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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 their firms as well as energy industry legal analysis, please visit www.martindale.com and our Legal Articles database. Duane Morris LLP 20 www.martindale.com
Walking Hand in Hand Newland Communities and Fowler White Boggs Banker profiles in partnership By Scott M. Gawlicki From an attorney’s perspective, there are real estate projects, and then there are “master-planned communities.” Consider San Diego-based Newland Communities’ latest project, the 7,000-acre Bexley Ranch. Located in Pasco County, Fla., just outside Tampa, Bexley will feature 6,000 single-family homes; 1,000 multifamily units; 400,000 square feet of retail space; 250,000 square feet of office space; land for two elementary schools, a middle school and a high school; an 18-hole golf course; a library; some 120 acres of parks; a 176-acre wildlife corridor and a 1,433-acre greenway corridor, each with walking trails and bike paths; and roughly $78 million in local road improvements. Getting a project this big off the ground— it’s being developed in three phases and should be completed around 2025—takes experience and plenty of legal legwork. In the case of Bexley, the legal concerns rest squarely on the shoulders of Rhea F. Law, president and CEO of Fowler White Boggs Banker. “Rhea’s knowledge regarding the legal issues surrounding project development complements our land use expertise perfectly,” says Newland Senior Vice President and General Counsel Martha Guy. “Her input on a project like Bexley is invaluable. She’s as much a part of our team as anyone in-house.” “I love my job,” Law says. “Newland is one of the largest residential and urban mixeduse community developers in the country— they have nearly 40 communities under way in 14 states. They’re very successful and the key to that success is their focus on quality and innovation. And I love working with innovative people.” Pictured clockwise from left are Don Whyte, Newland Communities; Rhea F. Law, Fowler White Boggs Banker; Sharon Koplan and Martha Guy, Newland Communities Starting With a Retreat Indeed, virtually everything about Newland’s approach to project development is innovative. Take, for example, the way the company launches each new project. It assembles all the key players, including land use planners, engineers, marketing experts, biologists, wetland experts, botanists and the project’s legal/permitting representative, in this case Law, for an “envisioning.” It’s a retreat of sorts, often held near the proposed building site. Photography by Red Kite Studios “Each team member brings an instinctive feel for where the community needs to go,” explains Don Whyte, Newland senior vice president for the Southeast region who also works with the company’s regional general counsel, Sharon Koplan. “Our communities are literally designed from the ground up. We begin by identifying the buyers. Will there be family units built for kids or empty-nester units for adults? Families are changing and their needs are changing, too. So we say, ‘Here are the potential buyers, what kind of amenities will they need?’ Then we examine each idea from a land use perspective.” JULY 2007 21
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