Nearly 70 percent of Washington voters approved the initiative, now known as the Cleanup Priority Act, in 2004. The federal government immediately filed suit to overturn it.
In June 2006, U.S. District Judge Alan McDonald of Yakima ruled the initiative was unconstitutional because it violates federal authority over nuclear waste, as well as the Constitution's interstate commerce clause.
The state appealed to the 9th U.S. Circuit Court of Appeals in San Francisco, which upheld McDonald's ruling on Wednesday.
"Although the desire to take action against further environmental contamination and to protect the health and welfare of the community is understandable, we conclude that the statute enacted through the passage of Initiative 297, the Cleanup Priority Act, is pre-empted by federal law," a three-judge panel of the court said.
Gov. Chris Gregoire expressed disappointment with the ruling, but said the decision doesn't limit the state's ability to require cleanup at Hanford.
"I will continue to do everything I can to make sure that Hanford is cleaned up in a manner that protects our citizens and the Columbia River," she said in a statement.
The federal government created Hanford in the 1940s as part of the top-secret Manhattan Project to build the atomic bomb. The site continued to produce plutonium for the nation's nuclear weapons arsenal for 40 years.
Today, it is the most contaminated nuclear site in the U.S., with cleanup expected to continue for decades.
Under a national plan to clean up all federal sites, nearly every site in the Energy Department complex would export or import waste, or both. The federal government had argued it has exclusive authority over radioactive waste and that the initiative, if allowed to stand, would slow or impair those efforts.
The state attorney general's office, which defended the initiative, had argued that the state's authority to regulate hazardous waste extended to mixed waste that includes radioactive materials. The state also argued that the federal government could not strike down a law without first seeing how it would be applied.
In July 2005, the Washington state Supreme Court ruled that parts of the initiative could stand even if a federal judge found other parts unconstitutional. McDonald, however, struck down the measure in its entirety.
In doing so, he also found that the initiative impairs the Tri-Party Agreement, a 1989 cleanup pact signed state Department of Ecology, the Energy Department and the U.S. Environmental Protection Agency.
Gerald Pollet, executive director of the watchdog group Heart of America Northwest that sponsored the initiative, said he was disappointed but that he expects the state to appeal.
"The court's decision could undermine cleanup of Hanford and every other contaminated Department of Energy site, if states do not have authority to regulate these mixed radioactive hazardous wastes," he said. "No one in their right mind would trust the Energy Department to clean up on its own. It never has, it never will."
The state is still reviewing whether to appeal, said Janelle Guthrie, spokeswoman for the state attorney general's office. But she also said the state may find there are other ways to accomplish its goals as part of its negotiations over the Tri-Party Agreement.
Last year, the Energy Department announced it would be unable to meet some cleanup deadlines in the pact. The state has threatened to sue, but the two sides remain in negotiations to establish new cleanup priorities and milestones.