Natural Resources Defense Council v. Nuclear Regulatory Com'n

• Decision Date: 01 October 1981
• Docket Number: No. 80-1328,80-1328
• Citation: 666 F.2d 595
• Parties: , 12 Envtl. L. Rep. 20,897 NATURAL RESOURCES DEFENSE COUNCIL, Petitioner, v. NUCLEAR REGULATORY COMMISSION and United States of America, Respondents.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 595

666 F.2d 595

215 U.S.App.D.C. 32, 12 Envtl. L. Rep. 20,897

NATURAL RESOURCES DEFENSE COUNCIL, Petitioner, v. NUCLEAR REGULATORY COMMISSION and United States of America,

Respondents.

No. 80-1328.

United States Court of Appeals, District of Columbia Circuit.

Argued April 7, 1981.

Decided Oct. 1, 1981.

Petition for Review of an Order of the Nuclear Regulatory commission.

Heidi Noun with whom Richard A. Lowe, Washington, D. C., was on the brief for petitioner.

Irwin B. Rothschild, III, Atty., Nuclear Regulatory Commission, Washington, D. C., with whom Sanford Sagalkin, Acting Atty. Gen., Anne S. Almy and James C. Kilbourne, Attys., Dept. of Justice, and Stephen F. Eilperin, Sol. Nuclear Regulatory Commission, and Richard A. Parrish, Atty., Nuclear Regulatory Commission, Washington, D. C. were on the brief for respondents.

Before BAZELON, Senior Circuit Judge, and MACKINNON and EDWARDS, Circuit Judges.

Opinion for the Court filed by Circuit Judge MACKINNON.

Opinion concurring in the result filed by Circuit Judge EDWARDS.

Senior Circuit Judge BAZELON concurs in the majority opinion written by Judge MACKINNON and joins in Judge EDWARDS concurring opinion.

MACKINNON, Circuit Judge:

Section 206(a)(2) of the Energy Reorganization Act of 1974 ¹ requires directors and responsible officers of firms manufacturing or supplying the components of nuclear power plants to report to the Nuclear Regulatory Commission ("Commission") the discovery of "defects" in "basic components" which could create a "substantial safety hazard," unless the official has actual knowledge that the Commission has already been informed thereof. ² Section 206(b) subjects any person who knowingly and consciously fails to comply with this reporting requirement to stringent civil penalties. ³ The Reorganization Act, however, does not define section 206's crucial terms: "defect," "basic component," and "substantial safety hazard." Rather, Congress left this task to the Commission to perform through rulemaking proceedings, specifically instructing that "(t)he Commission is required to adopt regulations promptly, with a view to defining the types of defect required to be reported relating to manufacture, assembly, installation, and operation." ⁴ It is the Commission's current definition of the term "basic component" with which we are primarily concerned in this case.

I.

On March 3, 1975, the Commission published for comment a proposed rule designed to implement section 206. ⁵ Following extensive rulemaking proceedings, the Commission issued the final rule on June 6, 1977, ⁶ adding a new Part 21 to the Commission's regulations. The rule defined a "basic component" for a nuclear power plant as

a plant structure, system, component or part thereof necessary to assure (1) the integrity of the reactor coolant pressure boundary, (2) the capability to shut down the reactor and maintain it in a safe shut down condition, or (3) the capability to prevent or mitigate the consequences of accidents which could result in potential offsite exposures comparable to those referred to in (10 CFR § 100.11). ⁷

The rule required, among other things, that each contract entered into for the purchase of a "basic component" after January 6, 1978 contain a clause subjecting the order to the reporting requirements of Part 21. ⁸ It also provided that the supplier/manufacturer of a basic component who discovers a defect in such a component after it is delivered to its purchaser must attempt to determine whether the defect could create a substantial safety hazard. Any manufacturer/supplier who cannot make this safety determination must so inform the purchaser, who must then evaluate the safety significance of the defect. The nuclear power plant licensee must make the ultimate safety determination if its lower-tier suppliers are unable to do so. ⁹ Finally, the rule provided the Commission with the authority to grant exemptions from its requirements under certain circumstances. ¹⁰

Recognizing that it lacked experience in implementing a reporting program of this scope, which regulated the activities of many non-licensees, the Commission explained in the Statement of Consideration accompanying the final rule:

The Commission intends to examine closely the implementation of new Part 21 with a view to making any clarifying or other changes that may be warranted in light of experience. In particular, insufficient experience has been accumulated to permit the writing of a detailed regulation at this time that would provide a precise correlation of all factors pertinent to the question of what is a significant safety hazard. Part 21 is intended in this regard as an initial effort to identify a number of the factors involved with the question of significant safety hazard. Further, additional guidance in the form of regulatory guides may be developed should experience with the application of Part 21 indicate the need for such guidance. In this regard, we expect that the implementation efforts of the staff and those subject to the rule, and the views of interested members of the public, should provide the necessary data base for such further guidance. ¹¹

Following promulgation of Part 21, the NRC received many requests for clarification of the rule. In response, the NRC staff held five public regional meetings during July 1977 to discuss and answer questions about the rule. ¹² One recurring question concerned how far down the tiers of suppliers Part 21 was to be applied. ¹³ The NRC staff indicated that "the entire supply chain involved in the production of a basic component for a power reactor that could create a substantial safety hazard, because of a defect in the component is within the scope of Part 21." ¹⁴ In other words, the staff maintained that the suppliers of all parts making up a basic component were subject to Part 21's reporting requirements. ¹⁵

The staff's interpretation soon began to cause problems for the nuclear industry. Some suppliers of "commercial grade items"-off-the-shelf items not specifically designed for use in nuclear power plants-made such a relatively insignificant percentage of their total sales to the industry that they deemed it in their best business interests to simply stop dealing with the industry rather than expose themselves to the civil penalties which would follow any failure to comply with Part 21. ¹⁶ Others were unwilling to subject themselves to Part 21 because they were unable to identify which of their commercial grade items might have nuclear end uses. ¹⁷ As a result of Part 21's application all the way down the supply chain, some firms had great difficulty obtaining necessary components ¹⁸ and others were forced to acquire them from suppliers whom they considered less reliable. ¹⁹

The Commission also began to receive many requests from suppliers of commercial grade items for exemptions from Part 21. Between January 5, 1978 and July 31, 1978, the Commission received 13 such requests. ²⁰ The Commission staff estimated that each request required six man-weeks to process, ²¹ and predicted that a reprogramming of staff resources would be necessary if another thirteen were received. ²² The staff accordingly recommended to the Commission that Part 21 be amended. ²³

On October 19, 1978, the Commission issued an immediately effective rule exempting commercial grade items from the reporting requirements of Part 21 until the items were "dedicated" for use as a basic component for a nuclear power plant. ²⁴ The Commission explained: ²⁵

Part 21 defines a "basic component" subject to the reporting and other requirements of the rule. In response to inquiries during and subsequent to the public regional meetings relating to "off-the-shelf" or "catalog" items, the staff provided guidance that such items may be within the scope of 10 CFR Part 21 depending on the circumstances at the time of procurement. This guidance has been construed by numerous organizations to mean that the requirements of 10 CFR Part 21 apply to manufacturers and distributors who are involved to any extent in supplying basic components, or parts of basic components, of a facility or activity including supplying base material or functional assemblies to the manufacturer of the "basic component." This meaning has led to the imposition of 10 CFR Part 21 at a procurement stage where there are no design or specification requirements that are unique to application of the item at a nuclear facility or activity, e.g., relays.

The use of this meaning of basic components has not improved the quality of such items, and therefore, has not enhanced safety. Instead it is causing most increases and inability to obtain needed supplies. To the extent that the purchaser is unable to obtain a needed item from the most qualified supplier and must turn to other less qualified suppliers, defining basic component to include such an item may to some extent detract from safety. To relieve the conditions that are resulting from the above interpretation and to mitigate this potential reduction of safety part 21 is being amended to remove from the scope of 10 CFR Part 21, during specific stages of procurement, those items of a commercial grade, e.g., bearings, relays, a bar stock that are (1) not subject to design or specification requirements unique to facilities or activities licensed by the Commission, (2) used in applications other than facilities or activities licensed by the Commission, and (3) able to be ordered from the manufacturer/distributor on the basis of the manufacturer's published specifications. At a defined stage of procurement, when the item is "dedicated" to a "basic component" (see 10 CFR 21.3(c-1) the item will become subject to the requirements of 10 CFR Part 21. ²⁶

In addition, the Commission reserved the right to inspect manufacturers/suppliers of commercial grade items where necessary to help identify defects reported by licensees and those suppliers covered by Part...