A high-stakes lawsuit against the U.S. Nuclear Regulatory Commission could force the agency to relinquish some of its authority over licensing smaller nuclear reactors to individual states, at a time when the NRC’s role is already facing challenges.
The complaint, originally brought by nuclear developer Last Energy and the states of Texas and Utah, asserts that the NRC does not have licensing authority over some nuclear microreactors and small modular reactors, or SMRs. If that were the case, states would likely assume oversight of such reactors, barring further congressional action.
It alleges that the NRC’s regulations have stifled innovation and development in the nuclear industry at a time when growing electricity demand is fueling a surge in support for nuclear energy. A settlement could be in the works.
“Although the case is still in its early stages, a successful legal challenge could significantly reshape the regulatory landscape for some reactors in the United States,” said Judi Greenwald, president and CEO of the Nuclear Innovation Alliance. “A patchwork of state-level oversight would hinder the commercialization of new reactors at home and abroad.”
In a statement, the NRC said it had “no comment on ongoing litigation“ but highlighted that it was reviewing three advanced nuclear construction permits.
“The NRC remains aligned with our interagency partners in efficiently regulating and enabling the deployment of nuclear power for America’s energy security while upholding the highest standards of public health, safety, and environmental protection,” the NRC said.
The agency has been in upheaval since President Donald Trump issued a slew of executive orders May 23 aimed at expediting nuclear safety assessments. Shortly after issuing the orders, the Trump administration informed the NRC that it would be expected to grant “rubber stamp” approval to new reactors already tested by the departments of Energy or Defense and sent an email firing Democratic Commissioner Christopher Hanson.
Michael Buschbacher, a partner at law firm Boyden Gray and lead counsel for Last Energy, Deep Fission and Valar Atomics in the lawsuit, contends that the fears of a chaotic regulatory environment are unfounded. He says that under the plaintiffs’ reading of the law, only designs that fall within new NRC-approved safe reactor parameters would skirt the agency’s licensing review.
“No commercial reactor can get away from the federal licensing requirements if it is not safe. And so that, to me, solves almost all of this concern,” he said.
“In terms of implementing it and ‘Do we really want 50 regulators?’ I mean, we already do have that. All kinds of rules apply to all power generation, and different states have different approaches to that. But we’re not adding a new requirement for states to figure out whether a reactor is safe — NRC will still have to do that,” Buschbacher continued, though he acknowledged that some changes to federal nuclear materials regulation might also be necessary.
In any event, diverse state-level approaches could potentially foster regulatory innovation, Buschbacher said, by creating a “race to the top.”
As for what a new NRC regulation should say, “the point is not that it has to adopt this or that specific threshold or methodology,” he said. “Congress did give the NRC authority to figure out what the exact line should be and why, but it didn’t let them just ignore that and say that everything falls under their licensing authority.”
Startups Valar Atomics and Deep Fission, the states of Florida and Louisiana, and the Arizona Legislature joined the lawsuit in the spring. The NRC originally said that the lawsuit was frivolous and violated the federal rules of civil procedure.
But in June the NRC joined the plaintiffs in asking the court to extend a stay on the proceeding until Sept. 29 to pursue “a mutually agreeable resolution that could avoid or limit further litigation in this case.” The U.S. District Court for the Eastern District of Texas granted the motion on June 30.
In May, shortly after being detailed to the NRC, DOGE representative Adam Blake had a series of introductory meetings with NRC commissioners and senior staff in which the lawsuit was raised, a person who was present at one of the meetings, granted anonymity to speak about a private conversation, told POLITICO’s E&E News.
“He thought it was part of his mandate to bring the parties together to facilitate a settlement of that lawsuit,” this person said. “The fact that Blake was there to settle the lawsuit suggests that it was going to be expected for NRC to give them some of what they wanted. Otherwise, why would you settle?”
It was not clear if Blake continued to push the agency toward settling the case after the initial meetings. He did not respond to a request for comment.
Legal arguments
The Atomic Energy Act of 1954 grants the NRC licensing authority over commercial reactors that use fissile nuclear material “in such quantity as to be of significance to the common defense and security, or in such manner as to affect the health and safety of the public.”
The plaintiffs argue that many microreactors and SMRs, like Last Energy’s 20-megawatt design, fall outside the NRC’s licensing authority because they use only small amounts of uranium and have passive safety features.
The NRC’s predecessor, the Atomic Energy Commission, “issued a rule in 1956 that just completely ignored this and said that anything, any civilian commercial reactor, regardless of design or anything else, has to get a construction and operation license,” Buschbacher said.
“Our argument is: Congress drew a line, the agency ignored it. And we brought a suit to say, ‘No, you can’t ignore what Congress told you to do,’” he said.
The Department of Justice, representing the NRC, responded in March with a motion to dismiss the case. The defense’s arguments centered on civil procedure, contending that only federal appeals courts can review NRC rules under the Hobbs Act, that the plaintiffs’ claims are time-barred by the six-year statute of limitations under the Administrative Procedure Act, and that plaintiffs should have worked “cooperatively with the NRC to address their objections to this longstanding and unremarkable rule by petitioning the agency to change it.”
The states and startups counter that the Supreme Court’s ruling in Corner Post v. Board of Governors of the Federal Reserve System last year allows parties newly injured by existing laws to pursue legal challenges. The complaint is one of the first to cite the Supreme Court decision.
DOJ’s response ventured a brief attack on the complaint’s merits, too, arguing that Congress implicitly acknowledged NRC jurisdiction when it passed the bipartisan 2024 ADVANCE Act, which imposes “regulatory requirements for micro-reactors” on the commission and instructs it to streamline the permitting process for advanced reactors.
What exactly a settlement might look like is difficult to predict, said a former senior official with the NRC, granted anonymity due to connections to the parties.
“I think a settlement would likely be an effort to try to get the NRC to have an expedited, simplified process for the ultimate licensing of microreactors,” the former official said. “It could also potentially include some opportunity for state inspection activities.”
One possibility could be that the commission may be close to completing a revised regulation that addresses the key issues raised in the lawsuit, said Keith Bradley, a partner at the firm Squire Patton Boggs.
“It is quite conceivable that the NRC is saying, ‘We have something that’s really close to done, just let us finish it,’” he said.
The agency could also have a “real desire to change” its regulations and may be willing to accept a court order partially vacating the existing rule, Bradley said.
An industry divided
The nuclear industry is split over the lawsuit’s push, and the startup plaintiffs have had little experience with the NRC.
Deep Fission has been in pre-application proceedings with the NRC since May 2024, and Last Energy only engaged with the agency in spring 2025. Valar Atomics has still not contacted or met with the commission.
Valar CEO Isaiah Taylor defended his company’s participation in the lawsuit. “If you believe that the jurisdiction is wrong, why would you engage in the process?” Taylor told POLITICO’s E&E News in an interview.
“Our standing comes from the fact that we’re trying to build reactors here in the United States. We have active customers, we have a site in Utah, and the NRC is wrongly holding jurisdiction over that project. It would be inconsistent of us to be in an NRC process given that,” he continued.
But SMR developers that have longer records of interacting with the NRC tend to oppose the lawsuit’s goals.
“For new reactors to be deployed at a meaningful scale, it will be vital to maintain public trust in the regulator,” said one nuclear company with more than five years of engagement history with the NRC. “A patchwork regulatory environment with inconsistent codes from state to state would present a challenge to developers and reduce efficiency at a time when we should be expediting processes.”
The company, granted anonymity due to fear of political retribution, went on to defend the NRC. The agency’s review timelines have generally shortened in recent years.
“As the nuclear industry evolves, the regulator must modernize in parallel. In recent years we have seen that licensing advanced reactors with the NRC under existing frameworks is possible. We believe the agency is capable of continued innovation,” the company said.
NuScale Power waited 41 months to receive a design certification in 2020, but it waited only 22 months to get a certificate for its new design in 2025. Part of the reduction in time is attributed to similar features in the two designs.
Greenwald with the Nuclear Innovation Alliance thinks that a successful lawsuit would burden both nuclear companies and states.
“This fragmented approach would undermine the federal government’s and plaintiffs’ shared goal of enabling the efficient and streamlined deployment of advanced reactors. It would also be very expensive and inefficient to have states attempt to duplicate NRC’s highly technical expertise,” she said.
Reporter Niina H. Farah contributed.
