ML20091P288
| ML20091P288 | |
| Person / Time | |
|---|---|
| Site: | Midland |
| Issue date: | 08/02/1983 |
| From: | Warnick R NRC OFFICE OF INSPECTION & ENFORCEMENT (IE REGION III) |
| To: | James Keppler NRC OFFICE OF INSPECTION & ENFORCEMENT (IE REGION III) |
| Shared Package | |
| ML17198A223 | List:
|
| References | |
| CON-BOX-08, CON-BOX-8, FOIA-84-96 NUDOCS 8406130014 | |
| Download: ML20091P288 (27) | |
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s 9:vern:r.; the e4;;. ttier, c' L:. :s r. tar. cest (the *19*4 Stes-i 8
Contra:t"). Un$tr'the 19E7 ant 2?74 agreer.ent, relying cr.
Consuniers Power's ecst estir.ates, *J.t parties agreed that up:n cort;1etion of the F.:dland Nuclear Facility, the cest of stear.
to Dov would be 1,ased on that pertion of t.he total plant des 2gn s.
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to in the c: tre:ts a s t.' e A1 r: e t e d S t e L- :n.estment. t*nder t.5 e c :r t r e :t f:r. a.
I :: e m i e s in th e : st cf the ;:ent and de:sys in the ;;a..t's c: ;;et :n n::e ese the cest of ste kr to
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12.
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.s.re rs 7:.er e s tir ated that the V.. d: a nd F.::e a To :* :ty w e.: d he c:n;:eted ;r:ct tc 1975 at a c:s. ed 1:56 c:::: n.
Af er.967 the M:dland N.::t ar To::::tv war sui ert t: ::-::-. r; s:hed. n; de*als Lrd c:st in:raases s.:t that hy se-te::et 15 6 C:ns re:s 7:.e: was p:ed::t;ng
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L:. c.r.ra tr.e s t r.t ;;ti t t: r.t was t: ::ttir f
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- v:t: r. cf the un:triair.ty at : vr.t. and at vr.a*. c rt tr.t M:datnd Nuclet: Ta::11ty w uld he c:r;3e'ed. " r. t unretta:nty had ha d ruts
- a*..ial adverr e eff t :.s t r. the h::h: gt*.
- vat ::r. by p r e ve r.*.it.t Lev fr:: c.aktn; ;:r.;.:c.;s ;;ans r e ctrding tht pr: ducts tn be z.anufactured at L:<*t Midland id:ll:ttes, hic.'.:gtn rivit:ct. e ployrent levelr. and capital prcjects.
caucin; a reda:tten in Michigan Civision operations.
14.
Pe:ause of these cen: erns. Dew rade it kn:vn to Consumers Power from the start of the negotiations that it w.s of critical importance te Dow that Consumer Teser sake full s
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-1 tr.alle to coc;;ete the w;f n.d N.::eer Tera:ity by a f;rr fate, 4
- w wanted the e v;;es s I!;ht to terr..r. ate any ct* :;st;:rs t e t
pur:hase steam.
Ir the c:.rse of the ne;:t:stacr.s =h::h 1*;ar.
am 1977 and c:n :.ded in J.ne ef 15?$.
t.'.e
- erti es t.' e r e f
- :e agreed that al; ;rier egretrerts he zanre::ef and that a r. e w Oereral A;re er ent.be e s
- rut e d.
t 15.
Cr. c: Llegt
.*.r.e 01 15'!. 5:. arf ::r.r ters 7:.e: ettete! :nt: te e artra: A;:
e-t ette:.'ef lett.: es Es.'.it i t A ( the.. ' Le.- e r a : 1 ;: e st e nt ). *
- r f e r *.'. e ae r.t r a: t;ree.
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the part:et a; teed t: rpt:af : ;;:va s : ct.: Int e r.f t. 1: ; :st :-
f Dov frer f urt*.t : ::tt ::: eatt: 'and cer;;st;:: et:t* 4 T::
emar;1e, under it :t:ct. * !! ) c ' tr t Genera
- A;:e rtr.t. *:::c*.
Power pree. fred tr *use its bert e ffertr te p:are tr.:t *cft*
Genera tin; 71tr..' in cer. ste: t; :; t it t et, it e:ertr;: s t rv. *
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oc er at: t ? ::1.1, 39t *. and i: ;; ace the entire Cent rat:r.;
Plant in cen.tercial operat:en ic process ste ar serviet an!
' electric servict on c ab:ut P.arcr. 2,19L2.*
Unter it ticn 4(C)(4), censur.ers Power further agreed to
- avoid in;rudent expenditures' and to *use its best efforts to optir:te the capital Anvesteents includable in the Allocated stes.s Invest-meat.'
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t*r f e : Ze:t::n i;*)*1) ef the. +:a; t ;
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i the ; e rti-s -; * -3 t.' at : f ?;t s : ::s 7:.-r 1 - e.i d:e t:
1 de::ste the F.: 2:and N.:len: Ter:::ty in c: re::ia! :peret:cn i
fe: ;;c:ess steas by Le:e-ter 21, 19e4, then ::. *:.1d he ert:t ed t: te r=ir.ete the c:r.tr e:t ar f p ay C:nt er er s a te:::na-l
- 1:n fee n :a:;er than ene.balf cf the ;r.fertly ine.::ed i
Alle:eted sie ar :r.vestrent exper f:tures as cf the date cf l
ter ; ati:n.
4 IE.
L':. der se::: ct att) cf the Otr. era; :;;ee ent.
- r.s. s:s 7:.s: ut f tet::1. :: 1ee; ":: :. :en*.;y :- f: rr ei
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s?ene.e: ;re :::41 e:rrernin; ::nsurers 7:-er's r:.strwet:::
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29.
04:::.; the :::.tt t :*. ner:tiatiens it 19-~ tr.i 1971.ea d:n; u; t: t>trut::: :( int :l"I Ge ne r t". A; tee tnt j
C r.r:rers re;tesented te Lie thts :* Lnew cf n: centt 6:t:ct
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pla::n; the P.:diant ?.:;e t: Ta :.::;-tr. c:c. mere:t; c;trat :. 2;.
March 19t.
fr. et:ately htfers ths t'e:ution of the c: tra:t.
i Dow tre::f:cally re uested ::r::::;rt er any ar.f:r-st :n i
4 advers t' y re fJ eet n; cr. the r t: *.;: ::st c: c
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- .
- f the pro)ect. Consurerr Fever aneure Lev that at knew cf :.: 'rur-priser* c any other adverse an unf: :losed inferr atien trout -
the p;c)ect. These re;;erentat: ens were intended te anf c:d ::.
fact induce reliance en the part cf Low in executing the General Agreenent in June 1978.
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4 he:n; c nstrweted en tr;t:perly ;1e:ed ar.d c r;e:ted f::: e.2 I
that these stils yt:t;ers and ether c:nstr :t::n ; :t:ers des: rated hereafter likely w u 2 ;revent :r.s a. e:s 7:.e: ft:=
g tee *.in; :ts ta:;et s:teda:e.
- r.s. ers 7:wer th.s c sre;;e.
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sen.ed s: Lev the status cf the ;r::e:t tr.d, an of fit.:r..
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- .:e a:e d r oterial :nt::T ati:n fic: ::v vith the ;r..ttt 1:
- rd.:e :. t: ente int: the Ger. tral A;te tten*.
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tr.d.rtu:te f ant ::r;6 e t ;* e r:C dt;: :ts tr.de: y:n-tne 1:.t l
- .rurer Fever de::def :: plt:e : gr.
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7 :n; the struet. tr were v tti saftt; intit;',-
tiens su:. At tr.t ertigtr.:y d.tre. ger.e:ater tu '. dant the eux;11ary tu: d:ng, st:rsge tar.o f er er tr;ene, cc:* :n; watt:
serv:ce water ;ur structure, tr.: numercus Lnder;; cur.d p:yer and ettlet estry:n; coci:n; vrtti tr.2 v:tal centi: ryttent.
he:ause thest rtructurer v:uld :t * *. Lir. wh:le er 1r i tr. en fill, preper plaeament and c:n;a:t:en was essentia: 1: Frevent the is11 free settling unds: the vtaght cf the structures.
Excessive settlement and/cr d:fferential degrees ci settlerer.t cf the fill can create serious unsafe conditions in any con-structier. project and are of particular concern in a nuclear i
power plant because they can cause blockage or rupture of Fir *8 1
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- n the l a s: s c f an er-;ineerit; s*sdy ete;;eted in *Fti t> the f.rt cf It es & w::re. Cens.rers 7:.e ed:;ted detai;ed s;e::f :stiens at.d ;;o:ed.res g:.ernir.; the f:1; t: he i
tsed en tre site and h:v it wet
- d he de;: sited, cc:;a:ted a.d tested. /-:n; ether th:ngs, the spe::fi:sticns and ; o:ed.:es l
eal ed fer.
t (a)
- 's e ci f; e r: f t e d k' nds c f a...; t e d, c:hes:Vt f:'; e.:t as ::ay :r areas c:nts::.:n; s a fe t}.:ela ted s.rt:t.:es :
i-r.*t: test.
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cf f;;; tt 4:hte ct ;;;;e: c::;a *.:::.:
I (e i 7ert ni ci the c:-ta:tet fal; et r;er:f:ed attervals te ens.:
- tr.st the ret. :et depree ci dentis; it:erstr} tr ;revent se t:teent had htt a:n:eved:
(f) Tul;.ti. e supervor:er. cf all f1*: crera-tict.: 1: a g;t1:f:t. tt:tt::..fca". en;;neer.
24.
T;#:trtr.t of t.ht f.;; et ths ;;Lt.t :te took
- ace fror 1975 th
- cugh 2577. C er.s ar e
- S Fe.er failed te ca serve any cf the ;teviously ictr.t:fied centrcir er other standards cf reascnth;e care ant ;rudence. Instead, consur.ers Power preceeded with the placement of the fill kneving that there was net proper supervisien, that ie; roper fill was being i
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. v e d, that t.' e f :11 :. *
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- test retv!ts e e tein; r**i
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o cert:fy the f:11 ss w-et::; st. forts of the U.S. N,::ea:
Fep;;et;ry C.-:ssi:n (*F);").
- v was not inf:rred cf a ;. ef these pretle:s by C r.s.re s 7:.er at ar.y tise prit t the f
eserstien cf the Seteral A; etrent.
25.
In 1977, the air:nistret::: b;;1 ding was ::n.
strbrie' :n the de fe:tive f:12 an' es:es sive settle er.t :::.::ef 3...
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e eir:r.:strat::n b;;**:n; had se: :ef ; t: 2-;*: ir.:res in :ne r: nth.
Ar. nt:::a: :n.est;;at:en c:nfurted t} ::r.s ur e:S 7:.t:
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- ster it 197* Lt.f ::r:ta;ef fr:: * :w c:nf::: e
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I
. ' : :: : t t; s a f t :;. -r t: t.e t s tr.:t;;e s ar.:;tting tat f::; ::
were L::: :: it ::: r '.r;::e ;
- - r e r...!
- f tr.:s anvert:;t.
ti:n. er wel; tr t;.
's:.
- e. r.- t: :::a ar t:s 2:st:
c:n= err.:n; t t r e t. :t:. cr : ::: r t: '..; ;;stertr., ws::
I.
....tt.t,.......
t I
Ot.
ra
- t-*
- ::.r rits 7:.t: : nee rt:;st:en was i
1:::ted t: tr. erLn:natier, cf tr.t f:1; : the v::in:t.v cf the 1
j air.:n:strat:en it:*::r.; L ' t yttftr.rt:ry tert :f tv: c the:
i p:rts ens cf the ::te. Even tr.:s inaf t;uatt :ts;e. rever'e:.
that there had been rysterat : er :rt at ths ;..:erent and 1
- .a
- ::cn cf the fill. #r:7.; ether t!.in;t. th: inveetigat en at the ain.inistratien'huild:n; rate f:un' *ve::t
- c: pc:kett c:
6 r in the fil! and ut.trcker. *ur;t cf :*ay t; *: 2 feet in d ineter, den:r.r trating tha*. the fil; ha d r.:t teen cc pt:ted t,
centrary to safety Analys:t F.eperts certifte: ty Censurert g
Power to the b'7.:.
27.
Tc examine the entire safety related pert:en cf the site, consu.sers Power conducted cnly one test boring. As a matter of prudent engineering practice,- a sir;1e boring was '
9
>f
-10 3
C
-...m
1 s
')
insuf ficient te deterrine the
- a fety cf f 11 : er t> e :: ;;ete site.
C:ntrary t: :e;:ese-tet...s :r. t.'e fifet).azt:;s:s 7e;:rts s heitted to the Ft-tiet L.rised c:lesi.e f:11 had been tsed in safety-re:eted arems. th:s sin;;e test ist:nstrate:
that Centurers 7:-er had ir; :;erly used rand e f:11 c:r.s: stir; cf eized e:ay, sind nr.
etle: = ate r: als wi th va r> ir.; ; r :; ert:es.
j C:ts amers 7:.e r 's : e; ;e s e r.t e t::r.s that tr.niz ef ::he si.e f:11 e
lef beer. Lied ir. the seftty artt bere *4*.e: deter *iEed by NE1 cf fief a s t: he ester:a* fe:se sitte ests.
ri.
I:th :. f:: e er.
ifte: tie:et;:t cf the Gttera; I
A ;t e t: ent. C:rJ. e:s 7: t: s re;:rts d:ru:ented that rand:
f:!! as tr;::;e y.**
.r.:.; :.t tr. : r e f e t;. erst n r. : te r -
f tie f:'
- t r e net t e -, : + r. s. ?
- + r. :.:
- s i : e t-I 1
ri or. d a r t:. h::e tht: (:
sept:st... r.;
.:.t-
- .:::; tr.e f:;.
v a '...'..'........ -
,n-*.e*.
6......**.a.**.*.
.e:e everr.;et c d:s:e;trfet th.e r.-ar:.-r :tr.terer :f
- ats
- n; terts c:r.tt: net re:.1.
v;.:::. c; :: i;rtht: estrana-i :t :evet:sf de;;ets cf c;r.;a:t::: pryr::a;.-f :ri:st:t;e :
4 1
ath: eve.
J.. least th et 'a.t:ts' c::.de:.t: :; tenturers 1:<t:
caring tat ;tt:ct 1974 t: 1577 tir: ver:f:et nurtrett instan:es j
cf failt:t t: teet ;::;e ;rt:e t;;ts er s; e :.f::s t::.t. ru* :.:
d::: ctutt var made t: L:v er t: the NE.
Zi.
By at leert the end cf Le:eret: 117-the ter.:ct manage:ett tf Consur.t:t to,t hnew c: should have hn:.7. tr.t t tht fil; ct which the P.:d:Lt.t N;: lear Tacil:ty var ht:n; f
i ect.:tru tet wat patent:y ::.adt ; ate it c:nttruct::t cf &
r.v:ltar p:ver p3ar.t a r.
poter.*ially unsafe. N:tv:thstani:n; this :nferration, Cct.surert Icwer made the conscious de::sien not to disclose this caterial informaticn te the N7.0.
Ccnsunt s Power. alse cade no disclosure to Dov during the ne;ctistion cf the General Agreement. Instead. Consumers Power decided to proceed with constru: tion of the diesel generater building and i
~...,
..m...m..
-m m
-...m
e-1 1
1 N
- ther s a fe ty r e: et.d str. t.: es e n the f:11, tr.: at) ::e at: ;
'? e f e!:e e f sie! ef. ;.;; t r c e d.: r ; the :.,;::: + t;;r s o
that c nstrweti:n.es ;r::eedin; :.:r e::y.
30.
At the time the Cer.eral.*;;eer ent was es eruted.
C:ns.rers 7:.er ses aise a.are, but d:d not d:s: lese t: L:w, that n:r..scils c:nstrwetict pret;ers w:uld affe:t its at:::ty to fulfill its ot11gett ens under the General Agree:ent. C:n.
str etien delays ca. sed by er gineering changes, w::k si:;;nges,
trd c:ntinuing fail.:es te f:11:w ;::per p:c:ed.res and s;e::f:.
cet::ns were of su:h nern:tude thet C:r.su:e:s 7:.e de::def r.
I j
tune 16*E te fereg: its us.a1 ;raet::e cf st:; ting a new s: red.'e.
!.:t a f:re:ast, if ;r:;t:!} ;;e;ared and d:s:: sed. v:.; ts t
- e.es ef *:tsurers 7:.s ': : ti :. : ;, i: r et tie Ete:t ;tt; t-i
- :::. ;5f :: ;'tt;:: ci.s i :t;: t :.: *: 1. :: t.t t *tr.t:A;
. ;t e t ent.
21.
- . rs' Ltis
- : n: s t r: ?:.t: s r. r t;;tstr*.e.
.: ens an: n:n.d:s:;:r.:s: :.r:r - tr.t it!".*i ret: ::.::n:
i
- t ;ard:n; tr.t stat;; c i it - ;:,e:t
- rs e s e ru.t
- tr e 0$ r e ;.
A; tee ent. Eat I:. kr.:vi tr.t r.e
- stst::n :t v:;;d n : r e ce t'
s ' yne d *.ht Cent:t; A;;eett".t.
I C.
Centurers ):.tr's L.ste; esentatzer.: 1.d Tailutet 7e ris:1cae 5 nee Iveret : Cf Tr.e Cer.ert; Aeree-e-t 31.
1:n:t Junt if7f.
ensurers Power has er,; ate; r.
En ong: ng pattert. ci a:::t; eser. tat:ct and cen:ealner.
I.
Des cf tr.e true it;t:t en c:s* tr.: schtfult caused r} Cer.tu tra 1
}.er's f.egligen:e att vil;f.T r s:enduct it. der:fr.:n; tn c:nstru: ting the ;1 ant. Spe::f : ally, this ongoint 1:aud constitutes a mater:a1 kreich cf Censumers Power's centrerttal and fiduciary obligations and justifies cancellatien cf D v's obligatiens te perfers under the General Agreement. In add:-
tion, Consumers Power's cencealment from Dov of the true cert and schedule was intended te prevent Dow froe. esercising its
(
l".
4,.
~
n.,,y
9
~
ri;5t 1: t-T i r a t e t? e ~< r - * ; L ;: e. e r.'
- s de s ::.i-d he r e-i
.*::e:.er, es t'e f :e:.: f, : : 3..
+. e ; - r. ; ; :f i
af*er.
a C:ns6:ers Ta.ez's c:neen;sent cf the trse status and *:ledu;e i
l of the prcie:t L:w has ines::ed ri*;;:ns of de;* ars in es;enses, in:;uding a: e than $6C es;2ien ez;er.ded to ::nstra:t its fe:ilities to re:eive ste kn free Cens ers Pr.er.
Law has 2:ne so in relian:e on the e:sre;:esentet:
.s cf :: 9 e:s 7:.er re;arding the status cf the ;:::ert. End ::.1-en int:r:ed cf f
the centinuing delays and c:.strset::n ;r::;e-s at the pre:e:t, c:
- 7.s. ers 7.e:'s :r t::::ty 1: reet *.he Ie:e-le: 21, 1914 deadline, D:s w:y*d n:t have in:urred these e:sts.
22.
7:::: 1: t * *.1::n c f tc= t attira; t;:te tnt,
- .-.rs ?..t; le;tt ::.r.r. t:ct : f *. t d.est; ;s.trat::
..::. ; t ' : Ja : s t f t t;. -: t ; a *.ti s tr. :t. ::
1;...;y **.
6 :t::t;* e r:-.h af*.t: the cre:ut :: cf it.e Ger. tit *,
- (* t i r e t *.; s s n. : f it - d:est; gtrerat:: tualdan; a*:ea,
etiti -;, ; ::.:t.t r as c: ;t:et t: a * *t; s a f e ty a;;;.'a!.:t it.J e t ::.::.e s evt: tr.t 4 :
e :: ;r:;e:tes ;;:etirt c f tt.t sttAt;ers ?:n ure:s 7:ve: ct ::t :
? ; f. tnt t u:;e t: T a :
- t;..
4 1
t: ::nt: nut cent tr'.:t: en t*. :: :: r.:e & *. tnit inferret:ct. ft:*
- . d e :; ;*.e the Ott t ra 1; *t-ent previster.: re :rin; L:.
t-is adt:st: cf such s;;nif::tn. events.
34.
- 1) A.; art ;; IliE. settler.ent cf pcrtient cf tJ t d:ets; generate: 1;;;:.*; had rea:hed f: : inches, emete
- ts: ugh the buildin; vas still en;;
n; the safety lir.:t. evt-a;;;c tit tiely half ::r; *.t '.,
tr. Au;ust 13. If76. Censuetra 7 cwar s.spended c:nstru t::- cf the d:esel gtr erater build:::
and other safety structutte &nd notified the NE:. At the sa,
time, recognizing that 11: ; evious schedule estimates were n:
lenger valid, consurers 7cstr decided again te delay prepara-tien ci a cost and s:hedult forecast for the project because soils probless and other un:ertainties prevented any realistic forecast from being made. Lempite its duty to disclose this 13
i i1 D.
, f
- f; ; tr.t 2.. :; ert *: *:w.
?:T.8 5*~~ 73 '2T I I
- d 18 88 7
6:.
o 35.
Tell:.;rg the A.;;st 23, 1b*8 s.s;er.6;:n of c:rs trs:tien C: s e:s 70.er c:nf arted kt:ther ir est:;at::n 1
wh::h conf;rred that there had been syste:stic and stess ne;.
If;er,:e in the ;;ere ent and es ;a:tten of f all underly :.g the erti:e site. 7te 1-vesti;ation con:Isfed that esser.t elly a;;
e is t.re and der.s:ty tes,ts c:nds:ted d.r:r.g the ;;e:e er.
a.- d c::;e:::en cf the f:11 het been in;;c;e 11 ;erferred. As late:
4 l
- s..* 4 ::ed in a 1. y li F rep:rt pre;ated by Se:htel. *there as i
l re'.::tal s t ar.,1, c f de te reir.ir.; which test results are valid r.:
i L*.f wh::h &*t 4
i 7(.
E t i;. *.s
- It c'.tr it!:..*.;
t'.
tt:t t.*.a *. in t I ; *..
- t te r;y
- :.; t.t 1 ; *. s s t.. r. a f e. s '.e L.. ! ; ; *. * * *. t ; ;. *.stis
- r.t et:s 7:.t e;e te: :: :: L::.i 1 e : tre s: ;t*! *: r e :.*-
c:r.s tru rtiet cf int
?.. f. tr.1 k. :l e t: Te::.;;
- .*
- a s:. 2:.;;
4 d*: s: ::. tne ft:e c t-::ess =tri.:.;r ft:t.1-* :ff;::t's th:t i
C:nt.rers }c.t: mar ;;;;ee::.; at it; :.-
.t
- :nt 'ar t ::
7:wt: als: cc::dtf :.:t t: re-:ve tr.: : t ;
- a r e
- .?
.n: t it f;;;
hut ::. stead temperar *} ;;;ee str.f en ;:rt:::.: cf the :tt ::.
f ar. siter;t tc cc ;a:*. tne efft tive fall. :::.sa t t 1:.t: was specif: cal 1} - warnei t} >G : ef t::s tis that tne;. t.a t n:*. a;;;:ve d 1
thi ;;c:edure c: tr. : esc ;;;:: cf cenett.it;::
I 27.
2. Le:ere t 197E. C:nru ers }c.t re;vtsitt Sechtel te assess the :::::t c. ;; tnt coe;; etic:. cf s::1s I
rere dial ver's..
- . A;;;. It76, ne:htt! inf erre t C:.s4.t:t Power that there.we.;d to at ;t ast ar. ti;nt.m:nti. celty at t.t fuel load date ic: Unit i ent a five.g.: nth delay for Unit 1.
S uk.
seguent schedale changer showed that the strget dater Centteers Power had held out te D:w' were ne lenger valid. Onese in:1uded
? s July 1979 techtel rey:rt and a November 1979 Consu ett f ewer f achedule, both of which identified further sli;; age in the tschedule. still further slippage became inevitable when Consumers i
f 1
14 F
\\\\
e
D,
\\
g T:.er's in.-stiget ':n of the f all confi-ei that
- ke t ex*'* e1 s:11s tees es :t ? 2 ta'aer..ere : sf-r.ete
- d tret ;.aars of o
additlenal delay weu;d he f.etessary to devise and ir;;e.er.t further resedial
- es.:es.
O 38.
On Le:erier t.1979, the Nse: ear 3
- stery cenrission issued ar. crder fir ding that there had beer. a
'breakd:<n in quality air.:an:e re:ated te s:11 ::nstru:::ct i
a:tivities under and arcand s afety re:sted strs:t.res and systems.* The N): a:s: f:.nd that C:r.s rers 7:.tr had este cater:e; fa:se stata:erts : :trtifyit; :ts c::;;;mn=e w;th fil: ;;;:ederes fyt :ned it the T.nal safet) Ar.a;; s:s s ep:rt, t
it si: d e.t r:::.e f th a t t.'t:e :t s:ned Lt.
- ar.r e s ::s t s s a f e t; l
- st.* :: te rnir; t t s t e r. a t:- c f tr.,
tr e d: a
- a rt; t t: ::::ert
..< : '.:.tt:.t s:.. ::?.rtr.ria::. ;-it: t.: a t : ur.:
stfet;. rt'
'.tf rirut.res tr. : r:rts t*
- ntums:a 7:.tr war te.ttet:rt :::s:et : ter.27.it a;; f.r re: :::;t re;a t: w : :,.,
26.
- t was Lt. rett ;; :;er: 1 a leart LAt erf :t
- t
- t ::: 1976, at 1:;nt cf tt.
UT ::::
tr. i t *:. ; tra 7:.t:
c:.'. ! n: t ce t *. the De t.t tt; L;; et: tr.
i t :;t t c: ;;e t :. da tet.
Tarther :
t.
C:r.rurt: 7 cwt als: Lt.e. :: s h:ul d ha ve Lt..-
t Ast :*. ca: u t. h ; t t: rett tr.i 1::t-et- *;
- lI4 deedi:r.e f::
c:trtreat; tit te c;t ra t:ct. ::. vie. c f tz : fa:t tr.at the ta;::
str;:turer cf the it:.11t} were rett::: :: thirty feet cf
- d.de uait LP.d ut.rt:t f:13 and tnt P: :.at reJe:ted the rtredial ettsurer which C:nstners Power had tas::
4*.
Centz*ers Povar't ::t*;*:tr te net
- the 24d4 deadlint was ccnfar:td in January Ill: vner, hechtel prev::::
Censueste Power with an updated ecst tr.1 schedule forecast, known as Terecast C, which declared that censuntra Power w:31d be unable to com;1ete the Midland Nuclea: Tacility until 1985.
The techtel forecast also projected that total plant costs would be 83.1 billion rather than the 81.67 billion prev:cusly l
-eatinated.
f 9
i
-1S*
t
=
.w
.f,i 4
O 3
s 8
Im +; ; t e i t s 1. :.
- a f ; e t.' e t it cc.'.d n-'
- ;;ete 41.
2 the ;::.'-:t iy ;;i4 0; 3
.:s *..-: fe:it-d i: :r :*t'.
f ::
o I.:w its itali ity in cider 1: ; t e. = r t L:v f t = te xt::.a t: ri; the
~ r.e a1 A;t e mm ent ur. der, Se :ti:n 9 '.5 )(1).
T.Mus, C::.s :ers 7:.e:
e
- Lilicly stated that it te f. sed te accept Be
- htel's esti=ates for ;; ant c: ;;etien. At tie s tre ti:e, h: wever, C:ns;:ers 7:.e: ;.erfer -d inte r.a; St.d.es d:s::esing that its pr.n:: pal alte rnrtive r were (1) e,.t2er t: c:*;;ete the nue: ear facil2 y 1
1 i:. Kay it!! and a ts c:e the ris h. that 3:w wo Id
- er
- r. ate *he
?e ne r al.L ;t e s er t ; c: (::j te ter:inate e:nstru:ts n L..d e:ther w:: e.cif the yr.: ject c: c::c. e rt :t t: ccal.f: red ;:.er.
2
...,..3......
......ts7t.
e.
..t.
._ g..
e..
........._....,.2,-...e..........
...,.. _-.3....
r
.'.,......sa s e.a c. c.s.t
.....a,.
r A.,
t u.::u: ef !;EE n:I;;::.
Ee: *::.s.:ers 7:.t: ::t:::st- : 1:
s 4
3
..t...... c o u., s
..e.
.., e : s.
.,s..
e.........
2...
r
...t.......ht C...&..
t
.....L..
.s.
- t s
s..
c.L..
+
t
"...'.t*..# I.'*.**..'*
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4
.*C**..*.*"..'.t C*.*.T*."".**..--*
r, 4
f gy...sgy..Cate ** a -*. * #... L '. s.-
- e d. ". '. *. p"..",-*..-*..**~*,*.*.1**..
- t*.
~.
p..,.....s,s..t
.,t.g.s,.
.t+,.
.w..g
~
e........
.... p g...s.t.,
...L
..r 1
L. cf its r:Thi tc ter ::.tte.
I. sutzt 1: :tr ?.L::h ifE:-
o i
- 1 t
- .
Censune:r Pows: thereaftt: ::k 'tl.t ;;i'i: ;:::.:::. :.r.
it intended to find ways ef th::ter..n; the s:nedule. At the 1
1:ne it took this putli: petitien. Censu.trs Tcver c:n:1udt'
. internally en F.ry 5, ifI:, tht
'wt gent t11; t; et v: ti }t::.it; b:tr en schedult and ::rt.'
~
s 41.
On Junt 25.-19f*, i: further the cen:ealnent f its inability to meet the 19E4 deadline, cenen=ert 7: er di:erted-
~
Bechtel to prepare a new constru: tion schedule unde: which the P.idland Nuclear Facility would be in operation by J:11 19E4.
. This date, which shortened the 1e:htel estinate by cne year.
J
' was announced for the specific purpose of, among other things.
't i
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d
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s
- te.estin; 0
- w f :: eier ries ; it s ri;'t *.: tar-i +t: ale
,e.,e r e : 1;:et:,* t.
o 44.
In c: der t: ef fect the c:ntinuin; c:::e s; ert.
Cer.s'atts 7:.e: a.nd its 6;ent,- Ee:htel, a;;eed en J.;y 10, ;9-:
that in all stateretts a.nd derrer.ts ;:e;ared *f:r 71:i:
c:nr. ; tier,.' tiey w:uld refer te 0::.r.zers 7:.er's *: ::t.i
.... s. s.. e... e, a,. e s.,..
. s.. n. t. s S. a. w + '. a *. * '. a.
.n,
c-..
..e..
4..
ter::a s t e t: :;erati:r. de e d:f r.e :: *.i te zet.
Atceste i
tire, it var e;:eed fer inte al ;.- :ses te use *.le t.;e i
,.s,..,
. e. <. e. s. a.. s. e.. :,. e....,,...,.......st s
i s..>...
I-tet.
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4 :.
...,. 3,
..r..e
.e
.....p..,s..,.
l
- -u '
t.
- t... '<
.es-l.;;
- H
- e.- d J.; r :. ;
7. a.. v.-. ' '.' *.. -... -.. -. -.
t..
......... &1.....
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6.
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- i!;.
- :.5.c F eve r cf.'.t ; e ;: err ecnferen:t t e d ; t r.1,. 1.:.t ;;&nt'. :;. :
6.'.'...t'.
r...... '
dt..-*.
a '. v...... t."..s. e.s 7L t.-
'l l
the s:he.;t cer.trived ic: ;uili: ::.r.s.: ; t. :: veuld : :
T:*lovin-t:4 press conf ert.:t. :r. b: i. i. ii. ISE*,
-.r.
leve: it.f:r:t d Dov that n: nes cc:;; t t:,; stier woul' :. :..
evailatit 1: Dov until et:;v. Tatrut: 'lii*
t l~
It et:1y Tetrut y :::r. m Fever a;t: ::-
4
' ;;:v the existenes ef.it : ynt 10 terninett I
l cealed d:::
b rett the deadlint. :::.
Instead cf ad. itting its inttility 1:
surers Povt: netified Dov t.ht; a new s:hedule would n:L nt l
released ur.til April. On Tet: vary 1E, 29E3, Dow requested j.
consumers Fewer to provide- *.caningful written assuran:e* t.hst the 1964 deadline would be-met. On P. arch' 7,. 29E3, Censu ers Power once again refused to ad: it its inability to meet the -
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4C.
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gy. + 4 9 p,. eg }. .y A. a. =. e., 6..g....g r t' f.a..). 4 e.4.. g s0w. s.8
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p. c.*,.. g.a.dn rd.-.a*.t ...-... e n.- 1....-*.,c'*.*...'.. resu1*. cf the neglige::r :' *:ntu.::1 Feder 17. the ;14:e i and c::paction cf the f;11 cr. tit.tidland Nuclear Tari;;*., t:it and its imprudent ch:ict cf remed;ti reasures-u..a::cptu.t i: the Nil, Censumers Pover placed itself in a positier. vn:rtt} removal and replacement cf the deficient fill could net it . accorplished without derolishing the nuclear' facility. 'C:nsurert .i .i .1 11 . 16- .t ) ' L, r,..m -.
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) 7:.er *.r en e":;ted a ::stly 6: .- t e s t e d.r. d+ r; ;re.i r ; ;:: g. an. a.. g. .i. s. a... n. 3.. i l new fet.'ati:ns, f.rtier eddi g tc the de:ay and esper.se of the 1 p::jert. 1 51. N%: efficie:s ! ave described the ragnitude and 4 c::;;exity of the tr.'er;ir.nir.; ;;;;;a: as e;;iva:ent te build:ng i s' third tue: ear ree:ter on t'e s:te. L'r. der ;;esent censtruction i s:ted;;es re e ase. ty Censurers 7:.er, the e arliest the. -der. d Fir.r.in; prc.;rar can be :: ;;e*.ed is in 755. As a c:nses.en:e. .s e. .a. g... r. g.., - g. e., s.. y,g, . s.,.
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C': O t r."a ry 1, I S E;. the NI f::.e d i f t:r.r. trz 1: er 13!.;;; f c: q.ti:t). a r r u: Ln:t infra:-icn I rt:a.cf i: the ney'i;.. Int 42;t*.:c: cf heating, ventilat;n; a r. : at:.:enditier.in; equi; tr.t. Ov: yetts later, er Tetruary 1 2tEl .$. t FE it;:st: a c:v:: ;tn :ty :r 11::.C:t cr. Censure:s 4 l ic.t: ft: yet anettt: tre tkd:'.r e t ist taality atL :an:e ;rc;rtn. 53. On Leeenber 2, 29E*, i:..he f a:e of m:unt:n; pressu:t free the NE Censurers ?cver 1.alted all non-sciis, safety.related cer.structicn be:ause ci :ts centinuing inatil2ty te manage construction in a coepetent and licensable sanner. Jurisdiction over the project has been assigned te the NRC
- j. - -
office of special cases, an office,spe sally created to review I 1 ' l I_ [ ' ~19- .'.l M y ,4 g,,,.4% ?e hun.d u m%wemme -- w-
j t.'.e st t::.t ' ed r.u:: e n: ;r:le-*.s. 3 - : =. s e : f s t s :. :.. -: :. I t ic:.:e 4.d mi s: tr.* is: e r.t. ~; +.re:2 *:.e: its '.cen s l'-:t te t increased scrutiny and i: esti;sti:n by de 90 eedir.; to furt.her in:: eases in the ;;c.t's c:st ar.d ve.:e as:r.dly de:ey:n; ? its cc:;2etics. I j 54. In light cf t.he c:ntin;:n; histcry of Ccr.r. +:s g l T:wer's negligen:e. pa',ity e s e.. e.:e 1 e akd:.r.s a.nd ener 1 fai:ures, there is r.: rees:.c'e ; =;e:
- '.at C:.s;. e:s T:ser v.'
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I 1 I. D. :w 's Te rr ir e t.i:r. Of The *e r.e.r.e! A-e e. er.t 56. Te:1:.ir.g C:r.s ur e rs 7:.er 's A;ril 11.15E3 j kr.r.:.r.:e:ent, ?:v underte:K to de e :ine the rees:ns fc C:n. j - 5.: :s 7: er's fai:ure 1: ::.;;ete the.. dl a.-d F.: e ar To:ility. w I L:. 'e Anded a review cf a arge :.-2e: ef C:nsumers 7:.e: e....
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duty t: ref:t :. f:::. na).ir. =aterial nitrepresentatient. Under the Genert; A rec c.t. Cent ter Pevc t;s: cve' the d::3 a f firra*ivel} tr ::sclost :n a current tasis all raterit; i ,i inferr.ation wh:ch Could sagn:f acantly affe:t Lov's rights and cbligatient unde: the Genera; Agreerent. Because of tht ~ fiduciary relatienship owed hy censu err Power te Dov, Cenrumers Power was required to adhere to an even higher standard cf f ull and fair diselesure than would ordinarily be applicable. 1 b N : .i a.. _ =..
N t s 60. As ;:e.i:.s'y alleged. C::.s. e:s 7:.r: ?as er;*;ed in an ::;:( ; series f : ter:e ..5: ,e ....:s..: o n:n.di s c!:s u: es, in disregard of its :::::n 13w, f:2.::ary Ard cent actual d;*ies, begir.r.ing as early as 1977 and c:: ;r;;ng until et ; east the date of this n: tion. Said tisre;resertati:ns ~ and n:n. dis:::sures were r.te..ded by C:r.s.rers t: be re:ied upon, and were relied L;:n, in indsting D:w te enter inte the 1976 General Agreeyent. Ther e a fter, C:r.s u. e s 7:.er's e:st e; re. senteti:ns and n:n.d:s:::r. er were ca; rt:eted t: ;:esent c: l de:ay Dev ft:: exercising its Oe;a: :: ;ht te t-r::nate the c:ntreet and were mise des:g ed te c:n=eal C:nsu.ers 7:.er's ne;;;;en:e and :n:::pete.:e :. +et;n; :tr ::::;rt;:nr :: 4 ...._..g .,....,......_,,...u.. ....eg. 3.*.'A,. . gy t ..s.=. g....s.., g *.. _..,.4..g g,.................. .e e.. .eg.,.. ,...y.. s L.5,; + ..s .........s....-. .t., ..g ,a...,...,... 3 g........e.,..,...., g..........., ,g t.. n:slead:n; bl. L::r; e.he a:n;s t r; s n d:: : :.tr it- :- : l Es a d::e :: tr. : ;ren:r t + : g ru:.. t t VdIhIr:-* L:. ;. t ys that the C:ur at:uepe tne.:: r;;nts cf the ;,trt:es et f:::evr: t A. T.*.a t c;;:n: he ner:tietsent le ading u; t; tr.. Este;*.:en of the 19?t a trt: A;r e erer.t. C:r.ru e:s Fever tr. t;t;
- n e. ate ria; nisre;:e e er..s t;:r.1 an:- r.:n-dis:::sures whf en r:.:t:
De'.* tc enter inte the !!?! Genera: Agreenent. 1 E. CLLt e t tt : ths ese tion cf t!.t 197E GentrL 1 .j Agretntnt,"Centuner: 1:.t: e ngagtf an enge:n. ::sreprestnist;;;. I and non-disclosures fer the purpere of ceneetling fro: Dev nater:al information cer.cerning the cost and scheduling of the project. C. That the fcregoing material nisrepresentaticnr / and ncn-disclosures were relied upon by Dow to its detrirent. 6 22-i. + e .w
-...~ ) 1 D. That t) ressem c f C: r.s e : s 7 :.e r
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t3e c:.e:e;.-;: e ent sh:u;d Le d is ; ;,;;y ;.-.;. o And any tr.d all etligati:ns of L:w under sa:d er.eral 1; tee ent ' j a:e 4:scharged. ~ E. That D:w is entitled t: su:h further a.d addi. tier.a1 re;:ef as this C=urt shall deer j.st and p:oper :r.::Ld:ng 6:tual da ages in es:ess of $60,000.000 as well as punit:ve and eier;;try car a;es e..d re as::.at;e att:rr.eys ' fees. .....s , e......... .. a. ., r. 4.3.e s_. ~..e., t (1.
- t.e C.;e;at
- :ns cf parm; aphs 2 57 are hereby
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t. C:r.su srs I:ver var re ui:et unde j 1 Ar*icic 4 f t : ef the Gt..t:t*. Agreement..at voll' as under str fiduciary et*.:; tiens, te av=id ir;rudent expenditure: s= as te.r.ir.:-i:e the a;;:epate cost of the price of steam.to D;v; 1, c. -Consumers Fo.er was further required a l under Article 1(c) cf the'Ger.eral Ag:eereni, as well 4 as under its fiduciary obligations, to keep Dow. 'l i O 4 ,,,,m., .m.6 V-J
s g currently inf:te.' cf.11 :sterial fe:ts which.::;d sig.if::s.mtly affect the ::st c: t. ir; cf L:. :t'.:. o j gations under the General A;;ee.:ent. l d. Cens.ue:s 7:.e: was farce s.1 ject te an t ieplied obligation under the Ge.eral A; eerent te i exercise g:>od faith, due care an' reas:r.alle diligence in the perfor:an:e of its contrertual ciligaticns. A 63. As previc. sly al:eged. C::.s. e:s 7:ver has re;eatedly vic1sted each of the f::egrir; :ega; ciligati:r.s. 1 i
- n':vidually a.od e:11ertively these arti:.s ::.r.itute rater:a; 2
i tren:les cf the,qeneral Agree:ent, entitling L:v t: car.:e: all .....,...u.a.,,.a..,.
- y.,..
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,a. .4.,, . r;;.it cf the ;tri:er as f:'1.a: A. Tr.:: ::.r r t:1 1:.t: 11: natt: : L';; :ren:.. ;- Gent:t; Agree:ent. I, 1. Tr.at C: s= tri I:ver har rattr:t;;.. irta:hei : : 4 f;du:iary duties c.ei 0:. C. Tnti t.y ttt:r cf the f::e;:n :rea:her cf i 0:ns=trs Fewer's c r.t.ra:1.t; an' fidu:it:,. 4.tzer te to.. s Gent: t* Agreerent th: 1 1: En' it c.tn=ellt i tr.d all zer.t;. r: chligations cf Dow under the General A; ee t-- are dis:htige: D. That 0:. :s entitled il ru::. : re.cr and add:. tienti relief at thir cc.rt thould deer. j:t. ;- d ;:cper, in:;.i:.; but not limited to recovery cf damages ret.:t::.; from Censunt:: Tower's wrongful conduct in:1uding c:re than tc,000,000 expended by Dow in direct relian:e cr. Consumers. Power'r f aithful adheren:e l to its legal obligations. I 1 'f. i f - w: 4 . ~ -w w w. =raas '-4 .er-.w.-- -.y.- g e.' .weWc se,- E w-+- 3 .pe
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64. The ellegaticas of ;arn;;a;hs 1-57 are hereby e reelleged and incerierated by referen:e. 65. All re:aining centreet obligations of Dow sh uld ~ i be escused by reasen of the fai16:e of fundanental assur;tacns up:n which c:strart perferran:e was based, including Censusers 1:-er's inntility te c:r;;ete the h:d;ttd Na:! ear Tecility. As j a result, Dow's perf:r:ar.:e te pur:tase stear has be: cme c:n-4 mere: ally it;;*:tichtle 1e: esse of the o:rurren:e of s;;er-vening centinge.ncies which were not within the c:ste=;;ation cf 4 j the ;arties at tr.e ::re tr.e Cent.a; A;restent was tae:::ed :n i !.n t 15 1. in:; d.n;; a. Tr.s t: r. ;;;::. tr.t .r., f::: t;:r v:.:::. tr.t ;; ant r rv:-.rer *tre
- it t:e: ed wat aft ;tte;> ::r;a iti
- t.. : r.::L.t it: ::tr a.. a rt;:: ef tr t ta i; t!. f..:;etr 7t:;..;'
t r.e art;.;;;:: Lt.a t the ;;in'. var
- ip til e cf it n; c:nst :::e. : as : rett the str;t dater cf :ll; and It!! f:: 11:
and tne ent:re i j ge r.tt ri:n
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l ne ar tur; :en that the ;;tn v:2.: te 1' c:r.r trv:tt - vith::. t re ar:nti; e time at a c:..it t:. t';- re a s :n ti. ; * ::st. V.f-2T;iI D:e prays tr.. the Court a:;; ;t t*.e lega'. righ s cf the ;trties at f ellon : ~ f, A. Dow's centract eti:;ations te purchast s te s.t have been frustrated er renderee c:= ercially ir;;a:tical by the failure cf f undamental assur;tiens upon which the General Agreement was based. E. The failure of these fundamental assun;tions t. j were not caused by any actions of Dow. 25-- t .. ~
m G C.
- w is entitied to : d:::a:eti:n C et =11 of sis
- ereining tt i;eti rs ut. der tre 0,:.e a A ;;, s e r.
are ei:.s-d. co'.N! IV Caleu stien eT er=it.atic: Ta;. ent r-der Art: ele Nine cf the 197E Ge.. era: A:reerent a 66. The allegatiens cf paragra;hs 1-57 are hereby ree::eged kr,d in:crp::sted by referenze. i 67. To the essent that its obligations under the i. Genera Agreecent are not lega!!y d:s:ht:ged en ene c rcre cf 1 the ;::unds set forth in C:> -tr :-:II, 3:s r.et:f:ed C:nrurers 7:-er inat it has esereised : s un;;al:f;ed right t: ter :nate I 1
- n a:::rdar.:e v:ta the ;;;vas ::s c ' Arti:le 9(E)G } cf the 1'
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l line at lear: e s e tr;;. at Le:e-t: :t i. t ti. t:rtu ers Fever's fe;se rt;:etertet ens ont i n: nit t:::rure s cenetrn:n; its at ::::. : et<- '. Le : :: : 2; 155 c:=.er::t; c;tre t::n date were cer: 77.e : t: ;rever.t.-ent : fer-d:: prevent. L:e fre: exere t:n; :ts tern net :r 7:;htr tr.:tr the Gerert! 7::etrent. C:n:trerr 7:~.e: therer.. c:b=h: ane:tast by et y hundret: cf till :r.2 cf d:;;trs the event;:*. terr.inatien charge wh::h Consumers Fever vtuid clair. that L: 5 was re quired i: pay-7C. The 1:re;:ing act::nr c f Ornru. crr Tc.cr tre :: 1 ~ ~ breach cf the fidu:iary obligatsens owed Lev at vel' as the General Agreement and further c:nttitute fraud' lent tisrepre-sentation and non-diselesures in violaticr. of Dov's come.cn law rights. As the direct and proxicate result of Consuners Fever's fsilure tieely to dis: lese its inability to complete the plant for commercial steam operation pr or to De: ember 31, 1984. Dov .i. A e
e-+& L v ] ] -1 ? n s int.
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- s es wh4 :h wiu; d ret ! a.e t e en it.:.::e d ?.ed 0:ns.e er s 7 :.e : t:se;y d:se;: sed this ir at ::ty.
VdI717:7I. L:w prays that the Court adjudge the ;e;al rights of the parties as felless: A. That te the er*er.t the General A;;ee.ent :s not otherwise legally discharged, L:w has pre;erly eser:ised :ts right tc tertir. ate under Article 9(5 )(1). 1. T..et conr;:ers 7:-er's c:rrunicati:ns t: Lov t l I c:nrerr.ing the e:: er::a; :;eratien date fe ;;c:ers steL-were fraud ;ent. ::r;eed::;. and in v:elet:cr ef C:ns' rer: 7 : st r 's
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- :.t :;t sha'; :- :::;;te: :: Lt :t:;t cf a tert. nata:. :s t et
- str as et:;) c: ;+ :t = t:.E i
. I :.r a. t :1 ?:.t: re:t t L tile ~1: :: ;.e tt int ;;tn. 1.
- - t :: t:
et c;ertt:c I j 7:::: 1: Le tnit: 3*. 15i4. 77.a t in :: ;;t1.1 r.: ter.it.at;:n charpt. : tr.e e r *.ent tr.a t ; a rr ent a s n: t c ile r.. e t e r.0;s e t, sa:d tern nat:en l l cntrgt shal; tt ted.:ed by th:1 un:;nt cf er;tnse: ine;;;ed by L:4 I:n:t a* ;t t
- at e L !,
if li:ts t: l l' e V!.. :.- WCM1d n t 1.tve teer. in:. red nad Cent;:trz :ver ::tly c.s:;: red :ts
- nttility te :: ;;ete the ;;tc.; ::: c:n. e: cia; tits: operat:er.
- ract to Deew
- .t 31, 1964.
b,. e 71.
- .e allegati:n:
- c. ;aragtspht~1-5 are hereby realleged and incorporated by :titrence.
72. C:nsumers Pove: 1.:ther owed to Dev at all relevant tirer a duty to escre:rt due care and te proceed in a competent, wc kn.anlike sanner_ cn ats part or on the part of its agents in the planning, supervaracn and construction ef the t Midland Nuclear racility. 4 4 4 w 4 .,m 1
'./ D, t t 73. C:..-e ae rs 7:.er S r s t r e s:S ad its hty by f e s 'ir g t: ese:cise d.e care it a c: geter.t..::b a*.like :s-.e: i n *Ja, p: a r.ning, su;.ervisien and c:nstruction of the F.idland N:: car r. Tacility. Cor.suzers 7:.er's actiens have instead ref;e:ted a l I willful dis:egerd for the rights of Dev and censtitute' re:k. 3
- essness er at minie. negligen:e. Dew has suffered sericus fintnetal ir.i ry as the ' ire:t and ;;:xicate result of C:r.s..ers i
l 7:-er's f adh:e to es-reise d e care in: vd:r; *2e 2:ss cf ever .n. 0. 0 a.. ~.,. i ,f .-...r..,. . 6. a. t.s.e C.... a.. a,e.he..s. e:.a . r= ... a n}.t. 9 i rights cf the ;a-ties as fe;:ess: 4
- j..
..,......,.....,......e,e...,...... e. 4 ....a..... ,...,.,.............;.......e.a s.... .a.. .n. ..a s.... .s.. t........s........a. e .v. s.t... n y......g s 1. ~..~.t'. '.-~..i_t..- 1...-.. ..t*. v..~.'...v .'.r.~..t.'.'. L*. '. v.. ' t t e ' * ". e a '.*.* e..* *. *.*..' - *. *. *'.*.* *. ' e : a.*..*..'.-'.*.*.*.e.*t*..*. ..s c:ntu:t has caus e: * :. *.: suf f tr stratus i:ntr.::t; :t a et - I e>.:ess cf EL;,CC .t'.. 1' C. 7:.t. h:. :s er.:.le: 1: re::vt: :ts it a;es e' I i the result cf Ccnru t:s 'r:.tr's :e:).2ers att r.e;;;; tnt
- r. :.; ; *.
4 1 t ;tther with such f*.rthe r a.: add:t:ent re;;cf at t.h: s C=.;r. 4 s*.a;l deer jurt tne ;:en: tr.::ud:n; pun:t:ve tr.d e> er;1ary dar. ages togett.e: v;. rett:nel.;e att:rr.eyt'-fees. I j Fe.;;;us A. Gasta } ?.ar.eger, spe: kity Freducts Manufact. ::.;. Energy and Utilities F.ichigan Division The Dov Chemical Conpany S 4 i I .ohh* e f -N.cr_ ...gA.... %.+.,-a..+ . - g %,, p i ...mwo -~n 4
1 a t w g n / Da u. p,y Mu'%I cmh.d o CODSumCTS i POY!Cr James S Fatehee Dmp%, n,,ca of,,,a f>'lNClfAL ST AFF M[ 2 o*neret offices: bEA fANF; 212 west uschn en Avenue, Jack.on, Michwen 49201 ts17) 7se-osco e tl U 0/RA' "C5 v July 15, 1983 A/RA 3AO ^ g SLO L b.TM hC 8 Mr. James G. Keppler Regional Director Nuclear Regulatory Commission gog Region III 799 Roosevelt Road Glen Ellyn, IL 60137
Dear Mr. Keppler:
As I advised you late yesterday afternoon by te.tephone, the Dow Chemical Company notified Consumers Power Company that it was exercising "its right of temination, effective imediately, by reason of Consumers Power's inability to meet the commercial steam operation date as defined in Section 9(B)1 of the General Agreement." I first learned of this action by Dow Chemical as a result of a telephone call at approximately 4:30 PM yesterday from Mr. Wayne M. Hancock, General Counsel of Dow Chemical Company. Mr. Hancock advised me that Dew's written notice of termination and a copy of the complaint filed against Consumers Power Company in the Midland Circuit Court had been hand-delivered to Mr. James W. Cook's office in Jackson at 4:00 PM yesterday. Mr. Cook was at the Midland Plant site. I am enclosing copies of the notice of termination and the Complaint for Declaratory Judgment. In summary, the Complaint for Declaratory Judgment asked I that the General Agreement be cancelled and all remaining obligations of Dow under the General Agreement be discharged. In addition, Dow is seeking damages from Consumers Power Company in the arount of $60,000,000. j Obviously in the short time which has been available, Consumers Power Company I has not fully evaluated the impact of the Dow Chemical Company's notice of termination and declaratory judgment action. We do not agree with the allega-l tions contained in the declaratory judgment complaint and vill deny the same, j As to construction of the Plant, we are continuing on the schedule we have previously announced. I would be pleased to respond to any further questions you may have regarding this situation. i Yours very truly, 'W .i l / JBF:im Enc. $ b CC: Harold R. Denton JDSelby JWCook C)} } > e ? a r en w tve-v w v ae,
i DOW CHEMICAL U.S.A. MlOLAND, MICHIGAN 48640 i July 14, 1983 Mr. James W. Cook Vice President Projects, Engineering and Construction Consumers Power Company 1945 West Parnell Road Jackson, Michigan 49201
Dear Mr. Cook:
Pursuant to Section 9(E) of the June 21, 1978, General Agreement between Consumers Power and The Dow Chemical Company, notice is hereby given that Dow exercises its right of termination, effective immediately, by reason of Consumers Power's inability to meet the commercial steam operation date as defined in Section 9(B)1 od the General Agreement. This notice of termination is given with full reservation of Dow's legal rights, including the attached Complaint for Declaratory Judgment And Other Relief which Dow will be filing today in the Circuit Court for the County of Midland, Michigan. Should Consumers Power wish to discuss this notice or the matters raired in Dow's Complaint, Dow stands willing to do sr. Sincerely, W. W R. A. Gaska Manager Specialty Pr ucts Manufacturing, l Energy & Ut lities 47 Building Attachment caj t
a o \\ STATE OF MICHIGAN i i IN THE CIRCUIT COURT FOR THE COUNTY OF MIDI.AND THE DOW CHEMICAL COMPANY, ) ) Plaintiff, ) ) COMPLAINT TOR DECLARATORY v. ) JUDCMENT AND OTHER REtIET ) CONSUMERS POWER COMPANY, ) File No. 83 -CK- ) Defendant. ) i Berbert B. Edwards (P13112) and Kirkland & Ellis Attorneys for Plaintiff A. Introduction 1. By this Complaint and based upon the facts alleged herein and based upon its information and belief, plaintiff The Dow r.hemical Company, seeks a declaratory judg-ment declaring its legal rights and obligations with respect to the June 21, 1978 General Agreement for the sale of steam to Dow by defencent, consumers Pcwer company, from its Midland Nuclear Facility currently under construction. Specifically, Low seeks a declaration that all obligations of Dow under the Ceneral Agreement are cancelled and discharged because of Consumers Power's fraudulent misrepresentations and non-disclosures, Consumers Power's material breaches of its con-t tractual and fiduciary obligations to Dow, and consumers Power's inability to complete the Midland Nuclear Tacility I within any reasonable time or cost. Alternatively, if Dow's I obligations are not deemed to be completely cancelled and ' discharged, Dow seeks a declaration that any termination payment required under the 1978 Ceneral Agreement must be substantially reduced by virtue of Consumers Power's wrongful conduct. Dow i + .e w 4
q further seeks a declaration that it is owed damages arising from Dow's expenditures of more than 560 million in reliance on Consumers Power's fraudulent misrepresentations and non-disclosures as well as such further and additional relief as the Court deems just and proper. B. The Parties 2. The Dow Chemical company ("Dow") is a Delaware corporation headquartered at 2030 Dow Center in Midland, Michigan. Dow is a diversified international manufacturer of a wide range of chemicals and other products, including industrial chemicals and raw materials, specialty and agricultural chemicals, and consumer products. Since Dow's founding in 1897, one of its principal manufacturing complexes, currently referred to as the Michigan Division, has also been located in Midland. Dow currently manufactures approximately 100 major products at its Midland facilities and employs approximately 7,800 people in the Midland, Michigan area. 3. Consumers Power Company (" Consumers Power") is a Michigan corpotstion whose principal business is the sale of electricity and natural gas to a service area comprising most I of the state of Michigan, including Midland. Consumers Power i j is the largest utility in Michigan and its revenues in 1982 i exceeded 52.7 billion. i C. Jurisdiction and venue l 4. Personal and subject matter jurisdiction of this l i Court is founded on sections 600.601, 600.605, and 600.711 of l } the Michigan compiled Laws and the Michigan General Court Rules of 1963. An actual controversy exists between Dow and Consumers Power and Consumers Power is a Michigan corporation carrying on a continuous and systematic part of its general business in Michigan. ? 9
i I ) } l 5. Venue properly lies in the ef.rcuit Court for the County of Midland under Section 600.1621(a) of the hichigan Compiled Laws because Consumers Power conducts business and maintains a place of business in Midland County. D. The Prior Contracts Between Dow And Consumers Power 6. In the operation of its Midland, Michigan manu-facturing facilities, Dow requires a continuous, reliable and economical supply of process steam. At all relevant times, Dow's Michigan Division has owned and operated its own power-houses to supply its steam needs. 7. Beginning in 966 Dow and Consumers Power engaged in discussions about e possibility of consumers Power supplying steam to Dow iros a nuclear plant it was planning to construct. As proposed, the Midland Nuclear Facility would consist of two nuclear steam supply systems, one of which (Unit
- 1) was designated to supply steam to Dow. As an inducement to Dow to discontinue its own production of steam and to rely in the future on steam from Consumers Power, Consumers Power indicated to Dow that the Midland Nuclear Facility would be-capable of producing 4,050,000 pounds of steam per hour on a continuous, economical, and reliable basis as required by Dow.
I S. At all relevant times, Consumers Power held itself out to Dow as capable of constructing the Midland Nuclear Facility in a workmanlike, safe and licensable manner. What such construction would proceed without undue delay, and l that Consumers Power would undertake the project wfthout incur-i ring unreasonable or imprudent expenditures. Consumers Power also advised Dow that Bechtel Power Corporation ("Bechtel") would be the architect-engineer and construction manager for i the project. On or about December 13, 1967, Consumers Power { t ? r ='- II r e=. 4.--.,ws w-e -e v--*--
3 -7 S and Dow executed an initial General Agreemant under 'thich 4 Consumers Power agreed to supply steam to Dow on completion of the Midland Nuclear Facility (the "1967 Contract"). 9. Under the 1967 Contract and at all times since, l Consumers Power has retained sole responsibility for the design, construction, operation and maintenance of the Midland Nuclear Facility. Dow has no right of ownership, control or direction over the plant and Consumers Power has reserved to itself the exclusive right to make changes in the concept, design, con-struction and operation of the plant at any time and to whatever extent it deems desirable. 10. Because of Consumers Power's complete control over and superior knowledge of the design and construction of the plant, Dow has placed its complete faith, trust and confi-dance in consumers Power. Because of the complete trust and confidence which Dow has placed in consumers Power and because of the exclusive control exercised by Consumers Power 9ver all phases of the project, consumers Power has occupied a fiduciary relationship to Dow, in addition to its other obligations under 4 the parties' agreements. In recognition of consumers' fiduciary 1 obligations, at all relevant times, Coasumers has had an espress I contractual obligation to keep Dow fully informed of all material - facs that would significantly affect the cost of steam to Dow, I l including projected cost and scheduling information. I f 11. Pursuant to the 1967 Contract, Dow and consumers Power entered into a separate contract on January 30, 1974, governing the calculation of Dov's steam cost (the "1974 Steam Contract"). Under the 1967 and 1974 agreement, relying on Consumers Power's cost estimates, the parties agreed that upon completion of the Midland Nuclear Facility, the cost of steam l I to Dow would be based on that portion of the total plant design - l - l
s and construction costs devoted to the facilities for ge erating and delivering steam to Dow. This portion of costs is referred to in the contracts as the Allocated steam Investment. Under the contract formula, increases in the cost of the plant and delays in the plant's completion increase the cost of steam to Dow. 12. In 1567, Consumers Power estimated that the Midland N; clear Facility would be completed prior to 1975 at a cost of $256 millaw.7 After 1967, the Midland Nuclear Facility was subject to continuing scheduling delays and cost increases such that by September 1976, Consumers Power was predicting that it would complete both units by March 1982 at a total project cost of $1.67 billion. E. The 1978 General Agreement 13. As a result of these schedule slippages and cost increases and of disputes over the continued validity of the then existing contracts, Dow and Consumers Power undertook late in 1977 the negotiation of an entirely new agreement. A funda-mental concern to Dow during these negotiations was to obtain from Consumers Power a fira date by which Consumers Power would complete the plant. Dow's need for such a date stemmed in l large part from the continuing adverse effect on Dow's Michigan Division of the uncertainty as to when and at what cost the Midland Nuclear Facility would be completed. This uncertainty had had substantial adverse effects on the Michigan Division by i Preventing Dow frca making long-:ange plans regarding the products to be manufactured at Dow's Midland facilities, Michigan Division employment levels, and capital projects. causing a reduction in Michigan Division operations. 14. Because of these concerns. Dow made it known to Consumers Power from the start of the negotiations that it was of critical importance to Dow that Consumers Power make full i 5-i k
q ] disclosure of accurate, reliable and up-to-date cost and schedule information. Furthermore, if Consumers Power were unable to complete the Midlaad Nuclear Facility by a firm date, Dow wanted the express right to terminate any obligations to purchase steam. In the course of the negotiations which began in 1977 and concluded in June of 1978, the parties therefore agreed that all prior agreements be cancelled and that a new General Agreement be executed. + 15. On or about June 21, 1978, Dow and consumers 3, Power entered into the General Agreement, attached hereto as e Exhibit A (the " General Agreement"). Under the General Agree-ment. Consumers Power undertook to supply up to 4,050,000 i I million pounds of process steam per hour to Dow upon completion of the Midland Nuclear Tacility. The General Agreement further Frovided that the cost to Dow of the steam would be based on the Allocated Steam Investment, reflecting a portion of the costs of constructing the facility, but that Dow would have no obligation to' pay Consumers Power for steam until the Midland Nuclear Facility attained commercial operation for steam generation as defined in the General Agreement. l 16. Recognizing the past history of the facility, the parties agreed to specific provisions intended to protect Dow from further cost increases and completio.1 delays. For example, under Section 1(B) of the Genersl Agreement, Consumers I } Power promised to "use its best efforts to place Unit 2 of the l Generating Plant in commercial operation for electric service i on or about March 1, 1981 and to place the entire Generating Plant in commetcial operation for process steam service and electric service on or about March 1, 1982." Under Section 4(C)(4), Consumers Power further agreed to " avoid imprudent expenditures" and to "use its best efforts to optimize the f capital investments includable in the Allocated steam Invest-l t ment.= i -6 I 4 , _ _. ~ w w r g wy w-- g e -y ---w 7-m ya
') ) 17. Under section 9(B)(1) of the General Agreement, the parties agreed that if Consumers Power became unable to I declare the Midland Nuclear Tacility in commercial operation I ' for process steam by December 31, 1984, then Dow would be i' entitled to terminate the contract and pay Consumers a termina-tion fee no larger than one-half of the prudently incurred Allocated Steam Investment expenditures as of the date of termination. T l 18. Under Section 1(c) of the General Agreement, Consumers Power undertook to keep "Dow currently informed whenever practical concerning Consumers Power's construction schedules, the progress of engineering design and construction, and proposed changes in engineering dasign, construction and operating and maintenance practices and procedures that will significantly affect the aggregate cost of process steam service to Dow." F. Consumers Power's Fraudulent Misrepresentations And Non-Disclosures in the Negotiation of the 1978 General Agreement 19. During the contract negotiations in 1977 and 1978 leading up to execution of the 1978 General Agreement, Consumers represented to Dow that it knew of no construction j problem or other circumstances that would prevent it from l placing the Midland Nuclear Facility in commercial operation by March 1982. Immediately before the execution of the contract, Dow specifically requested disclosure of any information adversely reflecting on the status, cost or completion of the I } l project. Consumers Power assured Dow that it knew of no "sur-l prises" or any other adverse and undisclosed information about j the project. These representations were intended to and did in fac+ induce reliance on the part of Dow in executing the General Agreement in June 1978. ! i I 9
1 20. Consumers Power's representations concerning the i absence of adverse and undisclosed information were false. l Specifically, consumers Power knew prior to the execution of f the General Agreement that the Midland Nuclear Tacility was being constructed on improperly placed and compacted fill and that these soils problems and other construction problems described hereafter likely would prevent Consumers Power from meeting its target schedule. Consumers Power thus misrepre-i sented to Dow the status of the project and, in addition, concealed material information from Dow with the intent to induce Dow to enter into the General Agreement. 21. The soils problems concealed from Dow arose from Consumers Power's decision, because the Midland Nuclear Tacility is located on the flood plain of the Tittabawassee River, to raise the level of the site by depositing and compacting more than 30 feet of fill. Rather than constructing foundations using underpinnings, pilings or other established techniques to rest the weight of the plant structures on bedrock or the undisturbed and compacted glacial deposits underlying the site, consumers Power decided to place plant structures directly on top of the fill. 22. Among the structures were vital safety installa-I tions such as the emergency diesel generator building, the auxiliary building, storage tanks for emergency cocling water, I service water pump structure, and numerous underground pipes and cables carrying cooling water and vital control systems. Because these structures would rest in whole or in part on i fill, proper placement and compaction was essential to prevent the fill from settling under the weight of the structures. Excessive settlement and/or differential degrees of settlement of the fill can create serious unsafe conditions in any con-l struction project and are of particular concern in a nuclear l l power plant because they can cause blockage or rupture of pipes -a-l y i l
'} and cables carrying cooling water and electricity essential to the plant's safe operation. 23. On the basis of an engineering study completed in 1969 by the firm of Dames & Moore, Consumers Power adopted t } detailed specifications and procedures governing the fill to be i used on the site and how it would be deposited, compacted and i tested. Among other things, the specifications and procedures called for (a) Use of specified kinds of unmixed, cohesive i fill such as clay in areas containing 9 safety-related structures: (b) Regular testing of fill for moisture content before and after placement on the plant siter (c) Control over the thickness of each layer of fill as it would be deposited on the sitT: (d) Use of qualified rollers and other compac-tion equipment to apply the necessary amount of compaction pressure on each layer of fill to achieve proper compaction: (e) Testing of the compacted fill at specified intervals to ensure that the required f degree of density necessary to prevent settlement had been achieved ~ (f) Full-time supervision of all fill opera-tions by a qualified geotechnical engineer. 24. Placement of the fill on the plant site took i place from 19'" through 1977. Consumers Power failed to observe any of the previously identified controls or other standards of reasonable care and prudence. Instead, Consumers Power proceeded with the placement of the fill knowing that there was not proper supervision, that improper fill was being .g. I i, l
m ,] used, that the fill had been insufficiently compacted, and that false or misleading test results were being relied upon to certify the fill as meeting standards of the U.S. Nuclear f Regulatory Commission ("NRC"). Dow was not informed of any of these problems by Consumers Power at any time prior to the execution of the General Agreement. 25. In 1977, the administration building was con-structed on the defective fill and excessive settlement occurred f immediately. By August 1977, portions of the foundation of the administration building had settled up to 3-1/2 inches in one month. An informal investigation conducted by Consumers Power later in 1977 and concealed from Dow confirmed that there were serious deficiencies in the fill underlying the entire sita. including the fill on which vital safety-related structures were about to be constructed. The results of this investiga-tion, as well as all other facts known to consumers Power concerning the negligent and improper fill placement, were concealed from Dow. 26. The 1977 Consumers Power investigation was limited to an examination of the fill in the vicinity of the administration building and a perfunctory test of two other portions of the site. Even this inadequate review revealed - that there had been systematic errors in the placement and compaction of the fill. Among other things, the investigation at the administration
- building site found
- voids" or pockets of air in the fill and unbroken lumps of clay up to 3 feet in l
{
diameter, demonstrating that the fill had not been compacted, contrary to safety Analysis Reports certified by Consumers Power to the NRC.
i 27.
To examine the entire safety-related portion of the site, Consumers Power conducted only one test boring. As a matter of prudent engineering practice, a single boring was l
, i
,a ee -
,~ coestruction cf tt.e Mials.nd, Nuclear Facil'ity. - Consumers Power g,7
,t did so in sta face, of expreza warnings, from NRC officials that
+
1.
b<
\\,'
s Consumers Consumers Powen was proceeding at its owr. risk.
s 3.
S
/
Power also decided notf to remove red replace the unsafe fill y
/
x bJt instead temporarily piled sard on, portions of the site in y
+
A, i
an attempt to compact the defective'-fill'. Consumers Power was r
- i specifically warned by NRC officials t$at they had not approved
} = .y } this procedure or the resumpti:n of construction. 1 In December 1978,\\ onsumers Power requested j '37. C (1 techtelitd assess the impact on i.. ant cogletion of soils A remedial work. In April 1979, Etchtel informed Consumers Power 4 m .- x that there Muld be at least an eight-month delay in the fuel s t ~ 1 'j" ..s 3 load date-ft.r Unit 2 and e, fiva-wenth' delay for Unit 1. g .4' 'I ~ sub-3 l 'seqaant schedule changes shuatd that the target dates Consumers h?ower had held cut to Dow thre no longer valid. - These included _J'a July 1579 Bechtel report and a November 1979 Consumers Power + x x schedule..both of which identified further slippage in the t + - m 3 \\ g }chedule. f,till further,alippaga became inevitable when Consumers s 1 l r y y l ', 3e q.si ' \\,' j' 1' f 5 s 1 ) J --z ,14 r s ' s y3 NF 3 - i ~ s( l -.-y. s - 1 '4 s 9 l ~ ( $) y[ l 1(- s 7 .,,, i f.,._._ ,._ I. ~ T b _. w._._.. , n 4'y .? nj ~) [=
~ 9 i Power's investigation of the fill confi m 4 that the remar'isl soils measures it had taken were inadequate and that years of l i. additional delay would be necessary to devise and implement i further remedial measures. 38. On December 6, 1979, the Nuclear Regulatory l 4 Commission issued an order finding that there had been a ' breakdown in quality assurance related to soil construction activities under and around safety-related structures and l systems." The NRC also found that Consumers Power had made material false statements in certifying its compliance with fill procedures outlined in the Final safety Analysis Report. The NRC determined that there remained an " unresolved safety issue concerning the adequacy of the remedial acticn to correct the deficiencies in the soil construction under and around safety-related structures and systess'. Consumers Power was therefore ordsred to terminate all further soils related work. 39. It was abundantly clear by at least the end of December 1979, in light of the NRC order, that Consumers Power could not meet the General Agreement's target completion dates. Furthermore, Consumers Power also knew or should have known that it was unable to meet the December 31, 1984 deadline for commercial steam operation in view of the fact that the major structures of the facility were resting on thirty feet of; irfhdequate and unsafe fill and the NRC had rejected the remedial measures which Consumers Power had taken. 40. Consumers Power's inability to meet the 1994 l deadline was confirmed in January 1980 when Bechtel provided 4 Consumers Power with an updated cost and sch;Jule forecast, known as Forecast 6, which declared that Consumers Power would be unable to complete the Midland Nuclear Facility until 1985. The Bechtel forecast also projected that total plant costs would be 83.1 billion rather than the $1.67 billion previously I estimated. -15 ' a. w.--
a 41. Despite its knowledge that it covu,n-t complete the project by 1984, Consumers Power decided to conceal from Dow its inability in order to prevent Dow from terminating the General Agreement under Section 9(BH2). Thus, Consumers Power publicly stated that it refused to accept Bechtel's estimates for plant completion. At the same time, however, consumers Power performed internal studies disclosing that its principal i alternatives were (1) either to complete the nuclesr facility in May 1985 and assume the risk that Dow would terminate the + General Agreement; or (ii) to terminate construction and either write-off the project or convert it to coal-fired power. f Consumers Power recognized that if Dow were to exercise its right to terminate under Section 9(B)(1), Dow's termination l payment based on costs incurred as of April 1,1980 would be a maximum of $185 million. Bad Consumers Power disclo' sed to Dow that it could not meet the 1984 deadline, Dow would have term-insted the contract. 42. On or about March 5, 1980, Consumers Power decided to continue construction of the Midland Nuclear Facility l and fabricate an artificial schedule purporting to show that it-f could complete the project before December 1984, thereby depriving Dow of its right to terminate. Pursuant to its March 1980 plan," Consumers Power thereafter took the public position that it intended to find ways of shortening the schedule. At the time it took this public position, Consumers Power concluded internally on May 5, 1980, that "we generally agree with Bechtel both on schedule and cost." 43. On 3une 25, 1980, to further the concealment of l its inability to meet the 1984 deadline, consumers Power directed l Bechtel to prepara a new construction schedule under which the-Midland Nuclear Facility would be in operation by July 1984. This date, which shortened the Bechtel estimate by one year, was announced for the specific purpose of,' among other. things. i 1 a.s-. .o n- ,:.-,s a 4 y ,.,,, - -r
q preventing Dow from exercising its right to terminate the I General Agreement. t I 44. In order to effect the continuing concealment, consumers Power and its agent, Rechtel, agreed on July 10, 1980 ? that in all statements and documents prepared "for public t consumption," they would refer to Consumers Power's " current project schedule" dates purporting to show that the 1984 com-mercial steam operation deadline could be met. At the same time, it was agreed for internal purposes to use the true schedule which recognized that the 1984 deadline would not be met. 45. Dow was not informed of the true schedule. Instead, at all times between July 10, 1980 and April 11, 1983, Consumers Power assured Dow that the plant would be in ccamer-cial operation by December 31, 1984. Throughout this period of deception, Consumers Power knew or should have known with each passing day that the 1984 deadline was ever more unattainable, but refused publicly to acknowledge these facts. 46. For example, on November 9, 1982. Consumers Power called a press conference to discuss the plant's schedule at which a Consumers Power official specifically denied that the schedule contrived for public consumption would not be met. Following the press conference, on November 15, 1982, Consumers Power informed Dow that no new completion dates would be.made l available to Dow until early February 1983. 47. In early February, Consusters Power again con-cealed from Dow the existence of its right to terminate. Instead of admitting its inability to meet the deadline, Con-sumers Power notified Dow that a new schedule would not be released until April. On February 18, 1983, Dow requested consumers Power to provide " meaningful written assurance" that-f the 1984 deadline would be met. On March 7, 1983, Consumers-Power once again refused to admit its inability to meet the r l t e
- e.
a-+ -~e ..m> y - e,ww.m .m, g w, _ I w. -r 4 v.,. -.
Q gg, 1984 deadline and instead responded that " April will be the \\ earliest time we can give you the benefit of our considered i gh judgment on cost and schedule." l { 48. Not until April 11, 1983 did Consumers Power 5 b finally admit to Dow that Unit 2 would not go into commercial } bI, / operation before February 1985 and that completion of Unit 1 would be delayed until August 1985. Consumers Power further estimated that the total cost of the project would be $4.43 r [ '(e .. ~
- l t billion, an increase of more than $1 billion over its previous r '.
t .)() (.i ^ 'r estimates. By virtue of the April 11 announcement, for the f J T' first time Dow possessed the unqualified right to terminate under Article 9(B)(1) of the General Ag:eement. B. Consumers Power's Other Material Breaches And Negligence In The Performance Of the 1978 General Agreement 49. The misrepresentations and non-disclosures ' alleged above constitute material breaches of Consumers Power's contractual and fiduciary duties. In addition Consumers Power has since June 1978 committed other material breaches by failing to use its best efforts to complete the plant and by failing to avoid imprudent expenditures in the design and construction of the Midland Nuclear Facility. Consumers Power has also negli-l gently and willfully failed to exercise due care in the con-struction of the Midland Nuclear Facility. 50. Since 1978, Consumers Power's mismanagement of the Nuclear Facility project has resulted in repeated schedule delays and inordinate cost increases. Among other things, as a I result of the negligence of Consumers Power in the placement and compaction of the fill on the Midland Nuclear Facility site 1 i and its imprudent choice of remedial measures unacceptable to the NRC, consumers Power placed itself in a position whereby removal and replacement of the deficient fill could not be accomplished without demolishing the nuclear facility. Consumers l l l w-y- y-+ g ,-w-W
.] Power then adopted a costly and untested underpinn$ng program involving tunneling under existing structures and installing 4 new foundations, further adding to the delay and expense of the project. 51. NRC officials have described the magnitude and complexity of the underpinning program as equivalent to building 'a' third nuclear reactor on the site Under present construction schedules released by Consumers Power, the earliest the under-pinning program can be completed is in 1985. As a consequence, more than eight years of delay in the Midland Nuclear Facility will have elapsed from the August 1977 detection of settlement at the administration building. During this same period. Consumers Power's estimates of the cost of the nuclear facility have increased by nearly $3 billion. 52. Continuing quality assurance problems at the Midland Nuclear Facility have resulted in the NRC's concluding that there is no reasonable assurance that consumers Power will construct a nuclear facility that meets NRC requirements for licensing for commercial operation. For example, since the underpinning program began, the NRC has ordered the work to be halted at least twice because cf negligence and lack of super-vision by consumers Power. On January 7, 1981, the NRC fined Consumers Power $38,000 for quality assurance infra ~ctions i related to the r.cgligent installation of heating, ventilating and air-conditioning equipment. Two years later, on February 8, 1983, the NRC imposed a civil penalty of $120,000 on Consumers Power for yet another breakdown of its quality assurance program. 53. On December 2,1982, in the face of mounting pressure from the NRC,. Consumers Power halted all non-soils, safety-related construction because of its continuing inability to manage construction in a competent and licensable manner. Jurisdiction over the project has been assigned to th NRC e Office of special Cases, an office specially creatt.d to review , i --w+ .. + - - -+-' +-. ,,+ av y c- , - + - = w ,w-----e
3 4 the most troubled nuclear projects. Because of its.own negli-gence and mismanagement, consumers Power has been subject to i increased scrutiny and investigation by the NRC, leading to further increases in the plant's cost and unreasonably delaying its completion. 54. In light of the continuing history of consumers Power's negligence, quality assurance breakdowns and other s failures, there is no reasonable prospect that consumers Power will complete the Midland Nuclear Facility at a reasonable cost and within a reasonable time, if indeed the plant will ever be finished. It now appears likely that the NRC will order a reinspection of virtually all plant systems and will require an independent third-party verification of design and construction. such actions will require at least a year of further delay and additional substantial cost increases by themselves. Because of the history of serious safety and other problems dis ' D '~iis reasonable to expect further delays and cost t
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increases, if not permanent termination of construction, to result from any additional inspection of the Micland Nuclear Facility and the discovery of additional material defects concealed thus far from Dow. 55. Based on the present status of the Midland l nuclear facility and its past history, consumers Power's April 11, 1983 cost and schedulet forecast was itself a continuation of Consumers Power's pattern of concealment and misrepresentation. Because of the continuing negligence aad recklessness of Consumers I Power and the numerous unresolved licensing and safety questions that have resulted, the Midland Nuclear Facility may never be completed and in any event it certainly will not come into commercial operation before 1986 at the earliest and at a cost of less than 86.0 billion. The Midland Nuclear Facility,' if completed, would produce energy at a commercially unreasonable l l l p L we - ,_w.,we-- -e'-,w w g, 'i.
+- mm Q m cost contrary to the assumptions on which the General Agreement l was premised. k j 2. Dow's Termination of The General Agreement 56. To110 wing Consumers Power's April 11, 1983 announcement, Dow undertook to determine the reasons for Con-sumers Power's failure to complete the Midland Nuclear Facility. Dow demanded a review of a large number of Consumers Power documents never before provided to Dow, a portion of which have i now been produced. The documents confirm that a continuous and systematic practice of misrepresentation and nondisclosure has been perpetuated by Consumers Power in derogation of its obliga-tion to keep Dow fully and securately informed of all material ~ facts concerning the project's cost and schedules. ~ 57. Accordingly, for all of the reasons described in this complaint. Dow served notice on Consumers Power that it was terminating the General Agreement pursuant to Section 9(B)(1) and reserving its rights to pursue its legal remedies under this complaint. COUNT I Fraudulent Misrepresentations and Non-Disclosures 58. The allegations of paragraphs 1-57 are hereby realleged and incorporated by reference. 59. At all relevant times Consumers Power owed Dow a duty to refrain from making material misrepresentations. Under the General Agreement, Consumers Power also owed the duty affirmatively to disclose on a current basis all material i i information which could significantly affect Dow's rights and t obligations under the General Agreement. Because of the - fiduciary relationship owed by consumers Power to Dow, Consumers - Power was required to adhere to an even higher standard of full j and fair disclosure than would ordinarily be applicable. ( 21-i -. -. ~ -
] n i 60. As previously alleged, consumers Power has engaged in an ongoing series of material misrepresentations and i non-disclosures, in disregard of its common law, fiduciary and 1 j contractual duties, beginning as early as 1977 and continuing until at least the date of this action. Said misrepresentations and non-disclosures were intended by consumers to be relied upon, and were relied upon, in inducing Dow to enter into the 1978 General Agreement. Thereafter, Consumers Power's misrepre- : sentations and non-disclosures were calculated to prevent or delay Dow from exercising its legal right to terminate the ,t l contract and were also designed to conceal Consumers Power's l negligence and incompetence in meeting its obligations to i construct a nuclear generating plant in a safe, efficient, workmanlike manner waile avoiding all imprudent expenditures. Dow did in fact justifiably rely to its detriment on these misrepresentations and non-disclosures which were false and misleading by, among other things, expending over 560,000,000 .i as a direct and proximate result. WHERETORE, Dow prays that the Court adjudge the legal rights of the parties' as follows: t i A. That during the negotiations leading up to the execution of the 1978 General Agreement, Consumers Power engaged in material misrepresentations and non-disclosures which induced Dow to enter into the 1978 General Agreement. 3. That after the execution of the 1978 General Agreement,' Consumers Power engaged in engoing misrepresentations i l i e and non-disclosures for the purpose of concealing from Dow material information concerning the cost and scheduling of the i ( project. C. That the foregoing material misrepresentations i and non-disclosures were relied upon by Dow to its detriment. i l l
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/ D. That by reason of Consumers Power's wrongful conduct, the General Agreement shculd be and is legally cancelled and any and all obligations of Dow under said General Agreement j are discharged. i t E. That Dow is entitled to such further and addi- ) tional relief as this Court shall doen just and proper including i actual damages in excess of $60,000,000 as well as punitive and i exemplary damages and reasonable attorneys' feas. i I COUNT II Material Breach of Contract and of Tiduciary Duties 61. The allegations of paragraphs 1-57 are hereby i realleged and incorporated by reference. 62. Consumers Pever owed Dow the following duties l under the General Agreement and by reason of the fiduciary relationship between the parties: a. Consumers Power was required under Article 1(B) of the General Agreement to use its best efforts to attain commercial operation of Unit 2 for electric service by March 1, 1981 and to place the i entire generating plant in commercial operation by { March 1, 1982. This contract obligation, as well as i its fiduciary obligation, required Consumers Power at l minimum to proceed with all phases of construction and licensing with due diligence and in a non-negligent. workmanlike manner so as to achieve these dates; b. Consumers Power was required under 1 Article 4(C) of the General Agreement, as well as under its fiduciary obligations, to avoid imprudent expenditures so as to minimize the aggregate cost of the price of steam to Dows g c. Consumers Power was further required t li under Article 1(c) of the General Agreement, as well 5 as under its fiduciary obligations, to keep Dow i ' + f r , - - + -,y-- s-
t 3 ~ currently inferrat' of all material facts which.would significantly affect the cost or timing of (.- obli-I gations under the General Agreement. d. Consumers Power was further subject to an implied obligation under the General Agreement to I esercise good faith, due care and reasonable diligence in the performance of its contractual obligations. 63. As previously alleged, consumers Power has repeatedly violated each of the foregoing legal obligations. Individually and collectively these actions constitute material breaches of the General Agreement, entitling Dow to cancel all remaining contract obligations. As the direct and proximate result of consumers Power's material breaches, Dow has suffered substantini financial injury including the loss of over 560,000,000 expended in reliance on the General Agreement. WHEREFORE, Dow prays that the Court adjudge the legal rights of the parties as follows: A. That Consumers Power has materially breached the General Agreement. B. That Consumers Power has materially breached its fiduciary duties owed Dow, C. That by reason of the foregoing breaches of j consumers Power's contractual and fiduciary duties to Dow, the General Agreement should be and is cancelled and all remaining obligations of Dow under the General Agreement are discharged. D. That Dow is entitled to such further and addi- { tional relief as this court should doen just and proper, including i but not limited to recovery of damages resulting fro'.s Consumers Power's wrongful conduct including more than $60,000,000 expended by Dow it. direct reliance on Consumers Power's faithful adherence to its 14 gal obligations. a b j ' ' ' - * ~ sM-y,w .m ,y..
] \\ cetNT 211 l Excuse by Reason of Failure of Tundamental Assumptions 64. The allegations of paragraphs 1-57 are hereby realleged and incorporated by reference. 65. All remaining contract obligations of Dow should be excused by reason of the failure of fundamental assumptions upon which contract performance was based, including Consumers Power's inability to complete the Midland Nuclear Facility. As a result Dow's performance to purchase steam has become com-mercia11y impracticable because of the occurrence of super-vening contingencies which were not within the contemplation of the parties at the time the General Agreement was executed in June 1978, including: s. The assumption that the fill upon which the plant structures were to be erected was adequatelyco$act'edandsuitableforconstructionof the Midland Nuclear Facility; 1 b. The assumption that the plant was capable of being constructed so as to meet the target dates of 1981 and 1982 for Unit 2 and the entire generating plant respectively. c. The assumption that the plant would be constructea within a reasonable time at a commercially reasonable cost. i WHEREFORE, Dow prays that the Court adjudge the legal rights of the parties as follows: t ~ A. Dow's contract obligations to purchase steam have been frustrated or rendered commercially impractical by I the failure of fundamental assumptions upon which the General Agreement was based. B. The failure of these fundamental assumptions were not caused by any actions of Dow. we ww.. ..w-- ,,,,,wem. ,w--- . on -.em-- c -g-s--,--- m ,i- -
\\ j = i l C. Dow is entitled to r. fs:laration that,a.11 of its remaining obligations under the General Agreement are excused, i COUNT IV i Calculation of Termination Fayment i Under Article Nine of the 1978 General Aereement t I 66. The allegations of paragraphs 1-57 are hereby re, alleged and incorporated by reference. 67. To the extent that its obligations under the { General Agreement are not legally discharged on one or more of the grounds set forth in Counts I-III, Dow notified consumers Power that it has exercised its unqualified right to terminate in accordance with the provisions of Article 9(B)(1) of the 4 General Agreement. 48. Although consumers Power acknowledged for the first time on April 11, 1983 that commercial operation for process steam would not occur prior to December 31, 1984, it knew or had reason to know of its inamility to meet this dead-l line at least as early as December 1979. 69. Consumers Power's false representations and 4^ nondisclosures concerning its ability to meet the December 31, i 1984 commercial operation date were designed to prevent, and in j fact did prevent, Dow from esercising its termination rights under the General Agreement. Consumers Power thereby sought to increase by many hundreds of millions of dollars the eventual termination charge which Consumers Power would claim that Dow l was required to pay. 70. The foregoing actions of Consumers Power are in breach of the fiduciary obligations owed Dow as well as the General Agreement and further constitute fraudulent misrepre-l- sentation and non-disclosures in violation of Dow's common law rights. As the direct and proximate result of Consumers Power's failure timely to disclose its inability to complete the plant 1 i I for commercial-steam operation prior to December 31, 1984, Dow --,..._~w. e +. ,., - ~.,
s. 7 ^ has incurred substantial expenses which would not have been incurred had Consumers Power timely disclosed this inability. i teEREFORE, Dow prays that the Court adjudge the legal rights of the parties as follows: i A. That to the extent the General Agreement is not t otherwise legally discharged, Dow has properly exercised its right to terminate under Article 9(B)(1). B. That Consumers Power's communications to Dow concerning the commercial operation date for process steam were I fraudulent, misleading, and in violation of Consumers Power's contractual and fiduciary obligations to Dow. ] C. That in computing the termination charge, to the extent that payment is not otherwise excused, said termination charge shall be computed on the basis of a termination date at least as early as December 1979 when Consumers Power became unable to complete the plant for commercial steam operation prior to December 31, 1984. D. That in computing the termination charge, to the extent that payment is not otherwise excused,.said termination charge shall be reduced by that amount of expenses incurred by Dow since at least as early as December 1979 which would not have been incurred had Consumers Power timely disclosed its inability to complete the plant for commercial steam operation prior to December 31, 1984. a COUNT V Weelleence 71. The allegatio ss of paragraphs 1-57 are hereby realleged and incorporated by reference. 72. Consumers Power further owed to Dow at all ~ relevant times a duty to exercise due care and to proceed in a ^ competent, workmanlike manner on its part or on the part of its ~ agents in the planning, supervision and construction of the Midland Nuclear Facility. we-w o,s.. w.--- u n m. -.,-o, ww T--t+ ve +- --T e -r t- +--- y__ e
m s 73. Consumers Power has breached its duty by failing to exercise due care in a competent, worlomanlike manner in the planning, supervision and construction of the Midland Nuclear Facility. Consumers Power's actions have instead reflected a i willful disregard for the rights of Dow and constituted rock-lessness or at minimum negligence. Dow has suffered serious financial injury as the direct and proximate result of consumers Power's failure to exerc'ise due care including the loss of over i 460,000,000. WHEREFORE, Dow prays that the Court adjudge the legal rights of the parties as follows: A. That Consumers Power owed a duty to Dow to proceed in a competent workmanlike manner and with due care in the planning, supervision and construction of the Midland i Nuclear Facility. 3. That Consumers Power has willfully disregarded and violated the aforementioned duties and through negligent conduct has caused Dow to suffer serious financial damages in excess of $60,000,000. C. That Dow is entitled to recover its damages as the result of Consumers Power's reckless and negligent conduct together with such further and additional relief as this court j shall deem just and proper including punitive and exemplary damages together with reasonable attorneys' fees. Romagius A. Gaska l Manager, specialty Products Manufacturing, j Energy and Utilities Michigan Division The Dow Chemical company i l . l [ .. ~....
y. m _s STATE OF MICHIGAN )) ss. COUNTY OF MIDIAND ) On this 14th day of July,1983, before me personally came the above-named Remigius A. Gaska and made oath that he has read the foregoing complaint by him subscribed, and knows the contents thereof, and that the same is true of his own knowledge or, on information and belief, he believes it to be true. Notary Public My Commission expires IAW OFFICES OF BERBERT H. EDWARDS, P.C. By: Eerbert H. Edwards (P13112) 2612 Ashman P.O. Box 1883 Midland. Michigan 48640 (517) 631-5811 KIRKLAND & EI.I.Is By: samuel A. Baubold I of Counsel: William R. Jentes James A. Goold Lawrence E. strickling Thomas D. Graber KIRKLAND & ELLIs 200 East Randolph Drive Chicago, Illinois 60601 (312) 861-2000 Wayne M. Nancock Thomas J. Cresswell THE DOW CEEMICAL COMPANY 2030 Dow Center Midland, Michigan 48640 l Dated: July 14, 1983 i I i I 1 l I l l i 6 , + - + - + ~ m,n+,--sw- ~~+ em ,-}}