[Senate Report 108-111]
[From the U.S. Government Publishing Office]




                                                       Calendar No. 232
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-111
_______________________________________________________________________



 
            THE COMMERCIAL SPACE TRANSPORTATION ACT OF 2003

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 1260




    July 24 (legislative day, July 21), 2003.--Ordered to be printed

                                 ______

                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003





       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      one hundred eighth congress

                             first session

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
           Jeanne Bumpus, Staff Director and General Counsel
                   Ann Begeman, Deputy Staff Director
                  Robert W. Chamberlin, Chief Counsel
               Kevin D. Kayes, Democratic Staff Director
                Gregg Elias, Democratic General Counsel




                                                       Calendar No. 232
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-111

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




              COMMERCIAL SPACE TRANSPORTATION ACT OF 2003

                                _______
                                

    July 24 (legislative day, July 21), 2003.--Ordered to be printed

                                _______
                                

       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 1260]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 1260) to promote the 
development of the commercial space transportation industry, to 
authorize appropriations for the Office of the Associate 
Administrator for Commercial Space Transportation, and for 
other purposes, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                          Purpose of the Bill

  The purpose of this legislation, as reported, is to authorize 
the Office of Commercial Space Transportation within the 
Federal Aviation Administration (FAA) for a period of five 
years beginning in fiscal year (FY) 2004. The legislation also 
would extend the authorization for indemnification offered to 
the commercial space launch industry through the Commercial 
Space Launch Amendments Act for a period of five years, until 
December 31, 2009.

                          Background and Needs

  The Office of the Associate Administrator for Commercial 
Space Transportation (AST) is the only space-related office 
within the FAA. Established in 1984 as the Office of Commercial 
Space Transportation (OCST) in the Department of Transportation 
(DOT), AST was transferred to the FAA in November 1995.
  Under Title 49, United States Code, Subtitle IX, Sections 
70101-70119 (the Commercial Space Launch Act), AST was given 
the responsibility to--
          (1) regulate the commercial space transportation 
        industry, 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;
          (2) encourage, facilitate, and promote commercial 
        space launches and re-entries by the private sector;
          (3) recommend appropriate changes in Federal 
        statutes, treaties, regulations, policies, plans, and 
        procedures; and
          (4) facilitate the strengthening and expansion of the 
        United States space transportation infrastructure.
  In fulfilling its responsibilities under the Commercial Space 
Launch Act, AST issues launch licenses for commercial launches 
of orbital rockets and suborbital sounding rockets. The first 
United States licensed launch was a suborbital launch of a 
Starfire vehicle on March 29, 1989. Since then, AST (including 
its predecessor, OCST) has licensed more than 100 launches.
  AST also licenses the operations of non-Federal launch sites, 
or ``spaceports''. Since 1996, AST has issued site operator 
licenses to four spaceports--
        (1) California Spaceport at Vandenberg Air Force Base;
        (2) Spaceport Florida at Cape Canaveral Air Force 
        Station;
        (3) Virginia Space Flight Center at Wallops Island; and
        (4) Kodiak Launch Complex at Kodiak Island, Alaska.
  The first launch from a licensed, non-Federal facility was 
that of National Aeronautics and Space Administration's (NASA) 
Lunar Prospector aboard a Lockheed Martin Athena 2 rocket on 
January 6, 1998, from Spaceport Florida.
  A number of private and commercial companies are planning to 
develop, or in the process of developing, reusable launch 
vehicles (RLVs). Many of these companies have shifted their 
focus toward suborbital market opportunities where the 
technical challenges and costs to develop a suborbital RLV are 
not as great as an orbital RLV. As discussed in a report 
entitled ``Suborbital Reusable Launch Vehicles and Applicable 
Markets,'' published by the Department of Commerce's Office of 
Space Commercialization, there are a number of current and 
emerging suborbital markets, which include military 
surveillance, commercial/civil earth imagery, fast package 
delivery, high speed passenger transportation, media, 
advertising, and space tourism. The privately sponsored X PRIZE 
competition will award $10 million to the first person or team 
to fly a privately funded RLV to an altitude of 100 km, return 
safely, and fly again within 2 weeks. The prize was created to 
jump start the space tourism industry, but also serves as a 
catalyst for the suborbital commercial space transportation 
industry. Based upon information provided to the Committee, it 
is expected that three United States teams will attempt 
launches before January 1, 2005.
  In 1988, Congress passed the Commercial Space Launch 
Amendments Act (the Act) that, among other things, established 
an insurance risk-sharing regime by which the Federal 
government would provide indemnification against catastrophic 
third-party losses resulting from licensed launch activities. 
The Act established insurance requirements for persons licensed 
to provide launch services. It allows the licensees, as an 
alternative to obtaining liability insurance, to demonstrate 
financial responsibility sufficient to compensate third-party 
claims arising from death, bodily injury, or loss of or damage 
to property resulting from licensed activities. This 
requirement is limited to the lesser of $500 million or the 
amount of the maximum probable loss (as determined by AST). 
Under the Act, in no case will a licensee have to provide 
insurance in excess of the maximum liability insurance 
available on the world market at a reasonable cost.
  The Act also required the Secretary to provide for the 
payment of successful third-party claims against parties to the 
extent such claims are not compensated by insurance, including 
self-insurance. These payments are subject to advance 
appropriations. With respect to the claims arising out of any 
particular launch incident, payments are limited to $1.5 
billion in excess of the required insurance amount. Since 1989, 
this amount is indexed to reflect inflation.
  The Act established a framework to govern third-party 
liability compensation plans in cases where aggregate claims 
are likely to exceed the required financial responsibility 
amounts. The Secretary is directed to survey the causes and 
extent of damages in such cases and to submit the results to 
Congress. The President is required to submit to Congress a 
plan outlining the dollar value of the claims and recommending 
funding sources. The Act describes the procedures and 
timetables applicable to Congressional consideration of the 
plan, which must be approved by a joint resolution. Expedited 
procedures are prescribed for any plan that requires additional 
appropriations or legislative authority. The compensation plan 
provisions apply only with respect to licenses issued or 
transferred for which the Secretary receives a complete and 
valid application no later than December 31, 2004.
  The United States commercial space launch industry continues 
to demonstrate a solid safety record and there has been no 
event requiring implementation of statutory indemnification 
provisions. However, a number of insurance market-driven 
factors are coalescing at a time of decreased commercial launch 
demand and heightened price sensitivity, reinforcing the 
findings set forth in the FAA report, ``Liability Risk-Sharing 
Regime for United States Commercial Space Transportation: Study 
and Analysis'' (FAA Liability Study), dated April 2002, that 
the existing risk allocation regime is adequate, proper, and 
effective, as well as necessary to maintain a near-level 
playing field with foreign competitors.
  The FAA Liability Study included an evaluation of the effects 
of the events of September 11, 2001, on the commercial space 
transportation insurance market. The report noted the 
increasing reluctance of underwriters and re-insurers to 
participate in aerospace risks after September 11, reflecting a 
re-evaluation of space risk in general. Their participation in 
space risk is critical to this market segment. Insurance market 
reactions have continued to evolve in this direction and 
difficulties in insuring space risk in general have increased 
due to recent satellite failures while in orbit, in addition to 
the overall reduction in the aviation liability insurance 
market following September 11. Although space insurance 
covering satellite assets is different from launch liability 
coverage, industry has advised the FAA that it is becoming 
increasingly difficult and costly to cover any aerospace risk, 
including launch liability.
  Because of the decline in demand for worldwide commercial 
launch services since 1999, competition between international 
launch providers is fierce and prices have dropped. Further 
increases in the cost of doing business would seriously hurt 
United States launch competitiveness. Foreign launch providers 
receive indemnification support from their governments. The 
industry has indicated that paying the expense of any 
additional insurance coverage requirements would not allow them 
to stay in business, even under the best market conditions.
  At its October 2002 meeting, the Commercial Space 
Transportation Advisory Committee (COMSTAC) adopted a report 
effectively endorsing the FAA Liability Study's analysis of the 
issues and most notably its assessment that maintaining the 
current liability risk-sharing regime is the only option that 
achieves four out of the five objectives delineated by the FAA 
in its study. In forwarding its report, the COMSTAC Chairman, 
Livingston L. Holder, Jr., stated that ``continuation of this 
regime is critical to the viability and global competitiveness 
of United States space launch providers, which--along with 
their subcontractors and suppliers--provide assured access to 
space for military, civil, as well as commercial missions.''
  COMSTAC also recommended in its report amending the 
Commercial Space Launch Act by eliminating the sunset provision 
applicable to indemnification authority or, alternatively, by 
extending the indemnification authority for 10 years.

                          Legislative History

  S. 1260 was introduced on June 13, 2003, by Senator McCain 
and Senator Brownback and was referred to the Committee on 
Commerce, Science, and Transportation. A hearing on the FAA 
Reauthorization was held on April 10, 2003. On June 19, 2003, 
the Committee met in open executive session and, by a voice 
vote, ordered S. 1260 reported without amendment.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 1, 2003.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1260, the Commercial 
Space Transportation Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

S. 1260--Commercial Space Transportation Act of 2003

    Summary: S. 1260 would authorize appropriations for fiscal 
years 2004 through 2008 for the Department of Transportation's 
(DOT's) regulatory and programmatic activities related to 
commercial space transportation systems. In addition, the bill 
would provide a five-year extension of DOT's authority to 
indemnify nonfederal entities that are licensed by DOT to 
provide such services.
    Assuming appropriation of the specified amounts, CBO 
estimates that implementing S. 1260 would cost a total of $65 
million over the 2004-2008 period. Enacting this bill would 
have no effect on direct spending or revenues.
    S. 1260 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, and tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1260 is shown in the following table. 
The costs of this legislation fall within budget function 400 
(transportation).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2003     2004     2005     2006     2007     2008
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending under current law:
    Budget authority \1\..................................       12        0        0        0        0        0
    Estimated outlays.....................................       12        1        0        0        0        0
Proposed changes:
    Authorization level...................................        0       13       13       13       14       14
    Estimated outlays.....................................        0       11       13       13       14       14
Spending under S. 1260:
    Authorization level \1\...............................       12       13       13       13       14       14
    Estimated outlays.....................................       12       12       13       13       14      14
----------------------------------------------------------------------------------------------------------------
\1\ The 2003 level is the amount appropriated for that year for the Office of Commercial Space Transportation.

    Basis of estimate: For this estimate, CBO assumes that the 
amounts authorized will be appropriated near the start of each 
fiscal year and that outlays will follow historical trends for 
those activities. Based on information from DOT, we estimate 
that extending the department's indemnification authority 
through 2009 would have no significant budgetary effect over 
the next five years. DOT has had this indemnification authority 
since 1988 but has never had to pay claims to third parties for 
accidents involving commercial space vehicles or services.
    Intergovernmental and private-sector impact: S. 1260 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, and tribal governments.
    Estimate prepared by: Federal costs: Kathleen Gramp; impact 
on state, local, and tribal governments: Gregory Waring; impact 
on the private sector: Lauren Marks.
    Estimate approved by: Paul R. Cullinan, Chief for Human 
Resources Cost Estimates Unit, Budget Analysis Division.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       NUMBER OF PERSONS COVERED

  The Committee believes that the bill would not subject any 
individuals or businesses affected by the legislation to any 
additional regulation.

                            ECONOMIC IMPACT

  This legislation would not have an adverse impact on the 
Nation. It would extend the third party liability 
indemnification offered by the Federal government to the 
commercial space launch industry for an additional 5 years. 
There have been no claims under this indemnification provision 
since its inception in 1988.

                                PRIVACY

  This legislation would not have a negative impact on the 
personal privacy of individuals.

                               PAPERWORK

  This legislation would not increase the paperwork 
requirements for private individuals or businesses. This 
legislation would require the FAA to submit a report to 
Congress on the need for a distinct regulatory regime for 
suborbital vehicles.

                      Section-by-Section Analysis


Section 1. Short title

  Section 1 would entitle the bill as the ``Commercial Space 
Transportation Act of 2003''.

Sec. 2. Office of Commercial Space Transportation

  Section 2 would authorize appropriations for AST of 
$12,601,000 for FY 2004, $12,979,000 for FY 2005, $13,368,000 
for FY 2006, $13,769,000 for FY 2007, and $14,183,000 for FY 
2008.

Sec. 3. Commercial space transportation indemnification extension

  Section 3 would extend the indemnification available to the 
commercial space launch industry until December 31, 2009, 
providing an additional five years of coverage beyond the 
current expiration date of December 31, 2004.

Sec. 4. Suborbital vehicle regulations

  Section 4 would require the Secretary of Transportation to 
submit a report to Congress on the need for a distinct 
regulatory regime for suborbital vehicles. The report would be 
due within 6 months of enactment of the bill.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                        TITLE 49. TRANSPORTATION


              SUBTITLE IX. COMMERCIAL SPACE TRANSPORTATION

            CHAPTER 701. COMMERCIAL SPACE LAUNCH ACTIVITIES

Sec. 70113. Paying claims exceeding liability insurance and financial 
                    responsibility requirements

  (a) General Requirements.--(1) To the extent provided in 
advance in an appropriation law or to the extent additional 
legislative authority is enacted providing for paying claims in 
a compensation plan submitted under subsection (d) of this 
section, the Secretary of Transportation shall provide for the 
payment by the United States Government of a successful claim 
(including reasonable litigation or settlement expenses) of a 
third party against a licensee or transferee under this 
chapter, a contractor, subcontractor, or customer of the 
licensee or transferee, or a contractor or subcontractor of a 
customer, resulting from an activity carried out under the 
license issued or transferred under this chapter for death, 
bodily injury, or property damage or loss resulting from an 
activity carried out under the license. However, claims may be 
paid under this section only to the extent the total amount of 
successful claims related to one launch or entry--
          (A) is more than the amount of insurance or 
        demonstration of financial responsibility required 
        under section 70112(a)(1)(A) of this title; and
          (B) is not more than $1,500,000,000 (plus additional 
        amounts necessary to reflect inflation occurring after 
        January 1, 1989) above that insurance or financial 
        responsibility amount.
  (2) The Secretary may not provide for paying a part of a 
claim for which death, bodily injury, or property damage or 
loss results from willful misconduct by the licensee or 
transferee. To the extent insurance required under section 
70112(a)(1)(A) of this title is not available to cover a 
successful third party liability claim because of an insurance 
policy exclusion the Secretary decides is usual for the type of 
insurance involved, the Secretary may provide for paying the 
excluded claims without regard to the limitation contained in 
section 70112(a)(1).
  (b) Notice, Participation, and Approval.--Before a payment 
under subsection (a) of this section is made--
          (1) notice must be given to the Government of a 
        claim, or a civil action related to the claim, against 
        a party described in subsection (a)(1) of this section 
        for death, bodily injury, or property damage or loss;
          (2) the Government must be given an opportunity to 
        participate or assist in the defense of the claim or 
        action; and
          (3) the Secretary must approve any part of a 
        settlement to be paid out of appropriations of the 
        Government.
  (c) Withholding Payments.--The Secretary may withhold a 
payment under subsection (a) of this section if the Secretary 
certifies that the amount is not reasonable. However, the 
Secretary shall deem to be reasonable the amount of a claim 
finally decided by a court of competent jurisdiction.
  (d) Surveys, Reports, and Compensation Plans.--(1) If as a 
result of an activity carried out under a license issued or 
transferred under this chapter the total of claims related to 
one launch or entry is likely to be more than the amount of 
required insurance or demonstration of financial 
responsibility, the Secretary shall--
          (A) survey the causes and extent of damage; and
          (B) submit expeditiously to Congress a report on the 
        results of the survey.
  (2) Not later than 90 days after a court determination 
indicates that the liability for the total of claims related to 
one launch or entry may be more than the required amount of 
insurance or demonstration of financial responsibility, the 
President, on the recommendation of the Secretary, shall submit 
to Congress a compensation plan that--
          (A) outlines the total dollar value of the claims;
          (B) recommends sources of amounts to pay for the 
        claims;
          (C) includes legislative language required to carry 
        out the plan if additional legislative authority is 
        required; and
          (D) for a single event or incident, may not be for 
        more than $1,500,000,000.
  (3) A compensation plan submitted to Congress under paragraph 
(2) of this subsection shall--
          (A) have an identification number; and
          (B) be submitted to the Senate and the House of 
        Representatives on the same day and when the Senate and 
        House are in session.
  (e) Congressional Resolutions.--(1) In this subsection, 
``resolution''--
          (A) means a joint resolution of Congress the matter 
        after the resolving clause of which is as follows: 
        ``That the Congress approves the compensation plan 
        numbered -------- submitted to the Congress on --------
        , 20--.'', with the blank spaces being filled 
        appropriately; but
          (B) does not include a resolution that includes more 
        than one compensation plan.
  (2) The Senate shall consider under this subsection a 
compensation plan requiring additional appropriations or 
legislative authority not later than 60 calendar days of 
continuous session of Congress after the date on which the plan 
is submitted to Congress.
  (3) A resolution introduced in the Senate shall be referred 
immediately to a committee by the President of the Senate. All 
resolutions related to the same plan shall be referred to the 
same committee.
  (4)(A) If the committee of the Senate to which a resolution 
has been referred does not report the resolution within 20 
calendar days after it is referred, a motion is in order to 
discharge the committee from further consideration of the 
resolution or to discharge the committee from further 
consideration of the plan.
  (B) A motion to discharge may be made only by an individual 
favoring the resolution and is highly privileged (except that 
the motion may not be made after the committee has reported a 
resolution on the plan). Debate on the motion is limited to one 
hour, to be divided equally between those favoring and those 
opposing the resolution. An amendment to the motion is not in 
order. A motion to reconsider the vote by which the motion is 
agreed to or disagreed to is not in order.
  (C) If the motion to discharge is agreed to or disagreed to, 
the motion may not be renewed and another motion to discharge 
the committee from another resolution on the same plan may not 
be made.
  (5)(A) After a committee of the Senate reports, or is 
discharged from further consideration of, a resolution, a 
motion to proceed to the consideration of the resolution is in 
order at any time, even though a similar previous motion has 
been disagreed to. The motion is highly privileged and is not 
debatable. An amendment to the motion is not in order. A motion 
to reconsider the vote by which the motion is agreed to or 
disagreed to is not in order.
  (B) Debate on the resolution referred to in subparagraph (A) 
of this paragraph is limited to not more than 10 hours, to be 
divided equally between those favoring and those opposing the 
resolution. A motion further to limit debate is not debatable. 
An amendment to, or motion to recommit, the resolution is not 
in order. A motion to reconsider the vote by which the 
resolution is agreed to or disagreed to is not in order.
  (6) The following shall be decided in the Senate without 
debate:
          (A) a motion to postpone related to the discharge 
        from committee.
          (B) a motion to postpone consideration of a 
        resolution.
          (C) a motion to proceed to the consideration of other 
        business.
          (D) an appeal from a decision of the chair related to 
        the application of the rules of the Senate to the 
        procedures related to a resolution.
  (f) Application.--This section applies to a license issued or 
transferred under this chapter for which the Secretary receives 
a complete and valid application not later than [December 31, 
2004.] December 31, 2009.

           *       *       *       *       *       *       *


Sec. 70119. Office of Commercial Space Transportation

  There are authorized to be appropriated to the Secretary of 
Transportation for the activities of the Office of the 
Associate Administrator for Commercial Space Transportation--
          (1) $12,607,000 for fiscal year 2001; [and]
          (2) $16,478,000 for fiscal year [2002.] 2002;
          (3) $12,601,000 for fiscal year 2004;
          (4) $12,979,000 for fiscal year 2005;
          (5) $13,368,000 for fiscal year 2006;
          (6) $13,769,000 for fiscal year 2007; and
          (7) $14,183,000 for fiscal year 2008.

                                
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