         IN THE UNITED STATES COURT OF APPEALS

                 FOR THE FIFTH CIRCUIT

                 _____________________

                      No. 97-11353
                 _____________________


WASTE CONTROL SPECIALISTS, LLC,

                              Plaintiff-Appellee,

                        versus

UNITED STATES DEPARTMENT OF ENERGY; JAMES M. OWENDOFF,
Acting Assistant Secretary for Enviornmental Management;
MARY ANN SULLIVAN, Deputy General Counsel for Environment
and Civilian Nuclear Defense Programs,

                              Defendants-Appellants.
_______________________________________________________

    Appeal from the United States District Court for
             the Northern District of Texas
_______________________________________________________

                 _____________________

                      No. 98-10331
                 _____________________


In Re: UNITED SATE DEPARTMENT OF ENERGY; JAMES M. OWENDOFF,
Acting Assistant Secretary for Environmental Management;
MARY ANNE SULLIVAN, Deputy General Counsel for Environment
and Civilian and Defense Nuclear Programs,

                              Petitioners.

_______________________________________________________

 On Petition for Writ of Mandamus to the United States
      District for the Northern District of Texas
_______________________________________________________
                      May 14, 1998
Before REAVLEY, DeMOSS and PARKER, Circuit Judges.

REAVLEY, Circuit Judge:

     Waste Control Specialists, L.L.C. (WCS) sued the Department

of Energy (DOE) for rejecting its proposal for a new facility for

disposing of DOE’s low-level radioactive waste.   After a one day

hearing, the district judge granted a preliminary injunction,

enjoining DOE from refusing WCS’s bid on specific grounds.     We

reverse and order dismissal of the case.

                          I.   Background

The Atomic Energy Act of 1954 (AEA)1 empowers the federal

government to regulate all activities involving radiological

health and safety of atomic energy and its byproducts.    The Low-

Level Radioactive Waste Policy Amendments Act of 1985 (LLWPAA)

amended the AEA to provide that the federal government is

“responsible for the disposal of . . . low-level radioactive

waste owned or generated by the Department of Energy.”2     Low-

level radioactive waste (LLRW) is defined in the LLWPAA by what

it is not: it is “not high-level radioactive waste, spent nuclear

fuel, or byproduct material (as defined in section 2014(e)(2) of

this title).”3   LLRW generally consists of “section 2014(e)(1)

byproduct material”: “any radioactive material (except special

nuclear material [i.e. plutonium or specified uranium isotopes])

yielded in or made radioactive by exposure to the radiation

     1
      42 U.S.C. §§ 2011-2297g-4 (1994).
     2
      42 U.S.C. § 2021c(b)(1)(A).
     3
      42 U.S.C. § 2021b(9)(A).

                                 2
incident to the process of producing or utilizing special nuclear

material.”4

     DOE disposes of its LLRW under its “Radioactive Waste

Management Policy.”   In accordance with that policy, the agency’s

LLRW “shall be disposed of on the site at which it is generated,

if practical, or if on-site disposal capability is not available,

at another DOE disposal facility.”5   Disposal at a non-DOE

facility requires an exemption from this policy.   Under the

agency’s current exemption policy, DOE may use a non-DOE disposal

facility if, among other things, the facility “compl[ies] with

applicable Federal, State, and Local requirements, and ha[s] the

necessary permits, licenses, and approvals for the specific

wastes involved.”6

     The AEA authorizes the Nuclear Regulatory Commission (NRC)

to issue licenses for LLRW disposal sites and to exempt certain

activities from licensing.7 An NRC regulation provides that “any

prime contractor of the Department [of Energy] is exempt from the

requirements for a license set forth in [42 U.S.C. § 2111] . . .

to the extent that such contractor . . . transfers, receives,

acquires, owns, possess, or uses byproduct material for: (a)


     4
      42 U.S.C. § 2014(e)(1). LLRW may also contain small
amounts of “special nuclear material” (see 42 U.S.C. § 2014(aa))
and “source material” (see 42 U.S.C. § 2014(z)).
     5
      DOE Order 5820.2A, Radioactive Waste Management (Sept. 26,
1988).
     6
      DOE Memorandum (Oct. 24, 1996) at 2.
     7
      42 U.S.C. § 2111.

                                 3
[t]he performance of work for [DOE] at a United States

Government-owned or controlled site.”8

     The NRC may relinquish to states, by agreement, its

authority to license and regulate certain activities, including

LLRW disposal facilities.9       Among other things, the “agreement

state” must certify to the NRC that it “has a program for the

control of radiation hazards adequate to protect the public

health and safety,” and that its public health, safety and

environment standards “are equivalent, to the extent practicable,

or more stringent that,” the NRC’s corresponding standards.10

     Texas is an agreement state.11       Under Texas law, “[a]

radioactive waste disposal license may be issued only to a public

entity specifically authorized by law for radioactive waste

disposal.”12     Thus, a private commercial waste disposal facility

company is barred by state law from obtaining a license in Texas

for the disposal of LLRW.

     On August 29, 1996, DOE issued a Request for Proposals (RFP)

in connection with the cleanup of its Fernald nuclear site in

Ohio.     In the Fernald RFP, DOE required that the bidders

demonstrate that they possess, or have the ability to obtain

     8
        10 C.F.R. § 30.12(a) (1997).
     9
        42 U.S.C. § 2021(b).
     10
          42 U.S.C. §§ 2021(d)(1), 2021(o)(2).
     11
      Notice of Discontinuance of Certain Regulatory Authority
and Responsibility within the State of Texas, 47 Fed. Reg. 15,186
(Apr. 8, 1982).
     12
          TEX. HEALTH & SAEFTY CODE ANN. § 401.203(West 1992).

                                      4
within 27 months of a contract award, “the proper Federal, State

and Local permits and licenses for the permanent disposal” of

LLRW.

     WCS’s facility in West Texas is licensed to dispose of

hazardous and toxic wastes, but not LLRW.   On September 20, 1996,

WCS submitted a proposed bid to the DOE for the Fernald RFP.    WCS

included a provision in the application for oversight of the site

by the Texas Natural Resource Conservation Commission (TNRCC).

In December, after the TNRCC withdrew from consideration as the

proposed oversight body, WCS submitted an alternative regulatory

oversight mechanism.   Under either plan, WCS argues that it would

be exempt from Texas state licensing requirements because it

would effectively become a DOE-controlled facility.

     On May 5, 1997, DOE sent WCS a letter informing it that,

while “DOE is not prepared to accept the WCS proposal as

submitted,” the agency “is considering” the development of an RFP

for future waste disposal contracts that “could . . . allow for

alternative regulatory structures.”   WCS sued DOE, arguing that

DOE’s refusal to consider its proposal was arbitrary and

capricious.

     After a one day hearing, the district court issued an

injunction enjoining DOE from denying any WCS bid “on the

ground(s) that: (i) WCS is not or cannot be licensed by Texas for

the disposal of low-level radioactive or mixed wastes; (ii) WCS

is not licensed by the NRC for the disposal of low-level

radioactive or mixed wastes; or (iii) WCS has imposed or sought


                                 5
to alter the provisions of the Fernald RFP relative to title to

the wastes subject thereto.”13

                           II.    Discussion

     Both sides agree that WCS’ proposal for DOE regulation of

the site could lawfully be implemented.        They disagree on whether

DOE has the discretion to require a state license as a

requirement for bidding.   DOE’s policy requiring such a license

is set forth only in its memorandum, which is not the product of

a formal rulemaking.   Moreover, even that memorandum does not

address the issue of utilizing self-regulation of the site in

place of a state license.14      We will not give deference to DOE’s

interpretation under Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984), because it had not

enunciated its interpretation prior to the litigation.15

     In granting the injunction, the district court focused on

section 110a of the AEA, which provides that


     13
      The Fernald RFP included a provision that the bidder must
take title to all the wastes. WCS’ proposal contained a
provision that DOE would be requested to take back title after
site closure. The district court found that this future
possibility did not “seek or purport to alter or vary the terms
relative to title of the RFP.” Because we hold that DOE has
discretion to require a state license, which WCS cannot obtain,
we do not reach the issue of title.
     14
      Since this litigation began, DOE has issued a “Notice of
Intent to Conduct Policy Analysis; Request for Public Comment,”
outlining the WCS proposal and a proposal from another private
entity and requesting comments on the issue. 63 Fed. Reg. 13,396
(Mar. 19, 1998).
     15
      See United States v. Food, 2,998 Cases, 64 F.3d 984, 987
n.5 (5th Cir. 1995); Irving Indep. Sch. Dist. v. Packard
Properties, 970 F.2d 58, 64 (5th Cir. 1992).

                                    6
            “Nothing in this subchapter shall be deemed .
            . . to require a license for (1) the
            processing, fabricating, or refining of
            special nuclear material, or the separation
            of special nuclear material, or the
            separation of special nuclear material from
            other substances, under contract with and for
            the account of the Commission; or (2) the
            construction or operation of facilities under
            contract with and for the account of the
            Commission.”16

The district court interpreted this section to mean that the NRC,

and thus the agreement states, could not require that a private

entity contracting with DOE for LLRW disposal have a license, and

that DOE could therefore not require an NRC or state license as a

precondition for bidding.    The district court, in issuing the

preliminary injunction, stated that “[t]he existence of a state

or NRC license is neither a necessary prerequisite nor a

sufficient basis for the receipt by a DOE contractor of DOE low-

level or mixed radioactive wastes for disposal at a private

site.”    Although correct, that does not answer the question of

whether DOE may require a state or NRC license as part of the

grounds for the contract.

     Section 110 is found in Subchapter IX, Atomic Energy

Licenses, which begins by stating that it is unlawful for anyone

“to transfer or receive in interstate commerce, manufacture,

produce, transfer, acquire, possess, use, import, or export any

utilization or production facility except under and in accordance


     16
      42 U.S.C. § 2140(a). “Commission” refers to the Atomic
Energy Commission. 42 U.S.C. § 2014(f). The district court
found that Commission also applied to the DOE, and DOE does not
disagree with that.

                                  7
with a license issued by the Commission.”17     As DOE argues, it

appears clear that the introductory phrase, “nothing in this

subchapter,” limits § 110 to production and utilization

facilities.      WCS argues that such a reading renders the two

subsections superfluous.      However, the second subsection

addresses the “construction or operation of facilities under

contact with and for the account of the Commission.”      The first

subsection addresses the issue the handling of “special nuclear

material,”18 focusing on activities rather than facilities.

     This interpretation is supported by NRC’s regulations.        The

regulations provide that a contractor of the DOE is exempt from

the licensing requirements “to the extent that such contractor .

. . receives . . . byproduct material for: (a) The performance of

work for the Department at a United States Government-owned or

controlled site.”19     Logically, if DOE does not “control” the

site, then the contractor is subject to the ordinary NRC

licensing requirements.20




     17
          42 U.S.C. § 2131.
     18
      "Special nuclear material” is defined as enriched
plutonium or uranium. 42 U.S.C. § 2014(aa).
     19
          10 C.F.R § 30.12 (1997) (emphasis added).
     20
      To the extent that the statute is ambiguous on the
licensing requirements, these regulations are entitled to
deference under Chevron U.S.A. Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984). Granted, the NRC’s
interpretation does not necessarily bind the DOE. However, the
same statute governs both the NRC and the DOE, and DOE has not
issued any regulations on the issue prior to this litigation.

                                    8
     If DOE chooses to regulate, or “control”, the private waste

disposal sites, then the sites are exempt from NRC and state

licensing requirements.     Where, however, DOE does not exercise

such control, the NRC and the agreement states retain their power

to regulate commercial sites providing a service to DOE.      Nothing

in the statute indicates that DOE must exercise regulatory

authority over such sites.

     WCS directs our attention to other statutes, arguing that

they indicate that DOE must facilitate competition.      DOE’s

enabling statute, the Department of Energy Organization Act,

specifies that one of the founding purposes of DOE is “[t]o

assure, to the maximum extent practicable, that the productive

capacity of private enterprise shall be utilized in the

development and achievement of the policies and purposes of this

chapter.”21     The overall federal procurement policy provides

that, with limited exceptions, “an executive agency in conducting

a procurement for property or services . . . shall obtain full

and open competition through the use of competitive procedures in

accordance with the requirements of this subchapter” and the

Federal Acquisition Regulation.22      Neither of these statutes,

however, direct the DOE to promote competition to the exclusion

of other concerns, such as safety and state involvement.

     WCS is effectively asking the courts to intrude into the

agency’s policy making process without a statutory basis.        We

     21
          42 U.S.C. § 7112(14).
     22
          41 U.S.C. § 253(a).

                                   9
reverse the grant of the preliminary injunction and order

dismissal of the suit against DOE.   The mandamus action against

the trial judge based on his order that high-ranking DOE

officials attend the settlement discussions is also dismissed as

moot.

     REVERSED.   The district court is ordered to dismiss the

case.




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