PSI ENERGY, INC. and Cincinnati Gas & Electric Co., Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee, 411 F.3d 1347

Opinion for the court filed by Circuit Judge NEWMAN. Dissenting opinion filed by Circuit Judge CLEVENGER. PAULINE NEWMAN, Circuit Judge. PSI Energy, Inc. and Cincinnati Gas & Electric Co. (together “the appellants”) appeal the judgment of the United States Court of Federal Claims, holding them liable for tax levied on users of enriched uranium for generation of nuclear power, although the appellants did not use the enriched uranium or produce nuclear power. We conclude that the tax was improperly levied on the appellants, and reverse the decision of the Court of Federal Claims.

BACKGROUND A nuclear reactor operates using the uranium isotope U-235. As the reactor fuel is depleted, the U-235 reverts to the inactive form. To use the uranium, it is necessary to increase the concentration of U-235 to that needed for nuclear reaction, a process called “enrichment.” Since 1977 the United States government has performed this enrichment and has charged the user-utility for the cost thereof. The fee is calculated by a formula that includes the difference in the amount of U-235 in the starting material, and the amount of U-235 in the enriched fuel that is returned to the utility.

This difference is defined in terms of “separative work units” (SWU). The appellants explain that SWUs are not tangible objects, but are the method used to quantify the amount of effort expended to produce the enriched uranium. Thus although the utility does not receive back the same batch of uranium that it delivered to the government, it is charged a fee based on the amount of enrichment acquired by the utility. Over the years, this activity contaminated the government’s uranium processing facilities with various radioactive and other waste products.

In 1992 Congress enacted the Energy Policy Act (EPACT), 42 U.S.C. § 2297g-l(

a) et seq., whose purpose was to recover the part of the cost of decontamination that was due to this work done for power-generating utilities (the cost due to military uses was not charged to the utilities). The EPACT levied a “special assessment” on the utilities whose spent nuclear fuel was processed by the government. The assessment was measured by the number of SWUs purchased from the DOE and used by the utility.

The EPACT provides that if the utility sells the SWU, it will not be considered to have purchased the SWU from the government: (2) a utility shall not be considered to have purchased a separative work unit from the Department if such separative work unit was purchased by the utility, but sold to another source. 42 U.S.C. § 2297g-l(c). For discussion of the background of the statute, see Commonwealth Edison Co. v. United States, 271 F.3d 1327 (Fed.Cir.2001) (en banc).

The appellant utilities purchased enriched uranium from the government from 1977 to 1983, but ultimately did not use any of it to generate electric power. In 1984 the appellants sold their entire stock of nuclear fuel to other utilities in the secondary market. Due to market standardization, the selling price was stated as if the resold fuel contained fewer SWUs than the utilities had purchased from the government.

The government levied a tax of $336,987.74 on PSI and over $67,000 on Cincinnati Gas, on the theory that because these utilities sold nominally fewer SWUs than they received from the government, they were liable for the assessment on the purportedly missing SWUs, whether or not they were used by these utilities. The Court of Federal Claims held that the tax was correctly applied. DISCUSSION The appellants argue that the statute levies the tax on the user of the fuel, and that since they did not use the fuel, they are not subject to the tax.

They argue that it is incorrect to tax the appellants as if they used the fuel, when they sold their entire stock. The appellants state that although the tax provisions of the EPACT designate the SWU as a convenient measure of the amount of enrichment, the statute explicitly exempts liability for the tax when the enriched fuel is resold. The appellants state that since the entire quantity of fuel was sold, the statute eliminates their liability for the tax, and that it is irrelevant that they had restated the SWUs present in the fuel that was sold.

The government responds that the tax is based on SWUs, and that by selling the fuel as if the fuel had fewer SWUs, it was as if the appellants used the fuel embodying the difference in SWU. Although the statute does not contemplate this apparently rare fact situation, it is clear that the tax was intended to be levied on the user of the enriched uranium. On any theory, the appellants did not use any of the enriched uranium; they simply resold it. In Union Electric Co. v.

United States, 363 F.3d 1292, 1294 (Fed.Cir.2004), this court explained: [A]s to those utilities that submitted the uranium to the government for processing, the tax was effectively imposed on their utilization of the government enrichment services. With respect to companies that purchased already-enriched uranium from those that had utilized the government enrichment services, the tax was effectively imposed on their purchase of the enriched uranium.

The court held that the tax was properly imposed on the ultimate user, and that the tax “did not apply to ... (3) domestic utilities that sold their government-enriched uranium prior to October 24, 1992.” Id. A SWU does not exist independently of the uranium nuclear fuel, for it measures the degree of enrichment acquired by the utility. When the appellants sold all of their enriched uranium, and retained none, they could not be charged with the tax levied on users. The government argues that its

interpretation of § 2279g-l(c)(2) should be accorded deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), stating that the statute is ambiguous and that the government’s

interpretation of an ambiguous statute must be given deference. However, we discern no ambiguity. The government argues that the Department of Energy stated the position now taken, in a comment during a rulemaking hearing in 1994. That comment, however, concerned the actual assay of resold uranium, not a discounted price. Nor is deference warranted for informal comments when the statute deals with the issue. There is no ambiguity in the statutory requirement and the precedent of Yankee Atomic Electric Co. v.

United States, 112 F.3d 1569 (Fed.Cir.1997) and Union Electric, supra, that the cleanup tax is levied on the user of the fuel, not on a non-user who simply resells the fuel. When all of the enriched fuel was resold by the appellants, by statute they are not hable for the tax. It is irrelevant that the fuel was resold for less than its cost in SWUs. The judgment of liability is reversed; on remand the appellants shall recover the assessment, with interest in accordance with law. REVERSED AND REMANDED . PSI Energy, Inc. v. United States, 59 Fed. Cl. 590 (2004). .

We take note that a member of this panel would hold these utilities liable on the broad ground that "liability stems from the contamination of the processing facility and the costs associated with decommissioning gaseous diffusion plants.” The statute, however, is explicit in imposing the assessment only on the user of the enriched uranium, as this court’s precedent has confirmed. Yankee Atomic, 112 F.3d at 1575 ("the Act targets whichever utility eventually used and benefited from the DOE's enrichment services”).

The dissent further strays in stating that the effect of this decision is that the tax on the missing SWUs is “lost,” for that question is not here at issue, and was not decided by either the trial court or this court.