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Public Service Company of Colorado v. Kempthorne

May 25, 2006

PUBLIC SERVICE COMPANY OF COLORADO, PLAINTIFF,
v.
DIRK KEMPTHORNE, IN HIS OFFICIAL CAPACITY AS GOVERNOR OF THE STATE OF IDAHO, DEFENDANT.
UNITED STATES OF AMERICA, PLAINTIFF,
v.
DIRK KEMPTHORNE, IN HIS OFFICIAL CAPACITY AS GOVERNOR OF THE STATE OF IDAHO; STATE OF IDAHO, DEFENDANTS.



The opinion of the court was delivered by: Honorable Edward J. Lodge U. S. District Judge

MEMORANDUM ORDER

On March 31, 2003 this Court entered an order denying Plaintiff's motion to dismiss/motion for summary judgment and granting Defendants' motion for summary judgment and declaratory ruling. (Dkt. No. 266). The Ninth Circuit reversed and remanded the matter. (Dkt. Nos. 276, 278). A status conference was held whereupon both parties withdrew their motions and stipulated to a period of discovery. (Dkt. Nos. 287, 288, 289, 290). The parties also agreed that the matter would be decided by way of a court trial which was held on February 6, 2006. (Dkt. No. 336). At the conclusion of the trial, the Court directed the parties to submit briefing which the parties have now done and the matter is ripe for the Court's consideration. (Dkt. Nos. 345, 346, 347). Accordingly, the Court enters the following order.

Factual and Procedural Background

This case has a lengthy factual and procedural history which centers around the transportation, receipt, storage, management, and removal of hazardous wastes at the Idaho National Engineering Laboratory ("INEL").*fn1 The INEL was established in 1949 to research various types of nuclear reactors. The INEL has since broadened its research to include other engineering facilities and research, including the Radioactive Waste Management Complex ("RWMC") where the Department of Energy ("DOE") manages waste generated by national defense sources and research programs.

The original complaint in this matter was filed on February 7, 1991. The parties in the action at that time were Plaintiff Public Service Company of Colorado, Defendant then Governor of the State of Idaho, Cecil D. Andrus, and Counter Defendant the DOE. (Dkt. No. 1, Case No. CV91-35-S-EJL).*fn2 A similar action was also filed by the United States of America against Governor Andrus and the State of Idaho (hereafter the "State" or "Idaho"). (Dkt. No. 1, Case No. CV91-54-S-EJL). In that action (Case No. CV91-54-S-EJL), the State of Idaho filed counterclaims against the United States of America. The cases were consolidated with Case No. CV91-35-S-EJL being made the lead case. The issues presented involved the review of the DOE's decision to store spent nuclear fuel at the INEL.

On May 7, 1991, the Honorable Harold L. Ryan granted the United States' motion for summary judgment and Public Service Company of Colorado's motion for preliminary injunction which enjoined Governor Andrus and the State of Idaho from interfering with the transportation of spent nuclear fuel across the highways of Idaho for storage at INEL. The parties filed cross motions for summary judgment. On June 28, 1993, Judge Ryan entered an order granting the State of Idaho's motion for summary judgment and denied the United States' motion for summary judgment. (Dkt. No. 118). The Court also enjoined the DOE from any further transportation, receipt, processing, and storage of spent nuclear fuel at INEL until a comprehensive Environmental Impact Statement ("EIS") was completed as required by the National Environmental Policy Act ("NEPA"), 42 U.S.C. § 4321 et seq. The EIS was to examine alternatives concerning transportation, receipt, storage and management of spent nuclear fuel at the INEL. (Dkt. No. 118). The Court retained jurisdiction over the case to resolve any disputes between the parties regarding the final EIS.

Following the issuance of the EIS, this matter was re-opened on May 19, 1995 to address the State's concerns regarding the United States' compliance with the final EIS. (Dkt. No. 149). The parties again filed countering motions for summary judgment. On October 17, 1995, during then Governor Philip Batt's administration, the parties resolved the matter by entering into a settlement agreement ("1995 Agreement"). (Dkt. No. 219). The Court entered an order adopting the 1995 Agreement and again retained jurisdiction over the case. (Dkt. No. 220).

The matter is again before the Court on the State's motion to re-open the case pursuant to the Court's retained jurisdiction seeking to contest the United States' compliance with the 1995 Agreement. (Dkt. No. 223). Specifically, the State seeks a determination that the DOE is obligated, pursuant to the express terms and conditions of the 1995 Agreement, to remove all transuranic waste located at the INEL no later than 2018, including, but not limited to transuranic waste which was indiscriminately buried in the subsurface disposal area. (Dkt. No. 223).*fn3 The Court granted the motion and ordered that the case be reopened. (Dkt. No. 231).*fn4 The parties then filed their cross motions.*fn5 The Court found in favor of the State and the decision was appealed. (Dkt. No. 266). The Ninth Circuit reversed and remanded the decision with the following direction:

We remand the case for the district court to consider the parties' extrinsic evidence, including the source of the 65,000 cubic meter estimate, in interpreting the contract so as to give effect to the second clause as well as the first. See Gumport v. AT& T Techs., Inc., (In re Transcon Lines), 89 F.3d 559, 568 (9th Cir. 1996) (stating that the parol evidence rule "does not prohibit the use of evidence to clarify or to explain ambiguous terms" of a contract). (Dkt. No. 276, p. 3). Accordingly, the Court held a four and a half day bench trial where both parties presented evidence regarding the interpretation of the 1995 Agreement and, in particular, the 65,000 cubic meters estimate. Having presided over this matter for several years, and having heard the evidence, reviewed the record, and considered the parties' oral and written arguments, the Court finds as follows.

Analysis

This is a contract case. As with everything in the law, but even more so in contract law, words are our tools.*fn6 The words expressed in a contract become legally binding and enforceable commitments upon the parties once the contract is finalized. Where the words are clear there is little dispute over the commitments upon each party. Where, however, words are unclear the contract must be interpreted to give meaning to the parties' intent. The meaning of a contract term can only be ascertained when viewed in the context in which the parties drafted the terms. "Any determination of meaning or ambiguity should only be made in the light of the relevant evidence of the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made therein, [and where applicable] usages of trade, and the course of dealing between the parties." See Restatement (Second) of Contracts § 202, 219-23 (1981). After the transaction has been shown in all its length and breadth, the words of an integrated agreement remain the most important evidence of intention. See Restatement (Second) of Contracts § 202 (1981).

1) Posture of the Parties:

The Court's inquiry begins by viewing the context of the contract negotiation and the posture of the parties when the negotiations of the 1995 Agreement began. On May 17, 1995 the State moved to reopen the case. (Dkt. No. 148). The Court reopened the case and reimposed the June 28, 1993 injunction which stopped any further shipments of spent nuclear fuel into Idaho. (Dkt. No. 149). Former Governors Andrus and Batt both testified that at the time they felt the United States was not keeping its commitments to Idaho and both were concerned that Idaho would become a de facto dumping ground, or permanent repository, unless an agreement was reached assuring that the waste stored at INEL would be removed from Idaho.*fn7 (Batt, pp. 82-84, 87).*fn8 The State also feared for the safety of the Snake River aquifer located directly below the waste buried at the subsurface disposal area ("SDA"); this fear stemmed from the recent leak of radioactive material at the Hanford facility that was threatening the Columbia River coupled with the knowledge that the wastes buried prior to the 1970's were stored in containers with a life-expectancy of twenty or twenty-five years which, in 1995, were nearing expiration. In some cases, the waste was contained only in cardboard boxes. (Andrus, pp. 19, 21, 23-24; Batt, pp. 72, 74-75; Lance, pp. 152-55). This fear was bolstered by Idaho's own experience with carbon tetrachloride from the National Reactor Testing Station ("NTRS")*fn9 which had migrated 600 vertical feet toward the Snake River aquifer. (Andrus, pp. 20, 30).

The State expressed its concerns and fears regarding the buried waste at INEL in a telegram to Dixie Lee Ray at the Atomic Energy Commission ("AEC").*fn10 (Andrus, pp. 20-21). The telegram was an effort by the State to obtain assurances from AEC that the waste at INEL, in particular the buried waste, would be removed from INEL. Thus, from the State's perspective the removal of waste centered around the buried waste at the INEL. The safety and security of the underground aquifer was a "lightning rod" issue in this case and was of primary importance to Idaho. (Guida, p. 101). Any leak of the wastes into the Snake River aquifer would not only have tremendous political ramifications, but also an economic impact of gigantic proportions throughout the State since the Snake River traverses nearly the entire length and width of the State of Idaho. (Lance, pp. 152-55).

The United States brought to the table the pressing need to remove and store spent nuclear fuel rods from Navy ships, which had been halted when Idaho secured the injunction upon reopening the case. (Guida, p. 93; Frei, pp. 167-169; Grumly, pp. 6, 8-11, 18-22). The delay in shipments of spent fuel rods to Idaho was creating a national security issue in that at least some nuclear powered ships could not operate until this settlement was resolved. (Batt, pp. 76-77; Grumbly, pp. 6, 8-11, 18-22; Frei, p. 168). Additionally, the DOE had its own spent fuel objective to bring foreign based spent fuel to the United States for storage because the fuel was coming out of reactors in unstable countries around the world and could potentially be made directly into nuclear weapons.*fn11 (Grumly, p. 22). Politically in 1995, the DOE was under budget constraints from Congress relief from which the DOE was seeking the support of Idaho's congressional delegation. (Grumly, p. 18-19). Finally, witnesses for the United States testified that DOE desired to reverse the perception that it had not lived up to its past obligations. (Grumbly, p. 9). According to Mr. Grumbly, the federal government wanted to improve its credibility by fulfilling its obligations and commitments which had not occurred in the past. (Grumbly, p. 9). For all of these reasons the Navy and DOE wanted very much to settle the dispute with Idaho.*fn12

With that background, the bargaining positions of the parties becomes clear. Idaho held an important bargaining chip having obtained an injunction precluding the shipment of the Navy's spent nuclear waste which was causing a national security problem thereby enabling the State to proclaim the August 31, 1995 proposal as its final offer. The United States' own objectives meant that it too was eager to reach a settlement in this matter.

2) Interpretation of the 1995 Agreement

The express language of the 1995 Agreement requires DOE to remove all transuranic waste, as defined in the Agreement, out of Idaho regardless of where it is located at the INEL. Paragraph B.1 states:

B. TRANSURANIC WASTE SHIPMENTS LEAVING IDAHO

1. DOE shall ship all transuranic waste now located at INEL, currently estimated at 65,000 cubic meters in volume, to the Waste Isolation Pilot Plant (WIPP) or other such facility designated by DOE, by a target date of December 31, 2015, and in no event later than December 31, 2018.

Transuranic waste is expressly defined in the contract at Paragraph A.4 of the 1995 Agreement and states that "'Transuranic waste' shall be defined as set forth in the EIS, Volume 2, Appendix E," which states:

transuranic waste Waste containing more that 100 nanocuries of alpha-emitting transuranic isotopes with half-lives greater than 20 years per gram of waste, except for (a) high-level radioactive waste; (b) waste that the U.S. Department of Energy has determined, with the concurrence of the Administrator of the U.S. Environmental Protection Agency, does not need the degree of isolation required by 40 CFR 191; or (c) waste that the U.S. Nuclear Regulatory Commission has approved for disposal on a case-by-case basis in accordance with 10 CFR 61.

The words of the contract could not be clearer. The waste meeting this definition and located at INEL must be removed from Idaho as stated in Paragraph B.1. It is the definition, not the 65,000 cubic meter estimate, that controls the obligation to remove waste under the 1995 Agreement. For better or worse, both parties are bound by the definition both as to what it includes and what it does not.

a) Drafting History - Alpha Low-Level Waste and Transuranic Waste Definition

This definition was a contested point in the negotiations. In arriving at the definition of transuranic waste, the State sought repeatedly to include alpha low-level waste in the definition. (Trever, pp. 22, 53-82). Idaho was particularly concerned about alpha low-level waste being removed because of future projects proposed by DOE at INEL which had the potential for alpha low-level waste to be stored at INEL permanently. (Trever, pp. 22, 55-82, 166-68). This is consistent with Idaho's efforts throughout these negotiations to expand the waste subject to removal from INEL. (Frei, p. 155; Urie, pp. 182-83; Trever, pp. 9-12, 53-82). On the other hand, the United States was insistent that transuranic waste be defined as in the EIS which excluded alpha low-level waste. Late in the negotiations, the State ceded the point and alpha low-level waste was taken out of the final definition thereby removing any obligation upon the United States to remove alpha low-level waste from INEL.*fn13 (Grumbly, pp. 47-49; Trever, pp. 81).

United States' witnesses testified that alpha low-level waste was removed from the definition so that the definition was consistent with other applicable Federal documents and regulations and because WIPP would not accept alpha low-level waste. (Frei, p. 155-57; Guida, pp. 68-69, 76-78). The Federal Government acknowledges that although not included in the definition of transuranic waste, the intent was to remove the alpha low-level waste by mixing it with transuranic waste stored at the Transuranic Storage Area ("TSA") to meet the requirements for shipment to WIPP. The United States maintains this intent is evidence by the DOE documents used by Ms. Trever and the parties' negotiations for the Site Treatment Plan. These intentions, however, were not conveyed to Idaho's negotiators. (Batt, pp. 100, 103; Trever, pp. 166-67).

The United States points out that the EIS, used to define transuranic waste, estimates the amount of waste stored at TSA was 65,000 cubic meters. The United States concludes that because Idaho knew the intent was for alpha low-level waste and transuranic waste at TSA to be treated together for removal to WIPP, Ms. Trever's conclusions regarding the 65,000 cubic meter estimate are unreasonable. Because the two waste streams were to be managed together, the United States contends, the quantity of material for removal referenced by the 65,000 cubic meters could only be that waste stored at the TSA. In response, Ms. Trever noted that figure used a definition which included both transuranic and alpha low-level waste. (Trever, 120-122, 143). During cross-examination of Ms. Trever, counsel noted portions of the ROD (Ex. 69) which stated that transuranic and alpha low-level wastes were generally expected to be managed together and that the site treatment facility was for treatment of alpha low-level waste such that it meets the acceptance criteria for disposal at WIPP. (Trever, pp. 128-29). In response, Ms. Trever acknowledged the ROD did speak to those things but that the statements were "at odds" with other portions of the ROD. Id. On redirect, Ms. Trever clarified that the ROD's application of the management of alpha low-level and transuranic wastes together seemed to only apply to storing and characterizing the waste not treatment and disposal because the ROD discussion regarding treatment did not coincide with the later plan proposals which included disposal ...


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