Hi Jeff,
Was the OneNote notebook created in the newer version or in an older one? If it was made in OneNote 2013 or earlier, the encryption level may be different, and the option to password-protect won’t be available. As you can see in the image, the feature is only available to OneNote 2016 and newer so if your notebook file was created from an older version, you’ll need to move or recreate it in a supported version to use password protection.