The U.S. Court of Appeals for the Second Circuit has agreed with a federal district judge who ruled in 2012 that Vermont efforts to force closure of the Entergy (NYSE:ETR) Vermont Yankee nuclear plant were largely improper because atomic safety issues are governed by the Nuclear Regulatory Commission (NRC).
The three-judge panel for the 2nd Circuit said Aug. 14 that Entergy had already filed its application for a 20-year license extension with NRC before lawmakers started consideration of state law saying the company could not run the 600-MW unit beyond March 2012 without state legislature approval.
The appeals court affirmed the district court’s ruling that two state statutes are preempted by federal law. As a result, the plant can continue to run at this time.
Vermont Attorney General William Sorrell said he is disappointed in the way the decision came out. But Sorrell also said Aug. 14 that Vermont won on a key provision that prevents Entergy from pursuing $4.62m in legal fees.
U.S. District Court Judge J. Garvan Murtha had issued a resounding victory for Entergy in early 2012. The appeals court upheld much of Murtha’s ruling in its recent 62-page decision. It did, however, reverse Murtha on the issue of whether Vermont’s interest in a below-market power contract violated part of the Commerce Clause.
Entergy said it was happy with the ruling. “We have felt strongly for a long time now that the State of Vermont’s Acts 74 and 160 were pre-empted by federal law and are very pleased with today’s decision,” Entergy said Aug. 14.
The appeals court agreed that Vermont was encroaching upon NRC turf when lawmakers passed legislation to force Entergy to get legislative approval for continued operation.
The 2nd Circuit said many state lawmakers knew that using radiological safety grounds was prohibited, so they tried to cloak their arguments to avoid the term “safety.”
Appeals panel: Vermont lawmakers knew they were on NRC turf
Entergy had sued the state in federal court in April 2011. The suit was filed against the governor, attorney general and members of the Vermont Public Service Board.
“In sum the district court permanently enjoined Vermont from taking any action to shut down Vermont Yankee after March 21, 2012,” under a pair of state laws passed after Entergy had bought Vermont Yankee from a group of New England utilities,” the appeals court noted.
Various statements by lawmakers “demonstrate the Vermont Legislature’s impermissible motive in passing Act 74 – namely, to shut down Vermont Yankee based on concerns of radiological safety while attempting to avoid a preemption challenge,” the appeals court said.
“We do not question the legitimacy or sincerity of those Vermont residents and officials who have safety-related concerns about Vermont Yankee, but Vermont has other avenues available to air its concerns,” the appeals court said.
“As the Supreme Court has held, the one avenue Vermont may not pursue is to pass a “state moratorium” on nuclear energy “grounded in safety concerns,” the appeals court held.
But it was premature for the district court “to wade into the commerce clause issue,” the appeals court held. “At present, in the absence of a completed PPA [power purchase agreement] and without evidence regarding its effect on out-of-state power consumers, we cannot determine whether the PPA Vermont has sought will have a direct impact on commerce in other states.”
The district court had held that Vermont had wrongly made an approval decision based on “below-wholesale-market” power that had been offered by the plant.
As a result, the appeals court vacated district court’s permanent injunction enjoining the defendants from allowing a state Certificate of Public Good based on the execution of a below-wholesale-market power deal between Entergy and Vermont utilities.
The federal district court had held there was “overwhelming evidence” that two state laws were really about radiological safety concerns, which are under jurisdiction of NRC.
“The Vermont Senate Finance Committee conducted its first hearings on the bill that would ultimately become Act 160 only days after Entergy filed its application with the NRC for an extension of its operating license for Vermont Yankee past 2012,” the appeals court said.
Only after Vermont lawmakers realize they were encroaching upon Atomic Energy Act territory did they try to “find another word for safety,” in order to avoid legal reversal, the appeals court said.
In 1972, Vermont Yankee opened and began operating under the ownership and management of the Vermont Yankee Nuclear Power Corp., a joint venture of eight New England retail electric utilities.
Entergy submitted a bid for Vermont Yankee in the summer of 2001 and sought a “certificate of public good,” a license from the board to continue to operate Vermont Yankee under Vermont law. As it was negotiating with the board, Entergy entered into a memorandum of understanding (MOU) with the Vermont Department of Public Service.
The 2002 MOU incorporated a power purchase agreement that promised Vermont retail utilities favorable priced terms from Vermont Yankee until 2012. Entergy maintains it agreed to the PPA because it feared that the Department would not otherwise recommend a certificate for the plant.
Entergy also, however, agreed in the 2002 MOU to waive any claim that federal law pre-empts board jurisdiction.
Fight over spent fuel, uprate began in 2003
The recent legal dispute can be traced to 2003 when Entergy petitioned the state to obtain a 21% power uprate that would, in turn, also produce more spent nuclear fuel. There was a 1970s Vermont law restricting waste storage, but the provision does not apply to temporary storage at the current Vermont Yankee site.
After agreeing to another MOU with the state in 2003, Entergy won Vermont approval for the uprate in 2004. But the Vermont attorney general issued a legal opinion saying the leeway on spent fuel at Vermont Yankee had been “owner-specific,” so Entergy had to seek the Vermont Legislature’s approval to add dry cask storage.
The Vermont Legislature in June 2005 passed Act 75, which effectively switched spent fuel approval from the Vermont board to the Vermont Legislature. This switch meant that a Vermont Legislature decision denying spent fuel storage could not be appealed to the state Supreme Court.
Act 74 also explicitly incorporates various MOUs, including one signed in 2005, which goes into great detail in explaining how the additional dry cask storage should be set up.
The state’s “flood analysis” for additional spent fuel storage was more extensive than what was required by NRC at the time, the court noted.
The Vermont Board of Public Service would eventually approve a certificate for the storage facility until 2012 and noted that Vermont Yankee provided about one-third of the state’s electricity.
Act 160 required that Vermont Legislative approval was needed to operate the plant beyond 2012. The bill was passed in May 2006 and says a nuclear plant can be operated in Vermont beyond 2012 only with explicit approval of the Vermont General Assembly.
Act 160 was approved about five months after Entergy had applied to NRC for a license renewal to run the plant until March 2032.
A tritium leak was reported at the plant in January 2010. NRC concluded that the public’s health and safety were not affected.
At the time of the leak, however, the Vermont Senate was considering S. 289, which would allow continued operation of Vermont Yankee beyond 2012. The bill failed to pass the Vermont Senate in March 2011.
The case, 12-707-cv (L) Entergy Nuclear Vermont Yankee, LLC v. Shumlin, was argued in January of this year.