Vermont Yankee: A Win for Nuclear?

Emily Dixon, J.D./C.L. 2014, Paul M. Hebert Law Center, Louisiana State University

The recent decision in Entergy Nuclear Vermont Yankee LLC v. Shumlin served as a victory for nuclear power and a loss for state efforts to limit its use.[1] In this case, the United States  Court of Appeals for the Second Circuit, affirming the district court in part,[2] granted a permanent injunction enjoining Vermont from enacting statutes intended to shut the nuclear plant down. The Court reasoned, despite Vermont’s arguments to the contrary, that the federal Atomic Energy Act of 1954 (“AEA”) preempted these state statutes.

Entergy Corporation (“Entergy”) successfully bid on the Vermont Yankee Nuclear Power Plant (“Vermont Yankee”), in operation since 1972 and was granted a “certificate of public good” by the state of Vermont in 2001.[3] The sale of the plant to Entergy was granted final approval by the Vermont Public Service Board (“Board”) on June 13, 2002.[4] Not long after the sale of Vermont Yankee, Entergy petitioned the Board to obtain permission for a twenty-percent “uprate.”[5] An uprate would allow Entergy to increase Vermont Yankee’s power output. However, this increase of output would also result in an increase of nuclear waste and therefore, an increased need for waste storage facilities.[6]

At the time of Entergy’s petition for the uprate, Vermont law prohibited the construction of new nuclear waste facilities unless the Vermont Legislature specifically approved the facilities as promoting the “general good of the state.”[7]However, the section 6501 requirement provided an exemption for “any temporary storage by Vermont Yankee Nuclear Power Corporation of spent nuclear fuel elements or other radioactive waste at its present site.”[8]

Both sections 6501(a) and 6505 were passed shortly after the Vermont Yankee began operations. At the federal level, the Nuclear Regulatory Commission (“NRC”) had granted Entergy’s request to increase waste facilities, but section 6501 required Entergy obtain Vermont’s approval, unless the section 6505 exemption applied to the plant’s new owners.

Entergy argued that the exemption in section 6505 applied as it was intended for the power plant in general and was not conditioned on a specific owner of the plant. [9] The Attorney General of Vermont issued an opinion letter declaring that the exemption was owner specific; since ownership of Vermont Yankee had changed, Entergy would need approval from the Vermont Legislature in order to increase the output of the plant.[10]

This conflict over increased capacity of the plant led to the passing of Act 74. Act 74 was enacted on June 21, 2005.[11] The Act consisted of two parts.  First, Entergy could seek a certification of a public good from the Board and construct new storage facilities for nuclear waste. Second, the Board’s certification would remain effective only until March 21, 2012, and any new spent nuclear fuel in Vermont after March 21, 2012 would require an affirmative vote by the Vermont Legislature. The Vermont Legislature’s failure to approve the new and necessary waste storage would effectively shut Vermont Yankee down.[12]

The passage of Act 74 codified the Vermont Attorney General’s opinion that the section 6505 exception did not apply to Entergy.[13]Act 74 also changed the opportunity for review of decisions affecting new facility construction. Prior to Act 74, if the Board denied Entergy’s request for new storage facilities, then Entergy could have appealed that decision to the Vermont Supreme Court. By empowering the Vermont Legislature to grant permission, Entergy’s right to have the decision reviewed by the courts was taken away.[14]

The expressed reasons for passing the statute stated only economic interests. Act 74’s express statements of legislative purpose reflect two primary policy interests: an increased use of a diverse array of renewable power sources,[15]and promotion of economically sound energy resources.[16] Since the AEA gives the states the ability to make economic choices in regards to nuclear power, neither of these expressed policy interests is facially impermissible.

The foundation for Vermont’s actions in the current case was laid by a prior case involving a California statute.  In Pacific Gas & Electric Co. v. State Energy Resource Conservation & Development Commission, the Supreme Court held a California statute was not preempted by the AEA because the state statute was passed pursuant to purely economic motivations.[17] In dicta, the Court posited that a state statute attempting to “regulate the construction or operation of a nuclear plant […] even if enacted out of non-safety concerns, would nevertheless directly conflict with the NRC’s exclusive authority over plant construction and operation.”[18]

Under this interpretation of Pacific Gas, potential effects, even if unstated and unintended, of a statute could result in the preemption of that statute by the AEA. Thus, a state statute purportedly regulating economic decisions dealing with a nuclear power plant should stay within the economic realm and have no effect on the construction or operation of a nuclear power plant.

Entergy brought suit in federal court, arguing that the federal AEA preempted Vermont’s Act 74.[19] In a bench trial, the district court agreed with Entergy.[20] The district court’s analysis of the legislative history showed that Act 74 was actually motivated by impermissible motives, as opposed to the motivations expressly claimed in the statement of purpose.[21] Vermont’s Governor appealed the decision to the Second Circuit, who affirmed.

The Second Circuit Court of Appeals began their preemption analysis with “the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.”[22]

The court noted that there are several forms of preemption. First, when Congress expressly states that it is preempting state authority, federal preemption exists.[23] Preemption is also found where state law impedes on the “execution of the full purposes and objectives of Congress.”[24] Here, though there is no express preemption, “Congress’ intent to supersede state law may be found from a scheme of federal regulation … so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.”[25]

In applying that analysis, the court looked to the purpose of the AEA, holding that Congress passed the AEA to allow private sector development of atomic energy, a goal previously not allowed under the Act’s original text.[26] The AEA granted “exclusive jurisdiction to license the transfer, delivery, receipt, acquisition, possession and use of nuclear materials” to the Atomic Energy Commission, the predecessor of the modern day Nuclear Regulatory Commission.[27] The AEA left “no role…for the states” in the licensing function.[28] But, the AEA did leave a particular responsibility to the states: “generation, sale, or transmission of electrical power produced through the use of nuclear facilities.”[29] In other words, the states hold the power to determine the demand for nuclear power, and how it can be sold and transmitted to the market place, but not to regulate the safety of a nuclear power plant, a power exclusively reserved for the NRC.

The Court of Appeals agreed with the district court, in that Act 74 was motivated by impermissible radiological safety concerns rather than permissible economic concerns.[30]Indeed, the court examined the legislative history, noting that some legislators asked questions about accidental release of radioactive waste, but were admonished by a colleague who restricted questions to only economic and aesthetic concerns.[31] Finally, in a committee meeting, one representative approved of the committee’s work to “ensure that the findings have been emasculated and sanitized” and that the bill no longer mentions “high-level nuclear waste.”[32]

Based on these statements from the legislative history, the Court of Appeals affirmed the district court. The court was willing to pierce the expressed intent of the Vermont Legislature to ascertain the true intent of Act 74. The court agreed that Act 74 was clearly to regulate the safety and operations of a nuclear power plant in Vermont. In addition to the impermissible regulatory goals, the Vermont Legislature intended to use the Act in concert with other Acts at issue in this case, to shut down Vermont Yankee. However, the Court of Appeals has made it clear to Vermont and any other state who may seek to do the same: “This is a legislative approach that Pacific Gas does not permit.”[33]

Conclusion

On August 27, 2013, two weeks after the Court of Appeals handed down their decision, Entergy announced the Vermont Yankee plant would be shutting down in 2014. The decision was described as being a “tough-call” by Leo Denault, Entergy’s CEO, but was ultimately made for economic reasons.[34] The plant simply was not profitable for the company.[35]It would seem from this result that while Vermont lost the legal battle, they may have ultimately won the war should the plant shut down.

In an industry plagued by extremely high costs and a long wait for profitability, the ability to make economic decisions is a powerful right for the states to hold, especially when the idea of nuclear power is often extremely controversial among a state legislature’s constituents. As discussed above, under current law, the states may exclude nuclear power from their makeup of energy providers, by the state legislature deciding such power is not economically viable for the state. This case has done nothing to change that right and in fact, has in some ways reinforced it.

However, the tides may be turning for the economic viability of a nuclear plant. Since the 1950s, the AEA has banned foreign ownership and investment in domestic nuclear plants.[36]The NRC holds the power to implement this regulation.[37] According to the NRC, they plan on announcing any changes to their implementation of this rule by the end of 2013. A change that loosens current restrictions on foreign investment could be a game changer for nuclear power in the United States; a greater flow of investment money means a lower hurdle for plants to meet before becoming profitable. It also means that economic arguments against a nuclear power plant in a particular state will be harder to rationalize. If nuclear power becomes more economically viable, the state’s economic justification for back-door regulation will become increasingly outdated.

In anticipation of an announcement by the NRC, and potential new investment in nuclear power, the Court of Appeals opinion in Entergy is well-timed.  It serves as a strong reminder to states that their intentions will be deeply analyzed, and mere statements of intent will not suffice to cover up motives that go beyond the boundaries of their rights.

Preferred citation: Emily Dixon, Vermont Yankee: A Win for Nuclear?, LSU J. Energy L. & Res. Currents (November 6, 2013), http://sites.law.lsu.edu/jelrblog/?p=368.