CORRECTED - UPDATE 2-Entergy, Vermont battle over nuclear plant's fate

Mon Sep 12, 2011 7:03pm EDT

(Corrects paragraph 21 to delete extraneous share price of $61.95 and reference to broader market)

* Trial to decide fate of 39-yr-old plant

* State seeks to prove it can overrule federal government

* Entergy shares gain 1 percent (Updates with company position, background, share price)

By Zach Howard

BRATTLEBORO, Vt., Sept 12 (Reuters) - Power company Entergy faced off against the state of Vermont in U.S. court on Monday to fight a landmark effort to force the closure of its aging nuclear power plant.

In the first day of a three-day trial to determine the fate of the Vermont Yankee plant, Entergy's (ETR.N) lawyers said Vermont politicians had infringed on the role of the federal Nuclear Regulatory Commission, which monitors the nation's 104 commercial power reactors.

New Orleans-based Entergy in April sued the state and Gov. Peter Shumlin in U.S. District Court, saying Vermont violated terms of Entergy's deal to buy the reactor in 2002 by giving politicians the power to shut it.

At issue is a law passed by the Vermont General Assembly in 2006 that New Orleans-based Entergy said put Vermont Yankee's fate in the hands of elected officials rather than the state utility regulator, the Public Service Board.

The 620-megawatt (MW) Vermont Yankee plant produces almost enough electricity to power the entire state. For years, Gov. Shumlin has spearheaded opposition to the reactor, saying the 39-year-old facility in Vernon, Vermont about 110 miles northwest of Boston is no longer safe.

Local resistance to the plant hardened after leaky pipes seeped radioactive material into the groundwater in 2010. If Vermont succeeds, it would be the first U.S. state to shut a nuclear power plant that had received an extended operating permit from the NRC.

In opening remarks to Judge J. Garvan Murtha Entergy said Vermont had wrongly taken on the role reserved for the federal government in seeking to rule on the safety of the plant.

"The Atomic Energy Act preempts any effort to shutdown Vermont Yankee for reasons of nuclear safety," Entergy lawyer Kathleen Sullivan said.

The trial started on the day an explosion at a French nuclear waste site killed a worker [ID:nL5E7KC2J9], and six months after an earthquake in Japan triggered the world's worst nuclear accident in 25 years and raised new doubts about the safety of the technology,

While the trial is set to last three days, a ruling is not expected until the late September or early October.

Lawyers for Vermont have argued that the state has long consulted with federal regulators on plant safety. They sought to show they were not interfering with the NRC's role as the U.S. nuclear regulator.

Instead, they sought to show Entergy had not been an honest partner to the state and was unfit to run the plant that the company bought for $180 million in 2002.

Vermont Assistant Attorney General Scot Kline said Entergy's recent effort to split off several of its nuclear plants, including Vermont Yankee, into a separate company, had shown it was more concerned with profits than safety,

Entergy eventually retreated from its plan to create a stand-alone nuclear power company in the face of resistance from states and some of its investors.

Kline said the state effort to shut the plant "supports the legislature's goal of building a sustainable energy system in Vermont."

Last year, Vermont's state Senate voted in favor of shutting the plant when its license runs out.

Entergy, the No. 2 nuclear power operator in the United States, said that measure invalidated the company's 2002 agreement with Vermont to seek permission from state regulators -- in addition to national regulators -- before operating the plant beyond March 21, 2012, when its original 40-year license was to expire.

Entergy has said the right to assess the plant's safety lies solely with the federal Nuclear Regulatory Commission, which this year granted it a license extension for 20 years.

The NRC has never denied an application to extend a license, having already renewed licenses for 71 of the nation's 104 reactors which provide about a fifth of the country's power.

Most of the more than two dozen reactors that have already retired in the United States were decommissioned primarily because upgrades and repairs were too expensive to keep them running. The last U.S. power reactor to exit service was Millstone 1 in Connecticut in 1998.

Shares in Entergy closed at $62.90, up 60 cents, or 1 percent, on the New York Stock Exchange.

Entergy, which is also battling efforts in New York to shut its Indian Point nuclear power plant, says it would prefer to negotiate deals with the states to improve plants and keep them in operation rather than fight lengthy legal battles.

Entergy CEO Wayne Leonard told an audience of financial investors last week that he was more interested in working a deal than fighting this out in the courts. "It's never over if you go through the courts."

RENAISSANCE

The global nuclear industry has experienced a renaissance over the last decade as developing nations sought to meet growing power demands and raise living standards. More than 60 new reactors are under construction around the world, according to the World Nuclear Association.

However, construction of new reactors in many developed nations has stalled. Some countries like Germany have sped up plans to phase out their existing nuclear fleets following the Fukushima accident in Japan earlier this year. (Additional reporting by Scott DiSavino and Matt Daily in New York; Writing by Matt Daily, Editing by Alden Bentley and David Gregorio)

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