) ("Northern States II"); Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1342 (Fed. Cir. 2000) ("The breach involved all the utilities that had signed the contract--the entire nuclear electric industry."). Therefore, the sole purpose of this trial was to determine the quantum of NSP's damages for the Government's partial breach of NSP's contracts.
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 13 of 111
The Standard for Determining Damages: The U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") has provided a legal framework for partial breach cases, in which the non-breaching party has taken steps to mitigate its damages prior to breach. Indiana Mich. Power Co. v. United States, 422 F.3d 1369, 1374-75 (Fed. Cir. 2005) ("Indiana Mich. III"). "Indiana Michigan altered the landscape considerably by parsing utility claims into actual expenditures and framing the inquiry as one of mitigation." Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249, 260 (2006). NSP must show that "(1) the damages were reasonably foreseeable by the breaching party at the time of contracting; (2) the breach is a substantial causal factor in the damages; and (3) the damages are shown with reasonable certainty." Indiana Mich. III, 422 F.3d at 1373 (citing Energy Capital Corp. v. United States, 302 F.3d 1314, 1320 (Fed. Cir. 2002)). The Government, however, as the breaching party bears the burden of showing that NSP's mitigation efforts as the non-breaching party were unreasonable. See Tenn. Valley Auth. v. United States, 69 Fed. Cl. 515, 523 (2006); see also Old Stone Corp. v. United States, 450 F.3d 1360, 1370 (Fed. Cir. 2006) (noting that the Government failed to show that costs incurred were unreasonable), petition for cert. filed, 75 U.S.L.W. 3333 (U.S. Dec. 14, 2006) (No. 06-837). Throughout the trial, counsel for the Government attempted to foist on this Court and NSP a self-serving form of causation that lacks any legal foundation. The Federal Circuit has recently stated that "the selection of an appropriate causation standard depends upon the facts of the particular case and lies largely within the trial court's discretion." Citizens Fed. Bank v. United States, No. 05-5173, 2007 WL 162820, at * 3 (Fed. Cir. Jan. 24, 2007). The Government's so-called "but for" standard, however, essentially is a "sole causation" standard. As will be discussed below, the Government's breach need not be the "sole cause" of damages
2
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 14 of 111
and NSP must only establish a causal connection between the Government's breach of contract as the primary and substantial cause of its mitigation costs. The law provides that other actions may act in confluence with the breach to also cause damages. Cal. Fed. Bank, FSB v. United States, 395 F.3d 1263, 1268 (Fed. Cir. 2005) ("Cal. Fed."), cert. denied, 126 S. Ct. 344 (2005). NSP has proven and discharged its burden (as well as showing that the magnitude of its losses were generally foreseeable) and the burden has shifted to the Government to show the unreasonableness of NSP's incurred mitigation costs a burden the Government has failed to discharge. Reasonable Certainty: The Government has agreed that NSP's damages were shown with reasonable certainty by stipulating that NSP actually incurred all damages sought. Trial Transcript ("Tr.") 730-32 (Government stipulating that costs actually incurred). Therefore, the Government apparently challenges NSP's mitigation costs only on the grounds of causation or foreseeability. For the reasons shown at trial and in this brief, however, NSP has fully proven that the Department of Energy ("DOE") caused NSP's damages and foresaw or reasonably could have foreseen the general nature of costs incurred by NSP in its efforts to mitigate the Government's damages. The Government has not otherwise met its burden to show NSP unreasonably incurred these costs. Acceptance Rate: This Court need not resolve the question of the acceptance rate because, as the Government acknowledged in its pre-trial brief, the rate at which DOE would have begun performance in 1998 has no impact on NSP's damages through December 31, 2004. See Defendant's Memorandum of Contentions of Fact and Law at 34. Furthermore, NSP need not establish any specific rate because it need only show reasonable mitigation and NSP never considered that DOE would actually perform beginning in 1998 at any rate when it made its 3
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 15 of 111
decisions to mitigate. NSP discusses and briefs this issue to inform this Court's decision in this case and in the event the Government further presses the acceptance rate issue. As discussed below, Congress enunciated the purpose of the Nuclear Waste Policy Act of 1982 ("NWPA"), as being to provide a firm schedule with a date certain January 31, 1998 when the federal government through DOE would begin removing fuel from commercial utilities. The NWPA expressly stated that the commercial utilities would pay for interim storage only until DOE began removal of fuel based on the schedule in the NWPA. Thus, it is clear that when utilities entered contracts with DOE all parties had the expectation (based on the purpose of the NWPA) that utilities would not have to provide for additional at-reactor storage after 1998. A 3,000 Metric Ton of Uranium aggregate annual steady-state rate after a five year rampup would best meet that need (and begin working off the backlog of accumulated waste). Summary of Damages: NSP has proven its incurred mitigation costs through December 31, 2004 for: (1) On-site storage of spent nuclear fuel ("SNF") at its nuclear plants, which includes its licensing and operation of its SNF dry storage facility at its Prairie Island nuclear plant and its costs of licensing and beginning to construct a dry storage facility at its Monticello nuclear plant; (2) Alternate storage facilities, which include (a) its costs for its participation in Private Fuel Storage, LLC (and its predecessor), which successfully received a license from the Nuclear Regulatory Commission to construct a dry storage facility in Utah and (b) its efforts to license an away-from-reactor SNF storage facility in Goodhue County, Minnesota, which effort was a condition of NSP receiving permission from Minnesota to build a dry storage facility at the Prairie Island nuclear plant; 4
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 16 of 111
(3) The costs of implementing up to 125 megawatts (later lowered to 110 megawatts) of mandated biomass generation, which was imposed by the Minnesota legislature as a condition of NSP being allowed to build its dry storage facility and load casks at the Prairie Island nuclear plant; (4) Other mandated payments, which include, inter alia, (a) a mandated payment into and administration of a fund for renewable energy the Renewable Development Fund for every dry storage cask that remained at Prairie Island after 1999 the year that the DOE would have begun picking up NSP's SNF had it not breached the contract, and (b) settlement payments to the Mdewakanton Dakota Tribe, whose land sits immediately next to the Prairie Island nuclear plant, which payments were a condition placed by the Minnesota legislature in lifting the 17 cask limitation imposed by the 1994 Minnesota legislation. A summary of NSP's damages in both nominal and present value dollars corresponding to the above bolded categories follows: SUMMARY OF DAMAGES (in Millions of Dollars) 1 CATEGORY On-Site Storage Alternate Storage Facilities Mandated Biomass Generation Other Mandated Payments TOTAL NOMINAL DOLLARS ADJUSTED FOR WEIGHTED AVERAGE COST OF CAPITAL $ 44,190,000 27,587,000 23,142,000 22,738,000 $117,657,000 $ 78,920,000 40,045,000 26,231,000 26,958,000 $ 172,154,000
As noted above, the cut-off date for damages in this case is December 31, 2004. Damages incurred by NSP after that date will be the subject of a future action. 5
400510160v8
1
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 17 of 111
II.
FINDINGS OF FACT A. The Nuclear Waste Policy Act Is Enacted To Codify The Federal Government's Longstanding Policy To Dispose Of Spent Nuclear Fuel And To Provide A Firm Schedule For Disposing Of The Waste
Early in the history of American atomic power, the Government acknowledged a definite federal responsibility to provide for the permanent disposal of SNF and high-level waste ("HLW") byproduct from the commercial use of nuclear power. See Florida Power & Light Co. v. Westinghouse Elec. Corp., 826 F.2d 239, 244 (4th Cir. 1987) (discussing President Eisenhower's Atoms-for-Peace commercial nuclear program and the passage of the Atomic Energy Act). 2 The Government's effort to manage the disposal of SNF and HLW was redirected when President Carter announced in 1977 that the Government intended to postpone indefinitely reprocessing in the United States. 13 Wkly. Comp. Pres. Doc. 502, 503 (1977) . As a result, "[t]he domestic nuclear industry was confronted not only with a shift in its technical future but with a sudden and unanticipated liability in the form of spent fuel stored at reactor sites with no near-term destination." H.R. Rep. No. 97-491, pt. 1, at 27 (1982), reprinted in 1982 U.S.C.C.A.N. 3792, 3793. In the "1977 timeframe, the federal government prohibited reprocessing and prevented us from implementing what our design was for that plant." Tr. 776 (Kapitz) (referring to Prairie Island). The majority of spent fuel pools existing at nuclear reactor sites, including those at NSP's Prairie Island and Monticello nuclear plants, were sized with the
This commitment is reflected, for example, in the Atomic Energy Commission's ("AEC") statement of its "Policy Relating to the Siting of Fuel Reprocessing 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. In announcing this policy, the AEC reaffirmed that "high-level waste repositories should be under Federal ownership and responsibility." 35 Fed. Reg. 17,530, 17,532 (Nov. 14, 1970). 6
400510160v8
2
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 18 of 111
intention that SNF would be stored therein temporarily before being shipped to a reprocessing facility. Tr. 775-76 (Testimony of Kapitz) ("[W]hen Prairie Island was first built, our spent fuel pool had very limited space . . . . When we built the plant, the design was to have enough space for one reload of fuel, typically around 40 fuel assemblies, and then also for the other unit, the 121 spaces, in case for maintenance or inspections, we needed to off-load the entire core. But each reload would be shipped off-site for reprocessing prior to the next refueling that occurred at the site."); see also, e.g., H.R. Rep. No. 97-785, pt. 1, at 47. The lack of reprocessing meant that SNF had to be removed and stored somewhere outside the pool if plant operation was to continue. H.R. Rep. No. 97-785, pt. 1, at 47. On January 7, 1983, President Reagan signed into law the Nuclear Waste Policy Act of 1982, Pub. L. No. 97-425, 96 Stat. 2201 (1983) ("NWPA") (codified as amended at 42 U.S.C. §§ 10131-10270). The NWPA formalized the Government's long-standing policy of accepting responsibility and providing for the timely disposition of commercial SNF and HLW. See 42 U.S.C. § 10131(b)(2) (indicating that one purpose of NWPA was "to establish the Federal responsibility, and a definite Federal policy, for the disposal of such waste and spent fuel"). Mr. Jon Kapitz a long-time nuclear engineer at the Prairie Island plant, who served as both project engineer and project manager of the Prairie Island dry storage project (Tr. 746, 748-49 (Kapitz)) explained that he understood the NWPA's disposal program as a "one for one exchange" where the DOE was "substituting their program, which was to take our fuel directly and dispose of it directly[,] for our reprocessing plan, which was what the plant was built on . . . ." Tr. 777 (Kapitz). 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. § 7
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 19 of 111
10131(a)(2)(A). To solve this problem, the NWPA acknowledged that one of the key purposes of the Act 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 HLW). The NWPA specified the date January 31, 1998 when DOE was required to begin removing SNF from commercial nuclear reactors. 42 U.S.C. § 10222(a)(5)(B); Maine Yankee, 225 F.3d at 1342 ("Congress found this objective so important when it promulgated the Act that it took the unusual action of specifying that all the contracts must contain this explicit requirement."). While the NWPA lodged the responsibility with the utilities for paying for DOE's disposal program and to provide interim storage of SNF, the utilities only had the responsibility for the costs of interim storage "until such waste and spent fuel is accepted by the Secretary of Energy in accordance with the provisions of this Act . . . ." 42 U.S.C. §§ 10131(a)(4) & (5); see also Plaintiff's Exhibit ("PX")275, 1983 Draft Mission Plan at 2-1 (SN045172) ("Until 1998, each utility will be responsible for providing its own additional on-site interim storage . . . ."). B. NSP's Three Standard Contracts And The Expectations At The Time The Contracts Were Signed
The NWPA created a quid pro quo arrangement so that utilities, such as NSP, would pay fees into the Nuclear Waste Fund in exchange for the Government's performance of SNF and HLW disposal services beginning no later than January 31, 1998. See Indiana Mich. Power Co. v. Dep't of Energy, 88 F.3d 1272, 1277 (D.C. Cir. 1996) ("Indiana Mich. I"); 42 U.S.C. § 10222(a)(5)(B). The NWPA instructed DOE and commercial nuclear utilities to enter into
8
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 20 of 111
contracts for the disposal of each utility's SNF and HLW. NWPA, Pub. L. No. 97-425, § 302, 96 Stat. 2201, 2257 (1983) (codified at 42 U.S.C. § 10222(a)(1)); see also Northern States II, 224 F.3d at 1364. Pursuant to NWPA § 302, DOE created a "Standard Contract for the Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste," ("Standard Contract"). Northern States II, 224 F.3d at 1364. While DOE developed the Standard Contract by use of a rulemaking process, the NWPA did not require that method and DOE did so only for its convenience. See PSEG Nuclear, LLC v. United States, 465 F.3d 1343, 1350 (Fed. Cir. 2006) ("However, the DOE was not statutorily required to use the administrative rulemaking process or to even develop a Standard Contract. Rather, it did so because it preferred developing a contract with standard provisions that could be used with multiple contractees to the extent practicable.") (citing 48 Fed. Reg. 5458, 5459 (Feb. 4, 1983)(Defendant's Exhibit ("DX") 2.01 in this case). In promulgating the final terms of its Standard Contract, DOE recognized, "The 1998 date is called for in the Act, and we believe it to be a realistic date. Our performance will be judged by meeting this date." DX2.02, 48 Fed. Reg. 16590, 16598 (Apr. 18, 1983); Tr. 3872-76 (Morgan). Based on the NWPA, the failure of a utility to sign a contract with DOE would have led to the shut down of its reactors. Tr. at 3863-64 (Morgan) ("My understanding is that [the Nuclear Regulatory Commision], which regulates reactor operation, said that or directed people that if they didn't sign the contract, they would have to shut down the reactors."); see also Indiana Mich. III, 422 F.3d at 1372; 42 U.S.C. § 10222(b)(1).
9
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 21 of 111
1.
NSP's Three Contracts And Its Nuclear Plants
On June 20, 1983, NSP entered into three of these "Standard Contracts" with DOE for the disposal of its SNF and HLW (1) at NSP's Prairie Island nuclear plant, (2) at NSP's Monticello nuclear plant, and (3) for NSP's SNF from Monticello that was subsequently shipped to the General Electric plant in Morris, Illinois. PX56 (Prairie Island), Tr. 129 (Bomberger); PX57 (Monticello), Tr. 130 (Bomberger); PX58 (Monticello-GE Morris), Tr. 131-34 (Bomberger). Xcel Energy Inc. ("Xcel") is a public utility holding company that has various operating subsidiaries including NSP. Tr. 91-92 (Bomberger). The Nuclear Management Company ("NMC") co-owned by four utilities including Xcel at the time of trial currently operates the Prairie Island and Monticello plants. Tr. 103-04 (Bomberger). Prairie Island is a two-reactor plant located near Red Wing, Minnesota, on the Mississippi River, generating approximately 1176 megawatts of net energy. Tr. 96 (Bomberger); Second Amended Complaint & Supplemental Complaint ¶ 2. Prairie Island's two reactors are both pressurized water reactors. Tr. 96 (Bomberger). The NRC licensed Prairie Island's unit 1 reactor in 1973 and it began commercial operation in the same year. Tr. 97 (Bomberger). Unit 1 is currently licensed by the NRC to operate until August 2013. Tr. 168 (Bomberger); Tr. 427-28 (McCarten). Prairie Island's unit 2 reactor began commercial operation in 1974. Tr. 97 (Bomberger). Unit 2 is currently licensed by the NRC to operate until 2014. Tr. 168 (Bomberger); Tr. 427-28 (McCarten). Prior to signing the Prairie Island Standard Contract with DOE, NSP had re-racked the spent fuel pools at Prairie Island twice completed in 1977 and
10
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 22 of 111
1981 increasing the total storage capacity of the spent nuclear fuel pools from approximately 200 assemblies to 1,386 assemblies. 3 Tr. 414-15 (McCarten); Tr. 775, 778 (Kapitz). Monticello is a single reactor plant located in Monticello, Minnesota, also on the Mississippi River. Tr. at 97 (Bomberger); Tr. 1802 (McKeown); PX389 at NSP-0052224 (Monticello Certificate of Need). The Monticello nuclear plant uses a boiling water reactor, which generates 600 megawatts of net electricity. Tr. 1802 (McKeown); Tr. 97 (Bomberger). The Monticello nuclear plant was licensed for commercial operation in 1970 and is currently licensed to operate until September 2010. Tr. 97 (Bomberger); Tr. 1802 (McKeown). NSP recently completed a license renewal application with the NRC, which will extend the license from 2010 to 2030. Tr. 1802-03 (McKeown). 4 Prior to signing its two Standard Contracts for Monticello spent fuel with DOE, NSP had re-racked its spent fuel pool at the Monticello nuclear plant once in 1978 increasing its total storage capacity to 2,237 assemblies. Tr. 1805, 1818 (McKeown); Monticello Certificate of Need Application, PX389 at NSP-0052203 ("In 1978 all but one low-density storage rack in the pool was replaced with higher density racks in order to The capacity of a spent fuel pool refers to the total number of spent fuel assemblies that can be safely stored in the spent fuel pool. Tr. 415-16 (McCarten). Generally, "a fuel assembly is an array of individual fuel rods held together by hardware, the hardware provides structural integrity, so you can handle fuel assembly" and also "provides a spacing of the fuel rods so that there [are] individual fuel rods and area that's free around them to allow for water flow" in the spent fuel storage pool. Tr. 416-17 (McCarten); see also Tr. 755-56 (Kapitz). Each fuel rod is a long metal tube that includes enriched ceramic uranium pellets inside the tube. Tr. 755 (Kapitz). The Prairie Island fuel rods individually (or together in an assembly) are approximately 14 feet tall. Tr. 758 (Kapitz). The Prairie Island pool includes 10 7-by-7 racks (with 49 spaces per rack) and 16 7-by-8 racks (with 56 spaces per rack). Tr. 5078-79 (Kapitz); Tr. 414, 464-68 (McCarten). Reracking is the process of removing a rack and replacing the rack with one that includes a greater array of spaces for example 8-by-8 (or 64 spaces) instead of 7-by-7 (or 49 spaces) without taking apart the fuel assembly. Tr. 5078-80 (Kapitz). 4 On November 8, 2006, NRC granted the license renewal. See NRC, Monticello Nuclear Generating Plant License Renewal Application, available at http://www.nrc.gov/reactors/operating/licensing/renewal/applications/monticello.html (visited Feb. 1, 2007); see also 71 Fed. Reg. 66,806 (Nov. 16, 2006). 11
400510160v8 3
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 23 of 111
establish today's capacity."); Annual Nuclear Waste Management Report (2004), PX475 at NSP0040588. Between 1984 and 1987, NSP shipped 1,058 spent fuel assemblies from its Monticello nuclear plant to General Electric's ("GE") Morris, Illinois spent fuel storage facility. Tr. 413 (McCarten); Tr. 134-35 (Bomberger); Tr. 1803 (McKeown). NSP and GE had entered into an agreement to have GE store these spent fuel assemblies. Tr. 132 (Bomberger); Tr. 1803 (McKeown). NSP's "Morris" contract with DOE encompasses these spent fuel assemblies shipped to the GE Morris facility. PX58; Tr. 134-35 (Bomberger). To date, NSP has paid DOE approximately $334 million for nuclear waste disposal services and is continuing to pay at a rate of approximately $12 million per year. Tr. 135 (Bomberger); Second Amended Complaint & Supplemental Complaint ¶ 9. 2. Both Parties To The Contracts Expected DOE To Perform At A Rate Sufficient To Remove The Need For Utilities To Acquire Additional Storage Capacity After 1998 And To Begin To Remove The Backlog
As noted above, one of the purposes of the NWPA was to create a firm schedule for the removal of the accumulated SNF at commercial nuclear reactors. At the time the Standard Contracts were signed, both DOE and NSP expected that DOE would perform at a rate sufficient to remove the need for NSP (or any utility) to acquire additional storage capacity after 1998 the statutorily mandated date to begin performance and to begin removal of the accumulated backlog of SNF that increased at NSP's (and other utilities') facilities. The Government's witnesses (and contemporaneous DOE documents) acknowledged that DOE implemented a strategy for performance that would avoid the need for additional at-reactor storage after 1998 and work off the backlog of generated SNF. Robert Morgan, the first acting12
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 24 of 111
director of DOE's Office of Civilian Radioactive Waste Management ("OCRWM"), Tr. 3779 (Morgan), stated at a December 20, 1983 DOE-sponsored conference: "The basic strategy which we have outlined in the mission plan is that, beginning in 1998, utilities will not have to provide any additional storage facilities on-site." Tr. 3882 (Morgan); PX286, Robert Morgan, Program Overview, Proceedings of the 1983 Civilian Radioactive Waste Management Information Meeting at 11 (SN069599) (Feb. 1984). Mr. Morgan acknowledged that this strategy was consistent with his understanding of the purposes of the NWPA. Tr. 3882-83 (Morgan). At the same conference, Mr. Morgan also stated, "During the first year of operation of the repository in 1998, we should be receiving fuel at a rate so that no utility would have to add any further storage facilities, either on-site or at another location." Tr. 3884 (Morgan); PX286 at 11 (SN069599). Mr. Morgan also acknowledged that DOE intended to begin working off the backlog of fuel. Tr. 3884 (Morgan); PX286 at 11-12 (SN069599-600). Similarly, DOE acknowledged the same strategy of performance in its 1983 Draft Mission Plan, a draft required by the NWPA and overseen by Mr. Morgan. Tr. 3885-87 (Morgan); see also PX275, Civilian Radioactive Waste Management Program Mission Plan at 2-1 through 2-4 ("The waste materials will be accepted in accordance with a Waste Acceptance Schedule designed to provide an acceptance rate in the first five years such that no utility will have to provide additional storage capacity after January 31, 1998."); see also Tr. 2118-21 (Supko) (discussing PX275). 5
In the subsequent 1984 Draft Mission Plan and the final 1985 Mission Plan, DOE continued to use similar acceptance rates for the industry in the aggregate. See Tr. 2128-35 (Supko); Mission Plan for the Civilian Radioactive Waste Management Program at 2-1, 2-2 (Draft 1984), PX276; Mission Plan for the Civilian Radioactive Waste Management Program at 381 (1985), DX45 at 381 ("[I]f the DOE fails to meet the schedule shown in Table 9-2 or 9-3 [using a steady-state rate of 3,000 MTU after a five-year ramp-up], then the additional storage capacity needed to accommodate the delay in schedule will be provided by the DOE, possibly at reactor sites."); Supko Demonstratives 2-5, PX1055; see also Tr. 2133 (Supko). 13
400510160v8
5
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 25 of 111
Mr. David Zabransky DOE's current contracting officer, Tr. 4326 (Zabransky), understood when he worked at Wisconsin Electric Power Company ("WEPCO") that DOE had a goal to have an acceptance rate that reflected the aggregate rate of discharges and would work off the backlog of SNF. Tr. 4445-46 (Zabransky). Mr. Thomas Pollog, currently DOE's contracting officer's technical representative, Tr. 3604 (Pollog), admitted that during the mid1980s, one of the goals of the DOE program was to have acceptance rates sufficient to alleviate the need for purchasers' to have storage outside of their pools. Tr. 3699 (Pollog). NSP had the same expectation. Mr. James Karalus, who assisted in preparing NSP's comments to DOE on the draft Standard Contract, stated that it was his understanding that DOE "would begin taking the fuel at that time [January 31, 1998] or very shortly after that date at a rate that was commensurate with our generation of spent fuel, on an industry basis . . . . And eventually ramp up to take all of the spent fuel . . . ." Tr. 323 (Karalus). Mr. Jon Kapitz, a longtime nuclear engineer at Prairie Island, understood that "the Department of Energy would then take our fuel at the rate at which we generated and also faster than that, . . . such that once they begin taking fuel from Prairie Island, [NSP] would no longer have the need to find additional storage space on-site." Tr. 774-75 (Kapitz). Finally, Ms. Laura McCarten also stated that she recognized in 1987 that the DOE was projecting rates that would have been sufficient to avoid obtaining additional at-reactor storage after 1998. Tr. 454-55 (McCarten). A 3,000 metric tons of uranium ("MTU") steady-state rate after approximately a fiveyear ramp-up period would best meet the intent of the program and expectations of the parties of a rate sufficient to remove the need to acquire additional at-reactor storage capacity after 1998 and to begin removal of the accumulated backlog of SNF. Tr. 2118 (Supko); Deposition of Lake Barrett at 10-11, 58-59 (Apr. 22, 2002) (deputy and one-time acting director of DOE's OCRWM 14
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 26 of 111
acknowledged that the 3,000 rate "was chosen in consideration with the production rate" of SNF and was consistent with his understanding of the intent of the NWPA); see also Deposition of Lake Barrett at 1163-64 (May 10, 2002). The design documents for the facility and total system life-cycle cost documents since the dawn of the program in 1983 repeatedly used the 3,000 MTU steady-state rate. Tr. 2136-42, 2220-22 (Supko); Deposition of Lake Barrett at 1334-35 (May 10, 2002). 6 C. NSP Monitors DOE's Program And Recognizes That Based On DOE's Projected Delay NSP Will Need To Provide Storage Through The End Of The Life Of The Plants As Licensed By NRC
In 1987, NSP was determining how it should meet SNF storage needs for its nuclear plants in light of DOE's responsibilities under the NWPA and NSP's Standard Contracts. Tr. 418 (McCarten). NSP was faced with the need to increase storage capacity at Prairie Island, as its spent fuel pools would run out of space in approximately 1994. Tr. 420-21, 439 (McCarten).
For example, DOE issued Nuclear Waste Fund fee adequacy assessments, which were "to determine whether the 1 mil per kilowatt hour fee [charged to utilities] was adequate to cover the life cycle cost of the Civilian Radioactive Waste Management system," and, for example, the 1986 Assessment used a 3,000 MTU steady-state rate after a five year ramp-up period as one of its assumptions. Tr. 2136-38 (Supko); Nuclear Waste Fund Fee Adequacy: An Assessment at 4 (Mar. 1986), PX271; PX1055, Supko Demonstrative 6. Additionally, similar to the fee adequacy assessments prepared by DOE, it also prepared total system life cycle cost ("TSLCC") analyses of the program "to project what the life cycle cost of the waste management system would be and for the purposes primarily of ensuring that the 1 mil per kilowatt hour fee would be adequate to cover the cost of the program." Tr. 2139 (Supko). The TSLCC studies regularly used as an assumption that DOE would perform at a 3,000 MTU steady-state (usually with a five-year ramp-up period). See, e.g., Tr. 2140-42 (Supko); Analysis of the Total System Life Cycle Cost for the Civilian Radioactive Waste Management Program at 22, 28 (Apr. 1986), PX302; PX105, Supko Demonstratives 7-8; Tr. 2150-52 (Supko); PX1055, Supko Demonstrative 12; Analysis of the Total System Life Cycle Cost for the Civilian Radioactive Waste Management Program at 28 (Table 2-2), PX262; Tr. 2202 (Supko); Analysis of the Total System Life Cycle Cost of the Civilian Radioactive Waste Management Program at 4-14 (May 2001), PX162; PX1055, Supko Demonstrative 18. 15
400510160v8
6
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 27 of 111
In January 1987, DOE issued a draft Mission Plan Amendment, in which it projected at least a five-year delay in opening a repository and, instead proposed that DOE might be able to meet its waste acceptance obligations beginning in 1998 through the use of a monitored retrievable storage facility. Tr. 430-35 (McCarten); Draft Mission Plan Amendment at 1015, 1018 (Jan. 1987), PX303 (concluding that DOE needed to "reassess and rebaseline the program for the first repository and revise its schedule" and noting that the "new schedule shows a fiveyear extension of the date for waste acceptance at the first repository, from 1998 to 2003"). Ms. Laura McCarten in 1987 working as a consultant within NSP's Special Nuclear Programs department, Tr. 407, 411-12 (McCarten) and later in 1990 the project manager of the Prairie Island dry storage project, Tr. 408 (McCarten) reviewed DOE's program including the 1987 Draft Mission Plan Amendment. Tr. 433 (McCarten). In August 1987, Ms. McCarten prepared a report for NSP management that evaluated the DOE program and also looked at the storage needs of NSP's nuclear plants to determine whether there was a "mismatch" between when DOE storage would be available and NSP's storage needs. Tr. 418 (McCarten). In the report, she recognized that DOE was now projecting a five-year delay in opening a repository. Tr. 419-20, 423; Laura McCarten, Spent Nuclear Fuel Strategic Plan at NSP-001635 (Aug. 1987), PX398B ("On January 28, 1987, the Federal government proposed a five year delay in opening the first repository. Under a revised program management plan published by the DOE, the first repository would not be completed until the year 2003."). Ms. McCarten recognized that DOE would not begin performance at a repository until at least 2003. Tr. 422-24 (McCarten) ("My understanding was that the DOE was projecting that the first repository would not operate prior to 2003."); PX398B at NSP-0001636.
16
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 28 of 111
Ms. McCarten also concluded that NSP "couldn't really realistically count on" DOE having an authorized monitored retrievable storage facility ("MRS") to meet the 1998 performance date. Tr. 425-26 (McCarten). In her report, Ms. McCarten conveyed "that although the MRS seemed like a good step, there were so many linkages and conditions associated with it, that it was not something to really put a lot of stock into or put a lot of reliance on or have confidence about." Tr. 425 (McCarten); PX398B at NSP-00001638 ("The DOE's waste acceptance schedule will depend on whether or not Congress authorizes construction of an MRS, the linkage between MRS operation and the first repository development, and when the first repository begins operating."). The report states: If Congress does not authorize an MRS, then NSP must provide storage for its spent fuel out to at least 2005. This is consistent with the delay recently announced by DOE. However, given the uncertainties and opportunities for further delay, NSP should anticipate having to provide storage for its fuel out to the end of the life of the plants. Monticello's 40 year operating license will expire in 2010. Prairie Island's Unit 1 and 2 licenses expire in 2013 and 2014, respectively. PX398B at NSP-0001638 (emphasis added); see also Tr. 427-28 (McCarten). In June 1987, DOE issued its final Mission Plan Amendment to Congress detailing the need for Congress to authorize an interim storage facility an MRS if DOE was to be able to begin timely disposing of SNF by 1998. OCRWM Mission Plan Amendment at 63 (June 1987), PX304; see also Tr. 452-53 (McCarten) (noting her review of the document). DOE stated, "If Congress does not approve the MRS facility, the transfer of waste to DOE facilities may not be able to begin in 1998." PX304 at 63. In December 1987, Congress passed the Nuclear Waste Policy Amendments Act, which nullified DOE's earlier proposal for an MRS at Oak Ridge, Tennessee, authorized DOE to build an MRS facility, though with restrictive scheduling and capacity linkages to the permanent 17
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 29 of 111
repository. Pub. L. No. 100-203, § 5021, 101 Stat. 1330-227, 1330-232, 1330-236 (1987) (codified, as amended, at 42 U.S.C. §§ 10162, 10168(d)(1)). DOE had requested that Congress include linkages between the MRS and repository over the objections of the commercial nuclear utilities. Tr. 3400-02 (Kouts); DX49 at 29; Tr. 2606-07 (Supko); DX53 at HQR0031748 (stating DOE's support for linkages in its MRS proposal to Congress); see also DX53 at HQR0031747, HQR0032039 (stating utility industry's opposition to including linkages). In June 1988, Ms. McCarten provided a revised report to NSP senior management regarding the DOE program and the timeframe that NSP would have to provide storage for its fuel before DOE performed. See Laura McCarten, Northern States Power Company Spent Nuclear Fuel Strategic Plan (June 1988), PX398A; Tr. 437-38 (McCarten). As a result of the enactment of the Amendments Act, Ms. McCarten noted that the law "created a restrictive link between the MRS construction schedule and the repository development schedule." PX389A at NSP-0001623; Tr. 442-43 (McCarten); id. 441 (McCarten) (stating "that an MRS facility had been authorized by Congress, but that there were also pretty severe restrictions or linkages between the MRS and the first repository"). Re-enforcing her preliminary conclusions of a year earlier, Ms. McCarten again concluded that NSP could not rely on DOE to perform before the end of the NRC-licensed life of the plants: As explained in Section 1.2, the DOE could begin accepting utility spent fuel in 2004. This date is based on the assumption that the NRC will issue construction authorization for the first repository in 1998, thus clearing the way for MRS construction to begin in 1998, and using the DOE estimate of six years to construct the MRS. However, given the uncertainties and opportunities for delay, NSP should anticipate having to store all spent fuel out to at least 2006-2007. Furthermore, interim storage technologies implemented should be compatible with the likelihood that NSP will have to provide storage for its spent fuel out to end-of-life of the plants.
18
400510160v8
Case 1:98-cv-00484-JPW
Document 292
Filed 02/09/2007
Page 30 of 111
PX389A at NSP-0001624 through NSP-0001625 (emphasis added); Tr. 444-45 (McCarten) (discussing this section of her report); see also Tr. 762-63 (Kapitz). Notably, also in June 1988, DOE recognized that the Amendment Act's linkages between the construction of the MRS and the construction of the repository were too restrictive and that DOE would not be able to perform by 1998 if the law was not altered. Draft 1988 Mission Plan Amendment at 18-19, PX279; Tr. 2148 (Supko) (noting that the Draft 1988 Mission Plan Amendment "showed the MRS facility beginning operation in 2003"). "The DOE recognizes that, under current conditions, waste acceptance at a waste-management facility cannot begin in 1998; furthermore, the delay in the repository schedule and the linkages between that schedule and key milestones in the siting and construction of an MRS facility make it unlikely that the DOE will be able to start accepting waste significantly before 2003." PX279 at 18-19. D. NSP Decides To Use Dry Storage Technology To Meet Its Need to Provide Storage Until The End Of Life Of The Plants
Based on Ms.