There is a frequent question that I get when I explain that the Nuclear Regulatory Commission (NRC) charges applicants for licensing reviews and licensees for inspections: isn’t that a conflict of interest? Implicit in the question is a concern that, if the agency has a financial interest in the application review or inspection, it might bias the outcome of the regulatory process. From one perspective, the concern is that the agency will run up the bills (even unintentionally, because there is no downside with respect to resources) through unnecessary reviews or by involving more reviewers in the process. Others are concerned that the fee structure creates an incentive for the NRC to approve more applications in order to keep up a stream of fee-related income to the agency. The straightforward response to the question is that the NRC’s fee structure is a creature of statute. Congress (not the NRC) sets the agency’s annual budget and all income from annual and licensing/inspection fees goes directly to the U.S. Treasury—effectively preventing the agency from reaping direct or immediate benefits from fee-related income. This would not have been an adequate response for some.
Delaware Riverkeeper Network filed a lawsuit against the Federal Energy Regulatory Commission (FERC), which has a similar fee structure as the NRC, in federal district court claiming that FERC’s structure and the resulting actual or perceived bias deprive them of constitutional due process under the Fifth Amendment. DRN argued that the funding mechanism for the FERC’s natural gas pipeline program, codified in the Omnibus Budget Reconciliation Act of 1986, creates an incentive for FERC to be biased in favor of the pipeline companies that it regulates. According to DRN, due process requires that an adjudicative agency, such as FERC, be neutral in its decision-making process—with even the appearance of bias rendering the process unconstitutional.
In a March 22 decision, the district court judge granted the government’s motion to dismiss the suit. The court first found that DRN had not identified any liberty or property interest cognizable under the Fifth Amendment’s due process clause and therefore failed to state a claim upon which relief can be granted. The court nevertheless went on to address DRN’s claims of bias. The court noted that DRN does not dispute that Congress determines FERC’s budget, which has no relationship to the number of approved pipelines or the quantity of gas being transported within FERC’s jurisdiction. FERC therefore does not have control over its own budget. The court also acknowledged that FERC’s budget cannot be increased by approving pipelines since FERC must make adjustments to “eliminate any overrecovery or underrecovery.” Finally, the court found that FERC’s long-term interest in its own continued existence does not result in a “possible temptation to the average [person] as a judge . . . which might lead him not to hold the balance nice, clear, and true.” In other words, the act of approving a pipeline and the financial sustainability of FERC as a whole is simply too attenuated to create a bias.
These same conclusions would apply to the NRC’s fee structure, as well as that of the more than 25 federal agencies that receive a portion, if not all, of their respective operating costs through the collection of user fees and other annual assessments. If applicants or members of the public are unhappy with Congress’s chosen appropriations to the NRC or with the fee structure itself, it seems that recourse apparently lies in Congress, not the U.S. Constitution.