Ninth Circuit Rejects NRC's Rationale for Declining to Consider Terrorism Risks in NEPA Review of Spent Nuclear Fuel Storage Facility

On June 2, the United States Court of Appeals for the Ninth Circuit held that the Nuclear Regulatory Commission (“NRC”) acted unreasonably in declining to assess the environmental impact of a terrorist attack in its environmental review under the National Environmental Policy Act (“NEPA”) of a license application for a spent nuclear fuel storage facility. The case is San Luis Obispo Mothers for Peace v. Nuclear Regulatory Commission, No. 03-74628. The decision may affect the environmental review of major federal actions involving the authorization of critical infrastructure facilities by other federal agencies.

The Case

Pacific Gas & Electric Company applied to the NRC under the Atomic Energy Act (“AEA”) for a license to construct a spent nuclear fuel storage facility adjacent to its existing nuclear plant in Diablo Canyon, California. Intervenors raised a number of technical and environmental contentions before the NRC, including the NRC’s failure to address the environmental impacts of terrorist acts in its Environmental Assessment (“EA”) under NEPA. The NRC found that NEPA does not require a review of the environmental consequences of terrorism risks. It ruled: 1) the possibility of a terrorist attack is too far removed from the natural or expected consequences of agency action to require study under NEPA; 2) because the risk of a terrorist attack cannot be quantified, the analysis is likely to be meaningless; 3) NEPA does not require a worst-case scenario analysis; and 4) NEPA’s public process is not an appropriate forum for sensitive security concerns.

The environmental intervenors petitioned the Ninth Circuit for judicial review. They contended that the NRC’s determination violated NEPA, the hearing requirements of the AEA, and the Administrative Procedure Act (“APA”). The Ninth Circuit rejected the AEA and APA challenges, but granted the petition on the NEPA claims and remanded the case to the NRC.

The Ninth Circuit characterized the NRC’s determination as a legal conclusion subject to review for reasonableness. It disagreed with the NRC’s fundamental position that the terrorism risk did not satisfy the proximate cause requirement for NEPA analysis set forth in Metropolitan Edison Co. v. People Against Nuclear Power, 460 U.S. 766, 773 (1983). The Ninth Circuit held Metropolitan Edison to be inapplicable because the Supreme Court there was discussing proximate cause in terms of the relationship between a change in the physical environment and an environmental effect, not the relationship between the federal licensing action and the change in the environment after a risk, such as a terrorist attack, is realized. The court then analyzed each of the NRC’s four stated grounds for not discussing terrorism in its EA.

The Ninth Circuit rejected the NRC’s determination that the risk of a terrorist attack is too remote and speculative. It found that determination to be patently inconsistent with the NRC’s own security requirements for licensees, as well current national policy. The court emphasized the agency’s ongoing top-to-bottom security review that was triggered post 9/ll by the very same threat.

The court also held that the NRC’s second ground – that the risk of a terrorist attack cannot be adequately quantified – to be unreasonable. It ruled that no provision of NEPA permits an agency to avoid taking a hard look at any significant environmental risk simply because the risk is unquantifiable. It observed that the NRC regularly undertakes qualitative assessments when quantification is not practicable. The court further found that the NRC had not shown on the record that the terrorist risk is unquantifiable.

Turning to the NRC’s third ground, the court ruled that the agency unreasonably confused the environmental intervenors’ request for a NEPA assessment of the terrorism risk with insistence upon a worst-case scenario analysis. On the contrary, it held that the environmentalists were seeking only an analysis of the range of environmental impacts that might flow from a terrorist attack.

Finally, the court declared unreasonable the NRC’s ruling that sensitive security concerns excused a NEPA review of terrorism risks. The court held that, while such concerns may warrant appropriate modification of the NEPA process, they cannot serve as a complete waiver of NEPA review or deny interested parties the opportunity to contribute information for the NRC’s consideration.

Broader Implications of the Ninth Circuit’s Decision

While the Ninth Circuit’s decision focuses on the specific question of the NRC’s review of a nuclear storage facility, the case may have an impact on the NEPA procedures of other federal agencies with authority to license critical infrastructure. Some agencies, such as the Federal Energy Regulatory Commission (“FERC”) include an assessment of the terrorism risk in the NEPA review of certain projects within their jurisdiction. Other agencies may take a different approach. The significance of this decision on other agencies depends largely on whether the agency provides for public input under NEPA of the possible environmental consequences of a terrorist attack on the facilities they authorize.