ML20093H937

Reply to Alabama Electric Cooperative,Inc 840718 & DOJ 840720 Responses to Commission 840709 Order.Certificate of Svc Encl

ML20093H937
Person / Time
Site:	Farley
Issue date:	07/24/1984
From:	Lindeman H ALABAMA POWER CO., NEWMAN & HOLTZINGER
To:
Shared Package
ML20093H934	List: ML20093H931 ML20093H937
References
A, NUDOCS 8407250414
Download: ML20093H937 (14)

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UNITED STATES OF AMERICA DOCFETED NUCLEAR REGULATORY COMMISSION M Before the Commission

• 84 J124 PS:18 In the Matter of )

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ALABAMA POWER COMPANY ) Operating Licenses'

) Nos. NPF-2 and NPF-8 (Joseph M. Farley Plant, )

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Units 1 and 2) ) c g REPLY OF ALABAMA POWER COMPANY TO RESPONSES OF ALABAMA ELECTRIC COOPERATIVE, INC.

AND DEPARTMENT OF JUSTICE Alabama Power Company ("APCO") submits this reply to the papers submitted by Alabama Electric Cooperative, Inc.

("AEC"), on July 18, 1984, and by the Antitrust Division of the Department of Justice (" Antitrust Division"), on July 20, 1984, in response to the Commission's Order of July 9, 1984. 1/ Both responses underscore two good reasons for adopting the declara-tory order procedure suggested by APCO:

(1) There is a substantial disagreement between APCO and AEC over interpretation of the license condition.

1/ AEC appears to have difficulty in separating the issues now raised before the Commission, and which concern only the application of an effective license condition, from the issues that were involved in the antitrust hearing on the merits, a proceeding that has been concluded. APCO does not agree with AEC's characterization of the factual record of dealings between the parties, including the conduct of negotiations pursuant to the license condition; indeed, as l Attachment A demonstrates, AEC's description of recent I communications is both inaccurate and in violation of a confidentiality agreement between the parties. None of that, however, appears to be relevant to the question now before the Commission.

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-y (2) Prompt and efficient resolution of that dispute is in the public interest.

The only remaining question is whether the declaratory order procedure is likely to lead to a more prompt and efficient resolution of the dispute over interpretation of the condition, as. contrasted with an enforcement proceeding under 10 CFR Part 2, Subpart B.

Both respondents oppose the declaratory order alter-native,-for reasons that are not made.very clear. Neither respondent explains why the declaratory order procedure would not work. AEC points to no legal defect in the procedure, and the Antitrust Division's legal criticism is based on a misunderstand-ing of the relationship between a declaratory proceeding and the enforcement process. 2/ What is clear is that both respondents would prefer to avoid having the Commission address the basic policy questions involved in interpreting the license condition. 3/ We respond, in the following sections,ito the specific points raised by AEC and the Antitrust Division.

-2/ The Antitrust Division participates in antitrust review proceedings before the'NRC in order.to give the NRC the benefit of its presumed antitrust expertise. The issue.now before the Commission is purely one of administrative '

procedure and economy, subjects on Which the Antitrust Division has no: recognized expertise and very limited experience.

3 / The fundamental issue is Whether the Commission' interprets the license condition to require APCO to' sell an interest in the Farley Plant at a price that imposes an economic penalty on APCO's. remaining customers. That is a policy choice that should be made by the commission itself.

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1. A Declaratory Proceeding Would Not Involve

" Intent," And Thus Could Be Concluded Expeditiously.

The Antitrust Division's objection that a declaratory j proceeding would be inadequate to deal with the issues raised by AEC's request for enforcement action is based upon a misunder-standing of the issues that would be addressed in a declaratory l order. The papers filed by AEC and APCO present two different i

issues. The first, raised by APCO, relates to the terms that APCO must offer AEC in order to implement the license condition.

This issue involves an interpretation of the license condition.

I That is all that would be involved in proceedings leading to issuance of a declaratory order, and the issue is subject to prompt resolution based on written submittals by the parties. 4/

{ The second issue, which was raised by AEC in its j enforcement rcquest, concerns the question of whether APCO's conduct of the negotiations to date with AEC constitutes a f

j deliberate violation of the license condition that calls for

, punitive action by the NRC. This issue of APCO's good faith in j

j the negotiations to date cannot be resolved without first

{ deciding what the license condition means; however, it involves n

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1 4/ The Antitrust Division states, in footnote 3 of its Response

~(p. 5), that "APCO . . . points to no specific ambiguity in the license condition requiring interpretation." APCO's i

i Petition, supported by the appendices thereto, describes four critical issues on which APCO and JJX: have reached a stalemate, with each~apparently convinced that its position j is supported by the license condition. The suggestion that i there is no_ ambiguity in the condition willicome as a suprise to any literate person'Who has undertaken to read

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far more than that, including inquiry into the subjective state of mind of both parties to the negotiations. Resolution of the first (interpretation) issue by the Commission could remove any need to consider the second issue. At the least, an NRC Staff Director would have the benefit of a definitive interpretation of the condition before deciding whether a charge of violation of the license by APCO is warranted. 5/ Thus, there is an excellent chance that adoption of the declaratory order path will save substaatial resources of the Commission and the parties.

An equally good reason for adopting the declaratory

procedure is that it will permit the sale of an interest in the Farley Plant to AEC (or a decision by AEC not to buy an interest) i to be made in the near future, without awaiting the outcome of a long, drawn out enforcement proceeding. That is an objective 4

that AEC apparently does not share with APCO.

2. An Enforcement Proceeding Would Be Lenghty And Resource-Consuming.

Both AEC and the Antitrust Division suggest that abbreviated enforcement proceedings could be conducted in lieu of a declaratory proceeding. This suggestion is unrealistic. ,

! First, contrary to the Antitrust Division's under-standing, an enforcement proceeding is not the " traditional, 4

familiar" means for resolving disputes over interpretation of a

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As APCO emphasized in its Petition, it does not seek to

, avoid answering for its actions to date, and is confident

.that the Commission, or its delegate, will find no reason to question APCO's good faith.

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t broad, non-specific license condition. NRC license conditions usually take the form of extremely specific technical specifica-tions. The enforcement procedures contained in 10 CFR Part 2, Subpart B are designed to enforce compliance with the conditions (and with regulations that protect the public health and safety),

as well as to impose sanctions that have the primary purpose of ensuring that corrective action will be taken to prevent recur-rent violations. There is no " traditional, familiar" NRC pro-cedure for dealing with an issue of how a cryptic license condition should be interpreted.

Second, because of the structure just described, NRC enforcement proceedings are accusatory in nature and involve the potential imposition of sanctions, including civil penalties and, if AEC has its way, suspension of the licenses for the Farley Plant. If APCO is placed at the 7 tak of punitive sanctions and compelled to defend itself against an NRC accusation that it has violated the license condition, APCO would have no choice but to contest an enforcement order vigorously and to build a full record in defense of its actions. The suggestion that enforce-ment proceedings could be abbreviated and managed informally comes with poor grace from those Who would not be at risk in such a proceeding.

l Third, an enforcement proceeding involves three levels of NRC decision-making before the issues would reach the

commissions a decision by a staff Director, after preliminary investigation, to issue a notice of violation, followed by a

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hearing before and initial decision by an Atomic Safety and i Licensing Board, which would be subject to review by the Atomic Safety and Licensing Appeal Board. This process is time-consuming. Moreover, a decision by either the Licensing or Appeal Board that is unfavorable to APCO could be deemed to be immediately effective. 6/ It is unfair to subject APCO to this

, procedural guantlet when the case involves basic policy questions i

j that should be resolved by the Commission itself.  ;

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3. The NRC Has Ample Discretion To Decide How Procedurally To Address The Issues Before It.

The Antitrust Division, but not AEC, implies that the NRC's hands may be tied because it has received a request from AEC to commence an enforcement proceeding. It is well settled that even in cases where the relevant statute or regulation i requires an opportunity for an adjudicatory hearing in licensing i and enforcement actions, the NRC may elect to refer issues J

material to these proceedings to other, simultaneously pending agency proceedings that have the potential for resolving or simplifying the issues raised. 7/ Here, the action requested by 6 / Dairyland Power Cooperative (La Crosse Boiling Water Reactor), L8P-81-7, 13 NRC 257 (1981): 10 C.F.R. { 2.764.

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7 Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 535 n.13 (1978); Union of CAEcorned Scientists v. ABC, 499 F.2d 1069 (D.C. Cir. 1974).

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, AEC -- commencement of an enforcement proceeding -- has been left g

to the sound discretion of the Commission. 8/ It is - i inconceivable that a court would brand as arbitrary and i

j. capricious a decision by the Commission to defer action on AEC's f

enforcement request (or to deny it without prejudice to renewal) i 1

because the Commission has decided first to issue a declaratory order interpreting the license condition in issue.  !

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1 CONCLUSION i  :

As demonstrated above, none of AEC's or the Antitrust ,

l Division's specific objections to the declaratory order alter-j native is soundly based.

i j The essential criticism leveled at-the declaratory I

order procedure suggested by APCO is that it is innovative. It stands to.save substantial resources of the Commission and the i- parties and to provide a resolution of the dispute over inter- -

i t j pretation of the license conditions in a context where the focus '

will be on interpretation of tho' condition rather than on i-

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j apportioning responsibility.for the currant stalemate in 4

) negotiations._ Against these advantages, no good reason has been I

i suggested for not proceeding along the declaratory order path.

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8 Illinois v. NRC, 591 F.2d 12 (7th Cir. 1979) Porter County'

. Ctanter of the tsaak Walton - League v. NRC, 606 F.2d 1353 '

( (1.C. Cir. 1979?.

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Respectfully Submitted, )

S. Eason Balch Robert A. Buettner Balch, Bingham, Baker, Ward, Smith, Bowman & Thagard Post Office Box 306 Birmingham, Alabama 35201 (205) 251-8100 J. A. Bouknight, Jr.

Harold F. Reis Holly N. Lindeman Newman & Holtzinger, P.C.

1025 Connecticut Avenue, N.W.

Washington, D.C. 20036 (202) 862-8400 Bysf //q [

HollyjR. Lindeman Of Counsel:

Laurence H. Silberman Morrison & Foerster 1920 N. Street, N.W.

-Suite 800 Washington, D.C. 20036 l

July 24, 1984

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l I O E Alabama Power Company -

600 North 18th Street ATTACHMENT A Post office Box 2641 Birmingham, Alabama 35291 Telephone 205 250-1000 L

AlabamaPower the southem electrc system July 23, 1984 Mr. Charles R. Lowman General Manager ,

Alabama Electric Cooperative, Inc.

P. O. Box 550 Andalusia, Alabama 36420

Dear Charles:

I was disturbed and di'sappointed when I read Alabama Electric Cooperative's description of our June 20, 1984 meeting in AEC's Response Urging Rejection of Alabama Power Company's Petition for a Declaratory Order. The description of that meeting and subsequent events is not only inaccurate, it violates AEC's agreement as to such meeting.

You will recall that Alabama Power requested the meeting in order to attempt to negotiata the price element of the proposed sale using people who were not " posturing" in front of a large group of representatives. Mr. Vann of your Board of Directors expressed reluctance even to meet unless it were agreed that the substance of the meeting would not be used in latcr pleadings or legal proceedings. It was Mr. Vann's con-cern that the Company was trying to " set him up". Based on the characterization of the meeting in your most recent pleading, it appears that the opposite was true.

You characterize that meeting saying "... the long in-transigence of APCO remained unbroken, and it was made clear i

to APCO that AEC would have to take steps in the near future to seek assistance from NRC Enforcemcnt Office...." You imply that you told us of your determination to go to the NRC only i after you had heard us on June 20. You will recall, however, I l

that before we even spoke at that meeting, you advised us of l your intent to go to Washington the following week to visit NRC officials to file a petition for enforcement.

We take exception not onDf to AEC's misstatement in that 1

respect but also to your characterization of our position as

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.Mr. Charles R. Lowman July 23, 1984 Page Two being one of " intransigence." The Company made a price pro-posal to AEC in April, 1983. AEC has never responded with any figure at which it would purchase an interest in the plant. -

Rather, it has demanded that the Company agree to a philosophy for calculating a number without ever knowing what the number will be. We asked you for that number during the June 20, 1984 meeting but you told us that AEC did not have that number despite the passage of over 14 months since the Company's initial proposal. You did say, however, that unless AEC re-ceived the benefits that it would have obtained through owner-ship _n the plant at whatever that number turned out to be, AEC was prepared to run the full course in litigation. This was your position even if it resulted in substantial cost penalties to APCO and its other customers.

f In our meeting, you suggested that we study the situation to determine-whether a proposal could be made by the Company (including a' proposal dealing with unit power rather than

' joint ownership) which would result in AEC realizing the bene-fits as if AEC had invested in the Farley Plant starting in 1971 or 1972. We told you we would look at such a proposal to determine whether anything was possible. When we returned to Birmingham, we determined that iour ability to make such a.

study was limited by our lack of knowledge of what you claim to be the cost penalty which_ Alabama Power must suffer to satisfy your fixed and unalterable condition.

a While talking with Ray Claussen on June 27, 1984, I asked to be transferred to you and I was told-you were in Washington.

On July 2, 1984, I was on vacation,_as was Joe Connor,.and I had my secretary tell your secretary that we would be unable to meet on July.9, 1984 but would reschedule a meeting after-we got back. -I, therefore, must take exception to AEC 's -

characterization in its pleading.that the Company unilaterally precluded any further voluntary negotiations.

. Please be assured that we.are~still willing to meet with you and discuss the sale of an-interest in'the plant. -

How--

- ever, it is difficult to envision .aur agreement being reached I when.the agreements which we do have with you are not kept.

If you will- provide 1us +1th your initial counter-offer on

- price and the basis-for_such counter-offer, we.will undertake f

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i Mr. Charles R. Lowman July 23, 1984 Page Three to analyze that price and respond to you as discussed in our June 20, 1984 meeting.

Sincerely, N

B. J. Crawford BJC/jw cc: Mr. James A. Vann Dixie Electric Cooperative, Inc.

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UNITED STATES OF AMERICA

, NUCLEAR REGULATORY COMMISSION 4 4 Before the Commission Ch(([0 Operating'84 JU 24 P5:18

'In the Matter of )

ALABAMA POWER COMPANY ) Lice. nses (Joseph M. Farley Nuclear Plant ) .

, Units 1 and 2) )

Nos.NPFh[.andTNPF-8 CERTIFICATE OF SERVICE 1

I hereby certify that copies of the foregoing

1) Letter to the Commissioners of this date, and

2) Reply of Alabama Power Company to Responses of Alabama Electric Cooperative, Inc. and Department of Justice ,

in the above-captioned proceeding were served on the following

by hand

• or by deposit in the: United States mail, first class, properly stamped and addressed, on the date shown below:

• Docketing and Service Section Office of the Secretary U. S. Nuclear Regulatory Commission lith Floor 1717 H Street, N. W. -

Washington, D.C. 20555

• Frederick M. Bernthal, Commissioner

U. S. Nuclear Regulatory Commission 1717 H Street, N.W.

Room H-1156 Washington, D.C. 20555 -

• James K. Asselstine, Commissioner U. S. Nuclear Regulatory-Commission 1717 H' Street, N.W.

Room H-ll36 Washington, D.C. 20555

• Thomas M. Roberts, Commissioner.

U. S. Regulatory Commission 1717 H Street, N.W. -

Room H-1103 Washington,;D.C. 20555

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• Nunzio J. Palladino, Commissioner U..S. Nuclear Regulatory Commission 1717 H Street, N.W.

Room H-lll4 Washington, D.C. 20555

• '-La ndo W . Zech, Jr., Commissioner U. S. Nuclear Regulatory Commission 1717 H Street, N.W.

Washington, D.C. 20555

• William J. Dircks Executive Director for Operations U. S. Nuclear Regulatory Commission Washington, D.C. '20555

• Herzel H.E. Plaine, Esquire General Counsel U. S._ Nuclear Regulatory Commission Washington, D.C. 20555

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• Martin G. Malsch, Esquire '

Office of General Counsel U. S. Nuclear Regulatory Commission Washington, D.C. 20555

• Joseph Rutberg Office of Executive Legal Director U. S. Nuclear Regulatory Con 4 mission Washington, D.C. 20555

• D. Biard MacGuineas, Esquire Volpe, Boskey and Lyons 918 - 16th Street, N.W.

Washington, D.C. 20006-Charles R. Lowman General Manager Alabama Electric Cooperative, Inc.

P.O. Box 550-

.Andalusia, Alabama -36420

• Guy'H. Cunningham III, Esquire Office of Executive Legal Director U. S.~ Nuclear Regulatory Commission' Washington, D.C. 20555

' *Melanie Stewart Cutler , Esquire Chief, Energy.Section- , ,

Antitrust Division U .' S . Department of Justice 9th & Pennsylvania Ave.,1N.W.

' Washington, D.C. 20530.

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• David W. Brown, Esquire l g Assistant Chief, Energy Section Antitrust Division U. S. Department of Justice 9th & Pennsylvania Ave., N.W.

Washington,.D.C. 20530

• gohn D. Whitler, Esquire Attorney, Energy Section Antitrust Division U. S. Department of Justice 9th & Pennsylvania Ave., N.W.

Washington, D.C. 20530 Dated this 24th day of July, 1984.

(

A. Bouknight, Jr.

wman & Holtzinger, P.C.

25 Connecticut Avenue, N.W.

Washington, D.C. 20036 (202) 862-8400 4

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