Amicus Curiae Brief — Huffman v. Western Nuclear, Inc.

—

Supreme Court, U.S.

FI I. E D

No. 87-645 NOV 18 198!

JOSEPH F. SPANIOL, JR.

IN THE CLERK

Supreme Court of the United States

OCTOBER TERM, 1987

F. CLARK HUFFMAN, et al.,

Petitioners,

V.

WESTERN NUCLEAR, INC., ef a/.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Tenth Circuit

BRIEF OF ELECTRIC UTILITY COMPANIES AS

AMICI CURIAE IN SUPPORT OF PETITION

FOR A WRIT OF CERTIORARI

HARRY H. Voicr *

MINDY A. BUREN

PAUL H. FALON

LEBOEUF, LAMB, LEIBY & MACRAE

1333 New Hampshire Ave., N.W.

Suite 1100

Washington, D.C. 20036

(202) 457-7500

Attorneys for Amici Curiae

Electric Utility Companies

* Counsel of Record

November 1987

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WILSON - Eres Printinc Co., Inc. - 789-0096 - WasHINGTON, D.C. 20001

TABLE OF CONTENTS

.....

— . —

INTEREST OF THE AMICI CURIAE ELECTRIC

.... 0

STATEMENT OF THE CASE —————

REASONS FOR GRANTING THE WRIT.-_---------

I.

II.

THE DISTRICT COURT’S INJUNCTION,

AFFIRMED BY THE TENTH CIRCUIT,

WILL HAVE IMMENSELY HARMFUL

PRACTICAL CONSEQUENCES NOT OFF-

SET BY ANY SUBSTANTIAL BENEFIT TO

TE. ccecencecesssecconecceccee

A. The Injunction Will Cause The Utilities And

Their Customers To Suffer Substantial Eco-

LL ee

B. The Injunction Will Not Assure The Via-

bility Of The Domestic Uranium Industry

THE INJUNCTION REPRESENTS AN IM-

PROPER JUDICIAL INTRUSION INTO

AGENCY RULEMAKING ..............-.---

A. The Decisions Below Contravene The Stand-

ard This Court Has Set For Review Of

e .

B. The Decisions Below Arrogate The Roles

Congress Intended Both For The Depart-

ment Of Energy And Itself ........_- -.

— —— —

10

11

15

ii iii

TABLE OF AUTHORITIES TABLE OF AUTHORITIES—Continued

CASES: Page Page

Alabama Power Co. v. Costle, 636 F.2d 323 (D.C. Young v. Community Nutrition Institute, 476 U.S.

Cie. 0 .1„ñ„4144„4„4„4%0⅕«ʒ — 12 974 (1986) „ 12

American Paper Institute v. American Electric

Power Service, 461 U.S. 402 (1983) ..-.------ 11 FEDERAL STATUTES:

Batterton v. Francis, 432 U.S. 416 (19777 11 Administrative Procedure Act, 5 U.S.C. 8 551 et

Baylor University Medical Center v. Heckler, 758 EEE SLE 10

F.2d 1052 (5th Cir. 1985) nanan tea 13 Atomic Energy Act of 1954, 42 U.S.C. § 2011 et

Burlington Northern Inc. v. United States, 459 | seq. (1982 & Supp. III 1985) 2

U.S. 131 (1982) 18 42 U.S.C. § 2201(v) (1982

Chevron U.S.A. v. Natural Resources Defense | 42 a,

Council, 467 U.S. 837 (1984) — 11 | 42 U.S.C. § 2210b (d) (198277777 .

Colorado Public Interest Research Group v. Hills,

420 F. Supp. 582 (D. Colo. 1976) .------------ 14 FEDERAL REGULATIONS:

Conrail v. National Association of Recycling In- | 38 Fed. Reg. 12,180 (1973) 13

dustries, 449 U.S. 609 (1981) ---------------- 14 39 Fed. Reg. 38,016 (1974) 3.5, 13

FPC v. Hope Natural Gas Co., 320 U.S. 591 51 Fed. Reg. 3624 (1986 3, 9, 10

41949 —————————— 8 51 Fed. Reg. 15,632 (1986) 10, 12

Independent Bankers Association v. Heimann, 627 51 Fed. Reg. 27,132 (1986) 6, 8, 9

P28 406 (D.C. Cir. 1998) .<ccccccccccsseess 13

Nader v. NRC, 513 F.2d 1045 (D.C. Cir. 1975) 13 CONGRESSIONAL MATERIALS:

New York State Commission on Cable Television

v. FCC, 571 F.2d 95 (2d Cir.), cert. denied, 439

Ua e 6% 12

Power Reactor Development Co. v. International

Union of Electrical Workers, 367 U.S. 396

S. Rep No. 1325, 88th Cong., 2d Sess., reprinted

in 1984 U.S. Code Cong. & Admin. News 3105. 14

Status of the Domestic Uranium Mining and Mill-

ing Industry: The Effects of Imports, Hearing

Before the Subcomm. on Energy Research and

ee 11 Development of the S. Comm. on Ener

* 1 2 5 2 — gy and

Puerto Rico Maritime Shipping Authority v. Natural Resources, 97th Cong., Ist Sess.

FMC, 678 F.2d 327 (D.C. Cir.), cert. denied, . 9

u 008 . Kw ö

Ricci v. Chicago Mercantile Exchange, 409 U.S. MISCELLANEOUS:

, |) | aa 14 Affidavit of Loring E. Mills, filed in Western

Small Refiner Lead Phase-Down Task Force v. Nuclear, Inc. v. Huffman, 825 F.2d 1438 (10th

EPA, 705 F.2d 506 (D.C. Cir. 1983) .......-.-- 13 Cir. 1987) (No. 86-1942) 77 6,7

Udall v. Tallman, 380 US. 1 (1965) — 11 Letter from U.S. Trade Representative Clayton

United States v. Riverside Bayview Homes, Inc., Yeutter to DOE Secretary John S. Herrington

674 UB. 181 ad 11 F r.. f 8

Vermont Yankee Nuclear Power Corp. v. Natural Memorandum for The President from DOE Secre-

Resources Defense Council, 435 U.S. 519 tary John S. Herrington (Sept. 26, 1985) 3

40 .—5—r7çꝙjt—«—.—— 14

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

No. 87-645

F. CLARK HUFFMAN, et al.,

Petitioners,

v.

WESTERN NUCLEAR, INC., et al.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Tenth Circuit

BRIEF OF ELECTRIC UTILITY COMPANIES AS

AMICI CURIAE IN SUPPORT OF PETITION

FOR A WRIT OF CERTIORARI

In accordance with this Court’s Rule 36, the domestic

electric utility companies (the Utilities“) listed below

1 The Utilities include:

Alabama Power Company

Arkansas Power & Light Company

Duke Power Company

Georgia Power Company

GPU Nuclear Corporation

Houston Lighting & Power Company

Kansas City Power & Light Company

[Continued }

2

have received the written consent of the parties to file

this brief as amici curiae. Copies of the consents have

been filed with the Clerk.

INTRODUCTION

Section 16lv of the Atomic Energy Act of 1954, 42

U.S.C. § 2011 et seg. (1982 & Supp. III 1985), provides

that the Atomic Energy Commission, now the Depart-

ment of Energy (“DOE” or the Department“):

to the extent necessary to assure the maintenance

of a viable domestic uranium indusdry, shall not

offer [uranium enrichment] services for source or

special nuclear materials of foreign origin intended

for use in a utilization facility within or under the

jurisdiction of the United States.

42 U.S.C. § 2201(v) (1982) (“section 2201(v)”) (em-

phasis added). Section 170B requires the Secretary of

DOE to submit an annual report on the viability of the

domestic uranium mining and milling industry to the

President and to the Congress. 42 U.S.C. § 2210b (a

(1982). On September 26, 1985, the Secretary of DOE

issued a determination that the domestic uranium indus-

1 [Continued ]

Kansas Electric Power Cooperative, Incorporated

Kansas Gas and Electric Company

Louisiana Power & Light Company

MSU System Services, Incorporated

New York Power Authority

Philadelphia Electric Company

Public Service Electric & Gas Company

Southern California Edison Company

Southern Company Services, Incorporated

System Energy Resources, Incorporated

Texas Utilities Electric Company

Toledo Edison Company

Union Electric Company

Virginia Power

Wisconsin Electric Power Company

Wolf Creek Nuclear Operating Corporation

try was not viable in calendar year 1984. Memorandum

for The President from DOE Secretary John S. Herring-

ton (Sept. 26, 1985). Nevertheless, DOE did not impose

enrichment restrictions on foreign-origin uranium under

section 2201(v): the Department concluded that such

restrictions would not assure the viability of the domestic

industry, and, in that circumstance, enrichment restric-

tions were not required by statute. See 51 Fed. Reg.

3624, 3627 (1986).

The Respondent domestic uranium mining and milling

companies in this case claim that section 2201 () re-

quires DOE to impose restrictions automatically upon a

finding that the domestic industry is not viable. The

District Court below agreed, and issued an injunction

that would have required DOE to limit its enrichment of

foreign uranium to 25% of all materials enriched be-

tween June 6, 1986 and December 31, 1986, and to re-

fuse to enrich any foreign uranium after January 1.

1987. Petition at 23a. On appeal, the Tenth Circuit up-

held the District Court’s injunction. Id. at 21a.

INTEREST OF THE AMICI CURIAE

ELECTRIC UTILITY COMPANIES

The Utilities filing this brief as amici curiae will be

vitally affected by the injunction. Each of the Utilities

is licensed by the Nuclear Regulatory Commission to con-

struct, own, or operate one or more nuclear reactors. Nu-

clear reactors depend for their operation on sufficient

and timely supplies of enriched uranium. In this country,

only DOE provides uranium enrichment services, and

each of the Utilities currently has one or more contracts

or options with DOE to have natural uranium enriched

to become usable reactor fuel. DOE enrichment of for-

eign-origin uranium is expressly permitted by the cri-

teria governing the terms and conditions under which

the Department’s enrichment services are made avail-

able. See 39 Fed. Reg. 38,016 (1974) (phasing out prior

4

restrictions on enrichment of foreign uranium). Ac-

cordingly, the Utilities, in reliance upon their enrichment

contracts with DOE and the Department’s ability to per-

form thereunder, have purchased or contracted to pur-

chase hundreds of million dollars worth of foreign-origin

uranium to meet their uranium enrichment obligations.

Unless this Court grants certiorari and reverses the

decision below, the injunction will have severe repercus-

sions for the Utilities and their customers. The injunc-

tion will abruptly and significantly frustrate the Utili-

ties’ commercial expectations. It will cause prices for

natural uranium and enrichment services to rise, at home

and abroad, just as the Utilities will be seeking to find

alternative sources for both. Utilities that enter into

alternative arrangements may still be saddled with their

original contractual obligations. Some of the Utilities

may not even be able to rearrange their supply and en-

richment contracts in time to meet their immediate re-

actor refueling needs. In all cases, the consequential costs

arising from the turmoil artificially induced by the in-

junction will be substantial, and such costs will be borne

by the Utilities and their customers.

In contrast, there is no assurance whatsoever that the

injunction will result in increased domestic production

of uranium. Rather, it is more likely that there will

be even less domestic production as DOE loses enrich-

ment sales to its cheaper overseas competitors, and do-

mestic utilities increase their reliance on both foreign

uranium and foreign enrichment services. In short, the

current plight of the domestic industry is not fairly trace-

able to uranium imports, but to long-term structural

infirmities in the United States market. An injunction

barring DOE enrichment of foreign uranium therefore

could compound, not redress, the injuries alleged by Re-

spondents.

The Utilities respectfully submit that this brief pro-

vides an important overview of the market disrup-

tions into which both the Utilities and the domestic in-

dustry will be plunged as a consequence of the injunc-

tion. Although the Utilities believe that the opinions of

the District Court and the Tenth Circuit, issuing and up-

holding the injunction, respectively, are plainly mistaken

as a matter of law, the Utilities are even more firmly

convinced that the injunction will be simply disastrous as

\ a practical matter.

STATEMENT OF THE CASE

The Utilities adopt the Petitioners’ Statement of the

Case.

REASONS FOR GRANTING THE WRIT

I. THE DISTRICT COURT'S INJUNCTION, AF-

FIRMED BY THE TENTH CIRCUIT, WILL HAVE

IMMENSELY HARMFUL PRACTICAL CONSE-

QUENCES NOT OFFSET BY ANY SUBSTANTIAL

BENEFIT TO RESPONDENTS.

A. The Injunction Will Cause The Utilities And Their

Customers To Suffer Substantial Economic Penal-

ties.

To leave in place the injunction affirmed by the Tenth

Circuit will work a severe economic hardship on the

Utilities and their customers. DOE’s uranium enrich-

ment criteria in effect at the time this lawsuit was ini-

tiated permitted the use of foreign-origin uranium to be

phased in beginning in 1977. 39 Fed. Reg. at 38,016. Be-

ginning in 1984, the criteria eliminated all restrictions

on the enrichment of foreign uranium for domestic use.

Id. at 38,017. The Utilities have relied on those criteria,

and on their contracts with DOE that do not restrict the

enrichment of imported uranium, to purchase, or contract

for the purchase of, foreign uranium. As of January 1,

1985, U.S. utilities were estimated to hold contracts or

options for natural uranium from foreign sources in

1985-1990 totaling 30.6 million pounds of UO. some

$780 million worth. See Affidavit of Loring E. Mills, filed

in Western Nuclear, Inc. v. Huffman, 825 F.2d 1438

(10th Cir. 1987) (No. 86-1942) (“Mills Aff.”), J 3, re-

printed as Appendix A hereto; Petition at 24 n.18.

Under the injunction, the Utilities will be unable to

have the uranium they purchased or contracted to pur-

chase abroad enriched pursuant to their contracts with

DOE. The Utilities’ obligations to their customers, how-

ever, will require them to take all necessary steps to

obtain enough enriched uranium to continue operating

their nuclear plants. Yet any of the alternatives the

Utilities are forced to select in these circumstances “will

result in significant adverse consequences in terms of

increased costs and market disruption.” Mills Aff. J 6.

Utilities wit: foreigr àranium under contract may

elect to walk away from their DOE enrichment contracts

and arrange for foreign enrichment services. This in-

creased demand for foreign enrichment will drive up the

price of such services. Moreover, as fewer utilities bring

uranium to DOE for enrichment, DOE will have to raise

the price of enrichment services to its remaining cus-

tomers in order to comply with its statutory requirement

to recover its costs. Mills Aff. T6 (a); see 42 U.S.C.

§ 2201(v). Utilities with foreign uranium already on

hand may attempt to purchase stockpiled domestic ura-

nium from other utilities to enrich under their contracts

with DOE. Such uranium will be hard to obtain as utili-

ties hoard their supplies for the future, and it will com-

mand a premium when it is available. Mills Aff. 7 6(b).

Finally, some utilities may seek to purchase newly-pro-

duced domestic uranium. The domestic industry, how-

ever, is not geared up to produce the amount of uranium

that will be required. Rather, domestic producers are

already importing foreign uranium for resale to U.S.

utilities, because it is more economical than mining and

milling additional quantities in this country. See 51 Fed.

Reg. 27,132, 27,135 (1986). The domestic producers will

certainly raise the price of any additional uranium they

7

do produce in order to cover their higher marginal costs—

and to take advantage of the surge in demand created by

the injunction. See Mills Aff. J 6(c).

Any of these choices will take time to implement. Yet

the injunction will take effect immediately, barring DOE

from accepting foreign uranium for enrichment. “U.S.

utilities with foreign uranium under contract and reac-

tor refueling scheduled during the next 18 months may

be unable to rearrange their contracts in time to meet

their needs.” Mills Aff. J 7. At the same time, the do-

mestic uranium industry presently lacks the production

capacity to respond to the new fuel requirements of all

operating domestic nuclear plants. Id. J 9. For both rea-

sons, some U.S. utilities could be forced to shut down

temporarily and purchase or generate more costly re-

placement power. Id. JJ 7, 9.

Thus, it is inevitable that the Utilities, pursuing any

of the options available to them if the injunction takes

effect, will end up with “duplicative, overlapping, or con-

flicting contracts for uranium supplies or enrichment

services or both.” Mills Aff. J 10. Lengthy and expensive

litigation over a host of contractual issues is sure to

follow. See id. Furthermore, “[u]nder traditional prin-

ciples of electricity rate regulation, the increased ura-

nium costs, the increased price for enrichment services,

and the costs of abrogating existing contracts will all be

incorporated in electric rates and ultimately would be

borne by the consumers of electricity.” Id. J 12.

These increased costs, which may be crippling in vary-

ing degrees to the Utilities and their customers through-

out the country, are wholly unnecessary. This Court can

prevent them by granting certiorari and reversing the

decision below.

B. The Injunction Will Not Assure The Viability Of

The Domestic Uranium Industry.

As the Petitioners have set forth in detail, see Peti-

tion at 4-12, the plight of the domestic uranium industry

in the mid-1980’s is the product of 40 years of legal,

political, and commercial developments. The primary

causes of the depressed U.S. uranium market are the

unanticipated decline in the demand for nuclear power,

the cancellation of power plants, the failure of domestic

mining and milling companies to decrease uranium pro-

duction in response to the decrease in consumption, the

build-up of utility inventories of natural and enriched

uranium, and the emergence of secondary and foreign

markets for both natural and enriched uranium.

Imports of foreign uranium have not been the major

cause of the domestic industry’s financial problems. No

less an expert on trade matters than the United States

Trade Representative has so determined, in response to

a request by the Secretary of DOE to investigate the

advisability of initiating a legal action to restrict ura-

nium imports pursuant to section 2210b (d).“ The Trade

Representative counseled against such an action, based on

his conclusion that the economic difficulties experienced by

the domestic industry are the result of long-term market

forces and cannot be alleviated by restricting DOE’s

enrichment of foreign uranium. Letter from U.S. Trade

Representative Clayton Yeutter to DOE Secretary John

S. Herrington (Dec. 26, 1985).

2 The statute authorizes the Secretary to determine whether

uranium imports constitute “a substantial cause of serious injury,

or threat thereof,” to the domestic industry. 42 U.S.C. § 2210b(d)

(1982). By requesting the Trade Representative to conduct a

preliminary injury determination, the Secretary fully discharged

his responsibilities in these circumstances. See 51 Fed. Reg. at

27,135.

8 The Trade Representative’s conclusion, of course, is the prod-

uct of expert judgment which carries a presumption of validity.

Cf. FPC v. Hope Natural Gas Co., 320 U.S. 591, 602 (1944);

Although foreign-origin uranium has captured an in-

creasing share of the domestic market over the past few

years, this trend has been a symptom, rather than a

cause, of the weaknesses of the U.S. uranium industry.

The serious decline of the domestic uranium industry was

evident as early as 1981, yet as of 1981 less than ten

percent of the uranium delivered to DOE for enrichment

was of foreign origin. See Status of the Domestic Ura-

nium Mining and Milling Industry: The Effects of Im-

ports, Hearing Before the Subcomm. on Energy Research

and Development of the S. Comm. on Energy and Natural

Pesources, 97th Cong., Ist Sess. 1-21, 41-45, 120-123

(1981). Further, more than 37% of the foreign-origin

uranium under contract for delivery to the United States

between 1985 and 1990 has been contracted for by domes-

tie uranium producers who have chosen to purchase ura-

nium abroad for resale instead of producing it themselves.

51 Fed. Reg. at 27,135. This outsourcing, as well as the

increase in uranium imports generally, is attributable to

the simple fact that higher grade ore and lower produc-

tion costs make it possible to buy foreign uranium for

less than what it costs to produce domestic uranium. Id.

In these circumstances, requiring DOE to restrict its

enrichment services for foreign-origin uranium will not

address the fundamental, long-term weaknesses of the

domestic industry. In fact, as the Department confirmed

during its recent rulemaking on revised enrichment cri-

teria,* restrictions on the enrichment of imported ura-

Puerto Rico Maritime Shipping Authority v. FMC, 678 F.2d 327,

335 (D.C. Cir.), cert. denied, 459 U.S. 906 (1982).

* Subsequent to the initiation of this lawsuit, DOE commenced

a rulemaking to revise the enrichment criteria in response to mar-

ket changes and the depressed condition of the domestic industry.

51 Fed. Reg. at 3625. Nevertheless, no restrictions on the enrich-

ment of foreign uranium were included in the final revised criteria

adopted by the Department, based on the Secretary's conclusion

that “restrictions would [not] assure the viability of the domestic

mining and milling industry.” 51 Fed. Reg. at 27,135. See Petition

at 11-13, 13 n.10.

10

nium “could further damage the U.S. mining industry,”

51 Fed. Reg. at 3627, and thus would be “counterproduc-

tive.” 51 Fed. Reg. 15,632 (1986). If such restrictions

take effect under the injunction, DOE’s enrichment

services will become less competitive in the world market.

That, in turn, will trigger a loss of enrichment sales by

DOE, and the viability of the domestic mining industry

will be jeopardized all the more.

Even in the short term, an injunction against the en-

richment of foreign uranium will hardly benefit the

domestic industry. As previously discussed, see supra,

pp. 6-7, an injunction will not result in an immediate in-

crease in domestic uranium production: The domestic

mining and milling companies lack the present capacity

to respond to a sudden increase in demand. Instead, U.S.

utilities will turn to foreign enrichment or purchase

stockpiled domestic uranium to meet their consumption

requirements. Furthermore, those domestic producers who

have purchased foreign-origin uranium for resale in this

country may be just as adversely affected as their utility

company customers by an injunction barring DOE en-

richment of such imports.

II. THE INJUNCTION REPRESENTS AN IMPROPER

JUDICIAL INTRUSION INTO AGENCY RULE-

MAKING.

The decisions below repudiate the deference properly

due to a reasonable statutory interpretation by the agency

charged with administering the law. Further, the injunc-

tion issued by the District Court and affirmed by the

Tenth Circuit is the product of unlawful judicial rule-

making that undermines the division of power inherent in

the Constitution and the Administrative Procedure Act, 5

U.S.C. § 551 et seg. (1982). This Court should grant

certiorari in order to restore that balance of power and

to vindicate the principle that federal appellate review is

intended to scrutinize, but not substitute for, agency de-

cision-making.

11

A. Decisions Below Contravene The Standard

The

This Court Has Set For Review Of Agency Deci-

sions.

This case is governed by well-settled principles of stat-

utory construction and appellate review of agency deci-

sions: the plain meaning of a statute must be enforced,

and if it is ambiguous, a permissible construction by the

agency entrusted to administer the law is entitled to con-

siderable weight.” Chevron U.S.A. v. Natural Resources

Defense Council, 467 U.S. 837, 842-845 (1984). Accord

American Paper Institute v. American Electric Power

Service, 461 U.S. 402, 423 (1983) ; Udall v. Tallman, 380

U.S. 1, 16 (1965); Power Reactor Development Co. v.

International Union of Electrical Workers, 367 U.S. 396,

408 (1961). Even if the meaning is not plain, however,

a court may not substitute its own interpretation for that

issued by an agency merely because there are several

plausible ways to view the statute’s meaning. Chevron

U.S. A., 467 U.S. at 843 & n.11. Rather, so long as the

agency has reasonably sought to implement the statute in

a manner that Congress has not proscribed, its interpre-

tation must be upheld. See United States v. Riverside

Bayview Homes, Inc., 474 U.S. 121, 131 (1985); Chevron

U.S.A., 467 U.S. at 843-845 & nn.11-14; Batterton v.

Francis, 432 U.S. 416, 426 (1977). |

The plain meaning of section 2201(v) is that restric-

tions on enrichment of foreign-origin uranium are re-

quired only when they are necessary to maintain a viable

domestic uranium industry. If the industry will not bene-

fit from the restrictions, they can hardly be necessary.

That is precisely how the Department analyzed section

2201 (v0:

The plain language of the statute makes clear the

restrictions are not to be imposed fer their own sake.

Rather, DOE has a duty to determine whether their

imposition would achieve the statutory objective of

assuring the viability of the domestic industry. And,

12

when DOE determines imposition would have a mean-

ingless or counterproductive effect on this objective,

DOE should not, and indeed, cannot impose restric-

tions.

51 Fed. Reg. at 15,632. Any other interpretation of the

statutory language—for example, to require DOE to re-

strict the enrichment of imported uranium when such

action would not help the domestic uranium industry—

is absurd and could not have been intended by Congress.

See Alabama Power Co. v. Costle, 636 F.2d 323, 392

n.158 (D.C. Cir. 1979) (opinion of Robinson, J.) (ab-

surd construction of a regulatory statute is to be avoided

if at all possible); New York State Commission on Cable

Television v. FCC, 571 F.2d 95, 98 (2d Cir.) (“The ap-

propriate methodology, then, is to look to the ‘common

sense’ of the statute or regulation, to its purpose, to the

practical consequences of the suggested interpretations,

and to the agency’s own interpretation for what light

each inquiry might shed”), cert. denied, 439 U.S. 820

(1978).

Thus, the failure of the courts below to sustain DOE’s

construction of section 2201(v) and DOE’s well-consid-

ered decision not to issue criteria barring the enrichment

of foreign uranium constitutes clear legal error. See

Young v. Community Nutrition Institute, 476 US. 974

(1986) (upholding agency’s statutory construction and

decision not to promulgate regulations) .

B. The Decisions Below Arrogate The Roles Congress

Intended Both For The Department Of Energy And

Itself.

Section 2201(v) requires DOE to establish written

criteria setting forth the extent to which the Depart-

ment’s enrichment services will be made available for

imported uranium. Further, it requires DOE to submit

its proposed criteria to Congress for a 45-day review

period before they can take effect. Thus, even if a court

13

ruled that DOE interpreted section 2201(v) incorrectly,

the only proper remedy would be for that court to order

the Department to issue criteria specifying the extent to

which new restrictions on enrichment of foreign uranium

would apply. Cf. Burlington Northern Inc. v. United

States, 459 U.S. 131, 141 (1982) (“federal-court author-

ity to reject [Interstate Commerce] Commission rate

orders for whatever reason extends to the orders alone,

and not to the rates themselves”); Small Refiner Lead

Phase-Down Task Force v. EPA, 705 F.2d 506, 545 (D.C.

Cir. 1983) (to vacate an agency’s new rule without re-

instating the old rule “avoids any problem of the [ap-

pellate] court overstepping its authority, and leaves it

to the agency to craft the best replacement for its own

rule”). Instead, by enjoining DOE to impose specific

limits on its enrichment of foreign uranium, the courts

below not only have ousted the Department of its pri-

mary jurisdiction over the promulgation of enrichment

criteria, but they also have deprived Congress of its role

in scrutinizing and approving the criteria. Such actions

constitute unlawful judicial rulemaking, which this Court

should not leave unreviewed.

At the time Respondents initiated this lawsuit, the De-

partment’s existing criteria had phased out all restric-

tions on DOE enrichment of foreign uranium as of Janu-

ary 1, 1984. See 39 Fed. Reg. at 38,017; 38 Fed. Reg.

12,180 (1973). Having failed to seek judicial review of

the criteria when they were adopted, Respondents may

not do so now—directly, or collaterally by seeking an in-

junction to prevent the enrichment of foreign uranium.

See Baylor University Medical Center v. Heckler, 758

F.2d 1052, 1058 (5th Cir. 1985); Independent Bankers

Association v. Heimann, 627 F.2d 486, 488 (D.C. Cir.

1980); Nader v. NRC, 513 F.2d 1045, 1054-55 (D.C.

Cir. 1975).

More importantly, the District Court’s willingness to

issue such an injunction and the Tenth Circuit’s willing-

14

ness to affirm it represent improper judicial encroach-

ments into administrative rulemaking. The injunction

effectively substitutes the judiciary’s own enrichment cri-

teria for those lawfully issued by DOE. “Such usurpa-

tion of administrative power . . . ill serve[s] the orderly

operation of the federal government. Nor [does] such

action pay proper respect to the division of power in-

herent in the Constitution and the Administrative Proce-

dure Act, ... .” Colorado Public Interest Research

Group v. Hills, 420 F. Supp. 582, 586 (D. Colo. 1976).

Cf. Vermont Yankee Nuclear Power Corp. v. Natural

Resources Defense Council, 435 U.S. 519, 557 (1978)

(condemning “judicial intervention run riot“).

For the same reason, the injunction too readily de-

prives the Department of its primary jurisdiction over

the issuance of enrichment criteria, even where the courts

found fault with the absence of new criteria restricting

enrichment of foreign uranium. The courts, while retain-

ing the final authority to expound a statute, are required

to avail themselves of the aid implicit in the agency’s

superior expertise concerning the subject matter in ques-

tion. See Conrail v. National Association of Recycling

Industries, 449 U.S. 609, 612 (1981); Ricci v. Chicago

Mercantile Exchange, 409 U.S. 289 (1973). The author-

ity to promulgate uranium enrichment services criteria

was delegated by Congress, with good reason, to DOE,

not to a federal court.

Section 2201(v) contains the 45-day review period re-

quirement to ensure that any uranium enrichment cri-

teria proposed by DOE become “subject to Congressional

scrutiny.” S. Rep. No. 1325, 88th Cong., 2d Sess. 16,

reprinted in 1984 U.S. Code Cong. & Admin. News 3105,

3120. By changing the effective enrichment criteria im-

mediately, the injunction circumvents the process of

scrutiny and approval that Congress expressly reserved

for itself.

15

CONCLUSION

For the foregoing reasons, as well as those stated in

the Petition, the writ of certiorari should be granted.

Respectfully submitted,

HARRY H. Voict *

MINDY A. BUREN

PAUL H. FALON

LEBOoEuF, LAMB, LEIBY & MACRAE

1333 New Hampshire Ave., N.W.

Suite 1100

Washington, D.C. 20036

(202) 457-7500

Attorneys for Amici Curiae

Electric Utility Companies

* Counsel of Record

November 1987

APPENDIX

la

APPENDIX A

IN THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH DISTRICT

No. 86-1942

WESTERN NUCLEAR, INC., et al.,

Plaintiffs-A ppellees,

’ V.

F. CLARK HUFFMAN, et al.,

Defendants-A ppellants.

AFFIDAVIT IN SUPPORT OF STAY

PENDING APPEAL

DISTRICT OF COLUMBIA Ss.

LORING E. MILLS, being duly sworn, says:

1. I am Vice President, Nuclear Activities of Edison

e Electric Institute (“EEI”). I make this affidavit in sup-

port of the motion filed by appellants for a stay pending

appeal of the injunction contained in the order issued by

District Judge Carrigan on June 20, 1986.

2. EEI is the national association of the nation’s

investor-owned electric companies, with offices at 1111

19th Street, N.W., Washington, D.C., 20036. EEI’s mem-

ee ——

— — —

2a

bers serve approximately 73 percent of all electricity cus-

tomers in the nation. They operate 85 nuclear plants and

currently have 16 additional units under construction.

These nuclear utilities are the majority of the domestic

uranium enrichment customers of the Depar.ment of En-

ergy (“DOE”). Part of my job with EEI is to gather

and review data and information concerning the supply

of, and demand for, natural uranium and enrichment

services by U.S. utilities that own and operate nuclear

power plants. Such data and information are available

to EEI from individual nuclear utilities or obtained from

publicly-available sources, including defendant-appellant

DOE.

3. The estimated total of existing contracts or options

held by U.S. utilities and U.S. uranium suppliers for nat-

ural uranium from foreign sources as of January 1, 1985

was as follows:

U.S. Uranium

U.S. Utility Supplier

Contracts Contracts Total Amount

With Foreign For Foreign From Foreign Producers

Year Producers Uranium (Million Pounds U 0.

1985 5.4 45 9.9

1986 5.4 2.8 8.2

1987 4.9 4.0 8.9

1988 4.9 24 73

1989 45 24 6.9

1990 5.5 2.1 7.6

Source: Energy Information Administration, Domestic Ura-

nium Mining and Milling Industry: 1984 Viability Assessment,

DOE EIA-O477 (“1984 EIA Report“ at p. 11, Table I.

In addition, at year-end 1984 there were approximately

29.2 million pounds U. O. equivalent of foreign unen-

riched uranium in process in the United States. Energy

Information Administration, Uranium Industry Annual

1984, DOE /EIA-0478(84) at p. 82, Table 42. Data for

calendar year 1985 have not yet been published.

3a

4. It is important to note that over 37 percent of the

foreign uranium under contract for 1985-90 delivery was

contracted for by domestic suppliers. Those suppliers,

several of which hold domestic uranium reserves, choose

to acquire uranium abroad and sell t to the U.S. utilities

rather than produce uranium from their domestic re-

serves to meet the utilities’ requirements. It is clearly

unfair to have an injunction that will require the utili-

ties to renegotiate their uranium supply contracts, at

bro. aium prices, for domestic uranium with the same

domestic producers who elected to deliver foreign ura-

= to begin with, instead of producing domestic ura-

um.

5. Certain U.S. nuclear utilities also have contracts

for the enrichment of uranium outside thhe United States.

However, most U.S. utilities have chosen to rely on DOE

for enrichment services. As a result of a free world sur-

plus of capacity for uranium enrichment, it is estimated

that there is presently available uncommitted foreign

enrichment capacity of approximately 5,000,000 separa-

tion work units (“SWUs”) per year, enough to enrich

all the foreign origin uranium now under contract or

option to U.S. utilities.

6. If this Court does not stay the injunction

appeal, U.S. nuclear utilities vill be — 1 —

among several unattractive options to ensure a sufficient

amount of enriched uranium to continue operation of

their nuclear plants. Pursuing any of these options, or a

combination, will result in significant adverse conse-

quences in terms of increased costs and market disrup-

tion. The options that U.S. utiliti i

*. ies are likely to pursue

a. Utilities with foreign uranium under contract will

consider seeking foreign enrichment services and may

choose to do so for all or only a part of their foreign

uranium, abrogating their existing enrichment contracts

4a

with DOE. While the price of foreign enrichment serv-

ices is currently competitive with DOE, a sudden surge

of demand can reasonably be expected to result in in-

creased prices for overseas enrichment. The correspond-

ing loss by DOE of enrichment volumes will result in an

increase in the price of domestic enrichment as well, be-

cause of the statutory requirement for recovery of costs

by DOE.

b. Utilities with foreign uranium that are obligated

to receive enrichment services under their DOE contracts

will be forced to try to purchase domestic uranium that

is currently stockpiled by others to substitute for their

foreign uranium. However, the domestic uranium that is

stockpiled by U.S. utilities probably will not be made

available to utilities in need because the injunction will

cause utilities with an ample supply of domestic uranium

to keep it for their own future needs. If sufficient domes-

tie uranium can be obtained, the result will be redundant

purchases of uranium that will cause a serious cash flow

problem for those utilities that are forced both to honor

their contracts for foreign uranium and to purchase sup-

plies of domestic uranium. This will be exacerbated by

the sudden increase in demand for domestic uranium, re-

sulting in higher prices than would be expected in a nor-

mal market with supply and demand at or near equilib-

rium.

c. Utilities could attempt to purchase newly-produced

domestic uranium, but they will find that the present

U.S. producing capacity is severely restricted in the short

run. As shown in paragraphs 3 and 4, many U.S. pro-

ducers are importing supplies of foreign uranium for re-

sale to U.S. utilities for domestic end use. Any amounts

that could be produced above already-contracted capacity

would undoubtedly command a premium price.

7. Pursuing one or more of the foregoing options will

take time. Because the injunction is immediately effec-

tive, U.S. utilities with foreign uranium under contract

5a

and reactor refueling scheduled during the next 18

months may be unable to rearrange their contracts in

time to meet their needs. Such utilities would be forced

to shut down temporarily and purchase or generate more

costly replacement power.

8. It must be remembered that a utility cannot simply

purchase natural uranium as U,O, and deliver it to DOE

for enrichment. The uranium must first be converted to

uranium hexafluoride (UF,). A major conversion facil-

ity, the Sequoyah plant owned by Kerr-McGee, is cur-

rently shut down because of an accident, and the restart

of the plant has been delayed by the Nuclear Regulatory

Commission for an indeterminate period. Those utilities

that have foreign uranium which has already been con-

verted to UF, and is ready for delivery to DOE will be

required by the injunction to purchase domestic U,O, and

contract for its conversion to UF,. This will create a

backlog at the one remaining conversion facility that is

operating in the United States, delaying delivery of UF,

to DOE. Meanwhile, the already converted UF, will be

stockpiled, unavailable for use, and the utilities will be

required to pay twice for the needed conversion service.

9. There is considerable doubt that the fuel require-

ments of all of the operating nuclear plants can be physi-

cally achieved under the injunction, because of the lack

of currently available production and conversion capacity.

This also could result in utilities being forced to shut

down temporarily and rely upon more expensive replace-

ment power.

10. Action by U.S. utilities to pursue one or more of

the options previously discussed will necessarily result in

most utilities winding up with duplicative, overlapping,

or conflicting contracts for uranium supplies or enrich-

ment services or both. Utilities presumably will take the

position that certain contracts are void because of the

injunction or that the orders of the District Court con-

stitute force majeure relieving them of their obligations.

Such claims may or may not be accepted by suppliers.

Either lengthy and expensive litigation or the payment

of termination charges or damage claim settlements will

likely be required to resolve the status of the contracts.

11. The additional costs to the utilities resulting from

efforts to secure alternate and in some cases duplicative

sources of supply, and to obtain a legal determination of

their obligations under their previous contracts, obvi-

ously cannot be quantified ahead of time. The distribu-

tion of costs will vary significantly, depending upon the

contractual status of a particular utility. Utilities that

are committed to foreign sources of uranium supply can

expect to experience sharply increased costs either as a

result of increased foreign enrichment prices or, if they

continue to seek enrichment services from DOE, as a

result of the cost of purchasing domestic uranium sup-

plies, most likely at an inflated price. Moreover, as fewer

utilities seek enrichment services from DOE, DOE will

be forced to increase the price of enrichment services to

its remaining customers to meet its congressionally-

mandated obligation to recover appropriate Government

costs.

12. Under traditional principles of electricity rate

regulation, the increased uranium costs, the increased

prices for enrichment services, and the costs of abrogat-

ing existing contracts will all be incorporated in electric

rates and ultimately would be borne by the consumers of

electricity.

13. In summary, if the injunction is not stayed pend-

ing appeal, there will be an immediate, severe disruption

in the cost and availability of enriched uranium needed

to produce electricity. The costs will be millions of dol-

lars in the next few months and could be several hundred

millions of dollars within the next few years. The dollar

costs, direct and indirect, will be borne by the U.S. utili-

7a

ties and the electric ratepayers. If the District Court's

injunction is later reversed on appeal, the utilities will

have no way to recover those costs. The harm that will

be caused by the injunction is truly irreparable.

/s/Loring E. Mills

LoRING E. MILLS

Sworn to before me

on July 10, 1986

s Michael J. Tobin

Notary Public