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The federal government this month faces a final round of claims by utilities in multibillion-dollar breach of contract litigation involving spent nuclear fuel disposal. At the same time, the government is headed for a different court to defend its decision to send the waste to Yucca Mountain, Nev. And stakes in the related legal battles are huge. In the contract cases, the government could pay damages of roughly $50 billion for not starting to pick up the spent fuel in 1998. In the Yucca Mountain cases, it could lose a controversial solution to the disposal problem. The utilities want damages to cover the costs of storing the waste that the government promised to take. They hope the threat of huge damages will force the government to move forward quickly with Yucca or some alternative. In Nevada, environmentalists and other critics say the threat already has driven the government to a solution that is wrong from legal, political, environmental, health and safety standpoints. “This is a topic of considerable importance to lots of folks — the Department of Energy, ratepayers, Congress and society at large,” said Jay E. Silberg of Washington’s Shaw Pittman, counsel to utilities in 19 spent nuclear fuel cases. “I think it’s important that people be aware of what’s at stake and what’s happening. The sooner Yucca Mountain goes through the licensing processes, the better we’ll all be.” The state of Nevada disagrees with the utilities and the Department of Energy (DOE). “I’ve told DOE to find me one scientist who is not on its payroll that will say this is a suitable site. They cannot find one,” said Joseph R. Egan of Egan, Fitzpatrick & Malsch in McLean, Va., counsel to Nevada. “We have put together 25 world-class experts, including many who have never testified against the nuclear industry, who say it isn’t.” MOVING FORWARD As a nuclear reactor operates, uranium is being used up in the fission process, which creates energy to generate electricity. Fission byproducts build up and eventually interfere with efficiency until the fuel can no longer produce energy. At that point, the fuel must be replaced. The spent fuel continues to emit radiation, so it must be stored in basins of water or in dry storage vaults or containers. The radiation won’t drop to a safe level for thousands of years. The utilities’ suits are primarily in the U.S. Court of Federal Claims. They charged that the government breached contracts entered into with utilities in 1983 under the Nuclear Waste Policy Act of 1982. Under the act, DOE was to begin picking up the utilities’ spent nuclear fuel on Jan. 31, 1998, in return for payments by the utilities into the Nuclear Waste Fund. “We paid all of the money, about $9 billion plus interest,” said Jerry Stouck of Washington’s Spriggs & Hollingsworth, counsel to three utilities with claims. The deadline passed without any action by the department. The government now says the earliest it can begin disposal is 2010, when the Yucca repository could be ready. “No one believes that,” said Stouck, voicing the skepticism of many who have watched or participated in the disposal debate for nearly 30 years. Utilities have filed about 25 suits, said Stouck. Most lawyers believe the six-year statute of limitations on the claims runs out on Jan. 31. Originally, the government had 60 contracts. Because of mergers and acquisitions in the nuclear industry, about 40 utilities may be involved now. Stouck, who will file six more claims, expects additional claims to come in by the deadline. Norm Hersh of Chicago’s Jenner & Block, representing Commonwealth Edison, added that, while Jan. 31 is “arguably” the deadline, “I think plaintiffs would have a claim there is a continuing breach here.” Some lawyers who have cases pending since 1998 chafe at the slowness of the process in the Court of Federal Claims, which is also managing the huge Winstar litigation, a breach of contract action filed by savings and loan associations against the federal government. “We were in the first wave of cases in 1998,” said M. Stanford Blanton of Balch & Bingham in Birmingham Ala., counsel to three utilities. “I’ve had a summary judgment motion fully briefed for about five years now. We are extremely frustrated by the inability to get these cases moving.” There has been some progress. The U.S. Court of Appeals for the D.C. Circuit and the Federal Circuit have established the government’s liability, something DOE acknowledges in its annual reports to Congress. Last spring, the Court of Federal Claims designated six cases as “lead” cases for resolving damages issues. The court has the first damages trial scheduled for March 1 in one of Shaw Pittman’s cases. Commonwealth Edison’s damages trial is set for November. Stouck expects trial dates for his cases in 2004 as well. But the veteran government contracts lawyer said he questions whether the “lead” case approach will work. It has not worked in the Winstar litigation, said Stouck, who is involved in that litigation as well. “I am worried that the court’s designation of these lead cases in spent nuclear fuel might wind up resolving the six cases but not any of the other cases, whichever side loses,” he said. “The court may be making a mistake in assuming that by pushing a couple of lead cases forward, they can provide substantial guidance for the others. The lesson from Winstar is you have to resolve these cases one by one. This is high-stakes, sophisticated litigation, and it’s a lot to ask a lawyer in that context to accept a ruling in another case as binding if there is fair argument for distinction.” Some of the damages issues yet to be resolved include: How much spent nuclear fuel was the government to have picked up beginning on Jan. 31? And, once an annual acceptance rate is settled, what was the sequence of pickups? Which utilities were first in line? Stouck’s utilities were shut down, so he believes they had priority under the contract. “We say if the government had been performing, they would have picked up our fuel fairly promptly, within a couple of years,” he said. “If it had done that, we would not have had to construct long-term storage facilities — that’s the damages.” The contracts are silent on how much fuel had to be picked up. The government argues that because no amount was specified, it could have picked up at low rates and the utilities still would have had to build storage facilities. Three judges have rejected the government’s low-rate argument, and one has accepted the industry’s claim that the annual acceptance rate should have been 3,000 metric tons. “Everyone will have different and unique damages — how much spent fuel they had, what they needed to do in order to continue to have room to store the fuel,” said Shaw Pittman’s Silberg. “Some people fortunately didn’t have to do anything for a while, but some had to build storage facilities.” The industry has estimated that the government could face damages totaling more than $50 billion. DOE, however, calls that estimate “highly inflated.” If it prevails on certain key issues, the agency said, total damages should be in the range of $2 billion to $3 billion. “I don’t underestimate that these will be difficult cases and will be appealed probably several times,” said Silberg. “We’ll just stick with it. A lot of dollars are involved. “Utilities had to expend a lot of their financial resources to make up the deficit the DOE has left us. We owe it to ratepayers and stockholders to try to get those dollars back.” THE MOUNTAIN And then there is Yucca Mountain. On Jan. 14, the D.C. Circuit will hear arguments in six cases brought by Nevada, Las Vegas, Clark County, the Natural Resources Defense Council and others. “To my knowledge this has never happened before in this court — this number of cases involving this number of defendants on the same subject matter,” said Egan, one of Nevada’s counsel. “The respondents include the president, the United States, DOE and others. It’s really going to be a spectacular event. We have an entire morning for oral argument. I’m expecting a hundred lawyers.” In 2002, President Bush and Congress signed off on Yucca Mountain as a nuclear waste repository and opposing litigation kicked into high gear. Nevada has six cases underway, ranging from a federalism-based constitutional challenge to a site-suitability challenge against DOE. Egan said Nevada’s litigation and the utilities’ litigation have an “enormous interrelationship.” “In fact, our entire thesis of when things went to hell in a handbasket at Yucca [is that it] occurred the very year the court imposed the breach of contract liability on DOE, which, in turn, spelled out damages that may go over $50 billion,” said Egan. “DOE said, ‘That’s it,’ and pulled the plug on all site-suitability rules at the same time tests were showing Yucca was completely unfit.” Egan believes the constitutional challenge has the potential to stop a repository at Yucca once and for all. “It involves whether 49 states can gang up on one state and impose on it an unwanted burden without a rational basis,” he explained, adding, “This is the most important land-use case in 50 years.” The government argues that Congress’ plenary authority over federal land is sufficient to sustain its designation of Yucca. A brief says, “The State sovereignty secured by the Tenth Amendment does not entitle a State to prevent the federal government from locating an unpopular facility on federal land within the State’s boundaries, nor does it require any special judicial scrutiny of the political process or the substantive basis of Congress’ decision.” In the nuclear business, a proponent of a project has to jump over many hurdles, said Shaw Pittman’s Silberg. “The opponents only need to trip us up on one of them and the project stops until you take care of that problem,” he said. “Yucca Mountain has overcome some very significant hurdles, but it has others ahead. The state of Nevada had 20 years to accumulate issues it wants to raise.”

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