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The state lost a major legal battle Wednesday in its fight to stop the Skull Valley Goshute Reservation in Tooele County from becoming a parking lot for thousands of tons of nuclear reactor waste.

The 10th Circuit Court of Appeals in Denver affirmed U.S. District Judge Tena Campbell's 2002 ruling that the state improperly hindered efforts by the Skull Valley Band of Goshutes and its partner, the utility consortium Private Fuel Storage (PFS), to pursue a federal license for their project.

While PFS applauded the ruling, Utah officials vowed to keep fighting, even as they began reviewing the 71-page decision.

"It's important to recognize we will continue to oppose the storage of high-level waste in Utah," said Amanda Covington, spokeswoman for Utah Gov. Olene Walker.

No comment was available from the Skull Valley Goshutes, but PFS spokeswoman Sue Martin hailed the ruling as "good news."

"This once again affirms the [U.S. Nuclear Regulatory Commission] has jurisdiction over the licensing of spent nuclear fuel storage," she said.

The appeals ruling comes at a crucial time for both sides: Next week in Washington, they will begin three weeks of closed-door arguments on the sole remaining obstacle still facing the waste site. To get its license from the U.S. Nuclear Regulatory Commission, PFS must convince a federal licensing board that the damage would not be too great if a jetfighter crashed into the storage casks.

PFS sees its facility as a solution to a national crisis of nuclear waste disposal. The proposed license would allow it to hold as much as 44,000 tons of used, but still dangerously radioactive, waste from the nation's 103 commercial reactors.

Up to 4,000 steel-and-concrete containers would hold the waste on 100 acres of the Goshute reservation for up to 40 years. A license could be granted as soon as next year, and waste could start rolling into the site by 2007.

The three-person appeals court, while offering some sympathy to Utahns wary of the project, agreed with PFS, the Goshutes and Campbell that it was wrong for the state to enact a package of laws in 1998 and 2001 intended to block the project.

Noting they "do not denigrate the serious concerns" of Utahns, the judges added it was the federal government - not the states - that Congress designated as the authority on spent nuclear fuel.

"We also note that many of the concerns that Utah has attempted to address through the challenged statutes have been considered in the extensive regulatory proceedings before the NRC, as well as in appeals from the NRC's decisions," the court wrote in its conclusions.

"We are hopeful that Utah's concerns - and those of any state facing this issue in the future - will receive fair and full consideration there."

The case began in 2001 when PFS and the Goshutes sued the state over the laws, which included heavy taxes, a $5 million license fee, a prohibition against doing business with anyone trying to bring high-level waste to Utah and others that basically violated what the business partners saw as their right to do business. State leaders are especially frustrated because PFS arranged to build the storage on tribal lands, which are not subject to state law.

Utah's principal legal argument in the case was that Congress never gave the NRC the authority to license a storage facility for reactor waste that was away from the reactor site.

But Campbell determined the federal laws preempted state regulations that Utah might have enacted on high-level waste. The state appealed a similar ruling by the Washington, D.C., circuit court that was rejected in February.

Neither attorneys for PFS nor those for the state had received the ruling and had the time to review it in depth and did not have further comment on possible future legal steps.