ML20055C472

Litigation Rept 1990-21

ML20055C472
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Issue date:	05/07/1990
From:	Cordes J NRC OFFICE OF THE GENERAL COUNSEL (OGC)
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TASK-AII, TASK-SE SECY-90-161, NUDOCS 9005090347
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p ADJUDICATORY ISSUE May 7, 1990 Onf0MTladOn)

SECY-90-lE1 The Commissioners FOR:

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FROM:

John F. Cordes, Jr.

j Solicitor SUFJECT:

LITIGATION REPORT 1990-21 b

Kerr-McGee Chemical Corporation, et al., v. U.S.

Nuclear Regulatory Commission, Nos. 87-1254, 88-1636, & 88-1726 (D.C. Cir., April 27, 1990)

In August 1988 the Commission issued a decision which classified some of the wastes at Kerr-McGee's West _ Chicago Rare Earths Facility as

" source material" and therefore under Illinois' regulatory authority under the section 274 agreement the Commission had entered into with Illinois earlier that year.

See In re state of Illinois (Section.274 Agreement), CLI-88-6, 28 NRC 75 (1988).

In that decision, the' Commission held that, given the production history of the Facility, some of the waste materials did not fit under the definition of " byproduct material" in section 11e(2) of the Atomic Energy Act.

Both Illinois and Kerr-McGee appealed, and on April 27, the Federal Court of Appeals for the District of Columbia held that our approach to rection 11e(2) was " impermissible" and remanded the decision to the agency "for further consideration consistent with [the Court's] opinion."

Opinion (attached)'

at 3.

Section 11e(2) defines " byproduct material" as "the tailings or wastes produced by the extraction or concentration of uranium or thorium from any ore processed primarily for its source material content."

(Emphasis added.)

This definition was added to the Atomic Energy Act by the Uranium Mill Tailings Radiation Control Act (UMTRCA) to give a

the NRC authority over mill tailings, which would.

T otherwise have escaped NRC regulation because mill

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tailings usually do not have enough thorium or uranium in them to qualify as " source material".

f In applying this definition to the wastes at the

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e'4 West Chicago Facility, the Commission held that, although all of the ores processed at the site had been processed for thorium, some of the ores had

.been originally processed only for the rare earths in them and only later, after the Manhattan Engineering District was' established,-reprocessed for thorium.

Reading the word "primarily" fin section-11e(2) at face value, the Commission held-on these facts that some of the-wastes were the result of processing "primarily" for rare earths, not-thorium, and should therefore be classed not as byproduct material subject to regulation under

UMTRCA, but simply as source material (since there was enough residual thorium in the wastes to qualify them as source material).

While acknowledging the ambiguity of section 11e(2), and'the Court's limited role under Chevron ov. NRDC, 467 U.S. 837 (1984). in dealing with such ambiguity, the Court nonetheless held that the commission's approach to section 11e(2) was~

impermissible because, first,-had~the wastes at issue not also qualified'as source material, the Commission's approach would.have left these mill-tailings orphaned and outside any regulation, and.

second, the Commission's approach rendered UMTRCA inapplicable to material which was "in all relevant ways identical" to other tailings which-the Commission had already ruled were subject to UMTRCA.

The Court suggested that the commission.

could have avoided these results by either reading the word "primiarily" to mean "substantially", or the word " ore" to'mean "any feedstock", rather than " native ore".

We have 45 days to seek rehearing or rehearing en-banc before the Court of Appeals, and 90 days to seek certiorari in the Supreme ~ Court.

At present, we are consulting with NRC staff and the

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r Department of Justice on the possible consequences, in other cases, of complying with the court's more liberal approach to section

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.11e(2).

We shall soon provide the Commission an-analysis of its options for responding to the court's ruling.

Contact:

Steve Crockett' 21600 f

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Johd

. Cordes, Jr.

, Solicitor c.

Attachment:

Decision DISTRIBUTION:

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Notice: This opinion is subject to fannal wvision before pubbestion in the Federal Reporter or U.S. App.D.C. Reports. Users are requested to notify the Clerk of any formal errors in order that conections may be made before the bound volumes go to press.

g Entteh States Gourt of Appeals g

FOR THE DISTRICT OF COLUMBIA CIRCUTT Argued Nevernber 14,1989 Decided April 27,1990 Nos. 87-1254 & 881636 KzRR MCGEE CHEMICAL CORPORATION, PirTITIONER v.

U.S. NUCLEAR REGULAMRY COMMISSION AND UNTTED STATES OF AMERICA, RESPONDENTS STATE OF ILUNOIS, INTERVENOR No. 88-1726 Pcol t, OF THE STATE or ItuNoIS, PETTTIONER v.

USA & NUCLEAR REGULAMRY COMMISSION, RESPONDENTS Bills of costs must be filed within 14 days after entry of judgment. The court looks eth disfsvor upon motions to file bills of costs out of time.

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2 Petitions for Review of Orders of the.

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Richard A. Meeerve, with whom Peter J.: Nickels 'and

.l Sonya D. Winner were on the brief, for-petitioner Kerr-7

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McGee Chemical Corp.

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Wiuiam D. Seith, with whom J. Jerome Sinul was on the brief, for People of the State of Illinois, petitioner in No. -

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88 1726 and intervenor in Nos. 871254 and 881636.

Roma J. Stewart and Russell R. Eggert also entered' appostrunces for intervenor.

. Steven F. Crockett, Attorney, Nuclear Regulatory Com-mission' ("NRC"), with whom Peter R. Steenland, Jr.,

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Jacques B. Gelin, and Angus E. Crane, Attorneys,' Depart-ment of Justice, and Wiuiam C. Parler, General Counsel, 3

and E. Leo Slaggie, Acting Solicitor, NRC,~.'were on the; l

brief, for respondents. William H. Briggs, Jr.; E.~ Leo Dash-her, and Martin G. Malsch, Attorneys, NRC, and'Vichi-Plant and Dirk D. Snell, Attorneys, Department of Jus ~

tice, also' entered appearances for respondents.

Before MixvA, BucxizY, and D. H.. Gnessuno, Circuit.

Judges.

Opinion for the court filed by Circuit Judge BUculzY.L

_ BucxizY: Circuit Judge: The Kerr McGee Chemical Corporation ("Kerr McGee") petitions for review of a deci.

. sion of the Nuclear Regulatory Commission ("N{tC" or

" Commission") approving an agreement transferring juris-diction to the State of Illinois over certain radioactive -

materials located within that state. Kerr McGee also peti -

tions for review of a subsequent proceeding conducted by.

'l the Commission to determine whether radioactive waste materials located at Kerr-McGee's West Chicago, Blinois-facility are " byproduct material" or " source material" i

within the meaning of sections 11(e) and 11(z) of the 4

Atomic Energy Act, as amended ("AEA"), 42 U.S.C.

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3 ll 2014(e),2014(s) (1982). Illinois seeks review of this lat-ter proceeding as well and appears as an intervenor in Kerr McGee's petitions.

These cases challenge the Commission's interpretation of the de6nition of " byproduct material" found in section 11(e)(2) of the AEA, 42 U.S.C. 5 2014(e)(2). While _the Commission's construction appears plausible enough on

-its face, a statute must be read with an eye on its struc-ture and purpose as well as a dictionary. When the Com-mission's interpretation is considered in the context of the AEA's structure, the purposes of the Uranium Mill Tail-ings Radiation Control Act of 1978 ("UMTRCA"), Pub.

L. No.95-604,92 Stat. 3021 (codi6ed in scattered sections of 42 U.S.C.), which added section 11(e)(2) to the AEA, and its application to the wastes at Kerr McGee's West Chicago facility, it is clear that the Commission's inter-pretation is impermissible. It frustrates the twin purposes of the UMTRCA by recreating a gap in NRC licensing authority that the UMTRCA was designed to close and by placing certain. radioactive wastes-the "ofsite material"-outside of the regulatory regime established by the UMTRCA to deal with the health hazards posed by uranium and thorium mill tailings. We therefore grant the petitions for review of the NRC's second proceeding and remand for further consideration consistent with this opinion.

I. BACKoRoVND A. Statutory Fram.ework The AEA, as enacted in 1954, was intended to facilitate the development, use, and control of atomic energy. See AEA Il 1, 3, 68 Stat. 919, 921-22 (codified at 42 U.S.C.

. Il 2011,2013). It established the Atomic Energy Commis-sic:a ("AEC"), the forerunner of the NRC, id. I 21, 68 Stat, at 924 (repealed by Energy Reorganization Act of 1974,'l104(a),88 Stat.1233,1237 (transferring functions to NRC)), and gave it licensing authority over three defined categories of nuclear materials: "special nuclear

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material," source material," and " byproduct material."

Id. Il 51-82, 68 Stat. at 929-35 (codi6ed at 42 U.S.C.

Il 20712112). Persons seeking to possess, use, or transfer -

these materials were required to have a license from the.

AEC. Id. Il 53,57,62 63,81,68 Stat at 930 33,935 (codi-6ed as amended at 42 U.S.C. Il 2073, 2077, 2092 93, 2111). Through its: licensing authority, the AEC was empowered to establish standards for the safe une of these materials. Id. I161, 68 Stat, at 948 51-(codified at 42 U.S.C.~ l 2201(b)).

"Special nuclear material" consists of Basionable mate-rial, such as reactor fuel. See S. Rep. No.1699,83d Cong.,

2d Sess. 8 9 (1954); see also 42 U.S.C. I 2014(sa) (statu -

tory de6nition) " Source material" is the raw material, such as uranium or thorium, from which special nuclear-material is produced, or ores containing source materials -

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tion determine" 42 'U.S.C. I2014(z) (1982); see also W.

Fox, Federal Regulation of Energy 8 22.02 (1983) (explain-ing the nuclear fuel cycle).L" Byproduct material," as origi -

nally defined,= wase material made radioactive.through exposure to special nuclear material. AEA i 11(e),68 Stat.

at 923 (current version codified at 42 U.S.C. I 2014(e)(1)).

.It is important to note that all three types of material were considered useful. The AEA made no provision for.

regulating waste materials generated during the extraction or concentration of source material.

By the 1960's: and early 1970's,- federal and -state authorities began to realize that wastes, or " mill tailings,"

resulting from the extraction,or concentration of. source material posed _a significant public' health problem. H.R.

Rep. No.1480, 95th~ Cong.. 2d Sess., pt. 2, 28 (1978)

(" House Report"). As early as 1960, however, the AEC had concluded that because these mill tailings generally could not be classified as source material (their source-material content being below the 0.05% by weight stipu-lated by NRC regulation,10 C.F.R. I 40.4(h) (1989)), they lay outside the AEC's statutory licensing authority and therefore beyond its regulatory reach. See AEC General -

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5 Counsel Memoranda dated Dec. 7,1960 EApr.15,1960,

- reprinted in Uranium Afill Tailings Contml Act of 1978:

Hearings on H.R. '11698, H.R.12229, H.R.19938, H.R.

12535, H.R.13049 and H.R.18650 Before the Subcomm.

on Enera and Power of the House Comm. on Interstate and Foreign Commerce, 95th Cong.,2d Sess. 204-07 (1978)

(" Hearings").

After congressionally directed studies of the mill tail-ings problem were completed, Congress began to consider remedial legislation. The -House Report described the need for such legislation in the following' terms:

Uranium mills are a part of the nuclear fuel cycle.

They extract uranium from ore for eventual use in nuclear weapons and power plants, leaving radioac-tive sand like waste---commonly called uranium mill tailings-in generally unattended piles. As a result of many years of uranium ore processing, about 140 mil-lion tons have now accumulated at active and inac-tive milling sites, according to the Nuclear Regulatory Commission.

NRC Chairman, Dr. Joseph M. Hendrie, describes -

how these piles are a hazard to the public health:

"The NRC believes that long term release from tailings piles may pose a radiation health hazard if the piles are not effectively stabilized to minimize radon releases and prevent unauthorized use of the tailings."

House Report at 25. The legislation submitted with the House Report, the UMTRCA, was designed to address this potential health hazard by augmenting the existing regulatory regime to bring mill tailings within the NRC's explicit authority and to establish a comprehensive pro-gram to providt for their safe disposal. See id. at 28-30.

The purpose of the UMTRCA was two fold: first, to close the gap in NRC regulatory jurisdiction over the nuclear fuel cycle by subjecting uranium and thorium mill tailings to the NRC's licensing authority; and second, to

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disposal and stabilization of tho' tailings. Title I of the <

UMTRCA provided a specinc remedial program 'for '

s twenty designated inactive uranium milling sitee.

UMTRCA Il101115, 92 Stat, at 3022 33 (codi8ed as i

amended at 42 U.S.C. $$ 79117925). Title II established -

a comprehensive remedial program for mill tailings at all 5

other sites. Id. Il 201209, 92 Stat. at 3033 41 (codified in scattered sections of 42 U.S.C. ch. 23).

Title II brought mill tailings within the NRC's licensing.

authority by adding a new category to the AEA's de8ni-tion of byproduct material, namely, the tailings or wastes produced by'the extraction or ;

concentration of uranium or thorium from any. ore processed primarily for its source material content.

Id. I 201, 92 Stat. at 3033 (codined. at - 42 U.S.C.

I 2014(e)(2)) ("section 11(e)(2)"). The remedial provisions of Title II are keyed to this new category of licensable -

byproduct material; thus section 11(e)(2)' serves as the trigger for determining what materials are to be' subject to the remedial program established by Title II.

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.Under the provisions of Title II, the NRC, in conjune-tion with the Environmental Protection Agency (" EPA"),

is required to establish. standards for the decontamina-

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tion, decommissioning, and reclamation of milling sites-and the stabilization. and disposal of mill tailings. Id.

il 203,205(a),206,92 Stat. at 3036,3039 41-(codified at s

42 U.S.C. Il 2022,2114,2201). The NRC must also ensure that the tailings are properly handled according to those m

standards, Id. Il 202, 205,92 Stat at 3033 36, 3039 (codi-Bed at 42 U.S.CiIl 2111,211314). Pursuant to this man-date, the ' NRC < and - the EPA have established S

comprehensive criteria for the management, stabilization,'

and disposal of mill tailings. See 10 C.F.R. part 40 Appen-dix A (1989); 40 C.F.R. Il61.250.252,192.30.43 (1989).

Finally, section 274.of the AEA,42 U.S.C. I 2021, pro-vides for the sharing of some of the NRC's regulatory responsibilities with the states. If a state desires to assume regulatory responsibilities for certain types of l

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radioactive materials within its hmmdaries, and the Com-mission finda, after opportuinty for notice and comment, that the state's regulatory program meets certain statu-tory requirements and is otherwise compatible with the Commission's regulatory program, the Commission must enter into an agreement transferring regulatory authority over those types of materials to the state. 42 U.S.C. I 2021 (1982). The petitions'now before us arise from such an agreement.'

B. Factual Background '

In 1067, Kerr McGee acquired a mill in West Chicago, Illinois. This mill, established in 1931, was used to extract thorium and rare earths from monazite ore until it was closed in 1973. Thorium was originally extracted for use

' ' in the production of mantles for gas lamps, but beginning in the 1940's, the federal government purchased large quantities of thorium for use in its national defense pro -

gram. Most of the tailings resulting from the milling pro-cess -remained at the facility. (the "onsite material").

During the Srst two derMhs of the plant's operation, it appears that significant wantities were removed for use.

as landfill. Thus wastes produced at the plant found their way to certain residential areas, a nearby creek, a local park, and a sewage treatment plant - (the "offsite material").

In May.1987, the Commission and the State of Illinois entered into an agreement (" Agreement") pursuant to see-tion 274 of the AEA which provided that Illinois would obtain jurisdiction over source material within the state, while the Commission would retain jurisdiction over byproduct material as of June 1,'1987. The Agreement did not specify which materials in Illinois were to be charac-terized as source or byproduct. When it was published for comment, however, the NRC staff expressed the opinion that the onsite material at Kerr McGee's facility was byproduct material and therefore would remain within the NRC's jurisdiction, while the offsite material was source material and therefore would fall under the state's juris-

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8' diction. Staff Assessment of h nw! Agreement'Between i

the NRC and the State of I#inois, 52 Fed. Reg. 230911, 2322 (1987). Kerr McGee objected to. the' NRC stafrs characterization of the ofeite wastes as source material:

-and urged the Comminaion to consider. this objection before approving the Agreement. On May.-13,1987, the-Commission approved the Agreement without responding.

to Kerr McGee's objection.'-Notice of Agreement 'With.

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State of I#inois, 52 Fed. Reg. 22,894 (1987). Kerr-McGee's ;

petition for review of the Comminaion's approval is before us in No. 87 1254.

'In the meantime, on May 28,1987, after the Agreement had been signed but just before it had gone into effect,'

the NRC staff moved before an-administrative appeal board to dismiss another proceeding concerning ossite material found in nearby Kress Creek on the grounds that it was source material and, as such, would no longer be?

within the jurisdiction of the NRC. Kerr McGee opposed this motion, and on June 23, 1987, the appeal board -

denied the stafra motion on the ground that the tailings in Kress Creek were byproduct material still within the NRC's jurisdiction. The stas petitioned the Commission for review of this ruling on July 13,= 1987.

On September 11, 1987,- the Commission announced that it would hold the stafra petition for review in abey-ance because the dispute with Kerr-McGee concerned the proper classi6 cation of a# of the offsite materials from the

'g West' Chicago facility, thus causing substantial uncei-tainty over the proper division of regulatory responsibility.

between Illinois and the NRC. In re State ofI#inois, NRC

.7-No.' MISC 871, Order at 2 (Sept.11,1987). To resolve this uncertainty, the Commission decided to conduct,a further-proceeding-to determine as a factual matter.

whether the materials at and around Kerr-McGee's facil-ity (including those 'at Kress Creek) should be classi8ed as source material or byproduct material. Id. at 2 3.

On August 5,1988, the Commission rendered its deci-sion, holding that the onsite material and the tailings at l

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Kress Creek and one other location were byproduct mate-i rial and therefore within its jurisdiction, while the others 4

were source material within Illinois' jurisdiction. In re i"

State of Ihois, 28 N.R.C. 75 (1988). The Commission so held because of its conclusion that while the de6nition of source material was based on'its content, the definition of byproduct o material, which contains the phrase

" processed primarily ' for. its source material content,"

required a' determination of the purpose for which the ore was first processed. Id. at 80. The NRC acknowledged that as a consequence of its reading of the statute, "two waste piles msy be identical in content and thus pose the same health hazard and yet one pile may be 'l11(e)(2) byproduct material' because of its history." Id.

The Commission based its determination on an analysis of the sales and production history of the facility. It found

' that the tailings produced during the period from 1936-1953 resulted frora ore that in the first instance had been processed' for its rare earth rather than its thorium (source material) content, while the reverse was true for most of the period after 1953. Because the offsite wastes were produced 'during the former period, the Commission concluded that they were source material. The Commis-sion stated that

[t]he sales and production figures for that period [be-fore 1954] show that processing was driven by the demand for rare earths: During the period 1936-1953,.

processing at the facility aimed to extract all the rare earths and thorium from 30,000 tons of ore, and all that was extracted was sold. However, of that 30,000 tons, only 13,986 were initially processed for thorium sales. The other 16,104 tons were initially processed only for their rare earths content, and the byproduct of that processing, still with its full complement of thorium, was stockpiled. Only later was that stock-piled byproduct reprocessed for its thorium, for sales to the AEC. Thus, although all 30,000 tons eventually were processed for their thorium, the demand for

- rare earths was apparently sufBeient to cause all 30,000 tons to be processed. Conversely, the demand

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purpose for the processing.... Thus the ore pro--

ceased before 1954 was processed primarily for its-rare earths content, and the wastes from that pro-cessing are not $11(e)(2) byproduct material.

Id. - at-87 (citations ^ and footnote omitted, emphasis-in original).

Thus,'even though all of the tailings had been derived '

from ores processed for their rare earth as well as thorium '

content and were identical both in their physical composi-

- tion and in the health hazards they posed, the.Commis -

sion held that one group of tailings-the offsite wastes-

. were source material,' while the other-group-the onsite wastes-were byproduct material. Id.: at 75, 80-87. This :

was the necessary consequence of a construction of sec -

tion 11(e)(2) that effectively held that_ unless the first, chief, or principal purpose for processing a particular batch of ore is to obtain source material, the resulting tailings are not byproduct material. Kerr McGee and Illi-nois petition for review of this decision in Nos. 88 1636 and 881726.

- II. Discussion In their petitions for review, Kerr McGee and Illinois take issue with the Commission's interpretation of section 11(e)(2) of the AEA. They also contend that the Commis-sion wrongly reliedi n a Kerr McGee internal memoran-o

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dum that wa8et4roperly partbf the ree'ordsaidietlast

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they were deniedee' opportunity to confront the memo-randum.~ Kerr McGee raises two additional arguments:

that transfer of regulatory jurisdiction to a state agency that has prejudged the issues and is a party to proceedings before the Commission violates Kerr McGee's due process -

rights, and that the Commission failed to follow its own precedural rules. Illinois, an intervenor in both.of Kerr-McGee's petitions, sides with the'NRC on the first argu-ment but takes no position with respect to the second. -

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11 As we 6md that the Commission's interpretation of ese-tion 11(e)(2) of the AEA is an impermissible one, we grant the petitions for review 'of the Commission's August 6, 1988 decision. Because the Commission's impermissible interpretation does not affect the Agreement transferring regulatory jurisdiction over source material to Illinois and because we reject Kerr-McGee's other argumenta, we deny Kerr McGee's petition for review of the Commission's

. approval of the Agreement.

When reviewing an agency's interpretation of an ambig-uous provision in its organic act, a court will defer to the agency's construction if it is reasonable. Chevron U.S.A.

Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843 & n.11,845 (1984). The court, however, must reject the agency's interpretation if it is "' inconsistent with the statutory mandate or [would) frustrate the policy that Congress sought to implement.'" Securities Indus. Ass'n

v. Board of Governors, 468 U.S.137,143 (1984) (quoting

- FEC v. Democratic Senatorial Campaign Committee, 454 U.S. 27, 32 (1981)).

Throughout the.AEA, different classes of materials are dealt with in accordance:with their physical properties and place within the nuclear fuel cycle. The UMTRCA is no different. In section 11(e)(2), as originally presented in the' UMTRCA, byproduct material was defined as-"the tailings or wastes produced by the extraction or concen-tration of uranium or thorium from source material." H.R.

13382, 95th Cong., 2d Sess. I 1 (1978) (emphasis added).

Because of his concern that tailings resulting from the processing of low grade feedstock ore containing less than

- the 0.05% uranium necessary to constitute source material under NRC rules would escape regulation under the pro-posed de6nition, then-NRC Chairman Dr. Hendrie sug--

gested that the de6nition of byproduct materials proposed in section 11(e)(2) be revised to substitate "any ore pro-ceased primarily for its source material content" (the lan-guage now appearing in the section) for the words " source material." Rearings at 343. When questioned as to the sig-nificance of the phrase " processed primarily for its source I

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12 material content," Dr. Hendrie_ explained that 'the lan-guage was intended to avoid bringing within NRC jurisdic-tion - radioactive wastes resulting from - activities not connected with the nuclear fuel cycle, which would be left

' to EPA regulation. The following exchange between Dr.

Hendrie and Subcommittee Chairman Dingell_is instruc.

I tive:

Ma. HENDam. Mr. Chairman, tis intent of the lan-guage is to keep NRC's regulatory authority primarily a the 8 eld of the nuclear fuel cycle. Not to extend.

-this out into such things as phosphate' mining and perbaps even limestone mining which are operations that do disturb the radium bearing crust of the Earth and produce some exposures but those other activities are not connected with the nuclear fuel cycle, EPA is looking at those and those-appear to me to be things that ought to be left to EPA regulation under the Resource Conservation Recovery Act and general authorities.

Ma. DneoEu Your thesis is that we ought not how-ever set up a set of circumstances where we would-leave some of these to' fall between the cracks and wind up being unregulated.

Ma.-HENDaB. I agree fully, Mr. Chairman, and I believe the way the language would cut here, as we recommended, would not leave any crevasse between the two authorities.

Id. at 344. It is clear from this exchange that the defini-tion of " byproduct material" proposed by Dr. Hendrie and adopted by Congress was designed to extend the NRC's -

regulatory authority over' all wastes resulting from the extraction or concentration of-source materials in the course of the nuclear fuel cycle.

And yet, in applying Its interpretation of section 11(e)(2), the NRC makes its determination of what waste materials will be subject to the Title 11 remedial regime not on the basis of their physical characteristics or rela-tionship to the nuclear fuel cycle, but solely on the objec-tive for which the feedstock ore is first processed. As a A

13-consequence, the NRC's interpretation recreates the regu-latory gap that the UMTRCA was designed to eliminate and excludes from regulation for the protection of the public health some of the radioactive tailings that Con-gress intended to bring within the agency's authority.

The NRC achieves this anomalous result by attaching

.the narrowest possible meaning to the phrase " ore pro-ceased primarily for its source material content." 42 U.S.C. I 2014(e)(2). The NRC construes the word "primarily" to mean that the extraction of thorium or ura-nium must be the first, chief, or principal reason for pro-cessing the ore brought to a mill in order for the resulting tailings to be characterized as " byproduct material? By implication, the NRC also' defines " ore" as material from

- hich nothing of value has yet been extracted.

w Thus, in the case before us, the NRC determined that because more than half of the feedstock ore processed

' during the period m which the offsite material was gener-ated was first processed for its rare earth content with the remaining material stockpiled and only later processed for -

thorium, the offsite wastes were not section 11(e)(2) byproduct material. State of Illinois, 28 N.R.C. at 87. Con-sequently, the NRC arrived at the bizarre conclusion that

. only one of the two piles of tailings could be classi6ed as -

byproduct material-and therefore made subject to those regulations designed to protect the public health from hazards posed by it-even though both-piles had been derived from the same ~ series of chemical processes applied to the same feedstock ore and, as a consequence, were chemically indistinguishable.-

This is not s' situation where inconsistent results are mandated by the language Congress has written into law.

Here the language is clearly ambiguous, or we would not be concerned with the deference due the agency's inter-pretation under the Chevron analysis. But Chevron does not require deference to an interpretation that would

" frustrate the policy that Congress sought to implement."

Securities Indus. Ass'n, 468 U.S. at 143. Here, the NRC

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-14 could easily have placed an alternative construction on-e the key-phrase, " ore processed primarily for its source material content," that would not have scuttled critical congressional objectives.

As the Supreme Court has pointed-out, the word "primarily" is capable of a range of meanings extending' from "6rst" or

• chief" to "substantially.". See Board of Governors v. Agnew, 329 U.S. 441, 446-47 (1947)-(inter-

- preting the term "primarily engaged" in section 32 of the~

Banking Act 'of 1933,12 U.S.C. I 78). Had the agency adopted the.latter meaning, it could easily have found that the offsite tallingn had been derived from ore that had been "substantially" processed for its thorium con-tent.

The word " ore" is also subject to more than one mean -

Ing.. In' fact, there is ample basis within the AEA for applying the term to the stockpiled material remaining--

after the rare earth had been extracted from the feedstock =

- ore and before that material had been processed for.its thorium. content.' For example, section ; 101 ' of. the UMTRCA states that "[a]' license for the production of' any uranium product from residual radioactive materials shall not be treated as a license for production from ores

... if such production is. In accordance with'section 7918(b) of this title." 42 U.S.C. I 7911(b) (1982) (emphasis added). The clear in. plication-is that if such production -

is not in accordance with section 7918(b), then production from residual radioactive materials may be treated as pro- -

duction from ores.

Areover, the NRC's designation of the offsite tailings as "soerce material" implies that they may be properly categorized as " ore" because the' NRC defines source material as " ores which contain by weight... (0.05%) or-more of... thorium." 10 : C.F.R. I 40.4(h) -(emphasis added); see also 42 U.S.C. I 2014(z) (statutory definition of source material). The NRC cannot have it both ways.

If the offsite tailings may be characterized as ore, so must the stockpiled material from which they were derived.

+

15 The NRC's construction is not saved by the happen-stance that the tallings in this case have a sufBeiently

= high thorium content (0.05% or more by weight) to enable

' the agency: to classify-the offsite wastes as " source material" and therefore subject to its licensing authority under another part of the AEA. In the first place, statu-j tory definitions are intended to have general applicability.

A construction of section 11(e)(2) is not acceptable-if it will orphan mill tallings having a source material content of less than the 0.05% threshold, as is usually the case.

Second, the NRC's interpretation would exclude the off-site wastes from coverage by the regulations promulgated e

pursuant to Title II that are designed to protect the public health against the hazards created by mill tailings pro-duced in the course of the nuclear fuel. cycle.

=

III. CONCLUSION The UMTRCA was intended to bring previously unreg-ulated radioactive end products of the source material 4-extraction process within the scope-of NRC regulation

.and to provide a comprehensive remedial program for the -

b safe stabilization and disposal of uranium and thorium mill tailings. The NRC's interpretation of section 11(e)(2),

however, places a portion of the thorium tallings from Kerr McGee's West - Chicago - facility outside of the UMTRCA's regulatory regime even though they are in all relevant ways identical to tailings found by the NRC to be byproduct material and thus subject to the UMTRCA's remedial program. The NRC's construction thus frus-trates the purposes of the UMTRCA by rendering it inap-plicable to waste material that it was clearly intended to reach and recreating a jurisdictional gap it was intended to close. As we find that interpretation impermissible, and as we have considered the other arguments put forth by Illinois and Kerr McGee and found them without merit, we grant the petitions for review in Nos. 881636 and 88-1726, and deny the petition for review in No. 87 1254.

So ordered.

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