The federal judge who blocked the merger of EnergySolutions and Waste Control Specialists accepted the U.S. government’s argument that the deal would drastically reduce competition in the market for disposal of low-level radioactive waste (LLRW), according to the court’s newly released opinion.
Judge Sue L. Robinson, of U.S. District Court for Delaware, issued the order on June 21, but the opinion was not made public until Thursday while the parties agreed to redactions to the document. The companies walked away from the merger just days after the court ruling; EnergySolutions on Friday again criticized the decision, saying Robinson’s opinion contained unspecified factual errors.
In the 10-day antitrust trial that ended May 5, Justice Department lawyers made the case that Salt lake City-based EnergySolutions’ $367 million buyout of its Dallas-based waste management rival would effectively establish a monopoly in the commercial LLRW disposal market in 36 states, the District of Columbia, and Puerto Rico.
EnergySolutions offers a broad range of nuclear services, including waste disposal. Waste Control Specialists operates a facility in Andrews County, Texas, for storage of LLRW and other waste forms.
Low-level radioactive waste can range from filters, protective gear, and resins from operational nuclear facilties to soil and debris from plants undergoing decommissioning. Commercial producers of higher-activity LLRW (based on radionuclide concentration) essentially have two options, Robinson wrote in her 53-page opinion: send it to Waste Control Specialists’ storage complex in West Texas for direct disposal; or to EnergySolutions’ facility in Clive, Utah, for concentration averaging and then disposal.
The market for disposal of lower-activity LLRW is somewhat broader, the judge found: EnergySolutions, WCS, a US Ecology facility in Idaho, and four municipal landfills in Tennessee. However, EnergySolutions and Waste Control Specialists have an edge here as well, according to the opinion. Commercial waste producers must secure authorization from the Nuclear Regulatory Commission for each project before they can send waste to the US Ecology site; that can take months, though the specific number was redacted in Robinson’s opinion. Meanwhile, under Tennessee’s Bulk Survey For Release program, qualified lower-activity LLRW waste must be processed before it can go to a landfill.
The judge indicated she was not persuaded by the companies’ argument that there is minimal overlap in their markets for LLRW disposal: “WCS’s exempt cell can accept approximately 90% of the waste that goes to Clive.” She appeared more swayed by competition figures provided by a Justice Department expert witness, who said post-merger EnergySolutions would possess 100 percent of the market for higher-activity waste from operational facilities, along with 96.7 percent of the market for lower-activity waste from that business segment (with the rest held by the Tennessee facilities).
In the full market for decommissioning waste, EnergySolutions currently holds a 90.3 percent share and WCS a 4.2 percent share, the opinion says.
“While there is no bright-line rule as to the minimum percentage that qualifies as undue, the Supreme Court has held that a post-merger market share of 30% triggered the presumption of anticompetitive effects,” Robinson stated. “The defendants’ pre- and post-merger market shares spectacularly exceed those percentages.”
Meanwhile, the obstacles to entry in the LLRW disposal market by other firms are known to be”incredibly high,” the judge wrote.
Robinson also dismissed Waste Control Specialists’ case that it is a failing company that needed the buyout to survive.
Attorney Van Beckwith, representing WCS at the trial, said in his closing arguments the company has lost $130 million over five years and could lose another $200 million going forward, according to Law 360. He said the West Texas waste storage facility could be closed and covered if the deal did not occur. Company executives said during the trial that some growth opportunities have not to this point been profitable, and that projects in the growing market for decommissioning of nuclear facilities “are too far out to save us,” Robinson wrote.
However, the Justice Department showed that WCS parent company Valhi Inc. has extended its subsidiary’s credit facility through March 31 of next year, and that at the end of 2016 the balance was $41.7 million. The company is meeting its financial obligations and has recently sealed a number of extended disposal contracts, Robinson wrote. She also noted opportunities for the company in the years ahead: The market for decommissioning of nuclear power plants could exceed $53 billion in the next two decades – with about 10 percent of the expense of decommissioning directed toward the LLRW disposal market.
Other firms had indicated interest in buying Waste Control Specialists after the EnergySolutions deal was announced, Robinson said. Valhi and WCS did not respond to those overtures, due to the “no talk” language in the agreement with its prospective owner.
“EnergySolutions respectfully disagrees with the Court’s opinion and believes it contains certain factual misstatements with respect to the nuclear waste processing and disposal industry,” the company said in a prepared statement Friday. “Furthermore, EnergySolutions maintains its belief that its acquisition of WCS would have been in the best interest of the long-term waste disposal needs for the nuclear industry.”
However, EnergySolutions reaffirmed that the companies would not appeal the ruling or continue their merger effort.
Waste Control Specialists has not publicly discussed its future in the wake of the blocked merger, but in a recent court document regarding redacting Robinson’s opinion noted the possibility of selling off some assets or a buyout by another company.
Also up in the air is its application to build and operate a facility for consolidated, interim storage of spent fuel from commercial nuclear reactors. Waste Control Specialists filed the application for an NRC license in April 2016, but a year later asked the regulator to suspend review of the application pending completion of the merger with EnergySolutions. The company has not declared whether it will move ahead with the project in the wake of the court ruling, but Valhi indicated in a May filing with the U.S. Securities and Exchange Commission that the license was “no longer probable.”
If that proves true, Holtec International could be the lone player in the market for temporary storage of used fuel until the Department of Energy meets its legal mandate to build a permanent repository for nuclear waste. The New Jersey company earlier this year applied for an NRC license for a facility with capacity to hold up to 120,000 metric tons of spent fuel in southeastern New Mexico — not far from Waste Control Specialists’ facility.
