Free Post Trial Brief - District Court of Federal Claims - federal

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No. 01-249C (Judge Lettow) _____________________________________________________________________________ IN THE UNITED STATES COURT OF FEDERAL CLAIMS TENNESSEE VALLEY AUTHORITY, Plaintiff, v. THE UNITED STATES OF AMERICA, Defendant. ______________________________________________________________________________ DEFENDANT'S INITIAL POST-TRIAL BRIEF ______________________________________________________________________________ Respectfully submitted, PETER D. KEISLER Assistant Attorney General OF COUNSEL: JANE K. TAYLOR Office of General Counsel Department of Energy 1000 Independence Avenue, S.W. Civil Division Washington, D.C. 20585 ALAN J. LO RE Senior Trial Counsel KEVIN B. CRAWFORD SHARON A. SNYDER Trial Attorneys Commercial Litigation Branch Civil Division Department of Justice Washington, D.C. 20530 September 21, 2005 DAVID M. COHEN Director HAROLD D. LESTER, JR. Assistant Director SONIA M. ORFIELD Trial Attorney Commercial Litigation Branch Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tel: (202) 353-0534 Fax: (202) 307-2503

Attorneys for Defendant

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TABLE OF CONTENTS STATEMENT OF FACTS ADDUCED AT TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 I. TVA BEARS THE BURDEN OF PROVING EVERY ELEMENT OF ITS DAMAGES CLAIMS, INCLUDING LIABILITY, CAUSATION, AND RESULTANT DAMAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 A. TVA Bears The Burden Of Proving All Elements Of Its Damages, Including The Fact Of Damage, By Preponderant Evidence . . . . . . . . . . . 6 TVA Cannot Establish Causation Or Resultant Damage Through Speculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

B.

II.

TVA HAS FAILED TO MEET ITS BURDEN OF ESTABLISHING THAT ITS COSTS WERE CAUSED BY THE GOVERNMENT'S DELAY . . . . . . . . 7 A. TVA's Basic Claims Regarding Causation and Rate Have No Basis in the Standard Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 TVA's Basic Claims Regarding Causation and Rate Are Inconsistent With Its Own Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 TVA Has Failed To Meet Its Burden With Respect To Its Alternative Argument That It Could Have Bridged Its Storage Gap Absent Dry Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 1. 2. 3. 4. 5. 6. 7. Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 The "Plus or Minus 20 Percent" Contract Provision . . . . . . . . . . 24 Emergency Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Transhipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Private Fuel Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Cask Pit Rack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Operating Without Full Core Reserve . . . . . . . . . . . . . . . . . . . . . 30

B.

C.

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III.

TVA Should Be Denied Recovery Of Any Damages Because Its Damages Are Indistinguishable From Interest Which May Not Be Awarded Against the Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Alternatively, Any Award of Damages To TVA Must Be Reduced Because Of Its Failure To Properly Model Its "But For" World Costs . . . . . . . . . . . . . . . 33 A. TVA's Damages Claim Should Be Reduced By At Least $6,135,235 Relating To Actual Costs That Were Incurred Unnecessarily Or That Would Have Been Incurred In The "But For" World . . . . . . . . . . . . . . . 34 1. TVA's Damages Claim Should Be Reduced By At Least $2,974,349 Relating To Certain Non-Incremental TVA Labor and Internal Chargeback Costs . . . . . . . . . . . . . . . . . . . . . . . . . 34 a. TVA's Damages Claim Should Be Reduced By At Least $2,799,278 Relating To Certain Non-Incremental TVA Labor and Internal Chargeback Costs . . . . . . . . . . 35 TVA's Damages Claim Should Be Reduced By At Least $175,071 Relating To Certain Additional NonIncremental Internal Chargeback Costs For Owned Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

IV.

b.

2.

TVA's Damages Claim Should Be Reduced By At Least $470,483 Relating To Certain Non-Incremental Or Unnecessary Contract Services & Procurement Costs . . . . . . . . 38 a. TVA's Damages Claim For Contract Services & Procurement Costs Should Be Reduced By $328,000 Relating To Non-Incremental Or Unnecessary Technical Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 i. $180,000 In Costs Relating To The Browns Ferry Studies At Issue Is Not Recoverable . . . . . . . . . . 39 $100,000 In Non-Incremental Costs Relating To The Qualification Of The Railroad Bay Floor At Sequoyah Is Not Recoverable . . . . . . . . . . . . . . . 40

ii.

b.

TVA's Damages Claim For Contract Services & Procurement Costs Should Be Reduced By At Least An Additional $131,512 Relating To Certain Fixed, Non-

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Incremental Core Team Overhead Costs At Its Browns Ferry Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3. TVA's Damages Claim Should Be Reduced By At Least $2,690,404 Because Its Claimed Overhead Costs Are NonIncremental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 a. TVA's Damages Claim Should Be Reduced By At Least $246,020 Relating To Fixed, Non-Incremental Core Team Overhead Costs At Its Sequoyah Facility . . . 42 TVA's Damages Claim Should Be Reduced By At Least $101,803 Relating To Certain Additional Miscellaneous Non-Incremental Overhead Costs . . . . . . 42 TVA's Damages Claim Should Be Reduced By At Least $2,342,581 Relating To Non-Incremental Overhead Costs Based Upon The Allocation of AFUDC . . . . . . . . . . . . . 43

b.

c.

B.

TVA's Damages Claim Should Be Reduced Based Upon Deferred "But For" Dry Storage Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 TVA's Damages Claim Should Be Reduced By An Additional $353,00 - $430,000 Based Upon Avoided "But For" Costs of Loading Fuel to DOE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

C.

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

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TABLE OF AUTHORITIES CASES Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Bank of America F.S.B. v. United States, No. 95-660(C), 95-797C, 95-7971C, 2005 WL 1792182 (Fed. Cl. July 21, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Bennett v. United States, 200 Ct.Cl. 635 (1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Bluebonnet Sav. Bank F.S.B. v. United States, 339 F.3d 1341 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Calhoun v. United States, 591 F.2d 1243 (9th Cir. 1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Castle v. United States, 48 Fed. Cl. 187 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Cavalier Clothes, Inc. v. United States, 51 Fed. Cl. 399 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Citizens Federal Bank v. United States, 59 Fed. Cl. 507 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Convoy v. Sperry Rand Corp., 672 F.2d 781 (9th Cir. 1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Cucuras v. Secretary of HHS, 993 F.2d 1525 (Fed. Cir. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 21 Hybritech Incorporated v. Monoclonal Antibodies, Inc., 802 F.2d 1367 (Fed. Cir. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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Indiana Michigan Power Co. v. United States, No. 04-5122, 2005 WL 2173563 (Fed. Cir. Sept. 9, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7 Julius Goldman's Egg City v. United States, 697 F.2d 1051 (Fed. Cir. 1983), cert. denied, 464 U.S. 814 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 LaSalle Talman Bank, F.S.B. v. United States, 317 F.3d 1363 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Library of Congress v. Shaw, 478 U.S. 310 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Long Island Savings Bank, FSB, et al. v. United States, No. 92-517C (September 15, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Margo v. Weiss, 213 F.3d 55 (2nd Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Myerle v. United States, 33 Ct. Cl. 1 (1897) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Missouri Housing Development Commission v. Brice, 919 F.2d 1306 (8th Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 21 Northern Helex Co. v. United States, 207 Ct. Cl. 862, 524 F.2d 707 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Pacific Gas & Electric v. United States, 58 Fed. Cl. 1 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Quiman, S.A. de C.V. v. United States, 39 Fed. Cl. 171 (1997), aff'd, 178 F.3d 1313 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Roseburg Lumber Co. v. Madigan, 978 F.2d 660 (Fed. Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 21

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San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557 (Fed. Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 21, 27 Standard Havens Prods., Inc. v. Gencor Indus., Inc., 953 F.2d 1360 (Fed. Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555 (1931) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 22 TVA v. United States, 60 Fed. Cl. 665 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 10 Town of Grantwood v United States, 55 Fed. Cl. 481 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012 (Fed. Cir. 1996), cert. denied, 520 U.S. 1116 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Wickham Contracting Co. v. Fischer, 12 F.3d 1574 (Fed. Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43, 44 Willems Indus., Inc. v. United States, 155 Ct. Cl. 360, 295 F.2d 822 (1961) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Yankee Atomic Electric Co. v. United States, No. 98-126C, 2004 WL 1535686 (Fed. Cl. June 28, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

STATUTES 42 U.S.C. § 10101 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 42 U.S.C. § 10161 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 42 U.S.C. § 10168(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 42 U.S.C. § 10222 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 42 U.S.C. § 10222(a)(1) (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 48 Fed. Reg. 5458 (Feb. 4, 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2

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10 C.F.R. § 961.11, Art. I.10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 23, 25

MISCELLANEOUS Restatement (Second) of Contracts § 352 cmt. a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS TENNESSEE VALLEY AUTHORITY, Plaintiff, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) )

No. 01-249C (Judge Lettow)

DEFENDANT'S INITIAL POST-TRIAL BRIEF Pursuant to this Court's order dated June 13, 2005, defendant, the United States, respectfully submits the following initial post-trial brief. STATEMENT OF FACTS ADDUCED AT TRIAL 1. On January 7, 1983, the Nuclear Waste Policy Act of 1982 ("NWPA"), Pub. L. 97-425,

96 Stat. 2201 (codified at 42 U.S.C. §§ 10101-10270 (1982)), was enacted. 2. The NWPA authorized the Secretary to enter into contracts with the owners and generators

of SNF of domestic origin for "the acceptance of title, subsequent transportation, and disposal of such [SNF and HLW]." 42 U.S.C. § 10222(a)(1) (1982). The contracts had to "provide for payment to the Secretary of fees . . . sufficient to offset expenditures." 3. On February 4, 1983, DOE, in furtherance of its obligations pursuant to the NWPA, 42

U.S.C. § 10222, published a notice of proposed rulemaking in the Federal Register, proposing terms for the "Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste" ("Standard Contract") mandated by the NWPA, 42 U.S.C. § 10222. See 48 Fed. Reg. 5458 (Feb. 4, 1983).

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4.

Although the proposed Standard Contract itself did not identify a specific rate by which

DOE would accept contract holders' SNF, it provided for DOE's issuance of documents for planning purposes to assist in the eventual definitization of the specific rate and order of SNF acceptance and disposal: 5. DOE shall annually provide to the Purchaser pertinent information to support waste disposal program cost projections, project plans and progress reports. 6. Beginning on April 1, 1991, DOE shall issue an annual acceptance ranking for receipt of SNF and/or HLW at the DOE repository. This priority ranking shall be based on the age of SNF and/or HLW as calculated from the date of discharge of such material from the civilian nuclear power reactor. The oldest fuel or waste will have the highest priority for acceptance, except as provided in paragraph B.3 of Article VI of this contract. 48 Fed. Reg. 5458, 5463 (Feb. 4, 1983) (Art. V.B.5 & Art. V.B.6) (emphasis added). 5. The proposed rule requested that written comments had to be submitted by March 7, 1983.

48 Fed. Reg. at 5458. One of the comments that DOE received in response to the proposed Standard Contract in the Federal Register came from TVA. TVA stated that "a commitment to do no more than start accepting deliveries by 1998 is empty and meaningless without setting forth some reasonable minimum rate of acceptance which corresponds to the purposes of the Act." PX1 at 5. TVA recognized that, "[o]f course, under the priority ranking system in the draft contract, it would be difficult at the time contracts are executed to give each Purchaser assurances of delivery acceptance at any specific rate," but suggested that "[t]his could, however, be done on an industry wide basis." Id. TVA suggested that DOE could add a contract provision to provide that "DOE shall start accepting delivery of SNF or HLW not later than January 31, 1998, at not less than the annual rate [at which] SNF and/or HLW is then being produced from civilian nuclear 2

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power plants covered by contracts . . . ." Id. Other utility and industry commenters also requested that DOE insert a minimum rate obligation into the Standard Contract, each suggesting various requirements to which DOE should obligate itself. DX 5. 6. On April 18, 1983, DOE issued the terms of the Standard Contract as a final rule. In the

final Standard Contract terms, DOE did not adopt TVA's request that DOE add a provision to require DOE to "start accepting delivery of SNF or HLW not later than January 31, 1998, at not less than the annual rate [at which] SNF and/or HLW is then being produced from civilian nuclear power plants covered by contracts . . . ." DX 5; JX1; PX1; Tr. 64:12-65:1 (Hayslett). Further, DOE denied the request of several other utilities to include a minimum rate obligation in the Standard Contract because, as of 1983, DOE did not know what its capabilities would be in 1998 and was unwilling to commit to the minimum rate obligations that the utilities proposed. Tr. 2212:15-2213:3 (Morgan); 2198:9-2199:3 (Morgan); 2209:5-20 (Morgan). In May 1983, TVA subsequently acknowledged that "no substantive dates or rates of removal of SNF are established" in the Standard Contract "beyond the requirement of the Act which requires DOE to start accepting SNF by 1998," DX 28, at TV 1469, and that DOE "did not accept TVA's suggestion that DOE should start accepting delivery of SNF and HLW in 1998 at a rate not less than that which they are being produced by the civilian nuclear power industry as a whole." DX 28, at TV 1471; see Tr. 122:10-123:4 (Hayslett). 7. In the final rule, DOE also modified the definition of the "facility" to which SNF could be

delivered beginning in 1998. Although the proposed rule would have required delivery to a repository in 1998, the final rule provided that DOE could deliver SNF in 1998 either to a

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repository or to "such other facility(ies) to which [SNF and/or HLW] may be shipped by DOE prior to its transportation to a" permanent repository. 10 C.F.R. § 961.11, Art. I.10. 8. Starting in 1983, TVA repeatedly recognized that, even if DOE began accepting SNF in

1998, there was a significant possibility that TVA would need additional storage for its SNF. DX 20 at 4; DX 141 at 9; DX 62 at 3-5; DX 92 at 1. 9. DOE's planning for implementing the Standard Contract has proceeded through three

broad phases. At the outset, it looked at the possibility of accepting fuel at one or two repositories. Tr. 1397:12-1398:6 (Kouts); 1411:2-10 (Kouts); 1421:15-19 (Kouts). By 1987, DOE had refocused its planning on acceptance in 1998 at an MRS. DX 48 at 312; DX 50; DX 51 at HQ5810; DX 292 at A-1; Tr. 1425:1-1426:5 (Kouts); 1591:5-15 (Kouts); 1450:23-1451:16 (Kouts); 1453:7-1454:3 (Kouts); 1591:9-15 (Kouts). This thinking continued until approximately September 1995 when the program's planning started to shift back to acceptance directly at a repository, but with a later SNF acceptance start date. Tr. 1308:22-1309:4 (Klein counterdesignation); 1731:22-1732:7 (Zabransky); 1743:13-25 (Zabransky). The 1995 ACR reflects the second phase in DOE's planning. PX 19; Tr. 1306:1-3 (Klein counterdesignation);1489:22-1490-8 (Kouts). 10. TVA would have required additional storage even if DOE had begun accepting fuel at any

of the rates presented by the parties in this litigation. Tr. 1231:22-1232:24 (Holton); 1238:201239:4 (Holton); 1239:10-15 (Holton); 1240:22-1241:8 (Holton); 1241:9-23 (Holton); 1242:3-8 (Holton). 11. TVA would not have been able to address its need for storage through any mechanism

other than dry storage. Not only has TVA disclaimed any reliance upon exchanges, but a market 4

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might not arise, TVA might not choose to participate, and DOE might not approve such participation. DX 176; DX 312; Tr. 2408:14-18 (Hartman); 1752:2-25 (Zabransky); 1377:231380:20 (Zabransky counterdesignation); 1754:8-11 (Zabransky); 1375:4-1376:4 (Zabransky counterdesginaton). Likewise, DOE was not required to approve a request that it accept additional fuel under the "plus or minus 20 percent" provision or the "emergency" provision of the Standard Contract, particularly since emergency acceptance is not intended to be available in these circumstances. DX 50; Tr. 1511:5-13 (Kouts); 1513:6-11 (Kouts); 2244:5-6 (Morgan); 2447:12-14 (Zabransky). TVA would not have chosen to tranship its fuel because of the difficulty of obtaining necessary approvals, the effect upon its other reactor pools, and the cost. Tr. 793:1522 (Bailey); 1288:15-1289:1 (Green); 793:22-794:14 (Bailey); 799:1-5 (Bailey). TVA would not have been able to use private fuel storage because it did not exist, and, even if it had existed, it would likely have been costly. Tr. 796:21-798:25 (Bailey). TVA would not have used a cask pit rack because it poses operational problems, is inconsistent with tritium production, and would have been costly. Tr. 770:5-8 (Bailey); 1946:18-23 (Brewer); 771:15-21 (Bailey); 1947:9-11 (Brewer); 182:8-16 (Hayslett); 1947:2-6 (Brewer). TVA would not have foregone full core reserve because of the financial and safety risks it would face. Tr. 1235:17-22 (Holton); Tr. 1283:1-5 (Green); 1283:6-1284:13 (Green); 791:24-25 (Bailey); 1943:9-1944:12 (Brewer). 12. TVA's damages submission includes costs that are not incremental to the breach. See

section IV.A, infra. The costs that TVA would have incurred for ISFSI construction and loading in the but for world can be ascertained, by subtracting these non-incremental costs from TVA's claim and then dividing the remaining actual costs into their fixed and variable components. Tr. 1890:9-15 (Brewer); 1862:6-21 (Brewer). These components, along with projections of TVA's 5

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future discharges, may be used to show that, at most, TVA incurred between 12.1 and 18.2 million dollars in costs, depending upon the acceptance rate and the projections used, to build its dry storage facility earlier than it would have in the but for world. Tr. 2283:15-2286:3 (Hartman). ARGUMENT I. TVA BEARS THE BURDEN OF PROVING EVERY ELEMENT OF ITS DAMAGES CLAIMS, INCLUDING LIABILITY, CAUSATION, AND RESULTANT DAMAGE A. TVA Bears The Burden Of Proving All Elements Of Its Damages, Including The Fact Of Damage, By Preponderant Evidence

As the United States Court of Appeals for the Federal Circuit has recognized, the mere fact of DOE's breach of the Standard Contract does not "perforce" make all of a utility's costs "to store its SNF recompensable: [a plaintiff] must prove foreseeability, causation, and reasonableness," Indiana Michigan Power Co. v. United States, No. 04-5122, 2005 WL 2173563, at *5 (Fed. Cir. Sept. 9, 2005), and it must prove these elements "by a preponderance of the evidence." Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400, 413-14 (2004). According to the precedent of this circuit, TVA bears the burden of introducing clear proof that it was injured as a direct result of DOE's delay in accepting its SNF. Myerle v. United States, 33 Ct. Cl. 1, 27 (1897). Further, the "measure of damages to be applied in the particular case is irrelevant until the claimant has established the fact of losses that were the natural and proximate result of the breach of contract." Willems Indus., Inc. v. United States, 155 Ct. Cl. 360, 376, 295 F.2d 822, 831 (1961). "Absent tangible proof of damages, [a party] may not recover for an alleged injury." Roseburg Lumber Co. v. Madigan, 978 F.2d 660, 667 (Fed. Cir. 1992). B. TVA Cannot Establish Causation Or Resultant Damage Through Speculation

In analyzing whether TVA has met its burden of proof, this Court is guided by the well6

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established rule that damages claims must be certain and not speculative to warrant a remedy. San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557, 1563 (Fed. Cir. 1997); see also Standard Havens Prods., Inc. v. Gencor Indus., Inc., 953 F.2d 1360, 1375 (Fed. Cir. 1992). The principles disallowing the award of speculative damages are "especially true in suits against the United States for the recovery of common-law damages." Northern Helex Co. v. United States, 207 Ct. Cl. 862, 886, 524 F.2d 707, 720 (1975); accord Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012, 1020 (Fed. Cir. 1996), cert. denied, 520 U.S. 1116 (1997) (quoting Northern Helex). TVA bears the burden of establishing that its claimed damages are not speculative, remote, or unforeseeable. Quiman, S.A. de C.V. v. United States, 39 Fed. Cl. 171, 183 (1997), aff'd, 178 F.3d 1313 (Fed. Cir. 1999). It further bears the burden of establishing reasonable certainty as to each item within its damages claims. Wells Fargo Bank, 88 F.3d at 1023; see Restatement (Second) of Contracts § 352 cmt. a ("[a] party cannot recover damages for breach of a contract for loss beyond the amount that the evidence permits to be established with reasonable certainty"). In this case, TVA has failed to carry these burdens. Thus, TVA is not entitled to a damages award. II. TVA HAS FAILED TO MEET ITS BURDEN OF ESTABLISHING THAT ITS COSTS WERE CAUSED BY THE GOVERNMENT'S DELAY A. TVA's Basic Claims Regarding Causation and Rate Have No Basis in the Standard Contract

To meet its burden with respect to causation, TVA must show that it would not have been required to build dry storage in the "but for" world ­ that is, the world in which DOE timely accepted SNF in accordance with its contract obligations. See Indiana Michigan, 2005 WL 2173563, at *5. Whether TVA would have required dry storage in the "but for" world depends 7

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upon two factors: the date at which the Government was required to begin accepting SNF and the rate at which (and schedule upon which) DOE was obligated to continue accepting SNF. Based upon the Federal Circuit's decision in Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000), DOE was obligated to start accepting SNF from the industry by January 31, 1998, and there is no dispute that, under the "oldest fuel first" ("OFF") scheduling requirement in the Standard Contract, TVA's first acceptance allocation was in 2002. In fact, this Court has already resolved the acceptance rate, as well as TVA's allocations within that rate, for the first 10 years of SNF acceptance. TVA v. United States, 60 Fed. Cl. 665, 673 (2004). The critical dispute in this case is the rate that DOE was obligated to follow after the first ten years of SNF acceptance. The Standard Contract does not obligate DOE to accept SNF at any particular rate. Tr. 66:18-22 (Hayslett); 1568:19-1569:3 (Kouts). The administrative record of the rulemaking process, through which the terms of the Standard Contract were developed, makes this fact absolutely clear. During the rulemaking process, many utilities and industry organizations, including TVA, asked DOE to add a provision to the Standard Contract that would obligate DOE to accept SNF at a rate that satisfied certain requirements. Tr. 2194:23-2195:10 (Morgan); 2206:22-2209:4 (Morgan); Tr. 64:12-65:1 (Hayslett); PX 1; DX 5. DOE specifically and intentionally declined the utilities' requests, finding that there were too many unknowns about DOE's capabilities in 1998 to create such commitments: The Nuclear Waste Policy Act was a series of requirements that I felt were extremely difficult to meet. There were many technical unknowns, what would be the licensing requirements from NRC, what would be the characterization requirements of a repository, and that there was the potential interventions by some stakeholders. 8

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But I felt that there was a potential that Congress may change the law which, in effect, they did at a later point in time. So I felt it was absolutely impossible or incomprehensible that I would agree to an acceptance rate with all these unknowns. I felt that would be just absolutely inappropriate. Tr. 2198:15-2199:3 (Morgan); see Tr. 2209:5-20, 2212:15-19 (Morgan). "It would be unconscionable," Mr. Morgan explained, for him "as a program director to make commitments that held the government responsible for things that I was not sure that we could meet because of the uncertainties of the program . . . ." Tr. 2212:21-25 (Morgan). To include firm minimum acceptance obligations in the Standard Contract, DOE "would have had to have all the information down [regarding] the repository to make sure it was an acceptable location for spent fuel, [it would] need a crystal ball." Tr. 2221:5-17 (Morgan). TVA internally acknowledged soon after the Standard Contract terms were published that its request to include a minimum rate obligation was rejected. DX 28 at 3; Tr. 122:10-123:4 (Hayslett). Accordingly, there is no basis for TVA's request that this Court impose an obligation upon DOE that would have required DOE to accept SNF at any particular rate, let alone a rate greater than the annual generation rate, given that DOE specifically declined to agree to any such obligation when it executed the Standard Contract and that no such language appears in the Standard Contract. However, the Court need not decide whether DOE created an obligation to satisfy TVA's purported acceptance requirement because, even assuming that it did, TVA would have been required to construct dry storage regardless of any delay by DOE. As the evidence at trial showed, DOE determined that its 900 MTU rate was "theoretically sufficient to eliminate in the aggregate the need for additional at-reactor out-of-pool storage starting in 1998." DX 78; Tr. 1662:8-1664:9 (Pollog). Further, an acceptance rate of 2100 MTU per year in the aggregate is "sufficient to keep 9

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up with the discharge rate of utilities and begin to work off the backlog at the utilities," in the aggregate. Tr. 1655:11-1656:15 (Pollog). Either of these rates would be sufficient to satisfy the minimum rate obligation that TVA, in varying language during the course of these proceedings, has alleged that DOE should be obligated to satisfy. Yet, as will be discussed below, neither of these acceptance rates, nor the higher rate modeled by the Government, had DOE satisfied them, would have precluded TVA's need to build dry storage in the "but for" world. Accordingly, to establish that it would not have to had to build dry storage in the "but for" world, TVA has concocted an acceptance rate that is wholly unsupported by any planning document that DOE has ever issued, much less by the terms of the Standard Contract. Specifically, although TVA admits that DOE was only obligated to accept SNF during the first 10 years of SNF acceptance at a rate of 900 MTUs annually, it claims that DOE was obligated immediately to increase that rate, or "would have" immediately increased that rate, to 3000 MTUs in Year 11, or in 2008.1 TVA's theory is completely inconsistent with the 900 MTU rate that the Court has already adopted for the first 10 years of program SNF acceptance set forth in the 1991 Annual Capacity Report ("ACR"). TVA v. United States, 60 Fed. Cl. 665, 669, 673 (2004). The SNF acceptance schedule identified in the 1991 ACR was developed with the understanding that SNF acceptance would continue at a rate of 900 MTUs a year beyond 2007 and through at least 2010. As the Government established at trial, DOE's planning proceeded through three broad phases. When the Nuclear Waste Policy Act was passed in 1982, "[t]here was no authorization for MRS. There was only direction to the Department to develop a proposal . . . . At that time,
1

We will refer to this rate as the "TVA 3000 rate." 10

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when the act was passed, only geologic repositories were authorized," Tr. 1397:12-1398:6 (Kouts); see Tr. 1411:2-10 (Kouts); 1421:15-19 (Kouts), even though an MRS was contemplated. 42 U.S.C. § 10161 (1983). In 1987, DOE submitted a proposal to Congress seeking authorization for DOE to begin accepting fuel in 1998 at an MRS with a 15,000 MTU capacity (at an annual rate of 1200 MTUs) and delaying the start of repository operations until 2003. DX 48 at 312; DX 51 at HQ5810; Tr. 1425:1-1426:5 (Kouts); 1431:24-1432:12 (Kouts); 1437:16-1438:5 (Kouts); 1591:5-8 (Kouts); see DX 50. Under this proposal, the acceptance rates at which DOE could accept SNF before a repository was operational "were totally dependent on what [DOE] could do at an MRS facility." Tr. 1427:11-22 (Kouts). At that time, DOE also warned that "the waste acceptance schedule may still need to be revised if the repository does not begin operations by 2003." DX 51 at HQ5866. Tr. 1438:11-1439:9 (Kouts). Congress acted upon DOE's proposal by expanding the authorizations for an MRS from the original NWPA language, but placing restrictions upon the operation and capacity of the MRS. Tr. 1442:11-13 (Kouts). Specifically, Congress mandated that the MRS "could not receive more than 10,000 tons until the repository was operational and no more than 15,000 tons overall while the repository was in operation," Tr. 1450:8-12 (Kouts), limiting even further the rate at which waste could be accepted. Tr. 1450:13-22 (Kouts); see 42 U.S.C. § 10168(d)(3); Tr. 158:15-1059:5 (Hutson). Subsequently, DOE reassessed the program, determining that the repository would not open until 2010. DX 292 at III; Tr. 1055:5-1056:8 (Hutson); 1450:23-16 (Kouts); 1453:7-1454:3 (Kouts); 1591:9-15 (Kouts). DOE also determined that it "probably couldn't build the entire facility that [it] had in [its] proposal in 1987 by 1998, but [it] could build 11

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a smaller facility that could just receive materials and store them, and then the larger facility, the integrated facility would come later . . . ." Tr. 1454:7-14 (Kouts). Under this plan, DOE would accept 400 MTU in each of the first two years of operation (1998 and 1999) and 900 MTU per year for the next ten years (2000 through 2010), so as not to exceed the new 10,000 MTU limit upon acceptance prior to repository operations. DX 292 at A-1; Tr. 1460:2-25 (Kouts); 1462:1219 (Kouts); 1608:9-1609:4 (Pollog); 1612:15-23 (Pollog). DOE projected that, after the commencement of repository operations in 2010, the rate could ramp up to 1800 for five years, after which time it would reach a steady state of 3000 MTU per year. DX 292 at A-1; Tr. 1461:11462:11 (Kouts). It was this MRS scenario, and this nearly identical rate, that DOE identified in the December 1991 ACR. DX 76; Tr. 1481:8-22 (Kouts).2 That document explicitly explains that "[t]he projected waste acceptance rates for SNF presented in table 2.1 assume: A site for a monitored retrievable storage (MRS) facility will be obtained, and the facility will initiate operations in 1998." DX 76 at HQ2360; Tr. 1479:13-22 (Kouts); see Tr. 1609:5-1610:8 (Pollog). It further indicates that, "[d]uring the first 10 years following projected commencement of Federal Waste Management System (FWMS) operation, the total quantity of SNF that could be accepted is projected to be 8,200 MTU. This is consistent with the annual capacity licensing conditions imposed on an MRS facility by the NWPA." DX 76 at HQ2360; Tr. 1480:12-23 (Kouts). The rationale behind the 1991 ACR is corroborated by contemporaneous internal DOE memoranda. PX 78; Tr. 1611:19-1612:5 (Pollog).

During the second year of operation the rate in the ACR is 600 MTU rather than 400 MTU, but the rates are otherwise the same. 12

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This same scenario and the same rates were also carried over into the Annual Capacity Report and Acceptance Priority Ranking ("ACR/APR") dated March 1995. PX 19; Tr. 1489:221490-8 (Kouts); 1620:15-1621:13 (Pollog); 1060:19-22 (Hutson). This report was originally to be issued in 1993, and "[t]he information from the 1993 ACR/APR is combined in this report." PX 19 at 2; see Tr. 1486:10-1487:20 (Kouts); 1619:19-1620:14 (Pollog); 1729:10-25 (Zabransky). During that time period, "the Department was still banking on the fact that the negotiator was going to be successful in trying to identify a host state, and a benefits agreement would be submitted to the Congress through which the linkages could be broken and the Department could initiate development of the facility." Tr. 1488:5-11 (Kouts); 1489:10-18 (Kouts); see 1741:15-17 (Zabransky). Thus, like the 1991 ACR, the rates reflected in the 1995 ACR/APR are "still holding to the deployment of an MRS, . . . substantially in advance of a repository. . . ," Tr. 1488:21-1489:1 (Kouts), explicitly stating that "[t]he projected nominal acceptance rates also reflect the capacity limit imposed by the Act on such storage facility prior to repository operations." PX 19 as 3-4; see also Tr. 1621:14-1622:11 (Pollog); 1730:14-21 (Zabransky); 1306:1-3 (Klein counterdesignation); 1342:4-14 (Milner counterdesignation). Only in September 1995 did the program's planning start to shift back to a repository-only system, anticipating first SNF acceptance in 2010. Tr. 1308:22-1309:4 (Klein counterdesignation); 1731:22-1732:7 (Zabransky); 1743:13-25 (Zabransky). This transition can be seen in the Analysis of the Total Systems Life Cycle Cost of the Civilian Radioactive Waste Management Program dated September 1995. PX 20 at PA-176210; Tr. 1732:8-1733:23 (Zabransky); 1491:2-14 (Kouts); 1491:24-1492:4 (Kouts). Moreover, the cost estimates for the program no longer contained an interim storage facility in advance of the repository, and the rate 13

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reflected the fact that acceptance would begin at a repository allowing a ramp up to 3000 by 2014, Tr. 1492:5-1493:1 (Kouts), as "the repository rates were unconstrained" by the 10,000 MTU limit. Tr.1592:1-1593:10 (Kouts); see Tr. 1733:9-1734:19 (Zabransky). This shift from acceptance at an MRS to acceptance at a repository continued to be reflected in later program documents. See e.g. PX 25; PX 29: PX 32; PX 36; Tr. 1494:19-1505:10 (Kouts). Even with a repository, however, DOE "realized it couldn't go from zero to the maximum amount in one year." Tr. 1362:3-7 (Pollog counterdesignation). "It was envisioned that, from an engineering perspective, you would not want to try to operate at maximum capacity on day one." Tr. 1403:5-8 (Kouts). "[W]hen you're starting a new nuclear facility, you like to walk before ­ actually crawl before you can walk and then before you can run, so you want to start with small steps, small capabilities, especially since these operations were first of a kind in terms of emplacing these materials into a repository." Tr. 1437:6-12 (Kouts); 1362:7-12 (Pollog counterdesignation). For this reason, DOE has never published a rate at which a repository started accepting fuel at 3000 MTU on the first day of operation. Tr. 1594:1-8 (Kouts). Similarly, throughout the entire time that DOE has been examining how to accept SNF, DOE has never considered accepting 3000 MTU of fuel in the Year 11 of acceptance at an MRS. Tr. 1593:16-1594:9 (Kouts). As Mr. Kouts explained, such acceptance would not be possible because "you would still be operating under the constraint, you'd be waiting for the repository to open, and you would bust the cap, if you will, on the 10,000 metric ton storage limit that Congress had placed on the facility." Tr. 1593:21-25 (Kouts). Viewed in this context, TVA's assertion that, after DOE accepted SNF at the 1991 ACR rate of 400, 600, and 900 MTUs for a ten-year

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period, DOE would immediately have begun accepting 3,000 MTUs at the MRS in Year 11 is simply unsupported by any program planning documents or contract requirements. B. TVA's Basic Claims Regarding Causation and Rate Are Inconsistent With Its Own Documents

TVA's broad claim that it was required to build ISFSIs at its Browns Ferry and Sequoyah sites because of the Government's delay in accepting its SNF and its specific claim regarding the rate at which DOE would have accepted SNF are both directly contradicted by TVA's own prior statements. Even before entering into the Standard Contract, TVA anticipated that it would need additional SNF storage concurrent with DOE's acceptance of SNF if no rate was inserted into the final contract. For instance, in an internal memorandum dated March 2, 1983, TVA stated that Both the Browns Ferry and Sequoyah Nuclear Plants and probably the Watts Bar Nuclear Plant will have utilized all presently available spent fuel pool storage capacity before 1998. Also as mentioned previously, DOE's draft contract commitment is merely to start accepting SNF and HLW no later than January 31, 1998. There are no stipulations as to rate of acceptance in the draft, and there may not be any in the final contract which is offered for execution. For these reasons we plan to continue our interim onsite spent fuel storage project activities. DX 20 at 4. TVA has repeatedly acknowledged that the Standard Contract did not provide a specific rate of acceptance, and, thus, TVA's concerns in this regard were never alleviated. DX 28 at 3; Tr. 66:18-22 (Hayslett); 125:14-25 (Hayslett); 127:12-16 (Hayslett); 136:5-6 (Hayslett); 779:13-21 (Bailey). By 1984, TVA had actually started to quantify the likelihood that it would need additional storage concurrent with DOE's acceptance of its SNF. Specifically, it determined that, "[i]f one were 100 percent certain that DOE would meet our needs by 1998, there is about a 50-percent

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chance that we might get by without doing anything." DX 141 at 9. Moreover, TVA indicated that it could still face this need even if it took interim measures which increased its storage capacity substantially. Id. However, TVA's interim measures never increased its storage to that extent, leaving a significant probability that it would need additional storage, by TVA's own measure. Tr. 1947:16-1949:16 (Brewer). TVA's concern that it would need additional storage in conjunction with DOE acceptance continued to be reflected in its documents in 1989. At that time, TVA not only anticipated that it would require additional storage by 1999, even while taking interim measures such as reracking, but it expressed a preference for onsite storage over DOE acceptance, recognizing the risk posed to its plant should DOE acceptance start and then stall. DX 62 at 3-5. The same concern is seen in an internal TVA memorandum drafted at the end of 1996. That memorandum indicated that TVA understood DOE to be "under court order to begin accepting spent fuel by January 31, 1998." DX 92 at 1. Under those circumstances, TVA still believed that "a limited quantity of on-site dry cask storage may be needed to store spent fuel generated after the fuel pools are full and until TVA's disposal allocation matches spent fuel generation." Id. Finally, even after it began litigating this case, TVA's response to an interrogatory regarding rate implicitly indicated that it would have required dry cask storage even had DOE started accepting SNF in 1998. Specifically, TVA stated that, prior to DOE's breach, TVA had estimated that DOE would take possession of SNF from TVA based upon the 1990 PETSC and the 1995 ACR/APR. DX 176 at 9a; Tr. 1004:9-19 (Hutson). The documents to which TVA referred both show the same rate for the first ten years that the Court has found applicable here, 16

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with the exception of the second year, where the 1990 PETSC shows acceptance of 400 MTU for a second year rather than jumping to 600 MTU. Compare PX 19 at 4 with DX 292 at A-1. For Years 11 and 12, the ACR/APR implies, and the PETSC explicitly states, that acceptance will continue at 900 MTU. PX 19 at 3-4; DX 292 at A-1. The PETSC then reflects that DOE would accept SNF at the rate of 1800 MTU annually for the next five years (Years 13 through 17), and only reach a rate of 3000 MTU annually thereafter. DX 292 at A-1. As TVA's own analyses now show, had DOE accepted its SNF at this rate, TVA would have required additional storage. Tr. 169:11-171:2 (Hayslett). Like TVA's broad statements about causation, TVA's statements about rate at trial are explicitly contradicted by TVA's interrogatory response. Compare DX 176 at 9a with Pl.'s PreTrial Br. at 6-13. TVA's arguments on causation generally, as well as the rate at which DOE would have accepted SNF in the "but for" world should be rejected upon this basis alone. See Cucuras v. Secretary of HHS, 993 F.2d 1525, 1528 (Fed. Cir. 1993) ("oral testimony in conflict with contemporaneous documentary evidence deserves little weight."); Hybritech Incorporated v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1375 (Fed. Cir. 1986) ("if documents or objective evidence contradict the witness's story, clear error may be found even in a finding purportedly based on a credibility determination."); Cavalier Clothes, Inc. v. United States, 51 Fed. Cl. 399, 413 (2001) (finding "testimony . . . incredible . . . particularly because it is inconsistent with the available contemporaneous documentation . . . ."); Bennett v. United States, 200 Ct.Cl. 635 (1973) (conclusions directly contradicted by earlier documents "are of little value."). Moreover, to the extent that the documents at issue are interrogatory responses, their import is even greater. "As a rule, `[a]dmissions in the pleadings. . . are in the nature of judicial 17

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admissions binding upon the parties, unless withdrawn or amended.'" Missouri Housing Development Commission v. Brice, 919 F.2d 1306, 1314 (8th Cir. 1990); see Calhoun v. United States, 591 F.2d 1243, 1246 (9th Cir. 1978) ("the Government is bound by the lower figure for 1961 unexplained bank deposits, which lower figure is in its answers to interrogatories."); Margo v. Weiss, 213 F.3d 55, 60-61 (2nd Cir. 2000) ("the plaintiffs cannot defeat a motion for summary judgment with. . . supplemental answers to interrogatories."). As TVA has made no effort to amend its response, it should be bound by that response. Finally, to the extent that TVA's earlier statements can be viewed as interpreting the contract, these interpretations should be given more weight than TVA's interpretation at trial. "A principle of contract interpretation is that the contract must be interpreted in accordance with the parties' understanding as shown by their conduct before the controversy." Julius Goldman's Egg City v. United States, 697 F.2d 1051, 1058 (Fed. Cir. 1983), cert. denied, 464 U.S. 814 (1983). C. TVA Has Failed To Meet Its Burden With Respect To Its Alternative Argument That It Could Have Bridged Its Storage Gap Absent Dry Storage

TVA argued, in the alternative, that even if the Government had accepted SNF at the rates provided by the Government, TVA would have bridged its storage gap by some mechanism other than going dry. Specifically, TVA contended that it would have met its storage needs, either through the use of exchanges, by asking DOE to accept 20 percent more fuel each year, asking DOE to accept fuel on an emergency basis pursuant to the Standard Contract, or by transhipment to Watts Bar, Private Fuel Storage, or another utility. As we showed at trial, and will explain below, not only could TVA not bridge the gap at any rate below the specific one that TVA proposes, it could not bridge the gap that would have existed even at its own proposed rate.

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After TVA rested its case, the Government demonstrated that TVA would have experienced a storage gap even at the rate it proposes. Although Mr. Holton prepared an analysis that purported to show how, assuming TVA's rate, TVA would have distributed its allocations among its reactor units in an effort to avoid dry storage, DX 311; Tr. 1211:14-1213:23 (Holton), as Mr. Holton explained, TVA's analysis "didn't look at it on that much of a fine mesh grid. . . ." Tr. 1233:6-11 (Holton). Rather, as the Government showed at trial, TVA's analysis improperly assumes that an allocation in a particular year resolves a storage need in that year, even though the storage need could arise early in the year, but DOE might not pick up until December 31. See Tr. 1234:9-12 (Holton); 1151:23-1153:16 (Hutson). If this erroneous assumption is corrected, TVA's analysis actually shows that it would have required additional storage during portions of many years, even at the rate that it advocates. As Mr. Holton testified, under TVA's own analysis, TVA would have only had 46 spaces in its Sequoyah pool at the beginning of 2015, but would have generated an additional 162 fuel assemblies that it needed to store. Tr. 1231:22-1232:24 (Holton). In 2016, TVA would begin with 14 available cells, but would have discharged 80 SNF assemblies. Tr. 1238:20-1239:4 (Holton). In 2017, TVA would have started the year with 19 spaces in its pool and would have discharged 80 assemblies. Tr. 1239:1239:10-15 (Holton). In 2018, TVA would have started the year with 44 spaces in its pool and would have discharged 162 assemblies. Tr. 1240:22-1241:8 (Holton). Similarly, at Browns Ferry Units 1 and 2, TVA would have started in 2013 with 285 cells but would have generated 368 assemblies and would have continued running a storage deficit for portions of each year through 2020. Tr. 1241:9-23 (Holton). Likewise, at Browns

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Ferry Unit 3, in 2016, TVA would have started the year with 151 spaces available and would have generated 328 SNF assemblies. Tr. 1242:3-8 (Holton). Confronted with these storage gaps, Mr. Holton, on the witness stand, invoked two new methods by which TVA could allegedly bridge the gaps, in addition to those methods previously discussed. Specifically, he claimed that TVA could meet its storage needs (1) by use of a cask pit rack or (2) by encroaching upon its full core reserve. Tr. 1233:13-17; 1237:14-19 (Holton). As set forth below, the evidence does not support any of TVA's claims that it could have resolved its storage needs through any mechanism, either those mentioned in its opening argument or those identified post hoc on the witness stand. 1. Exchanges

TVA cannot claim that it would have bridged its storage gap through the use of exchanges, first, because, during discovery, TVA repeatedly advised the Government that it was not pursuing an exchange theory. In response to the Government's interrogatory asking TVA to "[d]escribe in detail the schedule of SNF and HLW acceptance which you contend the Court should adopt, or to which you contend that the Court should refer, for purposes of assessing damages in this case as applied to you making sure to . . . identify any exchanges of acceptance slots assumed under each schedule or scenario. . . ," TVA stated that "TVA has not assumed any exchanges of acceptance slots." DX 176 at 2-2a; DX 312. Likewise, when asked "[d]o you intend to rely upon exchanges . . . to support your contentions regarding the overall order of priority ranking for the initial allocation of SNF and/or HLW acceptance positions among the various Standard Contract holders," TVA responded that it did not so intend. DX 312 at 61; see Tr. 1143:18-1144:1 (Shea). TVA also admitted that it had "not entered into any agreement with any other contract holder to 20

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exchange a DOE-approved DCS," nor had it even had "discussions or other communications . . . with other Standard Contract holders regarding the exchange of SNF acceptance slots and/or approved delivery commitment schedules." DX 312 at 29; see Tr. 1143:7-15 (Shea); DX 176 at 29; Tr. 186:8-12 (Hayslett). TVA also stated that it had "not submitted any exchange request to DOE for approval," nor had it even had any "discussions or other communications . . . with DOE regarding the exchange or possible exchange of SNF acceptance slots and/or approved delivery commitment schedules." DX 312 at 30; Tr. 1143:16-18 (Hutson); DX 176 at 32; Tr. at 185:14186:1 (Hayslett). Ultimately, TVA acknowledged, both during discovery and at trial, that it had never performed any analyses or studies having to do with exchanges, including the manner in which it would have accomplished any exchange, the cost of an exchange to TVA, or the Standard Contract holders with which TVA would have exchanged DCSs. DX 176 at 30, 33; Tr. 186:13187:7 (Hayslett); 189:4-10 (Hayslett). Given TVA's repeated denial that it was pursuing an exchange theory during discovery, it should not be permitted to advance such a theory now. As TVA's claim at trial conflicts with these earlier documents, it "deserves little weight." See Cucuras v. Secretary of HHS, 993 F.2d 1525, 1528 (Fed. Cir. 1993). In addition, as the documents at issue are discovery responses, TVA should be bound by those responses. See Missouri Housing Development Commission, 919 F.2d at 1314. Moreover, TVA cannot prevail upon this theory because it is entirely speculative. "[C]ontract law precludes recovery for speculative damages." San Carlos Irrig., 111 F.3d at 1563 (citing Roseburg Lumber, 978 F.2d at 667 (citing Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562-63 (1931)). The right to recovery should not be confused with 21

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concerns regarding the difficulty in ascertaining the amount of damages once the right is established. Story Parchment, 188 U.S. at 562-63. While the quantum of damages may be an approximation, the fact of damage must be shown with certainty. Id. Here, TVA has utterly failed to show that it has incurred damage because it would have engaged in exchanges. As Dr. Hartman, the Government's economics expert, testified, the creation of an exchange market would be highly speculative and would require the analysis of distinct characteristics, which TVA has failed to do here. Tr. at 2408:14-18 (Hartman); 2407:212408:25 (Hartman); 2409:25-2410:9 (Hartman); 2412:3-10 (Hartman); 1302:2-1303:6 (Barrett counterdesignation); 2409:6-14 (Hartman); 2410:11-13 (Hartman). DOE personnel also identified factors that make exchanges uncertain. Mr. Zabransky testified that he believed exchanges might occur in a mature situation, i.e., when "its gone on for years, maybe 5, 10, 15," and it has become routine. Tr. 1379:17-1380:20 (Zabransky counterdesignation). Tr. 1752:2-11 (Zabransky). However, he indicated that he did not believe it would happen before then, because of the uncertainties surrounding it. Tr. 1379:17-1380:20 (Zabransky counterdesignation); 1752:12-25 (Zabransky); 1355:16-1356:15 (Zabransky counterdesignation). Moreover, even if trading became established, there are reasons that utilities might choose not to participate. As Mr. Zabransky noted, a utility might not pursue an exchange because of political reasons or the costs of the exchange. Tr. 1377:23-1378:19 (Zabransky counterdesignation); 1378:24-1379:14 (Zabransky counterdesignation); 1754:8-11 (Zabransky).

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Exchange requests would have to be approved by DOE, which would approve or disapprove those requests "in its sole discretion." 10 C.F.R. § 961.11, Art. V.E; Tr. 1372:19 (Zabransky counterdesignation). While it is not now known precisely what criteria would be used by DOE to evaluate such a request, as no request has ever been submitted, see Tr. 1370:13-1371:2 (Zabransky counterdesignation), DOE personnel reviewed a number of issues that would necessarily be of concern to DOE. Tr. 1352:25-1354:10 (Milner counterdesignation); 1373:101375:1 (Zabransky counterdesignation). Moreover, DOE indicated that it would only approve exchanges that it could reasonably accommodate and that did not adversely affect other utilities. Tr. 1375:4-1376:4 (Zabransky counterdesignation). Accordingly, it is far from clear that exchanges would ever proceed, that TVA would have chosen to pursue them, that TVA would have found like-minded utilities with which to exchange in the precise amounts that TVA needed to exchange, or that TVA's proposed exchanges would have been approved. Indeed, even Mr. Holton acknowledged that he did not know for certain that TVA would be able to trade allocations with another utility. Tr. 1238:10-16 (Holton).3 Further, TVA has not taken any steps whatsoever toward modeling exchanges, or the costs thereof. Compare Yankee Atomic Electric Co. v. United States, No. 98-126C, 2004 WL 1535686 (Fed. Cl. June 28, 2004) with Tr.189:4-10 (Hayslett); see Bluebonnet Sav. Bank F.S.B. v. United States, 339 F.3d 1341, 1345 (Fed. Cir. 2003) ("[t]o derive the proper amount for the damages award the

Further, TVA could exchange only "approved delivery commitment schedules," 10 C.F.R. § 961.11, Art. V.E, further reducing the pool of potential exchange partners. Given that the ACR announcing allocations to which DOE could commit itself only extends ten years, id., Art. IV.B.5, the ability to find appropriate exchanges is even more difficult. 23

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costs resulting from the breach must be reduced by the costs, if any that the plaintiffs would have experienced absent a breach."). 2. The "Plus or Minus 20 Percent" Contract Provision

TVA's claims that it would have avoided dry storage through the use of the "plus or minus 20 percent" provision of the Standard Contract suffers from some of the same deficiencies. First, a request under the "plus or minus 20 percent" provision would be subject to DOE's approval when the utility submitted its Final Delivery Schedule. Tr. 1381:3-1382:21 (Zabransky counterdesignation); 1510:8-23 (Kouts); 1713:14-1714:25 (Zabransky); 1235:8-16 (Holton); 1236:7-11 (Holton). In reviewing such a request, DOE "would have to look to see whether or not it could adjust other purchasers downward in order to meet this increase in request, and that's essentially because the facilities only have so much capacity, and they can only operate at a certain level." Tr. 1511:5-13 (Kouts); 1513:6-11 (Kouts). In fact, in the 1987 ACR, DOE explicitly stated that "[t]he acceptance capacity available for allocation to the purchaser will equal the system operating capacity, unless part of that operating capacity is used to accommodate contingencies, e.g., emergencies, the contract's 20 percent adjustment provision and cask loading considerations." DX 50 at 2717. As Mr. Kouts explained, this was "more or less, informing the world that if someone comes in for a 20 percent adjustment, that it's going to have to come out of somebody else's hide . . . ." Tr. 1515:7-11 (Kouts); see also 1706:10-1708:4 (Zabransky). Moreover, "[t]he Department's position is consistent. It has not changed since this point." Tr. 1515:15-16; 1708:5-7 (Zabransky). Acknowledging these circumstances, during the ACR resolution process, the industry determined that utilities "all wouldn't [seek to increase their allocation by 20 percent] because if anyone did, it obviously, with a finite system, it would have to 24

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come out of somebody else's quantity. . . ." Tr. 1705:11-14 (Zabransky); see Tr. 1708:8-1711:21 (Zabransky); DX 65 at NEI 702. 3. Emergency Acceptance

The emergency provision would likewise require DOE approval. 10 C.F.R. § 961.11, Art. V.D. As Mr. Morgan stated, "of course, we'd have to approve acceptance of fuel. They couldn't just bring it to the door." Tr. 2244:5-6 (Morgan). In addition, the scope of circumstances that would likely be considered emergencies is narrow. As Mr. Zabransky testified, during the ACR issue resolution process, the industry concluded that "the emergency deliveries clause in the contract should be reserved for . . . emergencies, and as we defined emergencies, they were truly issues of public health and safety only." Tr. 2446:24-2447:3 (Zabransky); DX 235. Such emergencies did not include encroachment upon a utility's full core reserve. "It was an economic issue, it was a planning issue, but it wasn't an emergency." Tr. 2447:12-14 (Zabransky). "[I]f someone didn't plan ahead and didn't add reracks or didn't do what was ever necessary to add more storage, those who did didn't want that utility calling up and saying, but we had a line. They shouldn't be rewarded for their poor planning." Tr. 2455:4-16 (Zabransky). The position espoused by the industry has remained consistent over time. Tr. 2453:172455:1 (Zabransky). Moreover, as Mr. Zabransky testified, in his current capacity as the contracting officer for DOE, his view of the emergency provision has remained the same: "that it should be used when there's truly a health and safety emergency that might affect the public, and that's the view I've had for 15 or more years." Tr. 2455:20-2456:6 (Zabransky). 4. Transhipment

TVA's claim that it would have bridged the gap through the use of transhipment was also 25

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flatly contradicted by the evidence at trial. TVA's SNF assessment team originally considered the option of transhipping fuel between the Sequoyah and Watts Bar sites. Tr. 1288:8-11 (Green). However, the team's report, as well the testimony given by Mr. Green, the team leader, and Mr. Bailey, the site vice president of engineering and technical services, indicate that transhipment was flatly rejected by management for a variety of reasons that would have also been concerns in the "but for" world. DX 120 at 7, 11, Figure III-2, Figure III-3; Tr. 794:15-796:3 (Bailey); 1289:9-11 (Green); see 1097:25-1098:18 (Hutson). TVA determined that it would be very costly to tranship its fuel ­ in the range of "10 million or more." Tr. 793:15-22 (Bailey); see Tr. 1288:15-17 (Green); DX 120 at 37. In addition, it concluded that it was undesirable because it would fill up the Watts Bar pool more quickly, potentially driving Watts Bar to dry storage. Tr. 1288:18-22 (Green). TVA also decided against transhipment because of the difficulty of obtaining approval to transport the fuel. Tr. 1288:23-1289:1 (Green); 793:22-794:10 (Bailey). TVA determined that it would require approval from both the NRC and the State of Tennessee to ship fuel and concluded that it would be very difficult to obtain those approvals. Tr. 1288:231289:8 (Green). As Mr. Bailey testified at trial, "you can see that by the public opposition to Yucca Mountain. . . . I mean it would have been . . . a public battle it would have had to fight if we were trying to do that option." Tr. 794:10-14 (Bailey). No evidence was adduced at trial as to why this analysis would change in the "but for" world. In fact, Mr. Bailey, the highest ranking management official to testify at trial, explicitly stated that TVA's decision on transhipment would not have been any different had DOE started to pick up fuel in 1998. Tr. 799:1-5 (Bailey). Moreover, Mr. Hayslett, the key proponent of transhipment, admitted that he had not performed any analysis of transhipment whatsoever, 26

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including any analysis of the issues that originally led TVA to reject the option -- cost, licensing, and political fall-out. Tr. at 198:25-200:17 (Hayslett). Thus, TVA's bald assertion that it would have changed its position on transhi