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Standing between the Bush administration and its hope for expanded nuclear energy use are a mountain called Yucca and a slew of utilities with multibillion-dollar breach-of-contract claims against the federal government. Neither the mountain nor the litigation, say the utilities’ lawyers, is a true obstacle to an enhanced role for nuclear power in the nation’s energy future. Instead, they contend, this litigation, in particular, has the potential to influence a solution to the main problem: the seemingly insoluble and controversial issue of nuclear waste disposal. The litigation, primarily in the U.S. Court of Federal Claims in Washington, D.C., charges that the federal government breached contracts entered into with utilities in 1983 under the Nuclear Waste Policy Act of 1982. Under the act, the Department of Energy (DOE) was to begin disposal of spent nuclear fuel generated by the utilities on Jan. 31, 1998, in return for payments by the utilities into the Nuclear Waste Fund. But the deadline came and went without any action by the department. The government says the earliest it could begin disposal would be in 2010, when a proposed repository at Yucca Mountain in Nevada would be available. Both the Court of Federal Claims and the U.S. Court of Appeals for the Federal Circuit have found that the government did breach its contracts with the utilities. Eighteen suits are now back in the Court of Federal Claims, where discovery on damages is under way. The nuclear industry estimates the government’s breach has cost utilities more than $50 billion. “The government doesn’t want to face the piper here,” says Jerry Stouck of Washington, D.C.’s Spriggs & Hollingsworth, counsel to the so-called Yankee utilities. “We’ve got hard damages here, and there are going to be 50 cases before this is over.” Do the utilities want damages? “We’d much rather DOE perform,” says nuclear attorney Jay E. Silberg of Washington, D.C.’s Shaw Pittman, counsel to seven utilities. “We want a disposal site wherever it will be, online and operating,” he adds. “We’ve paid billions of dollars into the Nuclear Waste Fund to make that happen. The utilities shouldn’t have to wait.” And waiting is both expensive — damages mount as utilities bear the cost of storing the unmoved spent fuel on site — and even potentially dangerous, say some lawyers, because of the threat of additional terrorism at home.Nuclear plant owners are now storing about 40,000 metric tons of spent fuel in temporary storage at 72 plant sites in 36 states. Although security has been increased at all nuclear plant sites since the Sept. 11 terrorist attacks, Stouck says, “Maybe it’s OK to talk about terrorism now and use that as an additional reason why it makes sense to move this fuel to a centralized location.” DOLLARS AND SENSE A centralized location to dispose of the spent uranium fuel has been a hoped-for plan for nearly 30 years. The 1982 Nuclear Waste Policy Act was the first giant step toward that goal; five years later, in 1987, the government took the second by designating Yucca Mountain, 90 miles northwest of Las Vegas, as the potential, permanent resting place for 78,000 tons of radioactive waste. But the Yucca Mountain project has been dogged by environmental concerns and political opposition from area residents and their senior U.S. senator, Harry Reid, D-Nev., now second in leadership in the Senate. In 1994 — four years before DOE was to begin accepting the nuclear waste under its contracts with the utilities — several utilities went to the U.S. Court of Appeals for the D.C. Circuit to get an injunction to ensure that the department would perform on those contracts. “We had been thinking of these lawsuits for years before this because we knew DOE wouldn’t make the 1998 date,” says Shaw Pittman’s Silberg.In 1993, he recalls, DOE began backing away from its contract obligation. The department said it only had to take the fuel if it had a disposal site ready. The D.C. Circuit in 1996 held that DOE had an unconditional obligation to take the fuel in 1998. But DOE then notified the utilities that it would not be able to meet the 1998 deadline. The utilities went back to the D.C. Circuit for an order to perform. But the appellate court told them to seek their remedy under the contract, which meant going to the Court of Federal Claims. First in the door in early 1998 was Spriggs & Hollingsworth’s Stouck on behalf of the Yankee utilities (Maine Yankee Atomic Power Co., Connecticut Yankee Atomic Power Co. and Yankee Atomic Electric Co.). He sued DOE for breach of contract and sought damages of roughly $100 million per utility for the costs of long-term, on-site storage of the spent fuel. Other utilities quickly followed his lead. Last August, the Federal Circuit affirmed the government’s liability, saying, “The government does not, and could not, deny that it failed to meet the contractual requirement to begin accepting nuclear waste no later than Jan. 31, 1998.” Then turning to the U.S. Supreme Court’s 1996 decision in Winstar Corp. v. U.S., 518 U.S. 839, the appellate panel quoted: “Failure to perform a contractual duty when it is due is a breach of contract.” DAMAGES TRACK All of the spent fuel cases are now on a damages track in the Court of Federal Claims, which once again is faced with complicated legal and management issues in this new “cluster” of government cases. The court is still struggling with the Winstar cluster — more than 100 thrift institutions suing the government in breach-of-contract actions with potential damages of $30 billion. The utility lawyers, however, did not want the spent fuel cases to get bogged down the way the Winstar cases have. “The Winstar model hasn’t worked very well,” says Stouck. “The government wanted to consolidate the spent fuel cases. Why? They sort of liked what happened with the Winstar cases. They bollixed them up for years and nothing happened. But the utilities said, ‘We don’t want anything like Winstar.’ We opposed strict consolidation but asked for a coordinated discovery process.” And that’s what the utilities got. There is common discovery and a judge has been assigned to manage that process, but the cases return to individual assigned judges for substantive issues. The Yankee cases, which had moved faster than the others, are on a separate track. In the damages debate, one key issue involves the schedule of spent nuclear fuel pick-up under the government contracts. “At what rate would DOE have accepted our spent fuel had they not breached the contract?” asks Silberg. “The speed at which they take that fuel affects how we calculate our damages. If they had taken the fuel quickly, their liability is much greater.” DOE has done everything in its power, say utility lawyers, to minimize what was expected under the contracts. “We didn’t have to accept it all at one time,” says David M. Cohen, director of the Commercial Litigation Branch in the Department of Justice, which is representing DOE. “So, you have to determine when a plant’s fuel would have been accepted. All of the companies are contending their fuel was to be taken right away. It’s very difficult to sort out when the schedule was to begin. That’s a major issue.” Once the schedule issue is resolved, Cohen says, the next issue is what to include in the damages. “One issue would be if a nuclear plant said, ‘We put in cement casks’ to store the fuel and the plant wants the cost back. What if there was another, less expensive method of storing the fuel?” Other issues include whether there were priorities for fuel pickup from shutdown reactors, such as the Yankees, and whether “greater than Class C waste” was covered by the contracts. The government also has challenged the standing of three utilities which have sold their plants to sue. “We say they do have standing,” says Silberg, counsel to the three. “They suffered damages before they sold the plants.” The Tennessee Valley Authority (TVA) — a quasi-governmental entity — also is a plaintiff in the spent nuclear fuel case, and that has provoked another issue: Can one federal governmental entity sue another? “The government says if you have two agencies whose heads serve at the pleasure of the president, they can’t sue each other,” explains Peter K. Shea of TVA’s Office of General Counsel. “Basically, we say the Federal Circuit has recognized the real test is following the money trail to some extent. If the money goes from one treasury department to another, it’s really not moving anywhere. In TVA’s case, the money is going to TVA ratepayers or will come out of their pockets. That’s a highly significant difference.” There is also spent nuclear fuel-related litigation in the 11th Circuit. The government settled its contract breach with one utility, and instead of paying damages, it said it would offset future payments by the utility into the Nuclear Waste Fund. Other utilities claim that this is an illegal depletion of the waste fund. “My clients are relatively small players here,” says Stouck. “But Commonwealth Edison could have billions of dollars in damages. If the government can do this, pretty soon you could have no fund and no waste program.” THE PROGRAM DOE is expected this winter to recommend that Yucca be formally designated as the depository. But the government is battling in court to move ahead with the program. The 9th Circuit held that a federal court must hear the government’s suit against the state of Nevada, which has refused to issue water permits for the proposed waste site. “We believe our lawsuits are keeping pressure on Congress and the administration to move this project forward,” says Silberg. Unlike the Winstar cases, the spent fuel litigation holds the potential to influence the nuclear waste debate, adds Stouck. “It’s very fine for the government to say it wants to study Yucca more or environmentalists to say there are concerns here or Sen. Reid to say Yucca will never be built, but are they willing to pay a billion dollars in damages?” he asks. “OK, how about $2 billion or $3 billion? If we prevail on our damages claims and the numbers start to add up, there will be some voices out there that will say, ‘Wait a minute!’ “

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