Government Owes Damages in Spent Nuclear Fuel Litigation - Contract Law - Federal Circuit
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Government Owes Damages in Spent Nuclear Fuel Litigation

Nuclear waste is a pain in the reactor.

With that in mind, the federal enacted the Nuclear Waste Policy Act (NWPA) almost 30 years ago to authorize the Secretary of Energy to enter into contracts with nuclear plant utilities to accept and dispose of spent nuclear fuel and high-level radioactive waste in return for the utilities paying into a Nuclear Waste Fund.

It was under this plan that in June 1983, the Department of Energy (DOE) entered into the “Standard Contract,” with Southern California Edison (SCE) for the acceptance of spent nuclear fuel produced at SCE’s San Onofre Nuclear Generating Station (SONGS).

Where exactly the government intended to dispose of these wastes became a controversial issue; in 1987, Congress amended the NWPA to specify that the repository for storing these nuclear wastes would be located in Yucca Mountain, Nevada.

The U.S. nuclear waste program, however, is "one of broken promises and unmet commitments." DOE has yet to accept spent fuel from SONGS. Despite the 1987 amendment, the question of where and how the government will dispose of the wastes remains unanswered to this date. The government's current estimate is that it will not begin accepting the waste until 2020, if at all.

In 2001, SCE began constructing dry storage facilities, known as the Independent Spent Fuel Storage Installation ("ISFSI"), for its SONGS-produced nuclear waste. SCE created its ISFSI facilities to provide on-site storage for part of its SNF rather than to continue using an outside company. Following the construction of the first ISFSI facility, SCE filed a complaint in the Court of Federal Claims seeking damages from the United States as a result of DOE's breach of the Standard Contract.

At trial, the government did not contest the accuracy of the overhead costs presented by SCE, but instead argued that overhead costs were an improper measure of SCE's damages. The Federal Circuit Court of Appeals disagreed.

Here, the government's breach of the Standard Contract caused SCE to build, staff, and maintain an entirely new facility for SNF storage. SCE specifically constructed the ISFSI facilities to mitigate the government's breach. Because the ISFSI facilities had not existed prior to the government's breach, and indeed were necessitated by the breach, this is not a case where the underlying costs were incurred by operations independent of and unrelated to the breach.

Spent nuclear fuel litigation is prevalent in the Federal Circuit Court of Appeals, so attorneys can expect similar cases and awards in pending spent nuclear fuel cases. In the wake of the 9.0 earthquake and subsequent tsunami in Japan that left nuclear fuel rods exposed to air, U.S. companies who have not already taken precautions to safely store nuclear waste should start doing so to mitigate potential liability.

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