Spent Nuclear Fuel: Government Partial Breach of Contract

Spent Nuclear Fuel: Government Partial Breach of Contract

Partial breach of contract occurs in many government contracts involving disposition of nuclear waste, particularly spent nuclear fuel.  Spent nuclear fuel (“SNF”) is “nuclear reactor fuel that has been used to the extent that it can no longer effectively sustain a chain reaction.” 

These contracts involve the utility contractor purchasing services from the Department of Energy (“DOE”) to transport and dispose of SNF; the money spent by contractors is put into a Nuclear Waste Fund.

Nuclear Waste Policy Act: In 1982 Congress enacted the Nuclear Waste Policy Act (“NWPA”), 42 U.S.C. §§ 10101-10270, which puts the responsibility on the federal government to “provide for the permanent disposal of high-level radioactive waste and spent nuclear fuel as may be disposed of in order to protect the public health and safety and the environment.” 

As a result, the Standard Contract was developed.  The DOE enters into contracts will all U.S. nuclear utilities to take title of the utilities’ waste.  The NWPA imposes an unconditional duty on DOE to take the materials.

Standard Contract: Many utility contractors enter into a Standard Contract with the government, specifically the DOE, for transport and disposal of spent nuclear fuel.  When the government fails to perform its obligations under the Standard Contract and if the failures caused the increased costs, the contractor can recover through breach of contract legal theories.

The Standard Contract, known as the Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, U.S. Department of Energy Contract, is codified at 10 C.F.R. § 961.11.

Partial Breach of Contract:

The government commits a partial breach of contract when it fails to pick up and dispose of SNF in the timeframe that it had previously agreed to.  Contractors can subsequently bring an action claiming the partial breach of contract led to substantial additional costs and as a result, seek to recover that amount.

In SNF cases, the plaintiff is entitled to recover its reasonable costs incurred in its efforts to mitigate damages.  The plaintiff must still show that:

  • The damages were reasonably foreseeable by the breaching party at the time of contracting
  • The breach was a substantial causal factor for damages, and
    • The court will compare the breach and the non-breach worlds
    • If a cost would have been incurred in a non-breach world, it is not recoverable
  • The damages are established with reasonable certainty

The non-breaching party cannot achieve a better position to the one it would have been in had the breach of contract not occurred.

Recent Breach of Contract Cases

There have been numerous decisions where the courts have found contract claims against the government , and the government has paid out billions in damages.  Many disputes have taken place from the government failing to fulfill its contractual obligations to accept and dispute of radioactive waste.

In March 2014 the Court of Federal Claims awarded nearly $104 million in breach of contract damages to Carolina Light & Power Company and Florida Power Company.  The court noted that had the DOE fulfilled its promise to collect all waste, the companies would not have had to spend millions of dollars to build extra facilities to store the SNF.  Some of the costs sought to be recovered would have been incurred in a non-breach world and thus the companies were unable to recover all of the damages sought.

Defense to Breach in SNF Cases: The government has consistently sought to raise the unavoidable delays affirmative defense in breach of contract cases involving its failure to accept SNF from the nuclear utilities.  This defense is deemed waived if raised post-trial.

In Entergy Nuclear v. United States, the government raised this breach of contract defense unsuccessfully.  The government conceded that the defense cannot be used as a defense to liability for failure to accept SNF, but argued that it could be used as a defense to monetary damages.  However, the court affirmed a prior order which prohibited the use of unavoidable delays as a defense to both liability and damages.

Breach of contract in spent nuclear fuel cases is ongoing.  You may be able to recover a large amount of monetary damages. 

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