(1) In a hearing concerning adverse action or proposed adverse action against an existing license, the department shall present its case-in-chief first during the hearing to establish the background facts and the basis for the action or proposed action. The department shall have the burden to establish by a preponderance of the evidence that there is a reasonable basis for the department to take the adverse action. The licensee shall then have the opportunity to present its case-in-chief. The licensee has the burden of persuasion to establish that there is not a reasonable basis for the adverse action or proposed adverse action against the existing license. The department shall have the opportunity to present rebuttal evidence.

(2) In a hearing concerning the denial or proposed denial of a license, the department shall open the hearing by providing evidence to establish the background facts and any reasons relied upon by the department for the denial of the license or the proposed denial of the license. The license applicant or operator shall then present its case-in-chief. The license applicant has the burden of proof to establish by a preponderance of the evidence that the denial of the license has no reasonable basis and that all requirements of Title 50, chapter 53, MCA, and ARM Title 37, chapter 115, subchapters 1 through 22 have been met and the license applicant is therefore entitled to the license. The department shall then have an opportunity to present its case-in-chief. The department has the burden of persuasion to show that there is some reasonable basis for denial of the license or that the license applicant has not met all requirements of Title 50, chapter 53, MCA, and ARM Title 37, chapter 115, subchapters 1 through 22. The license applicant or operator shall have the opportunity to present rebuttal evidence.

(3) If the department has established by a preponderance of the evidence that there have been violations of Title 50, chapter 53, MCA, or ARM Title 37, chapter 115, subchapters 1 through 22, the department's exercise of discretion in deciding the level of negative licensing action to take must be upheld unless the hearing examiner finds that in light of all the circumstances, the penalty the department has imposed or proposed to impose is so disproportionate or excessive as to be arbitrary and capricious.