In a rare legal challenge related to fees the NRC charges nuclear licensees for its services, the US Court of Federal Claims recently held that the costs of certain NRC services provided in connection with Confirmatory Orders (COs) are not recoverable via hourly bills to individual licensees. The court held that COs are essentially enforcement orders, and thus cannot be viewed as conveying an “individual benefit” to licensees.

By way of background, the NRC is required to recover nearly all of its costs via fees charged to licensees (42 USC § 2214). It does so primarily through two types of fee assessments. Hourly fees (under 10 CFR Part 170) are charged to licensees for services that the NRC provides for the licensees’ individual benefit, such as reviewing license applications, whereas annual fees (under 10 CFR Part 171) are charged across classes of licensees to cover the costs of generic actions, such as the development of guidance and other safety-related activities.

Following the Fukushima Daiichi incident, the NRC conducted an inspection of the licensee’s facility and found two apparent violations. The licensee agreed to suspend its operations and develop an action plan to address the inspection findings. Eventually, the NRC issued a CO (to which the licensee consented) formalizing the proposed actions and modifying the license accordingly. The CO advised that it was issued per “Section 3.7 of NRC’s Enforcement Policy . . . in lieu of issuance of a Notice of Violation and consideration of civil penalties.”

The NRC later inspected the licensee’s compliance with the CO and determined that all terms had been satisfied. The NRC billed the licensee hourly (under Part 170) for those inspections and other services related to the CO. However, the licensee disputed the bulk of those charges (nearly $2M), arguing that the NRC’s services fell within an exception to the hourly fee rule. In relevant part, the exception states that “[f]ees will not be charged for orders related to . . . civil sanctions issued by the Commission . . . or for amendments resulting specifically from the requirements of these orders.” 10 CFR § 170.31 n.2. The NRC disagreed, asserting that the CO was not a “civil sanction” because it was issued “in lieu” of a Notice of Violation, and the licensee “consented” to its issuance; thus it lacked coercive effect and could not be viewed as punitive.

In its decision issued on February 25 (No. 18-249C), the US Court of Federal Claims ruled for the licensee, holding that the NRC’s interpretation of its fee regulation was unreasonable and was not entitled to Auer deference because the regulation was not ambiguous. In short, the court found that the CO constituted a compulsory instruction issued as part of an enforcement proceeding, and effectively required the licensee to expend approximately $50M in unplanned capital improvements to its facility—circumstances that could hardly be viewed as providing an individual “benefit” to the licensee—and therefore amounted to a “civil sanction” (whether punitive or not).

At bottom, the court determined that licensees are not required to individually bear (through the payment of fees charged under Part 170) the costs of certain services the NRC provides in connection with COs; rather, those costs are to be funded collectively through the annual fees paid by NRC licensees and under Part 171. This case is noteworthy in that licensees are often reticent to challenge the fees charged by their principal regulator. We will continue to track any further developments in this case and in the NRC’s fee recovery process.