British Nuclear Fuels Limited (BNFL) sparked fury among residents, councils and MPs after it emerged that it wanted to use sidings in Cricklewood, north-west London, to marshal trains taking fuel from three power stations to its reprocessing plant at Sellafield.
BNFL had to find a new location after it decided to terminate its contract with English, Welsh and Scottish Railways (EWS), the rail freight company, and use its own rail subsidiary.
Now BNFL has opened talks with EWS about leasing space at its marshalling yard in Willesden, an industrial area of north-west London. The move would be an embarrassing U-turn for the state-owned company as it would mean a return to the depot it used before switching contracts.
A spokesman for EWS said: "We are talking about the possibility of them using Willesden and we would need to find if we have enough capacity." He said EWS staff had had years of experience of marshalling trains carrying fuel flasks.
A BNFL spokesman said the company was still committed to using Cricklewood but was talking to EWS about using Willesden. One industry expert said the system of buying access to the track meant the contract would run for at least a year.
The company admits the affair has been a public relations disaster - plans emerged after BNFL informed the wrong council and MP of its intentions.
Local residents fear a train could be derailed because of vandalism on the line, and some parents want to withdraw their children from local schools. Environmental pressure groups have seized on evidence that the levels of radioactive material "sweated" by the flasks have breached international safety limits.
BNFL said the flasks were put through a number of tests such as a collision with a 100mph train and that there was no danger to residents.
Last week the Government instructed the Health and Safety Executive and other agencies to carry out checks on all radioactive fuel flasks.
Linda Hayes, a campaigner said: "The campaign will not stop just because they want to chuck it into Willesden if they think they can get away with it."
A spokesman for the London Borough of Barnet said: "We would be pleased [if the plan were shelved] and we would regard that as a vindication of our suggestions that there must be another way of handling this material."
EWS also wants to use a separate site near Cricklewood to build a railfreight depot for other contracts. The news has prompted criticism from the Campaign for Nuclear Disarmament which claims EWS wants to use it for storing food on its way to supermarkets. The company said it was too early to say what the yard would be used for and denied there would be any danger from the nuclear fuel flasks.
An EWS spokesman said: "We are in the process of reaching agreement with Railtrack to lease some of the sites at Cricklewood. I am not aware of the exact details of the customers."
He said there would be "no risk, no problems" even if BNFL pressed ahead with its plans for marshalling the fuel flasks nearby.