DOE Proposes Procedures for the Imposition of Civil Penalties for Violations of Part 810

Under Part 810, export of certain nuclear technology and assistance, or export of nuclear technology and assistance to certain destinations, is identified as “generally authorized” activities by the Secretary of Energy. For other activities and destinations, Part 810 requires the exporter to obtain a “specific authorization” from the Secretary. Exporting nuclear technology or assistance that is not either a generally authorized activity or covered by a specific authorization is a violation of Part 810 and AEA section 57b.(2), and may result in revocation, suspension, or modification of authorizations, as well as criminal penalties.

The DOE’s NOPR would clarify DOE’s authority to impose civil penalties for violations of AEA section 57b in addition to the existing criminal penalties. Specifically, the proposed rule would update 10 CFR § 810.1 to specify civil penalties and enforcement procedures as a purpose of Part 810 regulations, and update 10 CFR § 810.15 to include procedures implementing DOE’s civil penalty authority.

DOE discussed two methods for establishing the upper bounds of civil penalties. Under the first method, which DOE proposed using, the maximum penalty per violation would be set at $102,522, increasing every year in accordance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 and associated OMB guidance. Under the second method, however, the maximum penalty per violation would be initially set at $265,815, and then subject to similar inflation adjustments going forward.

The two methods differ based on when the DOE begins applying inflation adjustments to the maximum penalty amount. In the 2019 National Defense Authorization Act, rather than specifying a certain amount, Congress set the upper penalty boundary for violations of AEA section 57b to be consistent with violations of AEA section 234a, which established a maximum penalty for violations of $100,000 prior to the Federal Civil Penalties Inflation Adjustment Act of 1990. Under the first proposed method, DOE would presume a maximum penalty of $100,000 in 2018 dollars for a violation of AEA section 57b, and so would only apply inflation adjustments from 2018 forward. Under the second method, DOE would presume the maximum penalty for a violation of AEA section 57b to be fully equivalent to AEA section 243a, and therefore would apply inflation adjustments from 1990. The proposed rule, as it is currently drafted in the proposed rulemaking, uses the first method, resulting in a lower maximum penalty of $102,522.

DOE’s NOPR explained that the civil penalty will be imposed per violation. For continuing violations, each day from the point at which the violating activity began shall be considered an individual violation. The factors DOE proposed to consider in assessing a penalty include: “the nature, circumstances, extent, and gravity of the violation(s); the violator’s ability to pay; the effect of the civil penalty on the person’s ability to do business; any history of prior violations; the degree of culpability; whether the violator self-disclosed the violation; the economic significance of the violation; and such other matters as justice may require.”

As a procedural matter, the DOE enforcement policy would start with a notice of violation issued to the accused, including the nature of the alleged omissions or acts in violation of the rule and the proposed penalty. Within thirty days of the notice of violation, the accused may respond with facts, explanations or arguments supporting a denial of the alleged violation; a description of extenuating circumstances; citation to supporting authorities; answers to any questions in the notice of violation; and any relevant documents. A failure to respond to the notice of violation waives all further rights of the accused to challenge the penalty. After receiving a response to the notice of violation, the Deputy Administrator for Defense Nuclear Nonproliferation will make a final determination as to the violation and penalty and will issue a final notice of violation. The accused may then request a hearing from the Under Secretary for Nuclear Security, and a DOE Office of Hearings and Appeals administrative law judge will preside at a hearing on the matter. However, the accused will bear the burden of going forward and demonstrating that the decision to impose a civil penalty is not supported by substantial evidence.

Unlike the Nuclear Regulatory Commission enforcement process, the DOE process would not allow for a predecisional enforcement conference or alternative dispute resolution. In addition, a challenge in the DOE enforcement policy, and the resultant hearing, starts a lengthy process that could take nearly a year to reach resolution. The hearing would occur within 180 days of the Office of Hearings and Appeals receipt of the request for a hearing, and the decision would be rendered within 180 days of the hearing. The Under Secretary for Nuclear Security would then issue a final decision as soon as practicable after review. If the accused fails to the pay the civil penalty within the required timeframe contemplated by the rule, the Department of Justice can initiate a civil action to collect the penalty.

Comments on the proposed rulemaking must be received on or before November 4, 2019.