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System Fuels, Inc. v. United States

United States Court of Appeals, Federal Circuit

April 4, 2016

SYSTEM FUELS, INC., SYSTEM ENERGY RESOURCES, INC., SOUTH MISSISSIPPI ELECTRIC POWER ASSOCIATION, Plaintiffs-Appellants
v.
UNITED STATES, Defendant-Appellee SYSTEM FUELS, INC., ENTERGY ARKANSAS, INC., Plaintiffs-Appellants
v.
UNITED STATES, Defendant-Appellee

Appeal from the United States Court of Federal Claims in No. 1:11-cv-00511-SGB, Judge Susan G. Braden.

Appeal from the United States Court of Federal Claims in No. 1:12-cv-00389-CFL, Judge Charles F. Lettow.

Alexander D. Tomaszczuk, Pillsbury Winthrop Shaw Pittman LLP, McLean, VA, argued for plaintiffs-appellants. Also represented by Clare M. Cavaliero, Jay E. Silberg, Washington, DC; Layton Jager Smith, Jr., Jager Smith LLC, Jackson, MS.

Eric Peter Bruskin, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Christopher James Carney, James Patrick Connor, Bryant G. Snee, Robert E. Kirschman, Jr., Benjamin C. Mizer.

Before Moore, Mayer, and Wallach, Circuit Judges.

Moore, Circuit Judge.

In these related appeals, System Fuels, Inc., System Energy Resources, Inc., South Mississippi Electric Power Association, and Entergy Arkansas, Inc. (collectively, "System Fuels") appeal two judgments of the Court of Federal Claims denying one category of damages arising from the government's partial breach of contract. We reverse and remand both cases.[1]

Background

These cases are another round of litigation following the government's failure to accept and dispose of spent nuclear fuel (or "SNF"). The general facts and circumstances regarding spent nuclear fuel cases have been explained in both Court of Federal Claims opinions below and in opinions from this and other courts. See, e.g., Energy Nw. v. United States, 641 F.3d 1300, 1302–03 (Fed. Cir. 2011); Ind. Mich. Power Co. v. United States, 422 F.3d 1369, 1371–72 (Fed. Cir. 2005); Me. Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1337– 40 (Fed. Cir. 2000); Ind. Mich. Power Co. v. Dep't of Energy, 88 F.3d 1272, 1273–74 (D.C. Cir. 1996). Thus, we limit our discussion to only those facts necessary to understand the issues giving rise to these appeals.

In the Nuclear Waste Policy Act of 1982, Congress authorized the Department of Energy ("DOE") to contract with nuclear power utilities as part of its plan for a national nuclear waste disposal system. See 42 U.S.C. §§ 10131, 10222; see generally Energy Nw., 641 F.3d at 1302–03; Ind. Mich. Power, 422 F.3d at 1371–72. Congress set forth the contracts' basic terms, requiring the utilities to pay fees into a Nuclear Waste Fund in return for the government taking title to and disposing of the utilities' spent nuclear fuel beginning no later than January 31, 1998. 42 U.S.C. § 10222; Energy Nw., 641 F.3d at 1302. Pursuant to Congress' instruction, the DOE promulgated regulations defining the text of the standard contract for use with the utilities. Energy Nw., 641 F.3d at 1302; Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, 10 C.F.R. § 961.11 ("Standard Contract").

Under the Standard Contract the utilities are responsible for providing "all preparation, packaging, required inspections, and loading activities necessary for the transportation of [spent nuclear fuel] and/or [high-level radioactive waste] to the DOE facility." 10 C.F.R. § 961.11. The government is responsible for "arrang[ing] for, and provid[ing], a cask(s) and all necessary transportation of the [spent nuclear fuel] and/or [high-level radioactive waste] from the [utility's] site to the DOE facility." Id. The Standard Contract also requires that the casks supplied by the DOE "shall be suitable for use at the [utility's] site, meet applicable regulatory requirements, and be accompanied by pertinent information." Id.

In 1983, System Fuels and the government executed the Standard Contracts at issue in these appeals, which relate to spent nuclear fuel generated at the Grand Gulf (appeal No. 2015-5094) and the Arkansas Nuclear One (appeal No. 2015-5095) power stations. In 1994, the government announced that it would not be able to accept spent nuclear fuel from any utility by the statutory and contractual deadline of January 31, 1998. Waste Acceptance Issues, 59 Fed. Reg. 27, 007 (Dep't of Energy May 25, 1994). The government explained that the then-current projection for the earliest possible date it could begin accepting spent nuclear fuel was 2010. Id. at 27, 008. The government did not meet its 2010 projection and, in fact, has yet to begin accepting any spent nuclear fuel.[2] It is undisputed that the government's failure to accept spent nuclear fuel at this point in time is a partial breach of the Standard Contract.

System Fuels filed their first complaints seeking damages for the government's partial breach in 2003 (Arkansas Nuclear One) and 2005 (Grand Gulf). The Court of Federal Claims ultimately awarded System Fuels damages for costs incurred through August 31, 2005 (Grand Gulf) and June 30, 2006 (Arkansas Nuclear One). These awards included, inter alia, the costs System Fuels incurred to construct Independent Spent Fuel Storage Installations ("ISFSIs") at Grand Gulf and Arkansas Nuclear One to store spent nuclear fuel in dry storage casks that it would not have had to store had the government begun performing on time.

The decisions currently appealed arise from new complaints System Fuels filed seeking damages for costs incurred due to the government's continued partial breach covering the periods of September 1, 2005 to July 31, 2011 (Grand Gulf) and July 1, 2006 to June 30, 2012 (Arkansas Nuclear One) (collectively, "new damages periods"). Before the Court of Federal Claims, the government did not dispute that System Fuels was entitled to most of the damages it claimed for the new damages periods.[3] And the government does not appeal any of the Court of Federal Claims' damages awards that are adverse to it. Rather, System Fuels appeals the Court of Federal Claims' denial of damages for one category of costs: the costs incurred to load spent nuclear fuel into storage casks stored at the Grand Gulf and Arkansas Nuclear One ISFSIs. At both sites, System Fuels incurred costs when it loaded spent nuclear fuel into Holtec (Grand Gulf) or Holtec and VSC–24 (Arkansas Nuclear One) storage systems. This process involved first loading the spent nuclear fuel into canisters, then loading those canisters into the ...


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