Case Study

Federal Government to Pillsbury Client Xcel Energy: $100 Million+ Settlement for Spent Nuclear Fuel
Featured Pillsbury Attorneys: Alex D. Tomaszczuk, Jay E. Silberg, Daniel S. Herzfeld, Jack Y. Chu

7/12/2011
Pillsbury client Xcel Energy announced on July 8 that the federal government has agreed to pay the company an initial settlement payment of approximately $100 million, plus the adoption of administrative procedures to resolve claims for the 2009-2013 period. The settlement concludes long-running litigation over the U.S. Department of Energy's (DOE) failure to begin disposing of spent nuclear reactor fuel from Xcel Energy's nuclear plant sites, as required by contract and federal law.

Like other U.S. nuclear utilities, Xcel Energy is required under a 1982 law, the Nuclear Waste Policy Act (NWPA), to pay the DOE regular fees to fund a national nuclear waste repository and the DOE's collection of spent fuel from utilities. The NWPA required DOE's repository to be accepting spent fuel by 1998, however the DOE has yet to establish a repository even though it continues to collect utilities' fees. Left to manage its own spent fuel in the wake of the government's breach of its contract obligations under the NWPA, Xcel Energy has incurred significant costs in the process, and filed two suits to recover these costs from the United States.

The settlement resolves litigation in these cases. The first case, decided by the U.S. Court of Federal Claims in Xcel Energy's favor in September 2007, was on appeal, and the second case was scheduled to go to trial in the Court of Federal Claims this month.

The government's first settlement payment addresses Xcel Energy's spent fuel storage costs incurred through 2008. It also provides for "timely reimbursement" for the actual costs incurred for spent fuel storage between 2009 and 2013, according to Xcel Energy. Xcel Energy expects those costs will total another roughly $100 million that would be paid over the next four years. The utility notes this settlement does not address costs for spent fuel storage after 2013 and says such costs could be the subject of future litigation.

Government Contracts & Disputes partner Alex D. Tomaszczuk and Energy partner Jay E. Silberg represented Xcel Energy, along with Xcel Energy assistant general counsel Kerry Koep, in the litigation and the settlement proceedings. The attorneys, joined by Government Contracts & Disputes counsel Daniel S. Herzfeld and senior associate Jack Y. Chu also represented Xcel Energy in the cases.

Pillsbury represents a number of other utilities in similar spent-fuel litigation against the government and has successfully argued on their behalf in cases like Nebraska Public Power District v. U.S., in which the U.S. Court of Appeals for the Federal Circuit ruled the government cannot claim its repository delay was "unavoidable" and therefore cannot use this as an excuse to avoid reimbursing affected utilities.