Entergy wins key appeals court ruling on Vermont nuclear plant

NEW YORK Wed Aug 14, 2013 3:42pm EDT

NEW YORK (Reuters) - A federal appeals court on Wednesday largely sided with Entergy Corp in its fight to prevent Vermont from shutting down the only nuclear power plant in the state.

The ruling by the 2nd U.S. Circuit Court of Appeals upheld the bulk of a decision last year finding two laws the state enacted related to the 620-megawatt Vermont Yankee plant were trumped by the federal Atomic Energy Act.

The New York-based appeals court did, however, vacate an injunction preventing Vermont from requiring Entergy to execute an agreement requiring it to offer power at favorable rates in order to get a new certificate for the plant to continue operating.

The case has been closely monitored as a test of the ability of states to regulate nuclear power utilities, particularly after heightened safety concerns following the Fukushima disaster in Japan in 2011.

Governor Peter Shumlin reaffirmed his opposition to the nuclear plant, saying it is "not in the best interest of Vermont," and indicated that the final chapter has not been written.

"While I disagree with the result the 2nd Circuit reached in preempting Vermont's Legislature, the process does not end today," Shumlin, a Democrat, said in a statement.

Spokeswomen for Shumlin and the state's attorney general had no immediate responses when asked if Vermont would pursue further appeals, including to the U.S. Supreme Court.

Entergy had contended that the 1954 federal Atomic Energy Act vested the U.S. Nuclear Regulatory Commission with sole authority over radiological safety, leaving states to only regulate the need for power.

In its ruling on Wednesday, the appeals court said that the Vermont legislation at issue in the case was motivated by "impermissible concerns" about radiological safety.

The plant, which Entergy bought in 2002, has been the focus of years of political controversy over its operations.

The most recent fight followed Entergy's disclosure in January 2010 of a leak of radioactive tritium at the plant.

At the time, the Vermont Senate had been considering a law to authorize the plant's continued operation for another 20 years. That legislation failed to pass, despite the NRC's own approval of a new 20-year license for Vermont Yankee.

The failure of the legislation followed passage of two laws in 2003 and 2006 that became the center of the appeal.

The 2003 law, called Act 74, required an affirmative vote after March 2012 by the state's legislature for the storage of nuclear waste. If the vote was no, the plant would have to close.

The 2006 law, Act 160, required the state legislature's approval for the plant's continued operation.

Entergy went to court in April 2011. In January 2012, U.S. District Judge J. Garvan Murtha in Vermont ruled in favor of Entergy and blocked Vermont from forcing the company to shut the reactor.

In its ruling Wednesday, the 2nd Circuit cited debate in the Vermont legislature about radiological safety in its finding that the 2003 and 2006 laws were motivated by "impermissible concerns" about radiological safety.

"We conclude that the district court carefully, fairly, and properly analyzed the legislative intent undergirding Act 160 and found that it demonstrated an impermissible primary purpose on the part of the Vermont Legislature," U.S. Circuit Judge Christopher Droney wrote.

Terry Young, a spokesman for Entergy, said the company had long felt the 2003 and 2006 laws were preempted by federal law "are very pleased with today's decision."

On the portion of Murtha's ruling the 2nd Circuit reversed, the appeals court said the trial judge erred in issuing an injunction based on the mere intent of Vermont to seek a favorable power purchase agreement.

But Droney emphasized the court was not suggesting that any such agreement would not violate the U.S. Constitution's Commerce Clause by requiring more favorable rates for in-state rather than out-of-state utilities.

Shumlin in his statement noted that the Vermont Public Service Board continues to review Entergy's request for a state certificate of public good.

"Our state's energy future should be charted by Vermonters, and I am committed to increasing Vermont's reliance on renewable, sustainable and responsibly managed sources of energy," he said.

Shares of Entergy were up 11 cents at $65.82 on the New York Stock Exchange near midday.

The case is Entergy Nuclear Vermont Yankee, LLC et al v. Shumlin et al, 2nd U.S. Circuit Court of Appeals, 12-707.

(Reporting by Nate Raymond in New York; Editing by Gerald E. McCormick and Leslie Adler)

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