Simplified Alternative Procedure for Resolving Civil Penalty Cases

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 1

[CGD 93-079]

RIN 2115-AE68

Simplified Alternative Procedure for Resolving Civil Penalty

Cases

AGENCY: Coast Guard, DOT.

ACTION: Final rule.

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SUMMARY: The Coast Guard is adopting as final, with minor revisions, an

interim rule allowing for greater delegation by the District Commander

and for a simplified alternative procedure for resolving civil penalty

cases. This procedure streamlines the process for resolution of certain

uncontested oil discharge and pollution prevention civil penalty cases

by allowing a Coast Guard official to present a notice of violation

(NOV) and proposed penalty to a party in the field.

EFFECTIVE DATE: January 26, 1995.

ADDRESSES: Unless otherwise indicated, documents referred to in this

preamble are available for inspection or copying at the office of the

Executive Secretary, Marine Safety Council (G-LRA/3406), U.S. Coast

Guard Headquarters, 2100 Second Street SW., room 3406, Washington, DC

20593-0001 between 8 a.m. and 3 p.m., Monday through Friday, except

Federal holidays. The telephone number is (202) 267-1477.

FOR FURTHER INFORMATION CONTACT: Lieutenant Jonathan C. Burton, Project

Manager, Marine Environmental Protection Division (G-MEP), (202) 267-

6714.

SUPPLEMENTARY INFORMATION:

Drafting Information

The principal persons involved in drafting this document are

Lieutenant Jonathan C. Burton, Project Manager, Marine Environmental

Protection Division, and C.G. Green, Project Counsel, Office of the

Chief Counsel.

Regulatory History

On April 7, 1994, the Coast Guard published an interim final rule

in the Federal Register (59 FR 16558) establishing an optional

alternative civil penalty procedure and announced a six-month pilot

implementation program to test the new procedure. The Coast Guard

received 5 letters during the comment period and 4 after the comment

period was closed. All comments were considered before drafting this

final rule. No public hearing was requested, and none was held.

Background and Purpose

The procedures for assessing civil penalties by the Coast Guard are

contained in 33 CFR 1.07. The civil penalty process begins when an

alleged violation is detected by, or reported to, a Coast Guard

official. The alleged violation is investigated and, if it appears that

the elements for a violation case exist, civil enforcement action is

normally initiated by preparing a case report with a recommended

penalty and forwarding it to the appropriate Coast Guard District

office for review. Since the establishment of the Notice of Violation

(NOV) option, some cases are now eligible for issuance of a NOV and

parties are afforded the option of either paying the proposed penalty

and closing the case, or having the violation processed through normal

procedures.

If the case is not eligible for NOV issuance or if the party

declines the NOV, the District staff reviews the case report to verify

that there was evidence sufficient to establish a prima facie case and

that the recommended penalty is appropriate. The case file is then

transmitted, with a recommended action, to the Hearing Officer. Based

on the case file, the Hearing Officer independently determines whether

prima facie evidence of a violation exists and, if so, sends a Letter

of Notification to the alleged violator. This letter specifies, among

other matters, the alleged violation(s) and a penalty amount deemed

appropriate based on the information provided to the Hearing Officer. A

party can pay the penalty amount specified by the Hearing Officer,

request an in-person hearing, or provide written evidence or arguments

in lieu of a hearing. If the party pays the penalty, the case is closed

and no further action is required. If the party chooses either of the

latter two options, the Hearing Officer either conducts an in-person

hearing or reviews the submitted written evidence and arguments. The

Hearing Officer then issues a written decision assessing a penalty or

dismissing the case. The Hearing Officer's decision can be

administratively appealed to the Commandant of the Coast Guard.

The Notice of Violation option was developed to address the Coast

Guard's concern that the civil penalty assessment process was too

lengthy when applied to small (under 100 gallons) oil discharges and

minor pollution prevention regulation violations. The lengthy process

time meant that a party frequently would have additional violations

before being notified by a Hearing Officer of the initiation of action

for the first violation.

The NOV option provides for early notification of alleged violators

and offers early resolution of uncontested small oil spill and

pollution prevention violations. Early resolution of these minor

violations saves time and reduces costs of internal reviews, improves

deterrence, and facilitates corrective action by providing a party with

earlier notice of violations.

The interim rule amended 33 CFR 1.07 to add the optional

alternative procedure and the Coast Guard conducted a pilot program for

six months in the Captain of the Port zones of Charleston, SC;

Galveston, TX; and Los Angeles, CA. The result of the pilot program was

favorable. During the pilot program 197 NOVs were issued for oil spills

and 21 NOVs were issued for pollution prevention violations with a

total penalty value of $96,400. As of October 13, 1994, 160 NOVs had

been paid totaling $57,275 in penalties.

The optional procedure allows early settlement of cases in which a

Coast Guard issuing officer issues a NOV. A Coast Guard issuing officer

is a commissioned, warrant or petty officer with specific training and

authority to issue a violation notice.

A party has the option of paying the penalty proposed on the NOV,

declining the NOV, or taking no action on the NOV. If a party pays the

proposed penalty indicated on a NOV, the case is closed without further

processing by a District Program Manager or Hearing Officer. If a party

declines the NOV or takes no action, the case is processed as if an NOV

had never been issued. A complete case file, report and recommended

penalty amount is sent to the District Commander for review prior to

being forwarded to the Hearing Officer for processing as any other

civil penalty case. The Hearing Officer's Letter of Notification would

specify a penalty deemed appropriate based on the case file. The

proposed penalty is not limited to the amount proposed in the field on

the NOV.

The NOV option will be implemented by Coast Guard Captains of the

Port as soon as sufficient numbers of personnel have been trained in

the issuance of NOVs. Representatives from each district, marine safety

office, and detachment are being sent to a ``train the trainer'' course

on the NOV option at the Coast Guard Reserve Training Center in

Yorktown, VA. After the initial Yorktown training, each unit will be

able to properly train additional personnel. Each district will

publicize the dates when its units will start to use the NOV option.

Use of the NOV option is initially being limited, by Commandant

Directive, to violations of specified regulations and statutory

requirements subject to Class I Administrative Civil Penalties under

the Federal Water Pollution Control Act (FWPCA), as amended. A NOV can

be issued for two types of violations: (1) oil discharges in violation

of the FWPCA, if they are 100 gallons or less, and (2) violations of

pollution prevention regulations (33 CFR Parts 154, 155, 156) for which

the current penalty guidelines list a penalty not greater than $2500.

Coast Guard issuing officers can issue a NOV only in cases that

meet specific written guidance. Penalty amounts are taken from a

penalty schedule and may not be increased or decreased by the issuing

officer. Any case in which aggravating or extenuating circumstances are

involved, or in which the violations do not meet the specific written

guidance, is not eligible for NOV issuance and will be processed for

referral to the Hearing Officer in accordance with normal procedures.

Delegation by the District Commander 33 CFR 1.07-10(b)

The District Commander now has more flexibility to delegate

authority for review of alleged violations to any member under the

District Commander's command. For example, the District Commander may

now delegate case review authority to the Captain of the Port for

certain pollution prevention violations, thus eliminating the need for

review by the District Commander's staff prior to forwarding the case

to a Hearing Officer. The expanded delegation authority allows District

Commanders greater flexibility in allocating their personnel resources

to process violation cases.

Discussion of Comments and Changes

I. General Comments

The Interim rule language of Sec. 1.07-11 and the NOV form used for

the pilot program left the impression that a party could request a

hearing on the proposed penalty offered by the NOV. In fact, if a party

does not wish to accept the NOV, a full case is forwarded to the

Hearing Officer who then makes an independent determination and issues

a preliminary assessment letter to which the party can respond. To

clarify this procedure Sec. 1.07-11 now specifies that the NOV include

a statement that the party may decline the NOV and, if the NOV is

declined, the party has the right to a hearing prior to a final

assessment of a penalty by a Hearing Officer. The NOV also states that

taking no action on the NOV has the same result as declining the NOV

but the processing time may increase. Furthermore, the NOV form makes

it clear that the Hearing Officer is in no way bound by any assessment

proposed by the NOV. To facilitate understanding of these rights the

NOV form is reproduced in Figure 1.

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TR27DE94.000

TR27DE94.001

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Two comments received during the pilot program were in favor of the

regulations and suggested that the NOV option be broadened to include

other Coast Guard programs.

The NOV option can be used by other Coast Guard programs that use

the civil penalty process. Any program that implements use of the NOV

option will do so by internal policy with prior notification to the

public in the Federal Register.

Three comments were in favor of the alternative process but

suggested different penalty amounts for small oil spills and pollution

prevention regulation violations.

The penalty amounts specified for small oil spills and pollution

prevention regulation violations used during the pilot program were

based on current Commandant's policy guidelines for assessing Coast

Guard civil penalties. These penalty amounts are reviewed regularly to

ensure that they reflect a fair and equitable enforcement policy.

The pilot program results indicated that the current small oil

spill penalties were appropriate. However, the Coast Guard has revised

some penalties for pollution prevention violations. Results of the

pilot program indicated that using the same penalty amounts for

pollution prevention violations as those specified in the current

Commandant's policy guidelines for assessing Coast Guard civil

penalties provided no incentive to accept an NOV. To encourage

acceptance of the NOV, pollution prevention violations that have a

recommended penalty of $2,500 or less under the Commandant's civil

penalty guidelines will be proposed on an NOV at 75% of the amount

listed for the specific offense. Pollution prevention violations that

have a recommended penalty of $2,500 or more under the Commandant's

civil penalty guidelines are no longer eligible for issuance of an NOV

and will be sent to the Hearing Officer for a determination. The NOV

option will be closely monitored to determine if additional spill

categories or different penalties are needed in the future.

Two comments asked that the determination of first offense be based

on the record of each platform or vessel, not the company as a whole.

The Coast Guard agrees that for purposes of NOV issuance each

platform, vessel, or unit should be treated separately when determining

whether or not it is a first offense for the purpose of assessing

penalties. This is reflected in the NOV implementation guidance.

One comment indicated that Coast Guard petty officers do not have

the experience to make a judgment as to when to issue a NOV and that

any assessment should only be made after review by a higher ranking

authority.

The Coast Guard disagrees. Coast Guard Petty Officers selected as

issuing officers are trained professionals who have demonstrated

knowledge and ability in their field. Before any Petty Officer

investigates a violation and issues a NOV, he or she is first given

proper instruction and is determined to be qualified by his or her

command. Issuing officers, however, have no discretion in assessing

penalty amounts. If an NOV is issued, the penalty amount is taken

directly from the implementing guidance. If the offense does not meet

specific criteria in the guidance, an NOV cannot be issued.

One comment stated that a party should be given the right to be

heard prior to the issuance of a NOV.

The Coast Guard disagrees. A party is not entitled to a hearing

prior to initiation of civil penalty action. Under Coast Guard

procedures, the ``initiation of civil penalty action'' occurs with the

Letter of Notification from a Hearing Officer, or in some cases with

the NOV. The NOV does not take away any rights a party has to a

hearing. The NOV procedure is voluntary, and the recipient of an NOV

may opt to have the case processed under ordinary procedures which

include the right to a hearing before disposition on the case.

Three comments expressed general confusion over how the NOV option

will work and concern about the protection of rights for a party issued

an NOV.

The NOV is an opportunity to use an optional procedure for

processing civil penalty cases. It may be declined by a party. The NOV

form states that a party may decline the NOV, which will immediately

result in a violation case being forwarded through the appropriate

district to a Hearing Officer for determination. The form also states

that taking no action on the NOV has the same result as declining the

NOV. A ``no action'' response will, however, delay the referral of the

case to the District for review because the 45-day from issuance period

must elapse before the Coast Guard begins processing the case under

normal procedures. A change has been made to Sec. 1.07-11(b)(6) to

reflect this procedure.

Three comments expressed concern that the implementing guidance was

not provided to the public during the pilot program.

A number of individuals requested, and were provided, the Coast

Guard's NOV guidance during the pilot program. A copy of current

implementing guidance is available by writing to:

Marine Environmental Protection Division (G-MEP), U.S. Coast Guard

Headquarters, 2100 Second Street SW., room 3406, Washington, DC 20593-

0001.

Three comments felt that a notice of proposed rulemaking (NPRM)

should have been published instead of an interim final rule (IFR).

The changes to 33 CFR 1.07 are procedural and provide a benefit to

the public. Thus, under 5 U.S.C. 553(b)(3) a NPRM was not necessary. An

IFR was published to provide a regulatory basis to conduct the pilot

program. Comments were encouraged and a six month comment period was

established. All comments were considered in implementing this final

rule. The NOV procedure is optional and use of the procedure provides a

benefit to the public. The IFR, however, requested comments both on the

procedure and on its implementation. Those comments were considered

before issuing this Final Rule, however no comments resulted in

substantial change to the IFR.

One comment expressed concern that Coast Guard personnel would be

over-zealous in their prosecution of civil penalty cases against small

business.

The NOV option has safeguards built in to protect from such an

occurrence. The criteria for using an NOV is based on the size of a

spill and the violation history of the party to whom it may be issued.

Issuing officers may not deviate from this criteria.

One comment encouraged the Coast Guard to proceed with a final rule

but make sure that all rights of a party are preserved and that ``no

response'' should not be interpreted as acceptance of a penalty.

As previously discussed, ``no response'' will result in processing

of a violation through ordinary procedures as if a NOV had never been

issued.

One comment asked that the NOV be provided to an officer of the

company that is being cited rather than an employee who may not pass it

to the appropriate official. The comment also suggested that 60 days is

a more reasonable time to respond.

Since the purpose of the NOV option is to provide immediate

notification of a settlement offer, it is impractical to always deliver

the NOV to a company officer. Further, the NOV may be against an

individual, not a company. Every effort is made to ensure that the

correct responsible party is identified.

As to the length of time to pay an NOV, the Coast Guard agrees that

30 days was too short a period. As a result of the pilot program the

Coast Guard had already decided to lengthen the time a party has to

respond to an NOV. During the pilot program the number of NOVs paid

within 30 days was approximately 65%, while payment before 45 days

exceeded 85%. Therefore, the deadline for payment of a penalty in a NOV

in order to avoid submission of the case to the Hearing Officer

established in Sec. 1.07-11(b)(4) has been changed from 30 to 45 days.

Regulatory Evaluation

No comments were received on the draft regulatory evaluation. This

rule is not a significant regulatory action under section 3(f) of

Executive Order 12866 and does not require an assessment of potential

costs and benefits under section 6(a)(3) of that order. It is not

significant under the ``Department of Transportation Regulatory

Policies and Procedures'' (44 FR 11040; February 26, 1979). The Coast

Guard expects there to be minimal economic impact from this procedural

rule and a full Regulatory Evaluation is unnecessary. The total annual

cost to the public from civil penalties is not increased by this rule.

Both the public and the government should realize savings from the

reduction in administrative processing costs through eliminating the

need for review by the District Commander and action by the Hearing

Officer in those cases in which the penalty specified in a NOV is paid

within the allowed time by the party.

Small Entities

Only one comment was received on the impact of the interim rule on

small entities. That comment concerned potential over-zealous

enforcement and is discussed in the comment section of this preamble.

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the Coast

Guard considered whether this rulemaking would have a significant

economic impact on a substantial number of small entities. ``Small

entities'' include independently owned and operated small businesses

that are not dominant in their field and that otherwise qualify as

``small business concerns'' under section 3 of the Small Business Act

(15 U.S.C. 632). This rule is administrative in nature, making final an

alternate method of processing violation cases. The total number of

civil penalties levied against the public does not substantially change

as the result of this regulation. Therefore, the Coast Guard certifies

under section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.) that this rule will not have a significant economic impact on a

substantial number of small entities.

Collection of Information

This rulemaking contains no collection of information requirements

under the Paperwork Reduction Act (44 U. S. C. 3501 et seq.).

Federalism

No comments were received on the federalism implications of the

interim rule. The Coast Guard has analyzed this rule under the

principles and criteria contained in Executive Order 12612 and has

determined that this rule does not have sufficient federalism

implications to warrant the preparation of a Federalism Assessment.

Environment

No comments were received on the environmental impact of the

interim rule. The Coast Guard considered the environmental impact of

this rulemaking and concluded that, under section 2.B.2 of Commandant

Instruction M16475.lB, this rule is categorically excluded from further

environmental documentation. Procedural rules do not require

environmental impact studies.

List of Subjects in 33 CFR Part 1

Administrative practice and procedure, Authority delegations

(Government agencies), Freedom of Information, Penalties.

Accordingly, the interim rule amending 33 CFR Part 1 which was

published at 59 FR 16560 on April 7, 1994, is adopted as a final rule

with the following change:

PART 1--[AMENDED]

1. The authority citation for Subpart 1.01 continues to read as

follows:

Authority: 14 U.S.C. 633; 49 CFR 1.46.

Subpart 1.07--Enforcement; Civil and Criminal Penalty Proceedings

2. Section 1.07-11 is revised to read as follows:

Sec. 1.07-11 Notice of violation.

(a) After investigation and evaluation of an alleged violation has

been completed, an issuing officer may issue a Notice of Violation to

the party.

(b) The Notice of Violation will contain the following information:

(1) The alleged violation and the applicable law or regulations

violated;

(2) The amount of the maximum penalty that may be assessed for each

violation;

(3) The amount of proposed penalty that appears to be appropriate;

(4) A statement that payment of the proposed penalty within 45 days

will settle the case;

(5) The place to which, and the manner in which, payment is to be

made;

(6) A statement that the party may decline the Notice of Violation

and that if the Notice of Violation is declined, the party has the

right to a hearing prior to a final assessment of a penalty by a

Hearing Officer.

(c) The Notice of Violation may be hand delivered to the party or

an employee of the party, or may be mailed to the business address of

the party.

(d) If a party declines a Notice of Violation or takes no action on

the Notice of Violation within 45 days, the case file will be sent to

the District Commander for processing under the procedures described in

Sec. 1.07-10(b).

Dated: December 21, 1994.

J.C. Card,

Rear Admiral, U.S. Coast Guard, Chief, Office of Marine Safety,

Security and Environmental Protection.

[FR Doc. 94-31792 Filed 12-23-94; 8:45 am]

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