The San Luis Obispo Mothers, the Sierra Club, and Peg Pinard (collectively Petitioners) petitioned the Ninth Circuit to review a Nuclear Regulatory Commission (NRC or Commission) denial of a hearing request regarding Pacific Gas and Electric's (PG&E) license application to build an Interim Spent Fuel Storage Installation at its Diablo Canyon power plant. Petitioners claimed that PG&E violated provisions of the National Environmental Policy Act (NEPA),[1] the Atomic Energy Act (AEA),[2] and the Administrative Procedure Act (APA).[3] The Ninth Circuit held: that 1) NRC did not violate the AEA when it denied the two hearing petitions because neither the statute nor the regulations mandate the NRC to hold a hearing to determine if NEPA requires the NRC to consider the environmental impact of a terrorist attack; 2) NRC's use of its prior decisions to determine that NEPA does not require NRC to consider the environmental impacts of terrorism did not violate the notice and comment requirements of the APA; and 3) the factors NRC relied on to conclude that it did not have to consider the environmental impact of terrorism under NEPA were unreasonable. The Ninth Circuit thus determined that the environmental assessment was inadequate. The court denied the petition on the issues raised regarding the AEA and the APA, granted the petition in regards to the NEPA issue, and remanded the case back to the agency for further proceedings.

NEPA requires federal agencies to consider the environmental impacts of agency actions by imposing procedural obligations[4] that consist of an Environmental Impact Statement (EIS) or in the alternative, an Environmental Assessment (EA). An EIS is unnecessary if, after conducting a more limited EA, the agency finds that the agency action will not significantly impact the environment. In such instances, the agency issues a "Finding of No Significant Impact" (FONSI), along with an explanation of why the proposed action will not have a significant impact on the environment.[5]

The AEA addresses the need for safety standards in the licensing and operation of nuclear facilities by establishing the procedural requirements that NRC must follow for licensing decisions. To issue a license, NRC must ensure that the license and operation of the facility is in line with national defense and security and adequately protects public health and safety.[6] The AEA and the APA allow interested persons to petition for hearings addressing material issues in the NRC licensing proceeding.[7] Regulations dictate that the first hearing be held before the Atomic Safety and Licensing Board (Licensing Board),[8] which makes findings and issues the agency's initial decision.[9] A party can petition NRC to review the Licensing Board's decision[10] and if the NRC grants the petition for review, NRC identifies the issues for review and the parties included in the review process.[11] After the review, NRC issues a final decision.[12] Once NRC issues its final decision, a party can petition a court of appeals to review the final decision.[13]

On December 21, 2001, PG&E applied to NRC for a permit to build and operate a Storage Installation at its Diablo Canyon facility. The Storage Installation would provide PG&E with on-site storage for spent fuel created from operating two nuclear reactors. The additional storage would enable PG&E to continue operating the reactors, as it projected the current spent fuel storage would reach capacity in the current year. Thus, if PG&E did not build the additional storage, the reactors would no longer be able to operate. The proposed Storage Installation would consist of 140 stainless steel canisters that, over the course of more than sixteen years, would each be filled with radioactive waste, welded shut, and stored in concrete, on concrete pads.

On April 22, 2002, NRC issued a Notice of Opportunity for Hearing.[14] A hearing request must include contentions that the interested party wants addressed at the public hearing and NRC will only grant the hearing request if the petitioner has standing and has included at least one admissible contention.[15] On July 19, 2002, Petitioners submitted a hearing request and a petition to intervene, setting out five technical and three environmental contentions.The Licensing Board determined that a contention regarding PG&E's financial qualifications was admissible.[16] While the Licensing Board resolved that two of the environmental contentions were inadmissible (the contention alleging the "failure to address environmental impacts of terrorists or other acts of malice or insanity" and the contention "dealing with the failure to evaluate environmental impacts of transportation of radioactive materials"),[17] in the final ruling to NRC, the Licensing Board stated that the two environmental contentions were admissible "in light of the Commission's ongoing 'top to bottom' review of the agency's safeguards and physical security programs."[18]

NRC adopted the Licensing Boards determination that the two environmental contentions dealing with terrorism were not admissible,[19] but based its decision on four previous NRC decisions that all held that NEPA does not mandate a terrorism review.[20] NRC stated that its decision in the present case was based on its understanding of the requirements of NEPA, the reality of storing spent fuel and Congress's policy of having nuclear reactor facilities store spent fuel on-site. NRC also noted that Diablo Canyon has been, and will continue, storing spent fuel on-site whether or not it is allowed to construct an additional storage facility.[21]

In September 2002, prior to NRC's decision on the first petition, Petitioners submitted a second petition, asking NRC to suspend the Storage Installation licensing proceeding until there had been a thorough review of the sufficiency of the entire Diablo Canyon complex's protections against terrorist attacks and acts of malice or insanity. Petitioners argued that a second petition was necessary because regulations prevented them from bringing up issues concerning the entire complex's safety and security measures, as well as its emergency plan in the first petition.[22] Petitioners were careful to describe the second petition as a necessary action to make sure that the licensing decision complied with the AEA, and not as a rulemaking or enforcement action.

NRC denied the second petition, which it treated as a general motion,[23] on the grounds that by continuing to allow the operation of nuclear plants after the September 11, 2001 terrorist attacks, the Commission had indicated implicitly that the further operation of nuclear facilities posed no risk to the public health or national defense. Additionally, NRC reasoned that because it had already begun a review of the safety and security measures at the Diablo Canyon facility, it was not necessary to stop the licensing proceeding to consider Petitioner's terrorism concerns.

NRC denied the two petitions for review of the Licensing Board's determinations to reject Petitioner's challenges to the Storage Installation.[24] As NRC's denial of the petition is its final judgment, it is reviewable by the Ninth Circuit.[25]

In October 2003, the Spent Fuel Office, a division of NRC's Office of Material Safety and Safeguards, made public the EA for the Diablo Canyon Storage Installation. NRC determined that the construction, operation, and decommissioning of the Storage Installation would not have a significant impact on the environment, thus warranting a FONSI. The Ninth Circuit noted that within the EA, NRC discussed terrorist attacks. In response to a comment received based on a prior draft of the EA, NRC stated that "the Commission has determined that an NRC environmental review is not the appropriate forum for the consideration of terrorist attacks" and that the security review is the appropriate forum for such concerns.[26]

Petitioners alleged that NRC violated the AEA, the APA, and NEPA when it denied their petitions. Specifically, Petitioners first alleged that NRC violated the AEA by denying Petitioners' hearing request to determine if NEPA mandates NRC to consider the environmental impact of a terrorist attack on a storage facility. Secondly, Petitioners alleged that NRC violated the AEA's hearing requirements when NRC denied Petitioners' request for a hearing regarding security measures for the entire Diablo Canyon facility after the September eleventh terrorist attacks. Thirdly, Petitioners alleged that NRC violated the APA's notice and comment requirement when the Commission used its own prior decisions to determine the outcome of the present case. Finally, Petitioners alleged that NRC violated NEPA by refusing to consider the possible environmental impacts of terrorist attacks. The Ninth Circuit addressed in turn each of the allegations and sub-issues raised.

The Ninth Circuit first addressed Petitioner's AEA arguments: that 1) NRC violated regulations promulgated to implement the AEA concerning filing and deciding petitions; 2) NRC violated the hearing requirements of the AEA when NRC denied Petitioners' request for a hearing as to whether NEPA required NRC to consider the environmental impacts of a terrorist attack on the Storage Installation; and 3) NRC violated the AEA hearing requirements when it denied Petitioners' hearing request for a post-September eleventh review of the security procedures for the entire Diablo Canyon facility.

The Ninth Circuit determined that NRC did not violate the AEA when it rejected Petitioners' allegations without explaining each of the allegations individually. The court pointed out that while it is true that NRC did not state whether Petitioners had met the statutory standard for a hearing,[27] the regulations do not impose strict requirements on NRC to explain its decisions. The court noted that the only regulatory requirement of NRC is for it to issue a "timely decision."[28] Thus, the Ninth Circuit rejected Petitioners' argument because Petitioners did not allege that NRC violated an actual requirement of the AEA's implementing regulations.

The court then considered whether NRC violated the AEA when it denied Petitioners' request for a hearing about whether NEPA required a hearing to consider the environmental impact of possible terrorist threats. The crux of Petitioners' argument was that NRC's reliance on earlier decisions determining that NEPA does not require the NRC to consider the environmental impacts of terrorist attacks was improper; the Petitioners did not challenge the basis or merits of the earlier decisions. In Sierra Club v. Nuclear Regulatory Commission,[29] NRC had denied Petitioners' contentions, but had then addressed the merits of the contentions.[30] The court determined that because Petitioners did not challenge the validity of the earlier NRC decisions, Sierra Club was not applicable to the present case. The court distinguished Sierra Club from the present case by pointing out that in the present case, NRC did not address the merits of the contentions, but applied past decisions to determine if the contentions were admissible. The Ninth Circuit determined that this did not violate the AEA and noted that if it concluded differently, it would have burdened the agency with granting hearings on issues that it had already addressed.

The Ninth Circuit then considered whether NRC violated the AEA when it denied Petitioners' second petition regarding the overall security of the Diablo Canyon facility. Petitioners argued that the AEA mandates NRC to grant petitions for hearing if there is an issue of fact. Relying on Union of Concerned Scientists v. Nuclear Regulatory Commission,[31] Petitioners' claim that because NRC did not grant the petition for a hearing about the security of the entire complex, NRC violated the AEA. In Union of Concerned Scientists, the Court of Appeals for the District of Columbia held that an agency cannot rule if the ruling would eliminate an issue of fact; [32] however, an agency is not required to grant a petition for a hearing, it only has to consider the petition. The Ninth Circuit notes that NRC did not refute the idea that the Diablo Canyon facility's security may need to be improved; instead the agency determined that a licensing proceeding was not the appropriate place to address this issue. NRC directed the Petitioners to use other avenues to address the issue such as rulemaking or a current hearing before the Licensing Board. Petitioners responded to NRC's suggestions by claiming that they are "illusory" and that the rejection denied them the ability to take part in determining the appropriate post-September eleventh security procedures for the entire facility. Further, Petitioners claimed that the opportunity to participate in rulemaking would only take place after there had been a review of the security measures in place at the Diablo Canyon facility, so filing a rulemaking petition would be useless. The Ninth Circuit rejected this argument, stating that because Petitioners had not availed themselves of the rulemaking procedures, they were unable to fault NRC for not initiating rulemaking that was not requested. The court also dismissed Petitioners' claim that the use of a hearing before the Licensing Board was "illusory" because Petitioners were trying to use the licensing proceedings to attack the security measures in place at the entire Diablo Canyon facility. Lastly, the court noted that the fact that the Licensing Board cannot hear claims that challenge NRC rules or regulations does not equate to a denial of forum for Petitioners.

Next, the Ninth Circuit addressed whether NRC violated the APA's notice and comment requirements when it relied on prior NRC decisions to determine the admissibility of the contentions in the present case. Petitioners argued that NRC's reliance on past decisions was essentially an announcement of a NRC policy to refuse to consider the environmental impacts of terrorist attacks. Relying on Mada-Luna v. Fitzpartick,[33] Petitioners claimed that an agency cannot issue a determination based on facts that amounts to an agency policy without holding a public hearing.[34] The Ninth Circuit acknowledged the accuracy of this claim, but pointed out that the determination that NEPA does not require an agency to consider the environmental impacts of a terrorist attack is a legal determination, not a factual determination. To announce a legal norm, NRC is not required to follow the notice and comment provisions of the APA,[35] but can employ adjudication.[36] Therefore, the court concluded that it was reasonable for NRC to use prior cases that addressed similar issues and that NRC did not violate the notice and comment requirements of the APA.

The Ninth Circuit then turned to the final issue: whether NEPA requires an agency to take into account the environmental impacts of a terrorist attack. The court began by noting that the agency's determination would be reviewed under the reasonableness standard.[37] NRC, in reliance on its prior decision in Private Fuel Storage L.L.C.,[38] determined that NEPA does not require the NRC to consider the environmental impact of terrorist attacks. In Private Fuel Storage, the State of Utah alleged that the terrorist attacks of September eleventh had significantly changed the circumstances under which the Licensing Board had rejected past arguments about the threat of terrorism because the attacks demonstrated that a terrorist attack was both more likely and more dangerous.[39] NRC decided that even after September eleventh, NEPA does not require the agency to consider the environmental impacts of terrorism, determining that NEPA was the wrong forum to address such concerns.[40] In rendering its decision, NRC outlined four reasons why NEPA is not the appropriate place to consider the impacts of terrorism:

(1) the possibility of a terrorist attack is far too removed from the natural or expected consequences of agency action; (2) because the risk of a terrorist attack cannot be determined, the analysis is likely to be meaningless; (3) NEPA does not require a "worst-case" analysis; and (4) NEPA's public process is not an appropriate forum for sensitive security issues.[41]

The Ninth Circuit addressed each of these factors in turn.

The court first considered the factor regarding the remoteness of terrorist attacks. NEPA requires that agencies consider the environmental impact of actions that "significantly affect" the environment.[42] Thus, the court sought to determine what actions "significantly affect" the environment and considered a case provided by the Commission, Metropolitan Edison Co. v. People Against Nuclear Energy.[43] In that case, the Supreme Court stated that the agency "must look to the relationship between that effect and the change in the physical environment caused by the major federal action at issue" and there must be a "reasonably close causal relationship . . . like the familiar doctrine of proximate cause from tort law."[44] The Supreme Court stated that because NEPA is an environmental statute, the analysis had to look at the closeness between the change in the environment from the agency action and the effect.[45] The Ninth Circuit distinguished Metropolitan Edison from the present cases on the grounds that in Metropolitan Edison, the petitioners argued that NEPA required the NRC to consider the psychological impact of reopening Three Mile Island nuclear reactors, and therefore the causation analysis was not appropriate for the case. The Ninth Circuit then looked to NoGwen Alliance v. Aldridge[46] for the proper analysis. In NoGwen Alliance, the plaintiffs asserted that NEPA mandated the Air Force to consider nuclear war in the implementation of the Ground Wave Emergency Network (GWEN). In that case, the Ninth Circuit held that connection between the construction of the network and nuclear war was too attenuated to be included a NEPA assessment.[47]

Relying on these two cases, the court outlined a causation chain for determining whether an agency action "significantly affects" the environment: "(1) a major federal action; (2) a change in the physical environment; and (3) the effect."[48] The Ninth Circuit noted that in Metropolitan Edison the issue was the connection between the second and third events and the Supreme Court pointed out that a court considering the relationship between the first and second event would be faced with a completely different case.[49] The Ninth Circuit then looked to NoGwen, where the court addressed the link between the first and second events. In NoGwen, the Ninth Circuit held that because the court was looking at a different relationship between events, the agency had to consider the relationship between the agency action and the possible effect on the environment.[50] In NoGwen, the Ninth Circuit had drawn from its decision in Warm Springs Dam Task Force v. Gribble, [51] where the court held that an EIS did not need to address "remote and highly speculative consequences."[52] The court applied the holding from Warm Springs to the facts in NoGwen and determined that, under NEPA, NRC did not need to consider the threat of nuclear war on the GWEN facility because the threat was "remote and highly speculative."[53]

The Ninth Circuit then analogized the present case to NoGwen, stating that both cases deal with the relationship between the first and second events. Thus, the court identified the proper analysis as whether terrorist attacks are too "remote and highly speculative" to be required by NEPA. The Ninth Circuit noted that NRC did not address Petitioners' arguments that the Storage Installation would increase the risk of a terrorist attack; instead, NRC stated that as a matter of law, the possibility of an attack was remote and speculative.[54] Thus, the court determined that it was unreasonable for NRC to dismiss the Petitioners' claims as being "too remote and highly speculative" because it did not address them. The court supported its determination by pointing out that NRC's contention that the possibility of a terrorist attack was remote or speculative was contrary to the government's actions to prepare for a terrorist attack on nuclear facilities. Additionally, the Ninth Circuit recognized NRC had taken steps to prevent a terrorist attack on a nuclear facility.[55] Unable to resolve NRC's position that a terrorist attack was too remote to require a NEPA assessment and NRC's efforts to improve security at facilities to guard against a terrorist attack, the Ninth Circuit stated that NRC must make decisions consistent with its policies under the rule of reasonableness. Thus, the court concluded that, based on the policy goals of NEPA and the rule of reasonableness, the possibility of a terrorist attack on the Diablo Canyon facility was not too remote or speculative to be outside of NEPA's requirements.

The court then considered the second factor from Private Fuel Storage: the analysis is fultile because the risk of a terrorist attack cannot be determined.[56] In addressing this point, the Ninth Circuit explained that because an event is not quantifiable does not mean that it cannot be considered under NEPA. The court noted that it is possible to do low probability-high consequence analysis (which NRC currently does in different situations) that do not require a quantifiable value for the possibility of a terrorist attack. Additionally, the court stated that NRC has approved and utilized models of analysis for events not reducible to quantifiable numbers[57] and that there is nothing within NEPA or any other statute that allows an agency to take a possible environmental consequence out of a NEPA analysis merely by stating that the risk cannot be quantified.[58] The Ninth Circuit also noted that NRC did not prove that the risk of a terrorist attack was unquantifiable; NRC only stated that the risk was unquantifiable. The Ninth Circuit concluded that NEPA does not require the risk to be quantifiable to be considered under the statute, and if NEPA did require that the risk be quantifiable, NRC failed to prove that a terrorist attack cannot be quantified.

The Ninth Circuit then considered the third factor from Private Fuel Storage: NEPA does not require a "worst-case" analysis. The court initially noted that an assessment of the environmental impact of terrorism does not equal worst-case scenario analysis. While prior regulations implementing NEPA required a worst-case analysis, current regulations do not, but instead require an agency to manage uncertainties by submitting reliable scientific evidence that is "relevant to evaluating the reasonable foreseeable significant adverse impacts on the human environment, and . . . the agency's evaluation of such impacts based on theoretical approaches or research methods generally accepted in the scientific community."[59] This regulation applies to events that have a low probability of occurring, but if they occur, cause great consequences.[60] Thus, the Ninth Circuit determined that while NRC was right in its contention that NEPA does not require a worst-case analysis, the Commission was wrong in equating a worst-case analysis with an analysis of the environmental impact of terrorism. The court looked to a memorandum issued by the Council on Environmental Quality (CEQ) to determine what was encompassed in a worst-case analysis[61] and stated that NRC incorrectly labeled a terrorist attack a worst-case scenario because of the low probability of it occurring. The Ninth Circuit determined that because CEQ included high and low probability events in their discussion of a worst-case analysis, the requirement really focused on the possible outcome of the event, not the probability of the event occurring. Therefore, the court concluded that by asking NRC to look at the environmental impacts of a terrorist attack on the Storage Installation, Petitioners did not ask NRC to consider worst-case scenarios in its analysis.

Finally, the court considered the fourth factor from Private Fuel Storage: NEPA is not the right forum for sensitive security issues. The court began by noting that while NEPA requirements are not absolute, and must be applied in conjunction with other programs and statutes, there is no support for the argument that NEPA requirements are trumped when security concerns exist. The court looked to Weinberger v. Catholic Action of Hawaii[62] for the proposition that "security considerations may permit or require modification of some of the NEPA procedures . . . [but that] sensitive security issues [do not] result in some kind of NEPA waiver."[63] The court stated that NEPA's requirements must be measured in light of the twin aims of the statute: making sure that agencies consider the relevant information about the environmental impacts of an action and making sure that the public has an opportunity to participate the in the agency decision and access to the information.[64] Thus, the sensitivity of the information should not prevent the public from submitting information to the agency, even if the public was unable to view the information. The court turned to NoGwen for the statement that "[t]here is no national defense exception to NEPA . . . [the] agency [] must carry out its NEPA mandate to the fullest extent possible and this mandate includes weighing the environmental costs of the project even though the project has serious security implications."[65]

The Ninth Circuit concluded that 1) NRC did not violate the AEA when it denied the two hearing petitions because neither the statute nor the regulations mandate the NRC to hold a hearing to determine if NEPA requires the NRC to consider the environmental impact of a terrorist attack; 2) NRC's use of its prior decisions to determine that NEPA does not require NRC to consider the environmental impacts of terrorism did not violate the notice and comment requirements of the APA; and 3) the factors NRC relied on to conclude that it did not have to consider the environmental impact of terrorism under NEPA were unreasonable and the environmental assessment was therefore inadequate.