HUNTSVILLE, Alabama - A federal judge here could decide the future of one of America's biggest unfinished construction projects.
Former Chattanooga developer Franklin Haney is hoping the court will order the Tennessee Valley Authority to still sell him the incomplete Bellefonte Nuclear Power Plant even though Haney's Nuclear Development company has never gained the regulatory approval TVA says is required to transfer the construction permit for the twin-reactor complex to a new owner.
TVA invested more than $5 billion to design and build the two Babcock & Wilcox reactors on the Tennessee River in Hollywood, Alabama. But after nearly a half century of starts and stops on the project, TVA abandoned the nuclear project more than five years ago when it proved too expensive to finish and TVA's power growth slowed.
"It's our view that that technology is 60 years old, there are risks (to trying to finish the plant) and the costs are too high," TVA President Jeff Lyash told a Congressional committee last month when he was asked about Bellefonte. "It's much better to invest our customers' nuclear investment in small modular reactors and advanced reactors and leveraging the performance of our existing nuclear fleet."
TVA directors voted in May 2016 to dispose of the 1,400-acre riverfront property. Haney, a wealthy developer who has built numerous TVA offices and other real estate projects in the past, emerged as the top bidder for the Bellefonte plant in an auction in November 2016 when he offered to buy the 1,400-acre site for $111 million.
Haney has spent more than a decade trying to line up federal loan guarantees and investments to finish Bellefonte and insists that the partially built reactors could be completed and deliver power at an attractive cost.
Memphis motives
Nuclear Development attorney Caine O'Rear said Thursday that TVA appears to be blocking the sale for fear that Nuclear Development could finish Bellefonte and deliver power at a lower cost than TVA, perhaps even undercutting TVA rates for Memphis Light Gas & Electric (MLGW), which is TVA's biggest customer.
"TVA did not act in food faith to consummate the sale," O"Rear said
Haney's attorney claimed TVA illegally breached its contract with Nuclear Development when former TVA President Bill Johnson got "ticked off" at Nuclear Development executive Bill McCollum, a former TVA president, for urging MLGW to split with TVA and buy power from Nuclear Development or other power suppliers. Johnson cut off a proposed extension of the sales agreement with Haney's Nuclear Development just weeks after McCollum's visit to Memphis.
O'Rear also claimed TVA "concealed" its concerns about the U.S. Nuclear Regulatory Commission needing more time to authorize the transfer of the construction permit until just days before canceling the contract.
"The evidence reveals a course of conduct orchestrated by TVA's legal department, and ultimately carried out by TVA's CEO, to hide from Nuclear Development for a period of five to six months, TVA's concerns over the legality of the closing, only to disclose them at the last moment when there was insufficient time for resolution before the Nov. 30, 2018 closing date,' O'Rear argued in his final briefs presented to the court last month. "Johnson unilaterally made the decision to pull the plug at the last minute after it became real to him that Memphis, TVA's largest customer, might be lost if TVA sold Bellefonte to Nuclear Development, thereby constituting a per se violation of the cooperation and best efforts clauses."
Regulatory hurdles
TVA insists that the Atomic Energy Act requires Nuclear Development to get regulatory approval to take over the construction permit at Bellefonte before the plant can be sold and Nuclear Development has failed to meet the regulatory standard to prove it has the financial and technical expertise to safely complete and operate Bellefonte.
"The failure to obtain the NRC's approval by the closing date was a problem of Nuclear Development's making," TVA attorney Matthew Lembke said in a 12-page summary of TVA's arguments to the court. "Had Nuclear Development filed its application sooner, the problem could have been avoided."
Lembke said TVA reached out to the NRC about ways to transfer the construction permit and maintained Bellefonte's construction permit for a transfer to Haney's firm even though Nuclear Development failed to file a timely application for a license transfer.
U.S. District Court Liles Burke must now decide whether the sale contract for Bellefonte is still valid. Earlier this spring, Burke ruled in a request for a summary judgment that NRC approval was needed for a sale of a nuclear plant. But Haney attorneys dispute that finding and asked Judge Burke to vacate his earlier order on that subject.
Damages sought
If the deal is canceled, Nuclear Development wants TVA to pay nearly $38.5 million that Haney says he spent on the expectation that TVA would close the sale and he would buy the Bellefonte plant, including the $22.2 milion down payment Haney paid TVA in 2016, $6.3 million paid to TVA for Bellefonte maintenance and security, $750,000 for compensated costs and more than $9.2 million for expenses paid to attorneys, consultants, contractors and vendors Haney hired to figure out how to finish the Bellefonte reactors.
U.S. Rep. Steve Cohen, a Memphis Democrat and member of the House subcommittee on water resources and the environment, urged TVA last month to work with Nuclear Development to try to utilize the Bellefonte plant as part of TVA's strategy to develop more nuclear power to meet its decarbonization goals.
"Small modular reactors can help, but we've got this big plant which we have talked about at length at Bellefonte in Alabama that if we allow to be reconstructed and put into use, we can take billions of dollars of TVA assets and put them to use and really help the economy in Alabama and help Memphis with utility rates," Cohen said during a Congressional hearing on TVA's budget. "It does seem like Bellefonte is a place that could be really important for everything that TVA stands for."
But Lyash said TVA doesn't think Bellefonte can be licensed and built at a reasonable cost.
Bellefonte beyond nuclear
Lyash said "it is not clear yet" what TVA might do with the Bellefonte site if the sale is scrapped and the court determines that TVA still rightfully has ownership with no claim on the property.
"TVA does not intend to complete Bellefonte ( as a nuclear site)," the TVA president said. "We'll now take a fresh look at our Bellefonte site and how we can be capitalize on it. It has water; it has transmission; it's a large parcel of property. It could have value as an extra generation site. It could also be valuable for industrial development potential for Jackon County. I don't want to see the site sit idle so once we clear the lawsuit, working with the board, we'll go through the process of making a decision about using that site."
Judge Burke said Thursday he will work diligently to review the arguments and issue his decision on the dispute over the Bellefonte sale. That decision could ultimately be appealed to a higher court, depending upon the ruling, attorneys said.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.