[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]










                        NECESSARY UPDATES TO THE
                      COMMERCIAL SPACE LAUNCH ACT

=======================================================================

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON SPACE

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 4, 2014

                               __________

                           Serial No. 113-63

                               __________

 Printed for the use of the Committee on Science, Space, and Technology







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       Available via the World Wide Web: http://science.house.gov



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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
DANA ROHRABACHER, California         EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas                 ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR.,         DANIEL LIPINSKI, Illinois
    Wisconsin                        DONNA F. EDWARDS, Maryland
FRANK D. LUCAS, Oklahoma             FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
PAUL C. BROUN, Georgia               DAN MAFFEI, New York
STEVEN M. PALAZZO, Mississippi       ALAN GRAYSON, Florida
MO BROOKS, Alabama                   JOSEPH KENNEDY III, Massachusetts
RANDY HULTGREN, Illinois             SCOTT PETERS, California
LARRY BUCSHON, Indiana               DEREK KILMER, Washington
STEVE STOCKMAN, Texas                AMI BERA, California
BILL POSEY, Florida                  ELIZABETH ESTY, Connecticut
CYNTHIA LUMMIS, Wyoming              MARC VEASEY, Texas
DAVID SCHWEIKERT, Arizona            JULIA BROWNLEY, California
THOMAS MASSIE, Kentucky              MARK TAKANO, California
KEVIN CRAMER, North Dakota           ROBIN KELLY, Illinois
JIM BRIDENSTINE, Oklahoma
RANDY WEBER, Texas
CHRIS COLLINS, New York
VACANCY
                                 ------                                

                         Subcommittee on Space

               HON. STEVEN M. PALAZZO, Mississippi, Chair
RALPH M. HALL, Texas                 DONNA F. EDWARDS, Maryland
DANA ROHRABACHER, California         SUZANNE BONAMICI, Oregon
FRANK D. LUCAS, Oklahoma             DAN MAFFEI, New York
MICHAEL T. McCAUL, Texas             JOSEPH KENNEDY III, Massachusetts
MO BROOKS, Alabama                   DEREK KILMER, Washington
LARRY BUCSHON, Indiana               AMI BERA, California
STEVE STOCKMAN, Texas                MARC VEASEY, Texas
BILL POSEY, Florida                  JULIA BROWNLEY, California
DAVID SCHWEIKERT, Arizona            FREDERICA S. WILSON, Florida
JIM BRIDENSTINE, Oklahoma            EDDIE BERNICE JOHNSON, Texas
CHRIS STEWART, Utah
LAMAR S. SMITH, Texas























                            C O N T E N T S

                            February 4, 2014

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Steven Palazzo, Chairman, 
  Subcommittee on Space, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................     8
    Written Statement............................................     9

Statement by Representative Donna F. Edwards, Ranking Minority 
  Member, Subcommittee on Space, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................    10
    Written Statement............................................    11

Submitted statement of Representative Lamar S. Smith, Chairman, 
  Committee on Science, Space, and Technology....................    12
    Written Statement............................................    13

                               Witnesses:

Dr. George Nield, Associate Administrator for Commercial Space 
  Transportation, Federal Aviation Administration
    Oral Statement...............................................    15
    Written Statement............................................    18

Dr. Alicia Cackley, Director of Financial Markets and Community 
  Investment Team, Government Accountability Office
    Oral Statement...............................................    26
    Written Statement............................................    28

Dr. Henry Hertzfeld, Research Professor of Space Policy and 
  International Affairs, Elliot School of International Affairs, 
  George Washington University
    Oral Statement...............................................    59
    Written Statement............................................    61

Discussion.......................................................    72

             Appendix I: Answers to Post-Hearing Questions

Dr. George Nield, Associate Administrator for Commercial Space 
  Transportation, Federal Aviation Administration................    84

Dr. Alicia Cackley, Director of Financial Markets and Community 
  Investment Team, Government Accountability Office..............    99

Dr. Henry Hertzfeld, Research Professor of Space Policy and 
  International Affairs, Elliot School of International Affairs, 
  George Washington University...................................   105

 
          NECESSARY UPDATES TO THE COMMERCIAL SPACE LAUNCH ACT

                              ----------                              


                       TUESDAY, FEBRUARY 4, 2014

                  House of Representatives,
                                      Subcommittee on Space
               Committee on Science, Space, and Technology,
                                                   Washington, D.C.

    The Subcommittee met, pursuant to call, at 2:16 p.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Steven 
Palazzo [Chairman of the Subcommittee] presiding.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Chairman Palazzo. The Subcommittee on Space will come to 
order.
    Good afternoon. Welcome to today's hearing entitled 
``Necessary Updates to the Commercial Space Launch Act.'' In 
front of you are packets containing the written testimony, 
biographies, and required truth-in-testimony disclosures for 
today's witnesses. I recognize myself for five minutes for an 
opening statement.
    I want to take a moment to acknowledge the NASA Day of 
Remembrance, which was observed last Friday as a tribute to the 
crews of Apollo I and the Space Shuttles Columbia and 
Challenger. These men and women lost their lives in the pursuit 
of exploration and discovery and they will never be forgotten.
    In his 1984 State of the Union speech, President Reagan 
reminded us that our progress in space ``is a tribute to 
American teamwork and excellence.'' He challenged our best and 
brightest to develop launch companies ready to lift payloads to 
orbit regularly with minimal government interference. Shortly 
after his speech, Congress responded with passage of the 
Commercial Space Launch Act.
    As we once more consider changes to this groundbreaking 
legislation, President Reagan's words ring just as true for us 
today as they did three decades ago. We must continue providing 
a framework for supporting the development of commercial space 
launch. As the commercial space industry evolves, so too should 
our laws and federal regulations. While there are many issues 
we will address in the next CSLA, it is my desire that we give 
special focus to issues surrounding launch indemnification and 
the regulatory learning period.
    The third-party liability risk-sharing regime, which we 
know today as indemnification, provided a much-needed safety 
net for new companies that were developing to fill the Nation's 
launch needs after commercial satellite launches with Shuttle 
ended. Since it was first created in 1988, the regime has been 
extended six times, most recently a few weeks ago on the 
omnibus spending bill. I look forward to hearing what our 
witnesses have to say about this provision and any changes to 
it that might be helpful.
    In 2004, as part of the Commercial Space Launch Amendments 
Act, Congress placed a moratorium on most regulations related 
to spaceflight participants and vehicle design to ensure ample 
flexibility for a developing commercial human space launch 
industry. The need for this provision at the time was clear: 
How can the FAA regulate an industry that does not exist and 
has not flown a single paying customer? Today, the situation 
hasn't changed much. The FAA still has no data to use for 
regulations and the commercial human space launch industry is 
still working hard to get off the ground.
    The Commercial Crew Development Program at NASA has done a 
lot to move the industry along by providing an anchor tenant 
for orbital commercial human spaceflight, funding for early 
stage development, and funding to mature spacecraft designs. 
While the suborbital market seems to be maturing rapidly, it is 
still not clear that there is a business case for nongovernment 
orbital human space tourism in the near future. What is clear 
is that if the FAA begins trampling on these companies with 
regulations based in speculation instead of data, we may never 
see the promise of commercial human spaceflight realized. The 
learning period will expire in 2015 and I look forward to what 
our witnesses have to say about this provision and its relative 
importance to the industry.
    There are many other issues that may need to be addressed 
in a potential commercial space bill such as streamlining the 
permitting process, offering more flexibility for experimental 
aircraft, better defining the various types of spacecraft, and 
strengthening the informed consent provisions. We must also 
ensure that export controls and International Trafficking in 
Arms Regulations are rational and productive. We need to 
provide stable, certain, and competitive regulatory 
environments at the Federal Aviation Administration, the 
Federal Communications Commission, and the National Oceanic and 
Atmospheric Administration that facilitate domestic investment.
    I have to mention that as I prepared for this hearing I 
reviewed an article in the Journal of Space Law, which is 
published by the University of Mississippi School of Law. Ole 
Miss has a world premier space law program, and I am happy to 
know that Mississippi is at the forefront of these challenging 
issues. I look forward to working with both sides of the aisle 
in the next few months to come up with bipartisan solutions to 
these issues. There is a lot of promise in the future of 
commercial spaceflight, and if we work together, I know we can 
put in place policies that will help grow our economy and this 
great industry.
    With that, I yield to the Ranking Member, the gentlewoman 
from Maryland, Ms. Edwards.
    [The prepared statement of Mr. Palazzo follows:]

  Prepared Statement of Subcommittee on Space Chairman Steven Palazzo

    Chairman Palazzo: Good morning. I would like to welcome everyone to 
our hearing today and I want to thank our witnesses for taking time to 
appear before the Committee.
    Before we get started I want to take a moment to acknowledge the 
NASA Day of Remembrance, which was observed last Friday, as a tribute 
to the crews of Apollo 1 and the space shuttles Columbia and 
Challenger. These men and women lost their lives in the pursuit of 
exploration and discovery, and they will never be forgotten.
    In his 1984 State of the Union speech, President Reagan reminded us 
that our progress in space ``is a tribute to American teamwork and 
excellence.'' He challenged our best and brightest to develop launch 
companies ready to lift payloads to orbit regularly with minimal 
government interference. Shortly after his speech, Congress responded 
with passage of the Commercial Space Launch Act.
    As we once more consider changes to this ground-breaking 
legislation, President Reagan's words ring just as true for us today as 
they did three decades ago. We must continue providing a framework for 
supporting the development of commercial space launch. As the 
commercial space industry evolves, so too should our laws and federal 
regulations. While there are many issues we will address in the next 
CSLA, it is my desire that we give special focus to issues surrounding 
launch indemnification and the regulatory learning period.
    The third-party liability risk-sharing regime, which we know today 
as indemnification, provided a much needed safety net for new companies 
that were developing to fill the nation's launch needs after commercial 
satellite launches with shuttle ended. Since it was first created in 
1988, the regime has been extended six times, most recently a few weeks 
ago on the omnibus spending bill. I look forward to hearing what our 
witnesses have to say about this provision and any changes to it that 
might be helpful.
    In 2004, as part of the Commercial Space Launch Amendments Act, 
Congress placed a moratorium on most regulations related to space 
flight participants and vehicle design to ensure ample flexibility for 
a developing commercial human space launch industry. The need for this 
provision at the time was clear, how can the FAA regulate an industry 
that does not exist and has not flown a single paying customer? Today, 
the situation hasn't changed much. The FAA still has no data to use for 
regulations and the commercial human space launch industry is still 
working hard to get off the ground.
    The Commercial Crew Development Program at NASA has done a lot to 
move the industry along by providing an anchor tenant for orbital 
commercial human spaceflight, funding for early stage development, and 
funding to mature spacecraft designs. While the suborbital market seems 
to be maturing rapidly, it is still not clear that there is a business 
case for non-government orbital human space tourism in the near future. 
What is clear is that if the FAA begins trampling on these companies 
with regulations based in speculation instead of data, we may never see 
the promise of commercial human spaceflight realized. The learning 
period will expire in 2015 and I look forward to what our witnesses 
have to say about this provision and its relative importance to the 
industry.
    There are many other issues that may need to be address in a 
potential commercial space bill such as streamlining the permitting 
process, offering more flexibility for experimental aircraft, better 
defining the various types of spacecraft, and strengthening the 
informed consent provisions. We must also ensure that export controls 
and International Trafficking in Arms Regulations (ITAR) are rational 
and productive. We need to provide stable, certain, and competitive 
regulatory environments at the Federal Aviation Administration (FAA), 
the Federal Communications Commission (FCC), and the National Oceanic 
and Atmospheric Administration (NOAA) that facilitate domestic 
investment.
    I have to mention that as I prepared for this hearing I reviewed an 
article in the Journal of Space Law, which is published by the 
University of Mississippi School of Law. Ole' Miss has a world premier 
space law program, and I'm happy to know that Mississippi is at the 
forefront of these challenging issues. I look forward to working with 
both sides of the aisle in the next few months to come up with 
bipartisan solutions to these issues. There is a lot of promise in the 
future of commercial spaceflight. If we work together I know we can put 
in place policies that will help grow our economy and this great 
industry.
    With that I recognize the ranking member, Ms. Edwards, for an 
opening statement.

    Ms. Edwards. Thank you very much, Mr. Chairman. And I hope 
you all will bear with my voice. I promised the Chairman of the 
full Committee that I would go easy on him today because I 
don't have a voice and I will honor that promise.
    I appreciate all our witnesses here today. Looking back to 
when the Commercial Space Launch Act was passed in 1984 and I 
think it is--and then amendments of course in 1988 and 2004, 
and I think it is fair to say that the commercial space 
industry indeed has come a long way. Not only has it come a 
long way but it is growing and changing every day as companies 
and entrepreneurs continue to generate new ideas and technical 
concepts for potential commercial space transportation systems. 
Mr. Chairman, I think this type of ingenuity and innovative 
spirit that defines our Nation and our economic potential is 
great and I want to see it succeed.
    And as I said before, I am one of those adventurers who 
wants to be a passenger, but of course I want it to be safe. 
And of course my enthusiasm is tempered by the recognition that 
there are a number of questions that remain outstanding in this 
growing industry that need to be answered and issues that need 
to be resolved.
    The recently passed extension in the third-party liability 
indemnification regime for three years I think means that we 
have the time for a thorough and thoughtful examination of 
these questions, and I look forward to our Subcommittee 
conducting future hearings to address them. For example, should 
we be providing indemnification permanently or should we be 
laying the groundwork for an insurance-based regime? How might 
such a transition occur and on what timeline? What would such a 
transition mean for the insurance industry? And what other 
industry models can we examine for good practices? There are 
also questions about how liability should be treated for 
passengers or spaceflight participants as they are called, and 
that brings me to the question of whether the policy and 
regulation for commercial spaceflight with humans should differ 
from that for commercial launches carrying satellites, cargo, 
or other payloads, which have comprised the commercial space 
industry to date.
    In short, the real question is whether a one-size-fits-all 
approach to commercial space transportation and policy and 
regulation are appropriate for this industry or should we 
consider different frameworks for commercial human and 
commercial un-crewed space transportation systems? Already we 
are seeing existing statute being tested every day by the 
evolving nature of the industry. So I hope that we are going to 
be able to answer some of these questions.
    I am going to enter my full statement into the record so 
that I can relieve your ears of my voice, but I will say that I 
think this sampling of the range of questions for our witnesses 
today tells us that we have so much more to learn, and I really 
do hope that this Committee will do what is intended and, that 
is, really thoroughly and thoughtfully examine all of these 
questions, because I think it is important both for the 
maturing and growing industry but it is also important for any 
potential passenger and crews.
    And I know that we hadn't had that time before, but 
certainly with this three-year extension in place, we have the 
time for that kind of thoughtful consideration right now. And 
we also have the time to examine other industries that have 
evolved and we have examples of them that may show us some 
window into the way that we need to deal with the potential 
liabilities of this industry. And with that, I yield.
    [The prepared statement of Ms. Edwards follows:]

               Prepared Statement of Subcommitee on Space
                      Ranking Member Donna Edwards

    Thank you, Mr. Chairman, for holding today's hearing on ``Necessary 
Updates to the Commercial Space Launch Act,'' and welcome to our 
witnesses. Looking back to when the Commercial Space Launch Act (CSLA) 
was passed in 1984, followed by the Commercial Space Launch Act 
Amendments in 1988, and the Commercial Space Launch Amendments Act in 
2004, it is fair to say that the commercial space industry has come a 
long way. Not only has it come a long way, but it's growing and 
changing as companies and entrepreneurs continue to generate new ideas 
and technical concepts for potential commercial space transportation 
systems and related operations.
    Mr. Chairman, this is the type of ingenuity and innovative spirit 
that defines our nation and our economic potential; and I want to see 
it succeed. I've said it before and I'll say it again, I want to fly as 
a passenger one day. However, Mr. Chairman, my enthusiasm is tempered 
by the recognition that there are number of questions about this 
growing industry that remain unanswered, and issues that need to be 
resolved. I raise them because they are questions of national policy 
and safety that deserve our due diligence and that help us, as Members 
of Congress, to fulfill our responsibilities to the American taxpayers.
    Commercial space transportation, in fact, draws heavily on 
government support through contracts for launches, use of 
infrastructure, technical assistance, and financial support for the 
development of government-required transportation services. I want to 
recognize the significant taxpayer investments involved in supporting 
this industry as we consider any direction on policy or regulation.
    Mr. Chairman, the recently passed extension of the third-party 
liability and indemnification regime for three years means that we have 
the time for a thoughtful examination of these questions, and I look 
forward to our Subcommittee conducting future hearings to address them. 
For example, should we be providing indemnification permanently or 
should we be laying the groundwork for a shift toward an insurance-
based regime? How might such a transition occur and on what timeline? 
What would such a transition mean for the insurance industry? What 
other industry models should we examine?
    There are also questions about how liabilities should be treated 
for passengers, or space flight participants as they are called. And 
that brings me to the question of whether the policy and regulations 
for commercial space flights with humans should differ from that for 
commercial launches carrying satellites, cargo or other payloads, which 
have comprised the commercial space launch industry to date. In short, 
is a ``one-size-fits-all'' approach to commercial space transportation 
policy and regulation appropriate? Or should we consider different 
frameworks for commercial human and commercial uncrewed space 
transportation systems?
    Already, we are seeing the existing statute being tested by the 
evolving nature of the industry. For example, the current statute does 
not allow a commercial launch provider to hold a license on a launch 
vehicle design being used for paid flights, while also holding an 
experimental permit to test out improvements or modifications on 
another vehicle of the same design that is not being used for paid 
flights. This would seem to be something that could be remedied quickly 
through either legislative or administrative action, and I look forward 
to getting the FAA's thoughts on the matter at today's hearing.
    In addition, when will Congress allow FAA to issue safety 
regulations for these new vehicles? I know that some in industry would 
like to put that date off for as long as possible. But, Mr. Chairman, 
we all know that spaceflight involves risk, and I don't think we should 
wait until there is an accident to put sensible safety regulations in 
place.
    Finally, I also hope we can begin serious consideration of how we 
are going to handle accident investigation of commercial space 
launches, because we are getting closer to the day when humans will be 
flying on commercial suborbital, and eventually orbital systems. And 
when inevitably there is a ``bad day,'' I don't think the government, 
the industry, or the families of those who might potentially be lost 
will benefit if we wind up developing an accident investigation 
framework under pressure and in reaction to a catastrophic event.
    We have the opportunity and the time to thoughtfully consider what 
is needed to develop a structure for accident investigation, including 
the expertise that would be required and the data that industry should 
be collecting to facilitate a potential investigation, should an 
accident occur, and how other high-risk operations handle accident 
investigation.
    Well, this is just a sample of questions that I hope we can explore 
with industry, government, academia and other stakeholders through 
hearings and dialogue, over at least the coming year, to inform what 
will be important legislation. So, let's not rush a bill, Mr. Chairman, 
when there are too many critical questions and issues that need our 
careful consideration. Let's take the time to get it right. I look 
forward to working with you to ensure the safety and success of the 
commercial space transportation industry.
    Thank you, and I yield back the balance of my time.



    Chairman Palazzo. Thank you, Ms. Edwards.
    I now recognize the Chairman of the full Committee for a 
statement.
    Chairman Smith. Thank you, Mr. Chairman.
    Let me confess at the outset and say to the Ranking Member 
Donna Edwards that there are some days I wish she had 
laryngitis but today is actually not one of them. Furthermore, 
now that she is engaged to a Texan, I assume she will be voting 
with me more often.
    Ms. Edwards. Mr. Chairman, that was not really public.
    Chairman Smith. Oh, well, I was looking at your engagement 
ring. I thought that was a giveaway. Sorry.
    Ms. Edwards. In that case, thank you.
    Chairman Smith. We will scratch that for the record just 
for the--thank you, Mr. Chairman, for having this hearing. 
Also, I want to say we have excellent witnesses today.
    Americans' record of ingenuity is filled with examples of 
entrepreneurs who pushed the boundaries of the possible. The 
commercial space industry relies on this same creative spirit. 
Three decades ago, Congress and President Reagan worked 
together to pass the Commercial Space Launch Act. This 
legislation paved the way for American entrepreneurs to reach 
for the stars.
    America has always been a nation of innovators and 
explorers. We continue to remain on the forefront of new 
discoveries and technologies. Members of Congress were looking 
toward the future when they passed the Commercial Space Launch 
Act. They had the foresight to understand that space may not be 
the final frontier, but it is certainly the next frontier.
    Were it not for this legislation, perhaps we would not have 
some of the modern conveniences that we take for granted today. 
The Space Subcommittee recently held a hearing with 
representatives of the commercial space industry. The message 
from those witnesses was clear. They need the government to be 
consistent in its policy and regulations need to allow them 
flexibility to develop their businesses and hire more American 
workers.
    In 1984, there were 18 federal agencies involved in every 
launch. The system was inefficient and suffocated the industry. 
Congress passed the Commercial Space Launch Act to get 
government out of the way and reduce bureaucracy so American 
businesses could be innovative and develop. Perhaps we can 
continue to learn from that strategy.
    Today, the Subcommittee will examine various aspects of the 
commercial space launch industry and how it is affected by the 
act. There are several provisions of the law that need to be 
updated, and the industry continues to evolve, so must the laws 
that govern it.
    So, Mr. Chairman, I look forward to working with you and 
the Ranking Member and our friends on the other side of the 
aisle to draft a commercial space bill that will encourage the 
growth of the commercial space industry.
    Before I yield to the gentleman from California, Mr. 
Rohrabacher, I would like to single out and recognize Stu Witt 
in the front row there, who is the Chairman of the Commercial 
Spaceflight Federation and is here from California. Stu, 
welcome to the hearing.
    With that, Mr. Chairman, I will yield to the Vice Chairman 
of the full Committee, the gentleman from California, Mr. 
Rohrabacher.
    [The prepared statement of Mr. Smith follows:]

    Prepared Statement of Committee on Science, Space and Technology
                        Chairman Lamar S. Smith

    Thank you Chairman Palazzo for holding this hearing. And I thank 
the witnesses for being here to share their expertise on this topic.
    Americans' record of ingenuity is filled with examples of 
entrepreneurs who pushed the boundaries of the possible. The commercial 
space industry relies on this same creative spirit. Three decades ago, 
Congress and President Reagan worked together to pass the Commercial 
Space Launch Act. This legislation paved the way for American 
entrepreneurs to reach for the stars.
    America has always been a nation of innovators and explorers. We 
continue to remain on the forefront of new discoveries and 
technologies. Members of Congress were looking toward the future when 
they passed the Commercial Space Launch Act. They had the foresight to 
understand that space may not be the final frontier, but it is 
certainly the next one.
    Were it not for this legislation, perhaps we would not have some of 
the modern conveniences that we take for granted today. The Space 
Subcommittee recently held a hearing with representatives of the 
commercial space industry. The message from those witnesses was clear. 
They need the government to be consistent in its policy. And 
regulations need to allow them flexibility to develop their businesses 
and hire more American workers.
    In 1984, there were 18 federal agencies involved in every launch. 
The system was inefficient and suffocated the industry. Congress passed 
the Commercial Space Launch Act to get government out of the way and 
reduce bureaucracy so American businesses could be innovative and 
develop. Perhaps we can continue to learn from that wise strategy.
    Today the subcommittee will examine various aspects of the 
commercial space launch industry and how it is affected by the act. 
There are several provisions of the law that need to be updated. As the 
industry continues to evolve, so must the laws that govern it.
    As Chairman Palazzo pointed out, by working together we can develop 
bipartisan solutions to the various issues that face the commercial 
space sector.
    I look forward to working with him and our friends on the other 
side of the aisle to draft a commercial space bill that will encourage 
the growth of the commercial space industry.
    Thank you Mr. Chairman, I yield back.

    Mr. Rohrabacher. Thank you very much, and let me just note, 
as the author of the Commercial Space Launch Act of 2004, I 
would like to briefly touch on just three aspects of today's 
hearing, first, the regulatory learning period of commercial 
space regulations. Overcoming the challenges of creating and 
perfecting new space technologies has taken longer than we 
predicted ten years ago when we passed this act and we expected 
flights to begin much earlier than they actually have begun. 
What we should have done is structure this so the eight-year 
timeline started with the first commercial flight carrying a 
spaceflight participant. The most important point, however, is 
that we move forward, and that as we are moving forward, that 
regulating in the absence of actual flight data is the worst 
choice that we can make.
    So item number two is the limits on testing of space 
vehicles once launch licenses have been issued. Virgin Galactic 
is continuing their powered test flights on SpaceShipTwo and 
the FAA is close to a decision on their license application. 
Their ability to complete their test programming, however, may 
be at risk once they have received the license. So I mean the 
last thing I can assure everyone here that we never intended a 
company's ability to test their vehicle or gather additional 
safety information to be limited simply because the license has 
been approved.
    And finally, the current law indemnifies launch providers 
from claims above the insurance requirements but it also 
indemnifies government against the most probable claims in the 
case of an incident. This shared indemnification is important 
to both the government and the industry and we should make sure 
that we look at it as such.
    And so I look forward to our hearing of our witnesses. I 
have to leave at three o'clock but I am really looking forward 
to your testimony and I may not be able to stay for the 
question period, but thank you very much for yielding time and 
letting me put this on the record.
    Chairman Palazzo. Thank you. If there are Members who wish 
to submit additional opening statements, your statements will 
be added to the record at this point.
    Chairman Palazzo. At this time, I would like to introduce 
our panel of witnesses. Our first witness is Dr. George Nield, 
Associate Administrator for Commercial Space Transportation at 
the Federal Aviation Administration. Dr. Nield came to the FAA 
from the Orbital Sciences Corporation where he served as senior 
scientist for the Advanced Programs Group. He was the manager 
of the Flight Integration Office for the Space Shuttle Program 
at Johnson Space Center, a graduate of the United States Air 
Force Academy. He holds an M.S. and Ph.D. in aeronautics and 
astronautics from Stanford University and an MBA from George 
Washington University.
    Our second witness is Dr. Alicia Cackley, Director of the 
Financial Markets and Community Investment Team at the 
Government Accountability Office. She oversees policy research 
and program evaluation on a broad range of insurance, consumer 
protection, housing, and finance issues. Dr. Cackley received 
her Ph.D. in economics from the University of Michigan and has 
been with the GAO since 1990.
    Our third witness is Dr. Henry Hertzfeld, Research 
Professor of Space Policy and International Affairs at the 
Elliott School of International Affairs at George Washington 
University. He is also an adjunct professor of law at GW. Dr. 
Hertzfeld has served as a senior economist and policy analyst 
at both NASA and the National Science Foundation and is a 
consultant to both U.S. and international agencies and 
organizations. Dr. Hertzfeld is a member of the bar in 
Pennsylvania and the District of Columbia. He received his 
Ph.D. from Temple University.
    As our witnesses should know, spoken testimony is limited 
to five minutes each after which Members of the Committee have 
five minutes each to ask questions. Your written testimony will 
be included in the record of the hearing.
    I now recognize our first witness, Dr. Nield, for five 
minutes.

                 TESTIMONY OF DR. GEORGE NIELD,

             ASSOCIATE ADMINISTRATOR FOR COMMERCIAL

     SPACE TRANSPORTATION, FEDERAL AVIATION ADMINISTRATION

    Dr. Nield. Chairman Palazzo, Ranking Member Edwards, and 
distinguished Members of the Subcommittee, thank you for 
inviting me to speak with you today. This is an exciting time 
for commercial space transportation, and I appreciate having 
the opportunity to provide you with an update.
    Since I last testified before the Subcommittee in 2012, the 
level of commercial space transportation activity in the United 
States has increased significantly. For example, in Fiscal Year 
2012 there were only three FAA licensed or permitted launches. 
In Fiscal Year 2013 there were 18, a sixfold increase.
    The prospects for continued growth are solid. Both SpaceX 
and Orbital Sciences Corporation are now conducting launches 
under FAA licenses in order to deliver supplies to our 
astronauts onboard the International Space Station. Sierra 
Nevada Corporation, Boeing, and SpaceX are all developing 
systems to carry NASA astronauts to and from the Space Station 
as part of NASA's Commercial Crew Program. The development of 
suborbital vehicles is also continuing with a number of flight 
tests expected during the coming year.
    Virgin Galactic and XCOR Aerospace have signed up nearly 
1,000 potential participants, yet space tourism is just the tip 
of the iceberg. Potential suborbital missions include 
conducting scientific research, demonstrating new technologies, 
media and public relations, educational outreach, and satellite 
deployment. New ideas and plans are coming our way with 
increasing frequency. Right now, we have about 25 ongoing pre-
application consultations. This number includes proposals for 
new vehicles, new spaceports, safety approvals, and requests 
for payload reviews. All of these indicators are signs of 
industry growth.
    The FAA Office of Commercial Space Transportation has a 
twofold mission: To ensure protection of the public, property, 
and the national security and foreign-policy interests of the 
United States during commercial launch and reentry activities; 
and to encourage, facilitate, and promote commercial space 
transportation. To carry out our safety responsibilities, we 
develop and issue regulations, grant licenses, permits, and 
safety approvals, and conduct safety inspections during every 
licensed or permitted launch.
    With the advent of on-orbit commercial space 
transportation, the FAA has begun a dialogue with our 
stakeholders to explore the need for adjustments to the FAA's 
statutory authority. As the number of commercial space 
transportation vehicles increases, it is appropriate to 
consider closing the current regulatory and safety gap between 
launch and reentry. The FAA believes it is time to explore the 
orbital safety of commercial space transportation under the 
Commercial Space Launch Act licensing regime.
    As the popular film Gravity was able to illustrate so 
dramatically, collisions in space can have devastating effects. 
The FAA's experience with collision avoidance includes 
conducting analyses and implementing orbital debris mitigation 
practices for U.S. licensed launches. The National Space 
Transportation Policy, which was issued in November of 2013, 
calls on the FAA to execute exclusive authority in this area. 
Should the FAA's authority be increased, we would work to 
ensure that appropriate levels of orbital safety are maintained 
in addition to our responsibility for launches and reentries. 
The goal would be for the FAA to address orbital transportation 
safety, including for orbital debris mitigation, for spacecraft 
whose primary function was transportation.
    Finally, I would like to assure the Subcommittee that our 
partnership with NASA with respect to its commercial activities 
is proceeding very smoothly. We strongly support the 
Administration's requested changes for the Commercial Space 
Launch Act that would add a third category of occupants called 
government astronauts. The changes would complement our 
existing definitions of crew and spaceflight participants, and 
would increase transparency and ease the administration of our 
regulations in the context of NASA astronauts serving as crew.
    Mr. Chairman, this concludes my prepared remarks. I will be 
pleased to answer any questions that you may have.
    [The prepared statement of Dr. Nield follows:]


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    Chairman Palazzo. Thank you, Dr. Nield.
    I now recognize our next witness, Dr. Cackley, for five 
minutes.

                TESTIMONY OF DR. ALICIA CACKLEY,

               DIRECTOR OF FINANCIAL MARKETS AND

                   COMMUNITY INVESTMENT TEAM,

                GOVERNMENT ACCOUNTABILITY OFFICE

    Dr. Cackley. Chairman Palazzo, Ranking Member Edwards, and 
Members of the Subcommittee, I am pleased to be here today to 
talk about the Federal Aviation Administration's Commercial 
Space Launch Indemnification Program.
    As you are aware, a catastrophic commercial launch accident 
could have a significant impact on the uninvolved public or 
third parties in the form of personal injuries or property 
damage. In anticipation of such an event, a launch company must 
purchase a fixed amount of insurance for each launch per 
calculation by the FAA. According to the 1988 amendments of the 
Commercial Space Launch Act, or CSLA, the federal government is 
then potentially liable for claims above that amount up to an 
additional $3 billion as adjusted for inflation and subject to 
Congressional appropriations.
    My statement today is based on work that we completed in 
July of 2012 at the request of this Committee and the Senate 
Committee on Commerce, Science, and Transportation, with some 
updates as of January 2014 of FAA launch data and insurance 
industry capacity, as well as FAA's progress on implementing 
our recommendation.
    In July 2012 we compared the U.S. Government's 
indemnification policy with those of other countries and found 
that the United States provides less indemnification for third-
party losses than key competitors such as China, France, and 
Russia because these countries put no upper limit on the amount 
of their coverage, while in the United States, coverage stops 
at about $3 billion per launch. However, for a given launch, 
the point at which the U.S. Government starts to cover losses, 
the maximum probable loss, may be lower than in other 
countries.
    In all these countries, including the United States, these 
commitments to pay have never been tested because there has 
never been a third-party claim that exceeded the launch 
companies' insurance and thus reached the level of government 
indemnification. As a result, the potential cost to the federal 
government of indemnification for third-party losses is 
unclear. Estimating probable losses from a rare catastrophic 
event is difficult, but how accurate that calculation is 
depends on the soundness of the methodology that generates it.
    In July 2012, insurance industry officials and risk 
modeling experts told us that FAA's method of calculating 
maximum probable loss was outdated, had not been reviewed by 
outside experts, and may not be sound. An inaccurate 
calculation that understates the amount of insurance a launch 
provider must obtain would increase the likelihood of cost to 
the federal government and lower insurers' cost, whereas a 
calculation that overstates the amount of insurance would 
decrease the likelihood of federal costs and raise insurers' 
costs. In addition, the possible growth in commercial launches, 
including manned launches, could increase the number of 
launches eligible for CSLA coverage and thus potential costs 
for the federal government.
    In July 2012, FAA officials said that their method for 
calculating maximum probable loss was reasonable and 
conservative but they agreed that a review could be beneficial 
and that involvement of outside experts might be helpful for 
improving their methodology. In January 2014, FAA told us they 
have taken some initial steps toward revising and updating 
their maximal probable loss methodology but that budget 
constraints had prevented further progress in the short term. 
We continue to believe that our July 2012 recommendation that 
FAA periodically review and update as appropriate its 
methodology for calculating launch providers' insurance 
requirements has merit and should be fully implemented.
    With respect to the ability and willingness of the 
insurance market to provide additional third-party liability 
coverage, industry representatives we contacted in July 2012 
told us the market was generally willing and able to provide up 
to $500 million per launch, and one insurer recently confirmed 
this is still the case. Because the amount of insurance FAA 
requires launch providers to obtain averages about $82 million 
per launch as of 2014 and coverage available through CSLA is 
about $3 billion above a given launch's maximum probable loss, 
insurers could provide some of the coverage currently available 
through CSLA, namely, the difference between the maximum 
probable loss and the $500 million the industry indicated was 
the most they might provide. However, industry representatives 
cautioned that the amount and price of insurance that they 
might provide could change quickly if a large loss were to 
occur. If those costs are passed on to customers, U.S. launch 
companies could be more expensive and therefore less 
competitive than their foreign counterparts.
    Oh, I am sorry. Let me start this last part over.
    Finally, while ending indemnification could potentially 
decrease U.S. competitiveness, this depends on many factors and 
the actual effects are currently unknown. Launch companies and 
customers GAO contacted in July 2012 believe that ending 
federal indemnification could lead to higher launch costs for 
U.S. launch companies. If those costs are passed on to 
customers, U.S. launch companies could be more expensive, and 
therefore, less competitive than their foreign counterparts. 
However, it is unclear exactly how much the cost of third-party 
liability insurance, which brokers told us is about one percent 
of the total insurance coverage purchased by launch companies, 
might increase in the absence of federal coverage. And while 
launch customers said that price and vehicle reliability were 
key factors in their choice of a launch company, it is also not 
clear whether the increase in insurance costs alone would be 
sufficient reason for a launch customer to choose a foreign 
launch company over a U.S. company.
    Mr. Chairman, this concludes my prepared statement. I would 
be happy to respond to any questions.
    [The prepared statement of Dr. Cackley follows:]


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    Chairman Palazzo. Thank you, Dr. Cackley.
    I now recognize our final witness, Dr. Hertzfeld, for five 
minutes.

               TESTIMONY OF DR. HENRY HERTZFELD,

               RESEARCH PROFESSOR OF SPACE POLICY

                   AND INTERNATIONAL AFFAIRS,

            ELLIOT SCHOOL OF INTERNATIONAL AFFAIRS,

                  GEORGE WASHINGTON UNIVERSITY

    Dr. Hertzfeld. Thank you very much. Thank you for the 
opportunity to testify today on the topic of updating the 
Commercial Space Launch Act.
    Chairman Palazzo. Microphone, please.
    Dr. Hertzfeld. I am sorry. I will start again.
    Thank you for the opportunity to testify today on the topic 
of updating the Commercial Space Launch Act. This act has 
proven to be a very powerful and productive force in 
stimulating commercial space transportation in the United 
States. The Department of Transportation through the Federal 
Aviation Administration has carried out its obligations well 
and the United States is recognized as a responsible nation in 
administering commercial space launch activities. The FAA has 
also been successful in promoting commercial space endeavors. 
The fact that regulations have remained predictable, stable, 
consistent, and have been administered with fairness and 
transparency is alone enough to provide confidence in the 
domestic and international commercial communities.
    But there are some considerations that the Congress should 
address as commercial space activities evolve. The first is 
jurisdictional. The DOT is an agency with expertise in 
administering rules concerning all types of transportation but 
it has no special expertise in the fields of resource 
extraction, energy generation, or Moon landings, all of which 
are being seriously proposed for outer space commercial 
projects. In fact, Congress has not granted to any agency 
specific regulatory powers over most activities in outer space. 
And examples of that include launching a payload from a 
platform in space; oversight of a commercial payload landing on 
an asteroid or other celestial body; extracting, moving, or 
returning Earth resources from space.
    It is important to remember that by treaty agreements, the 
United States Government as a launching state is ultimately 
liable for damages from these activities should something go 
wrong. Rather than expand the scope of the CSLA, I would 
recommend that Congress consider allocating future jurisdiction 
over nontransportation issues to agencies with the required 
expertise in those areas. That has been the approach Congress 
has chosen in the past, witnessed by the Department of Commerce 
licensing of remote sensing payloads in the earlier FCC 
licensing of telecommunications satellites.
    The--at the same time, Congress should clearly define the 
jurisdictional limits of the CSLA in order to avoid overlaps. 
The topic of indemnification, if there were a catastrophic 
accident in space involving a U.S. Government or corporate 
asset, politics and international relations rather than any 
Congressional limit would likely determine who would pay and 
how much. The good news of course is that the probability of 
such a catastrophic accident in space is relatively small. The 
bad news is that some orbits are becoming crowded and there is 
a growing probability that an accident with large economic 
consequences could happen.
    This coupled with emerging space capabilities such as 
satellite servicing, active debris removal, or moving asteroids 
will raise new insurance and indemnification issues. Examples 
again are, although launch insurance is required, satellite 
insurance is not. The United States could undertake an effort 
to negotiate international agreements for limits to liability 
for damages in space. There is no international enforceable and 
binding dispute resolution system for commercial accidents in 
outer space. Binding arbitration might be one to consider. The 
United States Government should adopt incentives for private 
industry to develop its own insurance pool to possibly 
eliminate the need for government indemnification.
    Regarding the experimental period for suborbital human 
flight, there is no clear answer to when the experimental 
period should end, but it certainly will have to be extended 
beyond 2015. There are a number of companies developing human 
suborbital systems. Each company has a different technological 
approach making any end to an experimental period unique to 
each. Congress is faced with a dilemma. If it ends the 
experimental period when the first company is deemed to be 
successful, it penalizes late starters, but if it continues it 
indefinitely, then final regulations for safety in suborbital 
vehicles will be greatly delayed, possibly risking lives and 
damage.
    In regard to other nations, all launching states are 
parties to the Outer Space Treaty, have agreed to assume 
liability and indemnify launches, but there is no guarantee 
that if a problem occurs in space, all will handle it the same 
way or in a way that will be satisfactory to other nations. 
With the exception of a major unilateral shift in the 
indemnification regime such as terminating the U.S. 
Government's guarantee, it is unlikely that the current CSLA or 
any changes to it will significantly alter the competitiveness 
of U.S. launch companies.
    In summary, the CSLA has proven to be effective and 
responsive to U.S. industry's needs. However, because of the 
diverse spread of expertise and responsibility among different 
federal agencies, the Congress should address the interagency 
coordination of all United States space activities so that 
future commercial space licenses will be handled effectively, 
efficiently, and quickly with the maximum transparency that is 
possible.
    Thank you very much.
    [The prepared statement of Dr. Hertzfeld follows:]


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    Chairman Palazzo. Thank you, Dr. Hertzfeld.
    I thank the witnesses for being available for questioning 
today. Reminding Members that Committee rules limit questioning 
to five minutes, the Chair will at this point open the round of 
questions. The Chair recognizes himself for five minutes.
    When Congress enacted the law to promote commercial human 
spaceflight in 2004, it included an eight-year learning period 
to allow industry to innovate without excessive regulation 
while allowing the FAA to write rules based on actual problems 
during licensed flights. Unfortunately, it has taken a long 
time for the industry to emerge so Congress extended this for 
the full duration of the FAA Reauthorization Act in 2012, 
basically until September 30, 2015. It is my understanding that 
FAA's Commercial Space Transportation Advisory Committee, 
COMSTAC, has recommended that the learning period be restored 
to a full eight years from the first licensed flight of a 
spaceflight participant. Do you agree with the FAA advisory 
committee's recommendation? I would like to start with Dr. 
Nield.
    Dr. Nield. Mr. Chairman, if I could, I would like to tell 
you a little bit about what the FAA has been doing since 
Congress extended the learning period to give some context to 
the question itself.
    When we were asked to engage with industry about this 
subject, we went out and consulted with industry, specifically 
with COMSTAC, with NASA, with the Civil Aerospace Medical 
Institute (CAMI) as part of the FAA, and with academia, 
specifically the Center of Excellence for Commercial Space 
Transportation, and asked for their help and advice. We then 
held a series of eight public teleconferences to discuss what 
the FAA's oversight should look like, what levels of safety are 
appropriate, abort systems, fault tolerance, design margins, 
medical best practices, communications, and many other topics.
    And after reviewing the data and the lessons learned from 
the last 50 years of human spaceflight, we developed a draft 
document entitled ``The Established Practices of Human 
Spaceflight Occupant Safety.'' We posted that on our website 
and asked for comments from industry and from NASA. We are 
currently in the process of reviewing those comments and we 
hope to finalize the document this year. The ultimate goal is 
to gain the consensus of government, industry, and academia. 
And really, the document has two purposes, first of all, to 
serve as a framework and a benchmark for industry to use in 
developing industry consensus standards, and secondly, to serve 
as a baseline and a starting point should there be a need for 
government to issue regulations at some point in the future 
once the moratorium has expired. So, that sets the stage for 
where we are. I would be happy to expand on that later if you 
have time.
    Chairman Palazzo. Well, thank you, Dr. Nield.
    Dr. Hertzfeld, would you like to add anything to that?
    Dr. Hertzfeld. No, I don't think I can. I think that an 
arbitrary extension at this point such as the eight years that 
you had mentioned in your question might not be wise, but I 
think there is at some point a judgment call that will have to 
be made to end that period, and it should be based I think on 
the technical basis of the experience that we have had, 
particularly from the early flights and the expectations from 
any of the companies that might be in the wings to begin to 
start.
    Chairman Palazzo. The FAA interprets the CSLA to require a 
company with a licensed vehicle design to forfeit its ability 
to continue testing and improving that design once it has been 
put into service. Can you explain why the FAA believes it does 
not have the flexibility to allow these vehicles to continue 
testing, Dr. Nield?
    Dr. Nield. Yes. Our interpretation of the current law is 
that an experimental permit can only be used for specified 
purposes, basically for training or for demonstrating 
compliance, whereas a license can be used for compensation and 
hire, basically for commercial use. And although it has been 
mentioned already today that the intent was not to prevent or 
make difficult the opportunity to go back and forth, the way we 
read the current law, once a license is issued for a vehicle of 
the same design that currently has a permit, the permit would 
no longer be valid. Now, there is a way forward, which is you 
can still continue to do testing under a launch license, but 
under current law, we can't go back and forth.
    Chairman Palazzo. In 2012, GAO recommended that FAA should 
review the MPL calculation to ensure it is sound. How far along 
is FAA in the process and what have you found so far, again, 
Dr. Nield?
    Dr. Nield. We completely agree with the GAO 
recommendations. We believe we have a reasonable process which 
has been conservative, but we solicited and welcomed outside 
scrutiny and recommendations on how to improve the process. We 
have come up in house with what we think is a more objective 
and more accurate way of calculating the maximum probable loss. 
What we would like to do is spend the next 12 months basically 
to do an IV&V--independent verification and validation--of that 
software to make sure that it can be used for these very 
important decisions, basically how much insurance each company 
has to go get, and, again, we think it would be also valuable 
to have outside experts critique that, although there may be 
some funding requirements that are associated with that. So we 
would be happy to come back to the Committee later on in the 
year and give you a better progress report, but that is where 
we are right now.
    Chairman Palazzo. Thank you.
    I now recognize Ms. Bonamici for five minutes.
    Ms. Bonamici. Thank you very much, Mr. Chairman, and thank 
you to the witnesses for bringing your expertise to the 
Subcommittee.
    Dr. Hertzfeld, I want to ask about accident investigation 
involving commercial space operations. What will we need to 
know if we needed to determine what entity, whether it be an 
existing or new entity, should have the authority to 
investigate commercial spaceflight accidents, including those 
involving human spaceflight participants? How should 
investigations be handled? What type of expertise would be 
needed? And are there other high-risk industries that can serve 
as models?
    Dr. Hertzfeld. I really have not given that any thought in 
preparation for the testimony today, but when I testified in 
2011, I believe I did address a couple of issues related to 
that. And I think the National Transportation Safety Board 
generally has authority to investigate accidents related to 
transportation. Unless the law has been changed, space was left 
out of the actual list of those modes to which they would 
investigate. But I believe there is an MOU between the 
Commercial Space Office and the National Transportation Safety 
Board for accidents above a certain limit amount or those 
involving human beings would be under their jurisdiction. And 
if we go back to the Shuttle Columbia accident, I believe they 
were also involved because they had a lot of expertise in this 
area. NASA of course in the human spaceflight has had 
experience as well in accident investigation, but when 
something like this happens, the expertise within the 
government is found among the various agencies and I don't 
think any agency would decline to participate.
    Ms. Bonamici. Thank you. And I am going to ask Dr. Nield, 
what data should industry be required to collect in order to 
facilitate a potential accident investigation should an 
accident occur?
    Dr. Nield. We currently require a lot of information as 
part of a launch license process in terms of the vehicle and 
toxic propellants and the trajectories, what the hazards are, 
and so forth, so we already have that in place. And as Dr. 
Hertzfeld mentioned, we currently have MOUs, Memorandums of 
Understanding, between the FAA, the National Transportation 
Safety Board, and the Department of the Air Force to conduct 
investigations should there be an accident that occurs in the 
future.
    Ms. Bonamici. Can you think of any data that isn't being 
collected that might facilitate an accident investigation or it 
is your position that everything that should be collected is 
already being collected?
    Dr. Nield. I think we have a good set of requirements in 
terms of what information we need upfront. To build on your 
question though I think what could really help the industry 
going forward is a greater willingness to share information 
about close calls and incidents and accidents that do occur 
among the various companies. And of course that could be a 
difficult issue when you talk about proprietary data--
    Ms. Bonamici. Right.
    Dr. Nield. --and competition, but that could really help 
the safety.
    Ms. Bonamici. Terrific. Thank you.
    And for all the members of the panel, the Commercial Space 
Launch Act requires that space operators, before receiving 
compensation or agreeing to fly a spaceflight participant, 
inform each participant in writing about the risks of the 
launch and reentry, and it is my understanding that that is 
according to the vehicle type.
    Now, some say that informed consent is not a waiver of 
liability for any enhanced exposure to injury caused by the 
operator's carelessness, if any, and they advocate having each 
spaceflight participant exchange a liability waiver with the 
commercial launch provider. So basically, parties would agree 
not to file claims against the other party if there is an 
accident. Now, there are concerns about the rights of the 
passengers and their families and that they should be protected 
in the event of an accident. So what are your views on whether 
there should be cross waivers between spaceflight participants 
and commercial launch providers? Is informed consent still 
appropriate as we move to regularly scheduled and paid 
suborbital flights?
    And I think I will start with Dr. Hertzfeld. I don't know 
if the other of you are lawyers. It is a bit of a legal 
question.
    Dr. Hertzfeld. The way the system works today is the 
wording of the informed consent statement is left to the 
companies, I believe. Many states that have spaceports or are 
considering spaceports have passed legislation with wording on 
the informed consent, and each one is slightly different. And I 
think that is something of concern.
    Looking ahead, it is quite fine for states to compete 
against each other for economic reasons, but some of these laws 
are aimed at protecting the operator from a suit by one of the 
passengers if something went wrong and with the exception I 
believe of willful actions or gross negligence. They read 
differently and this may be something that the federal 
government should consider for preemption and it might be--
because the FAA has more data, more information on all of the 
companies and all of the risks, wording that perhaps should be 
drafted by the FAA and be uniform throughout the country.
    Ms. Bonamici. Thank you very much.
    And I see my time is expired. I yield back. Thank you, Mr. 
Chairman.
    Chairman Palazzo. I now recognize Mr. Rohrabacher for five 
minutes.
    Mr. Rohrabacher. Thank you very much. And I am going to 
have to be out of here in five minutes so I will get right to 
it. Dr. Nield, now, you are going to have to correct me if I am 
wrong in my assessment on what the law says, but right now, 
when some company like I guess Virgin Galactic gets a space 
launch license, at that point their ability to continue testing 
is highly restricted, is that correct?
    Dr. Nield. Just to be precise, currently Scaled Composites 
has the permit for SpaceShipTwo.
    Mr. Rohrabacher. All right.
    Dr. Nield. Virgin will be the eventual customer and they 
have applied for a launch license.
    Mr. Rohrabacher. Right.
    Dr. Nield. But once that license is issued, the use of a 
permit is invalidated.
    Mr. Rohrabacher. So they can't go--so what we are saying is 
that it makes sense to restrict the testing of something that 
has already been approved--well, we can't--we don't believe in 
perfecting it anymore or make it even a little more safer. Does 
that make any sense to you, that we are actually stopping a 
company that might want to test to see if there is more 
perfections they can do of their technology?
    Dr. Nield. That doesn't make any sense at all, and I would 
certainly not recommend that. Now--
    Mr. Rohrabacher. Okay. So----
    Dr. Nield. --additional testing could take place under a 
license, but----
    Mr. Rohrabacher. Yeah.
    Dr. Nield. --if there is bureaucracy involved here, then we 
ought to take a look at improving that.
    Mr. Rohrabacher. Mr. Chairman, I guess that means that what 
we--something we can do in the law to make sure that because 
someone has received a license, that they are not cut off then 
from improving what they have, the technology that they have, 
but that is necessary right now for us to change the law for 
that to happen.
    And let me ask, right now, you have got 18 federal agencies 
that in some way have something to do with the launch industry, 
and it was decided and we tried to focus most of this 
regulation on the Department of Transportation and the FAA 
Commercial Space Office. Doctor, you seem to be suggesting that 
we need to have more offices and more different bureaucrats 
involved complicating the process more rather than facilitating 
something that we need to develop in our country. You know what 
they say is bureaucracy is the most efficient system ever 
devised to turn creative energies into solid waste. And you 
seem to be advocating more government bureaucrats than less.
    Dr. Hertzfeld. Not exactly. I used the word agencies in my 
testimony----
    Mr. Rohrabacher. Yeah.
    Dr. Hertzfeld. --that is correct, but I am focusing more on 
expertise, wherever that might come from and however it might 
be best coordinated throughout the federal government. And even 
with 18 agencies involved, there is an intergovernmental review 
of all these licenses that goes to a number of agencies, and 
that process is apparently not working quite as well as it 
might and has slowed down some licenses so that whether the--
there is also, as I mentioned, a void in the law about on-orbit 
and in outer space activities----
    Mr. Rohrabacher. Right.
    Dr. Hertzfeld. --so that we are going to have to close that 
at some point, and when we do, many of these areas of other 
expertise will be necessary, and I think we have to----
    Mr. Rohrabacher. Well, I would hope that when we have areas 
of expertise that we don't set up a system in which someone who 
wants to participate in this incredible new avenue for human 
entrepreneurism, that we have them going to 20 different 
offices in order to talk to 20 different government officials 
in order to get--curry favor with each one of them, and if one 
of them doesn't put the stamp on the paper, well, you can't do 
what you want to do. And, believe me, there are a lot of 
businesses in our country that face this kind of overregulation 
and we should be very cautious not to put that type of burden 
on this new entrepreneurial effort in space.
    Dr. Hertzfeld. I agree with you. On the other hand, safety 
is one of the things that we do have to be very much aware of 
and that we do have to get the right information and have 
people who understand what is going on, work with those who are 
regulating.
    Mr. Rohrabacher. Well, maybe we could put them in the same 
office so they don't have to walk across town or something or--
--
    Dr. Hertzfeld. Could happen.
    Mr. Rohrabacher. Thank you very much. Thank you. And, Mr. 
Chairman, thank you.
    Chairman Palazzo. I now recognize Mr. Schweikert for five 
minutes.
    Mr. Schweikert. Thank you, Mr. Chairman.
    Educate me a little bit. How many countries right now are 
launch-capable or part of the international treaty, the 
compact?
    Dr. Nield. There are a number of countries who are involved 
in space in some way, but today, only China and Russia are able 
to launch people into space.
    Mr. Schweikert. But how many are part of some of the treaty 
mechanisms out there?
    Dr. Nield. Over 100.
    Mr. Schweikert. Okay. Out of those 100, how many of them 
have a liability mitigation mechanic? Do they all take it as a 
government indemnification? Are there others that have 
bifurcated it or created a reinsurance mechanic? How do other 
countries also deal with this?
    Dr. Cackley. Most of the other countries that we looked 
at--and we looked most specifically at China, Russia, France. 
Those are some of the main countries, and they all have a 
government indemnification program.
    Mr. Schweikert. Is there any one that you know of--sorry, 
Mr.--Doctor--anyone out there who has actually broken that 
model of sort of a national insurance?
    Dr. Cackley. Not that I am aware of but that doesn't mean 
it doesn't exist, but it certainly isn't among the largest 
companies that have the most launches that we have tracked.
    Mr. Schweikert. Okay. To my other doctors--and this is 
easy, doctor, doctor, doctor.
    Dr. Hertzfeld. There are about--there are 180--28 countries 
that have signed to ratify the Outer Space Treaty. There are 
about 11 countries with launch capabilities. Most other 
countries other than the ones mentioned are launching their own 
government satellites, so we are not really talking about the 
commercial end of it. And they have obligated themselves 
through the treaties to indemnify.
    I will point out though that the definition of a launching 
state extends to countries that purchase a launch as well----
    Mr. Schweikert. Well, you beat me to my next question. Is 
there bifurcation? You know, I am a private concern out of 
Taiwan. I approach the French. They are going to have--be my 
lift vehicle to put up a satellite. Do I carry a 
proportionality of risk? How is that mitigated?
    Dr. Hertzfeld. Potentially, but the French----
    Mr. Schweikert. Or--well, you only used the French but--
    Dr. Hertzfeld. No, and I am using it as an example. They 
would require insurance of some sort or indemnification for the 
launch and----
    Mr. Schweikert. How is that being acquired? So you are 
telling me if I am buying lift capacity, that as that 
purchaser, part of my--as I am out there in the market buying?
    Dr. Hertzfeld. It would be included in the price of the 
launch.
    Mr. Schweikert. Okay. And--but ultimately, I am paying the 
French Government for that?
    Dr. Hertzfeld. Yes.
    Mr. Schweikert. Okay. Just as a philosophical sort of 
touch, Congressman Rohrabacher was actually coming close to 
something and then let's see if I sort of express from a 
personal view and you tell me where I am right or wrong. I look 
at the internet, one of the most amazing sort of economic 
curves we can get our heads around, how it has changed the 
world, changed our lives, changed everything we are discussing 
and how we do our businesses. It is also something that had a 
very, very soft touch of government regulation, government 
intrusion, government control, government definitions. Why does 
that model not work in this world?
    Dr. Nield. In general, I think it does work and you need to 
look at the particular application. So when you are talking 
computers, then privacy and information scams and so forth are 
a concern, and the government has a role there----
    Mr. Schweikert. But you also see what a great job the 
government does in managing that and stopping it. I mean at 
some point we have to deal with the reality of incentives and 
smart people committing bad acts.
    Dr. Nield. Good point, and I am all for industry designing, 
developing, operating space vehicles. I think the government 
does have an important role to ensure public safety, and to the 
extent appropriate, to encourage, facilitate, and enable the 
industry to be successful.
    Mr. Schweikert. But if I was going to maximize public 
safety, does that safety really come from a command-and-control 
regulatory environment or does it come by actually sort of 
indemnification and insurance environment where the insurance 
world is actually able to think outside the box, think of other 
types of mitigation? My best example is that we regulate 
against securities fraud. You know, we have the entire SEC. We 
have all sorts of robustness out there, but somehow, bad things 
keep happening, but we do go in and bayonet the wounded after 
it is all over. So my fear is command-and-control regulatory 
environment often is at the back end of the disaster instead of 
the front end.
    So, Mr. Chairman, with that, I am over my time. I yield 
back. Thank you.
    Chairman Palazzo. I now recognize Mr. Bridenstine from 
Oklahoma for five minutes.
    Mr. Bridenstine. Thank you, Mr. Chairman.
    Just a couple of questions, Dr. Nield. When you talk about 
permitting, under a permit, that is when you do your testing, 
right? And then when you get licensed, that is when you do your 
operational flights?
    Dr. Nield. Yes, although a permit is voluntary. You can go 
right to license if you would like.
    Mr. Bridenstine. Okay. But you mentioned that under a 
license you can still do testing?
    Dr. Nield. Absolutely correct.
    Mr. Bridenstine. So how is that different than permitting?
    Dr. Nield. Congress established permitting somewhat similar 
to the way we have Experimental Airworthiness Certificates in 
aviation before or instead of having a formal certification 
process for the aircraft itself. So under commercial space, if 
you want to do commercial ops, you need to have a license. If 
you just want to do some testing or training, you can operate 
under a permit and it is a little bit easier, a little bit----
    Mr. Bridenstine. So even if you have a license, you can 
still modify your aircraft for the betterment of the crew and 
the safety of the crew and everything else.
    Dr. Nield. Absolutely. And with your help, that would 
continue.
    Mr. Bridenstine. Okay. And then as far as the--we were 
talking about the learning period. The Chairman asked a 
question about extending it up to eight years after the first 
spaceflight participant flight. It--now, eight years--do you 
agree that we need to have the learning period extend beyond 
where we currently are in 2015 and extend it to eight years 
after the first spaceflight or I guess the first participant 
spaceflight?
    Dr. Nield. Thank you for that question, and I have to say, 
no, I do not agree with that and let me tell you why. The 
United States has over 50 years of experience in human 
spaceflight. Alan Shepard had his suborbital flight back in 
1961. The X-15 was making rocket-powered suborbital flights 
back in 1962. The Space Shuttle, 135 flights over 30 years. 
Now, it is true that none of those carried a spaceflight 
participant who actually bought a ticket, but as far as I am 
concerned, the design and the operation of those vehicles 
really were independent of who was riding on board. Now, we had 
lots of lessons learned, data, problems solved, challenges 
overcome during that 50 years, and for us to just put that 
aside and say, well, let's start over without taking advantage 
of what we have learned I think is irresponsible.
    Mr. Bridenstine. Okay. So having that eight-year period 
originally would have been incorrect then, right?
    Dr. Nield. That would be my position, yes.
    Mr. Bridenstine. Okay. So we shouldn't have had the eight 
year--in your opinion, we shouldn't have had the eight years to 
begin with, let alone eight years going forward?
    Dr. Nield. That is correct. However, I am very sensitive to 
the concerns that industry has about government being 
overreaching and burdensome and holding things back. That is 
not what we want to do in the Office of Commercial Space 
Transportation. We want to enable safe and successful 
commercial operations.
    Mr. Bridenstine. Okay. Mr. Chairman, I yield back.
    Chairman Palazzo. Thank you. At this time we are going to 
go into a second round of questioning if there are no 
objections.
    All right. I will yield myself five minutes.
    And according to the experts in the insurance industry, 
there is a large pool of capital available for launch and 
payload insurance but this pool is also used for various other 
types of specialty insurance and is susceptible to quickly 
changing world events. Does GAO believe there is a sufficient 
amount of capital in the insurance market to allow for 
insurance at a reasonable cost within indemnification, Dr. 
Cackley?
    Dr. Cackley. When we did our work in 2012, we spoke to a 
number of insurance companies and insurance brokers. We looked 
very carefully at the question of industry capacity to cover 
more than the maximum probable loss that launch companies are 
currently required. And we very much discovered that there is 
more capacity than what is currently required, and the 
insurance companies told us that they had the capacity to go as 
high as $500 million in coverage, but they did talk about the 
fact that that ability was very much dependent on future 
events. So as soon as there--if there were to be a large 
event--large impact event, that could change very quickly, and 
therefore, there isn't necessarily stability of provision of 
insurance going forward that the launch companies could 
necessarily count on. So we don't have a position as to whether 
there is and will always be greater capacity, but there 
certainly is a possibility for greater capacity of--than what 
insurance companies are currently providing.
    Chairman Palazzo. Okay. And my final question, and this is 
going to be for Dr. Nield, CSLA envisioned a single license to 
launch for commercial spaceflight companies, essentially a one-
stop shop. It seems that FAA is having difficulty with how to 
regulate hybrid space vehicles which are part aircraft and part 
spacecraft. As I understand it, these vehicles are required to 
operate under different sets of regulations at different times 
of operation. This type of process is inefficient and 
expensive. Additionally, any time there are two sets of rules, 
gaps and conflicts can develop which can impact safety. How 
could the Office of Commercial Space Transportation and the 
Aviation Safety Office cooperate so that the aviation office 
provides all necessary input and expertise on airplane 
technology but the commercial space office has the one-stop 
shop role for the industry?
    Dr. Nield. Thank you for that question, and let me just say 
that the Office of Commercial Space Transportation and the 
Office of Aviation Safety do cooperate and do provide support 
to one another as appropriate. In terms of specific 
legislation, we certainly support a flexible regulatory 
structure which promotes growth, safely integrates operations 
into the National Airspace System, and leverages all the 
capabilities of the FAA. And we welcome the opportunity to 
provide additional technical assistance to the Committee as you 
consider avenues to correct the perceived obstacles to a 
streamlined operation.
    Chairman Palazzo. Thank you.
    At this time I recognize Ms. Bonamici for five minutes.
    Ms. Bonamici. Thank you, Mr. Chairman, and thank you for 
allowing this second round of questions, especially since 
Members over here had to leave before they got to ask 
questions.
    So for all of the distinguished panel, think back to the 
airline industry, the FAA previously had dual roles as both 
advocate and regulator of the airline industry, and that was 
eventually split and the FAA only retained the regulatory role. 
But in contrast now, the FAA has both roles regarding 
commercial space. So the Office of Space Commercialization in 
the Department of Commerce seems to complicate the issue as 
that office also has responsibilities that include industry 
advocacy. So what are the pros and cons of removing the 
advocacy role of the FAA, and if that decision is made, what 
entity or entities would be--or could be given that 
responsibility effectively? Dr. Nield, I will start with you.
    Dr. Nield. Thank you. I would point out that from the first 
passage of the Commercial Space Launch Act 30 years ago, there 
has been this dual role, on one hand, promote safety and on the 
other encourage, facilitate, and promote the industry. And that 
sounds to a lot of people like it could be a conflict and that 
question has come up over the years. Congress has asked for 
report. We have done independent studies. We have had debates 
about that. But as I look back, I think it has worked very 
well. To me, the ``encourage, facilitate, and promote'' role is 
a way of thinking. It is not a compromise of safety in any way. 
And if you look at the record, there have been 254 licensed or 
permitted launches in the last 30 years and none of them have 
ever had a fatality, serious injuries, or significant property 
damage. So I think we have the balance about right.
    Ms. Bonamici. Dr. Cackley or Dr. Hertzfeld, do you have the 
same opinion?
    Dr. Cackley. Well, we haven't looked at the duplication 
across FAA and the Department of Commerce in particular, so I 
don't have an opinion specifically on them, but I do know that 
GAO has looked at duplication across the federal government and 
a lot of different areas and it is something we identify as a 
concern and something that should always be reviewed and 
considered as to whether there is something that could be done 
differently.
    Ms. Bonamici. Thank you. Dr. Hertzfeld?
    Dr. Hertzfeld. Yes, certainly industry has not complained 
at this point, and I agree, it has worked fine up to now. I 
think there are a couple of issues that require monitoring in 
this area. When the agency was established in--the commercial 
space--launch regulation, we had one type of launch vehicle, 
ELVs. And then there was at a point which could come back at 
some day in the future reusable and relaunch and reentry 
vehicles that can come, land, and take off again. We don't have 
that now. But if we begin to have a series of different 
technologies, a series of different types of vehicles all 
regulated by one agency, then there could be an issue of some 
regulations favoring one type over another, all of them well-
meaning but not coordinating in a way that--and it could affect 
companies in terms of promoting space.
    Ms. Bonamici. Thank you. And I am going to try to get one 
more quick question in, Dr. Hertzfeld. With the likelihood of 
more frequent commercial launches, I wanted to ask about your 
position on whether developing incentives for private industry 
to develop insurance pools rather than--as an alternative to 
government indemnification. So in your view, are there some 
examples of incentives that can have the potential for 
encouraging those insurance pools? Are they a possible 
alternative to indemnification, especially in light of the need 
for newer launch vehicles to pay higher premiums until they 
establish reliability?
    Dr. Hertzfeld. I think the major test will be the growth of 
the industry. If there are enough launches, then there is 
possibly enough business to warrant that. In a slightly 
different way but the same scheme of indemnification was 
applied with the civil nuclear area and eventually they were 
able when we built enough nuclear power plants to have their 
own pool and cover their own insurance. I think it is a ways 
off but it is possible.
    Ms. Bonamici. Thank you very much, and I yield back. Thank 
you, Mr. Chairman.
    Chairman Palazzo. I now recognize Mr. Bridenstine for five 
minutes.
    Mr. Bridenstine. Thank you, Mr. Chairman.
    Dr. Nield, your title, Associate Administrator for 
Commercial Space Transportation of the Federal Aviation 
Administration, and it was my understanding that--and correct 
me if I am wrong--that the FAA's Commercial Space 
Transportation Advisory Committee, COMSTAC, has recommended 
that the learning period be restored to a full eight years from 
the first licensed flight of a spaceflight participant. So what 
is your relationship with the advisory committee, and do you 
and the advisory committee differ in that opinion?
    Dr. Nield. The COMSTAC provides advice to the Administrator 
and to me about issues of interest to commercial space 
transportation, and we very much appreciate their advice. We 
are not looking for a rubberstamp or a validation of what we 
are trying to do. In this particular case, there is a 
difference that you pointed out between their recommendation 
and my recommendation to the Congress.
    Mr. Bridenstine. That is all I had, Mr. Chairman. Thank 
you.
    Chairman Palazzo. I want to thank the witnesses for their 
valuable testimony and the Members for their questions. The 
Members of the Committee may have additional questions for you, 
and we will ask you to respond to those in writing. The record 
will remain open for two weeks for additional comments and 
written questions from Members.
    The witnesses are excused and this hearing is adjourned.
    [Whereupon, at 3:25 p.m., the Subcommittee was adjourned.]
                               Appendix I

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                   Answers to Post-Hearing Questions


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