COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK

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1 MEMORANDUM TO: JAMES TIERNEY, PROGRAM DIRECTOR FROM: SARAH SPRUCE, PRO BONO ATTORNEY RE: OVERVIEW OF VERMONT YANKEE CASE ENTERGY V. SHUMLIN, ET AL. DATE: AUGUST 12, 2011 I. Introduction In 2002, the current operators of Vermont Yankee (VY), Entergy Nuclear Vermont Yankee (ENVY) purchased the facility. 1 At the time, the Nuclear Regulatory Commission (NRC) license to operate was set to expire in March Since then, the NRC granted VY a license to continue operating another 20 years. 2 However, the state of Vermont has not issued a license to operate under Vermont laws. In February 2010, the Vermont State Senate voted not to renew VY s license while the House never voted on the matter. 3 Ambiguity over license renewal has sparked a lawsuit by ENVY against various Vermont officials seeking a declaratory judgment preventing Vermont from blocking further operation of the plant. 4 This memo examines the current lawsuit against the state of Vermont by ENVY. II. ENVY Complaint and Motion for Preliminary Injunction Following indications that Vermont may not renew VY s state license, ENVY filed suit against Governor Peter Shumlin, Vermont Attorney General William Sorrell, and members of the Vermont Public Service Board (PSB) in the U.S. District Court for the District of Vermont. 5 The complaint seeks a declaratory judgment that federal law preempts Vermont laws regulating the nuclear facility, federal law preempts Vermont from conditioning approval on providing below-market electricity rates to Vermont, and such rate conditioning violates the Commerce Clause. 6 ENVY also seeks a preliminary and 1 Defendants Memorandum in Opposition to Plaintiffs Motion for Preliminary Injunction, No. 1:11-cv-99, at 1. May 23, Available at 20Plaintiffs%20Motion%20For%20Preliminary%20Injunction.pdf (hereinafter Opposition Motion ). 2 Complaint for Declaratory and Injunctive Relief, No. 1:11-cv-99, at 2. April 18, Available at (hereinafter Complaint ). 3 An Act relating to approval for continued operation of the Vermont Yankee Nuclear Power Station, S.289, Feb. 24, 2010, available at The vote was 26 against the bill and 4 for. 4 Complaint, supra note 2, at 1. 5 Id. at Id. at 33. 1

2 permanent injunction preventing Vermont agencies from enforcing state laws regarding operation of VY, taking steps to shut down the plant, and conditioning operation on below-market electricity rates. 7 Addressing the first legal argument that Vermont is preempted by federal law, ENVY cites the Atomic Energy Act (AEA), 42 U.S.C. 2011, et seq. 8 According to ENVY, the AEA grants exclusive authority over construction and operation of nuclear facilities to the NRC. 9 In support of this argument, ENVY also cites the Supreme Court case Pacific Gas & Electric Co. v. State Energy Resources Consv. & Dev. Comm n (PG&E). 10 ENVY contends that this case holds the NRC has exclusive power to regulate plant construction and operation. 11 They argue a key difference between the PG&E case and Vermont s regulation attempts is that California was barring construction of new plants, not refusing to relicense existing plants. 12 ENVY points out that the Supreme Court stated in PG&E that, [W]e emphasize that the statute does not seek to regulate the construction or operation of a nuclear power plant. It would clearly be impermissible for California to attempt to do so, for such regulation, even enacted for non-safety concerns, would nevertheless directly conflict with the NRC s exclusive authority over plant construction and operation. 13 By attempting to shut down an existing nuclear facility with a valid NRC operating license, ENVY argues that Vermont has impermissibly overstepped their authority. ENVY further asserts that Vermont is attempting to regulate based on radiological safety concerns, which is impermissible regardless of the preemption issues. 14 Further, they argue that Vermont cannot make a non-safety related case to shut down VY. 15 A second major area of contention involves a Memorandum of Understanding (MOU) between ENVY, ENVY subsidiaries, a Vermont agency, and several Vermont utilities. The MOU required ENVY to waive any legal arguments regarding whether federal law preempts Vermont s ability to regulate the 7 Id. 8 Id. at 3. 9 Id. 10 Pacific Gas & Electric Co. v. State Energy Res., Consv. & Dev. Comm n, 461 U.S. 190, 212 (1983). In PG&E, the Supreme Court upheld a California statute that blocked new nuclear power plants until the state could determine how high levels of nuclear waste would be disposed of. Id. at 194, This statute required all electricity plants to receive certification from a state agency. The agency could not grant such a certification until it found that the federal government had come up with a solution allowing for the disposal of high-level nuclear waste, and it gave the state legislature authority to nullify any decision by the agency to lift the moratorium. Id. at 198 & n.8. The Court determined that the AEA was not intended to preempt states from all regulation of nuclear power plants but instead intended that the Federal government have control over radiological safety aspects. Id. at 205. The NRC does not regulate based on economic considerations or the necessity of a power plant in a state, leaving the reasonable inference that those considerations were left to the states. Id. at Complaint, supra note 2, at Memorandum of Law in Support of Plaintiff s Motion for Preliminary Injunction, No. 1:11-cv-99, at 15. Apr. 22, 2011, available at %20Memorandum%20of%20Law%20in%20Support.pdf. 13 Id. (quoting PG&E, supra note 10, at 212)(emphasis added). 14 Id. at Id. at 21. 2

3 plant, including Vermont s ability to grant or deny state relicensure. 16 ENVY contends that the MOU is no longer valid because Vermont breached the agreement. 17 One asserted breach is that according to the MOU it was the PSB that would make the renewal decision, not the State Legislature, which now has control over the renewal decision. 18 Secondly, ENVY argues that the MOU does not bar all preemption claims, since it expressly states the PSB is preempted from all areas of authority granted to the NRC. 19 ENVY also contends Vermont is preempted by the Federal Power Act (FPA), 16 USC 824(a). 20 ENVY asserts that Vermont has conditioned their approval of Vermont s license on ENVY giving Vermont utility companies electricity at below-market wholesale rates. The FPA, which gives the Federal Energy Regulatory Commission (FERC) exclusive authority over the rates and terms of wholesale interstate sales of electricity, preempts such condition according to ENVY. 21 Additionally, ENVY argues that Vermont s attempts to condition renewal on below-market rates for electricity violate the Dormant Commerce Clause. 22 ENVY maintains that the requirement is protectionist and designed to give Vermont an advantage over other states, thereby discriminating against non-vermont utilities in violation of the Commerce Clause. Plaintiff ENVY also maintains they have enough support for a preliminary injunction. ENVY believes they are likely to win on the merits of the case, that they will suffer irreparable harm without an injunction, the balance of hardships weighs in ENVY s favor, and that the injunction is in the public interest. 23 Addressing irreparable harm, ENVY argues that without a preliminary injunction they will experience loss of highly skilled employees, incur substantial financial losses related to refueling and maintenance, lose 20 years of revenues, and have to file a letter of decommission with the NRC that would not be reversible. 24 As to the public harm, ENVY argues that a VY shutdown would cost hundreds of jobs in Vermont, result in a less reliable power grid, increase greenhouse gas output, and deprive the state of millions of dollars in tax revenue. 25 Finally, they argue the balance of hardships is in ENVY s favor since the public will not suffer harm from continued operation, and in fact benefit, while ENVY will incur substantial losses. 26 III. Vermont s Response and Opposition Preliminary Injunction 16 Id at Id. 18 Id. 19 Id. at Id at Id at Id at Id at Id at Id. at Id. at 4. 3

4 The State of Vermont, as represented by Vermont Attorney General Sorrell, refute ENVY s claims. Vermont first counters that ENVY cannot expect to win their case on the merits. 27 First, ENVY waived all preemption claims in the MOU and through consistent recognition of Vermont s regulatory authority. 28 Second, Vermont has the authority to require VY get a Certificate of Public Good (CPG), which is required for all power generators. 29 Also relying on the Supreme Court decision in PG&E, Vermont argues that the AEA does not preempt all state authority over nuclear plants. PG&E expressly recognizes dual authority between state and federal agencies. 30 Additionally, Vermont points out that the NRC NEPA statements when considering VY s license renewal contained explicit language acknowledging that the ultimate decision concerning continued operation rested with the state. 31 The NRC made similar statements in the Federal Register and reports that the states have authority to regulate during the relicensing process based on economic or other permissible subjects, and Vermont argues that interpretation is entitled to Chevron deference. 32 Vermont also contends that ENVY s claim for relief is too broad and nonspecific. It would encompass a large number of statutes, regulations, contracts, and other laws, and if any of them are valid the claim would fail. 33 Even assuming some of the statutes are impermissible, Vermont claims that at least six of the eight statutes and regulations encompassed by the claim are laws of general applicability to all electricity providers. 34 Vermont also contends they are improperly basing their claim on future impermissible actions by the PSB that may never happen. 35 They also argue the other two encompassed laws, Acts 74 and 160, are not meant to regulate radiological safety, despite ENVY pointing out a sentence in Act 160 involving studying public health issues related to the plant. 36 The Opposition filing also maintains that both the FPA and Dormant Commerce Clause claims will fail because Vermont has not actually conditioned renewal based on market-price. According to Vermont, ENVY is relying on two statements by state legislators that are not in any bill or statute or even part of the legislative record. 37 The claim therefore fails to present an actual case or controversy, according to Vermont. 27 Opposition Motion, supra note 1, at Id. 29 Id. 30 Id. at 3-4 (citing PG&E, supra note 10, at 211). 31 Id. at Id. at Id. at Id. at Id. at Id. at Even assuming it did, Vermont contends that the proper remedy is to strike that portion of the bill, not the whole thing. Id. at Id. at 26 & n.12. 4

5 Regarding the MOU, Vermont claims that ENVY always knew the PSB was a statutorily created entity that could be changed by the Vermont Legislature at any time. 38 Similarly, ENVY even lobbied for Act 74, which it now challenges, and never claimed Act 160, giving control over relicensing to the Vermont Legislature, repudiated the MOU until this suit. 39 Vermont argues that they benefited from these laws and are now trying to challenge them after receiving those benefits. 40 Similarly, Vermont argues they are barred from repudiating the MOU (by bringing the present lawsuit) based on both judicial and equitable estoppel. 41 Vermont additionally argues that the doctrine of laches bars ENVY from bringing challenges to state actions that date back to 2002, 2005, and Next, Vermont argues that ENVY cannot show that any irreparable harm is actual or imminent. All ENVY s alleged harms arise from uncertainty as to whether they will be allowed to operate past 2012 and Vermont contends that this uncertainty will not be resolved by a preliminary injunction. 42 Secondly, Vermont points out they had plenty of time to bring this suit, arguably since the 2002 MOU, further showing that the harms are not imminent. 43 Vermont is also not persuaded by arguments that the specific harm allegations, including monetary losses or employee attrition, are enough to show irreparable harm. 44 Additionally, Vermont argues that a preliminary injunction would not be in the best interest of the public. First, they argue the net effect on jobs in Vermont is not clear over the long-term, since VY would be replaced by other power sources. 45 The loss of tax revenue is also not clear for similar reasons. 46 Arguments that the loss of VY would result in unreliable electricity and higher rates were also not persuasive to Vermont, who argues the studies relied on by ENVY are skewed and outdated and there is some evidence that other supply sources could lower rates. 47 IV. Preliminary Injunction Ruling On July 18, 2011, the U.S. District Court for the District of Vermont denied ENVY s motion for preliminary injunction. 48 The court determined that ENVY had not shown irreparable harm that could be prevented or relieved before a decision on the merits. 49 The court also declined to make a decision on the 38 Id. at Id. at Id. at Id. 42 Id. at Id. at Id. 45 Id. at Id. 47 Id. at Memorandum and Order on Plaintiff s Motion for a Preliminary Injunction, at 3, No. 1:11-cv-99-jgm. July 18, 2011, available at 49 Id. 5

6 likelihood of ENVY succeeding on the merits, but did note ENVY had raised serious questions regarding the AEA claim. 50 Since the court concluded that the only way ENVY s alleged harms will be addressed is through a final decision on the merits, and both parties would benefit from a faster decision, the court moved the trial to an earlier date. 51 The trial is set to start on September 12, Id. 51 Id. at Id. at 1. 6