Of all the intractable, unwinnable positions that U.S. Department of Justice lawyers are bound to defend, few can rival the fight over the storage of spent nuclear fuel.

The latest slapdown came on Nov. 19, when the U.S. Court of Appeals for the D.C. Circuit ordered the government to quit collecting annual fees from nuclear power plant owners for the disposal of radioactive waste. It was a major win for the industry, which has been paying $750 million per year to fund a program that doesn’t exist — and is unlikely to anytime soon. The Obama administration in 2010 pulled the plug on Yucca Mountain in Nevada as a site for the depository.

The real losers are U.S. taxpayers. In separate litigation, the government has already shelled out $2.6 billion to compensate power plant owners for storing waste — expenditures that were never supposed to be borne by the general public. And there’s no end in sight.

“It’s a big cost for taxpayers as far as the eye can see,” said Hogan Lovells partner Mary Anne Sullivan, general counsel of the U.S. Department of Energy from 1998 to 2001. The Justice Depart­ment “has been handed an impossible legal task.”

A Justice Department spokeswoman declined to comment.

According to the Government Accountability Office, the United States has generated more than 75,000 metric tons of spent nuclear fuel and high-­level nuclear waste — extremely hazardous substances — at 80 sites in 35 states.

In 1982, Congress passed the Nuclear Waste Policy Act, which struck a bargain: Power plant owners would pay an annual fee based on the number of kilowatt-hours of nuclear power they generate. As the “persons responsible for generating” the waste, they would bear the full cost of its disposal. In return, the government would build a permanent repository for the waste, to open by Jan. 31, 1998.

That didn’t happen — and the process for selecting a site is at an impasse. Senate Majority Leader Harry Reid (D-Nev.) opposes locating the waste dump at Yucca Mountain, and has the backing of the Obama administration. Rep. John Shimkus (R-Ill.), chairman of the House Energy and Commerce subcommittee on environment and the economy, insists that Yucca is the appropriate spot.

In 1987, Congress amended the Nuclear Waste Policy Act to designate Yucca Mountain as the only site to be considered. Meanwhile, the Energy Department for the past 30 years has collected the fees, amassing close to $30 billion. That money now earns about $1.5 billion in interest each year, according to Jay Silberg, a partner at Pillsbury Winthrop Shaw Pittman who represented the National Association of Regulatory Utility Commissioners in challenging the fees.

“It doesn’t make sense to continue to collect” the money, he said, especially since the government now has virtually no idea what a waste depository will eventually cost.

‘HYPOTHETICAL OPTION’

The D.C. Circuit last week agreed.

“Until the Department comes to some conclusion as to how nuclear wastes are to be deposited permanently, it seems quite unfair to force petitioners to pay fees for a hypothetical option, the costs of which might well — the government apparently has no idea — be already covered,” Senior Judge Laurence Silberman wrote for the panel, which included Senior Judge David Sentelle and Judge Janice Rogers Brown.

According to the Energy Department, the final balance of the fund to pay for disposal could wind up anywhere from $2 trillion short to $4.9 billion in excess — a range the appeals court called “so large as to be absolutely useless as an analytical technique.”

The court ordered the government to submit a notice to Congress that the payment rate would be lowered to zero until the Energy Department can conduct a “legally adequate fee assessment” or “Congress enacts an alternative waste management plan.”

Justice Department commercial litigation branch attorneys Allison Kidd-Miller and Jeanne Davidson, who represented the Energy Department, unsuccessfully argued that the utilities are already being compensated for the waste storage delay by suing the government for breach of contract in the U.S. Court of Federal Claims.

In the past year, such suits have cost taxpayers about $700 million — money that came from the general U.S. treasury via the Judgment Fund, not the $30 billion waste fund.

According to the Judgment Fund database, payments during the past 12 months include $82 million to Maine Yankee Atomic Electric Co., represented by Jerry Stouck of Greenberg Traurig; $72 million to Exelon Generation Co., represented by Norman Hirsch of Jenner & Block; $70 million to Portland General Electric Co., represented by Brad Fagg of Morgan, Lewis & Bockius; and $48 million to System Fuels Inc., represented by Alexander Tomaszczuk of Pillsbury Winthrop.

BREACH OF CONTRACT

The suits allege a straightforward breach of contract, and the government has had very little success countering the claims.

A complaint by Constellation Genera­tion Group Inc., which owns the Calvert Cliffs Nuclear Power Plant in Maryland and the Nine Mile Point Nuclear Station in New York, is typical. “The government was to accept and dispose of spent nuclear fuel and high level waste … in exchange for payments as provided in the Standard Contracts,” wrote Fagg of Morgan Lewis in a suit filed on Jan. 22, 2004, that settled for $50 million. “The government breached the Standard Contracts by failing to accept [spent nuclear fuel] for disposal as required.”

Even though the D.C. Circuit ruled the utilities will no longer have to pay into the fund, that outcome “does not bear on the ability of utilities to go forward with the breach-of-contract claims,” said Ellen Ginsberg, general counsel of the Nuclear Energy Institute. That’s because the utilities will still be stuck storing waste — and the contracts will still be breached.

Still, the decision to suspend the fees may spur Congress to act, said Stouck of Greenberg Traurig.

“This decision, more than any other victory the nuclear industry has won in litigation over spent fuel, has the potential to jump-start the Yucca Mountain program,” Stouck said. “The D.C. Circuit is clearly fed up with DOE’s decades of inaction on Yucca Mountain.”

Contact Jenna Greene at jgreene@alm.com. Marcia Coyle contributed to this report.