307 F.3d 1300 (11th Cir. 2002), 00-16138, Alabama Power Co. v. United States Dept. of Energy

Docket Nº:00-16138.
Citation:307 F.3d 1300
Party Name:ALABAMA POWER COMPANY, Carolina Power & Light Company, et al., Petitioners, v. UNITED STATES DEPARTMENT OF ENERGY, The United States of America, Respondents, Exelon Generation Company, LLC, Intervenor.
Case Date:September 24, 2002
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

Page 1300

307 F.3d 1300 (11th Cir. 2002)

ALABAMA POWER COMPANY, Carolina Power & Light Company, et al., Petitioners,


UNITED STATES DEPARTMENT OF ENERGY, The United States of America, Respondents,

Exelon Generation Company, LLC, Intervenor.

No. 00-16138.

United States Court of Appeals, Eleventh Circuit.

Sept. 24, 2002

Page 1301

[Copyrighted Material Omitted]

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David J. Cynamon, Alex D. Tomaszczuk, Jay E. Silberg, Shaw Pittman, Washington, DC, David R. Boyd, Balch & Bingham, Montgomery, AL, M. Stanford Blanton, Yvonne Norris Beshany, Balch & Bingham, Birmingham, AL, for Petitioners.

Harold D. Lester, Jr., David M. Cohen, U.S. Dept. of Justice, Civ. Div., William L. Olsen, U.S. Dept. of Justice, Washington, DC, for Respondents.

Brad Fagg, Morgan, Lewis & Bockius, LLP, Washington, DC, for Intervenor.

Petition for Review of a Final Order of the United States Department of Energy.

Before TJOFLAT and BIRCH, Circuit Judges, and GOLDBERG [*], Judge.

TJOFLAT, Circuit Judge:

Pursuant to the Nuclear Waste Policy Act of 1982 ("NWPA"), 42 U.S.C.§ 10101 et seq., the Department of Energy ("Department") contracted with operators of nuclear power plants to begin disposal of spent nuclear fuel ("SNF") "not later than January 31, 1998." 42 U.S.C. § 10222(a)(5)(B). It failed to do so. Hoping to stem the tide of litigation arising out of this massive breach, the Department entered into a settlement agreement with one utility, Exelon Generation Company ("Exelon"), in which the Department amended its contract with Exelon by giving it an "equitable adjustment"--in effect, an offset against future payments that Exelon (like all other utilities that produce nuclear waste) is obligated to pay into the Nuclear Waste Fund ("NWF"). 1 The petitioners challenge this final agency action pursuant to the NWPA's judicial review provision, 42 U.S.C. § 10139. They contend that this "offset" is indistinguishable from a direct payment of NWF monies, and that such payments are unauthorized by law. We agree.


What should be done with nuclear waste? Who should pay for its disposal? These were the central questions animating the NWPA. The legislation took a large step toward answering these questions: the U.S. Government would take responsibility for disposing of the waste, and the utilities that produced the waste would bear the cost. The NWPA thus established a quid pro quo; the Government would provide a valuable service and utilities would pay money for this service. Rather than promulgating top-down legislation that would cover all of the intricacies of this arrangement, Congress authorized the Department to enter into contracts with energy firms. These contracts were to contain only a few statutorily required provisions, with the remainder to be established by the Department. The Department promulgated a "Standard Contract" through a notice-and-comment rulemaking proceeding. See 10 C.F.R. § 961.11. Important terms include the obligations of the Department and the reciprocal obligations of energy firms under the statute, both of which are discussed below. Also important are the remedial terms--an issue left untouched by the statute. Specifically, Article IX.A of the Standard Contract covers "unavoidable

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delays"; it provides that a party will not be liable under the contract if its failure to perform is not due to its fault. Id. If a delay is caused by something within the "reasonable control" of either party, then Article IX.B provides that "the charges and schedules specified by this contract will be equitably adjusted to reflect any additional estimated costs incurred by the party not responsible for or contributing to the delay." Id. Article XI, governing remedies, states that "[n]othing in this contract shall be construed to preclude either party from asserting its rights and remedies under the contract or at law." Id. Finally, Article XVI, entitled "Disputes," requires an internal dispute resolution procedure for "any dispute concerning a question of fact" under the contract. Id.

The NWPA provides that the entities owning and operating nuclear power plants, as generators and owners of nuclear waste, will pay the full cost of disposing of the waste. Under both the statute and the Standard Contract, holders of SNF must pay into the NWF, which serves as the financing vehicle for the nuclear waste disposal program. 42 U.S.C. § 10222; 10 C.F.R. § 961.11, art. VIII. "In paying such a fee, the person delivering spent fuel ... to the Federal Government shall have no further financial obligation to the Federal Government for the long-term storage and permanent disposal of such spent fuel." 42 U.S.C. § 10222(a)(3). The NWF is the only source of funding that Congress identified in the NWPA for matters relating to the programs and policies established pursuant to the Act. The initial amount of the fee was set by both the statute and Standard Contract at 1.0 mil per kilowatt-hour. 42 U.S.C. § 10222(a)(2); 10 C.F.R. § 961.11, art. VII. To date, total payments into the NWF exceed $10.5 billion. See Department of Energy, Summary of Program and Budget Information as of December 31, 2000, tbl. 1-3.

Although the NWPA allows Congress to make appropriations to the NWF beyond those monies that the Standard Contract holders deposit into it, 42 U.S.C. § 10222(c)(2), the Act provides that the fees charged to the generators of SNF for permanent disposal should fully offset the costs of developing and operating such facilities, 42 U.S.C. § 10222(a)(4). As previously noted, the original fee amount was set by statute (and the Standard Contract) at 1.0 mil per kilowatt-hour. This initial assessment was to be only a starting point. Because the NWPA expressly established the nuclear waste program on a full cost recovery basis, the Act requires that the NWF have neither too much nor too little to pay for the program costs. Specifically, the Act requires the Secretary annually to review the ongoing fee amount to determine whether fee collections will result in either insufficient or excess revenues to cover the costs of the program. Id. If the Secretary determines that there will be either insufficient or excess revenues, the Secretary is required to propose to Congress "an adjustment to the fee to insure full cost recovery." Id. The Act, partially unconstitutional under INS v. Chadha, 462 U.S. 919, 103 S.Ct. 2764, 77 L.Ed.2d 317 (1983), states that "[t]he adjusted fee proposed by the Secretary shall be effective after a period of 90 days of continuous session have elapsed following the receipt of such transmittal unless during such 90-day period either House of Congress adopts a resolution disapproving the Secretary's proposed adjustment." Id. No such change has ever been proposed by the Secretary, prompting the D.C. Circuit to observe that the Secretary, "not unlike Goldilocks, [always finds] that the statutory fee is not too high, and not too low, but just right." National Ass'n of Reg. Util. Commissioners ("NARUC") v. U.S. Dep't of Energy, 851 F.2d 1424, 1426 (D.C.Cir.1988).

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There is one statutorily required contractual provision that has been the source of much litigation: the Department's commitment to dispose of SNF beginning not later than January 31, 1998. Enacted in 1982, the NWPA gave the Department over fifteen years to select a repository site and begin permanent disposal--a much needed lead time in light of the arduous regulatory processes mandated by the NWPA in the name of science, safety, and cooperative federalism. After this date, the Department was obligated to begin its reciprocal obligation to dispose of the waste. See 42 U.S.C. § 10222(a)(5); 10 C.F.R. § 961.11. By 1995, the Department became certain that it could not meet its obligation. It announced that it had "become apparent that neither a repository nor an interim storage facility constructed under the Act will be available by 1998" and that the Department would not begin disposing of the SNF until 2010 at the earliest. Final Interpretation of Nuclear Waste Acceptance Issues, 60 Fed.Reg. 21,793, 21,794 (May 3, 1995). What to do with all of that waste in the mean time? The Department denied having any contractual or statutory obligation to dispose of SNF pending the construction and licensing of a permanent repository. Id. The Department further asserted that it was not authorized to accept, store, or dispose of SNF absent the existence of a permanent repository. Id. at 21,797. This interpretation of the NWPA was challenged in the D.C. Circuit, which found the Department's interpretation unreasonable and therefore not entitled to Chevron deference. Indiana Michigan Power Co. v. Dep't of Energy, 88 F.3d 1272 (D.C.Cir.1996). The Department argued that the use of the word "dispose" in the statute presupposed the availability of a repository. 2 This is because the statutory definition of "disposal"--a form of the word "dispose"--was defined by the Act as "the emplacement in a repository of ... spent nuclear fuel ... with no foreseeable intent of recovery." 42 U.S.C. § 10101(9). Therefore, the Department argued, the Act contemplates that a repository be operational before it becomes contractually obligated. The D.C. Circuit rejected this argument, holding that the ordinary meaning of the phrase "dispose of" does not presuppose the availability of a permanent repository. Indiana Michigan, 88 F.3d at 1275. The court concluded that the Department had an unconditional obligation to begin disposing of the utilities' SNF by January 31, 1998. Id. at 1277.

After the D.C. Circuit vacated the Department's Final Interpretation, the Department responded by announcing yet again that it would be unable to begin acceptance of SNF and asserted that it had no financial responsibility for its failure to meet the...

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