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District Court Returns Appeal On Nuclear Plant Tax To State Court


The 2nd U.S. Circuit Court of Appeals in Manhattan ruled Tuesday that a generating tax imposed by the state on Vermont's only nuclear plant is legal and sent the appeal back to the state court.

The case stems from a generating tax that Vermont has imposed on the Vermont Yankee Nuclear Power Plant. The assessment of $0.0025 per kilowatt-hour of electricity generated could raise up to 12 million dollars annually until the nuclear plant closes.

Last year Entergy’s lawsuit challenging the tax was dismissed by the federal district court in Burlington.  The company, which owns Vermont Yankee, appealed to the Second Circuit Court of Appeals, arguing that the electricity tax is unconstitutional and is not really a tax.

The appeals court ruled Tuesday that it is a tax and that Entergy must challenge it through the Vermont courts.  

Vermont Attorney General Bill Sorrell was in Washington, D.C. and unavailable for comment Wednesday.  He issued a statement noting the court decision “...found that Vermont provides a full and fair process for Entergy’s challenge.”

Entergy/Vermont Yankee responded to calls with a short e-mail statement noting that: “We are reviewing the court's decision and will determine next steps."

Vermont Law School Professor Patrick Parenteau says this decision is secondary to decisions over decommissioning of the plant. "This ruling certainly is going to expose Entergy to a significant tax. Unless they are able to challenge this new tax successfully either before the Vermont tax commissioner or in the Vermont courts, so its another sort-of economic burden on a plant already, according to Entergy, losing money. So Entergy’s gonna lose even more money unless they are successful at challenging this tax.  But it really doesn’t have anything to do with the really big issue of how soon will this plant be dismantled, the site cleaned up, and the full decommissioning that’s required under the Atomic Energy Act  be completed .”

New England Coalition Technical Consultant Ray Shadis sees the case as a struggle for jurisdiction as Entergy prepares to close the facility. "Without respect to the revenues that may be generated from this tax, nothing to sneeze at, really underneath this is a struggle for autonomy on the part of Entergy and for some stakeholder involvement on the part of the state and how that decommissioning is going to go. And when it’s going to go.”

Parenteau says the most interesting facet in this ruling is that the Second Circuit  sent the issue back to the state. "This generating tax only applies to Entergy because it’s the only large electricity generator in the state, at least large as the tax has defined it in the state. So any entity in the state of Vermont could potentially be subject to this kind of tax. The Circuit had no trouble saying that it was a valid tax, and they used the example of a casino.  They said suppose a state had only one casino - could they tax that casino? And the answer is yes, as long as the money goes into the general revenue. That was the key. The Court is saying Vermont is free to impose a tax that only applies to one individual corporation.”

Ray Shadis, meanwhile, was surprised that the court rejected Entergy’s arguments. "I thought Entergy had a very good argument, especially on the notion that they were singled out for treatment, if you will.  That kind of argument is very strong, I think. So it’s nice to see that the state can assert its rights, which includes the right to tax.”

Entergy Nuclear Operations plans to close Vermont Yankee next year.  It began operating in 1972.

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