The US Department of Energy (DOE) published a notice of proposed rulemaking (NOPR) in the October 3 Federal Register to establish procedures for imposing civil monetary penalties for violations of 10 CFR Part 810 (Part 810). Notably, DOE also proposes a maximum penalty, per violation, of $102,522. If DOE views a violation as a continuing one, then each day from when the violating activity began to when it stopped would constitute a separate violation for purposes of computing the penalty. Comments on the NOPR are due by November 4, 2019.
As background, Part 810 controls the export of unclassified, nonpublic nuclear technology and assistance. The regulations have been in place for decades, and explicitly include criminal penalties and nonmonetary civil penalties, such as injunctions. However, Part 810 has been silent about civil monetary penalties because DOE was uncertain whether it had authority to impose such penalties. Congress clarified that authority through the National Defense Authorization Act for Fiscal Year 2019, which amended Section 234.a of the Atomic Energy Act (AEA). The NOPR would amend Part 810 to establish civil monetary penalties and to include new procedures to implement this statutory directive by adding new Section 810.15(c).
The Monetary Penalty and Mitigating the Penalty
DOE proposes to set the maximum penalty per violation at $102,522. The AEA sets the maximum civil penalty per violation at $100,000, but this amount is subject to adjustment for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act. However, DOE opens the door for commenters to suggest that the daily penalty should be a whopping $265,815, if DOE made subsequent upward adjustments required by OMB Memoranda M–17–11, M–18–03, and M–19–04. The NOPR states, “There may be a question of whether Congress desired a lower maximum civil penalty amount to apply [because] Congress did not specifically change the amount of the allowable maximum penalty, as it did in previous amendments.” Either way, because DOE proposes to treat each day of an ongoing violation as a separate penalty, this could lead to penalties in the millions of dollars.
The NOPR gives DOE discretion to set the amount of the penalty for each violation. DOE would consider a number of factors including, perhaps most significantly, whether the person or entity voluntarily disclosed the violation to DOE. This factor highlights the importance of a compliance program and the significance DOE places on self-disclosure. Other factors DOE proposes to consider include the violator’s ability to pay, the nature and gravity of the violation, the effect on the person’s ability to do business, any history of prior violations, “the degree of culpability,” and the “economic significance” of the violation. DOE also proposes to consider a catch-all consideration—“such other matters as justice may require”—leaving the potential for DOE to exercise broad discretion. These appear to be modeled after the US Nuclear Regulatory Commission (NRC) enforcement policies, which set forth factors that can mitigate penalties. One notable difference from the NRC is that DOE does not have accompanying guidance that would provide for an alternative dispute resolution pathway to settle allegations of violations.
Being Notified of and Challenging a Penalty
The NOPR sets forth a fairly detailed procedure that DOE would follow when imposing civil monetary penalties under Part 810. The process would begin with a written notice of violation (NOV) from the deputy administrator for Defense Nuclear Nonproliferation to the person suspected of violating Part 810. The person would have 30 days to respond in writing to the NOV. If there were no response, the NOV would become final and the penalty would be due within 30 days. If the person submits a response, the deputy administrator would consider this response before issuing a final NOV and setting the amount of the penalty, if applicable.
If DOE imposed a monetary penalty, then the violator would be entitled to request a hearing before a DOE administrative law judge (ALJ) to challenge the finding and the penalty amount. A person requesting a hearing “bears the burden of going forward and of demonstrating that the decision to impose the civil penalty is not supported by substantial evidence.” A hearing must be held within 180 days unless both DOE and the subject agree to an extension. Before the hearing, either party can request formal discovery, including depositions, interrogatories, requests for production, and requests for inspection. The ALJ would have the authority to issue subpoenas. Testimony at the hearing would be under oath or affirmation, and the hearing would be closed to the public. After the hearing, the ALJ would then issue a recommended decision within 180 days of the receipt of the hearing transcript, to the under secretary for Nuclear Security, who would make the final determination.
If a person did not pay the civil penalty required by a final determination or NOV, the proposed rule would permit DOE to refer the case to the US Department of Justice for collection.
Comments on this proposed rule are due by November 4, 2019. We will continue to track this rulemaking. You can contact us for assistance if you wish to submit comments or if you have any questions or concerns.
