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United States v. Energy Solutions, Inc.

United States District Court, D. Delaware

June 21, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
ENERGY SOLUTIONS, INC., ROCKWELL HOLDCO, INC., ANDREWS COUNTY HOLDINGS, INC., and WASTE CONTROL SPECIALISTS LLC, Defendants.

          Jennifer Hall, Esquire, United States Department of Justice, Wilmington, Delaware. Counsel for Plaintiff. Of Counsel: Julie Elmer, Esquire, R. Cameron Gower, Esquire, Bindi Bhagat, Esquire, Travis Chapman, Esquire, and John Lindermuth, Esquire of United States Department of Justice Antitrust Division, Washington, D.C.

          Paul J. Lockwood, Esquire, Joseph O. Larkin, Esquire, and Veronica B. Bartholomew, Esquire of Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, Delaware. Counsel for Defendants EnergySolutions, Inc. and Rockwell Holdco. Inc. Of Counsel: Tara L. Reinhart, Esquire, Steven C. Sunshine, Esquire, Tiffany Rider, Esquire, and Steven Albertson, Esquire.

          Donald E. Reid, Esquire and William M. Lafferty, Esquire of Morris Nichols Arsht & Tunnell, Wilmington, Delaware. Counsel for Defendants Andrews County Holdings, Inc. and Waste Control Specialists LLC.

          OPINION

          ROBINSON, SENIOR DISTRICT JUDGE

         I. INTRODUCTION

         The Department of Justice, Antitrust Division (the "government"), seeks to enjoin Rockwell Holdco, Inc. and its wholly owned subsidiary Energy Solutions, Inc. ("Energy Solutions") from acquiring Andrews County Holding, Inc. and its wholly owned subsidiary Waste Control Specialists LLC ("WCS," and collectively with the other defendants, the "defendants"). The government alleges that the acquisition would substantially lessen competition for disposal of low-level radioactive waste in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.

         There is no dispute that the court has personal jurisdiction over all of the defendants. The court has subject matter jurisdiction pursuant to 15 U.S.C. § 25 and 28 U.S.C. §§ 1331, 1337(a), and 1345. The court held a bench trial from April 24 to April 28 and May 1 to May 5, 2017. Having considered the documentary evidence and testimony, the court makes the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52(a).

         II. FINDINGS OF FACT

         As an initial matter, this case is limited to radioactive waste generated by commercial entities, not the federal government. The commercial generators of radioactive waste include nuclear power plants, hospitals, and research facilities. (D.I. 203-1 ¶ 17; https://www.nrc.gov/reading-rm/doc-collections/fact-sheets/radwaste.html (last visited May 19, 2017)) Because nuclear power plants generate over 90% of commercial radioactive waste, the bulk of the evidence presented focused on those customers. (PTX 185 at -102; DTX 323 at -235). This case is further limited to low-level radioactive waste ("LLRW") which will be described in more detail below.

         The facts are organized in the following manner: (1) a brief description of the defendants; (2) a description of the external factors that shape the disposal options available to commercial generators, which include the waste classification criteria, compact state agreements, and processing; (3) an explanation of the decommissioning process, which is not necessarily an external factor but does raise certain issues about radioactive waste disposal not present during normal operations; (4) findings regarding the customer self-help measures defendants argue should be considered an alternative to disposal, including storage, on-site burial, and waste minimization; and (5) a description of the various disposal options available to commercial generators. Finally, WCS has asserted a failing firm defense, so the court must make findings of fact regarding WCS's financial situation and efforts to find a buyer.

         A. The Defendants

         Energy Solutions is a Delaware corporation headquartered in Salt Lake City, Utah and wholly owned by Energy Capital Partners II, LP through its subsidiary Rockwell Holdco, Inc. (D.I. 203-1 ¶1; D.I. 212 at 345:6-12; D.I. 215 at 940:17-941:2) It offers generators of nuclear waste a wide range of services, including the decommissioning and remediation of nuclear sites and facilities, management of spent nuclear fuel, transportation of nuclear material, and processing and disposal of radioactive waste. (D.I. 203-1 ¶ 2) Energy Solutions' disposal facility is in Clive, Utah (the "Clive facility" or "Clive"). (D.I. 203-1 ¶¶ 39-44)

         WCS is a Delaware limited liability company headquartered in Dallas, Texas that owns and operates radioactive waste disposal facilities in Andrews County, Texas. (Id. at ¶¶ 7 & 48) WCS is wholly owned by Valhi Inc. ("Valhi") through its subsidiary Andrews County Holding, Inc. ("ACH") (Id. at; PTX 608 at -468) Valhi owns a number of other companies in unrelated industries including NL Industries, Inc., Kronos Worldwide, Inc., CompX International, Inc., Tremont LLC, Basic Management Inc., and The LandWell Company. (Id.) Valhi, in turn, is an indirect subsidiary of Contran Corporation ("Contran"). (Id.) All of Contran's outstanding voting stock is held by a family trust established for the benefit of Lisa K. Simmons and Serena Simmons Connelly and their children. (Id.) WCS owns and operates: (1) a commercial radioactive waste disposal cell (the "compact waste facility"); (2) a federal radioactive waste disposal cell; (3) a byproduct waste cell; and (4) a Resource Conservation and Recovery Act Subtitle C hazardous waste facility (the "exempt cell"). (D.I. 203-1 ¶ 48) Only the compact waste facility and exempt cell are relevant to this case.

         B. External Factors

         Certain external factors shape a generator's disposal options. Waste classification and compact state agreements create the outer-limits of where a commercial generator can dispose of radioactive waste. In contrast, processing expands a commercial generator's options by transforming waste in ways that allow it to go to a different disposal facility. Finally, decommissioning presents unique logistical challenges that eliminate certain disposal options not out of preference but economic feasibility. Each of these factors are discussed in turn.

         1. Waste classification

         The Nuclear Regulatory Commission ("NRC") regulates the disposal of radioactive waste. (D.I. 203-1 ¶ 22) The NRC may also delegate responsibility to regulate the radioactive waste within its borders to individual states with which it has entered into agreements ("agreement states"). (Id. at ¶ 35) There are currently 37 agreement states, including Texas, where WCS is located. (Id. at ¶¶ 35-36)

         NRC regulations divide radioactive waste into two broad categories: high level radioactive waste ("HLRW") and low level radioactive waste ("LLRW"). (Id. at ¶ 10) HLRW consists of spent uranium fuel or waste materials remaining after spent fuel is reprocessed. (Id. at ¶ 11) LLRW is any waste that is not HLRW, and can take a variety of forms. (Id. at ¶¶ 12 & 13) During normal operations, LLRW generated by nuclear power plants primarily consists of resins, filters, and dry active waste (such as personal protective clothing). (D.I. 211 at 144:24-145:10; D.I. 216 at 1281:24-1283:4) During decommissioning, LLRW primarily consists of construction debris, soil, and large metal components like steam generators. (D.I. 211 at 145:3-10)

         NRC regulations further divide LLRW into four classes: Class A; Class B; Class C; and Greater Than Class C. (Id. at ¶ 32) The boundaries of these classes are determined by the level of radionuclide concentration per cubic meter expressed as a sum of fractions ("SOF"). (10 C.F.R. § 61.55; D.I. 211 at 140:8-15) Class A has the lowest activity level and Greater Than Class C has the highest activity level. 10 C.F.R. § 61.55. Although the NRC sets different boundaries for different radionuclides, Class A usually has an SOF of less than one ("SOF<1") and Class B/C usually has an SOF greater than one ("SOF>1").[1] (Id.; D.I. 211 at 140:8-15)

         For each class of waste, NRC regulations impose different requirements governing the construction, operation, and closure of a disposal facility and the manner and method of disposal. 10 C.F.R § 61.55. The higher the class of waste, the more rigorous (and expensive) the requirements. Id. For example, waste disposed of at a Class A facility can be dumped directly on the ground and driven over by a bulldozer, whereas waste disposed of at a Class B/C facility must be sealed in steel-re info reed high-density concrete containers and buried at greater depths. (D.I. 215 at 1113:15-1114:21)

         2. Compact state agreements

         Pursuant to the Low-Level Radioactive Waste Policy Act enacted by Congress in 1980, each state is responsible for the disposal of LLRW generated within its borders. (D.I. 203-1 ¶ 23) A state can meet this obligation by establishing a licensed LLRW disposal facility in-state, or by entering into a compact agreement with another state that has a licensed LLRW disposal facility. 42 U.S.C. §§ 2021a-2021j. In addition, compact states are allowed to exclude LLRW from non-compact states. Id. Therefore, under the compact system, a commercial generator's disposal options depend on its location.

         Today, there are four active licensed LLRW disposal sites in the United States: (1) a Barnwell, South Carolina facility that belongs to the Atlantic Compact; (2) a Richland, Washington facility that belongs to the Northwest and Rocky Mountain Compacts; (3) Energy Solutions' Clive facility; and (4) WCS's compact waste facility. (D.I. 203-1 ¶¶ 39-44) Both Barnwell (as of 2008) and Richland exclude out-of-compact waste. (Id. at ¶¶ 39-40) This means that Energy Solutions' Clive facility and WCS's compact waste facility are the only licensed LLRW disposal sites that accept waste from the thirty-six states that do not belong to the Atlantic, Northwest, or Rocky Mountain Compacts (the "relevant states").[2] Although both Clive and the compact waste facility accept Class A waste, only the compact waste facility accepts Class B/C waste. (Id. at ¶¶ 41-42) As a result, when Barnwell closed to out-of-compact waste in 2008, commercial generators had nowhere to dispose of Class B/C waste until the compact waste facility opened in 2012. (D.I. 211 at 57:9-15; D.I. 213 at 525:11-18) In the interim, the industry developed several responses to the lack of disposal options, including concentration averaging, volume reduction, waste minimization, and storage. (See, e.g., D.I. 211 at 57:9-15; D.I. 212 at 372:8-21)

         3. Processing

         Not every disposal facility is licensed to accept every class of waste, and some facilities that accept Class A waste cannot accept the full range of Class A waste.[3] In addition, disposal is priced by a combination of weight or volume and class. (D.I. 212 at 450:8-18; D.I. 215 at 1014:18-20) As a result, third-party vendors, called "processors," offer services to change the waste in ways that allows it to be reclassified, volume reduced, and redirected to a different disposal facility. (D.I. 212 at 400:8-10) Even after processing, however, the waste still has to be sent to a disposal facility.[4] (Id. at 308:25-309:5) Except for Energy Solutions, no processors own a disposal facility.

         Waste can be reclassified through concentration averaging, whereby higher-activity LLRW that normally must go to a Class B/C facility is mixed with other material to create overall lower-activity waste that can instead go to a Class A facility. (D.I. 211 at 138:11-142:2; D.I. 212 at 361:24-362:3) Energy Solutions admits that concentration averaging can "change the classification of some or all of the waste prior to shipping it to the disposal site." (D.I. 215 at 1016:15-17; see also D.I. 211 at 141:25-142:2 (agreeing that "concentration averaging is an NRC method of moving higher class waste to lower class waste")) A combination of factors makes concentration averaging economically feasible. First, waste is not assigned a class until it is ready for disposal. (D.I. 203-1 ¶ 33) Second, NRC regulations permit the concentration of a radionuclide to be determined indirectly, or averaged over the volume or weight of the material. 10 C.F.R. § 61.55(a)(8).

         Concentration averaging requires materials that can be easily mixed together such as filters and resins. (PTX 10 at -132) It is not feasible to apply concentration averaging to materials like irradiated hardware and sealed sources.[5] (D.I. 212 at 366:6-16; D.I. 215 at 1044:6-7; Id. at 1069:1-1070:5) Notably, however, more than 90% of the LLRW generated during the operations of a typical nuclear power plant is filters and resins. (D.I. 211 at 129:21-130:14) The concentration averaging process for filters is called "filter shredding" and for resins is called "down-blending."[6] (Id. at 138:19-25; D.I. 212 at 363:24-364:11; D.I. 213 at 528:24-529:9) For now, processors have found that it is not economically feasible to apply concentration averaging to materials above a certain sum of fractions. (D.I. 211 at 140:21-141:4) These are not fixed limits, however. When Energy Solutions first offered down-blending in 2010, it was not economically feasible to down-blend resins above a sum of fractions less than three (SOF <3). (D.I. 218 at 1731:1-16) Now, Energy Solutions offers down-blending up to a sum of fractions less than six (SOF <6). (Id.) Indeed, Energy Solutions admits that it can technically process resins with a sum of fractions greater than or equal to six (SOF>6), but has found it "not economically prudent" at this time. (PTX 185 at -080) Accordingly, the industry is not done pushing the limits of what can be transformed into Class A waste through concentration averaging.

         Finally, higher-activity LLRW that appears bound for a Class B/C disposal facility can also be redirected to a Class A disposal facility with the use of "segmentation" and "sorting and segregation." Segmentation takes irradiated metal that would be Class B/C if left intact and cuts it into smaller pieces so some of it can be disposed of as Class A. (D.I. 212 at 368:12-25) In sorting and segregation, processors sort through containers of radioactive waste and segregate higher and lower class material, so the material can be disposed of in the least restrictive facility available. (D.I. 211 at 141:21-24; D.I. 212 at 302:4-303:1; D.I. 213 at 531:18-532:5; D.I. 214 at 801:4-16; D.I. 215 at 1015:20-24)

         4. Decommissioning

         Decommissioning is the "process of safely closing a nuclear power plant... to retire it from service after its useful life has ended." (PTX 92 at -325) It is an expensive process that can cost between $500 million and $1 billion. (PTX 55 at -882; D.I. 215 at 1003:7-12) To pay for the decommissioning, regulations require each nuclear power plant to establish a decommissioning trust fund before starting operations. 10 C.F.R. § 50.75. Once a nuclear power plant ceases operations, it has sixty years to complete decommissioning. 10 C.F.R. § 50.82 (a)(3).

         After ceasing operations, nuclear power plants may choose between three decommissioning strategies: DECON, SAFSTOR, and ENTOMB. (U.S. NRC Backgrounder on Decommissioning Nuclear Power Plants, https://www.nrc.gov/reading-rm/doc-collections/fact-sheets/decommissioning.html, last visited May 30, 2017 (hereinafter, "US NRC Backgrounder")) In DECON, or "active decommissioning," equipment, structures, and portions of the facility containing radioactive contaminants are removed from the site and disposed of at a commercially operated low-level waste disposal facility. (Id.; PTX 92 at -325) In SAFSTOR, the nuclear power plant is maintained and monitored in a safe condition and later actively decommissioned. (PTX 92 at -325; D.I. 214 at 836:11-23) Most utilities will initially enter into SAFSTOR to allow their decommissioning trust fund to grow to a level sufficient to cover the costs of active decommissioning. (D.I. 212 at 423:20-424:4; D.I. 214 at 911:5-19; D.I. 215 at 976:18-977:8) ENTOMB involves permanently encasing the site in concrete until radioactivity levels decay to a level permitting release of the property. (U.S. NRC Backgrounder) To date, no NRC-licensed facilities have requested the ENTOMB option. (Id.)

         For active decommissioning, a nuclear power plant normally hires a prime contractor to manage the entire process. (DTX 138) Prime contractors bid for the project by submitting proposals that, among other things, identify the various subcontractors fulfilling each role, including LLRW disposal. (Id.; D.I. 212 at 401:4-7) Energy Solutions has the capabilities to offer both disposal services and bid on decommissioning projects as a prime contractor. (See, e.g., PTX 574) WCS has not bid on decommissioning projects as a prime contractor, but it has entered into several teaming agreements with North Star Group Services, Inc. ("North Star"), a prime contractor, to bid as part of team. (PTX 111; PTX 119) Even after a nuclear power plant accepts a bid, it can always contract directly for disposal with someone other than the subcontractor identified in the bid. (D.I. 212 at 400:20-401:18; Id. at 410:8-23)

         Finally, the parties agree that there are some differences in LLRW disposal for decommissioning compared to normal operations. Decommissioning projects generate different streams of waste and larger volumes. (D.I. 211 at 144:24-145:10; D.I. 214 at 794:17-795:7) For example, decommissioning generates more irradiated metals and large components. (D.I. 211 at 144:24-145:10; D.I. 215 at 1042:21-1042:20) It also generates a large volume of construction debris and soil that tends to have lower radioactivity compared to resins, filters, and other types of operational waste. (D.I. 211 at 144:24-145:10)

         C. Self-Help

         Defendants assert that customers can rely on a variety of self-help measures as alternatives to disposal. Those purported self-help measures are storage, on-site burial, and waste minimization.

         1. Storage

         Nuclear power plants have the option of storing LLRW in regulation-compliant storage facilities located within their plant sites. To store the waste, nuclear power plants must incur the costs of building, maintaining, and operating the storage facility. These costs include security and administrative oversight, lighting, air, and fire-protection systems, rental of specialized equipment to move the waste into and out of storage, and insurance. (D.I. 211 at 57:1-8; Id. at 64:6-10; Id. at 66:9-69:3; D.I. 213 at 545:5-14; Id. at 546:21-547:25; Id. at 549:21-550:8) All of these costs go up as more waste is stored. (D.I. 211 at 67:1-4; Id. at 69:1-70:5) Storage also invites risks not attendant to disposal including radiation exposure to employees and the public, changes to regulations that render the storage non-compliant, and increases to future disposal prices (as has been the trend). (D.I. 211 at 65:2-66:4; Id. at 69:5-15; Id. at 146:2-20; D.I. 213 at 545:5-550:15) Storage is, as one nuclear power plant representative testified, "very expensive." (D.I. 216 at 1426:2)

         Defendants argue that storage is a market alternative to disposal, but admit that "waste storage and waste disposal are two different things." (D.I. 211 at 145:15-19) Nuclear power plants are responsible for the LLRW that they generate and that responsibility (or potential liability) ends only with disposal. (Id. at 56:22-57:1; Id. at 145:20-23) As a result, storage is, as one nuclear power plant representative testified, simply "an interim function" for waste on its way to a "final [and] permanent resting point." (D.I. 211 at 49:23-25; Id. at 56:19-57:8) Considering the foregoing, it is unsurprising that the NRC and generators of nuclear waste prefer disposal over storage when that option is available. (See U.S. NRC Regulatory Issue Summary 2011-09 Available Resources Associated with Extended Storage of Low-Level Radioactive Waste (stating that "the Commission and staff have consistently recognized permanent disposal of LLRW as the preferred management strategy over extended storage"); D.I. 211 at 63:19-64:19 (nuclear power plant preferring disposal over storage because "[t]he NRC's position is if you have the ability to dispose of waste, you should dispose [of] it if it's economically feasible")) Ultimately, because storage does not fulfil the same function as permanent disposal, it is not an alternative to disposal.[7]

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finally, defendants assert that NRC regulations recognize decay in storage as an acceptable method of disposal. (D.I. 220 at 2162:1-7; 10 C.F.R. &sect; 20.2001(a)(2)) Decay in storage as a disposal method, however, is limited to "some very specific isotopes" typically found in the medical field. (D.I. 212 at 305:13-16; 10 C.F.R. &sect; 35.92 (allowing decay in storage for medical waste that has a half-life of 120 days)) Nuclear power plants use radionuclides that have half-lives of 100 to 5,000 years. (D.I. 211 at 71:15-72:10) At most, nuclear power plants can use decay in storage to transform higher-activity LLRW into lower-activity LLRW that can be disposed of in a Class A facility. (D.I. 215 at 1110:11-20) But even then, the evidence suggests that this transformation rarely happens. (See Id. at 1057:22-1058:19 (nuclear power plant waiting for ten years and counting for higher-activity resins in storage to decay to a level where it can be disposed of as Class A); D.I. 211 at 71:15-72:10 (another nuclear power plant representative testifying that in 31 years, only one container, out of hundreds, transitioned from Class B to Class A "and the only reason it did was because it was right at that threshold")) Ultimately, defendants presented no evidence showing what ...


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