ALLIED-GENERAL NUCLEAR SERVICES, ET AL., PETITIONERS V. UNITED
STATES OF AMERICA

   No. 87-1902

   In The Supreme Court Of The United States

   October Term, 1988

   On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The Federal Circuit

   Brief For The United States In Opposition

            TABLE OF CONTENTS
   Question Presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-12a) is reported
at 839 F.2d 1572.  The opinion of the United States Claims Court (Pet.
App. 13a-54a) is reported at 12 Cl. Ct. 372.

                             JURISDICTION

   The judgment of the court of appeals (Pet. App. 55a) was entered on
February 24, 1988.  The petition for a writ of certiorari was filed on
May 20, 1988.  The jurisdiction of this Court is invoked under 28
U.S.C. 1254(l).

                          QUESTION PRESENTED

   Whether petitioner's property was taken without just compensation
when the Nuclear Regulatory Commission, acting in accordance with its
mandate under the Atomic Energy Act of 1954, did not grant petitioners
a license in the late 1970s to operate a nuclear fuel reprocessing
plant.

                               STATEMENT

   1. At the end of World War II, Congress adopted the Atomic Energy
Act of 1946, ch. 724, 60 Stat. 755, which prohibited the private
possession and use of nuclear energy technology.  Eight years later,
however, Congress enacted the Atomic Energy Act of 1954, 42 U.S.C.
2011 et seq. (AEA), which provides that private entities may possess
and use "special nuclear material" if they obtain a license from the
Nuclear Regulatory Commission (Commission).  /1/ See 42 U.S.C.
2014(v)(l), 2131.  The AEA defines "special nuclear material" as
plutonium, enriched uranium, and other substances that are capable of
releasing substantial quantities of atomic energy.  See 42 U.S.C.
2014(aa).

   The AEA establishes a two-step licensing procedure for entities
that want to possess or use nuclear technology and materials.  First,
an applicant must receive a permit from the Commission to construct a
facility for the possession or use of special nuclear materials.  See
42 U.S.C. 2014(v), 2014(aa), 2014(cc), 2131, 2133, 2235, 2239;  10
C.F.R. 50.10(b), 50.23, 50.55.  Second, the applicant, after
completing construction, must obtain an operating license from the
Commission.  See 42 U.S.C. 2133, 2137, 2232, 2235;  10 C.F.R. 50.56,
50.57.  The AEA provides that the Commission may not issue a license
if it believes that such a license "would be inimical to the common
defense and security or to the health and safety of the public" (42
U.S.C. 2133(d)).

   2. This case concerns nuclear fuel.  Most nuclear power plants in
this country are fueled by slightly enriched uranium dioxide.  As the
fuel enters the reactor, the uranium consists of about three percent
uranium-235 and 97% uranium-238.  Westinghouse Elec. Corp. v. NRC, 598
F.2d 759, 762 n.4 (3d Cir. 1979).  During the controlled nuclear chain
reaction, the uranium-235 atoms fission into lighter atoms and some of
the uranium-238 atoms transmute into plutonium, which also may fission
(ibid.).  Fission products impede the nuclear chain reaction.
Accordingly, nuclear fuel must be removed from the reactor as "spent"
and replaced with fresh fuel before the uranium and plutonium in the
fuel are completely expended.  Ibid.  Spent nuclear fuel, therefore,
contains uranium and plutonium that may be separated from the fission
waste products and made into new nuclear fuel (ibid.).  In the
separation process, plutonium must be isolated from the radioactive
waste.  This fact gives rise to great concern because plutonium may be
used by foreign governments or terrorists to build nuclear weapons.
Id. at 763.

   On February 1, 1970, petitioner Allied-General Nuclear Services
(AGNS) was formed to construct a nuclear fuel reprocessing plant in
Barnwell, South Carolina.  The Commission granted AGNS a construction
permit for the plant on December 18, 1970.  AGNS began construction in
February 1971.  In July 1971, the United States Court of Appeals for
the District of Columbia Circuit set aside many of the Commission's
rules implementing the National Environmental Policy Act of 1969, 42
U.S.C. 4321 et seq. (NEPA).  See Calvert Cliffs' Coordinating Comm. v.
AEC, 449 F.2d 1109 (1971).  The Commission promptly adopted new rules
to provide for complete environmental reviews of nuclear projects.
See 10 C.F.R. Pt. 50, App. E (1972).  The Commission also set forth
criteria by which to judge whether to suspend construction on projects
before a NEPA review could be completed (id., Para. E).  Petitioners
asked the Commission not to suspend construction on the Barnwell
reprocessing plant.  On November 30, 1971, the Commission granted
petitioners' request and allowed petitioners to "proceed with
construction at their own risk" (36 Fed. Reg. 23333).

   In February 1974, the Commission determined that any decision to
permit nuclear fuel reprocessing on a large scale would require an
environmental impact statement under Section 102(2)(c) of NEPA, 42
U.S.C. 4332(2)(C).  Westinghouse Elec. Corp. v. NRC, 598 F.2d at 763.
Thus, the Commission began work on a Generic Environmental Statement
on Mixed Oxide Fuel (GESMO).  See 39 Fed. Reg. 5356 (1974).  The
Commission published its first draft of GESMO in August 1974.  See 39
Fed. Reg. 30186.

   The Commission's draft GESMO prompted a number of critical
comments.  The President's Council on Environmental Quality stated
that the draft was "incomplete because it fails to present a detailed
and comprehensive analysis of the environmental impacts of potential
diversion of special nuclear materials and of alternatives safeguard
programs to protect the public from such a threat" (C.A. App. 84).
The Council noted that the threat from the illicit use of plutonium
"is so grave that it could determine the acceptability of plutonium
recycle as a viable component of this Nation's nuclear electric power
system" (ibid.).  The Commission essentially agreed with those
comments.  In November 1975, therefore, the Commission announced that
it would conduct a full assessment of issues regarding plutonium
security before it decided whether to approve wide-scale nuclear fuel
reprocessing.  See 45 Fed. Reg. 53056-53057, 53059 (1980).  Shortly
thereafter, President Ford stated that the nation "should pursue
reprocessing and recycling in the future only if they are found to be
consistent with our international objectives" concerning the spread of
nuclear weapons.  Statement by the President on Nuclear Policy, 12
Weekly Comp. Pres. Doc. 1624, 1626 (Oct. 28, 1976).

   3. President Carter outlined his policy on plutonium recycling on
April 7, 1977.  President Carter expressed deep concern about the risk
that plutonium could be obtained from the recycling process and be
used by foreign governments to make nuclear weapons.  See statement on
Nuclear Power Policy, 13 Weekly Comp. Pres. Doc. 506.  President
Carter stated that, in order to promote the government's international
non-proliferation goals, his policy was to "defer indefinitely"
domestic commercial plutonium recycling and to initiate a
multinational evaluation of alternative fuel cycles.

   In light of President Carter's statement, the Commission announced
its intent to reassess "the future course and scope of GESMO, the
review of recycle-related license applications, and the matter of
interim licensing." 42 Fed. Reg. 22964 (1977).  The Chairman of the
Commission sought the President's views on those matters.  A White
House official responded that "the President believes that his
non-proliferation initiatives would be assisted both domestically and
internationally if the Commission were to terminate the GESMO
proceedings . . ." (id. at 57186).  On December 23, 1977, after
receiving comments from interested parties, the Commission issued an
order terminating the GESMO proceedings and most license proceedings
relating to plutonium recycling.  See id. at 65334.  The Commission,
however, stated that it would reexamine this decision after two
studies of alternative fuel cycles were completed (ibid.; Westinghouse
Elec. Corp. v. NRC, 598 F.2d at 765).

   Petitioners and others sought judicial review of the Commission's
order.  The United States Court of Appeals for the Third Circuit
upheld the Commission's action.  The Third Circuit stated that,
"(g)iven th(e) broad delegation of authority to the NRC to choose the
necessary means by which to implement the general policy objectives of
the AEA, we cannot say that the NRC must inexorably proceed with the
processing of license applications and the development of a final
GESMO when in its judgment to do so would endanger the attainment of
its statutory objectives." Westinghouse Elec. Corp. v. NRC, 598 F.2d
761, 771.

   In early 1980, when the two studies regarding fuel cycles were
complete, the Chairman of the Commission asked the President whether
the Administration's views had changed.  The White House responded
that President Carter believed "that the GESMO proceedings should
remain terminated and that a reopening of GESMO would be inimical to
national security . . . ." The Commission published this response and
sought public comments on whether the Commission should reopen its
GESMO and license proceedings.  See 45 Fed. Reg. 53933 (1980).
Neither petitioners nor any other applicant for a license to construct
or operate a reprocessing facility responded.

   In early 1981, President Reagan announced that he was "lifting the
indefinite ban which previous administrations placed on commercial
reprocessing activities in the United States." Statement Announcing a
Series of Policy Initiatives on Nuclear Energy, Pub. Papers 903 (Oct
8, 1981).  President Reagan stated that it is "important that the
private sector take the lead in developing commercial reprocessing
services" (ibid.).  Petitioners, however, have not sought to reopen
either the GESMO proceedings or the proceeding concerning its
application for a license to operate the Barnwell plant.  Petitioners
instead filed this suit alleging that the Commission's actions
constitute a taking of the Barnwell reprocessing plant for public use
without just compensation (C.A. App. 48, 51, 54, 55).

   4. The United States Claims Court granted the government's motion
for summary judment.  The court held that petitioners' complaint is
premature because petitioners have not sought to obtain a final ruling
on their application for an operationg license (Pet. App. 32a-36a).
Alternatively, the court held that petitioners' property has not been
taken without just compenstation.  The Claims Court noted that "the
regulatory framework of the AEA was in place when (petitioners)
acquired or generated the property interest which (they) allege() has
not been taken" (id. at 26a n.7).  The court reasoned that the
"regulatory action here, presumed to be valid, cannot be said to have
involved considerations so unforeseeable that the public, rather than
the plaintiff, should bear the burden of the loss" (id. at 31a).

   The United States Court of Appeals for the Federal Circuit agreed
that petitioners' Barnwell plant had not been taken without just
compensation.  /2/ The court noted that the Commission suspended
licensing proceedings because President Carter viewed the processing
of spent fuel at Barnwell as a threat to the common defense of the
United States (Pet. App. 9a).  The court, relying on this Court's
opinion in Keystone Bituminous Coal Ass'n v. DeBenedictis, No. 85-1092
(Mar. 9, 1987), held that in uncompensated taking did not occur
because the government used its police powers to protect the public
from the threat of the spread of nuclear weapons.  The court of
appeals found "dispositive" the "basic rule that . . . as against
reasonable state regulation, no one has a legally protected right to
use property in a manner that is injurious to the safety of the
general public" (Pet. App. 8a).

   The court of appeals also based its judgment on an independent
ground.  The court observed that petitioners built the Barnwell plant
under a regulatory scheme that forbids the unlicensed operation of the
plant and that requires the Commission "to take into account the
common defense and security of the nation in passing on the licenses"
(Pet. App. 10a).  Petitioners built the plant with the knowledge that
the Commission could use its licensing power in "unforeseen"
circumstances -- here, to prevent the risk of nuclear weapons (ibid.).
 The court of appeals stated that "the novelty of nuclear fission, the
fearsome effect of its use in war, the public fears, all forbid us to
suppose that the government had committed itself to use of its
licensing power not to respond to some new ground of hesitiation just
because it was not originally foreseen" (ibid.).

   Lastly, the court of appeals rejected petitioners' argument that
there was a taking because the government encouraged petitioners to
build the Barnwell plant (Pet. App. 11a-12a).  The court noted that,
although government employees engaged in "jawboning" to encourage the
construction, the government did not guarantee petitioners an
operating license and never entered into a contract (express or
implied) with petitioners.  In the absence of such a contract or
promise, the court held, the government is not liable for petitioners'
losses.

                               ARGUMENT

   The judgment of the court of appeals is correct.  Its decision does
not conflict with any decision of this Court or any other court of
appeals.  Thus, no further review is warranted.

   1. The government "did not occupy, use, or in any manner take
physical possession of the (Barnwell plant)." United States v. Central
Eureka Mining Co., 357 U.S. 155, 165-166 (1958).  /3/ Nor has the
Commission issued a final order denying petitoners' application for an
operating license.  At bottom, therefore, petitioners' claim is that
they expected to receive an operating license in the late 1970s when
the Barnwell plant was nearing completion, and that the Commission's
failure to issue a license at that time was a taking of the Barnwell
plant.  Petitioners' claim is meritless because they knowingly assumed
the investment risk that the Commission, acting within its statutory
mandate, would not issue an operating permit when the plant reached
completion.

   The AEA (42 U.S.C. 2131) prohibits the operation of a nuclear fuel
reprocessing plant without a license from the Commission.  When
Congress adopted the AEA in 1954, it was aware that companies wishing
to build nuclear facilities would have to make substantial investments
in construction with no assurance of an operating permit.  Congress
enacted the law over the objection of witnesses who complained that "a
company might invest large sums in construction of a (facility), and
then be denied the right to operate it." Power Reactor Development Co.
v. International Union of Electrical Workers, 367 U.S. 396, 410
(1961).  Consequently, as this Court observed in Power Reactor
Development Co., a holder of a construction permit is "on notice . . .
that it proceeds with construction at its own risk, and that all its
funds may go for naught" (id. at 415 (emphasis added)).  In this case,
petitioners "willingly accepted that risk, however great" (ibid).  /4/

   Furthermore, petitioners had notice that the Commission has broad
authority to issue any order "to promote the common defense and
security or to protect health or to minimize danger to life or
property" (42 U.S.C. 2201(b)).  And the Commission, in reviewing
applications for operating licenses, is required under the AEA to deny
the license if "the issuance of a license . . . would be inimical to
the common defense and security . . . of the public" (42 U.S.C.
2133(d)).  Thus, petitioners were fully aware that the Commission
could deny an operating license on the ground that nuclear fuel
reprocessing creates an unacceptable risk of the spread of nuclear
weapons.  Accordingly, the Commission's decision not to issue a permit
to operate the Barnwell plant in the late 1970s, while the Commission
studied the proliferation risk, was well within the range of the
Commission's discretion as defined by the AEA and substantially
advanced the statutory policies of the AEA.  Westinghouse Elec. Corp.
v. United States, supra.

   Indeed, petitioners had particular notice of the risk associated
with building the Barnwell plant.  Shortly after construction began in
1971, the Commission allowed petitioners to "proceed with construction
at their own risk" while the Commission considered the environmental
impact of the plant (36 Fed. Reg. 23333 (1971)).  The Commission's
review of the widespread implications of plutonium reprocessing
continued throughout the 1970s.  During that process, the Commission's
attention was focused on the danger that the plutonium could be
diverted and used to build nuclear weapons.  See page 4, supra.  Thus,
the Commission's decision in late 1977 to suspend licensing
proceedings on reprocessing facilities had deep and public roots.
Petitioners' investment in the Barnwell plant was surely affected.
But petitioners never had the right to use its Barnwell plant to
reprocess nuclear fuel.  The value of petitioners' investment in the
facility was always dependent on petitioners securing an operating
license.  And petitioners "willingly accepted th(e) risk" (Power
Reactor Development Co., 367 U.S. at 415) that the Commission would
not issue such a license at the time of petitioners' choice.

   This Court's decision in Ruckelshaus v. Monsanto, 467 U.S. 986
(1984), forecloses petitioners' argument that its property has been
taken.  In Monsanto the Court addressed a claim that the government
took Monsanto's property interest in trade secrets, submitted to the
government by Monsanto to register its pesticides, when the government
considered those secrets in evaluating other applications for
registrations.  The Court rejected the takings claim specifically on
the ground that a federal statute authorized the government to use and
disclose trade secrets admitted in connection with an application to
register pesticides.  The Court stated that "as long as Monsanto is
aware of the conditions under which the (trade secret) data are
submitted, . . . a voluntary submission of data by an applicant . . .
can hardly be called a taking" (467 U.S. at 1007).  /5/ The Court
observed that "Monsanto could not have had a reasonable,
investment-backed expectation that EPA would keep the data
confidential beyond the limits prescribed in the . . . statute" (id.
at 1006).  /6/ See also Connolly v. Pension Benefit Guaranty Corp.,
475 U.S. 211, 226-277 (1986) (prior notice weighs against the finding
of a taking).

   Here, petitioners built the Barnwell plant while they were fully
"aware of the conditions under which" (Monsanto, 467 U.S. at 1007)
they could operate the plant.  They were aware that the Commission,
acting in accordance with the provisions of the AEA, might not issue
an operating permit.  Petitioners, therefore, "could not have had a
reasonable, investment-backed expectation that" (id. at 1006) the
Commission would necessarily permit operation of the plant once it was
constructed.  See generally Andrus v. Allard, 444 U.S. 51, 64-65 n.21
(1979) ("(t)he timing of acquisition of (property) is relevant to a
takings analysis of (the owner's) investment-backed expectations").
Accordingly, the Commission's actions did not constitute a taking of
petitioners' property.  /7/

   2. Petitioners primarily challenge (Pet. 12-16) an independent
ground of the court of appeals' judgment.  They assert that the court
of appeals erred in stating that there was no taking of petitioners'
property because the Commission's moratorium on licensing nuclear fuel
reprocessing plants was prompted by concerns for public safety and was
designed to avoid a public nuisance -- i.e., the spread of nuclear
weapons.  Petitoners' assertion, however, is not squarely presented
for review because the court of appeals' independent ground for its
judgment, discussed in point 1, supra, is plainly correct.

   In any event, the court of appeals' alternative reasoning is also
supported by this Court's precedents.  In Mugler v. Kansas, 123 U.S.
623 (1887), this Court considered a takings claim by owners of
breweries.  They claimed that their property had been taken when
Kansas adopted a constitutional amendment prohibiting the manufacture
of intoxicating liquors.  In rejecting the takings claim, the Court
stated:  "A prohibition simply upon the use of property for purposes
that are declared, by valid legislation, to be injurious to the
health, morals, or safety of the community, cannot, in any just sense,
be deemed a taking or an appropriation of property for the public
benefit" (id. at 668-669).

   In Keystone Bituminous Coal Ass'n v. DeBenedictis, No. 85-1092
(Mar. 9, 1987), slip op. 17, this Court rejected a claim that Mugler
and its progeny had been implicitly overruled.  The Court reaffirmed
those decisions "which focus() so heavily on the nature of the
(government's) interest in the regulation" (ibid.).  Accordingly, the
court of appeals followed this Court's decisions in Keystone
Bituminous Coal Ass'n and Mugler in ruling that the Commission's
actions, which were authorized by the AEA and were designed to protect
the public from the spread of nuclear weapons, did not constitute a
taking of private property.  Cf.  United States v. Central Eureka
Mining Co., 357 U.S. 155 (1958) (government order closing gold mines
during World War II was not a taking).  /8/

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   JOHN R. BOLTON

      Assistant Attorney General

   DAVID M. COHEN

   DOUGLAS LETTER

   TERRENCE S. HARTMAN

      Attorneys

   AUGUST 1988

   /1/ The AEA created the Atomic Energy Commission to administer the
statute.  In 1975, Congress abolished the Atomic Energy Commission and
created the Nuclear Regulatory Commission to assume all licensing and
related regulatory functions.  See 42 U.S.C. 5814(a), 5841(f).  We use
the word "Commission" to refer to either the Atomic Energy Commission
or the Nuclear Regulatory Commission.

   /2/ The court of appeals ordered the Claims Court to dismiss
petitioners' complaint with prejudice (Pet. App. 12a).

   /3/ The AEA expressly provides that the Commission must pay just
compensation if it occupies or operates a private nuclear facility.
See 42 U.S.C. 2236(c), 2238.

   /4/ We do not dispute that the Barnwell plant is property.  But
that plant's value as a reprocessing facility has always been
dependent on the Commission's issuance of a license.

   /5/ The Court concluded that Monsanto did not have sufficient
notice of the government's use of Monsanto's data for the period
between October 22, 1972, and September 30, 1978.  Thus, the Court
held that the government's use of data submitted during that period
may constitute a taking.  See 467 U.S. at 1010-1014.

   /6/ In Monsanto, the government appropriated private property but
the Court held that there was no taking because Monsanto knowingly
accepted such appropriate in return for the benefit of a pesticide
registration.  In this case, petitioners similarly sought a license
that would enhance the value of their property, but -- in contrast to
the situation in Monsanto -- the government has not in any way
appropriated any of petitioners' property.  Thus, there plainly is no
requirement that petitioners receive something of value in exchange
for the Commission's decision not to issue an operating license in the
late 1970s.

   /7/ Contrary to petitioners' suggestion (Pet. 17-18), this Court's
decision in United States v. Riverside Bayview Homes, 474 U.S. 121
(1985), is not inconsistent with this result.  In Riverside, the Court
observed that a taking may occur when a landowner is denied permission
to put his land to any "productive use" (id. at 127 n.4).  In this
case, petitioners have not shown that they were denied all productive
use of their land.  Rather, they assert (Pet. 18-19) that the Barnwell
plant's value was affected by the Commission's actions.  But the
plant's value as a reprocessing facility was always dependent on
petitioners obtaining an operating license.  Thus, unlike the
situation contemplated in Riverside Bayview Homes, the plant never had
an independent market value that was affected by the Commission's
actons.

   /8/ Petitioners argue (Pet. 15-16) that the Commission's actions
cannot be justified as designed to promote public safety and the
nation's defense because President Reagan changed presidential policy
in 1981 when he supported nuclear fuel reprocessing.  As we have
noted, however, petitioners have not renewed their efforts to obtain
an operating license and have apparently abandoned the Barnwell
project for economic reasons.  See C.A. App. 317.  Petitioners have
not sought judicial review of the Commission's actions since the Third
Circuit's decision in Westinghouse Elec. Corp. v. NRC, supra.  And, of
course, the mere fact that there has been a change of presidential
policy does not mean that the preceding policies were not valid and
lawful.  For present purposes, therefore, the Court must assume that
the Commission has always acted reasonably and within the confines of
the AEA.