HUNTSVILLE, Alabama — After nearly a half century of development, deferrals and even disputes over its ownership, the fate of one of America's biggest unfinished construction projects may soon be decided.
The Tennessee Valley Authority, which began building the Bellefonte Nuclear Power Plant in Northeast Alabama in 1974 but never finished the twin-reactor plant, is fighting an effort by developer Franklin L. Haney to buy and complete the half-finished facility. Through the company he formed to acquire Bellefonte known as Nuclear Development LLC, Haney is suing TVA for not completing the sale of the 1,400-acre Bellefonte site, which Haney agreed to buy after TVA abandoned the Jackson County plant five years ago.
A federal judge is hearing arguments here this week to determine whether Haney's $111 million purchase offer for Bellefonte must still be honored by TVA even though Haney has yet to gain regulatory approval to transfer the construction permit for Bellefonte from TVA to Haney's Nuclear Development.
In a rare Sunday court hearing, TVA attorneys argued that Haney failed to obtain the required permission from the Nuclear Regulatory Commission for his proposed purchase within the two years allotted for in the sales agreement to be completed, and the utility terminated the sales contract with Haney on Nov. 30, 2018.
Haney's attorneys said TVA failed to provide "reasonable cooperation" with Nuclear Development required under the original 2016 sales agreement.
"This case is a simple breach-of-contract case," said Caine O'Rear III, an attorney for Nuclear Development.
In a video deposition, Haney testified that he was "shocked" when TVA declined at the last minute to grant what he thought was an agreed-upon, six-month extension of the sales agreement in 2018 to give more time for the development of a plan to finish the two Babcock & Wilcox pressurized water reactors at Bellefonte.
"I didn't think we had any problem," Haney said.
Former TVA President Bill Johnson, who said he made the decision not to grant an extension of the sales agreement for Bellefonte with Haney in the fall of 2018, said he was irritated by the comments made by former TVA Chief Operating Officer Bill McCollum, who Haney hired to help with the Bellefonte project.
McCollum met with officials of Memphis Light Gas & Water and urged the city-owned utility to consider buying power from Bellefonte or from power suppliers other than TVA, including Entergy and the MidContinent Independent System Operator.
"To me, he [McCollum] crossed the line," Johnson said.
The Memphis utility has not yet agreed to buy any of the power from Bellefonte, but MLGW is soliciting offers from other power suppliers and studying whether to end its 82-year relationship with TVA after giving the federal utility the required five-year notice. Memphis is TVA's largest customer among the 153 local power companies that distribute TVA power, and MLGW pays TVA about $1 billion a year for its electricity supplies.
In a meeting with Johnson and TVA Chief Counsel Sherry Quirk in 2018, Haney said he was unaware of McCollum's comments urging MLGW to consider going to MISO or Entergy to replace TVA, and he said Nuclear Development was ready to close the purchase of Bellefonte if TVA would work with him on the construction permit transfer.
Haney made an initial $22 million down payment on Bellefonte in November 2016 when his Nuclear Development emerged as the winning bidder for the plant over two other bidders. Haney's offer was more than four times the $26.4 million appraised value TVA set for the Bellefonte site on the Tennessee River in Hollywood, Alabama, which is about 60 miles southwest of Chattanooga.
Bellefonte at a glance
Location: 1,600 acres between Highway 72 and the Tennessee River in Hollywood, Alabama. TVA declared 1,400 acres as surplus property and is keeping 200 acres for employee training facilities.
Investment: TVA has spent more than $5 billion to design, build and maintain Bellefonte, excluding most interest expenses incurred through most of the 47-year life of the plant.
What is on the site: Two unfinished Babcock and Wilcox pressurized water reactors, plus two cooling towers, switchyard, transmission lines and training facility and offices.
Status: When TVA last considered finishing the plant, engineering studies said Unit 1 was 55 percent complete and Unit 2 was 35 percent complete.
Ownership: TVA owns the plant and has a construction permit with the Nuclear Regulatory Commission. Nuclear Development LLC, headed by developer Franklin L. Haney, agreed to buy Bellefonte for $111 million in 2016, but TVA terminated the sales agreement on Nov. 30, 2018, when Haney failed to gain NRC approval for a construction permit on the plant. Haney is suing TVA to try to complete his purchase of Bellefonte.
TVA declared Bellefonte a surplus property in May 2016 after twice attempting to finish the two reactors as a nuclear plant and unsuccessfully trying to sell the plant for other uses to both Texaco and the U.S. Department of Energy. As the growth of power demand slowed and the costs of nuclear plant construction rose in the 1980s, TVA determined it no longer needed the 2,400-megawatt plant, which is capable of supplying the energy needs of about 1 million homes.
TVA spent more than $5 billion to design, build and maintain Bellefonte and has continued to spend up to $10 million a year to maintain the facility in deferred status. The abandoned plant still employs 35 workers to maintain the construction permit on the facility, according to site director Jim Chardos.
The two reactors at Bellefonte were among 17 reactors TVA once planned to build, but only seven of those units were ever completed. TVA previously scrapped plans for nuclear plants in Hartsville and Phipps Bend in Tennessee and at Yellow Creek in Mississippi. TVA suspended construction at Bellefonte in 1988 and gave up its nuclear construction permit at the plant in 2006, but TVA two and a half years later reversed itself and sought to renew its construction permit when it decided it might need Bellefonte in its power portfolio.
Ultimately, the TVA board voted in May 2016 to abandon Bellefonte and put the plant site up for sale.
Johnson said he terminated the sales agreement with Haney in the fall of 2018 because he wasn't sure that Nuclear Development ever could secure the NRC approval for taking over the unfinished plant, not to squelch potential competition from Nuclear Development or to block its efforts to urge Memphis to split with TVA.
In a ruling last month in response to motions for summary judgment in the dispute between TVA and Haney, U.S. District Court Judge Liles Burke said "there is a genuine dispute of material fact as to whether Nuclear Development was ready, willing and able to close on the closing date."
Burke also said the sale of Bellefonte "is clouded with factual disputes," especially since the summer of 2018 when "the fog lies thickest" due to claims of inadequate steps being taken by Haney to take over the nuclear plant and "allegations of bad blood between the parties after McCollum's visit to Memphis." Burke said that there are "genuine disputes of material fact as to whether TVA fulfilled its duties under the agreement" to sell Bellefonte.
A trial on Haney's lawsuit began, Sunday but closing arguments in the case are not expected until after final briefs are filed, perhaps in June.
Haney, an 80-year-old developer from Chattanooga who unsuccessfully campaigned in the 1970s as a Democrat for both U.S. Congress and governor of Tennessee, has built or bought hundreds of millions of dollars worth of everything from government office buildings to soft drink bottling businesses and one of the country's biggest privately owned toll roads.
Over the past decade, Haney has sought an even more ambitious goal to become the first private individual to own a commercial nuclear power plant in America. Through his Nuclear Development LLC, Haney has hired McCollum, former TVA Nuclear Chief Preston Swafford and former TVA Chairman Dennis Bottorff, along with former U.S. Rep. Bud Cramer in Alabama and the Montreal, Canada-based SNC Lavalin to work on preparing plans to finish Bellefonte.
In 2014, Haney secured $2.3 billion of federal tax credits allocated for new nuclear power plants, and he has worked in the past to secure up to $5 billion in federal loan guarantees from the U.S. Department of Energy. To help such federal subsidies and raise other capital, Haney met in 2018 with Donald Trump's former personal attorney, Michael Cohen, and reportedly offered him $10 million if he could secure federal loan guarantees to help finance the completion of Bellefonte.
Such federal tax credits are not available for TVA as a government-owned utility.
Frank Haney, the son of Franklin L. Haney and the current president of the Franklin Haney Co., said Bellefonte "is a valuable, albeit unfinished, asset" and his firm is eager "to deliver clean, affordable power and jobs to the region." A study by the University of Alabama estimated the completion of Bellefonte could create as much as a $1 billion annual regional benefit and 10,000 temporary and permanent full- and part-time jobs in Northeast Alabama and elsewhere.
"We're happy to talk with TVA about how best to achieve that cooperatively, or to do it ourselves if TVA just wants to sell Bellefonte and not partner with us," Haney said. "But we think there's a win-win solution that would involve TVA completing the sale of the plant to Nuclear Development, Nuclear Development owning and operating it — which would relieve TVA of debt and risk — and Nuclear Development and TVA agreeing to a long-term deal under which Nuclear Development sells Bellefonte's power to TVA at a favorable price, so that TVA can then re-sell it."
Haney said finishing Bellefonte would create more jobs in the Tennessee Valley and help meet President Joe Biden's goal of a zero-carbon electric grid by 2035. TVA now projects it will be able to cut 80% of the carbon emissions it had in 2005 by 2035, but the agency doesn't think its power portfolio will be carbon neutral under present plans until 2050.
"There's no question that if TVA said 'yes' tomorrow [to the sale], the Bellefonte project could proceed," Haney said.
TVA President Jeff Lyash said TVA had no choice but to turn down the sale, and he insists it's time to move beyond the previous generation of nuclear power for new energy sources.
"Our position from the beginning was that because Nuclear Development failed to obtain the transfer of the construction permit from the NRC, they didn't meet the legal requirements to close the sale because the NRC requires that permit transfer," Lyash told the Times Free Press in a recent interview. "We properly did not close on the sale, and now that contract has expired."
TVA generates more than 40% of its electricity from nuclear power, and the federal utility is studying plans to build more generating capacity from the next generation of smaller modular-built reactors to boost its production of carbon-free power. Lyash, a nuclear engineer and proponent of atomic power, says he isn't interested in trying to resurrect the past generation of nuclear power plants such as Bellefonte.
"We made the decision some time ago not to finish the Bellefonte nuclear plant," he said. "It is a 60-year-old technology, and it has been dormant for quite a long time. Our view is that TVA investing in the last century's nuclear technology isn't the way to go and instead focusing on 21st century nuclear technology such as SMRs (small modular reactors) is a much better long-term play for our customers."
Contact Dave Flessner at email@example.com or 423-757-6340.
Bellefonte starts and stops
> 1974 - Construction permit issued and building begins.
> 1985 - Construction halted on Unit 2, then 55 percent complete.
> 1988 - Construction halted on Unit 1, then 88 percent complete.
> 1992 - Engineering work resumed to prepare for restart of construction.
> 1994 - Stone & Webster estimates finishing Bellefonte will cost $2.6 billion. Engineering work halted.
> 1996 - TVA studies option of converting plant to combined-cycle, natural gas.
> 1998 - Gas conversion option dropped. TVA offers plant to the Department of Energy to make bomb-grade tritium.
> 1998 - DOE picks existing TVA plants to produce tritium.
> 2001 - Texaco proposes using Bellefonte as site for coal gasification plant.
> 2001 - Chattanooga financier Franklin Haney offers to finance completion of Bellefonte as a nuclear plant.
> 2002 - Texaco drops proposal. TVA turns down Haney offer.
> 2004 - TVA enters into talks with other utilities and joins NuStart to pursue new plant design for site.
> 2005 - NuStart picks Bellefonte as site for Westinghouse AP1000 nuclear plant. TVA withdraws construction permit for original plant.
> 2006 - TVA sells stainless steel tubing, pipes at Bellefonte for scrap metal. Other equipment transferred to other plants.
> 2008 - TVA decides to consider reviving Bellefonte units 1 and 2.
> 2009 - Nuclear Regulatory Commission reinstates construction for original reactors in terminated status.
> 2016 - TVA decides to sell Bellefonte; Franklin Haney’s Nuclear Development LLC agrees to buy the plant for $111 million.
2021 - Haney’s lawsuit against TVA for not selling Bellefonte goes to trial in U.S. District Court in Huntsville, Alabama
Sources: Tennessee Valley Authority, Nuclear Regulatory Commission