[Federal Register Volume 69, Number 173 (Wednesday, September 8, 2004)]
[Notices]
[Pages 54324-54326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-20299]


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NUCLEAR REGULATORY COMMISSION

[Docket Nos. 030-36567, 030-34261; License Nos. 27-23914-01E, 42-23850-
02E, EA-03-187]


In the Matter of 21st Century Technologies, Inc., Las Vegas, NV; 
Order Imposing Civil Monetary Penalty

    21st Century Technologies, Inc. (Licensee) is the holder of Exempt 
Distribution License No. 27-23914-01E, issued by the Nuclear Regulatory 
Commission (NRC or Commission) on May 19, 2004.\1\ The license 
authorizes the Licensee to distribute products containing byproduct 
material (i.e., tritium) in accordance with the conditions specified 
therein.
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    \1\ Prior to May 19, 2004, the company held License No. 42-
23850-02E, Docket No. 030-34261, and was based in Haltom City, 
Texas.
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    An inspection and investigation of the Licensee's activities were 
completed in October 2003. The results of the inspection and 
investigation indicated that the Licensee had not conducted its 
activities in full compliance with NRC requirements. A written Notice 
of Violation and Proposed Imposition of Civil Penalty (notice) was 
issued to the Licensee by letter dated April 13, 2004. The notice 
stated the nature of the violations, the provisions of the NRC's 
requirements that the Licensee had violated, and the amount of the 
civil penalty proposed for the violation ($6,000).
    The Licensee responded to the notice in a letter dated May 11, 
2004. In its response, the Licensee admitted the violations, provided 
qualifying information with respect to several of the examples, 
contested the classification of the violations as a Severity Level III 
problem, contested the NRC's application of its civil penalty 
assessment process, and requested remission or mitigation of the 
proposed civil penalty. The licensee's letter also described 21st 
Century's plans to correct and prevent recurrence of the violations.
    After consideration of the Licensee's response, and for the reasons 
discussed in the Appendix to this Order, the NRC concludes that the 
severity level of the violations was appropriately determined, that the 
civil penalty assessment process was correctly followed, and that the 
licensee has not provided a basis for reducing the severity level of 
the violations or for mitigating the proposed civil penalty. Therefore, 
the NRC concludes that the civil penalty proposed for the violations 
designated in the notice should be imposed by Order.
    In view of the foregoing and pursuant to section 234 of the Atomic 
Energy Act of 1954, as amended (Act), 42 U.S.C. 2282, and 10 CFR 2.205, 
it is hereby ordered that:

    The Licensee pay a civil penalty in the amount of $6,000 within 
30 days of the date of this Order, in accordance with the payment 
methods described in NUREG/BR-0254. In addition, at the time of 
making the payment, the licensee shall submit a statement indicating 
when and by what method payment was made, to the Director, Office of 
Enforcement, U.S. Nuclear Regulatory Commission, One White Flint 
North, 11555 Rockville Pike, Rockville, MD 20852-2738.

    The Licensee may request a hearing within 30 days of the date of 
this Order. Where good cause is shown, consideration will be given to 
extending the time to request a hearing. A request for extension of 
time must be made in writing to the Director, Office of Enforcement, 
U.S. Nuclear Regulatory Commission, Washington, DC 20555, and include a 
statement of good cause for the extension. A request for a hearing 
should be clearly marked as a ``Request for an Enforcement Hearing'' 
and shall be submitted to the Secretary, U.S. Nuclear Regulatory 
Commission, ATTN: Rulemakings and Adjudications Staff, Washington, DC 
20555. Copies also shall be sent to the Director, Office of 
Enforcement, U.S. Nuclear Regulatory Commission, Washington, DC 20555, 
to the Assistant General Counsel for Materials Litigation and 
Enforcement at the same address, and to the Regional Administrator, NRC 
Region IV, 611 Ryan Plaza Drive, Suite 400, Arlington, Texas 76011. 
Because of continuing disruptions in delivery of mail to United States 
Government offices, it is requested that requests for hearing be 
transmitted to the Secretary of the Commission either by means of 
facsimile transmission to 301-415-1101 or by e-mail to 
[email protected] and also to the Office of the General Counsel 
either by means of facsimile transmission to 301-415-3725 or by e-mail 
to [email protected].
    If a hearing is requested, the Commission will issue an Order 
designating the time and place of the hearing. If the Licensee fails to 
request a hearing within 30 days of the date of this Order (or if 
written approval of an extension of time in which to request a hearing 
has not been granted), the provisions of this Order shall be effective 
without further proceedings. If payment has not been made by that time, 
the matter may be referred to the Attorney General for collection.

[[Page 54325]]

    In the event the Licensee requests a hearing as provided above, the 
issues to be considered at such hearing shall be:

    Whether on the basis of the violations admitted by the Licensee, 
this Order should be sustained.

    Dated this 30th day of August 2004.

    For the Nuclear Regulatory Commission.
Frank J. Congel,
Director, Office of Enforcement.

Appendix To Order Imposing Civil Monetary Penalty--EA-03-187 Evaluation 
and Conclusion

    On April 13, 2004, a Notice of Violation and Proposed Imposition 
of Civil Penalty (notice) was issued to the Licensee for violations 
identified during an NRC inspection and investigation. The Notice 
stated the nature of the violations, the provisions of the NRC's 
requirements that the Licensee had violated, and the amount of the 
civil penalty proposed for the violations ($6,000).
    The Licensee responded to the notice in a letter dated May 11, 
2004. In its response, the Licensee admitted the violations that 
resulted in the civil penalty, provided qualifying information with 
respect to several of the examples, contested the classification of 
the violations as a Severity Level III problem, contested the NRC's 
application of its civil penalty assessment process, and requested 
remission or mitigation of the proposed civil penalty.
    The NRC's evaluation of the licensee's response, and conclusions 
regarding the licensee's requests are as follows:

Summary of Licensee's Response & Request for Remission or 
Mitigation of the Penalty

    1. Severity Level III should not be assigned to actions where 
there is no clear knowledge on a licensee's part that the actions 
taken are in violation of the license and the licensee has a 
rational basis for conducting licensing activities, even though 
those activities turn out to be outside the scope of the license. 
Licensee contends that five of the seven examples included in the 
violations assessed a civil penalty are due to misinterpretation and 
misunderstanding of the license provisions, and states that 
reasonable minds can differ on these issues notwithstanding the fact 
that the NRC has the final word.
    2. The licensee takes exception to NRC's statement that ``The 
number of examples of these violations, and the extended time period 
over which they occurred, represent a programmatic concern with the 
potential to impact radiological safety.'' The licensee cites a 
reference in NRC's Enforcement Policy to not citing licensees for 
failing to report events the licensee is unaware of, and draws a 
parallel here by stating ``A licensee should not be cited for a 
programmatic failure unless the licensee was actually aware that it 
was not following the licensing program or if licensee believed in 
good faith that it was following the licensing program.''
    3. The licensee understands the NRC staff to have previously 
agreed that none of the license infractions impacted or potentially 
impacted public health and safety. This appears to be inconsistent 
with the letter of April 13 where it expressed ``a programmatic 
concern with the potential to impact radiological safety.''
    4. The licensee acknowledges that two examples of the violations 
assessed a civil penalty were not the result of misinterpretation 
and misunderstanding of license provisions, but argues that these do 
not support a finding of a programmatic failure because they are too 
few in number and because they may have been the result of employee 
sabotage.
    5. The NRC should not have considered ``Identification'' credit 
in the civil penalty assessment process because the standard of 
considering previous escalated enforcement during the past 2 years 
or past 2 inspections, whichever is longer, is directed toward 
nuclear power plant inspections or inspections that occur on an 
annual or near annual basis, and not to situations involving 
inspections that occur every 5 years.
    6. Although the NRC identified the violations in this case, 
credit for identification should be given to the licensee because, 
under the circumstances, the licensee's actions related to 
identification were not unreasonable.
    7. Licensee should be given credit for prompt and comprehensive 
action because it took immediate actions necessary upon discovery of 
each violation to assure compliance with the license, and, in a 
timely manner, developed and is implementing the lasting actions 
designed to prevent recurrence of the violations at issue, actions 
that are appropriately comprehensive to prevent occurrence of 
violations with similar root causes.
    8. The licensee states that special circumstances exist that 
warrant the exercise of discretion to reduce the severity level of 
the violations. These include the significance of the violations, 
the clarity of the requirement, the overall sustained performance of 
the licensee, and other relevant circumstances. The licensee repeats 
many of its previous arguments, including its assertion that it was 
operating in good faith relative to compliance with the license, and 
that it has taken extensive corrective action to assure long-term 
compliance. The licensee states, ``Licensee believes that there is a 
sufficient lace (sic) of clarity about the license requirements to 
justify a reduction of the assignment of Severity Level III to Level 
IV and elimination of the fine for civil penalty.''

NRC Evaluation of Licensee's Responses & Request for Remission or 
Mitigation of Penalty

    1. The licensee is essentially saying that Severity Level III 
should not be assigned where the licensee did not know it was 
violating NRC requirements. If the NRC had been able to show the 
licensee knew it was violating NRC requirements, and continued to do 
so, the NRC could have characterized the violations as willful non-
compliances, and could have considered assigning a higher severity 
level to the violations, in accordance with Section IV.A.4 of the 
Enforcement Policy. The specific severity level example that NRC 
relied upon (Enforcement Policy, Supplement VI, C.8) does not 
reference willfulness and supports a Severity Level III 
determination without regard to willfulness. In addition, in 
determining severity level, the NRC also considered the fact that 
the violations impacted the ability of the NRC to perform its 
regulatory function, in accordance with Section IV.A.5 of the 
Enforcement Policy.
    The alleged ``lack of clarity'' in the license does not justify 
a reduction in the assigned Severity Level III. The NRC staff does 
not agree that reasonable minds would differ as to the meaning of 
License Condition 10. The licensee asserted that it relied on 
Attachment 16 to the license as authorizing distribution of several 
products which the NRC found in this action to have been distributed 
in violation of the license. License Condition 10 authorized certain 
types of products and explicitly referred to specified attachments 
for details regarding the authorized products. The license, however, 
nowhere referenced Attachment 16 with respect to any authorized 
product. License Condition 10 was crafted and submitted by 21st 
Century as a license amendment after discussions between the former 
21st Century President and NRC staff. The former President of 21st 
Century stated at the predecisional enforcement conference that he 
had misunderstood the license and that he was ``guilty of probably 
not being real smart in reading licenses''. 21st Century had every 
opportunity to seek clarification from the NRC as to what the 
license allowed prior to modifying its products and distributing 
them. Moreover, 21st Century was the subject of prior escalated 
enforcement in 1996, and as a result was well aware that only those 
products explicitly authorized by the license could be distributed 
by the company. The appropriate response to any perceived lack of 
clarity in the license was for the licensee to obtain clarification. 
Instead, the licensee failed to have systems in place to assure 
compliance with the license, and failed to seek any necessary 
clarification prior to modifying its products and distributing them.
    2. The licensee is responsible for assuring that it is complying 
with the conditions of the license. In addition, a programmatic 
concern does not rest on whether the licensee was aware it was 
operating in noncompliance. As discussed in item 1 above, if the NRC 
had been able to show that the licensee was aware it was operating 
in noncompliance, the violations could have been characterized as 
willful non-compliances, and the NRC could have considered assigning 
a higher severity level. Adopting the licensee's views would 
encourage licensees to remain ignorant of NRC requirements.
    3. NRC has acknowledged that the violations did not result in 
any actual safety consequences. NRC has not stated, however, that 
there were no potential safety consequences. As we stated at the 
predecisional enforcement conference, the NRC has a responsibility 
to assure that licensees who distribute radioactive material to 
members of the public, do so in a manner which provides reasonable 
confidence that the products are safe. NRC reviews the engineering 
designs and safety features of

[[Page 54326]]

such products before allowing them to be distributed. By 
distributing products that had not been reviewed and approved by 
NRC, 21st Century circumvented the very process that is designed to 
assure safety, and thereby created a potential for safety 
consequences.
    4. The NRC's Office of Investigations (OI) conducted a 
comprehensive investigation into the violations. OI found no 
evidence of employee sabotage and the licensee has not provided any 
such evidence. If the NRC had found evidence of employee sabotage as 
the cause of the violations, we would have held 21st Century 
accountable nonetheless, and could have considered assigning a 
higher severity level to the violations, in accordance with Section 
IV.A.4 of the Enforcement Policy. NRC licensees are accountable for 
the violations committed by their employees, and appropriate 
enforcement action may be taken therefor. Advanced Medical Systems, 
Inc., 39 NRC 285, 311-12 (1994), aff'd. Advanced Medical Systems, 
Inc. v. NRC, 61 F. 3d 903 (6th Cir. 1995). See also Enforcement 
Policy, Section VII.B.6.
    5. The ``two years or two inspection'' criterion was added to 
the civil penalty assessment process in 1995. In the June 30, 1995 
Federal Register notice announcing this and other Enforcement Policy 
changes, the NRC said this particular change was made to focus 
additional attention on ``situations of greater concern (i.e., where 
a licensee has had more than one significant violation in a 2-year 
or two-inspection period ....'' The two-inspection period interval 
was adopted in recognition of the fact that some licensees, such as 
21st Century Technologies, Inc., are inspected at intervals that 
exceed two years.
    6. There is no basis to agree with the licensee's assertion that 
it should be given credit for ``Identification'' as the licensee did 
not in fact identify any of the violations itself. Moreover, 21st 
Century was the subject of previous escalated enforcement action in 
1996 for unauthorized distribution of licensed material, and was 
repeatedly told verbally and in writing that no products could be 
distributed that were not explicitly authorized by the license. 
Despite that previous enforcement action, the licensee failed to put 
a program in place to identify non-compliances.
    7. While the licensee has laid out an extensive set of long-term 
corrective actions, the point the NRC made in denying credit for 
prompt and comprehensive corrective action was that the licensee was 
still developing these corrective actions at the time of the 
enforcement conference, about two years after NRC became involved in 
pointing out the violations to the licensee. While the licensee may 
have taken timely short-term actions to stop the violations as they 
were identified, the licensee did not consider long-term 
comprehensive action to improve its oversight of licensed activities 
until it hired a consultant just prior to the predecisional 
enforcement conference. Accordingly, the licensee's corrective 
actions overall were not prompt.
    8. There is no basis to grant 21st Century's request for 
mitigation and a reduction in the severity level of the violations, 
due to the claimed ``special circumstances'' of significance of the 
violations, lack of clarity of the requirement, overall sustained 
performance of the licensee, ``good faith'' (non-willful) nature of 
the violations, or extensive corrective action. The significance of 
the violations does not justify mitigation because the Severity 
Level III classification was appropriate and in accordance with the 
Enforcement Policy. See Items 1-4, above. There was no lack of 
clarity in the pertinent license condition. The licensee's admitted 
failure to understand its own license does not reduce the 
significance of the violations. See Item 1, above. The licensee's 
assertion that its overall sustained good performance justifies 
mitigation is not supported by the facts or the Enforcement Policy. 
The 1996 enforcement action in conjunction with the subject current 
violations indicates the opposite of sustained good performance. 
Moreover, the Enforcement Policy nowhere states that the assigned 
severity level may be reduced because of sustained good performance. 
The licensee's assertion that it deserves mitigation because the 
violations were committed in ``good faith'' (no willfulness) is 
unjustified. See Items 1-2, above. Nor would any corrective actions 
justify a reduction in the assigned Severity Level III. Corrective 
actions are considered in determining whether the base civil penalty 
should be increased or decreased. See Enforcement Policy, Section 
VI.C.2.c. The NRC staff did consider the licensee's corrective 
actions and appropriately determined that credit for prompt and 
comprehensive corrective actions was not warranted. See Item 7, 
above.

NRC Conclusion

    The NRC concludes that the severity level of the violations was 
appropriately determined, that the civil penalty assessment process 
was correctly followed, and that the licensee has not provided a 
basis for reducing the severity level of the violations or for 
mitigating the proposed civil penalty. Therefore, the staff 
recommends that the civil penalty proposed for the violations in the 
notice should be imposed by Order.
[FR Doc. 04-20299 Filed 9-7-04; 8:45 am]
BILLING CODE 7590-01-P