June 01, 2012

Power Grab: Preempting States’ Rights to Turn Off Nuclear Power

Kenneth J. Rumelt

During the expansion of the civilian nuclear power sector in the 1970s, the state of California passed a law prohibiting construction of new nuclear power plants. California was concerned that federal authorities had not approved a plan for the long-term disposal of spent nuclear fuel. Without a viable disposal option, California feared nuclear power would prove a bad investment if the industry continued to grow and temporary storage options became scarce and expensive, potentially leading to reactor shutdowns. The Nuclear Regulatory Commission (NRC), however, determined that it would be safe to continue licensing reactors.

Two public utilities with plans to build nuclear power plants challenged the moratorium in a case that was ultimately decided by the U.S. Supreme Court in Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Development Com’n, 461 U.S. 190 (1983). The utilities argued that the moratorium was preempted under the Supremacy Clause by the Atomic Energy Act of 1954 (AEA), which gave the federal government authority to regulate nuclear power. Moreover, the utilities argued that California’s legislature was in reality motivated by safety concerns, even though safety concerns were not apparent on the face of the California statute. The Supreme Court, however, rejected the utilities’ arguments and set boundaries in its opinion on the limits of the AEA’s preemptive effect. It held that in enacting the AEA, Congress intended to preempt state regulation of nuclear safety, but not states’ “traditional authority over the need for additional generating capacity, the type of generating facilities to be licensed, land use, ratemaking, and the like.” Pacific Gas, 461 U.S. at 212. The Supreme Court accepted California’s economic rationale and held that the moratorium fell within the states’ residual authority.

More than thirty years later, the boundaries of state authority to regulate nuclear power are being challenged again, this time in connection with Vermont’s efforts to close the Vermont Yankee nuclear power plant at the expiration of the plant’s original forty-year federal operating license. In Entergy Nuclear Vermont Yankee, LLC v. Shumlin, 1:11-CV-99 JGM (D. Vt.), the plant’s owners (collectively “Entergy”) challenged provisions of Vermont law that prohibited the state Public Services Board (PSB) from renewing Vermont Yankee’s state license without prior approval from the state legislature. Attempts to win legislative approval died in 2010, but, in April 2011, the NRC granted the Vermont Yankee a twenty-year extension of its federal operating license. The decision seemingly put Vermont at odds with the NRC, and Entergy quickly filed suit to prevent the State of Vermont from closing the plant.

On January 19, 2012, after a three-day bench trial and several months of deliberation, Judge Garvan Murtha ruled in Entergy’s favor, citing “overwhelming” evidence that the legislature was motivated by safety concerns. 2012 WL 162400 (D. Vt. Jan. 19, 2012). Vermont appealed the decision to the Second Circuit on February 18, 2012. The ultimate decision, whether at the Second Circuit or the U.S. Supreme Court, could determine whether states will play a significant role in determining the future of aging nuclear power plants. If Vermont loses on appeal, aging plants will likely continue operating until profits disappear or the NRC decides not to extend an operating license. If Vermont wins on appeal or the court’s opinion gives states enough room and guidance to avoid preemption, states like Vermont may choose to close aging plants in favor of more modern facilities, investments in energy efficiency, or both. This article suggests that the Entergy decision may be overturned on appeal because it was inconsistent with the Supreme Court’s preemption jurisprudence, which only requires a rational nonsafety basis for state regulation that falls outside the scope of NRC authority. Likewise, closure of a forty-year-old plant, as opposed to a moratorium on construction, is not “in the teeth of the [AEA]’s objective to insure that nuclear technology be safe enough for widespread development and use.” Pacific Gas, 461 U.S. at 213.

Preemption and the AEA

The Supreme Court recognizes three species of preemption under the Supremacy Clause of the U.S. Constitution, which provides that federal law “shall be the supreme Law of the Land.” U.S. Const. art. VI, cl. 2. These are commonly referred to as express, conflict, and implied preemption. Congress may expressly preempt state law with explicit statutory language defining the scope of federal preemption. Federal law also preempts conflicting state law where it is physically impossible to comply with both or where state law stands as an obstacle to accomplishing the full purposes and objectives of Congress. Finally, a scheme of federal regulation may show Congress’s intent to occupy an entire field of regulation from which preemption of parallel state law is implied.

Two fundamental principles guide preemption cases. First, Congress’s purpose is the “ultimate touchstone” of a court’s analysis. Second, courts should presume state law is not preempted unless “that was the clear and manifest purpose of Congress.” Wyeth v. Levine, 555 U.S. 555, 565 (2009). The case for federal preemption is “particularly weak where Congress has indicated its awareness of the operation of state law in a field of federal interest, and has nonetheless decided to stand by both concepts and to tolerate whatever tension there is between them.” Id. at 575 (internal brackets omitted).

The leading case on AEA preemption is Pacific Gas, discussed above, where the Supreme Court limited the AEA’s preemptive effect to the safety aspects of nuclear power. There was no explicit language in the AEA barring California’s authority to halt new construction, and the legislative history showed that Congress intended for states to maintain their traditional authorities. Moreover, there was no conflict between California’s moratorium and NRC’s decision to continue licensing reactors because the NRC indicated “only that it [was] safe to proceed with such plants, not that it [was] economically wise to do so.” Pacific Gas, 461 U.S. at 218. Although there was no conflict between state and federal regulation, the Supreme Court’s analysis did not end there. When the federal government occupies the entire field of regulation, the test for preemption is whether “the matter on which the State asserts the right to act is in any way regulated by the Federal Act.” Pacific Gas, 461 U.S. at 213 (citing Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 236 (1947)). Therefore, it would be unlawful for a state to pass a moratorium “grounded in safety concerns.” Pacific Gas, 461 U.S. at 213. Although California’s intent in enacting the moratorium was “subject to varying interpretation,” the California statute did not regulate how to construct or operate a nuclear plant on its face, nor did it evidence concern over safety or establish state standards for nuclear waste disposal. Id. at 216.

Despite the apparent importance of prohibiting state legislation “grounded in safety concerns,” the Supreme Court’s review of the state legislative history in Pacific Gas was not particularly searching. The Supreme Court relied on the Ninth Circuit’s review of legislative motives, which focused on statements in a committee report that the waste disposal problem was “largely economic or the result of poor planning, not safety related.” Id. at 213 (quoting the committee report). The utilities argued for a more searching review of the legislative history, which would reveal safety motivations. However, the Supreme Court declined, finding instead such efforts often “unsatisfactory” because “[w]hat motivates one legislator to vote for a statute is not necessarily what motivates scores of others to enact it.” Id. at 216. Moreover, it was “pointless” to look deeper into legislative motives because states clearly had authority to determine the need for additional generating facilities sufficient to freeze construction on economic grounds. Id. The Court concluded that Congress left states sufficient authority to determine on economic grounds what kind of plant should be built and whether to prohibit construction of new nuclear plants indefinitely.

The Entergy Decision

In Entergy, the Vermont legislature’s avowed purpose was to determine the future of Vermont Yankee after considering the “state’s need for power, the economics and environmental impacts of long-term storage of nuclear waste, and choice of power sources among various alternatives.” Entergy, 1:11-CV-99 JGM, 2012 WL 162400, at *39 (quoting Act 160, 2006 Vt. Laws 160). While the district court recognized these policies were not preempted, it did not “blindly accept” the legislature’s “articulated purpose.” Id. (citing Greater N.Y. Metro. Food Council, Inc. v. Giuliani, 195 F.3d 100, 108 (2d Cir. 1999), quoting Gade v. Nat’l Solid Waste Mgmt. Ass’n, 505 U.S. 88, 106 (1992)). The district court reviewed in detail the history of the challenged provisions from introduction to final passage, including statements from various witnesses at committee hearings. It was clear from the record that various legislators expressed concerns for the safety of the Vermont Yankee plant or were warned they could not pass a law grounded in safety concerns. One expert witness testified at a committee hearing, “The problem that we’re dealing with here is that a lot of the concerns that citizens have are concerns that you can’t address directly the way they want them to be addressed.” Entergy, 1:11-CV-99 JGM, 2012 WL 162400, at *6. While the state proffered various statements in the record in support of a nonsafety rationale, the district court rejected them after determining they were linked to safety concerns and concluded that but for the safety concerns, the legislature would have acted differently. The district court expressed similar concerns that the Vermont legislature had “virtually unreviewable” power to allow Vermont Yankee’s license to lapse for any reason, “permissible or impermissible under federal law.” Id. at *38.

The district court also found problems in the plain text of the challenged statutes, which called for studies that analyze, among other things, “public health issues, including issues related to dry cask storage of nuclear waste and decommissioning options.” Id. at *39. “Consideration of radiological public health in re-licensing decisions is the exclusive province of the NRC under the [AEA]. A state’s consideration of it in determining whether to license a plant’s continued operation is preempted.” Id.

It is apparent from the Entergy opinion that there is a fertile record of statements by legislators on radiological safety. Given this record and the parallel statutory reference to public health issues, the Entergy decision will likely survive on appeal if, as the district court found, consideration or expressions of concern over safety renders state action invalid or shifts the burden to the state to prove it would have come to the same decision anyway. Whether this approach was correct, however, requires a more careful analysis of the opinion and relevant case law.

A More “Rational” Approach

There is little doubt Vermont faces a significant challenge on appeal. Nevertheless, the Entergy decision is potentially vulnerable. Recall that in Pacific Gas the Supreme Court rejected calls to look beyond California’s “avowed economic purpose” for the moratorium on new nuclear plant construction for important reasons. Pacific Gas, 461 U.S. at 216. First, searching the legislative record to determine a state’s true motive is unhelpful because “[w]hat motivates one legislator to vote for a statute is not necessarily what motivates scores of others to enact it.” Id. Second, it is “particularly pointless” to look to the legislature’s motives where its retained authority is “sufficient to permit” the state to act as it did. Id. Moreover, it “should be up to Congress to determine whether a State has misused the authority left in its hands.” Id.

While the district court in Entergy started its analysis with Pacific Gas, it relied on readily distinguishable case law to look further into legislative motives than did the Supreme Court. The closest case to Pacific Gas is a Tenth Circuit decision that held invalid a state licensing scheme for spent nuclear fuel storage facilities, including an option for counties to bar transportation and storage of spent nuclear fuel. Skull Valley Band of Goshute Indians v. Nielson, 376 F.3d 1223 (10th Cir. 2004). However, unlike Pacific Gas, the state in Skull Valley failed to provide a nonsafety rationale or any evidence that “Congress intended to allow detailed regulation of nuclear facilities by county governments.” Id. at 1247. The district court in Entergy also relied on a case from the Eastern District of New York that held a state provision preempted because the “enforcement of a local law criminalizing participation in a nuclear plant’s emergency evacuation plan . . . [was] motivated by safety purposes.” Entergy, 1:11-CV-99 JGM, 2012 WL 162400, at *35 (in reference to Long Island Lighting Co. v. Suffolk County, N.Y., 628 F.Supp. 654, 665 (E.D.N.Y. 1986)). However, the Eastern District distinguished its case from Pacific Gas, noting that the defendant in Long Island Lighting was acting outside its sphere of authority and was “interfering with the NRC’s post-construction licensing process.” Long Island Lighting, 628 F.Supp. at 666.

In Entergy, it is the district court’s reliance on several non-AEA cases, however, that is farthest afield from Pacific Gas. Ultimately, these cases fail to support what the Supreme Court found to be a “pointless” review of legislative history because in each case the state legislature attempted to craft a nonpreempted purpose for a state law that interfered with federal law. For example, in Greater N.Y. Metro., the defendant city placed its own content and format regulations on cigarette advertisements when federal law expressly prohibited states from doing so “based on smoking and health.” Greater N.Y. Metro. Food Council, Inc. v. Giuliani, 195 F.3d 100, 107 (2d Cir. 1999). The Second Circuit admonished the defendant city for making “the startling contention” that a city ordinance placing restrictions on tobacco advertisements was not “based on smoking and health,” but rather “aimed solely at promoting law enforcement.” Greater N.Y. Metro., 195 F.3d at 108. In these cases, “[t]he key question is . . . at what point the state regulation sufficiently interferes with federal regulation that it should be deemed pre-empted under the Act.” See Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 107 (1992) (cited in Entergy for a different proposition). Where the effect actually interferes with federal regulation and Congress expressly prohibits certain legislative motives courts should look beyond the articulated purpose of the state law to protect federal supremacy. However, where the effect of state regulation does not frustrate the operation of federal law, what is there for the courts to protect?

Last, the district court in Entergy points to a “but-for” causation standard for preemption where states advance multiple purposes that indicate motivation, even in part, by an impermissible purpose. The “but-for” standard shifts the burden to the state to show it would have passed the suspect legislation anyway. This standard, however, originated in cases that are inapplicable to the AEA: equal protection claims and claims involving fundamental individual rights. In these cases, the Supreme Court applies strict scrutiny, where the relevant test for state action is whether the law is necessary to achieve a compelling governmental purpose, and the burden is on the government. However, in cases where fundamental rights are not implicated or where there is no suspect class involved (e.g., race or national origin), the test is whether the law is rationally related to a legitimate government purpose and the burden is on the party challenging the government action. See, e.g., Hodel v. Indiana, 452 U.S. 314, 331 (1981). In these cases, the legislation “carries with it a presumption of rationality that can only be overcome by a clear showing of arbitrariness and irrationality.” Id. at 331–32. It is valid unless it is “so unrelated to the achievement of any combination of legitimate purposes that a court can only conclude that the legislature’s actions were irrational.” Id. (internal brackets and quotations omitted).

The “rational basis” test is more closely aligned with the Supreme Court’s preemption jurisprudence. As noted above, there is a strong presumption against preemption in cases involving the AEA. The reason federal preemption of state law in such cases is “particularly weak” is that states are separate sovereigns whose laws should not be preempted unless that is the “clear and manifest purpose of Congress.” Where Congress has shown a willingness to accept state regulation in a particular field and in the absence of explicit language, it is difficult to infer a “clear and manifest” intent to preempt state law.

In the AEA, Congress left a relatively narrow field of nuclear power regulation to the federal government, radiological safety. It is clear from statements by the NRC and the Supreme Court in Pacific Gas that the final decision on whether to continue operating a nuclear plant is beyond the NRC’s authority. Given the “particularly weak” support for AEA preemption of state law, courts should defer to a state’s declared purpose for regulating aspects of nuclear power Congress left to them and which do not interfere or conflict with NRC regulations. Moreover, if there is any question of whether the legislature’s motives were preempted, a court should limit preemption of state law to cases where it can “only conclude” that the legislature’s actions were preempted. See Hodel, 452 U.S. at 332. Thus, the district court in Entergy should have asked whether there was any rational nonsafety basis behind the legislature’s decision, not whether the state considered radiological public health in its relicensing decision.

Did Vermont’s Decision Frustrate Federal Regulation of Nuclear Power?

In Entergy, the district court recognized that “numerous precedents, and logic, indicate that a law enacted for an impermissible purpose must have a preempted effect in order to be invalid under the Supremacy Clause.” Entergy, 1:11-CV-99 JGM, 2012 WL 162400, at *37. However, exactly what the preempted effect was in Entergy is not entirely clear. According to the district court, the effect was apparent from the legislative text, which called for the Vermont legislature to consider public health issues related to dry cask storage of nuclear waste and the concurrent authority to allow Vermont Yankee’s Certificate of Public Good (CPG) to lapse for any reason and evade review. While this may be true, the district court failed to explain how this interfered with NRC’s regulation of nuclear safety. Although the NRC makes the final decision on safety, it does not make “the final decision on whether or not to continue operating the nuclear plant.” Id. at 31 (citing an NRC document).

It seems the district court relied heavily on the Supreme Court’s statement in Pacific Gas that a state moratorium “grounded in safety concerns falls squarely within the prohibited field.” Id. at *34 (citing Pacific Gas, 461 U.S. at 212–13). This statement in the Pacific Gas opinion should be considered in context. California enacted its moratorium on construction of new nuclear power plants in the 1970s. If states were allowed to ban construction of new plants on safety grounds alone, it is possible that no new plants would ever have been built and it would have neutered the NRC and frustrated the AEA’s objective “to insure that nuclear technology be safe enough for widespread development and use.” Pacific Gas, 461 U.S. at 213. More than thirty years later, the AEA’s original objective seems largely to have been achieved. Arguably, keeping old reactors online for longer than an original forty-year license prevents newer, safer, and more cost-effective nuclear plants from competing.

Also, imagine a situation where two statutes have the same language. The legislative history of Statute A is grounded in concerns over nuclear safety while the history of Statute B relies on nonsafety concerns. Both statutes place a moratorium on construction of new nuclear plants until the NRC approves a long-term nuclear waste disposal plan. Under a strict “grounded in safety” rule, only Statute B would survive, though Statute A has the exact same effect. This begs the question of whether the state’s motives make a difference. Even if Statute A is preempted, what is to stop the legislature from redrafting Statute A to mimic Statute B? The only difference is that the legislature will choose its words more carefully the second time to survive judicial scrutiny. Although the state’s purpose could be gleaned from the earlier statute, the Supreme Court in Pacific Gas purposefully ignored looking to legislation of a “common heritage” because the related legislation was not before the court, was not passed, and its “pedigree [did] not taint” other parts of the California statute. Id. at 215–16.

A strict “grounded in safety” test also creates a situation where the more problems that arise at a nuclear power plant, reflecting diminishing economic feasibility, the less likely it is that states will be able to avoid preemption. State officials are bound to make comments on safety concerns and, therefore, create a record that potentially shows decisions were “grounded in safety.”

The Supreme Court in Pacific Gas also relied on the test for preemption in field preemption cases announced in Rice v. Santa Fe Elevator Corp., which provides that state law is preempted if “the matter on which the State asserts the right to act is in any way regulated by the Federal Act.” Pacific Gas, 461 U.S. at 213 (citing Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 236 (1947)). A closer examination of the Rice case reveals that Congress eliminated the dual state and federal system of regulation at issue to achieve uniformity. Any intrusion by a state into the preempted field in Rice would interfere with that goal. In contrast, the Supreme Court has recognized the validity of state intrusion into a field occupied by the federal government in cases where a system of dual regulation exists and there is no direct conflict with federal law. Such was the case in Pacific Gas and later Supreme Court decisions on AEA preemption of state law (e.g., Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) (upholding award of punitive damages); English v. Gen. Elec. Co., 496 U.S. 72 (upholding state tort law claim for intentional infliction of emotional distress).

Could Vermont Prevail on Appeal?

While the record in Entergy is largely unfavorable to the state of Vermont, there are solid arguments in favor of giving Vermont much more leeway than it was given by the district court. Congress clearly left the states authority to regulate aspects of nuclear power, and there is a strong presumption against preemption. There is little value and arguably little legal authority to search for preempted legislative motivations when there is at least a rational nonsafety basis for the state’s actions. Moreover, the NRC is not affected by the result on appeal because it cannot determine whether Vermont Yankee should be allowed to continue operating, only that it is safe to do so. Vermont, on the other hand, faces potential limits to its sovereignty. The Supreme Court recognized there are “both safety and economic aspects” to nuclear power. See Pacific Gas, 461 U.S. at 196 (referring specifically to nuclear waste). Indeed, Entergy recovered millions of dollars from taxpayers for the federal government’s breach of its promise to collect and dispose of spent nuclear fuel pursuant to federal law. Entergy Nuclear Vermont Yankee, LLC v. United States, 95 Fed. Cl. 160 (2010). Given these competing interests, it seems Vermont could prevail. Perhaps the Second Circuit, and potentially the Supreme Court, will consider the concurring opinion in Pacific Gas in which Justice Blackmun states, “There is, in short, no evidence that Congress had a ‘clear and manifest purpose,’ to force States to be blind to whatever special dangers are posed by nuclear plants.” Pacific Gas, 461 U.S. at 225 (Blackmun, J., concurring) (internal citations omitted).

Looking to the Future

The issues discussed in this article are a subset of those the Second Circuit will need to resolve on appeal. Among those issues is whether Vermont has a rational nonsafety basis for regulating Vermont Yankee at all, given that the Supreme Court in Pacific Gas carved out merchant generators as an exception to states’ traditional authority to regulate utility rates. However, the district court did not address this issue, and it is beyond the scope of this article. Similarly, the district court did not preempt the Vermont PSB’s authority to determine, as a matter of economics or other nonsafety reason, whether to deny Vermont Yankee a CPG. The PSB’s docket remains open. It is critical, however, for the Second Circuit to address the scope of federal preemption and the proper weight to be given legislative histories. This will provide the guidance necessary to determine whether there are any permissible grounds on which states are allowed to shut down aging nuclear power plants otherwise given an extended life by the NRC.

Kenneth J. Rumelt

Mr. Rumelt is a fellow and staff attorney at the Vermont Law School Environmental and Natural Resources Law Clinic.