By Dietrich Knauth

Law360, New York (September 27, 2012, 10:22 PM EDT) — An Entergy Co. unit sued the U.S. government Wednesday, seeking damages for what it calls the government’s decadelong, ongoing failure to dispose of spent nuclear fuel at two power plants in Michigan, which it says breaches a waste disposal contract.

Entergy Nuclear Palisades LLC filed its suit in the U.S. Court of Federal Claims, saying it and the plants’ previous owner have paid the Department of Energy $274 million in fees under the 1983 waste disposal contract, as a contribution toward building a long-term waste depository.

Under the terms of the plants’ contract with the government, the U.S. agreed to begin picking up the spent nuclear fuel and high-level radioactive waste no later than January 1998, according to the complaint. But it has not done so, in part because political battles have scuttled every plan to build a long-term disposal site, the complaint says.

While the complaint did not mention specific damages, the court’s docket sheet lists Entergy’s demand as $100 million.

Entergy bought the Palisades Nuclear Plant and the Big Rock Point plant from Consumers Energy Co. in 2007. Entergy continues to pay roughly $6 million a year in fees relating to the plant, the complaint said.

But the government still has no plan to begin disposal of the waste, despite several breach of contract judgments and court orders against it in similar lawsuits, according to the complaint.

“Consumers and [Entergy] have fully complied with all their fee payment obligations under the contract,” the complaint said. “The government, however, has failed to perform its reciprocal obligation to dispose of the spent nuclear fuel, and currently has no plan to meet these obligations.”

Entergy says the government’s foot-dragging has caused it to rack up other costs, including regulatory costs, taxes and fees associated with efforts to ensure sufficient on-site storage or find off-site alternatives, and has delayed Entergy’s plans to decommission the shuttered Big Rock Point.

“As a direct consequence of the government’s disregard of its contractual obligations and defiance of the D.C. Circuit’s rulings, [Entergy] has been incurring and will be forced to incur substantial additional costs to provide for extended on-site storage of its spent nuclear fuel,” the complaint said.

These expenses include buying, loading and maintaining storage casks and related equipment; monitoring storage facilities; and making necessary changes to the plants, according to the complaint.

The DOE is fighting dozens of lawsuits by utilities that had contracted with the agency over the past 20 years to send their spent fuel to the planned Yucca Mountain nuclear waste repository.

The project has been beset by delays and legal challenges, and in the past two years the DOE and the Nuclear Regulatory Commission have suspended their licensing on Yucca Mountain, leaving operators to deal with spent fuel themselves.

Taxpayers could face $19 billion in liabilities by 2020, as the U.S. Department of Energy reneges on contracts with nuclear operators to dispose of thousands of tons of spent fuel accumulating at their plants, the U.S. Government Accountability Office reported in September.

The GAO found that spent fuel stored on-site at nuclear plants will likely increase by about 2,000 tons annually before the DOE can open a new centralized storage facility, which could take as many as four decades. In addition to the $19.1 billion in liabilities racked up by 2020, the DOE could be on the hook for an additional $500 million annually thereafter.

ENP is represented by Layton Jager Smith Jr. of Jager Smith LLC.

The case is Entergy Nuclear Palisades LLC v. U.S., case number 12-cv-01641, in the U.S. Court of Federal Claims.

Published by Law360