Sacramento Municipal Utility District v. United States

In the United States Court of Federal Claims

No. 09-587C

Filed: January 31, 2013

*************************************

* Collateral Estoppel;

* Law of the Case Doctrine;

* Mandate Doctrine;

SACRAMENTO MUNICIPAL UTILITY * Mitigation Costs;

DISTRICT, * Nuclear Waste Policy Act, 42

* U.S.C. §§10101-10270 (2006);

Plaintiff, * 10 C.F.R. Part 171 (NRC fees);

* 10 C.F.R. § 961.11, Art. VI B; V D

v. * (exchange rights);

* Fed. R. Evid. 702 (expert opinions);

* RCFC 26(a)(1)(A)(iii) (disclosure of

THE UNITED STATES, * damages);

* RESTATEMENT (SECOND) OF CONTRACTS

Defendant. * (1981);

* RESTATEMENT (SECOND) OF JUDGMENTS

* (1982).

*

*************************************

Timothy R. Macdonald, Arnold & Porter, LLP, Denver, Colorado, and Howard N. Cayne,

Arnold & Porter, LLP, Washington, D.C., Counsel for Plaintiff.

Scott R. Damelin, United States Department of Justice, Civil Division, Commercial Litigation

Branch, Washington, D.C., Counsel for Defendant.

Jane K. Taylor, Office of General Counsel, United States Department of Energy, Washington,

D.C., Of Counsel for Defendant.

MEMORANDUM OPINION AND FINAL ORDER

BRADEN, Judge.

This Memorandum Opinion and Final Order adjudicates claims alleged in a September 4,

2009 Complaint, filed by Sacramento Municipal Utility District (“SMUD”), for mitigation costs

incurred from January 1, 2004 to December 31, 2009, as a result of the Department of Energy’s

(“DOE”) breach of a June 14, 1983 contract between SMUD and DOE (the “Standard

Contract”), that was required by the Nuclear Waste Policy Act (“NWPA”), 42 U.S.C. §§ 10101-

10270 (2006). The Standard Contract obligated DOE to begin to dispose and store SMUD’s

spent nuclear fuel (“SNF”) and high-level waste (“HLW”), by January 31, 1998, and to continue

to do so until disposal was complete. See 42 U.S.C. § 10222(a)(5)(B). In exchange for DOE’s

disposal and storage services, SMUD was required to pay a fee that was deposited in the Nuclear

Waste Fund. See 42 U.S.C. § 10222(a)(5)(B).1

Over a decade ago, the United States Court of Appeals for the Federal Circuit held that

DOE’s failure to dispose and store SNF and HLW generated by the nuclear-utility parties to the

Standard Contract by January 31, 1998, was a partial breach thereof. See Maine Yankee Atomic

Power Co. v. United States, 225 F.3d 1336, 1342-43 (Fed. Cir. 2000). To date, DOE has not

disposed of nor stored the SNF or HLW of SMUD or of any other nuclear-utility party to the

Standard Contract.

To facilitate a review of this Memorandum Opinion and Final Order, the court has

provided the following outline:

I. FACTUAL BACKGROUND AND RELEVANT PROCEDURAL HISTORY.

A. Sacramento Municipal Utility District v. United States, Civil Action Docket No.

98-488C.

B. Sacramento Municipal Utility District v. United States, Civil Action Docket No.

09-587C.

II. DISCUSSION.

A. Whether Plaintiff’s Spent Nuclear Fuel And High Level Waste Would Have

Been Removed Prior To January 1, 2004, Utilizing The Standard Contract’s

Exchange Provision.

1. The Plaintiff’s Argument.

2. The Government’s Response.

3. The Plaintiff’s Reply.

4. The Court’s Resolution.

B. Whether Plaintiff Would Have Stored Class B And C Waste Onsite In The

Non-Breach World.

1. The Plaintiff’s Argument.

2. The Government’s Response.

3. The Court’s Resolution.

1

If SMUD had declined to become a party to the Standard Contract, the Nuclear

Regulatory Commission (“NRC”) would not have renewed SMUD’s nuclear operating license.

See 42 U.S.C. § 10222(b)(1)(A).

2

C. Governing Precedent Regarding Damages In Spent Nuclear Fuel Cases.

D. The Mitigation Costs That Plaintiff Claims Were Incurred From January 1,

2004, To December 31, 2009, As A Result Of The Partial Breach Of The

January 21, 1998 Standard Contract.

1. Whether Plaintiff Is Entitled To The Cost Of Independent Spent Fuel

Storage Installation Operating And Related Maintenance Expenses.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Plaintiff’s Reply.

d. The Court’s Resolution.

2. Whether Plaintiff Is Entitled To The Cost Of Nuclear Energy Institute

Fees.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Court’s Resolution.

3. Whether Plaintiff Is Entitled To The Cost Of Insurance Premiums.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Court’s Resolution.

4. Whether Plaintiff Is Entitled To The Cost Of The Cosumnes Power

Plant Explosion Analysis.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Court’s Resolution.

5. Whether Plaintiff Is Entitled To The Cost Of Constructing A

Wastewater Treatment Plant.

a. The Plaintiff’s Argument.

b. The Government’s Response.

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c. The Court’s Resolution.

6. Whether Plaintiff Is Entitled To The Cost Of An Interim Onsite

Storage Building.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Court’s Resolution.

7. Whether Plaintiff Is Entitled To Recover The Cost Of Nuclear

Regulatory Commission Fees.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Court’s Resolution.

8. Whether Plaintiff Is Entitled To The Cost Of Greater-Than-Class-C

Storage.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Court’s Resolution.

9. Whether Plaintiff Is Entitled To Certain Overhead Costs.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Court’s Resolution.

10. Whether Plaintiff Is Entitled To The Cost Of Capital.

a. The Plaintiff’s Argument.

b. The Government’s Response.

c. The Court’s Resolution.

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E. Whether The Government Is Entitled To An Offset For The Costs That

Plaintiff Would Have Incurred From January 1, 2004, Through 2008 To

Operate The Wet Pool.

1. The Government’s Argument.

2. The Plaintiff’s Response.

3. The Court’s Resolution.

III. CONCLUSION.

* * *

I. FACTUAL BACKGROUND AND RELEVANT PROCEDURAL HISTORY.

A. Sacramento Municipal Utility District v. United States, Civil Action Docket No.

98-488C.2

The Rancho Seco Nuclear Generating Station Unit 1 (“Rancho Seco”) was a nuclear-

powered power plant, located in Sacramento County, California, that was operated by SMUD.

See SMUD III, 70 Fed. Cl. at 339. As a result of a public referendum, on June 7, 1989, SMUD’s

Board of Directors decided to shut down Rancho Seco permanently. Id. at 340. Thereafter,

SMUD began to investigate options to decommission Rancho Seco and store its SNF in a dual-

purpose dry-storage facility, instead of the wet pool that SMUD was using at that time. Id. at

341.

On June 9, 1998, SMUD filed a Complaint in the United States Court of Federal Claims

alleging, among other claims, that DOE breached the Standard Contract, for which SMUD was

2

The following Memorandum Opinions and Orders were issued in Docket No. 98-488C:

Sacramento Mun. Util. Dist. v. United States, 61 Fed. Cl. 438 (2004) (“SMUD I”) (denying the

Government’s motion to dismiss SMUD’s takings claim and dismissing SMUD’s illegal

exaction claim); Sacramento Mun. Util. Dist. v. United States, 63 Fed. Cl. 495 (2005) (“SMUD

II”) (determining that DOE was liable for a partial breach of the Standard Contract when it failed

to begin to dispose of SMUD’s SNF by January 31, 1998); Sacramento Mun. Util.

Dist. v. United States, 70 Fed. Cl. 332 (2006) (“SMUD III”) (determining that SMUD was

entitled to mitigation damages for certain costs incurred as a result of DOE’s partial breach of the

Standard Contract); Sacramento Mun. Util. Dist. v. United States, 74 Fed. Cl. 727 (2006)

(“SMUD IV”) (determining that SMUD was entitled to an award of $39,796,234 in mitigation

costs caused by DOE’s partial breach of the Standard Contract); Sacramento Mun. Util.

Dist. v. United States, 293 F. App’x 766 (Fed. Cir. 2008) (unpublished) (“SMUD V”) (affirming-

in-part SMUD II-IV and remanding for the trial court to determine causation, in light of the 1987

Annual Capacity Report, and to determine other mitigation costs); and Sacramento Mun. Util.

Dist. v. United States, 91 Fed. Cl. 9 (2009) (“SMUD VI”) (on remand determining that SMUD

was entitled to mitigation costs of $53,159,863, but staying entry of a final judgment, pending

resolution of this case, Docket No. 09-587C).

5

entitled to mitigation costs for a period that eventually would span from January 1, 1992 to

December 31, 2003. Id. at 356-57. On March 30, 1990, a proposal was adopted by SMUD to

move its SNF from wet pool storage to a dry storage system, primarily because of the projected

savings. Id. at 342. After several delays, the construction of an Independent Spent Fuel Storage

Installation (“ISFSI”), to implement dry storage, was completed in 2001. Id. at 355. From April

2001 to August 2002, SMUD moved twenty-one canisters of SNF into the ISFSI. Id. at 355-56.

On January 19, 2005, the court determined that DOE was liable for the January 31, 1998

partial breach of the Standard Contract. See SMUD II, 63 Fed. Cl. at 506. On March 31, 2006,

the court determined that DOE’s January 31, 1998 partial breach of the Standard Contract

entitled SMUD to certain mitigation costs, incurred from May 15, 1997 to December 31, 2003.

See SMUD III, 70 Fed. Cl. at 367-73 (determining that SMUD was entitled to recover mitigation

costs for: dry storage; labor severance and recruiting; dry storage project delays; spent nuclear

fuel; ISFSI operation and maintenance; gantry crane refurbishment; and the preparation,

packaging, inspection, and loading of SNF). The court, however, denied SMUD’s recovery of

other claimed mitigation costs. Id. at 373-78 (determining that SMUD was not entitled to

mitigation costs for: dual purpose dry storage; related contract, lease, or other legal obligations;

certain aspects of the ISFSI construction; internal labor costs; overhead costs; and onsite drop-

testing). The court also determined that DOE was entitled to an offset of $4,196,360 for the

amount that “SMUD saved [in 2003] by placing SNF into dry storage and decommissioning the

wet pool[.]” Id. at 375. In reaching this conclusion, the court rejected SMUD’s contention that

it “would have been successful in trading SMUD’s acceptance priority with another utility or

convincing DOE to accept SMUD’s SNF early,” i.e., prior to 2003. Id. Thereafter, supplemental

expert testimony was proffered in this case to ascertain SMUD’s specific mitigation costs,

whereupon the court determined that SMUD was entitled to recover $39,796,234. See SMUD

IV, 74 Fed. Cl. at 730, 735. SMUD and the Government filed cross-appeals.

On August 7, 2008, the United States Court of Appeals for the Federal Circuit issued an

opinion, affirming-in-part and reversing-in-part SMUD IV, and remanding Civil Action Docket

No. 98-488C, instructing the court to determine causation by applying the 1987 Annual Capacity

Report (“1987 ACR”) acceptance rate. See SMUD V, 293 F. App’x at 771. On remand,

applying the 1987 ACR acceptance rate, the United States Court of Federal Claims determined

that SMUD established entitlement to $39,796,234 in mitigation costs. See SMUD VI, 91 Fed.

Cl. at 18.3 In addition, the court “restor[ed] the $13,363,629 in offsets allowed by the appellate

court,” for a total award of $53,159,863. Id. The court also determined that the Government was

still entitled to an offset of $4,196.360 for wet pool savings realized by SMUD in 2003, since

3

The United States Court of Appeals for the Federal Circuit has held that, because there

has only been a partial breach of the Standard Contract, “[a] plaintiff can recover only such

damages as he or she has sustained, leaving prospective damages to a later suit in the event of

further breaches.” Ind. Mich. Power Co. v. United States, 422 F.3d 1369, 1377 (Fed. Cir. 2005);

see also id. at 1378 (“Accordingly, [plaintiff] must bring any future actions for damages related

to DOE’s breach of the Standard Contract within six years of incurring such damages.”).

Therefore, SMUD was entitled in Civil Action Docket No. 98-488C to mitigation costs incurred

during the relevant period, i.e., up to December 31, 2003. Any future costs would only be

recovered in a separate action.

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“that ruling was not reversed on appeal.” Id. But, the court rejected the Government’s request

that the court offset this same amount of wet pool savings for January 1, 2004 to December 31,

2008, because “it is proper to account for any 2004-2008 SNF wet pool savings offset in [Docket

No. 09-587C].” Id. at 19. Instead, the court ordered that Civil Action Docket No. 98-488C be

stayed, pending the court’s resolution of Civil Action Docket No. 09-587C, to determine whether

SMUD would have achieved any savings during those years from the decommissioning of its

wet pool and, if so, the amount to be offset against SMUD’s recovery in Docket No. 98-488C,

because “the amount of costs SMUD may seek in [Docket No. 09-587C may] not be sufficient to

allow the Government to recoup the amount of SNF wet pool savings realized from 2004-2008.”

Id.

On March 12, 2010, SMUD filed a Petition for a Writ of Mandamus requesting that the

United States Court of Appeals for the Federal Circuit order the court to lift the stay in Civil

Action Docket No. 98-488C that prevented entry of final judgment in SMUD VI. On September

16, 2010, SMUD’s Petition was denied. See In re Sacramento Mun. Util. Dist., 395 F. App’x

684, 688 (Fed. Cir. 2010) (unpublished).

B. Sacramento Municipal Utility District v. United States, Civil Action Docket No.

09-587C.

On September 4, 2009, SMUD filed a Complaint in this case, Civil Action Docket No.

09-587C, alleging that DOE was in partial breach of the Standard Contract and had violated the

implied covenants of good faith and fair dealing, for which SMUD was entitled to mitigation

costs incurred after January 1, 2004. 9/4/09 Complaint.4

On November 3, 2009, the Government filed an Answer And First Affirmative Defense

alleging that, to the extent not barred by N. States Power Co. v. Dep’t of Energy, 128 F.3d 754

(D.C. Cir. 1997), “the ‘unavoidable delays’ clause of the [S]tandard [C]ontract would affect or

eliminate the Government’s liability for, and/or [SMUD’s] ability to recover, damages for

DOE’s delay.” Answer at 9.5

4

The underlying facts in Docket No. 09-587C were set forth in SMUD III and SMUD IV

and are also derived from: the Government’s November 3, 2009 Answer (“Answer”); Joint

Exhibits in Docket No. 98-488C (JX 1-6000); Plaintiff’s Exhibits (PX 6001-6358); the

Government’s Exhibits (DX 6001-6245); and the transcript of a trial of Docket no. 09-587C held

October 24-27, 2011 (“TR at 1-1163”).

5

Subsequently, the United States Court of Appeals for the Federal Circuit held en banc

that the decision in Northern States Power has res judicata effect on the partial breach of

Standard Contract cases filed in the United States Court of Federal Claims, because the United

States Court of Appeals for the District of Columbia’s ruling was not barred by sovereign

immunity and did not “impermissibly invade” the jurisdiction of the United States Court of

Federal Claims to adjudicate the partial breach and mitigation cost claims at issue. See Neb.

Pub. Power Dist. v. United States, 590 F.3d 1357, 1376 (Fed. Cir. 2010).

7

On February 19, 2010, SMUD served the Government with Initial Disclosures, including

“a computation of each category of damages claimed by the disclosing party.” RCFC

26(a)(1)(A)(iii). Therein, SMUD estimated “that its mitigation damages [were] in the range of

approximately $31 million to $37 million for 2004 through 2010.” Pl. Discl. at 4.

On April 23, 2010, the parties filed a Joint Motion For Protective Order that the court

granted on April 26, 2010.

On July 16, 2010, SMUD produced additional information, including a spreadsheet

itemizing mitigation costs claimed for the period of 2004 through 2010.

On December 10, 2010, SMUD served the Government with a Damages Expert Report to

explain the basis of mitigation costs for 2004 through 2009, and advised the Government that

this Expert Report would be supplemented to include 2010 mitigation costs after SMUD’s expert

completed his review of all of the supporting documents. On March 8, 2011, the Government

deposed SMUD’s damages expert, during which he testified that he planned to supplement the

December 10, 2010 Expert Report, but was waiting for SMUD’s counsel to provide final

documentation.

In late March 2011, SMUD’s counsel informed the Government that the Supplemental

Damages Expert Report was nearly completed. On April 8, 2011, however, the Government

objected to including any 2010 mitigation costs in this proceeding, but would agree to do so only

if SMUD agreed to afford the Government an extra two-and-a-half months to submit its Expert

Reports. On April 13, 2011, SMUD’s counsel replied that the Government had sufficient notice

of SMUD’s intent to seek 2010 mitigation costs in this proceeding. On April 18, 2011, the court

convened a status conference to discuss this issue. During that conference, the Government

represented that it conducted discovery of SMUD’s mitigation costs for 2004 through 2009, but

not through 2010. Following argument by the parties, the court made an oral ruling that SMUD

would only be able to seek mitigation costs up to December 31, 2009 in this case, Docket No.

09-587C, but could pursue any costs incurred after that date in a separate action.

On April 20, 2011, SMUD filed a Motion For Leave To File Its Supplemental And

Amended Complaint to allege a claim for mitigation costs for 2004 through 2010. On that same

date, SMUD also served the Government with a Supplemental Expert Report and supporting

documentation with its final damages claim through 2010. On April 21, 2011, the court

convened a status conference to discuss SMUD’s April 20, 2011 Motion. On May 4, 2011, the

Government filed a Response, arguing that SMUD’s damages in this case must be limited to

those incurred prior to the date of its suit, i.e., September 3, 2009. The Government, however,

did not oppose SMUD’s April 20, 2011 Amended Complaint to the extent it alleged mitigation

costs from January 1, 2004, to December 31, 2009.

On May 9, 2011, the court convened a second status conference to discuss SMUD’s April

20, 2011 Motion For Leave To File Its Supplemental And Amended Complaint.

On May 17, 2011, the court issued a Memorandum Opinion and Order Regarding

SMUD’s Motion For Leave To File A Supplemental And Amended Complaint, determining that

8

allowing SMUD “to include 2010 damages in its claim at this juncture would require the

Government to conduct significant extra discovery and potentially delay the evidentiary hearing

on damages set for October 24-28, 2011.” See Sacramento Mun. Util. Dist. v. United States, 98

Fed. Cl. 495, 499 (2011). In addition, SMUD did not establish how it would be prejudiced, since

SMUD could bring a future action to seek costs incurred in and after 2010. Id. For those

reasons, SMUD’s April 20, 2011 Motion For Leave was denied-in-part and granted-in-part to

allow SMUD to amend the September 4, 2009 Complaint to allege a claim for mitigation costs

incurred through December 31, 2009. Id.

On June 10, 2011, SMUD filed a Motion To Strike The Government’s Unavoidable

Delay Defense Or For Judgment On The Pleadings or to rule, as a matter of law, that the

Government’s November 3, 2009 Answer And First Affirmative Defense was deficient. On July

8, 2011, the parties filed a Joint Motion And Stipulation, in which SMUD withdrew its June 10,

2011 Motion To Strike, based on the Government’s agreement that it would not pursue the

unavoidable delays defense in this case. On July 11, 2011, the court issued an Order granting the

parties’ July 8, 2011 Joint Motion And Stipulation.

On August 4, 2011, the Government filed three other motions in limine. The first motion

sought to strike SMUD’s prior arguments in Civil Action Docket No. 98-488C regarding the

ability to obtain an early SNF removal date, based on the assumption that utility exchanges

would be available and on DOE’s policy favoring a priority for shutdown reactors. The second

motion argued that SMUD is not entitled to recover any type or amount of interest related to

claimed nominal damages. The third motion was to exclude the expert testimony of Michael W.

Snyder, because he attempted to introduce a new opinion not disclosed when his initial expert

report was filed.

On August 12, 2011, SMUD filed a Memorandum Of Contentions Of Fact And Law and

an Exhibit List and Witness List. On August 25, 2011, SMUD also filed Responses to each of

the Government’s August 4, 2011 motions in limine. On August 26, 2011, SMUD filed a

Motion For Leave To File Designated Testimony, i.e., for the admission of certain portions of

the trial and deposition testimony, in other SNF cases, of Government witnesses: Mr. Robert

Campbell; Ms. Christine Gelles; Mr. David Huizenga; Mr. Ronald Milner; and Mr. David

Zabransky.

On September 6 and 8, 2011, the Government replied to SMUD’s August 25, 2011

responses to the Government’s three August 4, 2011 motions in limine. On September 12, 2011,

the Government also filed a Response to SMUD’s August 26, 2011 Motion For Leave To File

Designated Testimony.

On September 14, 2011, the Government filed a Memorandum Of Contentions Of Fact

And Law, an Exhibit List, and a Witness List.

On September 20, 2011, SMUD filed a Reply in support of its August 26, 2011 Motion

For Leave To File Designated Testimony. On September 26, 2011, SMUD also filed a Motion

For Leave To File The Designated Deposition Testimony Of John Hoffman. That same day,

SMUD also filed a Motion For Leave To File A Response To The Government’s Untimely

9

Request To Exclude Evidence Regarding A Possible Wet Pool Offset, which the court granted

on September 29, 2011.

On September 30, 2011, the Government filed a Response to SMUD’s September 26,

2011 Motion For Leave To File Designated Deposition Testimony Of John Hoffman.

On October 5, 2011, the court held a conference to discuss pretrial matters and pending

motions.

On October 13, 2011, the Government filed a Response to SMUD’s September 26, 2011

Motion regarding Mr. Hoffman’s deposition. On that same date, the court issued an Order

denying the Government’s August 4, 2011 Motion In Limine to prohibit SMUD from introducing

relevant evidence on entitlement to interest, because an appeal had been filed in System Fuels,

Inc. v. United States, 92 Fed. Cl. 101, 109-114 (2010) (suggesting en banc reconsideration of the

“no interest” rule). The court also granted-in-part and denied-in-part the Government’s August

4, 2011 Motion In Limine to exclude the expert testimony of Michael Snyder, allowing him to

testify as a potential rebuttal witness. The court also denied the Government’s August 4, 2011

Motion In Limine to strike plaintiff’s previously litigated and rejected arguments asserting

exchanges and priority for a shutdown reactor, and allowed SMUD to introduce relevant

evidence on this issue at trial. In addition, the court granted SMUD’s August 26, 2011 Motion

For Leave To File Designated Deposition And Trial Testimony and advised the parties that the

record would remain open after trial to allow the Government to submit counter-designations and

SMUD to submit any counter-counter-designations. The court also granted SMUD’s September

26, 2011 Motion For Leave To File Designated Deposition Testimony Of John Hoffman and

advised the parties that it would leave the record open for a reasonable amount of time after the

trial to allow the Government to depose another witness on the subjects addressed by Mr.

Hoffman. The court, however, deferred ruling on the Government’s request to exclude evidence

regarding a possible wet pool offset as discussed in its September 14, 2011 Memorandum Of

Contentions Of Fact And Law.

From October 24, 2011 to October 27, 2011, the trial was held in Washington, D.C. on

the mitigation costs to which SMUD was entitled for the period from January 1, 2004 to

December 31, 2009.6

6

At the October 24-27, 2011 trial, the following witnesses testified on behalf of SMUD:

Mr. Einar Ronningen, Superintendent of Rancho Seco Assets; Mr. Jason McAlister, in charge of

budget planning and budget reporting for SMUD’s Energy Supply Unit, which includes Rancho

Seco; Mr. James J. Field, Engineering Supervisor at Rancho Seco from 2004 to 2009; Mr. Steve

Redeker, Plant Manager at Rancho Seco from 1993 to 2008; and Mr. Robert Grubb, President

and Chief Operating Officer of Transnuclear, Inc.

In addition, the court also admitted the written direct testimony of the following expert

witnesses who testified on behalf of SMUD: Mr. Frank C. Graves, an economic consultant with

the Brattle Group (PX 6350); Mr. Ivan F. Stuart, a nuclear industry consultant with I. Stuart &

Co. (PX 6351); Ms. Eileen M. Supko, a nuclear industry consultant with Energy Resources

International, Inc. (PX 6352); and Mr. Kenneth P. Metcalfe, C.PA., C.V.A., an economic

damages consultant with the Kenrich Group LLC (PX6353). The court also admitted the written

10

On December 16, 2011, the Government objected to SMUD’s Exhibit List. On

December 19, 2011, the Government filed a Notice Of Counter-Designations To SMUD’s

Designations Of Prior Deposition And Trial Testimony Of Department Of Energy Witnesses

(“Gov’t DOE Counter-Designations”), as well as Counter-Designations To SMUD’s

Designations Of Prior Deposition And Trial Testimony Previously Submitted In Plaintiff’s First

Spent Nuclear Fuel Case (“Gov’t First Case Counter-Designations”).

On January 3, 2012, SMUD filed a Response to the Government’s December 16, 2011

Objections to SMUD’s Exhibit List.

On January 9, 2012, the Government filed a Motion To Correct The Cumulative Index

For The Trial Transcript. On January 11, 2012, SMUD filed a Motion To Correct The

Cumulative Index and a Response to the Government’s Motion To Correct.

On January 13, 2012, the Government filed a Reply to SMUD’s January 3, 2012

Response to the Government Objections To Plaintiff’s Trial Exhibits. That same day, the

Government filed a Response to the SMUD’s January 11, 2012 Motion To Correct.

On January 18, 2012, SMUD filed a Motion For Leave To File Additional Designations.

And, on January 23, 2012, SMUD filed a Reply in support of its January 11, 2012 Motion To

Correct.

On January 25, 2012, SMUD and the Government filed initial Post-Trial Briefs

(respectively, “Pl. Br.” and “Gov’t Br.”).

On February 6, 2012, the Government filed a Reply to Plaintiff’s Objections To

Defendant’s Counter-Designations and a Response to SMUD’s January 18, 2012 Motion For

Leave To File Additional Designations. On February 16, 2012, SMUD filed a Reply in support

of its January 18, 2012 Motion For Leave To File Additional Designations.

rebuttal testimony of Mr. Michael W. Snyder of MHF Services, formerly the Superintendant of

Radioactive Waste Operations at Rancho Seco from 2001 to January 2009 (PX 6358). Each of

these individuals also testified at the October 24-27, 2011 trial on cross-examination and re-

direct.

Testifying as a fact witness on behalf of the Government was Ms. Christine Gelles,

Director of the DOE’s Office of Disposal Operations. In addition, the court admitted the written

direct testimony of the following expert witnesses on behalf of the Government: Dr. Jonathan

Neuberger, Ph.D., an economic consultant with Economists Inc. (DX 6242); Mr. William Jones,

a nuclear industry consultant with ABZ, Inc., (DX 6243); Mr. Gregory Maret, a nuclear industry

consultant with Sequoia Consulting Group (DX 6244); and Mr. Robert Peterson, M.B.A., an

economic damages consultant with LitCon Group, LLC (DX 6245). Each of these individuals

also testified at the October 24-27, 2011 trial on cross-examination and re-direct.

11

On February 17, 2012, SMUD filed a list of the assumptions relied on by Mr. Kenneth

Metcalfe in his Written Direct Testimony. On February 24, 2012, the Government filed a list of

assumptions relied on by Mr. Robert Peterson in his Written Direct Testimony.

On February 24, 2012, both SMUD and the Government filed Post-Trial Response Briefs

(respectively, “Pl. Resp.” and “Gov’t Resp.”).

On April 2, 2012, the court issued an Order granting each party’s Motion To Correct The

Cumulative Index and allowing the Government to file counter-designations to the designated

deposition testimony filed by SMUD prior to the October 24-27, 2011 evidentiary hearing and

for SMUD to file counter-counter-designations. Neither the Government nor SMUD filed any

subsequent designations.

On December 4, 2012, SMUD filed a Notice Of Supplemental Authority notifying the

court of the United States Court of Federal Claims’ opinion in Portland General Electric

Co. v. United States, No. 04-09C, 2012 WL 6013274 (Fed. Cl. Nov. 30, 2012).

II. DISCUSSION.

A. Whether Plaintiff’s Spent Nuclear Fuel And High Level Waste Would Have

Been Removed Prior To January 1, 2004, Utilizing The Standard Contract’s

Exchange Provision.

1. The Plaintiff’s Argument.

SMUD argues that, in light of economic incentives, the Standard Contract7 exchange

provision would have been utilized, so that all of SMUD’s SNF and HLW would have been

removed prior to January 1, 2004 in the non-breach world. Pl. Br. at 38-40. SMUD supports

this assertion with the testimony of DOE officials and Government experts that exchanges would

have occurred. PX 6355 at 173 (June 6, 2002 Mr. Zabransky (Contracting Officer for the

Standard Contract) Dep.), PX 6355 at 253 (July 14, 2004 Dr. Bartlett (former Director of DOE’s

Waste Program) Direct); PX 6351 ¶¶ 34-35 (Stuart Written Direct) (testifying that the “lengthy

schedule leading up to DOE performance . . . would have given utilities and DOE the time

necessary to coordinate and get approval for exchanges,” and therefore “there is no reason to

assume disapproval due to an ‘infeasible schedule’”); TR at 977 (Neuberger) (Government

expert economic witness).

In addition, SMUD’s economic expert, Mr. Frank Graves, confirmed at the evidentiary

hearing that using the Oldest Fuel First (“OFF”) sequence would impose $1.6 billion of

7

The Standard Contract provided that utility-parties could exchange their place in line for

DOE disposal at a set time prior to performance. See 10 C.F.R. § 961.11, Art. V.B.1 (Standard

Contract) (setting process for approval of delivery commitment schedules 63 months prior to

delivery). The Standard Contract, however, also provided that DOE had the discretion to

prioritize the disposal of SNF and HLW from shut down nuclear reactors. See 10 C.F.R. §

961.11, Art. VI B., V D.

12

additional spent nuclear fuel storage costs on the nuclear utility industry that could be avoided, if

the parties were able to utilize efficient exchanges. PX 6350 at 35. Since the utilities “are not

actual competitors . . . historically [they] engage in mutually beneficial exchanges . . . of

personnel, material, and even contract rights . . . not based on altruism, but collective self-

interest.” Pl. Br. at 42 (citing TR at 170 (Ronningen); TR at 609-10, 614-15, 628-29 (Field)).

Moreover, the nuclear industry had a history of cooperation, as evidenced by the uranium

exchange market and the nuclear plant spare parts market. TR at 619-20, 628 (Field); see also

PX 6352 ¶¶ 25-28 (Supko Written Direct); PX 6351 ¶¶ 25-26, 28 (Stuart Written Direct).

Since DOE would have benefitted from these exchanges, it is reasonable to assume DOE

would be reasonable in approving them. See, e.g., PX 29 at ZAB-001-0899 (Apr. 8, 1983 DOE

Memorandum) (“[A]side from some complex record keeping, [an exchange provision] poses no

great problem to [DOE], and consequently, [DOE] ha[s] accepted this suggestion.”); PX 6356 at

106 (Robert L. Morgan, the first Director of the SNF Program) (observing that DOE would

approve exchanges, because it “intend[s] to be reasonable” and “if at all possible [DOE] would

approve it”); see also PX 6356 at 145 (Nancy Slater-Thompson, Team Leader of the Regulatory

Coordination Division of the DOE’s Office of Civilian Radioactive Waste Management) (“[I]t

was [DOE’s] intention to accommodate, to the extent practicable, all reasonable requests to

exchange”); PX 6355 at 254 (Dr. Bartlett) (testifying that he “anticipated that [DOE] would

readily approve any proposed swaps”).

The record establishes that it was unlikely that the removal of SNF would have operated

under an OFF schedule. PX 6355 at 252-53 (Dr. Bartlett) (“The system would, in my opinion,

never have operated under an OFF concept. It would be extremely inefficient and inappropriate.

Because many of the discharges had been small quantities of fuel over large intervals of time.

And you could not operate your transport facilities and equipment efficiently if you followed the

OFF principle.”); PX 6356 at 69 (Mr. Keith Klein, Manager of DOE’s Richland Operations

Office) (stating that “a strict taking of the oldest fuel first from reactors would be very difficult to

implement” and therefore DOE “needed to have some flexibility in the system to allow common

sense to be used”); PX 6351 ¶¶ 8, 23, 32, 36-37 (Stuart Written Direct) (testifying that OFF

acceptance is “inconsistent with the view of DOE officials who were in charge of running and

developing the program in the real world and inconsistent with the historical practices of

shipping and managing spent fuel” and explaining how using OFF acceptance would be less

efficient and more burdensome both for the utilities and DOE); PX 6350 at 77 (Graves Written

Direct) (“The [G]overnment’s suggestion that Rancho Seco . . . would have had its SNF removed

according to its OFF allocation implies that the DOE would have developed a program that was

entirely capable of addressing all the industry’s SNF removal needs after 2004 and most of them

before, but that the program would have been implemented so poorly that it would not actually

solve those storage problems.”); TR at 977-78 (Neuberger) (“[T]here were clear incentives for

some utilities to accelerate their spent fuel acceptance relative to OFF.”); see also TR at 982-83

(Neuberger) (clarifying that he was not offering an opinion that it was more likely than not that

SMUD would have held fuel until 2008).

In addition, as SMUD’s expert testified, “Rancho Seco’s fuel would have been removed

by 2003, and in fact likely well before then, even under unduly pessimistic assumptions about

the non-breach world.” PX 6350 at 5 (Graves Written Direct); see also id. (under Mr. Graves’s

13

“base case,” Rancho Seco’s SNF would have been removed in 1999). In addition, Mr. Graves

testified that there were dozens of utilities with OFF allocation rights in excess of their needs in

the early years of the SNF removal with the ability to exchange allocation rights without

disrupting their fuel storage needs. PX 6350 at 33-36, 38-39. To verify this assumption, Mr.

Graves conducted multiple sensitivity analyses to address: the updated discharge and capacity

data; extreme variations in spent fuel storage costs; the exercise of market power by utilities with

early acceptance allocations; transaction costs; barriers to trades; and the effect of greater-than-

Class-C (“GTCC”) waste. PX 6350 at 44-77. Even a simple comparison of acceptance under

the 1987 ACR would establish that within a few years after DOE’s removal of SNF commenced

in 1998, DOE’s total acceptance capacity would have exceeded the total amount of “must move”

fuel held by other utilities. PX 6350 at 18 (Graves Written Direct).8

Even if the court rejected the assertion that DOE would have removed Rancho Seco’s

SNF prior to 2004, SMUD would have utilized the exchange provision to remove its SNF prior

to 2008. Pl. Br. at 63-66. To obtain a fuel-out date in 2004, SMUD had to initiate and schedule

two exchanges to remove 112.3 metric tons of uranium (“MTU”) of SNF when DOE would have

accepted 3,000 MTU of SNF total for the year. Pl. Br. at 63-64; PX 6350 at 18-19 (Graves

Written Direct); see also PX 119 (1987 ACR); PX 554 (1996 Annual Priority Ranking).9

Similarly in 2005, 2006, or 2007, SMUD only would need to arrange for one exchange to

remove 82.1 MTU of SNF. Pl. Br. at 64-65. Moreover, during this time Plaintiff contends that

there would have been more OFF allocation rights available than “must move” fuel needs. Pl.

Br. at 63-65.

8

SMUD emphasized that Mr. Graves’s exchanges model was accepted by the United

States Court of Federal Claims in every case involving a shutdown utility and that each of these

decisions subsequently was affirmed by the United States Court of Appeals for the Federal

Circuit. Pl. Br. at 36 (citing Yankee Atomic Power Co. v. United States, 94 Fed. Cl. 678, 701

(2010), aff’d, 679 F.3d 1354 (Fed. Cir. May 18, 2012); Pac. Gas & Elec. Co. v. United States, 92

Fed. Cl. 175, 184-85 (2010), aff’d, 668 F.3d 1346 (Fed. Cir. 2012); Dairyland Power

Coop. v. United States, 90 Fed. Cl. 615, 627-36 (2009), aff’d in part, vacated in part on other

grounds, 645 F.3d 1363 (Fed. Cir. 2011)).

The only decision in which the United States Court of Federal Claims rejected Mr.

Graves’s exchange model did not involve a shutdown utility. See Kan. Gas & Elec.

Co. v. United States, 95 Fed. Cl. 257 (2010), aff’d in part, rev’d in part on other grounds, 658

F.3d 1361 (Fed. Cir. 2012). Nevertheless, the Kansas Gas & Electric Co. court effectively

reached the same result, determining that the utility would have managed its SNF in different

ways to avoid additional storage charges. Id. at 294-95.

9

Under a 2005, 2006, or 2007 “fuel out date,” SMUD would need to make only one

exchange, so it would want to facilitate an earlier acceptance. PX 6350 at 18-19 (Graves Written

Direct). Moreover, even if SMUD’s fuel out date were 2008, SMUD’s SNF would have been

removed at the beginning of the year, because “SMUD would have been at the front of the line

for acceptance in 2008 based on [OFF], and both DOE and SMUD would have had every

incentive to achieve final acceptance early in the year.” Pl. Br. at 65. In addition, if SMUD’s

fuel out date were 2008, “SMUD would have had an opportunity and incentive to sell their

allocations from 2000 to 2005 for significant value.” Pl. Resp. at 9 n.2 (citing TR 998-99

(Neuberger)).

14

Although the Government criticized Mr. Graves’s assumptions, it “offers not a shred of

evidence that SMUD would have been prevented from exchanging its single 2008 allocation for

an earlier one.” Pl. Resp. at 5. The Government also did not present an alternative scenario, take

a position on what the proper inputs should be, or develop its own model of the non-breach

world. Pl. Resp. at 29-31 (citing TR at 978-83, 992-93, 1008, 1017, 1029, 1040-44, 1048 (Dr.

Neuberger)). Therefore, SMUD concludes that the Government’s proposed OFF schedule and a

2008 fuel out date were not “a plausible view of the non-breach world for SMUD[.]” Pl. Br. at

49-50; see also Pl. Resp. at 4.

SMUD contends that, even if the court accepts SMUD’s exchange model, it should not

offset any related costs, since those costs would be less than SMUD’s wet pool operating costs

from 1999-2004. Pl. Br. at 50; Pl. Resp. at 28-32. In other words, offsetting SMUD’s mitigation

costs by SMUD’s expedited exchange costs would place SMUD in a worse economic position

than if the Government had performed, contrary to the law of expectation damages. Pl. Resp. at

28 (citing RESTATEMENT (SECOND) OF CONTRACTS § 347 cmt. a (1979)). Applying standard

economic principles, Mr. Graves estimated that the exchange costs would be $8.4 million in his

base case. PX 6350 at 5-6 (Graves Written Direct). This is less than the approximately $20

million in wet pool operating costs incurred in the breach world that SMUD would not have

incurred in the non-breach world. Pl. Br. at 50. Even if the court adopts the Dairyland Power

approach and finds that SMUD’s exchange costs would be half of the avoided wet pool costs,

SMUD’s mitigation costs should not be reduced, “because SMUD has already ‘paid’ for half the

avoided costs.” Pl. Resp. at 34.

2. The Government’s Response.

The Government responds that the law of the case doctrine precludes SMUD from

claiming that its SNF would have been removed earlier than under the OFF schedule. Gov’t Br.

at 13-16. In Civil Action Docket No. 98-488C, SMUD contended that it would have removed its

SNF earlier than the OFF schedule by utilizing the exchange or priority for shutdown reactors

provisions of the Standard Contract, but the court rejected this argument. See SMUD III, 70 Fed.

Cl. at 375 (reasoning that accepting this argument would require the court to “speculate about

whether SMUD would have been successful in trading SMUD’s acceptance priority with another

utility or convincing DOE to accept SMUD’s SNF early.”). SMUD did not appeal that ruling.

Nevertheless, in this case, Civil Action Docket No. 09-587C, SMUD reintroduced the evidence

rejected in Civil Action Docket No. 98-488C, and added Mr. Graves’s opinions. Gov’t Br. at 15-

16. The Government insists that SMUD made a litigation decision not to proffer Mr. Graves’s

opinion in the first case, and should not be allowed to do so here, as it “violates the law of the

case doctrine . . . and would prejudice the Government.” Gov’t Br. at 16.

In addition, SMUD’s re-introduction of its exchange argument is barred by collateral

estoppel. Gov’t Br. at 16. Although the court has not entered final judgment in Docket No. 98-

488, “the mandate rule bars re-litigation of these accelerated acceptance theories on remand in

SMUD’s first case, [and therefore] the Court should find that issue sufficiently ‘final’ for the

collateral estoppel doctrine to apply.” Gov’t Br. at 16. Therefore, SMUD also is barred from

introducing a new theory to support SMUD’s assumption that DOE would accelerate removal of

15

SMUD’s SNF, including: the priority for shutdown reactors; emergency deliveries; the “plus or

minus 20 percent” provisions in the Standard Contract; and the transportation campaigns opinion

proffered by SMUD’s nuclear industry consultant. Gov’t Br. at 15-17. Each of these arguments

previously was raised by SMUD and rejected by the court. Therefore, they are barred either by

the mandate rule; the law of the case; or collateral estoppel; or they are waived for failure to raise

them in the first case. Gov’t Br. at 17 (citing SMUD III, 70 Fed. Cl. at 336 n.1, 339). In fact,

“other than generalized references . . . , SMUD failed to present any evidence or analysis as to

how these provisions would effect, if at all, DOE’s acceptance of SNF and HLW from SMUD in

the [non-breach] world.” Gov’t Br. at 17.

The Government then turns to its assertion that SMUD failed to establish that its SNF

would have been removed prior to 2008. Gov’t Resp. at 41-50. The Standard Contract granted

DOE “virtually unreviewable discretion” to approve any exchanges, and that discretion should

“weigh heavily against any damages award based upon this provision of the Standard Contract.”

Gov’t Resp. at 42 (citing Hi-Shear Tech. Corp. v. United States, 356 F.3d 1372, 1380 (Fed. Cir.

2004) (holding that a contractor cannot increase a damage award by claiming that the

Government would have exercised an option to extend the contract)). In response, SMUD cites

the potential efficiencies to be gained by utilizing exchanges, but these efficiencies have not been

ascertained nor quantified by DOE. Gov’t Resp. at 42-43; see also Gov’t DOE Counter-

Designations Att. A (Zabransky 10/19/09 TR at 711-12 (Pac. Gas & Elec., Co. v. United States,

Dkt. No. 04-0074C) (“What is efficient for one party maybe [sic] inefficient for another. So it

really determines – it depends upon the specifics of who is making the judgment as to whether

something is efficient or not.”)). Moreover, other nuclear utilities have testified that exchanges

were not a viable option and would not have participated in an exchange market. Gov’t DOE

Counter-Designations, Att. A (Zabransky 8/12/09 TR at 592-99, 301-02) (Yankee Atomic Elec.

Co. v. United States, Dkt. Nos. 98-126C, 98-154C, 98-474C) (asserting that Wisconsin Electric

Power Co., one of sixteen named plaintiffs in that case, would not have utilized exchanges, until

the DOE acceptance program established a five-to-ten-year track record).

In addition, the United States Court of Federal Claims’ decision in Dairyland Power

highlighted the significant deficiencies in utilizing exchanges. Gov’t Resp. at 43-47. Dairyland

Power concerned a shutdown reactor with only 38 MTU of SNF, where there was a strong

incentive to engage in an exchange. See Dairyland Power Coop., 90 Fed. Cl. at 622, 634. In

contrast, Rancho Seco had 228.8 MTU of SNF. Gov’t Resp. at 44. Moreover, the Dairyland

Power court found that plaintiff’s expert’s model underestimated the costs of exchanges and

determined that plaintiff’s exchange costs in that case would consume half of its expected

exchange savings. Gov’t Resp. at 45-46 (citing Dairyland Power Coop., 90 Fed. Cl. at 635-36).

The trial court’s award of half of costs was affirmed on appeal. Dairyland Power Coop., 645

F.3d at 1371-73.

In this case, SMUD’s hypothetical exchange scenario is also premised on unreliable

expert testimony. Gov’t Resp. at 47-50. First, Mr. Graves’s spent nuclear fuel storage cost

estimate was based on an insufficient and unreliable data sample. Gov’t Resp. at 47 (citing DX

6242 ¶¶ 124-70 (Neuberger Written Direct) (highlighting Mr. Graves’s use of generic costs, as

opposed to actual costs; a limited data sample; and miscalculation of three amounts used as a

proxy for wet pool cost estimates)). Second, the maximum pool capacity data relied on by Mr.

16

Graves were found to be unreliable in other SNF cases. See Kan. Gas, 95 Fed. Cl. at 290-91; see

also DX 6242 ¶¶ 108-118 (Neuberger Written Direct) (stating that Mr. Graves’s justifications of

his pool storage capacity data were incomplete and did not fully measure the impact of his

errors). Third, Mr. Graves’s model did not account for the fact that a potential seller of

acceptance allocations would attempt to extract a high premium from SMUD for an exchange, in

light of SMUD’s willingness to pay. Gov’t Resp. at 48-49. As such, Mr. Graves’s model

significantly underestimated exchange costs. DX 6242 ¶¶ 171-74 (Neuberger Written Direct).

Finally, Mr. Graves’s model relied on other speculative assumptions, e.g., there is no evidence

that: any nuclear utility contemplated moving back in the acceptance queue; there would have

been 100% participation in an exchange market; uncertainty and risk aversion was considered;

DOE would have approved all of the hypothetical exchanges; nor that perfect competition and

trading conditions would be present. Gov’t Resp. at 49-40 (citing DX 6242 ¶¶ 44, 57-79, 80-87);

see also Kan. Gas, 95 Fed. Cl. at 289-94 (determining that Mr. Graves’s exchange model was

unreliable for similar reasons). In addition, Mr. Graves’s sensitivity analyses examined only the

effect of individual changes, not cumulative effects. Gov’t Resp. at 50 n.17 (citing DX 6242 ¶¶

31, 195-96).

3. The Plaintiff’s Reply.

SMUD replies that, as a matter of law, the court is not barred from determining what

would have happened in the non-breach world during 2004 to 2009, as to a “fuel out” date. Pl.

Br. at 30 (citing SMUD VI, 91 Fed. Cl. at 18-19 (holding that the court was not required to

address the savings that SMUD realized from 2004 to 2008, but would do so in this case)). For

this reason, the court preserved all issues regarding the period 2004 to 2009 for subsequent

adjudication. See SMUD VI, 91 Fed. Cl. at 19 (“SMUD has requested an unspecified amount of

damages ‘from January 1, 2004 forward’ in a separate proceeding. Accordingly the court has

decided it is proper to account for any 2004-2008 SNF wet pool savings offset in that

proceeding.” (citation omitted)). Although the court awarded the Government an offset for

avoided wet pool savings, that ruling applied only to the period through December 31, 2003. Pl.

Br. at 31. Since SMUD “chose to live with this 2003 wet pool deduction, [it] cannot be

collaterally estopped from challenging the [G]overnment’s claim to an offset for damage periods

that were not at issue.” Pl. Br. at 32; see also Pl. Resp. at 13 (citing Charter Fed. Sav.

Bank v. United States, 87 Fed. App’x 175, 178 (Fed. Cir. 2004) (reversing the trial court’s

determination that collateral estoppel applied, because any ambiguity should be resolved in favor

of the party against whom preclusion is asserted)).

In SMUD III and SMUD VI, the court “did not determine SMUD’s fuel out date . . . , did

not determine whether SMUD could have exchanged or advanced its 2004, 2005, or 2008

allocations, and did not determine whether the [G]overnment was entitled to any offset for 2004

forward,” because SMUD filed this case for mitigation costs from 2004 forward. Pl. Br. at 33-

34. Therefore, no final judgment was entered in Civil Action Docket No. 98-488C, after the

court decided to ascertain the fuel out date and any wet pool savings offsets in this case. Pl. Br.

at 34. Moreover, applying collateral estoppel to this case would be improper, where there has

been a subsequent change in applicable law altering the framework for evaluating Mr. Graves’s

exchanges model. See Pac. Gas & Elec. Co. v. United States, 536 F.3d 1282, 1292 (Fed. Cir.

2008) (holding that the 1987 ACR established the proper acceptance rate); see also Dairyland

17

Power Coop., 645 F.3d at 1369-71 (affirming the trial court’s award of damages based on Mr.

Graves’s exchanges model); Bingaman v. Dep’t of Treasury, 127 F.3d 1431, 1437 (Fed. Cir.

1997) (holding that “a significant change in the ‘legal atmosphere’ . . . can justify a later court’s

refusal to give collateral estoppel effect to an earlier decision”). Therefore, “[t]o the extent this

[c]ourt did not feel the law permitted such a finding in 2005, particularly because of the absence

of an acceptance rate, there have been multiple decisions since this [c]ourt’s 2006 decision

making clear that the law supports such a finding today.” Pl. Resp. at 11.

Moreover, neither the law of the case nor the mandate rule is applicable in this case,

“because these doctrines serve to limit a party from relitigating issues within the same case.” Pl.

Resp. at 12 (citing Jamesbury Corp. v. Litton Indus. Prods., Inc., 839 F.2d 1544, 1550 (Fed. Cir.

1988) (stating that the law of the case doctrine “prevent[s] the relitigation of issues that have

been decided and . . . ensure[s] that trial courts follow the decisions of appellate courts . . . on a

question made previously during the case”), overruled on other grounds by A.C. Aukerman

Co. v. R.L. Chaides Const. Co., 960 F.2d 1020 (Fed. Cir. 1992). Likewise, the mandate rule

governs only the issues that a trial court considers on remand. Pl. Resp. at 12. Docket No. 09-

587C, however, is a new case, not a remand proceeding, and the appellate court has not directed

the court to establish a “fuel out” date. Pl. Resp. at 12.10

4. The Court’s Resolution.

In adjudicating the claims alleged in Civil Action Docket No. 98-488C, the court

previously rejected SMUD’s argument that “it might have been able to convince another utility

in the queue to switch places to enable SMUD’s SNF to be removed in 2003.” SMUD III, 70

Fed. Cl. at 375. The court reasoned: “To accept SMUD’s position, the court would need to

speculate about whether SMUD would have been successful in trading SMUD’s acceptance

priority with another utility or convincing DOE to accept SMUD’s SNF early.” Id. SMUD did

not appeal this ruling. In addition, the court “determined that the $4,196,360.00 SMUD saved by

placing SNF into dry storage and decommissioning the wet pool should be offset.” Id. (citing

Bluebonnet Sav. Bank, F.S.B. v. United States, 339 F.3d 1341, 1345 (Fed. Cir. 2003) (“To derive

the proper amount for the damages award, the costs resulting from the breach must be reduced

by the costs, if any, that the plaintiffs would have experienced absent a breach.”)).

On August 7, 2008, the United States Court of Appeals for the Federal Circuit affirmed

SMUD III in-part, reversed-in-part, and remanded the case with instructions to apply the 1987

ACR and reevaluate certain of the mitigation costs that SMUD claimed. See SMUD V, 293 F.

App’x at 771. On remand, the Government argued that the court should apply the $4,196,360

offset identified in SMUD III for the wet pool savings realized from 2004 to 2008. See SMUD

VI, 91 Fed. Cl. at 18. The court denied this request, in part because the scope of the mandate was

10

In a December 4, 2012 Notice of Supplemental Authority, SMUD argued that a recent

decision of the United States Court of Federal Claims, Portland General Electric Co v. United

States, 2002 WL 6013274, at *16-17, *23, supports SMUD’s position that an exchange-market

would have developed in the “but for” world, allowing for an early “fuel-out” date. That case,

however, is neither binding precedent nor relevant to the court’s evaluation of legal issues of

preclusion relevant to this case.

18

limited to SMUD’s mitigation costs through December 31, 2003 and no evidence was proffered

in the trial of Docket No. 98-488C as to any additional wet pool savings realized during 2004 to

2008. Id. at 18-19. Instead, the court decided that it would account for any wet pool savings

offset due the Government in this case, Docket No. 09-587C. Id. at 19.

A threshold issue presented in this case is the effect of the law of the case and the

collateral estoppel doctrines on the issues adjudicated in Civil Action No. 98-488C. As to the

law of the case doctrine, the United States Court of Appeals for the Federal Circuit has held that

this doctrine “requires a court to follow the decision on a question made previously during the

case.” See Jamesbury Corp., 839 F.2d at 1550 (emphasis added); see also id. (“The law of the

case is a judicially created doctrine, the purposes of which are to prevent the relitigation of issues

that have been decided and to ensure that trial courts follow the decisions of appellate courts.”);

Suel v. Sec’y of Health and Human Servs., 192 F.3d 981, 985 (Fed. Cir. 1999) (“Under law of

the case . . . a court will generally refuse to reopen or reconsider what has already been decided

at an earlier stage of the litigation.”) (emphasis added). Because the law of the case doctrine

applies only to issues decided in a case, it does not necessarily apply in the trial court’s

consideration of the preclusive effect of the prior court’s findings in a separate, although related,

case.

In contrast, issue preclusion applies if the following conditions are established:

(1) the issue is identical to one decided in the first action; (2) the issue was

actually litigated in the first action; (3) resolution of the issue was essential to a

final judgment in the first action; and (4) the plaintiff had a full and fair

opportunity to litigate the issue in the first action.

Laguna Hermosa Corp. v. United States, 671 F.3d 1284, 1288 (Fed. Cir. 2012) (quoting In re

Freeman, 30 F.3d 1459, 1465 (Fed. Cir. 1994)); see also Bingaman, 127 F.3d at 1436-37 (“The

principle of collateral estoppel dictates that an issue that is fully and fairly litigated, is

determined by a final judgment, and is essential to that judgment, is conclusive in a subsequent

action between the same parties.”).

In this case, a final judgment did not issue in Docket No. 98-488C. For purposes of issue

preclusion, however, the United States Court of Appeals for the Federal Circuit has held that “it

is not necessary for [prior rulings] to be final orders for purposes of appeal.” Dana v. E.S.

Originals, Inc., 342 F.3d 1320, 1323 (Fed. Cir. 2003); see also Interconnect Planning

Corp. v. Feil, 774 F.2d 1132, 1135 (Fed. Cir. 1985) (same). Instead, a “‘final judgment includes

any prior adjudication of an issue in another action that is determined to be sufficiently firm to be

accorded preclusive effect.’” Dana, 342 F.3d at 1323 (quoting RESTATEMENT (SECOND) OF

JUDGMENTS § 13 (1982)). Therefore, finality is to be determined, based on “whether the prior

decision was ‘adequately deliberated and firm’ or ‘avowedly tentative,’ and whether the parties

were fully heard in the prior proceeding.” Dana, 342 F.3d at 1323 (quoting RESTATEMENT

(SECOND) OF JUDGMENTS § 13, cmt. g (1982)).

Applying this precedent, the court has determined in this case that the issue of whether

SMUD would have been able to utilize the exchange provision has been adjudicated following a

19

trial on the merits. See SMUD III, 70 Fed. Cl. at 374-75. The court’s ruling therein, rejecting

SMUD’s exchanges argument on the grounds that it was speculative, was not appealed.

Although the case was remanded for the court to apply the 1987 ACR acceptance rate, the

exchange provision ruling was not subject to the remand. See SMUD V, 293 F. App’x at 771.

Moreover, on remand, the court held an evidentiary hearing, during which SMUD did not seek

reconsideration of the court’s prior ruling on exchanges. In SMUD’s words, it “chose to live

with this 2003 wet pool deduction.” Pl. Br. at 32. In SMUD VI, the court issued a final order on

remand, but “stay[ed] . . . execution of this judgment” for the purpose of allowing for a possible

additional offset against SMUD’s recovery, based on the damages determination in the present

case. See SMUD VI, 91 Fed. Cl. at 18-19. The fact that SMUD has not been afforded an

opportunity to appeal SMUD VI, however, does not bar issue preclusion. See RESTATEMENT

(SECOND) OF JUDGMENTS § 13, cmt. f (1982) (stating that “[t]he better view is that a judgment

otherwise final remains so despite the taking of an appeal[,] unless what is called an appeal

actually consists of a trial de novo,” i.e., that simply because there has not been a final

determination on appeal does not mean that a judgment should not be considered final for

preclusive purposes). Of course, SMUD could have appealed the court’s exchange ruling in

SMUD III. SMUD did not do so, nor did it challenge that ruling during the remand proceedings.

As such, the court’s determination as to finality in this case does not contradict the

“require[ment] that the party against whom the estoppel is asserted have had the right, even if not

exercised, to challenge on appeal the correctness of the earlier decision.” Interconnect Planning,

774 F.2d at 1135. In Interconnect Planning, an initial decision on a motion for partial summary

judgment was entered, although the non-prevailing party’s ability to appeal was uncertain. Id.

In such circumstances, the United States Court of Appeals for the Federal Circuit has stated that

it did not intend “to penalize a party for declining to try to take a piecemeal appeal,” particularly

where the appeal “would have been a meaningless exercise,” in light of a then pending

application for a patent reissuance. Id. at 1136; see also Vardon Golf Co., Inc. v. Karsten Mfg.

Corp., 294 F.3d 1330, 1333-35 (Fed. Cir. 2002) (same).

Therefore, the fact that SMUD did not appeal the court’s remand decision in SMUD VI

does not bar application of the doctrine of issue preclusion to an issue not subject to nor

considered on remand, particularly if other elements of the issue preclusion test have been met.

SMUD’s resurrected exchange argument is identical to that decided in SMUD III, i.e., whether

SMUD could have used exchanges to have its SNF removed earlier than OFF allocation. See

SMUD III, 70 Fed. Cl. at 375. Although SMUD argues that the issues in the two cases are not

identical, because Civil Action Docket No. 98-488C dealt with the Government’s failure to

remove SNF prior to 2003, both Civil Action Docket No. 98-488C and this case, Civil Action

Docket No. 09-587C, concern SMUD’s assertion that it would have used exchanges to

accomplish an earlier fuel out date, albeit for different years in each of the two cases. In other

words, SMUD shifts its claimed fuel out date, but does not change its argument as to whether

SMUD could or would have used these exchanges. As such, there are no significant changed

circumstances that would affect SMUD’s use of exchanges from 1998 to 2003 during the period

from 2004 to 2009. See Arkla, Inc. v. United States, 37 F.3d 621, 625 (Fed. Cir. 1994) (“Absent

significant changes in controlling facts or legal principles since [the initial case], or other special

circumstances, the [prior court’s] resolution of the[] issue[] is conclusive here.”); see also

RESTATEMENT (SECOND) JUDGMENTS § 27 cmt. c (“[I]n the absence of a showing of changed

20

circumstances, a determination that, for example, a person was disabled . . . in one year will be

conclusive with respect to the next as well.”).

In this case, SMUD’s argument emphasizes that there is “a substantial overlap between

the evidence or argument to be advanced.” See RESTATEMENT (SECOND) JUDGMENTS § 27 cmt.

c. Compare Pl. Br. at 38-49, Sacramento Mun. Util. Dist. v. United States, No. 09-587 (Fed. Cl.)

(discussing why the exchange provision was added to the Standard Contract, citing the testimony

of DOE officials that exchanges would have occurred because of efficiency gains, historical

evidence on nuclear utilities’ cooperative customs and practices, and that DOE would have been

reasonable in approving exchanges), with Pl. Resp. at 58-61, Sacramento Mun. Util.

Dist. v. United States, No. 98-488C (Fed. Cl.) (same). The additional proffer of Mr. Graves’s

exchanges model also highlighted the identity of these issues. Under Mr. Graves’s “base case”

model, SMUD’s SNF would be removed from Rancho Seco by 1999 and, under any of his

“sensitivity analyses,” SMUD’s SNF would be removed prior to 2003. PX 6350 at 5 (Graves

Written Direct). Therefore, the evidence proffered in this case was available to SMUD in its

round one case, as well.

In addition, the “essential to final judgment” requirement is met where a finding is

“necessary to the judgment rendered in the previous action.” In re Freeman, 30 F.3d at 1466.

The court’s prior ruling that SMUD failed to establish that it would be able to utilize exchanges

to remove SNF prior to 2003 was a necessary predicate to the court’s determination in Docket

No. 98-488C that the Government was entitled to offset SMUD’s mitigation costs by $4.2

million for the wet pool savings costs that SMUD achieved. See SMUD III, 70 Fed. Cl. at 375.

The “actually litigated” requirement also is met, because “the parties to the original action [Civil

Case Docket No. 98-488C] disputed the issue [of exchanges] and the trier of fact decided it.” In

re Freeman, 30 F.3d at 1466. SMUD was afforded a full and fair opportunity to litigate the

exchange issue in Docket No. 98-488C. In this case, SMUD presented evidence at trial and

argued in post-trial briefing that it would have used the exchange provision prior to the court’s

decision in SMUD III. SMUD, however, failed to appeal the court’s ruling in SMUD III or seek

reconsideration on remand. See Pac. Gas & Elec. Co., 668 F.3d at 1354 (“Absent contrary

instructions, a remand for reconsideration leaves the precise manner of reconsideration—whether

on the existing record or with additional testimony or other evidence—to the sound discretion of

the trial court. Because this court instructed the trial court to undertake a recalculation of

damages consistent with the 1987 ACR, the trial court enjoyed broad discretion to allow the

testimony of [plaintiff’s] expert on the exchanges provision of the Standard Contract.” (internal

quotation marks and citations omitted)). Counsel for other utilities did not make this mistake.11

11

For example, in Pacific Gas & Electric, the United States Court of Federal Claims

initially found that the evidence did not support plaintiff’s exchange theory, and excluded Mr.

Graves’s testimony as “too speculative to be helpful to the court[.]” Pac. Gas & Elec.

Co. v. United States, 73 Fed. Cl. 333, 413, 436 (2006); see also Pac. Gas & Elec., 536 F.3d at

1292 (affirming the exclusion of Mr. Graves’s testimony). On remand, however, the court was

instructed to reconsider Mr. Graves’s testimony in light of the 1987 ACR acceptance rate and

determine whether it “provide[d] a reasonable description” of the non-breach world. See Pac.

Gas & Elec. Co., 92 Fed. Cl. at 184. Subsequently, that court found that the evidence adduced

21

In another case, the United States Court of Federal Claims discounted Mr. Graves’s

testimony regarding “the impact of the factors shown by [the Government] to retard market

development.” Yankee Atomic Elec. Co. v. United States, 73 Fed. Cl. 249, 306 (2006). But,

after Mr. Graves testified at the remand trial, the court determined that the use of the 1987 ACR

acceptance rate “minimize[d] the court’s previous concerns related to market uncertainty that

prevented the full acceptance of Mr. Graves’s initial opinion.” Yankee Atomic Power Co., 94

Fed. Cl. at 691. Again, in that case, the trial court determined that the plaintiff would have been

able to remove its SNF earlier than under the OFF allocations by utilizing the exchange

provision. Id. at 693.

In this case, however, SMUD did not seek reconsideration nor move for leave to

introduce additional evidence of exchanges on remand, despite the fact that the court’s finding

that the exchange argument was speculative rested in part on the court’s observation that “the

evidence presented on the acceptance rate under the terms of the Standard Contract [was] highly

speculative,” SMUD III, 70 Fed. Cl. at 375 n.40, an observation that would have brought

SMUD’s exchanges argument squarely within the scope of matters open for reconsideration on

remand.12 As SMUD admitted, however, it made a decision to “live with” the court’s prior

ruling on exchanges. Pl. Br. at 32.

Nevertheless, SMUD argues that the principles of issue preclusion should not apply,

because there has been a “change in the legal atmosphere,” as a result of the United States Court

of Appeals for the Federal Circuit’s decisions approving the use of an exchanges model in

Yankee Atomic, Dairyland Power, and Pacific Gas & Electric. The court is mindful that our

appellate court has indicated that “a significant change in the ‘legal atmosphere’ – whether in the

form of new legislation, a new court decision, or even a new administrative ruling – can justify a

later court’s refusal to give collateral estoppel effect to an earlier decision.” Bingaman, 127 F.3d

at 1438; see also Morgan v. Dep’t. of Energy, 424 F.3d 1271, 1276 (Fed. Cir. 2005) (“Bingaman

establishes that where a party seeks to establish the legal consequences of new facts that are

identical to facts previously adjudicated, collateral estoppel will not bar relitigation of the legal

consequences of those facts if an intervening change in law has altered the applicable legal

test.”).

on remand supported plaintiff’s position that it would have used the exchange provision in the

Standard Contract to advance one year in the acceptance queue. Id.

12

Moreover, at the remand evidentiary hearing, the court made it clear that the Federal

Circuit’s mandate reopened the issue of causation. 7/27/09 Post-Remand Hearing TR at 72,

Sacramento Mun. Util. Dist. v. United States, No. 98-488 (the court agreeing that the

Government’s argument that it was entitled to seek an offset for 2004-2008 wet pool cost savings

was not an argument that exceeded the appellate court’s mandate). In addition, SMUD has

acknowledged the court’s determination regarding exchanges was based in part on the absence of

an acceptance rate. Pl. Br. at 34 (“Since this [c]ourt imposed a wet pool offset for 2003, in large

part because of the absence of an acceptance rate, the Federal Circuit has established the

acceptance rate[.]”).

22

The SNF cases cited, however, affirmed the trial court’s factual findings. See Dairyland

Power Coop., 645 F.3d at 1370 (“This court reviews the factual findings of the Court of Federal

Claims only for clear error. . . . We find no error in [the trial court’s conclusion regarding

exchanges], as it appears to have been grounded in proper weighing of the evidence.”); see also

Yankee Atomic Elec. Co., 679 F.3d at 1359 (“Just as this court found in Dairyland, the

Government did not identify any record evidence to support a finding that the trial court

committed clear error in adopting an exchanges model.”); Pac. Gas & Elec., 668 F.3d at 1355

(“The record supports the trial court’s award of damages [based on application of the exchanges

model] and this court discerns no error in the trial court’s determination concerning the

entitlement and offset applied.”). None of these cases concerned a change in the legal standard

applicable to the exchanges model, but they evaluated evidence of exchanges submitted on

remand according to existing evidentiary and legal standards. See Kan. Gas & Elec.

Co. v. United States, 685 F.3d 1361 (Fed. Cir. 2012) (the trial court’s rejection of Mr. Graves’s

exchange model was not challenged on appeal).

To be sure, the appellate court’s directive to use the 1987 ACR acceptance rate to

determine causation represented a “change in the legal atmosphere,” but the court does not

consider that directive to afford a litigant the authority to relitigate settled issues. See SMUD V,

293 Fed. App’x at 771 (vacating and remanding with instructions that the court apply the 1987

ACR acceptance rate).

SMUD is also correct that it is not estopped from challenging any wet pool offset sought

by DOE from 2004 through 2008, but that does not afford SMUD an opportunity to also

relitigate arguments previously raised and adjudicated in Docket No. 98-488C in SMUD II. Of

course, in that first case no fuel out date for SMUD was established. In the absence of SMUD’s

prevailing on its exchanges argument, however, the parties agree that SMUD’s final fuel out date

is 2008 under the 1987 ACR-based OFF allocations. Pl. Br. at 53 tbl. 4 (SMUD Allocations

Based On OFF Priority); Gov’t Br. at 12; see also PX 119 (1987 ACR); PX 554 (1996 Annual

Priority Ranking).

Finally, the application of the collateral estoppel doctrine is particularly important given

the ongoing nature of the damage claims in the SNF cases. To date, the Government has been in

breach of the Standard Contract for fourteen years. Barring some other resolution, the United

States Court of Federal Claims faces decades of determining ongoing damages in six-year

intervals. See Ind. Mich. Power Co., 422 F.3d at 1377 (“A plaintiff can recover only such

damages as he or she has sustained, leaving prospective damages to a later suit in the event of

further breaches.”). Therefore, these cases must be managed and adjudicated with finality.

Otherwise, both trial and appellate courts will waste both time and resources – an outcome that is

not efficient for the courts nor the parties. As such, the interests of justice require that the parties

adhere to the time-tested rules of judicial repose.

For these reasons, the court has determined that SMUD is precluded from relitigating

whether SNF would have been removed from Rancho Seco earlier than under the OFF schedule,

by exchanges or otherwise.

23

B. Whether Plaintiff Would Have Stored Class B And C Waste Onsite In The

Non-Breach World.

1. The Plaintiff’s Argument.

SMUD also argues that it would not have stored Class B and C waste onsite after

decommissioning was completed in 2008, because it decided to exit the nuclear industry. Pl. Br.

at 51 (citing TR at 249 (Ronningen); TR at 751 (Redeker)). “DOE’s failure to perform and the

fact that SMUD would be storing SNF onsite indefinitely was the dispositive factor in SMUD’s

decision to keep the B and C waste onsite.” Pl. Resp. at 50 (citing TR at 127, 193 (Ronningen);

TR at 657 (Redeker)). This is so because, “[a] key aspect of decommissioning the site in the

non-breach world would have been shipping all of SMUD’s radioactive low level waste to a

disposal facility for final disposal.” Pl. Br. at 17 (citing TR at 127-28, 182-83 (Ronningen); TR at

657 (Redeker)); see also DX 6034. Moreover, in the non-breach world, SMUD would have to

maintain a nuclear license if it decided to store Class B and C waste onsite. TR at 249

(Ronningen); TR at 751 (Redeker). Of course, if the DOE had performed under the Standard

Contract, SMUD could have disposed of this waste at the disposal facility in Barnwell, South

Carolina, or elsewhere. TR at 199-200, 249 (Ronningen). The fact that Mr. Redeker and Mr.

Ronningen recommended that the Class B and C waste be shipped to Barnwell in the actual

breach world underscores this point. Pl. Resp. at 51 (citing TR at 128, 193-94, 199-200, 205-06,

210 (Ronningen)). Moreover, the potential for environmental liability13 would not have deterred

SMUD from shipping waste offsite in the non-breach world, because that liability would exist

wherever the Class B and C waste was disposed, including at Rancho Seco. TR at 210, 249

(Ronningen); TR at 751 (Redeker).

2. The Government’s Response.

The Government responds that SMUD’s decision to store Class B and C waste onsite was

not caused by DOE’s breach, but was a business decision. Gov’t Br. at 36, 41 (citing DX 6244

¶¶ 23-27 (Maret Written Direct)); Gov’t Resp. at 25. Therefore, even in the non-breach world,

SMUD would have kept Class B and C waste onsite. Gov’t Br. at 39. In the breach world,

SMUD could have shipped this waste to the Barnwell disposal facility as many other utilities did

during that time, but elected not to do so because of potential environmental liability. DX 6244 ¶

23 (Maret Written Direct); DX 6033 (Barnwell Disposal: Rancho Seco Recommendation to

Utilize Disposal Opportunity); TR at 201-10 (Ronningen) (discussing SMUD’s decision not to

ship B and C waste to Barnwell in the breach world); TR at 737-38 (Redeker) (same). These

same concerns would exist in the non-breach world and would have caused SMUD to reach the

same business decision to store Class B and C waste onsite. Gov’t Resp. at 25.

13

Environmental liability refers to that incurred under the Comprehensive Environmental

Response, Compensation and Liability Act of 1980, i.e., “[a]n Act to provide for liability,

compensation, cleanup, and emergency response for hazardous substances released into the

environment and the cleanup of inactive hazardous waste disposal sites.” Pub. L. No. 96-510, 94

Stat. 2767 (1980) (codified as amended at 42 U.S.C. §§ 9601-9675 (2006)).

24

3. The Court’s Resolution.

As Mr. Ronningen and Mr. Redeker testified, SMUD’s primary goal after the decision to

shut down Rancho Seco was to exit the nuclear industry entirely and as soon as possible. TR at

249 (Ronningen), 657 (Redeker). This could be accomplished only if SMUD shipped and stored

its Class B and C waste offsite. The most likely off-site recipient in the non-breach world was

the Barnwell facility in South Carolina. TR at 127 (Ronningen) (“We would have shipped [the

Class B and C waste] for disposal at the Barnwell facility.”); TR at 657 (Redeker) (“We would

have shipped [the Class B and C waste] and disposed of it at Barnwell.”). Although the

Barnwell facility declined to accept “out-of-compact” shippers, as of June 30, 2008, since

SMUD had Class B and C waste prior to that time, it would have been able to utilize Barnwell

and would not have had Class B and C waste onsite as of 2008. TR at 199-200, 206

(Ronningen).

Moreover, the Government’s argument was contradicted by Mr. Ronningen, who testified

that the DOE’s breach was the “primary reason” that SMUD decided to store and maintain B and

C waste on-site. TR at 193 (Ronningen). In addition, both Mr. Ronningen and Mr. Redeker

emphasized that decision was made because SMUD’s SNF was already onsite and because

storing B and C waste there entailed a small incremental cost. TR at 127 (Ronningen) (testifying

that “the decision was made to utilize the staff that was necessary to be onsite for the fuel

oversight, and have them oversee some low-level waste, as well”), 248 (Ronningen) (“[W]e saw

the increment costs or management saw the incremental costs [of keeping low-level waste

onsite] as being very slight.”); TR at 657 (Redeker) (“[W]hen it was clear to us that the nuclear

fuel was going to stay there for a long time, we balanced the risk of shipping [the B and C waste]

to Barnwell as opposed to the incremental cost to store it on site given that the nuclear fuel

would be there, and the incremental cost to store it on site was very low.”). Moreover, in direct

response to the concern about environmental liability, Mr. Ronningen testified that “[t]he

liability is there for all the waste we’ve ever disposed of and the B and C waste when we finally

dispose of it.” TR at 249 (Ronningen); see also TR at 658 (Redeker) (stating that SMUD

previously accepted the risk of disposing other radioactive materials offsite, because “[a]nytime

you dispose of waste there is a risk, you eventually have to accept it”), 737-38 (Redeker) (“[W]e

could potentially avoid that degree of risk . . . given that the nuclear fuel is already [at Rancho

Seco].”).

For these reasons, the court has determined that SMUD would have shipped its Class B

and C waste off-site in the non-breach world prior to or during 2008.

C. Governing Precedent Regarding Damages In Spent Nuclear Fuel Cases.

“The remedy for breach of contract is damages sufficient to place the injured party in as

good a position as it would have been had the breaching party fully performed.” Ind. Mich., 422

F.3d at 1373. Such damages “are recoverable where: (1) the damages were reasonably

foreseeable by the breaching party at the time of contracting; (2) the breach is a substantial

causal factor in the damages; and (3) the damages are shown with reasonable certainty.” Id. In a

suit for a partial breach, however, “a claimant may not recover . . . prospective damages for

anticipated future non-performance resulting from the same partial breach.” Id. at 1376. In

25

addition, a “non-breaching party should not be placed in a better position through the award of

damages than if there had been no breach.” Bluebonnet Sav. Bank, F.S.B. v. United States, 339

F.3d 1341, 1345 (Fed. Cir. 2003).

To ascertain whether mitigation costs claimed by the nuclear utility-parties to the

Standard Contract were incurred because of DOE’s partial breach of the Standard Contract, the

court is required to make a “comparison between the breach and non-breach worlds[.]” Yankee

Atomic Elec. Co. v. United States, 536 F.3d 1268, 1273 (Fed. Cir. 2008); see also Energy

Nw. v. United States, 641 F.3d 1300, 1305 (Fed. Cir. 2011) (“It is only by comparing this

hypothetical ‘but-for’ scenario with the parties’ actual conduct that a court can determine what

costs were actually caused by the breach, as opposed to costs that would have been incurred

anyway.”). To conduct this comparison, “[the Government] must move forward by pointing out

the costs it believes the [nuclear-utility] plaintiff avoided[,] because of [DOE’s] breach[.]” S.

Nuclear Operating Co. v. United States, 637 F.3d 1297, 1304 (Fed. Cir. 2011). But, “with

respect to both claimed costs and avoided costs, [the nuclear utility-party to the Standard

Contract] bear[s] the burden of persuasion.” Id. Therefore, “a plaintiff seeking damages must

submit a hypothetical model establishing what its costs would have been in the absence of

breach.” Energy Nw., 641 F.3d at 1305; see also S. Nuclear, 637 F.3d at 1304 (“As we held in

Yankee Atomic, ‘[b]ecause plaintiffs . . . are seeking expectancy damages, it is incumbent upon

them to establish a plausible ‘but-for’ world.’”); Energy Nw., 641 F.3d at 1308 (“[T]he burden of

proving the non-breach world . . . lie[s] with [the plaintiff].”). But, a cost that would have been

incurred in the non-breach world is not recoverable. Energy Nw., 641 F.3d at 1307 (“If a cost

would have been incurred even in the non-breach world, it is not recoverable.”). Likewise, a cost

that would have been incurred in the non-breach world that has not been incurred in the breach

world, i.e., an avoided cost, is required to be offset against a plaintiff’s recovery. See Carolina

Power & Light Co. v. United States, 573 F.3d 1271, 1277 (Fed. Cir. 2009). An offset, however,

does not apply to costs that have merely been deferred. Id.

In addition, “[w]hile the amount of damages need not be ascertainable with absolute

exactness or mathematical precision, recovery for speculative damages is precluded.” Ind.

Mich., 422 F.3d at 1373; see also Locke v. United States, 283 F.2d 521, 524 (Ct. Cl. 1960)

(“Certainty is sufficient if the evidence adduced enables the court to make a fair and reasonable

approximation of the damages.”). This is so, because “‘[t]he risk of uncertainty must fall on the

defendant whose wrongful conduct caused the damages.’” Energy Capital Corp. v. United

States, 302 F.3d 1314, 1327 (Fed. Cir. 2002) (quoting Mid-Am. Tablewares, Inc. v. Mogi

Trading Co., 100 F.3d 1353, 1366 (7th Cir. 1996)).

26

D. The Mitigation Costs That Plaintiff Claims Were Incurred From January 1,

2004, To December 31, 2009, As A Result Of The Partial Breach Of The

January 21, 1998 Standard Contract.

As a result of DOE’s partial breach of the January 21, 1998 Standard Contract, SMUD

seeks mitigation costs incurred from January 1, 2004 to December 31, 2009, as follows:

Type of Cost Amount

ISFSI Dry Storage Operations and Maintenance $19,852,000

GTCC Waste Segmentation and Storage $3,928,000

NRC Fees $938,000

Miscellaneous Additional Costs14 $1,616,000

Total $26,334,000

Pl. Br. at 8 (citing PX 6353 ¶ 38, Table I (Metcalf Written Direct)).

1. Whether Plaintiff Is Entitled To The Cost Of Independent Spent Fuel

Storage Installation Operating And Related Maintenance Expenses.

a. The Plaintiff’s Argument.

SMUD argues that it is entitled to $13,366,60215 for mitigation costs associated with

operating and maintaining the Independent Spent Fuel Storage Installation from 2004 through

2009. Pl. Br. at 9. These costs include: “NRC-required security supporting the ISFSI, ISFSI

technicians that provided 24/7 onsite oversight and required maintenance work, purchased

materials and supplies supporting the ISFSI, SNF-related engineering support, and regulatory

compliance administration.” Pl. Br. at 9-10. SMUD emphasizes that this claim includes only

maintenance and operations costs that are “directly and solely related to the ISFSI” and excludes

costs that were “partially shared” or related to costs and activities that SMUD would have

undertaken in the non-breach world. Pl. Br. at 10-12 (citing PX 6353 ¶¶ 54-55 (Metcalfe Written

Direct); PX 6265 at A3 Rev. (Metcalfe’s Damages/Cost of Debt Binder A); TR at 106-23

(Ronningen)).

14

These “miscellaneous additional costs” include: building a new wastewater treatment

plant ($546,000); modifications to the Interim Onsite Storage Building (“IOSB”) ($539,000);

ongoing operation and maintenance costs at the IOSB ($59,000); modifications to address certain

drainage issues ($10,000); an explosion analysis regarding the Cosumnes Power Plant ($51,000);

and increased American Nuclear Insurance (“ANI”) insurance premiums from 2004 to 2008

($411,000). In addition, SMUD seeks to recover $3,619,000 for the cost of capital.

15

This amount represents SMUD’s total claimed ISFSI costs of $19,852,000, minus its

claimed costs for NEI dues ($535,527), 2009 ANI insurance premiums ($371,880), 2009 NEIL

insurance premiums ($92,342), and overhead costs ($5,485,649), which are included in SMUD’s

ISFSI cost figure, but are discussed separately herein.

27

SMUD asserts that it has established these costs with sufficient certainty to “enable[] the

court to make a fair and reasonable approximation of [SMUD’s] damages.” Pl. Br. at 27 (citing

Locke, 283 F.2d at 524). As in SMUD III, the costs in this case were tracked via January 1,

2004, to December 31, 2009 work orders captured by SMUD’s SAP accounting system.16 TR at

98, 102, 106-07 (Ronningen); TR at 260-63, 269-71 (McAlister). In addition, Mr. Ronningen

and Mr. Metcalfe testified that they reviewed the costs incurred from 2004 to 2009 to ensure

accuracy. TR at 97-98, 100-01 (Ronningen); PX 6353 ¶¶ 39-44 (Metcalfe Written Direct

Testimony). SMUD produced other evidence, including: electronic detail from the accounting

system; screen shots from the accounting system; routing sheets; accounting reports; outside

contracts; purchase orders; invoices; and labor hour reports. PX 6353 ¶ 43 (Metcalfe Written

Direct Testimony); see also PX 6275 at KRGSMUDII-007497-7500; PX 6276; PX 6277; PX

6278; PX 6281; PX 6282; PX 6283. In addition, all of SMUD’s supporting invoices for third-

party costs over $3000 were confirmed by the Government’s expert. DX 6245 Att. 2-a (Peterson

Written Direct).

b. The Government’s Response.

The Government responds that SMUD is not entitled to $4,054,676 of the claimed third-

party costs, because it did not provide the “necessary payment support documentation.” Gov’t

Br. at 61 (citing DX 6245 ¶ 45 (Peterson Written Direct)). The court previously reviewed the

same accounting system and determined that SMUD’s system was “designed to ensure

transactions were timely recorded and accurately reported.” SMUD III, 70 Fed. Cl. at 366. But,

this finding did not relieve SMUD of the obligation to establish claimed mitigation costs with

reasonable certainty. In Docket No. 98-488C, the Government identified $2.2 million in

accounting errors in SMUD’s claim and, in this case, the Government identified an error in

SMUD’s labor rate calculations resulting in an $8067 error that SMUD subsequently removed

from its claim. Gov’t Br. at 62. These errors demonstrate that simply relying on SMUD’s

accounting system to establish damages to a reasonable certainty “is not acceptable.” Gov’t Br.

at 62. For this reason, the Government requested payment support documentation, but was not

provided with access to “hard copy payment support documentation or the portion of the SAP

system containing the payment support documentation.” Gov’t Br. at 61 n.17. Despite the

court’s prior indication that the Government should bear the expense of obtaining this

documentation, SMUD had the burden of establishing, with reasonable certainty, the amount of

its damages claim, yet it has not done so for the $4,054,676 in third-party costs. Gov’t Br. at 61

(citing DX 6245 ¶ 45, Attach. 2a-1 (Peterson Written Direct)).

c. The Plaintiff’s Reply.

SMUD replies that the Government’s contention as to $4,054,676 in third-party costs is

unsupported, because the Government: does not “dispute that any specific costs were actually

incurred;” does not “point to any reason for needing every cancelled check in order to establish

that SMUD incurred such costs generally;” and does not “provide[] [any] case law in support of

the need for cancelled checks and wire transfers.” Pl. Resp. at 69. As for the two errors cited,

16

SMUD utilizes an SAP accounting system for “tracking [its] costs,” “inputting budget

plans,” and “run[ning] all of [its] reports to look at actual and plan data.” TR at 258 (McAlister).

28

neither is relevant to the Government’s expert’s assertion that cancelled checks for every outside

invoice over a certain amount is required. In fact, SMUD’s inadvertent $2.2 million error in

Docket No. 98-488C was removed during the discovery phase of SMUD III. Pl. Resp. at 70.

Likewise, the $8067 labor rate error in this case was removed, because it was a fraction of a

percent of SMUD’s total claim and thus “too small of an issue over which to argue[.]” Pl. Resp.

at 71. “SMUD offered the [G]overnment the opportunity to review cancelled checks, but the

[G]overnment decided to do nothing.” Pl. Resp. at 71. Therefore, Mr. Metcalfe confirmed

payment by gathering a sample of cancelled checks and wire transfers. PX 6353 ¶ 43 (Metcalfe

Written Direct); PX 6276 at KRGSMUDII-007668 to 007672, KRGSMUDII-007675 to 007678,

KRGSMUDII-007680 to 007683.

Last, in SMUD’s December 4, 2012 Notice Of Supplemental Authority, SMUD argues

that Portland General Electric supports its assertion that it need not provide copies of cancelled

checks or wire transfer receipts in order to prove its damages. See Portland Gen. Elec. Co., 2012

WL 6013274 at *23 (finding cost reports and expert testimony regarding the plaintiff-utility’s

accounting system sufficient).

d. The Court’s Resolution.

The court previously determined that “the Government, not SMUD, is responsible for

operation and maintenance costs associated with storage of SNF, until DOE accepts the last of

SMUD’s SNF.” SMUD III, 71 Fed. Cl. at 371. Therein, the court also determined that the costs

recorded in SMUD’s SAP accounting system were “established with reasonable certainty.” Id.

at 365-66. In this case, the Government challenges $4,054,676 of SMUD’s claimed ISFSI costs

on the grounds that these third-party costs were not adequately supported. The Government,

however, does not challenge any of these costs as unforeseeable nor contend that they were not

incurred because of the Government’s breach.

The evidence proffered by SMUD establishes that it recorded costs using the same SAP

accounting system that the court credited as reliable in SMUD III. TR at 98, 102, 106-07

(Ronningen); TR at 260-63, 269-71 (McAlister). In addition, SMUD presented supporting

evidence from the SAP accounting system, including: screen shots from the accounting system;

routing sheets; accounting reports; outside contracts; purchase orders; invoices; and labor hour

reports. PX 6353 ¶¶ 43 (Metcalfe Written Direct Testimony); see also PX 6275 at

KRGSMUDII-007497 to 007500; PX 6276; PX 6277; PX 6278; PX 6281; PX 6282; PX 6283.

And, as the Government’s expert acknowledged, SMUD provided detailed invoice support for

third-party costs over $3000. DX 6245 Att. 2-a (Peterson Written Direct).

The $8067 error in this case was removed from SMUD’s damages claim and does not

undermine the reliability of SMUD’s accounting system. Moreover, the Government has not

specifically challenged any specific cost, other than broadly arguing that additional

documentation is needed for all third-party costs. Nor has the Government advanced any new

basis for challenging the reliability of the SAP accounting system that the court previously found

reliable. Indeed, the Government had the opportunity to review SMUD’s cancelled checks and

did not do so. Nothing further is required to establish that SMUD incurred these costs with

reasonable certainty. See Locke, 283 F.2d at 524 (“Certainty is sufficient if the evidence adduced

29

enables the court to make a fair and reasonable approximation of the damages.”); see also

Portland Gen. Elec. Co., 2012 WL 6013274 at *23; Dominion Res., Inc. v. United States, 84

Fed. Cl. 259, 284 (2008).

For these reasons, the court has determined that SMUD is entitled to $13,366,602 in

mitigation costs incurred as a result of SMUD’s ISFSI operations and maintenance costs.

2. Whether Plaintiff Is Entitled To The Cost Of Nuclear Energy Institute

Fees.

SMUD paid annual membership dues to the Nuclear Energy Institute, which “provides a

warehouse for sharing of knowledge, [and] provid[es] input for regulatory development.” TR at

114 (Ronningen).

a. The Plaintiff’s Argument.

SMUD argues that it is entitled to $535,527 for membership in the Nuclear Energy

Institute (“NEI”) from 2005 through 2008. Pl. Br. at 10. The goal of the NEI is to assist

facilities like SMUD “safely and cost-effectively” to manage SNF storage, including sharing

industry knowledge and best practices. Therefore, SMUD’s membership is required because of

the presence of SNF on-site at Rancho Seco. TR at 114-15, 121, 243 (Ronningen). Furthermore,

these mitigation costs are “reasonable under the circumstances.” Home Sav. of Am.,

FSB v. United States, 399 F.3d 1341, 1353 (Fed. Cir. 2005). SMUD adds that there is no

requirement that a mitigation cost must be a regulatory or licensing requirement in order to be

compensable. Pl. Resp. at 51 (citing Chain Belt Co. v. United States, 115 F. Supp. 701, 714 (Ct.

Cl. 1953) (holding that a plaintiff “is entitled to recover the amount proved to have been spent as

expenses incurred in a reasonable effort to avoid the harm which both parties had reason to

foresee would be the probable result of defendant’s breach of the contract”)). Notably, the

Government expert cited no evidence that SMUD would have maintained its membership in

NEI, even if SMUD’s SNF had been removed to an offsite location.

b. The Government’s Response.

The Government responds that SMUD is not entitled to recover any costs related to NEI

membership dues for the years 2004 through 2008, because that expense is related solely to SNF

storage and SNF would have remained onsite until 2008 under the OFF schedule in the non-

breach world. Gov’t Br. at 45 (citing TR at 238-40 (Ronningen)); DX 6244 ¶¶ 30-32 (Maret

Written Direct). In addition, NEI membership is not a regulatory or licensing requirement, and

therefore, “is not a cost or activity that DOE’s delay in SNF acceptance caused SMUD to incur

to ‘mitigate’ the breach.” Gov’t Br. at 45 (citing TR at 238-41 (Ronningen); DX 6244 ¶ 30

(Maret Written Direct)); see also Gov’t Resp. at 30 (“SMUD identified no requirement that it

belong to NEI, and we are aware of no case law that allows for recovery of unnecessary costs

that a plaintiff voluntarily decides it wants to incur.”). In fact, SMUD’s NEI dues are not solely

related to SNF storage, but are also related to nuclear decommissioning and the disposal of Class

B and C radioactive waste. TR at 240 (Ronningen); TR at 653-54 (Redeker); DX 6244 ¶ 32

(Maret Written Direct). Moreover, “[t]he record is silent as to any details of the services or any

30

benefits provided to SMUD by NEI that ‘mitigated’ DOE’s delay in SNF acceptance.” Gov’t Br.

at 46.

c. The Court’s Resolution.

Because the court has herein determined that SMUD’s SNF would not have been

removed in the non-breach world prior to 2008, SMUD is not entitled to recover its NEI fees for

the years 2004 through 2008. See also SMUD VI, 91 Fed. Cl. at 12-14; TR at 114-15, 121, 241,

249 (Ronningen), 657, 751 (Redeker). In addition, in the non-breach world, SMUD’s

decommissioning would have been completed (as it was in the actual world), and SMUD’s class

B and C waste would have been removed offsite prior to or during 2008. Accordingly, the court

has determined that SMUD is not entitled to NEI fees claimed from 2005 through 2008.17

3. Whether Plaintiff Is Entitled To The Cost Of Insurance Premiums.

SMUD maintained several insurance policies with ANI, including a facility form policy,

a master worker policy, and a suppliers and transporters policy. PX 6354 at 23-25 (Hoffman

Dep. Test.); TR at 132-43 (Ronningen). SMUD also maintained a nuclear property insurance

policy with Nuclear Electric Insurance Limited (“NEIL”) that covered damages to real and

personal property at Rancho Seco. TR at 132-33 (Ronningen).

a. The Plaintiff’s Argument.

SMUD argues that it is entitled to $410,714 for increased premiums paid for a liability

policy with ANI for the period from 2004 to 2008. Pl. Br. at 12-13, 67 (Table 5). In the non-

breach world, these premiums would have been reduced, because SMUD would not have stored

SNF onsite, although SMUD concedes that it would have maintained some ANI insurance

coverage for on-going decommissioning activities at Rancho Seco. Pl. Br. at 12-13 (citing PX

6265 at A5; PX 6248 (2010 ANI Rating Guide); PX 6354 at 190 (Hoffman Dep.)). Moreover,

the Government presented no evidence that industry-wide insurance premiums would be priced

differently if DOE performed under the Standard Contract. Pl. Resp. at 53-54.

Mr. Hoffman, ANI’s Director of Underwriting, testified that SMUD correctly stated the

premiums and premium multiplier for each year. PX 6354 at 83-86, 92-111, 116-18 (Hoffman

Dep.); see also PX 6224; PX 6225; PX 6226; PX 6248 (2010 ANI Rating Guide). With the

exception of certain premium multipliers, the factors in the 2010 Rating Guide were not changed

during the years 2004 to 2009. PX 6354 at 21 (Hoffman Dep.). Mr. Hoffman’s analysis,

however, did not account for the presence of Class B and C waste onsite, because ANI’s rating

procedures do not list the presence of low-level waste as a ratings factor for shutdown facilities.

PX 6248 at 9 (2010 ANI Rating Guide, Section I.J.3) (“If a unit at a reactor facility is

permanently shut down, that unit is eligible for premium credit as follows: . . . Fuel Shipped

Offsite or in Dry Storage”); see also PX 6354 at 86-87 (Hoffman Dep.) (relying on Section I.J.3

of the 2010 Rating Guide). The presence of low-level waste, however, was to be expected

17

As SMUD did not claim NEI dues from 2009, the court makes no findings as to that

year’s NEI dues. See Pl. Br. 65, n.8.

31

during that period, because SMUD was decommissioning Rancho Seco. PX 6354 at 132

(Hoffman Dep.) (stating that exposure under the Suppliers and Transporters Policy would be

lower if SNF was offsite, because “there likely would be fewer shipments . . . of low-level waste

involving the spent fuel facility”); PX 6354 at 173 (Hoffman Dep.) (confirming that SMUD

would be decommissioning the byproducts of the nuclear facility, including low-level waste).

As to insurance costs in 2009, when the decommissioning was completed and SMUD’s

nuclear license terminated, SMUD had no further need to maintain a nuclear insurance policy

and would have terminated the ANI insurance. PX 6354 at 191-92 (Hoffman Dep.). In addition,

by 2009, SMUD also would have terminated its NEIL insurance policy for real and personal

property at Rancho Seco. Pl. Br. at 13 (citing TR at 132-33 (Ronningen)). Moreover, there is no

evidence to support the proposition that SMUD would have made a business decision to keep the

Class B and C waste onsite after decommissioning was completed in 2008. In fact, SMUD

would have had every incentive to remove all radioactive waste offsite so that it could terminate

the NRC licenses and exit the nuclear industry. TR at 249 (Ronningen); TR at 751 (Redeker).

Accordingly, it is speculative to assume that SMUD may have maintained its NEIL insurance for

unidentified “legacy exposure issues,” and SMUD’s ANI and NEIL costs of $464,222 are

therefore recoverable in full beginning in 2009. Pl. Resp. at 57.

b. The Government’s Response.

The Government responds that SMUD is not entitled to recover the cost of ANI

premiums paid during 2004 to 2008, because SMUD’s SNF would have remained onsite. Gov’t

Br. at 39. In addition, Mr. Hoffman failed to consider whether the ANI premiums would have

been required for the Class B and C waste that remained onsite and therefore SMUD’s

qualification of its insurance costs is flawed. PX 6354 at 149 (Hoffman Dep.); see also id. at 49-

52, 57-58 (stating that the facility form policy and master worker policy covered damages arising

from low-level waste, such as Class B and C waste). In fact, the decision to continue to store

Class B and C waste onsite was a business decision that was not caused by DOE’s breach. Gov’t

Br. at 41; Gov’t Resp. at 25. In addition, Mr. Hoffman’s analysis was also flawed, because he

utilized the current-day premium rating guide, not the rating guide from 2004 to 2008. PX 6354

at 92-93, 99-104.

SMUD also has failed to meet its burden of proof to show that it would not have incurred

ANI and NEIL premiums in 2009. Gov’t Br. at 43. As for the NEIL insurance, SMUD relied

solely on the testimony of Mr. Ronningen that because decommissioning was completed in 2009

such costs are “directly associated with the oversight of fuel[.]” TR at 133 (Ronningen). But,

Mr. Ronningen also testified that the continued storage of Class B and C waste onsite would

require NEIL insurance. TR at 225 (Ronningen). In addition, the NEIL insurance agreement

does not state that the insurance is directly associated with or otherwise required by the presence

of SNF. DX 6230 (Apr. 10, 2009 NEIL Insurance Agreement). Further, SMUD did not

establish that NEIL insurance was not otherwise required in 2009 in light of Rancho Seco’s

potential legacy issues and other ongoing activities, such as the switchyard, backup control

center, and photovoltaic plant. Gov’t Br. at 44. As to the ANI insurance, SMUD specifically

failed to demonstrate that it would not have maintained the same level of ANI coverage, due to

the presence of Class B and C waste onsite in 2009. Gov’t Br. at 44-45; Gov’t Resp. at 25.

32

c. The Court’s Resolution.

SMUD’s claim for increased ANI premiums for 2004 through 2008 is premised on

SMUD’s SNF being stored offsite during those years. The court has ruled in this case that

SMUD’s SNF would have remained onsite; therefore, SMUD is not entitled to its ANI insurance

or NEIL insurance costs for those years. See also SMUD VI, 91 Fed. Cl. at 13-14, 18. In

addition, the court has determined that SMUD would exit the nuclear industry beginning in 2009,

including no longer storing class B and C waste onsite. TR at 199, 200, 206 (Ronningen).

Therefore, SMUD would have had no reason to pay ANI premiums in that year in the non-

breach world.

SMUD’s NEIL property insurance “provide[s] protection against the financial

consequences of accidents at nuclear power generating stations, which may not otherwise be

available, or available on the terms and conditions provided by NEIL.” DX 6230 at

SMUDII277324 (Apr. 10, 2009 NEIL Insurance Agreement). Mr. Ronningen testified that NEIL

insurance was required, because of the presence of the SNF, GTCC, and Class B and C waste

that remains onsite at SMUD. TR at 221-25 (Ronningen). As such, the NEIL premiums are a

mitigation cost that is “fair and reasonable under the circumstances.” Home Sav. of Am., FSB,

399 F.3d at 1353. Contrary to the Government’s argument, it is not necessary that SMUD

establish that it is required by law to carry NEIL insurance. The Government’s alternative

argument that NEIL insurance is required because of unidentified “legacy exposure issues” is not

supported in the record. The fact that other activities are ongoing at the Rancho Seco site—

including: a backup control center; photovoltaic plant; and a switchyard—does not establish that

SMUD otherwise would be required to maintain NEIL insurance. Although SMUD would need

to incur some form of property insurance in the non-breach world, the Government has not stated

what that cost would be. See S. Nuclear, 637 F.3d at 1304 (holding that it is DOE’s burden to

“move forward by pointing out the costs it believes the plaintiff avoided because of its breach”);

see also DX 6230 at SMUDII277323 (Apr. 10, 2009 NEIL Insurance Agreement).

For these reasons, the court has determined that SMUD is entitled to $371,880 for ANI

insurance premiums for 2009 and $92,342 for NEIL insurance premiums for 2009.

4. Whether Plaintiff Is Entitled To The Cost Of The Cosumnes Power

Plant Explosion Analysis.

The Cosumnes Power Plant is a natural gas-fired power plant about a half-mile south of

Rancho Seco that is owned by SMUD and was brought on-line in 2006. TR at 124 (Ronningen).

In 2004, SMUD undertook an analysis to determine the effects of an explosion at the Cosumnes

Power Plant on the ISFSI, where SMUD’s SNF was stored. TR at 124 (Ronningen).

a. The Plaintiff’s Argument.

This analysis was conducted in 2004 in anticipation of the Cosumnes Power Plant going

online in 2006. PX 6088 (Engineering Analysis of Consumes Explosion); TR at 123-24

(Ronningen). If the SNF had been removed prior to 2006, this testing would not have been

33

necessary. TR at 123-24 (Ronningen); PX 6353 ¶ 60 (Metcalfe Written Direct); PX 6293; PX

6281 at KRGSMUDII-004317 to 004329. Therefore, SMUD argues that it is entitled to $51,473

for testing costs to determine the effects on the SNF stored at Rancho Seco in the event of an

explosion at the nearby Cosumnes Power Plant. Pl. Br. at 14.

b. The Government’s Response.

The Government responds that SMUD is not entitled to the costs incurred for the

explosion analysis because, in the non-breach world, SMUD would still have been required to

conduct this analysis as SNF would have remained onsite at Rancho Seco. Gov’t Br. at 46-47

(citing DX 6244 ¶¶ 33-34 (Maret Written Direct); TR at 177, 179-80 (Ronningen)); see also

Gov’t Resp. at 29-30 (“The analysis was performed during a period of time in which the SNF

would have been on-site . . . even with timely DOE performance.”).

c. The Court’s Resolution.

In SMUD VI, 91 Fed. Cl. at 12-13, and herein, the court found that SMUD would not

have removed its SNF offsite until 2008. As such, in the non-breach world, SMUD was required

to undertake the potential explosion analysis in anticipation of the Cosumnes Power Plant going

online in 2006.

For these reasons, the court has determined that SMUD is not entitled to recover the costs

of the Cosumnes Power Plant explosion analysis.

5. Whether Plaintiff Is Entitled To The Cost Of Constructing A

Wastewater Treatment Plant.

In 2008 and 2009, SMUD built a new wastewater treatment facility at Rancho Seco to

correct a decrease in water quality caused by the Freeport Water Project undertaken by another

municipal utility, East Bay Municipal Utility District (“East Bay MUD”). TR at 130-31

(Ronningen). SMUD also built a new wastewater treatment facility at the Cosumnes Power

Plant in response to the decreased water quality. TR at 129-32 (Ronningen). Subsequently,

SMUD entered into a $5 million settlement agreement with the East Bay MUD to mitigate the

costs of building these two facilities. TR at 131-32 (Ronningen), 742-43 (Redeker); see also DX

6222 (70/30/04 Freeport Regional Water Project Mitigation Settlement Agreement).

a. The Plaintiff’s Argument.

If SMUD’s SNF was removed prior to 2008, SMUD would not have been required to

retain on-site staff or the wastewater treatment facility. Pl. Br. at 14 (citing TR at 91

(Ronningen)). Therefore, but for DOE’s partial breach of the Standard Contract, SMUD would

not have been required to construct a wastewater treatment plant at Rancho Seco. Pl. Br. at 14.

SMUD asserts that this mitigation activity was reasonable, because SMUD built an

inexpensive zero-discharge system. Pl. Br. at 15 (citing TR at 130-31, 230-31 (Ronningen)).

Therefore, SMUD argues that it is entitled to $546,000 that it spent to build a new wastewater

34

treatment facility at Rancho Seco in 2008 to serve the continued full-time staff required “to

operate, maintain, and secure the SNF.” Pl. Br. at 14 (citing TR at 128-30 (Ronningen)).

Although SMUD received compensation in the settlement to offset the cost of building the

wastewater treatment facility, that amount did not fully compensate SMUD nor allow it enough

to implement the mitigation required at Consumnes. TR at 236-38 (Ronningen); TR at 743

(Redeker). SMUD adds that the savings recognized by SMUD from terminating its National

Pollutant Discharge Elimination System (“NPDES”) permit18 should not be offset against the

cost of this project because these are costs that SMUD “did not incur in the breach world, and

would not have incurred in the non-breach world” and they merely “reflect[] the difference in

costs saved between two choices of mitigation, of which SMUD implemented the less

expensive.” Pl. Resp. at 61. In addition, although SMUD concedes that others visit the site,

such visits are infrequent. TR at 118-19 (Ronningen) (noting that personnel visit “a few times a

year” to operate the backup control center).

b. The Government’s Response.

The Government responds that SMUD is not entitled to recover costs incurred to build

the wastewater treatment facility. Gov’t Br. at 48-51. This facility would have been required

regardless of the DOE’s partial breach, because SMUD personnel serving and using other

facilities at the Rancho Seco site, including the photovoltaic plant, backup control center, and

electric switch yard, also use the wastewater treatment facility. TR at 118-19, 228-29

(Ronningen); see also DX 6228 at SMUDII410973 (“These additional industrial facilities will

continue to be maintained and may expand to include additional commercial office use once the

decommissioning is complete.”). Furthermore, the change to the water supply was caused by the

Freeport Project, not by DOE, and bears no relationship to DOE performance. Gov’t Resp. at

27. This project was undertaken to mitigate the effects of the Freeport Regional Water Project

(“Water Project”) that resulted in the Rancho Seco and Cosumnes Power Plants receiving low

quality water and requiring SMUD to install expensive water treatment systems. Gov’t Br. at 50

(citing TR at 738-39 (Redecker)). To settle a dispute regarding this situation, SMUD agreed on

July 30, 2004 to a $5 million settlement. DX 6222 (July 30, 2004 Settlement Agreement). In

addition, SMUD should offset any allowed costs by the $5 million settlement that was intended

as mitigation for the Freeport Project, but which SMUD spent elsewhere. Gov’t Br. at 51; Gov’t

Resp. at 27-28; see also TR at 132 (Ronningen); TR at 742 (Redeker).

c. The Court’s Resolution.

The record indicates that the only employees who work regularly at the Rancho Seco site

today, in the breach world, do so to monitor the nuclear waste that remains onsite due to the

DOE’s partial breach. TR at 90-91 (Ronningen). In the non-breach world, SMUD employees

would only need to visit the site “a couple of times a year.” TR at 118-19 (Ronningen). But,

18

Prior to constructing the wastewater treatment facility, SMUD was required to

maintain an NPDES permit for discharging wastewater at a cost of approximately $40,000 per

year. TR 229-32 (Ronningen). Since the new facility was a zero-discharge system, SMUD only

needed to obtain a county permit at a cost of approximately $2000 per year. TR 229-32

(Ronningen).

35

other activities at the site, such as the backup control center, a photovoltaic plant, and a

switchyard, would require water. TR at 118 (Ronningen).

SMUD did not meet its burden of demonstrating that it would not need to construct a

waste water treatment facility at Rancho Seco in the non-breach world to support these other

non-SNF operations. Nor did SMUD proffer any evidence of other options that would have

addressed its water needs. A scenario in which SMUD’s other operations could function without

water at the site is unsubstantiated. Although SMUD employees only need to visit the backup

control facility “a couple of times a year” to make sure it works (TR at 118 (Ronningen)), it is

improbable to think that SMUD would not need fully-functioning water services at the site, in

the event that a backup was needed to serve as the primary control center.

For these reasons, the court has determined that SMUD required a wastewater treatment

facility, irrespective of DOE’s partial breach, and received some compensation by way of the

Freeport Project settlement to offset this cost. Therefore, SMUD is not entitled to mitigation

costs to construct the wastewater treatment plant.

6. Whether Plaintiff Is Entitled To The Cost Of An Interim Onsite

Storage Building.

In 2008, SMUD undertook the renovation of an existing building onsite at Rancho Seco

called the IOSB. These renovations included paving, painting, and roof repair work required to

make the building suitable for long term storage. TR at 125 (Ronningen). The IOSB was within

the Part 50 licensed area of Rancho Seco, signifying that it was licensed to store nuclear waste

materials. The IOSB subsequently housed various cask handling and loading equipment used to

remove the SNF from the wet pool, including: a transfer trailer; the transfer cask; a hydraulic

ram; a lifting yoke; a bailed fuel grapple; and other miscellaneous parts. TR at 125 (Ronningen).

This equipment, however, became radioactive during the SNF transfer process, and had to be

stored in a licensed facility. The IOSB was also used to store Class B and C waste. TR at 127

(Ronningen).

a. The Plaintiff’s Argument.

SMUD argues that it is entitled to $608,486 for mitigation costs related to the IOSB and

2009 operating expenses for the IOSB. Pl. Br. at 16. These costs were incurred because of

SMUD’s dry storage system and will be needed in the future, if SMUD is required to remove an

SNF canister from the ISFSI. TR at 217 (Ronningen). Since the equipment stored in the IOSB

has been contaminated, it needs to be held in a licensed facility, such as the IOSB, until it can be

disposed of in compliance with NRC regulations. TR at 126-27 (Ronningen). More

importantly, “DOE’s failure to perform and the fact that SMUD would be storing SNF onsite

indefinitely was the dispositive factor in SMUD’s decision to keep the B and C waste onsite.”

Pl. Resp. at 50 (citing TR at 127, 193 (Ronningen); TR at 657 (Redeker)). Therefore, a key

aspect of decommissioning Rancho Seco, in the non-breach world, would entail shipping all of

SMUD’s radioactive low level waste to a facility for final disposal, so that SMUD should be able

to recover the cost of the IOSB, even though it is also used to store B and C waste. Pl. Br. at 17

36

(citing TR at 127-28, 182-83 (Ronningen); TR at 657 (Redeker)); see also DX 6034 (2002 Cost

Estimate Data).

In sum, SMUD’s decision to refurbish the IOSB, instead of building a new licensed

facility, was the lowest cost and most reasonable mitigation. Pl. Br. at 16-17. Although SMUD

is not required to maintain this equipment, it was reasonable to do so, because selling it would

entail a cost, as would reacquiring and re-fabricating the equipment, if it is needed in the future.

TR at 217-18 (Ronningen); see also TR at 192, 215 (Ronningen) (testifying that there was no

other existing facility within SMUD’s Part 50 license other than the IOSB in which to store

equipment); TR at 216-17, 246 (Ronningen) (testifying that storage within the ISFSI likely

would violate security requirements and would require upgrades to the area and building a new

facility).

b. The Government’s Response.

The Government responds that SMUD is not entitled to the costs of refurbishing or

operating the IOSB, because SMUD made “an independent business decision completely

unrelated to DOE’s delay” to store Class B and C waste at the IOSB. Gov’t Br. at 36 (citing DX

6244 ¶¶ 23-27 (Maret Written Direct)). In other words, in the non-breach world, SMUD still

would have incurred these costs. Gov’t Br. at 39. In addition, SMUD was not required to keep

nor maintain the cask and handling equipment as part of its NRC license and, in fact, attempted

to sell both after Rancho Seco was decommissioned. TR at 217-21; PX 6134 at SMUDII000350

(Aug. 31, 2006 Rancho Seco Weekly Update) (discussing potential sale of cask and handling

equipment as they were “no longer necessary”). SMUD’s position that there would be additional

costs to dispose of the equipment and later reacquire it “lacks support and is irrelevant.” Gov’t

Resp. at 21. SMUD made no calculation of the cost to rent equipment versus maintaining the

equipment nor did any of SMUD’s experts attempt to quantify these costs. TR at 220

(Ronningen). As a result, SMUD “failed to provide evidence upon which to account for any

such costs in any damages analysis.” Gov’t Resp. at 22.

Likewise, the 2009 operating costs for the IOSB are not recoverable, because they were

not required to mitigate the DOE’s partial breach of the Standard Contract, but were caused by

SMUD’s independent business decision to store Class B and C waste onsite. See Ind. Mich., 422

F.3d at 1376 (holding that there is no causation where a decision to re-rack SNF was “purely a

business judgment which it would have had to pursue irrespective of DOE’s partial breach”).

Moreover, even if the costs to maintain the IOSB were nominal, DOE is not required to pay

SMUD for these costs. Gov’t Resp. at 22. On November 23, 2009, the NRC issued an Order

that required licensees to implement enhanced security measures for any Class B and C waste

stored in an IOSB. DX 6190. This supports the Government’s position that the costs of these

security measures were caused by SMUD’s decision to store Class B and C waste onsite. Gov’t

Resp. at 22 (citing DX 6190 (Nov. 23, 2009 NRC Order)). Moreover, DOE’s partial breach may

have conferred a benefit on SMUD by allowing it to defer the need to incur disposal costs for the

Class B and C waste, as long as the rate of cost increases for disposal was less than SMUD’s

internal rate of return. DX 6242 ¶ 39 (Neuberger Written Direct); TR at 738 (Redeker).

37

c. The Court’s Resolution.

In the non-breach world, SMUD would not have refurbished the IOSB nor incurred

operation and maintenance costs for the IOSB in 2009. But, in the breach world, the IOSB is

required to store Class B and C waste that, in the non-breach world, would have been stored

offsite. In the non-breach world, SMUD also would not be required to maintain transfer

equipment, since SMUD’s SNF and HLW would not be stored onsite.

Nevertheless, the Government argues that SMUD’s decision to keep the transfer

equipment onsite was neither required, nor reasonable. Gov’t Br. at 37-38. But the Government

did not proffer any evidence of an alternative solution. Cf. SMUD V, 293 F. App’x at 772 (“It is

the Government’s burden to show that it was unreasonable for SMUD to pursue dual-purpose

storage canisters to mitigate the Government’s breach.”). In the court’s judgment, SMUD’s

decision to maintain transfer equipment onsite at a comparatively low yearly expense that also

was available in case of an emergency is “fair and reasonable under the circumstances.” Home

Sav. of Am., FSB, 399 F.3d at 1353. The Government’s counter-argument that SMUD’s actions

were unreasonable, because SMUD could have sold the equipment, is undermined by the

Government’s recognition that SMUD attempted to do so without success. Gov’t Br. at 38

(citing TR at 217-221(Ronningen)); see also Ind. Mich., 422 F.3d at 1375 (holding that the

plaintiff “is ‘not precluded from recovery . . . to the extent that [it] has made reasonable but

unsuccessful efforts to avoid loss.’” (quoting RESTATEMENT (SECOND) OF CONTRACTS § 350(2)

(1981)) (ellipsis and alteration in original)). In the same vein, the Government’s argument that

SMUD cannot recover these costs, unless it was required by law to keep the equipment onsite,

strains the standard for reasonableness. See Home Sav. of Am., FSB, 399 F.3d at 1353. SMUD

is not required to establish with mathematical precision that it elected the lowest cost option,

particularly where the equipment may be necessary in the event of an emergency.

Likewise, the Government’s argument that SMUD’s Class B and C waste caused

increased security costs in 2009 is irrelevant, in light of the court’s determination that the B and

C waste would have been shipped offsite prior to 2009. Although SMUD “may have been

conferred a benefit” by the DOE’s partial breach, because low-level waste storage costs would

increase, the Government’s argument is speculative. In addition, the possibility that SMUD

would benefit by this action, if and when SMUD ships this waste offsite, is not relevant. See

Carolina Power & Light Co., 573 F.3d at 1277 (holding that an offset is not appropriate for costs

that are deferred, not avoided).

For these reasons, the court has determined that SMUD is entitled to $608,486 in

mitigation costs for the refurbishment and modification of the IOSB, and related operating

expenses for 2009, because SMUD established that, in these “individual circumstances,” SMUD

“exercised reasonable judgment” in mitigating costs for the transfer equipment and storage

onsite. See N. Helex Co. v. United States, 524 F.2d 707, 718 (Ct. Cl. 1975) (stating that the test

is “whether, in the individual circumstances, the [plaintiff] exercised ‘reasonable commercial

judgment’ . . . in the effort to mitigate damages”).

38

7. Whether Plaintiff Is Entitled To Recover The Cost Of Nuclear

Regulatory Commission Fees.

SMUD paid fees to the NRC under 10 C.F.R. Part 171 (“Part 171 fees”) that annually are

charged to all nuclear utilities that have not permanently ceased operations or that still have

nuclear fuel onsite. PX 6353 ¶¶ 63-64 (Metcalfe Written Direct).

a. The Plaintiff’s Argument.

SMUD argues that it is entitled to recover $938,000 in Part 171 fees from 2004 to 2009.

Pl. Br. at 18. Under NRC regulations, SMUD would not have been assessed these fees if

SMUD’s SNF had been removed and stored by the DOE as required under the Standard

Contract. See Final Rule, 64 FED. REG. 31,448, 31,455 (June 10, 1999) (stating that the “new

annual fee will not be assessed to those reactors that have permanently ceased operations and

have no fuel onsite”); see also PX 6353 ¶ 64 (Metcalfe Written Direct).

To the extent that SNF would have remained on site at Rancho Seco from 2004 to 2009,

SMUD is entitled to recover all of the Part 171 fees, except for the decommissioning-related

portion. Pl. Resp. at 66 (citing PX 6353 ¶ 64 (Metcalfe Written Direct); PX 6265; PX 6279; PX

6287; PX 6309; PX 6310; PX 6311). Prior to 1999, there were two Part 171 fees: one for

operating utilities and one for utilities with dry-storage facilities. See 10 C.F.R. §§ 171.15(b),

171.16. Because SMUD did not fit into either of these categories, it did not pay any Part 171

fees. Pl. Resp. at 62. In 1999, the NRC changed the fee structure, after DOE’s partial breach of

the Standard Contract. PX 6310 at KRGSMUDII-002780; PX 6311 at KRGSMUDII-002816

(1986 NRC Memorandum stating that the assessment of Part 171 fees “could create a

disincentive for licensees to pursue dry storage”); see also Boston Edison Co. v. United States,

658 F.3d 1361, 1368 (Fed. Cir. 2011) (affirming the trial court’s ruling that the change in Part

171 fee structure was caused by DOE’s partial breach); Consol. Edison Co. v. United States, 92

Fed. Cl. 466, 513-16 (2010) (finding that the change in the Part 171 fee structure was caused by

the DOE’s partial breach). Accordingly, SMUD argues that in the non-breach world in which

the pre-1999 Part 171 fee structure was unchanged and SMUD continued to store fuel in the

Rancho Seco wet pool, SMUD would not have paid a Part 171 fee, except for the

decommissioning-related portion. Pl. Resp. at 65-66.

As to the Government’s arguments to exclude the testimony of Mr. Metcalfe, the work

papers supporting his analysis of the recoverable portion of the Part 171 fees were included in his

expert report and disclosed to the Government in December 2010. Pl. Resp. at 64 (citing PX

6279, PX 6287, PX 6309, PX 6310, PX 6311); see also TR at 859 (Metcalfe) (“[I]t says in my

report, my report includes the work papers which are an integral part thereof.”). SMUD asserts

that the Government had a full and fair opportunity to respond to Mr. Metcalfe’s opinions and

did so via Mr. Peterson’s testimony. Pl. Resp. at 64 (citing DX 6245 ¶ 63 (Peterson Written

Direct)). As such, the Government now cannot seek to exclude Mr. Metcalfe’s testimony on the

grounds that the Government was “prejudice[d],” because Mr. Metcalfe’s opinion was not

“buried” in his work papers. Pl. Resp. at 64.

39

b. The Government’s Response.

The Government responds that SMUD is not entitled to Part 171 fees for the years 2004

to 2008, because SNF would have remained at the Rancho Seco site during this period. Gov’t

Br. at 51. Mr. Metcalfe’s testimony that, even if the SNF had remained onsite after 2004, SMUD

is entitled to recover some portion of the Part 171 fee, should be excluded, because SMUD failed

to disclose this opinion during discovery. Gov’t Br. at 53 (citing PX 6264 at 18 (Metcalfe Expert

Report); see also RCFC 26(a)(2)(B) (requiring that an expert’s written report contain a

“complete statement of all opinions the witness will express and the basis and reasons for

them”); O2 Micro Int’l Ltd. v. Monolithic Power Sys., 467 F.3d 1355, 1368-69 (Fed. Cir. 2006)

(holding that an expert’s report must “contain a complete statement of all opinions to be

expressed and the basis and reasons therefore”). The only opinion disclosed in Mr. Metcalfe’s

expert report related to NRC fees is based on SMUD’s SNF being removed prior to 2004. PX

6264 at 18. Therefore, it is irrelevant that such a calculation ultimately may be found in his work

papers, because an expert is required to disclose information in the expert report, i.e., trial is not

a “scavenger hunt” where the Government is required to search a “mass of binders” for relevant

information. Gov’t Br. at 57.

Even if Mr. Metcalfe’s opinion properly were before the court, it should be rejected as

unreliable as it is an “unsupported legal conclusion with no reasoning or explanation.” Gov’t Br.

at 54 (citing Fed. R. Evid. 702 (requiring that an expert’s opinion “help the trier of fact to

understand the evidence or to determine a fact in issue;” be “based on sufficient facts or data;”

and be “the product of reliable principles and methods;” and that “the expert has reliably applied

the principles and methods to the facts of the case”)). In this case, however, Mr. Metcalfe did

not identify any factor or piece of evidence that led to his opinion, and there is no such evidence

in the record about the spent fuel storage portion of the Part 171 fee. In addition, Mr. Metcalfe

was an accountant without any expertise in the operation of nuclear plants or regulatory

oversight of nuclear power plants. Gov’t Br. at 56. Therefore, it is not surprising that Mr.

Metcalfe’s testimony failed to provide the court with a calculation of the amount of NRC fees to

which SMUD could be entitled. Gov’t Br. at 56 (citing TR at 856-57 (Statement of SMUD’s

counsel)). Only in Plaintiff’s Post-Trial Brief did SMUD attempt such a calculation, but that

calculation was not subject to discovery, and because Mr. Metcalfe stated during his deposition

that he was not offering that calculation as an opinion, Mr. Metcalfe’s testimony must be

discounted. Gov’t Resp. at 35-36 & n.14 (citing Pl. Br. at 67 n.11). As such, Mr. Metcalfe’s

testimony as to the NRC fees lacks foundation and is “unhelpful to the [c]ourt.” Gov’t Br. at 56.

Finally, the Government asserts that SMUD mischaracterizes the holdings in relevant

decisions. Gov’t Resp. at 34-35. For example, the appellate court has not held that NRC’s fee

structure changed as a result of the partial breach, but observed that this was a trial court

determination that was not challenged on appeal in Boston Edison Co. 658 F.3d at 1368-70.

Similarly, the trial court’s determination that the change in NRC fees was caused by DOE’s

partial breach, in Consolidated Edison, 92 Fed. Cl. 466, was appealed to the United States Court

of Appeals for the Federal Circuit.19 Moreover, SMUD failed to disclose that the trial court in

19

After the completion of briefing in this case, the United States Court of Appeals for the

Federal Circuit issued Consolidated Edison Co. of New York v. Entergy Nuclear Indian Point 2,

40

Wisconsin Elec. Power Co. v. United States, 90 Fed. Cl. 714 (2009), also credited the testimony

of a DOE official, who had concluded that the Part 171 fee change “would have occurred in 1999

even if DOE had begun performance in 1998[.]” Id. at 785-86. In sum, in each of these cases

the plaintiffs produced evidence regarding NRC fees during discovery that was later considered

by the court. Gov’t Resp. at 35. The Plaintiff did not do so in this case.

c. The Court’s Resolution.

SMUD argues that it is entitled to a portion of fees incurred from 2004 through 2008

because of the NRC’s change to the Part 171 fee structure following the DOE’s partial breach of

the Standard Contract. The United States Court of Appeals for the Federal Circuit recently held

that a plaintiff-utility “failed to prove either (1) that the NRC’s overall generic activity costs

increased as a result of DOE’s breach, or (2) that DOE’s breach caused the NRC to change the

generic fee structure in 1999,” and therefore was not entitled to Part 171 fees. See Consol.

Edison Co., 676 F.3d at 1340. The utility-plaintiff in that case presented no evidence “that its

generic fees increased as a result of DOE’s breach.” Id. Therefore, the appellate court rejected

subsequent public comments made by the NRC, as well as an internal memorandum by an NRC

Commissioner, as “insufficient as a matter of law to demonstrate that the new NRC rules were

the result of the government breach.” Id. at 1339. The public comments stated that the former

Part 171 fee structure raised concerns that it “could create a disincentive for licensees to pursue

dry storage.” Id. at 1338. In this case, SMUD relies on a November 5, 1998 internal NRC

memorandum stating that the former Part 171 fee “raised two concerns: (1) the fee structure

could create a disincentive for licensees to pursue dry storage, and (2) the fairness of assessing

multiple annual fees if a licensee holds multiple ISFSI licenses for different designs.” PX 6311

at KRGSMUDII-002816. But, this evidence does not materially differ from that presented in

Consolidated Edison.

For these reasons, the court has determined that SMUD failed to demonstrate that the Part

171 fee change was a result of the Government’s breach, so that SMUD is not entitled to recover

any portion of its Part 171 fees from 2004 through 2008. The court, however, has determined

that SMUD would have exited the nuclear industry in 2009 in the non-breach world. Therefore,

in the non-breach world SMUD would not have been required to pay NRC fees for 2009 and,

therefore, SMUD is entitled to receive $118,750 in mitigation costs for the NRC fees that SMUD

paid in 2009.

8. Whether Plaintiff Is Entitled To The Cost Of Greater-Than-Class-C

Storage.

In 2004, SMUD began the process of physically dismantling and decommissioning

Rancho Seco. Decommissioning was an extensive process involving the segmentation and

removal of reactor vessel internals that are an integral part of the power plant containing the

nuclear fuel. TR at 153-54 (Ronningen). The segmentation of the reactor vessel internals

created a significant amount of low-level waste, categorized by DOE as Class A, B, and C waste,

LLC, 676 F.3d 1331 (Fed. Cir. 2012), holding that the plaintiff was not entitled to recover for

Part 171 fees paid to the NRC. Id. at 1340.

41

and high-level GTCC waste. The GTCC waste was loaded into a canister like the ones used to

store SNF and placed in the ISFSI for long-term storage. TR at 30, 91, 136 (Ronningen). A

twenty-four-hour security service also is onsite, as required by NRC regulations. TR at 90-91

(Ronningen).

a. The Plaintiff’s Argument.

SMUD argues that it is entitled to recover $3,927,926 in mitigation costs incurred to

prepare, segment, package, inspect, and load GTCC waste into the ISFSI. Pl. Br. at 19. The

evidence presented in this case establishes that DOE would have picked up and stored SMUD’s

GTCC waste and SNF in the non-breach world. PX 6351 ¶¶ 40-41 (Stuart Written Direct); PX

6352 ¶¶ 11-15, 59 (Supko Written Direct); PX 6355 at 146 (May 8, 2002 Mr. Milner Dep.

(Yankee Atomic Elec. Co. v. United States)), 254 (July 14, 2004 Dr. Bartlett (former Director of

DOE’s Waste Program) Direct); PX 6356 at 40, 49 (June 13-14, 2002 Campbell Dep. (Yankee

Atomic Elec. Co. v. United States)), 59-62 (Aug. 10, 2004 Mr. Huizenga (DOE Assistant Deputy,

Administration for the Office of International Material Protection and Cooperation) Direct).

Under the Standard Contract, DOE is responsible for providing acceptance criteria and

the technical attributes of the transportation casks. PX 44 Art. IV.B (Standard Contract).

Because DOE did not pick up the GTCC waste, SMUD was required to store it in the ISFSI. Pl.

Br. at 21 (citing TR at 248 (Ronningen); TR at 764-65 (Grubb); PX 6358 ¶¶ 11, 22 (Snyder

Written Direct)). To accomplish this, SMUD segmented its reactor vessel internals so that the

GTCC waste would fit into a canister designed to be stored in the ISFSI. TR at 763-64 (Grubb);

TR at 768-70 (Grubb); PX 6358 ¶¶ 23-26 (Snyder Written Direct). In the non-breach world,

SMUD would have undertaken the GTCC waste segmentation and removal process in

accordance with DOE’s criteria, not the physical constraints of the ISFSI. Pl. Br. at 22 (citing

TR at 760-75, 782-87, 819-20 (Grubb); TR at 138-40, 161-64, 185-87, 248 (Ronningen); PX

6358 ¶¶ 11, 13, 22-26, 38, 45, 48, 55, 68-69, 71, 73 (Snyder Written Direct)); see also Pl. Resp.

at 43 (citing TR at 765, 787-88, 815-16 (Grubb); PX 6358 ¶¶ 13, 14, 69-70 (Snyder Written

Direct)).

In the breach world, SMUD is required to incur the cost of preparing, packaging, and

loading GTCC waste for transport from the ISFSI to a DOE facility, when and if DOE performs.

Pl. Resp. at 44-45 (citing PX 6358 ¶¶ 13-14, 72-79 (Snyder Written Direct)). The segmentation

tasks that SMUD would be required to undertake in the non-breach world were dependent on the

type of transportation cask that DOE would select, but that design has not yet been elected by

DOE. TR at 769-70, 785-86, 813-16 (Grubb); TR at 974 (Gelles); TR at 1063 (Jones); TR at

1081 (Maret); PX 6358 ¶¶ 68, 78-79 (Snyder Written Direct). Because the cost of packaging of

GTCC waste for transport to a DOE facility has not occurred, allowing the Government an offset

for GTCC waste loading costs would be inappropriate. Pl. Resp. at 42 (citing Carolina Power &

Light Co., 573 F.3d at 1277 (“This court rejects the argument that [plaintiff] has avoided the

costs of loading casks such that the government should benefit from an offset in the damages

award. Plaintiffs have not avoided the costs of loading. Rather, they have merely deferred these

costs.”)).

42

SMUD contends that the mitigation costs to procure the GTCC basket and canister and to

load the basket and canister into the ISFSI are costs that SMUD is entitled to recover, because

they “serve no purpose other than for the temporary storage of GTCC at the ISFSI.” Pl. Resp. at

49 (citing PX 6358 ¶¶ 45-48 (Snyder Written Direct)). These costs total $977,583. Pl. Resp. at

49-50 (citing PX 6358 ¶¶ 45-52, 57, 59, 64-65 (Snyder Written Direct)).

Although the overall segmentation project cost $15 million under a fixed-price contract

with Transnuclear, Inc. (“Transnuclear”), SMUD’s damages expert undertook an independent

detailed review of the project cost and determined that $3,927,926 was solely related to the

Government’s partial breach. Pl. Br. at 23 (citing PX 6358 ¶¶ 10-11 (Snyder Written Direct); see

also TR at 138-39, 158-66 (Ronningen)). Despite difficulties in segregating the costs of the

fixed-price contract, Mr. Snyder provided a thorough and reasoned basis for determining the

costs that were GTCC-related. Pl. Br. at 23 (citing PX 6358, Part IV (Snyder Written Direct)).

Moreover, the law does not require more where the Government has created the situation that

caused the imprecision. See LaSalle Talman Bank, F.S.B. v. United States, 317 F.3d 1363, 1374

(Fed. Cir. 2003) (“[W]hen damages are hard to estimate, the burden of imprecision does not fall

on the innocent party.”). The Government proffered no evidence disputing the accuracy of Mr.

Snyder’s calculations. Pl. Resp. at 48-49.

In sum, “[j]ust as this [c]ourt awarded its damages related to the dry storage project in

[SMUD III] to prepare and store the fuel during the period of the government’s breach, . . . so too

should this [c]ourt award SMUD its comparable damages for its GTCC project.” Pl. Br. at 24;

see also Pl. Resp. at 40-41 (comparing the Government’s argument regarding GTCC waste

storage costs in this case to the Government’s rejected argument regarding SNF storage costs in

SMUD III, 70 Fed. Cl. at 372-73).

b. The Government’s Response.

The Government responds that the costs to perform GTCC waste segmentation and

removal are not recoverable, because these are activities that SMUD would have been required

to undertake in the non-breach world to decommission Rancho Seco. Gov’t Br. at 26; see also

Gov’t Resp. at 11 (“[N]othing in the RVI project was ‘caused’ by DOE’s delay.”). Specifically,

SMUD was required to dismantle the reactor vessel and segment all of the vessel’s internal

components, including all radioactive waste, whether it was Class A, B, and C waste, or GTCC

waste.20 Gov’t Br. at 27 (citing DX 6243 at ¶¶ 12-13, 18, 23, 40, 42 (Jones); DX 6244 at ¶¶ 20-

22 (Maret); TR at 182-87 (Ronningen); TR at 731-34 (Redecker)). Contrary to SMUD’s

argument that it is entitled to segmentation storage costs, the United States Court of Appeals for

the Federal Circuit in Yankee Atomic declined to hold that DOE is responsible for the costs of

segmenting HLW. Gov’t Br. at 29 (citing Yankee Atomic, 536 F.3d at 1279 (confining a utility’s

ability to recover GTCC-related storage costs)). In fact, the Standard Contract requires a utility

to “arrange for, and provide, all preparation, packaging, required inspections, and loading

20

Class A, B, and C, waste are low-level radioactive waste SMUD had to segment and

remove as part of decommissioning and for which responsibility is not assigned to DOE under

the Standard Contract.

43

activities necessary for the transportation of SNF and/or HLW to the DOE facility.” PX 44, Art.

IV.A.2 (Standard Contract). Therefore, SMUD is attempting to transfer GTCC waste removal

and segmentation costs to DOE, contrary to the Standard Contract. Gov’t Br. at 31.

In addition, the evidence adduced at trial failed to establish causation as to the claimed

GTCC-related portion of the Reactor Vessel Internals (“RVI”) project. The Government does

not dispute that the method used by SMUD to remove and segment GTCC waste was the least

costly and most efficient and, for that reason, SMUD would have undertaken the same project in

the same manner and at the same cost in the non-breach world as it did in the breach world.

Gov’t Br. at 31-32 (citing DX 6243 ¶¶ 28-30 (Jones Written Direct); TR at 770-71, 807, 809-10,

812-13, 818-19 (Grubb)). Moreover, SMUD could and did accomplish this task even without

knowing the characteristics of the DOE’s cask. Gov’t Br. at 33-34 (citing DX 6243 ¶¶ 29-30

(Jones Written Direct); DX 6244 ¶¶ 20-22 (Maret Written Direct)). Therefore, Mr. Snyder did

not establish that SMUD would not have performed the same segmentation and removal project

in the non-breach world or that SMUD needed to segment the GTCC waste from the reactor

vessel to provide it to DOE for shipment. Gov’t Br. at 30. In addition, Mr. Snyder improperly

and speculatively relied on the Draft Environmental Impact Statement for the Disposal of GTCC

Low-Level Radioactive Waste and GTCC-like Waste for the proposition that SMUD will need to

undertake a significant additional segmentation project when the DOE performs. Gov’t Resp. at

19 (citing PX 6358 ¶ 74 (Snyder Written Direct)). As DOE’s Director of the Office of Disposal

Operations testified, this document was not a final decision by the DOE, but a draft presenting a

“bounding” set of assumptions. Gov’t Resp. at 19-20 (citing TR at 955-56, 964-65 (Gelles)).

Therefore, these costs would have been incurred by SMUD absent the partial breach and are not

recoverable. See Energy Nw., 641 F.3d at 1307 (“If a cost would have been incurred even in the

non-breach world, it is not recoverable.”). This includes the costs of loading the GTCC waste,

the cask, and the canister. Gov’t Resp. at 14. Furthermore, SMUD’s argument that, absent DOE

acceptance criteria, there is no way to know how the segmentation and removal would have

occurred in the non-breach world ignores SMUD’s burden to establish the costs it would have

avoided in the non-breach world. Gov’t Resp. at 12-13 (citing Yankee Atomic, 536 F.3d at 1273

(requiring the trial court to perform a comparison between the breach and non-breach world)).

SMUD also failed to establish with reasonable certainty the GTCC-related portion of its

claim. Gov’t Resp. at 14 (citing Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012, 1023

(Fed. Cir. 1996) (holding that damages “such as would have been realized by the party from

other independent and collateral undertakings . . . are too uncertain and remote to be taken into

consideration as a part of the damages occasioned by the breach of the contract in suit.”)). First,

the Transnuclear executive in charge of SMUD’s RVI project admitted that he could not

segregate how much of the fixed price contract was related to GTCC waste nor could he

ascertain how precise an estimate would be. TR at 786-87 (Grubb). Second, SMUD’s expert,

Mr. Snyder, failed to account for certain costs included within the fixed-price contract to

determine if they were GTCC-related. TR at 797-800 (Grubb). Third, Mr. Snyder failed to

obtain information from Transnuclear’s sub-contractors to determine if and what portion of their

costs, such as tools, were GTCC-related. TR at 800-01 (Grubb). Fourth, Mr. Snyder included

the total cost of the water processing equipment used to address water clarity problems in his

estimate, but that issue arose prior to the removal of the GTCC waste and the same equipment

was used to address problems related to Class A, B, and C waste as well. TR at 1156-57, 1162

44

(Snyder). Fifth, Mr. Snyder included SMUD internal labor costs in his estimate, but did not

review any time sheets to determine whether the work was GTCC-related. TR 1161-62

(Snyder). Instead, Mr. Snyder allocated a percentage of the time charged to the overall RVI

project to the GTCC-related portion of the project. Gov’t Resp. at 17. Finally, the fixed-price

contract did not identify the costs of the GTCC-related portion, but Mr. Snyder nevertheless

concluded that “$2.387 million” of the contract was GTCC-related. TR at 1147-49 (Snyder); PX

6358 ¶¶ 32-44 (Snyder Written Direct). In sum, Mr. Snyder either did not seek or ignored

available information that would have provided a more accurate assessment of SMUD’s GTCC-

related costs. Gov’t Resp. at 18. As a result, “the evidence [i]s insufficient to determine the

quantum of [damages] to a reasonable certainty.” Bluebonnet Sav. Bank, F.S.B. v. United States,

266 F.3d 1348, 1358 (Fed. Cir. 2001). Even if SMUD would have been required to undertake a

different project in the non-breach world, those costs would have been greater than in the breach

world. Gov’t Br. at 34. The bottom line is that SMUD cannot show that it suffered a net loss,

comparing the breach world to the non-breach world, and should not be permitted to recover for

an actual world cost that it claims would have been greater in the non-breach world. Gov’t Br. at

35 (citing Bluebonnet Sav. Bank, 339 F.3d. at 1346 (holding that it was necessary for the trial

court to “make further determination as to what costs, if any, the plaintiffs would have incurred

in the absence of breach and thus to ascertain the net financial effect of the breach on the

plaintiffs”)).

The Government adds that a jury verdict method of determining damages is inappropriate

here, because SMUD has not shown a “justifiable inability to substantiate the amount of [its]

resultant injury by direct and specific proof[.]” Gov’t Resp. at 18-19 (quoting Joseph Pickard’s

Sons Co. v. United States, 532 F.2d 739, 742 (Ct. Cl. 1976)).

c. The Court’s Resolution.

To decommission Rancho Seco, SMUD undertook a large RVI segmentation project.

This entailed dismantling and removing the internals from the reactor vessel and then placing

them in the reactor cavity. TR at 771 (Grubb). To protect against radiation, the reactor cavity

was flooded with water, so that all of the segmentation work took place underwater in the reactor

vessel. TR at 761 (Grubb). Removal of the various parts of the internals involved separating

them from each other by milling and shearing off bolts and cutting apart various pieces. TR at

759-62, 770-71, 805 (Grubb). This project, however, created approximately 41,000 pounds of

GTCC waste and about 300,000 pounds of Class A, B, and C waste. TR at 795-96 (Grubb); DX

6129 at SMUDII3113412 (Sept. 19, 2006 Transnuclear RVI Segmentation Project Final Report).

SMUD was careful to minimize the amount of GTCC waste created and to separate it from A, B,

and C waste. TR at 793-94 (Grubb). The GTCC waste consisted primarily of reactor vessel

baffle plates and baffle formers that were removed essentially intact from the RVI. TR at 811-12

(Grubb). The GTCC waste was placed in the GTCC basket on the bottom of the reactor vessel

cavity. TR at 771 (Grubb). In addition, GTCC “chips” created by the shearing and milling

process were collected and placed into the GTCC basket. TR at 772-74 (Grubb). While in the

reactor cavity, the GTCC basket then was placed inside a previously constructed storage canister,

similar to those used by SMUD to store SNF. TR at 1152-53 (Snyder). This canister then was

removed from the reactor cavity, vacuum dried, backfilled with helium, welded shut, and in

45

February 2006 was moved into the ISFSI. TR at 761-62 (Grubb); PX 6358 ¶¶ 26, 57 (Snyder

Written Direct).

The United States Court of Appeals for the Federal Circuit has held that DOE is

responsible under the Standard Contract for the disposal of GTCC waste. See Yankee Atomic,

536 F.3d at 1278-79. SMUD argues that its GTCC waste and SNF would have been picked up at

the same time. The record shows that this could have been accomplished under the “plus/minus

twenty percent” provision of the Standard Contract and that the parties contemplated that DOE

would not leave GTCC waste at a utility after SNF was collected. PX 6351 ¶¶ 40-41 (Stuart

Written Direct); PX 6352 ¶¶ 11-15, 59 (Supko Written Direct); TR at 763-64 (Grubb); PX 6355

at 146 (May 8, 2002 Mr. Milner Dep. (Yankee Atomic Elec. Co. v. United States)), 254 (July 14,

2004 Dr. Bartlett Direct); PX 6356 at 40-41, 49 (June 13, 2002 Mr. Cambell (DOE Engineering

Program Manager) Dep.), 59-62 (Aug. 10. 2004 Mr. Huizenga (DOE Assistant Deputy,

Administration for the Office of International Material Protection and Cooperation) Direct). The

Government does not dispute this point. Therefore, the court has determined that SMUD’s

GTCC waste would have been removed by the end of 2008, along with SMUD’s SNF. Since

SMUD’s GTCC waste would be removed in the non-breach world, the Government’s partial

breach caused SMUD to incur GTCC storage costs. As such, SMUD is entitled to recover the

costs of storage for its GTCC waste. See Yankee Atomic, 536 F.3d at 1279 (affirming the trial

court’s holding that “the conclusions reached with respect to recoverability of SNF storage

expenses are equally applicable to GTCC waste, which is stored on-site in the same manner as

SNF”).

The court has considered SMUD’s claim for GTCC mitigation costs in two categories:

costs that SMUD would have incurred in the non-breach world; and costs that SMUD would

have incurred in the non-breach world but, in the breach world, that SMUD will incur in the

future, i.e., deferred costs. The first category includes the costs to remove and segregate GTCC

in the reactor vessel. These are costs that SMUD would have incurred in the non-breach world,

but will not incur again in the breach world, and are not recoverable. See Energy Nw., 641 F.3d

at 1307 (“If a cost would have been incurred even in the non-breach world, it is not

recoverable.”). Nevertheless, SMUD insists that it is entitled to damages for these costs because

the entire Reactor Vessel Internals segmentation project was driven by the need to store the

GTCC waste in the ISFSI. But in the non-breach world, SMUD would have undertaken this

project with direction by DOE as to its choice of canister. Pl. Br. at 22-23. Therefore, SMUD

asserts that it is entitled to receive the entire amount as storage costs, until it is known what the

project would have entailed in the non-breach world. Pl. Resp. at 41-42.

To the extent that SMUD would have incurred lower costs in the non-breach world,

SMUD has the burden to demonstrate a plausible non-breach world establishing these lower

costs. See S. Nuclear Operating Co., 637 F.3d at 1304 (“As we held in Yankee Atomic,

‘[b]ecause plaintiffs . . . are seeking expectancy damages, it is incumbent upon them to establish

a plausible ‘but-for’ world.’”). Conversely, to the extent that SMUD established that it would

have incurred higher costs in the non-breach world, i.e., avoided costs, the Government is

entitled to an offset for those costs. See Carolina Power & Light Co., 573 F.3d at 1277. Neither

SMUD nor the Government, however, established with any reasonable certainty that SMUD’s

segmentation costs would have been lower or higher in the non-breach world. Moreover, these

46

are not deferred costs that SMUD will be required to incur, if and when DOE performs. See id.

To the extent that SMUD may be required by DOE to cut the GTCC waste into smaller pieces to

fit into a DOE-selected canister in the future, that is not a cost that SMUD has yet to incur in the

breach world.

The second category includes costs SMUD incurred to load the GTCC into the storage

cask and then remove it to the ISFSI. These are costs that SMUD will be required, in the breach

world, to incur again, if and when DOE performs. Therefore, they represent deferred costs for

which SMUD is entitled to recover. See Carolina Power & Light Co., 573 F.3d at 1277. Also

falling into this category are costs for the design and fabrication of both the GTCC canister and

GTCC basket.

SMUD states that the following mitigation costs fall into the “loading” category and are

recoverable: (1) fabrication of the GTCC canister ($224,431); (2) design and fabrication of the

GTCC basket ($250,000); (3) SMUD operations and maintenance personnel ($84,965); (4)

Bigge Crane operators ($35,790); (4) contract surcharges to procure GTCC canister and GTCC

basket ($17,894.84);21 (5) SMUD’s engineering costs related to developing, loading, and

transporting the GTCC canister and GTCC basket ($174,202); (6) labor surcharges associated

with engineering costs ($58,530.35); (7) radiation protection crew costs during transportation

and loading of the GTCC canister into the ISFSI ($67,567); (8) design of the GTCC canister

($57,799); and (9) contamination protection clothing used to transport and load the GTCC

canister into the ISFSI ($6,404). Pl. Resp. at 49-50.

The court finds that the cost to procure the GTCC basket and the GTCC canister, and

attendant design costs, are related directly to these loading costs. Likewise, SMUD’s associated

engineering costs and labor surcharges are loading costs. And, the radiation protection crew and

contamination protection clothing are loading costs, because they were incurred to conduct

GTCC loading operations. These are costs that SMUD is entitled to recover.

The Government correctly asserts that SMUD also must establish these costs with

“reasonable certainty.” See Ind. Mich., 422 F.3d at 1373. To do so, SMUD must make a fair and

reasonable approximation of the damages incurred. See Locke, 283 F.2d at 524 (“Certainty is

sufficient if the evidence adduced enables the court to make a fair and reasonable approximation

of the damages.”). The costs for GTCC canister fabrication, canister design, and GTCC basket

and GTCC canister surcharges are specified in purchase orders and therefore were established

with reasonable certainty. Although payment for the GTCC basket design and fabrication was a

“milestone payment,”22 SMUD established this amount represents a fair and reasonable

21

The Government concedes that the first four categories are “loading” costs. Gov’t

Resp. at 20 n.8.

22

SMUD’s contract with Transnuclear to perform the RVI project was a fixed-price

contract, with payments due upon completion of different milestones. PX 6084 (Transnuclear

RVI Project Contract); see also PX 6358 ¶¶ 32 (Snyder Written Direct) (testifying that, based on

his experience, “the values assigned in the itemized price list accurately reflect SMUD’s and

Transnuclear’s understanding of the costs to perform those listed tasks”).

47

approximation of the cost to design and fabricate the GTCC basket. PX 6358 ¶¶ 32, 47 (Snyder

Written Direct).

For these reasons, the court has determined that SMUD established the costs for the

GTCC basket design and fabrication and GTCC canister design and fabrication of $550,124.84

with reasonable certainty.

SMUD has also established Bigge Crane operation costs with reasonable certainty.

SMUD determined the percentage of total Bigge Crane contract costs attributable to the GTCC

project by “dividing the number of man-hours SMUD and Transnuclear anticipated would be

spent on GTCC-specific tasks (16 shifts) by the number of man-hours SMUD and Transnuclear

anticipated would be spent on s

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