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Kathleen M. Sullivan, attorney for Entergy Nuclear, presents the company’s case to Judge J. Garvan Murtha in U.S. District Court in Brattleboro.

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A federal case

At U.S. District Court hearing, Entergy says Vermont overstepped its authority; state counters that company is trying to void previously agreed-to deals

BRATTLEBORO—In a defensive priming of the pump for hearings this fall, Entergy lawyers went beyond asking for a court order that that would allow its Vermont Yankee nuclear plant to continue operating while its lawsuit against Vermont makes its way through the courts.

At a hearing for Entergy’s quest for a preliminary injunction, the company’s lead attorney, Kathleen M. Sullivan, of the New York-based law firm of Quinn Emanuel Urquhart & Sullivan, told Judge J. Garvan Murtha that he should overturn Vermont’s Acts 74, 160, and 189.

Two days of hearings concluded last Friday afternoon with both sides making their final arguments over whether Entergy Nuclear should be granted an injunction.

If Murtha grants the company’s request, his decision will block any effort by the state to close Vermont Yankee next year.

Murtha said last Friday that he will likely hand down his decision after the Fourth of July holiday.

Entergy is suing the state to nullify a 2006 Vermont law that gives the Legislature the authority to determine whether the state Public Service Board (PSB) will be permitted to consider a renewal for the plant’s Certificate of Public Good (CPG), a requirement of the original legislation that approved the 38-year-old plant’s construction in the 1970s.

The law stipulates that permission must be granted by both the Vermont Senate and the House of Representatives.

In February 2010, the Vermont Senate voted 26-4 to deny the PSB permission to issue the certificate for another 20 years.

In March of this year, the federal Nuclear Regulatory Commission, which has sole jurisdiction over regulating issues of nuclear safety, approved a 20-year license extension for Vermont Yankee.

At issue are three acts:

• Act 74, which permitted Entergy to store its radioactive waste in “dry casks.”

• Act 160, in 2005, which asserted the legislature’s power to control whether the PSB issues the Certificate of Public Good.

• Act 189, in 2008, which required a “comprehensive vertical audit” for the plant “to provide for a thorough, independent, and public assessment of the reliability of the systems, structures, and components” of the plant.

Sullivan opened Friday’s closing arguments reiterating Entergy’s primary contention in this case: Vermont thinks it can regulate radiological safety, yet only the NRC has this right of pre-emption.

In fact, she added, Entergy could not have waived its right to a pre-emption claim against the state, despite company officials doing exactly that when they signed a Memorandum of Understanding.

Under the Constitution’s supremacy clause, the corporation could not waive an authority held by the federal government, she said.

“[We’re] powerless to waive the power of the federal law in any event,” said Sullivan.

She said that the state overstepped its bounds in denying Vermont Yankee permission to operate beyond the expiration of its original 40-year license on March 21, 2012.

Sullivan added that regulating radiological safety, and only radiological safety, motivated legislators to enact Acts 74, 160, and 189, and that the state “engaged in a semantic exercise” to find “code words” that were substitutes for the word “safety.”

The Entergy team played audio clips from legislative sessions and committee meetings to prove its argument.

One recorded example included Sen. Ann Cummings, D-Washington, saying during 2006 discussions on Act 160, “Okay. Let’s find another word for safety.”

After listening to multiple recordings of legislators and lawyers discussing pre-emption, Murtha told Sullivan an argument could be made that the conversations depicted legislators trying to ensure they did not step into the federal government’s territory.

Sullivan stressed that despite its actions, the Legislature was only being “conscientious” by following what it believed was the will of its citizenry.

She told Murtha that in addition to Entergy’s pre-emption claim, Vermont could not regulate a wholesale plant like Vermont Yankee, since only the Federal Energy Regulatory Commission (FERC) can regulate a plant that sends power out of state.

A wholesale plant, such as Vermont Yankee, feeds power into the New England grid, said Sullivan. Vermont’s decision to close the power station would harm the entire region and this action steps on FERC’s toes.

“A wholesale plant has to fend for itself,” said Sullivan. “It’s Entergy and its shareholders that are holding the bag [if the plant closes].”

She also said that Entergy cooperated with the state in the past on issues like dry-cask storage “under conditions of duress.”

If the company had not agreed to the conditions, the state would not have granted it the right to use that method for storing spent fuel.

State makes its case

The state’s legal team, led by Assistant Attorney General Bridget Asay, contended that Entergy cannot claim that Vermont is attempting usurp federal authority because of previous agreements that the company made with the state.

She also asserted that federal law give states the right to regulate non-safety-related aspects of nuclear power, such as plant reliability, environmental impacts, and economics.

She said Entergy had plenty of time to dispute those agreements, but chose not to until it filed the lawsuit last month. She said Entergy was trying to “avoid a consequence they agreed to years ago.”

Scot Kline, assistant attorney general, said that Entergy has benefited from working with the state, from the original deal to buy Vermont Yankee in 2002 to getting permission for on-site dry-cask storage.

In her closing argument on Friday, Asay said that the NRC worked with the state to develop Act 189. She cited a letter from the NRC sent to then-Gov. Jim Douglas, responding to a request to have the agency work with the Vermont Public Service Board to cover what areas were appropriate for the state to examine in its study.

Asay said when it came to assessing plant reliability, the NRC and Vermont’s authority overlapped. She said that the NRC had no objection.

Asay added that it was “hard to square” Entergy’s claims that the state used code words for safety like “public health.” She said the state has considered policies that impact public health long before Vermont Yankee’s construction.

Kline, in closing statements on Friday, said Entergy had not demonstrated immediate harm and had not met the criteria for a preliminary injunction.

He said the company has promised several times over the course of nearly a decade, in legal contracts and testimony, that it would not raise the issue of federal pre-emption.

“Entergy is where they’ve known they’ll be for years,” said Asay, about the company’s knowledge of Vermont Yankee’s 2012 license expiration.

Before court recessed on the first day of hearings last Thursday, Entergy’s legal team announced it would not cross examine the state’s three expert witnesses — Bruce Hinkley, Seth Parker, and Bob Stein. Instead, lawyers wanted to use Friday’s time to rebut the state’s arguments.

A pall of ‘uncertainty’

Sullivan told Murtha that a preliminary injunction would lift the burden of “uncertainty” cast over the plant, its long-term energy contracts with other utilities, business decisions like refueling, and the anxiety of its employees.

That echoed the points made Thursday by John Herron, president, CEO, and chief nuclear officer for Entergy Nuclear, about the economic harm that would occur if an injunction was not granted.

Herron said that if Vermont Yankee is forced to shut down temporarily, the company would lose about $20 million a month. Even with the injunction, he said, the plant might have to close before March 2012 due to uncertainty surrounding the timing of its next scheduled refueling.

Entergy Nuclear must make a decision about buying new fuel assemblies for Vermont Yankee’s reactor by July 23. The plant’s next refueling outage is scheduled for October, at an estimated total cost of $150 million.

Herron said Entergy replaces about a third of the reactor’s fuel rods during refueling outages, which generally happens every 18 months, at a cost of more than $65 million.

Herron added that if Vermont Yankee does not receive its preliminary injunction, conditions may force the plant into a permanent shutdown as early as mid-summer.

If he didn’t grant a preliminary injunction, Murtha asked, wouldn’t Vermont Yankee have to agree to shut down?

Herron answered that “the decision is not finalized yet” and would require further discussions.

“Uncertainty is creating a very difficult situation for us,” Herron said.

All potential remedies to the “harms” listed by Entergy lawyers referenced operating beyond March 2012.

Quoting Herron on Friday, Kline said that a preliminary injunction would not give employees “comfort,” or make the decision to refuel “easier,” by guaranteeing the plant would stay open.

Also, refueling is a reoccurring business expense and risk, said Kline, so the preliminary injunction would help, but not completely remove harm.

Sullivan said Friday that if Vermont Yankee were to shut down next year, it would trigger the loss of more than 1,000 jobs, both at the plant and in the surrounding communities.

“We are harmed now by uncertainty in a business that survives on uncertainty,” she said.

Sullivan said that Entergy’s business model was to operate the plant past 2012. Vermont Yankee spokesperson Larry Smith confirmed that Entergy has presumed this business model since it purchased the plant in 2002.

Entergy attempted to sell Vermont Yankee last summer but months ago announced it could not, due to Vermont’s denial of a Certificate of Public Good.

The NRC’s role

The primacy of the role of the federal government in regulating nuclear power is at the heart of this legal dispute. So where does the NRC stand?

“The NRC is not a player in this,” said NRC spokesperson Neil Sheehan in a separate interview, adding that it’s “rare” for the commission to involve itself in a pre-emption case.

When asked if the NRC would have taken action if it saw Vermont lawmakers walking into pre-emption territory, Sheehan said that the NRC pays attention, but that the process is “not that formal.”

“We were aware [of Vermont’s decisions regarding Vermont Yankee], but at no point did we see an issue that would rise to the level of pre-emption concern,” Sheehan said.

The NRC state liaisons work with state governments and monitor developments, he said.

He said state officials have access to inspections, documents, and meetings with NRC officials but understand that all decisionmaking regarding safety lies with the federal agency, he said.

Sheehan cautioned that now that Entergy’s case is before the courts, things are “still playing out.”

He said he won’t know if the Department of Justice will enter the case until the outcome of an alleged NRC commissioners’ vote is affirmed and made public.

“It’s impossible to say if the federal government will have a position,” said Sheehan.

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Originally published in The Commons issue #107 (Wednesday, June 29, 2011).

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