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City of West Chicago v. United States Nuclear Regulatory Commission

decided: March 1, 1983.


Petition for Review of an Order of the United States Nuclear Regulatory Commission. Appeal from the United States District Court for Northern District of Illinois, Eastern Division. No. 81 C 5743 -- Frank J. McGarr, Judge.

Cummings, Chief Judge, Bauer, Circuit Judge, and Grant, Senior District Judge.*fn*

Author: Cummings

CUMMINGS, Chief Judge.

This appeal by the City of West Chicago (City) consolidates review of two orders. Petitioner first challenges a Nuclear Regulatory Commission (NRC) order of February 11, 1982, granting to Kerr-McGee Corporation (KM) a license amendment (Amendment No. 3) authorizing demolition of certain buildings at KM's West Chicago facility, and acceptance for on site storage of contaminated soil from offsite locations. In the Matter of Kerr-McGee Corp. (West Chicago Rare Earth Facility), 15 NRC 232 (1982). The second challenge is to a district court order of April 5, 1982 dismissing plaintiff's mandamus suit for lack of subject-matter jurisdiction. City of West Chicago v. NRC, 542 F. Supp. 13 (N.D. Ill. 1982). We uphold the NRC order in No. 82-1575 and affirm the district court's dismissal order in No. 82-1684.

I. Facts

KM operated a milling facility in West Chicago for the production of thorium and thorium compounds from 1967 to 1973. Although the plant closed in 1973, there is presently on site approximately 5 million cubic feet of contaminated waste material consisting of building rubble, contaminated soil, and tailings from the milling of thorium ore. The NRC has been studying KM's proposed plan to decommission the site -- ultimately dispose of the tailings and other contaminated materials -- since submission of the plan in August 1979. In December 1979 the NRC staff published a notice of intent to prepare a draft environmental impact statement (EIS) to discuss the KM plan for interment of wastes onsite. 44 Fed. Reg. 72246 (Dec. 13, 1979). The draft was issued for comment in May 1982 (NRC Br. at 4).

The current NRC license for the West Chicago site is a "source material" license issued pursuant to NRC regulations, 10 C.F.R. Part 40, and authorizing KM to possess and store thorium ores.*fn1 In March 1980 and March 1981 KM submitted emergency requests to demolish Buildings Nos. 1 and 3 at the West Chicago site. On April 24, 1981, the NRC staff granted these requests as Amendment No. 1 to KM's existing license. Amendment No. 3, which is the focus of the City's suit challenging the NRC order, was issued in September 1981 and allowed demolition of six additional buildings on site in a non-emergency situation. Amendment No. 3 also authorized receipt and storage on site of contaminated material that was formerly taken from the site for use as landfill.

On October 14, 1981, the City brought suit challenging the issuance of Amendment No. 3 as well as the NRC's delay in adopting a final decommissioning plan for the site and issuing an EIS for the plan. The City requested the district court to set aside Amendment No. 3, claiming, inter alia, that the amendment violated the National Environmental Policy Act (NEPA) because no EIS was issued before approval, and that the City had no notice of KM's request for the amendment and consequently had no opportunity to request a hearing. The City also sought an order compelling NRC to issue an EIS for, and to take final action on KM's proposed plan for decommissioning and stabilization of the site. Judge McGarr temporarily enjoined KM's activities under the amendment and ordered the NRC to give notice to the City and consider any request for hearing that the City might make (Rec. Doc. No. 16). NRC did so, and on February 11, 1982, issued its order denying the City's request for a formal, trial-type hearing, addressing the contentions raised by the City in the written materials it submitted, and issuing Amendment No. 3. 15 NRC 232. Meanwhile, the City filed a preliminary injunction motion raising the same claims in the district court. On April 5 the district court dismissed the City's motion for a preliminary injunction for lack of subject-matter jurisdiction, holding that the court of appeals had exclusive jurisdiction over any challenges to Amendment No. 3 now that NRC had taken final aciton on it; and that the claims that NRC acted improperly in not having issued an EIS or a final amendment adopting a decommissioning plan for the West Chicago facility were not ripe for judicial determination, since they related to an amendment not yet issued. 542 F. Supp. 13. The district court denied the City's motion to stay its April 5 order (Rec. Doc. No. 61) and this Court denied both the City's motion to stay the district court order and its motion to stay Amendment No. 3 pending appeal, City of West Chicago v. NRC, No. 82-1575 and No. 82-1684 (May 13, 1982).

II. Review of the NRC order

The City challenges the NRC order, 15 NRC 232 (1982), on both procedural and substantive grounds, contending first, that the NRC violated its own regulations, the Atomic Energy Act, due process, and the National Environmental Policy Act (NEPA) in issuing Amendment No. 3, and second, that the order must be set aside because it is both unsupported by substantial evidence in the record and arbitrary and capricious. We address the procedural issues first.

A. The NRC order cannot be set aside on procedural grounds.

The Atomic Energy Act of 1954 (AEA), § 189(a), 42 U.S.C. § 2239(a), clearly requires NRC to grant a "hearing" if requested "in any proceeding under this chapter, for the granting, suspending, revoking, or amending of any license or construction permit * * *."*fn2 The parties in this case are arguing about the kind of "hearing" the NRC is required to conduct when issuing an amendment to a source materials license. The City argues that NRC must hold a formal, adversarial, trial-type hearing as provided by NRC regulations, 10 C.F.R. §§ 2.104 and 2.105. We shall refer to the hearing process outlined in those Sections as a "formal hearing." NRC and intervenor KM argue that the NRC may hold an informal hearing in which it requests and considers written materials without providing for traditional trial-type procedures such as oral testimony and cross-examination. We shall refer to this kind of hearing as an "informal hearing."*fn3 In the circumstances of this case, we find that an informal hearing suffices.

1. NRC did not violate its own regulations.

Under Commission regulations, a formal hearing is triggered by either a notice of hearing under 10 C.F.R. § 2.104 or a notice of proposed action under § 2.105. The City argues that both regulations require the Commission to hold a formal hearing in this case.

Section 2.104 provides that a notice of hearing will issue when "a hearing is required by the Act or this chapter [10 C.F.R. ch. 1] or [when] the Commission finds that a hearing is required in the public interest."*fn4 The City argues that NRC must issue a notice of hearing because the first sentence of Section 189(a) of the AEA requires a hearing upon the request of an interested party. See supra note 2. NRC however offers a narrower interpretation of the phrase "required by the Act" in Section 2.104. It contends that a formal hearing is "required by the Act" within the meaning of Section 2.104 when the AEA mandates a hearing even absent a request for one; in other words, even when a proceeding under Section 189(a) will be uncontested. The second sentence of Section 189(a) provides that NRC shall automatically hold a hearing on certain applications for a construction permit even absent a request for a hearing. The first sentence of Section 189(a) on the other hand requires NRC to grant a hearing only upon the request of an interested person. By distinguishing the two sentences in this manner, NRC interprets Section 2.104 to "require" a hearing only in cases falling under the second, rather than the first sentence. Because a materials license amendment clearly falls within the first sentence of Section 189(a), it does not, we hold, trigger the Section 2.104 notice of hearing, or the formal procedures provided therein.

The City argues next that the notice of hearing under Section 2.104 is triggered in this case by Section 2.105 of "this chapter."*fn5 See supra note 4. Yet consistent with its interpretation of the words "required by the Act" in Section 2.104, NRC contends that nothing in chapter 1 requires a hearing in the sense of mandating one even absent a request. 15 NRC at 245. Far from mandating a hearing even absent a request, Section 2.105 provides only that notice of proposed action -- also called notice of opportunity for a hearing -- will issue in certain circumstances. If no hearing is requested, none will be held. 10 C.F.R. § 2.105(e)(1). NRC agrees that a party who requests a hearing pursuant to the notice of opportunity for a hearing issued under Section 2.105 is entitled to a notice of hearing under Section 2.104 and a formal hearing will be convened. 15 NRC at 246; see also NRC Br. at 15 n. 9. However, Section 2.105 by its own terms requires issuance of a notice of proposed action only in limited circumstances, for example, with respect to an application for or an amendment of a facility license, 10 C.F.R. § 2.105(a)(1), (a)(3), a license for "receipt of waste radioactive material from other persons for the purpose of commercial disposal by the waste disposal licensee," id. § 2.105(a)(2), (a)(3), a license to receive high-level radioactive waste at a geologic repository operations area, id. § 2.105(a)(4), or a license "as to which the Commission determines that an opportunity for a public hearing should be afforded," id. § 2.105(a)(6). The City argues that Amendment No. 3 effectively licenses KM to receive offsite thorium for commercial disposal under Section 2.105(a)(2). By its terms Section 2.105(a)(2) requires notice of proposed action as to (1) commercial disposal, which this is not, since KM is only a temporary storage site and is apparently not being reimbursed or otherwise compensated for its actions (Admin. Red., Vol. 6, Doc. No. 7), (2) by a waste disposal licensee, such as those licensed at Hanford, Washington, or Barnwell, South Carolina. KM, to the contrary, operates under a source materials license, rather than under a license for a commercial waste disposal site, and had no intention of changing its status, id.

Finally, the City argues that NRC should have found that the "public interest" required a formal hearing, 10 C.F.R. § 2.104(a); id. § 2.105(a)(6). We note that the determination of whether the public interest requires a hearing is left to NRC's discretion, and find that in this case, NRC had ample cause to reject the City's argument.

First, counsel for the City agreed at oral argument that all the buildings at the West Chicago site did have to come down. The City did not object to the issuance of Amendment No. 1 in April 1981 allowing demolition of Buildings Nos. 1 and 3. In granting Amendment No. 3, the NRC staff indicated that its conclusion was based on its earlier favorable review of KM's demolition plan under Amendment No. 1, covering project management, employee training, and radiological and health and safety effects, as well as several site visits made to view the Amendment No. 1 demolition in progress (Admin. Rec., Vol. 6, Doc. No. 4). The staff specifically determined that the prior demolition work was done in a safe manner. Having concluded that the prior demolition work posed no threat to the public health or safety or to the environment, and that Amendment No. 3 would pose no new technical or safety problems, NRC could reasonably have concluded that the "public interest" did not require a formal hearing on Amendment No. 3.

Second, with respect to the receipt of offsite materials, the NRC staff concluded that the materials would not constitute a danger to the public health and safety and that there was no need to exercise licensing authority over them. See 10 C.F.R. Part 71. The staff also found that receipt of such a relatively small amount of offsite materials would present no unusual technical problems or safety, health, or environmental concerns, and would not increase the problems of decommissioning and storage or disposal of wastes (Admin. Rec., Vol. 6, Doc. No. 4). In addition, Amendment No. 3 only authorized storage of the materials temporarily; a decision regarding disposal could be made at a later date, subject to further review. 15 NRC at 258. Based on these staff reports, NRC could reasonably have concluded that the public interest was served without a formal hearing.*fn6

Thus no formal hearing was required under NRC's interpretation of 10 C.F.R. §§ 2.104 and 2.105. When a court is called upon to construe administrative regulations, "the ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation." Bowles v. Seminole Rock Co., 325 U.S. 410, 414, 89 L. Ed. 1700, 65 S. Ct. 1215, quoted in First Bank v. Avenue Bank and Trust Co., 605 F.2d 372, 376 (7th Cir. 1979). Although NRC's interpretation of its regulations is at times somewhat convoluted, it is not plainly erroneous or inconsistent with the text of the regulations. We therefore hold that NRC acted in conformance with its regulations in denying the City a formal hearing.

2. NRC did not violate the Atomic Energy Act.

Our inquiry cannot end with a finding that the NRC acted in conformance with its own regulations, for we must determine whether those regulations as interpreted violate the governing statute. If the AEA requires a formal hearing in the case of a materials license amendment, then ...

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