[Federal Register Volume 62, Number 64 (Thursday, April 3, 1997)]
[Rules and Regulations]
[Pages 15827-15830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8314]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 2
[Docket No. RM97-2-000; Order No. 594]
Statement of Compliance With Section 223 of the Small Business
Regulatory Enforcement Fairness Act of 1996; Policy Statement
Issued March 26, 1997.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule; policy statement.
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[[Page 15828]]
SUMMARY: The Commission is issuing this Policy Statement in compliance
with section 223 of the Small Business Regulatory Enforcement Fairness
Act of 1996 (SBREFA). Section 223 of SBREFA requires each agency
regulating the activities of small entities to establish a policy to
provide for the reduction, and under appropriate circumstances, for the
waiver of civil penalties for violations of statutory or regulatory
requirements by small entities.
It is the policy of the Commission that to be considered for a
reduction or waiver of a penalty, a small entity must not have a
history of previous violations, and the violations at issue must not
have been the product of willful or criminal conduct, or have caused
loss of life or injury to persons, damage to property or the
environment, or endangered persons, property or the environment. A
small entity that complies with those standards is eligible for
consideration for a waiver or reduction of a civil penalty. An eligible
small entity will be granted a waiver if it can also demonstrate that
it performed timely remedial efforts, made a good faith effort to
comply with the law and did not obtain an economic benefit from the
violations. If an eligible small entity cannot meet the criteria for
waiver of a civil penalty, it may be eligible for consideration of a
reduced penalty. Upon the request of a small entity, the Commission
will consider the entity's ability to pay before assessing a civil
penalty.
The Commission reserves the right to waive or reduce civil
penalties in circumstances other than those listed under this Policy if
it is in the public interest to do so.
DATES: This rule is effective March 29, 1997.
FOR FURTHER INFORMATION CONTACT: Stuart Fischer, Office of General
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, D.C. 20426, Telephone: (202) 208-1033.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in the Public Reference Room
at 888 First Street, N.E., Washington, D.C. 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing 202-208-1397 if dialing locally or 1-800-856-3920 if dialing
long distance. To access CIPS, set your communications software to
19200, 14400, 12000, 9600, 7200, 4800, 2400, or 1200 bps, full duplex,
no parity, 8 data bits and 1 stop bit. The full text of this order will
be available on CIPS in ASCII and WordPerfect 5.1 format. CIPS user
assistance is available at 202-208-2474.
CIPS is also available on the Internet through the Fed World
system. Telnet software is required. To access CIPS via the Internet,
point your browser to the URL address: http://www.fedworld.gov and
select the ``Go to the FedWorld Telnet Site'' button. When your Telnet
software connects you, log on to the FedWorld system, scroll down and
select FedWorld by typing: 1 and at the command line and type: /go
FERC. FedWorld may also be accessed by Telnet at the address
fedworld.gov.
Finally, the complete text on diskette in WordPerfect format may be
purchased from the Commission's copy contractor, La Dorn Systems
Corporation. La Dorn Systems Corporation is also located in the Public
Reference room at 888 First Street, N.E., Washington, D.C. 20426.
Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A.
Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa,
Jr.
STATEMENT OF PENALTY REDUCTION/WAIVER POLICY TO COMPLY WITH SECTION 223
OF THE SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT OF 1996
I. Introduction
The Commission is issuing this Policy Statement in compliance with
section 223 of the Small Business Regulatory Enforcement Fairness Act
of 1996 (SBREFA).1 Section 223 of SBREFA requires each agency
regulating the activities of small entities to establish a policy to
provide for the reduction, and under appropriate circumstances, for the
waiver of civil penalties for violations of statutory or regulatory
requirements by small entities.
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\1\ Pub. L. 104-121, 110 Stat. 860, et seq., Section 201, et
seq. (1996). Section 223 is part of Subtitle B of SBREFA, entitled
``Regulatory Enforcement Reforms.'' Subtitle B is codified as a note
to 5 U.S.C. Sec. 601 (1996), which is part of the Regulatory
Flexibility Act. Because of this, we will use the session law
citations in this policy statement.
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It is the policy of the Commission that to be considered for a
reduction or waiver of a penalty, a small entity must not have a
history of previous violations, and the violations at issue must not
have been the product of willful or criminal conduct, or have caused
loss of life or injury to persons, damage to property or the
environment, or endangered persons, property or the environment. A
small entity that complies with those standards is eligible for
consideration for a waiver or reduction of a civil penalty. An eligible
small entity will be granted a waiver if it can demonstrate that it
also performed timely remedial efforts, made a good faith effort to
comply with the law and did not obtain an economic benefit from the
violations. If an eligible small entity cannot meet the criteria for
waiver of a civil penalty, it may be eligible for consideration of a
reduced penalty. Upon the request of a small entity, the Commission
will consider the entity's ability to pay before assessing a civil
penalty.
The Commission reserves the right to waive or reduce civil
penalties in circumstances other than those listed under this Policy if
it is in the public interest to do so.
II. Background
A. SBREFA
President Clinton signed SBREFA into law on March 29, 1996. The
stated purpose of SBREFA is, among other things, ``to create a more
cooperative regulatory environment among agencies and small businesses
that is less punitive and more solution oriented.'' 2
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\2\ Pub. L. No. 104-121, 110 Stat. 858, Section 203(6) (1996).
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Many of the provisions of SBREFA, such as congressional review of
agency rulemaking, a right to judicial review under the Regulatory
Flexibility Act (RFA), and amendments to the Equal Access to Justice
Act became effective either on the date of enactment or within 90 days
of that date. However, section 223 of SBREFA, entitled ``Rights of
Small Entities In Enforcement Actions,'' takes effect by March 29,
1997, one year after enactment.3 Section 223(a) of SBREFA requires
each agency regulating the activities of small entities to establish a
policy or program
[[Page 15829]]
providing for the reduction and, under appropriate circumstances, the
waiver of civil penalties for violations of statutory or regulatory
requirements by small entities.4 Penalty reduction/waiver policies
or programs are ``subject to the requirements or limitations of other
statutes.'' 5
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\3\ Id., Section 223(a). In addition to the requirements of
section 223, section 213(b) of SBREFA requires agencies regulating
the activities of small entities to establish a program by March 29,
1997, for responding to inquiries concerning information on, and
advice about, compliance with statutory and regulatory requirements.
Id., Section 213(b). The Commission has already established and
publicized advice programs for small entities offered by its Office
of Hydroelectric Licensing and Office of Pipeline Regulation, as
well as the availability of assistance through the Enforcement Task
Force Hotline. Additionally, Commission staff from the Office of
General Counsel, the Office of Electric Power Regulation and the
Office of Chief Accountant respond to compliance inquiries made by
all entities, regardless of size. Thus, the Commission has complied
with section 213(b).
\4\ Id., Section 223(a).
\5\ Id., Section 223(b).
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1. Definition of ``Small Entity''
Section 221(1) of SBREFA defines the term ``small entity'' as
having the same meaning as in section 601 of the RFA.6 Section 601
of the RFA, in turn, defines ``small entity'' as ``small business,''
``small organization'' and ``small governmental jurisdiction.'' 7
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\6\ Id., Section 221(1).
\7\ 5 U.S.C. Section 601 (1994).
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Under Section 601(3) of the RFA, a ``small business'' has the same
meaning as ``small business concern'' under section 632(a) of the Small
Business Act,8 unless an agency, after consultation with the
Office of Advocacy of the Small Business Administration (SBA) and after
opportunity for notice and comment, establishes its own
definition.9
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\8\ 15 U.S.C. Section 632(a)(1) (1994).
\9\ 5 U.S.C. Section 601(3) (1994).
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Section 632(a)(1) of the Small Business Act defines a ``small
business concern'' as an enterprise ``which is independently owned and
operated and which is not dominant in its field of operation.'' 10
The SBA has applied the definition of small business to a number of
specific industries based on the sizes of the enterprises and their
affiliations.11 The SBA defines a ``Natural Gas Transmission
Company,'' which includes an interstate natural gas pipeline, as a
small business if it has less than $5,000,000 in revenues.12 The
SBA considers an electric utility, including a hydroelectric project, a
small business if it produces up to four million megawatt hours per
year.13
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\10\ 15 U.S.C. Section 632(a) (1994).
\11\ 13 CFR 121.101-201.
\12\ 13 CFR 121.201.
\13\ Id.
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When the SBA determines whether an enterprise is a small business,
it counts the enterprise's affiliations. Family enterprises or
enterprises in which the same individual or individuals have a
controlling interest are aggregated together for this purpose.14
If the aggregate total of the affiliated enterprises exceeds the size
requirement for small businesses, none of the affiliated enterprises is
considered a small business.
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\14\ Id., Section 121.103.
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The RFA defines ``small organization'' as a not-for-profit
enterprise which is independently owned and operated and not dominant
in its field.15 The RFA defines a ``small governmental
jurisdiction'' as a governmental entity with a population of less than
50,000.16
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\15\ 5 U.S.C. Section 601(4) (1994).
\16\ 5 U.S.C. Section 601(5) (1994).
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2. Conditions and Exclusions
SBREFA does not mandate the content of a penalty reduction/waiver
policy. Subject to the requirements or limitations of other statutes,
section 223(b) of SBREFA suggests, but does not require, several
conditions or exclusions that may be included in such a policy. These
are: Requiring correction of the violation within a reasonable period
of time; limiting the applicability of the reduction/waiver policy to
violations discovered through participation in a compliance assistance
or audit program operated or supported by the agency or a state;
excluding small entities that have been subject to multiple enforcement
actions by the agency; excluding violations involving willful or
criminal conduct; excluding violations that pose serious health, safety
or environmental threats; and requiring a good faith effort to comply
with the law.17 In addition to the suggested conditions and
exclusions, section 223(a) of SBREFA states that ``under appropriate
circumstances'' an agency may consider ability to pay in determining
penalty assessments on small entities.18
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\17\ Pub. L. 104-121, 110 Stat. 862, Section 223(b) (1)-(6)
(1996).
\18\ Id., Section 223(a) (1996).
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B. The Commission's Civil Penalty Authority
The Commission has the authority to assess civil penalties under
section 31(c) of the Federal Power Act (FPA),19 section 316A of
the FPA,20 and section 504(b)(6) of the Natural Gas Policy Act of
1978 (NGPA).21 The Natural Gas Act does not provide for civil
penalties.
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\19\ 16 U.S.C. Section 823b(c)(1994).
\20\ 16 U.S.C. Section 825o-1 (1994).
\21\ 15 U.S.C. Section 3414(b)(6) (1994).
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1. The FPA
Section 31(c) of the FPA provides for penalties up to $10,000 per
violation per day and requires that:
In determining the amount of a proposed penalty, the Commission
shall take into consideration the nature and seriousness of the
violation, failure or refusal and the efforts of the licensee to
remedy the violation, failure, or refusal in a timely manner.22
\22\ 16 U.S.C. 823b(c)(1994).
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The factors the Commission considers in assessing civil penalties
are: Whether the person had actual knowledge of the violation or
constructive knowledge deemed to be possessed by a reasonable
individual acting under similar circumstances; whether the person has a
history of previous violations; whether the violation caused loss of
life or injury to persons; whether economic benefits were derived
because of the violation; whether the violation caused damage to
property or the environment; whether the violation endangered persons,
property or the environment; whether there were timely, untimely or no
remedial efforts; and whether there are any other pertinent
considerations.23 The section 385.1505 factors are similar to the
conditions and exclusions suggested under section 223(b) of SBREFA.
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\23\ 18 CFR 385.1505.
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Under the ``other pertinent considerations'' factor, the Commission
has considered the size of a project, the gross revenues earned and
whether the entity relied on advice given by Commission staff. While
the Commission is not required under the FPA to consider an entity's
ability to pay, the Commission has considered that factor when the
respondent raised the issue.24
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\24\ See, e. g., Clifton Power Corp. v. FERC, 88 F.3d 1258, 1267
(D.C. Cir. 1996); Bluestone Energy Design, Inc. v. FERC, 74 F.3d
1288, 1295 (D.C. Cir. 1996).
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The Commission also has civil penalty authority under section 316A
of the FPA,25 to remedy violations of sections 211, 212, 213 and
214 of that statute. Sections 211 and 212 of the FPA concern wheeling
electric power. Section 213 contains reporting requirements involving
requests for wholesale transmission services. Section 214 deals with
sales by exempt wholesale generators.
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\25\ 16 U.S.C. 825o-1 (1994).
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2. The NGPA
Section 3414(b)(6) of the NGPA provides for civil penalties up to
$5,000 per violation per day and does not identify specific required
factors to consider when assessing penalties, other than requiring that
the violation is ``knowing.'' 26 However, the Commission has
informally considered factors similar to those in section 385.1505 when
analyzing NGPA civil penalty matters.
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\26\ 15 U.S.C. 3414(b)(6)(A) (1994). The NGPA defines
``knowing'' as actual knowledge or constructive knowledge deemed to
be possessed by a reasonable individual who acts under similar
circumstances. 15 U.S.C. 3414(b)(6)(B) (1994).
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[[Page 15830]]
III. Discussion
A. Eligibility for Penalty Reduction or Waiver
The Commission is adopting many of the exclusions suggested by
section 223(b) of SBREFA. Specifically, to be considered for a
reduction or waiver of a penalty, a small entity must not have a
history of previous violations, and the violations at issue must not
have been the product of willful or criminal conduct, or have caused
loss of life or injury to persons, damage to property or the
environment, or endangered persons, property or the environment.
27 While SBREFA suggests limiting penalty reduction or waiver
policies to violations discovered through a small entity's
participation in a compliance assistance or audit program, 28 we
will not make this a prerequisite because it would be too limiting.
Requiring participation in a compliance assistance program could
exclude first time violators who did not recognize their need for
compliance assistance. Although seeking compliance assistance may be an
indication of good faith for purposes of a penalty waiver or reduction,
it will not be used as a bar to eligibility for this Waiver/Reduction
Policy.
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\27\ See, Pub. L. 104-121, 110 Stat. 862, Section 223(b)(3)-(5)
(1996).
\28\ Id., Section 223(b)(2).
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B. Criteria for Waiver or Reduction of a Civil Penalty
If it meets all of the eligibility criteria for this Waiver/
Reduction Policy, a small entity will be granted a waiver of a civil
penalty if it can also demonstrate that it performed timely remedial
efforts, made a good faith effort to comply with the law and did not
derive an economic benefit from the violations. The requirements for
timely remedial efforts and good faith are conditions suggested for
penalty waiver or reduction under sections 223(b)(1) and (6) of SBREFA.
These conditions are similar to factors that the Commission already
considers under its regulations when determining civil penalties.
29
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\29\ See, e.g., 18 CFR 385.1505(b)(8)-(10). The Commission
considers good faith when determining the types of remedial efforts
made by the violator and whether the violator had actual or
constructive knowledge of the violation. See, e. g., 18 CFR
385.1505(b) (1), (2) and (8)-(10).
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While the requirement that the small entity not be allowed to
retain economic benefits from the violations is not a condition or
exclusion identified in SBREFA, the Commission believes that this
factor must be considered when determining whether to waive or reduce
civil penalties. The final penalty amount should capture any economic
benefits derived from violations. Otherwise small entities could be
encouraged to violate statutory and regulatory requirements for profit.
Violators should not be able to retain economic benefits that are
unavailable to small entities that comply with statutory and regulatory
requirements.
If an eligible small entity meets some, but not all, of the
criteria for a waiver of a civil penalty, it may still be eligible for
a penalty reduced from that which would otherwise be appropriate. The
appropriateness of a penalty and the level of reduction will be decided
on a case-by-case basis by considering the same criteria used for
determining a waiver.
In determining whether to reduce a civil penalty, the Commission
will also consider, upon request, the small entity's ability to pay. In
considering ability to pay, the Commission is following the suggestion
in section 223(a) of SBREFA. If a small entity wants the Commission to
consider its ability to pay a civil penalty, the entity must provide
written documentation demonstrating its financial condition. Acceptable
documentation includes, but is not limited to: Federal income tax
returns, state income tax returns, income statements, balance sheets,
statements of change in financial position, bank statements for loans
and checking accounts. The Commission reserves the right to request
more than one type of verifying data on financial condition. In
analyzing ability to pay, the Commission will consider the small
entity's cost of compliance with statutory and regulatory requirements.
The Commission reserves the right to waive or reduce civil
penalties in circumstances other than those listed under this Policy if
it is in the public interest to do so.
IV. Administrative Effective Date and Congressional Notification
Under the terms of 5 U.S.C. 553(d)(2), this Policy Statement is
effective on March 29, 1997. The Commission has determined, with the
concurrence of the Administrator of the Office of Information and
Regulatory Affairs of the Office of Management and Budget, that this
Policy Statement is not a major rule within the meaning of section 251
of Subtitle E of SBREFA.30 The Commission is submitting this
Policy Statement to both Houses of Congress and to the Comptroller
General.
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\30\ 5 U.S.C. 804(2) (1996).
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List of Subjects in 18 CFR Part 2
Administrative practice and procedure, Electric power, Natural gas,
Pipelines, Reporting and recordkeeping requirements.
By the Commission.
Lois D. Cashell,
Secretary.
In consideration of the foregoing, the Commission amends Part 2,
Chapter I, Title 18 of the Code of Federal Regulations as set forth
below.
PART 2--GENERAL POLICY AND INTERPRETATIONS
1. The authority citation for Part 2 is revised to read as follows:
Authority: 5 U.S.C. 601; 15 U.S.C. 717-717w, 3301-3432; 16
U.S.C. 792-825y, 2601-2645; 42 U.S.C. 4321-4361, 7101-7352.
2. Part 2 is amended by adding an undesignated center heading and
Sec. 2.500, to read as follows:
Statement of Penalty Reduction/Waiver Policy to Comply With the Small
Business Regulatory Enforcement Fairness Act of 1996
Sec. 2.500 Penalty reduction/waiver policy for small entities.
(a) It is the policy of the Commission that any small entity is
eligible to be considered for a reduction or waiver of a civil penalty
if it has no history of previous violations, and the violations at
issue are not the product of willful or criminal conduct, have not
caused loss of life or injury to persons, damage to property or the
environment or endangered persons, property or the environment. An
eligible small entity will be granted a waiver if it can also
demonstrate that it performed timely remedial efforts, made a good
faith effort to comply with the law and did not obtain an economic
benefit from the violations. An eligible small entity that cannot meet
the criteria for waiver of a civil penalty may be eligible for
consideration of a reduced penalty. Upon the request of a small entity,
the Commission will consider the entity's ability to pay before
assessing a civil penalty.
(b) Notwithstanding paragraph (a) of this section, the Commission
reserves the right to waive or reduce civil penalties in appropriate
individual circumstances where it determines that a waiver or reduction
is warranted by the public interest.
[FR Doc. 97-8314 Filed 4-2-97; 8:45 am]
BILLING CODE 6714-01-P