[Federal Register Volume 62, Number 128 (Thursday, July 3, 1997)]
[Proposed Rules]
[Pages 36028-36030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17452]


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DEPARTMENT OF TRANSPORTATION

14 CFR Part 440

[Docket No. 28635; Notice 96-8B]
RIN 2120-AF98


Financial Responsibility Requirements for Licensed Launch 
Activities

AGENCY: Federal Aviation Administration (FAA), Associate Administrator 
for Commercial Space Transportation, DOT.

ACTION: Notice of reopened comment period.

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SUMMARY: The FAA is soliciting additional comments on notice no. 96-8 
(61 FR 38992; July 25, 1996), which proposed financial responsibility 
and allocation of risk requirements for launch activities carried out 
under an FAA license. An additional 30-day comment period on the notice 
of proposed rulemaking is provided for this purpose.

DATES: Comments must be received by August 4, 1997.

ADDRESSES: Comments should be mailed in triplicate to the Federal 
Aviation Administration, Office of Chief Counsel, Attention: Rules 
Docket (AGC-200), Docket No. 28635, Room 915G, 800 Independence Avenue, 
SW., Washington, DC 20591. Comments must reference Docket No. 28635. 
Comments may also be submitted electronically to the Rules Docket by 
using the following Internet address: [email protected].
    Commenters wishing to receive acknowledgement of receipt of their 
comments must include a pre-addressed, stamped postcard on which the 
following statement is made: ``Comments to Docket No. 28635.'' The 
postcard will be date-stamped and mailed to the commenter. Copies of 
materials relevant to this rulemaking, including copies of all public 
comments, are kept by the Rules Docket Technician, Room 915G, at the 
above address. The docket may be examined Monday through Friday, except 
Federal holidays, between the hours of 8:30 a.m. and 5:00 p.m.
    An electronic copy of the notice of proposed rulemaking (NPRM) may 
be downloaded from the FAA regulations section of the Fedworld 
electronic bulletin board service (703) 321-3339, the Federal 
Register's electronic bulletin board service (202) 512-1661 or the 
FAA's Aviation Rulemaking Advisory Committee Bulletin Board service 
(202) 267-5948. A modem and suitable communications software is 
required.
    Internet users may reach the FAA's web page at http://www/faa/gov 
or the Federal Register's web page at http://www.access.gpo.gov/
su__docs for access to recently published rulemaking documents.
    Any person may obtain a paper copy of the NPRM by submitting a 
request to the FAA, Office of Rulemaking, ARM-1, 800 Independence 
Avenue, SW., Washington, DC 20591 or by calling (202) 267-9680. 
Communications must identify the notice and docket number.
    Persons interested in being placed on the mailing list for future 
Notices of Proposed Rulemaking should request from the FAA Office of 
Rulemaking a copy of Advisory Circular No. 11-2A, notice of proposed 
rulemaking distribution system, that describes the application 
procedure.

FOR FURTHER INFORMATION CONTACT: Ms. Esta M. Rosenberg, Attorney-
Advisor, Regulations Division, Office of the Chief Counsel, Federal 
Aviation Administration, Department of Transportation, Washington, DC 
(202) 366-9305.

[[Page 36029]]

SUPPLEMENTARY INFORMATION:

Background

    On July 25, 1996, the FAA's Associate Administrator for Commercial 
Space Transportation (AST) published an NPRM entitled, ``Financial 
Responsibility Requirements for Licensed Launch Activities''. A 60-day 
comment period was provided for the public to submit comments and 
information. The comment period closed on September 23, 1996. In 
addition, during the open comment period, a technical corrections 
notice was published August 26, 1996 (61 FR 43814). The NPRM solicited 
comments on AST's approach to implementing and assuring compliance with 
financial responsibility requirements for licensed launch activities. 
Comments were also requested on the proper allocation of certain risks 
associated with those activities. Requirements for financial 
responsibility and allocation of risk are part of a comprehensive 
scheme mandated by 49 U.S.C. Subtitle IX, ch. 701 (formerly, the 
Commercial Space Launch Act of 1984, as amended (CSLA)), to protect 
launch participants from potentially unlimited liability or 
catastrophic losses.
    In response to industry requests that more time be provided for 
comment development, the comment period was reopened October 2, 1996, 
for an additional 60-day comment period (61 FR 51395). The second 
comment period closed on December 2, 1996.
    Following review and consideration of comments received, AST 
intended to codify financial responsibility requirements in a final 
rule. However, shortly after the close of the comment period, a launch 
vehicle failure at Cape Canaveral Air Station resulted in some property 
damage to the facility. Although the launch was not FAA-licensed and 
therefore not subject to CSLA requirements for financial responsibility 
and allocation of risk, the resultant damage has led to greater 
scrutiny--by both the Government and the U.S. commercial launch 
industry--on the scope of required insurance coverage and related 
issues.
    Following this event, the FAA provided additional clarification to 
launch licensees of the agency's existing requirements for liability 
insurance coverage. Licensees were notified, in writing, of the 
agency's longstanding requirements that claims of Federal Government 
employees and employees of Federal Government contractors and 
subcontractors (referred to collectively in this Notice as Government 
personnel) for injury, damage or loss must be covered by third-party 
liability insurance. Based upon their reactions, it has become apparent 
to the agency that the commercial launch industry was not aware of 
AST's interpretation. In this respect, licensees incorrectly believed 
that the NPRM proposed a change to existing practice that would not be 
implemented until issuance of a final rule. To avoid self-insuring this 
risk, licensees have procured additional liability coverage that would 
respond to claims of Government personnel.
    At the May 14, 1997, meeting of the Commercial Space Transportation 
Advisory Committee (COMSTAC), the Risk Management Working Group 
reported industry concerns that fundamental changes in policy were 
being implemented by AST in advance of a final rule. The Working Group 
Chairman reported that ``the potential effects of these changes on risk 
management issues are serious. Industry members do not believe that 
they had a sufficient understanding of the FAA`s position to be able 
adequately to express their concerns in the first round of comments and 
wish to ensure that the FAA fully understands industry's position 
before a final rule is issued.'' The COMSTAC adopted a resolution 
recommending that the agency issue a supplemental notice of proposed 
rulemaking and allow an additional opportunity for public comment.
    The agency has determined that it is not necessary to issue a 
supplemental notice of proposed rulemaking to allow another opportunity 
for industry comment. However, it does find appropriate the reopening 
of the comment period on Notice No. 96-8 for 30 days to allow for 
submission of additional public comments.

Request for Comments

    The agency requests further comments on all aspects of the NPRM 
proposed in notice 96-8, ``Financial Responsibility Requirements for 
Licensed Launch Activities.'' Persons who filed comments previously may 
supplement their earlier views or submit replacement comments that will 
be added to the docket.
    Commenters are requested to be specific and precise in stating 
their objections and concerns with respect to particular provisions in 
the NPRM.
    The agency would like commenters to address the appropriate means 
of implementing statutory requirements for allocation of risks among 
launch participants. The NPRM reflects the statutory requirement for 
reciprocal waivers of claims among launch participants. As part of the 
waiver agreement, private party launch participants agree to assume 
responsibility for their employee's losses as required by 49 U.S.C. 
70112(b). This requirement is explain at 61 FR 39012. The agency 
requests comments on the intended meaning and proper implementation of 
this requirement, and its relationship to third-party liability 
insurance requirements.
    The agency requests comments on the appropriate scope of required 
third party liability insurance. In the NPRM, AST proposes to define a 
``third party'' as ``(a)ny person other than: (A) (t)he United States, 
its agencies, and its contractors and subcontractors involved in launch 
services for licensed launch activities; (B) (t)he licensee and its 
contractors and subcontractors involved in launch services for licensed 
launch activities; and (C) (t)he customer and its contractors and 
subcontractors involved in launch services for licensed launch 
activities.'' In addition, ``Government personnel, as defined in this 
section (Sec. 440.3(a)(6)) are third parties. For purposes of these 
regulations, employees of other launch participants identified in 
paragraphs (a)(15)(i)(B) and (C) of this section (Sec. 440.3) are not 
third parties.''
    AST's proposed definition is explained at 61 FR 39003 and reflects 
current agency practice. This definition has broad implications for 
liability insurance requirements, implementation of statutory-based 
reciprocal waivers of claims and the agreement to be responsible for 
employee losses, as well as provisions for Government payment of excess 
claims.
    The agency would like commenters to address the following 
questions. Are employees of the Federal Government and its contractors 
and subcontractors (Government personnel) properly classified as third 
parties? If not, how should their claims against other launch 
participants for damage, injury, or loss be addressed, particularly in 
light of the limits on the Government's ability under appropriations 
laws to accede to unfunded contingent liability? From an insurance 
perspective, what issues or problems does the proposed definition 
present in providing liability insurance coverage for third-party 
claims? Should employees of all private party launch participants also 
be deemed third parties? If so, how would this affect CSLA-required 
liability coverage? If these employees are not third parties, how 
should their claims be managed? That is, how should the various launch 
participants protect themselves financially from claims by other launch 
participants' employees?

[[Page 36030]]

Specific Comments on Costs and Benefits

    The results of the FAA's analysis of the economic effects of this 
rulemaking were summarized in the NPRM at 61 FR 39015. The NPRM states 
that over a four-year period there is a reallocation of expected costs 
of claims of $20,000 from the U.S. commercial space launch industry 
(benefits) to the United States (costs). This reallocation is a 
consequence of the Federal Government's payment under the statute of 
third-party claims in excess of required insurance, up to $1.5 billion 
exposure for liability.
    Because this proposed rule would have long-lasting consequences on 
commercial launch activities, the agency is reiterating its need for 
specific comments on costs and benefits, with sufficient detail to 
determine the economic burdens associated with this proposed 
rulemaking. Commenters are encouraged to provide information on 
additional costs that would be imposed on the commercial launch 
industry, including launch services providers, their customers, and the 
contractors and subcontractors of both, as a result of the NPRM. This 
additional economic information would help the agency to quantify costs 
and benefits associated with this rulemaking and to weight 
alternatives. For example, the additional cost of obtaining liability 
insurance coverage for claims of Government personnel should be readily 
ascertainable and may be offered in support of a commenter's view on 
the appropriate allocation of that risk.
    Views are also requested on alternative means of achieving the same 
level of compliance (i.e., benefits), but at a lower cost. To be useful 
to the agency, any usable cost or benefits information must identify 
(1) all relevant assumptions, and (2) sources of information whenever 
possible.

Additional Comment Period

    Because the comment period on notice 96-8 has closed, it cannot be 
extended, but must be reopened. To allow industry additional time for a 
more thorough review of applicable issues and drafting of responsive 
comments, the FAA finds that it is in the public interest to reopen the 
comment period. Accordingly, the comment period is reopened through 
August 4, 1997. Late-filed comments will be considered to the extent 
practicable; however, no further extensions of the comment period are 
contemplated.

    Issued in Washington, DC, on June 20, 1997.
Patricia G. Smith,
Acting Associate Administrator for Commercial Space Transportation, 
Federal Aviation Administration.
[FR Doc. 97-17452 Filed 7-2-97; 8:45 am]
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