Free Published Opinion/Order - District Court of Federal Claims - federal

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In the United States Court of Federal Claims
No. 01-249C (Filed: January 31, 2006) ************************* TENNESSEE VALLEY AUTHORITY, Plaintiff, v. UNITED STATES, Defendant. *************************
Peter K. Shea, Office of the General Counsel, Tennessee Valley Authority, Knoxville, Tennessee, for plaintiff. With him at trial and on the briefs was Edwin W. Small, Assistant General Counsel. Also with him on the briefs was Maureen H. Dunn, General Counsel, Tennessee Valley Authority, Knoxville, Tennessee. Sonia M. Orfield, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, D.C., for defendant. With her at trial and on the briefs were Alan Lo Re, Senior Trial Counsel, Sharon A. Snyder, Trial Attorney, and Kevin B. Crawford, Trial Attorney. Also with her on the briefs were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, and Harold D. Lester, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, D.C.

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Breach of standard contract for disposal of spent nuclear fuel; damages; mitigation; Restatement (Second) of Contracts § 350; scope of relief available for sequential partial breaches

OPINION AND ORDER LETTOW, Judge. This action is one of a series of cases pending before the Court involving contracts between the federal government and operators of the nation's nuclear electric utilities for the disposal of spent nuclear fuel. Plaintiff, the Tennessee Valley Authority ("TVA" or "Authority"), seeks damages for the failure of the Department of Energy ("DOE") to perform under a contract 1

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("Standard Contract") executed between the parties in 1983 for the disposal of spent nuclear fuel ("SNF") and related materials generated at two nuclear power plants owned and operated by TVA ­ the Browns Ferry and Sequoyah nuclear plants.1 As damages, TVA seeks costs incurred in building on-site dry storage facilities for the spent fuel that it otherwise would have transferred to DOE under the Standard Contract. In a prior decision, this court granted a motion by TVA for a partial summary judgment that DOE breached its obligations to act in good faith on Delivery Commitment Schedules ("DCSs") submitted by TVA to DOE in accordance with the Standard Contract, and ultimately to accept, transport, and dispose of TVA's SNF as required by the Standard Contract. Tennessee Valley Auth. v. United States, 60 Fed. Cl. 665, 674 (2004). In that decision, however, the court denied TVA's motion for summary judgment insofar as it requested an award of damages because the government had not yet had an opportunity to conduct discovery specifically related to TVA's alleged damages, and the court therefore could not determine that no genuine dispute of material fact existed as to the amount of those damages or that TVA was entitled to those damages as a matter of law. Id. at 675-76. The court ruled that TVA necessarily had alleged and proven a partial breach of the Standard Contract, and that the Authority could seek damages based upon actual costs incurred in mitigating the partial breach. Id. at 679. In that respect, the court ruled that TVA could seek damages through the end of its fiscal year completed prior to the date of trial. Id. at 678-79. To adjudicate the issues of fact respecting damages, the court conducted an 11-day trial commencing on June 21, 2005 and ending on July 15, 2005, initially in Chattanooga, Tennessee
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In the Nuclear Waste Policy Act ("NWPA"), Pub. L. No. 97-425, Title III, § 302, 96 Stat. 2201, 2257 (Jan. 7, 1983) (codified at 42 U.S.C. § 10222), Congress authorized DOE "to enter into contracts with any person who generates or holds title to high-level radioactive waste, or spent nuclear fuel, of domestic origin for the acceptance of title, subsequent transportation, and disposal of such waste or spent fuel" in exchange for the payment of an initial fee followed by recurring fees. 42 U.S.C. § 10222(a)(1). Congress mandated that the country's nuclear plant operators, primarily electrical utilities, enter into such contracts with DOE as a prerequisite to maintaining their operating licenses. Id. at § 10222(b); see also Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1337 (Fed. Cir. 2000) ("The [NWPA] effectively made entry into such contracts mandatory for the utilities."). DOE endeavored to establish standard terms for such a contract, and the Department undertook a rulemaking for that purpose. See 48 Fed. Reg. 5,458 (Feb. 3, 1983). It ultimately promulgated a Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste. 48 Fed. Reg. 16,590 (Apr. 18, 1983) (codified at 10 C.F.R. § 961.11) ("Standard Contract"). TVA was one of the active participants in DOE's rulemaking and urged DOE to specify a rate of pick up in the Standard Contract to enable utilities better to plan their arrangements for spent fuel storage DX 5.063 (TVA's unsigned comments), at 5. DOE did not adopt this suggestion, instead building a planning process into the contract for scheduling pick-ups of spent nuclear fuel. See Standard Contract arts. IV-V. 2

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and subsequently in Washington, D.C. Post-trial briefs were filed thereafter, and a closing argument was held on October 27, 2005. The case is now ready for disposition. For the reasons set forth below, the court finds that plaintiff is entitled to damages caused by the government's breach in the amount of $34,893,207 for the period beginning when it became apparent that DOE would not timely collect and dispose of TVA's SNF and ending at September 30, 2004, TVA's most recently closed fiscal year prior to the date of trial. FACTS2 TVA and DOE entered into a Standard Contract for disposal of SNF in June of 1983. Tr. 62:23 to 63:3 (Test. of Thomas L. Hayslett, Jr., former Chief of TVA's Nuclear Fuel Supply Branch); JX 1 (Contract No. DE-CR01-83NE44420 (June 28, 1983) ("TVA Contract")).3 TVA's Standard Contract covered SNF and waste produced at four of TVA's facilities ­ (1) Browns Ferry, a three-reactor facility which is located on the northern shore of Wheeler Lake in Limestone County, Alabama, (2) Sequoyah, a two-reactor facility which is located on the western shore of Chickamauga Lake in Hamilton County, Tennessee, (3) Watts Bar, a two-reactor facility which is located on the western bank of the Tennessee River in Rhea County, Tennessee, and (4) Bellefonte, a two-reactor facility which was to be located on the western bank of the Tennessee River in Jackson County, Alabama. JX 1 at 35-43 (TVA Contract Appendix A). In this action, TVA seeks damages related only to the Browns Ferry and Sequoyah plants. Tr. 10:24 to 11:10 (Pl.'s Opening Statement); TVA's Damages Trial Memorandum of Facts and Law ("Pl.'s Tr. Memo.") at 2. One of the goals of the Nuclear Waste Policy Act ("NWPA") was to reduce the backlog of spent nuclear fuel that had accumulated at nuclear power facilities around the nation. Tr. 819:14-20 (Test. of Lake H. Barrett, deputy director of DOE's Office of Civilian Radioactive Waste Management). Another goal of the waste disposal program was to preclude utilities' need to provide for storage of spent fuel outside the pools attendant to their reactors. Tr. 1365:9 to 1367:10 (Test. of Thomas E. Pollog, technical representative of the contracting officer, DOE's Office of Civilian Radioactive Waste Management); DX 37 at 11 (Proceedings of the 1983 Civilian Radioactive Waste Management Information Meeting (Feb. 1984)).4 To serve these

This recitation of facts constitutes the court's principal findings of fact in accord with Rule 52(a) of the Rules of the Court of Federal Claims ("RCFC"). Other findings of fact and rulings on questions of mixed fact and law are set out in the analysis. Citations to the trial transcript are to "Tr. __." Joint Exhibits are denoted as "JX," plaintiff's exhibits are denoted as "PX," and defendant's exhibits are denoted as "DX." These water-filled pools provide a storage area proximate to the reactor for fuel-rod assemblies that are being moved into and out of the reactor or are otherwise being stored on a temporary basis. 3
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goals, DOE conducted a survey of utilities as part of its waste management program to determine the amount of spent fuel that had been accumulated to date, as well as the amount of fuel that was being generated annually. Tr. 910:21 to 912:6 (Test. of Pollog). DOE's analysis indicated that nuclear power plants nationwide would generate approximately 2,000 metric tonnes of uranium ("MTU") per year of new waste in the form of spent fuel. Tr. 833:20 to 836:7 (Test. of Barrett). To prevent utilities from exceeding their wet storage capacity as well as to reduce the backlog of waste, DOE determined that approximately 3,000 MTU would need to be collected by DOE each year (the 3,000 MTU rate allowed a catchup of 1,000 MTU per year to eliminate the spent fuel that had been accumulating before the startup of DOE's collection program). Id. at 833:20 to 835:19. This rate of 3,000 MTU became the baseline rate that was used by DOE when designing its repositories, and this number was set out in DOE's strategic plans. See, e.g., PX 11 § 2.7 (Mission Plan for the Civilian Radioactive Waste Management Program (June 1985)). DOE also set the annual fees to be paid by utilities under the Standard Contract at a level consistent with a steady-state rate of 3,000 MTU per year. Tr. 74:15 to 75:13 (Test. of Hayslett). DOE expected that a "permanent" waste repository would require a transition period of approximately five years from the date it started operation until it could ramp up to the targeted rate of 3,000 MTU per year. Tr. 852:6 to 857:19 (Test. of Barrett). Early in DOE's nuclear waste disposal program, DOE contemplated that it would open more than one repository for spent fuel and high-level waste ("HLW"). Tr. 1400:9 to 1402:16 (Test. of Christopher A. Kouts, Director of DOE's Office of Systems Analysis and Strategy Development). During the period of 1985-1987, however, DOE became concerned that it might miss its contractual obligation to begin accepting SNF and HLW by the end of January 1998. Id. at 1407:3 to 1426:13; PX 96 (DOE Fund Fee Adequacy: An Assessment (Feb. 1985)); PX 94 (DOE Analysis of the Total System Life Cycle Cost for the Civilian Radioactive Waste Management Program ("TSLCC") (Apr. 1986)). DOE proposed to Congress a plan whereby a monitored retrievable storage facility ("MRS") would be built to function in conjunction with a permanent repository. Tr. 1421:20 to 1426:5 (Test. of Kouts); DX 48 (Monitored Retrievable Storage Submission to Congress (Mar. 1987)). DOE contemplated that the MRS could begin accepting SNF and HLW from utilities by the contractual deadline of January 1998, even if a "permanent" repository had not been completed by that date. Tr. 1426:21 to 1427:22, 1431:24 to 1433:2 (Test. of Kouts). The MRS was also to serve another important purpose. It would act as a processing facility where SNF from utilities could be re-packaged for permanent storage before being sent to a permanent facility. It was envisioned that all SNF would first be shipped to the MRS for processing before being taken to a permanent repository, even after a permanent repository came on line. This would allow a permanent repository facility to be a simpler operation, with less need for capacity to repackage waste on-site. Id. at 1414:10 to 1416:18. DOE published an Annual Capacity Report ("ACR") in June 1987 which indicated that DOE's performance would begin with an MRS having been installed and having become operational in 1998 with a total capacity of 15,000 MTU, to be followed by a repository opening in 2003. Tr. 1440:4 to 1442:8 (Test. of Kouts); DX 50 (1987 Annual Capacity Report (June

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1987)).5 If DOE had been able to follow the schedule provided in the 1987 ACR, the repository would have reached its steady-state acceptance rate of 3,000 MTU/year in approximately 2008 (i.e., opening in 2003 with a five-year ramp-up). Congress adopted the concept of an MRS in enacting legislation in 1987 amending the NWPA. Tr. 1442:4-23 (Test. of Kouts); see Nuclear Waste Policy Amendments Act of 1987, Pub. L. No. 100-203, §§ 5001-5065, 101 Stat. 1330, 1330-227 to 1330-255 (1987) (codified in scattered sections of Title 42 of the U.S. Code, including 42 U.S.C. § 10168) . However, Congress placed important limitations on a possible MRS. First, an MRS could not be built until a site was selected and approved for a permanent repository. Tr. 1450:2-22 (Test. of Kouts); see 42 U.S.C. § 10168(d)(1). Second, the total capacity of an MRS was to be limited to 10,000 MTU until the permanent repository became operational. See 42 U.S.C. § 10168(d)(3). DOE published ACRs for 1991 and 1992 that reflected the operation of an MRS for the first ten years of operational acceptance (beginning in January 1998), with a concomitantly reduced acceptance rate. Tr. 1478:1 to 1484:3 (Test. of Kouts); see DX 76 (1991 Annual Capacity Report (Dec. 1991)); DX 84 (1992 Annual Capacity Report Revision 1 (May 1993)). In March 1995, DOE published a combined ACR and Annual Priority Ranking ("APR") for 1994 based on data through 1993 that continued to show an acceptance rate consistent with MRS operations for the first ten years of waste acceptance operations. Tr. 1485:9 to 1490:8 (Test. of Kouts); PX 19 (Acceptance Priority Ranking and Annual Capacity Report (Mar. 1995)).6 DOE delayed the issuance of the 1994 APR-ACR until March 1995 because it had become apparent that a repository would not be ready on time. In May 1994, DOE announced that because of the delays in constructing its planned storage repository, it would not begin SNF collection until 2010. Waste Acceptance Issues, 59 Fed. Reg. 27,007, 27,008 (Dep't of Energy May 25, 1994) (notice of inquiry). And, at some point in 1995, DOE determined that it would not be able to site an MRS and abandoned the idea of an MRS. Tr. 1490:9 to 1493:1 (Test. of Kouts). However, DOE did not publish another ACR or APR to reflect these changes until 2004. Tr. 1551:25 to 1554:9 (Test. of Kouts). Notwithstanding its determinations in 1994 and 1995, DOE did not at that time rescind the prior ACRs, nor did it suspend or terminate the obligation of affected utilities to comply with the procedural requirements of the Standard Contract to identify their spent fuel that required disposal.

As defined in the Standard Contract, ACRs were to "set forth the projected annual receiving capacity for the DOE facility(ies) and the annual acceptance ranking relating to DOE contracts for the disposal of SNF and/or HLW including, to the extent available, capacity information for ten (10) years following the projected commencement of operation of the initial DOE facility." Standard Contract art. IV.B.5(b). As provided in the Standard Contract, APRs addressed the receipt of SNF and HLW from individual facilities "based on the age of SNF and/or HLW as calculated from the date of discharge of such material." Standard Contract art. IV.B.5(a). 5
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TVA re-racked its storage pool at Sequoyah in 1995, Tr. 768:15 to 769:3 (Test. of Jack A. Bailey, Vice President of Nuclear Asset Recovery and Strategic Projects, TVA), PX 34 at 3 (TVA Report of Costs Incurred by TVA Through September 30, 2002 (July 2003)), and reracked the pools at Browns Ferry during its fiscal year 1999. Tr. 782:17-25 (Test. of Bailey); Tr. 58:2-6 (Test. of Hayslett).7 The re-racking increased the aggregate storage capacity of the Sequoyah and Browns Ferry pools to approximately 2,500 MTU, accounting for full core reserve and some unusable cells. Tr. 60:21 to 61:3 (Test. of Hayslett).8 TVA pursued this re-racking because its estimates in the early 1990's showed that SNF would exceed pool capacity at Sequoyah by the mid-1990's and at Browns Ferry by the year 2000, assuming that DOE's performance had been consistent with the reduced acceptance rates shown in the 1991 ACR. PX 34 at 1. Because the re-racking would have been required even if DOE had performed, TVA does not seek compensation for its re-racking costs. Tr. 58:2 to 59:11 (Test. of Hayslett). The Standard Contract did not establish a specific rate or schedule for the collection of SNF. Rather, it established a process by which a rate would be established for each utility. See Tr. 66:18 to 67:12 (Test. of Hayslett). As previously determined by the court, DOE effectively short-circuited this process by its failure to perform under TVA's Standard Contract. See Tennessee Valley Auth., 60 Fed. Cl. at 674. That action by DOE breached the scheduling provisions of TVA's Contract at some point during 1997. Id.9 Under the contractual process, TVA was to submit to DOE proposed Delivery Commitment Schedules ("DCSs") for DOE's review and approval. JX 1 at 11, App. C. Such DCSs were to specify the amount of SNF the utility "wishe[d] to deliver to DOE beginning sixtythree (63) months thereafter." Id. at 11. The amount of spent fuel covered by such DCSs was to be based upon allocations established by DOE and published in ACRs and APRs. ACRs were to set forth the projected annual receiving capacity for DOE facilities for ten years following the projected commencement of operation of the initial DOE facility. Id. at 10; Tr. 67:1-12 (Test. of Hayslett). APRs were to provide utilities with annual allocations of available capacity, based on a doctrine calling for the utilities with the oldest fuel to receive the earliest allocations. JX 1 at 10; Tr. 910:1-19 (Test. of Pollog).

Re-racking is a process whereby existing SNF racks in a wet storage pool are removed and replaced with higher density racks, which provide additional capacity for fuel assemblies. This has the effect of increasing the storage capacity of the pool. Commercial nuclear power producers typically maintain a "full core reserve" at each nuclear generation facility, which means that utilities leave enough spaces in the wet storage pools at each facility to unload fully the fuel from one reactor in case of an exigent circumstance. See Tennessee Valley Auth., 60 Fed. Cl. at 675 n.11. Utilities may well have had a basis to undertake measures as early as May 1994 to mitigate a future breach. DOE had announced in May 1994 that it would not be in a position to accept SNF for disposal until 2010. See supra, at 5. 6
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TVA based its estimates of DOE's SNF collection on the APR­ACR issued in March 1995. Tr. 84:10-23 (Test. of Hayslett). This APR-ACR indicated that TVA's first allocation of capacity would occur in 2002. Id. at 84:13-16; see PX 19. Thus, under the terms of the contract, TVA was required to submit a DCS to DOE 63 months prior to the date listed in the ACR to lock in that capacity allocation. Tr. 83:23-24 (Test. of Hayslett); JX 1 at 11. In consequence, TVA was required to submit its first DCS in 1997. TVA's DCS submittals for 2002-2007 were filed with DOE beginning in 1997. Tr. 9:20 to 10:19. These DCSs represented TVA's allocations for the first 10 years. DOE was required by contract to approve or disapprove the schedules within three months. JX 1 at 11. However, TVA's DCSs were neither approved nor disapproved. Tr. 84:24 to 85:5 (Test. of Hayslett). In response to DOE's failure to act on TVA's DCSs beginning in 1997, in addition to other indications that DOE would not begin performing in 1998 (including the May 1994 notice, Waste Acceptance Issues, 59 Fed. Reg. at 27,008, and a TSLCC issued in September 1995, PX 20 (TSLCC (Sept. 1995)), TVA created a spent nuclear fuels task force in the 1996 and 1997. Tr. 999:10 to 1000:2 (Test. of Donald L. Hutson, former senior project manager in TVA's nuclear fuels division). TVA came to the conclusion that because DOE would not begin collection of its waste in 2002, its storage-pool capacity minus one full-core reserve at Sequoyah would be exceeded in 2004, the capacity of the storage pool serving Browns Ferry Unit 3 would be fully used by 2006, and the storage pool serving Browns Ferry units 1 & 2 would reach its normal full usage in 2010. DX 311 (TVA Analysis of Storage Pool Capacity, Prepared by George M. Holton, Jr., senior engineering specialist in TVA's nuclear fuel supply and disposal department).10 TVA considered a number of potential strategies for dealing with the spent fuel that exceeded the normal capacity of its pools, see Tr. 783:10 to 797:3 (Test. of Bailey), and ultimately decided to build dry storage facilities at both Sequoyah and Browns Ferry. TVA began planning for the dry storage facility at Sequoyah in 1998, construction began in 2001, and installation was completed in Fiscal Year 2004. PX 34 at 5; PX 43 (TVA Report of FY 2004 Costs Incurred by TVA (Nov. 2004)), at 1.11 TVA commenced storing SNF at its Sequoyah dry storage facility during FY 2004. PX 43 at 5. TVA also began planning for construction of a dry storage facility at Browns Ferry in 1998; construction on the project began in 2001. PX 34 at 16, 18-20. As of September 30, 2004, the storage pad for the dry storage facility at Browns Ferry was 75% complete, and TVA envisioned that it would begin loading spent fuel into casks for storage in that dry storage facility during the summer of 2005. PX 43 at 6, 8.

TVA recently decided to restart Browns Ferry Unit 1, which had been idled. TVA expects that Unit 1 will be reloaded in 2006 and restarted in 2007. Tr. 1248:10-22 (Test. of Holton). TVA's Fiscal Year ("FY") ends on September 30 of each year; e.g., FY 2004 ended September 30, 2004. 7
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DISCUSSION Standards for Decision It is a basic tenet of contract law that "`[t]he 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.'" Indiana Mich. Power Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005)(citing San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557, 1562 (Fed. Cir. 1997)). "`[T]he general principle is that all losses, however described, are recoverable.'" Indiana Mich., 422 F.3d at 1373 (quoting Restatement (Second) of Contracts § 347 cmt. c). TVA's claim is fundamentally one to recover costs incurred in its efforts to mitigate damages resulting from DOE's breach. Where a party to a contract is put on notice by the other contracting party that it does not intend to perform under the contract, the non-breaching party has an obligation to take steps to avoid damage. "`[O]nce a party has reason to know that performance by the other party will not be forthcoming, . . . he is expected to take such affirmative steps as are appropriate in the circumstances to avoid loss by making substitute arrangements or otherwise.'" Indiana Mich., 422 F.3d at 1375 (quoting Restatement (Second) of Contracts § 350 cmt. b); see also Tennessee Valley Auth., 60 Fed. Cl. at 674 (same). In its earlier decision, this court noted that TVA's claim is necessarily one for partial breach; to find a "total breach would abort the contract, thereby obviating DOE's obligation to collect TVA's SNF . . . in the future and most likely resulting in the forfeiture of TVA's operating licenses [for its nuclear plants] pursuant to 42 U.S.C. § 10222(b)." Tennessee Valley Auth., 60 Fed. Cl. at 677-78; see also Indiana Mich., 422 F.3d at 1374. The Federal Circuit held in Indiana Michigan that there is "no reason why efforts to avoid damages in contemplation of a partial breach should not . . . be recoverable," just as they are recoverable for mitigation upon a total breach. 422 F.3d at 1375. Accordingly, TVA is not barred from recovery because its claim is one for recoupment of its costs of mitigation due to partial breach. To recover damages, TVA must show that "(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." Indiana Mich., 422 F.3d at 1373 (citing Energy Capital Corp. v. United States, 302 F.3d 1314, 1320 (Fed. Cir. 2002)). See also Indiana Mich., 422 F.3d at 1376 ("[plaintiff] must prove foreseeability, causation, and reasonableness"). In putting forward its defenses to TVA's claims, the government bears a concomitant burden of proof. To eliminate or reduce TVA's mitigation-related damages, the government bears the burden of showing that TVA's mitigation efforts were unreasonable. See Restatement (Second) of Contracts § 350(2); First Heights Bank, FSB v. United States, 422 F.3d 1311, 131617 (Fed. Cir. 2005); Long Island Savs. Bank, FSB v. United States, 67 Fed. Cl. 616, 642 (2005); 8

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see also Koppers Co. v. Aetna Cas. and Sur. Co., 98 F.3d 1440, 1448 (3d Cir. 1996) (applying Pennsylvania law) ("Mitigation is an affirmative defense, so the burden of proving a failure to mitigate is on the defendant.") (citing Williams v. Masters, Mates and Pilots of Am., 120 A.2d 896, 901 (Pa. 1956); Ecksel v. Orleans Constr. Co., 519 A.2d 1021, 1028 (Pa. Super. Ct. 1987)). In short, TVA's damages may be reduced to the extent that the government can show TVA did not undertake reasonable efforts to mitigate its damages or that the efforts it did undertake were insufficient or unreasonable. "The amount of loss that [the non-breaching party] could reasonably have avoided by . . . making substitute arrangements or otherwise is simply subtracted from the amount that would otherwise have been recoverable as damages." Restatement (Second) of Contracts § 350 cmt. b. Nonetheless, TVA is "`not precluded from recovery . . . to the extent that [it] has made reasonable but unsuccessful efforts to avoid loss.'" Indiana Mich., 422 F.3d at 1375 (quoting Restatement (Second) of Contracts § 350(2)) (emphasis added). Analysis A. The Time Period Covered by TVA's Claim In its decision in Indiana Michigan, a SNF case also involving a Standard Contract with DOE, the Federal Circuit determined that "[b]ecause [the utility's] claim is premised upon the government's partial breach, its damages were limited to those costs incurred prior to the date of its suit." 422 F.3d at 1376-77. In preparation for the trial on damages in this case, which took place in June and July of 2005, the court requested that the parties cover at trial TVA's damages through its most recently completed Fiscal Year, i.e., through September 30, 2004. See Tennessee Valley Auth., 60 Fed. Cl. at 679. The parties' supplemental filings and proofs of damages put forward at the trial therefore were calibrated to show events through September 30, 2004. Accordingly, under RCFC 15(a), (b), and (d), the court determines that TVA has sought and pursued an amended and supplemental complaint alleging damages through that date. See Intrepid v. Pollock, 907 F.2d 1125, 1129 (Fed. Cir. 1990) (citing Griffin v. School Bd., 377 U.S. 218, 227 (1964)); Remediation Constructors, Inc. v. United States, 68 Fed. Cl. 162, 167 (2005) (supplemental complaint); United Partition Sys., Inc. v. United States, 59 Fed. Cl. 627, 644 (2004) (same) (citing Fed. R. Civ. P. 15(d) advisory committee's note to the 1963 amendment; Mathews v. Diaz, 426 U.S. 67, 75 (1976); Black v. Secretary of Health and Human Servs., 93 F.3d 781, 790 (Fed. Cir. 1996)). In accord with RCFC 15, the court grants amendment and supplementation of TVA's complaint to pursue damages through September 30, 2004. B. TVA's Claimed Damages TVA's dry storage facilities, also known as independent spent fuel storage installations ("ISFSI"), were constructed to accommodate storage casks containing shielded spent nuclear fuel on secure concrete pads. The storage casks themselves are constructed of steel and concrete and are approximately 10 feet in diameter and 20 feet in height. They may weigh 270 tons each when filled with spent nuclear fuel assemblies. Tr. 321:15-17, 325:5 to 326:5 (Test. of Charles R. Davis, Project Manager at TVA's Sequoyah Nuclear Plant). The process of putting SNF into dry 9

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storage begins at a spent fuel pool. The fuel to be placed into dry storage must have been in a pool for five years or longer, because spent fuel removed from a reactor pool more quickly would be too "hot" to store safely in a dry storage cask. JX 1 (Standard Contract) App. E, ¶ 3; Tr. 2293:25 to 2294:6 (Test. of Dr. Raymond S. Hartman). A container called a multi-purpose canister ("MPC") is lowered into the pool, and spent fuel assemblies are loaded. The MPC will serve as the innermost container for the spent fuel within a storage cask. The MPC is moved to a refueling area, where it is welded shut, taken out of the water, and placed into a container called a "transfer cask." The transfer cask is taken to a railroad bay, where the transfer cask is lifted by crane onto a storage cask made of steel and concrete. The MPC is then transferred directly from the transfer cask into the storage cask, after which a concrete lid is placed on the storage cask. The filled storage cask is then moved a short distance by rail out of the railroad bay, then loaded onto a large "crawler" type vehicle that carries the cask to the dry storage pad. Tr. 317:14 to 324:6, 1034:1 to 1038:25 (Test. of Davis). Building the dry storage facilities required numerous alterations to TVA's plant sites. In addition to building concrete storage pads, TVA had to modify its facilities to enable loading of spent fuel assemblies into the casks and subsequent transporting of the casks to the storage-pad area. The roads and railroad bays at the plant sites were not originally designed to carry loads as heavy as the storage casks. These roads and railroad bays were rebuilt, and some underground utilities had to be moved. Alterations had to be made to the storage pools to accommodate the MPCs, and new fail-safe cranes had to be installed in the loading area. Tr. 319:15 to 326:14 (Test. of Davis).12 Additionally, at Browns Ferry an additional turning pad had to be installed to accommodate the crawler, and security facilities had to be altered and extended significantly at Browns Ferry because at that nuclear plant, unlike at Sequoyah, the dry storage facility could not be accommodated within the secure area previously available. Tr. 588:13 to 590:12 (Test. of Robert A. Chapman, Project Manager at TVA's Browns Ferry Nuclear Plant). Early in its preparations for the dry storage construction projects, TVA requested proposals from a number of different possible suppliers of storage casks. TVA ultimately selected Holtec International ("Holtec") to design the ISFSI and to provide the storage casks. Tr. 317:2-4 (Test. of Davis). TVA determined that Holtec provided the best design in terms of ease of use and safety, and that Holtec's design would be cost-effective over the long term. Tr. 315:20 to 317:13 (Test of Davis); PX 34 at 3. TVA contracted with the engineering firm Stone & Webster to conduct much of the construction and field engineering work on the projects. Tr. 326:15 to 328:4 (Test. of Davis), 590:17-25 (Test. of Chapman). TVA also employed internal resources on the projects, including TVA-owned heavy equipment and TVA's central engineering staff. Tr. 328:19 to 330:15 (Test. of Davis).

TVA has determined that it would have had to upgrade the cranes had DOE performed on its contract; therefore TVA does not seek damages for that expense. Tr. 337:4 to 338:1 (Test. of Davis). 10

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TVA has used a "but for" methodology in determining whether costs associated with the dry storage projects at Sequoyah and Browns Ferry are recoverable. A cost recovery has not been sought if a cost would have been incurred in connection with DOE's performance under the TVA Contract. Tr. 336:6 to 337:3 (Test of Davis), 617:25 to 620:6 (Test. of Chapman); PX 34 at 7. TVA has identified the following major items to be non-recoverable: a study conducted to test the survivability of the crane in the auxiliary building; modifications to the auxiliary building crane; and construction of the cask work platform, support stand, loading area stand, and lifting yoke. PX 34 at 7. TVA has also determined that 50% of the costs associated with training, operating, and maintenance procedures should not be allocated to DOE, because some of these costs would have been incurred in the non-breach, but-for world associated with DOE's performance. Id. TVA has allocated those costs it deems recoverable into five different categories: (1) TVA labor; (2) contract services and procurement; (3) internal charge-backs; (4) overhead; and (5) travel. See PX 34 at 8. The TVA-labor category encompasses the direct salaries paid to TVA's employees for work performed in connection with the dry storage project. Contractservices expenses are those associated with personal-service contracts and other arrangements for obtaining professional services (e.g., engineering services or staff augmentation). Procurement relates to purchases of tangible items such as equipment, fittings for facilities, and materials for construction. Internal charge-back expenses consist primarily of costs associated with engineering work performed by the TVA nuclear corporate engineering group, and also includes equipment rental from TVA's internal heavy-equipment division. Overheads include various TVA-attributed costs, including workman's compensation, insurance, allowance for funds used during construction ("AFUDC"), and indirect administrative charges. Travel expenses include costs incurred by TVA employees traveling in connection with the project; travel related to the dry storage projects was conducted and charged in accordance with federal travel regulations. See id. at 8-16. TVA requests that the court award damages incurred in constructing and operating SNF dry storage facilities at TVA's Sequoyah and Browns Ferry Nuclear Plants which, except for DOE's breach, would have been unnecessary. Tr. 176:4-7 (Test. of Hayslett), 336:6 to 337:3 (Test of Davis), 619:14 to 620:6 (Test. of Chapman). In its pretrial submissions, TVA claimed mitigation damages totaling $35,752,512.11 through September 30, 2004, which amount includes the capital costs of the dry storage facilities at Sequoyah and Browns Ferry incurred through September 30, 2004, as well as the costs of operations and management (O/M) at the Sequoyah dry storage facilities in FY 2004. TVA's evidence of damages is summarized as follows:

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Sequoyah Nuclear
FY 1998 1999 2000 2001 2002 2003 2004 Cap. 2004 O/M Total TVA Labor $8,345.59 33,026.08 62,133.92 161,542.27 98,926.01 201,131.25 266,475.06 7,773.20 $839,353.38 Contract Servs. & Procurement $0.00 125,952.40 185,744.16 1,519,715.93 3,431,039.35 7,300,563.51 3,630,852.12 143,395.30 $16,337,262.77 Internal Charge-backs $0.00 191,892.22 87,920.03 14,121.52 231,183.06 420,322.08 243,922.47 4,588.00 $1,193,949.38 Overhead $703.70 37,198.71 34,066.43 99,739.24 267,435.66 736,684.12 575,000.05 6,790.00 $1,757,617.91 Travel $95.96 1,859.43 3,037.02 838.14 652.72 1,319.45 2,186.12 12.00 $10,000.84 FY Totals $9,145.25 389,928.84 372,901.56 1,795,957.10 4,029,236.80 8,660,020.41 4,718,435.82 162,558.50 $20,138,184.28

Browns Ferry Nuclear
FY 1999 2000 2001 2002 2003 2004 Total TVA Labor $0.00 5,784.62 124,393.82 58,377.94 115,178.47 258,195.21 $561,930.06 Contract Servs. & Procurement $ 180,000.00 120,000.00 84,454.28 3,134,023.55 4,963,420.76 3,813,485.77 $12,295,384.36 Internal Charge-backs $ 0.00 0.00 7,125.00 3,952.00 108,070.73 1,662,653.23 $ 1,781,800.96 $ Overhead 0.00 0.00 83,164.87 84,110.03 246,275.21 519,236.05 $ 932,786.16 $ Travel 0.00 411.45 7,671.75 6,078.44 1,283.93 26,980.72 $ 42,426.29 FY Total $180,000.00 126,196.07 306,809.72 3,286,541.96 5,434,229.10 6,280,550.98 $15,614,327.83

PX 72 (Summary of TVA's Incurred Costs - SQN); PX 73 (Summary of TVA's Incurred Costs ­ BFN); see Tr. 499:7-20 (Test. of Paul J. Walker, Project Control Specialist at TVA's Sequoyah Nuclear Power Plant), 608:11-25 (Test. of Chapman). Of these claimed costs, Mr. Walker of TVA testified at trial that the total amount for Sequoyah should be reduced by $21,074, due to an inadvertent accounting error that included 12

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repair costs for the crane that were not recoverable. Tr. 501:20 to 502:23 (Test. of Walker). Mr. Chapman, project manager at Browns Ferry Nuclear, testified that the amount of damages for Browns Ferry of $15,614,327.83 should be reduced by $48,000, to eliminate an amount that was paid to Holtec for a study that was not part of the dry storage project. Tr. 628:9 to 629:1 (Test. of Chapman). These two deductions reduce the total damages claimed in TVA's submittals to $35,683,438.11. 1. Causation. To prevail, TVA must show that it built the dry storage facilities to respond to DOE's breach. See Indiana Mich., 422 F.3d at 1373. Both parties start from the premise that (1) DOE's allotted quantities for disposal during the ten-year period from 1998­2007 would apply,13 (2) DOE's first pick-up under that ten-year schedule would have occurred in 2002, and (3) if DOE had performed under that schedule, then given the capacity of TVA's SNF pools and the estimated rate of TVA's SNF generation, TVA's pools would have been sufficient to handle its SNF for the first ten years of DOE's performance (1998­2007) under the contract without building dry storage facilities.14 The government nonetheless contests causation of damages, suggesting that TVA made plans to build dry storage prior to DOE's breach, and therefore DOE's breach was not the but-for cause of TVA's decision to build dry storage. Internal TVA documents indicate that TVA conceptually investigated the possibility of using dry storage prior to 1997. See, e.g., DX 41 (Concept for an All-Purpose Transport, Storage, and Disposal Cask for Spent Nuclear Fuel Management, Raymond E. Hoskins, TVA (Dec. 12-15, 1983)); DX 92 (TVA High Level Waste Situation (Dec. 5, 1996)). However, the same early documents reveal that these investigations were inchoate and speculative in nature. See DX 92 ("A limited quantity of on-site dry cask storage may be needed.") (emphasis added). As of 1997, TVA had made no decision to build dry

TVA accepted for purposes of this litigation the quantities of SNF allotted by DOE for disposal during the ten-year period from 1998-2007 when DOE expected to be using an MRS that was never built. See Tennessee Valley Auth., 60 Fed. Cl. at 671. That concession appears to be unique among the numerous spent-fuel plaintiffs pursuing claims in this court. Because DOE has not to date picked up any SNF from TVA or any other holder of a Standard Contract, DOE has breached its contract with TVA. Id. at 674. The government disputes that TVA's pools would always have been sufficient to accommodate accumulating SNF if DOE had begun to perform in 1998. See Closing Arg. Tr. 68:19-23 (Oct. 27, 2005) (government's counsel's statement that TVA would have needed to begin dry storage in 2013 if DOE had performed as DOE had projected and TVA expected); DX 217 (Report of Dr. Raymond S. Hartman) at EXT013 0035, EXT013 0036 (opining that TVA would have needed to begin dry storage at Sequoyah and Watts Bar in approximately 2013 if DOE had picked up SNF at a total rate of 900 MTU/year from 1998 onwards). This contention is addressed infra, at 17-21. 13
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storage, nor had it undertaken any detailed examination of that possibility. Tr. 767:15-22 (Test. of Bailey). TVA initiated a number of operational changes in its nuclear program in the mid-1990's. These changes included license extensions for its current facilities, power upgrades in each of its facilities, the restart of the Browns Ferry 1 reactor, and participation in tritium and "BLEU" fuel programs with DOE.15 Each of these changes resulted in an increased amount of SNF output by TVA's nuclear facilities. Tr. 70:8 to 71:18 (Test. of Hayslett). These changes, however, would not have caused TVA to exceed its pool storage capacity during the first ten years of DOE SNF collection if DOE had performed under the contract. Id. at 71:19 to 73:6. The court finds that but for DOE's failure to perform under the Contract, TVA would not have been required to build dry storage facilities, and that TVA's decision to build dry storage was made in direct response to DOE's breach. See DX 105 (TVA Spent Fuel Storage Study (Dec. 12, 1997)), at TVA003742 ("DOE has informed utilities that disposal of spent fuel at a federal repository will not begin in 1998. . . . Consequently, it is imperative that TVA[ ] implement spent fuel storage alternatives.").

The government has suggested that TVA's participation in DOE's programs for production of tritium and for use of blended low enriched uranium ("BLEU") fuel is partially responsible for TVA's need for dry storage. See, e.g., Tr. 181:3 to 183:7 (Test. of Hayslett). As discussed infra, at 17, TVA's investigation of its possible participation in these programs affected its plans for the pools. The tritium program prevented TVA from using its cask pit at Sequoyah for interim SNF storage; the cask pit is needed as part of the tritium program for loading and unloading. Additionally, the process of tritium production requires that some additional uranium be used in the reactor, thereby creating some additional SNF. Tr. 201:9 to 202:12 (Test. of Hayslett). TVA did not agree to participate in the tritium program until approximately 1999, however (after DOE's breach), see infra, at 17, and DOE is contractually responsible for the additional spent fuel costs associated with the tritium program. Tr. 202:13-20 (Test. of Hayslett). The tritium program, therefore, was not a causal factor in TVA's decision to build dry storage. TVA's participation in DOE's BLEU fuel program is reflected in an agreement by which TVA has agreed to accept fuel from DOE for use at Browns Ferry that contains higher levels of impurities than are found in normal commercial-grade nuclear fuel. BLEU fuel is derived from reprocessed material. The result of using this fuel is a slight increase in SNF production. Id. at 70:8 to 71:5, 76:4 to 79:2. However, like the tritium program, the BLEU fuel program did not originate until after DOE's breach, and the first shipment of BLEU fuel was not loaded at Browns Ferry until Spring of 2005. Id. at 76:4-12. Therefore, like the tritium program, the BLEU fuel program did not affect TVA's immediate need for dry storage. Moreover, both programs were undertaken by TVA at the behest of DOE. 14

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2. Foreseeability. For TVA to recover, the damages must have been reasonably foreseeable by the breaching party at the time of contracting. Indiana Mich., 422 F.3d at 1373 (citing Energy Capital, 302 F.3d at 1320; see also Restatement (Second) of Contracts § 351(1) ("Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made."). The Restatement defines foreseeability as follows: "(2) Loss may be foreseeable as a probable result of a breach because it follows from the breach (a) in the ordinary course of events, or (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know." Id. DOE was aware of the nation's growing spent nuclear fuel inventory at the time it entered into the TVA Contract. DOE designed its waste disposal plan to collect all new SNF created by the nations's nuclear utilities, as well as to reduce and eventually eliminate the backlog of SNF that utilities had generated to date. See supra, at 3. DOE also recognized that utilities might be forced to build additional on-site storage facilities if DOE were not successful in performing under its contracts for SNF disposal, as reflected by the fact that one of DOE's goals was to preclude the utilities' need to provide storage outside their spent fuel pools. See supra, at 3. In short, the court finds that it was entirely foreseeable to DOE that failure to perform under the contract would result in damages of the nature and magnitude that TVA claims. 3. Certainty. To recover, TVA must prove its damages with reasonable certainty. Indiana Mich., 422 F.3d at 1373 (citing Energy Capital, 302 F.3d at 1320 (Fed. Cir. 2002)). "While the amount of damages need not be `ascertainable with absolute exactness or mathematical precision[,]' recovery for speculative damages is precluded." Indiana Mich., 422 F.3d at 1373 (quoting San Carlos Irrigation, 111 F.3d at 1563); see also Restatement (Second) of Contracts § 352. The Federal Circuit dealt with the certainty issue in Indiana Michigan by specifying that a utility bringing suit under the Standard Contract would be limited to recovering damages that it had actually incurred. Indiana Mich., 422 F.3d at 1376-77. Projected future damages were not currently obtainable, but new claims for damages could be brought later after additional actual expenditures had been incurred. Id. As previously noted, supra, at 9, this court's prior decision had also limited TVA to its actual damages through the most recently completed fiscal year antedating trial, see Tennessee Valley Auth., 60 Fed. Cl. at 679, and the parties' supplemental filings and proofs put forward at the trial have been calibrated to address actual damages and events through September 30, 2004. Accordingly, TVA's damages can be calculated with reasonable certainty. C. Reasonableness of TVA's Mitigation There is no dispute that TVA acted to mitigate the damages caused by DOE's partial breach. TVA accordingly fulfilled its obligations to take affirmative steps to avoid loss. See Indiana Mich., 422 F.3d at 1375 (citing Restatement (Second) of Contracts § 350(2)). TVA's 15

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expenses of its mitigation are accordingly recoverable to the extent they are reasonable. In that regard, as noted supra, at 8-9, the government bears the burden of proving that TVA's actions to mitigate DOE's partial breach were unreasonable.16 1. TVA's chosen method of mitigation. TVA's mitigating actions were successful and thus presumptively reasonable. It nonetheless had explored mitigating strategies other than dry storage, but it rejected them as more expensive or impracticable.17 TVA examined a number of ways in which it might reconfigure its existing pools. Re-racking the pools at Sequoyah and Browns Ferry was not a viable alternative. As described supra, at 6, Sequoyah and Browns Ferry had already been reracked or were in the process of re-racking when DOE's breach occurred. Once re-racking of a SNF storage pool has taken place with high-density racks, the capacity of that pool has essentially been fully used, and further re-racking would provide nominal gains. Tr. 768:15 to 769:3 (Test. of Bailey). TVA also looked at the possibility of using "baby racks"; i.e., racks that fit around the outside edges of the pools. Technical reviews of this option, however, indicated that it would have been technically marginal from a regulatory and safety perspective. Id. at 783:10 to 785:23, 787:2. TVA additionally investigated a method of storage known as "cask-pit storage," but decided against this option because it would have been costly and would have reduced the operational flexibility of the plant. Id. at 770:18-22. Cask-pit storage would have involved placing storage racks in the cask pit, the area of the pool used for loading and unloading

That mitigation is chiefly at issue cannot be contested. As the Federal Circuit determined in Indiana Michigan: [Upon discovering DOE's breach], utilities were in fact obligated to take mitigatory steps. It would have been improvident for [utilities] to have waited until January 1998 before deciding what to do with [their] nuclear waste. Indeed, the losses which the utilities are obligated to mitigate are not merely pecuniary unto themselves, e.g., the increased cost of obtaining storage for SNF on short notice. Having been placed in a position where they are required to find alternate storage for SNF, the utilities must de facto accept responsibility to guard against the environmental impact of improperly-disposed and maintained SNF, a situation which the NWPA was enacted to avoid. 422 F.3d at 1375. A non-breaching party need only pursue reasonable mitigation alternatives, and is not required "to take steps to avoid loss if those steps may cause other serious loss. [The nonbreaching party] need not, for example, make other risky contracts, incur unreasonable expense or inconvenience or disrupt [its] business." Restatement (Second) of Contracts § 350 cmt. g. 16
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fuel casks. Id. at 769:4 to 770:17. An additional limitation on the use of cask-pit storage was that after the breach, TVA contracted with DOE to produce tritium. The tritium program required that the cask pits at Sequoyah and Watts Bar be available for loading and unloading tritium casks from DOE, and that need eliminated the possibility of using the cask pits for storage. Id. at 771:8 to 774:15. In addition to considering methods of reconfiguring existing pools, TVA evaluated the possibility of transshipment of SNF and private fuel storage. TVA particularly evaluated transshipment of spent fuel from Sequoyah to Watts Bar, a nuclear generation facility with more available pool capacity than at Sequoyah. Transshipment was considered technically possible (both reactors use the same technology and have compatibly sized fuel assemblies), but the costs and public-relations hurdles were considered too high to make this option practicable at the time. Tr. 792:12 to 794:14 (Test. of Bailey); see also DX 120 (Spent Fuel Storage Evaluation (July 29, 1998)) (TVA's Chief Nuclear Officer directed TVA to "[d]iscontinue any further consideration of the transshipment option."), at 7. TVA also did not have the option of resorting to "private" fuel storage facilities. None have been licensed. Tr. 796:21 to 797:3 (Test. of Bailey). Moreover, TVA is not a member of any private fuel storage consortium. Id. at 796:10-17. The court concludes that TVA was reasonable in its chosen method of mitigation. 2. The government's claim that TVA's damages should be limited because dry storage would have been necessary at some future point even absent a breach. The government avers that TVA would have been required to build dry storage facilities at Sequoyah and Browns Ferry even if DOE had not breached its contract with TVA. The effect of DOE's breach, the government argues, was merely to require TVA to build the dry storage facilities sooner than they would have but for the breach. Tr. 38:10-21 (Def.'s opening statement); Def.'s Initial Post-Trial Br. at 9-10, 18-32. The government frames this argument as one of causation, see Tr. 38:21-22 (Def.'s opening statement), but in the circumstances of this case, it realistically is a contention aimed at limiting the amount of damages TVA may recover as a result of its mitigation efforts. The government contends that TVA's damages should be constrained to the difference between the costs of building the dry storage facilities in the present (breach) world versus the costs of building the facilities later in the but-for, non-breach world. See Tr. 2356:8 to 2362:3 (Test. of Hartman); Def.'s Initial Post-Trial Br. at 32-33. Because the government seeks to limit the non-breaching party's recovery for mitigation, the government bears the burden of proof. See supra, at 8-9. The first ten years of DOE's expected performance are not in dispute. Both parties accept the aggregate rates of SNF acceptance that DOE provided for the first ten years of DOE SNF acceptance in the ACR for 1994 as issued in March 1995. DX 311; see supra, at 13 n.13; see also PX 19 at 4. Under the 1994 ACR, DOE was to collect an aggregate of 400 MTU in year one, 600 MTU in year two, and 900 MTU in years three to ten. PX 19 at 4. Notably, a part of the seventh year, 2004, and all of the eighth, ninth, and tenth years, 2005-2007, are beyond the 17

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scope of the actual damages at issue in this litigation. Thus, the government's contention addresses future events, and it must shoulder the double burden of establishing that the future events were relatively certain to occur and that TVA's mitigation was unreasonable in light of those events. A key dispute between the parties respecting those future events concerns the rate of acceptance that DOE might have established in the but-for, non-breach world for the years after year ten, i.e., year eleven (2008) and onward. This is largely a hypothetical exercise. At trial, TVA presented evidence indicating that TVA projected its expected allocations for year eleven (i.e., 2008) onward on the assumption that DOE'S acceptance of SNF would reach a rate of 3,000 MTU/year beginning in year eleven. Tr. 73:8 to 75:13, 88:12 to 89:9 (Test. of Hayslett). The 1994 ACR (issued in 1995) did not provide aggregate SNF acceptance rates for the time period after year ten (2007), see PX 19 at 4, and the 1994 ACR itself has been overtaken by events. The government endeavors to support two propositions: first, that 3,000 MTU/year is not an appropriate long-term steady-state disposal rate, see Def.'s Initial Post-Trial Br. at 9-10, and second, that DOE in the but-for world would not have reached the 3,000 MTU/year steady-state rate until approximately 2015, not 2008. Def.'s Initial Post-Trial Br. at 12; Tr. 1461:1 to 1462:11 (Test. of Kouts). The government's first contention does not comport with the long-term acceptance rates listed in nearly all of DOE's planning documents. As discussed supra, at 4, DOE's planning documents consistently referenced a 3,000 MTU/year long-term steady-state rate. The government rests its second contention on a DOE document released in December 1990 entitled Preliminary Estimates of the Total-System Cost for the Restructured Program ("PETSC"), DX 292. Tr. 162:9 to 169:6 (Test. of Hayslett); see Tr. 37:17 to 40:22 (Def.'s opening statement). The government argues that TVA should be bound by the rates listed in the PETSC because one of TVA's October 2001 interrogatory responses stated that the PETSC was one of many documents on which TVA relied to help it determine DOE's future rates of acceptance. Def.'s Initial Post-Trial Br. at 16-17; see DX 176 (TVA's Answers to Defendant's First Set of Interrogatories (Oct. 9, 2001)) at 9a. The primary purpose of the PETSC was to evaluate the costs of the program and the adequacy of the fees being paid into the program. DX 292 at (iii.). In calculating the costs of the program, the PETSC listed as one of its assumptions that the first repository would be delayed until 2010. Id. at 3, 9, 25. This represented a change from earlier DOE documents, which had stated that repository operations would begin in 2003. See id. at 3; DX 51 (Office of Civilian Radioactive Waste Management Mission Plan Amendment (June 1987)), at 6, 10. Given that the ramp-up period for the repository would be approximately five years, see Tr. 852:6 to 857:19 (Test. of Barrett), if the repository opened in 2010, it would not reach its steady-state rate until approximately 2015. The 1990 PETSC shows an acceptance rate of 400 MTU in 1998 and 1999, 900 MTU/year from 2000 to 2009, 1,800 MTU/year from 2010 to 2014, and 3,000 MTU/year from 2015 onwards. DX 292 at A1. The government argues

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that the rates of acceptance listed in the 1990 PETSC represent the rates of acceptance that would have prevailed in the non-breach, but-for world. Def.'s Initial Post-Trial Br. at 15-17. An examination of the 1990 PETSC, however, demonstrates that its rates of acceptance are based upon a mistaken assumption: that "Congress . . . [would] modify the current linkages between the repository and the MRS facility in order to allow the MRS facility to begin accepting waste in 1998." DX 292 at 10. As previously observed, Congress imposed a number of restrictions when it authorized an MRS in the Nuclear Waste Policy Amendments Act of 1987. One of these restrictions was that construction of an MRS could not begin until after issuance of a license for the construction of a repository. Congress never eliminated this "linkage." See 42 U.S.C. § 10168(d)(1)). Therefore, the acceptance schedule envisioned by the 1990 PETSC was based on assumptions that were never authorized by Congress, and the linkage referred to in the PETSC was still in effect when DOE released the 1994 ACR in March 1995. Because the 1994 ACR listed 1998 as the first year of DOE SNF acceptance, the assumption implicit in 42 U.S.C. § 10168(d)(1) is that the permanent repository would have been sited by that time. With the repository sited by 1998, and construction requiring approximately five years, the repository should have opened in approximately 2003. With a five-year ramp-up required to reach a steady state rate, the acceptance rates listed in the 1994 ACR indicate that it would have been reasonable to assume that DOE would begin accepting 3,000 MTU/year by 2008. This ten-year schedule, with construction of a repository beginning in 1998 with repository acceptance reaching 3,000 MTU/year in 2008, is consistent with the Mission Plan Amendments issued by DOE in 1987. DX 51 at 41-42, 61. For purposes of this litigation, TVA has chosen to ignore any additional capacity that a permanent repository may have provided during the 2003-2008 time period (the "ramp-up" period), and it does not contest TVA's allocations as published by DOE in its 2004 APR for the years 1998-2007. Tr. 1213:21 to 1215:11 (Test. of Holton); DX 311. TVA claims that if DOE had begun performance in January 1998 as provided in the Contract, with TVA's first allotment scheduled for year five of operations (2002), and if DOE had collected SNF at a rate of 3,000 MTU/year beginning with year 11 (the "TVA 3,000" rate), then TVA would have had sufficient pool capacity to avoid building dry storage. Tr. 71:25 to 73:6 (Test. of Hayslett). TVA further contends that even if the court accepts the rates assumed in the 1990 PETSC as the government advocates (the "DOE 3,000" rate), TVA still would have been able to avoid building dry storage by employing a number of different options at its disposal to bridge a small temporary gap. Pl.'s Response to Def.'s Initial Post-Trial Brief ("Pl.'s Initial Post-Trial Resp. Br.") at 11-14; Tr. 109:3 to 111:2 (Test. of Hayslett). In aggregate, the storage space provided by the SNF pools at Browns Ferry 1 & 2, Browns Ferry 3, and Sequoyah 1 & 2 totals approximately 2,870 MTU. DX 311 at 2-4. If TVA provides for one full core reserve at each of the three pools, the available capacity is approximately 2,500 MTU. Tr. 60:25 to 61:3 (Test. of Hayslett); DX 311 at 2-4. Analysis of the capacity of TVA's storage pools is unchanged whether one looks at the pools individually or in the aggregate. Tr. 220:9 to 221:11 (Test. of Holton). This is due to the fact that TVA could decide how to 19

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apportion the available disposal allotments under the Standard Contract across its plants. Tr. 83:5-19 (Test. of Hayslett), 221:13 to 223:3 (Test. of Holton). TVA and DOE each made estimates as to the amount of SNF that TVA would generate each year; the differing estimates are illustrated in their calculated "cumulative discharges." PX 85 (Summary of DOE Model Results ­ TVA Projected Discharges); PX 86 (Summary of DOE Model Results ­ DOE Projected Discharges). TVA's internal estimates of SNF production are slightly higher than those of DOE, attributable primarily to the fact that TVA assumes that its nuclear plants will be offline for a shorter time than DOE estimates. Tr. 69:14 to 70:7 (Test. of Hayslett), 262:1-6 (Test. of Holton). Using the "TVA 3,000" SNF acceptance assumptions, TVA would have been able to stay within the storage capacity of its pools. Tr. 72:9 to 73:6 (Test. of Hayslett); PX 85; PX 86; DX 311. According to TVA's internal SNF discharge forecast, TVA's storage needs would have reached their maximum in 2018. In 2018, TVA would have had approximately 2,391 MTU of SNF; this amount is within the aggregate capacity of the pools minus full-core reserves. PX 85. The government suggests that the timing of DOE's collection during any given year is unknown (i.e., new SNF might be unloaded before DOE might make its collection for that year), and as a result TVA might have been forced to encroach on full core reserve in parts of a number of years at each of its facilities. TVA responds that it would have had several options to deal with such a scenario, and in any event, it would not have built dry storage as a result of such temporary encroachments on full core reserve. See Tr. 1231:3 to 1241:8 (Test. of Holton). TVA's Mr. Holton indicated that TVA's current business practices allow it temporarily to encroach on full core reserve and that it has done so in the past. See id. at 1233:10 to 1234:8. Additionally, Mr. Holton noted that the Standard Contract allows TVA to request that DOE increase its annual allocations by 20%, and the contract also includes a provision that would allow a utility to exchange allotments with other utilities if that utility faces SNF capacity limitations. Id. at 1234:13 to 1235:4, 1237:10-14. Temporary cask-pit storage may also have been an option, see id. at 1237:14-19, particularly at Browns Ferry, which is not participating in the tritium program. TVA also avers that it would not have been required to build dry storage even if one adopts the rate of SNF acceptance that the government advocates (the "DOE 3,000" rate), in which DOE would not have ramped up to collection of 3,000 MTU/year until 2015. See Pl.'s Initial Post-Trial Resp. Br. at 11-14; see also Tr. 109:3 to 110:5 (Test. of Hayslett). Using DOE's projected discharges for TVA, TVA's maximum SNF storage needs would have reached 2,774 MTU in 2018, PX 86; using TVA's more conservative estimates, TVA's storage needs would have reached a maximum of 2,933 MTU in 2018. PX 85. While both of these figures exceed the available capacity of 2,500 MTU in TVA's storage pools, this does not end the analysis. Given the proportionately large cost of building and operating dry storage facilities, TVA would have had several options available in the but-for scenario to deal with its spent fuel while still avoiding dry storage. These options included encroachment on full core reserve, increasing TVA's allotments with DOE, exchanging allotments with other utilities, cask-pit

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storage, and transshipment of SNF to other plants.18 See Tr. 109:3 to 111:2 (Test. of Hayslett). As described supra, at 20, TVA has been willing to encroach on full-core reserve on occasion, potentially increasing TVA's pool storage space to some 2,870 MTU over a short period. Additionally, as discussed supra, at 20, the Standard Contract included a provision allowing utilities to request that DOE increase or decrease SNF allocations for a given year by as much as 20%, as well as a provision allowing for "swaps" of allocations between utilities. See JX 1 arts. V.B.2, V.E. Mr. Hayslett indicated that successful invocation of the "plus or minus 20%" provision alone could have resulted in additional collection of 240 MTU by DOE through 2018. Tr. 109:20 to 110:5 (Test. of Hayslett). The government disputes the viability of the "plus or minus 20%" provision, claiming that any action taken under this provision would likely have to have been approved by DOE, and that any increase for one utility would result in a decrease for another utility. See Def.'s Initial Post-Trial Br. at 24-25; Tr. 1509:23 to 1515:16 (Test. of Kouts). However, a witness for the government and a witness for TVA both expressed an understanding that the Standard Contract would require DOE to accommodate a request by a utility under the "plus or minus 20%" provision. See Tr. 921:6 to 922:7 (Test. of Zabransky), 1235:23 to 1236:16 (Test. of Holton). The government also disputes the viability of the exchange provision, claiming that because there is currently no defined market in SNF exchanges and t