F. CLARK HUFFMAN, ET AL., PETITIONERS V. WESTERN NUCLEAR, ET AL. No. 87-645 In the Supreme Court of the United States October Term, 1987 The Solicitor General, on behalf of the Department of Energy, the Secretary of Energy, and officers and employees of the Department of Energy sued in their official capacities, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Tenth Circuit in this case. Petition for a Writ of Certiorari to the United States Court of Appeals for the Tenth Circuit PARTIES TO THE PROCEEDING The petitioners are John S. Herrington, the Secretary of Energy, and F. Clark Huffman, Sherry E. Peske, Philip G. Sewell, James W. Vaughn and Joseph F. Salgado, all of whom are officers or employees of the Department of Energy sued in their official capacities, and the United States Department of Energy. The respondents are Western Nuclear, Inc., Energy Fuels, Inc., and Uranium Resources, Inc. TABLE OF CONTENTS Question Presented Parties to the Proceeding Opinions below Jurisdiction Statutory provision involved Statement Reasons for granting the petition Conclusion OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-21a) is reported at 825 F.2d 1430. The order of the district court (App., infra, 22a-24a) is unreported. JURISDICTION The decision of the court of appeals (App., infra, 1a) was entered on July 20, 1987. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(l). STATUTORY PROVISION INVOLVED Section 161(v) of the Atomic Energy Act of 1954 (42 U.S.C. 2201(v)) provides: Contracts for production or enrichment of special nuclear material; domestic licensees; other nations; prices; materials of foreign origin; criteria for availability of services under this subsection; Congressional review (In the performance of its function the Commission is authorized to) (A) enter into contracts with persons licensed under Section 2073, 2093, 2133 or 2134 of this title for such periods of time as the Commission may deem necessary or desirable to provide, after December 31, 1968, for the producing or enriching of special nuclear material in facilities owned by the Commission; and (B) enter into contracts to provide, after December 31, 1968, for the producing or enriching of special nuclear material in facilities owned by the Commission in accordance with and within the period of an agreement for cooperation arranged pursuant to Section 2153 of this title while comparable services are made available pursuant to paragraph (A) of this subsection: Provided, That (i) prices for services under paragraph (A) of this subsection shall be established on a nondiscriminatory basis; (ii) prices for services under paragraph (B) of this subsection shall be no less than prices under paragraph (A) of this subsection; and (iii) any prices established under this subsection shall be on a basis of recovery of the Government's costs over a reasonable period of time: And provided further, That the Commission, to the extent necessary to assure the maintenance of a viable domestic uranium industry, shall not offer such 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. The Commission shall establish criteria in writing setting forth the terms and conditions under which services provided under this subsection shall be made available including the extent to which such services will be made available for source or special nuclear material of foreign origin intended for use in a utilization facility within or under the jurisdiction of the United States: Provided, That before the Commission establishes such criteria, the proposed criteria shall be submitted to the Joint Committee, and a period of forty-five days shall elapse while Congress is in session (in computing the forty-five days there shall be excluded the days in which either House is not in session because of adjournment for more than three days) unless the Joint Committee by resolution in writing waives the conditions of, all or any portion of, such forty-five-day period. QUESTION PRESENTED Under Section 161(v) of the Atomic Energy Act of 1954 (42 U.S.C. 2201(v)), the Department of Energy (DOE) sells uranium enrichment services to electric utilities that need enriched uranium as reactor fuel. Section 2201(v) provides that DOE shall restrict its enrichment of foreign-sources uranium for domestic uses "to the extent necessary to assure the maintenance of a viable domestic uranium industry." The Department of Energy has determined that the domestic uranium industry is not viable and that the imposition of restrictions on the enrichment of foreign uranium would not make it viable. The question is whether Section 2201(v) requires the Department of Energy to restrict enrichment of foreign uranium whenever the domestic uranium is not viable, whether or not the imposition of such restrictions would make the domestic industry viable. STATEMENT This case presents a question of statutory interpretation of great practical importance. Section 161v of the Atomic Energy Act of 1954, 42 U.S.C. 2201(v) (Section 2201(v)), requires the Department of Energy (DOE) to restrict its provision of enrichment services for foreign uranium "to the extent necessary to assure the maintenance of a viable domestic uranium industry." The Secretary has determined that the domestic uranium industry is not viable, and that there is no level of reduced enrichment services for foreign uranium that would make it viable. Consequently, the Secretary has interpreted Section 2201(v) as not requiring -- or authorizing -- any restriction on enrichment of foreign uranium. The lower courts disagreed, holding that once the Secretary finds that the domestic uranium industry is not viable, he must automatically terminate the provision of all enrichment services to foreign uranium, even if this will do nothing to revive the domestic industry. 1. a. The principal civilian use of uranium is as fuel for nuclear reactors operated by electric utilities. Because natural uranium does not contain enough of the highly fissionable isotope U-235 to serve as reactor fuel, it must undergo a process known as enrichment. The enrichment process for commercial reactor fuel increases uranium's U-235 content from approximately 1% to approximately 3%. App., infra, 4a. Under the Atomic Energy Act of 1954 (ch. 1073, Section 158, 68 Stat. 948 (42 U.S.C. 2188)) as originally adopted, the Atomic Energy Commission (AEC) was given a monopoly over the ownership of special nuclear materials, including enriched uranium. /1/ Utilities operating commercial reactors thus were required to lease their fuel from the AEC. App., infra, 3a. In 1964, Congress eliminated this government monopoly on ownership of nuclear fuel. The Private Ownership of Special Nuclear Materials Act (the Private Ownership Act) (Pub. L. No. 88-489, 78 Stat. 602) authorized non-governmental persons to own reactor fuel, subject to strict licensing requirements and regulatory controls. The Private Ownership Act did not, however, eliminate the government's de facto monopoly in the provision of enrichment services (Section 16, 78 Stat. 606; see S. Rep. 1325, 88th Cong., 2d Sess. 2 (1966) (hereinafter Private Ownership Act Report)). Within the United States, the provision of enrichment services remains exclusively in the hands of the federal government (App., infra, 4a). When the Private Ownership Act was passed, imports of uranium were insignificant. But both the AEC and the Joint Committee on Atomic Energy were concerned that imports might someday displace the domestic uranium industry, and that this could have a detrimental effect on the nation's energy and national security needs (Private Ownership Act Report 30). Accordingly, the Private Ownership Act included a proviso requiring the AEC to restrict enrichment of foreign-source uranium "to the extent necessary to assure the maintenance of a viable domestic uranium industry" (42 U.S.C. 2201(v)). No foreign uranium was enriched for domestic use in the early years of the AEC's enrichment services program (see 31 Fed. Reg. 16479 (1966) (initial criteria providing that foreign-source uranium would not be enriched for domestic use)). However, during the 1970's, the AEC studied the advisibility of phasing out these restrictions. In 1974, after soliciting comments on such a proposal (38 Fed. Reg. 32595 (1973)), the AEC amended its enrichment services criteria by establishing a schedule under which by 1984 all restrictions on enriching imported uranium would be eliminated (39 Fed. Reg. 38016 (1974)). The criteria permitting the enrichment of foreign uranium were reported to Congress pursuant to Section 2201(v) and Congress took no adverse action. The scheduled phase-out of restrictions took place as planned, and DOE has not since reimposed any restrictions on enrichment of foreign uranium. /2/ b. In the later 1970's and early 1980's, the position of the domestic uranium industry deteriorated rapidly and dramatically (App., infra, 5a). As one report put it, the industry suffered "a collapse that by industrial standards occurred practically overnight" (Blundell, U.S. Uranium Mines, Thriving 5 Years Ago, Are Nearing Extinction, Wall St. J., June 12, 1985, at 1). The main cause of this development was "a classic oversupply situation," brought about by a combination of excess capacity and reduced demand (Status of the Domestic Uranium Mining and Milling Industry: The Effects of Imports: Hearing Before the Subcomm. on Energy Research and Development of the Senate Comm. on Energy and Natural Resources, 97th Cong., 1st Sess. 15 (1981) (statement of Shelby Brewer, Assistant Secretary of Energy for Nuclear Energy) (hereinafter 1981 Hearing). On the one hand, exploration and other investment increased significantly in the 1970's, in response to optimistic projections of future demand (id. at 19-20 (charts 2, 3, 4, showing peak and decline of exploration, employment, and capital expenditures)). But just as supply was increasing, developments threatening the economic feasibility of nuclear power generation, followed by heightened concerns over reactor safety triggered by the Three Mile Island incident, led to a wave of "reactor delays and cancellations, and (a) lack of new reactor orders" (id. at 12). The result was a precipitous decline in the price of uranium ore. In 1981, the Edison Electric Institute, a utility trade association, reported that the spot market price of uranium had declined from $43.25 per pound in 1979 to 23.50 per pound (1981 Hearing 148 (statement of Edison Electric Institute)). By 1984, the spot market price had fallen to $15.50 per pound, which the industry informed DOE was less than one-half the conventional United States producer's average cost of production (51 Fed. Reg. 27132, 27136 n.12 (1986)). The spot market price has not recovered appreciably since then. /3/ Two other important developments contributed to the decline of the domestic uranium industry during this period. First, the United States lost its monopoly as the only provider of enrichment services for commercial nuclear reactors. Beginning in the mid-1970's, two european consortia and the Soviet Union began to supply foreign nuclear facilities with enriched uranium, produced largely from foreign-source ore (51 Fed. Reg. 3624, 3625, 3627 (1986)). By the 1980's, enriched uranium from foreign sources also was being imported into the United States, reaching a level of 4.9% of total requirements in 1984 (Energy Info. Admin., Dep't of Energy, Domestic Uranium Mining and Milling Industry: 1985 Viability Assessment xii (1986) (hereinafter 1985 Viability Assessment). Indeed, DOE suddenly found that it had become the highest priced supplier of enrichment services for commercial reactors, charging $138 per separative work unit (SWU) /4/ in 1984, whereas its foreign competitors were charging $105-$115 per SWU (51 Fed. Reg. 3625 & n.2 (1986)). "As a result, DOE's foreign competitors * * * captured about 60 percent of the total foreign market and * * * made significant inroads into the domestic markets" (id. at 3625). Second, as part of the same imbalance of supply and demand that crippled the domestic uranium industry, many utilities found themselves committed to long-term contracts to purchase enrichment services that they no longer needed. DOE has estimated that these commitments gave rise to a surplus of enriched uranium amounting to about 39 million SWU's by 1984. This in turn "led to the emergence of a secondary market in which utlities have been willing to sell their surplus SWU's to other utilities at discounts of $30 per SWU and more" (51 Fed. Reg. 3625 (1986)). DOE sought to deal with the crisis in the domestic uranium industry in different ways. In an effort to stimulate demand, the Department continued to promote the expanded use of commercial nuclear energy (see 1981 Hearing 12-13). And in an attempt to minimize the market's perception of oversupply, DOE stated that it would not draw down or sell off the considerable stockpile of uranium under its control (e.g., id. at 13). But the Department has no statutory authority to regulate either the importation of enriched uranium, or the secondary market in enriched uranium. Both of these sources, which offer direct competitive substitutes for the product of the domestic uranium industry, are subject to the exclusive oversight of the Nuclear Regulatory Commission (NRC). /5/ The only other regulatory tool available to DOE is Section 2201(v), but the Department has consistently concluded that any effort to restrict the provision of enrichment services to foreign uranium would be at best futile, and at worst counterproductive. (See pages 8-12, infra.). c. In 1981 Congress conducted hearings on the problems of the domestic uranium industry (see 1981 Hearing). DOE's representative testified that "(a)lthough there have been cutbacks in exploration and production and thus in employment, foreign uranium, we feel, has not been the central cause of this problem" (id. at 12). Indeed, imports at that time were not a major factor in the market, accounting for only 10% of deliveries in 1980 (id. at 16). /6/ Assistant Secretary Brewer therefore testified that DOE did not believe there was any need to change the planned phase-out of enrichment restrictions the AEC had adopted in 1974 (id. at 18). In 1982, Congress again dealt with the issue of uranium imports, this time while considering the reauthorization of the Nuclear Regulatory Commission. Significantly, Congress rejected a proposal that would have required DOE, when uranium imports reached a level of 37.5%, to revise its enrichment criteria "so as to encourage the use of domestic origin uranium in domestic nuclear powerplants" (128 Cong. Rec. S13054 (daily ed. Oct. 1, 1982)). Instead, Congress enacted a new measure, codified at 42 U.S.C. 2210b, that set forth a series of reporting requirements to ensure that Congress could monitor the condition of the domestic industry, and that already-existing trade and national security statutes would be enforced with respect to uranium imports. Specifically, Section 2210b required the Secretary to promulgate criteria for assessing the viability of the domestic uranium industry, set forth eight statutory criteria that the Secretary was to consider in making such a determination, /7/ and directed the Secretary to submit annual reports on the viability of the domestic uranium industry to both the President and the Congress. Pursuant to Section 2210b, the Secretary issued criteria for determining the viability of the domestic uranium industry (10 C.F.R. Pt. 761). Elaborating on the factors specified by Congress, the Secretary defined viability primarily in terms of "the extent to which the domestic mining and milling uranium industry will be capable, at any particular time, of supplying the needs of the domestic nuclear power industry under a variety of hypothetical conditions" (48 Fed. Reg. 45747 (1983)). Although the financial condition of the domestic uranium industry was one criterion to be examined, the Secretary made it clear that this was not the end of the inquiry. Instead, the focus was on the capacity of the domestic industry to supply domestic generating facilities in the event of various future contingencies, such as an interruption of imports. See 1985 Viability Assessment at x, 55-62 (evaluation of likely effects of supply interruptions). In December 1984, the Secretary made his first viability finding pursuant to Section 2210b and the DOE criteria. The Secretary concluded that the domestic industry had been viable in 1983. In September 1985, however, he determined that in 1984 the industry was not viable. See 1985 Viability Assessment at ix. In December 1986, the Secretary found that the domestic industry was not viable in 1985. d. Four months after the Secretary's initial determination that the domestic uranium industry was not viable, the Secretary initiated a rulemaking to revise the criteria under which enrichment services are offered (see 10 C.F.R. Pt. 762). The notice of proposed rulemaking specifically addressed the question whether the depressed condition of the domestic industry required the Secretary to impose restrictions on the enrichment of foreign-source uranium under Section 2201(v) (51 Fed. Reg. 3624 (1986) (initiation of rulemaking)). The notice indicated that the Secretary proposed not to restrict the enrichment of foreign uranium, because he believed that "(i)mport restrictions on foreign uranium would not assure the viability of the domestic mining and milling industry" (id. at 3627). After extensive comment, the Secretary adopted final revised criteria that did not restrict enrichment of foreign uranium (51 Fed. Reg. 27132 (1986)). The explanation of that decision addressed both the legal issue in this case, which had been raised by comments from the domestic uranium industry, and the question whether restrictions on the enrichment of foreign uranium would in fact assure the viability of the domestic uranium industry. The Secretary adhered to the legal view that "(t)he plain language of the statute makes clear that restrictions are not to be imposed automatically if the domestic industry is non-viable, but only if they are needed to, and in fact, will assure the maintenance of a viable domestic uranium industry" (id. at 27134). On the factual question, the Secretary concluded that "restrictions would (not) assure the viability of the domestic mining and milling industry" (51 Fed. Reg. 27135 (1986)). The Secretary again found that the domestic industry's difficulties arose from "structural weaknesses," chiefly the collapse in demand that had led to a situation in which "the market simply will not sustain a price for (uranium) that enables the industry to recover its costs of production" (ibid.). Restrictions on enrichment would do nothing to address those basic difficulties (ibid.). Moreover, the Secretary determined that restrictions on enrichment would not protect domestic producers from foreign competition because of DOE's lack of market power in the market for enrichment services: "(w)hile DOE is the only provider of uranium enrichment services in the United States, DOE nonetheless lacks 'market power' because enrichment services are available, at comparable or lower costs, from foreign sources" (ibid.) Having found that imposition of restrictions on enrichment would not assure the viability of the domestic uranium industry, the Secretary went on to examine the likely effects of such restrictions. He concluded that "restricting DOE's ability to enrich foreign uranium is likely to be counterproductive and to further damage the U.S. mining industry" (51 Fed. Reg. 27136 (1986)). Accordingly, the Secretary adopted final revisions to the enrichment criteria that do not restrict enrichment of foreign uranium. 2. a. Respondents, three domestic uranium mining and milling companies, brought this lawsuit in the United States District Court for the District of Colorado on December 7, 1984. The complaint challenged a number of DOE policies and alleged practices. At issue in this petition is Count I, /8/ which claimed that DOE's failure to impose restrictions on the enrichment of foreign uranium is unlawful. In their summary judgment motion, respondents alleged that the only material facts were that the domestic industry is not viable and that DOE had not imposed restrictions on enrichment of foreign uranium. On those facts, respondents claimed that they were entitled to judgment as a matter of law. Respondents' Motion for Summary Judgment as to Count I. Initially, respondents asked the district court to order DOE to undertake a rulemaking to determine the appropriate level of restrictions. Later, however, they asked the district court to issue an order imposing its own restriction levels. Petitioners submitted a cross-motion for summary judgment. /9/ On June 5, 1986, the district court granted respondents' motion for summary judgment. In an oral explanation of its decision to grant respondents summary judgment on Count I, the court offered the view that Section 2201(v) requires the imposition of restrictions whenever the domestic industry is not viable, regardless of whether such restrictions would restore the viability of the industry: "To me (the statute) says that the agency * * * shall not offer (enrichment) services for source or special nuclear materials of foreign origin -- period" (App., infra, 25a). The district court entered an order requiring DOE to limit its enrichment of foreign uranium to 25% of all materials enriched between June 6, 1986 and December 31, 1986, and imposing a total ban on enrichment of foreign uranium beginning January 1, 1987 (id. at 23a). The court further ordered DOE to commence a rulemaking to establish criteria for providing enrichment services that would "assure the maintenance of a viable domestic uranium industry" (ibid.). /10/ b. Petitioners appealed to the United States Court of Appeals for the Tenth Circuit, and at the same time asked the district court for a stay of its order. When the district court did not act on that request, petitioners moved for a stay from the court of appeals, which was granted on July 21, 1986. /11/ On July 20, 1987, the court of appeals issued its decision, affirming the district court's grant of summary judgment on this issue (App., infra, 1a-21a). /12/ The court of appeals noted that the parties agreed that the domestic uranium industry is not now viable (id. at 14a). Treating the issue under Section 2201(v) as one of statutory construction, the court rejected the Secretary's argument that the phrase "to the extent necessary to assure the maintenance of a viable domestic uranium industry" means that restrictions need not be imposed when they will not assure the maintenance of a viable domestic industry. Instead, the court found that the statute "instructs that when domestic nonviability is determined, restrictions on enrichment of foreign-source uranium must be imposed and become increasingly aggressive, to the point of 100% restriction, until the domestic industry is rejuvenated and becomes viable" (App., infra, 17a). According to the Tenth Circuit, Section 2201(v) "does not provide that increasingly stiffer restrictions are required only to the point that DOE determines that such restrictions will not resuscitate the industry" (App., infra, 17a-18a). At petitioners' request, the Tenth Circuit has issued a stay of its mandate that will continue until this petition is disposed of. REASONS FOR GRANTING THE PETITION The decision below is seriously flawed. It violates the clear meaning of Section 2201(v), conflicts with controlling authority of this Court concerning agency interpretations of statutes, rests on factual premises which directly contradict the findings of the Secretary of Energy, and threatens grave injury to the interests of the United States. Although the decision below is not in conflict with any other decision, it is highly unlikely that a conflict will develop, given that the district court's order in effect subjects DOE to a nationwide injunction prohibiting it from enriching foreign-source uranium for use in domestic commercial reactors. /13/ Petitioners therefore submit that review by this Court is warranted. 1. a. Section 2201(v) directs DOE to restrict enrichment of foreign uranium in one circumstance and one circumstance only: when it is "necessary to assure the maintenance of a viable domestic uranium industry." The statute does not command, or indeed permit, the imposition of restrictions under any other set of circumstances. The statute thus prescribes different responses on the part of the Secretary, depending on the underlying conditions in the uranium market. If the domestic industry is viable, but enrichment of foreign-source uranium might threaten its continued viability, then the Secretary is directed to impose restrictions on the enrichment of foreign uranium. Or, if the domestic industry is not viable, but restrictions on the enrichment of foreign uranium would restore it to viability, then the Secretary is also required to impose such restrictions. On the other hand, if the domestic industry is viable, and no restrictions on enrichment of foreign-source uranium are necessary to assure its continued viability, then the statute does not authorize the Secretary to restrict enrichment of foreign-source uranium. Similarly, if the industry is not viable, and no degree of restrictions on enrichment of foreign uranium would make it viable, then the statute again does not authorize the Secretary to impose restrictions on the enrichment of foreign uranium. The Secretary has determined that the domestic uranium industry is not viable, and that no degree of restriction of enrichment services will render it viable (51 Fed. Reg. 27135 (1986)). Consequently, the condition precedent for imposing restrictions on the enrichment of foreign-source uranium -- a finding that such restrictions are "necessary to assure the maintenance of a viable domestic industry" -- is not satisfied, and the statute, by its own terms, simply does not apply. The court of appeals rejected the Secretary's interpretation of the statute, purporting to find it inconsistent with the "unambiguous" language of Congress (App., infra, 17a). According to that court, the statute's use of the mandatory word "shall" indicates that the Secretary must impose restrictions on enrichment of foreign uranium whenever the domestic industry is not viable. In the court's view, the qualifying phrase, "to the extent necessary to assure the maintenance of a viable domestic uranium industry," simply "informs the DOE of the amount of restriction require; it does not provide a scenario in which the DOE is excused from restricting foreign enrichment notwithstanding a nonviable domestic industry" (ibid. (emphasis in original)). The court of appeals did not enforce the unambiguous language of Section 2201(v). It rewrote the statute. The statute sets forth one and only one condition triggering the Secretary's duty to restrict enrichment of foreign uranium: a finding that such a restriction is necessary to "assure the maintenance of a viable domestic uranium industry." Under the court of appeals' interpretation, however, the statute contains in effect two conditions triggering the requirement to restrict enrichment services. As the lower court construed the statute, the Secretary must impose restrictions on the enrichment of foreign uranium either when it is necessary to assure the maintenance of a viable domestic uranium industry, or when the domestic uranium industry is not viable. The statute, however, contains only one condition; to construe the statute as imposing some other condition is to engage not in interpretation but in judicial amendment. The legislative history supports this conclusion. There is no suggestion in that history that Congress thought it was creating a mechanical rule that would require the Secretary to impose a "100% restriction" under certain circumstances. The statute directs the Secretary to limit the enrichment of foreign uranium "to the extent necessary" to assure the viability of domestic producers -- language that suggests the exercise of discretion. The Joint Committee, in explaining the new provision, described it as a "flexible restriction" that would allow the agency "to survey periodically the condition of the domestic and world uranium market and to offer * * * enrichment services on a basis which will assure, in its opinion, the maintenance of a viable domestic uranium industry" (Private Ownership Act Report 31 (emphasis supplied)). This clearly suggests that Section 2201(v) was thought of as a standard calling for the exercise of judgment by the Secretary, not as an automatic cutoff that would apply regardless of the Secretary's findings about underlying market conditions. Under the court of appeals' construction, however, once the Secretary finds the domestic industry is not viable, "restrictions on enrichment of foreign-source uranium must be imposed and must become increasingly aggressive, to the point of 100% restriction" (App., infra, 17a). This mechanical rule finds no support in the legislative history, and ignores the usual relationship between Congress and the Executive, in which expert agencies apply congressional policy to changing facts (see, e.g., United States v. Shimer, 367 U.S. 374, 382 (1961)). Indeed, the construction imposed by the court of appeals leads to absurd results. If, for example, the Secretary had found that the domestic uranium industry was not viable because all American uranium reserves had been exhausted, the interpretation adopted by the court of appeals would nevertheless require DOE to cease all enrichment of foreign uranium. But if there were no domestic uranium to enrich, and DOE was barred from enriching foreign uranium, then DOE would have no choice but to close its doors. Presumably, the fuel needs of American nuclear power plants would then have to be satisfied by importing foreign uranium enriched elsewhere -- in Europe or the Soviet Union -- while DOE's enrichment facilities stood idle. b. The text and legislative history of Section 2201(v) compel the conclusion reached by DOE: restrictions are required only when they would assure the maintenance of a viable domestic uranium industry. If there were any difficulty in the interpretation of Section 2201(v), however, the court of appeals should have deferred to the considered views of the Secretary rather than simply imposing its own preferred reading. As this Court has explained, "if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute" (Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984) (footnote omitted)). In this respect, the case is controlled by Young v. Community Nutrition Institute, No. 85-664 (June 17, 1986). There, the FDA's decision not to promulgate regulations limiting the quantity of a certain carcinogen present in foods was challenged. The FDA's statutory mandate, drawn in words that parallel the language of Section 2201(v), stated that the Administrator "shall promulgate regulations limiting the quantity (of such substances) to such extent as he finds necessary for the protection of public health." Like the lower courts here, the respondents in Young "view(ed) the word 'shall' as unqualified," and argued that the phrase "to such extent as he finds necessary" gave the agency "discretion in setting the particular tolerance level, but not in deciding whether to set a tolerance level at all" (slip on. 5). Rejecting that argument, this Court deferred to the FDA's interpretation of the statute, which was "that the phrase 'to such extent as he finds necessary for the protection of public health' * * * modifies the word 'shall'" (ibid.). This agency construction, the Court held, was "sufficiently rational to preclude a court from substituting its judgment for that of the FDA" (id. at 7). The decision below cannot be squared with this Court's holding in Young. In Young, the Court found that "the phrasing" of the statute at issue was "ambiguous" because the decisive "appositive phrase" -- "to such extent as he finds necessary" -- was "free-floating" (slip op. 6). In Section 2201(v), however, the phrase "to the extent necessary to assure the maintenance of a viable domestic uranium industry" appears as a prefix to the word "shall," and is clearly the condition precedent of the statutory obligation. Moreover, in Young either of the two competing constructions could have been adopted without "endors(ing) an absurd result" whereas, here, the operation of Section 2201(v) would only be "sensible" if DOE's interpretation is upheld (slip op. 7). Finally, the legislative history of the statute at issue in Young "provide(d) no single view" about the nature of the decision that was delegated to the agency (ibid.). In contrast, the legislative history of Section 2201(v) strongly supports the construction that DOE has given to the statutory provision. Accordingly, this Court's disposition of the much closer question in Young necessarily requires deference to DOE's construction of Section 2201(v). /14/ 2. The court of appeals appears to have disagreed with the Secretary's interpretation of Section 2201(v) in part because it implicitly disagreed with -- or simply ignored -- the Secretary's findings about the state of the domestic uranium industry. The court found that Section 2201(v) "instructs that when domestic nonviability is determined, restrictions on enrichment of foreign-source uranium must be imposed * * * until the domestic industry is rejuvenated and becomes viable" (App., infra, 17a (emphasis supplied)). This clearly implies that restrictions on the enrichment of foreign uranium under present market conditions would revive the domestic industry -- which is exactly contrary to what the Secretary found. Later, the court opined that "DOE cannot accomplish its statutory purpose -- the maintenance of a viable domestic uranium industry -- without imposing restrictions on enrichment of foreign uranium" (id. at 18a). This too suggests, contrary to the Secretary, that restrictions on enrichment of foreign-source uranium would somehow further the statutory purpose. In a similar vein, the court asserted that "DOE may determine how much restriction is required to ensure viability, but it cannot decide not to impose restrictions when the industry is not viable. It must continue to increase restrictions until the domestic industry becomes viable" (ibid. (emphasis supplied)). Again, this suggests a vision of the facts which is exactly the opposite of what the Secretary found. Perhaps if the domestic uranium industry did not have enormous excess capacity, if DOE had a complete monopoly on enrichment services and if there were no secondary market for enriched uranium, then the court of appeals might have been warranted in assuming that a "100% restriction" on the enrichment of foreign uranium could revive the domestic industry. But that is not the current state of the domestic uranium market, as determined by the Secretary. On the contrary, the Secretary found that because of excess capacity and severely depressed prices, competition from foreign sources of enriched uranium, and an active secondary market in enriched uranium, any restriction on the provision of enrichment services to foreign uranium would provide at best only transitory relief. 51 Fed. Reg. 27135-27138 (1986). /15/ It is of course elementary that "'(o)n summary judgment the inferences to be drawn from the underlying facts * * * must be viewed in the light most favorable to the party opposing the motion.'" Matsushita Elec. Ind. Co. v. Zenith Radio, No. 83-2004 (Mar. 26, 1986), slip op. 12 (quoting United States v. Deibold, Inc., 369 U.S. 654, 655 (1962)). This principle applies with equal force to issues of disputed fact about market structures or other economic conditions (see, e.g., United States v. Diebold, supra). If the court of appeals was not convinced by the Secretary's analysis of conditions in the domestic uranium industry, the proper course, at most, would have been to reverse the district court's decision granting summary judgment and either to remand for further proceedings to determine whether the Secretary's findings were arbitrary, capricious or an abuse of discretion, or to remand with instructions to direct the Secretary to conduct a further investigation into the conditions of the domestic uranium industry. /16/ It was manifestly improper, however, for the court of appeals silently to substitute its views of the domestic uranium market for the findings of the Secretary, and then to use those views, which have no support in the record, as part of the justification for a mechanical imposition of restrictions under Section 2201(v). 3. The court of appeals' decision affirms an injunction which prohibits DOE from providing any enrichment services to foreign uranium. This order, if left unreviewed, will have very serious adverse consequences for electric utilities, DOE's enrichment program, and United States trade, nuclear cooperation and nonproliferation policies. a. The district court's injunction confronts utilities who have agreed to purchase foreign uranium feed stock /17/ and have contracted with DOE for enrichment services with a dilemma. DOE's enrichment contracts impose cancellation penalties for failure to use contracted-for services (see 10 C.F.R. 762.10). Thus, unless these utilities can break their contracts with DOE, they will either have to obtain domestic uranium for DOE to enrich, or pay the cancellation penalties and obtain enrichment services elsewhere. If the utilities go forward with DOE enrichment, they either will have to dispose of the foreign uranium they have purchased or break their purchase agreement. /18/ b. The district court's order also poses a grave danger to DOE's commercial enrichment operation. Enrichment fees from domestic utilities amount to hundreds of millions of dollars a year. In the 1986 rulemaking, DOE stated that "(l)ost sales resulting from (customer) terminations could reach at least $300 million annually by 1988" (51 Fed. Reg. 3627 (1986)). Indeed, current customers, in response to the district court's order, have suggested that they would attempt to rescind their contracts entirely if DOE is unable to enrich foreign uranium. Successful legal action would mean the loss of termination fees and possibly even the award of substantial damages against DOE for breach of its enrichment contracts. 51 Fed. Reg. 27136 n.10 (1986). The immediate threat to DOE, and hence to the treasury, thus runs well into the hundreds of millions of dollars and may amount to more than a billion. Moreover, because Section 2201(v) requires DOE to price its enrichment services so as to cover its costs, a substantial contraction of DOE's customer base would "force DOE to further curtail operations at its enrichment plants, increasing the unit cost of production, and thus drive more of DOE's customers overseas" (51 Fed. Reg. 27137 (1986)). This could produce a spiral of increasing costs and decreasing volume that eventually could eliminate DOE's commercial enrichment operations. /19/ c. The least readily quantified but perhaps the most important consequences of the district court's order would be felt by United States foreign policy, specifically trade and international nuclear policy. Most of the uranium imported into this country comes from Canada, our largest trading partner, and Australia, a close ally with which we have a trade surplus. Both Canada and Australia have presented Diplomatic Notes to the Department of State, setting forth in the strongest terms their objection to the injunction imposed by the district court (51 Fed. Reg. 27137 n.17 (1986) (quoting Notes)). The Notes suggest that the imposition of restrictions under Section 2201(v) would be inconsistent with the United States' obligations under the General Agreement on Tariffs and Trade (GATT). 51 Fed. Reg. 27137 n.17 (1986). /20/ No matter how the GATT issue might be resolved, the restrictions would have, in the words of the United States Trade Representative in a letter to the Secretary of Energy, "'an adverse impact on our trade and other relationships with important trading partners without resolving the long-term problems of the industry'" (id. at 27137 (citation omitted)). Trade is not the only aspect of foreign policy implicated by the decision below. Congress has determined that "the proliferation of nuclear explosive devices or of the direct capability to manufacture or otherwise acquire such devices poses a grave threat to the security interests of the United States" (Nuclear Non-Proliferation Act of 1978, Pub. L. No. 95-242, Section 2, 92 Stat. 120). The decision below threatens American non-proliferation efforts in two ways. First, the damage to the competitive position of DOE's enrichment program discussed above threatens a loss of DOE's foreign enrichment customers. Nuclear fuel exported from the United States is subject to stringent conditions designed to ensure that it is used in a manner consistent with United States non-proliferation policy (Sections 304-307, 92 Stat. 131-138 (codified at 42 U.S.C. 2155-2158)). As the Department of State noted in commenting on the issue presented in this litigation, a shift away from DOE enrichment by foreign customers would replace those strict controls with "the controls of foreign enrichers, none of whom follows as stringent non-proliferation conditions as those required by U.S. law" (51 Fed. Reg. 27137 n.15 (1986) (declaration of Deputy Assistant Secretary of State for Nuclear Energy and Energy Technology Affairs James Devine)). Moreover, "(a) decline in DOE's position in the enrichment market would also create an increased commercial incentive for the spread of nuclear enrichment technology, which has potential nuclear weapons application" (ibid.). More subtle but no less real is the impact of this decision on the general perception of the United States as a partner in nuclear cooperation. United States nuclear cooperation is accompanied by a number of very strict controls and limitations, designed to ensure that cooperating countries use American expertise in a manner consistent with United States non-proliferation policy (42 U.S.C. (& Supp. III) 2153). Nuclear cooperation, however, is available from sources other than the United States, some of which do not apply the same strict non-proliferation controls. Third countries will choose to obtain assistance and cooperation from the United States, and thereby accept the limits on their use of nuclear technology imposed by Congress, only if they perceive the United States to be an absolutely reliable partner. The decision below threatens that perception. As Deputy Assistant Secretary of State Devine explained, "(u)nless the 'rules of the game' for nuclear cooperation are consistent and clear, there is a risk that such cooperation will be diminished and that the credibility and influence of the United States on nuclear non-proliferation matters in both bilateral and multilateral contexts will be undermined" (51 Fed. Reg. 27137 n.15 (1986)). If the lower courts were correct in finding that Congress has chosen a policy that threatens international perceptions of American reliability, then of course that policy must be followed until Congress changes it, whatever the consequences. We suggest, however, that a decision touching concerns of such delicacy and importance is best reviewed in this Court. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. CHARLES FRIED Solicitor General RICHARD K. WILLARD Assistant Attorney General THOMAS W. MERRILL Deputy Solicitor General JOHN HARRISON Assistant to the Solicitor General LEONARD SCHAITMAN RICHARD A. OLDERMAN Attorneys OCTOBER 1987 /1/ "Special nuclear material" is defined in 42 U.S.C. 2014(aa) and includes plutonium and enriched uranium. The term "source material" includes unenriched uranium or thorium (42 U.S.C. 2014(z)). /2/ The AEC was abolished in 1974 (Energy Reorganization Act of 1974, Pub. L. No. 93-438, Section 104(a), 88 Stat. 1237). Its "licensing and related regulatory functions" were transferred to the Nuclear Regulatory Commission (NRC) (Section 201(f), 88 Stat. 1243). All other AEC functions were transferred to the Energy Research and Development agency, the predecessor of the Department of Energy (DOE) (Section 104(c), 88 Stat. 1237). /3/ The current spot market price was $16.65 per pound on August 31, 1987 (NUEXCO Monthly Report No. 229, at 34 (Sept. 1987)). /4/ A SWU is a measure of the production capacity of uranium enrichment plants and hence a unit in which enrichment services can be measured (51 Fed. Reg. 3625 & n.1 (1986)). SWU's "measure the amount of effort expended to separate a given amount of natural uranium into two components -- one having a higher concentration of fissionable uranium-235" (id. at 3625 n.1). /5/ The AEC's authority to license the domestic sale or the importation of special nuclear material (see 42 U.S.C. 2073(a)) is now vested in the NRC. The NRC is required to deny any such license that "would be inimical to the common defense and security or the health and safety of the public" (42 U.S.C. 2099). Any authority under the Atomic Energy Act to restrict sales of enriched uranium on the secondary market or uranium imports would have to derive from that provision. /6/ Imports have been at higher levels in succeeding years. "Natural (unenriched) uranium imports in 1982, 1983, 1984, and 1985 represented, respectively, 51.7, 25.9, 39.2 and 34.4 percent of U.S. requirements" (1985 Viability Assessment at xii). /7/ The statute (42 U.S.C. 2210b(c)) provides: Criteria for monitoring and reporting requirements The criteria referred to in subsection (a) of this section shall also include, but not be limited to -- (1) an assessment of whether executed contracts or options for source material or special nuclear material will result in greater than 37 1/2 percent of actual or projected domestic uranium requirements for any two-consecutive-year period being supplied by source material or special nuclear material from foreign sources; (2) projections of uranium requirements and inventories of domestic utilities for a 10 year period; (3) present and probable future use of the domestic market by foreign imports; (4) whether domestic economic reserves can supply all future needs for a future 10 year period; (5) present and projected domestic uranium exploration expenditures and plans; (6) present and projected employment and capital investment in the uranium industry; (7) the level of domestic uranium production capacity sufficient to meet projected domestic nuclear power needs for a 10 year period; and (8) a projection of domestic uranium production and uranium price levels which will be in effect under various assumptions with respect to imports. /8/ The court of appeals mistakenly refers to the issue in this case as Count IV (App., infra, 14a). /9/ The Secretary commenced the 1986 rulemaking described in this petition while the suit was proceeding in the district court. The final rule was adopted after the district court issued its order, while that order was stayed by the court of appeals. 51 Fed. Reg. 27134 n.4 (1986). This petition does not involve a direct challenge to the revised criteria adopted in the rulemaking. /10/ The court stated that "(i)f the Department believes that criteria less restrictive than those imposed by this order would assure the maintenance of a viable domestic uranium industry, then the Department shall clearly articulate its reasons for such a position" (App., infra, 23a). The court thus recognized that Section 2201(v) affords the Secretary discretion in setting the appropriate limitations in the circumstances when the statute applies. But the court's order does not permit the Secretary to do what he believes is clearly contemplated by the statutory language -- impose no restrictions when it is impossible, by limiting enrichment services, to assure the viability of the domestic uranium industry. /11/ While this case was pending in the court of appeals Congress adopted a continuing resolution funding DOE and other agencies for the fiscal year that ended on September 30, 1987. That statute contained a provision expressly authorizing DOE to continue to enrich foreign uranium until this lawsuit comes to "final judgment." Pub. L. No. 99-500, Section 305, 100 Stat. 1783-209. /12/ The court of appeals also reviewed the district court's decision on another count of the complaint attacking aspects of DOE's enrichment services contracts not directly concerned with enrichment of foreign uranium. The court of appeals remanded that issue for further fact-finding to determine whether respondents had standing to maintain their claim. App., infra, 6a-14a. This part of the court of appeals' judgment is not challenged by this petition. /13/ The district court's order requires DOE to refuse to enrich all foreign uranium intended for domestic use (App., infra, 23a). It thus has the effect of a nationwide injunction. DOE therefore cannot litigate the issue in the other courts of appeals and "gain the benefit of adjudication by different courts in different factual contexts" (Califano v. Yamasaki, 442 U.S. 682, 702 (1979) (discussing difficulties posed by nationwide class actions)). Petitioners' only option is to seek review in this Court. /14/ The court of appeals appears to have misunderstood DOE's argument based on Young, suggesting that the Secretary was asserting that he had discretion to "abandon the statutory goal" (App., infra, 18a). But DOE has never maintained that it has discretion to ignore Section 2201(v). On the contrary, in response to comments on the 1986 rulemaking, the Secretary found that "(t)he plain language of the statute makes clear that restrictions are not to be imposed automatically if the domestic mining industry is non-viable, but only if they are needed to, and in fact, will assure the maintenance of a viable domestic industry" (51 Fed. Reg. 27134 (1986)). Thus, the Secretary does not argue, as the court of appeals seems to have believed, that DOE need not comply with Section 2201(v) because "this policy is not wise in the present uranium market" (App., infra, 18a). The question in this case is not whether the statute is wise but rather what it means. /15/ It is possible (though by no means certain) that in the short term the imposition of restrictions would lead to increased consumption of domestic uranium, although DOE believes that any such benefit would not be enough to make the industry viable (51 Fed. Reg. 27136 (1986)). This possibility, which would lead to temporarily increased income for respondent, is sufficient, we believe, to satisfy the "distinct and palpable injury" requirement of Article III (Warth v. Seldin, 422 U.S. 490, 501 (1975)). /16/ Respondents have never challenged the Secretary's determination that restrictions would not assure the maintenance of a viable domestic uranium industry. Rather, they have argued that as a matter of law the Secretary is required to impose restrictions whenever the industry is not viable, whether or not those restrictions would accomplish (or even further) the statutory goal. In the absence of any such challenge to the Secretary's findings, it would in fact have been appropriate to grant petitioners' motion for summary judgment. /17/ For the period between 1985 and 1990, United States utilities are estimated to have contracted for some $780 million worth of foreign uranium (Petitioners' C.A. Mot. for Stay Pending Appeal, App. 58, 73). /18/ The utilities' decision will depend on the comparison between (i) the termination charge and other expenses associated with breaking their enrichment contracts and (ii) the additional expense that would be involved in obtaining domestic uranium (see 51 Fed. Reg. 27136 (1986)). As DOE noted in its 1986 rulemaking, any incentive to buy domestic uranium will be concentrated in the early years of the contracts, when termination charges are highest (ibid.). DOE determined in that rulemaking that this incentive would not be sufficient to make the domestic uranium industry viable even in the short term (ibid.). /19/ The damage done by the district court's order, if it is allowed to stand, will be shared between the utilities and DOE (and other parties, including possibly the domestic uranium industry, see 51 Fed. Reg. 27136 (1986) (explaining that restrictions probably would lead consumers simply to obtain both uranium and enrichment abroad)) in a manner that cannot be predicted. /20/ The Diplomatic Notes presented to the Department of State by Canada and Australia in response to the district court's decision were attached to petitioners' June 1986 motion to the Tenth Circuit for a stay pending appeal. After the court of appeals delivered its decision in July 1987, Canada and Australia once again presented Notes reiterating their position. Diplomatic Note No. 194 from the Embassy of Canada (July 22, 1987); Diplomatic Note No. 237/87 from the Embassy of Australia (July 24, 1987). APPENDIX