Western Nuclear, Inc. v. Huffman, s. 85-2428
| Decision Date | 20 July 1987 |
| Docket Number | Nos. 85-2428,86-1942,s. 85-2428 |
| Citation | 825 F.2d 1430 |
| Parties | WESTERN NUCLEAR, INC., Energy Fuels Nuclear, Inc.; Uranium Resources, Inc., Plaintiffs-Appellees, v. F. Clark HUFFMAN, as Chief Enrichment Services Branch, Enriching Operations Division, Department of Energy; Sherry E. Peske, as Acting Director of Marketing and Business Operations (Uranium Enrichment) of the Department of Energy; John R. Logenecker, as Deputy Assistant Secretary of Uranium Enrichment of the Department of Energy; William R. Voigt, as Special Assistant for Strategic Policy Assessment to the Assistant Secretary for Nuclear Energy of the Department of Energy; James W. Vaughn, as Assistant Secretary for Nuclear Energy of the Department of Energy; Earl Ghelde, as Special Assistant to the Secretary of the Department of Energy; Daniel Boggs, as Under Secretary of the Department of Energy; Donald P. Hodel, as Secretary of the Department of Energy; United States Department of Energy, Defendants-Appellants, City of San Antonio, Acting By and Through the City Public Service Board of San Antonio, Duke Power Company; Gulf States Utilities Company; Houston Lighting & Power Company; Kansas City Power & Light Company; Kansas Electric Cooperatives, Inc.; Kansas Gas & Electric Company; New York Power Authority; Ohio Edison Company; Pennsylvania Power & Light Company; Philadelphia Electric Company; Public Service Company of Colorado; Public Service Electric & Gas Company; Southern California Edison Company; Southern Company Services, Inc.; the Connecticut Light and Power Company; the Toledo Edison Company; Virginia Electric and Power Company; Western Massachusetts Electric Company; Wisconsin Electric Power Company; Union Electric Company; Baltimore Gas and Electric Company; Arkansas Power & Light Company; Middle South Energy, Inc.; Middle South Services, Inc.; and Louisiana Power & Light, Amici Curiae, National Taxpayers Union, Amicus Curiae, States of Wyoming, New Mexico, Colorado, Utah and Nevada, Amici Curiae. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Marc Johnston, Atty., Civil Div., Dept. of Justice, Washington, D.C. (Richard K. Willard, Asst. Atty. Gen., Dept. of Justice, Washington, D.C., Robert N. Miller, U.S. Atty., D. Colo., and Leonard Schaitman, Atty., Civil Div., Dept. of Justice, J. Michael Farrell, General Counsel, and I. Avrum Fingeret, Deputy Asst. General Counsel, Dept. of Energy, of counsel [No. 86-1942 only], with him, on the briefs), for defendants-appellants.
Peter J. Nickles of Covington & Burling, Washington, D.C. (John H. Schafer [No. 85-2428 only], and Paul G. Gaston of Covington & Burling, Washington, D.C., and Harley W. Shaver and Bruce Dewald of Shaver & Licht, Denver, Colo., with him, on the briefs), for plaintiffs-appellees.
Harry H. Voigt, Mindy A. Buren, and C. Christopher Sprague of LeBoeuf, Lamb, Leiby & MacRae, Washington, D.C., on the briefs, for amici curiae City of San Antonio, et al.
B. Jeanine Hull of Kirkpatrick & Lockhart, Washington, D.C., and William A. Strauss and William T. Lane of Nat. Taxpayers Union, Washington, D.C., of counsel, on the brief, for amicus curiae Nat. Taxpayers Union.
A.G. McClintock, Wyoming Atty. Gen., Steven R. Shanahan, Sr. Asst. Atty. Gen., Paul Bardacke, New Mexico Atty. Gen., Duane Woodard, Colorado Atty. Gen., Brian McKay, Nevada Atty. Gen., and David L. Wilkinson, Utah Atty. Gen., on the brief, for amici curiae States of Wyo., N.M., Colo., Nev. and Utah.
Before McKAY, McWILLIAMS and BALDOCK, Circuit Judges.
Plaintiffs, three uranium mining and milling companies, filed a five-count complaint challenging various Department of Energy (DOE) policies. Shortly after filing the complaint, plaintiffs moved for summary judgment on count two, which challenged the DOE's use of the recently adopted uranium enrichment services contract (UESC). The district court granted plaintiffs' motion, and the DOE appealed. While that appeal was pending, the district court also granted plaintiffs' summary judgment motion on count one, which alleged that the DOE was statutorily required to restrict enrichment of foreign uranium. The DOE appealed that decision, and we consolidated the two appeals.
This case raises important issues, the resolution of which will affect not only the parties involved in this suit but also all utilities that use nuclear power as well as the eventual consumers who purchase power from such utilities. A brief exposition of the nuclear industry and its history is helpful in understanding these important issues and their ramifications.
Private-entity involvement in the nuclear industry evolved gradually. In its infancy, the Government had a complete monopoly over the nuclear industry. It owned all uranium, all nuclear fuel, and all nuclear production and utilization facilities. Initially, the Atomic Energy Commission (AEC), the DOE's predecessor, controlled these operations. The AEC did permit private entities to mine uranium ore, but these entities could only sell to the Government. In 1954, Congress enacted legislation that permitted private ownership of nuclear reactors as well as private possession and use, but not ownership, of nuclear fuel. The AEC issued licenses permitting use of nuclear fuel and monitored entities that owned reactors and used nuclear fuel. However, private entities that mined uranium ore continued to have only one customer--the Federal Government. Finally, in 1964, Congress passed legislation permitting private ownership of nuclear fuel and allowing uranium mining and milling companies to sell to private entities.
Notwithstanding this shift to the private sector, the Government continued to play an important role in the nuclear fuel cycle. The natural uranium mined could not be used directly as nuclear fuel by the private entities that bought it. Natural uranium consists of less than one percent U-235, and nuclear fuel must contain approximately three percent U-235. Thus, to be used as nuclear fuel, uranium must have a higher concentration of U-235 than is found in nature. The process that produces this high concentration is called "enrichment," and, in 1964, the AEC was the only entity in the world with enrichment facilities. Consequently, private entities could not use natural uranium unless the AEC first enriched it to the level required for use as nuclear fuel. Congress recognized this and, when it privatized the ownership of nuclear fuel, permitted the AEC to contract with private entities for the provision of enrichment services. In order to protect the economic strength of the domestic uranium industry, Congress also restricted enrichment of foreign uranium when the resulting nuclear fuel was designated for use in domestic facilities. Initially, the AEC was not permitted to enrich any foreign uranium for domestic use. As demand for nuclear fuel increased, however, the restrictions were phased out, and the AEC, later the DOE, eventually provided enrichment services for both domestic and foreign uranium.
Increases in demand for nuclear fuel also encouraged foreign entities to build enrichment facilities. This increased the competition for enrichment and permitted some of the DOE's domestic and foreign customers to obtain enrichment services outside the United States. As long as demand for nuclear fuel continued to increase, neither the DOE nor the domestic mining and milling companies were overly concerned with foreign competition. Rather, they were operating at capacity and were not threatened by the foreign competition.
The boom, however, was followed by a bust. Private entities that expected uranium demand to exceed supply had entered long-term contracts for uranium and for enrichment services. The quantities were based on forecasts of nuclear fuel needs in all present and future facilities. Unfortunately, many nuclear facilities were not completed on schedule, or were never completed and private entities were left with huge stockpiles of nuclear fuel and no place to use it. Some sold nuclear fuel to other entities and, as their contracts expired, stopped purchasing both uranium and nuclear fuel. Others, however, began to purchase higher quality uranium at lower costs from now fully operational foreign mines.
The DOE also faced increased foreign competition in the enrichment field. It responded by offering enrichment services on new and different terms. Restrictions on enrichment of foreign uranium had long since been discontinued, but the DOE now offered a variable-tails option in order to attract customers away from the foreign competition. Tails are the depleted uranium left over after the enrichment process is completed. A DOE customer could select a low tails assay--a low concentration of U-235 in the tails--and decrease the uranium required in the enrichment process. In other words, by increasing the enrichment used on a particular quantity of uranium, the DOE was able to increase the amount of enriched uranium produced from a given quantity of natural uranium. By offering the variable-tails option, the DOE permitted its customers to use more uranium and less enrichment services or less uranium and more enrichment services.
These DOE policies with respect to enriching foreign uranium and offering a variable-tails option increased the perceived economic threat to domestic uranium mining and milling companies. They faced increased use of foreign uranium as well as decreased use of uranium in general because of the new variable-tails option. Plaintiffs and other mining and milling companies responded by requesting that the DOE implement restrictions on enrichment of foreign uranium as required by 42 U.S.C. Sec. 2201(v) (1982), which provides that the DOE, "to the extent necessary to assure the maintenance of a viable domestic uranium industry shall not offer [enrichment] services for source or special nuclear materials of foreign origin intended for use in a...
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