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Alabama Power Co. v. Department of Energy

Citation: 33 ELR 20055
No. No. 00-16138, 307 F.3d 1300/(11th Cir., 09/24/2002)

The court holds that the U.S. Department of Energy's (DOE's) amended contract with a nuclear power plant operator constituted a direct payment of Nuclear Waste Fund (NWF) monies and was unlawful under the Nuclear Waste Policy Act (NWPA). DOE entered into contracts with the nuclear power plants to fulfill the requirements of the NWPA, which states that DOE takes responsibility for disposing of nuclear waste while the owners and operators of nuclear power plants cover the full cost by paying into the NWF. The NWF is the only source of funding that the U.S. Congress identified in the NWPA for matters relating to the programs and policies established pursuant to the Act. Although the NWPA allows Congress to make appropriations to the NWF beyond those monies that the standard contract holders deposit into it, the Act provides that the fees charged to the generators of spent nuclear fuel (SNF) for permanent disposal should fully offset the costs of developing and operating such facilities. When it became clear that DOE would not meet its contractual requirement to begin disposal of the SNF by 1998, thereby imposing additional storage costs on the standard contract holders, the standard contract holders filed suit alleging breach of contract, breach of a duty of good faith, and a taking. Before a final decision in that case was reached, DOE entered into an amended contract with one standard contract holder that gave that power plant an equitable adjustment by allowing it an offset against future payments that the power plant is obligated to pay into the NWF. Other standard contract holders challenged the amended contract's validity by arguing that it was not an authorized use of NWF monies.

The court first holds that the standard contract holders have standing to sue DOE. Because the NWF is designed to collect all of the costs for disposing of SNF, any shortfall in the NWF caused by the amended contract would have to be made up by fees paid by other standard contract holders. Alternatively, if there were to be excess dollars in the NWF, the standard contract holders would be deprived of the reductions that would otherwise ensue. In either circumstance, they will be forced to pay for the damages resulting from DOE's breach of the amended contract and will suffer an injury that is redressable by precluding DOE from expending NWF monies in this way. The court next holds that the NWPA does not allow DOE to utilize NWF monies to pay for the interim storage costs of DOE's contract creditors. When DOE granted the power plant an offset against the fees it would otherwise be required to pay into the NWF, this action was tantamount to an expenditure of NWF dollars on the power plant's continued interim storage costs as a result of DOE's breach. It is clear that DOE may not do this. The NWPA provides that DOE may make expenditures from the NWF only for purposes of radioactive waste disposal activities, and an expenditure in interim storage is not an act of disposal. The court also holds that common sense and a practical understanding of the regulatory scheme Congress envisioned dictate against DOE's actions. If DOE could pay for its breach out of a fund paid for by the utilities, the government would never be liable. And those utilities that neither settle nor litigate their claims would end up paying greater fees to cover the costs of other utilities. By establishing a contract and a quid pro quo arrangement, the regulatory scheme contemplates that the ultimate burden of the government's breach fall on the government, not on other utilities.

Counsel for Petitioner
F. William Brownell
Hunton & Williams
1900 K St. NW, Washington DC 20006
(202) 955-1500

Counsel for Respondent
Christopher S. Vaden
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000