June 24, 2011, Belly Buttons and Blarney in Brattleboro

Don KreisJohn Herron, CEO of Entergy’s nuclear operations, seems affable enough. He drew a laugh in U.S. District Court in Brattleboro on Thursday when he referred to a “belly button count” as a folksy synonym for the number of people working at his company’s Vermont Yankee nuclear power plant. But there was nothing affable about the implied threat that Herron delivered a few minutes later in the courtroom of Judge J. Garvan Murtha. The backdrop, of course, was the lawsuit Entergy has filed against Gov. Shumlin and other high state officials seeking to block the state’s assertion of veto power over the Vernon plant’s continued operation after March 21, 2012. Judge Murtha convened the parties in his courtroom starting Thursday for a two-day hearing to consider Entergy’s request for a preliminary injunction—a pre-trial order that would keep Vermont Yankee in business past March 2012 while the case works its way toward a possible date with the U.S. Supreme Court. Sitting in the witness box just a few feet away from the judge, Herron noted that Vermont Yankee has plans for a refueling outage beginning in late October. Then Herron explained that, in order to conduct the planned replacement of one-third of the fuel rods in the reactor, which is necessary to the facility’s continued operation at full power, he would have to commit, by July 23 at the latest, to buy the radioactive material from the supplier, General Electric. The price tag, according to Herron—a cool $60 million. Herron looked Judge Murtha in the eye and testified that, unless Entergy gets its preliminary injunction, the New Orleans-based company just might close down Vermont Yankee—permanently. “Here’s the challenge I have,” Herron said. “I have to make a $60 million investment here that I may not ever be able to recover.” Of course, the permanent shutdown of Vermont Yankee is precisely what Gov. Shumlin and lots of other Vermonters desire. But Judge Murtha is supposed to be—and by all appearances actually is—a neutral arbiter. As such, he could not have enjoyed being told by a high official of the plaintiff in an important lawsuit pending before him that unless he grants extraordinary and emergency relief—ruling along the way that the plaintiff is likely to win its case—the litigation will be pointless and hundreds of Vermonters (all those belly buttons) will lose their jobs. So here’s what Judge Murtha did. He waited patiently until the lawyers were finished questioning Herron and then he posed some questions of his own. First, Judge Murtha asked Herron whether he would commit to spending that $60 million in July given that even with a preliminary injunction, the case might still end in defeat for Entergy—a process that could take years. “I would release GE to manufacture those fuel assemblies based on that,” Herron testified. Then Judge Murtha pounced. “What happens if I don’t?” he asked, meaning grant a preliminary injunction. Herron equivocated. “I don’t want to say we would agree to shut down,” he told the judge. “It’s a decision we have not really finalized yet.” Meanwhile, the threat stands. And Judge Murtha will have to assess it in light of a notably unpersuasive argument by Entergy. One threshold Entergy must clear is demonstrating a likelihood of success on the merits. And it is here that Entergy has its strongest case. Although there are colorable arguments on both sides, what looms large is federal legislation that, under the Constitution’s supremacy clause, grants to the U.S. Nuclear Regulatory Commission the exclusive right to regulate radiological safety at nuclear power plants. When the Vermont Legislature in 2005 and 2006 adopted the bills that claimed for the lawmakers themselves the right to veto Vermont Yankee’s continued operation, legislative leaders were careful to omit any mention of safety from the final draft of the bill. The second of the two contains formal legislative findings to the effect that everything but safety was the basis of the enactment. Among other things, this yielded a theatrical morning on Thursday in U.S. District Court that featured Entergy lawyer Kathleen Sullivan playing a series of “gotcha” sound bites from the legislative record. These were designed to convince Judge Murtha that no matter what the Legislature declared formally, everyone knew that the stated reasons were pretextual and the law was grounded in, to quote Sullivan’s persistent refrain, “safety, safety, safety.” “Okay . . . let’s find another word for safety,” Sen. Ann Cummings is heard saying during deliberations on the 2006 legislation. Attorney Sarah Hofmann, then the chief of public advocacy for the Vermont Department of Public Service, is likewise heard telling legislators that “we can help you come up with some language that you could put at the top (i.e., in the declaration of findings) to hopefully prevent preemption problems.” Sullivan showed Murtha successive versions of at least one legislative document suggesting that lawmakers simply deleted the word “safety” prior to final enactment. It is, of course, abysmal public relations for a company that wishes to remain in Vermont to be heard trashing the state’s citizen-lawmakers. So, Sullivan kept praising as “conscientious” the state legislators who were talking about safety, maintaining that this was the issue constituents seemed to care about. Vermont Assistant Attorney General Bridget Asay countered by playing a series of “anti-gotcha” sound bites on behalf of the defendants. “We are not looking at safety, we are looking at reliability,” the Court heard Sen. Ginny Lyons advise her colleagues from the Senate floor. In any event, Murtha gave every indication that he regarded the sound bites as a waste of his time. He offered the very plausible theory that, by listening to those urging that references to safety be stricken from the measures, lawmakers were not being disingenuous but were, rather, simply following good legal advice to avoid the regulation of safety issues. More persuasive—and quite possibly dispositive—was Sullivan’s comparison of this situation to the famous Sherlock Homes story in which the sleuth solved the case by noting the failure of a dog to bark one dark and dreary night on some moor. Here, the dog that didn’t bark was the lack of references during hearings and debates to other reasons for authorizing a legislative veto of continued Vermont Yankee operations. Legislative history—all the stuff that gets said or written on the record as bills are considered—has fallen from favor in the federal courts, and for good reason. Anyone can say anything about any bill, and none of it really explains what was in the heart or head of any given legislator when he or she votes. But, in this case, the court will still want to assure itself that if the legislation in question is not about nuclear safety, it has some rational purpose. And, as was amply debated in court on Thursday, Vermont doesn’t have much to regulate about Vermont Yankee other than safety for the simple reason that the plant is no longer owned by any of the state’s regulated utilities. Thus, if the plant falters for some reason, the economic consequences do not inure to Vermont electric customers. This is in sharp contrast to the situation the U.S. Supreme Court confronted in its 1983 Pacific Gas & Electric (PG&E) case, much debated in Vermont these days. California had banned the development of new nuclear power plants on the ground that dire economic consequences could befall the state’s citizenry given the lack of options for disposing of nuclear waste. The Supreme Court said this assertion was not preempted because it was not an effort to regulate safety but, rather, the economic aspects of nuclear power. But the unbuilt California plants would have been owned by regulated utilities that would have passed on those waste-related costs to their customers. Vermont Yankee is a merchant generator; if the plant goes broke over waste disposal, Entergy does not get to send the bill to Vermont electric customers. That was the whole reason for allowing Entergy to buy the plant from regulated utilities in Vermont (and elsewhere in New England) in the first place. But forget Entergy’s likelihood of success on the merits for the moment. For it is Vermont Yankee’s status as a merchant generator that undermines its argument on another hurdle Entergy must clear to win a preliminary injunction. Entergy must demonstrate that without the injunction, it will suffer irreparable harm as the result of the state’s unconstitutional assertion of authority. In fact, what Entergy has demonstrated is that it now confronts, in admittedly stark terms, adverse consequences of the very business risk it knowingly undertook when it bought Vermont Yankee in 2002. This became patently clear as Herron was explaining why Entergy could not simply shut Vermont Yankee down temporarily and await a hoped-for final victory in court. He agreed that other nuclear plants have closed temporarily in analogous circumstances, but then he described Vermont Yankee as a “merchant plant” that is a “separate business entity that has to survive on its own.” In other words, Vermont Yankee is a separate subsidiary of Entergy that has no guaranteed revenue stream from retail customers paying regulated rates. “I don’t have the option of going to the ratepayers to see if I can get recovery—that option’s not there for me,” Herron explained to Judge Murtha. Precisely so. When Entergy bought Vermont Yankee in 2002, it did so knowing that the plant’s federal operating license expired on March 21, 2012, along with its state-law authority to operate. Indeed, Entergy explicitly agreed to seek permission from the state Public Service Board for permission to continue running after that date. And Entergy knew that it would have to eat any financial losses if further licenses and permits were not forthcoming—that’s what makes Vermont Yankee a merchant generator. And then there is the longstanding legal principle that one who comes before a court seeking equitable relief—in this case, a preliminary injunction—must do so with “clean hands.” Entergy has a problem in this regard: It actively lobbied in favor of the first of the two bills it now challenges as unconstitutional. “That should matter,” Asay argued. She has a point. Judge Murtha, for his part, seemed to be struggling with a coolness to injunctive relief on the one hand and a desire to find a middle ground on the other. He suggested during his colloquy with Herron that he might enter an injunction of limited duration and, despite previous references to trial in October, the judge also disclosed that he now plans to hear the merits of the case in September. One question this raises is: Why have a trial at all? Trials are to resolve disputed issues of fact. Here, the dispute is purely one of law: Is Vermont’s assertion of authority over Energy preempted by the federal Atomic Energy Act or not? The question has been extensively briefed in connection with the request for preliminary injunction and, after this week’s courtroom proceedings, the issue has now been exhaustively argued. Call me an omphaloskeptic if you want, but sometimes I think that if Entergy was really concerned with irreparable harm, it would stop talking about belly buttons and just get on with the case.

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