ML20235E507

Speech Entitled Enforcement Proceedings, Presented at 870914-15 ALI-ABA Meeting

ML20235E507
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Issue date:	09/14/1987
From:	NRC
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FOIA-87-614 NUDOCS 8709280142
Download: ML20235E507 (23)

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September 14, 1987 ALI-ABA ENFORCEMENT PROCEEDINGS I appreciate the opportunity to be here.today to discuss the Comission's enforcement program. Let me begin by discussing the Comission's Enforcement Policy. Attached to your material is the Enforcement Policy which is found at 10 CFR Part 2, Appendix C of the Comission's regulations. Note that the version attached to the material at and following page 357 was published on November 20, 1985. Earlier this month the Comission approved modifications to the policy which I will be addressing shortly. The revised policy will be published soon in the Federal Register.

A significant change to the Commission's enforcement prograin occurred this past spring with the reorganization of the staff of the Commission, resulting in the creation of the Office of Enforcement and the demise of the Office of Inspection and Enforcement. The reactor inspection function of IE was transferred to the Office of Nuclear Reactor Regulation and the material

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5 g inspection function was transferred to the Office of Nuclear Material Safety and Safeguards. The enforcement function was transferred to the Office of Enforcement which reports to the staff's Executive Director for Operations as do the Regional Administrators through the Deputy Executive Director for Regional Operations.

The Deputy Executive Director is the principal enforcement officer of the NRC. The Director, Office of Enforcement acts for the Deputy Executive l

Director as directed or in his absence. The principal function of the Office of Enforcement is to manage the Comission's Enforcement program which is primarily a regional based program. It does this by developing policies and procedures for enforcement of NRC requirements, managing escalated enforcement I

actions which involve violations at Severity Level III or above, and monitoring regional enforcement actions. About five percent of the agency's enforcement actions are escalated actions. Regardless of which Offices are involved in developing or approving the enforcement action, most Notices of Violation and Notices of Proposed Civil Penalty are issued by the regions. Enforcement Orders, including civil penalty orders are normally issued by the Deputy i

Executive Director. Putting the organization to one side let me turn now to the enforcement process.

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3 j The purpose of the NRC Enforcement Program is to promote the public l

f health and safety by ensuring compliance with Comission requirements, by obtaining prompt correction of violations, by deterring future violations, by encouraging improvement of licensees, and by example the industry's performance.

Enforcement sanctions are applied after considering the significance and circumstances surrounding a particular violation. The Comission has availablo 3 basic sanctions. Notices of Violations, civil penalties, and orders.

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) The Notice of Violation which is addressed isn 10 CFR Section 2.201 formalizes a violation. A civil penalty which is addressed in 10 CFR 2.205 is a monetary fine issued under the authority of section 234 of the Atomic Energy Act of 1954, as amended; this section provides for penalties of up to

$100,000 per violation per day. I will discuss the civil penalty process later on in greater detail. Orders suspend or revoke or modify licenses. The i authority for the Comission to issue orders is broad and is found in sections 161 and 186 of the Atomic Energy Act.

Notices of Violation and civil penalties are issued based on violations of requirements. Orders may be issued because of either a violation, or in the absence of a violation, because of a safety issue. In this regard an issue of the day is what enforcement action may be taken when a licensee does not meet

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a policy statement. An example of a policy statement is the " Fitness for Duty" i policy statement which sets forth the Comission's expectation that licensees ,

will have a fitness for duty program. A policy statement is not a requirement thus a civil penalty or notice of violation cannot be issued for a licensee's failure to meet a policy statement. However, if the failure to meet a policy l

statement creates a safety issue, the Commission can issue an order to remedy 1 the issue under its authority to issue orders as necessary to protect the public health and safety. Thus, the Comission can act if licensee's employees are not fit for duty even in the absence of a specific requirement.

The first step in the enforcement process is to characterize the severity I l

! of a violation into one of five severity levels. Severity Level I is the most significant., Severity Level III is of significant concern, and Severity I

Level V is of minor concern. Examples are provided in 8 supplements of the policy to provide guidance in determining severity levels. The supplements are 1 - reactor operations, 2 - facility construction, 3 - safeguards, l

4 - health physics, 5 - transportation, 6 - fuel cycle and material operations, 7 - miscellaneous matters, and 8 - emergency preparedness. The supplement on j miscellaneous matters contains guidance for violations involving material false statements and for violations invciving employee discrimination for raising '

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I safety concerns. Both of which I will be discussing in greater detail in a  !

l few minutes. In reviewing the examples in the supplements, it is important to understand that the examples are merely that. They are neither controlling 'nor exhaustive. The circumstances surrounding the violations, including degrees of wi11 fulness, management involvement, and other regulatory concerns can raise the severity of a violation.

Once the severity of the violation is established the sanction is determined. 1 Normally only notices of violations are issued for violations at a Severity Level IV or Level V. The vast majority of violations are categorized at this level and result in Notices of Violations which require a written response as 4

l to the corrective action to be taken and when full compliance will be achieved.

In certain circumstances Notices of Violations are nct issued in order to .

1 encourage self identification and correction of violations. For example, if a licensee identifies a violation that is of a Severity Level IV or V and reported it if required - citations normally are not made provided the matter is corrected and is not a repetitive violation.

The recent revisions to the Enforcement Policy provides an additional area for exercising enforcement discretion. Where a licensee identifies violations during either a forced shutdown due to poor performance or an extended shutdown

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because of a major safety event NRC may refrain from taking enforcement action provided the licensee is diligently and aggressively addressing the cause of the problems that led to the shutdown. Enforcement action may be taken for the violation that caused the shutdown. Taking additional enforcement action may not serve the purposes of the policy of encouraging identification and correction of problems. On the other hand taking strong enforcement action where a licensee identifies a problem may discourage aggressive and comprehensive identification and correction.

Four conditions must be met to utilize this enforcement discretion and specific Commission approval is required before the Staff may exercise this discretion.

The first condition addresses the shutdown and has three parts - (1) the shutdown must have resulted from a major safety event where NRC has taken significant enforcement action or the licensee is forced into an extended l shutdown because of poor performance. (2) the licensee is implementing a comprehensive plan for problem identification and correction and (3) NRC concurrence is required for restart. Under these circumstances the licensee has incentives to identify and correct problems thus minimizing the deterrent effect of civil penalty actions.

The second condition is that the violations must not be willful and must be i

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identified by the licensee as opposed to the NRC. ~If the NRC identifies the violation first, before determining whether to take enforcement action we will consider the need for action based on whether it is likely that the licensee's program would have identified the violation. Enforcement l would be appropriate if the corrective action program is not working properly.-

The third condition is that the violations be based on activities that predated the cause of the shutdown. If violations occurred after the shutdown, there may be the need to provide additional incentives through civil penalties for assuring work is performed properly.

The fourth condition is that the severity level of the violations must be  :

less than Severity Level II. This fourth condition is to distinguish the violations from the more significant ones. The same incentives are present ,

to identify all violations regardless of the severity level. Nevertheless i enforcement action for violations at the higher level is warranted to convey a message to other licensees regarding the significance and consequences of 4

such violations. Similarly, enforcement action may be taken if multiple Severity Level III violations are found.

To date the Commission has approved the application of this discretion to l

8 the TVA plants and five others - Rancho Seco, Davis Besse, Pilgrim, Comanche Peak, and Palisades.

Continuing on with the enforcement process let us assume that we have reviewed the circumstances of a case, categorized the severity levels of the violations, and determined that enforcement discretion should not be exercised.

If the violation is at a Severity Level V, a Notice of Violation will be issued by the region. If the Severity Level is a IV, a Notice of Violation will normally also be issued by the region. However, if the violation is one where additional management attention is clearly warranted, or the violations could be classified at a Severity Level III, or the violation is repetitive or could lead to escalated action, an enforcement conference can be held before issuing the Notice of Violation for the Severity Level IV violation. Enforcement conferences are also normally issued before taking action on violations of a Severity Level III or higher level.

The enforcement conference is a very important step in the enforcement process. This is normally a closed door meeting between the NRC and the licensee to discuss the violations and surrounding circumstances, their significance, their causes and the licensee's corrective actions. Information is developed during the conferences that can help determine the appropriate enforcement action.

To make the conferences more effective, we are making a substantial effort to issue inspection reports prior to the enforcement conference.

9 Following the conference if escalated action is contemplated, the region reconnends to the Office of Enforcement whether such action should be taken.

t This is the stage where the civil penalty process begins.

l Civil penalties are (1) normally issued for violations at a Severity Level III or above absent mitigation (2) may be issued for violations at a Severity Level IV if the violations are repetitive or similar to previous Severity Level IV violations.

(3) may be issued for any willful violation, and I

(4) issued for certain violations of 10 CFR Part 21. -

i If a civil. penalty is to be proposed the base value of a penalty it first determined. This is based on a combination of the type of licensed activity, l

the type of licensee, and the severity level of the violation. The base values are established by taking the value found in Table IA of the Enforcement Policy and multiplying it by the percentage found in Table IB. For example the base penalty for a power reactor Severity Level III violation involving reactor operations is $50,000.

Once the base amount is established then a series of mitigating and aggravating circumstances are considered to adjust the penalty. For purposes

10 of determining the severity levels and making penalty assessments, violations are sometimes grouped together in problem areas.

i There are five factors that can adjust a civil penalty.

The first factor considered is who identified the violation. The penalty-may be mitigated up to 50% for violations promptly identified, corrected, and if required reported by the-licensee. In considering this factor we look at the duration of the violation and the opportunities the licensee had for identification.

The second factor is the corrective action to prevent recurrence. Unusually prompt and extensive corrective action may result in 50% mitigation, while untimely or marginally acceptable corrective action may result in 50% escalation of the penalty. Under these two factors, a licensee who does a good job in identifying and correcting a violation may have the penalty completely mitigated.

We then look at the past performance of a licensee. It is not acceptable to fix a problem today and then next month to have the same problem repeated.

Here we are looking at the overall performance as well as the effectiveness of prior corrective action in the area of concern. Good prior performance may mitigate a penalty up to 100%. Prior poor performance on the other hand may j l

escalate a penalty up to 1005.

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11 Similarly we look at prior notice of similar events. A penalty.may be increased up to 50% for prior. notice such as'a licensee audit or' specific NRC or industry notice where effective preventive action had not been taken.

This is an' area where we intend to place greater effort, especially for licensees who have more than one unit or site.

The fifth factor is multiple examples. The penalty may be increased because o'f multiple examples of a particular violation during the inspection.

In addition to these factors the' Commission may consider the duration of the violation to increase a sanction. In cases with particular poor performance or with a serious management breakdown the penalty may te escalated notwithstanding the mitigating factors.

After weighing the various factors and circumstances surrounding the j

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violations, a proposed penalty amount is determined. The case is reviewed )

by the Office of General Counsel and the case is coordinated with the Office 3 of Nuclear Reactor Regulation or Nuclear Material Safety and Safeguards as l

appropriate. )

i If a civil penalty is to be proposed, the licensee will then receive a )

written Notice of Violation and Proposed Imposition of Civil Penalty. The licensee then has 30 days to respond in writing to the Notice. The NRC will 1

12 then consider the response and either mitigate the penalty or impose it which it does by an order published in the Federal Register. Thereafter, the licensee may pay the penalty or request a hearing. If after a hearing, the licensee does i

not pay a civil penalty, then the NRC will ask the Department of Justice to institute a collection action in District Court for the penalty. Out of about 600 penalties to date, less than a dozen cases have gone to a hearing, and of those cases only 3 have had to be referred to the Department of Justice for collection.

In addition to civil penalties, orders may be used to suspend or revoke licenses or to require additional corretive actions. I expect to see the more frequent use of Demands For Information which is a formalized letter issued under the authority of section 182 of the Atomic Energy Act to obtain information to determine whether an order or other enforcement action is needed.

A willful violation may be referred to the Department of Justice for prosecution in addition to subjecting the licensee to civil sanctions. Potential criminal material false statements under 18 USC 1001, as well as a variety of violations by NRC licensees which under chapter 18 of the Atomic Energy Act may be prosecuted criminally are referred to the Department of Justice for action.

The referral process is managed by the Office of Investigations.

13 I have been describing the enforcement sanctions available to the Comission which are applicable to all licensees. The Commission has authority to take enforcement action not only on corporate licensees but also against individuals. In the past, this issue was addressed by a single l sentence in the policy that stated " Enforcement sanctions involving l

l individuals, including licensed operators, will be determined on a case-by-case basis." The revised policy now has a section on Enforcement Actions for Individuals.

l Over the years the Commission has taken action on a number of occasions to renove individuals. For exai@le, removals from licensed activities have included a plant manager of a power reactor licensee, physicians using licensed material, a president of an irradiator firm, and licensed reactor operators.

These cases have primarily involved issues of integrity where the person appeared to have deliberately provided false information to the NRC. Letters of Reprimand and Notices of Violations have also been issued to licensed reactor operators.

The new section in the policy provides some examples when action may be taken against individuals. These would be serious violations where (1) there is little doubt that the individual fully understood or should have understood his or her responsibility, (2) the individual knew or should have known the required

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actions, and (3) the individual knowingly, or with careless disregard failed to take required actions.

Action against the individual will not be taken if the improper action of the individual was primarily caused by management. For example clearly inadequate training or procedures. This is because NRC has taken the view that it should defer to the corporate licensee for the supervision of its employees and take action against individuals when their actions result in significant violations of NRC requirements involving incompetence or wi11 fulness. Such an approach places primary responsibility on management for hiring and supervision of employees as well as training and development of procedures to ensure safe performance of licensed activities.

Enforcement actions against licensed individuals may involve the traditional sanctions available to be used against any licensee. In the case of a non-licensed individual, an order may be used modifying the corporate license requiring the removal of the individual from licensed activities for a specified time period or if appropriate indefinitely.

I Now let me turn to the subject of Material False statements. This has been

! one of the more controversial issues in NRC enforcement. The Comission first got involved in this issue in its 1978 YEPCO decision which held among other

15 things that the term " material false statement" in section 186 of the Atomic Energy Act reached omissions as well as affirmative statements and that intent was not necessary for a finding that a material false statement was made. Thus a statement made in good faith that was in error and which had the ability to influence the agency could be labeled a material false statement. The Consission reasoned that forgiving innocent errors could place a premium on innocence and that licensees should have every incentive to scrutinize their internal operations to assure that the Connission obtained the information it needs for safety decisions.

Obviously if the NRC makes the wrong decision because it has received inaccurate or incomplete information it matters little to those who may suffer the negative consequences whether the submittal was in error due to intent to deceive or merely negligence. The point here is that information provided to NRC by its licensees and applicants must be complete and accurate if NRC is to properly carry out its statutory responsibilities.

The difficulty perceived by many is that the label material false statement implies lying and intention to mislead. This may be the wrong label with its negative connotation to be used for the inadvertent error. However, under the

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16 current regulatory scheme, the material false statement citation is the only way to capture an inaccurate or incomplete statement.

Consequently, the Comission has embarked on a rulemaking to put intent back into a material false statement. In March of 1987 the Comission published a proposed rule establishing an affirmative obligation that information provided to the Comission or information requiring to be maintained by a licensee or 1

applicant "shall be complete and accurate in all material respects."

i As part of the rulemaking the Comission also addressed the full disclosure provision of the VEPC0 decision that requires material information to be provided the agency. Since the VEPC0 decision, a number of reporting requirements have been promulgated. Most safety information which a licensee develops will likely be required to be reported by some specific requirement.

Nevertheless there may be some circumstances where a licensee possesses some residual safety information which could affect licensed activities that is not otherwise required to be reported. As the Comission said in VEPCO:

"The fact remains that no specific set of regulations however carefully drawn can be expected to cover all possible circumstances. Information may come from unexpected sources or take an unexpected form, but if it is

17 material to the. licensing decision and therefore to the public health and safety, it must be passed on to the Commission if we are to perform our task."

The Commission is codifying this obligation to provide information by requiring that applicants and licensees notify the Comission of information identified by the licensee or applicant as having for the regulated activity a significant implication for the public health and safety or comon defense or security.

This provision requires the licensee to make an initial determination.

This provision has been criticized because it can be read to provide absolute deference to the licensee. Some may be concerned that a licensee may purposefully close its eyes and thus see nothing to report. Obviously if a licensee does not recognize it has significant information it won't recognize its obligation to provide it.

We do not intend to apply the rule in such a narrow fashion. An affirmative documenteij finding of significance is not necessary before a licensee may be cited. Rather actions of a licensee demonstrating that the licensee in fact recognized the information as significant can be considered in determining whether a citation is to be made. Moreover, a licensee's failure to identify

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18 information if it raises questions about the licensee's competence or integrity can be treated with the appropriate order.

With the promulgation of this rule which I expect to occur within this year, NRC will be able to treat the full range of information issues. It will be able to take enforcement action and label errors as intentional, reckless, or inadvertent as appropriate. A premium will not be placed on innocence. The  ;

label material false statement will be reserved for the egregious situation.

Thus, the Commission will be able to add a negative connotation for the licensee's failure when it is appropriate to do so. I would expect that when the rule is promulgated the enforcement policy will be appropriately amended.

There are two other enforcement issues which are important issues to discuss. These are the enforcement of commitments made in the licensee's Final Safety Analysis Report known as the FSAR and treatment of employee discrimination complaints under section 210 of the Energy Reorganization Act.  !

The FSAR issue is important because the staff is considering revising Technical Specifications for power reactors and as part of that process, material removed from the Technical Specification will be placed in the FSAR. Briefly stated the FSAR is a major part of the licensee application and it describes how a licensee will meet NRC requirements. A licensee who fails to meet a FSAR

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comitment may thereby violate the substantive requirement that was not  !

l implemented. Failures to meet the FSAR may also result in violations of quality 1

1 assurance requirements in 10 CFR Part 50, Appendix B. Assuming other requirements are met, the licensee may depart from the FSAR if the process under 10 CFR 50.59 is followed. 10 CFR 50.59 permits changes to the facility as described in the I

FSAR provided there is not an unreviewed safety question or a conflict with a Technical Specification. Licensees should be aware that they may be subject to enforcement action if (1) commitments in the FSAR to do something in the future are not implemented at the time the operating license is issued, (2) the licensee i makes changes in its facility described in the FSAR without meeting the require-ments of 10 CFR 50.593 and (3) changes to the FSAR are made without a 50.59 i review. To read the requirements otherwise m uld permit a licensee to change the FSAR first and then change the facility to match the FSAR without the need for a 50.59 review.

The final substantive area I will discuss today is employee discrimination under section 210 of the Energy Reorganization Act. That provision makes it unlawful for an employee to discriminate against a worker for raising a safety concern. Section 210 provides for the Department of Labor to investigate and resolve complaints of discrimination. The purpose of the Departnent of Labor's

20 efforts is to provide a remedy for the empioyee. NRC on the other hand is concerned with the potential for an act of discrimination to chill other employees desires to come forward with safety information. NRC has made it a violation of NRC requirements for discrimination against employees fcr raising safety issues.

Attorneys representing employees should be aware that employees must go to DOL within 30 days of the Act of discrimination to obtain protection under section 210. In this regard the Administrative Conference of the US has recently come up with a recommendation to develop common standards for section 210 and other whistle blowing statutes and in particular to provide filing the complaint within 180 days rather than the 30 days. NRC may consider the matter regardless of the time period but NRC does not provide a direct remedy to the employee. Instead it focuses on sanctions against the licensee.  !

Licensees should be aware that NRC considers protected activity to include i

both internal complaints to the licensee and external complaints to NRC. When NRC learns of a complaint filed with DOL, licensees will be getting a letter asking what action the licensee is taking to assure that the alleged discrimination l

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whether actual or perceived does not have a chilling effect on other employees.

l A copy of any investigation the licensee has made is also requested. This l

21 information is sought to assist the Commission in determining whether it should await the completion of the DOL process before acting. Technical safety issues will be addressed regardless of the timing'of the DOL process. In this way the licensee is put on notice of the need to consider action and 15tC's interest in the matter.

In most cases, I would expect that NRC will wait until the DOL process has been completed before taking formal NRC action.

Let me close by briefly discussing some enforcement cases. The cases set out in the material are representative of the escalated actions we have considered this year.

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The most significant reactor case this year was the Peach Bottom shutdown l (EA 87-46) which involved inattentive operators. A number of cases involved sleeping security guards. Failure to do adequate 50.59 reviews resulted in a number of penalties. Failure to pay attention to detail such as valve lineups

'and assuring engineered safety features are operational have also resulted in penalties. Radiation exposure cases continue to get attention.

Integrity issues continue to arise. Last month a doctor was removed at a V.A. Hospital for failing to report misadministration. Earlier in the year a doctor was removed for failing to exercise oversight at Milford Hospital.

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In the material areas, failing to control licensed sources such as moisture density gauges are getting civil penalties. A significant case involved U.S. Testing which was shut down because of a breakdown in control of licensed activities. A key concern there was radiography being conducted by numerous i

unauthorized perscns. A similar problem occurred at A-1 Inspection where the license was suspended.

About a year ago a civil penalty of $310,000 was imposed against the Sequoyah Fuels Corporation for violations involving lack of training and supervision resulting in a death at the Sequoyah Fuels Corporation. Last month after an extensive investigation an Order was issued requiring the licensee to

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show cause why certain supervisors should not be removed from licensed activities j 1

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for lack of candor with NRC when NRC was trying to understand the accident. A l proposed civil penalty was also issued in that case for a material false statement.

The last case I will mention is the Pesse Case. This is a case where the l

licensee went bankrupt. NRC issued an Order to clean up the facility. The trustee argued he was not obligated to clean up the facility. NRC pursued the matter in bankruptcy court. The Bankruptcy Court judge held the Trustee was responsible for the cleanup. However, in view of the lack of funds, the matter has been turned over to the EPA for clean up under the Super Fund.

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-23 As you can see it hos been a busy year for NRC enforcement. For those of you who are interested in enforcement matters at NRC I reconenend that you i

subscribe to NUREG-0940. This NUREG contains the full text of escalated enforcement actions.

, I look forward to your questions during the discussions.

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