March 18 (Bloomberg) -- Hokuriku Electric Power Co. will continue operating a nuclear reactor in central Japan after winning an appeal against a suit brought by a group of citizens concerned about safety in the event of an earthquake.

The Nagoya High Court today reversed a ruling ordering the utility to shut the No. 2 reactor at the Shika plant in Ishikawa prefecture, it said in a statement. The Kanazawa district court ordered the 1,206-megawatt unit halted in March 2006.

Today’s ruling comes as Japan’s nuclear power industry tries to win back public support after an earthquake in July 2007 triggered a fire and radiation leaks at the world’s biggest atomic plant and a series of cases involving falsification of safety data came to light. The government and two other regional utilities are now contesting similar court cases in one of the world’s most earthquake-prone countries.

“The result confirms the stance we’ve been attesting to for three years since the first ruling that the Shika No. 2 reactor is safe,” Hokuriku Electric said in a statement. “We will make further efforts to gain the public’s trust and ensure the safe operation of the plant.”

Shares in the utility have lost 12 percent in the last six months, tracking the decline in the 17-member Topix Electric Power & Gas Index. The stock rose 0.7 percent to 2,270 yen at 1:08 p.m. in Tokyo trading.

‘Freedom From Fear’

“Today’s ruling is an injustice,” the plaintiffs said in a statement released in Tokyo. “The decision ignores the dangers faced by Japan, an earthquake-prone country, and we will appeal and continue fighting until we can bring about a world free from the fear of nuclear accidents.”

The group first filed suit against the utility in 1999 to demand the shutdown of the reactor, claiming the area is near a fault in the earth’s crust. Hokuriku Electric estimates the maximum strength of a potential quake at magnitude 6.8, while the plaintiffs argued that temblors as strong as magnitude 7.3 could strike.

In 2006, the Kanazawa District Court ruled that the utility should consider a large-scale tremor and take into account an offshore fault, 44 kilometers in length, in its quake assessment.

The utility has “properly” assessed faults near the facility and hasn’t underestimated the size of a potential earthquake, the Nagoya High Court said in a statement on the ruling. “The citizens’ claim didn’t present enough proof that the reactor will endanger the lives, health and bodies of plaintiffs,” it said.

Tectonic Shifts

Japan, the world’s third-biggest nuclear generator with 55 reactors, is located in a zone where the Eurasian, Pacific, Philippine and North American tectonic plates meet and occasionally shift, causing quakes.

The 6.8-magnitude temblor that struck northern Niigata prefecture in July 2007 rocked Tokyo Electric Power Co.’s Kashiwazaki Kariwa plant more than assumed in its design.

Tokyo Electric later said it had known since 2003 that a fault running near the site was active, contradicting a previous survey submitted to the trade ministry. A committee convened by Niigata prefecture, where the plant is located, will today decide whether it agrees with the decision of the trade ministry’s Nuclear and Industrial Safety Agency that a reactor at the plant is now ready to restart.

Safety Cover-Ups

For Japan’s central government, getting the plant back online is part of a broader energy policy to increase nuclear generation in order to cut carbon emissions and reduce fossil fuel dependency. Japan aims to supply 49 percent of total electricity demand with nuclear power by 2030 from about 31 percent in 2005.

To head off opposition to new reactors, the nuclear safety agency demanded that power companies reveal any unreported safety breaches by the end of March 2007. In response, seven of Japan’s 12 public utilities said they had falsified records for 30 years.

Hokuriku Electric said it failed to report a malfunction of the control rods, which resulted in an irregular shutdown during maintenance at its Shika No. 1 unit, also in Ishikawa prefecture. Control rods manage emergency shutdowns of reactors.

“We have ensured safety against earthquakes, and we will continue to do so to gain the trust of local residents and people nationwide,” Yasushi Komoda, director general of the nuclear safety agency, told reporters in Tokyo today.

To contact the reporter on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.

Last Updated: March 18, 2009 00:19 EDT