[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
H.R. 3245, COMMERCIAL SPACE ACT
OF 2003
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
NOVEMBER 5, 2003
__________
Serial No. 108-33
__________
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
90-164 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
______
COMMITTEE ON SCIENCE
HON. SHERWOOD L. BOEHLERT, New York, Chairman
LAMAR S. SMITH, Texas RALPH M. HALL, Texas
CURT WELDON, Pennsylvania BART GORDON, Tennessee
DANA ROHRABACHER, California JERRY F. COSTELLO, Illinois
JOE BARTON, Texas EDDIE BERNICE JOHNSON, Texas
KEN CALVERT, California LYNN C. WOOLSEY, California
NICK SMITH, Michigan NICK LAMPSON, Texas
ROSCOE G. BARTLETT, Maryland JOHN B. LARSON, Connecticut
VERNON J. EHLERS, Michigan MARK UDALL, Colorado
GIL GUTKNECHT, Minnesota DAVID WU, Oregon
GEORGE R. NETHERCUTT, JR., MICHAEL M. HONDA, California
Washington CHRIS BELL, Texas
FRANK D. LUCAS, Oklahoma BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland SHEILA JACKSON LEE, Texas
W. TODD AKIN, Missouri ZOE LOFGREN, California
TIMOTHY V. JOHNSON, Illinois BRAD SHERMAN, California
MELISSA A. HART, Pennsylvania BRIAN BAIRD, Washington
JOHN SULLIVAN, Oklahoma DENNIS MOORE, Kansas
J. RANDY FORBES, Virginia ANTHONY D. WEINER, New York
PHIL GINGREY, Georgia JIM MATHESON, Utah
ROB BISHOP, Utah DENNIS A. CARDOZA, California
MICHAEL C. BURGESS, Texas VACANCY
JO BONNER, Alabama
TOM FEENEY, Florida
RANDY NEUGEBAUER, Texas
------
Subcommittee on Space and Aeronautics
DANA ROHRABACHER, California, Chairman
LAMAR S. SMITH, Texas BART GORDON, Tennessee
CURT WELDON, Pennsylvania JOHN B. LARSON, Connecticut
JOE BARTON, Texas CHRIS BELL, Texas
KEN CALVERT, California NICK LAMPSON, Texas
ROSCOE G. BARTLETT, Maryland MARK UDALL, Colorado
GEORGE R. NETHERCUTT, JR., DAVID WU, Oregon
Washington EDDIE BERNICE JOHNSON, Texas
FRANK D. LUCAS, Oklahoma SHEILA JACKSON LEE, Texas
JOHN SULLIVAN, Oklahoma BRAD SHERMAN, California
J. RANDY FORBES, Virginia DENNIS MOORE, Kansas
ROB BISHOP, Utah ANTHONY D. WEINER, New York
MICHAEL BURGESS, Texas VACANCY
JO BONNER, Alabama RALPH M. HALL, Texas
TOM FEENEY, Florida
SHERWOOD L. BOEHLERT, New York
BILL ADKINS Subcommittee Staff Director
ED FEDDEMAN Professional Staff Member
RUBEN VAN MITCHELL Professional Staff Member
KEN MONROE Professional Staff Member
CHRIS SHANK Professional Staff Member
RICHARD OBERMANN Democratic Professional Staff Member
TOM HAMMOND Staff Assistant
C O N T E N T S
November 5, 2003
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Dana L. Rohrabacher, Chairman,
Subcommittee on Space and Aeronautics, Committee on Science,
U.S. House of Representatives.................................. 6
Written Statement............................................ 7
Statement by Representative Bart Gordon, Minority Ranking Member,
Subcommittee on Space and Aeronautics, Committee on Science,
U.S. House of Representatives.................................. 7
Witnesses:
Mr. Gary C. Hudson, Chief Executive Officer, HMX, Inc.
Oral Statement............................................... 8
Written Statement............................................ 10
Biography.................................................... 13
Mr. Michael S. Kelly, Technical Manager, Northrop-Grumman/Xon
Tech
Oral Statement............................................... 14
Written Statement............................................ 17
Biography.................................................... 20
Mr. Raymond F. Duffy, Jr., Senior Vice President, Willis InSpace
Insurance Underwriters
Oral Statement............................................... 22
Written Statement............................................ 24
Dr. Henry R. Hertzfeld, Senior Research Scientist, Elliot School
of International Affairs, George Washington University
Oral Statement............................................... 26
Written Statement............................................ 28
Biography.................................................... 30
Ms. Pamela L. Meredith, Counsel, Zuckert, Scoutt & Rasenberger,
LLP
Oral Statement............................................... 31
Written Statement............................................ 32
Biography.................................................... 39
Discussion
Passenger Indemnification...................................... 40
Government Responsibility...................................... 43
Effects of Cost on Access to Space............................. 47
The Purpose of Commercial Human Space Flight................... 48
Effects of a Loss of a Vehicle................................. 48
Determining a Balance of Regulation............................ 49
Experimental Certification..................................... 51
RLV vs. EELV................................................... 52
Risk........................................................... 52
Indemnification for Vehicle Operators.......................... 56
Indemnification and Industry Survival.......................... 57
Manned vs. Unmanned Regulation................................. 57
Appendix 1: Answers to Post-Hearing Questions
Mr. Gary C. Hudson, Chief Executive Officer, HMX, Inc............ 60
Mr. Michael S. Kelly, Technical Manager, Northrop-Grumman/Xon
Tech........................................................... 63
Mr. Raymond F. Duffy, Jr., Senior Vice President, Willis InSpace
Insurance Underwriters......................................... 67
Dr. Henry R. Hertzfeld, Senior Research Scientist, Elliot School
of International Affairs, George Washington University......... 69
Ms. Pamela L. Meredith, Counsel, Zuckert, Scoutt & Rasenberger,
LLP............................................................ 73
Appendix 2: Additional Material for the Record
H.R. 3245, Commercial Space Act of 2003.......................... 82
Section Analysis of H.R. 3245.................................... 93
Prepared Statement by James A.M. Muncy, Space Policy Consultant,
PoliSpace...................................................... 95
A ``Clean Sheet'' Perspective on Promoting and Regulating the
Commercial Space Flight Industry, by Gary C. Hudson, October
28, 2003....................................................... 101
Statement by Jeff Greason, President, XCOR Aerospace............. 107
H.R. 3245, COMMERCIAL SPACE ACT OF 2003
----------
WEDNESDAY, NOVEMBER 5, 2003
House of Representatives,
Subcommittee on Space and Aeronautics,
Committee on Science,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:37 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Dana L.
Rohrabacher [Chairman of the Subcommittee] presiding.
hearing charter
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
H.R. 3245, Commercial Space Act
of 2003
wednesday, november 5, 2003
10:30 a.m.-12:30 p.m.
2318 rayburn house office building
A. Purpose
On Wednesday, November 5, 2003, at 10:30 a.m., the House
Subcommittee on Space and Aeronautics will hold a hearing to address
the legal, regulatory, and public policy ramifications of H.R. 3245,
the Commercial Space Act of 2003, for the emerging commercial human
space flight industry. The entrepreneurs who comprise this industry
hope in the near future to provide round trips into space for paying
customers. H.R. 3245 proposes to regulate and license domestic
commercial human space flight through the Associate Administrator for
Commercial Space Transportation (AST) within the Federal Aviation
Administration (FAA).\1\ The bill also proposes to provide government
indemnification to commercial human space flight providers for certain
liabilities incurred from launch mishaps.
---------------------------------------------------------------------------
\1\ In 1985, the FAA created the Office of Commercial Space
Transportation (OCST) to regulate and promote the commercial space
transportation industry. In 1995, OCST's authority was transferred to
the FAA's Associate Administrator for Commercial Space Transportation.
This office is commonly known as the ``AST.''
---------------------------------------------------------------------------
This hearing will examine the relative merits of regulating
commercial human space flight through the AST, or the FAA's Aircraft
Certification and Regulations Office (AVR),\2\ or through another
Government office and, by extension, the manner in which experimental
launch vehicles should be regulated. The hearing will also address the
merits of providing indemnification to commercial human space flight
ventures. The government already offers indemnification to traditional
commercial space transportation ventures, such as satellite launch
operations.
---------------------------------------------------------------------------
\2\ For historical reasons, the FAA's Aircraft Certification and
Regulations Office is commonly known as the ``AVR.''
---------------------------------------------------------------------------
B. Critical Questions
The following questions were submitted in advance to all of the
witnesses:
1. Should the government regulate commercial human space
flight? If so, what should the public policy objectives (e.g.,
encouraging development of the industry, protecting third
parties, protecting passengers, etc.) of that regulation be and
how should they be balanced?
2. Should the government offer indemnification for commercial
human space flight, and if so, against what sorts of liability?
How should any indemnification relate to existing policies and
international treaties?
3. What changes would you recommend to H.R. 3245? In
particular, do you support commercial human space flight being
regulated by the Office of Commercial Space Transportation at
the Federal Aviation Administration? If not, where and in what
manner would you propose to regulate commercial human space
flight?
C. Witnesses
1) Gary Hudson is the Chief Executive Officer of HMX, an
aerospace services company. Mr. Hudson is the former President
and Chief Executive Officer of the Rotary Rocket Company.
2) Michael S. Kelly is a Technical Manager at Northrop-
Grumman/Xon Tech, and founder of the Kelly Space and Technology
Corporation. Mr. Kelly currently heads the Commercial Space
Transportation Advisory Committee's (COMSTAC) reusable launch
vehicle working group.
3) Raymond Duffy, Jr. is Senior Vice President at Willis
InSpace Insurance Underwriters.
4) Henry Hertzfeld is a Senior Research Staff Scientist at the
Space Policy Institute Center for International Science and
Technology Policy at the George Washington University.
5) Pamela Meredith is of counsel at the law firm of Zuckert,
Scoutt & Rasenberger, LLP where she practices aerospace and
space law. Ms. Meredith also is an Adjunct Professor of
satellite communications and space law at American University's
Washington College of Law.
D. Background
The Existing Regulatory Regime for Commercial Space Transportation
Launches
Any person or private entity wishing to conduct commercial space
transportation activities (generally, satellite launches) in the United
States must obtain FAA authorization to do so. Furthermore, U.S.
citizens must obtain authorization from the FAA to operate launch or
re-entry sites anywhere in the world. The FAA derives this authority
from the Commercial Space Launch Act of 1984 (CSLA) and has delegated
that authority to the AST. The AST has the dual mandate of regulating
and promoting the commercial space transportation industry in the
United States.
When the CSLA was enacted, only expendable launch vehicles (ELVs),
sounding rockets, and certain types of ballistic missiles were
available for private sector use. These vehicles typically are used to
lift satellites into orbit. Since enactment of the CSLA, commercial
enterprises have pursued the development of reusable launch vehicles
(RLVs). A reusable launch vehicle is one that is designed to return
from Earth orbit or outer space to Earth substantially intact. Congress
amended the CSLA in 1998 to add licensing authority for re-entry
vehicles, including RLVs. Proponents of the use of RLVs hope that they
may ultimately provide trans-atmospheric high-speed flight around the
globe for rapid international travel.
With developmental RLVs designed to fly human beings into outer
space, a number of applicants have approached the AST desiring to enter
the space launch licensing process. The ``hybrid'' design of certain of
these vehicles and the fact that RLVs are meant to carry human
passengers makes the question of how they should be regulated
difficult. For example, some RLV concepts are considered ``hybrids''
because they combine aviation (for example, wings) and space
technologies (for example, rocket propulsion). This hybrid quality
muddies the regulatory lines of authority over RLVs between traditional
space and aviation regulatory authorities. The fact that human beings
will be passengers on the RLVs also creates regulatory confusion
inasmuch as the established regulatory process for licensing commercial
space launches currently does not contemplate human passengers, while
aviation regulation has had authority to regulate passenger-carrying
vehicles in the past.
Some in the industry believe that the AST should regulate RLVs
because the vehicles are designed to reach space and this is the
traditional domain of the AST. However, there have been complaints that
the AST licensing process is too slow to allow the commercial human
space flight industry to grow. Moreover, AST has little experience
regulating aviation technologies and no experience regulating vehicles
with passengers. As an alternative to regulation by AST, some in the
industry believe that the AVR should take the lead in regulation. AVR
has a relatively streamlined process in place for certifying
experimental aircraft and experience regulating passenger-carrying
vehicles. Still others in the industry believe that commercial human
space flight should not be regulated whatsoever or they advocate the
creation of a wholly new office within the Federal Government to
regulate commercial human space flight ventures.
At present, it is not clear what type of regulatory regime would
(or should) cover commercial human space flight operations.
Specifically, it is not apparent whether a standard commercial space
launch license issued by the AST must be issued, or whether an aircraft
certification, such as an experimental airworthiness certification,
should be issued by the AVR. It should be noted that the FAA recently
issued regulations meant to clarify the FAA licensing requirements for
hybrid RLVs based on the design of the vehicle and that these
regulations mirror the definitions proposed in H.R. 3245. However, the
FAA regulations do not (and are not meant to) cover human space flight.
Regardless, there is an overall concern that uncertainty about the
applicable regulatory regime may impede the ability of developers of
systems for commercial human space flight to obtain financing from
would-be investors.
Government Indemnification for Commercial Human Space Flight Operations
In 1988, Congress amended the CSLA to indemnify the commercial
space launch industry against successful claims by third parties.
Specifically, the United States currently agrees to pay third party
claims against licensees in amounts up to $1.5 billion above the amount
of insurance that a licensee carries. The CSLA's definition of ``third
party'' excludes all government employees, private employees, and
contractors involved directly with the launch of a vehicle.
The CSLA requires that private launch companies purchase sufficient
liability insurance to cover a minimum amount of damage. This amount is
determined by the FAA on a case-by-case basis depending on its
calculation of the ``maximum probable loss'' from claims by a third
party.\3\ This amount is capped at $500 million for coverage against
suits by private entities.
---------------------------------------------------------------------------
\3\ In the alternative to purchasing adequate insurance, private
launch companies must demonstrate that they have adequate resources to
cover all potential losses.
---------------------------------------------------------------------------
Since the majority of commercial launch activity occurs at national
launch ranges (for example, Cape Canaveral and Vandenburg Air Force
Base), the CSLA also requires any insurance policy a company obtains to
also protect the Federal Government, its agencies, personnel,
contractors, and subcontractors.
The liability insurance section of the CSLA requires reciprocal
waivers of claims between the licensee and its contractors,
subcontractors, and customers. In effect, the licensee and any other
organization assisting in the actual launch are preventing from seeking
damages from one another.
Since its enactment, the CSLA's indemnification regime has been
subject to an expiration date. The expiration date already has been
extended by Congress several times. At present, FAA-licensed launch
operators are ensured of indemnification under the statutorily
prescribed procedures through December 31, 2004. H.R. 3245 extends
indemnification through December 31, 2007.
International Law Governing Space Launches
International agreements make clear that the United States bears
absolute liability for the international consequences of private
American space launches. By setting insurance requirements based on
maximum probable loss, as directed by the CSLA, the Government is
essentially making a risk estimate that its potential liability under
international agreements will be covered by the insurance purchased.
The international law governing the United States' outer space
activities consists of four multinational treaties and ``customary
space law.'' Two of the treaties, the Outer Space Treaty of 1967 and
the Liability Convention of 1972, expressly address issues of third
party liability in the international context. Article VI of the Outer
Space Treaty places responsibility for all national outer space
activities on respective government signatories, even when a launch is
conducted by a private organization. The Liability Convention expands
the basic international liability concepts set forth in the Outer Space
Treaty. To date, there have been no claims under international law for
third-party liability resulting from U.S.-licensed commercial launches.
The Regulatory and Indemnification Regime Proposed by H.R. 3245
H.R. 3245 seeks to amend the CSLA by placing authority for the
regulation of human space flight activities under the AST. As stated in
its findings, the bill means to ``create a clear legal and regulatory
regime for commercial space transportation, including an unambiguous
delineation of regulatory roles and responsibilities.''
H.R. 3245 recognizes that with the advent of commercial human space
flight there are two new factors with which to deal in the commercial
space transportation regulatory and liability risk-sharing regimes:
passengers and crew. The bill delineates qualifications that passengers
must meet to be eligible for space flight, but does not contemplate
qualifications for crew members. The bill also includes a provision
requiring a reciprocal waiver of liability claims between licensees and
passengers, but the bill is not clear as to treatment of the crew for
liability purposes.
H.R. 3245 broadens the existing indemnification regime for
commercial space transportation launches to include commercial human
space flight launches and extends the indemnification regime by three
years. In addition, the bill directs the Secretary of Transportation to
arrange for the National Academy of Public Administration (NAPA) to
conduct a study on the existing liability-risk sharing regime for
commercial space transportation.
Chairman Rohrabacher. I hereby call this meeting of the
Space and Aeronautics Subcommittee to order. And without
objection, the Chair will be granted the authority to recess
this committee at any time. Hearing no objection, so ordered.
At today's hearing, we will examine the topic of commercial
human space flight as it relates to H.R. 3245, the Commercial
Space Act of 2003, a bill I have sponsored and Bart Gordon co-
sponsored. We will explore whether launch vehicles that carry
people to outer space merits government indemnification,
especially if those vehicles are private sector vehicles, and
whether current regulatory processes needed to be--or need to
be changed or whether legal regimes for protecting passengers
and crew as well as the uninvolved public are adequate. I
believe space entrepreneurs offer great hope for our troubled
space transportation industry by introducing new, innovative
concepts and yes, as being examples and inspirations to people
within the industry and within government.
Testimony given at a joint hearing between this
subcommittee and its Senate counterpart last July revealed that
government regulations are pivotal in the early development of
space entrepreneurial ventures, however, bureaucratic red tape
simply can't be allowed to impede the growth of such promising
industries. As Ronald Reagan, a fellow I used to work for, once
observed when signing the first Commercial Space Act 20 years
ago: ``We need to cut red tape to see blue sky.'' However,
there is something about the color of the sky that may not be
right in that quote, because what we are looking for is not
blue sky, but we are looking to go beyond blue sky.
And that said, the FAA's Space Transportation Office has
announced a determination of a licensed application for the
first passenger carrying RLV and that it has--this application
has been completed, which means that the 180-day clock for the
license approval process has begun for a sub-orbital RLV
manufacturing company. This is a major first step for the
industry and a hopeful sign for the future of commercial human
space flight. I believe H.R. 3245 will help nurture this
emerging commercial human space flight industry. We owe our
support to those individuals who continue to push the
boundaries of the new frontiers that are--that confront us and
especially those in the commercial space transportation
industry.
Critical areas where H.R. 3245 is silent or lacks clarity
will be examined and explored today so that the legislation can
be strengthened in preparation for a markup early next year in
the Full Committee. The bipartisan support already demonstrated
for this bill demonstrates a bipartisan support for the
concept, and let us get moving on it. And we may have changes
based on your testimony today. But if--but the bipartisan
support will ensure that we do move forward and that we are
taking your observations and your recommendations that you have
for us today very seriously. So the expert witnesses we have
assembled will help us achieve this end.
[The prepared statement of Chairman Rohrabacher follows:]
Prepared Statement of Chairman Dana Rohrabacher
Today's hearing will examine the topic of commercial human space
flight as it relates to H.R. 3245, the Commercial Space Act of 2003, a
bill I've sponsored and Bart Gordon co-sponsored. We will explore
whether launch vehicles that carry people to outer space merits
government indemnification, whether current regulatory processes need
to be changed, and whether legal regimes for protecting passengers and
crew, as well as the uninvolved public, are adequate. I believe space
entrepreneurs provide a beacon of hope for our troubled space
transportation industry by introducing innovative concepts.
Testimony given at a joint hearing between this subcommittee and
its Senate counterpart last July revealed that government regulations
are pivotal in the early development of space entrepreneurial ventures.
However, bureaucratic red tape simply can't be allowed to impede the
growth of such promising industries. As Ronald Reagan observed when
signing the first Commercial Space Act twenty years ago, ``we need to
cut real red tape to see blue sky.''
That said, the FAA's space transportation office has announced that
a determination of a license application for the first passenger-
carrying RLV has been completed. This means that the 180-day clock for
the license approval process has begun for a sub-orbital RLV
manufacturing company. This is a major first for the industry, and a
hopeful sign for the future of commercial human space flight. I believe
H.R. 3245 will help nurture this emerging commercial human space flight
industry.
We owe our support to those individuals who continue to push the
boundaries of new frontiers in the commercial space transportation
industry. Critical areas where H.R. 3245 is silent or lacks clarity
will be explored today, so that the legislation can be strengthened in
preparation for markup early next year.
The bipartisan support already demonstrated for this bill will
ensure its success in moving forward in a careful and deliberative way
within the Committee. The expert witnesses we have assembled will help
us achieve that end.
Chairman Rohrabacher. And now I would turn to our Ranking
Member, Mr. Gordon, for his opening statement.
Mr. Gordon. Thank you, Mr. Chairman, and good morning.
I want to add my welcome to the witnesses to today's
hearing, and I look forward to a good exchange of views.
As Chairman Rohrabacher has said in his opening statement,
we will be discussing a number of provisions in this--in his
commercial space bill H.R. 3245. I am happy to be an original
co-sponsor of this bill, as I believe we need to clarify the
congressional intent with respect to the emerging commercial
human space flight industry. Of course, as today's testimony
will bear out, we are dealing with complex issues, and there
are varying points of view. As I stated at last month's
Subcommittee markup of this legislation, we all will benefit
from further discussion and provisions of the Chairman's bill.
And I welcome today's hearing as an important first step.
There are several items, in particular, that I hope the
witnesses will address. For example, at least one of the
witnesses argues that we should not extend existing
indemnification provisions to the commercial human space flight
industry. I hope he will elaborate on this--on his rationale.
And I would like to hear the other witnesses given their views
on the topic. In addition, it appears that some of the
witnesses at today's hearing, and at July's joint hearing with
the Senate, would argue for a hands-off approach by the
Government relative to passenger safety on these systems. Will
such an approach be sufficient? And is there going to be a
point at which the Government is going to have to get involved
as it is in the aviation industry?
I would also like to hear what they think the industry
should do ensuring safety--or passenger safety if the
Government is to get involved.
Well, there is a lot to talk about today, and once again, I
am glad you are here.
And Mr. Chairman, I yield back my time.
Chairman Rohrabacher. Thank you very much.
And without objection, the opening statements of other
Members will be put into the written record so we can get right
to the testimony. Hearing no objection, so ordered.
I also ask unanimous consent to insert at the appropriate
place in the record and the background memorandum prepared by
the Majority staff for this hearing. And hearing no objection,
so ordered.
And before beginning, I also ask unanimous consent to
insert at this point in the record the written testimony that I
have invited from Jim Muncy on this legislation. Without
objection, so ordered. [Note: The prepared statement of Mr.
Muncy appears in Appendix 2: Additional Material for the
Record.]
I further ask unanimous consent that the record for this
hearing remain open until November 12, 2003 so that the public
may provide additional written testimony for the record on H.R.
3245 and that testimony may be inserted into the record.
Without objection, so ordered.
And we do have a distinguished panel with us today to
provide their unique perspective on the critical issues that we
are examining. We have asked them, and I would ask them to
summarize, if you may, or points to--if you get--if you can
summarize in five minutes. That means we are going to really
pay attention to the most important points that you have to
make, but the longer you go over five minutes, the less
attention we are going to pay to your most important points. So
we would hope that you could summarize and focus on those
things that are most contentious and the things that you want
to convey. However, your full testimony will be made part of
the record. And we will be looking at that as we move forward
with this legislation.
Our first witness is Gary Hudson, who is the Chief
Executive Officer of HMX, an aerospace services company. Mr.
Hudson is the former President and Chief Executive Officer of
Rotary Rocket Company. And Mr. Hudson, you may now proceed.
STATEMENT OF MR. GARY C. HUDSON, CHIEF EXECUTIVE OFFICER, HMX,
INC.
Mr. Hudson. Mr. Chairman, Members of the Subcommittee, I
have timed this at exactly five minutes, so we will see if I am
close.
I have 34 years of experience in promoting commercial space
transportation, and I always intend, even in my current semi-
retirement, to continue to speak my mind, so thank you for
listening.
Today, there is an argument raging in the emerging launch
industry: How should piloted space flight vehicles be
regulated?
The origin of this debate goes back two decades. At the
time, private rocketeers faced a number of federal agencies,
each of whom claimed they were in charge. These ranged from the
FAA, which had the legitimate authority under the then existing
law, to the Department of State, which wanted to regulate
rocket launches under the absurd notion that they were exports.
The professed goal of the sponsors of the first Commercial
Space Act was to put an end to this problem and provide a one-
stop-shop for launch approvals. I supported that unreservedly.
But I lost the battle to limit the scope of the Act.
Instead, a completely new entity was created, the Office of
Commercial Space Transportation, as well as a new concept,
federal launch license. At the time, some of us complained this
new entity was not needed, that the existing law was adequate
with minor revisions, that the new OCST would not be able to
figure out what to do about piloted reusable rockets. Our
concerns were brushed aside. They have now emerged as crucial
to the future survival of an industry in crisis.
Some may be concerned that I stand in opposition to H.R.
3245. This is decidedly not so. I do support it, and with
additions, as you have mentioned, Mr. Chairman, wish to see it
passed. I applaud those who have worked hard to bring it to
this body, and I will be happy to work with you to improve the
wording of the Act to address certain issues. One of these
issues is the perception of risk.
It is my duty to remind this committee that there has been
no third-party injury since the beginning of the Space Age in
the Western world. During the past 20 years, we have spent tens
of millions of taxpayer dollars funding AST and, before it,
OCST. In the next decade, we will spend over $100 million more
just for regulation. My question to our industry and to this
Congress is: Have these funds made us safer that if we had
retained our previous regulatory structure under prior Federal
Aviation Regulations? I think the answer is unambiguously: No.
AST has grown increasingly bureaucratic. Launch license are
now major federal actions. In spite of my warnings and counsel
of the past five years, we have now reached a crisis.
Experiment flight-testing of sub-orbital passenger vehicles has
begun. AST is not up to the challenge of this development.
Therefore, I recommend its dis-establishment and the
elimination of the need for U.S. persons to seek launch
licenses. In its place, I propose we return to the pre-1984 law
governed by the Federal Aviation Regulations. This will be
sufficient to protect the safety of third parties and to
fulfill international obligations. Piloted rocket aircraft of a
variety of types would then be regulated under the--by the FAA
under ``experimental'' type certificates. Several rocket
aircraft have already been issued such type certificates.
The strongest objection to such an approach comes from my
good friends and colleagues who wish to begin offering
passenger rides and who fear the cost of FAA standard type
certification. I understand their position and I sympathize.
And I believe a barnstorming era for space transportation is
desperately needed, but we can reach that result by forthright
action of a different type.
Current FAA rules generally prohibit revenue flying of
experimental aircraft. I propose we simply change the rule.
Congress can permit certain experimental type certified
aircraft defined as space vehicles to operate under a limited
exemption for a period of time, call it 20 years.
Coincidentally, this time is the same period from the Wright
Brothers' first flight to the establishment of the first Civil
Aeronautics Authority by this--Congress in 1926. Some have
asked: ``How do we protect the passengers on those flights?''
H.R. 3245 correctly supplies the solution by defining ``space
flight participants'' as someone who would give their informed
consent to fly.
Another issue is liability. In 1972, the U.S. Government
unwisely assumed responsibility for worldwide third party
liability from space launches from any U.S. person.
Fortunately, the letter of the treaty can be satisfied by
requiring that individual launch operators obtain liability
insurance. Indeed, this is a current AST requirement.
Interestingly, a similar system as I propose is in place
for commercial launches in Russia. There are no launch
licenses, no environmental impact statements, no two-year
process costing hundreds of thousands or millions of dollars.
Provide your insurance certificate, submit proper
notifications, and you are good to go. How is it that the
bureaucrats of the former Soviet Empire can be more rational
and sensible than we?
And I am afraid the Chairman has stolen my thunder, because
I say signing the first Commercial Space Act 20 years ago,
Ronald Reagan said: ``Let us cut red tape to see that blue
sky.'' And I say let us finally do as he wished.
Thank you.
[The prepared statement of Mr. Hudson follows:]
Prepared Statement of Gary C. Hudson
Mr. Chairman, Members of the Subcommittee:
I have spent thirty-four years of my life promoting commercial
space transportation, and intend--even in my current semi-retirement--
to continue to speak my mind. Thank you for listening.
Today there is an argument raging in the emerging launch industry.
How should piloted human space flight vehicles be regulated?
The origin of the debate goes back two decades. At that time,
private rocketeers faced a number of federal agencies each who claimed
they were in charge. These ranged from the FAA, which had the
legitimate authority under the existing law, to the Department of
State, which wanted to regulate rocket launches under the absurd notion
that they were ``exports.'' The professed goal of the sponsors of the
first Commercial Space Act was to put an end to this problem and
provide a ``one-stop-shop'' for launch approvals. I supported that
unreservedly.
But I lost the battle to limit the scope of the Act. Instead, a
completely new entity was created: the Office of Commercial Space
Transportation, as well as a completely new concept: ``Federal launch
licenses.'' At the time, some of us complained that the new entity
wasn't needed, that the existing law was adequate with minor revisions,
and that the new OCST would not be able to figure out what to do about
piloted reusable rockets. Our concerns were brushed aside. They have
now emerged as crucial to the future survival of an industry in crisis.
Some in this industry may be concerned that I stand in opposition
to H.R. 3245. This is decidedly not so. I do support it and, with
additions, wish to see it pass. I applaud those who have worked hard to
bring it before this body. I will be happy to work with you to improve
the wording of the Act to address certain issues. One of those issues
is the perception of risk.
It is my duty to remind this committee that there has been no third
party injury since the beginning of the Space Age in the Western world.
During the past 20 years, we have spent tens of millions of taxpayer's
dollars funding AST and before it, OCST. In the next decade we will
spend over $100 million more. Just for regulation! My question to our
industry and this Congress is: have these funds made us safer than if
we had retained our previous regulatory structure under previous
Federal Aviation Regulations? I think the answer is unambiguously no.
AST has grown increasingly bureaucratic. Launch Licenses are now
Major Federal Actions. In spite of my warnings and counsel of the past
five years, we have now reached a crisis. Experimental flight-testing
of sub-orbital passenger vehicles has begun. AST is not up to the
challenge of this development. Therefore, I recommend the dis-
establishment of AST, and the elimination of the need for US persons to
seek ``launch licenses.'' In its place, I propose that we return to the
pre-1984 law governed by Federal Aviation Regulations. This will be
sufficient to protect the safety of third parties and to fulfill
international obligations. Piloted rocket aircraft of a variety of
types will then be regulated by the FAA under ``experimental'' type
certificates. Several rocket aircraft already have been issued such
certificates.
The strongest objection to such an approach comes from colleagues
who wish to begin offering immediate passenger rides who fear the cost
of FAA certification. I understand their position, and sympathize. And
I believe that a barnstorming era for space transportation is
desperately needed. But we can reach that result by other forthright
action.
Current FAA rules generally prohibit revenue flying of experimental
aircraft. I propose we simply change the rule. Congress can permit
certain experimental aircraft defined as space vehicles to operate
under a limited exemption for a period of time--20 years.
Coincidentally this is the same period from the Wright Brothers first
flight to the establishment of the first Civil Aeronautics Authority in
1926. Some have asked how we protect the passengers on these flights?
H.R. 3245 correctly supplies the solution by defining ``space flight
participants'' as someone who would give their informed consent to fly.
Another issue is liability. In 1972 the U.S. government unwisely
assumed responsibility for worldwide third party liability from space
launches by any U.S. person. Fortunately, the letter of the treaty can
be satisfied by requiring that individual launch operators obtain
liability insurance. Indeed, this is a current AST requirement.
Interestingly, a similar system is in place for commercial launches
in Russia. There are no launch licenses, no environmental impact
statements, and no two-year process costing hundreds of thousands or
millions of dollars. Provide your insurance certificate, submit proper
notifications, and you are good to go. How is it that the bureaucrats
of the former Soviet Empire can be more sensible than we?
Signing the first Commercial Space Act twenty years ago, President
Ronald Reagan said we would ``cut red tape to see blue sky.'' Let us
finally do as he wished.
Thank you.
Subcommittee Questions:
Q1. Should the government regulate commercial human space flight? If
so, what should the public policy objectives (e.g., encouraging
development of the industry, protecting third parties, protecting
passengers, etc.) of that regulation be and should they be balanced?
1. This is an excellent question. The air travel industry experienced
it's ``barn storming'' era and operated for over 20 years before the
creation of the Civil Aeronautics Administration in 1926. Commercial
human space flight needs a similar period of minimal regulation to
reach its full potential. Promotion of the industry should be
encouraged, and the best means to accomplish this will be a light
regulatory hand. Regulation should be confined, for at least the next
twenty years, to protecting third parties. Passengers need no
protection in the near-term, since no one can be imagined to be
engaging in this experience who is not appraised of the risks. I favor
having an ``informed consent'' requirement for these second parties.
Q2. Should the government offer indemnification for commercial human
space flight, and if so, against what sorts of liability? How should
any indemnification relate to existing policies and international
treaties?
A2. I do not believe that the government should provide any
indemnification whatsoever to first or second parties (vehicle
operators or passengers). I believe the government should require
operators of commercial human space flight vehicles to obtain third
party liability insurance with the U.S. Government as a named insured
as is currently required. This is consistent with the requirements of
international law, including the 1972 Liability Convention. I do not
see why the commercial space industry requires indemnification to
succeed when third party risks are virtually non-existent. In the past
fifty years there have been no third party injuries or fatalities from
space launches in the Western world. Ideally, I would like to see the
U.S. withdraw from the 1972 Liability Convention or renegotiate it to a
regime more in keeping with the liability limits that were placed on
international air travel operations by the Warsaw Convention. There is
no rational reason why the actions of a U.S. person should implead the
U.S. government in tort claims.
Q3. What changes would you recommend to H.R. 3245? In particular, do
you support commercial human space flight being regulated by the AST?
If not, where and in what manner would you propose to regulate
commercial human space flight?
A3. I recommend the following changes to H.R. 3245:
1) Clarification that vehicle operators, and not the
government, are to set the medical and other standards by which
they accept ``space flight participants'' into their programs;
2) Dis-establishment of AST.
3) Direction to FAA to permit experimental space flight
vehicles to be operated for profit, with the added requirement
that third party liability insurance be provided by vehicle
operators identifying the U.S. government as a ``named
insured.''
4) Elimination of ``launch licenses'' in favor of
reapplication of FAR 101, with appropriate minor changes, to
conduct unmanned rocket launches.
I do not support commercial human space flight being regulated by
AST. I recommend dis-establishment of AST for the reasons sited in my
testimony. I recommend that commercial human space flight be regulated
within the FAA by AVR (Regulation and Certification Group) under the
``type certification'' environment used for all other aerospace
vehicles.
Additional Frequently Asked Questions:
Q1. You favor elimination of AST. Isn't that a radical solution?
A1. I prefer to think that saving $100 million+ over the next decade,
by dis-establishing AST now, is the far more rational solution. If
third parties were really at seriously high risk from space launch
activity, there would be a legitimate argument for AST's continued
existence. But the record shows that modern space launch of any type
(orbital or sub-orbital, manned or unmanned) is essentially free from
measurable risk to third parties.
It should also be noted that AST has 70 or 80 staff at any one
time, who do nothing all day but study what new regulations they think
might be desirable, process license applications or think up new
requirements for industry. At the same time, the entire sub-orbital
human space flight industry does not have as many engineers and
technicians actually building the vehicles! Regulators actually
outnumber the people doing the work; this would be considered a parody
of regulatory behavior in almost any other area of human endeavor. For
example, what if the FDA had as many regulators as there were
physicians?
Q2. Who would be in charge of regulation if AST is dis-established?
A2. The same organization that had regulatory responsibility for
private rocket activities prior to the formation of OCST in 1984, the
FAA via FAR 101.
Regarding Unmanned Rockets. Given that unmanned rockets have to be
launched from specialized facilities established by federal or State
authorities, that are regulated at the local, county, State and
national level by environmental rules, air traffic rules and many other
health/safety laws and regulations, there is simply no need for an
additional overarching level of bureaucracy to control launch
facilities or rockets. These facilities establish detailed safety
regulations to which all launch operators must adhere. AST is not
needed to assure that launch operators of unmanned rockets abide by
these rules and regulations, since the operator will not be allowed to
fly if they fail to comply with range rules. AST adds no safety to
unmanned operations but costs launch operators hundreds of thousands to
millions of dollars in added regulatory compliance each year.
Regarding Human Space Flight Vehicles. Piloted vehicles can be
regulated as aircraft per the Federal Aviation Regulations. They should
be allowed to operated from the same categories of airfield that more
conventional experimental aircraft do; when fully certificated, they
should be allowed to operate wherever certificated aircraft may,
subject to noise and emission regulations.
Q3. AST says they will ``tailor'' launch licenses to permit
experimental flights. Isn't this a reasonable solution to the problem
of experimental flight-testing?
A3. No. When a research aircraft developer gets experimental type
certification, the developer may fly as frequently as he wishes, when
he wishes, and may make modifications to his aircraft during the test
program without obtaining further certification approval from the FAA.
By contrast, AST has not yet developed their ``tailored'' rules, but
appears to want far more restrictions that those which are imposed on
any experimental aircraft to date, even though the sub-orbital vehicles
being proposed (or flying) have virtually no potential for third party
harm. Even if they adopted the exact same rules as FAA/AVR, they would
be an unnecessary and expensive redundancy. AVR can do the job, with no
additional staff or funds, if the job is re-scoped away from being a
``license'' invoking the specter of a Major Federal Action.
Q4. You refer to ``aircraft'' but many piloted space launch concepts
are not winged airplanes. How would these be regulated?
A4. According to the legal definitions in the FARs, ``aircraft'' is any
device that flies in or though the air. Since physically all space
vehicles must fly through the air on their way to space, they are
already by definition aircraft. The FARs regulate many types of
aircraft that are not ``fixed wing'' such as rotorcraft, gliders and
powered-lift vehicles as well as rockets. In fact, if the current AST
approach followed the only type of aircraft not covered by the FARs
would be piloted sub-orbital space launch vehicles. This makes no
sense. One class of vehicle should not be taken completely outside of
the FARs simply to justify the existence of an entity (AST) that is not
needed in the first instance; an exemption should be made to allow that
specific class to of aircraft to be operated for profit within the
FARs.
Q5. Isn't certification very expensive?
A5. That depends. Certification costs vary widely, and much nonsense is
spoken about them. There are many levels of type certification. So
called ``standard type certification'' is only one of them. It is true
that the certification costs for a new Boeing commercial aircraft may
be hundreds of millions of dollars. Smaller, four-place, general
aviation aircraft are routinely certificated for much less. If this was
not so, no new general aviation aircraft would be built. Yet new models
are being introduced every year, ranging from trainers to light jets.
The perceived impediment of ``standard type certification'' would be
obviated in the near-term (for the next two decades) if we adopt my
suggestion to permit experimentally type certificated space vehicles to
be flown, with limitations, for profit. This is a ``no cost'' solution.
Full standard type certification would not be mandated for 20 years.
When one considers the multiplicity of ``plans,'' documents,
reviews, meetings, tests and acceptances now being required by AST to
obtain a reusable launch vehicle license, the cost of ``certification''
vs. the cost of RLV ``licensing'' seems to have become comparable in
both time and dollars. The ultimate difference is that RLV licensing is
being done by an entity with no experience providing true certification
expertise to the operator, while the FAA/AVR has certified thousands of
different aircraft types. Furthermore, once an operator has a type
certificate, the vehicle may be flown without any further notification
or permissions (excepting a flight plan) while AST requires 60 day
advance notification of every flight, and intrusive and burdensome
inspections, reviews and further approvals to operate once a license
has been granted.
Q6. Is there any example of experimental type certificated aircraft
being operated for hire today?
A6. Yes. The FAA now allows experimental type certificated aircraft to
be rented to certified flight instructors, who may then use them to
train student pilots. This is operation for hire and is a recent
exemption to the rule. The rationale for letting student pilots pay to
fly in an experimental aircraft is the same as I propose for ``informed
consent space flight participants;'' that is, the student pilot, by
virtue of his or her training, knows the risks and is able to make a
judgment to accept or reject the risks. The sub-orbital or orbital
space flight participant would be assumed to be capable of the same
judgment. The space flight participant will not be walking up to a
ticket window and buying a seat; it is widely expected that they will
undergo instruction and orientation training by the firms offering the
flights prior to being accepted to fly.
Biography for Gary C. Hudson
Mr. Hudson, 53, was a founder and Chairman of the Board of
Directors of Rotary Rocket Company, and is a founding principal of HMX,
Inc., an aerospace consulting and engineering firm. He is also founder
and Operating Manager of AirLaunch LLC, a startup currently working on
a military launch system for the Defense Applications Research Agency
(DARPA).
Mr. Hudson has worked in the field of commercial space for over 34
years with an emphasis on development of innovative low-cost systems.
In 1981, he built the first large private launch vehicle developed in
the U.S. He is also the designer of the Phoenix VTOL/SSTO family of
launch vehicles which led to the DC-X Delta Clipper project. He has
participated in many launch vehicle projects including support for both
General Dynamics and Boeing Aerospace Corporation during the SDIO
program. He has published many papers on space vehicles and systems and
has authored several studies on low cost propulsion systems. At Rotary
he managed the successful Roton ATV program, the only piloted reusable
launch vehicle demonstrator to have flown since the Space Shuttle
Enterprise.
In 1994 he co-founded HMX, which designs and develops innovative
aerospace propulsion systems. In 1995 HMX developed a rocket engine
propulsion system for Kistler Aerospace Corporation. HMX also provided
early propulsion support to Scaled Composites for the SpaceShipOne
project, participated in the NASA Alternate Access to Space concept
study contract in 2000, and participated in the Phase I Concept
definition for the DARPA RASCAL project. HMX also developed the DARPA
MIPCC Test Bed, a sophisticated test facility located at Mojave, CA
used to qualify the Mach 4 jet engines used in the RASCAL first stage.
In 1982 he co-founded Pacific American Launch Systems, Inc. where
he was directly responsible the design and development of the Liberty,
a small expendable launch vehicle using an innovative pintle rocket
engine, which underwent prototype engine testing for the U.S. Army
Strategic Defense Command on behalf of SDIO at Edwards Air Force Base,
California. During this period he also served as a consultant to the
United States Air Force's ``Project Forecast II.'' He is a former Board
Member of the Space Transportation Association, a founder of the STA
Space Tourism Division, a member of the Board of Advisors of the Space
Frontier Foundation and has presented testimony before the U.S.
Congress on several occasions.
Mr. Hudson has conducted seminars for the U.S. Naval Postgraduate
School, and the Institute for Space and Astronautical Sciences of Tokyo
University and taught graduate-level launch vehicle design at Stanford
University. He is a Fellow of the British Interplanetary Society and a
Senior Member of the American Institute of Astronautics and
Aeronautics. In January 1994 he received the ``Laurel'' award from
Aviation Week & Space Technology ``for the vision, drive and competence
that have pushed [reusable launch vehicles] to the front of the U.S.
launcher agenda.''
Chairman Rohrabacher. You know, I will have to admit, I was
Ronald Reagan's speechwriter, so----
Mr. Hudson. I am well aware, Mr. Chairman.
Chairman Rohrabacher. Thank you very much for your
testimony. And you have made some very provocative points. I
thank you very much.
Our second witness is Mr. Michael Kelly, who is a technical
manager at Northrop-Grumman. And is it pronounced--is it Exxon?
Is it like the--do you pronounce it like Exxon like the
gasoline or----
Mr. Kelly. No, Xon Tech is the name.
Chairman Rohrabacher. Xon Tech.
Mr. Kelly. However, I must say that I am testifying as a
private individual today.
Chairman Rohrabacher. All right. And also, with your
background, however, you are a founder of the Kelly Space
Technologies Corporation. Mr. Kelly currently heads the
Commercial Space Transportation Advisory Committee's Reusable
Launch Vehicle Working Group. And Mr. Kelly, you may proceed,
and we understand you are speaking for yourself today. Thank
you very much for being with us.
STATEMENT OF MR. MICHAEL S. KELLY, TECHNICAL MANAGER, NORTHROP-
GRUMMAN/XON TECH
Mr. Kelly. Thank you, Mr. Chairman and Members of the
Subcommittee, for giving me this opportunity to once again
testify on the issues of crucial importance to the future of
space transportation.
The issue that we are talking about today is the regulation
of a future industry: the RLV industry. The first question that
has been asked is the right one, and that is: ``Does the United
States Government have any legitimate reason to regulate the
RLV industry at all?'' Not every activity of human beings needs
to be regulated. I am glad this was the first question. If
there is a requirement for government regulation, that
requirement can be identified, and I believe that all
subsequent questions can be answered in the context.
My position is that there is a legitimate requirement for
the regulation of RLVs or any commercial space flight by the
Government for only the following reasons: defining and
enforcing the boundaries of action that protect the lives and
property of one group of people from the actions of another has
always been the proper function of government; RLV operations
are hazardous, the hazards are not all known, I might add, and
they are hazardous to uninvolved parties domestically and even
abroad for orbital operations; the job of coordinating national
and international safety is a large one and it requires the
action of the Federal Government; and there are other
international considerations, such as treaty compliance, that
can be handled only by the Government.
Now these are the requirements for government regulation,
and there should be no regulation beyond what is required. When
it comes to passenger flight, people who have the financial
means and the desire to fly as passengers on an RLV have the
absolute right to do so. The government has no legitimate
authority to restrict that activity.
Now the office designated to license commercial space
launch is the FAA/AST, Office of the Associate Administrator
for Commercial Space Transportation. It was established to
ensure public safety while promoting the commercial space
industry. With regard to who should regulate the flight of
commercial RLVs carrying paying passengers, it should, in my
opinion, be AST. But the extent of that regulation should not
reach beyond AST's charter of protecting the lives and property
of uninvolved parties. In other words, there should be no
regulation, per se, of human passenger flight, only regulation
of routine RLV operation.
I have supported the division of AST from FAA/AVR, which
regulates aviation, because the two have different and
incompatible charters. AVR regulates an industry with an 80-
plus-year revenue history and a 100-year technology history. It
applies the vast experience gained over that time to ensure
that anyone can board an airplane as a paying passenger without
undue fear of losing life and limb and that uninvolved parties
on the ground do not bear undue risks from the operation of
aircraft.
There is no similar body of experience with which to
regulate RLVs. There has only been one type of reasonable space
launch vehicle, the X-15, that has ever flown. In an
accumulated 199 flights, there was one fatal accident and
several non-fatal incidents and one instance of property damage
to uninvolved third parties, the only RLV flight experiences
thus demonstrated the need for a legal authority.
However, AVR and AST have institutionally different roles.
AVR regulates a mature industry. AST is a relatively new office
that regulates an industry that doesn't yet exist and that will
not exist if regulated as a mature industry. AVR applies
lessons learned and is slow to allow innovation in commercial
aviation precisely because it does not wish to stray from what
has worked. There are virtually no lessons to apply to RLVs,
and certainly none that would apply to all of the types of RLVs
that are envisioned or may be envisioned.
My own personal experience, as a member of the RLV industry
and as Chairman of the COMSTAC RLV Working Group, is that AST
is primarily an organization that lives up to its charter of
protecting the lives and property of uninvolved parties while
promoting the commercial space industry. There is room for
improvement. Application of rules is being done for the first
time, and both AST and developers have to learn how to satisfy
these rules.
We are seeing that the rules themselves can be improved.
The ``Final Rule'' on licensing of commercial RLVs is the best
we could do at the time. It was written before any RLVs entered
development. And it is flawed. I, therefore, believe that AST
should be mandated to periodically perform a zero-base review
of its rules and revamp them as required. This is the best way
to continuously incorporate the lessons learned in what will be
a very long learning process while preventing the resulting
rules from becoming mountains of corrections of previous
mistakes.
From the discussion of licensing and its purpose, the
question of indemnification can be addressed. Since AST space
flight licensing requires demonstration of safety of uninvolved
parties and their property, it is not unreasonable to ask the
Government to indemnify those flights. In fact, if there is one
thing I have learned, it is that the only test of seriousness
is the willingness of people to put up money. If the Government
issues a launch license and therefore says it is safe for that
vehicle to fly, that license only has meaning if the Government
is willing to share the burden of the consequences of an
accident. Though I support indemnification of the RLV industry
when it comes to third-party life and property loss, I support
it with respect to passenger flights with less enthusiasm,
because it does serve a means of promoting the industry, and
the risk to the Government is fairly small. As part of the
changes to indemnification, however, I believe that we ought to
re-examine the magnitude of what we always thought a realistic
number was for the maximum probable loss.
The final issue to be addressed here is where the
regulatory body for human passenger space transportation should
be located. I have already stated my position that I believe
AST to still be the regulatory office of choice and will
maintain that position as long as AST fulfills its charter.
Another question is whether AST should be part of the FAA
or moved to another place. I think the advantages of being
within the FAA, which regulates the national airspace, are
overwhelming, and I, therefore, believe that AST should remain
within FAA with one powerful proviso: when it comes to matters
of commercial space flight, the Associate Administrator for
Commercial Space Transportation has to have the last word. Much
controversy could be avoided and uncertainty removed if such a
mandate existed.
The concept of AST as a ``clean sheet of paper''
organization that can grow with an emerging industry is what I
supported from the beginning. I see no fundamental flaws and
nothing that can not be corrected. I think that, overall, we
are on the right track with AST, and I think that the
Commercial Space Act of 2003 will play a large, positive part
in helping AST bring the commercial RLV industry into being.
[The prepared statement of Mr. Kelly follows:]
Prepared Statement of Michael S. Kelly
Mr. Chairman, and Members of the Subcommittee on Space and
Aeronautics, thank you for giving me the opportunity to once again
testify on issues of crucial importance to the future of space
transportation.
The issue before us today is the regulation of a future industry,
the ``Reusable Launch Vehicle'' (RLV) industry, specifically in its
application to carrying paying passengers. The very first question to
ask in this regard is: does the United States Government have any
legitimate reason to regulate the RLV industry at all? Put a different
way, is there a requirement from the people of the United States for
such regulation? If so, the requirement can be identified, and all
subsequent answers can be answered in a context.
My position is that there is a legitimate requirement for
regulation of RLVs (or any commercial space flight) by the government,
for only the following reasons:
Defining and enforcing the boundaries of action which
protect the lives and property of one group of people from the
actions of another has always been the proper function of
government
RLV operations do pose a hazard to uninvolved
parties, domestically and even abroad (for orbital operations)
The job of coordinating national and international
safety is a large one, requiring the action of the Federal
Government
Other international considerations, such as treaty
compliance, can be handled only by the government
These are the requirements for government regulation, and there
should be no regulation beyond what is required. People who have the
financial means and the desire to fly as passengers on an RLV have the
absolute right to do so. The government has no legitimate authority to
restrict that activity.
The office designated to license commercial space launch is the
FAA/AST. It was established to ensure public safety while promoting the
commercial space industry. With regard to who should regulate the
flight of commercial RLVs carrying paying passengers, it should in my
opinion be AST. The extent of that regulation, however, should not
reach beyond AST's charter of protecting the lives and property of
uninvolved parties.
Today there is a licensing regime for commercial RLVs that meets
the AST charter. It need not be extended in order for RLVs to carry
paying passengers. The Commercial Space Act of 2003 contains language
requiring disclosure to paying passengers, and if that is met, those
passengers are no longer uninvolved third parties. They are as informed
as the hundreds of astronaut candidates who spend careers competing for
a ride on the Space Shuttle, knowing full well the dangers involved.
It is critical to note the difference between travel on an airline
and a ride on an RLV. An airline is a routine mode of transportation, a
``common carrier'' if you will. People have come to expect a degree of
safety in air travel that is without parallel in transportation, or in
fact in any other human activity. Space flight is years from being
routine, or even a mode of transportation per se. Transportation refers
to reaching a desired destination. Space flight, for the foreseeable
future, will be an end in itself.
The type of regulation over a common carrier that demands the level
of safety of air travel is different in kind from that pertaining to
what can only be classed as an adventure ride.
I have supported the division of AST from FAA/AVR, which regulates
aviation, because the two have different and incompatible charters. AVR
regulates an industry with an 80+ year revenue history, and a 100-year
technology history. It applies the vast experience gained over that
time to insure that anyone can board an airplane as a paying passenger
without undue fear of losing life or limb, and that uninvolved parties
on the ground do not bear undue risk from the operation of aircraft.
That vast experience came at a price, and was applied very late in
history. There were fatalities among aircraft developers, passengers,
and uninvolved parties. Even with regulation from AVR, there are still
fatalities and loss of property among passengers and uninvolved
parties. I do not question that AVR plays a large role in reducing such
incidents, and as I have noted, has made air travel a uniquely safe
human activity. This is possible precisely because there have been so
many incidents to serve as hard lessons.
There is no similar body of experience with which to regulate RLVs.
Only one type reusable space launch vehicle, the X-15, has ever flown.
Three were built, two survive. They accumulated 199 flights, with one
fatal accident, several non-fatal incidents, and one instance of
property damage to an uninvolved third party. Thus, the only RLV flight
experience has demonstrated the need for a legal authority.
However, AVR and AST have institutionally different roles and
outlooks. AVR regulates a mature industry. AST is a relatively new
office that regulates an industry that doesn't yet exist, and that will
not exist if regulated as a mature industry. AVR applies lessons
learned, and is slow to allow innovation in commercial aviation
precisely because it does not wish to stray from what has worked. There
are virtually no lessons to apply to RLVs, and certainly none that
would apply to all the types of RLVs that are envisioned or may be
envisioned.
All of the lessons of the RLV industry lie ahead. Learning them
requires freedom, the freedom of developers to use technology that is
unfamiliar and unacceptable to AVR, and the freedom to fly paying
passengers who knowingly accept the risks. These things are not within
the cultural scope of AVR, and it is unreasonable (and even unwise) to
expect that to change. AST has a culture that is open to more, by
disposition as well as charter.
It is worth asking how AST is performing its role. The experience
of RLV industry members to date has been mixed. Those in various stages
of discussions of launch licenses report differing impressions, good
and bad. Given the wide range of personalities involved, this should be
no surprise. AST is an organization of human beings, in a new field,
interacting with other human beings. There are going to be
disagreements and disappointments.
My own personal experience, as a member of the RLV industry, and as
Chairman of the COMSTAC RLV Working Group, is that AST is primarily an
organization that lives up to its charter of protecting the lives and
property of uninvolved parties while promoting the commercial space
industry. There is room for improvement, naturally. Application of
rules is being done for the first time, and both AST and developers
have to learn how to do satisfy those rules.
We are also seeing that the rules themselves can be improved. The
``Final Rule'' on licensing of commercial RLVs was written before the
first commercial RLV entered development, and that rule has already
proven itself flawed. We in the industry helped write it, and it was
the best all of us knew how to do at the time. But if we had it to do
over again, there are things we all now know would be done differently.
If there is to be a change made to the Commercial Space Act of 2003
with respect to AST, it would be to mandate that the office
periodically perform a zero-base review of its rules, and revamp them
as required. In my view, this is the best way to continuously
incorporate the lessons learned in what will be a very long learning
period, while preventing the resulting rules from becoming mountains of
corrections of previous mistakes.
There is one onerous aspect of AST that is a consequence of when it
was formed. Because it was formed after the enactment of the National
Environmental Protection Act, its licensing activities require NEPA
compliance. For purposes of research and development flights, this
places a burden on developers not experienced by experimental aircraft
designers or, for that matter, by any other researchers. AST licensing
does not distinguish between R&D flights and operational flights, but
should. In fact, in my very first testimony before this Subcommittee, I
advocated a class of license analogous to an Experimental Aircraft
Certificate that would cover any number of flights confined to a
certain performance envelope. Both the industry and AST have failed to
follow through on that concept, but both recognize the need.
Furthermore, AST has indicated that it will in fact grant such multi-
flight licenses.
Whether authority can be granted to AST to apply the grandfathered
principles of experimental aircraft development to relieve the
unnecessary burden of NEPA compliance is not something I am qualified
to judge. In last week's RLV Working Group meeting, the developers and
AST discussed this at length. The consensus was that statutory relief
is unlikely, and that the only solution is likely to be a categorical
exclusion resulting from a string of granted licenses all of which have
environmental Findings of No Significant Impact associated with them.
There is no doubt that this will be the outcome, since no activity
associated with RLV development has ever resulted in anything else. I
note it here only to lament that there is one intractable drawback to
AST licensing, one that is not of AST's making. I do not regard that
one drawback as sufficient justification to place the future of the RLV
industry in anyone else's hands.
From the discussion of licensing and its purpose, the question of
indemnification can be addressed. Since AST space flight licensing
requires demonstration of safety of uninvolved parties and their
property, it is not unreasonable to ask the government to indemnify
those flights. In fact, if there is one thing I have learned it is that
the only test of seriousness is the willingness of people to put up
money. If the government issues a launch license, that license only has
meaning if the government is willing to share the burden of the
consequences of an accident. If the government is not willing to do so,
the licensing activity is meaningless, burdensome showmanship.
By the arguments given above, this means that if the government
does nothing more than ensuring the safety of uninvolved parties and
their property, it does not bear the burden of indemnification for
paying passengers on an RLV. The real question comes down to
responsible risk taking. Is it responsible of the government to risk
the taxpayers' money to indemnify an industry when the government does
not have a certain degree of oversight, or are there factors beyond
that risk which justify it?
In my opinion, there are two factors which justify the risk. First,
the same licensing process that ensures the safety of uninvolved
parties and their property will in fact reduce the risk of loss of life
in an RLV accident. The degree of care needed just to get to an RLV
flight is very high, and there is little doubt that AST will require
the exercise of even more care for a passenger vehicle if only because
it will be a large vehicle. Second, the charter of the government to
promote the industry, with all of its potential economic benefits,
justifies some risk. Once again, it is a test of seriousness.
There is an aspect of indemnification that is often overlooked,
however, and that is reasonableness of the magnitude of the maximum
probable loss. Though I do not have current figures at my disposal, the
last number I recall for third-party launch liability insurance was
$900 million. Whether we are talking about expendable or reusable
launch vehicles, each has to demonstrate a probability of less than one
in 30 million casualties per flight in order to receive an AST license.
This automatically constrains flights to sparsely populated areas. An
accident affects only a small portion of those areas, yet any
reasonable appraisal would show that the entire area isn't worth $900
million.
Like so many things associated with space flight, the unreasonably
high limits of loss are the result of a very human trait. When faced
with an unknown of any kind, human beings automatically assign an
unquantified, but arbitrarily high risk to that unknown. Only after
acquiring knowledge based on experience do people begin to place risk
in the proper hierarchical order. The first part is what has kept us
from extinction. The second is what allows progress. Unfortunately, the
placing of risk in proper hierarchical order is sometimes either very
slow to come, or never happens at all. In those cases, progress either
lags or ceases.
In the Western world, there has never been a case of a third-party
human fatality due to a launch accident. The only property damage of
which I am aware has been the loss of a cow to a V-2 that strayed into
Mexico, and the top of a camper sheared off by the wing of an X-15 as
it made an emergency landing approach that came too low over a highway
(the latter is the one instance of third-party property damage caused
by an RLV).
These do not add up to $900 million.
I support indemnification of the RLV industry when it comes to
third-party life and property loss, simply because the government will
not permit RLV flights unless they meet third-party safety
requirements. I support indemnification with respect to passenger
flights, primarily because the risks are mitigated by the licensing
process. It is with less enthusiasm that I support this indemnification
as a means of promoting the industry, but the risk to the government is
fairly small. What I would suggest is a re-examination of just how much
exposure there is. I do not believe that it is close to the magnitude
we have always thought, and a realistic assessment may make the
government more comfortable in assuming this contingent liability.
The final issue to be addressed is where the regulatory body for
human passenger space transportation should be located. I have already
stated my position that I believe AST to still be the regulatory office
of choice, and will maintain that position as long as AST fulfills its
charter. Another question is whether AST should be part of the FAA, or
moved to another place.
This is a question I've wrestled with for years, and the answer is
never as clear cut as I would like. There are definite advantages for
AST to reside within FAA. The latter has the entire National Air Space
under its jurisdiction, and perhaps the biggest practical concern in
space flight is coordination with the NAS. Here the lives and property
at stake are of a large magnitude, but FAA has the infrastructure to
permit space flights to coexist with the NAS. This coordination extends
to foreign countries. Replicating the mechanisms already in place would
be horrendously inefficient, if it were even possible.
However, there is also the cultural issue to consider. FAA's
culture is geared toward a technological status quo which makes for
unparallel safety in aviation, but which is absolutely incompatible
with the needs of an industry whose technologies are yet to be defined.
Large organizations can and generally do taint smaller ones. I am
amazed at the degree of autonomy and cultural identity AST has managed
to maintain. I have also observed the cost of that maintenance. There
has been no small amount of energy spent on territorial matters that
serve no one's interests in the long run.
I think the right solution is to leave AST in FAA, with one
powerful proviso: when it comes to matters of commercial space flight,
the Associate Administrator for Commercial Space Transportation has the
last word. Much controversy could be avoided, and uncertainty removed,
if such a mandate existed. To quote one of the developers with whom I
discussed this matter, the Associate Administrator ``must have a
bazooka'' to ensure that AST is allowed to fulfill its charter. Given
the vast resources available to AST within the FAA, however, it should
remain there.
The concept of AST as a ``clean sheet of paper'' organization that
could grow with an emerging industry is what I supported from the
beginning. There have been many setbacks for the industry in the
intervening years, and AST has occasionally gotten ahead of itself and
the industry in its rule-making zeal. But as far as interactions among
organizations of people go, the AST/industry relationship has been
remarkably good.
I see no fundamental flaws, and nothing that cannot be corrected.
Yes, there are problems, if one regards the inevitable disputes of an
industry with a regulatory body as problematic. Where an activity of
AST does not contribute to the end of ensuring the safety of uninvolved
parties and their property, it should be changed--and given AST's past
performance, I do not foresee any resistance to this. I would suggest
mandating periodic zero-base review and rework of rules in order to
ensure that the AST process does not fossilize.
What I would not like to see, and what I think is to no one's
benefit, is a change from a regulatory organization that has achieved a
substantial degree of understanding of the industry it is regulating to
one whose regulatory approach is incompatible with that industry.
I think that, overall, we are on the right track with AST. It has
the charter and the spirit to safely promote the emerging RLV industry,
including the passenger RLV industry. The Commercial Space Act of 2003
will play a large, positive part in seeing that industry come into
being.
Biography for Michael S. Kelly
PROFESSIONAL SUMMARY:
Mr. Kelly is launch systems engineer with over twenty three years
of experience in ballistic missile propulsion systems and reusable
space launch systems design. Experienced manager and technical lead of
multiple system development projects.
MAJOR ACCOMPLISHMENTS:
Founded a technology development and systems
engineering and integration company.
Patented and demonstrated a tow-launched technique
for space launch vehicles.
Headed successful effort at establishing FAA
licensing regulations amenable to the existence of an
entrepreneurial Reusable Launch Vehicle industry.
Invented and demonstrated an economical
thermochemical process and business model for large-scale
conversion of organic waste to natural gas.
Led a 100-man systems engineering team, which
produced a patented modular solid propellant launch vehicle.
EDUCATION:
MS, Mechanical Engineering, Perdue University, 1983
BS, Mechanical Engineering, Perdue University, 1978
SECURITY CLEARANCE: SECRET/June 2003
Member, Commercial Space Transportation Advisory Committee (COMSTAC)
Chairman, COMSTAC RLV Working Group
Chief Scientist, Law Offices of Mark Cantrell, Space Law Consultants
NORTHROP-GRUMMAN XONTECH EXPERIENCE:
Technical Manager, Riverside, CA; June 2003 to Present
As Technical Manager, supported the Northrop-Grumman Targets and
Countermeasures proposal to MDA. Capture manager for the development of
identified business opportunities. Member of the Commercial Space
Transportation Advisory Committee (COMSTAC), Chairman of the COMSTAC
Reusable Launch Vehicles Working Group.
WORK EXPERIENCE SUMMARY:
Kelly Space & Technology, Inc., Chairman and Chief Executive Officer,
1993 to July 2003
Founded KST, a technology development and system engineering and
integration company. Assisted MoD/BAe in marketing both Polaris A-3 TK
R and its associated Chevalin equipment module to Army MICOM for
targets work. Patented tow-launch technique for space launch vehicles.
Orchestrated the program that demonstrated towed flight of large,
manned supersonic vehicle, using Air Force and NASA assets, at Dryden
Flight Research Center. Received contract from Motorola for launch of
20 Iridium satellites. Incorporation of tow-launch into NASA Space
Launch Architecture defined by KST under NRA 8-27. Invented and
demonstrated a high-performance, low-cost, non-toxic monopropellant
having industrial as well as rocket applications. Invented and
demonstrated economical thermochemical process and business model for
large-scale conversion of organic waste into natural gas.
TRW, Inc., Staff Engineer, Engineering Mechanics Laboratory, 1992-1993
Identified and developed new business opportunities for TRW in
System Engineering Support for commercial and governmental launch
services projects. Initiated and completed several proposals to Japan
Broadcasting Company for technical oversight on BS-3N launch program,
and to DARPA on launch pad gas dynamics studies in support of the
Taurus Program. Prepared the Launch Services segment of the TRW
Strategic Plan. Initiated a large IR&D program aimed at giving the USAF
a more cost-effective option for Spacelifter.
TRW Launch Services Organization, Director of Engineering, 1990-1992
Invented and patented modular solid propellant launch vehicle. Led
a 100-man system engineering team in development of the concept for
application to Iridium, MLV-III, and various other spacecraft programs.
The concept eventually flew in the form of the Athena.
TRW Ballistic Missiles Division, Missile Technology Laboratory, Staff
Engineer, 1989-1990
Provided general engineering and business development consultation
to TRW and its customers on a wide range of ballistic missile and
commercial space launch vehicle initiatives.
TRW Ballistic Missiles Division, Fluid Mechanics Section, Propulsion &
Ordnance Engineering, Section Head, 1984-1989
Supervised a general analytical and hardware development Section
supporting the Peacekeeper and Small ICBM programs. Work involved all
aspects of the airborne portion of weapon system development except for
the re-entry vehicle. Led the writing of the Post Boost Vehicle
specification. Gained a significant amount of experience in
governmental procurement practices as a member of the proposal
evaluation board for the Small ICBM Assembly, Test & System Support and
Post Boost Vehicle source selections. Helped identify the cause of the
Small ICBM Flight Test Missile 1 failure, leading to redesign of the
Stage I nozzle, and new diagnostic techniques for visualizing solid
rocket motor interior ballistics. Managed an IR&D program which
successfully developed CFD codes to predict unsteady loads on nozzles
during hot-flyout stage separation. Performed foreign threat special
studies. Performed SE/TA function for Evader Replica Penetration Aids
propulsion system development. Performed engineering support functions
for Re-entry Systems Launch Program (not to be confused with ``Rocket
Systems Launch Program'') under ABRES. Assisted MoD/British Aerospace
in determining reuse options for Polaris A-3 TK R boosters.
TRW Ballistic Missiles Division, Propulsion & Ordnance Engineering,
Stage Development Engineer, 1982-1984
Lead propulsion engineer for the Peacekeeper missile's Stage IV,
participating in all aspects of development, from component design and
test through stage and Weapon System Flight Proof Design Review and
Critical Design Review. Shepherded Flight Test Missile (FTM) 1 through
processing and flight. Performed ``quick-look'' flight data evaluation,
prepared and delivered immediate briefing to the BMO Commander for FTM-
1 through 18. Lead engineer for development of the new Stage IV surface
tension propellant tank, and participated in zero-G testing of the tank
aboard the NASA KC-135. Discovered Stage IV regulator failure in FTM-5
data, a component design flaw that was subsequently corrected.
Correctly identified the location of the problem for the FTM-15 Stage
IV before the end of flight; led the tiger team to find the failure
mechanism; personally found the exact cause of the failure through
review of the Stage build records. Wrote the Missile Compliance Matrix
for the Peacekeeper booster at Weapon System Critical Design Review,
clearing the missile for production.
TRW Ballistic Missiles Division, Propulsion & Ordnance Engineering,
Member of Technical Staff, 1980-1982
Mr. Kelly began his career providing basic engineering review in
support of the development of the Peacekeeper ICBM's Stage IV.
Chairman Rohrabacher. Thank you very much, Mr. Kelly.
Our third witness is Raymond Duffy, a Senior Vice President
of--at Willis InSpace Insurance Underwriters. So we have the
insurance industry here to give us their perspective. And we
appreciate your testimony. You may proceed.
STATEMENT OF MR. RAYMOND F. DUFFY, JR., SENIOR VICE PRESIDENT,
WILLIS InSPACE INSURANCE UNDERWRITERS
Mr. Duffy. Thank you, Mr. Chairman.
Actually, I am a broker, not an underwriter, but I place
the insurance with insurance companies, so I am a little bit
different.
Thank you----
Chairman Rohrabacher. Thank you for that correction.
Mr. Duffy. Thank you very much, Mr. Chairman.
I am pleased to have the opportunity today to discuss some
of the issues concerning H.R. 3245. And I plan on responding to
the Committee's questions as outlined in the invitation letter,
but will primarily be responding to question number two
regarding government indemnification for commercial human
flight. As my resume indicates, the area of professional
expertise in which I concentrate is directly involved with the
insurance coverages that would respond to any launch vehicle
failure.
The first question: ``Should the Government regulate
commercial human space flight?'' I believe that the Government
should regulate human space flight. Public policy objectives of
encouraging development of the industry, protecting third
parties, and protecting passengers are all important, but I
believe that the regulations should focus primarily on flight
safety issues. Prior experience for any new launch vehicle has
shown us that most failures occur during their first three
flights. Poor results for any new launch program will have a
detrimental effect, not only on that particular vehicle, but
also on all future commercial human space flight. Rigorous
concern for flight safety issues would help assure the public
that all is being done, even in the unfortunate event of a
launch or flight failure. This concern would also have a very
positive effect in the insurance underwriters' decisions as
they reviewed the insurability of the risk.
Second: ``Should the Government offer indemnification for
commercial human space flight, and if so, against what sorts of
liability?'' The second part of that: ``How should any
indemnification relate to existing policies and international
treaties?''
The Government offer of indemnification should not be
extended to commercial human space flight. The current
indemnification protection provided to the commercial space
industry is unique to commercial industries in the U.S. and
critical to the success of it. The inclusion of government
indemnification to commercial human space flight would
potentially dilute the effectiveness of the indemnification and
possibly jeopardize the availability of it.
The commercial space industry is suffering from a
significant downturn. This downturn is the result of a number
of factors, including the economy, manufacturing defects, and
to a significant degree, the technology transfer regulations
that have been imposed by the Government. The international
competition offers similar, if not superior, liability risk
sharing protection to that offered by the U.S. Any loss or
negative development of the availability of indemnification to
the commercial space industry would only have the result of
further damaging its position as world leader.
The current license requirements for a commercial launch
under the CSLA require liability insurance to be purchased up
to the maximum probable loss for the launch site as established
by the Government. This indemnification would only be used in
the event that the loss exceeds this. The required insurance is
available at reasonable cost and would also be available for
commercial human space flight licensees as well. The severity
of a launch failure for a commercial human space flight would
most likely be significantly less than a commercial space
flight due to the size of the launch vehicle and the location
of the launch. The cost of the insurance excess of the maximum
probable loss would be expensive at first, but I believe it
would be available. The cost of this excess would drop
following successful experience of the flight vehicle.
Although the loss of a commercial human space flight would
not likely be as severe as a commercial launch vehicle failure
because new vehicles have a high failure rate, the potential
frequency of loss is significant. If a FAA license for a
commercial human space flight mission was provided with the
CSLA indemnification, the frequency of loss, even without the
severity, could erode the availability of the indemnification
for the commercial space industry. Historically, government
contracts have paid for research and development of new launch
vehicles and absorbed the new launch risk. By the time
commercial launches take place, the vehicle's bugs have been
worked out. If the indemnification was provided to commercial
human space flight without the Government's involvement during
this initial period, this would also increase the degree of
risk being covered and erode the availability of the
indemnification for the commercial space industry.
At this point, I believe an understanding of the workings
of the aviation insurance industry would also be helpful.
Generally, an aviation underwriter writes all lines of aviation
insurance: airlines, product liability, general aviation, and
in some cases, space. The annual--the aviation industry's
insurance premium is less than one percent of the annual
casualty premium worldwide. The total annual premium for launch
liability is less than $20 million. If there were a launch
liability loss greater than that, the loss would be paid from
all the supporting lines of business. Depending on the severity
of the loss, payment may even end up coming from the non-
aviation property and casualty lines. A high frequency of loss
in this area would quite likely affect the availability of
coverage for it, just as such a frequency could affect the
availability of indemnification in the future. The potential
lack of indemnification in insurance following poor experience
along with strict regulations could all work toward the
development of a safer commercial human space flight program.
Regarding passenger liability, I do not believe that there
should be any passenger liability protection provided by the
Government. Except for instances of gross negligence or willful
misconduct, passengers should assume this risk. It would not be
appropriate for the Government to extend any protection to
these people. If someone is willing to participate in
commercial human space flight at this stage of its development,
then the risk should be dealt with solely between the passenger
and the launch provider. It is unlikely there would be any
commercial insurance available responding to this risk.
The second part of the question regarding the current risk-
sharing financial regime that is in place regarding treaties,
what we have in place is sufficient right now, as indicated in
the Risk Management Working Group's Report to COMSTAC in
October of '02.
The third question: ``What changes would you recommend to
H.R. 3245? In particular, do you support commercial human space
flight being regulated by the OCST at the FAA?'' I would
recommend that the bill transfer the regulation of sub-orbital
human space flight from the FAA Office of the Associate
Administrator for Commercial, excuse me, Space Transportation
to the FAA, the AVR. As I have indicated previously, safety
concerns for the vehicles would be paramount. The AVR has
considerable experience in this area and would be more suited
to promulgate the appropriate regulations.
Thank you.
[The prepared statement of Mr. Duffy follows:]
Prepared Statement of Raymond F. Duffy, Jr.
Mr. Chairman, distinguished Committee Members and Staff:
I'm pleased to have the opportunity today to discuss some of the
issues concerning H.R. 3245, the Commercial Space Act of 2003.
I will respond to the Committee's questions as outlined in the
invitation letter, but will primarily be responding to question #2
regarding government indemnification for commercial human flight. As my
resume indicates, the area of professional expertise in which I
concentrate is directly involved with the insurance coverages that
would respond to any launch vehicle failure.
1. Should the government regulate commercial human space flight? If
so, what should the public policy objectives (e.g., encouraging
development of the industry, protecting third parties, protecting
passengers, etc.) of that regulation be and how should they be
balanced?
Government should regulate human space flight. Public policy
objectives of encouraging development of the industry, protecting third
parties and protecting passengers are all important, but I believe that
regulations should focus primarily on flight safety issues. Prior
experience for any new launch vehicle has shown us that most failures
occur during the first three flights. Poor results for any new launch
program will have a detrimental effect not only on that particular
vehicle but also on all future commercial human space flight. Rigorous
concern for flight safety issues would help assure the public that all
was being done even in the unfortunate event of a launch or flight
failure. This concern would also have a very positive effect on the
insurance underwriters' decisions as they reviewed the insurability of
the risk.
2. Should the government offer indemnification for commercial human
space flight, and if so, against what sorts of liability? How should
any indemnification relate to existing policies and international
treaties?
The government offer of indemnification should not be extended to
commercial human space flight. The current indemnification protection
provided to the commercial space industry is unique to commercial
industries in the US and critical to the success of it. The inclusion
of government indemnification to commercial space flight would
potentially dilute the effectiveness of the indemnification and
possibly jeopardize the availability of it in the future.
The commercial space industry is suffering from a significant
downturn. This downturn is the result of a number of factors, including
the economy, manufacturing defects, and to a significant degree the
technology transfer regulations that have been imposed by the
government. The international competition offers similar, if not
superior liability risk sharing protection, to that offered by the U.S.
Any loss of or negative development of the availability of
indemnification to the commercial space industry would only have the
result of further damaging its position as world leader.
The current license requirements for a commercial launch under the
CSLA require liability insurance to be purchased up to the maximum
probable loss for the launch site as established by the government.
This indemnification would only be used in the event of a loss that
exceeds this. The required insurance is available at reasonable costs
and would also be available for commercial human space flight licenses
as well. The severity of a launch failure for a commercial human space
flight would most likely be significantly less than a commercial space
launch due to size of the launch vehicle and the location of the
launch. The cost for insurance excess of the maximum probable loss
would be expensive at first, but I believe it would be available. The
cost of this excess would drop following successful experience of the
flight vehicle.
Although the loss of a commercial human space flight would not
likely be as severe as a commercial launch vehicle failure, because new
launch vehicles have a high failure rate the potential frequency of
loss is significant. If a FAA license for a commercial human space
flight mission was provided with the CSLA indemnification, the
frequency of loss even without severity could erode the availability of
the indemnification for the commercial space industry. Historically
government contracts have paid for the research and development of new
launch vehicles and absorbed the new launch risk. By the time
commercial launches take place, the vehicle's bugs have been worked
out. If the indemnification was provided to commercial human space
without the government's involvement during this initial period this
would also increase the degree of risk being covered and erode the
availability of the indemnification for the commercial space industry.
At this point I believe an understanding of the workings of the
aviation insurance industry would be helpful. Generally, an aviation
underwriter writes all lines of aviation insurance for airlines,
product liability, general-aviation, and in some cases space. The
aviation insurance industry's annual premium is less than one percent
of the annual casualty premium. The total annual premium for launch
liability is less than $20 million. If there were a launch liability
loss greater than that, the loss would be paid from all the supporting
lines of business mentioned. Depending on the severity of the loss,
payment may even end up coming from the non-aviation property and
casualty lines. A high frequency of losses in this area would quite
likely affect the availability of coverage for it, just as such a
frequency could effect the availability of indemnification in the
future. The potential lack of indemnification and insurance following
poor experience along with strict regulations could all work towards
the development of a safer commercial human space flight program.
I do not believe that there should be any passenger liability
protection provided by the government. Except for instances of gross
negligence or willful misconduct the passengers should assume this
risk. It would not be appropriate for the government to extend any
protection to these people. If someone is willing to participate in
commercial human space flight at this stage of its development than the
risk should be dealt with solely between the passenger and the launch
provider. It is unlikely there would be any commercial insurance
available to respond to this risk.
As indicated in the Risk Management Working Group Report to COMSTAC
on October 31, 2002, ``the current risk-sharing regime assigns
financial responsibility for the most probable third-party damages
arising from U.S. based launches and those conducted by U.S. commercial
entities to the launch licensee whose insurance protects the interests
of the U.S. government as an additional insured. Accordingly, under the
existing liability risk-sharing regime, the government is afforded
financial protection in meeting certain of its international treaty
obligations, up to the maximum probable loss, at no cost to the
government (or the U.S. taxpayer).'' This would be the same case for
the commercial human space flight industry if the same approach were
followed regardless as to whether indemnification is provided.
3. What changes would you recommend to H.R. 3245? In particular do
support commercial human space flight being regulated by the Office of
Commercial Space Transportation at the Federal Aviation Administration?
If not, where and in what manner would you propose to regulate
commercial human space flight?
I would recommend that the bill transfer the regulation of sub-
orbital human space flight vehicles from the FAA office of the
associate administrator for Commercial Space Transportation (AST) to
the FAA Regulation and Certification Group (AVR). As I've indicated
previously, safety concerns for the vehicles should be paramount. The
AVR has considerable experience in this area and would be more suited
to promulgate the appropriate regulations.
Chairman Rohrabacher. Thank you very much.
Our fourth witness is Dr. Henry Hertzfeld, a senior
research staff scientist at the Space Policy Institute Center
for International Science and Technology Policy at George
Washington University. Dr. Hertzfeld, you may proceed. And
thank you very much for being with us.
STATEMENT OF DR. HENRY R. HERTZFELD, SENIOR RESEARCH SCIENTIST,
ELLIOT SCHOOL OF INTERNATIONAL AFFAIRS, GEORGE WASHINGTON
UNIVERSITY
Dr. Hertzfeld. Thank you, Mr. Chairman, Members of the
Subcommittee.
Government supervision and regulation of all space flight
is mandatory. The Congress has an obligation to ensure that
commercial space flight is as safe as possible for all parties
involved and that innocent parties, both domestically and
internationally, are protected. Virtually all space activities
are global, and by treaty, each nation is responsible for the
actions of their citizens in space. And it is simply common
sense in today's security and defense environment that the
advanced technological capabilities needed to get to space will
require government knowledge and supervision of those
activities, whether they be for government or commercial
purposes. Finally, one must travel through air space to get to
outer space, which will require close coordination, but not
necessarily integration, with the existing regulations for
aviation.
Only recently has the prospect of commercial human space
flight been seriously proposed. This could develop into new
business opportunities in the coming years. The risks of
commercial space flight are two-fold: financial for investors
and injury to people and property. In order to encourage
commercial activity, the Government should be as neutral as
possible to investors in new space activities, neither
subsidizing them nor adding new financial regulations to the
actual investment.
Up to now, most commercial space activity has included a
significant amount of government use, mainly communications and
remote sensing satellites, which provides at least some excuse
for continuing government indemnification liability.
However, a purely commercial human space flight, whether
sub-orbital or in-orbital, has no dual-use purpose. Its market
will be adventure-seekers or sightseers, and private investors
will incur the profits or losses. The private company has a
business interest and an obligation to cover all potential
liabilities as would be prudent for any profit-oriented
enterprise in any industry.
Therefore, the U.S. Government should have no obligation to
subsidize this type of commercial activity and should incur no
financial risks from the activities of U.S. citizens involved
in commercial human space travel.
This means that the current form of indemnification for
space activities as enumerated by the FAA in its regulations
will have to be changed. The types of changes I propose would
shift the entire liability for commercial human sub-orbital and
in-orbit activity to the firm. Although the cost of insurance
might discourage some from entering this industry, this cost is
only a relatively small fraction of the total cost of a launch
and would be included in the price of the launch. Those
incurring the risk should be willing to pay for the risk,
particularly where there is no direct Government benefit from
the activity.
H.R. 3245, as it is now drafted, may establish several
other bad precedents. It perpetuates the conflict within the
FAA/AST of being both a promoter and a regulator of the
industry. It takes a piecemeal approach to regulation by
focusing on commercial human space activities rather than
considering the entire spectrum of future aviation, sub-
orbital, and orbital commercial activities in a comprehensive
and cohesive framework. And it proposes a definition of space
and aviation activity that fails to adequately separate
regulatory functions and jurisdiction.
Currently, the Office of Commercial Space Transportation at
the FAA has a dual role of promoting the ELVs and RLVs as well
as regulating them. Regulations by their very nature may
counter promotional activities. I believe the time has come to
separate these activities.
And there is another serious conflict brewing within the
FAA regulatory environment itself. The history of the
development of space is very different from that of aviation.
The legal structure of the two sectors is also very different.
Even though one has to fly through air to get to space, the
same companies build both aircraft and spacecraft, and the
Government R&D structure in aerospace is focused primarily in
one agency, that does not mean that the two activities are the
same and should be regulated by the same agency.
H.R. 3245 only addresses commercial human space flight.
Other new developments that will affect both aviation and space
include: high altitude platforms that may have functions that
compete with low-Earth orbit satellites, unmanned aircraft,
space launches that use airplanes for the first stages, et
cetera. Also, by separating commercial human space activities
from the transportation of cargo into sub-orbital and orbital
locations, different regulations could emerge for virtually
identical physical launches. The borders between aviation and
space and the regulatory framework will become fuzzy.
In fact, the potential of using high altitudes, those
higher than current commercial airplanes use but lower than
entering orbit, for purposes other than transporting people or
cargo from one point on Earth to another is an area that has
great commercial and security implications and potential.
Regulations currently are not well formulated about the
commercial use of those altitudes. I would recommend the
Congress study the entire spectrum of space supervision and
regulatory options.
One option that could be considered would be to establish
an independent regulatory agency for space activities,
something on the model of the Nuclear Regulatory Commission or
the Federal Communications Commission. This would separate the
promotion of commercial activity from its regulation and the
problems of air versus space regulation could be coordinated
through actions of two relatively equal and independently
separate organizations.
The, as yet, unsolved problem of what should be classified
under aviation and what should be space for regulatory actions
has always been a contentious situation with many proposals,
but no solutions. H.R. 3245 addresses this issue by using a
definition that has now been prepared by the FAA--now been
proposed by the FAA in a proposed rule making issued just a
couple of weeks ago. Previous attempts at definitions have
focused on either a physical description of where space begins
or on a functional approach. The physical definition is very
imprecise. The functional approach is one that is most commonly
used where if an activity is meant to reach outer space, it is
regulated as a space activity, even if it never reaches space.
If it is not destined for outer space, then it is regulated
under aviation regulations, where appropriate.
The proposed definition is still not the solution to the
problem. One issue involves regulating the payload, the
ultimate reason for the launch. Will a definition of space that
is based on the vehicle lead to unintended increased
jurisdiction over payloads as well? Another issue is the
situation where a commercial firm could be required to obtain
both an aviation certificate and a space launch license.
In conclusion, until the reliability of space vehicles
improves greatly, it is clear that the commercial space launch
industry is not mature nor is it similar enough to commercial
aviation aircraft to be part of the aviation regulatory regime.
At some future time, it is possible that aviation systems and
space systems can be handled together. The time is yet to come,
and by forcing round pegs into square holes at this juncture,
the Congress could be inhibiting both human and non-human
commercial space development rather than encouraging it.
Thank you.
[The prepared statement of Dr. Hertzfeld follows:]
Prepared Statement of Henry R. Hertzfeld
Government supervision and regulation of all space flight is
mandatory. The Congress has an obligation to insure that commercial
space flight is as safe as possible for all parties involved and that
innocent parties both domestically and internationally are protected.
Virtually all space activities are global. By treaty, each nation is
responsible for the actions of their citizens in space. And, it is
simply common sense in today's security and defense environment that
the advanced technological capabilities needed to get to space will
require government knowledge and supervision of those activities,
whether they be for governmental or for commercial purposes. Finally,
one must travel through air space to get to outer space, which will
require close coordination, but not necessarily integration, with the
existing regulations for aviation.
Only recently has the prospect of commercial human space flight
been seriously proposed. This could develop into a new business
opportunity in the coming years. In order to encourage commercial
activity, the Government should be neutral as possible to investors in
new space activities--neither subsidizing them nor adding new financial
regulations to the actual investment. The risks of commercial space
flight are two-fold: financial for investors and injury to people and
property. The Government does have an obligation to insure that
commercial space companies fully protect non-participants and
government property while maintaining some basic standards for the
safety of its employees and customers.
Up to now most commercial space activity has included a significant
amount of government use (mainly communications and remote sensing
satellites), which provides at least some excuse for a continuing
government indemnification liability.
However, purely commercial human space flight, whether sub-orbital
or in-orbit has no dual-use purpose. Its market will be adventure-
seekers or sightseers and private investors will incur the profits or
losses. The private company has a business interest and an obligation
to cover all potential liabilities as would be prudent for any profit-
oriented enterprise in any industry.
Therefore, the U.S. Government should have no obligation to
subsidize this type of commercial activity and should incur no
financial risks from the activities of U.S. citizens involved in
commercial human space travel.
This means that the current form of indemnification for space
activities as enumerated by the FAA in its regulations on financial
responsibility will have to be changed. At present, the FAA determines
the maximum probable exposure for third-party liability from a
commercial launch activity and requires the private company to
indemnify that activity up to that amount (which can be as high as $500
million per flight). Between that figure and a cap of $1.5 billion, the
U.S. Government is obligated to pay for third party damage. Above the
cap, the payment options are not specified. The types of changes I
propose would shift the entire liability for commercial human sub-
orbital and in-orbit activity to the firm. Although the cost of
insurance might discourage some from entering this industry, this cost
is only a relatively small fraction of the total cost of a launch and
would be included in the price of a launch. Those incurring the risk
should be willing to pay for the risk, particularly where there is no
direct Government benefit from the activity.
H.R. 3245, as it is now drafted, may establish several bad
precedents. It perpetuates the conflict within the FAA/AST of being
both a promoter and regulator of the industry. It takes a piecemeal
approach to regulation by focusing on commercial human space activities
rather than considering the entire spectrum of future aviation, sub-
orbital, and orbital commercial activities in a comprehensive and
cohesive framework. And it proposes a definition of space and aviation
activity that fails to adequately separate regulatory functions and
jurisdiction.
Currently the Office of Commercial Space Transportation at the FAA
has a dual role of promoting the ELV (and RLV) industry as well as
regulating it. Regulations by their very nature may counter promotional
activities. As commercial space activities expand (e.g., commercial
human sub-orbital and eventually possible orbital flights), these two
roles become even more difficult to accomplish within the same Office
than before. I believe the time has come to separate these activities.
Promotion of U.S. industry has traditionally been the province of the
U.S. Department of Commerce. If the DOT/FAA is to regulate space
without conflict, the promotional activities should be transferred
elsewhere.
And, there is another serious conflict brewing within the FAA
regulatory environment itself. The history of the development of space
is very different from that of aviation. The legal structure of the two
sectors is also very different. Even though one must fly through air to
get to space, the same companies build both aircraft and spacecraft,
and the Government R&D structure in aerospace is focused in one agency,
that does not mean that the two activities are the same and should be
regulated by the same agency. As it now stands, different offices
within the FAA must compete for regulatory authority. As commercial
space matures, the conflicts will become much greater. This is
wasteful, and will lead to sub-optimal solutions for the aviation
industry, for the space industry, and for U.S. competitiveness
internationally.
H.R. 3245 only addresses commercial human space flight. Other new
developments that will affect both aviation and space include: high
altitude platforms that may have functions that compete with low Earth
orbit satellites, unmanned aircraft, space launches that use airplanes
for first stages, etc. Also, by separating commercial human space
activities from the transportation of cargo into sub-orbital and
orbital locations, different regulations could emerge for virtually
identical physical launches. The borders between aviation and space and
the regulatory framework will become fuzzy.
In fact, the potential of using high altitudes (those higher than
current commercial airplanes use, but lower than entering orbit) for
purposes other than transporting people from one point on Earth to
another is an area that has great commercial (and security) potential.
Regulations currently are not well formulated about the commercial use
of these altitudes. It appears that the uses of these altitudes will be
functionally and competitively closer to space uses than aviation, but
the means of getting there may be more like aircraft than spacecraft.
As this activity develops, the question of where and how it should be
regulated is open to debate. Because commercial human space activity is
only one part of this debate, setting precedents now for the regulation
of these activities in a piecemeal fashion may create disincentives and
confusion for other near-term innovative commercial activities in this
region of the atmosphere. I would recommend that the Congress study the
entire spectrum of space supervision and regulation options.
One option that the Congress might consider would be to establish
an independent regulatory agency for space activities on the model of
the FCC or the NRC. This would separate the promotion of commercial
space from its regulation. And the problems of air vs. space regulation
could be coordinated through actions of two equally independent and
separate organizations. This would eliminate wasteful turf wars within
an agency and would not prematurely force space regulations into
aviation regulation, which, as it is now formulated, is not the
appropriate model for space activities.
The as yet unresolved problem of what should classified under
aviation and what should be space for regulatory actions has always
been a contentious situation with many proposals but no solutions. H.R.
3245 addresses this issue by using a definition that has now been
proposed by the FAA in a proposed rule-making in the Federal Register
(Vol. 68, No. 202, October 20, 2003). Previous attempts at definitions
have focused on either a physical description of where space begins or
on a functional approach. The physical definition is imprecise. The
functional approach is the one most commonly used where if an activity
is meant to reach outer space it is regulated as a space activity (even
if it never reaches space). If it is not destined for outer space, then
it is regulated under aviation regulations, where appropriate.
The proposed definition is still not the solution to the problem.
Other problems and issues are raised by the construction of a
definition based on the design of the vehicle involved. One issue
involves regulating the payload--the ultimate reason for the launch.
Currently the FAA reviews each payload for safety. Will a definition of
space that is based on the vehicle lead to unintended increased
jurisdiction over payloads as well? Another issue is the situation
where a commercial firm could be required to obtain both an aviation
certification and a space launch license. This likely will be expensive
and time consuming. It is also counter to the intent of Congress to
create a simpler, more commercially friendly regulatory regime that
encourages firms to engage in innovative space and aviation activities
and encourages future financial commitments from both entrepreneurs and
from the investment community.
In conclusion, until the reliability of space vehicles improves
greatly, it is clear that the commercial space launch industry is not
mature nor is it similar enough to commercial aircraft to be part of
the aviation regulatory regime. The current FAA space launch licensing
regime is oriented toward issuing a license for each space mission
(i.e., launch), while in the aviation world a Certification of Flight
Worthiness certifies that a particular vehicle is safe to fly
commercially. By creating an independent space regulatory agency that
could include authority over commercial human space activity as well as
high altitude activities (at least those that are not related to
transporting humans from one point to another on Earth), the pressures
to move too quickly toward integration with aviation regulation would
be eased.
At some future time it is possible that aviation systems and space
systems can be handled together. That time is yet to come, and by
forcing round pegs into square holes at this juncture, the Congress
could be inhibiting both human and non-human commercial space
development rather than encouraging it.
Biography for Henry R. Hertzfeld
Dr. Henry R. Hertzfeld, Senior Research Scientist at the Space
Policy Institute, George Washington University, is an expert in the
economic, legal, and policy issues of space and advanced technological
development. He has served as a Senior Economist and Policy Analyst at
both NASA and the National Science Foundation, and has been a
consultant to many agencies and organizations. He is the co-editor of
Space Economics (AIAA 1992), as well as many articles on space economic
and legal issues. Dr. Hertzfeld holds a B.A. from the University of
Pennsylvania, a M.A. from Washington University, and a Ph.D. degree in
economics from Temple University. He also has a J.D. degree from the
George Washington University and is a member of the Bar in Pennsylvania
and the District of Columbia.
Chairman Rohrabacher. My, my, we do have different points
of view here, don't we? And I see that the great thing about
being on that side is you can give your opinions but in the
end, the guys on this side have to make up the final decision.
And sometimes it is not 90/10. Sometimes it is 45/55. But for
most of the laws that we have to deal with, it is 45/55. So----
Mr. Wu. Yes, but Mr. Chairman, if I may interject, we may
make some legislative decisions, but some of the folks out
there actually wind up building the stuff, so that----
Chairman Rohrabacher. All right.
Mr. Wu [continuing]. Proves its own challenge.
Chairman Rohrabacher. All right.
Well, we appreciate all of you, and we have one final
witness: Pamela Meredith, who is counsel at the law firm of
Zuckert, Scoutt & Rasenberger, LLP, where she practices
aerospace and space law. Ms. Meredith also is an adjunct
professor of Satellite Communications and Space Law at American
University's Washington College of Law. Thank you very much for
being with us today, Ms. Meredith. And you may proceed.
STATEMENT OF MS. PAMELA L. MEREDITH, COUNSEL, ZUCKERT, SCOUTT &
RASENBERGER, LLP
Ms. Meredith. Thank you very much, Mr. Chairman and Members
of the Subcommittee.
I suppose there is a reason why you put Gary Hudson and me
on opposite sides of the table here. Thank you for inviting me
to speak on this very important subject of commercial human
space flight and the regulation of it and, in particular, H.R.
3245.
I commend the Committee for taking these early steps to lay
the legal foundation for the development of a commercial human
space flight industry.
Let me say that I am here today speaking in my own personal
capacity, and I do not represent my firm or any clients of the
firm. And the views I express here are entirely my own.
I have submitted testimony for the record, and this, what I
am doing here now is summarizing the points of that testimony.
Commercial human space flight should be regulated by the
Government. The Commercial Space Launch Act, which this
committee was instrumental in creating, provides a good
framework for that regulation with a few modifications. The
FAA's Space Office is the appropriate regulator for commercial
human space flight. There are some revisions required for the
Commercial Space Launch Act to be appropriate for regulating
human space flight. And those revisions need to accomplish the
four following objectives: one is to make clear that the FAA's
Space Office has the authority to license human space flight;
the second is create or establish protection, safety
protection, that is, reasonable safety protection for
passengers and crew; and establish reasonable liability and
insurance protection for passengers and crew; and finally to
regulate only to the extent necessary. Those are the four
objectives that need to be achieved by revisions of the
Commercial Space Launch Act.
Now looking at your bill H.R. 3245, the purpose of that
bill, the stated purpose of that bill, is the opening of outer
space to the American people. And to truly accomplish that
goal, the bill needs to meet the four objectives I just
outlined.
The bill does make clear that the FAA's Space Office has
the authority to license human space flight. The bill creates a
safety regime where the entire safety focus is on the general
public to the exclusion of passengers and crew. In other words,
with the exception of medical standards and a requirement for
training, the FAA's Space Office would be examining--would not
be examining the passengers' safety on board the vehicle, but
rather the innocent bystanders, the third parties, the innocent
bystanders that may be injured in a launch accident. Now is
that the kind of safety regime that promotes the bill's goal of
opening up space to the American people? I am just posing the
question.
As far as liability is concerned, the bill provides for
assumption of risk by passengers and crew. The bill provides
for the passenger to assume the risks inherent in human space
flight. It appears that the bill will require the passenger to
waive its rights to claim against the launch company and its
contractors and subcontractors in the event the passenger is
injured. It is a little bit unclear how the bill is going to
accomplish that goal. There are some things in the bill that
need to be clarified, but that seems to be the thrust of it.
Also, the passenger could be held liable to third parties
who are injured on the ground, those are the innocent
bystanders, in the event of a launch accident. In such a case,
the passenger would not be protected by the launch company's
liability insurance. That liability insurance would protect the
launch company and the launch company's contractors and
subcontractors but would not protect the passengers the way the
bill is structured. Also the way the bill is structured, the
passenger would not have the benefit of the government
indemnification, which again protects the launch company and
other launch participants for any damage or any liability above
the insured amount. One can pose the question: In essence, the
passenger gets the worst of all worlds; is this the kind of
legal regime that promotes the goal of opening space to the
American people?
[The prepared statement of Ms. Meredith follows:]
Prepared Statement of Pamela L. Meredith
1. Should the government regulate human space flight? If so, what
should the public policy objectives (e.g., encouraging development of
the industry, protecting third parties, protecting passengers, etc.) of
that regulation be and how should they be balanced?
Summary Answer: The government should regulate commercial human space
flight. The Commercial Space Launch Act of 1984, as amended and
recodified\1\ (``CSLA''), provides an appropriate general framework for
the regulation of human space flight. Some revision of the act is
desirable to clarify that the CSLA applies to human space flight and
necessary to establish reasonable safety and liability regimes for
human space flight.
---------------------------------------------------------------------------
\1\ Title 49, Transportation, Subtitle IX, Commercial Space
Transportation, Chapter 701, Commercial Space Launch Activities, 49
U.S.C. 70101-70121.
---------------------------------------------------------------------------
Current Regulation of Commercial Space Transportation
The Department of Transportation, and by delegation the Federal
Aviation Administration's Associate Administrator for Commercial Space
Transportation (``FAA/AST''),\2\ licenses and regulates launches and
re-entries\3\ under the CSLA.\4\ The FAA/AST licenses and regulates
launches and re-entries ``[c]onsistent with the public health and
safety, safety of property, and national security and foreign policy
interests of the United States.. . .'' \5\
---------------------------------------------------------------------------
\2\ See 49 C.F.R. 1.47(v) (providing that the Federal Aviation
Administrator ``is delegated authority to. . .[c]arry out the functions
vested in the Secretary by 49 U.S.C. Subtitle IX''); see also 50 Fed.
Reg. 9036 (Mar. 6, 1985) (delegating authority under the CSLA to the
Director of the Office of Commercial Space Transportation) and 60 Fed.
Reg. 62762 (Dec. 7, 1995) (transferring the Director of Commercial
Space Transportation's CSLA authority to the FAA Administrator).
\3\ A license is required to ``launch a launch vehicle'' or ``re-
enter a re-entry vehicle.'' 49 U.S.C. 70104(a)(1). A launch vehicle
is ``(A) a vehicle built to operate in, or place a payload in, outer
space; and (B) a sub-orbital rocket.'' Id. 70102(7). A re-entry
vehicle is ``a vehicle designed to return from Earth orbit or outer
space to Earth, or a reusable launch vehicle designed to return from
Earth orbit or outer space to Earth, substantially intact.'' Id.
70102(14).
\4\ The FAA/AST's licensing and regulatory authority extends to: 1)
launches/re-entries in the U.S.; 2) launches/re-entries by U.S. persons
or entities anywhere in the world; 3) launches/re-entries by U.S.
controlled foreign entities on the high seas or from international air
space, unless there is an agreement that a foreign government will
license the launch/re-entry; and 4) launches/re-entries of U.S.
controlled foreign entities in foreign countries if there is an
agreement that the U.S. will license the launch or re-entry. 49 U.S.C.
70104(a). The FAA/AST also licenses and regulates launch sites and
re-entry sites. Id.
\5\ Id. 70105(a)(1).
---------------------------------------------------------------------------
Initially, the FAA/AST's authority applied only to launch
operations. The authority was extended by a 1998 amendment to the CSLA
to include re-entry operations.\6\ The purpose of the amendment was to
``establish a statutory framework for the licensing of commercial re-
entry activities.. . .'' \7\ Prior to the adoption of that amendment,
this committee noted: ``Currently, there is no licensing procedure to
conduct re-entry from space. Such re-entry is vital if new technologies
in reusable launch vehicles are to be exploited and the opportunity to
conduct commercial experiments in space for return to Earth is to be
taken.'' \8\
---------------------------------------------------------------------------
\6\ Commercial Space Act of 1998, Pub. Law 105-303, 102, 112
Stat. 2843, 2846-2851 (1998).
\7\ Commercial Space Act of 1997, H.R. Rep. No. 105-347, at 20.
\8\ Civilian Space Authorization Act, Fiscal Years 1998 and 1999,
H.R. Rep. No. 105-65, at 23. The Committee pointed out that the FAA/AST
had previously taken the position that ``a re-entry [was] subject to a
launch license requirement on the grounds that re-entry entailed the
placing of a launch vehicle in a sub-orbital trajectory `from Earth
orbit [and that the FAA/AST had] since abandoned that position.. . .''
Id., at 60; see also Commercial Space Act of 1997, H.R. Rep. No. 105-
347, at 21 (providing the same).
---------------------------------------------------------------------------
It is not entirely clear that the FAA/AST's licensing authority
under the CSLA extends to human space flight. There is no explicit
mention or clear embrace of humans, whether crew or passengers, in the
CSLA. At the same time, there is no prohibition on the licensing of
humans. The FAA/AST appears to have taken the position that it has the
authority to license human space flight.\9\
---------------------------------------------------------------------------
\9\ See, e.g., Financial Responsibility Requirements for Licensed
Re-entry Activities, Notice of Proposed Rule-making (``NPRM''), 64 Fed.
Reg. 54448, 54457 (Oct. 6, 1999) (providing that ``[w]ith the
development of RLV technology comes the possibility of crewed or
piloted launch vehicles whose operations would be subject to FAA
licensing''). In the same NPRM, the FAA solicited comments on the
subject of a ``regulatory program that would. . .address passenger
safety.'' Id.
---------------------------------------------------------------------------
A license under the CSLA is required ``to launch a launch vehicle.
. .or to re-enter a re-entry vehicle.'' \10\ Launch means ``to place or
try to place a launch vehicle or re-entry vehicle and any payload from
Earth (A) in a sub-orbital trajectory; (B) in Earth orbit in outer
space; or (C) otherwise in outer space.. . .'' \11\ A ``payload'' means
``an object that a person undertakes to place in outer space by means
of a launch vehicle or re-entry vehicle.. . .'' \12\ While the term
``payload'' does not include humans, the definition of ``launch'' does
not preclude humans.
---------------------------------------------------------------------------
\10\ 49 U.S.C. 70104(a).
\11\ Id. 70102(3).
\12\ Id. 70102(9).
---------------------------------------------------------------------------
The Need to Regulate Commercial Human Space Flight
There are at least two reasons why the government should, or would
want to, regulate commercial human space flight. First, the Treaty on
Principles Governing the Activities of States in the Exploration and
Use of Outer Space, Including the Moon and Other Celestial Bodies\13\
(``Outer Space Treaty''), to which the United States is a party,
provides that States ``bear international responsibility for national
activities in outer space, including the Moon and other celestial
bodies, whether such activities are carried on by governmental agencies
or by non-governmental entities.. . .'' \14\
---------------------------------------------------------------------------
\13\ Outer Space Treaty, done Jan. 27, 1967, 18 U.S.T. 2410.
\14\ Id., art. VI.
---------------------------------------------------------------------------
The ``activities of non-governmental entities. . .shall require
authorization and continuing supervision.. . .'' \15\ The treaty does
not distinguish between manned and unmanned flight. The treaty does not
specify the kind or degree of regulation required; rather it leaves
that to each State party to decide with respect to its national space
activities.
---------------------------------------------------------------------------
\15\ Id.
---------------------------------------------------------------------------
Second, there are public policy reasons for regulating commercial
human space flight. The government has an interest in ensuring that
such flight is consistent with fundamental public policy objectives,
such as public safety, national security, and foreign policy interests
of the United States. This Committee made note of precisely these
public policy concerns when adopting the CSLA:
Government supervision over the activities of private parties
who provide commercial launch services must be exerted to
safeguard life and property, to prevent actions that would
jeopardize national security and foreign policy, and to ensure
that U.S. treaty obligations, such as those in the Outer Space
Treaty, are met.\16\
---------------------------------------------------------------------------
\16\ Commercial Space Launch Act, H.R. Rep. No. 98-816, at 8.
While it may be clear that some government regulation of commercial
human space flight is in order, questions remain as to when to
regulate; how to regulate; and how much to regulate. The answer to the
first question depends on the state of the commercial human space
flight industry. In other words, how imminent is commercial human space
flight? The issue of how and how much to regulate depends to a large
extent on the policy objectives the government seeks to achieve. It
also depends on the general philosophy and approach to regulation of
high technology commercial endeavors.
Public Policy Objectives of Commercial Human Space Flight Regulation
The policy objectives of the CSLA are to: 1) ``promote economic
growth and entrepreneurial activity through the use of the space
environment. . .;'' 2) ``encourage the United States private sector to
provide launch vehicles, re-entry vehicles, and associated services. .
.;'' and 3) provide for licensing and regulation of launches and re-
entries consistent with ``the public health and safety, safety of
property, and national security and foreign policy interests of the
United States.''\17\
---------------------------------------------------------------------------
\17\ 49 U.S.C. 70105(b)(1)-(3).
---------------------------------------------------------------------------
These policy objectives also support human space flight. To
accomplish these objectives with respect to human space flight, the
following key ingredients of human space flight regulation should be
considered:
A clear articulation of the FAA/AST's authority to
license and regulate commercial human space flight. Private
sector initiatives are generally encouraged by regulatory
certainty and discouraged by regulatory uncertainty.
Reasonable safety protection of passengers and crew.
The FAA/AST has interpreted its public health and safety
mandate under the CSLA as directed at the public at large, and
not extending to launch service participants, e.g., launch site
personnel. The question is whether the FAA's safety mandate
should extend at least to passengers in order to establish
reasonable safety protection. A regime with virtually no safety
oversight of passengers may not be sustainable if the goal
truly is to promote an industry of public space travel.
Reasonable qualification criteria for crew and
passengers. Given the high-risk nature of space flight at this
stage of industry development, qualification criteria may be
advisable for both crew and passengers. The FAA already imposes
certain qualification requirements on ground-based launch
safety personnel, which may be applied or adapted for crew.
Qualification criteria for passengers should be designed to
ensure a minimum level of safety for the passenger, while not
being so burdensome as to discourage human space flight.
Reasonable liability and insurance protection for
passengers and crew. The liability regime for passengers should
be compatible with the current CSLA provisions for commercial
space transportation, which have worked well. At the same time,
the regime must offer the necessary liability and insurance
protection to promote commercial human space flight. The
current regime, as set forth in the CSLA, has three major
components: 1) cross waivers; 2) third party liability
insurance; and 3) indemnification:
The CSLA requires the licensee to enter into
cross waivers of liability with its customers whereby
each party agrees not to sue the other and to assume
responsibility for loss or damage it sustains and for
injury, loss or damage sustained by its employees.\18\
The licensee and customer must each extend these
waivers to their respective contractors and
subcontractors involved in launch/re-entry services
requiring them not to sue the other party or the other
party's contractors and subcontractors.\19\
---------------------------------------------------------------------------
\18\ Id. 70112(b); 14 C.F.R. 440.17 and Part 440, Appx. B,
Agreement for Waiver of Claims and Assumption of Responsibility
(``Waiver Agreement''). The purpose of the cross waivers is: ``(1) to
limit the total universe of claims that might arise as a result of a
launch; and (2) to eliminate the necessity for all these parties to
obtain property and casualty insurance to protect against these
claims.'' Commercial Space Launch Act Amendments of 1988, S. Rep. No.
100-593 (1988), at 14.
\19\ 14 C.F.R. 440.17(b); Waiver Agreement, supra note 18, 4.
The CSLA requires the licensee to obtain
third party liability insurance in an amount stipulated
by the FAA/AST.\20\ This insurance must protect not
only the licensee, but also the United States, the
licensee's contractors and subcontractors and the
customer, as well as the contractors and subcontractors
of the customer.\21\
---------------------------------------------------------------------------
\20\ 49 U.S.C. 70112(a).
\21\ Id. 70112(b).
The CSLA provides that indemnification is
available against third party claims above the insured
amount, subject to certain conditions.\22\ See question
2, below.
---------------------------------------------------------------------------
\22\ See infra notes 37-39 and accompanying text (describing
indemnification under the CSLA).
Should a passenger be required to sign a liability waiver by
which it relinquishes its rights to sue the licensee and other
launch participants assuming the passenger is injured? \23\ The
benefit of such a waiver would be that the passenger could not
get sued by the licensee or other launch participants.
Currently, launch customers, which are required to sign
waivers, protect themselves through insurance. Is it reasonable
to expect passengers to take out life insurance? Would such
insurance even be available (at a reasonable price) for a risky
activity such as space flight? Or should the licensee be
required to indemnify the passenger through limited ``carrier''
liability?
---------------------------------------------------------------------------
\23\ See Martin Marietta Corp. v. International Telecomm. Satellite
Org., 991 F.2d 94, 100 (4th Cir. 1992) (providing that ``neither the
language of the [CSLA] Amendments nor their legislative history
reflects a Congressional intent to protect parties from liability for
their own gross negligence'').
Should crew members be required to sign liability waivers?
Assuming crew members are the employees of the licensee, such
employees are not now required to sign waivers. While the
employees are not full beneficiaries of the waivers, they are
afforded some protection.\24\ Precisely how far this protection
extends and whether it would be adequate is not entirely clear.
---------------------------------------------------------------------------
\24\ For example, the customer agrees to hold such employees
harmless from any liability arising out of claims from customer's
contractors and subcontractors. Waiver Agreement, supra note 18,
5(b).
Should passengers be considered third parties and, thus,
beneficiaries of the licensee's third party liability insurance
in the event of an accident resulting in passenger injury or
death? If not, should the passenger be protected as an
additional insured from claims by third parties? Should the
passengers be entitled to CSLA indemnification? Or should the
licensee be required to indemnify the passenger through limited
---------------------------------------------------------------------------
``carrier'' liability?
The same questions apply to the crew. Assuming crew are
employees of the licensee, the FAA/AST does not consider them
third parties.\25\
---------------------------------------------------------------------------
\25\ Compare the FAA's definition of ``third party'' in 14 C.F.R.
440.3(a)(15)(ii) (providing specifically that U.S. government personnel
are third parties).
Minimal regulation. Private industry is best served
by minimal regulation, i.e., regulation only as necessary to
serve essential public policy objectives. This is especially
true for evolving high technology industries, such as, space
transportation. Excessive regulation can stifle technological
development. The technology should drive the regulation, not
vice versa. The CSLA espouses this approach. It provides that
launch and re-entry should be regulated ``only to the extent
necessary. . .to ensure compliance with international
obligations of the United States and to protect the public
health and safety, safety of property, and national security
and foreign policy interests of the United States.'' \26\
---------------------------------------------------------------------------
\26\ 49 U.S.C. 70101(a)(7). (Emphasis added).
2. Should the government offer indemnification for commercial human
space flight, and if so, against what sorts of liability? How should
any indemnification relate to existing policies and international
---------------------------------------------------------------------------
treaties?
Summary Answer: There appears to be no reason to treat a human space
flight differently than unmanned flight as far as indemnification of
the licensee and its contractors, subcontractors, and customers and the
customers' contractors and subcontractors are concerned. However,
whether the passenger and crew should be entitled to indemnification
depends on the broader liability regime selected for these individuals.
International Treaty Obligations
The United States may be held internationally liability for damage
caused by launch vehicles or their payloads, or the component parts of
launch vehicles or payloads, under certain conditions. This liability
is imposed by the Outer Space Treaty\27\ and the Convention on
International Liability for Damage Caused by Space Objects\28\
(``Liability Convention'') and general principles of international law.
---------------------------------------------------------------------------
\27\ Under the Outer Space Treaty, ``[e]ach State Party to the
Treaty that launches or procures the launching of an object into outer
space [or] from whose territory or facility an object is launched, is
internationally liable for damage to another State Party by such object
or its component parts.. . .'' Outer Space Treaty, art. VII.
\28\ Liability Convention, done Mar. 29, 1972, 24 U.S.T. 2389.
---------------------------------------------------------------------------
The Liability Convention provides that a launching state is
``absolutely liable to pay compensation for damage caused by its space
object on the surface of the Earth or to aircraft in flight.'' \29\
Absolute liability means that it is not necessary to prove fault. ``In
the event of damage being caused elsewhere than on the surface of the
Earth to a space object of one launching State or to persons or
property on board such a space object by a space object of another
launching State,'' liability is based on fault.\30\
---------------------------------------------------------------------------
\29\ Id., art. II.
\30\ Id., art. III.
---------------------------------------------------------------------------
Liability rests with the ``launching state,'' which is defined as
the State ``which launches or procures the launching of a space object
[or a] State from whose territory or facility a space object is
launched.''\31\
---------------------------------------------------------------------------
\31\ Id., art. I(c).
---------------------------------------------------------------------------
Liability under the Outer Space Treaty and the Liability Convention
applies to the United States, as a party to these treaties. The
treaties do not impose liability directly on private companies, such as
launch companies and their contractors or customer. Nor do they impose
liability directly on private individuals, such as crew or passengers.
On the other hand, the United States may be held liable under the
treaties for the activities of these entities and individuals because
the United States bears ``international responsibility'' under the
Outer Space Treaty for national activities in space.\32\
---------------------------------------------------------------------------
\32\ See supra note 14 (setting forth the international
responsibility of the United States for its national activities in
space pursuant to the Outer Space Treaty, art. VI).
---------------------------------------------------------------------------
Needless to say, the Outer Space Treaty and Liability Convention
are not the only sources of liability for the licensee and its
contractors, subcontractors and customers, or for passengers. These
parties could also be held liable under private tort law, even for
damage in a foreign country.\33\
---------------------------------------------------------------------------
\33\ See Liability Convention, art. XI.2 (providing that
``[n]othing in this Convention shall prevent a State, or natural or
juridical persons it might represent, from pursuing a claim in the
courts or administrative tribunals or agencies of a launching State'').
---------------------------------------------------------------------------
Current Indemnification Regime for Commercial Space Transportation
The CSLA requires that a launch or re-entry licensee obtain third
party liability insurance (or demonstrate financial responsibility) to
compensate claims from third parties for the ``maximum probable loss.''
\34\ The FAA/AST determines the amount of insurance required.\35\ That
amount shall not exceed $500 million.\36\ In practice the FAA/AST
requires considerably less. The amount varies from launch vehicle to
launch vehicle.
---------------------------------------------------------------------------
\34\ 49 U.S.C. 70112(a)(1)(A).
\35\ Id. 70112(a)(2).
\36\ Id. 70112(a)(3)(A)(i).
---------------------------------------------------------------------------
The CSLA provides for indemnification for claims above the insured
amount, subject to certain conditions. Adopted as part of the 1988
Amendments to the CSLA, the indemnification provision allows:
To the extent provided in advance in an appropriation law or
to the extent additional legislative authority is enacted
providing for paying claims. . .the Secretary of Transportation
shall provide for the payment by the United States Government
of a successful claim. . .of a third party. . .resulting from
an activity carried out under the license.. . .\37\
---------------------------------------------------------------------------
\37\ Id. 70113(a)(1).
The limit of the indemnification is $1.5 billion above the
insurance amount.\38\ The indemnification is available for claims of a
third party against the licensee or a contractor, subcontractor or
customer of the licensee, as well as a contractor or subcontractor of
the licensee's customer.\39\
---------------------------------------------------------------------------
\38\ Id. 70113(a)(1)(B).
\39\ Id. 70113(a)(1).
---------------------------------------------------------------------------
The rationale behind the indemnification was that there was not
sufficient commercial insurance available at a reasonable price to
protect against third party liability resulting from a catastrophic
launch accident. Congress reasoned that ``[t]he potential unlimited
liability that the commercial launch industry faces from third party
claims is a deterrent to the development of a domestic commercial
[launch] industry.'' \40\ Congress stated:
---------------------------------------------------------------------------
\40\ Commercial Space Launch Act Amendments of 1988, S. Rep. No.
100-593 (1988), at 17.
Commercial operators cannot be expected to provide hundreds of
millions of dollars in liability self-insurance to gain a
license to operate launch vehicles. Nor can domestic commercial
operators be expected to pay exorbitant premiums which would
eliminate any possible profit from these operations or make
their services noncompetitive with foreign launch services.\41\
---------------------------------------------------------------------------
\41\ Id., at 11.
The indemnification was intended to be temporary, that is, ``to
facilitate the transition of the Nation's launch industry from a
Government activity to a commercial activity.'' \42\ A sunset provision
in the CSLA provides that the indemnification expires unless the
request is received by December 31, 2004.\43\ The proposed legislation,
H.R. 3245, provides for a three year extension of the
indemnification,\44\ a short horizon given the long lead time involved
in space projects.
---------------------------------------------------------------------------
\42\ Id., at 22.
\43\ 49 U.S.C. 70113(f).
\44\ H.R. 3245, 5. A Senate bill provides for an extension of the
indemnification provision to December 31, 2009. S. 1260, 3.
---------------------------------------------------------------------------
Government Indemnification for Commercial Human Space Flight
The question of whether the Government should indemnify human space
flight is twofold. First, the question is whether the current
indemnification regime should distinguish between manned and unmanned
flight in terms of providing indemnification in favor of the types of
parties that currently benefit from the indemnification. These parties
include the licensee and its customer and their respective contractors
and subcontractors. There does not appear to be a reason to
distinguish, as the rationale that supports indemnification of unmanned
flights applies equally to manned flights.
Second, the question is also whether passengers should benefit from
the indemnification, assuming they may be liable to third parties for
any damage they cause. The answer to this question depends on the
broader liability regime selected for them. If they are required to
sign waivers, and if they are considered non-third parties and
additional insureds under the licensee's third party liability
insurance, it may be reasonable to extend the indemnification to them.
On the other hand, if they are considered third parties that may sue
the licensee and its contractors and subcontractors, or if they are
otherwise indemnified through some type of ``carrier'' liability, it
may not make sense to also extend the indemnification to them.
3. What changes would you recommend to H.R. 3245? In particular, do
you support commercial human space flight being regulated by the Office
of Commercial Space Transportation at the Federal Aviation
Administration? If not, where and in what manner would you propose to
regulate commercial human space flight?
Summary Answer: I would recommend: 1) Careful consideration of the
possible implications of extending the FAA/AST's authority to human
space flight through an amendment of CSLA definition of ``payload;'' 2)
Careful consideration of whether the proposed safety regime for
passengers is adequate to achieve H.R. 3245's goal of opening outer
space to the American people; and 3) Clarification of the liability
regime established by H.R. 3245 and consideration of whether it is
adequate to achieve the bill's goal.
The Objectives of H.R. 3245
The articulated goal of H.R. 3245 is ``the opening of outer space
to the American people and their economic, scientific, and cultural
enterprises is a priority goal which should guide Federal Space
investments, policy development, and regulatory action.'' \45\ To
achieve this goal, H.R. 3245 should, at a minimum, accomplish these
objectives: 1) clarify the FAA/AST's authority to license human space
flight; 2) provide reasonable safety protection for passengers and
crew; 3) impose a reasonable liability regime on passengers and crew;
and 4) regulate only to the extent necessary.
---------------------------------------------------------------------------
\45\ H.R. 3245, 2(3).
---------------------------------------------------------------------------
Licensing Authority for Commercial Human Space Flight
H.R. 3245 attempts to clarify that the FAA/AST has the authority to
license commercial human space flight under the CSLA. The bill does so
by amending the definition of ``payload'' to include an ``individual,''
and not just an ``object,'' as is currently the case. As noted above,
the CSLA authorizes the FAA/AST to license the launch of a launch
vehicle or re-enter a re-entry vehicle and any payload.\46\ The new
definition makes passengers and crew a payload.\47\
---------------------------------------------------------------------------
\46\ See supra note 3 (providing that the FAA has the authority to
license the launch of a launch vehicle and the re-entry of a re-entry
vehicle).
\47\ H.R. 3245 does not define ``individual,'' but makes it
implicitly clear that the term encompasses both crew and passengers,
which the bill calls ``space flight participants.'' The bill defines
crew as ``an individual or individuals carried within a launch or re-
entry vehicle who performs a function necessary for the protection of
public safety.'' H.R. 3245, 3(c)(2). A space flight participant means
``an individual who is not crew carried within a launch or re-entry
vehicle during a launch or re-entry.'' Id., 3(c)(4).
---------------------------------------------------------------------------
The implication of including crew and passengers as payloads is
that the FAA/AST has so-called ``payload determination'' authority over
crew and passengers under the CSLA. That means that the FAA/AST has the
authority to ``prevent the launch or re-entry [of these individuals] if
[the FAA/AST] decides the launch or re-entry would jeopardize the
public health and safety, safety of property, or national security or
foreign policy interests of the United States.'' \48\ It will be
necessary to carefully consider other potential consequences of
including ``individuals'' in the definition of ``payload.''
---------------------------------------------------------------------------
\48\ 49 U.S.C. 70104(c). The FAA has this authority for payloads
that are not otherwise subject to U.S. government licensing or
authorization. 14 C.F.R. 415.51.
---------------------------------------------------------------------------
Safety Protection for Passengers and Crew
H.R. 3245 takes the position that Federal regulation of human space
flight ``should focus on protecting the safety of the general,
uninvolved public, while allowing involved persons to assume risks
which are inherent to human space flight activities.'' \49\ In other
words, H.R. 3245 provides that the FAA/AST's public health and safety
mandate be directed at the general public, to the exclusion of
passengers and crew. Accordingly, the FAA/AST's ``payload
determination'' as to whether the launch would ``jeopardize public
health and safety'' presumably would focus on whether the passenger/
crew poses a hazard to the public at large, and not whether the space
flight would be safe for the passenger or crew.
---------------------------------------------------------------------------
\49\ H.R. 3245, 2(6); see also id., 4 (providing that the focus
of commercial human space flight regulation should be on ``protecting
the safety of the general public, while allowing space flight
participants who have been trained and meet license-specific standards
to assume an informed level of risk'').
---------------------------------------------------------------------------
H.R. 3245 does temper this laissez-faire safety treatment to some
extent by imposing qualification requirements on passengers, designed
to protect their safety, such as medical standards and a requirement
for training. The question is whether this safety regime is
sustainable. In other words, is this minimalist approach to safety
regulation adequate to promote the bill's goal of opening outer space
to the American people?
Liability Regime for Passengers and Crew
Again, H.R. 3245 takes the position that federal regulation of
human space flight should ``allow[ ] involved persons [presumably
passengers] to assume risks which are inherent to human space flight
activities.'' \50\ The first question is whether the bill as now styled
achieves that objective. A separate question is whether such a
liability regime is sustainable and whether it promotes the goals H.R.
3245 is trying to accomplish.
---------------------------------------------------------------------------
\50\ H.R. 3245, 2(6).
---------------------------------------------------------------------------
The liability treatment of passengers and crew in the bill is
incongruous. H.R. 3245 treats passengers and crew as non-third parties,
while at the same time depriving them of the protections afforded to
other non-third party participants in launch and re-entry services.
H.R. 3245 amends the CSLA definition of ``third party'' to make clear
that ``crew and passengers'' are not third parties. These individuals
are added to a list of non-third parties, which includes the licensee,
the customer and their respective contractors and subcontractors. Yet,
crew and passengers do not benefit from the protection as additional
insureds under the licensee's third party liability insurance, as do,
e.g., the licensee's contractors, subcontractors, and customer.
Passengers and crew also do not benefit from the CSLA indemnification.
It is not clear whether passengers or crew will have to sign the
CSLA liability waiver. The waiver applies to the licensee and its
``customers'' and their contractors and subcontractors that are
``involved in launch services.'' Are passengers and/or crew
``customers?'' The FAA defines customer as ``the person who procures
launch services. . .,'' \51\ which is true of a passenger, but not
crew. It would be a stretch to apply the remaining portion of the
``customer'' definition--providing that ``any person who has placed
property on board the payload'' is a customer--to crew.
---------------------------------------------------------------------------
\51\ 14 C.F.R. 440(a)(3).
---------------------------------------------------------------------------
Even assuming passengers meet the definition of ``customer,'' are
passengers ``involved in launch services?'' The waiver applies only to
parties ``involved in launch services.'' Furthermore, H.R. 3245's
addition of ``passengers'' to a list of non-third parties that already
contains ``customers'' suggests that passengers are not considered
customers for purposes of the liability waiver under the bill. If the
bill's intention was to extend the waiver to customers, that purpose
may not have been achieved.
Biography for Pamela L. Meredith
Title: Co-Chair, Space Law Practice Group
Practice Areas: Commercial Space Contracts, Administrative Law,
Insurance, Policy and Legislation
Education: Persbraten Gymnasium (Artium, 1975); University of Oslo
School of Law (J.D. equivalent, 1981); McGill University, Air &
Space Law Institute (LL.M., 1983)
Pamela L. Meredith advises clients on commercial space project
planning, implementation, risk management, and contract dispute
resolution issues. She has written numerous articles and a textbook on
related topics and is a frequent speaker at satellite communications
and space law conferences in the U.S. and internationally.
Ms. Meredith is also an Adjunct Professor of Satellite
Communications and Space Law at American University's law school in
Washington, D.C.--a course she started in 1989.
As part of her space law practice, Ms. Meredith drafts and
negotiates commercial and U.S. government space contracts, including
launch contracts, satellite manufacturing contracts, transponder lease
agreements, and contracts for supply of spacecraft components and
launch vehicle subsystems. She represents both U.S. and foreign
companies and a foreign government.
Ms. Meredith advises on space project risk management and space
insurance issues, including policy wording, coverage disputes, and
insurance defense. Ms. Meredith also has testified as an expert witness
for insurers in commercial space contract litigation.
Ms. Meredith advises on U.S. government export licensing and
regulatory matters. She helps obtain licenses and approvals from the
U.S. State Department. These include DSP-5 and DSP-83 licenses and
approvals for Technical Assistance Agreements, Manufacturing Licensing
Agreements, and retransfers of technology.
Ms. Meredith assists in obtaining launch licenses from the Federal
Aviation Administration (FAA) and advises on FAA regulatory issues,
including rule-makings. She also monitors Congressional legislative
developments that may impact FAA launch licensing and regulation.
Ms. Meredith assists in obtaining licenses and other approvals for
communications satellite services before the Federal Communications
Commission (FCC). Ms. Meredith has assisted or advised on some aspect
of most of the FCC rule-making proceedings for communications
satellites in the 1980s and 1990s, including fixed satellite service
(C-, Ku-, Ka- and V-bands) and mobile satellite service (geostationary,
big LEO and little LEO). She has also testified as an expert witness in
litigation concerning the interpretation of FCC regulations.
Ms. Meredith is a Member of the District of Columbia and New York
bars. She chairs the American Institute of Aeronautics and
Astronautics' (AIAA) Legal Aspects Committee.
Select Publications:
Textbook:
Space Law: A Case Study for the Practitioner: Implementing a
Telecommunications Satellite Business Concept (Martinus
Nijhoff, 1992). (384 pages, co-authored: P.L. Meredith & G.S.
Robinson).
Articles:
American Journal of International Law, 1984, ``The Legality of a High
Technology Missile Defense System: The ABM and the Outer Space
Treaties.''
National Legal Center for the Public Interest, 1986, ``Domestic
Commercialization of Space: The Current Political Atmosphere.''
(Co-authored).
Nordic Journal of International Law, 1986, ``The Legality of Launch
Vehicle Passage Through Foreign Airspace.''
Proceedings of the XXXII Colloquium on the Law of Outer Space, 1989,
``A Comparative Analysis of United States Domestic Licensing
Regimes for Private Commercial Space Activities.''
Journal of Space Law, 1989, ``Status of the `Patents in Space'
Legislation in Congress.''
Proceedings of the XXXIII Colloquium on the Law of Outer Space, 1990,
``Implementing a Telecommunications Satellite Business Concept:
Overview and Relative Timing of Legal Actions.''
California Western Law Review, 1990, ``Privately-Owned Commercial
Telecommunications Satellites: Licensing and Regulation by the
Federal Communications Commission.''
The American University Journal of International Law and Policy, 1991,
``Legal Implementation of Space Debris Mitigation Measures.''
Proceedings of the XXXIV Colloquium on the Law of Outer Space, 1991,
``Risk Allocation Provisions in Commercial Launch Contracts.''
The Air and Space Lawyer, 1992, ``Implementing a Telecommunications
Satellite Business Concept: The Necessary Legal Steps.''
Proceedings of the XXXV Colloquium on the Law of Outer Space, 1992,
``Spacecraft Motion Management (SMM): Institutional and Legal
Frameworks.''
Cambridge University Press, 1994, ``A Legal Regime for Orbital Debris:
Elements of a Multilateral Treaty.''
Proceedings of the XXXVII Colloquium on the Law of Outer Space, 1994,
``Damage Caused by Orbital Debris to a Commercial Satellite:
Liability Issues Raised by a Hypothetical Case Scenario.''
Satellite Finance, 1998, ``Financing a Communications Satellite
Venture: Assessing the Regulatory Risk'' (with Rachel B.
Trinder).
Journal of Space Law, 1999, ``Space Technology Exports: The Current
Political Climate'' (with Sean P. Fleming).
Discussion
Passenger Indemnification
Chairman Rohrabacher. Thank you very much for your
testimony. And all of the witnesses, you have our appreciation.
We now will proceed with questions. And as Chairman, I will
kick them off. I would like to--the point you just made, Ms.
Meredith, about passengers and their indemnification, so a
passenger, as you see it now, would be in need of
indemnification for not being held responsible for a crash? Is
this true with a passenger on an airplane today or would it be
true of a passenger in something else?
Ms. Meredith. Well, you know, Mr. Chairman, I have got to
be careful here. I am here talking about space law and not
aviation law. It is not my expertise, so I can't really tell
you about aviation liability. But all I am saying is if the
goal of the bill is to promote the opening of space to the
American people, we have to be careful that we don't create a
regime that allows only the super wealthy to take advantage of
the opportunity because others will not be able to put in place
the insurance they will need to cover themselves to go up on a
space ride.
Chairman Rohrabacher. Well, I understand. The whole issue
of indemnification, I understand that I--it was not something
that I thought of as being something that had anything to do
with passengers. And maybe someone--is there anyone else on the
panel--maybe Mr. Duffy knows this answer, do we need--Ms.
Meredith suggests that we need to make sure that the--we
specifically state that the passengers have indemnification,
are not liable for damages caused if the vehicle crashes. Do
you see that as well?
Mr. Duffy. Well, I don't know where this--the bill that is
being proposed veers away from the CSLA, but looking at the
existing CSLA, the customers are included and the definition as
the insured under the launch licensee so the customers are
protected the same way everybody else is. And I would allocate
the customer to the passenger at that point, so----
Chairman Rohrabacher. So do you believe that problem is
taken care of? Ms. Meredith, do you----
Ms. Meredith. Well, I tell you what. The way the bill is
structured today, it is not entirely clear that the passenger
would be a customer under the Act. That is--we could go into
the--I have gone into the details of that in my written
testimony, but it----
Chairman Rohrabacher. Okay. Let----
Ms. Meredith [continuing]. Is not entirely clear.
Chairman Rohrabacher. Okay. Let me ask the panel, would
we--for those who agree that there should be indemnification,
we all agree that--you all agree that--believe indemnification,
that passengers should be included in that indemnification, is
that correct, for those of you who agree with indemnification?
I think Mr. Hudson is opposed to that or says it is not
necessary.
Mr. Hudson. Well, I think it is not necessary, but there--
--
Chairman Rohrabacher. Right.
Mr. Hudson [continuing]. Will be indemnification anyway,
because the companies will be buying it, so the customers
would, in fact, be included in that policy.
Chairman Rohrabacher. Okay. But do we--so maybe we need to
make sure, as this bill proceeds, that we put something
specifically into making sure there is no doubt in someone's
mind, because we know if there is doubt at all, lawyers get
rich off doubt, don't they? And we wouldn't want to see that
happen, would we? Sorry, Bart.
So--but Mr. Kelly, did you have something to say on that?
Mr. Kelly. I--Pamela raises an excellent point. I hadn't
considered the passenger, particularly a well-heeled passenger
probably has more money than the launch vehicle operator----
Chairman Rohrabacher. Mr. Tito, there you go.
Mr. Kelly. Mr. Tito may well be held liable for causing the
vehicle to have been built in the first place and then riding
as a passenger in it. And unless this is made clear, yes, he
would be open to liability beyond what he deserves.
Chairman Rohrabacher. Well, I think as this bill proceeds,
we will take that recommendation to heart and make sure that
that is crystal clear. And that is very important.
I--the idea that government license and government
regulation is the trade-off, that indemnification goes with
regulation and license, that is an interesting philosophical
point, and I--it is not one that--I was a little--I--the Chair
has been looking at indemnification as a gift bestowed upon
certain people in the society, and the basic points today by
the panel seems to indicate that if you are going to regulate
somebody and you are going to license somebody, that person has
a right to expect something in return. Indemnification is part
of that. But now, of course, that doesn't--how does that work
in comparison with other industries?
Mr. Hudson. The reward, Mr. Chairman, is usually the
profitability to your company or the ability to be in business
if there is a----
Chairman Rohrabacher. Right.
Mr. Hudson [continuing]. Staked control of an industry, as
in this case. In aviation, for example, there is no additional
indemnification that I am aware of for, say, airline operators.
Chairman Rohrabacher. The panel will enlighten us on that,
if they----
Dr. Hertzfeld. Well, I believe there are many industries,
particularly the pharmaceutical industry. They are heavily
regulated, pharmaceuticals for the Food and Drug
Administration, and yet they are liable for civil suits if
something goes wrong.
Chairman Rohrabacher. Right. And also--well, we also have
the nuclear power industry, which is regulated, and then we
give them indemnification because we--do we not? I mean, they
are--very, very--my staff is indicating that there are
industries, but very few industries, that get such
indemnification.
Mr. Duffy. Right, they are very--I mean, in fact, I believe
the nuclear regulatory industry is primarily 85 804
indemnification that way through the government contracts and
such. But to my knowledge, this is the only industry that has
indemnification in excess of the required insurance unless
somebody knows something----
Chairman Rohrabacher. And there is an hour--to be fair to
Ms. Meredith's point, if you are going to have indemnification
of unmanned rockets and if you were going to indemnify this
industry in terms of just putting cargo up, it makes no sense
to have a double standard and to try to convince the industry--
to make it harder for the industry to put someone--a human
being as their cargo that--to have a regulatory rule here or a
series of regulations that then makes it harder for the
aerospace industry to actually build a rocket and launch a
system that has a human being on it as compared to just cargo.
That doesn't make any sense. And your analysis should have
really, you know, shot out at me there, because that is logic
as--until I heard you just testify, it didn't really hit home.
So we will probably have a second round, but we now go to
Mr. Gordon.
Government Responsibility
Mr. Gordon. Thank you, Mr. Chairman.
Just quickly following up on your--I guess your question
concerning the legitimate concern that if the Federal
Government does authorize a--or give a license for flight, then
there is some responsibility. I would agree that there is some
responsibility that goes with that. I would disagree with Mr.
Kelly that thinks that it ought to be indemnification. I mean,
again, we have already cited that we don't do that for
airlines, we don't do it for trucking. When I get my personal
driver's license, we don't. There may be a reason to do that.
Indemnification, there may be a reason for us to do it, but it
is not a logical jump from just because we authorized it. So--
but I think we do need to give some consideration as to whether
there are other legitimate reasons for indemnification.
Let me go to the idea of passenger risk. There seems to be
two general feelings here. One is that there is an absolute
assumption of risk. The passenger says, you know, ``I know what
the odds are. Here I am, you know, signing up. And let us go,''
versus the idea that, once again, if there is going to be some
type of licensing from the Federal Government that there should
be at least some general guidelines as to that. So let me ask
the panel just by a raise of hands, how many of you think that
it is just a complete assumption of risk for passengers? Okay.
And how many of you think that the Federal Government has some
responsibility to the passenger? Raise your hand. All right. So
you are going both ways here?
Mr. Duffy. Just--no, I--just a little clarification. In
what capacity? In--to regulate properly? Absolutely, I believe
that the Federal Government has a duty that way.
Mr. Gordon. Well, again, Mr. Chairman, I will just make an
editorial comment since we are trying to put a bill together
here. I certainly feel that in terms of a test pilot that is
being paid that they know what they are getting into. I think
that a passenger, you know, we regulate ferris wheels and, you
know, all kinds of different types of equipment. I feel that
there needs to be some type of a minimum responsibility. Again,
there is an assumption that this is risky and it can't be
beyond, you know, other than risk, but I am a little hesitant
to just say, you know, ``Thrill seekers, bring your millions on
over and, you know, you have got a one in five chance and you
can brag to all of your buddies if you make it.'' I think we
have a little bit more responsibility than that. Where that
lies, I am not sure, but if we are going to license it, we have
got to have a little more responsibility.
Yes, sir, Mr. Hertzfeld?
Dr. Hertzfeld. Yes, sir. I think we--the confusion here is
over whether the Government has any financial stake in the
indemnification scheme. In terms----
Mr. Gordon. Indemnification, I think, is another matter.
Indemnification is more third party.
Dr. Hertzfeld. Right.
Mr. Gordon. The question I posed was the paying passenger,
whether or not there is an absolute assumption of risk so that
the Government would have no responsibility to set any kind of
guidelines. And you seem to think that there--by a show of your
hand, you said there was that absolute assumption of risk,
that----
Dr. Hertzfeld. Um-hum.
Mr. Gordon [continuing]. There is no government role here
for the passenger--as passenger.
Dr. Hertzfeld. There certainly could--no. There certainly
could be a government role in requiring a company to have
insurance to cover, for example, the third party liability
issues that----
Mr. Gordon. Right. I want to talk about that, but I only--
--
Dr. Hertzfeld. Okay.
Mr. Gordon [continuing]. Have a short bit of time. Right
now, I am focused just on the paying passenger.
Dr. Hertzfeld. Okay. The--just as the Government takes on
some responsibility these days in the cigarette industry and
other industries, if there is a potential liability, a
potential safety risk, the Government certainly could have a
role in protecting passengers that--in its licensing authority.
Mr. Gordon. So here--I mean, this really is sort of
strange. You are saying that there is an absolute assumption of
risk with the passenger, that the passenger takes all of the
risk and that there should be no government regulation as to
any level of safety, yet you are saying if the Government--if
the passenger takes that absolute risk, then we ought to still
have some indemnification?
Dr. Hertzfeld. No, no.
Mr. Gordon. I mean, that doesn't make any sense to me.
Dr. Hertzfeld. I am simply saying the passenger is a free
agent. They can buy a ticket or not buy a ticket. If they buy a
ticket, then one presumes that the company will have various
levels of insurance that will apply to the passenger or the
passenger themselves can purchase insurance on the flight. And
that is different from whether the Government assumes any risk
itself. As a condition of flying, it can require, and does
require, participants to purchase insurance.
Mr. Gordon. On airlines? On buses?
Dr. Hertzfeld. Companies have liability insurance, and
passengers may or may not, but the risks there are clearly
different. And the risk--the third-party risks are also
different there.
Mr. Gordon. So you are going to say to me, as a taxpayer,
that I have got to guarantee indemnification here, but I don't
have anything to say about the rules which they are going to be
flying?
Dr. Hertzfeld. I am not sure that I follow the logic there,
because----
Mr. Gordon. Well, that is because I am not following your
logic.
Dr. Hertzfeld. Okay.
Mr. Gordon. You----
Dr. Hertzfeld. Yeah.
Mr. Gordon. Okay. Are you saying that the Federal
Government should have some responsibility, not the third
parties, but to the paying passenger?
Dr. Hertzfeld. Only in the most general sense to the
company that you--that the company has to provide certain
safety--go through certain safety requirements----
Mr. Gordon. Okay. So now you are saying that the Federal
Government would set what those standards are?
Dr. Hertzfeld. Possibly, yes, minimal standards for the
safety of the flight.
Mr. Gordon. Okay. So you shift--you have shifted positions
then?
Dr. Hertzfeld. Slightly.
Mr. Gordon. So you are no longer the absolute--so now we
have got three to two absolute take assumption of risk. Does
anybody else want to--do you all three, any of you want to
modify your position?
Mr. Duffy. Just, Mr. Gordon----
Mr. Gordon. Yes.
Mr. Duffy [continuing]. The Government would have a duty to
provide regulations that would create a safe environment for
the flight.
Mr. Gordon. Okay. So now we are two to three then?
Mr. Duffy. Right. But that--there would be an assumption of
risk on the passenger as far as any liability arising out of
that flight, any liability through him, anything that happened
arising out of that flight----
Mr. Gordon. Once there is a certain threshold----
Mr. Duffy. The same as with an airline.
Mr. Gordon. Okay. So now we are two to three here. So you
all two--the ones on the left, once again, are you still in the
position that there is an absolute assumption of risk?
Mr. Kelly. Yes, there is. The Government's regulation of
space launch, once again, is--requires demonstration of a level
of safety to third parties and their property that
automatically, if satisfied, demonstrates that--or at least
mitigates the risk to a third party. H.R. 3245 requires
disclosure of the safety record of an RLV to a potential
passenger. Until you know--until you have experience flying
these things, you can not dictate, in advance, safety
standards, because there are no standards. There is nothing----
Mr. Gordon. But there is a difference between----
Mr. Kelly. No, no, no----
Mr. Gordon. You are not talking about paying passengers to
be the test pilots, are you?
Mr. Kelly. In effect, that is what they are, and that is
what barnstorming passengers were in the early days of
aviation. There are people who do things that are very risky,
and the Government----
Mr. Gordon. So----
Mr. Kelly [continuing]. Does not regulate that nor should
it.
Mr. Gordon [continuing]. Is the paying passenger going to,
for lack of a better term, drive the vehicle?
Mr. Kelly. No. No, no, no.
Mr. Gordon. Okay. Well, since--so then if they are not--so
the barnstormers were the ones that were really testing the
equipment?
Mr. Kelly. Absolutely.
Mr. Gordon. So the passengers aren't doing anything--there
are no--there is no testing there, so there----
Mr. Kelly. No.
Mr. Gordon [continuing]. Is no benefit. The passenger
doesn't bring any value added?
Mr. Kelly. The--other than paying for the flight. That is
his benefit, and that is what will propel the industry.
Mr. Gordon. All right. I am getting ready to go a little
longer, because----
Chairman Rohrabacher. That is all right.
Mr. Gordon. So just to--so then, I guess--so we are two to
three, but our two, I guess, you would say that by virtue of
getting the licensing that that is where the Federal Government
would come in with a certain standard level of safety?
Mr. Kelly. And they already do, yes.
Mr. Gordon. Okay. Now Mr. Hudson, would you agree with
that?
Mr. Hudson. I promise I will not change my vote. The--but
let us put some temporal perspective on this. We are looking
back at 100 years of aviation this year. What--where we are is
looking forward at 100 years of space flight that has not yet
occurred. From the time the Wright Brothers first flew to 1926,
there was no regulatory authority in this Nation whatsoever,
and that was the barnstorming era. That is where you could pay
your $5 at a county fair and be taken up in a jenny that was
surplus from World War II. And people did that. Some died. It
was through that period of time until, actually, the
unfortunate death of Knute Rockne, that real regulation did not
occur in the commercial aviation industry. And that wasn't
really seriously codified until the FARs in 1963. And we have a
long period of time where we learned and where, unfortunately,
people died.
There are some enterprises, adventure enterprises, for
example, climbing Everest, which, if you go out as a climber,
you won't even be accepted unless you have some level of
training and experience. And 100 people climbed every year
paying $50,000 to $100,000, and 10 percent of them die. We
don't expect that kind of injury or fatality rate in future
sub-orbital or orbital flight, but the possibility always
exists. Those people accept that risk for some period of time,
and that is why I recommended a period of, perhaps, 20 years
where the risk might decline, maybe, after 10 years and you go
to a new set of standards.
Mr. Gordon. But you said even the Everest folks had to get
a license?
Mr. Hudson. No, they do not, sir. They--the companies that
mount the expeditions at Summit Everest will look at you and
say, you know----
Mr. Gordon. Yeah, but I mean they require a certain--they
don't just--it is not just--there are still certain
requirements.
Mr. Hudson. Only imposed by the companies on the
participants, not by any federal agency.
Mr. Gordon. So is there any indemnification?
Mr. Hudson. I am certain people go out and try and buy it.
I don't know that you could get very much at that rate.
Mr. Gordon. All right. Thank you.
Excuse me for taking so long. I----
Chairman Rohrabacher. No, that is all right. I--just to
note that my family--I am the first Rohrabacher not to have
been born on a small farm ranch and my family--people in my
family were always working people and pretty poor. And my dad
always reminded me when I was a kid about the day that he saw
the plane land--the barnstormer land at the carnival and how
they scraped up the money and from--everybody in the family put
their money together so that he could get in that plane and go
up on a flight, and of course, my father later became a
military officer during World War II and a pilot and stayed--
and, you know, it uplifted our family. That one little
experience uplifted our family beyond what our family had ever
been before. And so when we are talking about these types of
situations, we are talking about uplifting humankind. And if he
couldn't have gone on that flight because there had been some
kind of restriction that, after all, this barnstormer hadn't
passed all of his tests and didn't have the money to put down
on some things, then his airplane would never have landed in
that carnival in the first place or if they would have said,
``You know, you can go up, but if something happens to the
plane, as the passenger, you are going to have to pay for the
guy's cows that you run into,'' or something like that. It
probably would have been a $10 ticket and dad never would have
made it up. And well, you wouldn't have me here today. So there
are pluses and minuses for all of that.
But with that said, we will go to Mr. Bell from Texas, who
probably has some other homely anecdotes as well.
Effects of Cost on Access to Space
Mr. Bell. None to rival that, Mr. Chairman.
But I think you make an interesting point that you are--you
were talking about poor people having opportunity to fly and
enjoy that experience. And Ms. Meredith, I thought you made an
excellent point during the course of your testimony that you
would hate to see this turn into a system where only the super
wealthy in our society could take advantage of it. But as this
legislation is proposed, don't you think that is exactly the
type of system that we would be creating?
Ms. Meredith. Yes----
Mr. Bell. Microphone, please.
Ms. Meredith. I think that is what the bill, as it is
structured now, is creating, yes, with the waivers and the lack
of any insurance and indemnification protection.
Mr. Bell. Does anybody disagree with Ms. Meredith's
assessment?
Mr. Hudson. Well, since I am at the other end of the table,
I guess I will disagree.
Mr. Bell. You don't have to just because you are sitting
there.
Mr. Hudson. No, but it--there is history there, so we can
friendly disagree on this subject. No, I think that the facts
of physics are what may exclude poor individuals in the near-
term from flying on sub-orbital or orbital space vehicles. Try
as we might, the best engineers and the best minds of this
country in aviation and space have bent their will to this, and
we are still talking about ticket prices for sub-orbital flight
that might be $100,000 and ticket prices going to orbit that
will be several millions. We are not going to change that in
the next two decades, so----
Mr. Bell. So what do you disagree with that she is saying?
I mean----
Mr. Hudson. Well, I am saying that I don't believe that you
can create an egalitarian structure that allows anybody to fly
just because of insurance issues or indemnification issues. I
don't--I think that is in the noise of the actual cost of
engaging in the activity.
The Purpose of Commercial Human Space Flight
Mr. Bell. And correct me if I am missing something, but all
we are really talking about here is a way to make money, are we
not? I mean, what are--I guess if there are other great
purposes behind this type of commercial space flight, I would
love to be educated in that regard, because it sounds like we
are just opening it up for a way to pump millions into--for
private individuals to--or private companies to take folks into
space. Am I missing something?
Mr. Kelly. Well, one of the things that we are doing is
allowing those people who have the desire and the money or the
means to go into space. And the first one of these people,
Dennis Tito, put up, from what I have heard, $15 million to $20
million of his own money to fulfill a lifelong dream. He
couldn't do it in this country, because no one would let him,
so he had to go to Russia to do it. I say that if people have
the money and the desire to go into space, that if there is a
means available, there is no reason why in this country they
shouldn't be able to avail themselves of that means. This
legislation allows them to do that.
Why there should be any concern about this initially being
for wealthy people is a little puzzling to me. Every single
product that comes along from the automobile to the personal
computer is affordable only to very well heeled individuals to
begin with. And it is only through the growth of markets and
the growth of demand that the cost of things comes down. And
those wealthy individuals are the ones who, through their early
purchases, pay for the development of these industries and
allow them to become available to everyone. So I would
encourage private passenger space flight early on, just as
aviation was only available to wealthy people in the early days
of the airlines, so space is going to be available only to
wealthy people until, as Gary pointed out, we can get a better
handle on how to do it economically.
Effects of a Loss of a Vehicle
Mr. Bell. Does anybody else wish to comment on that?
I guess what concerns me, though, too, is the downside that
seems to be somewhat overlooked in all of this, in the case of
an accident, Mr. Duffy, if you could, explain one part of your
statement I--because I didn't understand this. ``Although the
loss of a commercial human space flight would not likely be as
severe as a commercial launch vehicle failure because new
launch vehicles have a high failure rate, the potential
frequency of loss is significant.'' Are you--what are--exactly
are you saying?
Mr. Duffy. Sure. Thank you. We are talking from the
concepts that I understand so far, we are talking about a
relatively smaller launch vehicle than we would with, you know,
the Delta IIs or Delta IVs or any of the Atlases.
Mr. Bell. Okay.
Mr. Duffy. So severity is the amount of damage that the
vehicle would do in the event of a loss, number one. And number
two, and that is an important point, and I am glad you brought
it up. Historically, all of the launch vehicles that we have,
we use in the United States today for commercial space flight,
have been subsidized by the U.S. Government military in order
to get to where they are today. So all of that R&D cost, we
have gone through it all. They have worked out all of the bugs.
And before there is anything that goes up for a commercial
launch, it has been true--tried and tested. In this
environment, there isn't the money there coming from the
Federal Government, so these guys are going to be trying things
without that testing. So the likelihood--in my opinion, the
likelihood of a loss is greater because of that. There is no
R&D going on. The people themselves are going to be
experiencing this, these barnstormers. So the likelihood of
frequency is greater because of that.
Mr. Bell. And Mr. Chairman, I know my time is--if I could
ask one other--but you are not attempting to downplay what the
impact would be in case of some type of fatal accident
associated with commercial space flight, are you? Don't you
think that could have a rather devastating impact on the
overall space program and people's view of space even though
they have assumed the risk?
Mr. Duffy. Absolutely, in fact, that is a comment I make in
my statement that--but yes. I mean, initially, if--and that is
why I feel that it is so important for some government
involvement in the regulations so it is safe that if there is a
high frequency of failure with the initial stages of human
space flight that that could very seriously damage the public's
outlook on it and the future of it in general.
Mr. Bell. Thank you, Mr. Chairman.
Chairman Rohrabacher. Thank you.
We have an active Member of this subcommittee, Mr. Wu of
Oregon. And you may proceed.
Determining a Balance of Regulation
Mr. Wu. Thank you, Mr. Chairman.
And I just want to make a couple of general comments and
then toss something out for our panel's consideration and
response. I think that under the Chairman's questioning and Mr.
Gordon's questioning, this legislation, which I am a supporter
of, and this industry, potential industry, which I am a
supporter of, I would like to see both succeed, but there are
clearly some significant issues of indemnification, liability,
regulation that we need to work out over time. And I intend to
do more homework on my own to work on some of those things and
hopefully get some good counsel and advice from you all, too.
It troubles me a little bit this image of putting up customers/
passengers as potential test pilots. I mean, when you take
someone to Disneyland, you know, you kind of think that they
have run the Matterhorn a few times before they put the paying
customer on the Matterhorn. And we know from Disneyland that
even Disneyland isn't perfect, but you know, it has been run a
few times.
So what we have here is kind of a spectrum where at one end
is what the Chairman has described as the barnstorming scenario
of wide open, unregulated--well, and who knows what the
liability and indemnification scenarios would be. That is one
end. And the other end is highly regulated, carefully worked
out indemnification and so on and so forth. And you have a full
spectrum here. And the challenge is we have got to work it out
and get it right, because if we don't work it out and get it
right, the industry won't take off. And if we get it wrong, you
know, there is more risk and so on. I just want to point out
that, you know, I used to be a tech lawyer and did a bunch of
copyright and patent work. And I believe that for the first
while, folks could get their music in the jukeboxes and not pay
royalty on it, and that was to get the jukebox industry going.
So there was this period from 1903 to 1926 when there was
virtually no regulation of aviation. I just want to point out
that we put folks into space, as I recall, around 1960, '61, or
'62. So it has been 40 years, and the question is whether, you
know, after four decades, maybe the physics makes this a
different process but whether it is appropriate to proceed
somewhere between the barnstorming scenario and the highly-
regulated, carefully worked out liability scenario. And I just
want to toss that out for the panel to discuss where on that
continuum do you think we ought to be at this point in time and
that is doable for the industry and is good public policy for
the long term, because I do believe that there is an
inspirational factor in letting people get into space. As the
Chairman said about his father, and as--since one astronaut
told me, we wouldn't let folks, civilians, get into our stuff,
but you know, the Russians were a little bit more strapped so
they cut a deal, and I think that was inspirational to a whole
lot of folks. And there is that important function.
I want to toss that out to you all to discuss about where
we should be on this continuum at this point in time.
Ms. Meredith. Okay.
Mr. Wu. We have the two ends of the continuum right here.
Ms. Meredith. I guess we have two different sides of the
continuum here. Okay, Gary?
Mr. Hudson. I yield.
Ms. Meredith. I think you are making an excellent point,
and your point is we need a balance, because we need a
sustainable regime here. We don't need something that will work
for a year and then we have a fatal accident and then we have
to rethink it all. I think we need a balance in our safety
regulation. Again, we can't just look to people outside the
vehicle. We have to have some safety scrutiny of the person,
the passenger that is riding on the vehicle. That is the one
thing. And in the liability side, there has to be a sharing of
liability. Everything can not be on the passenger, because I
don't think you have a sustainable regime that way. Maybe some
indemnification by the Government, some indemnification of the
passenger by the launch company that limited liability, and
perhaps some by the passenger. The passenger is paying the
price of the ride. But there has to be a balance, and I think
that is the key, finding that right balance that creates a
sustainable regime.
Mr. Wu. We could make it more interesting and jump to the
other end and then come back across the room. Please, Mr.
Hudson?
Mr. Hudson. Thank you.
No one is suggesting at this table, I am certain, or in the
industry, that we start flying passengers as test pilots. There
is no suggestion of that whatsoever. All the responsible
operators, and that includes everyone that is in the business
at the moment, because you don't go into the business without
spending millions of dollars, you are not irresponsible if you
do that, there is too much visibility in your--on your actions,
all responsible operators have test programs. Some have
suggested as many as 1,000 flights, test flights, prior to
actually carrying a paying passenger. In testimony before
this--before the Joint Committee hearing last summer. Others
have programs of 20, 30, 40 flights with fully qualified test
pilots. Those flights are ongoing today. At least one company
has flown four or five times already. So the space flight
participant in the barnstorming era, which may be an
unfortunate characterization of----
Mr. Wu. Okay. But that one is going to stick. It is too
colorful not to.
Mr. Hudson. Indeed, and--but I don't think it is a
pejorative term or a negative term, frankly. I think it is
representative of where we have to be for these near-term
flights where you may be flying 50 people a year or 20 people a
year or 100 people a year. As we learn, those people, to a
degree, are part of the experiment. They are part of the grand
experiment of opening the space frontier to all of humanity for
the rest of time. And if we impose upon them a regulatory
structure that is as burdensome as we currently put on, say,
commercial passenger aviation, that future will be closed off,
at least in this country.
Experimental Certification
I would finally state that the recommendation that I make
with regard to experimental type certification is precisely the
environment that you have to operate in. During the
experimental type certification, every aircraft gets this. If
Boeing goes out and builds a new triple seven, the very first
one that they develop, they fill out one sheet of paper. It
takes 42 minutes. And they have one FAA-designated
airworthiness representative come out, look at it, stamp the
piece of paper, and they fly. And they will fly 1,000 flights
before they carry a revenue passenger and get full type
certification.
We can do exactly the same thing with sub-orbital and
orbital rockets. And as we move through that type certification
process, ultimately, at some point, you reach the same level of
maturity as the commercial airline industry. We will not reach
it, we can not mandate it, we can not pull it out of a hat in a
time scale, in my view, of less than, probably, two decades.
Perhaps one decade, but that is being optimistic. It is more
likely two, maybe even three. So we have to create an
environment to allow people to take those risks in the near-
term to make sure that Aunt Minnie can fly into orbit in 2050
to visit her grandchildren.
Mr. Wu. With the indulgence of the Chairman, would any of
the other panelists, Mr. Kelly, Mr. Duffy, Dr. Hertzfeld, would
you like to comment or are we----
RLV vs. EELV
Mr. Kelly. Just a couple of quick comments. First, I want
to differentiate between the reusable launch vehicle, which I
think is an unfortunate term. I have tried to get it banned
without success, but--and the space launch industry, as we know
it, with expendable launch vehicles. Reusable launch vehicles
are just that. As Gary said, they may fly up to 1,000 times
before carrying the first revenue passenger. An expendable
launch vehicle only flies once, and there is no such thing as
an existing expendable launch vehicle despite the fact that
satellite customers often say, ``Well, I want to fly on an
existing launch vehicle.'' There is only a design, and the
vehicle itself only exists once.
That is the difference between the safety record that an
RLV can achieve and what an ELV can achieve, according to Mr.
Duffy. You may have failures early in flight, but if the
vehicle is not destroyed, then that same vehicle will fly many,
many, many times, and that vehicle will be the one that has the
flight safety record. By the time you go to fly passengers, you
know everything about that vehicle, at--what it does, what it
is going to do, and therefore, you can make a very sound
judgment as to what the risks are. And this is part of the
reason that they included a flight safety record in H.R. 3245.
I believe that that provision alone, along with the FAA/AST
licensing requirements, are sufficient to guarantee the safety
of passengers.
I do not think that you need to go beyond that, because to
do so would be to place a more onerous burden, certainly a huge
financial burden on the developers that would prevent them from
ever getting to the point where they could carry paying
passengers.
Risk
There is a final comment, and that is I have always been
puzzled at the supposition that one fatal accident in the
commercial reusable launch vehicle industry, fatal passenger
accident, would be the end of the industry. That would separate
that industry from every other activity undertaken by human
beings. If there were a case--I can't think of a case where an
entire activity of human beings has been shut down by one fatal
accident, but that seems to be the perception. If that were the
case, there would be no automobile travel, there would be no
aircraft travel, there wouldn't be--you wouldn't be able to get
out of bed in the morning, because everything involves risk.
And to say that this industry of all activities would be shut
down as the result of a single fatal accident is just, to me,
not credible.
Mr. Duffy. I will just make a couple comments quickly from
the insurance perspective.
There is a required insurance that is under the CSLA for
commercial launch vehicles. Underwriters understand that. And
you have to remember that in the world, there are a very
limited number of underwriters who participate in this kind of
a risk. And to be honest, only a couple of those underwriters
who participate in it really truly understand it. It is--absurd
as that may seem. There are, maybe, two or three in London,
maybe one or two in the States, and that is it. And all of the
other underwriters are followers. And they trust the lead
underwriters on what their judgment is. So it is key that you
understand that there is a very tiny number of people who
really have any true understanding of how this all works.
If there was a regime in place similar to what we have for
the CSLA where the launch company, the subcontractors, the
Government, and the customer or passenger, whatever, were
included in that program, and then the license would require
that the--this program was purchased up to the maximum probable
loss, that is it is under the CSLA, as determined by the
Government, they figure out what is the worst probable loss for
this location. What is the worst thing that can happen here?
And that is the amount of insurance they have, and everybody is
protected in that. Underwriters will buy that.
They won't buy it cheaply. It is--I spoke to two
underwriters last week. One is the largest domestic
underwriter, and the other one is--got bought by a British
company, but they used to be as big as the other one. And one
said, ``Well, yeah, I think we could do something, but, you
know, it will be expensive.'' And the other one say, ``No way
would I touch that,'' in the beginning. So really what we are
doing is we are going over to London now and we are going to
get participants over there and get those guys involved,
because they are more likely to participate in something like
this, especially in the initial stages. So it is not something
that you can buy off of the shelf. It is something you are
going to have to put together.
And secondly, the success of the industry is so critical to
the availability of insurance. If you take the worldwide
premium, that is the number of dollars that companies pay to
the underwriters for launch liability, that is the Boeings,
that is the Lockheeds, that is the orbitals here in the States,
because those are the only three companies that launch. That is
it. And then you have got the Russians. You have got the
Chinese. You have got the Japanese and a little bit with the
Australians. All of those countries, by the way, have regimes
that are similar to what we have here. That total premium is
less than $20 million. And they are providing limits in the
area of 500. So what I mentioned in my remarks earlier is that
if a loss occurs, it is going to have to come from the other
sectors. It is going to come from airlines and general aviation
or products liability and everywhere else. That is the only way
they are going to pay it. And then what is going to happen is
the results are going to be so skewed because they really don't
expect a loss in this area. That is why they are charging so
little premium, and the availability is--will be in question
down the road.
So again, I go back to the safety issues. It is very
critical that the safety issues are observed and critiqued and
dealt with critically, because that, in itself, could blow the
whole thing out of the water. And I am very cautious of the
expense factor that these guys are up against. I mean, this is
a tough road to hoe. They don't have any federal R&D money, and
that is the killer. And you know, Mr. Kelly could tell you more
companies than I could that have failed already in the last
four or five years because they didn't have the money. They
were trying to do it themselves. It is so difficult, especially
in this environment--economy, not environment. I am sorry.
Economy.
Thank you.
Mr. Wu. Dr. Hertzfeld.
Dr. Hertzfeld. I think we have to start with the premise
that space is risky business. It is complicated. The failure
rate of launch vehicles doesn't--is relatively high. It doesn't
approach the safety record of commercial aviation. It doesn't
even come close to it. And the barnstorming type of image is
wonderful, and it is out there, and it does stimulate people,
and it is certainly something good to have in our minds. Yet I
agree with the balanced approach, because society itself in the
United States is not in a barnstorming era. We are not in the
1910's or '20's or even '30's. We have developed a very
sophisticated set of regulations to protect people, to protect
life in all sorts of industries, not just space and aviation.
So that--there is going to have to be a compromise met between
people fully--people and companies just out there doing
whatever they want to do and at the same time abiding by a lot
of regulations, not just aviation and space ones. Environmental
ones are big, for example, also.
One significant failure that costs human lives in human
lives in commercial space flight could be catastrophic to the
industry. And I think, as an example, when the Concord accident
occurred a couple of years ago, they didn't fly the Concord for
one full year. What company, particularly a small company, can
survive without any revenues from their flight operations for a
full year? And if we are talking small companies, in
particular, in the sub-orbital human environment, it could very
well be the end of them. After the Challenger incident, there
were a number of small entrepreneurs involved in commercial
experiments on the Shuttle. Many of them had to shut down
because the Shuttle was not flying for a year or more.
So the risk is out there. They may be normal business
risks, but space is riskier than other--many other endeavors,
and we have to--we can't forget that. And the testing involved
is expensive and costly. It is not launching--it is not taking
off from an airport the way we can test a commercial aircraft.
So that--as I said, I believe there is a balance that has to be
met, but I don't think we can go back to an era of the 1920's
at this point.
Thank you.
Mr. Wu. I thank the Chairman for his indulgence, and I
thank the panel for all of your thoughtful commentary. Thank
you, Mr. Chairman.
Chairman Rohrabacher. All right. And so just a couple of
things. First of all, I would like to--one other anecdote. When
I was a kid, I used to go out to the desert and rent
motorcycles and I would ride all over. You know. It would be a
great thing. It would be fun. You know. A group of friends of
mine would be out there riding motorcycles. And you know, hey,
it was dangerous, but we signed off. We were over 18, so we
signed off and said, ``If something happens to us, no problem.
You rented to us. We can't sue you.'' So we had the opportunity
to actually have a pretty good life. I mean, it was really
something I will never forget, and it was fun, and not to
mention the drinking we did at night, but that is another whole
other issue, which no one would sign off on, I guess. And by
the way, when we were 18, we were permitted to drink in
California in those days. So--well, we shouldn't get into that
stuff.
But anyway, the point I want to make is when I go back now
to the desert and the kids who are--you know, want to go out
and experience what I did, they can't do it. They can't do it.
So you have a generation now of young people who do not have
the opportunity to rent a motorcycle and go out in the desert
and do what I did. I think that is tragic. And the reason they
can't is because they can no longer sign away this right to
sue. You know. And I think, if anything, we have got--at least
in this industry, at least when somebody is going up on top of
a rocket and into space, they should be able to sign away their
right to sue knowing that that is part of what you have to--in
order to have the experience, that is what you have got to do.
So I would hope that at least that is some kind of a consensus.
Is that a consensus that people should have that right to sign
away their right to sue? Does anyone disagree with that? If you
are going to be a passenger, you should have that right. Okay.
Now something--and by the way, I would hope that whatever
we do and whatever we come up with, whatever--and the bill has
been--actually, we just put this bill through the process to
get the discussion going. And obviously, this thing is going to
be hotly debated and worked on by everybody in the Committee,
and there will be lots of changes. And people are looking right
now to try to make sure we do what is right. But I would hope
that whatever comes out in this process, when you have got a
fellow like Dick Rutan, who is an historic figure in the
aviation business, he is out there, and he wants to put
something into space not with any government subsidies, doing
it with his own money, I would hope that there is something--
that what we do in Washington, DC isn't something that prevents
entrepreneurs like that and frontiersmen like that from doing
it, from getting the job done. And if it is, if something we
are doing here is going to keep his efforts grounded and
prevent him from his accomplishments, there is something wrong.
Mr. Wu. Mr. Chairman, may----
Chairman Rohrabacher. Sure.
Mr. Wu. Will the gentleman yield for a moment?
Chairman Rohrabacher. Absolutely, Mr. Wu.
Mr. Wu. I think the Chairman and I, at least for a period
of time, grew up in roughly the same geographic area. And I
remember those motorcycles in the desert, although I think I
might have followed the Chairman by just enough time that the
commercial operations were gone and--but private people were
loaning motorcycles to each other going through the desert. But
I want to bring that back home to something that the panelists
said, which is I think back also to--I think they were called
minibikes. Do you remember those?
Chairman Rohrabacher. Right.
Mr. Wu. They were kind of like a motorcycle--no, I am
sorry, a lawnmower engine, a little tiny tire, and you get on
those and they would go, I don't know, 20, 25, 30 miles an
hour. And there are these large housing tracks in southern
California near where the Chairman currently lives. And we
would zip through those neighborhoods at what, at my age, now
seem like hair-raising speeds, but we never thought about some
of the risks. And I don't recall ever putting on a helmet. And
the point is, you know, my wife won't let the kids get on the
bikes, on pedal bikes, without a helmet. And some things evolve
over time, Mr. Chairman, and----
Chairman Rohrabacher. Well, there is a----
Mr. Wu [continuing]. We just need to find the right
balance.
Chairman Rohrabacher. But there is a halfway point between
not being able to sign away your liability and requiring you to
wear a helmet to make sure it is relatively safe. And I think
that is what your whole presentation is about is where do you
draw that line, which, of course, is what we are trying to do.
Indemnification for Vehicle Operators
So now a couple final questions for the panel. First of
all, should--let us just--with a show a hands, should the
Government indemnify the vehicle operators for these new manned
space private operations? Should the--there be a government
indemnification for the people who are operating this vehicle?
And if you could--so if we could just go down yes or no.
Mr. Hudson. No.
Mr. Kelly. Yes.
Chairman Rohrabacher. Mr. Kelly?
Mr. Duffy?
Mr. Duffy. No.
Dr. Hertzfeld. No.
Chairman Rohrabacher. No.
Ms. Meredith. Yes.
Chairman Rohrabacher. Okay. How about should there be an
indemnification of the passengers or a crewmember?
Mr. Hudson. No.
Mr. Kelly. I would have to--I can't give a yes or no to
that, because the panel is--the point that I haven't had time
to assimilate, but----
Chairman Rohrabacher. Okay. That is fair.
Mr. Duffy?
Mr. Duffy. Private only, not government.
Chairman Rohrabacher. Okay. So if Mr. Tito goes up, he is
indemnified? Nobody can----
Mr. Duffy. If he buys insurance.
Chairman Rohrabacher. Nobody can--right. Nobody can sue Mr.
Tito, but----
Mr. Duffy. Any--you can sue anybody. It doesn't----
Chairman Rohrabacher. Well, yeah. Okay.
Ms. Meredith. Yes, I think they should have
indemnification. I don't see why they should be in any other
different position than a satellite owner customer.
Chairman Rohrabacher. Okay. That was a very important point
in your testimony, as I have mentioned.
And finally, is indemnification necessary for a prosperous
industry? Or will this industry thrive without indemnification?
Mr. Hudson. Yes.
Indemnification and Industry Survival
Chairman Rohrabacher. So you think it needs
indemnification?
Mr. Hudson. No, I would say I believe the industry will
thrive without.
Chairman Rohrabacher. It will thrive, because I was going
to say, it sounded contradictory----
Mr. Hudson. Right.
Chairman Rohrabacher [continuing]. With what you said
earlier.
Mr. Kelly.
Mr. Kelly. I think the industry can thrive without
indemnification. I think it is a question of fairness to
provide indemnification if you are going to give permission to
fly.
Mr. Duffy. I don't believe it is necessary.
Dr. Hertzfeld. The industry could survive.
Ms. Meredith. I think the industry is greatly helped by
indemnification, because all of the foreign competitors have
it.
Chairman Rohrabacher. Okay.
Mr. Duffy. There aren't any foreign competitors who are
launching people in space, though. That is----
Manned vs. Unmanned Regulation
Chairman Rohrabacher. Okay. Well, this is--and now I do
have one other thing here. Now in terms of the FAA and it seems
to me--do we need more than a--okay, the point that you made,
should we have--should there be more regulation required of a
manned space flight than of a space flight that is not manned?
In other words, could--should we require two approvals be
necessary to launch a vehicle with manned space flight perhaps,
a two-tiered approach, or can--should we just require the same
type of safety that we require from someone launching an
unmanned vehicle?
Mr. Hudson. I certainly don't believe there should be two
tiers of regulation. I think----
Chairman Rohrabacher. The same? It should be about the
same?
Mr. Hudson. Whatever we adopt ultimately should apply to
both piloted and--or human space flight and non-human space
flight.
Chairman Rohrabacher. Okay.
Mr. Kelly?
Mr. Kelly. I don't believe that we should adopt anything
more than is required for normal RLV licensing, which already
covers eventualities, such as passengers somehow being in a
safety-critical position that would affect the flight and cause
third-party damage. There isn't anything more that is needed.
Chairman Rohrabacher. Okay.
Mr. Duffy?
Mr. Duffy. Well, I believe that the--that regulations would
be needed in order to make it the equivalent of the aviation
industry and generally the airline industry, perhaps not to
that degree, but certainly to make it safe. It is paramount----
Chairman Rohrabacher. Yes. Are airplanes--the question is
do--when you have a cargo airplane, if you have just a line
that carries only cargo, do they have to have the same
regulations as those carrying passengers or is it further--is
it more restrictive of airplanes--are the regulations more
restrictive of airplanes that carry passengers as compared to
cargo?
Mr. Hudson. They are essentially comparable, but there is--
there are slight differences. There can be slight differences.
Chairman Rohrabacher. Slight differences. Okay.
Mr. Hertzfeld?
Dr. Hertzfeld. I don't think a two-tiered system is good,
but there may be some modifications to accommodate humans on
what exists now, if you need it.
Ms. Meredith. I think some minimum regulation of the safety
of the passenger is in order.
Chairman Rohrabacher. Okay. Well, I want to thank all of
you for helping us today. And you have certainly stimulated a
lot of thought, and we are taking this very seriously, because
we don't want to see Dick Rutan or any of these other
entrepreneurs or wildcat-ers or barnstormers, whatever you want
to call them, grounded because of something we are doing or not
doing here in Washington. We want to make sure we are doing the
right thing, and if there is an impediment, it is because it is
the right thing to do and not because we have just been
frivolous with our regulations. So we are taking this issue
very seriously, and you have helped us today immensely.
So please be advised that the Subcommittee Members may
request additional information for the record, and I would ask
other Members who are going to submit written questions do so
within one week of this hearing.
And now is there something else I need to say officially to
end the hearing? Okay. So again, thank you very much, and this
concludes the hearing. And we are now adjourned.
[Whereupon, at 12:21 p.m., the Subcommittee was adjourned.]
Appendix 1:
----------
Answers to Post-Hearing Questions
Responses by Gary C. Hudson, Chief Executive Officer, HMX, Inc.
Questions submitted by Chairman Dana Rohrabacher
Q1. H.R. 3245 directs the Secretary of Transportation to arrange for
the National Academy of Public Administration (NAPA) to conduct a study
on the existing liability-risk sharing regime for commercial space
transportation.
Q1a. Given that the Federal Aviation Administration issued a study
regarding the liability risk-sharing regime for U.S. commercial space
transportation in April 2002, is another study necessary? If so, what
new or additional information is needed?
A1a. I believe that a new study of the liability risk-sharing regime
for U.S. commercial space transportation is unnecessary.
Q1b. Should any new study be limited to the liability-risk sharing
regime for commercial human space transportation (as opposed to the
entire commercial space transportation industry)?
A1b. Not applicable in view of (1a) response above.
Q2. Since its enactment, the commercial space launch indemnification
regime has been subject to an expiration date. H.R. 3245 extends
indemnification by three years through December 31, 2007. What
effect(s) would a phase-out or elimination of the indemnification
regime have on the U.S. commercial space transportation industry
generally and the emerging commercial human space flight industry in
specific?
A2. The history of third party liability claims related to U.S.
commercial space launch accidents is almost non-existent. Given this, I
do not believe that elimination of the indemnification regime would in
fact cause any significant harm to the existing space launch industry.
From a practical point of view, I also do not believe that there would
be significant harm to the emerging industry, but it is always possible
that there might be limited perceptual harm. (By this I mean some
investors or customers might fear that they would be impleaded in any
suit that alleges damage from launch or re-entry accidents, and this
might cause them to withdraw support or business form a smaller launch
provider who would not otherwise have the resources to prevail in a
major legal action. This concern would be frankly overblown, but
nonetheless might exist for unsophisticated backers and customers.)
Q3. Your testimony argues that the aviation experimental certification
model should be used to regulate commercial human space flight.
Presumably, however, the vehicles used for commercial human space
flight will differ considerably from experimental aircraft in terms of
design and purpose. Given this assumption, how might the experimental
aircraft regulatory model be adapted for commercial human space flight?
A3. The differences between ``conventional'' experimental aircraft and
commercial human space flight vehicles are ones of perception rather
than actual third party risk. First, there is really no such thing as a
conventional experimental aircraft. Such machines range the gamut from
lightweight amateur home-built aircraft to rocket powered vehicles (EZ-
rocket) and supersonic aircraft (including SpaceshipOne's recent flight
under experimental rules). They also include 777 class aircraft prior
to FAA issuance of standard type certification permitting revenue
service and converted and modified military jets. Second, the real
question is how much damage to third parties can such vehicles produce?
I have heard no evidence from FAA/AST or any other presumed
knowledgeable party that suggests that a vehicle of the class of
SpaceShipOne (to offer a specific example) can in fact produce any more
damage than a light business jet or a heavy turbine aircraft, both of
which may be flown in the experimental category. In fact, the worst-
case accident that could be cased by SpaceShipOne would be a nose over
flight into the ground under rocket thrust immediately after release
from its carrier aircraft. Ironically, this accident could occur right
now, as SpaceShipOne flies under an experimental certificate. In fact,
as it flies higher and faster, it offers less risk to third parties
since the aircraft is more likely to break up in the air from
aerodynamic loads, producing a larger debris field but smaller mass of
individual debris elements each with a reduced potential for harm.
Therefore to answer the question, I believe that there are no human
space flight vehicles being considered for which the risk is greater to
third parties than for aircraft which currently operate under AVR
experimental type certificates, nor are there likely to be any built in
the foreseeable future.
Q4. Your testimony advocates the elimination of ``launch licenses'' in
favor of reapplication of FAR 101 to conduct unmanned rocket launches.
Please describe how this approach would work in practice. What are the
benefits of this approach?
A4. It is important to distinguish between unmanned rockets (sub-
orbital or orbital) and piloted human space flight vehicles. I propose
extension of experimental certificates to the latter class of vehicles.
I also proposed in my testimony to dis-establish the FAA/AST office. If
this were done, some mechanism must be in place to allow a minimalist
regulatory regime that permits launch of unmanned rockets. I proposed
that the old FAR 101 be once again employed. The first large launch
vehicle built in this country was approved for flight (not licensed)
under FAR 101. The procedure at that time (1981) was to file a request
for flight approval with a regional FAA office following the procedures
outlined in the FAR. Once done, approval was almost always granted on a
time scale measured in a few days. My total cost for the application
was $2,000, all for legal fees. We chose to use an attorney for our
first application in order to be assured of meeting all the
requirements, but subsequent applications could have been done
administratively, and would have cost virtually nothing. One can
compare this form of approval with current launch licensing which can
cost a million dollars per flight in time and effort, including five
hundred or (more likely) thousands of hours of applicant's time just to
prepare the application, plus taking two or more years to issue,
according to AST's own briefings. If there was evidence that AST's
procedures had enhanced the public safety, an argument might be made
for their continued existence, but there is no evidence of any public
safety benefit. There is only the cost to taxpayers measured at $100
million over the past twenty years and that much again for the next
decade, plus the inhibitory effect of their policies as are now being
seen on the only flying human space flight vehicle project in this
country.
Questions submitted by Representative Bart Gordon
Q1. Section 4 of H.R. 3245 includes a provision that says:
``The Secretary of Transportation shall. . .focus the
Department's regulation of commercial human space flight
activities on protecting the safety of the general public,
while allowing space flight participants who have been trained
and meet license-specific standards to assume an informed level
of risk.''
Q1a. That language would appear to preclude DOT from regulating
passenger safety on commercial passenger-carrying spacecraft. Do you
consider that to be an appropriate public policy? Why or why not?
A1a. In the near-term, commercial human space flight vehicles will
carry only space flight participants who have decided to travel in such
vehicle for sport or entertainment purposes. The vehicles will not be
used for the common carrier purpose of point-to-point transportation of
people or cargo. In light of this fact, I believe that it is
appropriate public policy to regulate such vehicles only for the
purpose of protecting the interest of third parties, and not the space
flight participants. For example, we do not regulate the sport of
mountain climbing, because all the participants take part of their own
free will. Likewise, we do not regulate auto racing, even though we do
regulate travel by automobile.
Q1b. If you think that DOT should not regulate passenger safety at the
present time, is there any point in the future when the government
should become involved in such regulation?
A1b. DOT should regulate commercial passengers on space flight vehicles
when the vehicles are used for point-to-point flight for the purpose of
transportation and not sport. That time lies fairly far into the future
at the current pace of progress.
Q2. What information do you believe a commercial human space flight
company would have to provide to allow a potential passenger to give
his or her ``informed consent''? For example, what constitutes
sufficient information on a vehicle's safety record, if the vehicle has
only flown a statistically insignificant number of times?
A2. I believe that a commercial space flight company offering sport
rides to a paying or nonpaying customer should be obliged to inform the
participant of the experimental nature of the vehicle, and to state
clearly that it has not be subjected to FAA or government
certification. (This is done for experimental aircraft today.) I also
believe that the records and flight history of the particular vehicle
type and tail number should be available for inspection by the
participant or their agent.
Q3. H.R. 3245 says that a license holder may launch a paying passenger
into space only if ``the space flight participant has received training
and met medical or other standards specified in the license.''
Q3a. Do you agree with the provision?
A3a. I strongly believe that government has no public policy interest
in requiring any space flight participant to have met any medical
standards. We do not require such training or medical certification for
other extreme sports.
Q3b. Who should set the standards and determine the appropriate level
of training?
Q3c. Who would certify that the training had been done?
Q3d. Should the specified standards be uniform across the industry? If
not, how would you make it work in practice?
A3b,c,d. In view of this response, questions (b) through (d) are not
applicable. I would like to also point out that medical standards and
training requirements may well be imposed upon potential space flight
participants by the operators of some human space flight vehicles, but
they will be doing so for insurance purposes.
Answers to Post-Hearing Questions
Responses by Michael S. Kelly, Technical Manager, Northrop-Grumman/Xon
Tech
Questions submitted by Chairman Dana Rohrabacher
Q1. H.R. 3245 directs the Secretary of Transportation to arrange for
the National Academy of Public Administration (NAPA) to conduct a study
on the existing liability-risk sharing regime for commercial space
transportation.
Q1a. Given that the Federal Aviation Administration issued a study
regarding the liability risk-sharing regime for U.S. commercial space
transportation in April 2002, is another study necessary? If so, what
new or additional information is needed?
A1a. The study performed by the Federal Aviation Administration
regarding liability risk-sharing for U.S. commercial space
transportation in April 2002 is a thorough, extremely competent work.
There is more basic information and detailed, thoughtful analysis in
the 289 pages of the published report than anyone, me included, has had
time to fully absorb and process. I do not believe that it is in the
taxpayers' interest to endlessly repeat work already done, particularly
in a case, such as this, when the original work was done so well.
There are certainly new questions regarding human space
transportation that have arisen since the FAA study was published. Ms.
Meredith's point regarding third party suits against wealthy
passengers, raised in the 5 November 2003 hearing, is a case in point.
I do not believe, however, that such questions yet merit a formal
government study. They are things best debated, for the time being,
within the industry itself.
Q1b. Should any new study be limited to the liability-risk sharing
regime for commercial human space transportation (as opposed to the
entire commercial space transportation industry)?
A1b. The question correctly notes that the scope of the FAA study was
very broad, and suggests that a more sharply focused study pertaining
to human space flight may be needed. Once again, I do not believe that
there are questions pertaining to human space flight that have as yet
achieved either the level of definition or the urgency to merit a
federal study.
Questions submitted by Representative Bart Gordon
Q1. Section 4 of H.R. 3245 includes a provision that says:
``The Secretary of Transportation shall. . .focus the
Department's regulation of commercial human space flight
activities on protecting the safety of the general public,
while allowing space flight participants who have been trained
and meet license-specific standards to assume an informed level
of risk.''
Q1a. That language would appear to preclude DOT from regulating
passenger safety on commercial passenger-carrying spacecraft. Do you
consider that to be an appropriate public policy? Why or why not?
A1a. I disagree to some extent that DOT is precluded from regulating
passenger safety on commercial passenger-carrying spacecraft. The
language ``allows'' people who have been trained ``and meet license-
specific standards [emphasis added]'' to assume an informed level of
risk. This inherently builds the potential for a regulatory mechanism
into passenger safety on commercial passenger-carrying spacecraft, in
that it allows the possibility of a license not to the liking of FAA to
be denied.
The current licensing rule, as well as the Commercial Space Act of
2003, do no give FAA the authority to deny licenses on the grounds of
passenger safety, but the potential is there should future legislation
and subsequent rule-making put it in place.
However, the basic assumption of the question, that DOT is
precluded by H.R. 3245 from regulating passenger safety, is correct. I
do consider that appropriate public policy. Nowhere in the Constitution
is the United States government given the authority or power to protect
people from the consequences of their own choices and actions. That
Congress occasionally does pass legislation attempting enforce such
``protection'' is not proof that such legislation is legitimate. All it
means is that Congress has acted outside of its authority.\1\
---------------------------------------------------------------------------
\1\ The government does not, for example, regulate hang-gliding,
mountain-climbing, roller-coasters and other thrill rides, etc. Nor
should it.
---------------------------------------------------------------------------
It is not the business of the government to ``allow'' people to do
things they want to do. On the contrary, it is the people who allow the
government to do what it does (through the Constitution and its
processes), and to stop it when it exceeds its authority. Any
regulation of voluntary activity for the purpose of protecting people
from the consequences of their own actions exceeds the authority of the
government, and is a threat to basic human freedom.
Q1b. If you think that DOT should not regulate passenger safety at the
present time, is there any point in the future when the government
should become involved in such regulation?
A1b. I do not believe there is ever a need for such regulation.
Q2. What information do you believe a commercial human space flight
company would have to provide to allow a potential passenger to give
his or her ``informed consent''? For example, what constitutes
sufficient information on a vehicle's safety record, if the vehicle has
only flown a statistically insignificant number of times?
A2. This is good question, because the answer provides the foundation
for the responses to questions 1a and 1b.
In any sales/purchase transaction between two private parties, it
is the moral obligation of the seller to disclose pertinent information
and of the buyer to ask enough questions to make an informed purchase
agreement. When it comes a transaction involving significant risk to
life and limb, such as purchase of a ride in a space plane, the moral
obligations on the parts of each party are elevated significantly. A
seller who hides a poor safety record, or portrays the level of risk as
anything other than what it is, is a villain. A buyer who doesn't ask
if what he is doing is risky is a fool.
A seller of rides in space, mountain-climbing expeditions, scuba-
diving trips, etc., who fails to disclose known risks or, worse, known
problems, is open to legal action should an accident ever occur. Such a
person is a fraud, who can and should be taken to task.
Anyone who buys such an experience without asking what the risks
are is either foolish, or considers the burden of thinking about asking
questions to be greater than suffering the loss of his or her own life.
There is no way to protect such people, other than to deprive the rest
of the population of its basic human right to travel in space by
forbidding it.
Aside from the inevitable lawsuits that will result when people
start flying as passengers in space (and they are inevitable), the best
protection for both seller and buyer is full disclosure. The question
of what constitutes sufficient information if the vehicle has flown a
statistically insignificant number of times is an excellent one. It
reflects the fact that ``full disclosure'' is not a static term, since
the information possessed even by the seller is limited by his or her
flight experience.
This is important to note, because it is a fact. In other words, as
much as we may wish it were otherwise, as much as we may desire to
provide all the answers, it is a fact of reality (and therefore
unchangeable by legislation) that we will not have all of the answers
in the beginning. More and more flight experience will provide the
sellers with the experience they need to run a safe operation, the
prerequisite to a profitable business.
There is no need for a regulatory requirement on the level of
disclosure, since the market will ultimately control it. Furthermore,
any attempt to impose such a requirement will guarantee one thing:
there will never be a case of passenger injury in space flight, because
there will never be any passenger space flight.
The burden on RLV developers imposed by the relatively simple
launch licensing rule now in effect is almost insurmountable, and
threatens the future of the industry. That is in part due to the fact
that, when we crafted the rule, we did not know how to ask all the
right questions. Mind you, I supported the rule-making process, and
thought--in fact, still think--that we did a very good job. Now that we
have more information, we find that the rule is too vague in some
areas, and too specific in areas where no specificity is physically
possible. All parties are doing what they can to deal with these
problems.
Setting any regulatory requirement on level of disclosure will beg
unanswerable questions. An unanswerable question will, of course, never
be answered, and if passenger space travel must await answers that
never come, it will never happen.
All human activity involves risk. The degree of risk, and how it is
perceived, both change with experience. When people approach anything
they do not understand, they assign it an arbitrarily high,
unquantified level of risk. This is a survival trait of the species
(not unique to ours, I might add). As we gain knowledge of things, we
tend to place their levels of risk in a more realistic hierarchy, and
even quantify those risks where possible. What we consider a risk may
turn out not to be so, while risks we hadn't considered will always
manifest. Furthermore, as we gain experience doing anything, the degree
of risk itself changes. It tends to decline with practice. Technology
improvements, historically, drive risk down. But this entire dance of
activity and risk has one absolute prerequisite: we have to engage in
the activity.
There is no shortcut to this process. We cannot sit around and
think about things forever and expect risk to go down. There is no
substitute, in reality, for the activity itself. There is no regulatory
magic wand that will prevent accidents from happening, apart from
stifling all human activity to the extent that no one ever takes a
risk. That is contrary to human nature, and to American nature in
particular.
In my own dealings with people, I always believe in giving them any
information they want to make a good decision. I don't understand how
anyone can operate on any different set of rules. If I were offering
passenger space flight, I would give passengers as much information as
they could absorb, and, in fact, more that they would probably want or
need. I would do so even if it cost a sale--in fact, I have done so,
even when it cost a sale. It is not in anyone's interest to do
otherwise. But it is even less in peoples' interests to attempt to
regulate such disclosure.
Q3. H.R. 3245 says that a license holder may launch a paying passenger
into space only if ``the space flight participant has received training
and met medical or other standards specified in the license.''
Q3a. Do you agree with the provision?
A3a. From the standpoint of good practice, I don't see how anyone could
disagree with providing training to or requiring necessary medical
standards of a passenger on a commercial space flight. I am uneasy
about placing it into law, simply because it opens a door to the
government taking future regulatory action that it has no
Constitutional authority or moral right to take.
Q3b. Who should set the standards and determine the appropriate level
of training?
A3b. Standards for training in other hazardous activities, such as
scuba diving, parachuting, hang-gliding, etc., are often set by
industry associations. Initially, each flight provider will set his or
her own standards.
In fact, it is part of the natural evolution of business that
individual companies set the standards initially, and the ones who do
the best job of it have their standards adopted by the rest of the
industry.
Q3c. Who would certify that the training had been done?
A3c. Initially, the company itself will certify that the individual is
fully trained. Do not equate this with ``rubber stamping.'' Any
certification that is genuinely required (and no one, at this time,
knows what is, or even if any is) will emerge as the industry evolves,
and those companies that provide it will survive while those that do
not will not.
In all likelihood, one or more industry associations will
ultimately emerge that will set standards for both training and
certification of training, if indeed it is necessary. I must stress,
however, that no one knows or could know at this time if any training
is required, let alone what it would be.
Q3d. Should the specified standards be uniform across the industry? If
not, how would you make it work in practice?
A3d. Once again, it is not a given that any training is required, nor
is it a given that passengers need to meet any medical requirements.\2\
One of the reasons why it is not a given is that there is no single
design solution for a passenger spacecraft.
---------------------------------------------------------------------------
\2\ In fact, I would turn that question around and ask how such
requirements could be imposed in the face of the Americans With
Disabilities Act.
---------------------------------------------------------------------------
It is impossible to predict what technologies will win in the
marketplace. Assuming, however, that at some point a spacecraft design
solution emerges that becomes widely adopted, and requires training of
passengers, there will unquestionably emerge an industry association
that will provide standards.
This is happening with Reusable Launch Vehicles as I write. The
American Institute of Aeronautics and Astronautics has a working group
that is now working to set various standards for RLVs. Though a bit
premature (given that there is nothing to standardize), this sort of
practice is the standard for standards in all industries. I would
expect nothing different in the passenger space flight industry.
Answers to Post-Hearing Questions
Submitted to Raymond F. Duffy, Jr., Senior Vice President, Willis
InSpace Insurance Underwriters
These questions were submitted to the witness, but were not
responded to by the time of publication.
Questions submitted by Chairman Dana Rohrabacher
Q1. H.R. 3245 directs the Secretary of Transportation to arrange for
the National Academy of Public Administration (NAPA) to conduct a study
on the existing liability-risk sharing regime for commercial space
transportation.
Q1a. Given that the Federal Aviation Administration issued a study
regarding the liability risk-sharing regime for U.S. commercial space
transportation in April 2002, is another study necessary? If so, what
new or additional information is needed?
Q1b. Should any new study be limited to the liability-risk sharing
regime for commercial human space transportation (as opposed to the
entire commercial space transportation industry)?
Q2. Since its enactment, the commercial space launch indemnification
regime has been subject to an expiration date. H.R. 3245 extends
indemnification by three years through December 31, 2007. What
effect(s) would a phase-out or elimination of the indemnification
regime have on the U.S. commercial space transportation industry
generally and the emerging commercial human space flight industry in
specific?
Q3. Presumably, the vehicles used for commercial human space flight
will differ considerably from experimental aircraft in terms of design
and purpose. Given this assumption, how might the experimental aircraft
regulatory model be adapted for commercial human space flight?
Q4. H.R. 3245 includes pre-qualification criteria for space flight
participants, but none for crew members.
Q4a. Are the pre-qualification criteria listed for passengers in H.R.
3245 sufficient? Should criteria be added or deleted?
Q4b. Should the bill include pre-qualification criteria for crew
members?
Questions submitted by Representative Bart Gordon
Q1. Section 4 of H.R. 3245 includes a provision that says:
``The Secretary of Transportation shall. . .focus the
Department's regulation of commercial human space flight
activities on protecting the safety of the general public,
while allowing space flight participants who have been trained
and meet license-specific standards to assume an informed level
of risk.''
Q1a. That language would appear to preclude DOT from regulating
passenger safety on commercial passenger-carrying spacecraft. Do you
consider that to be an appropriate public policy? Why or why not?
Q1b. If you think that DOT should not regulate passenger safety at the
present time, is there any point in the future when the government
should become involved in such regulation?
Q2. What information do you believe a commercial human space flight
company would have to provide to allow a potential passenger to give
his or her ``informed consent''? For example, what constitutes
sufficient information on a vehicle's safety record, if the vehicle has
only flown a statistically insignificant number of times?
Q3. H.R. 3245 says that a license holder may launch a paying passenger
into space only if ``the space flight participant has received training
and met medical or other standards specified in the license.''
Q3a. Do you agree with the provision?
Q3b. Who should set the standards and determine the appropriate level
of training?
Q3c. Who would certify that the training had been done?
Q3d. Should the specified standards be uniform across the industry? If
not, how would you make it work in practice?
Q4. Your testimony focuses on a number of insurance issues.
Q4a. What is the current state of the insurance industry that writes
insurance for aviation and space activities?
Q4b. Do you see the outlook for that insurance industry changing--
either for better or for worse--over the next few years? Why?
Q4c. Is insurance for space activities getting more expensive or less
expensive?
Q4d. What do you think the impact of new commercial human space flight
companies seeking insurance will be on the overall situation in the
insurance industry?
Answers to Post-Hearing Questions
Responses by Henry R. Hertzfeld, Senior Research Scientist, Elliot
School of International Affairs, George Washington University
Questions submitted by Chairman Dana Rohrabacher
Q1. H.R. 3245 directs the Secretary of Transportation to arrange for
the National Academy of Public Administration (NAPA) to conduct a study
on the existing liability-risk sharing regime for commercial space
transportation.
Q1a. Given that the Federal Aviation Administration issued a study
regarding the liability risk-sharing regime for U.S. commercial space
transportation in April 2002, is another study necessary? If so, what
new or additional information is needed?
A1a. The FAA study on liability and risk-sharing was well-done and
thoroughly covered the history, legislation, regulations, and issues.
There should be no need for another large comprehensive study of this
topic so soon after that study. However, the FAA is responsible for
promoting the launch vehicle industry and therefore the recommendations
reached in that study regarding the necessity of retaining and
extending the current indemnification scheme were, perhaps, a foregone
conclusion since the launch vehicle industry considers this
indemnification extremely important.
It might be beneficial to commission a study by an objective,
disinterested party on the relative merits of either continuing,
modifying, or eliminating the government indemnification. NAPA might
not be the most objective organization in this regard since it has a
long history of studies of space for NASA and other space-related
agencies. I would suggest an organization within the insurance industry
(possibly one involved in insuring nuclear facilities since there are
direct parallels between the evolution of the PriceAnderson Act and
government space indemnification) or a major university business school
with a strong insurance department.
Q1b. Should any new study be limited to the liability-risk sharing
regime for commercial human space transportation (as opposed to the
entire commercial space transportation industry)?
A1b. The study should approach commercial human space flight as a sub-
issue under the general framework of space indemnification. The package
of regulations on insurance for space activities should be integrated
into a logical unit rather than a series of ad hoc rules.
Q2. Since its enactment, the commercial space launch indemnification
regime has been subject to an expiration date. H.R. 3245 extends
indemnification by three years through December 31, 2007. What
effect(s) would a phase-out or elimination of the indemnification
regime have on the U.S. commercial space transportation industry
generally and the emerging commercial human space flight industry in
specific?
A2. It is hard to determine what the effect would be. Since many
foreign nations which compete with U.S. launch vehicles do indemnify
their launches for third-party liability risks, it is clear that
eliminating that subsidy would make U.S. launches less competitive, at
least in the near-term. However, there are many other factors behind
risk-taking and indemnification in the space industry that may provide
arguments minimizing this anti-competitive effect.
First, third-party liability insurance is not that expensive for
large companies and for proven launch vehicles. Payouts for third-party
damage worldwide have been extremely small over the entire history of
space launches and the probability of significant damage is low.
Second, since the U.S. is the preeminent space faring nation, most
other nations have followed the U.S. example in many areas of space
licensing and regulations. There are, of course, major differences
among nations, but it is quite possible that, over time, if the U.S.
eliminated the indemnification provisions others would follow. However,
all nations, including the U.S., would still be ultimately liable for
this type of damage from a vehicle launched from their nation (or for
which their citizens were significantly involved). That would put the
burden of the regulatory agency within each nation to require financial
responsibility for each launch sufficiently high that the governments
would not have to provide additional funds in the event of a lawsuit.
Governments, however, would still be the insurer of last resort.
Third, currently most U.S. launch vehicles are covered by P.L. 85-
804 (government indemnification for ultra hazardous activities
connected with national security). The details of this are complex, but
without this indemnification it is likely that the EELV and other new
launch vehicles would not have been built. The question is one of dual-
use: if the vehicles covered by this law are used for purely civilian
activities, can P.L. 85-804 be used? It may be possible for vehicles
necessary for defense purposes, but new sub-orbital human-rated
vehicles without military uses would clearly not be covered by P.L. 85-
804. This area needs to be further studied.
Q3. H.R. 3245 includes pre-qualification criteria for space flight
participants, but none for crew members.
Q3a. Are the pre-qualification criteria listed for passengers in H.R.
3245 sufficient? Should criteria be added or deleted?
A3a. I am not an expert in this area.
Q3b. Should the bill include pre-qualification criteria for crew
members?
A3b. It is logical that criteria for crew members should be established
for reasons of the safety of passengers and other crew members. The
question of what criteria are most appropriate might more properly be
addressed by a regulatory body after considerable study and industry
inputs.
Questions submitted by Representative Bart Gordon
Q1. Section 4 of H.R. 3245 includes a provision that says:
``The Secretary of Transportation shall. . .focus the
Department's regulation of commercial human space flight
activities on protecting the safety of the general public,
while allowing space flight participants who have been trained
and meet license-specific standards to assume an informed level
of risk.''
Q1a. That language would appear to preclude DOT from regulating
passenger safety on commercial passenger-carrying spacecraft. Do you
consider that to be an appropriate public policy? Why or why not?
A1a. As I read the language, it may not preclude the regulation of
passengers and passenger safety. It depends on the interpretation of
``space flight participants'' coupled with an interpretation of what
type and extent of ``risk'' is to be considered sufficient to meet a
criteria of ``informed.'' If the definitions are set low (i.e., all
conceivable types of risk are included in the requirement of being
informed; all possible people are included as space flight
participants, etc.), then the license procedure of the DOT may be
comprehensive and include regulations concerning passengers. In effect,
protecting the general public from harm can be viewed from the
perspective that any passenger who many be marginal in any sense
(physical, mental, security, financial, etc.) can be seen as a
potential danger to the safety of the flight and therefore to the
general public.
Given that possibility, given the sensitivity of the U.S.
Government to security issues, and given that any rocket launch can be
seen as a possible national security threat (just as any commercial
airplane flight is now viewed after 9/11), the wording of the language
in the bill should be more precise and should include at least a narrow
opening for the DOT to regulate some aspects of passenger safety on
spacecraft.
I think the intent of the bill is to allow incentives for risk-
takers and entrepreneurs to fly in spacecraft. That could be
accomplished by establishing regulations that only affect the safety of
others, defined as both other passengers, employees of the company
providing the launch and their contractors, and the general public. If
drafted carefully, this could open up risk-taking in several important
areas: financial, and personal. There should (other than requiring
either the person and/or the launch company to have a necessary amount
of third-party liability insurance) be enough flexibility to allow a
person to risk his or her life and money on the flight but not endanger
others.
The use of the term, space flight participant, is interesting and a
good choice of words. In the U.N. Treaty on the Rescue of Astronauts,
there is no definition of an astronaut. However, the language of the
title of the treaty is different from the body of the treaty where the
term ``personnel of a spacecraft'' is used. That enables the Treaty to
cover Astronauts, Cosmonauts, Pilots, Passengers, Mission Specialists,
etc. and makes no distinction between nations, languages, civilians,
government employees, etc. By using the term ``participant'' in H.R.
3245, a similar comprehensive coverage to anyone onboard (and possibly
those on the ground supporting the flight) is included.
In today's environment, it is good public policy to protect safety
while permitting economic and financial risk-taking. By trying to
deregulate (or not regulate) this activity using a model loosely built
on the aviation era of the 1920s--very laissez-faire in all aspects--
the Congress would be out of sync with the basic regulatory and legal
foundation of industry and activity today. Space flight today is not
the same as aviation was in its early days and the free-wheeling model
is not appropriate. Congress should attempt to provide as much
entrepreneurial freedom as possible for space, but not try to recreate
something that can't be recreated.
Q1b. If you think that DOT should not regulate passenger safety at the
present time, is there any point in the future when the government
should become involved in such regulation?
A1b. I have suggested above limited regulation. That could be expanded
later if conditions warranted.
Q2. What information do you believe a commercial human space flight
company would have to provide to allow a potential passenger to give
his or her ``informed consent''? For example, what constitutes
sufficient information on a vehicle's safety record, if the vehicle has
only flown a statistically insignificant number of times?
A2. I have no strong opinion on this. Regulations on what information
should be provided will depend on many factors and this would probably
best be determined through a fact-finding study and a mutually agreed
upon set of standards between the DOT and industry. Clearly, over time,
these factors would change and therefore the law should allow for an
administrative process to determine the standards. For example, a
vehicle's safety record (number of successful launches) is only part of
the picture. What about cabin conditions (air quality, for example),
exposure to radiation (can depend on flight path, latitude, season of
the year, and activity of the sun), financial responsibility of the
company and its subcontractors, etc.?
Q3. H.R. 3245 says that a license holder may launch a paying passenger
into space only if ``the space flight participant has received training
and met medical or other standards specified in the license.''
Q3a. Do you agree with the provision?
A3a. Yes. As in my answer to Question 1, the safety of others may be
involved. A good quick example is the well-known risk factors
associated with radiation. A woman who is pregnant is at much higher
risk and even today would be excluded from flying on the Shuttle or
other space vehicles.
Q3b. Who should set the standards and determine the appropriate level
of training?
A3b. This would have to be the regulating agency such as the DOT. If
standards are set, there can always be put in place a system for a
waiver of the rule in the case where an individual is both willing to
take a risk and that risk would pose no danger to others. (For example,
if a person with a disability that ordinarily would preclude him or her
from the flight could prove on a case-by-case basis that their
disability would not cause harm to others.)
Q3c. Who would certify that the training had been done?
A3c. The regulatory agency could establish a mechanism for doing this--
either through their own procedures or by accepting the certificate of
a qualified private sector person or firm.
Q3d. Should the specified standards be uniform across the industry? If
not, how would you make it work in practice?
A3d. General standards should be established. The system should be
flexible enough to accommodate different types of flights and different
specifics for vehicles and situations.
Q4. In your testimony you state that the cost of insurance ``is only a
small fraction of the total cost of a launch and would be included in
the price of a launch. Those incurring the risk should be willing to
pay for the risk, particularly where there is no direct Government
benefit from the activity.''
Q4a. What do you estimate that fraction would be?
A4a. I was referring to the cost of third party liability insurance as
currently provided for commercial communications satellite launches.
(This is the only large commercial activity in space right now and
therefore is the best example for comparison, even if there are
significant differences between this and human flight). When the cost
of the satellite itself, the launch, and insurance are added together,
they are small in comparison to the total revenues generated over the
long (5- to 15-year) lifetime of the satellite. This is why
communications companies consider space a profitable investment and
make money on the investment even with the very high current launch
costs.
Liability insurance is also much less of a problem for large
companies than for smaller ones and for new start-ups. There is no
current market for insurance for human space flight of the type that
would be covered by H.R. 3245. It is highly probable that insurance
costs would be high in the initial years (until a track-record of
success would be developed). And, since revenues from human space
flight are flight-specific, insurance and launch costs in general
cannot be amortized over many years as with communications satellites.
Furthermore, insurance costs fluctuate with the availability of
insurance generally (i.e., the pool of available insurance funds varies
depending on the payouts for other events such as major hurricanes or
other disasters) and predicting the possibility availability and cost
of insurance for human space flight in advance is difficult.
Q4b. Would that fraction be significantly smaller if the
indemnification regime in existing law were extended to commercial
human space flight activities, or would there be no appreciable impact?
A4b. See above. The cost would be greater for human space flight, at
the very least as a percentage of revenues.
Q4c. Would the absence of government indemnification have any impact
on the ability of a commercial human space flight company to get
insurance?
A4c. Possibly. The real question is whether the government should
subsidize commercial human space flight where there is no apparent
direct connection between a government purpose and the flight. Up to
now virtually all spacecraft in orbit have some government interest.
Even the purely commercial communications satellites provide necessary
back-up capabilities for the military and security interests of the
U.S. Government. Human space flight is aimed at recreation and at
entertainment. It should be left up to Congress to determine whether
that economic activity has a sufficient public purpose to warrant
indemnification.
I think that making the public purpose argument for commercial
human space flight would be difficult. There is no reason why the full
cost of liability insurance should not be born by the company. By
requiring through regulation that a company purchase ``enough insurance
to cover all potential third party losses,'' the government would set a
precedent for commercial operations that helps to develop a full-cost
profit basis for the future. And, even though other nations might
subsidize this type of insurance, it is quite possible that if the U.S.
as the leader in space sets this commercial precedent, others will
follow.
Clearly, if a third party is damaged in another country by a U.S.
space flight, the U.S. Government could still be liable under U.N.
Outer Space Treaties. The likelihood of an incident and payout by the
government is low, but not zero, even if the government removes the
indemnification from commercial human space flight. That possibility
alone will require some regulation on determining how much insurance is
``enough'' for each flight or category of flight by a regulatory
agency. The current DOT/FAA assessment of requiring ``maximum probable
loss'' would probably not provide a high enough insurance threshold and
an assessment approaching a limit of ``maximum possible loss'' might
have to be substituted. How much of a financial difference this would
make in the cost of insurance is indeterminate since insurance would be
purchased on a specific vehicle and/or series of flights. It would,
nevertheless, be more expensive.
Answers to Post-Hearing Questions
Responses by Pamela L. Meredith, Counsel, Zuckert, Scoutt &
Rasenberger, LLP
This response addresses some but not all of the questions, or
aspects of the questions, of Representatives Dana Rohrabacher and Bart
Gordon. Clearly, the answers to each of the questions could easily be
the subject of a lengthy dissertation, which is not the purpose of this
brief response. The response is based on the text of H.R. 3245 provided
for the November 5, 2003 hearing.
Questions submitted by Chairman Dana Rohrabacher
Q1. If an accident were to occur due a commercial human space flight
launch by a U.S. citizen or company resulting in harm to the space
flight participants (passengers) and crew, as well as harm to foreign
or domestic ``third parties,'' in what jurisdictions might claimants
bring suit and against whom? What domestic laws, international laws,
treaties, or agreements might be implicated?
A1. Without Commercial Space Launch Act (``CSLA'')\1\ waivers of
liability, the passenger could be sued by, and could itself sue, the
launch company and its contractors and subcontractors involved in
launch services, as well as fellow passengers. H.R. 3245\2\ does not
impose a waiver requirement with respect to passengers.\3\ The
passenger could also be sued by ``third parties'' (innocent bystanders)
who are injured or whose property is damaged. The passenger would not
have the benefit of third party liability insurance protection or
United States Government Indemnification (``USG Indemnification'') as
H.R. 3245 is currently drafted. The passenger could be held liable to
these parties for negligence, gross negligence, reckless conduct, or
willful misconduct under applicable U.S. state tort laws for any injury
or damage he or she caused.
---------------------------------------------------------------------------
\1\ 49 U.S.C. 70101-70121 (2003).
\2\ Commercial Space Act of 2003, H.R. 3245, 108th Cong.
(introduced Oct. 2, 2003) (``H.R. 3245'').
\3\ See id. 3(d)(2) (rewording some of the cross waiver
provision, but making no mention of passengers).
---------------------------------------------------------------------------
Passengers With CSLA Waivers
The CSLA mandates waivers among the launch company, the satellite
customer, and their respective contractors or subcontractors.\4\
Section 3(d)(2) of H.R. 3245 does not make clear that the CSLA waiver
applies to passengers; although, it appears from the preamble of H.R.
3245 that the intention is to extend the waiver to passengers.\5\
---------------------------------------------------------------------------
\4\ See 49 U.S.C. 70112(b)(1) (requiring that the launch company
``make a reciprocal waiver of claims with its contractors,
subcontractors, and customers. . .''). See also 14 C.F.R. 440.17 and
Part 440, Appx. B, Agreement for Waiver of Claims and Assumption of
Responsibility (``Waiver Agreement'') (implementing the requirements in
49 U.S.C. 70112(a) ). The purpose of the cross waivers is: ``(1) to
limit the total universe of claims that might arise as a result of a
launch; and (2) to eliminate the necessity for all these parties to
obtain property and casualty insurance to protect against these
claims.'' Commercial Space Launch Act Amendments of 1988, S. Rep. No.
100-593 (1988), at 14.
\5\ H.R. 3245 2(6).
---------------------------------------------------------------------------
If passengers are required to sign reciprocal waivers of the kind
currently mandated by the CSLA, then the launch company, fellow
passengers, and the launch company's contractors and subcontractors
involved in launch services would be precluded from suing the
passenger.
Likewise, the passenger would be precluded from suing the launch
company and its contractors and subcontractors involved in launch
services, as well as fellow passengers.
In most U.S. jurisdictions, the waiver would not preclude recovery
by the passenger where the launch company or its contractors or
subcontractors have acted with gross negligence, reckless disregard for
the consequences of their actions, and/or willful misconduct.\6\
---------------------------------------------------------------------------
\6\ See, e.g., Martin Marietta Corp. v. International Telecomm.
Satellite Org., 991 F.2d 94, 100 (4th Cir. 1992) (providing that
``neither the language of the [CSLA] Amendments nor their legislative
history reflects a Congressional intent to protect parties from
liability for their own gross negligence''). In this case, Martin
Marietta invoked a contractual waiver of liability to defend against
INTELSAT's claims that Martin Marietta had been negligent and grossly
negligent in failing to launch INTELSAT'S satellite into the correct
orbit.
---------------------------------------------------------------------------
Passengers Without CSLA Waivers
If passengers are not required to sign reciprocal waivers, they
could be sued by, e.g., the launch company and fellow passengers for
negligence, gross negligence, reckless conduct, or willful misconduct
under applicable U.S. state tort laws for any injury or damage they
caused. A fellow passenger who is a foreign national may in addition be
able to sue in a foreign country under foreign law. Note that the
passenger's liability exposure could be significant in the early years
of space travel as the passenger may have access to, or even be
expected to oversee or operate, vehicle control interfaces and
equipment.
Conversely, passengers would be able to sue the launch company and
its contractors and subcontractors involved in launch services, as well
as fellow passengers. Possible causes of action would include
negligence, gross negligence, reckless conduct, or willful misconduct,
as well as strict products liability with respect to the launch
company. Breach of contract or breach of warranty would likely be
precluded by protections in the contract between the launch company and
the passenger.
Suits Against Passengers by ``Third Parties'' on the Ground
Passengers could be sued by third parties on the ground. Most
likely, such a suit would be directed at the launch company, but could
include the passenger as well. The launch company and passenger could
be held liable for their negligence, gross negligence, reckless
conduct, or willful misconduct. The launch company could in addition be
held strictly liable on the theory that launch activity is ``abnormally
dangerous,'' as could conceivably the passenger if it were concluded he
or she essentially acted as a pilot.\7\ The suit would typically be
brought in the state where the launch company resides or where the
injury/damage occurred.
---------------------------------------------------------------------------
\7\ See Restatement (Second) of Torts 519 (2003), which provides:
(1) One who carries on an abnormally dangerous activity is subject to
liability for harm to the person, land or chattels of another resulting
from the activity, although he has exercised the utmost care to prevent
the harm. (2) This strict liability is limited to the kind of harm, the
possibility of which makes the activity abnormally dangerous. For
example, according to the Restatement: any flight by aircraft, together
with ascent to or descent from the flight, is activity of such
character that both the operator of the aircraft and its owner if he
has consented to or permitted the operation are subject to strict
liability for physical harm to the land, or to persons or chattels on
the ground. Id., at 520A. However, as far as flying is concerned,
there is a trend away from imposing strict liability for damage on the
ground, based on the view that flying has become routine and should no
longer be considered ``abnormally dangerous'' activity. See William J.
Appel, Annotation, Strict Liability, in Absence of Statute, for Injury
or Damage Occurring on the Ground Caused by Ascent, Descent, or Flight
of Aircraft, 73 A.L.R.4th 416 (1989). This trend would likely not
benefit launch activity.
---------------------------------------------------------------------------
If injury or damage occurs in a foreign country, that country may
bring a claim on behalf of a national who has suffered injury or damage
against the United States under the Treaty on Principles Governing the
Activities of States in the Exploration and Use of Outer Space,
Including the Moon and Other Celestial Bodies\8\ (``Outer Space
Treaty'') and the Convention on International Liability for Damage
Caused by Space Objects\9\ (``Liability Convention''), assuming that
the foreign country is a party to these treaties. The Liability
Convention imposes strict liability for any damage on the surface of
the Earth.\10\ The injured party may also claim directly under U.S. or
foreign law, through U.S. or foreign courts.\11\
---------------------------------------------------------------------------
\8\ Outer Space Treaty, done Jan. 27, 1967, 18 U.S.T. 2410.
\9\ Liability Convention, done Mar. 29, 1972, 24 U.S.T. 2389.
\10\ Id., art. XII.
\11\ See id., art. XI.2 (providing that ``[n]othing in this
Convention shall prevent a State, or natural or juridical persons it
might represent, from pursuing a claim in the courts or administrative
tribunals or agencies of a launching State'').
---------------------------------------------------------------------------
Launch companies licensed under the CSLA are required to obtain
third party liability insurance in the amount determined by the Federal
Aviation Administration's (``FAA'') Associate Administrator for
Commercial Space Transportation.\12\ The specific coverage amount,
which cannot exceed $500 million,\13\ depends on the launch vehicle and
launch location, but typically would be less than $200 million.
---------------------------------------------------------------------------
\12\ 49 U.S.C. 70112(a)(2).
\13\ Id. 70112(a)(3).
---------------------------------------------------------------------------
The CSLA requires that such insurance must protect the launch
company and the satellite customer, as well as their respective
contractors and subcontractors as additional insureds.\14\ As H.R. 3245
is currently drafted, passengers would not be protected by the third
party liability insurance.
---------------------------------------------------------------------------
\14\ Id. 70112(a)(4)(c).
---------------------------------------------------------------------------
Under the CSLA, launch companies and the satellite customer, as
well as their respective contractors and subcontractors are entitled to
indemnification in the event liability to third parties exceeds the
insured amount, subject to certain conditions.\15\ The indemnification
cap is $1.5 billion above the insured amount.\16\ Under H.R. 3245,
passengers are not entitled to such indemnification.
---------------------------------------------------------------------------
\15\ Id. 70113.
\16\ Id. 70113 (a)(1)(B).
---------------------------------------------------------------------------
Suits Against Crew
Assuming crew are employees of the launch company, they are not
required to sign waivers. Crew members nonetheless are offered some
protection under the waiver, as the satellite customer and its
contractors and subcontractors are prevented from bringing suit against
launch company personnel. However, assuming crew members are
contractors or subcontractors to the launch company, they are covered
by the CSLA waiver and protected by the launch company's third party
liability insurance, as well as USG Indemnification.
Q2. H.R. 3245 includes pre-qualification criteria for space flight
participants, but none for crew members.
Q2a. Are the pre-qualification criteria listed for passengers in H.R.
3245 sufficient? Should criteria be added or deleted?
Q2b. Should the bill include pre-qualification criteria for crew
members?
A2a.b. Pre-qualification criteria seem to be in order, especially given
the proposed lack of focus in H.R. 3245 by the FAA on passenger safety.
The pre-qualification standards must not be so severe as to stifle the
development of the industry and frustrate the legislation's purpose to
open space to the American people.
Pre-qualification Criteria for Passengers
H.R. 3245 proposes that:
[t]he holder of a license under this chapter may launch or
re-enter a space flight participant [i.e., passenger] only if--
1) the space flight participant has received training and met
medical or other standards specified in the license[; and]
2) the space flight participant is informed of the safety
record of the launch or re-entry vehicle type.. . .\17\
---------------------------------------------------------------------------
\17\ H.R. 3245 (3)(d)(1)(B).
The adequacy of these criteria must be viewed in light of the
regulatory focus proposed by the bill. H.R. 3245 states the FAA shall
``focus on protecting the safety of the general, uninvolved public,
while allowing involved persons to assume risks which are inherent to
human space flight activities.'' \18\ In other words, the FAA will not
be required, or permitted, to regulate the safety of passengers onboard
the vehicle, but only the safety of the general public.
---------------------------------------------------------------------------
\18\ Id. 2(6).
---------------------------------------------------------------------------
With this proposal, the FAA will not examine or regulate safety of
the passenger compartment. Essentially, what happens to the passenger
onboard the vehicle is not an issue for the FAA. For example, the FAA
will not examine whether the levels of noise, vibration, temperature or
toxic fumes are suitable for human exposure. Accordingly, if the
passenger returns to Earth deceased as a result of toxic fumes in the
passenger compartment, the FAA will have successfully carried out its
safety mandate, assuming there is no incident to the general public.
Is this sound public policy? Is it acceptable in today's society
that a regulatory agency turn a blind eye to the safety of persons
engaged in the regulated activity? While this is the FAA's approach to
satellite payloads--the FAA is not concerned with ``mission success''--
it may not be suitable for passengers. First, satellite customers are
better equipped to scrutinize the launch environment than most
passengers. Second, how can one compare a lost life to a lost
satellite?
If a ``hands-off' regulatory approach to passenger safety
nonetheless is adopted, passenger qualification, training, and informed
consent become all the more critical. Not only are the legislative
criteria important, but their careful and considered implementation and
enforcement is key. YET, THE CRITERIA CANNOT BE SO STRINGENT AS TO
FRUSTRATE THE VERY PURPOSE THE BILL IS INTENDED TO PROMOTE, NAMELY
``THE OPENING OF OUTER SPACE TO THE AMERICAN PEOPLE,'' \19\ THAT IS,
THE PUBLIC AT LARGE.
---------------------------------------------------------------------------
\19\ Id. 2(3).
---------------------------------------------------------------------------
Pre-qualification Criteria for Crew
The carrier would have a business interest in ensuring that the
crew is properly qualified and trained. The FAA would have the
authority to review crew qualifications under its mandate to ensure
public safety.\20\ It currently does so in connection with launches of
satellite payloads. If the FAA's authority is extended to cover
passenger safety, crew qualification should be similarly extended.
---------------------------------------------------------------------------
\20\ 49 U.S.C. 70105(b).
Q3. Should passengers be considered ``third parties'' who could seek
damages from the licensee in the case of an accident? What are the
---------------------------------------------------------------------------
benefits and drawbacks of such an arrangement?
Q3a. Should the licensee be required to indemnify the passenger
through limited ``carrier'' liability as additional insured?
Q3b. Should passengers be entitled to indemnification against claims
that may be made against them by third parties?
A3a,b. The term ``third party'' has a particular meaning within the
CSLA regime. Merely making the passenger a ``third party'' does not
solve the problem. Applying the same regime to passengers as is today
applied to satellite customers is one possible approach. That includes
waivers, third party liability insurance protection, and USG
Indemnification. Alternative approaches should also be considered,
including waivers combined with ``carrier'' indemnification of the
passenger against third party liability. Partial waivers are also
possible, e.g., where the passenger is permitted to sue the launch
company and its contractors and subcontractors, but not the fellow
passengers or crew.
Significance of ``Third Party'' Designation Under CSLA
The CSLA currently establishes a regime whereby it distinguishes
between: 1) persons who are ``involved in launch services;'' and 2)
third parties. The first group includes the licensee, i.e., the launch
company and its contractors and subcontractors; the satellite customer
and its contractors and subcontractors; and the U.S. Government and its
contractors and subcontractors, involved in launch services or re-entry
services. Third parties are defined as any party other than those
included in the first group.\21\
---------------------------------------------------------------------------
\21\ Id. 70102(16). Note, however, that U.S. Government employees
are also considered third parties. 14 C.F.R. 440.3(a)(15)(ii).
---------------------------------------------------------------------------
These two groups are subjected to different treatment. Those in the
first group are:
required to sign liability waivers;\22\
---------------------------------------------------------------------------
\22\ 49 U.S.C. 70112(b).
protected by third party liability insurance that the
launch company is required to obtain;\23\ and
---------------------------------------------------------------------------
\23\ Id. 70112(a)(3).
with the exception of the U.S. Government and its
contractor and subcontractors, entitled to USG Indemnification
for third party liability subject to the conditions spelled out
in the CSLA.\24\
---------------------------------------------------------------------------
\24\ Id. 70113(a)(1).
As a general rule, third parties may bring suit against any party,
and they are not protected by the launch company's third party
liability insurance\25\ or by USG Indemnification.
---------------------------------------------------------------------------
\25\ An exception exists for U.S. Government employees, who are
considered third parties. Id. 70112(a)(4). See supra note 21
(considering U.S. Government employees as third parties).
---------------------------------------------------------------------------
Passengers as Third Parties Under CSLA
If passengers are considered ``third parties'' under CSLA, they
would not be required to sign waivers; they would not be protected by
the launch company's third party liability insurance against suits from
other third parties; and they would not be entitled to USG
Indemnification.
The result would be that the passenger could get sued by the launch
company and its contractors and subcontractors and fellow passengers.
At the same time, the passenger would be entitled to sue the launch
company and its contractors and subcontractors for injury or damage it
suffers.
A passenger with third party status under the CSLA could also be
sued by other third parties. The passenger would not then have the
benefit of the launch company's third party liability insurance or USG
Indemnification. However, the passenger would be entitled to seek
indemnification from the launch company and its contractors and
subcontractors, if these were the parties that caused the injury or
damage. Whether the passenger would be successful is another matter.
Treating Passengers Like Satellite Customers Is a Possibility
If passengers were treated like satellite customers under the CSLA,
they would be required to sign waivers; they would be protected by the
launch company's third party liability insurance against suits from
third parties; and they would be entitled to USG Indemnification.
Creatine Alternative Passenger Protection Under H.R. 3245
It is possible to design an alternative risk allocation and
liability protection scheme for passengers. Several variations are
possible:
Waiver and Carrier Indemnification
One possibility is to combine a CSLA waiver with mandated
launch company indemnification for third party liability.
The CSLA waiver would preclude: 1) the passenger
from suing the launch company and its contractors and
subcontractors and fellow passenger for injury and
property damage; and 2) the launch company and its
contractors and subcontractors and fellow passengers
from suing the passenger.
The passenger would be entitled to mandated
contractual indemnification by the launch company from
and against third party liability. This could be in the
form of a legislative requirement to indemnify, hold
harmless, and defend the passenger from and against any
third party claims, suit, or liability the passenger
may be subjected to as a result of space travel
activities. This requirement could be accompanied by a
requirement that the launch company name the passenger
an additional insured under the third party liability
insurance that the launch company is required to take
out under 49 U.S.C. 70112(a). This model would not
include USG Indemnification of the passenger.\26\
---------------------------------------------------------------------------
\26\ Depending on the circumstances and the interpretation of 49
U.S.C. 70113, the USG Indemnification available to the launch company
might cover the launch company for its indemnification of the
passenger.
Limited Waiver by the Passenger and Carrier Liability
---------------------------------------------------------------------------
With Cap
Another possibility is to allow the passenger to sue the
launch company and its contractors and subcontractors but not
its fellow passengers. This could be coupled with a prohibition
on suits against the passenger by the launch company and its
contractors and subcontractors and fellow passengers. As for
third party liability, either the model applicable to satellite
customers or the model discussed immediately above could be
used.
USG Indemnification of the Licensee/Carrier
In any event, USG Indemnification should apply to the company
operating the vehicle for human space flight. This is consistent with
the treatment of expendable launch vehicle companies in the U.S. and
around the world.
Questions submitted by Representative Bart Gordon
Q1. Section 4 of H.R. 3245 includes a provision that says:
``The Secretary of Transportation shall. . .focus the
Department's regulation of commercial human space flight
activities on protecting the safety of the general public,
while allowing space flight participants who have been trained
and meet license-specific standards to assume an informed level
of risk.''
Q1a. That language would appear to preclude DOT from regulating
passenger safety on commercial passenger-carrying spacecraft. Do you
consider that to be an appropriate public policy? Why or why not?
Q1b. If you think that DOT should not regulate passenger safety at the
present time, is there any point in the future when the government
should become involved in such regulation?
A1a,b.
I agree that the quoted bill language directs the FAA to focus on
the safety of the general public to the exclusion of the passenger. I
am concerned that this approval may not be sound public policy. Is it
acceptable in today's society for a regulatory agency to turn a blind
eye to the safety of persons engaged in regulated activity? Moreover,
could the very purpose that the bill is trying to serve--namely ``the
opening of outer space to the American people''--be frustrated if an
accident were to happen, as it would have a chilling effect on further
human space flight.
Under H.R. 3245, the FAA will not have the mandate to examine or
regulate safety of the passenger, including the passenger compartment.
The passenger's safety would simply not be an issue for the FAA. For
example, the FAA would not examine whether the levels of noise,
vibration, toxic fumes, or temperature are suitable for human exposure.
That decision would be left to the vehicle operator and the passenger.
Accordingly, if the passenger returns to Earth dead as a result of
toxic fumes in the passenger compartment, the FAA would have carried
out its safety mandate successfully, assuming there is no incident to
the general public.
While this is the FAA's approach to satellite payloads under the
CSLA--the FAA is not concerned with ``mission success''--it may not be
suitable for passengers. Satellite customers are better equipped to
scrutinize the launch environment than most passengers. Furthermore,
how can one compare a lost life to a lost satellite?
Some FAA evaluation and regulation to ensure passenger safety may
be in order. HOWEVER, THAT REGULATION MUST BE MINIMAL SO AS NOT TO
STIFLE THE DEVELOPMENT OF A NASCENT INDUSTRY. Furthermore, the
regulation must be balanced against the medical and training criteria
imposed on the passenger, For example, a healthy and fit person who is
trained will likely have a higher tolerance for certain conditions in
the passenger compartment than a person without such physical fitness
and training.
Q2. What information do you believe a commercial human space flight
company would have to provide to allow a potential passenger to give
his or her ``informed consent''? For example, what constitutes
sufficient information on a vehicle's safety record, if the vehicle has
only flown a statistically insignificant number of times?
A2. H.R. 3245 requires that a ``space flight participant [be] informed
of the safety record of the launch or re-entry vehicle type.'' \27\
---------------------------------------------------------------------------
\27\ H.R. 3245 3(d)(1)(B).
---------------------------------------------------------------------------
Your question suggests--and clearly this will be the case--that the
passenger will not have a statistical basis upon which to make an
informed decision on vehicle safety. Assuming the passenger is not a
flight safety engineer or otherwise able to make a professional
evaluation of passenger safety, the informed consent becomes
meaningless. Rather, the consent takes the character of an assumption
of risk. On the other hand, if the FAA could undertake some measure of
passenger safety evaluation, the passenger could make an informed
decision based on the agency's findings. The approach chosen by H.R.
3245 presupposes that the launch company will have sufficient economic
and business incentive to ensure passenger safety.
Passengers should have access to the launch license application
filed with the FAA. The CSLA requires launch companies to submit an
application to the FAA prior to launch.\28\ The FAA evaluates the
application to determine whether the launch is ``[c]onsistent with the
public heath and safety, safety of property, and national security and
foreign policy interests of the United States.. . .'' \29\ Again, the
FAA's safety focus is currently on the general public, not the
satellite payload. Likewise, under H.R. 3245, the safety focus would be
on the general public to the exclusion of the passenger.
---------------------------------------------------------------------------
\28\ 49 U.S.C. 70105(a)(1).
\29\ Id.
Q3. H.R. 3245 says that a license holder may launch a paying passenger
into space only if ``the space flight participant has received training
---------------------------------------------------------------------------
and met medical or other standards specified in the license.''
Q3a. Do you agree with the provision?
Q3b. Who should set the standards and determine the appropriate level
of training?
Q3c. Who would certify that the training had been done?
Q3d. Should the specified standards be uniform across the industry? If
not, how would you make it work in practice?
A3a,b,c,d. Some medical and training criteria may be in order in the
beginning years of commercial human space flight, as such flight is
likely to involve certain physical rigors and to require some measure
of cooperation by the passengers.
It would make sense to have the same regulatory agency that
licenses the launch also set the medical and training qualification
standards. The launch operator could certify that the training had been
done. The certification should be subject to FAA oversight. From a
regulatory perspective, uniform standards make sense. However, given
the infancy of the industry and the variety of vehicles being proposed,
some vehicle flights may warrant additional passenger training and
physical fitness criteria.
Q4. Would the cross-waivers of liability against death or personal
injury of a passenger contained in H.R. 3245 still hold if there were
allegations of negligence?
A4. As presently drafted, H.R. 3245 does not provide for a waiver of
liability with respect to passengers. See answer to Chairman
Rohrabacher's Question No. 1.
In most U.S. jurisdictions, the waiver would not preclude recovery
by the passenger where the launch company or its contractors or
subcontractors have acted with gross negligence, reckless disregard for
the consequences of their actions, or willful misconduct.\30\
---------------------------------------------------------------------------
\30\ See supra note 6.
Q5. Section 70104 of Title 49 of the U.S. Code states that a U.S.
company planning to launch a launch vehicle or re-enter a re-entry
---------------------------------------------------------------------------
vehicle outside of the United States will need to get a license.
Q5a. If the U.S. Code is expanded to cover commercial human space
flight activities, would a U.S. company that was offering rides on the
Russian Soyuz spacecraft in a partnership with a Russian company need
to get a license from the U.S. Department of Transportation? If not,
why not?
Q5b. If so, how would DOT enforce the terms of the license?
A5a,b. The CSLA provides for U.S. licensing in the following
circumstances:
launches from or re-entries in the U.S.;
launches and re-entries anywhere by U.S. citizens and
U.S. entities;
launches or re-entries by U.S.-controlled entities on
the high seas, unless there is an agreement between the U.S.
and a foreign country that the foreign country shall have
jurisdiction; and
launches or re-entries by a U.S. controlled entity in
a foreign country, if there is an agreement between the U.S.
and the foreign country that the U.S. shall have
jurisdiction.\31\
---------------------------------------------------------------------------
\31\ 49 U.S.C. 70104.
Assuming, the U.S. company and the Russian company have created a
partnership or joint venture company to actually conduct the launch in
Russia and the partnership/venture is U.S.-controlled, then the FAA
will not license the venture unless there is an agreement between
Russia and the U.S. that the FAA will license the venture.\32\
---------------------------------------------------------------------------
\32\ Id. 70104(a)(4).
---------------------------------------------------------------------------
If, however, the launch or re-entry were to take place in the
United States, an FAA license would be required.
The venture or partnership between Lockheed Martin and the Russian
companies Energia and Khrunichev to launch satellites on the Proton
rocket from Baikonur, Kazakhstan, does not to my knowledge require a
license from the FAA. On the other hand, the partnership of Boeing and
Russian, Ukrainian, and Norwegian companies--Sea Launch--to launch from
the high seas is licensed by the FAA.
Appendix 2:
----------
Additional Material for the Record
Sectional Analysis of H.R. 3245
Summary of the ``Commercial Space Act of 2003''
The bill clarifies the regulatory framework for commercial human
space flight. The bill extends the existing commercial space
transportation indemnification regime by three years, through December
31, 2007, and mandates a study on the liability risk-sharing regime for
commercial space transportation. The bill specifies that the licensing
authority for private-sector remote sensing systems within the Commerce
Department be delegated to the Office of Space Commerce. The bill
authorizes to be appropriated $11,523,000 and $11,000,000 for fiscal
years 2004 and 2005, respectively, for the FAA Office of Commercial
Space Transportation. The bill also authorizes to be appropriated
$1,800,000 and $2,000,000 for fiscal years 2004 and 2005, respectively,
for the Department of Commerce's Office of Space Commerce.
Section 1. Short Title.
Section 2. Findings.
This section makes certain findings regarding the U.S. commercial
space transportation industry and commercial sub-orbital human space
flight in general.
Section 3. Amendments.
This section authorizes to be appropriated $11,523,000 and
$11,000,000 for FY 2004 and FY 2005, respectively, for the FAA Office
of Commercial Space Transportation. The bill amends the Commercial
Space Launch Activities Act (Title 49, U.S.C., Subtitle IX, Chapter
701) to clarify the regulatory purview of the FAA Office of Commercial
Space Transportation to include licensing of commercial human space
flight by defining certain terms relevant to commercial human space
flight. These terms include the following: crew, space flight
participant, sub-orbital rocket, and sub-orbital trajectory.
This section directs that the holder of a commercial human space
flight license may launch or re-enter a space flight participant only
if the participant has received training and met medical or other
standards specified in the license, the participant is informed of the
safety record of the launch or re-entry vehicle type, and the launch or
re-entry vehicle is marked in a manner to identify it as a launch or
re-entry vehicle rather than an aircraft. This section also includes a
provision requiring a reciprocal waiver of liability claims between the
holder of a license, its contractors, subcontractors, and its customers
(``space flight participants'').
Section 4. Regulatory Framework.
This section directs the Secretary of Transportation to undertake
efforts to create a streamlined, cost-effective, and enabling
regulatory framework for the U.S. commercial human space flight
industry that is clearly distinguished from the Transportation
Department's regulation of air commerce, focuses its regulation of
commercial human space flight on protecting the safety of the general
public, and allows space flight participants who are trained and meet
license-specific standards to assume an informed level of risk. The
Secretary is directed to report to Congress within six months after the
date of enactment of this bill on progress made in implementing this
section.
Section 5. Commercial Space Transportation Indemnification Extension.
This section amends existing law by extending the existing
commercial space launch indemnification regime by three years, through
December 31, 2007.
Section 6. Liability Regime for Commercial Space Transportation.
This section directs the Secretary of Transportation to enter into
an arrangement with the National Academy of Public Administration
(NAPA) not later than 60 days after enactment of this bill to conduct a
study on the liability risk-sharing regime in the United States for
commercial space transportation. The study shall recommend
modifications and actions required for alternative approaches to the
current liability risk-sharing regime. The study results shall be
transmitted to the Congress not later than 18 months after enactment of
this bill.
Section 7. Office of Space Commerce.
This section redesignates the Office of Space Commercialization as
the Office of Space Commerce. The section also authorizes the
appropriation of $1,800,000 for FY 2004 and $2,000,000 for FY 2005 for
the Office of Space Commerce.
Section 8. Delegation of Licensing Authority.
This section requires the Secretary of Commerce to delegate the
authority to license private-sector remote sensing space systems
operators provided under current law to the Director of the Office of
Space Commerce. This section also amends current law by adding
additional functions and duties to the Office of Space Commerce.
Prepared Statement of James A.M. Muncy
Preface
I very much appreciate the opportunity to present my views on H.R.
3245, the Commercial Space Act of 2003. To make this testimony as
useful as possible for Members and staff, I have structured it in the
form of a ``Frequently Asked Questions'' document, essentially a
tutorial on the issues underlying the legislation along with my
recommended positions on those issues. I have also attached a copy of
my recent Space News column as further background.
What's the historical context for this legislation?
When the Congress crafted the Commercial Space Launch Act of 1984,
it demonstrated bipartisan foresight in promoting the emergence of a
now-vital commercial space transportation industry. For two decades,
the role and capabilities of that industry have grown to encompass the
launch of nearly all military and civilian spacecraft as well as many
commercial satellites. While only commercial launches by U.S. providers
are licensed by the Department of Transportation, the CSLA's creation
of a streamlined, ``one stop shop'' to regulate and promote the
industry has enabled it to serve public as well as private interests.
From time to time, the Congress has amended the CSLA to add new
statutory authority or clarify the mission of the Office of Commercial
Space Transportation (OCST) based on new industrial, technological or
policy developments.
Today, the nascent sub-orbital reusable launch vehicle (RLV)
industry seeks to pioneer new commercial human space flight market
opportunities, as well as offer microgravity research, remote sensing/
surveillance, and micro-satellite launch services.
So will OCST will regulate and promote these new RLVs?
Unfortunately, in 1995 the previous Administration transferred the
OCST into the Federal Aviation Administration, a much larger and, by
all accounts, more bureaucratically conservative organization.
Coincidentally, Congress had removed the FAA's promotional authority
regarding commercial aviation in 1996. This confluence of events, along
with a lack of clear definitions for important terms in the original
CSLA (`sub-orbital rocket' and `sub-orbital trajectory') has created
some confusion over regulatory jurisdiction within the FAA, which in
turn has hindered private investment in the sub-orbital RLV industry.
On July 24, 2003, a joint hearing before the Senate Subcommittee on
Science, Technology and Space and the House Subcommittee on Space &
Aeronautics featured strong and unanimous testimony that this
jurisdictional issue should be resolved by legislation that would
define key terms and restore the sole authority of the Office of
Commercial Space Transportation to regulate and promote this industry.
It is this need to create a predictable and enabling business
environment for the emerging U.S. sub-orbital RLV industry that calls
for enactment of the Commercial Space Act of 2003.
Is this all just about space tourism?
No. While sub-orbital RLVs do not, by definition, fly all the way
into Earth orbit like the Space Shuttle, they can provide a scientific
experiment with a few minutes of microgravity time or an environmental
sensor with a high enough altitude to collect timely data over a large
region. Furthermore, using low-cost expendable upper stages, sub-
orbital RLVs can provide affordable launch services for small (<250 kg)
satellites or scientific probes, a class of spacecraft that
universities can often afford to build but not launch.
That said, travel and tourism is one of America's largest
industries, and the adventure travel market is its fastest growing
sector. If we have learned anything from the few successes and many
failures of ``space commercialization,'' it is that we need to identify
and promote space activities which have a large terrestrial market.
Communications satellites paid off because there was a pre-existing
demand for long-distance communications, which then continued to grow
as space technology lowered prices and improved quality. Direct
broadcast satellites are paying off because there is a preexisting
demand for affordable and diverse entertainment and information. So
too, expanding America's adventure travel industry into space will tap
into a pent-up market demand, thus winning significant private
investments in sub-orbital RLVs.
Of course, the benefits of giving more Americans the opportunity to
experience space flight go well beyond new jobs and profits. As the
public reaction to Dennis Tito's 2001 flight to the International Space
Station proved, the American people believe that they too have ``the
right stuff'' and might one day be able to fly into space, even if they
choose not to. The more real this opportunity becomes, the more
children will be inspired to study math and science so they can
participate in this exciting future.
If NASA can't build a new RLV. . .how can entrepreneurs?
The cost and difficulty of developing a heavy-lift (i.e., Shuttle-
class) RLV that could carry astronauts, modules, or large satellites
into space is indeed daunting. NASA's own estimates for a 2nd
Generation RLV ran over $30 billion before that program's cancellation
in 2002.
Furthermore, the limited market for launching satellites is not
encouraging large orbital RLV development today because the demand for
those launch services cannot grow quickly enough to repay investors for
the high costs of developing orbital RLVs. That is one of the tragic
mistakes of NASA's RLV development efforts over the past decade:
assuming that commercial industry would invest in a capability it
cannot financially justify simply because NASA wants to get that
capability on the cheap. (The other mistake is the assumption that
better technology will somehow overcome this economic reality.)
On the other hand, sub-orbital RLVs are smaller, simpler, easier,
and (therefore) much cheaper to develop. And unlike satellite launch,
the space adventure travel market does appear to be large enough to
justify these much-lower development costs. Of course, sub-orbital RLVs
can't solve NASA's real and pressing space transportation problems
today, or anytime soon.
But one day these vehicles and markets may grow up and enable a
true revolution in access to orbital space, much as home-built personal
computers eventually displaced the ``mainframes'' of the old 1970's
data processing industry.
How should the Federal Government regulate sub-orbital RLVs?
Answer #1: Moderately, and primarily to protect the uninvolved
general public, while allowing investors and adventure-seeking
customers to take informed risks so the industry can ``grow up.''
Answer #2: Not at all like it regulates commercial aviation, which
is a mature, well-established industry that provides commodity
transportation services for the general public.
Answer #3: Not exactly the way it regulates the current expendable
launch vehicle (ELV) industry either, because sub-orbital RLVs aren't
as big or potentially destructive as ELVs, they will become inherently
more reliable via reusability, and--of course--they will carry human
beings and not just satellites as payloads.
What part of the Federal Government should regulate sub-orbital RLVs?
As is so often the case, who you give the job to will determine how
well the job gets done. This is the key issue H.R. 3425 seeks to
answer. While some proposed sub-orbital RLVs look every bit like a
Goddard, Heinlein, or Von Braun rocket, others look a lot like
airplanes. They may have wings, use aerodynamic lift during their
flight profiles, and even take off and land horizontally at runways.
But they are not at all conventional aircraft, and must not be
regulated as if they were.
American aviation will celebrate 100 years of success next month.
The level of safety we enjoy today is not simply the result of tough
regulation but rather that regulation enforces safety-promoting best
practices that have evolved over time based on real-world experiences
from millions of flights. Of course, the FAA has built up a very large
bureaucracy over this time in order to carry out its regulatory duties:
some 50,000 employees. In 1996 the Congress even took away the FAA's
job of ``promoting'' aviation so it could focus on doing its regulatory
and airspace management jobs more effectively, allowing more passengers
to fly more places more safely and affordably.
All of these facts disqualify the aviation side of the FAA from
providing the modest, enabling regulatory framework that the sub-
orbital RLV industry needs during its formative years.
But isn't the FAA in charge of regulating launch vehicles too?
Yes, and that is an Executive Branch mistake Congress should fix.
The Commercial Space Launch Act created a separate Office of Commercial
Space Transportation reporting directly to the Secretary. A misguided
attempt to ``flatten'' government in 1995 ended up transferring OCST
into the very organization the CSLA's sponsors never wanted involved in
regulating space transportation, namely the FAA. OCST is now the Office
of the FAA Associate Administrator for Commercial Space Transportation,
but this 50-person office's de jure independence is de facto
circumscribed by living inside a 50,000 person bureaucracy. To be sure,
there may be some unplanned synergies or efficiencies made possible by
this situation, but those have been demonstrably overwhelmed by the
legal, bureaucratic, and cultural barriers to effective action this
reorganization created.
As witnesses testified on July 24th, the mere possibility that a
sub-orbital RLV company might have to win regulatory approval of both
the aviation and space launch sides of the FAA has already delayed or
prevented private investment in this industry.
How can Congress fix this confusion?
First and foremost, the Congress needs to confirm its original
intent in enacting the CSLA. All commercial space transportation
ventures--including sub-orbital RLVs carrying human space flight
participants--should be regulated by one organization that also has the
mandate (and temperament) to promote the growth and competitiveness of
the industry as a whole.
Enacting into law the FAA's recently-published definitions of
``sub-orbital rocket'' and ``sub-orbital trajectory'' will give clear
regulatory jurisdiction to the FAA's Associate Administrator for
Commercial Space Transportation. Those (and other useful) definitions
are already contained in H.R. 3245, and must be preserved in the final
enacted legislation.
Do any RLV companies prefer the aviation side of FAA to the space side?
No. One funded RLV developer has loudly complained that he should
be allowed to fly a sub-orbital RLV as easily as he has flown earlier
experimental aircraft, i.e., with minimal government oversight.
However, he has applied for a launch license. No credible industry
official claims it would be easier to obtain commercial aircraft type
certification for revenue-earning operations carrying space flight
participants than it would be to get a launch license.
So are experimental aircraft rules easier for flight-testing of RLVs?
They may be easier to get than a launch license, but they don't
allow for the kind of flight profile even early sub-orbital RLVs will
display. For one thing, RLVs will fly faster than the speed of sound,
and eventually at hypersonic speeds. FAA environmental rules do not
allow experimental aircraft to do so without a special waiver.
More importantly, the legal regimes under which aircraft and
spacecraft operate are completely different. The Warsaw Convention
limits private and public liability for aviation accidents. The U.N.'s
Space Liability Convention makes the ``launching state'' (i.e.,
government) wholly liable for damage caused by any space object. Should
the U.S. government allow a private RLV developer to incur
international liability for taxpayers without having to obtain a
federal launch license?
(See also my attached October 27, 2003, Space News column.)
What about expertise in regulating passenger flights?
Some inside the FAA's Office of Regulation and Certification (FAA/
AVR), which oversees airplanes and airlines, have said they should have
a role in licensing of passenger-carrying RLV flights, because only
they have expertise in passenger regulation. This is precisely the sort
of regulatory confusion that stifles private investment in sub-orbital
RLVs.
Actually, the only governmental organizations with experience in
regulating human space flight are NASA, Russia's Rosaviacosmos, and the
emergent Chinese space program. And the only nation with expertise in
commercial human space flight is Russia. So FAA/AVR has no claim to
relevant expertise.
Obviously, the federal role in sub-orbital RLV flights carrying
space flight participants cannot be as laissez-faire as the wholly
unregulated days of airplane barnstorming. However, OCST (also known as
FAA/AST) is perfectly capable of working with industry to set license-
specific standards for training and medical qualification, as called
for in H.R. 3245. AST does not need AVR looking over its shoulder.
What's this ``indemnification'' thing, anyways?
Because the U.S. government and rocket companies are both liable
under international law for damages caused by a space transportation
accident, the Congress created a risk-sharing regime for so-called
``excess third party claims'' in its 1988 amendments to the CSLA.
Usually referred to as indemnification, the regime provides for the
following mutual protection. First, industry has to buy liability
insurance or demonstrate financial resources to pay the ``maximum
probable loss'' (MPL) from a licensed launch or re-entry activity, and
to use this coverage to protect the Federal Government from its legal
exposure. In exchange, the Federal Government promises to indemnify the
launch operator for up to $1.5 billion in ``excess claims'' above the
MPL, after which the launch operator's financial responsibility
continues.
Why did the Congress create this regime?
After the Challenger accident in 1986, national policy decided to
transfer the launch of all commercial and most military and civilian
satellites from the Space Shuttle to the nascent commercial ELV
industry. However, industry wasn't willing to ``bet the company'' by
assuming total liability for the improbable (less than one in ten
million) but huge losses that could result from a catastrophic launch
accident. So far the regime has worked well, and never cost the
government a penny.
Should the government indemnify space tourist rides, though?
First of all, the government is not protecting a sub-orbital RLV
company from a lawsuit by its customer in the event of a tragic
accident. Those ``second party'' liability issues will be handled by
contractual cross-waivers and insurance.
Second, and more importantly, the government currently indemnifies
U.S. entertainment companies that launch direct broadcast satellites on
Ukrainian rockets by the Boeing-led Sea Launch consortium. Is fostering
private investment in domestic reusable launch vehicles any less in the
national interest than ``subsidizing'' people who watch the Playboy
channel via satellite?
How should the government protect RLV ``passengers''?
The very use of the word passenger, instead of the term used by the
International Space Station partnership and in H.R. 3245--space flight
participant--conveys an inappropriate notion of everyday
transportation. Sub-orbital RLV flights are, we all hope, going to
become frequent and affordable opportunities for people to experience
space flight, but they are not--at least not initially--going to be a
means of transportation between points A and B.
Furthermore, these are inherently new kinds of vehicles. They
certainly aren't aircraft, but they also are very different from
traditional ICBM-derived ELVs. Nobody has the knowledge base to write
the level of safety regulations for RLVs that existed for aircraft even
50 years ago, because we haven't flown many (or arguably any) RLVs yet.
That said, no one expects sub-orbital RLVs to enjoy (or endure) the
same two-plus decades of laissez-faire that existed for the early
aviation industry. America is less risk-tolerant in 2003 than 1903, and
commercial human space flight will not be granted an exception to
cultural reality.
What the Federal Government can and should do is foster the
gathering of knowledge that will lead to safer vehicles by allowing
persons to voluntarily assume an informed risk in order to achieve
their dream of experiencing space flight. That requires that the
government take an affirmative role in requiring each RLV operator to
propose vehicle-specific training and medical requirements during the
license application process, as well as mandating the disclosure of the
safety record of the RLV type to space flight participants before they
can be carried for revenue.
This is a common-sense, evolutionary approach that will allow
government and industry to both learn how to promote safety, instead of
trying to arbitrarily impose safety ahead of time.
What, if anything, would you change about H.R. 3245?
Frankly, the legislation as written provides most if not all
required statutory authority and jurisdictional clarity to help enable
a growing sub-orbital RLV industry. Of course, there are other current
or potential governmental barriers to success that could be addressed
in legislation.
First and foremost is the issue of further empowering OCST to its
job of regulating and promoting the U.S. commercial space
transportation industry by moving it out of the FAA and creating it as
a separate modal administration within the Department of
Transportation. I cannot imagine a stronger signal of political support
for this industry than for Congress to decide that industry merits its
own distinct Commercial Space Transportation Administration, with a
Presidentially-appointed and Senate-confirmed Administrator that
reports directly to the Secretary of Transportation.
Not only would a CSTA be free of jurisdictional interference from
OCST's more powerful siblings inside the FAA, but more importantly it
would be free of the FAA's dominant bureaucratic and hyper-regulatory
culture.
To some extent, Section 4 of H.R. 3245 invites the Secretary of
Transportation to take executive action that would produce this very
result. By directing the Secretary to propose an enabling regime which
promotes as well as regulates the nascent commercial human space flight
industry, the Congress is setting forth the appropriate ``performance
requirements'' that could justify a ``separate modal administration''
design solution. Arguably the existing language is sufficient, and may
be as far as the Congress is willing to go at this time.
Anything else?
My second suggestion would be to authorize and direct OCST to
create a less burdensome licensing process for the experimental flight
test of RLVs. Available only to non-revenue, developmental flights,
this regime could be modeled on the FAA's minimalist regulation of
experimental aircraft. Certainly OCST could be encouraged to waive or
reduce those requirements which do not impact on public safety and
which are within its control.
However, the largest single burden in the licensing process is not
any requirement created by OCST itself, but rather the legally-imposed
mandates of the National Environmental Policy Act (NEPA). Because
issuing a launch, re-entry, or site operator license constitutes a
``major federal action,'' an environmental assessment of the cumulative
impact of the licensed space transportation activity must be conducted
before the license can be issued.
It is this requirement that forces Elon Musk's company, SpaceX, to
pay to count the sea lions near the Vandenberg Air Force Base launch
site, as he testified to on July 24th. It is this requirement that
could cost space ports hundreds of thousands of dollars before a single
RLV flight can take place from their isolated location. It is this
requirement that leads a few to wish they could launch RLVs under the
``categorical exemption'' (or ``CATEX'') provided to aviation under the
NEPA.
There is no way Congress could or would absolve OCST (and the sub-
orbital RLV industry) from its NEPA responsibilities. But Congress
could, conceivably, take two affirmative steps. First, legislation
could direct OCST to use all available resources to pursue a CATEX for
RLV operations with other federal agencies. Of course, there are no
guarantees here, and a strong legislative solution would trigger a
referral to committees more concerned about protecting the EPA's (and
their) jurisdiction than commercial space transportation.
The other option would be to take the same approach but seek a
waiver of NEPA or other lessening of the environmental assessment
burden only for research and development (i.e., experimental flight
testing) of RLVs. Because these test flights could be more constrained
(in location and quantity), presumably the environmental impact would
be much more limited in amount and duration.
Of course, the issue is not actual environmental impact (all
licensed launches have had a Finding of No Significant Impact), but the
NEPA's requirement of a lengthy and costly assessment for both the
launch activity and the launch site, include all possible future
licensed activities at the site. That burden should not be levied on
non-revenue R&D activities.
Perhaps it would be possible for the Science Committee, given the
Chairman's and Ranking Member's senior positions on two other
committees of relevant jurisdiction, to explore possible solutions to
this problem over the next few months. However, I would not recommend
that this issue slow down passage of H.R. 3245 beyond early 2004.
Conclusion
On behalf of the emerging commercial sub-orbital RLV industry, let
me once again state my appreciation for the time and attention given
these issues by the Subcommittee. H.R. 3245 as introduced is an
excellent start at crafting enabling bipartisan legislation that will
help this industry create huge economic, scientific, and even national
security benefits for the United States. Hopefully the Full Committee
on Science can hold a perfecting mark-up very early next year, followed
by House passage, conference, and enactment into law as soon as
possible.
A ``CLEAN SHEET'' PERSPECTIVE ON PROMOTING AND REGULATING THE
COMMERCIAL SPACE FLIGHT INDUSTRY
Gary C. Hudson
October 28, 2003
For the purposes of this white paper, I will generally assume that
the current space flight promotional and regulatory structures of the
United States Government (USG) do not exist. While naive, a thought
experiment that allows for the possibility of a ``do-over'' positively
serves to focus our attention on first principles rather than waste
time and effort parsing existing rules and regulations.
I make one initial assumption: that it is in the interest of the
Congress and the American people to foster a healthy, growing space
flight industry. Like the history of its predecessor, the air travel
industry, the benefits seem obvious: the more frequently we fly and the
more varieties of machines we fly, the lower the cost per flight. This
is the way we will learn about making space flight safe and reliable
and the result will be increased economic potential for the Nation.
When we fly both frequently and safely, we begin to implement the
dreams of a true commercial space frontier that generates wealth and
helps provide for our future prosperity and security.
However, the desire to fulfill international treaty obligations and
to protect public safety has led us to a cul-de-sac in the road to a
hopeful future. We have stumbled in our ability to promote the space
flight industry, imposing an unclear, overly bureaucratic regulatory
environment that is stiffing innovation, progress and commerce. We need
to rethink our approach from first principles; that is the purpose of
this white paper.
The key question is how do we get from our present condition (no
routine, affordable space flight) to a robust, innovative industry that
creates new technologies and new commercial opportunities for our
citizens? I believe the answer is to emulate the model that has given
the United States--and with it the World--safe and cheap air travel.
The process that has been used for the past one hundred years to bring
us to the era of modern air travel can be profitably analyzed and
adapted to provide the same boon for commercial space flight.
First I will discuss promotion of the industry, since the matter
can be dealt with fairly expeditiously and because there is little
debate about the desirability of some degree of industry promotion.
Industry Promotion. If we ask the ``first principles'' question,
``why should the USG promote commercial space flight?'' the simplest
answer is to help U.S. companies employ, grow and generate revenue. If
we assume that no entity currently exists to promote commercial space
flight, how would the nascent commercial space flight industry best be
served? Responsibility for promotion of commercial activities resides
principally within the USG Department of Commerce. Such promotion is
helpful only to the extent that it produces substantive results
assisting U.S. companies in identifying opportunities and penetrating
new markets. While there is tremendous potential to promote the growth
of commercial space markets, including space tourism, the bulk of the
current market for space launch services is in sales to the USG. The
establishment of a DOC Office of Commercial Space (OCS) chartered to
assist commercial space enterprises in doing business with other
elements of the USG would provide the first step. We could consider
this a ``one-stop-shop'' to assist companies in identifying USG
business opportunities such as bidding on launches or spacecraft that
serve USG needs.
To be clear, I am thinking of this office as an advocate for the
companies rather than as a contracting office. For example, NASA is
obligated by statute to purchase commercial space transportation
services if offered by private entities rather than to develop its own
systems. In the absence promotion and awareness, NASA routinely flouts
this law. A Commerce Department Office of Commercial Space should be
tasked by the Congress to insure that NASA and other USG agencies meet
their statutory obligations. This will open opportunities for existing
and emerging companies to provide commercial space transportation
services as the Congress envisioned. Since emerging space flight
companies do not have the resources to challenge taxpayer-financed
legal departments at organizations such as NASA, the only fair way to
exert real leverage on behalf of the emerging industry is to use
government lawyers to deal with government lawyers. Hopefully just the
threat of such a challenge would be enough to ensure it never reach the
stage of legal action, and most matters would be addressed at the level
of interagency policy board interactions.
DOC OCS would also administer any incentive programs that the
Congress might establish in the future. For example, loan guarantees
and insurance indemnifications have been proposed or passed previously.
Without addressing the merits of either, I would assign the DOC OCS the
responsibility for administering such programs. Likewise, should the
Congress ever decide to establish prizes or other incentive programs of
any kind, DOC OCS would be the point of interface and administration.
Industry Regulation. If we then approach the question of regulation
from first principles we have to ask the question: ``why regulate?''
After all, Jefferson was famous for teaching ``that government which is
best, governs least.'' The air travel industry experienced it's ``barn
storming'' era and operated for over 20 years before the creation of
the Civil Aeronautics Administration in 1926.
It is believed by some that ``licensing'' by the USG of private
actions in space (including space flight) is required to meet our
obligations under the Outer Space Treaty. From first principles, one
might question the desirability of continuing to adhere to an archaic
and restrictive international agreement promulgated principally by
diplomats of the former Soviet Union at the height of the Cold War.
Their goal was to limit the ability of Western countries with free
societies from maximally exploiting the benefits of private space
flight. Asking for repeal of the Outer Space Treaty seems beyond the
charter of this white paper, but we can fulfill the letter of the
Treaty through a very mild regulatory regime. So, in the final
analysis, the Outer Space Treaty alone is no bar to a sensible and
adequate regulatory environment. I argue that a generic ``approval''
process, which does not rise to the level of a major or significant
federal action, can provide the international fig leaf necessary for
treaty compliance. Addition of an insurance requirement with the USG as
a ``named insured'' can solve the liability issue created by the
Treaty.
Past USG legislation refers to three specific elements that warrant
establishment of regulatory oversight of space flight operators. First,
and most obvious to virtually all observers is public safety. In
addition, ``national security'' and ``foreign policy interests'' are
also called out as justification. I will deal with public safety
momentarily, but first it is helpful to address the other two issues,
since they can be linked.
Much bad law is promulgated in the name of ``national security.''
The best national security comes from a technologically vibrant and
healthy growing economy. We can best defend ourselves when we are both
rich enough to pay for the best defense, and when we can employ the
most capable technology in our defense. Often time we damage our
security and our international competitiveness in the name of
``national security'' and ``foreign policy interests.'' The matter of
export controls comes to mind. While this is not the forum for that
particular debate, it needs to be recalled that the European Ariane
program exists almost exclusively because, for ``national security and
foreign policy'' reasons thirty years ago we elected to reject a French
application to launch a Symphonie dual use communication satellite on
an American booster. This decision led directly to the creation of the
Ariane and its capture of half of the world launch market for two
decades. Rejection did not make us any more secure than we would have
been had we made a decision that would have prevented a united Europe
from funding a highly competitive and subsidized commercial
launcher.\1\ And it hurt us badly from a commercial launch business
viewpoint.
---------------------------------------------------------------------------
\1\ In a perfect world, I would not unduly restrict the overseas
transfer of finished space launch components or systems (these being
different than the technology or know-how to fabricate same) to
countries who have shown they are not a near- or long-term threat to
the U.S. (How to make this distinction? As historians note, no liberal
democracy has ever gone to war against another. Let the Department of
State certify acceptable countries and the matter is solved.)
---------------------------------------------------------------------------
The need to act with regard to rockets and public safety is a far
less controversial issue. One hundred years of air travel has resulted
in a busy, crowded airspace that requires coordinated efforts to
maintain safety. Few would argue that some form of regulatory oversight
is reasonable. At the same time, few voices currently call for any but
third-party protection. (First parties are the vehicle operators.
Second parties are passengers or ``space flight participants.'' Third
parties are people with no relationship to the activity. Once the
industry is mature, some degree of protection for second parties
comparable to that in operation for civilian transport aircraft will be
appropriate, but that time is decades in the future.)
Thinking from ``first principles,'' let us bound the public safety
problem by asking the question ``why do we need the USG to regulate
third party protection for space flights?'' What is the risk to the
public if all forms space flight were completely unregulated by the
USG? We face many of our current problems because of our inability to
understand risk, and our perception is that it is high. Lack of a
technical understanding of how space vehicles operate and how much
damage they can cause seems at the root of this problem. The problem is
further exacerbated by the way we visualize failure. Specifically, if
one sees the explosion of a launcher, that explosion fills the screen
of our television, simply because the cameraman is doing his job. This
drama hides the truth. Insurance statistics, as evidenced by market
rates of third party liability insurance, tell the real truth. No third
party is injured in these failures! No third party was injured by the
breakup of the Columbia, even though 200,000 pounds of debris fell over
several states. So low was the risk that humans would be harmed, that
only about 40 percent of the orbiter was even recovered; 60 percent
burned up or fell and will never be found. And this is not merely the
luck of the draw. Analysis of the impact to human life if the breakup
had occurred one orbit later, placing it above Dallas-Fort Worth, has
shown essentially identical results.
A number of constraints are present already on any space flight.
For the vast majority of sub-orbital or orbital flights, space flight
is an expensive proposition. The cheapest space flights are ones that
do not go to orbit. In this case, a few efforts are currently underway
to build small X-prize-class sub-orbital launchers. Yet the cheapest of
these cost a few million to a few tens of millions of dollars, not a
sum to be spent by irresponsible individuals or organizations. There
are airspace restrictions imposed by the FARs. One can't simply build a
rocket in the suburbs and launch from one's driveway. Another
constraint is insurance. Suppliers often choose not sell propellant,
avionics and other materials to builders who appear to lack common
sense or minimal third party liability insurance. Even today, some X-
prize contenders can't purchase the propellants they require because
the manufacturers are afraid of liability, not from third parties, but
from the flight crew or operator's employees who might sue if injured
in ground or flight test. These and similar constraints on wild or
irresponsible behavior are acting totally in the absence of any
burdensome USG regulation.
Under FAR 101, provision existed for unmanned rocket flight
approval by local FAA offices with only a fraction of current AST
oversight requirements. In fact, we know this approach works, since
many quite large amateur rockets, not to mention the U.S.'s first
commercial rocket in 1981 and another in 1982, operated in a regulatory
environment of exactly this nature. No injuries to any third parties
resulted from this lightly regulated activity prior to the creation of
Office of Commercial Space Transportation in 1984.
However, assuming that meeting our obligations under the Outer
Space Treaty demands some further USG oversight, an option might be for
the USG to establish minimum third party insurance requirements in
order to obtain ``approval'' to operate space vehicles. Establishing
this standard is straightforward--such calculation is a minor part of
current licensing. The amounts set for ``maximum probable loss'' have
so far been eminently reasonable, usually well below $100 million. This
amount is readily available on the world market. I myself bought a
comparable amount of third party liability insurance for less than
$100,000 in 1981. I bought this insurance, not because of a USG
mandate, but rather because our customer asked us to do so. (Note that
I am not talking about ``launch insurance'' or that type of insurance
that protects a spacecraft owner from launch failure and pays a claim
if the launch vehicle fails to deliver the spacecraft to the desired
orbit. There is a limited pool for such insurance, and premiums are
very much higher than for third party liability insurance.) These
premiums reflect the market knowledge that there has never been a third
party claim of any magnitude in the history of Western space launch
programs.
Once a maximum probable loss calculation was performed by the
designated regulatory entity, I would recommend that it be reviewed and
approved or at least concurred with by the aforementioned DOC OCS. This
safeguard would prevent unreasonable regulators from subverting the
process. I would also recommend that the entity setting the insurance
standard be required to make the determination in writing within 30
days of a request for a determination, that the term of the
determination be for a period of at least five years with a review at
the one year mark to allow for the lowering of the requirement if the
record of the vehicle or system so warrants, and that a appeals process
including the DOC OCS be included in the law. Finally, a
Congressionally set upper bound on the determination is needed, perhaps
to be set at $500 million. However, no taxpayer-funded indemnity should
be provided for amounts that exceed the Congressional upper limit. To
do otherwise simply removes the incentives of third party plaintiff to
settle any claims for reasonable amounts.
It is tempting to stop here and not explore more involved
regulatory oversight of the type we currently see. But if we desire
more oversight, at a minimum the scope and force of the regulation
should be limited in keeping with the real, and not the imagined risk,
posed by commercial space vehicles. It should be comparable to
regulations imposed on equivalent vehicles in a similar industry.
Every year, thousands of new experimental aircraft are licensed by
the FAA via a one-page ``experimental'' type certification application,
in addition to a one-hour or shorter inspection often times conducted
by an FAA Designated Airworthiness Examiner who might not even by a
government employee. Many of these aircraft crash each year. Usually
pilots and passengers are killed and occasionally third parties as
well. Experimental type certification applies equally to small home-
builts, converted war-birds as big as a B-17, exotic aircraft built for
research purposes and even jumbo jets prior to completing ``standard''
type certification that allow them to be sold and operated in passenger
revenue service.
It is easy to show that the economic promise of the commercial
space industry exceeds that of amateur built aircraft whose owners
currently use the experimental type certification process. (I am not
denigrating the social or economic value of these thousands of amateur-
built aircraft, but simply making the point that the total dollars
currently generated by commercial space launch already exceeds the
market size of the home-builts by a substantial fraction. Once a
growing space flight industry expands, that disparity will become even
more obvious.) Since a third party casualty or fatality is just as hurt
or dead if injured or killed by a Lancair-IV crash as they would be if
they were the victim of an out of control SpaceShipOne, there is a
gross disparity in the law if we treat space flight vehicles
differently from experimental aircraft. Our failure is in our
perception of an accident event, not in the results.
It is no challenge to say that space flight vehicles fail more
often. Perhaps that is true; the casualty numbers suggest it is also
irrelevant. Injured is injured, dead is dead. One might contend that
space launch vehicles make bigger smoking holes in the ground, and thus
have a higher potentiality for damage than a home-built. But this is
also misleading. It is true that most (but by no means all) space
flight vehicles carry flammable fuel (usually the same as commercial
jets use) and oxidizers (such as the liquid oxygen that is stored in
large tanks outside of every hospital in this country) and the
unplanned mixing and combustion (or rarely detonation) of these
propellants can be spectacular. Yet it should be remembered that most
explosions of space flight systems are planned; they are the result of
the system working, and the termination of flight in this manner
prevents unmanned rockets from going where they are not wanted. It is
quite rare that a rocket blows up on its own due to a systems failure;
even so it is not unusual for such a problem to occur even with
certificated passenger airliners, i.e., TWA 800 that suffered a fuel
tank explosion, or several other similar accidents. The mere fact that
rockets can produce larger explosions than some experimental aircraft
does not change the fact that at any conceivable launch rate over the
next few decades, with any imaginable failure rate, they can never
exceed the currently acceptable casualty losses of the existing
experimental aviation community.
The space launch industry labors under another burden not faced by
experimental aircraft operators. When a developer wishes to design and
build a new aircraft, no mater how big, fast or dangerous it may be,
there is no requirement for any involvement of the National
Environmental Protection Act. By creating a licensing regime specific
to launch vehicles (as distinct from the approval process for aerospace
vehicles controlled under the FARs), the USG has introduced the wild
card of ``Major Federal Action'' now interpreted as requiring an
environmental review, assessment or impact statement for each launch
license. For the few dozen licenses issued to date, the results of
these reviews have always been ``FONSI'' or Finding of No Significant
Impact. The Congress can mandate that enough is enough and that no
further review will be required for each license, or they can dispense
with licensing altogether and simply designate launch systems as
aerospace vehicles already exempt from NEPA under the FARs, not
requiring such review. Millions of dollars continue to be wasted
conducting these time-consuming reviews that have no measurable
benefits. (The FAR already cover launch systems of all types, by
definitions long-standing. An aircraft, according to the FAR, is a
device that flies through the air under power. Power plant is
irrelevant. Finally, the FARs also define what a rocket is. These
definitions date from 1963.) So where do we go from here?
The establishment of OCST was promoted on the grounds that it would
streamline a chaotic approval process. At the time, some alleged that
as many as nineteen federal agencies had regulatory authority over
launchers. While that number never proved to be anything but a sound
bite, and flying in the face of approvals that had been granted to
previous large commercial rockets a few years earlier, it is true that
some USG entities did propose rather tortured interpretations of their
regulatory authority. The most notorious was the Department of State,
which proposed to regulate launches under the export control provisions
of ITAR. It is necessary to make certain that these spurious claims do
not resurface, and it may be that legislation will be needed to further
clarify the situation. The details are beyond my scope for the moment,
but will deserve near-term attention when and if any of the ideas in
this memo are implemented.
My recommendation is to dis-establish FAA/AST and to let the FAA
local FSDOs once again control unmanned rocket flight under FAR 101 as
was done prior to the creation of OCST in 1984. Insertion of a maximum
probable loss calculation and third party insurance requirement into
FAR 101 would be trivial. There would be no measurable impact on the
safety of the public, but we would save $11 million per year now spent
on AST or more than $100 million in the next decade alone.
But, what about piloted reusable space vehicles that carry
passengers? They can also be handled quite simply. The chief objection
that many have had to dis-establishing FAA/AST and giving all its
functions to FAA/AVR is that experimental aircraft cannot be operated
for hire and that full standard type certification is too expensive for
new operators. Given that the Congress can direct the FAA to change any
provision of the FARs, a simple solution would be to provide permission
for any experimental aircraft to be operated for hire, provided the
passenger is fully informed of the risks, the aircraft is not operated
as a scheduled transportation service under part 121 of the FARs\2\ and
the maximum probable loss calculation for third partly liability
insurance is applied. This approach eliminates the claim that under AVR
new operators would not be able to achieve the early revenues needed to
attract investors and fund vehicle improvements. The industry can be
allowed to operate this way for some designated number of years--the
barnstormers era--and then evolve an appropriate regulatory environment
as experience is gained and the industry matures. Based on our
experience with the development of the air travel industry, I suggest a
period of twenty years until this provision sunsets.
---------------------------------------------------------------------------
\2\ If the FAA/AVR objects to this provision, they can be reminded
that they are currently letting owners of experimental aircraft hire
out experimental aircraft to flight instructors who then use them for
pilot training. A sub-orbital or even orbital ``space flight
participant'' can easily assume equivalent risk as a student pilot. A
suitably controlling definition might also be developed that doesn't
permit experimental aerospace craft to be flown for hire unless they
are designed to operate over >50 Km altitude, to insure that only space
vehicles benefit from this provision.
---------------------------------------------------------------------------
Different provisions for piloted and unpiloted vehicles should be
handled in the same way that FAA currently handles UAVs and piloted
aircraft. Once deemed operational, vehicles will be flown--not on
individual ``launch licenses''--but instead after the filing of a
flight plan in the same way an aircraft operator files for IFR
operation. This is also how the FAA intends for UAVs to be integrated
into the National Airspace System.
In this way the barnstorming phase of the commercial space industry
can be nurtured, with demonstrably no new risk to the public, while
providing an easy transition from experimental operations to early
revenue service for ``informed consent space flight participants.''
Ultimately the industry would be fully integrated into the successful
air transport enterprise that has provided the benefits of air travel
to all Americans.
In the next few decades we would be able to amend that phrase to
``the benefits of air and space travel.''
Implementation
Specific steps that should be taken to implement the philosophy
espoused by this memo are:
1) Dis-establish the current AST organization. End the
practice of launch licensing.
2) Confirm that unmanned rockets fall under the purview of the
FAR 101 and that piloted rockets of all types fall under the
FARs for experimental certification.
3) Confirm that to operate any unmanned rocket or piloted
rocket, an operator need only obtain permission from the FAA
per either FAR 101 for unmanned systems or applicable FARs for
piloted vehicles.
4) Establish that experimental aerospace vehicles can be
operated for hire with limitations to focus this provision on
human space flight if deemed necessary.
5) Confirm that launch, space flight, operation to or on other
celestial bodies and re-entry are not exports for the purposes
of export control regulations. Further confirm that no other
permits, licenses or approvals are required from the Federal
Government to operate aerospace vehicles.
6) Establish an advocacy office with DOC to promote and
represent the industry especially within the Federal
Government.
Prepared Statement of Jeff Greason
President, XCOR Aerospace
1. Indemnification and licensing are not and should not be linked.
The Federal Government licenses many private activities without
indemnifying those activities against some or all legal claims.
Indemnification is not the quid pro quo for licensing; it is the quid
pro quo for industry purchasing insurance that protects the government
from the most probable third party claims.
.Quite unlike the early history of aviation, the U.S. government
has chosen to accept a strict liability standard for space through the
U.N. Space Liability Convention. As Mr. Hudson pointed out in his
November 5th testimony, that was an unwise decision and not one for
which industry should bear the burden. That is what has driven the U.S.
government to force companies to purchase expensive insurance in
amounts dictated by the U.S. government. Indemnification against excess
claims beyond Maximum Probable Loss (MPL) is a way of mitigating the
damage done to the industry by these choices. If the government wants
to move towards a different third-party liability regime, withdrawing
from the Liability Convention, establishing a limited liability regime
similar to the Warsaw Convention, and removing the requirement to
purchase MPL insurance, then there will be no justification for (and no
need for) indemnification.
It has always been our belief that the launch operator is the sole
party responsible for third party liability risk. Ms. Meredith made an
excellent point during the November 5 hearing that this may require
clarification. H.R. 3245 may benefit from additional language making
clear that passengers and crew are not responsible for risks to third
parties. In addition it also should be made clear that third party
indemnification would not apply to passengers since they are not liable
and are customers, rather than licensed launch operators.
2. Sub-orbital vehicles do not pose the same third party risks as
current launch vehicles.
The Federal Government has spent billions of dollars on basic
research to make expendable launch vehicles (ELVs) possible. In
addition the government has spent billions of dollars making sub-
orbital vehicles possible by funding the Mercury program, X-15 program,
sounding rocket programs and even current efforts such as DARPA's
RASCAL and FALCON programs. Sub-orbital RLV (reusable launch vehicle)
companies now are poised to bring the taxpaying public some return on
that investment.
Total third party risk from launch vehicle operations is a function
of four factors: how reliable the vehicle is, how much destructive
potential a vehicle has, where the vehicle flies, and how frequently
the vehicle flies.
Despite the fact that ELVs are `more mature,' they are not
inherently more reliable than emerging sub-orbital RLVs concepts, and
in fact can never be. By its very nature, each ELV is a different
vehicle which can only be fully tested in actual use. Because of their
high cost per vehicle, a launch provider may never conduct a single
non-revenue test flight of a new vehicle, so there is some increased
risk associated with early flights. It is this inherent complexity and
risk that necessitates the so-called ``advantage'' of billions of
dollars of federal subsidies and ``standing armies'' to provide
oversight of ELV development and operations.
RLVs, on the other hand, can be affordably tested in an incremental
way. Inexpensive empirical proof of reliability can supplant expensive
analytical assumptions about reliability. Furthermore, over time an
individual vehicle (as well as a specific design) can establish a clear
and well-defined reliability track record. The need to attract
customers, plus a regulatory mandate to publish the safety record, will
promote greater testing and deliver greater reliability for the
industry as a whole.
In a sub-orbital vehicle, the profit per flight is low enough that
it takes roughly one thousand flights to make back the vehicle
replacement cost. Therefore, anyone with hull loss probability worse
than one per thousand flights would go bankrupt very quickly. Simple
economics dictate that vehicle reliability will be at least ten times
that of the ELV industry.
Because they are so much larger, carry more fuel, and require much
more performance, ELVs can cause much greater damage from a worst-case
accident than would a sub-orbital RLV. In fact, the huge potential for
damage mandates the current systems approach to ELV safety: destroy the
vehicle (and payload) before any observed failure can worsen and lead
to catastrophic consequences. RLVs, on the other hand, can and will be
designed to ``fail safe.''
Related to this is the issue of where ELVs and RLVs will fly. Many
ELVs are launched from Cape Canaveral, and their launch operations are
regularly constrained by that spaceport's closeness to significant
population centers along the East coast of Florida. Sub-orbital RLVs,
on the other hand, will initially be able to fly in restricted airspace
over sparsely populated terrain. They will only begin to overfly more
populated areas after they have built up significantly greater
reliability than is possible for ELVs.
Lastly, the notion that the frequency of sub-orbital RLV flights
will somehow outweigh all the other factors and therefore create more
total risk than for ELVs is patently false. First, sub-orbital RLV
flight frequency will be lower during the initial flight test regime.
But more importantly, it is the frequency of sub-orbital RLV flights
that creates both higher and more precisely-definable reliability.
Furthermore, each time a RLV flies it risks not only the mission value
but also the capital asset value of the RLV. Since one flight will only
earn back a fraction of a percent of the RLV's construction or
replacement cost, simple economics will mandate reliability at least an
order of magnitude greater than ELVs.
3. Increased sub-orbital flights will strengthen the 3rd party
liability insurance industry for space transportation, not
threaten it.
With fewer than 20 launches per year the current space insurance
industry has economic factors that are inherently unique. Most insured
industries have many times more insurable events. For example, millions
of homeowners have fire insurance. Therefore the risk is spread out
over many policies. Anything that increases the number of insured
events in the space transportation industry will lower, not increase,
the risk to the insurers. The more flights, the greater the usefulness
of actuarial methods for assessing risk. This will make it easier for
the insurance industry to set rates appropriate to the actual
demonstrated level of risk.
Sub-orbital RLVs, whether passenger-carrying or not, are already
held to extensive regulations to ensure their third-party liability
risk is no greater than that of ELVs. No changes from the current AST
approach is needed for this, and the risk of insurance claims is no
higher for incrementally testable sub-orbital RLVs than for ELVs.
Indeed, many types of failures that have destroyed ELVs would only
abort the mission for an RLV.
4. The Federal Government has a compelling public interest in
fostering a sub-orbital RLV industry.
There is a perception that commercial human space flight and sub-
orbital RLVs are a ``single use'' technology; that they will fly a few
rich tourists and have no other application or benefits. That is
incorrect.
In the beginning, only the rich owned automobiles. The nascent
airline industry likewise only carried the rich, and the airmail.
Opening up any new market is a boon first to the wealthy customers
(including DOD and NASA), then to a greater audience. A new ability to
fly reusable rocket vehicles will benefit the entire space
transportation industry and the U.S. government's strategic goals in
space. Since the U.S. government has its own space launch capabilities
(Shuttle, Titan, and now EELV), the primary benefit the government
receives from commercial ELV operations is support of the industrial
base. The more commercial activity, the less the U.S. government has to
pay to maintain these capabilities and infrastructure. Sub-orbital RLV
efforts will create private support for the aerospace industrial base.
This is in addition to the benefits of high technology job creation
resulting from a vibrant RLV and commercial human space flight
industry. Indeed, while the workforce of the existing aerospace
industry is aging, it may be critical to the continued competitiveness
of the United States in aerospace that we foster the creation of
exciting new aerospace industries such as commercial human space flight
that will once again attract the best engineers and technicians.
Second, there is a clear U.S. government requirement for sub-
orbital RLV capabilities. In civilian space, microgravity and science
payloads have flown on expendable sub-orbital rockets since the
beginning of U.S. space efforts and that activity continues today.
Budget constraints have cut back sounding rocket flights in recent
years. Adding low cost, reusable commercial sub-orbital capability will
restore this research tool. In military space, current DOD efforts such
as the RASCAL and FALCON programs employ sub-orbital components, some
reusable and some expendable, for satellite launch and for sub-orbital
delivery of military packages or munitions. Commercial RLVs will
develop the technology base for DOD systems of the future, at no cost
to the taxpayer. Industry can only develop these capabilities if
customers pay for them; and human space flight participants can provide
that critical customer base. Initial flights will be expensive because
vehicle development will have to be paid for, therefore the revenue
will come from customers who can afford a high price.
Third, if commercial human space flight is allowed to proceed, it
will soon enter the normal development cycle of ever-increasing safety
and efficiency that we see in all other areas of technology. Early
aircraft, cars, computers, VCRs, and televisions were at first all very
expensive. The research and development were funded by the initial
customers who paid a high price for them. If nobody had paid that high
initial price, these commodities would have never developed into their
current ubiquitous cheapness and utility. The United States government
has funded space technology development for more than 40 years, yet
access even to brief space experiences remains a distant dream for U.S.
citizens. Allowing industry to offer space flight to risk-tolerant
adventurers means that soon ordinary citizens can realize their dreams
in space. This will also open a new frontier for the United States and
for all humanity.
5. The regulatory and promotional functions of AST are not in
conflict.
It is true that AST has two distinct public policy goals:
protecting public safety AND enabling a competitive U.S. commercial
space transportation industry. These goals are not so much in conflict
as they are complementary. Since frequent early failures would damage
the industry, it is in the industry's interest to work towards greater
reliability.
Furthermore, effective streamlined regulation is often the best way
to enable an emerging industry, just as the early aviation industry
approached the Federal Government seeking regulation during the 1920s.
The primary ``promotional'' activity of AST is to develop regulations
which protect public safety without killing the industry. Without a
promotion responsibility AST would have absolutely no need to consider
the burden to the industry while developing regulations. If safety is
the sole concern, not allowing anyone to fly is a legitimate approach.
Commercial aviation went from 1926 to 1995 with the same agency
carrying the promotion and regulation mission. Clearly this did not
pose a major threat to public safety, and it did result in a successful
and safe aviation industry.
6. While the government may take steps to promote safety, space flight
participants must be responsible for their own risk and must
decide how much risk is acceptable to them.
Sub-orbital trips are not a ride at Disneyland (fake adventures
meant to mimic real-world adventures). Sub-orbital rides are similar to
climbing mountains or scuba diving: real adventures with their own
inherent risks the participant willingly takes, in order to have a
once-in-a-lifetime experience.
However, we are not advocating a ``hands off'' policy. The Federal
Government can and should take steps to set us on the road towards
ever-increasing participant safety. Setting a specific level of safety
now will result in either setting the requirement too low, removing
incentives to push safety as hard as possible, or too high, crippling
the industry. Indeed, different vehicle concepts will have different
initial safety records that may not reflect their potential in well-
developed systems.
Requiring vehicle operators fully to disclose safety records
facilitates continuous safety improvement without falling into the trap
of a single one-size-fits-all standard that will ultimately fail to
ensure passenger safety. At the November 5 hearings, Mr. Duffy
correctly pointed that most accidents on launch vehicles happen in the
first three flights. Reusable Launch Vehicles will probably fly ten
times that number before the first passenger-carrying flight. This is a
great virtue of RLV's low reflight cost: a level of demonstrated
reliability that the ELV industry simply cannot afford.
Barring additional massive government spending, the only way to get
the sub-orbital industry off the ground is to allow companies to
innovate and take risks. A single accident could wipe out a company,
but not a robust industry with multiple launch operators. By making
safety records public, customers will gravitate to the safest
providers. It was not until 1934 that public disclosure of accident
causes was required of aviation; space vehicles already have accidents
investigated by NTSB and disclosed. H.R. 3245 in its current form,
requiring public disclosure of a carrier's safety record, imposes on
the space industry a safety measure resisted by air carriers for
decades during the early history of aviation.
All three current RLV launch license applicants plan a substantial
flight test program; Scaled Composites has already done many flights of
their test program and plans many more, XCOR has done 15 flights of a
test vehicle developed for the purpose of flight-testing technology and
laid out plans for a more extensive test program for their sub-orbital
vehicle in their license application to AST. The fear that space flight
participants would somehow fly on an untested vehicle is unfounded, and
forcing disclosure of safety records will drive less-safe vehicles from
the market.
7. It is neither necessary nor desirable to address all possible
future concerns in H.R. 3245 today.
Some critics of H.R. 3245 have raised additional issues for
consideration or pointed out that H.R. 3245 does not address all
problems which may arise in the future. While we agree that H.R. 3245
does not address all possible future concerns, we see no reason for it
to do so. The Commercial Space Launch Act of 1984 has been amended
before and it will be amended again. During the history of aircraft
regulation, the legal structure governing regulation changed many
times. It is inevitable that as the industry develops and lessons are
learned, the regulation and the law governing the industry will change.
It is enough for H.R. 3245 to address the immediate concerns raised by
the emergence of commercial human space flight and sub-orbital RLVs;
the future will undoubtedly develop differently than we expect. The
important thing is to create a good initial framework on a timely
basis, and we believe H.R. 3245 meets this test very well.
8. Commercial human space flight is far from mature; it is just about
to begin.
While government efforts have carried humans into space since 1961,
true commercial human space flight has yet to begin, and that early
state of the industry must be kept in mind in considering H.R. 3245.
Currently, astronauts aboard NASA vehicles face a risk one million
times greater than the risk faced by passengers on commercial aircraft.
Government space flight efforts rest on expendable or semi-expendable
craft in which major elements are newly manufactured for each flight
and, by their nature, cannot be tested in a realistic environment
before use. It is the absence of such testing which makes quality
control in ELVs such a demanding task requiring the resources of a
large organization. Given that background, it is not surprising that in
the 40 years of government human space flight there has been little if
any significant improvement in safety.
Simple economic necessity will drive the operators of RLVs to a
higher safety requirement than government space flight efforts. Unlike
governments, private companies simply cannot afford a high rate of
loss-of-vehicle accidents; if vehicles crash often and must be
substantially repaired or replaced, the company will go broke. Previous
space technology has never been driven to meet commercial requirements
such as not throwing away expensive assets, and we have not yet seen
even the beginning of progressive improvement in safety. Therefore, we
truly are starting from scratch: we have the resource of the
technologies developed over the last 40 years, but not the benefit of
an operational track record in relevant systems. The last 40 years of
expendable launch vehicle technology bear the same relationship to RLVs
as vacuum tubes did to transistors; the basic circuit principles were
similar, but the implications for system design were very different.