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NUCLEAR POWER REGULATORY
INITIATIVES
Although about 100 U.S. nuclear power
plants generate approximately 20 percent
of the country’s electricity, no nuclear
plants have been constructed since the
1970s. Now concerns over greenhouse gas
emissions and energy independence have
renewed interest in nuclear power. Utilities
will benefit from at least two federal
regulatory innovations to spur nuclear
plant construction.
In late 2006, the Nuclear Regulatory
Commission (NRC) issued a final rule
updating CFR 10 Part 52 for approval of
nuclear plant construction. The new
rule establishes a streamlined process for
site selection, design certification and
an operating license, each of which was
previously a separate approval proceeding.
The streamlined process could cut the
new plant approval time in half. The
use by utilities of probabilistic risk
assessment (PRA) in their applications,
reflecting decades of experience operating
sophisticated offshore nuclear plants
abroad, also supports greater efficiency
in the approval process. The NRC has
adopted the position that third parties
wishing to contest plant construction
must base their objections on sound and
demonstrable technical reasons somewhat
comparable in sophistication to a PRA.
“Nuclear Power 2010” is a complementary
Department of Energy (DOE) initiative.
This joint government/industry cost-shared
effort focuses on identifying standardized
nuclear plant technologies and site selection
techniques. Thanks to the program, the
DOE is close to finalizing two standardized
nuclear plant designs, which by replacing
customized, site-specific designs will further
simplify regulatory approval. Also, the
Tennessee Valley Authority is taking the
lead in demonstrating how new nuclear
plants can be built on existing sites to
facilitate site approval.
Roy P. Lessy Jr.
Partner, Energy and Natural Resources
rlessy@pattonboggs.com
Peer Review Rated
Patton Boggs LLP
NEW CONTRACT TERMS FOR
NUCLEAR CONSTRUCTION
Pressures to reduce greenhouse gas
emissions have renewed interest in nuclear
power plant construction. However, U.S.
utilities will be unable to obtain financing
unless they can ensure plant operation
within a fixed period. Utilities are likely to
demand different construction contract
terms than those from the 1970s by:
• Replacing cost-plus arrangements with a
fixed sum for the entire project.
• Replacing the role of the subcontractor
design team with direct contracts between
utilities and designers.
• Requiring that contractors bear the
following risks: labor interruptions,
even though personnel shortages are
anticipated; procurement problems, even
for overseas purchase; and schedule risk,
even when the contractor will have little
or no control over the design schedule.
• Expecting contractors to bear the risk
of damage to existing facilities when new
plants are built nearby.
• Requiring contractors to meet Safety
Conscious Work Environment (SCWE)
standards of the Nuclear Regulatory
Commission (NRC), and to maintain
Employee Concern Programs (ECP) for
workers.
• Dealing with a tightening surety market.
Some issues from 30 years ago will
remain critical:
• Contractor quality assurance responsibilities
under evolving NRC regulations
and construction acceptance standards.
• Contractors participating in environmental
site assessment and approval
under the National Environmental
Policy Act of 1969.
Increasing the contractor’s risk could help
utilities commoditize the construction
process, ensuring prompt NRC approval
and recovery of capital and construction
costs in ways that can attract financing.
Richard H. Lowe
Partner, Construction Law and Litigation
rhlowe@duanemorris.com
Peer Review Rated
Charles W. Whitney
Chair, Nuclear Energy Practice Group
cwwhitney@duanemorris.com
Peer Review Rated
MASS LITIGATION LIABILITY
Two recent mass litigation verdicts in West
Virginia state courts may lead to significant
liabilities for energy producers, and could
spur similar lawsuits in other states.
Individual cases arising from a 2001 flood
were consolidated and allowed to proceed
by the Supreme Court of Appeals of West
Virginia as In re: Flood Litigation. The
approximately 4,000 plaintiffs alleged that
landscape alterations from surface coal
mining and timber operations caused
flooding of nearby homes and businesses.
Many defendants settled before trial, and
the first case tried in 2006 produced a
jury verdict for the plaintiffs. In March
2007, the trial court set aside the verdict,
ruling that the floods were caused by an
unforeseeable event and not the actions of
the defendants. Nevertheless, the Flood
Litigation cases were an innovative attempt
to hold energy extractive producers liable
for what previously were considered “Acts
of God.” Subsequent floods have resulted
in additional litigation.
In another new mass litigation approach,
a class of West Virginia landowners sued a
natural gas producer, alleging that they
were fraudulently denied the full value of
natural gas royalties by company practices
considered standard in the industry. The
2007 jury decision in Estate of Garrison
G. Tawney, et al., v. Columbia Natural
Resources, L.L.P. awarded the plaintiffs
$404.3 million, including $270 million in
punitive damages. Although an appeal is
likely, two lawsuits against other producers
have already been filed. The plaintiffs’ case
focused on the deduction of post-production
costs from royalties as well as alleged
“fraud” in failing to properly identify such
deductions on royalty statements. The
size of the verdict will likely force natural
gas companies to change their royalty
calculation formulas and royalty statements.
Richard J. Bolen
Partner, Litigation
rbolen@huddlestonbolen.com
Peer Review Rated
Huddleston Bolen LLP
For more information on these lawyers and
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analysis, please visit www.martindale.com
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Duane Morris LLP
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