IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA __________________________________________ ) SOUTHERN ALLIANCE FOR CLEAN ) ENERGY,

) ) Plaintiff, ) ) Civil Action No. 10-1335 (RCL) v. ) ) UNITED STATES DEPARTMENT OF ENERGY, ) ) Defendant. ) __________________________________________)

REPLY MEMORANDUM IN SUPPORT OF PLAINTIFFS CROSS-MOTION FOR SUMMARY JUDGMENT Plaintiff, the Southern Alliance for Clean Energy (SACE), seeks disclosure of redacted portions of documents that contain the terms and conditions, including the credit subsidy fee estimates, of the loan guarantees for the construction and operation of two nuclear reactors at the Vogtle Electric Generating Plant. The Department of Energy (DOE) fails to demonstrate that any of the redacted information was properly exempt from disclosure under Freedom of Information Act (FOIA) Exemptions 4 or 5. In response to Plaintiffs Cross-Motion for Summary Judgment, DOE contends that the information contained in its offer to issue loan guarantees to Georgia Power Company, Oglethorpe Power Corporation, and Municipal Electric Authority of Georgia (collectively, the Applicants) belongs to the Applicants. Such claims are illogical. Accordingly, SACE respectfully requests that this Court grant Plaintiffs Cross-Motion for Summary Judgment, deny Defendants Motion for Summary Judgment, and order the release of all withheld information.

In the alternative, SACE requests that this Court take the matter under advisement and order DOE to file the contested documents, under seal, for in camera review. Based on this review and on the record, the Court may determine whether there are material facts in dispute that prevent it from resolving the matter on summary judgment. If summary judgment is appropriate, the Court may review the documents and make a de novo determination on each redaction. DISCUSSION I. DOE Improperly Withheld Information Pursuant to Exemption 4. A. The Credit Subsidy Fee Estimates and Loan Guarantee Terms were not Obtained from a Person Under FOIA Exemption 4 and Should be Disclosed. FOIA creates a presumption in favor of disclosure that places a heavy burden on an agency to justify withholding information from the public. Dept of State v. Ray, 502 U.S. 164, 173 (1991). Information generated by the government cannot be withheld. Grumman Aircraft Engg Corp. v. Renegotiation Bd., 425 F.2d 578, 582 (D.C. Cir. 1970). Rather, for information to be withheld under FOIA Exemption 4, it must be obtained from a person. DOE fails to demonstrate that the credit subsidy fee estimates and other terms and conditions of its commitment to issue the loan guarantees were obtained from the Applicants themselves. Because DOE cannot meet its heavy burden, the withheld information should be released. 1. DOE Fails to Demonstrate That the Credit Subsidy Fee Estimates Were Obtained From a Person. Rather than asserting that the credit subsidy fee estimates were obtained from the Applicants, DOE instead alleges that the Applicants provided some of the inputs used to calculate the fees. See, e.g., Defendants Reply in Further Support of its Motion for Summary Judgment and Opposition to Plaintiffs Cross-Motion for Summary Judgment at 3 (February 17,

2012) (Def.s Reply) (stating that [t]he input[s] originate, primarily, from data that the Applicants . . . have provided to the Government, and arguing that because [DOE] derived the credit subsidy cost estimates from the information supplied by the Applicants, the Agency properly withheld this information under Exemption 4.). This allegation misses the point. SACE is not seeking the Applicants inputs; it is seeking the credit subsidy fee estimate itself. This fee estimate does not fall within Exemption 4. DOEs reliance on Comstock International (U.S.A.) v. Export-Import Bank or Public Citizen v. NIH to justify the withholding of the credit subsidy fee estimates based on the Applicants inputs is misplaced. In Comstock, the amount of fees charged was not withheld. Comstock Intl (U.S.A.), Inc. v. Export-Import Bank of United States, 464 F. Supp. 804, 806 n.3 (D.D.C. 1979) (stating that the produced documents included the major elements of the loan agreement, setting forth of the amount of the loan, its term, the rate of interest and the amount of fees charged.) (emphasis added). In Public Citizen v. NIH, the royalty rates at issue were first provided by the licensees to the NIH. Pub. Citizen Health Research Grp. v. NIH, 209 F.Supp.2d 37, 44-45 (D.D.C. 2002). Here, the reverse is true. DOE originally provided the fee estimates to the Applicants. See Def.s Reply at 2 (stating that DOE and OMB bear responsibility for calculating the credit subsidy cost estimates . . . in accordance with the Federal Credit Reform Act of 1990). The appropriate inquiry is whether any of the Applicants inputs could be extrapolated from DOEs credit subsidy fee estimates. See Gulf & Western Industries, Inc. v. U.S., 615 F.2d 527, 529-30 (D.C. Cir. 1979) (stating it is apparent that the [agency] deleted portions of the report which contained information supplied by [the applicant] or from which information supplied by [the applicant] could be extrapolated.) (emphasis added). Importantly, DOE never

claims extrapolation is possible. This is unsurprising, considering that the fee calculation involves a myriad of inputs. See Ctr. for Pub. Integrity v. Dept of Energy, 191 F. Supp.2d 187, 194 (D.D.C. 2002) (holding that DOE had not met its burden under Exemption 4 and stating that an attempt to reconstruct many factors from a single number is tantamount to attempting to solve for x in the equation x + y + z = $3.65 billion without knowing the other variables.). The credit subsidy fee is not a simple restatement or summary of information provided by the Applicants. See Philadelphia Newspapers Inc. v. Dept of Health and Human Services, 69 F.Supp.2d 63, 67 (D.D.C. 1999) (holding that government analysis is not simply a summary or reformulation of information . . . .). It is a complex calculation, requiring the Loan Program Office to analyze and review all related information. See Def.s Reply at 3 (the determination of the credit subsidy cost relies [upon], among other factors, technical, financial, and other project-related information provided by the Applicants, inputs and analyses conducted by third parties, and LPOs analysis and review of all related information.). Because the fee was generated by DOE from a myriad of unascertainable inputs, it was not obtained from a person and must be released. 2. DOE Fails to Demonstrate That the Loan Guarantee Terms and Conditions Were Obtained From a Person. As noted above, FOIAs strong presumption in favor of disclosure places a heavy burden on DOE to justify the withholding of the loan guarantee terms from the public. See Ray, 502 U.S. at 173. DOE cannot make the necessary showing, as it fails to provide a specific, factual basis establishing that the redacted terms and conditions were actually obtained from the Applicants. See, e.g., In Defense of Animals v. NIH, 543 F.Supp.2d 83, 102-03 (D.D.C. 2008). Instead, DOE relies on impermissibly conclusory assertions. See Def.s Reply at 4 (stating, the Applicants were, in the first place, the sources of information, but citing only the Vaughn Index Appendix

A at 1 (which makes no claim that the Applicants were the source of the information) and DOEs Memorandum in Support of Motion for Summary Judgment at 16-17 (which asserts that the loan terms were supplied by the Applicants but cites to no declaration supporting that claim; indeed, the Frantz Declaration provides only that the loan guarantee terms were subject to extensive negotiations [ECF No. 21-1 at 13-14] and the Supplemental Pulliam Declaration provides only that the Applicants provided information to DOE related to financing of the project [ECF No. 295 14])). Such unsubstantiated assertions are insufficient to meet DOEs heavy burden. See e.g. In Defense of Animals, 543 F.Supp.2d at 102-03 (finding that FOIA Exemption 4 did not apply because the Defendants have nowhere demonstrated that the contractor was the source of the information in the first instance.) (emphasis added). DOE fails to demonstrate why, despite the mandate of the Energy Policy Act of 2005 that the Secretary of Energy shall make loan guarantees on such terms and conditions as the Secretary determines, 42 U.S.C. 16512, these terms were nevertheless obtained from the Applicants. Accordingly, the terms and conditions must be released. B. The Credit Subsidy Fee Estimates and Loan Guarantee Terms are Not Confidential Under FOIA Exemption 4 and Should be Disclosed. DOE also fails to meet its heavy burden of establishing that the credit subsidy fee estimates and the loan guarantee terms are confidential information under FOIA. Exemption 4 protects disclosure of commercial or financial information obtained from a person and privileged or confidential. U.S.C. 552 (b)(4). To be considered confidential, the information must either be likely to . . . cause substantial harm to the competitive position to the person from whom the information was obtained, or impair the Government's ability to obtain necessary information in the future. Natl Parks & Conservation Assn v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974) (National Parks I). DOE proves neither.

1. DOE Fails to Prove That Disclosure of the Requested Information is Likely to Cause Substantial Competitive Harm to the Applicants. An opponent of disclosure, rather than the requester, carries the burden of proving that substantial competitive harm is likely to result. McDonnell Douglas Corp. v. U.S. Dept. of the Air Force, 375 F.3d 1182, 1195 (D.C. Cir. 2004). Claims of substantial competitive harm must be supported with specific factual or evidentiary material rather than mere conclusory opinion testimony. Natl Parks and Conservation Assn v. Kleppe, 547 F.2d 673, 679 (D.C. Cir. 1976) (National Parks II). DOE does not provide the required support. Defendants claim of competitive harm rests on four arguments, asserting DOE has: proffered ample evidence that, until and unless the loan guarantees are finalized, disclosure of the credit subsidy cost estimates and other loan guarantee terms at this time could (1) adversely affect the Applicants ability to negotiate favorable financing terms should they require alternative sources of financing; (2) permit the Applicants competitors to better evaluate financing alternatives; (3) create confusion in the credit market; and (4) expose the Applicants to unfavorable negotiating positions with other lenders. Def.s Reply at 5. Despite assertions of ample evidence for each of these arguments, DOE fails to demonstrate with specific factual or evidentiary material that disclosure of the credit subsidy fee estimates and the loan guarantee terms is likely to cause substantial competitive harm to the Applicants. DOEs Reply pays short shrift to arguments one and three, instead focusing on arguments two and four. The third argumentthat disclosure would create confusion in the credit market is completely ignored and unsupported by DOE. Rather than providing ample evidence of substantial competitive harm, DOE apparently accepts Plaintiffs argument that confusion in the credit markets is not a relevant inquiry for establishing competitive harm under Exemption 4. As this Circuit has previously stated, [t]he important point for competitive harm in the FOIA

context . . . is that it be limited to harm flowing from the affirmative use of proprietary information by competitors. Pub. Citizen v. NIH, 209 F.Supp.2d. at 47 (emphasis in original) (citing Pub. Citizen Health Research Grp. v. Food & Drug Admin., 704 F.2d 1280, 1291 n.30 (D.C. Cir. 1983)). Similarly, little supporting detail is provided for Defendants first argumentthat disclosure would adversely affect the Applicants ability to negotiate favorable financing terms should they require alternative sources of financing. Although the opponent of disclosure has the burden of proving substantial competitive harm is likely to result, DOE does not provide evidence that alternative financing does exist. Instead, it asserts that the Plaintiff failed to demonstrate the absence of alternative financing, essentially asking Plaintiff to prove a negative. While conceding that the loan guarantee program was established to provide financing for projects that are typically unable to obtain conventional private financing, DOE misconceives its burden as the opponent of disclosure. Def.s Reply at 5. If the Applicants have found the exceptional lender willing to work with them, then DOE must provide evidence of that alternative financing arrangement. DOEs support for its second argumentthat disclosure would permit the Applicants competitors to better evaluate financing alternativesdoes not establish that the credit subsidy fee estimates or the loan guarantee terms are likely to cause substantial harms to the Applicants. Competitive harm is unlikely if a competitor cannot extrapolate confidential information belonging to the Applicants from the information disclosed. Boeing Co. v. U.S. Dept. of Air Force, 616 F.Supp.2d 40, 47 (D.D.C. 2009) (reasoning that [t]he presence of unascertainable or fluctuating variables [is a] relevant element in determining a clear link between disclosure and harm.). Id. at 47-49. In Center of Public Integrity v. Department of Energy, this Court held

that bids for a tract of land to be sold by DOE were not confidential information under Exemption 4 because competitors could not extrapolate harmful information from the bids. The withheld information was based on multiple factors, including reserve estimates, future cash flow price projections, and risk factors associated with the reserves. Ctr. for Pub. Integrity, 191 F. Supp.2d at 194. The Court rejected DOEs argument that extrapolation was possible, equating it to a math problem in which competitors would have to solve for x in the equation x + y + z = $3.65 billion without knowing the other variables. Id. Here, disclosure of the credit subsidy fee estimates is unlikely to cause substantial competitive harm because fluctuating and missing variables in the calculation of the credit subsidy fee estimates prohibit extrapolation. See generally Boeing Co. v. U.S. Dept. of Air Force, 616 F.Supp.2d 40 (D.D.C. 2009). Although DOE contends that disclosure of the credit subsidy fee estimates would allow competitors to evaluate financing alternatives and receive the benefit of the Applicants due diligence work, Def.s Reply at 7, the evidence points to a different conclusion. The credit subsidy fee is a cash payment from the loan guarantee applicant, the amount of whichas required by the Federal Credit Reform Act of 1990is calculated by the Office of Management and Budget (OMB), 1 Def.s Reply at 3, and incorporates economic and technical assumptions underlying the Presidents budget . . . for the fiscal year in which the funds will be obligated. OMB Circular No. A-11, Section 185.5, at 13. The credit subsidy fee calculation is based on a number of fluctuating and unascertainable variables. Def.s Reply at 3.
The DOE Loans Programs Office clearly outlines this definition on its website: Section 1702(b) of Title XVII provides that the Department of Energy must receive . . . a cash payment of [the Credit Subsidy] [C]ost directly from the applicant. The credit subsidy is applied to establish a reserve against the risk of estimated shortfalls in loan repayments. The computation and management of the Credit Subsidy Cost is governed by the Federal Credit Reform Act of 1990 (FCRA). https://lpo.energy.gov/?page_id=35. OMB broadly and vaguely defines cost estimates as payments to the government to cover defaults and delinquencies, interest subsidies, and other requirements . . . including origination and other fees, penalties, and recoveries. OMB Circular No. A-11, Section 185.3, at 9; 2 U.S.C. 661a(5)(C) (2006).
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DOE admits the variables include inputs from the Applicants, inputs and analysis from third parties, the [DOE Loan Program Offices] analysis and review of all related information, and other factors. Id. The Applicants provide technical, financial, and other project-related information including comprehensive information about the structure and financing plan of the project, financial model with the projected project output, the projected credit rating of the project, items such as the take-off contracts, construction and related contracts, financial reports, construction cost data, and similar information about the Applicants and the project. Id. These numerous, complex, and wide-ranging inputs are distilled into a simple figure: the amount of a cash payment required for the loan guarantee. The calculation process for nuclear power loan guarantees is likely substantially more complex, and includes many more fluctuating and unascertainable variables, than the computation of bids for the tract of land at issue in Center for Public Integrity. To extract confidential information in the nuclear power context, the Applicants competitors would have to solve for a, b, and c in the equation a + b + c + d + e + f + g . . . = credit subsidy fee estimate without knowing many of the variables. This is a Herculean task. Accordingly, disclosure of the credit subsidy fee estimates is unlikely to cause the Applicants competitive harm. DOE also attempts to broaden this reasoning to justify withholding the loan guarantee terms, but its arguments suffer similar flaws. The Reply mentions that [i]nformation upon which DOE may be willing to make federal loan guarantees for new nuclear projects might allow competitors to better evaluate financing alternatives and estimate the Applicants costs of supplying electricity. Def.s Reply at 8. These concerns are unsupported by the evidence because the multitude of different fluctuating variables represented by the loan guarantee terms

would make it unlikely for competitors to extrapolate specific information such as estimated cost of supplying electricity. DOEs fourth argumentthat disclosure would expose the Applicants to unfavorable negotiating positions with other lendersdoes not comport with the test for competitive harm. This Circuit has found that injuries unrelated to the use of disclosed documents by competitors are . . . irrelevant. Pub. Citizen Health Research Grp. v. Food & Drug Admin., 704 F.2d 1280, 1291 (D.C. Cir. 1983). In the FOIA context, competitive harm should be limited to harm flowing from the affirmative use of proprietary information by competitors. . . . [and] should not be taken to mean simply any injury to competitive position. Pub. Citizen v. NIH, 209 F.Supp.2d at 47 (emphasis in original). Although Defendant contends that disclosure of the requested information would permit lenders to exercise undue bargaining leverage for future financings, there is no attempt to prove that private lenders are competitors of the Applicants. Def.s Reply at 7-8. Moreover, the credit subsidy fee estimates and loan guarantee terms reflect the governments risk associated with the loan guarantee, as calculated pursuant to federal regulations and based on a number of political factors. See OMB Circular No. A-11, Section 185.5 and 2 U.S.C 661a (5)(C). A federal loan guarantee is fundamentally different from a private loan, and DOE offers no explanation as to why private lenders would base any loan terms on such a calculation or extract any of the same concessions from the Applicants. DOEs speculation does not rise to the level of a likely risk of substantial competitive harm. For all the reasons provided above, the withheld information should be disclosed.

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2. DOE Fails to Prove Disclosure of the Requested Information Would Impair the Governments Ability to Obtain Necessary Information in the Future. While not dispositive, the governments interest in the effectiveness of its programs is another factor to be considered. See Pub. Citizen v. NIH, 209 F.Supp.2d at 51-52. DOEs claims that disclosure of the information will cause harm to the government program are unavailing, and DOE has not met its burden to establish that disclosure of the credit subsidy fee estimates will impair the loan guarantee program. DOEs argument regarding impairment of the effectiveness of its program misinterprets the relevant case law and the circumstances surrounding the loan guarantee program. Quoting the Frantz declaration, and relying upon Comstock, DOE asserts that [d]isclosure of such sensitive and confidential information to the public . . . could significantly and adversely impact . . . completion of the Vogtle Project [and] have a chilling effect on future applicants decision to apply for a loan guarantee. Def.s Reply at 9. This argument, however, overlooks important elements of Comstock International (U.S.A.) v. Export-Import Bank. Although the court in Comstock withheld a loan agreement and progress reports for the construction project, it did not withhold the type of information found in the credit subsidy fee estimates or the loan guarantee terms. See Comstock, 464 F.Supp. at 80506. The documents produced in Comstock included the major elements of the loan agreements, setting forth the amount of the loan, its term, the rate of interest, and the amount of fees charged. Id. at 805 n.3. Here, the credit subsidy fee estimates determine fees paid by the Applicant and the loan guarantee terms set forth the major elements of the agreements. Moreover, although Comstock outlines potential negative consequences of disclosure of a loan agreement (including borrowers going elsewhere for financing), DOE fails to mention the initial qualification of the negative consequences: Because Eximbank competes in the world market with other government-supported export credit unions that are not required to disclose 11

financing agreements to outside parties . . . . Comstock Intl, 464 F.Supp. at 807-08. This is a critical qualifier which cannot be brushed aside. Here, there is no competition in the market. DOE provides no evidence that it is competing with other governments or private financing to provide loan guarantees for nuclear power projects. Instead, DOE again demands Plaintiff must prove a negativethat there is no alternative financingdespite its admission that nuclear projects are typically unable to obtain conventional private financing and its burden as the opponent of disclosure under FOIA. Def.s Reply at 5 and Petroleum Info. Corp. v. U.S. Dept of Interior, 976 F.2d 1429, 1433 (D.C. Cir. 1992) (noting the burden is on the agency to show that requested material falls within a FOIA exemption.) (internal citation omitted). DOE fails to demonstrate that disclosure of the credit subsidy fee estimates and loan guarantee terms will impair the governments ability to obtain the necessary information in the future. While disclosure may be undesirable for the Applicants, it will not impair the governments ability to implement the loan guarantee program. Accordingly, the credit subsidy fee estimates and the loan guarantee terms are not confidential under Exemption 4 and must be disclosed. II. DOE Improperly Withheld Information Pursuant to Exemption 5. Information may be withheld under FOIA Exemption 5 if it pertains to inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency. 5 U.S.C. 552(b)(5). Specifically, the Exemption 5 deliberative process privilege protects advice, recommendations, and opinions which are part of the deliberative, consultative, decision-making processes of the government. NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150-154 (1975). To justify its withholdings under the deliberative process privilege of Exemption 5, DOE claims the information it withheld is either predecisional

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or reflects deliberation. DOE fails to understand that both parts of the test must be satisfied. See Coastal States Gas Corp. v. Dep't of Energy, 617 F.2d 854, 866 (D.C. Cir. 1980). And, in any event, the information satisfies neither. First, DOE claims that the withheld information is predecisional because negotiations over the loan terms continued after the conditional commitments were issued. Def.s Reply at 11. The conditional commitments represent the terms and conditions of DOEs offer. DOE Term Sheets (ECF 11-9, 10, 11) at 1. DOE neglects to explain why these terms and conditions were negotiated after the commitments were issued. Indeed, DOEs explanation is limited to the statement that all the withholdings relate to the issuance of the loan guarantee. Def.s Reply at 11, citing Supp. Frantz Decl. at 10. This is not enough. See National Parks II, 547 F.2d at 680 (Conclusory and generalized allegations are indeed unacceptable as a means of sustaining the burden of nondisclosure under the FOIA, since such allegations necessarily elude the beneficial scrutiny of adversary proceedings, prevent adequate appellate review and generally frustrate the fair assertion of rights under the Act). Additionally, DOEs reference to correspondence documents post-dating issuance of the conditional commitments does nothing to support its generalized justification. Defs Reply at 11-12. Instead, it proves Plaintiffs point that these documents post-date the decision and should be released. Without more information, there is no reason to believe the terms discussed in the correspondence are predecisional. Second, DOE claims certain requested information contained more than just facts, thus characterizing that information as deliberative. Def.s Reply at 12. DOE asserts that because its decision to issue loan guarantees is based upon a competitive review process, information related to that process must necessarily be deliberative. See Def.s Reply at 12, citing Supp. Frantz Decl. 5 and 10. However, DOEs heavy burden requires more of the agency than a bold conclusion;

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its conclusions must be specific. See National Parks II, 547 F.2d at 680. And, DOEs attempt to shift this burden on Plaintiff is misguided. It is not Plaintiffs arguments that fall flat. Def.s Reply at 13 ( Plaintiffs conclusory and cursory arguments fail to overcome the established principle). Instead, it is DOE that omitted the justification necessary to explain why (1) the information withheld was deliberative, and (2) if it was deliberative, why other factual material was inextricably intertwined with that deliberative information such that DOE did not need to disclose it. See Ryan v. Dept of Justice, 617 F.2d 781, 790 (D.C. Cir. 1980) (holding that facts in a document must be segregated and disclosed unless they are inextricably intertwined with exempt portions). DOE has not established that the information withheld is either predecisional or deliberative. To be properly withheld under the deliberative process privilege of Exemption 5 DOE needed to prove that the information was both. Because of those failures, the information must be released.

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CONCLUSION For the reasons set forth in Plaintiffs Cross-Motion for Summary Judgment and as discussed above, Plaintiff respectfully requests that the Court grant its Cross-Motion for Summary Judgment and deny Defendants Motion for Summary Judgment. Dated: March 6th, 2012

Respectfully submitted, /s/ James B. Dougherty James B. Dougherty 709 3rd Street SW Washington, DC 20024 (202) 488-1140 jimdougherty@aol.com DC Bar No. 939538
/s/ Mindy Goldstein Mindy Goldstein Turner Environmental Law Clinic 1301 Clifton Road Atlanta, GA 30322 (404) 727-3432 mindy.goldstein@emory.edu GA Bar No. 727476 Pro hac vice
Counsel for Southern Alliance for Clean Energy

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