States, Advanced Reactor Developer Challenge NRC’s Authority to License Advanced Reactors

The outcome of a lawsuit filed at the end of 2024 challenging the U.S. Nuclear Regulatory Commission’s (“NRC’s or the Agency’s”) authority under a 1956 rule to license certain nuclear facilities could have important implications for advanced reactor licensing processes and the supply of electricity in the U.S. in the years ahead.

On October 31, 2024, the NRC proposed a rule, which develops a licensing framework for the new generation of nuclear reactor technology – advanced reactors (“Part 53 Rule”).  You can read our overview of the rule here.

During the comment period for the proposed Part 53 Rule, Texas, Utah, and advanced reactor developer, Last Energy, Inc. (the “Plaintiffs”), filed a lawsuit against the NRC challenging the Agency’s authority to license certain advanced reactor technology, such as microreactors.  The Plaintiffs’ complaint, which was filed in the Eastern District of Texas on December 30, 2024, alleges that the NRC’s proposed licensing requirements exceed the Agency’s statutory authority and hinders the development of advanced reactor technology in the U.S.

Specifically, the lawsuit challenges the NRC’s Utilization Facility Rule of 1956, which grants the Agency with authority to license a “utilization facility,” which is broadly defined as “[a]ny nuclear reactor other than one designed or used primarily for the formation of plutonium or U-233” (emphasis added).  According to the Plaintiffs, the Utilization Facility Rule violates the Atomic Energy Act of 1954 (“AEA”), which restricts the Agency’s licensing authority to reactors that use “special nuclear material in such quantity as to be of significance to the common defense and security, or … the health and safety of the public” (emphasis added).  In support of their claims, the Plaintiffs trace the history of the AEA, arguing that it evinces a clear congressional intent to narrow the NRC’s licensing authority.  The Plaintiffs contend that the NRC has ignored the AEA statutory limitations by requiring licenses for even the smallest advanced reactors, which do not pose any significant risks to security or public health.

In addition to the AEA claim, the Plaintiffs accuse the NRC of violating the Administrative Procedure Act.  Citing NRDC v. EPA, 755 F.3d 1010, 1023 (D.C. Cir. 2014), the Plaintiffs argue that the NRC failed to justify its assumption that microreactors are covered by the AEA’s language.

Among other relief, the Plaintiffs seek a court order vacating the Utilization Facility Rule as applied to certain advanced reactor technology and remanding it to the NRC for a new rulemaking.  Additionally, the Plaintiffs seek declaratory relief that the “tiny research and test reactors” operated by certain Texas and Utah universities and Last Energy’s proposed small modular reactors and microreactors do not need NRC licenses to operate – instead, such reactors should be subject to “applicable state-level radioactive materials handling, verification, and inspection requirements.”

The government has not yet entered an appearance or filed any papers in the litigation.  Hence, it remains uncertain how the new administration may react to this challenge, given its support for the development new U.S. energy sources.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.